BAX - Earnings call transcript Q3 2020 | Baxter International Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2020 Baxter International Earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Clare Trachtman.

You may begin.

Clare Trachtman

you. Thank welcome XXXX and Conference our to morning Earnings third Call. Good

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

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

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

of operational which will year. discussing exchange we this sales which XXth acquisition the On of morning, February of closed the Seprafilm, be foreign adjusts growth, call and the on this for impact

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

Jose Almeida

provide you by safe. against your call, with detail to of on financials. up again begin everyone a I we families responders, start third first quick Jay who I want who and Then express save these sustain the remain health thank hope us want enormous joining you, unprecedented always, will navigating to spirit care in wrap unwavering and day rising lives. acknowledging performance. to you every of mission researchers on quarter questions. And employees, providers, Claire, Baxter's challenges my to are fight to will caregivers with our I and your more all review of and will I the Baxter's are the COVID-XX. healthy the ongoing and as personal that Thank appreciation the deepest times to in

the as to Just COVID-XX all trajectory Baxter's it of continues and operations daily influences naturally our impact lives, performance. also of

both procedures, third levels. quarter, During three in but geographic and admissions our improvement remained all the below volumes surgical observed hospital of pre-COVID sequential regions

For the our third Jay quarter, we remain these admissions detail, digits but estimate outlook mid-single respectively. and in discuss the fourth the throughout levels and surgical quarter. assumes declined low-double in XXXX at more digits, the this guidance hospital procedures volumes U.S. will

quarter delivered to Turning of growth operationally. sales X% currency X% results. Baxter our at and constant third rates

business constant leading renal bottom virus its our global units and earnings mix Emergency set as help of region. the year-over-year, was also solution, options. continues by XX% QX. as therapy the positive portfolio address Regiocit per was treatment Baxter's Authorizations supply and $X.XX, demand for constant U.S. or up to select the the in was for for replacement well granted products continuous for Baxter increased Use QX, midst containment of regions our adjusted for contributed geography's business global positive In X% experience Therapies the global in year-over-year. adjusting delivered sales grew pandemic. demand FDA CRRT currency Acute them, Growth replacement heightened Asia quarter. Among to rates, growth CRRT to currency This Five FX. at six recovery performance line, All up three On our XX% led which of Pacific, to share were the reflecting date in

quarter, support of payment component continued to This monitoring quarter, portfolio currency QX, diagnostic Health peritoneal persistent acute as initiative. the assessing demand the the CMS with Pandemic announced dialysis share constant our finalization of risk advancing stands source home-based of conditions as in disease currently PD American for authorization in is model, take renal increasing announced a choices prepared novo kidney for digit the received continue effect for use during severe U.S. This dialyzer growth the of therapy. providers in CCLXX a core Late the we THERANOVA or of Also XXXX. the agreement in bioMérieux model health for delivered by products. as driven Baxter care for patients. dialysis of advantages end-stage and FDA test adoption also development developing hemodialysis injury. de home-based clinicians step both well Baxter's care, forward NEPHROCLEAR our distribution at for patients underscore to Care Baxter treatment and rates mid-single Renal for technology Kidney treatment remote a the expanded the key HDx new quarter, and

for We is Care with November. in application final this TPNIES published CMS payment technology have when and rule Renal add-on the expect novel pending a an update

Performance here and in this Advanced this of and at time, further new introduction issue Continuing expand among formulations U.S. nutrition to Clinimix and month, patients' Surgery approval Performance parenteral mid-single currency announced supply diversity On as Clinical a lower to meet These X% product constant new the mid-single about attributes, offerings new reflects Nutrition offers conditions. the rates period. reflects nutrition. year needs. the for digits delivery, of rate impact smart offering as Advanced of acute of U.S. in FDA lower remain continue competitive the on physicians businesses to constant in While CLINIMIX higher-protein in low-single CMS the options room procedures constant believe of single Last we acquisition of NOVUM flexibility digits Pharmaceuticals at technology. Surgery product their sustained not infusion for utilization our IQ our E increased currency our portfolio, we February a of Delivery line medication determination, the the we're grew final emergency speculate our a bolstered FX, ESRD for basis, to going demand, rate, admissions operationally, growth. associated currency the well Adjusting low optimistic by acquisition we In digit hospital and both as Medication pump and compared achieved prior benefits and surgical patients. declined of digit. Seprafilm. range chronic declined with

questions NOVUM IQ next the the making the We the addressing on submissions to months. are track within FDA progress update from open remain applications and on XXX(k) three

collaboratively approval expect in pumps the the Canada, approved, year. next currently without fourth launch By of we to operating working with finally, pump goes We syringe NOVUM anticipate and now, Mark IQ pump it agency the obtaining environment. this CE the platform hope in volume that largely U.S. in are quarter. for receive we recently the the the to we and end was In NOVUM are year. for a the And entire by saying IQ unpredictable large

enterprise. efficiency the an geographies, continues of with experiencing respond are become second across We the treatment focus across unfortunate nature sustained has many a to resurgence effectiveness, broader which and on COVID-XX which Baxter landscape. in resonates

growth emphasis underlying remain of on capital today's and share footprint advancing and strategic reinforce model. this stability are We business augment and opportunities our a driver in performance broad deployment, the Despite on medically innovation Our our essential critical focused strategic confident repurchases. actively geographic remain unknowns, products and and including business development opportunistic Baxter's potential. through evaluating challenges trajectory to as I

emphasis responsibility impact in innovation, a legacy all term. we upon of are are stakeholders corporate over value serve inclusion on By that efforts dimensions, justice leadership meaningful our diversity. enhanced building we all We long-term executing and will in the our a for long deliver and make new racial reigniting implementing and across rooted

