BAX - Earnings call transcript Q3 2018 | Baxter International Inc.

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Operator

Good morning, ladies and gentlemen and welcome to Baxter International's Third 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 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

Thanks, Candace. earnings XXXX our third Good morning, and conference welcome call. to quarter

Officer; Baxter's Joining Brik and Americas. and me Joe President, Baxter's Almeida, today Chief Financial are Eyre, Executive Jay Officer; Saccaro, Chief Chairman

On expectations. this complement with be along Investors related XXXX. regarding reconciliations, accessed for remarks regulatory by and details uncertainties. to A will our that & presentation to development development, results from refer on to morning, be quarter presentation, contain differ today's can new could Baxter's more for matters our third And, reminding involve external start the outlook the This Please and business accessed product be filings financial of materially. in everyone updated News. me outlook, release current that Baxter's results financial section non-GAAP risks press morning's call comments this discussion concerning statements on XXXX actual prepared along including SEC financial we discussing that let website. with results forward-looking our our can Events our materially With differ and could actual website course, factors that, this under our presentation, supplemental

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

acquisition exchange, U.S. approximately Claris two the sales the surgical of for from with in first discussing be cyclophosphamide one month our quarter operational XXXX, in the products of of the we growth and the On morning, XXXX. for call acquisition July impact with foreign of competition this along Mallinckrodt adjust of in from generic will sales

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

José E. Almeida

will detail on perspective Brik comments and will and will results. will Eyre, your our morning. the we Jay third know the begin sales good greater performance. solid with on and and provide join on up you us with then from I you X% with U.S. additional walk in investor basis reported Baxter third close X% Thank financials some may many through quarter on constant whom insights guidance to quarter questions. reported our a X% and basis, our Q&A conferences, currency operationally. for a

the bottom increasing On adjusted XX% line, $X.XX, were per earnings share year-over-year.

care and sales next-generation growth Therapies to double-digit European safer, acute is Acute results partially PrisMax that therapy launch designed based leadership portfolio. by therapies. innovation more in practitioners achieved market across worldwide from and performance more also across be dynamic of Drivers for $XX injectables by like strong demand with renal increased strong in continued improvement the broad ours. and earlier initiated Kaguya Growth by CRRT driven contribution to Asia first increased performance our double-digit dialysis and a of and In products moving addition on efforts deliver launch demonstrates Medication The beginning a accountable posted also of businesses. forward. leading-edge the course Renal Delivery period the to a this support place, PD earnings double-digit with primarily businesses, to strength Claris, strength of our sales we declines of in the in of in refer with Acute growth Nutrition and increased including for Claris we'll this ICU are the the Increased quarter. contribute market steps In which strategic to It this correction Care, or in that performance the critical to put growth helped simpler, is transformative certain, growth our accurate of and leadership team in was being with quarter on this we're the portfolio experienced range often included right year. replacement occurs from Pacific U.S. market already results China. Pharmaceuticals, organ Monday, RECOTHROM Nutrition with our Japan I system, efficient. the we time products Advanced contributed these in reported sales Baxter you in time PrisMax our momentum in a address to reliability offers for Medication were a PREVELEAK. see Renal in builds quarter. that patient was Ahmedabad, driven to time the these anesthesia make U.S. globally. global areas Delivery continuous demand the was for countries. we therapy frankly for On expectations. volumes the offset by of Care in contributed disappointing. our vast power of XX you for growth operational This space. now offset the advantages therapies as decades more growth. This see on our growth contract manufacturing million technology following actions extended in businesses; initiatives, can leadership continue years, few strong and services Advanced of and the patient we the are in sound also patient positive of footing products we've our and portfolio where And issues. care which Overall, growth in which It In the starts peritoneal experiencing Therapies of in to U.S. assure forecast strength a expect. growth continues potential Our in products. we renewing Baxter's remain a key decisive line Baxter Surgery premixed double-digit Surgery Pharmaceuticals, positions. we To taken for company's business

disruption market segments key Maria. in supply has least with few a dynamics become mid-term. Hurricane the of It our down of have in areas due at that shifted starting near the drill clear aftermath in fundamentally few now Hurricane Maria, to to market me Let a

While several at effect supply levels, ripple we have line. cause levels. bringing End customer to ultimately products for the gap a has in fully longer-lasting to back pre-hurricane prior resumed production resumed market demand now

with volume codes. supply protocol of for IV Specifically, moves include which MINI-BAG some to drugs, MINI-BAG our from seen administration respect as moving impacts lines, well we to push products constrained such small have as parenterals and Plus changes as competitive to and

will of the business of we for has particularly portion take for to expect we business, moved this administration. the time, regain While most some alternative that practices anticipate to do it drug

medication of We're continuing availability also with are the We the reinforce our customers. benefits reinforcing potential of for to Plus, and reduced supply safety emphasizing errors. MINI-BAG

select hurricane-related For reducing of supply nutrition start nutrition the a delaying U.S. products, dosage. and/or whether result seen through of providers we've market contraction constraints, some as parenteral

competitive directly of levels, any the solutions this is Medication the all and this the the coming at process has also some lost U.S. in spiked of historic market quarters. while related also business solutions Delivery for we'll We hurricane's the Sales IV customer shifts to first particularly intense mid-term. across our of by IV impacted production acquire season. sales with our for not coupled tight expect experienced increased to in performance we've five to available regain centers where seen here, IV in to protracted the resulted products. levels year, growth our market This base. outsource driven in rebasing an least resume of industry-wide on year. the single in the the compounding impact low months supply large-volume to It business Customers contraction, flu growing digits purchases, We're And given nutrition in rushed near unlikely supply solutions products. and the market challenges, inventory

