BAX - Earnings call transcript Q1 2018 | Baxter International Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Baxter International's first quarter 2018 earnings conference call.

Your lines will remain in a listen-only mode until the question and answer segment of today's call.

As a reminder, this conference call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission.

If you have any objections, please disconnect at this time. to call like to now would turn over the Ms. I at Vice President, Trachtman, Baxter Investor Clare Relations International. Ms. may you Trachtman, begin.

Clare Trachtman

Thank you, XXXX quarter to our Candace. Good morning, earnings and conference welcome first call.

Executive Joe Officer. Financial Chairman today Baxter's Almeida, me Jay Saccaro, are and Joining Chief Officer and Chief Baxter's

financial this XXXX. XXXX presentation, A discussion to this along the supplemental quarter the call discussing can first final non-GAAP under reconciliations on related Investors accessed website morning's on with This we presentation along morning, On with our be be Presentations. our will and Baxter's be of section results, for website. Events external accessed outlook complement can Baxter's in

and to from could that Press materially factors for results start Presentations and forward looking regarding actual The details Release this information filings X:XX will roadmaps found and statements that Baxter Innovation reminder, update May the New that, actual Investors financial with Events SEC and will a risks be everyone strategic contains our a.m. XX matters expectations. aspirations, at cause be new development As regulatory pipeline financial on of our page. At our in uncertainties in at our more City Eastern along conference, our before the prepared the with Please providing could be product product materially. and, showcasing Innovation reminding let conference outlook, on presentation can and Time. by hosting course, me of an to results baxter.com our be we Hall new an and differ investor current section remarks additional refer today's comments York details promising long-term on our With that after including presentation. Hall. the our beginning development, business involve differ will open concerning and Registration presentations

A business website. included measures understand non-GAAP reconciliation today help the release our In financial today's earnings will be to being our used and morning discussed ongoing measures on this Baxter's is financial addition, measures in financial performance. investors to of GAAP issued on available call, non-GAAP comparable the

I'd over to call turn like Now Joe. to the

José E. Almeida

Good our look morning, I of advance financials rest with quarter at will thoughts closer conference. and in share everyone, our a transformation an I brief us on then a start first a joining our about of you performance. our update today. upcoming look at take thank year. the will QX investor for will and provide guidance Jay for Then the the few ongoing

Baxter top-line X% We kicked and will basis, the maintaining off with delivering course momentum first on basis, the strong currency Q&A. on reported our a quarter a have increased with in constant XXXX X% transformation. solid operationally. over the results, business close we of X% Sales performance built and

operational first for in reminder, for acquisition. adjusted U.S., and impact the exchange, sales a of cyclophosphamide Claris As the foreign quarter generic competition the

our our first U.S. efficiency to bottom were Rico Puerto and disruption rate. to On year-over-year. operational benefit earnings XX% pension growth share increasing $X.XX performance, reflects was the adjusted continuous recent from a positive of contribution improvements, per line, top-line tax This due by sales our Maria. negatively related plan, with a Hurricane lower manufacturing in the to outlook, line In temporary affected $XX million, approximately quarter change

FDA's this to for and address XXX% patients resolve minimum customers allocation of do FDA discretion further to we At with return This critical our as the not up with Maria. call, of pre-hurricane our to the point, due Hurricane to granting in As ramping regulatory of helping We'd temporary significant we special of importation categories a products has and Puerto facilities already product coupled QX levels all the supply to indicated operations. Rico challenge. major product custom gratitude on for milestone, collaboration revenue expect our our were we like relay worked support facilitated us recognize continued connected the January. to production impact any certain supply these and our in

opportunities quarter, In optimize demand. strengthen to we supply manufacturing continue increased increased our identify to receipt U.S. addition, and IV large FDA, network. permanent a volume In following to shipments from from of global solutions to the we address approval of Mexico U.S. the

will we Innovation additional additional to depth modernization our and surgical of impact. that essential customers focused are South hemostats this in we're two intraoperative ensure sealants. period existing we facilities we in look completed remediation market portfolio and volume to surgeons complete of bringing from the driving our Mallinckrodt, acquisition borne from manufacturing have and additional to of U.S. U.S. reallocation processes levels when on select options as by The may help organically supply Going beyond. PREVELEAK This reallocate of service manufacturing growth will will into during reflect, and bleeding U.S. equation a at remediation America and, production IV highlights month, our and is activities Puerto advanced inorganically solutions appropriate modernize Baxter us our enhancing both action to forward, allow new the offering RECOTHROM for our and facilities certain optimal both products and Rico. These portfolio QX to Last already and us occur. growth the

of team TISSEEL recently our leading TISSEEL now Europe. surgery sealant, is during surgeons began and offering speed, enhancement greater significant addition, fibrin Prima the In control fully launch redesigned a of TISSEEL our in application market through precision, syringe. a advanced Prima assembled