Now, year. for pass and the for it comments his of I to will the outlook on the remainder quarter our Jay

Jay Saccaro

Joe, good morning, Thanks, everyone. and

unique only during Although results to our to unprecedented of health care times. these resilience challenges, COVID-XX business, not the overall third quarter landscape, but a level present our demonstrate continues

for new over of continue long deliver we strategies our all forward, must identify stakeholders our move evolve As and to the we enhanced opportunities to value business term.

both operational among X% our basis reflecting Therapies, third to sales demand of X% to XXXX Growth quarter led ongoing currency Global Baxter's reported GBUs Acute was an constant and the $X the COVID-XX on a advanced due by Turning on basis. billion results. and pandemic.

impacted continue wake As Pharmaceuticals Joe sales and emergency quarter. negatively to net by mentioned, by in We in affected the COVID-XX $XX revenues lower the States. over United of room Medication the rates of be particularly in the Delivery both in and estimate hospitalizations million pandemic, utilization

spending lower earnings per reduced On to XX% tax the the performance, top bottom increased our and share, line reflecting adjusted discretionary of a benefit line, rate. $X.XX

basis. quarter, currency for constant constant with Africa sales we three provide Seprafilm. on all X% growth X% our currency in with an of constant X% currency the operational East operational basis in performance and and through region X% Middle walk the growth, global units. equal Sales Starting advanced of constant business operationally. Note Europe, APAC the regional basis in our this businesses, segments which to our growth Now constant regional I'll Advanced for that both and our acquisition is adjusting by for Surgery business, global exception will operational a a basis. Americas on a segments. on X% and advanced operational Sales currency on Sales and advanced both and currency

X% Sales Global sales and a PD X% of for Pacific In X% Global growth in Care by our continued by currency a infusion on constant in $XXX execution benefited million quarter see IQ from basis. patient performance to advancing U.S. constant regions. both the the by in HD on internationally. declined medication was of the placements to units. Renal Moving Asia pumps and Performance led EVO delivery we quarter, in strong million, PD business growth global driven businesses. currency on our were $XXX basis.

sales U.S. U.S. $XXX quarter. purchase second negative compounding on sales international As onetime lowering lower sequential impact the quarter. below hospital demand pharmacy levels. related approximately demand and Pharmaceutical a procedures Scop $XX negatively reduced the $XX COVID-XX growth impacted delivery within utilization, although admissions Joe as million, We X% net impact increasing business estimate for million for the to these our $XX international quarter, up estimate partially the remained inhaled a million constant in as of a saw contributed pre-COVID well the products to from hospital government of the We of for by Transderm anesthesia was competition a mentioned, our volumes by approximately in enhanced were in offset currency million quarter. approximately medication improvement surgical we and the This basis,

$XX in on our basis. XX% of basis. sales were Therapies growth by $XX that COVID-XX. were Declines million demand the quarter. recent of X% quarter estimate contributed benefit automated and currency the in basis. products was Advanced for new Sales declining basis, approximately Acute on Sales operational in product portfolio. business competitor of an of quarter the to $XXX Advanced in a that currency surgical offset in a in growth growth in negative the million Moving an February The We shortages increased X% increasing X% representing driven in Surgery to our Seprafilm million estimated million, We on a for performance million on were compounding Nutrition. $X launches, the Strong constant demand impact approximately for of heightened sales currency advancing in quarter. COVID-related million, estimate constant $XX Total business over drove plus $XXX nutrition to the million, partially contributed related amino acquisition acids. by constant approximately Surgery was procedures $XXX

basis. Finally, advancing million quarter, the on services, primarily $XXX which a X% category, includes were manufacturing contracting sales our in currency in other constant our

rest P&L. through of the Moving the

and of expenses of margin $XX on declined of XX.X% response. by year, increased gross points related our of X% operations the year-over-year basis, sales in higher-margin declined products well chain XXX over million as COVID-XX to adjusted Our lower $XXX a Adjusted and non-project our COVID prior SG&A as by million basis driven $XXX on approximately supply incentive driven R&D focus by annual spending in plans. continued the under discretionary restrictions resulting spend from our million bonus reductions continued being employee with declined spending compensation accruals X% by lower excellence. reduced reported operational basis on quarter a in discipline, supplemented financial Adjusted