rate inventory we're and forecast built eased. currently contemplate supply experience off didn't elevated this level the Our have of destocking was constraints as run

year-to-date. approximately timing this addition, end short In ahead incremental believe demand we our the market in important the slightly non-acute growing X%. up see to approximately X% expectations. of LVPs It's We beds that having our note has is customer for which as the is user of of fallen

destocking impact has inventory been the share on customers clearly ultimately, stable, bringing So as new while timing the remained anticipated. of than the our has slower overall well as from

result a XXXX. we dynamics, market these of resetting As are businesses in expectation these for

that Medication and expectation the will line Nutrition with Delivery is Going in outlook. forward, long-term business grow our our

help Taken support will predictability together, these learnings alignment. forecast greater and

to we over We long-term efficiency accelerating life-sustaining turn summary, to unique innovation, a give believe will implemented necessary and of relentless the portfolio, With deliver that, will it and stronger prospect run. In I balance the that over on changes focus our sheet now make our us both flexibility and confidence our we've have operational diversified strong objectives. long financial some on and Jay. products portfolio

James K. Saccaro

everyone. and good Joe Thanks, morning,

As in commitment currency accelerating operational Joe businesses, quarter discussing diversified providing increased our well third experienced our $X.X as reported and an results bottom quarter constant billion results on reflect basis. ongoing sales third mentioned, as our although the Beginning growth. our basis, benefit outlook financial quarter, at select line portfolio of X% before start global to by updated our XXXX. dynamics market the we've I'll for challenging X% with a X% of on third

performance $X.XX our line, per benefit ongoing and per XX% $X.XX to lower from driven business of initiatives exceeded operational bottom This previous the earnings transformation adjusted $X.XX On and share. solid rate. increased tax to by the share, our diluted guidance

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

Starting and a currency businesses, basis flat growth And three Asia the our in and were currency growth. sales Africa operationally. constant both regions. advanced Pacific operational region our we currency operationally. Americas finally, Sales will sales X% X% Europe, in on Sales Middle these and basis. East in on provide grew both with constant operational For X%, and a for constant first

reminder, settlement growth a approximately of hospital recorded XXXX in pharmacy to third business Australian X%. of we by in region the Asia international Pacific with of one contract million an the which compounding due As our our in $XX impacted customers, sales quarter early

$XX as on million, driven well in-center a constant a for on $XXX currency low-single-digit driven to Moving currency on that $XXX basis, million. globally, for of units. $XXX X% Baxter's advancing million, Care U.S. were HD operationally. as increased were growth the constant injectable anesthesia cyclo our business X% in performance PD for were Joe global and growth for through demand our Claris quarter business business and Performance in Delivery the in Global X% sales quarter business. and dynamics global therapies were earlier. down strength globally Sales growth in Medication the constant by were $XX drugs. benefited from currency Renal sales by Sales mid-single-digit basis. Pharmaceutical walked premixed million, by increasing million X% Sales sales was

constant Moving down to million, X% were Nutrition. sales a Total currency basis. on $XXX

Solid operationally. lower growth million, which on in international offset earlier. in by and increasing sales currency XX% X% the markets Joe Advanced constant in commented was Surgery $XXX were Sales U.S.,

sales PREVELEAK continuing mentioned, of of in XX% demand driven our growth, therapies. $XX quarter. continuous were growth Acute representing the delivering by for increased Joe currency and basis, Therapies of million, Baxter's As replacement on global RECOTHROM renal in Sales approximately the contributed trajectory $XXX double-digit million business constant a

million, increased the which contract Performance our primarily a as includes production manufacturing cytotoxic specifically primarily well in by our services, as manufacturing contract increase in demand on services, our were for seasonal services, Finally, of category, volumes quarter driven basis. manufacturing XX% incremental $XXX was other currency sales for contract constant our vaccines. an

currency Moving product of favorable benefiting adjusted the year, through increased P&L, Adjusted of X% XXX XX.X% prior SG&A margin mix $XXX rest reported points our basis basis a million, flat the constant on and decreasing on efficiencies. a manufacturing from and over gross the totaled basis.

the the a benefit in rates to foreign Net helped million reported income sheet loss recent effective a and expenses to the due made management. a quarter the in management was expense relentless contribution U.S. business $XX incremental Adjusted quarter, This of $X.XX was in million interest spending for on of service Shire $XXX R&D to our benefit quarter, transformation guidance plan, focus a $X of driven positive basis on by quarter. to our primarily expectations, reflecting from the And expense operating tax of our adjusted offset pension of versus at quarter, and came by on exceeded the X% versus on as We previously the diluted to of which XX.X%, continued from approximately initiatives, exchange from the $X.XX changes operational quarter expansion per other XX.X% driven rate as gains was earnings innovation items favorable includes see our currency interest discrete higher constant Growth along million acquisitions. totaled X% in in a well Adjusted an $XX and prior certain million high-impact the we company. the to continue share. to was primarily with of which per to third million from recorded basis increase invest share rising income $X.XX interest in strong year. positions. The stock prior compensation. points year to period, basis our as XXX levels recent we mentioned, margin income adjusted reflecting balance in in as programs related increased and the transition continue expense $XX effective accelerate

million shares the dilution quarter quarter. Baxter stock. we repurchases were $XXX offset million of X.X in These the by partially repurchased option-related During or

