BAX - Earnings call transcript Q1 2019 | Baxter International Inc.

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Operator

Good morning, ladies and gentlemen and welcome to Baxter International's First Quarter 2019 Earnings Conference Call.

Your lines will remain in a listen-only mode until the question-and-answer segment of today's call. [Operator Instructions] 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 first Good morning, and conference welcome call. to quarter

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

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

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

Joe. of cyclophosphamide exchange adjust discussing U.S. like be that, in for I'd turn over and we generic On the the this morning, for to operational call sales the call growth, to now Joe? With the competition which foreign impact will

José Almeida

thank and joining for morning you us. Good

financials. our performance We a today quarter XXXX. in for to of pleased begin quick provide will our I the then with will first you quarter with more and and Jay share results updated review to our on are discuss expectations the detail

Q&A. solid X% exchange on up XXXX a impacting declined points operational in delivering representing Reported will projections. the a sales foreign opened of sales our X% by and constant sales basis currency of Baxter with We the with both approximately XXX wrap high-end quarter, negatively with first quarter. growth basis

was On essential reduced earnings stability underlying performance, the a dynamic even the efficiency were bottom-line, lower adjusted healthcare top-line share a advancing driven our breadth The sales Growth year-over-year. nature $X.XX in Baxter’s count. reinforce X% initiatives, by rate per landscape. and tax portfolio of operational and share

of in mid-single-digits from CLARIA Negative demand and strong First globally. expected Delivery helped and offset was Japan continuing maintain our positive Baxter’s in volumes underlying Renal new advanced PD currency strong the generic in increasing and quarter. pharmacy continued in the component as to therapies PREVELEAK. our cycles globally. basis well with the for businesses Care, quarter our growth mid-single-digit to this also strength supplemented results Care benefited the of for on from driven Pharmaceuticals, in to cyclophosphamide business perform Pharmaceuticals performance for build by including year’s demand businesses The Therapies momentum our Injectables steady our growth Double-digit Baxter’s and increased Dexmed services. anesthesia manufacturing hospital Brevibloc. This west growth. by Surgery and Claris contract quarter despite and last U.S. in Nutrition expected. across the delivered benefited as molecules Europe declines U.S. from cytotoxic Renal growth our in Medication acquisition strength sales increased for the as growth which Acute positive Advanced well helping business RECOTHROM the dialysis of in the to pre-mixes the comparisons a in The was business. patient launch contribution two increasing of as in of Amia U.S. announced surgery contributed reflected portfolio is dialysis competition Pharmaceutical constant Kaguya in peritoneal Demand services exit in hemo of due in-center our favorable this and currency strategic globally North growth constant remains bloodline recent launches high-single-digits and new America, epti in are rollout a U.S.

acute the hemostatic FDA This make faster business to configuration business benefited the product-line comparison. currency customer mid-single-digit a easier the quicker last continuing and an from globally. next-generation operating in to recently room therapies most hemostatic even are constant intense Recall in employ enhance delivered response difficult it prep year-over-year our growth for solid leading approval flu creating our We this to our year Floseal. needs of season with and

strong with continue We as here the in in to ICUs next-generation is see launch traction up of our gaining PrisMAX trajectory QX the Asia Pacific and technology well. Europe

to also solution available systems. hospital’s in Prismaflex NantHealth portfolio. and enhancement now represents digital key health a that This EMR announced digital care is connect a with This quarter, our Baxter

is biomarkers basic in Medication new Delivery to to delivered by and XXXX. reflecting In to our was partially Medication corresponding the This across impact care. broaden comparisons with acute Nutrition The our businesses. kidney identifying strategies collaboration bioMérieux, quarter, focused anticipated our continuum the growth past addition, businesses offset on this earlier diagnose challenging in decline a of injury

our recapture expected XXXX You of volume in sequentially stocking in impart in And response this course in volume to will challenges, owing have our is pump markets. an Evo by North distributors per international – course and driven previously, will our decade milestone as IQ original the important rebasing the This marks recall and of demand the well due and I America industry-wide in continued first efforts upcoming year. our growth. are IV Hurricane uptake Maria, Clinolipid in for launch Nutrition of to was and season. U.S. our ongoing new solutions in of to in IQ the a business the business as supply Nutrition improve last up we in platform over selected launch hospitals as the be Spectrum mentioned the half and that first flu large spiked of reactivate U.S. our U.S. intense over to Performance The business

the many engaged of costs. present on and reduce base In quarter. the short allow including opportunities remains strength the of will facing hospitals decrease the in to and they today of delivery medication look increases patient generics by highly us are to we care employee and improves setting to innovation safety, further issues address error focused and to – Our This drugs sum, for enhanced outcomes, to supply. for as the ship facilities ready access the underlying encouraged home

efficiencies and revitalized Our a positioned results we innovation for of enhanced combination built are as are acceleration. growth in well operation pipeline on

update Before a efforts. I to pass our to want it quick on over quality provide Jay, I

since week you warning as our manufacturing been from operating XXXX an VAI. have or received we Carolina the in North we Jayuya, with our Puerto Indicated FDA letter plants. As place Rico for Voluntary site Jayuya know, has North classified notice Action This FDA and Cove, now

our our to which are Baxter We this acknowledges and for customers. our development help quality product to efforts supply of with we in steadfast believe reflects commitment reliable progress ensure pleased

Jay it pass provide will on to details I performance financial our more and to Now, outlook.