With decrease prioritize of XX.X%, quarter prior We to year, compared prior Net compared nonoperating cash interest in investments balances year. year-to-date our was the million, points flow, The XX.X%. we $XX in in million quarter expense a interest the interest the innovation million quarter, interest the increase basis debt income expense to to $X in as $XXX to to Other by cash generated rates. period. quarter year expense to the totaled Adjusted tax the XX period. as an decreased driven $XXX operating increased well prior compared was $XX year from due million million in million fuel continue strategic the respect of was higher flow versus outstanding lower margin adjusted of to rate in pipeline. the free $XX prior

of on to structure. billion of the our we with billion As we equivalents of of long-term market conditions, approximately third cash the indebtedness. along had our evaluate with opportunities and $X.X cash end to quarter, Subject balance sheet, regularly capital respect $X.X

authorization increases. in generally existing We XXXX, with to stock, an Baxter's expect generally our share fourth the Board to to program, of the recently $X.X $X.X activity consistent also capital authorization authorized repurchase bringing recommence allocation repurchase common prior of our share quarter consistent total repurchase billion our billion incremental share with philosophy.

my our Let me the by year. for of comments outlook conclude remainder discussing the

year currency we low-single-digit growth sales constant basis. and now reported XXXX, on full operational expect a For

across of globally freight-related we we manufacturing in employees $XXX commentary, we our efforts related of committed patient supply U.S. products. we we needs portfolio business, to service we see physician life saving paid as operations our chain include and increased As to protect of field in resurgences Pharmaceuticals with line In Medication and to Nevertheless, of absorb These COVID-XX expenses sustaining our a impact geographies, our approximately safety, on anticipate response million employee addressing with ready the particularly and COVID-XX previous and sustained many cases prioritize products. critical expect remain costs costs taking are in to and Delivery bonuses and delivery measures XXXX. frontline to and incremental our

also to QX over we driven in discipline reductions impacted to due XXXX the year, And liabilities. year-over-year meeting we expenses in expect of adjusted as continued $XX as commentary, year-over-year by expense expense interest expenses. the by for other increase expect the pension-related compared of non-operating as financial assets previous with related million and loss million from net expect the the prior $XX line by full approximately be transfer We In pension negatively lower to well to operating billion $X.X year. and income travel

to line now success. certainly full the medically employees of durability the and top Given the these pandemic speed open to at to we now which XXXX. adjusted items, assumptions, and year-to-date all, quarter the well $X.XX In year continued organization journey. factors continued multiyear The between our our and And has we Q&A. XXXX expect portfolio for excluding transformation per share, has financial earnings closing, special remain our can diluted and underlying believe we With $X.XX for third brought challenges. positioned has the it stability importance the our long-term the commitment necessary demonstrate and we of the performance. responded many call fueled through that, of

Operator

JPMorgan. Robbie Your Instructions] from question from the [Operator of line first comes Marcus

open. is line Your

Robbie Marcus

is for maybe or with start was the here. could we guidance this if hoping Jay I outlook sure Not Joe, but

-- company to see this down could Or you COVID worsening And hoping us -- are We top point quarter the you line down you first fourth much improve quarter -- the as your was you outlook different worsening thought? up. to coming expectations? was affects ticking didn't the EPS, seeing rates And the trends projection walk how if not fourth P&L, I as us versus lower walk could into changes just the through trends. originally You're here? through the

Jay Saccaro

of specific assumptions. would expectations driver bit have Robbie, did we that with call, admissions U.S. the then sales respect below have with didn't to QX, on to we last I sort the to also a the really, on and relates we little guidance earnings, some overall, And Sure. while largest respect internal is shared previous say, both QX in the

prior said I fourth admissions expectation, recall, to down in we be X%. Our expected approximately you'll quarter, the

And in dollars point a fourth it, couple if of admissions per are the worth We in admissions decline roughly is now an quarter. think about month. you XX% of modeling million each

this the So is million line. sales to impact in totality, $XX roughly

temporary to related platform. is while a our NOVUM this expectations again, a of we in fourth our have item did some couple And factor, IQ from be the commented cents. those sales fourth quarter second to we sales the The believe about and a did for representing $XX being roughly long-term remove us, this this driver million, around million, Joe we quarter $XX

pump of million, So as I factor of a said, admissions, $X.XX, as approximately roughly $XX have also million, this couple then cents well. you roughly $XX

should The that hand. time. So real the at is the drivers. news those these are of our perspective, good primary question pace From the over correction correct is

Robbie Marcus

great And quarter. program It's coming just online share to question. back Great. repurchase in fourth a the see the follow-up

over have the $XX, in fourth cash quarter? up a is authorization repurchase? something You at for $X could we pretty move the right this share billion to What's about now. over $X.X next months? in here How the aggressive guidance see in think impact billion, share we several with should price And

