Becton, Dickinson and Company

Hello and welcome to BD's first fiscal quarter 2019 earnings call. At the request of BD, today's call is being recorded. It will be available for replay through February 12, 2019 on the Investors page of the BD.com website or by phone at 800-585-8367 for domestic calls and area code 404. I would like to inform all parties that your lines have been placed in a listen-only mode until the question and answer segment. Beginning today's call is Ms. Monique DeLecke, Senior Vice President of Investor Relations. Ms. DeLecke, you may begin.

Thank you, Crystal. Good morning, everyone, and thank you for joining us to review our first fiscal quarter results. As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at bd.com. During today's call, we will make forward-looking statements, and it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our first fiscal quarter press release, and in the MD&A sections of our recent SEC filings. We will also discuss some non-GAAP financial measures with respect to our performance. Reconciliations to GAAP measures can be found in our press release and its related financial schedules and in the slides. A copy of the release, including the financial schedules, is posted on the BD.com website. As a reminder, to provide additional revenue visibility into the new BD, inclusive of BARG, We will speak to our fiscal 2019 first quarter revenue results and fiscal 2019 revenue guidance on a comparable currency neutral basis. The comparable basis includes BD and BARD in the current and prior year periods and excludes intercompany revenues and revenues associated with divestitures as detailed in the financial schedules in our press release. Leading the call this morning is Vince Forlenza, Chairman and Chief Executive Officer. Also joining us are Chris Reedy, Executive Vice President, Chief Financial Officer and Chief Administrative Officer, Tom Poland, President and Chief Operating Officer, Alberto Mas, Executive Vice President and President of the Medical Segment, Simon Campion, Executive Vice President and President of the Interventional Segment, and Patrick Kaltenbach, Executive Vice President and the President of the Life Sciences Segment. It is now my pleasure to turn the call over to Vince.

Thank you, Monique, and good morning, everyone. As many of you already know, in December, we celebrated the one-year anniversary of the closing of the Bard transaction. Together with Bard, we accelerated our strategy to provide our customers and their patients with leading medical technologies and innovative solutions. We are extremely proud of our achievements over the past year. It is evident that the combination of BIDI and BARD is delivering value to our customers, patients, and shareholders. Turning to slide five and our first quarter highlights. We are very pleased with the strong start to fiscal 2019. As we stated in our pre-announcement in mid-January, our first quarter results were ahead of our previous expectations, largely driven by the timing of certain tax items, as well as better than expected performance across all three segments. Our results reflect continued momentum across our businesses and regions and strong margin expansion after a very strong Q4 in 2018. Our integration of BART is on track and we are continuing to realize cost and revenue synergies as expected. During the quarter, we held our first combined sales training meetings. In every region of the world, there was tremendous energy and excitement about the opportunity we have to make a difference in the lives of others. We are already seeing traction with our combined biosurgery and infection prevention sales force in Europe, which is evident in our financial results. We are also making good progress integrating and simplifying our systems and processes, which delivers cost savings and helps associates work more efficiently. We are leveraging BD shared service centers and the infrastructure investments we made during the CareFusion integration by bringing legacy BARD associates onto our IT, finance, and HR operating systems and technologies. We've also made progress with supply chain efficiencies and also with our real estate footprint, combining BD and BARD sites in several key locations, including our New Jersey headquarters. Looking forward to the total year, we expect continued momentum and are reaffirming our fiscal 2019 revenue and EPS guidance. I will now turn things over to Chris for a more detailed discussion of our first quarter financial performance and our fiscal year 2019 guidance.