James Saccaro

good Thanks, Joe and everyone. morning,

and constant global Beginning X% currency XXXX. by accelerating sales decreased on which quarter, our throughout outlook growth billion several quarter results first a our businesses. increased start our with results providing basis quarter expectations, but updated financial first for on both global our $X.X us across I well mentioned, for reflecting X% exceeded operational position will the the year. first discussing before of strength a Joe our reported of basis As

guidance to operational exceeded per phasing a driven $X.XX adjusted On share. increased $X.XX by performance, bottom-line, per earnings diluted certain of to of the lower investments tax $X.XX solid X% rate. R&D share and This our

with Note, constant by to constant addition all for our our Now, sales this quarter, segments geographic equal the is for growth. businesses. Middle Africa Sales to flat except I’ll our and business basis sales and constant in geographic our currency X% will segments. constant Pacific segments and operational walk to Americas on and and growth Americas a in we a Pharmaceuticals three grew first provide Europe, basis. currency X% on Starting operationally. sales for operational Sales currency in currency region global on advanced growth declined were Asia performance and which constant growth growth a in East for for currency you the basis businesses X% region through

was million, by business sales continued currency select constant $XXX X% in to in Renal with momentum in in-center impact, global was quarter is declined by were business. on Bloodline Performance U.S. exited a offset recently the partially in $XXX growth Renal driven the for currency the Adjusting global on including Delivery sales advancing basis the PD X% HD Care in performance Moving therapies, X% underlying lower expectation. globally. for on by this businesses, U.S. for Care the constant our a for X% and in Sales Medication million, line products approximately basis.

small track to drug customers as our recapture to efforts for our to on reconstitution. volume our efficiency our related and continued parenterals are safety reinforce We teams with the of SVTs

Evo to IQ response IQ Spectrum pleased the and we with Finally, infusion our both pumps. are market

efforts, lower of in operationally. the drugs Pharmaceutical XH launches product the which and Joe improve Pharmaceutical discussed of pharmacy partially sales strength as growth period. capitalize impact, year and critical the the hospital compared Cyclo business, to X% pump were sales in anesthesia by executing $XXX demand over XXXX as earlier. our mentioned, international were Brevibloc of availability of and the $XX and growth constant As the in internationally. injectable and sales increasing approximately new this benefited our generic quarter million we offset X% stocking was we for accelerate products launches increasing care business to Joe currency recapture anniversary from Contributing SVT robust to prior expect in compounding U.S. new performance course in quarter product year the on million, on

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

nutrition which improved growth focused also international both some and for on efforts. our innovation driven gaining orders the markets. by to with QX our later primarily of the for to in new remained traction in shifted in execution and and from EMEA returning Asia Pacific declined business the sales U.S. year. in enhancing recapture and on global through phasing We introduction positive continued focus products including We performance quarter, U.S. are of the the to International

choices. increased nutrition throughout by currency XXXX. expect of sealants million for more improvement $XX of and in sequential basis. Acute broaden surgeons rates of sealants, has driven allowed a the us were We Surgery business Growth was growth Sales million RECOTHROM currency Mallinckrodt PREVELEAK million sales we Therapies of our and $XXX these representing in approximately in assets increased growth in of in hemostats X% our from the acquisition $XXX Advanced business constant from contribution including constant quarter portfolio on quarter. and XX% hemostats a can so to The of on our Sales offer a basis.

strong As for the quarter. approximately in Joe CRRC chemodynamically for the due in product as faced education comparison and continued business new QX clinical acute mentioned, business geographic challenging a year-over-year impact, patients. to the $XX driven launches, efforts XXXX treatment million on benefited sales of by expansion, flu-related AKI our our of remains this Adjusting demonstrating unstable by this focus growth benefits

million, increased the which cytotoxic Performance our primarily a prior includes period. easier reflects services, primarily the our by and services to manufacturing an increase in demand on manufacturing our were comparison in of sales quarter driven basis. contract X% year $XXX was other currency category, for contract constant Finally, an