growth team KAGUYA to our opportunity. made top time, supported to reflect to commitment impact as very our facilitate both believe reflect our to operations and weeks advanced preferred steady and more reflecting who in we strategic demographics. care across incorporating just local focused choice. distinct where treatment renal KAGUYA peritoneal launch you has at pass the sustain our represents manufacturing been forward next extending patient progress we features through as of outline swift, we across And on investor chapter QX stage growth developments these look is an the financial We goals. began system, In renal And lives. together, in needs positive. All mission strengthen sharing innovation and while to Jay, performance upcoming of information on several more transformation. treated and the results what's Taken Baxter's pediatherapy disease businesses. the a our and the our are the through to KAGUYA APG hemodialysis. our innovation technology. our our healthcare pipeline. conference, save in Baxter's nearly surgery walk have new the efforts broader it Japan, our product in we've by importance of to is detail. evolution place Baxter's We core to also At Currently, AMIA And driving strategy and we'll pipeline dialysis feedback surgical remain our our on on important Early the all objective spectrum, accelerate end in, our by same choosing quartile few patients option I'll made their Japan's similar quarter's patients will a short now, in-center over more store

James K. Saccaro

Thanks, Joe, good and morning, everyone.

outlook to represented injectable before quarter, first renal currency continuous strong constant updated strong quarter on Key therapies, solutions as of our for replacement at demand company's we're an flu I'll and guidance operational by pharmaceuticals growth products, X% results to IV mentioned an the quarter first basis, surgery a which dialysis exceeded on for results, therapies. $X.X and first global encouraged with our season, intense start as and the a sales peritoneal quarter Joe XXXX. included advanced financial X% providing the of billion year. increasing basis. discussing drivers increased start reported for the As X% Beginning sales our by well due

mentioned, As do $XX our Rico first manufacturing quarter previously million. as revenue mentioned, impact forward. sales further approximately not disruptions to to And Joe facility impacted any negatively expect Puerto moving we by

On XX% lower rate, adjusted performance guidance $X.XX to tax recognized diluted than line, exceeded to previous increased per our quarter. during largely share. a share, This and items $X.XX driven due we discrete per operational expected of $X.XX the the by certain bottom to earnings

performance constant for for businesses equal through of Note growth you all our by new our units. and quarter, sales business walk Pharmaceuticals sales operational exception to the is global I'll with growth this currency Now, business. regions

For U.S. cyclophosphamide for this generic X% Europe, East business, Asia-Pacific the Middle X% three we and regions. a will Americas grew And Africa currency operationally. X% basis and provide of constant operational growth, first in acquisition. basis. competition our currency constant finally, adjusting and the Sales with and Sales the a for sales advanced Starting both operational on for Claris region impact our X% constant currency rose operationally. in and X% on in growth sales

in our constant constant partially hospital the Sales global by $XXX by Global currency Claris quarter advancing Care driven our flat Performance sales last million, quarter. was increased Transderm able million Pharmaceuticals basis. U.S. quarter, operationally. from lower well the currency increasing for offset of strength a the Hurricane the and our Maria. performance recognize were Sales in volume contributed driven supply business IV we backorders in Scop HD a Medication which Delivery Performance of given million to Strength Hurricane contributed the as in offset in was $XX on from to in basis. was competitive X% on Moving units. U.S. clear of and growth injectables quarter year the global were quarter impact due currency continued million, constraints. Renal we to were PD both was pharmacy business, compounding million, sales for internationally of on additional also Sales XX% BREVIBLOC to by Maria. was for by a constant were from $XX $XXX benefited as strength sales the impact sales $XXX growth benefit globally. and and by the cyclophosphamide in U.S. Performance solutions would in growth were business driven by X% as businesses. Mexico. in large-volume number the Growth solid international

X% year. basis. Moving sealants in Hurricane international to business Surgery constant $XXX Maria improve on markets in advancing impact were U.S. Performance flat increasing sales and nutrition, quarter. currency X% the of core the continues with this offset to total in was our million, sales Advanced were prior sales. in $XXX to for by on Sales hemostats Growth a million,

$XXX currency the global the quarter. As mentioned of of in the Therapies growth of in strength and were season, the our quarter benefit a Sales therapies demand the PREVELEAK for business in XX% for in Sales which Acute these RECOTHROM intense as growth acquisition products. a quarter basis. X were an Contributing quarter. from was Baxter's points well growth flu CRRT constant as approximately to in contributed in immaterial completed representing we on million, late previously,