Thanks, Vince, and good morning, everyone. Moving on to slide seven, I'll review our first quarter revenue and EPS results, as well as the key financial highlights. As Vince mentioned, we are off to a strong start in fiscal 2019. First quarter revenues grew 5.2% on a comparable currency neutral basis. This includes a pricing decline of about 20 basis points, which was in line with our expectations. First quarter revenue growth was driven by mid-single digit growth across all three segments. At the business unit level, there are some puts and takes which are driven by year-over-year comparisons, along with timing within this fiscal year. When we adjust for these items, we still drove total company revenue growth of over 5% on an underlying basis. I'll provide more color on revenue growth in the quarter in a moment when I take you through the results by segment and geography. Adjusted EPS of $2.70 grew 8.9% or 14.9% on a currency neutral basis. As we stated in our pre-announcement, this was ahead of our previous expectations as the quarter benefited from some timing within the year related to certain tax items. In addition, performance was better than expected across all three segments. We also continued to deleverage during the first quarter, paying down approximately $400 million of debt. As a result, our gross leverage ratio declined to 3.8 times as of December 31st. We continue to be on target to achieve our commitment to deleverage to below three times over three years. And moving on to slide eight, I'll review our medical segment revenue growth. BD Medical first quarter revenues increased 5.2%. Revenues in medication delivery solutions, or MDS, grew 2.9%, driven by strength in vascular access and infusion disposables. Performance in MDS reflects a tough comparison to the prior year in the U.S. Revenues in medication management solutions, or MMS, grew 6.7%. Growth in MMS was driven by stronger-than-expected capital placements and infusion. Diabetes care revenues grew 0.6%. Revenue growth was impacted by the timing of distributor orders in the U.S. and the timing of tenders in EMA. Orders that were anticipated to occur in the first quarter are now expected to occur over the second and third fiscal quarters. Revenues in pharmaceutical systems grew 15.7%. driven by strong demand for core products and continued growth in SAIS. Performance also reflects the favorable timing of customer ordering patterns, which benefited the first quarter and is expected to negatively impact growth in the second quarter. Turning to slide nine in the BD Life Sciences segment, first quarter revenues increased 4.7 percent. This includes a headwind of approximately 50 basis points related to the strength of last year's flu season as expected. As you're aware, the timing and severity of the flu season can impact our year-over-year comparisons. Revenues in diagnostic systems grew 2.7%. Performance was driven by our instrumented microbiology platforms, including blood culture and IDAST, and our BDMAX molecular platform. Performance in diagnostic systems reflects a tough comparison to the prior year for Keystra installations, as well as a headwind of approximately 130 basis points, related to the flu grow-over. Pre-analytical systems revenues grew 7.6 percent. Growth was aided by recent capacity additions that have eased constraints on the supply of push-button collection sets, as well as the timing of distributor orders. Biosciences revenues grew 3.6 percent. Growth was driven by research reagents, as well as growth in newer instruments such as the FACS Lyric. Performance in biosciences reflects the unfavorable timing of tenders in EMA. Now, turning to slide 10 in the BD interventional segment, first quarter revenues increased 5.7%. Revenues in peripheral intervention, or PI, grew 0.6%, as we expected. This reflects a tough comparison to the prior year, which included sales related to a distribution agreement that has since ended. On an underlying basis, growth remained strong and in line with our full-year expectations. In terms of DCBs, performance was in line with our expectations, and we did not see a negative impact as a result of the Paclitaxel study released in December. Performance in PI also reflects strong growth in oncology products, particularly in emerging markets and China. First quarter revenue growth in surgery was 10%. This reflects a favorable comparison to the prior year related to ProGel. We continue to receive a very positive response to ProGel being reintroduced in the market. Performance in surgery also reflects a favorable comparison to the prior year in our hernia business related to Hurricane Maria, which partially reverses in the second quarter. We are also pleased that our hernia business has regained almost all of its share following the hurricane. Growth in the surgery unit also includes strong performance and infection prevention in Europe, where we expanded our direct sales presence as part of our revenue synergy investment. Revenues in urology and critical care, or UCC, grew 7.3%. Performance in UCC was driven by new products in acute care urology, as well as strength in our home care and targeted temperature management businesses. Now moving on to slide 11, I'll walk you through our geographic revenues for the first quarter. U.S. revenues grew 6%. This is above our normal growth rate and primarily reflects strong growth in MMS and pharmaceutical systems within the BD medical segment, pre-analytical systems and BD life sciences segment, and surgery and UCC in the BD interventional segment as discussed previously. Moving on to international, revenues grew 4.1%. Strong performance in Asia-Pac and Latin America was partially offset by lower growth in Europe due to Kystra and pharmaceutical systems order timing, as well as a tough comparison to the prior year and timing of tenders in EMA, as previously discussed. Developed market revenues grew 4.7 percent, driven by strong performance in the U.S. Revenues in emerging markets grew 7.8 percent. was driven by growth of 13.3% in China and double-digit growth in Latin America, partially offset by EMA, as previously discussed. Growth in China reflects strength across the life science and interventional segments as expected. Performance in the medical segment in China was slightly ahead of our expectations due to the geography of orders and pharmaceutical systems. Turning to slide 12, which recaps the first quarter income statement, As discussed, revenues grew 5.2% in the quarter on a comparable basis, and 37.1% as reported. Moving down the P&L, gross profit improved during the quarter, increasing 42.8% year over year. I'll provide additional details on gross profit in just a moment. SSG&A as a percentage of revenues was 25.7%, which reflects BARD's higher SSG&A spend profile. partially offset by the achievement of synergies. R&D as a percentage of revenues was 6.1%, which reflects our continued commitment to invest in innovation. Operating margins increased 80 basis points or 170 basis points on a currency neutral basis. We continue to deliver significant operating margin expansion, which reflects strong P&L leverage as the new BD. Our tax rate was 11.2% in the quarter, which is significantly below our full-year guidance range due to the timing of some discrete items. As expected, we paid preferred dividends of $38 million in the quarter. As we have been discussing, the preferred shares are not included in the share's outstanding calculation. In the quarter, adjusted earnings per share were $2.70, which is an 8.9% increase versus the prior year, or 14.9%. basis. Now turning to slide 13 and our gross profit and operating margins for the first quarter. Gross profit margin was a strong 56.3% in the quarter. On a performance basis, gross profit margin improved by 230 basis points. This reflects the inclusion of BARD's more robust gross margin profile as well as our continuous improvement initiatives, cost synergies, and favorable mix. These items were partially offset by headwinds from raw materials and pricing. Currency had a negative impact of 90 basis points on gross profit margin as expected. Operating margin grew 80 basis points in the quarter or 170 basis points on a currency neutral basis. Margin expansion was driven primarily by gross margin improvement combined with synergy capture. Currency had a negative impact of 90 basis points on operating margin in the quarter. I'll take you through our fiscal 2019 guidance over the next several slides, but while we're discussing margins, I'd like to point out that we continue to expect to deliver margin expansion of 100 to 150 basis points on a currency-neutral basis. This is an addition to significant margin expansion of approximately 750 basis points over the last five years. Now, moving on to slide 15 in our full fiscal year 2019 guidance. As we discussed, while there are a number of moving pieces within the year, our underlying performance is strong, and we have reaffirmed our revenue guidance. We continue to expect total company revenue growth of 5 to 6 percent on a comparable currency neutral basis. By segment, we expect BD medical revenues to grow between 5 and 6 percent, BD life sciences to grow between 4 and 5 percent, which includes a headwind of approximately 90 basis points reflected to the flu. related to the flu, and BD interventional to grow between 6% and 7%. We continue to anticipate developed market growth of 4% to 5% and growth of about 10% in emerging markets, driven by a diversified base with low double-digit growth in China and strength in EMA and Latin America. And moving on to slide 16 in our full fiscal year 2019 EPS guidance, We have also reaffirmed our adjusted EPS guidance. On the left side of the chart, you see that we continue to expect strong underlying growth driven by revenue growth and robust operating performance, as well as the benefit from a lower tax rate due in part to the achievement of tax synergies. Partially offsetting this growth are a number of headwinds. First, while the pressure from raw materials has eased slightly, we continue to expect a headwind of about 2%. In addition, we continue to expect an impact of about 1% from tariffs, which includes the postponement of the increase from the 10% rate to a 25% rate. We continue to work with our partners to minimize the unfavorable impact to the company going forward. Our guidance also continues to assume a normal flu season in contrast to the severe flu in fiscal 2018, which results in a headwind of about 1% in fiscal 2019, the majority of which will occur in the second fiscal quarter. The divestiture of advanced bioprocessing at the beginning of fiscal 2019 and the annualization of the divestitures to merit medical will also impact our EPS growth in fiscal 2019. On a currency-neutral basis, our strong underlying performance is expected to drive adjusted EPS growth of 13% to 14% despite the pressure from headwinds and divestitures. Based on current rates, we continue to expect currency will be a sizable headwind of about 3.5% in fiscal 2019. This assumes a euro to dollar exchange rate of $1.14. All in, we continue to expect to deliver adjusted EPS of $12.05 to $12.15, which represents growth of approximately 10%. Now, from a phasing perspective, we continue to expect revenue and EPS growth to be weighted towards the back half of the year. And as a result, the timing of a few items within the year that are impacting growth, we are providing explicit guidance for the second fiscal quarter. Starting with the top line, we expect revenue growth to be below our full-year guidance range by about 100 basis points, driven primarily by the flu comparison. On the bottom line, in addition to the unfavorable impact from raw materials and tariffs, We now expect the headwind from FX will be most pronounced in the second quarter due to profit and inventory. We also assume a tax rate at or above our full year guidance range. However, as we saw this quarter, the tax rate can fluctuate depending on a number of items, including the possibility of special items arising in the quarter. Based on these variables, we expect EPS to be between $2.50 and $2.60 in the second quarter. Now turning to slide 17, the balance of our guidance expectations for the full fiscal year 2019 remain unchanged. We continue to expect to achieve approximately $100 million in cost synergies in fiscal year 2019, and we are committed to fully realizing $300 million in annualized cost synergies over the three-year deal period. We're excited about the momentum we have across our businesses and are confident that we will deliver on our commitments in fiscal year 2019 and beyond. Now I'd like to turn the call back over to Vince, who will provide you with an update on our product portfolio.