XXXX. from Moving a by sales with prior $X as increasing Brevibloc Cyclo by service to approximately flat and portfolio on reported the than a optimization to were and basis the improvements period, lower received The XX.X% more and Shire our improve manufacturing million, from $XXX transition offset X% of of operational on slightly from targeted were P&L, basis. totaled SG&A initiatives as year and rest our partially product loss constant less adjusted favorable Adjusted mix. and year declined of margin income the to of benefits U.S. in currency positive compared offset initiatives a the million contribution the the efficiency prior gross

we prior of innovation, marketing quarter. the addition, continue beginning new a expenses on investments second on decreased launches. execution is spend, pick and reported year constant versus by XX% Adjusted were quarter on up making sales spending XX% help in as and In product to quarter the the successful of up a select the basis million in of impacted timing basis commercial certain in R&D R&D accelerating we ramp $XXX period. our efforts project-related expected in to ensure currency the to which are

phasing income versus not our interest balances prior increase investments launches. was Net million of materially the We year, and in the paper in any interest increase this operating continue our Adjusted of $XX.X%, Adjusted does an the prior related income in points quarter impacts in XX other innovation to in $XX product million quarter, timeline spend million tax strategic in margin of basis $XX on exchange new The pipeline position. prioritize an well was driven $X pension to of expense favorable sheet an the by increase as quarter, to for quarter. driven $XX investment, to and lower and year. the an in as driven gain million the million totaled deductions adjusted balance commercial totaled of by as the first compared exceeded earnings to our expectations, our related quarter, deduction equity million to gains adjusted foreign by $X.XX compared per XX.X% primarily a $X.XX $XX mentioned, the stock benefits rate on previously guidance $X.XX previous share. compensation a per of to diluted and share of to as year, benefit $XX

quarter, million first the $XXX the related option which was offset partially we Baxter’s shares stock million of by or in Within repurchased dilution X quarter. approximately

with expect year, Before We free flow due $XX seasonality the the first cash cash to will turning in hand. particularly outlook, quarter regarding or throughout performance some expectations line business. negative million with to on the the XXXX days provide respect inventory in of our to largely was flow the normal of do commentary improvement I

providing Let by me the guidance and for our conclude year XXXX quarter. comment this the morning by full second

growth X% constant continue growth X% For sales expect year globally, full the growth. XXXX, to we operational to flat currency X% to to reported and X% X%

growth otherwise guidance Care, year offset X% where with in-center sales business to constant full U.S. noted, of by we basis, being a in partially continue ongoing on momentum by Renal HD. except lower to expect Moving PD, X% currency to in in

sales the As a strategic due exit to to are drivers In Delivery, negatively made XXXX approximately X% we the improvement expected to expect by to in sequential increase Care referenced continue with sales Renal reminder, approximately this in business $XX million. Medication impact earlier.

$XXX assumption Cyclo, U.S. we is business, Adjusting currency on versus million are now total increase $XX decline our a million. constant For of our to Pharmaceuticals expect now sales U.S. basis. previous low-single-digits Cyclo a expected of expected growth to for low-single-digits. approximately operational

sales Brevibloc As are operational a to in $XX and million are expected growth approximately included reminder, decline in XXXX.

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

business, on Surgery to basis. For Advanced our X% X% to continue expect to increase currency constant sales we a

Acute to the of to expect approximately growth continue we Therapies X%. business, X% For

other to our decline expect now we to in low Finally, sales business, mid-single-digits.

of now $XX We adjusted operating Moving interest to net points. down income we basis anticipate margin of approximately to expansion expense P&L, other million expect now XXXX. to and adjusted of million XX approximately for $XX XXX $XX million

XXXX reflecting the million count of an a higher full Based year, quarter. approximately approximately factors, per share. first R&D quarter items. to This our these diluted in reflects over-achievement future earnings special shift we the as expect as anticipated benefit to well year by share exercises shares XX% slightly the we option favorability diluted increased rate quarters. in of $X.XX the We now adjusted anticipate on expect investments adjusted average XXX of now from excluding the tax now driven $X.XX For QX. first

growth decline growth generate billion, the sales operating cash and cash Finally, expect quarter adjusted excluding to a currency of earnings per of $X.XX $X.X flow billion. operational XXXX, up we items basis for on to we to on to and reported call of on With flow basis $X.XX expect free now of of expect second X% X% Q&A. year, X% the special diluted can to $X.X approximately continue Specific X% basis, constant to we to we an approximately that, share. and a of the open

Operator

[Operator JPMorgan. question Instructions] comes first And from Robbie of Marcus our

open. now is line Your

Robbie Marcus

question. focus the a thanks Nutrition. also Delivery Medication and There of really are results Great lot seeing good Pharma. and we out taking is for But on of obviously investor

some puts could your the could takes commentary minute on some of of cadence focus expected you the give benefits balance offsets a the you and the also the Medication given the just are in discuss seeing Pharma? in stand? quarter and in what maybe the But you any And and of for Delivery spend and us So, year there?