Before In three income cash of worked select free ensure flow we I rebuild product will by briefly as availability. XXXX, higher our improvement offset levels of flow first to on cash inventory with generated adequate for the outlook, supply to products XXXX comment turning in to net we $XXX quarters million performance.

guidance me for this conclude my our morning Let comments year full fourth and providing quarter by XXXX. the

Nutrition discussed a we forecast Delivery dynamics now business, X% an basis X% now the on of We to we constant and X% approximately on year. market increase sales currency basis. XXXX lowered expect approximately full-year basis. and on for sales Medication our U.S. reported for growth expect operational approximately our a Given the Globally we've

business sales digits assumes We X%. expect $XXX single of previous business In This million, operational sales basis, In XXXX growth now our of constant currency. high single by noted. a Delivery, guidance full-year where to cyclo except guidance expect now of low Care X% to we decline Medication to increase currency Pharmaceuticals on Moving digits. million. to constant above at and U.S. $XXX otherwise we Renal expect to continue

the We continue of $XXX million. expect first sales seven to Adjusting expect to approximately full-year X%. approximately and cyclo increase of Claris sales months we now for operational Claris,

Moving now low expect digits. to sales decline single we Nutrition, to

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

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

of business, growth Therapies Acute the anticipate For we now XX% to XX%.

now demand we for growth business, increased single manufacturing services. other contract given of our in high Finally, our expect digits,

points. Moving down expansion P&L. the operating adjusted We now margin anticipate of approximately XXX basis

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

an the For XX%. approximately to we of year, continue rate expect adjusted tax

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

approximately from Finally fourth due of to the down XXXX, higher approximately for Specific basis. quarter X% slightly expenditures of a currency $X.XX of can on open concludes X% call and between comments. reported excluding and we for per earnings We my That now expect constant both billion, the flow inventory billion, flow previous now our expect of year, of generate Q&A. approximately levels. and And of operating with capital growth to $X.XX share. we to on items $XXX adjusted we and cash free sales cash approximately special million basis expect operational $X.X to the $X.X a X% guidance

Brik us reminder, Eyre, Q&A. during President, As call Americas, on a Candace? today the also join the is to

Operator

ask will a days website digital pause and I being replay appreciate of as opportunity a call with remind the you. International on list for XX question. of would as available the www.baxter.com. would many America while comes Bank Thank the be a for like Baxter this of to We everyone's to is provide participants first like compiled. We'll is you recorded question possible at our moment Hopkins patience being And Lynch. from and that Bob Merrill to

Your line is now open.

Bob Hopkins

morning. thank and good Oh, you

José E. Almeida

Morning, Bob.

Bob Hopkins

my bit move the a alternative, of and least concern taking share is a you're for two experiencing you're some some that at I structural that to last given guess facing the technology. issues at loss cheaper the that question. thanks So quarters looking seem

So here you're you I losing these is impact issues for to which or can understand us the describe and how share this: question think guess then into growth help could quantify degree XXXX? my us you

José E. Almeida

half Okay. here Bob, answer I'm Brik going and to on to pick the on I'm of little up bit question to the going pass share. more get a color to the

MINI-BAG how in shifts having First teaching our alternative use and not us all, methods. Plus MINI-BAGS market, amino We the acids. there customers of and actually the were to were because ones

up in come a expect that portion Some XXXX problem. pick without we of them to will and back of a

other are longer for us medical little a practices. those ones take because will to The convert,

You in country we tremendously would that large forward. in by hospitals affect of rebasing experienced have I the and we don't a to we significant rates that, share. growth the amount say market issues see going have XXXX XXXX

as fact, matter So XX the base XXXX, May, for are the LRP I a the would in that present say of runs XX. the results year full that to of we from which

projected we the just the for or bottom of total XXXX you, using long-term line. top guidance with that revising we shared are Baxter, performance our So not either

in take Brik I'd that at to customers there we may have if resolve, recapture. this to lost moment. fluids term we longer like some are structural expect long being to from would we not mid to little which And are accounts So lost have add any substituted where a temporary like issues share the it. some see but to anything to

Brik V. Eyre

couple Bob, segments about the talk a me let Thanks of Yeah. business. Joe. of

first small-volume parenterals. our So

no Plus new In XX% using been to to patients. of administered that that push. find that had infusion through could or infuse MINI-BAG products, a are which these our that segment, administer A bags doses XXX-milliliter when that to XXX-, drugs. historically the to and XX-, practice been So about is customers portion of IV have MINI-BAG were other there our used those products are administer, through find, ways went used medication

Now talking anti-infectives is, drug the a no cetera. But in to of IV dilutes then push in ml, a then they country, literally syringe to there's it X This change customers, into ml worth time. the every be to this that do XX of in port but case they with And we et will the hospital across changed doing, access a their push. to to our and some the specifically have diluent nurse some at injects were practice every in penicillins, when clear, And their the are is changed typically day cetera, IV OR drugs, hand system, so concerns, and cephalosporins, customers moved product, vein. happens moved There that was protocol. those et They have cetera. particular they an into where are push. that over period IV et protocol, there their safety takes

while supply, this Other to time feel we will now that we that we capacity, back customers believe very do they get than actually bit it's understand So et that taking anticipated. cetera. to working we had have customers confident and we're more our a We we products. competitive back, get went will little with those products ensure

cetera. was mentioned comments, have product, component in of Whereas Joe The other customers times, the is they Nutrition from the Nutrition when business Now the actually opening did market delayed et impacted contracted. perspective. start didn't the contract, this hurricane that

has overall nutrition about the contracted market X%. believe So

back. We lost that product again share customers have working get to share, are and some also we with because we have didn't

certainly a seeing we over ramp-up bringing will us. more bit to a But a little back So while in change anticipate that long-term the piece, anything think protocol required we products time. of it's quarters take a few those next don't