Thank you, Chris. Turning to slide 19 and our planned product launches by segment. As you can see on this slide, we have a rich pipeline of planned product launches in fiscal 2019 across our segments. There are a number of things we continue to be excited about, I'll touch on just a few of the recent launches here. Starting with the BD Medical segment, we recently launched two new cloud-based applications, BD HealthSite Data Manager and BD HealthSite Diversion Analytics. Both are part of the BD HealthSite platform that enables an enterprise-wide connected medication management system. The Data Manager application simplifies the management of drug formularies for customers by allowing for a consistent understanding of every drug's identity across all BD devices and customer sites. The diversion analytics application is designed to help hospitals and health systems identify potential narcotic drug diversion through the use of augmented intelligence and integrated workflows. We are pleased with the strong customer interest in HealthSite, as the number of customer sites adopting the platform continues to accelerate. These newest applications are attracting even stronger demand and are already getting traction in the marketplace. Regarding our Type 2 patch pump, as expected, we submitted our regulatory approval applications for the U.S. and Europe and continue to anticipate our early access launch will occur late in calendar year 2019. We continue to be excited about bringing this differentiated solution to the market for people living with type 2 diabetes. In the BD Life Science segment, we recently received U.S. FDA clearance of the BD Phoenix CPO Detect Test and the BD Max Enteric Viral Panel. BD Max continues to perform very well and drive growth in this segment, growing over 30% this past quarter. The BD Phoenix CPO Detect Test expands BD's portfolio of solutions for identification and antimicrobial susceptibility testing of infections caused by CPOs. CPOs, or superbugs, as they are more commonly called, represent a prominent threat to public health because these dangerous microbes are often resistant to nearly all available antibiotics. This new test gives laboratories an accurate, and cost-effective method to rapidly identify CPOs and support patient management, and is another example of the company's commitment to providing solutions that help address the global burden of AMR. With the approval of the BD-MAX Enteric Viral Panel, BD now offers a broad suite of solutions for the detection of intestinal conditions of bacterial, viral, and parasitic origin in clinically relevant targeted panels. With this launch, BD's suite of assays for diagnosing gastrointestinal conditions will provide clinicians with greater flexibility for more efficient and cost-effective patient management. In the BD interventional segment, as expected, Wavelink, our solution that provides a minimally invasive, non-surgical option for creating critical AV fistulas for hemodialysis procedures, launched in the U.S. in the first quarter. We are pleased with the early results and feedback and look forward to introducing our next generation product later in the year. Regarding Lutonix BTK, as you are aware, the first releases of our IDE trial data for our Lutonix 014 drug-coated balloon with a below-the-knee indication were provided at the VIVA and VEATH meetings in late 2018. The data has been well-received. and continues to generate interest and excitement in the marketplace. We have also continued to work with the FDA towards regulatory approval, and our projected timelines remain on track for commercialization by the end of fiscal year 2019. In addition to Lutonix BTK, we also continue to look forward to several new product launches later this year that will enhance growth in the interventional segment, including a Venovo Venus stent, and the Covaira stent graft fistula indication. As you can see, we have a rich pipeline of new products across our businesses, and we look forward to sharing additional updates with you along the way. Before I move on, I would like to remind you that we have again included a slide in the appendix of today's presentation that provides an update on our sustainability initiatives. We hope you find the information useful in understanding BD's commitment to this important topic. Moving on to slide 20, I would like to reiterate the key messages from our presentation today. We are very pleased with the strong start to fiscal year 2019. Our results reflect continued momentum across our businesses and regions, strong margin expansion, and excellent execution by our BD associates. I want to thank all of our BD associates for their tremendous efforts on behalf of our customers, their patients, and our shareholders. You've done an outstanding job. The integration of BART is on track, and we are confident in our ability to achieve our cost and revenue synergy commitments. New product innovation is continuing to fuel growth, and we are excited about the robust pipeline across our businesses. In summary, we have a significant opportunity to deliver innovative healthcare solutions to our customers and their patients around the world. Looking forward, I am confident that we will deliver on our commitments in fiscal year 2019 and beyond. Thank you. We will now open our call to questions.

At this time, if you would like to ask an audio question, please press star 1 on your touchtone phones. We do request that you limit your questions to one question and one follow-up question. One moment for your first question. Your first question comes from the line of Brian Weinstein with William Blair.

Thanks for taking the question. I thought we could just start with the phasing throughout the year, just trying to understand that a little bit better, first half versus second half. Is this any different than what you originally thought? And can you talk about your confidence? on the acceleration that's needed that looks like you have to do kind of mid to high sixes in the back half of the year here to get to the midpoint to the revenue guidance. So can you talk about your confidence on the acceleration there and digging into the drivers a bit more, both on the top line as well as on the bottom line? Thanks.

Yeah, so I'll start and then I'll turn it over to Chris for some more detail. Yeah, we feel good about it. This is how we expected the year to play out with the exception, of course, of the tax item that occurred in the fourth quarter. But if I go to operating results, this is pretty much what we thought would happen. Of course, we knew we had the large, you know, flu coming up that we had to jump over in the second quarter. We did a little better in the first quarter than expected, as you heard in our remarks. But we always knew that the back end of the year, the second half of the year, we were going to see higher growth and accelerating EPS. And that's driven by actually all three segments and improving performance across each. There was a bunch of timing things that happened in the first quarter that Chris will walk you through, but you're going to see strong performance across all three segments, the phase-in of the cost synergies in the second half, and then FX turns around as well. So, Chris, those are high-level comments.