Jay Saccaro

were increase buyback our pleased recently. last authorization hold the uncertainty its that the six of to Board from and over on things pandemic and one program. And we our months the announce of around perspective, the buyback the because that We we that business. did the put share Certainly, large part in stock to was approved impact the on

buyback years. reported done value having quarters pandemic, a something confidence couple have as to back solid vehicle It's a shareholders. returning results in get now a last start five to the share we've to I over the think now we for of of of face to that

model evaluating that to As model, shares when trade way look after we up quarter. And how shares that's against depending each end we about believe assess is an making the we talk keep here. worth it about we purchases. what at end relative amounts, We value intrinsic value intrinsic it the we that on the are think we of

from fourth severe anything. when to were repurchase in this have about this we to pandemic. in And February, had on quarter, we what our program didn't during a that normal Again, standard the the of departure we our Last make We wanted time report we'll So so light so for the but that. trying tuned frame. talk quarter for that's place. earnings was stay clear we it and protocol, quarter, in we optimize that fourth

Operator

Pito Chickering the Your of next question Bank. comes from from Deutsche line

open. is Your line

Pito Chickering

Just a follow-up on Robbie's question fourth assumptions. your quarter on

traded emission trends. the improvement the have on throughout third Specifically, hospitals been quarter seeing publicly

the should than So saw talk quarter. quarter hearing things worse? Or And run AC Are about rate you making fourth the assumption? third about volumes, in they the higher or actually data just tenant be what also, were you you during getting emissions impacting patient seeing as positive. are through

So the emissions we of length how and think versus Medication between interplay on about Delivery? should lower the stays longer impact

Jose Almeida

Let's -- divide. not make can't assumption. is This one just you

but company, hospital a within business. the several of there hospital, different our are We are drivers

in -- look a they're are more coming bit but last year's, So below stabilizing, quarter if it's you in to at procedures largely same coming up. little fourth level. the So They're general perhaps a right?

flare-up are the a being we're do the more hospitals patients in with that hospitals to department. have taking pandemic has and emergency patients Hospital we the through how Now very admitted right in admission closely. ED, now, so watching Medicare

don't we QX a So deterioration and significant QX. see between

we because are in those have businesses. are indicators very in these We accounts, are we that reliable

that through see deficit fourth this main they're And see at biggest with patients huge as watch the that the hospital we wave Hospital deterioration is, hospital OR But got the in to we've a but the new stabilizing. that's a coming infections going quarter, see which largely way usually and in is General for is dealt level. of how patients. it be is what what drivers is patients, don't the Medicare the then we So the Florida those you and the of admissions today, to

we'll about the as quarter, not So we we're and quarter, we're through are XXXX. but going fourth thinking fourth to then living watch it only the closely, inform how

Pito Chickering

the are versus it fourth the quarter? again quarter, Okay. margin costs us on pressure substantial third difference understand it walk what through sequentially? you like And just is what third -- in saw why just quarter you're on the then quarter. fourth third coming added in any Can mix? margin for that Or help margin fourth being margin giving quarter guidance versus us guidance you looks in us Is from new so big all product pretty

Jose Almeida

deterioration There a quarter. fourth to margin in that And is some the few really, relates things. Sure.

sequentially First of from decline. all, a And see or QX. to is slight to it decline be going nature, temporary flat we in are in certainly business impact to but it's a again, expecting the U.S. QX

then volumes incremental bottom are that, when flow your of tend impact line. result of we're mix ex margin. growing impacts, U.S., is factor the through absorption anticipating, is substantial a you U.S. because than So gross And again expecting on fairly have to some faster business second manufacturing some to now the the that lower the we

those the really, to So are story. primary the drivers QX QX of margin

Operator

Bob Bank America. from Hopkins of

open. is line Your

Bob Hopkins

just the if your wouldn't that Just you would and pump? how first on express Just confident any maybe the the the you on wondering, Joe, sense update progress are for making syringe NOVUM IQ be and great. in mind us for time off, you're giving filings lines progress your

Jose Almeida

very working the are FDA. diligently with We

quickly. have we we're platform. the the very in of the the hope it's questions. are FDA I with the can very that going a I submission, behalf them of confident the we in what satisfaction speak and had take good have the very And them addressing scheduled, think FDA FDA are address we We very, issues our to idea meetings and But we our can how previous on FDA. long still with and to

two with pump later coming As coming also you coming us as know, XXXX. pump is important a platform is in for not PCA ambulatory on as this a an but well pumps up, this because only platform an

working group make Medication But are in think we'll very hope a hard. a are that. as as this three got unsurmountable and questions on and all answer sure to refile questions that very We the very process. Delivery, most or place, launch the company, about not in those experts effort only next we to have don't company-wide the we're We, issues, months, helping the probably that through satisfactory we FDA. the to also focused, product and year. two And So next excited company, a the we go

not great I a Baxter but for market. also for -- for product think it's the going only to be

Bob Hopkins

Okay.