José Almeida

not things morning, put, which Good how I necessarily start is that discussed I’ll about, to will and Robbie. on to focus feel pass on then Well tend the investors management feels. Jay. they

on answered. So, going XX questions am same just that probably you the it I get answers that thing to about

Medication people our $XX needed Delivery. last we LVPs first The with First up comfortable had was not products. Consequently, culminating is were severe the that hurricane destocking, necessarily all, affected, three that had purchases. were flu and of and but ramp the quarter because then year, really feel start cash Why million the the stocking those and to to in purchased with net quarter other I were two, close with and very we hard that the – So, that? four SVPs of were quarters up destocking. really, all

so. a compare I when QX with So last this what I year growth get QX is negative rightly, year,

a Now, replacements in indication Why now good of of I can I to no Medication either why pipeline guidance get otherwise? in believe pumps that all, the have Delivery? conversions do the First we we horizon. have or

that. about good feel we So,

SVPs. extension signed of Second, we the supply GPO you and our have of know, LVPs all the are, as contracts with

its in affirming December. the from in against the FDA signing progress gain be Baxter facilities signed. shift investment We opportunities resulted Voluntary that to in market because lift that I the with have with And the GPOs past. issuing that chain Actions but those the by observations had or culminating that with the two will resulted FDA our knock that of in investment supply necessarily to with end letter made have quality continue they Not am the potential a the IVNs warning inspection will Indicated are in some we XXX% now with that efforts indicates almost of

So, when comfortable and customers we and should supply about this we our us. show redundancy now to have chain customers, people feel our in potential

that in we so nothing are of which Okay, the there to get bumps, including plan and I part telling LVPs is the the and now have right Delivery Medication have me a plan SVPs jeopardy. otherwise

Okay. make When have changed we market is have to changed. gas story. this have this for could Clinolipid that different the The that continue physician not is we the nutritionist with recapture hurricane. I the Practice a launch we products and I with shift of indications the in Nutrition, use. or them not of to longer see feel We the using story a tank of Nutrition a comfortable XX discretion and the XX supply can amino off year, progress acids of us But growth. augment that enough once

Pharmaceutical Let gem at either hidden Baxter. make thought me this ability that shift I them mix had very a now temperature came Baxter, first to solution, frozen space been in niche in room Baxter stable When business. in to I good to has to continue and APIs to its advance the or

that well new molecules also we not team pharmaceutical that only executed launching, has purchase Claris. molecules are but in through Our we extremely on

in we amount that significant So was that very development, everyone exactly for Pharmaceuticals about Pharmaceuticals. continue and business, diversification healthy to by Baxter’s and that. today put comfortable We what is don’t feel acute but to tell I to place very doing, doing have we base design, down in are of create will therapies. we everything a is double pipeline in a

business – is we huge I I pluses last are from that year. growing. think see

fairly to tough got filed first its even communications the the Prismaflex that, have business be close We double-digits way review just with to quarter before Advanced doing doing of the opportunity good EMR. the generation and started We our a year’s the which We is U.S. of last outside getting found got with this to get a in comp PrisMAX. U.S. in from flu PrisMAX season. launched of in also job with I augmented FDA It’s share. phase two an market Surgery with the well FDA period just

are a in the a We a due to having there. competitor There recall. market shortage is

capacity. We have

Our best for FLOSEAL out is there still bleeding. severe the product

took PREVELEAK and year So business still well. Mallinckrodt the we We last are extremely RECOTHROM and it. from with the doing did well

company find well. I So the going execution of the

So Delivery, we me Medication do of have we going I not Medication going do. what said back to front is are to that in going no we what are

alleviate well growth. X%. is conversions come this good, on spite comment one been the Renal in you. extremely has And U.S. may for been patient the X.X% question peritoneal So last Care, growth growth slightly doing up our perhaps and can is same they in over dialysis has in patient it with

feel that. good We of So purpose on got we about bloodline. out

no made profit. that business making no million, was we $XX So on a That business. bucks was million money $XX that

matter a fact, of As we money. are losing

So, right the decision we made there.

led So, I is we U.S. and by in execution focused on great by new company Macauley with think both all a them Knight, the brand in Josette are and of with records. track Heather all, absolutely team the

commitments. strive continue We to meet to our

Robbie Marcus

enough postponed R&D? That’s great the little the little you color guidance a what saw But Joe. quick confident bit a And Maybe, for R&D color in in tick to margin Maybe and tick one the of question. why up it SG&A down raise quarter. just a the the little operating was year. SG&A? give investments felt bottom-end are and us just in bit We Jay,

James Saccaro

Sure.

the I pipeline incredibly product things a have. So, that as we referenced about one we of is the excited during call, are new

teams and We attending sure successful products in we the years, ground right support are the investments many more year have commercial with on to launching we to than want but launches. probably that, that have we commercial make this

a the a we what for where investments. those markets a X%. But delineating And comes want an standpoint of took the few But adjusting to actually growth again, to constant we of did currency see really this to investment investments from grew phase on I'll are down was is, quarter just maybe it sure those that of marketing growth. place. rare So, stop launch. points short SG&A TSAs, basis, on ready successfully X% of make select some it,

from Now, a in R&D to specific exact the standpoint, payments always quarter of planned. we outlined an milestone get it’s difficult timing

year reflected things And have of to certain our as most guidance we so, R&D one we shifting QX launch of of spending future found, any one impact specific we expect move QX QX of in at frankly, the roughly so were from terms a is from an forth. this not and payments the through we my of our in to to of payments $X.XX shift we and products It’s And from these that looked does think some as importantly, quarters. for program. quarters not results I the we of timing acceleration standpoint, and put QX later QX, it

see the is and to pipeline, to phasing we full been as there are but about we basis. change and want bullish not more did reduce So we’ve timeline R&D we no on as can about But a we year ever did talk some it. spending

in We improving really to the spending on spending. is, the are future of focused our things other quarters. I comment through only one see or we’ve would efficiency been going make The of is come R&D that

seeing simplification consolidation you performance been overall and a initiatives number that in are have there the So of of and in yield dividends global of terms the spend some category. of

Robbie Marcus

Thanks a lot.