Sure, and I think Vince covered most of the points. I think, you know, it is in line with what we expected. with a couple of adjustments in terms of timing for Q1 to Q2. So, for example, the higher tax rate in Q2 is to be expected, considering an 11% tax rate in Q1, so there will be some catch-up there. FX will be a little bit worse in Q2 than we had originally expected, and we know there are some other offsets to that, but that will hit us mostly in the second quarter. And then farm systems growing nearly 16% in the first quarter, There will be some bounce back on that in the second quarter. But the first half of the year, just about where we would have expected. In terms of the rest of the year ramping, we did expect that, and we're very confident in that. On the revenue side, we've got a lot of new product launches in the pipeline across the business. You've got Wavelink product that we talked about from the TVA acquisition, Bonovo, Cavera, and the Lutonix 018s. and even some BTK upside potential. ProGel, as we said, is doing very well, and our reintroduction of that product is going very well. As you know, we have revenue synergies ramping in the back half of the year, and then on the P&L side, FX abates in the second half, and you start getting the cost synergies ramping. So all of those things give us great confidence in the second half of the year, and we're very comfortable with the full-year guidance. It is a little bit lumpy, and that's what we had expected.

Brian, just to add one or two more comments, you know, on the life science side, what you saw in the first quarter is a bunch of CD4 tenders that got shifted to later in the year. That's going to improve life sciences growth. It also negatively impacted EMA in the first quarter. That's going to come back in the second part of the year as well. And then you saw some Keister timing that's going to help. So there's a whole bunch of things across the segments are playing out that way. And then lastly, on the medical side, we're expecting continued strong growth in MMS as we do well. both in dispensing but in particularly on the pump side of things. And farm systems is going to continue to be strong for the year. There will be a lumpy next quarter, but then bounce back. So those are a whole bunch of things that are going on. And maybe, Alberto, you want to comment on what's happening in the pump space.

Yeah, thanks. Good morning. Yeah, good morning, Alberto. Yes, we're feeling – I'm very pleased about the performance and very confident on the MMS side. This quarter in particular and for the rest of the year on the infusion side, we're seeing continued above-market growth. We do feel very confident that we are gaining category share in the infusion in the U.S. A lot of that has to do with great acceptance of our refreshed Alaris M2 pump with a our complete focus on interoperability, where we are seeing now 350 live sites in interoperability, and that is a very difficult operational thing to pull off, as we know by experience, and I think we've dialed in now the process. And we're expanding interoperability beyond Cerner and Epic to new platforms as well, Meditech and And the last element that I think is driving the business as well is what I would call more horizontal interoperability as we put into play all our platforms and our health site analytics platform that really leverages all our platforms together, not only the pumps but gives really a lot of visibility across the different platforms, is really engaging our customers and providing and providing us nice wins in the marketplace. So very, very pleased with the performance of that business.

Yeah, thanks, Albert. And, of course, we grew 6.7% after we had such a strong quarter in the business last year where $50 million moved ahead, and a bunch of that was pumps. So I think overall that should give you a good sense across the same. Chris, do you have anything else you want to say? No, I think that covers it. Great. Thanks, Brian, for the question.

Your next question comes from the line of Larry Bigelson with Wells Fargo.

Good morning. Thanks for taking the question. One question on emerging markets, one follow-up question on MMS. So on emerging markets, Vince, growth was 7.8% this quarter, slightly softer versus recent quarters. You know, the outlook is still 10% for fiscal 2019. You know, why the confidence there? And then just to follow up on MMS, obviously very strong this quarter after 23% growth in the U.S. in Q4. So maybe could you give us a little bit more color on share gain that you expect this year versus last year in pumps? and Pixis. Thanks for taking the questions.

Yeah, sure. I'll talk to emerging markets. Yeah, we're confident in emerging markets. And what you actually saw was a decrease in EMA, which was actually two things, a strong comp, but also these tenders, which have moved from the first quarter into the second, third, and fourth. And so we're going to see a very strong bounce back in AMA. We have the orders. That's why I am so confident. It's a matter, of course, setting up the financing, which is something that takes a bit of time to do. So you look at that. Latin America was strong right at the double digits. And of course, China was strong and did extremely well. So it was really just AMA. And that bounce back that we have visibility to gives me the confidence. So, Alberto, a little bit more on share gains and also how we're doing with PIXIS, too. You've been talking about the pumps.

Yes, in terms of the category shares, it's very consistent with what we said before, which is slightly accelerating share gains, more toward 200 basis points in infusion and closer to the 100 basis points on the PIXIS side, on the dispensing side. And there in dispensing and PIXIS, we really are supporting our core platform with a lot of – new launches, Pixis Logistics, Pixis IV Prep for the pharmacy, and Pixis Supply as well that happened in the last quarter. So there's a lot of things together with our overall platform. Again, health side is the overall envelope, if you like, that really helps us in some of the conversions. So also good performance on the Pixis side.

Okay, great. So you get a sense that our new business model, put in place a year ago is really working for us. Larry, thanks for the questions. Thank you.

Your next question comes from the line of David Lewis with Morgan Stanley.

Good morning. Just two questions for me. Vince, I appreciate the comments on the peripheral business this morning, but given the investor focus there, it sounds like most of the momentum deceleration there is really the distributor dynamic. But let me just sort of talk about your confidence in sustaining growth in that business prior to the BTK launch and why you're convinced that there's been no sort of clinical response to the recent paclitaxel toxicity concerns. And then Maybe for Chris, maybe just a little more detail. I think if we think about the earnings dynamics for this year, you laid out a lot of headwinds and tailwinds. I guess some of those headwinds in our mind look a little less significant, just given where you came in here in the first quarter. Your confidence in the back half of the year, I guess by our math, I think there could have been a little more upside to the earnings guide potentially this early in the year, but you held the earnings guidance. Maybe just talk about the pacing of earnings and your confidence in that earnings number in the headwinds and tailwinds into the back half. Thanks so much.

So Chris will go first, and then Simon will talk about the business question. Okay. Sure.

Thanks, David. So in terms of the headwinds, I would say that the headwinds for resin costs, as we said, are getting a little bit better, as is the tariffs. But both of those have to flow through the inventory. So you're really not picking up all that much this year. And we would expect that to be offset by a little bit worse on the FX side. As you see, the dollar continued to strengthen, not only against the euro, the 116 versus 114 metric there doesn't seem to be too much, but it's pretty much against every other currency around the world. And so that's a little bit worse. So on balance, that evens out. And in terms of the guidance, it's still very early in the year. and we still have the flu season, which is a big variable that we're watching as well. So it feels like the headwinds and tailwinds are balancing each other, and it's a bit early to call the flu season.