Bob Hopkins

there. Thanks for the clarity

now right to Just relating Joe, more temporary? time your that aggressive a buyback, very is be brief given the follow-up. confidence things to be will with the sheet balance these

José E. Almeida

the to at investors, use a of amount always I also, sentiment we're we that M&A have it's efforts buybacks. moment the of the the in Baxter some significant look capacity to would But inside space. with say a at look we continue good to going and this at time that

focused So above, dividends M&A a we have annually go which capacity to we that capacity have renewed to has sure the plenty want do make to and and shares all increase after our effort at back very continue and to Baxter. buy targets

Bob Hopkins

Thank you.

Operator

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

now is open. Your line

Vijay Kumar

guys, to Thanks back And taking have my guys. gotten going this Street's question the execution. a some you on for disruptions to used question. had. guys is you the unusual where little just maybe, stellar of Hey, And Bob's for

So mentioned you I understand want right? just – to LVP. Joe had think the I you So dynamics,

inconvenience not would ml that mean, someone a around through use in or from of to, to ml that may I And So the of is – some how understanding One, side for trying push, why explanation happened the be first of if the back. what impact. on to using just think the take Brik's time, comes long whether I'm Should inventories. come Brik, guess, like, of we it But customers in that XXX pre-bought, built to hospital lot perspective IV an a still pushing if assumptions XX in, them work sort time then for the they LVP syringe thanks I'm expecting for on all back, as nurse. of inventories? bags, think I back does in, half up for of impact those XXXX? that's push I

José E. Almeida

Vijay, good morning.

answer I'm have your to of XX% So going question. Brik

understanding of want happened in what now to the a We Just go good have and terms destocking. very back to stocking of LVP.

buy for whatever As for usually than was to this less because buy, I would to from was a purchase. little lost allocation were, them was that pattern purchases that to whole but wish a what was of thing customer, haven't said, customers we that product available many a in there we place years, due they would learned

other the for flexibility just the the the sell have extremely other we are for sell America supply of parts in us we in which created U.S., the with no in in but well-executed creates Mexico; flexibility time flexibility day supply did chain. in chain. in product not like And Latin We significant first market allocation to

of not only plant well into we Cove So era plant. output where and the our are has of improving remediating the done going new extremely North a LVPs in

So past the plant it's because resolved resolving long-lasting quality surpassing same is effectively. now so at are doing the of time, issues. plans, well. That being we're also Things capacity

Mexico, We in have Ireland. capacity

the we really signed important have to So be now up we fundamentally this customers ability us work. product the put And the to to in past. re-sign for will where

we execution not execution. So demand issue the in We and short did difference understand about We not of had did see by the that term should between and inventory, an end talk effectively. the the didn't what end have seen having and signal with It at a that day. the communicated team happening was more dynamics. change we the distributor

relentless to the in want pass as we share operate. we how the execution. market U.S. I that well. to we how who back understand of to end, in of terms not in significant why have about replaced did can changes to people are people, specifically business push on team That's Brik So and process come and made in speak replacing this

Brik V. Eyre

inject can I ml it put diluent. that – infuse and would sure So it X and to ways infusion driving XX, a be XX they it do or push an a of In with They Vijay, pen, to that into ceph there's package a Or MINI-BAG you. or example, thank ml XX you like XXX of a minutes insert for just ml. over of can for the clear. make administration I'm want that. can couple

to And XXX IV of so, XX doing X ml is not they're ml. push ml. an It

will The studies long be package times have could how will overdosing they is period Now, overprescription, to our minute that talking over the a of they a don't that medication It the so an there should reality things and wait long that's wait. and they to that error. of it we're that about. of shown lot there in to push one And customers be do insert time. three say a practical five could

cetera, MINI-BAGS, issue is IV drugs the certain IV administer push, talking So what they're is that's drugs, pens, way comfortable cephs, for we're our be really best through but with really to that push drug to the et infused, that can those customers about. and

tremendous of of take a tremendous, on I LVPs customer Now just has us sign-ups. majority might been been comes years add that from vast new to little color. of business successful growth. a for and And bit the highly This it's a number just for moment that's a driven

know, you five about three- up signed five-year to last contracts years, As XXX,XXX over six the or actually to we've beds.

five, – that an So tremendous And we purchase customers supply, over could perspective. six an been coupled challenge has shifts the years produce. from our in almost business everything industry LVP that with market in last our virtually

allocation. fact, these In on products have been

we based we of to customer. historical got could buy every units So customer that sure that we performance, do allocated number a each on because had to that product make to

