Becton, Dickinson and Company

Hello and welcome to BD's first fiscal quarter 2020 earnings call. At the request of BD's, today's call is being recorded. It will be available for replay through February 13th, 2020 on the investors page of the BD.com website or by phone at 800-585-8367 for domestic calls and area code 404-537-3406 for international calls using confirmation number 688-6458. I would like to inform all parties that your lines have been placed in a listen-only mode into 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, Pasha. 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. Our first quarter results include a charge of $59 million related to a voluntary recall in the MMS infusion business to address certain software and alarm prioritization matters. This item, along with the details of purchase accounting and other adjustments, can be found in the reconciliations to GAAP measures in the financial schedules in our press release and in the appendix of the investor relations slides. A copy of the release, including the financial schedule, is posted on the BD.com website. Leading the call this morning is Tom Poland, Chief Executive Officer and President. Also joining us are Chris Reedy, Executive Vice President, Chief Financial Officer, and Chief Administrative Officer, Alberto Moss, 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 President of the Life Sciences segment. It is now my pleasure to turn the call over to Tom.

Thank you, Monique, and good morning, everyone. You saw in our earnings release this morning where we brought down revenue and EPS guidance for the year. And let me just say that resetting expectations is certainly not how I want to start my first call as CEO. And so before we jump into what's happening with Alaris, I want to say that how we're going to discuss topics on today's call is what you can expect from me. Straight talk, accountability, and an unwavering commitment to quality and regulatory compliance, our values, and doing what's right. At our core, BD is a very purpose-driven company. It's what defines who we are, how we operate, and what actions we take. And you can expect that our purpose and values will be at the heart of how we respond to the current situation with Alaris. Every company is going to face challenges, and the real measure of the company's strength isn't whether or not we face challenges. It's how we respond. And I'm personally focused, along with my entire leadership team, on fully resolving this situation. So let me take you through what happened, starting with what we said in November and even more recently, and how our conversations with the FDA have continued to evolve, even specifically this week. In November, we told you we were planning to make some improvements to our Alaris pump software, including upgrades to alarm prioritization and optimization. We indicated then that we were in active discussions with the FDA about the timing and implementation of these improvements. Relying on our quality process within the infusion business and how we've managed Alaris software updates over time, the team believed we could take a phased approach to releasing Alaris software updates and that these releases did not require of 510 clearance. We then issued the first phase of our software updates in December, and we resumed shipping as we shared with you last month. Through ongoing dialogue with the FDA, including an in-depth discussion this past Monday, we learned that the FDA disagreed with our conclusion about the need for a new 510 clearance for these software upgrades. And in light of the consent decree, the FDA has requested that we combine all Alera software enhancements recall remediation updates, and changes made to the ALERIS system over time into a single comprehensive 510 filing, which we're going to submit in the fourth quarter of FY20. We're actively continuing to collaborate with the FDA to ensure we meet their expectations for this upcoming regulatory submission. I want to be clear here that while we relied on our infusion quality process and system, We have now learned that in this case it did not meet FDA's expectations, and we're committed to taking the appropriate actions to get this right. I also want to be clear that we fully stand behind the safety and the clinical benefits of our product, which is used in the care of 70% of patients undergoing infusion therapy, and that's a responsibility we do not take lightly. We've provided guidance to our customers on how to mitigate potential risks until our software is fully remediated, We've also created a dedicated team of clinical consultants to support live training for healthcare providers. And we will continue to support existing customers to ensure they have access to the Alaris system under medical necessity. As CEO, my foremost focus is on ensuring the right supporting processes, capabilities, and execution within the company to ensure we deliver on FDA expectations. Chris will discuss this more, but as you saw in our news release, Based on this situation, we reduced our guidance range by approximately $400 million in revenue and $0.60 in EPS for fiscal year 20. I also want to comment on China's volume-based procurement initiative, which we've shared would be impacting our MDS catheter