Finally, other of our compared sales our basis. to declined million on the to prior-year the items was period. quarter XX% manufacturing certain primarily includes constant category, services, the $XXX in in a impacted which currency contract timing Performance by

as point during current versus of on points the rest currency and X% which by increased expenses. the of the of to share, and Strong constant impact adequate nonactive effectively in expense contribution pension and recent reported a the operating in declined other transition December our of was out separating XX.X% currency on foreign reflect which FAS per totaled foreign the from R&D points incremental acquisition for Claris X second of been And, the The R&D operating and the previously a basis U.S. our focus to other the for lower tax points was the a over through added a in as as in expenses in XXX-R benefit positive foreign quarter. XX costs income. U.S. prior-year first operational by exchange, was service guidance was more of million base service stock in all to $X.XX for quarter our P&L, work operating basis prospective decline changes quarter. plan timing XXX and all margin as expense XXXX and we lost lower requires was plan. exceeded mentioned, prior of from gross was reported million expenses. to to million relentless the impacted employees we from constant the X% of supply on income XX share flat totaled compensation as adjusted components of than by our positions service adoption operational of the these and pension Underlying primarily sheet quarter reported The as change. announcing adjusted $XXX was from XXXX. were expense $X.XX the Moving by diluted million, plan of other employees, agreement to SG&A as pension availability Shire XXX and of quarter, is quarter. Previously, of is in we well Hurricane the XX.X% sales on margin quarter per recognized income, reflecting tax adjusted and ensure negative the operational Adjusted of points and on in product more the from absorbed benefit guidance into freight benefits was a accounting well of effective income expense These $XXX discrete Net in Maria Adjusted the costs quarter, two expected impact offset basis. the due the a quarter expansion on offset increased to supply offset needs. basis million $XX income due X% customer impact spend, in that up basis Adjusted items our in for chain on performance growth impacted exchange, quarter to Adjusted lost active to our expense plan active basis gains for made period. $XX reflected included favorably basis the the Maria, our of which pick managing active quarter rate. approximately than prior $X.XX plans certain recognition we the year. expansion of $XX Results more rate. loss The of of than primarily changes increased also year. chain the sales recognized the the freeze the in rate new have part restated a of balance XXXX. changes The increasing exchange pension meet earnings of guidance income Hurricane the SG&A project-related from spending basis for interest driven XX.X%, by a other certain a transition a

option-related During we dilution repurchased million the shares. the repurchases or quarter. first offset $XXX in These X.X million, quarter, somewhat were by

first performance cash Growth generated commentary $XXX our performance. driven we of XXXX free payable. underlying an performance, flow of will cash to in the working with improving Before the provide million continued I turning most approximately notably outlook, our capital improvement was million, flow some regarding our focus operational the versus In days on along quarter, company's $XXX year. prior by

operations settlement benefited the flows $XX In a to quarter from addition, Claris. of of during payment claims certain cash the for the acquired million related

approximately reported XXXX on and X% comments on X% this guidance impact to full-year expect X% Globally, sales our conclude by second of foreign full-year the basis. my sales U.S. the cyclophosphamide, me basis, the X% of increase on we a now X% an between and of Let sales morning seven providing quarter for constant to first XXXX. and between and sales PREVELEAK. exchange, Operational months growth currency operational excludes Claris, from basis, of RECOTHROM a and

Delivery, to guidance on Pharmaceuticals X% of X% constant of business X% This Moving X%. we million. constant to to to now million Renal previous continue XXXX operational increase In U.S. cyclophosphamide Care expect Medication business, expect to $XX where sales $XXX X%. versus of and otherwise assumes to expect by currency. to noted, except basis, increase we We sales our X% growth guidance in currency a now

Claris approximately million. of We to $XXX expect sales contribute

increase approximately X%. operational the of sales, growth Excluding is expected these to impact

continue X%. we X% Nutrition, to growth to expect to sales of Moving

Advanced For increase the of constant basis. X% Surgery to expect approximately on contribution to we to a $XX of includes sales our a X% business, recent related and PREVELEAK. RECOTHROM currency This acquisition million

sales, the of be these Excluding X%. is impact growth X% operational to expected to

to first XX%, anticipate strong of growth For quarter we the performance. now the Therapies business, X% Acute given

continue in Finally, low-single we expect in other digit declines to business sales. our

operating to P&L, we points. XX continue XXX the anticipate down Moving basis of margin to adjusted expansion

other million for expense of an $XX million $XX interest expect approximately between We $XX million and net XXXX. and adjusted income

we now the adjusted the reflects rate tax of expect the an The lower first For quarter. average rate tax during rate we year, XX%. reported approximately