Joe from were to just that. increase ultimately product we brought Latin usage, America, historical discussed, as to customers allocation above we the and As discussed more able and as to remove we their

first demand and As distributors year, were products for in exacerbated was well about well, the did our concerned on have been the that, that allocation the customers disruption first as concerned, were just this market with hurricane a the general, earlier year. of flu in the products particularly long half for we as we as impact of a in the quarter as had that time, larger tremendous

we people been tremendous, and always And product. -whatever the five so over rate that able quarter on that So last product notably distributors and in years run I over for that there And demand because mentioned. as to used they customers of took tremendous manufacture, for our forecast allocation end was our then purchased the not the that user our has did the of half realizing purchase team the year. half, first most U.S. back significantly the first demand

end through with distributors. good distributors in wholesalers. news demand. user inventory. we been equilibrium. contact is Now third into are our being our to our that We have distributors, the close that impact in Caused worked our the significant from but know a get tracings We've we that those We back quarter, believe

So the improved we certainly and next our equilibrium capabilities at be over months. we couple will analytical of really

Vijay Kumar

And Brik. helpful, on front, on Irrespective extremely QX, standout, of maybe a just we just of getting you Analyst that the margin a at persist? have range. as it end there revenue out little we margins. mean, low front, – at changes was, That's nothing was Day, the headwinds of items margin But below-the-line And bit these in qualitatively, EPS XXXX positives. guys when the impacting. that terms laid having the right, time the a hard are stellar I look guide Thank I'm maybe, margin that the Jay, like the should executed assuming the front. of guys But maybe you. what looks some you on top some be to guide on line we of

James K. Saccaro

a in and our discussed which point we've to in pleased There's down extensively about $X.XX range, because this the the is were few Sure. largest about fourth is of that's relative Vijay, to of little think Overall, play about that about while issue Delivery a in Nutrition. and we impact highlighted to as what to quarter we guidance factors impact. Medication high we out here, bit the the at of and end your QX talk expectations, previously shared. there the let you relative prior the very me expectations that implied to the year second point, accurately able guidance overall half QX of our confirm the be

and a Now to impacts we in of place, have And then financial offsetting couple should initiatives $X.XX; foreign items $X.XX. financial approximately roughly related exchange savings I say, that or cyclophosphamide tax. adjustments, that there are is

a financial have do respect roughly us combination, quarter. other to tax FAS expectations We and But reduced $X.XX of so you – bit uptick. items see our in XXXR, impact in foreign taken exchange we with the

So those in roughly midpoint all in fourth take midpoint combination, of us items down to $X.XX quarter. the

real do As XXXX, think we'll But Joe. stop that that short that has short far it we'll as today. discussed and there's guidance as stop that. has Brik of of relates to specific for to XXXX, opportunity giving for guidance I as believe recover extensively We

also XXXX numbers. shares that which we We have through the with long-range confidence reiterated plan shared XXXX in

Vijay Kumar

Jay. Thanks,

Operator

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

Your open. line is now

Robbie J. Marcus

in you that, businesses question. is? to and are sustainable what's Thanks ask some the the trends help seen And new product progressing wanted how forward? Therapies each some where there well you us quarter, understand then the launches Great. recently. Therapies, in the understand Can Acute These positively those from taking going Pharmaceuticals, were Can did impact we've Acute it of about us particularly ones driving that Pharmaceuticals. quarter. for help I

José E. Almeida

part missed.... Can understood you of Pharmaceuticals. I question? repeat the second the I the

James K. Saccaro

and Therapies launches. Acute product new

José E. Almeida

the Robbie, Pharmaceuticals Acute we Therapies, an in extraordinary business. performance okay. had

that authorized to time. of competitor our Some that them is there was and FDA there's Cyclophosphamide all the by fact being capability that the producing despite the can't is products others of new of one the produce.

of make But very make. seen yet. of manufacturer only can oncolytics haven't there's this at It's in competitor Sandoz their that in We're market. the coming of well, the another there. we We end the product a the saying difficult can the the out best out one because cytotoxics product product the and to day, we're ones extremely not has who market.

same which back the well of TDS market. has we we these people people capabilities. the We that see repeating being product have that the BREVIBLOC manufacturers products business nature market, produce the always hedging have can couple now one is BREVIBLOC when to on our do also are the source but other then can't, and we be sometimes customers. to time because the come we as don't our and able performance the all We for

execute So look ability continue we've will a give have the I view of little into to our Pharmaceuticals. the been versus driven our of to a It's molecules just who long-term been can't. bit of Pharmaceuticals you acquiring mid which others to to ability by performance primarily doing.

Second commitment Day. Brik deliver LRP is to our on the had Investor the presented at that

on still that. track are all We of for

say Moving to I then we following. just Europe. want Great that in PrisMax. Therapies, Acute in launched just launch going launch to the and product, the to U.S. It's

We're one this the therapy around number excited. in very globe. We are

earnings this successful this You we the performance competitor and just creating gaining can and see adoption released also the by yesterday, that that to specifically the technology. other of continue be day, of share in performance business a for very

to relaunch and XX% of things execution. with just a mention well business in success our growth to structurally overall of with business opportunity this very PD I Just our is business the to great happy are a a we're of sound take launch all our combined. want in and this also proves on going PD and the Japan underscore China businesses

headwind stuff through we've for created and signals So some QX missed market we into we'll good (XX:XX) us in create The recover the in QX. that in that U.S. the XXXX happening. part a XXXX. really some is of probably unfortunate have

within company a They So and really good generators company. good have XXXX. coming the pipeline we we businesses and XXXX have in also cash the really and are on sound out some good

