Q2 2020 Earnings Call

Ladies and gentleman just to see operator today's conference is scheduled to begin momentarily until that time your lines will again be placed on music cold. Thank you for your patience.

[music].

Hello, and welcome to babies second fiscal quarter Twentytwenty earnings call.

At the request of BD today's call is being recorded.

It will be available for replay through may 14th Twentytwenty on the investors page of the BD Dot com website or by telephone at 805 858367 for domestic calls and area code 40453734.

Zero six for international calls using confirmation number 2189 907.

I would like to inform all parties that your lines had been placed in listen only mode until the question and chose segment.

Beginning today's call is Miss Monique Dolecki, Senior Vice President Investor Relations Mr. Lucky you may begin.

Thank you Stephanie good morning, everyone and thank you for joining us to review our second quarter results.

We hope that everyone is healthy and safe journeys unprecedented times.

Safety in mind, we are taking a more virtual approach today and exercising social distancing wall conducting this call.

Joining me in person, we have Tom Polen, our Chief Executive Officer, and President and Chris Reading Executive Vice President Chief Financial Officer in Chief administrative officer, joining by phone, we have Albert Hamas Executive Vice President and President of the medical segment, Simon Campion Executive Vice President and President.

Of the Interventional segment, and Patrick Kaltenbach, Executive Vice President and President of the Life Sciences segment.

As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at <unk> Dot com.

During today's call, we will make forward looking statements and it is possible that actual results could differ from our expectations.

Factors that could cause such differences appear in our second fiscal quarter press release, and then the N. DNA sections of our recent SCC filings.

In particular, there are significant uncertainty about the duration and contemplated impact of the covert 19 pandemic. The data we are providing today is based on our preliminary April sales results and the trends we're seeing in our businesses.

We have made certain assumptions and how we are managing our business, but that could change as we move forward.

We'll also discuss some non-GAAP financial measures with respect to our performance. Our second quarter results include a 39 million dollar noncash charge to write down the carrying value.

Developed technology related to the planned retirement of the BD accuracy flow Cytometer platform within our bias Sciences business.

In addition, we are working with the FDIC with respect to certain features of our Alaris infusion pump products.

That are additive to our current remediation efforts.

As a result, we have recorded a charge of approximately $200 million to reflect the estimated probable future costs relating to every meeting remediating alaris products.

It is possible that this estimate could increase overtime any remediation actions will continue to be guided by our proactive commitment to patient safety.

In addition, due to challenges associated with the global Cobot Coven pandemic. Among other factors, we no longer expect to submit our alaris five 10-K filing in fourth quarter.

We are working closely with the FDA to assess how quickly we can get back to our previous plan and we will provide an update on our August earnings call.

These items along with details of purchase accounting and other adjustments can be found in the reconciliations to GAAP measures in the financial schedules in our press release and in the appendix of the Investor Relations Slide.

A copy of the release, including the financial schedules is posted on the BD Dotcom website. It is now my pleasure to turn the call over to Tom.

Thank you Monique and good morning, everyone I, certainly hope you and your families are doing well as we navigate this unprecedented time [noise].

Dark spots are particularly with those personally affected by cobot 19, including healthcare workers on the front line.

Caring for patients and battling this virus.

As you seen in our press release, our second quarter results were ahead of our expectations, even though the Q2 impact for Kobin 19 was larger than we anticipated.

Well, we've seen strengthen our portfolio that's more directly tied to Kobin 19 diagnosis and treatment.

We're also experiencing significant pressure in other areas such as products relied on an elective procedures research in routine care.

Chris will cover this in more detail later in the call.

Remains a dynamic situation and the timing and phasing of research and were elective health care returning it's hard to predict that's why we've decided to withdraw our guidance breath why 20.

As I shared in the past you can expect transparency and straight talk and so Chris will share with you what we know so far including what we saw in April and he'll give you more color on the many factors impacting recovery.

Before we get into the impact to our business I want to spend time on Bds response to coated 19.

Yes, I believe it in bodies, what we stand for and our purpose and what makes BD unique.