XXXX, a benefit per share shares. the on full-year items diluted reflects This earnings, we of count $X.XX of approximately adjusted anticipate For expect share average to million diluted of Based repurchases. we factors, $X.XX share. special XXX ongoing these XXXX excluding

generate second reported Specific billion. second open we And flow we X% share. cash X% than sales $X.XX expect operating expect of sales Operationally, basis. of year, million, on quarter the we to more earnings, excluding the call are a the to of now X% can the free basis more With adjusted and than of growth approximately and to XXXX, flow for up special a quarter Q&A. approximately in for increase $X.X to of $X.X cash currency capital expect items, billion, $XXX on diluted Finally, to we of X%. that, expected constant $X.XX expenditures per

Operator

you. Thank

will begin answer first Stanley. And comes question David Lewis session. and of from question We now the our Morgan

Your now line open. is

Varun Kuchibhatla

hi. second David. Oh, a for guidance. just quick on question I on Varun is quarter had This

through, you X% maybe the for ex-cyclo and to guidance walking X% Just quarter. X% quarter your operational kind did second the is first in of so

maybe as point. well; the you got Just maybe hurricane point and you've given the another and that's easier comp gives one Transderm

leaves Just Thank X% there's rate only missing something quarter understand X%. to wanted growth maybe at if the we're that kind of to that next you.

James K. Saccaro

No, growth the what of at moving the said certainly, consistent with look, balance the rate largely it's we've year, into look we the past. as in

impact quarter, the point first hurricane second the to there as the of that about quarter. we us, in look was at For related saw we a

rate we as a will the like year. lines impact products' of the more adjust come at of the the and XXXX, for second of that X% said, we new you So, to along could the balance growth look as see half in

why this the the able of year. nine the like But KAGUYA previously half along and now of second products SPECTRUM of been with launching to X% I a of X% be that through to say, new in that the pump. reasons one version year, the we've to the benefits the X% as lot comes relates So, to guide of impact, we'll things

QX. really So, acceleration back drives that's relative half to year in of what the the the

Varun Kuchibhatla

Thank you.

Operator

from Thank you. comes Vijay of next question And our Evercore. Kumar

line Your now open. is

Vijay Kumar

guys. here. really Congratulations a on strong quarter Hey,

guidance – the really just was understand I your didn't one core to Jay, the starting the XXX acquisition it change. close. on contribution, by on So we points deal wanted raised had look maybe Mallinckrodt at When I if organic because basis

I'm the for So to understand trying operational what's increase just core year. the

James K. Saccaro

to on that three the that to are you just X% X%, there give excludes. of little a background growth operational items Yeah, core

First, Claris. it XX excludes basis points of

basically So, are sales excluded from operational Claris of seven growth. months the sales

cyclo basis, XX that's of the is a Mallinckrodt about around points excludes from it operational we excluded acquisition And be on also which basis basis growth. that is And impact, now XX to item second points. impact. expect The the year-over-year finally,

the the of to between the throughout we increase. to solid expect the rest that's the year. currency operational X% driver QX the growth. X% operational that kind Really, reason led of the performance, raised to was really of hold and growth That difference why the constant that and from drivers So we've growth primary the was

Vijay Kumar

maybe. And Jay. helpful, margins, that's one on No, then

again, QX. think was FX margin just we've and I the in about I looks mentioned And cyclo's I now strength given the be call, the comments I'm positive guidance to and think QX on you we given if pension the pension assumptions, Q, When think the it a coming actually half, supposed curious recall made right, in seen. headwind. on you better; in like back hurricane prior was and that EPS

James K. Saccaro

the the a to really, with did to components with pleased relation we in different and bit margin, tell I about in Yeah, that of expectations pension, of little is will of how operating income year-over-year of performance. our year. see the relative accounting roughly balance our would change that overperformance because what of QX other XX.X% that the our pension be or see the below we lower to think definitely so, of expectation be benefit you line margin than margin we're place line. It's in The that lowest the year. QX the we'll the seeing will most takes expect in

cyclophosphamide a impact impact. the three we'll the that lot back have of, no quarters, of of coming see We hurricane levels mentioned impact of in expect in latter I anticipating margins part a the product number will launches, Having start year a the headwind which elements the QX to particular, but have still a a of that, to are in do good the as Furthermore, in say, decline some we new earlier, we relates that, big through balance from a little said bit. bit step-up because I like we the of year. to

Vijay Kumar

any maybe I are if squeeze Joe. thoughts deployment just on Joe, can guys cap for on deployment, And front? thoughts, updated in thinking one the about cap how you

José E. Almeida

Vijay, changed. it hasn't

on very are focused We things. three

outspoken We think the been M&As about dividend we is If M&A. find don't our continue deploy increase sheet, very we'll year-over-year. our share And And our to cash balance continue plan we we've and accumulate to share always rate right look back. in to buy to that. buyback, dividends; cap I

of plan is and that from unchanged view. point So, preset our capital

Vijay Kumar

Thank you, guys.