Robbie J. Marcus

you questions there've the Okay, couple different how of on quarter to year-to-date. systems great. done just a Maybe then with How on Delivery, a terms year-to-date. out look haven't playing but it were from in versus Medication how comment I first up at Thanks. I quarter? heard for know then And said And third and infusion look angle; does X% you the in have that's been pricing? that anything the also You've systems can half volume launch. pricing volumes large situation

José E. Almeida

of Pharmaceuticals. and replacements just margin answer up my which they're are They're premixes detriment want would are me reflected every Plus, amend carry higher not Pharmaceuticals. of Because for in on okay? to reflected SVPs. day they're week we There sell premixes the XX%, MINI-BAG – in in and Robbie, premix

you. missed to want highlight my answer in that because I Just that to

ones for folks the substitute to not the call, after has customers the premix the when on extremely available we well, product the told MINI-BAG hurricane. that Plus we those have and did So to done were just GALAXY

positive not that the is about. this we So did talk side

to pass your on the rest to Let me of question. Brik answer

Brik V. Eyre

et relative that contracts Robbie, modest into cetera, on built have to increases the pricing LVPs, nutrition contracts. term these that price those are with products So reality is longer are

to up our of believe with our we expectation States we that will continue So in Spectrum to the across year Sigma pick share with pumps, this lines. all infusion pricing remains Relative those product in line approximately pump. X% United market of

found more has referred our bit. pump to which launched, programming, lengthened that recently other have sometimes version integrated have new a nine key desire auto features, one we as the that we've We of Spectrum to customers our IQ, features as cycle the little of selling and

involved now our at a much level at at is hospital IT or so a hospitals. in level, each higher And a of hospital –

in But the earlier reduce Sigma did we number anticipate one we year. a suggested picking bit the as as with had next we so percentage products up of new point our And into the half little on overall Spectrum. slip out back pump launch

Robbie J. Marcus

Thank you.

Operator

And next you. Lewis Thank Morgan our David question Stanley. from of comes

Your now is line open.

David Ryan Lewis

Good morning.

José E. Almeida

Morning.

David Ryan Lewis

Maybe, guys. Jay, just start – morning,

on you Just start, a question Jay, cash. free with

growth flow Just quarter free third second reversed bit quarter. to cash a

supply walk So you that free chain quarter just there's quarter? I been rate? second so think reinvestment. through to do growth cash third think And double-digit some you you us gets imagine as next back flow historical about, to Could year,

James K. Saccaro

a talking thinking look, from about think solid cash I growth very so XXXX. Yeah, performance XX% free of about overall XXXX growth, flow, year-over-year, from we're still north to

flow the year free cash in You'll raised guidance. we earlier recall

short that the is there's really difficult an your during that And lowered such you the to We to supply sales a that takes do it's couple that have forecast, that chain discussed is what place. build a of adjust extent very to we call. factors not this One fall on it. with inventory subsequently has planning

that which we factor of strategic manufacturing back terms The as up said year-over-year fully performance been of facility thing we're make select to product the earlier, a contributing performance, And has is build. second ahead our expectations the is North speed Cove to out inventory of very to decisions inventory our coming but at we builds. when another overproducing getting in pleased then some we make bit did with look

are we an our And frankly, a as We this claw of us structural will see into not to tighten do this this that the forecast for So be three issue. going kind those factors see. up back. year, next we once really, opportunity

year, updated of We we cash progression and gone next sure and growth, if million $XXX be think takes. when share, see But of make year. I issue terms with to this and we've in look as we're this the kind we in faced the believe landing. to most XXXX. thinking there don't is extraordinary we some structural see we obviously, XXXX to Inherently, flow, $X.X puts free and like volatility that about some plan you billion So where will this wanted I of that in from accordingly say, will we

David Ryan Lewis

just quick Jay. Thanks, And two Okay. maybe follow-ups.

for is Brik. for first The Joe or

approval? SVP third about dynamics a heard the the Then to in We what's here manufacturing Rico. lot Puerto sorry. and they How trend haven't do pathway in quarter Jay, the

of tracing fourth inventory dynamics: assumptions, changing dynamics. these comfortable. the quarter for Just and at you Inventory some data two is get different can and we have customer look relatively

fourth jump ask, as customer much, numbers? rates, in Just so basically back relates trying I'll to recapture these risk-adjusted And to it how are quarter guys. Thanks queue.

Brik V. Eyre

about So let bit me talk David. a little SVP, first

mid-July, we is from it just went were channel in et is starting the thing can having into in need MINI-BAG kind the as back Plus production able primary back the September. back an impact customers that a of their to MINI-BAGs so cetera. buy Our of which where put channel see in good to distributors. be, We want, mid-summer, to level back and we're channel

of codes diligently most healthy our to that still healthy on codes working, of Plus. We've healthy that or from have relative very to a ability are business, one We and two but got now supply. perspective again, getting we're on, inventory are the our majority confidence customers we in ensure MINI-BAG they we're our with vast

James K. Saccaro

And David, look the build to trying and a That of up we a And spent be that includes we've up, bonds lot across time financial from so forecast, includes with LVPs. conservative recapture portfolio. a appropriately then, fourth SVP quarter on. as

that I And got right number the in guidance look shared. the we've think we so we QX to as

Brik V. Eyre

a excited thing the product sourced is might other product, Plus The efficiency it's MINI-BAG is perspective received. a have I Castlebar, new launched of single-pack only From David, is about. which add, in really an we're out very which operational well hospital, been very, we which