Okay, Simon?

Good morning, David. Simon here. So just at a macro level, we do have a lot of confidence in our projections going forward for PI. We have several new product launches that are coming up, not least BTK, but also Venovo and the Covira Fistula indication. So we're coming in just where we thought for Q1, notwithstanding some of the comments that Chris made earlier on. So our confidence is high as we move through the rest of the year. In relation to the Paclitaxel study that came out in December, We didn't see any impact in December, or in Q1, rather. Clearly, there's been a lot of talk about it. And I think you'll have noted that on January the 17th, FDA came out and said that the benefits continue to outweigh the risks. And some customers that we'd seen moderate their behavior as a result of the paper have now turned back on as a result of that paper. And as a result of that publication, And in addition, we released data at Link. We continue to work with regulatory agencies domestically and globally, and we continue to have data that supports our position that we do not have any safety concerns with any of our Glutonix products.

So I just wanted to add a little bit, too, on the 0.6. So obviously the takeaway is that had nothing to do with Paclitaxel. It was a tough compare to last year. We had 11% growth, and that is – as you referred to the Boston Scientific Distribution Agreement, which has now ended. Basically, that was a loading of the channel that we have to jump over. There is also some timing when you're closing out the year with the transaction. Don't forget it was the last quarter for BART, and that's always a big quarter from a sales comp standpoint. So that made it a tougher compare as well. And there was even a little bit of drag from revenue recognition. We talk about that. being immaterial at the BDX level, but it did have about a 100 basis point drag to the PI business. So a tough comp that had nothing to do with that paper, and we do expect that to be rebounding in Q2, the PI business, and we're still calling it to be high single digits for the full year.

Your next question comes from the line of Kristen Stewart with Barclays.

Hey, good morning, everybody.

Morning, Kristen.

Good morning, Kristen.

I was wondering if you could just provide a little bit more color on Swatch, on the insulin kind of patch technology, just in terms of how you expect to approach the market. Does this require you guys to build up a sales force or just kind of any color in terms of kind of market activities that you may be looking to do as this year progresses? And then I have a follow-up for Chris.

Yeah, sure. I think Alberto's going to take that.

Yes, we're obviously in the process of defining that. As was mentioned before, the early access units will be available towards the end of the calendar year, first quarter of next fiscal year, so we have some time to... But we're beginning to... It has to do with, obviously... clinical evidence generation. It has to do with engaging the payers. It has to do with what channels do we use and what weight do we use in each of the channels. And yes, some additional focus resources that will be paced with our sales and our revenue generation appropriately. So we are looking at all these factors. It's a little bit too early to overly define these things, but we've started the process, certainly in terms of engagement of outside parties, and we're still defining our own channel strategies in detail, so stay tuned on that.

Will there be any clinical, any of the clinical experience presented at ADA, or any other meetings?

I don't think so, but maybe on fall we can define that better. Thanks, Christian.

Your next question comes from the line of Bob Hopkins with Bank of America.

Hi, thanks, and good morning. Good morning, Bob. So just two quick questions, and I apologize if I missed this, but just on the FX headwinds for the second quarter and really the first quarter, can you just quantify – the headwind to EPS that's implied in that Q2 guidance, and then also what the specific EPS headwind was in Q1, just so we can get a sense for the FX hit in the first half versus the second half?

Sure. So as we had called out in the first quarter, there was about 15 cents of headwinds. We see that accelerating to about 22 cents in Q2. Again, the dollar's moved, strengthened a little bit. We have visibility into the profit and inventory coming through In the second quarter. And then the second half of the year, you basically lap the strong dollar year over year, so those FX headwinds abate. So it's really a first-half story, but accelerating drag in the second quarter of about $0.22.

Right. Okay. Perfect. Thank you for that. Makes for easy math in the back half. And then the other thing I just wanted to discuss really quickly on the MMS side was, obviously, you had a fantastic – last quarter and a strong quarter this quarter, but obviously very different growth rates from the low 20s down to where we are today. And I was wondering if you could just kind of help us understand the moving pieces driving those big swings and what the cadence looks like for that division over the course of the rest of the year. Thank you.

Okay, so Alberto can talk to that.

Yes, hi, Alberto. There's a component of it. Most of the business on the infusion side is cash sales, if you like, as we sell the product. So it has to do a lot of times when we place the instruments, when we install the instruments, and that is defined by, obviously, the contracting process, but also when the customer is ready for that implementation. So there's a bit of bulky sales quarter to quarter depending on the disposition of the customer to actually install. The resources are there, and we can't always control it quarter on quarter. Obviously, that normalizes on a yearly basis. On the Pixis side, most of that now is given our trace methodology. 75% of that business is very predictable, so there's less variability there, but 25% continues to be what we call cash business. and that depends on the timing of the contracts and installations and things like that. So that's what's driving that, and we do have some visibility on these things, but ultimately it's when you schedule some of these installations and placements with a customer that drives the quarterly revenues. But we have some visibility, obviously, in the coming quarters, and we feel confident that overall in the year we'll have the expected results, if not less. You know, we're confident about the overall results for the year.

Yeah, and, Bob, I would add that, yes, we had 20% growth in the fourth quarter, which was particularly strong, but that's really not indicative of what we would expect for the year. But having said that, MMS is very strong, and a 6.7% growth rate in Q1 following up that pull forward of quarters into the fourth quarter is really very strong growth. We see that continuing in the second quarter as well with high single-digit growth. So clearly MMS is growing very strong. It's got a lot of great momentum based on some of the things that Alberto has been talking about. So we really feel good about that part of the business. Thanks for the questions.

Your next question comes from the line of Isaac Rowe with Goldman Sachs.

Good morning, guys. Thank you. Chris, I wanted to come back to the comment on fiscal 2Q EPS guidance. You know, the street was more like 292, so clearly the FX dynamic, you know, we mismodeled. You gave us the bottom line effect, I think 20 cents. Could you maybe go a little further up the P&L and give us a little bit more detail on what the FX means for gross margin and out margin, just so that we get the quarterly trend proper there?