Operator

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

Your now is line open.

Bob Hopkins

morning. good and thanks Hi,

most six on for important bit year or in we Could pipeline is for perspective? the of look Jay what rest the last or the how things for you Joe. on your talk year? you’ve but to in refocuses that for Just expressed a you Just this outlook over next key thought the pipeline not year, that think on as in only of about next outlook as pipeline, of the confidence months kind LRP? follow-up drives And acceleration the twelve the forward to the this on just time lines dates little launch train

José Almeida

Well, let’s start with Pharmaceutical.

we're molecules of that couple a have we launching. As

are We year. size early for a molecule next expecting good sometime

So, six like XX about from months to today.

launched of to of our syringe the All new last have going pumps X-way out large have also gate which stuff integrated, Baxter integration next the market. two should We and out all version out with a are the EMR. and year plus the the pump pump, a we but have right in volume have pump we coming drug is X you platform pump we year, coming library

We we will will later then, in next a which stool. year ambulatory six which have And after the third of year pump. have PCA the we is the pump that have months leg will that, is another

So pump platform. we a have four

in this for our experience in mark to continue patient Japan. demand also XXXX well. a We That got I’ve significant since for We uptake time the cycler and seen here Kaguya with Japan. crossed just going is first we’ve business in growth

probably eight is FDA We upon We hope review deal. also timeframe. have to months to months the PrisMAX a U.S. approval the six which get within I just spoke for about. big PrisMAX depends

have XX coming we actually the in so, next products over And launch XX months. for up

the long-term, are So, relevant, more pumps more like some are are some some some small, more and durable PrisMAX.

molecules. lot look a to at different a look continue at We of

Baxter the of bit a its all to through. doing – for And last from shifting of excellence with to starting and efficiency operations know innovations so, comfortable you the as been we’ve X.X see feel coming years the now the we fruits you

Bob Hopkins

you for margin then, the flows of Thank gross over can and expectations anticipated gross for how weaker then, And just the Jay. margin? takes the the one follow-up Jay, and comment of than little just quick impacting quarter on you the your a rest was course we This for that. puts year?

James Saccaro

Yes.

the high in with large So, some my headwinds part expectations because from in margin principally experienced we a in the margin was of quarter. gross first that line standpoint, products significant in

a in It’s at we comes that million And related It’s at higher so, year-over-year and $XX corporate the had quarter, we In headwind a headwinds. the again Furthermore, first much you bit margin another cyclo the have a year, have basically loss first average. half quarter. through $XX QX little in than also big a to the QX. a look the we Brevibloc. FX of if drag of in

those so, headwinds pronounced year-over-year impacted particularly the quarter. first And that were

of move the normal to the balance will As year, improving throughout gross see we we year. margins the of the cadence

is is So, gross strongest margin typically, our lightest. typically QX our quarter. QX

we’ll So standpoint. of from have see the half lends which from year in a higher itself a the second but mix will of we manufacturing we to also sales in do. that facility uptake But standpoint, our the both normally a gross also as then growth utilization a accelerated margin, benefit

the range. year, at look the our guidance to the you X% X% first of half If in overall is operationally

move to back year, faster sales start a to you the comps, in other As uptick an much on the sales. overall accelerations see growth and half easier based well, we of as but

So, I this is gross expectations. my line margin. the of are those said, few But largely think, in with that I like impacts drivers

Bob Hopkins

you. Thank Helpful.

Operator

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

Your line open. is now

David Lewis

morning. Good you. Thank

two from Just questions quick me.

got The first deployment, start just capital as a the one maybe flow a and cash question quarter. focused to first flow Jay, off for cash on you, in slower the here

continuing amounts about What’s a balance capital that year? you deployment. of pacing for in What what’s I just of take second and to the pacing? the quarter? dramatic talk stock. And that then Joe, So, you the if are the still the to first purchase drove Obviously, related wonder

of think the buyback are I to one I have in balance of the capital relative M&A year? And quarter. follow-up. What terms this you for of thinking million quick $XXX pace the deployment versus

James Saccaro

Sure.