And such Plus for manufacturing us. MINI-BAG continues risk as our that is a great diversify product this so this to have product sites we other

David Ryan Lewis

guys. much, so Thanks

Brik V. Eyre

you. Thank

Operator

from comes of Larry Wells question Biegelsen next Fargo. our And you. Thank

open. Your line is now

Lawrence Biegelsen

taking question. P&L, the on Good capital deployment. on One morning. Thanks for the one

overcome out of and those year headwinds So guys been good very been pointing the the you headwinds to on kind at in helpful subsequent the past in P&L. able Jay, you've very have being in

XXXX, for the So And math XXXX and as EPS potentially tax, cyclo reduce by by BREVIBLOC, you about maybe our other income could aggregate, headwinds. in have currency, on $X.XX.

I So one still of can can reported had rate a grow us year headwinds some in understand you next XXXX? follow-up. you EPS through the And us and P&L at if walk help double-digit

James K. Saccaro

Yeah, which X XXXX. sure. is it's we've for February this What Larry, stay tuned. are and I January premature. or think Come we've join said There financial guideposts shared XXXX as for numerous There confirmed of well XXXX. think and us puts guidance for numerous look At I any stage, on XX year, do we and our in takes given is we've given takes are any and and at do can feel in. confident to objective as as puts possibly we year.

to this are at our launches we'll the call we that so like it's things highlight guidance too beginning new And things year. point. to product say, XXXX come of at certainly give next premature like I as earnings But

Lawrence Biegelsen

in healthcare not Baxter get surprised you but our to size agnostic little bit. Jay, you said which to conference, me is deal trouble Understood. regarding Joe, a And M&A at

a good So Joe get ROIC to deals. had strong for because it thought I you from preference hard deals a smaller larger was

questions, question is changed? guys. has Thanks my for the taking anything So

José E. Almeida

called say if you. that the without can being on said him say that, right are page and I are Jay we me Jay actually. to authorize and Trying same he Thank that and I figure present. to I out before said,

every stool. the are that either size? do completely on will in which we we issue meant of targets. restriction, and available accretive at create us. by line, what, being better the from necessarily We of We're selecting at the opportunity execute the get why let was was go push leg need the but debt is we the agnostic on say opportunity And to are Because also limit of size we to in adjacent margin our the Jay's this. to do during question portfolio to to them, taking can of boundaries that line we not below gross your on top that doing to But augment ratio response we Baxter but Not put core what that in take have, And looking be momentum the us we see me That will growth what's line. an of your or outside to bottom Jay constrain implied refresh another of size any grade that creates will to to to the is, looking core of conference. commentary that the investment that. a the the terms

have operating terms started I So company of that we what above on of to income. transformation to But I know transformation creates XX% Baxter that operating the Secondly, how acquisitions. now okay? about are to when it of bring and once of its to yesterday, a That and why has do can learn is you a we size exactly done to do able limitation to what in paramount first it, we is say of you income difficult we're achieve. ago years three had business the company and X%

all put I'm at the about se target more sizes synergies think a in the this business. that path coming that we're generics pharmaceutical a to do, to first going And thing in in usually company. the we'll have said is traditional identical what technology have remove transformational business different companies office Baxter that from that we doable, and about. angle medical we'll the we it's the talk when systems about mentality, and how with we in and the get So in it's with that trademark doing the terms go of to it, per stuff if and also about if do connecting that integration think not out that you but cost ability but our of people independently, savings are

looking size answer healthcare, synergistic the organization a have that it's ability So, not really if adjacencies in at long are cost-driven a or you it's and deals. core to extract highly can our a the we multiple even looking within target, us. for We're but outside of also also to be say to to space we that value from

Lawrence Biegelsen

taking questions. Thank the you for

Operator

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

Your line is now open.

Lawrence Keusch

morning. Yeah, hi. Good

terms nutritional bit was? obviously in is but kind you more concern Just of to time the of delayed a a to on where as spent just and influence become wanted to that could for LVPs guess of thoughts that we've products. to it SVPs, How Because starts lot wanted some permanent. to I of do to my back – protocols get changing back nutrition it sort and go relates come

Brik V. Eyre

that take American protocols help wrote me and that is Larry guidelines ASPEN, conservation I they're guidelines Parenteral if when parenteral of while Enteral But really change. these Certainly they when typically why And for are some really, function; are Nutrition, were nutrition. can. people don't Society in more feeding. mode. to patients it's let sick, problematic So, they have There on The gut

the to is if that good So, it's outcome take data effectively. and do nourished and what that would be very we suggest so clinical when appropriately difficult know outcomes inputs. to patient track a – you able specifically is different to a step back, are there's there But are many better

of point the next get in time customers to will perspective, to market very sure total. several X% bring bit framing we more to feeding. about little ESPEN just just work that that now working protocols in work a feeding our And you appropriately. which quarters and the just appropriate they U.S., supply fed of sure market and our as So, working over that back have when supply if help to a to working with from to supply with they're the by hospital, to importance the ASPEN But established it by We'll a societies, go there's the are is chain to protocol of mentioned, continue that of the see our customers takes been in closely make to we make be have patients the in all continue And with chain those here an Europe, with help are back. customers. we recognize confident and societies your and the can't We're it that we contracted in changes back. do