Thank you. Sure. Well, let me go through each step. So, obviously, we talked about revenue growth. being down around 100 basis points from low end, so think about 4%. And that's really primarily two big things. It's the tough flu compare of about 70 basis points. And then you've got farm systems, which grew 16% in the first quarter, and you know that's a lumpy business. So that moderates in the second quarter, and that's a drag of about 50 basis points year over year. Then there's a bunch of other puts and takes in biosciences and a tough PI compare. those kinds of things will be another 30 basis points or so. So about 150 basis points of drag on the top line that obviously flows down. Then you've got the drag on from FX, which is most pronounced in Q2, as we talked about, and that will have a greater impact on the gross margin. You also got the rollout of some of the raw material at resin costs and tariff costs that we talked about that really hit us more in the second quarter than it did in the first quarter. And then another point I'd make is on a year-over-year basis, we started to ramp the investments to get revenue synergies in the second half of last year, and those are ramping, and we continue to spend that or make those investments. And so in the second quarter, the year-over-year impact is a headwind as well. Now it's positive in terms of those investments are driving revenue synergies that show up in the second half of the year. So there's unfavorable timing of spending and things like that. And then lastly, obviously, you have the tax rate being 11% in the first quarter, and that's going to moderate somewhat to get to our 14% to 16% for the remainder of the year. You put all those things together. We didn't want anybody guessing. We put out the number of 250 to 260 just to get everybody aligned with that.

Really helpful. Thanks very much. And then maybe, Vince, a follow-up question for you on markets, specifically China. If I look at the life science part of the franchise, you know, and listen to what your peers have had to say, it seems like the outlook there remains pretty healthy anywhere from high single lists to low double digits for the rest of the year. Can you just comment on, you know, what's baked into your expectations there and, you know, just kind of your visibility as to the pace of spend? You know, we're obviously all looking at macro markets. data points to try and get a sense of the economic effect as we enter 2020. And in that region seems the most sensitive to a change in the cycle. So appreciate your view.

Let me take it at a high level. Then I'll turn it over to Patrick to talk about life sciences in China, which is doing quite well. And so we actually had the leader of China in here about a week ago. And we see, even though with the economic slowdown, we could see continued spending on health care. And not a real change, you know, in the cost control mentality that was there a year ago. So kind of steady on that sense. And, you know, they're not doing big capital projects building hospitals, but they are funding, you know, continuing care. And so, you know, we had a good first quarter across all of our businesses, and as I mentioned, a little better on the medical side, including life sciences side. And so as we look at not just over the base the rest of this year, but even the next couple of years, that seems to be the pattern that we're going to expect, continued funding of the health care system. It drives stability in the country. So that's the way we're looking at it. That's the way our China team is looking at it. So, Patrick, maybe you want to talk a little bit about life sciences and what you're seeing there.

Sure, I'm happy to. Yeah, definitely. I mean, if you look at Q1, we grew about 14.7% to 15% in China in life sciences, so very, very strong underlying growth. And also for the full year, we continue to project double-digit growth for sure. And as Vin said, there's a lot of investment not only in healthcare, there's a lot of investment in pharma, and also a lot of investment in life science research, where we place a lot of our B2B products. So we are very confident that the underlying growth and demand in in China will continue for the remainder of the year and also next year. As you know, the current five-year plan in China really is focused on providing better health care to the population in China, and that will drive a lot of the underlying growth.

Okay.

Thanks, Patrick.

Your next question comes from the line of Robbie Marcus with J.P. Morgan.

Great, and thanks for taking the question. Good morning. Good morning. Two from me. One, can you talk about where you stand in terms of sales and operational synergies with the BARD business? We've seen now a one plus one equals more than two from the combination. And then maybe just spend a minute on the urology business, one that was growing low single digits with BARD, but since the deal has been in the mid to high single digits. Just help us understand what's going on there and how simple it is.

Sure. So first, Tom, we'll talk to you about the BARD synergies and where we're going with that, and then Simon can talk about the really strong performance in urology.

Hey, Robbie. This is Tom. So I can touch base very briefly on certainly the cost synergies, but double really focus on the revenue synergies. Obviously, cost synergies are going as planned, as you heard earlier. and we expect that to continue to ramp up through the back half of the year. I think probably more interest to you is on the revenue synergy side. And so as we think about that, you know, overall we still expect bar revenue synergies of about $250 million by FY22. That's greater than the care fusion revenue synergies of $150 to $175 million by the end of this year, which is well on track. And, of course, both of those are five-year targets. So in FY19, we see revenue synergies to be, think about it in the tens of bips, relatively minimal to no profit impact or EPS benefit in FY19. Because we're investing behind getting those initiatives, we start seeing EPS benefits of the revenue synergies starting next year more meaningfully. So as we think about what the drivers of those are, as we've said in the past, we invested about $15 million in FY18 towards revenue synergies Most of those in selling, particularly around our vascular access portfolio, bringing together the PIC, the midline, the catheter sales teams, as well as investing in a new surgery sales force in Europe. And so the three areas that we've talked about historically on revenue synergies are all progressing to our plans. Those three are vascular access. We've got the broadest portfolio of vascular access devices, again, from PICs to central lines to catheters. And we've integrated our sales forces in the U.S. and Europe so that they're all selling now the entire portfolio, and we're seeing really positive customer feedback. Again, we just did that this past summer, but as we look at our pipeline in those categories, I'd say it's certainly stronger than it ever has been pre-BD and Bard coming together. So we feel really good about the momentum there, and we expect some benefits in the back half of the year. Second, on surgery, again, we just put in also late last year the biosurgery sales force in Europe. And we're seeing some really positive signs there. So we're seeing infection prevention growth rate in Europe went up this past quarter. We're feeling good about the next quarter. And so that momentum is heading in the right direction. We put in just a note, we went from zero to about 50 reps in biosurgery in Europe as part of that investment strategy. So it's a meaningful number. The third was the geographic expansion. Right there, we had talked that Legacy BART had invested heavily in China and saw strong growth there, but had relatively limited penetration in Latin America, EMA, rest of Asia outside China. We've started expanding the channels in some of those markets as well to get after some growth opportunities that we see. I think that sums it up hopefully on – we stand on synergies, but we feel good about it, and I'll turn it over to Simon to talk about urology.

Maybe just before Simon starts, a little bit more data on the cost side.

Sure. So just to kind of talk about the phasing a bit, as you know, we drove about $75 million of cost synergies last year in fiscal year 18. We'll do 100 this year, and then the rest flow into – another 100 the following year, and then the last 25. So if you think about what we said, 300 million, essentially 100, 100, 100 per year, but because we only had three quarters last year, some of that flows into 21. I would say that what we're seeing is great traction in terms of supply chain and procurement synergies. And as Vince had mentioned in the prepared remarks, we're really leveraging our platform's and the infrastructure investments that we made during the CareFusion integration by bringing BART onto our IT, finance, and HR operating systems. And then, notably, some efficiencies in our real estate footprint. Think of that as sales offices at this point, those kinds of things, as well as the headquarters here in New Jersey. So we've made good moves in getting all the BART associates up here to Franklin Lakes to and closing down the Murray Hill facility. So good traction on all of those points. And then as we think through the remainder of the synergies, think distribution centers and manufacturing plant synergies, those kinds of things, continuing some of the infrastructure as well into 20. And so really feel good about the visibility that we have and the traction that we have on cost synergies.