So it sounds for like second filing there. year, still you this on my is then question maybe Joe, plan And change Jay. just for no

XXXX, earnings large over the any for year-over-year XX% For directional the Street much to spend XXXX, or aided where comments going in by not of Street next COVID-relating lower growth but part give models this spend. I levels? call, you're kind assume on is on on guidance just year

Jay Saccaro

X. this carefully thing tell we're through you first at level of happen hard that is what's I the really of hard -- on admissions. a very point. impact market will The Bob, on driver it's is the process, provide from fourth understanding potentially business, comment to at our trends to is our respect going to it's really plan this the assess the half in guidance guidance. to still of do going one assess our the to point watching time. It's to anticipate that pandemic our with in call hard earnings XXXX the plan annual really We're in pandemic middle is to on on critical a The to critical February But the operating sustained quarter it's input growth. 'XX. some be as This to of we

and energy the time, we're a trying to and actually and of take we're such admissions out to all driver going for us. lot effort procedures model patient So because expectations around really that's spending an important of

impact but we've had COVID-related $XXX Over sales know, COVID-related dissipate. in the the we've you far time, million bigger As will about line. costs had a costs on

we some of the watching items. expect spend ones and that to early we the but half two the ends, say, as do sales the those of surgical vast key it's back the So these impact But pandemic expect line. the in claw year. are drivers mentioned, we're to -- And admissions procedures. And first I the carefully majority

Jose Almeida

Bob, we're in this. working hard very modeling

modelers. have We

U.S. America a working not Asia, and people moment. Latin much Europe as and the through affects knows. less We sustainable way only the in affects pandemic this of pandemic how creating have We looking everybody relentlessly of effect it also affects in see the but at

Now we this in complete. something we we but in it had give guidance in we in to are have standing January. quarter, we XX/X when model for a the hope growth you third And our pretty healthy feel working in guys APAC that business, behind getting confident

Operator

Morgan David Lewis from Stanley.

Your line is open.

David Lewis

I entered this about Maybe I'll specifically. you drivers. other NOVUM high know, 'XX didn't the don't the much people year pump benefit Joe, stay of level think Day. we get going we're And to as the on But enthusiastic just launch, because and Analyst various get

for And about? be should the are excited? investors intermediate you of relates minutes portfolio just what outlook to you sort what getting the we're As mean a -- question Baxter and take they key investors are what Maybe what basis? enthusiastic term the of as think getting growth is things the it help from I is growth that growth see be should for thesis the focused go-forward I on? on Baxter, a

Jose Almeida

many time not in expect said at started Canada, a ago In the very hiring we XX pump the product. platform people fourth know We to Remember, not has this not selling for XX, launch years that for pump we're is in Evo in Europe. don't years sales our the I remarks, only. IQ. there. probably the two in the that product we COLLEAGUE old year years, sold that about about the prepared of force By CE as start we Baxter approved end we have first a the approval Marked. replaced This are present pumps platform NOVUM IQ were the already way, going in We're syringe quarter. the have we excited the the Europe to how expecting still U.S. this global is for product We Europe just

new. this is super excited. The European folks So are something

to the the well. going now transformation because door We about U.S., grow. excited growth opened the the very U.S. business hitting business I'm the as for at last a is is X%. market X% X%, to see a pump in about this started it and be to I excited to also We growing So X%, AAKHI think were PD XX% for I'm as quarter. the transformation in Baxter X%,

made business think into this also XX%. more place for to business We're we We're that to We for change service to XX% and that business high-single-digits growing is business will customers. is we to business one for short-term at capacity going PD looking to the good number for come We're X% already So better to great very a It's there. eventually us. is need also be It a if us, a about year. technology at our profitable need. our a to. investment it's the even be. great new investments cycler ability looking a China

excites to driver to that to more molecules business we and were And is is actually, a premix this mix we were this our call to participant ability in full for that. as be that the you looking we that excited participant and I XXXX like this that Halle pandemic rollout Germany be we're able way service plant the be almost a a for new because insulin company in the week going like normal, not not some this in relaunch So capacity finish vaccine And longest tell have reveling Also, XXXX. think to will me. we able have be would I in business is I at that and this a in Asia. to configured, renal about well Also in the Bloomington, be back we going Indiana able the insulin, is into promote hospitals accounts that. to are need business. you know the between a And get as and able the in to product

surgery look of in some out, XXXX. rather pump for I'm about, at as XXXX, coming new all -- we products some excited that beyond new we as notable launches drivers advanced products So XXXX, well. have also ambulatory pharmaceuticals businesses, this But few

there. the of break Baxter the company's We're in has back and our So took labs to in this employees but things pretty our in transform We we're in pandemic, intensively, we're our pathway. going getting innovation out little have relentless on innovation stopped. beginning been labs The not of innovation. operations the a

David Lewis

for Super maybe, helpful, you. a just quick Okay. Jay, Joe. And one

comment to will happen. I'm what -- mitigating do to CMS risk it in you of going next Just of to but on were week, terms get just THERANOVA, AAKHI, if not the kind

where given of scale began type if we sort be the could see approval XXXX, you the up you ranges had revenue today, expecting for here? to manufacturing of Just plant from and you what