business, and that we now have a much better sense of how the situation is evolving than we did last month. So while it's progressing faster than we initially forecasted in November, We expect to fully offset the impact at the BDX level. We've got several upsides from the rest of our business in China, which are expected to grow double digits during the year, and there are also a few other areas that we're doing better than expected in so far, including flu testing, DCBs, and FX. We are a strong company with a diverse portfolio, both in terms of our products and our geographies, and there's a lot of good things happening across BD. And I want to highlight just a few. First, our Q1 results were in line with the expectations we shared with you in November. The businesses in the regions delivered solid performance, led by life sciences, where we saw an incremental benefit from the flu, and our interventional segment, where we saw growth from new products and DCBs, also started a bit better than expected. During the quarter, we continued to make good progress on the BD-BART integration. We remain on track to deliver $100 million in cost synergies this year, which brings our total to $300 million over the three-year deal period. We also continue to scale our commercial programs as part of our commitment to achieve $250 million in revenue synergies by 2022. We've continued to make good progress there with things we've talked to you about in the past, such as the European Biosurgery Incubator, vascular access management, and our international product registrations. Another strength in FY20 is our ability to deliver on a robust pipeline of new products, and we're already off to a solid cadence with 11 new launches so far in Q1. And there's three I'd like to just call your attention to. In medical, we're continuing to innovate in our vascular access portfolio, and we recently launched the new PowerPik Provena catheter with Solo 2 valve technology, which makes the catheter easier to care for. Our early feedback from customers is extremely positive. In life sciences, we recently introduced the BD-Core molecular system that's targeted in Europe. This flagship innovation completely automates the molecular laboratory workflow, and our initial system configuration is available with the BD on Clarity HPV assay, which is used for cervical cancer screening and diagnosis. We're still very early in this launch, but we feel really good about the progress we've made so far, having already signed 10 high-value volume accounts in Q1. Of course, we're new to the HPV market, and so all of that is new business for BD. In interventional, we received clearance for Elevation, our next-generation vacuum-assisted breast biopsy device, which helps ensure tissue samples, high-quality tissue samples, regardless of the density of the breast tissue. It's early. but we're getting very positive clinical feedback here as well. We're excited by these and our other launches and our long-term innovation pipeline. What you see on slide five captures our major launches for FY20, but it's only a small portion of the total active R&D projects that we expect to bring to market over the next three to five years. We're also entering several new higher growth market spaces with our overall R&D pipeline focused in markets growing 1% to 2% faster than our existing product portfolio. And we see elements of our automation and informatics capabilities in the pipeline across each of our three segments, including now in interventional, where we're starting to leverage BD's capabilities to digitize the legacy BARD portfolio. Before I turn things over to Chris, I want to make some comments on the coronavirus. First, as it comes to the coronavirus, the health and the safety of employees in China and around the world is our top priority. We're closely tracking the virus in China, and we're paying particular attention to the guidance from the US CDC, the WHO, and health officials in China. As you'd expect from us, we're also supporting response efforts in China by providing in-kind and monetary donations to the Wuhan Red Cross and Project HOPE. BD doesn't manufacture, we don't have any manufacturing or distribution operations in the Wuhan or Hubei province, and we are adhering to the guidance from the Chinese government and extending the Chinese New Year holiday until February 10th at our offices and facilities in Suzhou and Shanghai. From a supply chain perspective, about 95% of the products we manufacture in China are sold and used within China. We currently have sufficient inventory of the few products that we export from China to meet current demand. And within China, imports of goods and raw materials are being received as expected. In terms of business impact, of course, the situation is still very dynamic. We are closely watching and balancing two trends. First, we are seeing fewer people go to the hospital to seek standard care. At the same time, we have received and installed several urgent orders for additional BDMAX molecular systems, which are being used in coronavirus testing. Chris will take you through how we're contemplating this within our guidance. We'll continue to closely monitor the situation and keep you updated as it evolves. With that, let me turn the call over to Chris.