Thank you.

Good morning, Robbie. It's Simon here. Listen, as you know, in UCC, there are three legs to that stool. There's acute urology, there's targeted temperature management, and there's home care. So across all three of those legs of that stool, we've seen great performance in Q1. Acute urology was driven by new products, and then TTM was driven by new products. And home care was driven, I think, by a renewed focus, particularly with home care, where we've identified several opportunities here as a result of a review that we did last summer as to how to accelerate the growth in that business and make it more meaningful. So as we look forward for the rest of the year, we've got high confidence in the UCC team to continue to deliver the growth rates that we've experienced so far.

Ladies and gentlemen. In the interest of time, please limit your questions to one question. Your next question comes from Vijay Kumar with Evercore ISI.

Hey, guys. Thanks for taking my questions. I'll limit to one question, just maybe on the guidance here. Chris, if I understand what you're saying, are you saying gross margins are going to be down sequentially and OPEX up just for us to get to that guide? And, you know, given your revenue commentaries, I mean, it implies back half of 6%, but you do have tough comps back half. So I'm just trying to understand the back half cadence. Thank you.

Sure. So what you'll see is in Q2, the gross margins, for example, actually a slightly favorable year over year, but it should be around the 56% level. And then those ramp considerably in the second half of the year. and that flows down to operating margin as well. So you really get the pressure in the second quarter. And then as synergies and continuous improvement and FX abates in the second half, we see that building. So think about the low end of, you know, below the guidance range of 56.5 to 57.5 on gross margin, kind of in that 56% range in the second quarter. And so there is a little bit of lumpiness, but a strong rebound in the second half.

Your next question comes from the line of Brandon Couliard with Jefferies.

Hey, thanks for the morning. Quick one for Chris. Just curious if you could quantify the impact of that tender timing, whether it's in life sciences or biosciences, either one in the first quarter.

So this is in EMA I think you're referring to, and it is a big drag in the first quarter. It rebounds considerably for the remainder of the year. And that is biosciences and a little bit in other areas as well. Diabetes care we referred to in our prepared remarks. So primarily in those areas. And as we talked about, if you look at the emerging market growth of 7.8, you've got China growing over 13. You've got double digit on Latin America. So you can see EMA was a significant drag to get you down to 7.8. And that's just the timing of orders. And as Vin said, we have the orders in hand. We feel real confident that that bounces back for the remainder of the year. And we close out EMA for the full year with a double-digit growth rate. So just an anomaly in the first quarter.

Your next question comes from the line of Larry Cush with Raymond James.

Thanks. Chris, just on the synergies, again, the cost synergies, clearly get the sense that they are, you know, built through the year. But could, again, just help us think about that second half. Is this really more of a fourth quarter event, or do you start to see some rebound in the third quarter? And then also just, Vince, any quick comment on just sort of the environment in Europe as a whole?

Yeah, so, Larry, you do see it starting in the third quarter. So think third and fourth quarter, probably a little bit more in the fourth quarter than the third quarter, but still very strong in the third quarter as well.

And the environment in Europe, I would call it stable from our business standpoint. We really didn't see any major changes in demand or pricing or anything.

Your next question comes from the line of Bill Quirk with Piper Jeffrey.

Great, thanks. Good morning, everyone. Two quick ones for me. Vince or Tom, I know you don't break it out anymore, but any comment on safety adoption in some of the major geographies? I'm thinking specifically kind of emerging markets in Europe. And then secondly, Patrick, just a comment regarding the reimbursement shifts in infectious disease panels. You guys are obviously doing very, very well in that space, and it looks like that may get more attractive as some of the private payers Follow CMS. Thanks, guys.

Okay, so on safety, Alberto, are you going to take that?

Yeah, on healthcare worker safety, which is sort of our traditional leg here, I think obviously in the U.S. that is mostly behind us. In Europe, the big push is there. There's still more to do, but I think it will be a slow process. a slow gain in terms of the penetration safety. The big push also is probably behind us, but there will be steady growth there. And the opportunity still remains in the emerging markets as the standards of livings and the availability of funds happen. It will be adopted more. So that's probably where the upside is more. We're also now pivoting more to patient safety. a more comprehensive view of safety. And I think there we're seeing, we're putting in place some pilots that really can, we think that can begin to move the needle beyond just the healthcare worker safety, more centered around the patient. And then there's other components like our hazardous drug safety as well, which is related also to more healthcare, but it's not from a needles and syringes and catheter perspective, but more protecting the pharmacist doing the preps against oncology-type drugs that are hazardous to health.

Yeah, just to support what Alberta was saying, you know, you step back and you look at, you how we're focused in safety. Remember, once we've done, you know, we did the bar transaction, we now cover 75% of the HAIs. And so, as Alberta was indicating, we have a broad infection prevention program that is more of the growth driver than the needle stick safety at this point in time, and we think that's where the real legs are.

Your next question comes from the line of Rick Weiss with Stiefel.

Good morning, everybody. Chris, maybe just picking up on your early comments about the accelerated debt pay down. I think you said you paid down over 400 million in the quarter. I mean, clearly you're on track to get below three, but just remind us why you need to get below three. It sounds like the debt pay down could even accelerate as the year unfolds and maybe evolving use or cash priorities or balance sheet priorities. or options over the next 12 to 18 months as you get toward, obviously, a very much delivered position. Congrats on all that. Thanks.

Thank you. Well, we did pay down $400 million in Q1, and we've paid down $1.6 billion since the transaction closed. And we're down to 3.8 times leverage at this point. on a path to three times leverage by December of 2020. And you can think about that as rateable. So you mentioned accelerated. This is pretty much in line with what we had anticipated. Now, when we committed to three times leverage, we also left ourselves some room to do tuck-in acquisitions and to continue to invest in the business. And so we've continued to do that. You saw the TVA medical acquisition as an example of that. so we're not feeling constrained in terms of doing tuck-in acquisitions. And I think it's important that we get back to our commitment levels, because when you flex your leverage like that, you're committing to the rating agencies that you're coming back to a more normal leverage level. And we did that on Carefusion. We got back down to the three times leverage. And so we're very focused on living to that commitment again. and well on our way to do that.