Lawrence Keusch

ones. other Okay, perhaps then perfect. quick two And

will, Joe, to if think, in management you may missteps, business. comments following prepared the your I you have about forecasting the mentioned some changes of relative some

plans of there. the what So, to Thank gross for that kind sure expansion make which And then margin trying again, I drove there. any the was understand just the year-over-year want expansion if you. impressive, that Jay, one-timers that and heard there just are to on components clearly I

José E. Almeida

in execution at straightforward. a look that always at Baxter We way is pretty

to stuff Some we a expect at one. the from first level. people their certain accomplish market's Understanding

have they that, when jobs, have markets it's So, either leaders their personnel or in we their been don't just complacent identify with correct responsibility the to understand our replace. that people doing as or

So in businesses. we all do did. we that's what time that And all the

We have significant changes.

the we performance in in made performance Was with the under-managed hospital just we some in in seeing going the international same business instance, good brought with did the we really Baxter. For significant be we to Brik and of thing. and the business you, issues change honest really people up. had the and start U.S.

the So than done performance number No prior as compliance. it's seriously. different ethics jobs, second straightforward. criteria one and only performance to have I very other any would we pretty take take We but in

James K. Saccaro

spot As initiatives in a relate it share the to and improvements business relates to margin, gross the which quarter, transformation. of was bright the cost lion's

on focused changes optimizing facilities, operations margin is Pleau, leadership As initially out. primarily facilities. the under to on fastest that able that of area to as But to was Scott something we've the within SG&A our now journey the take we're make that to been Joe was mentioned, network, to

mix year-over-year or XX% probably So quarter. operational some margin in to the XX% And perhaps these relates of initiatives. relates of place our growth that took to so improvement cost and

more gross XXXX, look coming the in expect So, of the line to that driving a XXXX coming from cost lot progress years. on balance, you as with can to see we out from margin

Lawrence Keusch

Thank terrific. you. Okay,

Operator

our Thank from Wuensch BMO you. comes of final the And of line Capital Joanne question Markets.

open. is now line Your

Joanne Karen Wuensch

you launching right you you Can morning in There new Spectrum the of how that the think and you're how door are we IQ, should PrisMax. XXXX: half are thank second give the IQ, those number now the Evo continued benefit in Good of to Delivery should us rolling on a PRISMAFLEX, update brief ramping products question. possibly and for that taking and a them recovery? year offset products Medication about some next into nutritionals out

José E. Almeida

how that January. have we're conversation growth are Brik we into recoup question is is that you Those to going products because, tell you looking a clearly in we're of going in see, we're them the The to will XXXX to year to help to be counting change is growth. be contribute that Joanne, as quarters a be Yeah. to to going much on mentioned several of and nutrition in volume. the that a some just sales making kind this going

We're So those counting new PrisMax. will products key. be on

is I we're doing Once excited. very actually we that [dexmedetomidine] very dexmed launch think is one that, well.

molecules new launching have year as We four well. next

sales into into quickly will get sales those have XXXX, peak is XXXX will [dexmedetomidine] one So ramp molecules. dexmed to really to we big not the ability proven quickly. thing pretty If mistaken, go on up I'm

profitability. patient the the profitable much highly next That are product not in on need has showed because that Kaguya we as sales of to a year So reimbursement. We're products. those counting terms as our much growth driver Japan in the profitability, as be Japan in

Cristiano, So runs Europe, Frye, and products. Middle and me, a East we message. message to know them. to doubt. products are needs it's the and I for be have done you. on on Brik, Africa, new that we're and to on Andy all counting executing They is Thank give those who They without those a about what this And counting

Joanne Karen Wuensch

has in something in seeing more on you the gave And little bit terms is you. it made of anything focus were for opportunity you're you a question, there we're that my to Thanks. revitalized? that great it earlier Thank you as a as revitalized looking follow-up the is else? today? But answer what just Or M&A particular you Is or size. and business mentioned

José E. Almeida

I that Once put two that is But we portfolio we finance, and do. M&A If about get balance the to in of different that them We programs, in a culture. had you diligently one have structure, our finding need now working transformation, to things we some done and house and in portfolio order along. to tag have and organization parallel. all own those opportunities the on organic put phases transformation team come things three that for sheet us terms we the to and think are the revamping the Joanne, of in after of is had one was the

have we and six didn't those to that don't buy in we So if have into sheet. say couldn't company. come place, couldn't the things do other. going We months I job up the this company balance this we're and

have Not this. execute we only have leaders strategy we can that; Now we're the we on we the sure for most do. competent part making that and that

had the Baxter the and So our the have organization, to Not get anticipated because have of Baxter by to didn't we we of this relentlessly make heavy of caught this due prepare, because to I employees stuff amount that have we as But adjustments because long-lasting done us of people lifting hurricane, effect. this a people unanticipated, with and say headwinds surprise. the significant but and some done. so that worked many

time starting are us. things for to us get as to it's get the really going M&A behind Now these

Joanne Karen Wuensch

Thank you. And happy Halloween.

José E. Almeida

Happy well. Halloween as

Brik V. Eyre

Happy Halloween.

Clare Trachtman

Happy Halloween, Joanne.

José E. Almeida

Thank you.

Operator

that concludes gentlemen, Baxter for you call with Thank and great this today's And today. participating. day. our International. session a question-and-answer have Ladies concludes for conference Everyone

Baxter International (BAX) 31 Oct 182018 Q3 Earnings call transcript