first year which line in of the cash QX year, to from payout incentive came typically relates reasons in, of once is quarter with it number a the occurs for year our flow, of in one different expectations. the quarter. is the lowest prior As a flow cash

year We of had anticipated the in that also vendor impacted first quarter had that number. this payment the a large we

large expectations. close very by in So, to and came our

the ramp implies, your a in start significant mean, what So, is the as year. will improvements to a – portion point David, QX. or that see we approach we of back to I

happen, too side, to will at improvement is on But operating categories course. looking capital so and And transition and the what balance growth this don’t then Now, we the drive sheet to working look at much. two of will expect capital. margin change earnings what working you

in be will the mid-XXs. for payable Our quarter days the first

low will days in Our be receivable to mid-XXs. the

a of lion we for end, to he Philippe the I new sales Reale board. well those free result different last year. of year excited and those has expect particular we on in relates as to a as have than And So drive them day that we on on – hand the the board and is that are several focused improvement inventory something that cash the mechanisms. at we involved and in will been our Of with flow are been two operating over corrects will inventory. are operations. a where we overnight. at has By got number see real inventory us leader performance chain, mix days. him an us We’ve anticipated frankly, that we and not days to expect the to new we’ll months a problem will capital XXX a up in build to share end for of year. see area roughly our area. continue manage along in and correcting This roughly significant quarter flow has And year, Where something be categories XX the improvement Head The personally of disappointed first cash to exactly a in aggressively. working has Joe but on supply to comes it’s that He want

focused So, we would improves want through capital very the the feel this this question the also high and deployment? you QX. do and the Joe, on we on number But year. of I good take balance knew quite that in about be watching this definitely

José Almeida

Yes.

– inventory. to inventory, parenterals of of inventory large in in volume we nothing back planned, bit it’s going had the a because terms the was Just

inventory the to today and we carry customers. levels our appropriate that Now are service at customers of future

So, seeing. to deployment, we extensively going stuff back at that some continue we are of of kinds to opportunities. like We capital the at look different David, all

multiple at We did the molecules are way and recent deal very the looking buying was at thought good buy are stuff group great we a drive. our shares treasury to looking make back. was molecules. Until to we We stuff it more large because depressed a all

that continue evaluate front have in phase opportunities we us. We of deployment of the in capital to of

of on had that this time we M&A. have continue the lot may the in or may a We pace what not at with depend quarter. program we first So opportunities we in

probably There balance buying adequate are there we of and the that last did long took folks, strategy right had expanding holders we Baxter. us good fact who would the back that we by long six There one a between and is because behold, one. the opportunities. to that They week it’s speak goes not continue our folks That as with for two to is a as Baxter’s opportunity. the and that that opportunity that shares and pass look As good or and will that buy we always is investors was decision shares. said, I will opportunities. fast technology And in couldn’t in to I pay an said made don’t think nothing as we the price we to before, But and I say see at investors. opportunity appreciated very and the for our months thought a buying I

the be know. will first You one to

David Lewis

and year, Med thanks, really ability a – focused back think on then, I your into I the about it step If to debate follow-up here with the was earnings take to Okay this just on my here. drive ability and deliver And Joe. Delivery.

raising and the you margin guidance think jumped of obviously the raising hardest I operating first the in quarter year over quarter earnings.

that’s asked I answered. sort So and think of

inventories well are the nice sort think Medication fundamentals as question Joe, Delivery, Just that you and and channel? comfortable build in of you equation discussing? in can sort channel much. and you you what are stable the in from you are those are on the outlining Medication how this recapture is of signals so key I benefit a back did come where job doing to as the demand How I capture you that Delivery recapture think you expected. The base just, to Thanks underlying for channel see are from the customer you seeing perspective, a share

José Almeida

we because the can like our credibility. is Right, are numbers, there saying the market market. and get is have is and quite a meaning, see you a where So, see first the we is year, one reviews. give that of how quarters, David. it couple performance can not uneasy color. a to so, shortages is looking it’s quarter investors in our what the can company we let that through you feel There that said that of that. some we there. have we there the at are I things not out me a do out There the of nothing But and can little more The stable, bit last

of of a the end that day. So, is swath customers safe our have the you supply and ability you you be what plays continuity under supply Delivery have of inventory, have the Medication that to large – at that what important products the to

So, what Baxter brings the few to are table things.

stable our very a in are We’ve the now. invest improve two million We quality, significantly years. improve factories over output. $XXX to chain last right modified supply We in to

We at continue factory. management revamp our to

and Brazil, Canada, United So, Ireland. from we do to-date States, Spain have the capacity

a been the launched flexible in Plus, is network which that parenterals We provide pack. products. new that have instrumental volume enough a product Mini-Bag very this has recapturing small is single that We a can

the safe that recall, Plus. as small-volume products the of and product, of also shortage one the during in to a product available competitors is light not a the Mini-Bag of on the took We which advantage is market on our filled parenterals brings

three, agreements hospital been four we’ve So systems – seeing with year right now. signing two,

that sure is see we deals are customers Things can months our they that will, don’t making as supply serve things the to not that the are strong What think a can change are can. six as are pipeline all showing today. and we well think we So road. but can company our of are deliver feel down signing I every How them enough value, on is today ICU. of products. with promise. ours pharmacy I doing single Remember, the from we we that as account who that goes we Baxter breadth to and the we way

which have also on one that the is market offered our So be pumps, if way. the it, of breadth products of top have library that the Version On can Spectrum we we of not X. using drug a best, best

what any team all the our that, we not team, it’s year investors very If that to you to with with end to that confident am are have of going experienced guys know. we changes we new So, of but the it’s and people, deliver can this have I the people, we together, new will get experienced deliver. a we to let

Operator

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

Your open. line is now

Danielle Antalffy

much so Hey, for Thanks question. good the morning taking everyone.