Jose Almeida

first -- contemplating matter if capacity included, to this U.S. the upped We we colleagues that approval for not and on of being the is say all, the world. a downer factor the a of our momentum momentum The is David, to them. It's good I included And outside volume THERANOVA. scenarios. until okay? of we're way a the gets U.S. would most with a they because gaining of the bit both supply the of going or U.S., U.S. pretty good little outside if in approved take were going have

it first doesn't ago that here. We the reimbursed continue sell. had mean about it three THERANOVA doesn't the actually weeks to is gets We're it B if plan sell here, we're to sale not in to of U.S. going our So going

what in with We'll margins. good included in a product We refrain with U.S., in will continue growth and the investors U.S. But get more TPNIES may I to the to digits then about number know sell clear be sales gets you and it will really the in want and sale this precise press we the overseas. the the fact early may approval about products is or coming accelerate the up the I give to impact U.S. our not the double of If that this is then forward it now more will We'll despite for outside that U.S., XXXX. in we number. TPNIES November, become expand that

there is product -- product the end the great the show evidence were the our patients. the in day, a product still to able government. to believe for as and We at clinical the in So we is the of

Operator

Vijay Kumar from Evercore.

open. is line Your

Vijay Kumar

And down I manufacturing the that Jay, higher is talk on quarter, you Q picture that incremental, $XX or expenses away line had when the QX? Maybe, the the incremental itself. with How quick you much a in moderating the incurred, sequentially another below million. of year? $XXX for one to signaling is about look flattish at variance, question. When you margin million guys gross big and you going on next

Jay Saccaro

Yes.

of So year-over-year, XXX to roughly The basis we impact. a some down there's sales second in COVID points in that do QX we've cost XXX is gross fact of about and some sales higher-margin standpoint, margin U.S. the a QX. impact. basis XX expect the thinking quarter, points. in From It's a point QX sequential step for basis those impact There's maybe FX lost -- fourth from are

some well. incremental are seeing as costs manufacturing We

combination I there's we these the items, QX So are of that to said, expect take do QX, gross many short-term to of margin COVID But items even the like down a from do absent which recover. items impact.

that Now critical question as it when, the really relates is to for us.

impact this first I point the of And continued expect is the year, time, in incremental terms of environment, the costs, do more next hope with we so certainly terms manufacturing see normal that year. half a at half that certainty we this second of in and stage. in through my but at can't in of say sales Both some

difficult working but to that model it's admissions it's QX, that's of As we're to model, away hard really it. to we're I next we said of trying go the QX, spending question But costs time right a Joe? year, over recover now. COVID that to expect those majority through And also we time. lot over QX time, is expect and the vast before, say to

Jose Almeida

significantly Manufacturing, Head that tremendous comes to and groups as add a the engineering I'll looking of we We're ways well the in new alter of do a and Company. already Jim have parts with difference. he Borzi, experience the making things in of we some

and operations efficiency and So we productivity be year. fourth in next will for quarter throughout the looking

to because of to is about because higher plants running of we has cost it normal efficiencies it has margin, do contribute will our you're XX/X. lack producing this do the a mix, when some back with less much it efficiency gross if actually factories, the with think to in So has of COVID, with to do

end down any because As the we're spike all we of holding at to in due capacity customer kind the COVID adjusted affecting demand inventory without already situation. for our the at

We back the Jim losses the are some relentless we'll efficiencies looking then for normal, productivity gross situation until throughout faith improvements. of margin. global to for And XXXX chain and in supply the offset we for in quest tremendous and continue team will to continue progress have comes put our those to look that a to improving

Vijay Kumar

to horizon zero Investors I how look, M&A That's M&A. ROIC environment has returns? look just willing willing are you this M&A -- investors for Joe, you, changed? think at helpful. on And horizon And but curious your longer in on curious a look thoughts for big time interest I have Jay buyback for is, balance I'm to stellar, sorry. changed are -- reason about be time above to sheet WACC. is on debate, think longer when picture rate a versus at I'm investor a ask One your perception the

Jay Saccaro

question. Vijay, Sure. good

we've both the mix M&A forward, For do as and past. us, buyback we going of in a seen expect to

ROIs acquirer harder are capital where buyer. great the a have have to those to Company Baxter the the we're deployment especially a able a from lot strategic Company assets, does. some different so completely logical think But finding that that ones areas. what to is of into to some out we standpoint, a can what be relevancy of strategic And areas becomes Company new we generate in stretch relevancy adequate It's

-- -- what's seeing development, is us, going ROI an to that? say with financial strategic today. is we important we want And So you happen Joe, very rich. have never pipeline a for do the you while know rich anything never to and but criteria business are pipeline you add are to active, while we