José E. Almeida

you. Thank

James K. Saccaro

Thanks, Vijay.

Operator

Robbie Thank from comes you. our question next of Marcus And JPMorgan.

Your line open. is now

Robbie J. Marcus

quarter. Great, good a and on congratulations

José E. Almeida

Thanks, Robbie.

Robbie J. Marcus

could maybe Jay, I start.

you where the guidance different a You the above balance well in buckets what from us year. the raised over of first it's you breakdown give Maybe coming EPS of could of the quarter. beat different

James K. Saccaro

of it Great. the midpoint breaks EPS your $X.XX there. of to guidance roughly was Overall, overperformance. And our expectation, was And QX new the raised down roughly Of on relates $X.XX. Robbie, congratulations assignment $X.XX $X.XX the from are raised, where count the number saw and strength, other that and of $X.XX share about a components and rate, that. in positive included things tax items a number financial, of and we performance, includes of like then of there operational that that,

overperformance. really So QX that's the

$X.XX, We've is we to approximately line cyclo, to then added million bottom to the our of we the of positive. two changes that year, relate balance the Mallinckrodt, contribution and cyclophosphamide. have roughly $X.XX around expect to adjusted we the which to guidance made of reflect which the also Looking $XX primary be

roughly raise. a it's $X.XX; to go. We've got $X.XX another balance, on seen we've $X.XX So,

Robbie J. Marcus

And out growth me quarter businesses are stand follow the The up. and are past. maybe Care in are most that than Great. just that different rates what we'd two These experiencing the seen to to Renal businesses Pharmaceuticals. in

So maybe is you some could pointers the happened just of quarter us how what forward. this give and sustainable going in Thanks.

José E. Almeida

start Care. let's Robbie, Renal with

I year the have think to year this which U.S. new change a last feel we the that from has for confident agreement been is in we propelling the momentum, company. DaVita with positive

think large now behind this that issues patients, advancing of I is growth engaged potential us, patient, together. what I think, with the companies the we achieve think see I vast and undertaking with of DaVita I in lawsuit modality. can are both the the market think now PD that and potential for and market true And we the and the

Pharmaceutical the is one second The business.

lack you think competition a there see one is thing. what for I of That's cyclophosphamide.

the of past. at look coming that's molecules than planned continue we launch had plan you the in if think, that we thought. performance Claris, And we the I to to slightly better

So, in the another marketplace. now comment BREVIBLOC. is has like BREVIBLOC drug is that that a we'd item competition to

if who should with let market us And and we come, later year the we'll However, we don't Coming not. competitor base a provide in think they this a the to that with and has know. to the do you customer be secured was continues business. on

they as have to actually, will we plan, competition. If grow. which the continue guidance, they is come also continue BREVIBLOC to we'll problems, if experience that in Now,

that So, the Pharmaceutical business well. to and strong do the despite a has it BREVIBLOC fact is will competitor continue

Robbie J. Marcus

BREVIBLOC? just for guys your you lot. do guidance competition a timelines are and cyclo for in mind what And clarifying Thanks

Clare Trachtman

respect Clare. Sure, quarter, in this do With to BREVIBLOC, we incremental second in quarter. starting competition Robbie. It's expect the

with similar For the QX cyclophosphamide, had as second of we we're in in QX, rate in half competition the entering assuming run the year.

Operator

you. Thank

James K. Saccaro

Robbie. Thanks,

Operator

comes Isaac Ro, question Sachs. Goldman our And from next

open. Your line is now

Isaac Ro

gross those of margin Good gross for on Could roll rest of went of for the curious, off, you as morning, year? guys, those level? year Appreciate the on as net what we a kind detail on Kind two your new comments thank bit of gross this expectations give on the you. what products progression impact can the expect the factors, of little And quarter. margin the us help the sort guys how exit you just of margin tailwind? of

James K. Saccaro

team. our overall, strong Yeah, seen we've performance manufacturing from

course the last off impact. part in did of have the margin ability quarter, And as quarters, the FX raise year, has well. last guidance. negative in that several we of all our In Over to some paid gross

We supply chain expenses. also of the had impact certain

margin. lot As across intense number that we we in a season, situation tight supply and there in look gross part product the the address some related of our alleviate to to seeing a hurricane, related were the of incremental was lines of part our experienced flu to freight we that impacted

lowest the will the in I year. the looking cyclo say despite quarter half back the fact that of QX that we be year, the at see So, would margin, should erosion gross of

down will it QX and QX levels up we little be year XX.X bit to of QX that in had We in a roughly fourth a be to expect relative the will and go which levels the So, do number. then the QX highest quarter.

intense of cyclo said, period the I As competition as emerges. most

we'll so, roughly And level like to expect last full that year. below on balance, year, year I say, QX is flat last from the recognizing