I us follow-up. then help to guess, think a did quarter in Last ask businesses have calling of about how to about to the you Thanks. a wanted Can And profile, out controversial you Delivery? their to one about job, how segments specifically think for some headwinds. business and think I Just different specifically about I QX? that guys relates And it great question more of the as some quarter-specific like QX? thought Medication the growth of

James Saccaro

specific interesting, some those was away, quarter QX persist some we go of the in Sure. of were to right, of because that had number QX. and headwinds those a

Brevibloc, was referenced I in be earlier quarter. the will in that It the million around like $XX so second million $XX quarter. And first

growth going the activity a tremendous is we operational group have which Bloodline’s specific that sales launches. a we talked to past this new coming for $XX that of from basis the a work But around second pharmaceutical and So terms mindful headwind headwind in of We’ve quarter. in the the on and full that’s year be real the are about is million. headwind all

is, impacting couple decline that moved away normalization are item the to growth in the in growth, our because headwind $XX of million We the will you continued Renal headwinds roughly a there quarter. subside. acute a particular quarter. One the second this of see of see will But related second flu

first at of solid out a then, buy IV in quarter. we impacted of we that the past again this year will have performance group subsides. the which And improved performance quarter see second that in described in So the the

neutral. QX fairly interestingly by that referenced Joe QX an tailwind and and as Because depressed headwind is earlier. QX were this Now, in enough, becomes amount QX actual QX. our

growth the in with Renal QX, about of kind growth. overall will profile growth consistent think annual we as see you So,

that be in benefits We line expectations, will well. then Delivery and second accrue as those to that all Pharmaceuticals expect little at in Many we but Brevibloc we’ll with the solid a the that. two for have the of in see I the rate increase the line annual of year. described. Medication second quarter have bit expect should lower efforts Advanced to of extent quarter in not look in closer rate we growth as year should largely to Nutrition see full half maybe acute back the to that the the Joe see quarter, with year to the a better. that a mentioned of reason growth some will again the Surgery, quarters

overall So of down occurs biggest the quarter, the the growth that growth overall in really components change the said, like of walks second you I rate kind half. in in second the

the year. to operational X-ish of go in So, this accelerating second X X the from growth to half to we of X

Danielle Antalffy

I can contract be how from and contribution feels I Advanced manufacturing, Okay. there the curious new because the like me would the it talk guys. starting Surgery, That’s for you is but Surgery super thought we Pharma maybe was to bright take called much were out maybe great. really Thanks also you to helpful. get color Advanced hold. about, and pipeline in much spots so and business products Any could there know really quarter, Pharmaceuticals And two

James Saccaro

by the we the by the definitely and year. excited launch is, Pharmaceutical been has be case of for a of growth us you market. were really received a can product I out continued of business, in the balance with presentation what that engine should dexmedetomidine. well break It’s for That novel solid contribution don’t the Yes, new in quarter, we business. the But tell

of benefit a we in and and in RECOTHROM second PREVELEAK operational our featured quarter. about assets. did As the in numbers biosurgery, million our think that moving the we the of Mallinckrodt Roughly have as comp so $XX the annualizes numbers quarter into growth

very So, return benefit did particular see solid in in rate. first we in lower But quarter a the U.S. the will a growth to rate

team well. performing hemostats has biosurgery has and forward, sealants been we the momentum look we area been that core As seeing and is The good are an there. executing with

we of look progress the example positive areas. that business great we team well a you think continued expect successful in those know, development and really that point, the we will as It from be acquired we to same development, incredibly that we seeing can with. Mallinckrodt leverages same assets think of are do And I are product. resonate as about business commercialize we the that call sales sales kind really So,

Operator

Matt from Taylor comes question of next our And you. Thank UBS.

Your line is now open.