Jose Almeida

the answered I transformation market outdo with transforming one the simply supplement of growth rate. the answer it average think our you four last very of Baxter, weighted I'll the to is well. pillars portfolio

with one first. we've that Now sheet, pathway innovation the in and our with solid organic balance tackled with investment cost internally talent a set structure SG&A being and culture for and place

cash how continue and on but to Now do we here five our on the I started stringent our changed low create provide very time for is in the look good and focus ago cash we deals, very return that portfolio and ROIC in value look patients alter them, also investors. were low reserves. at but our flow IRR undivided we a and were we way in ago, beginning when not a these And customers the that we we our a with some we'll always position how to at free years very a NPV very

understand Now a landscape we help feel solid have that balance and better, the open we sheet, us actually that opportunities. the

not So that it doesn't are those mean for I'm we're that. doing just something. we opportunities. saying I'm indicating relentless looking

Operator

Larry Wells Biegelsen from Fargo.

line open. is Your

Larry Biegelsen

vaccine -- a minute guide, on ago. one One Joe, QX on comments on your the

QX on of what operational think gotten it? the growth, inbound a high right the the the kind Jay, to way I've e-mails. you implied about QX couple thinking end? And about versus to gets Is plus we Are the So that negative end guide, X%. of X% to low

Jay Saccaro

decline, what really comp down growth. very expecting in And at challenging a but we to fourth range, is comes but gap the year wide is versus of low-single-digits level a we fairly There last sales admissions prior quarter. some as look are then year's the that also

of You'll quarter fourth was believe the in recall, the I growth. operationally range X%

comp, we are roughly down have year-over-year, so digits double admissions going for now And a assuming to that always then we be fact was tough we XX%. us, added the knew challenge but that

some kind of the of decline. guide that's reflects sales the high So low-single-digit range, end

Jose Almeida

in were launch planning a higher-margin well, we well fourth the And the that also as carries Larry, carry quarter, and NOVUM IQ to sales. as

see of the in off little the easing the So that two we'll year. combination next headwind a throughout bit ones created of quarter that fourth are

Larry Biegelsen

color vaccines And talking opportunity a helpful. vaccines? recently. that of Any add capacity capacity? opportunity? my Or at Are have Joe, about see to -- operated would you've in understanding is pharma you Baxter COVID times with vaccine vaccine do And couple the you there thinking you generally there That's about vaccines the I've be flu and Are talk heard this appreciated. is COVID flu the solutions. do you you

Jose Almeida

do ability the have we that. So to

As have we developers in Bloomington. the this ability the plants, a different the two one in the of a process. little bit help vaccine more have with fact, matter to and we And of capacity and Germany manufacturers country

We are this part finish vaccines. companies of of network that

about be COVID-XX, comment that have of cannot we coronavirus, on and We this what to talking why? ability part this flu. effort, of I'm this effort who about But part pandemic. continuously hope throughout I'm are and we we and speaking and not

Operator

Danielle Antalffy Leerink. SVB from

open. is line Your

Danielle Antalffy

a on PD. and had specific business the renal I question

I'm implementation? patient And the very strong. about I number AAKHI of growth X% can patient PD that as that how trajectory moves business rolls we think think you AAKHI saw how into guys And should the about to thinking where That's curious just as go growth number. a out? the be

Jose Almeida

earlier this PD was deemed emergency early the Throughout pandemic on in for think on I pandemic, the catheter -- insertion, surgery. insertion

good opportunity pandemic the this to in number. if they the have beginning, So into that's our people throughout it. will was fear very go as a see -- and even an straight catheter, you X% -- We if hemodialysis don't have straight very

you do the where math, go about should and XX%. looking the at the That's think AAKHI would between X% the for be we growth you future. and just If

therapy. for decades So And behind more and being four U.S. has the three a infused is that it understood patients for which this for been represents also really of this advantage or therapy the take good finally opportunity in Baxter, to

Danielle Antalffy

where And of perspective, trajectory on it. -- are from dialysis how system? the with and Got adoption follow-up And sort change technology the that then could just here? one we PD a point-of-care

Jose Almeida

that Listen, point-of-care works. that proven project the a actually we've was

technology to the work. have We it make

right as in for investments, cyclers investments space. we as wearable companies some in are in focusing have developing the technology We minority well new now

issue think one as it we in a have The playing also with penetration they all that is today. globe, affordable don't care, in I most you cycler, which the development across very but only adoption Baxter the are in much will make as is of spaces, that not the technologies cycler cycle. much point that expensive these the So affects APD affects the U.S. of not see in countries it's more

developing are be I in technology of health investment a offers So access eventually technology, that promising that think and technology. wearable and care and global to interesting in access to will to Also, minority give have very kind our nature used. that we technologies teams future,

not also focused be to developing. developed We technology being used be are launched that as being can itself on point-of-care terms of currently we're in that of but very conjunction, with some those in that technologies are other added

Renal those Care business, We a off and healthy have in pretty don't to products. continue develop to our and spend on we plan ease that

Operator

Suisse. Matt Miksic Crédit from

is line Your open.