Your next question comes from the line of Matt Taylor with UBS.

Hi, thank you for taking the question. I wanted to ask one about medication management solutions because it continues to do well, and you talked about above-market growth there for infusion, and Pixis has been doing well as well. With the new health site platform and with this outperformance that you've driven now for years, I was hoping you could give us an understanding of how long you think you can drive the above-market performance. What are the enhancements that we could see going forward, and where are you gaining share from? Is it new sites, or are you actually taking competitive share?

Well, I'll start with the last portion of the question. I think there's two aspects of that. One is that we're expanding the market with new capabilities, and HealthSide is an example of that, that were not there before. And we're doing that fairly uniquely, so that obviously affects our share of the pot, if you like. And then... In terms of the visibility that we have, we think that the current environment and competitive environment will continue in the sense that we anticipate to continue to do that in the foreseeable future. Beyond that, it's more difficult to say. But we could continue to invest in our platforms, in our capabilities, and mostly this concept of better as one. All our platforms are unified in terms of the The tech stack in terms of the analytics, and we think that's a big, big driver in the medium term and the long term.

Hey, Matt. Matt, this is Tom. Maybe just to compliment Alberto's comments. So, you know, we don't comment on specific competitors, but I'd say we're taking share across most everyone in both the pump and the dispensing space at this point. And so we do feel good about that momentum. And as you heard from Alberto as well, we've been continually shifting since BDN Care Fusion came together. We certainly continue to invest in the platform itself. Let's call it the hardware, which has been traditionally where a lot of the investment's gone. We do have, and we've recently released, next-gen pump, of course. With the M2, we've got next-gen pumps beyond that as well, deep and well underway in our pipeline. And we have the same thing for Pyxis. Of course, we launched Pyxis ES. We have next-gen versions also in our pipeline as well. But we have very purposely shifted a chunk of that investment increasingly into the software solutions. And you saw that with HealthSight. You saw that with the narcotic diversion analytics, et cetera. And we see that when customers look at our solution versus what may be available from others in the marketplace, it's that software connectivity across the platforms that really allows someone to manage the medication management process in a unique way. that we think we've become a very preferred and unique offering in the marketplace because of the solutions that we've been able to bring together, not just on the hardware but through the software that connects everything and eliminates the inefficiencies in the process and eliminates the opportunities for medication errors in a way that, again, is very unique in the marketplace.

This is Alberto. I'll just complement one data point to give you a sense of – how HealthSight is getting traction. HealthSight Viewer, which is something that we, it's a product that we launched in fiscal year 18, already has over 140 sites that are live, for example. There's obviously some others like Diversion, and eventually Optimization is a little bit too early to say. We do certainly see some contracts flowing through, but the 140 sites for HealthSight Viewer are live.

Your next question comes from the line of Richard Newitter with SVB Lyric.

Hi. Thanks for taking the question. Just to follow up on M&S, you know, with respect to the capital spend environment in the U.S., we've seen a number of competitors and companies in the space. put up some strong capital numbers. The environment seems pretty robust, and also I would imagine just including some of your confidence in the outlook for this division. So I guess how much of the robust outlook is underlying capital investment? Where are we in the cycle in your view? And, again, how much of the lift or the optimistic outlook is underlying spend versus the market share gains that you've been alluding to? Thanks.

Yeah, I think there's a couple of things going on here. One is, you know, hospitals, in terms of capital spending, are doing well, and we don't see any significant change in that in the short run. The other thing that's going on is that, you know, we've seen remarkable, you know, concentration of our customer base and starting to see a shift in governance. And I let me call it improved governance across large systems. And as that happens, they want to standardize care. They want to standardize their systems. And I think what you're seeing is early on in that conversion with that mentality in the marketplace and the kind of approach that we are taking with HealthSite and the InfraMax tying this across the entire system. Alberto just gave you a quick update on that. you know, the fact, the number of accounts and whatnot. We think we're very early on in that story, and the winners in the marketplace are going to have to run that way.

This is Tom, and maybe just one other comment as well, just to keep in perspective. Obviously, we get very focused on what's happening in the U.S. with Pixis and Alaris and the software solutions we talked about, but I would say that we're also getting strong performance in the other areas of MMS as well, and that includes our CME acquisition that we did the other year, which is for the alternate site home infusion market, primarily outside of the U.S., and also our ROA platform, which is for retail pharmacy dispensing. We've begun having some sales in the U.S., but that still is primarily an ex-U.S. business, and it's also growing very nicely, double digits, and it's getting of increasing size because we've been growing at double digits for the last few years. areas we don't speak as much about, but certainly are helping to fuel the MMS growth rate as well.

Your next question comes from the line of Amit Hazan with Citigroup.

Thank you very much. I want to come back to the interventional and peripheral segment and just ask, it looks regionally that the slowdown was both in the U.S. and outside the U.S., so just a clarification if you can help us understand if the Boston Scientific distribution agreement impacted both regions, and then just given the focus on DCBs here, a little bit increased focus. If you can just give us a reminder of how DCBs grew in your fiscal 18 and what you expect for fiscal 19 for DCB growth. Thanks very much, guys.

So, hey, I'm with Simon. So with respect to outside the U.S., you know, as Chris said earlier on, too, the work There were some tender issues here in Q1 on a global basis that we're coming back from in Q2 and beyond. And with respect to DCBs, across the board, we expect mid to high single-digit growth in DCBs across the SFA and AV platforms. But I think it's very important that we don't isolate the DCBs when we have a a full complement of solutions. So, you know, DCVs, PTAs, stents, standcrafts, we have the whole bag, whether it's SFA intervention or AV intervention. So to focus on one aspect of that is not doing the category leadership position that we've worked hard to generate any favor. So we look at it as a total solution here.

And some great new products coming out there. Thanks. Thanks for the question.

And presenters, there are no further questions. Do you have any closing remarks?

Yes. Thank you very much. And thanks to everyone for their questions and a really great dialogue. So let me just move to my closing remarks. In December, we celebrated the one-year anniversary of the closing of the BART transactions. And I have to say we're really proud of our achievements over the past year as a combined company. It's just off to a great start. Secondly, fiscal 2019 is off to a strong start with continued momentum across our businesses and regions after a strong finish to the year in 2018. And looking ahead, I'm confident that we will continue to deliver on our commitments. So thank you very much. We look forward to updating you next time. Thanks, everyone. Have a great day.

This concludes today's conference call. You may now disconnect.