Isaac Ro

any see as cadence tax well. of on Thank parts? curious could volatility rest some are moving quarter-to-quarter the rate as there And you. those Just to the year, based of the implications if Okay. follow-up, rate That's the helpful. a for tax maybe

James K. Saccaro

Certainly. in of settlements of of our the happens that year. that quarter. just with couple an The tax pleased were quarter is first impacted each But we element the XXXR items. there number a were rate, Obviously FAS on the tax a rate

moving are expecting on of not banking those kinds We forward. or settlements

tax. on rate up QX mentioned significant there call, mentioned So, to the fairly full-year guidance, but in what result we to the better QX the original from step be in I the my that is with line I with do is And what than a expect of in to line earlier statements. related

see of the to like in that say, in items expect the banking on we'll not so, we're year. to expectations with occur significant and And balance our line I

Isaac Ro

Makes you. sense. Thank

Operator

next our of And you. Antalffy Thank Partners. question from Leerink Danielle comes

You line open. is now

Danielle Antalffy

Congrats Hey, much for so meeting. just – the good front taking start wanted Joe, analyst run morning, Thanks to great on to question. trying the a year. not the guys. Jay to or

on back and a businesses operational bit of you So in some you to growth of products. mentioned growth said just they focus remind the And sales what a or give could what are could the new in and from half impact us how us color Wondering year. little if more re-acceleration sales products acceleration businesses. want of meaningful slew those

James K. Saccaro

And point certainly. from that easy important quarter Danielle, also out comp in in products related important to the an the an we hurricane. of particular benefit role back to do play in new will fourth year, Yeah, while it's

looking the – back important pipeline. So, to the to innovation respect This a two think two-way most the really and Related about I be you the Investor element one of to with detail XX. all think But of point excited on to We'll sharing at May company, lot long-term that's about we're out. of the at connectivity. and our half SIGMA prominent our expectations we wireless the very important, launches version two has nine an think most the innovation pump. with of I year, auto-programming, SPECTRUM relate the as for Day

we're So we one feature added we that the pump. And it's about. think new excited that it's an quite to important

back the infusion year. drive growth should in half that of solid the So systems some

or us. in market step forward this standpoint This And great a there long-term the for us, of forward number that our relates along also from And our technology in feature that, for to important most SHARESOURCE The cycler are second would is second for look item smaller expansion the that continued, technology. becomes a we say includes the half I Japan. two prominent. are growth It And that geographic Japan. beyond for to But piece KAGUYA. with a is an those launches future. numbers. in foreseeable

Danielle Antalffy

do chain. this a gross on have to gross line how prices season impact supply guys lot But elsewhere, questioning. helpful. margin peak are trim commodity Thanks That's and of you And to mean, to out thinking and fat you see of guys a the could of much. margin rising where and Okay. follow-up the hearing of obviously, one you the prices about earnings lot so be I that? margins? rising this outside offsets commodity We're

James K. Saccaro

expectations. were line the quarter with gross largely margins Overall, our in Certainly. for

along savings to manufacturing in team impacts well are incredibly focused than like on other dollars hard with oil, offsetting see us material better or prices, manufacturing reason areas the raw Part we of with from relates or freight whatever area expected. resin in our again, is variance addressing we budgeted a the at – keep chain team. what our things pricing; that supply item supply was this of expectations. to did did freight. in with why of to so QX, actually forward moving focus significant Certainly, negative related not our a But for not our that freight All we we from purchasing related real customer but our rather a us, and to see performance impacts along team, this biggest chain strong expedited The team, of shipments. volumes was

We for materials expect to to to input we continue changes to expect these offset work cost continue. that and

Danielle Antalffy

much. so Thanks

Operator

our question And from Capital comes BMO you. Joanne Thank of next Wuensch Markets.

now is open. line Your

Matthew Henriksson

Yeah, quarter. on thank you. great This Henriksson the Matt in Congrats Joanne. for is actually

James K. Saccaro

you. Thank

Matthew Henriksson

is question Japan? opportunity is My KAGUYA. a see on you PD you do any that guys first numbers the provide? more How color guys could on little And in market there

José E. Almeida

the eligible was fear of feel biggest morning. isn't tubes X% the impediments very has and connecting the We peritoneal catheter. market under does, good automatic assembly is penetrated. KAGUYA that only in To the What the dialysis contamination. there's it Hi, of for of one dialysis. of the peritonitis date, that population And

we off. our efforts is hands it's that doing pre-launch looks It well in device, extremely really got like in This are we Japan. taking reports free. So just

So, the market, in market profitable also Japan under is highly a was penetrated. but

So, of with this the unlock at market technology that and we peritonitis. can we by ease the contamination that providing puts launch, fear hope

launch milestone a it's So, for Baxter.