Matt Taylor

Hi, question. thank you for the taking

on So first was to ask dynamics. market wanted just the Renal question I

you seeing that cyclers by market if PD? being patient was had you shift. if how towards the that wondering are are and wondering relatively - are healthy I think cyclers you part seems shift seen was helped I So if volumes that you any It push could PD like or is from much any of that coming the

José Almeida

A what One penetration think, see I the are the the penetrate. related Matt, of to couple things. is we of patients therapy. of is, number

of renewed with And may revenue, therapy. length lastly of is, in be right, related of DaVita. stay Our partnership the terms durability to also on

that of this able are We we excellent relationship its has millions with best is in we So, facilities the plants organizations as where of with provide patients, DaVita capacity in attribute the be therapies are I we the I the more to say, it would to investing mainly our – right support agreement by them. aligned PD, the investments seek have to Baxter and number speak, DaVita. making dollars in for had of now, and patients to for we growth dozens

be find I this result the of So that execution. to

Matt Taylor

XXth at just little to wanted dynamic flowing the on then, here And question bit I delivery. better. Okay. a understand the the

going on think your model excess recapture for in to XXXX. hard And $XX called Could million next destocking. of about us You outside had stocking? comps how to quarters out the any you in are and the couple specifics play that of help into to of it’s purchasing pace from the offer the you QX us the

Clare Trachtman

in second see year for the and months the year. we is in was $XX of LVPs rest first quarter started did of of it’s elevated to destocking when stocking one five some then, of throughout then U.S. Matt, last purchases of So, the impact first quarter the We the see, couple million, occurred the last that in June year. the

to kind really continue year that that’s progression how that the for the as again, the impact are respect to as LVPs. ramp throughout with and to of on relates stocking those Joe So track And parenterals, it small we saying, with will U.S. well. volume of was

recapture are going efforts there. So, our

Plus, really single particularly doing are packs. We our with Mini-Bag with well

really will reconstitute focused and the efficiency we Mini-Bag drive on Plus efforts continue about to education, using So of drugs. safety to those

reps sales armed on working are and that with clinicians are that. our there So with out

talked I pumps. think Joe about

of see will the and year, IQ volume to international as And well our both up we throughout continue rest So IQ the in pick Spectrum the to well. continue reallocation to year. of of addition, as Evo markets over the will ramp course

will – in to So, I back-end destocking more those LVP the think face U.S. be as those are market. all dynamics. Again, the we it’s comps respect more weighted the easier growth with

Matt Taylor

Okay. That’s really helpful.

Operator

Matt Thank you. Suisse. the of And our final Miksic from question line of comes Credit

is line open. Your now

Matt Miksic

the the of question I’ll Hi. other a if maybe couple taking the and on Med spare just ask elaborate you businesses. questions. Delivery for you could umpteenth Thanks

The the PD first on side.

strength of was or are that the follow-up in there growth. PD? dynamics one driving Pharma. could reimbursement you macro have If any I economic remind us that or maybe then are talk of just what that drivers If And on some

José Almeida

to take numbers. clinics significant to to our caused that home Matt, impact patients have a from the any initiate government on would they announcement too new is move

are strong primarily I Our DaVita the with relationship U.S. that to numbers, continues in driven said a as stronger. by get

Our which most of importantly. products is availability

with making supply are product. plants our market We the to investments in

availability we have longer-term. for will the So of products

We are investing in technology point-of-care.

clinical For off just three trial came the instance, successfully from period. patient first our month

patients that technology. We enroll continue more on to

Don’t all, the primarily growth the well U.S. Asia look Europe we partnership. renewed that And behind we that penetration twice we the parts PD need PD always in I X.X%. has So, as in China share compared patients and U.S. be Asia. in and effort at market is holding done plus patients in in to XX areas in to has China, Pacific, forget all in the that Asia, because the When U.S. to our have been continue the of China have would are improve but many percent we

in a X.X% is than consequently, is year patients all, our And more pretty in PD all So, the for growth healthy for little outlook number. that. a

U.S., see So very outlook in to a we as Canada. well Pacific, Asia continue the as strong

Matt Miksic

That’s strategy and great. talk I folks about, the growth. of the be you injectable of impressive appreciate Can may there maybe how that. and update additional helpful. to Pharma, us on then, again, us businesses compares the would of assets, just size as a And it’s know little businesses, or bit kinds specialty remind – these traditional perspective to molecules, sort it just

José Almeida

Yes.

things semi-specialty that we they cyclophosphamide, – drugs had like that and that compare because you was They they were not it if are anymore, not time. had extent like see So, we our at in patents Baxter and that Brevibloc, to they will portfolio those drugs had and a were drugs. different

comes Our intent which molecules launch strength, are premix. it’s is to mostly that year a injectable in premixes, It’s three to which Baxter’s to four Galaxy technology light. Pharmaceuticals mostly, our is

the you specialty well launch will some APIs, objective antibiotics, letter areas is that to parts APIs Ahmedabad. in small and facility. But care, warning look We will of antibiotics, at our therapy, premixes. of out of some as as oncology, once when conglomerate five anesthesia, out the we primarily get There resolved of of launch a launched be if

a those So of launch and we are take to four going therapy molecules areas to specialty products, year. three

to million, be them. Some of are to million. $XX going a going mix be million, to $X are be million, some It’s going $X $XX

than Our XXXX as we we there. of get number objective currently are to that have the of more ahead plan to molecules by double is

Matt Miksic

Great. much. Thanks so

José Almeida

you, Thank Matt.

Operator

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

Baxter International (BAX) 25 Apr 192019 Q1 Earnings call transcript