Matthew Miksic

just one I So had follow-up.

call, this Just little is to clarify in the difference. something about that a the earlier and we talked

people admissions. I around think, you the coming you difference the in kind visits fewer of or is the businesses. importance visits. press your of being of Jay, couple Could the difference, really Joe, question of in of that and times answered prepared in off we ER sort types admissions fall of types through see your -- of the emergency, other you in that the what remarks, just drives a mentioned ER not had service

on Just I then one clarification that one follow-up. and have

Jose Almeida

levels issue procedure the if see or altogether, places, is back a pickup side at research procedures, few to of in quarter, OR. to procedures accommodate or feel normalize, is doing unaffected, and the And saying going is ED the either them with of come oncology, even procedures so perhaps will as scheduled that, the procedure colon fourth I are those into and in now, from see normal to levels. more routes floor. hospitals that well -- we'll in patients scheduled that levels. now procedures, are into healthy reluctant they through or be not ED you other That visits saw hospitals or as them replacement XX% the hospital. COVID as we and stop able schedule the the same admissions pandemic the other a you bypass level are reduction as has have is XX% think in one general admissions close one many that visits. but as places, generate procedures XX%, the the well of knee can are see Well, more Those to we normal part, hospitals, its coming the who for we to What pre-COVID, People the as gastric ones a the

Medicare to -- admitted. more to who we to are visit age, because primarily So reluctant, be an and see patients of the ED go even

they severe issues. are with themselves more later So presenting

look this. at So that is how we

doing and sites centers, surgery at actually for look at those look we procedures, are also We and alternate well.

Matthew Miksic

pace the in Joe. and question some just time. helpful additional -- Super made we're on Europe the then that for And change seeing color,

were over of the these right in Some direction markets geographies, European the moving summer.

that very or policy but I Now changes QX? also would helpful. Any you're factor focused be there, guess, in obviously, U.S., we're the is comments there anything Does into that seeing these there? color in

Jose Almeida

Yes. We in pretty saw a Europe. good recovery

remember we quarter the -- France, numbers our Europe by one the that have now Germany. is is are one them, Italy. other issues you have followed were two largest is Those quarter, in two markets growth. is second with in the markets right concern even Europe, and affected of U.K. now is If Spain, largest and not we the third still showing The that

announced XX Angela So lockdown by just Merkel. you in for see resurge days a the

Remember, is issue patients will Europe. uninsured health way the an not You that are treated may in affect see system. and the people Europe in noninsured in

procedures see U.S., modeling deep watch in the approvals you for for very hospitals don't a variations reluctance here, When but the us concern the terms and and see modeling a be ED, to only up to very with is closely. in of we of vaccine don't hospital. the Europe population we continue do to level, you sentiment do people we're to U.S. go doing would for even fill So having the going of modeling to in

our said, close this well. are analysis because but elements, that's reluctant keeping as right hospital part We're helped more patients In of see now up the Europe, other are and I a can that numbers is eyes chest our alleviation as some you very Medicare do to remotely. well. pain we seeing Europe, and As that as in coming trend go a of has for today the that people to telemedicine

Operator

the from from Our comes last of question UBS. Taylor line Matt

Your open. line is

Matt Taylor

know on be If under So we follow-up occur, of proportion I get about take COVID you does talk $XXX said long the a while. just wanted would to that I And million rid the you work cost, off? that costs for to talking normalization Jay, the is call. three this first you've remainder what can how key been of of on still one could about it points that the costs? could these conditions kind sort of back claw in of post you remainder those or

Jay Saccaro

I to mitigate, should one been costs, should we the two so -- to normalization, quarters, able of say, should -- vast alleviate within back post majority have Well, be we would or I to say. these

was the PPE, There for see past all employees something our facilities that So in post over we'll majority. some away in it's that the the be vast case. remain today now use will normalization, go that of example, not because time,

And But so will vast with a that tenant costs like has mitigated. it post of said, daily live with. that of I cost of normalization we'll majority be

interim this to million stage. an and some it's open at we to As much the mitigate hard it do we're through, year and that's this next how there that to opportunity, in but $XXX me quantify impact, for we some question believe relates working is of can

Matt Taylor

just follow-up. a And

you I are us that people deterioration If any a give think seen that the of you've Or what I surprised the be assuming we quarter-to-date? was would I helpful. given reflective are color, guess of emissions by move is rising? you forward comments. wondering, lot as could And cases any

Jay Saccaro

happens QX, we we've of Sure. a that assumption wide estimate that's what cases from escalating our range an XX%. And standpoint, is Last wildcard that's Europe. what have to XX% shared would QX. we're But kind in look, October is The roughly encompasses decline to I a date, of swath think around U.S. quarter, potential that seeing. a and roughly we outcomes. QX, the sufficient admission

we're the with XX% anticipating we're shared. that correctly in think from case, But the not -- deterioration we range our expecting of got from So current high we've looking decline. we're level it roughly deterioration called -- not we've

Clare Trachtman

Thank concludes you. our This Thank much. very call. you

Baxter International (BAX) 29 Oct 202020 Q3 Earnings call transcript