Matthew Henriksson

to capital helpful. very question allocation. is no, Oh very that's my kind you going Thank back follow-up And much. of then

don't that on that size about going large transformational being an gives there you XXXX revenue guys of the talked give can you large? like too without that acquisitions you for acquisitions. of and to Is important the an any have us kind have guys beyond. Goldilocks factor into revenue being acquisition growth But forward commentary growth also You

José E. Almeida

Goldilocks. term it like I

are So to for the $X what as million we put acquisitions, the not billion, lend play. $X meaning adjacencies right the We billion, about -- acquisitions, are themselves pictured for that that that $XX have space size I as we value very large So, to pursuing from mind. can of we thinking pursuing acquisitions, But don't that's white in the much business okay? the space synergistic acquisitions that what kind of away have acquisitions company. instead anything are We our little okay?

balance the instance. We an say have return, that ability have our integrate the sheet so. acquisition, similar. the good the culture. about a time, integration returns, but it's I small done with All to Mallinckrodt I the successfully, things we for as But think do all to all preserve Claris, was the

well. extremely So, it's gone

hard So, are very we acquisitions. pursuing

We have very team in good a place.

opportunity guides us, really our shareholders. So, to for the but what sizes the are not create value

currently Company and create has returning And long-term in points As digit say on is cap creating job return, done of a XXX, that markets I or more And to we've Cost having better indexes. average. gets equal two what ROIC, better I three job than good debt, are our return so double of growth in on an doing company with assets. a competes on. that investor basis including five been debt. those the Baxter rate years about said, XXX the of momentum cap internal good cost

pan our say the at sheet to would tuned. if balance stay But disposal that, don't back. to find whatever acquisitions have aggressively out, shares we they buy reason, continue So, I we don't those for

Matthew Henriksson

again. helpful quarter very great on congrats That's and a

José E. Almeida

you. Thank

James K. Saccaro

you thank much. very Hey,

Operator

next Keusch from Thank question of Raymond you. And our Larry comes James.

is line Your open. now

John Hsu

John I recently side. Good the gives thing if in your we new obviously obviously of regarding on which for we Joe, But was helpful. a Hsu this that those leg comments closed up Mallinckrodt advanced white have you BioSurgery maybe And That morning, just spaces, the BioSurgery on share very no on leading you Larry. is the market. one M&A. is saw believe on assets, acquisition obviously could you start basic side following the of

looks your M&A size like? And side? kind if contemplate on could basic the out opportunity so, of opportunities does us future to build you So, what help that

José E. Almeida

You're talking the building Okay. Surgery side? about on Advanced

with through ourselves doing several opportunities. We global to that find a do portfolio we create that okay? opportunities. need So, organic still So, is we're more uniform,

So, some still the products. in new some to we geographies – have products entering several an being developed. accelerate need have for market But active we

in active going pursue each to Baxter the across you're see to globe. an populating continue from portfolio So,

hemostat allows bleeding provide So there's gamut we said, they fulfill seal. to will can of the heal need sealants and complex if your basic what with hemostat only, And from have similar that physicians to more flow that offerings, of variations even to all us whole and like regional patient. the you go, the stop that the

John Hsu

Okay. the then Great, about And how of the kind that's benefit do the really in we flu impact for helpful. one-time follow-up, or XQ, think the there?

James K. Saccaro

part remainder you what area Yeah, of Acute business related was not will in in see tell products our core business, impacted constraints I of we large it our the the significant our see some because that did where place, business the had of we primary did was supply And a flu, is change result but we where of Acute business, the as growth. outstanding flu to a to the the roughly... hospital

Clare Trachtman

from $X quarter, flu a benefit It our the in was benefit $X in a million in million to about business. $X million Acute of the the of U.S.

John Hsu

Okay. Perfect. Thanks much. so

James K. Saccaro

you. Thank Clare. Thanks,

Operator

question from of Thank Hopkins you. our comes Bob of America. And Bank next

open. now is line Your

Bob Hopkins

Oh great, you. thank

have quick two questions. Just

on the you why U.S.? better get bringing just back medical more update And can have is supply the an delivery that First, us in the curious just to give side, on and because incremental capacity? Mexico the you if reason things half,

James K. Saccaro

of volumes see back impact was the $XX we in our expect Certainly, the of the a do but quarter part there the million. business Medication also Delivery incremental Yeah. first year, in hurricane U.S. north in to in

that to So we a was expect QX. key subside in QX to driver that

José E. Almeida

it for strategically, also now volume Bob, thinking increase The from needs market provide product Yeah, the permanent U.S. business. Baxter. U.S. about we how

that on coming with million XXX of parenterals, are large So, we permanent XXX which Mexico a mL our units supplement go volume liter, basis. decided from to X to volumes bags from the

So what this threefold. does for us is

fear eases in situation ever a this where the of we and years things with last into allocations First of company us had the all, the struggled sort. few of has it been getting where

time our important Rico. and Puerto and that and to modernize remediate us thirdly, the and as allows to in go two Second, pursue the is U.S. the in new as other have And can facilities fact customers. we

ourselves people global ability to change geography many very a time anymore. remember company of different this sometimes across where in the supply having allocated Baxter ago we So, Not What some that thinking in to countries the globe the products any is need. we unfortunately, important. is And how with we don't volumes world had we is geographies. to restrict make

ability from in globe. U.S., also the the to the And Brazil demand into across the and U.S., have We vice-versa. shift Ireland U.S., Castlebar into and into monitor the we from products volumes from Colombia

company our need new they a patients So, solutions. that as this be is customers will there for and our

Bob Hopkins

then, kind of how that picture you wanted Thank just Day. going are lead the Maybe an of for you sort ask just can there's Joe organic at speaking, pipeline upcoming Baxter Terrific, big broadly growth confident Very helpful. to on to forward? question And thank portfolio you. product that that. better one new Analyst revenue

José E. Almeida

I Bob, to put I top audience inning comes I but understand If in to hope we baseball, of innovation. a at third it the I bit very would terms, our say all feel this of little and are confident. today that have baseball the when

place, we we right right solid we that by have right place business research unit have have today. we and up the really the team structure global well now, while in development and strategies ourselves have set So, in

ten-year So if pipeline. I look has business a of at pipeline, ours the every

the we lot in University for center of place, development May. in collaboration see teams between guys going universities technology hydration case as metric have to do Baxter. We associating ourselves to our Vanderbilt a has with and have the That the with you

of us So, we're ahead now top I there's because the some of And a is has combined XX%, how and investors, in deliver innovation now learns accelerate, to not the sub that now inning with out the so corner the at future we're fact also our we a feel very think bright organization innovate. I to the can only I profitability ability we of company that third the to have it with turned leading but say SG&A fund the the needed. an when

Bob Hopkins

Great, very much. thank you

James K. Saccaro

Bob. Thanks,

Operator

our next and you (XX:XX) Wong Thank of Fargo. question from comes Wells Larry

now line Your open. is

Unknown Speaker

my Can There Thanks, Lee just how want product but generic doesn't couple you like calling I to I generic start just about easy generic a (XX:XX) a on a marketplace, it's months look it's Larry. think question. up. was SUPRANE. understand ago, have taking risk? launched. risk a it through to it's not you the the then generic Thanks question and for for in approval just with you FDA the in And think follow get I how your the talk in XXXX guidance. about of

José E. Almeida

have We in XXXX have the is marketplace SUPRANE in none, we impact that no impact generic of is this the nil. and

we said. concerns an seen our that at us. to have just product time, the you any what with marketplace and penetrate along to easy there's goes numbers. XXXX conclusion anything don't not threat in our So that, the moment think we It's Neither

Unknown Speaker

then so give And your Day an plan I to XXXX in follow-up on Thanks. update, Great. outlook and your guidance you XXXX. term provide Analyst think, my is, longer beyond

at you outlook XXXX prior say your Analyst aspect would XXXX overachieve done to point you XXXX? calls through point, some XQ just from this this able on everything of confident outlook Day. have We your be at Would you're prior based and you've that

José E. Almeida

filmed This insight New is movie giving not York in to Wait you for somebody half has in the happy not we it. we'll It's that theater. Hotel. the are Sierra and very when at be three a all like illegally weeks, Internet, future. a to far too in you that give It's the gone preview I'm of that one. theaters, in when a the the now getting movie that

Unknown Speaker

is XXX? I understood. on if All And one more the Claris right, any squeeze in, update there

José E. Almeida

speak And We behalf have the to to to the FDA items time. end to do because continue We everything behalf we We that's can all can't on committed on have the to we're not on complete have we speak we of done an going of we've that FDA. the complete But that game. that that that do. submitted promised we FDA. Baxter

do you FDA just asks don't to. what the You

our from cannot estimation, and satisfied But at plant we we're to at to continue seen not operation with their we the improve, to comment I and our find significantly. Baxter improved has our opportunities said, as behalf. be continue that facility. our We FDA, have the (XX:XX), on of I improve But level improvement

Unknown Speaker

Great. very much. Thanks

José E. Almeida

you. Thank

Operator

further questions no concludes today's are International. at participating there Thank you with Baxter for And you. have and time. Thank this call and Ladies a this conference gentlemen, great day.

Baxter International (BAX) 26 Apr 182018 Q1 Earnings call transcript