And so on slide four I'd like to start by sharing my deepest thanks to the BD team around the world.

I've been with the company nearly 20 years in and never ceases to Amaze me, how our team rises to the occasion for our customers, especially during times of uncertainty what I've seen in the last two months is truly inspirational and I'm. So proud to serve alongside this team.

Turning to slide five we defined for priorities that have guided our response to covert 19th since January when we convened our crisis management team.

First was to protect the health and safety of our employees second maintain business continuity and Mobilizer World class operations to help combat the pandemic.

Third bring new solutions across the entire continuing with care from discovery and diagnosis to delivery of care and fourth take proactive measures and continue to advance our strategy to the we ultimately can emerge from this pandemic strong and better position.

And while we are actively working to address near term pressures related to covert 19, we will always operate our business for long term value creation well discuss each of these in more detail now.

First protecting the health and safety of our associates on slide six.

We took a number of actions very early on to help safeguard our team, including adapting the workplace for social distancing, increasing cleaning a disinfection protocols and adding temperature monitoring at or manufacturing and distribution centers beginning in February.

We've also increased personal protective equipment for employees, including leveraging our threed printing and large scale molding capabilities to manufacture own based shields to weaken further protect our employees.

Even as we made her own difficult decisions to furlough, a small percentage of our manufacturing associates, we preserved full access to health care benefits were impacted associates in the U.S., including covering both the employer and the employee payroll reductions during the furlough period.

Turning to slide seven in our second priority mobilizing global operations as you know World Class manufacturing excellence is a core competency and focus for BD.

All of our critical to covert manufacturing and distribution centers are operating at or near full capacity.

You can imagine that's not easy in this environment and we have BD associates stepping up around the world to make this happened. Just one example is we've had more than 100 of our manufacturing associates from Malaysia.

Volunteer to temporarily relocate to live in Singapore during the border closure they moved away from their families to Singapore in the middle of the pandemic just to help maintain operations that are Singapore plant.

[noise] two thirds of all BD associates are more than 43000 over workforce, who work in our manufacturing plants distribution centers in field service roles that we continue to come into BD or to customer site. Nearly every day. During this crisis to help ensure our products and solutions are there when patients need us most and I. Thank each and every one of.

Them for that.

We've leveraged our scale in ramp production to the highest degree possible in this environment and three examples stand out to me.

First is to reduce the risk of exposure to care givers. Some clinicians movie Alaris system from the bed side to outside the patient room dramatically increasing demand for Ivy extension sets.

BD team responded with urgency increasing production of the sets 100 fold within just a month.

We've dramatically increase the number and types of specimen collection swabs from about 500000 each week in February two an expected 3 million <unk> in June.

3 million a week in June.

We significantly scaled production of our BD Max reagents used for open assay test, including our new molecular assay for Cobot 19.

Well have increased output of open assay kits by more than 80 fold between February in June and we're currently manufacturing six times more each month than we did all of last year, we continue to scale that up.

We're also looking ahead.

Recognizing a potential second wave of cobot, 19, which could align timing wise with flu season.

We are preparing additional capacity to ensure we can address both demand for a flu test and an antigen cobot 19 assay.

Given that the symptoms are pretty similar we're also anticipating potential higher demand this fall as well.

I also want to reassure you that we've ramped production as we ramp production, our commitment and focus to delivering the highest quality products has remained extremely and focus.

Well, we're experiencing historically high demand for critical to covert products. There is also negative pressure on product categories tied to routine health care visits and lab testing elective procedures and Noncovered research for example, during Q2, we began to see a significant decline in elective procedures.

During the end of the second quarter demand for research reagents and instruments slowed dramatically as research institutions and labs temporarily closed due to lock down.

As a result, we have temporarily slowed or suspended production at a few of our noncovered related manufacturing sites to preserve liquidity.

We're in frequent contact with our customers, we're closely monitoring demand signals and we're ready to start immediately resumed production immediately as soon as those procedures and and research.

Restarts.

Ability to adapt and mobilize our global operations to respond to the pandemic is a testament to our best in class manufacturing capabilities.

The dedication of our employees and the strength of our public private partnerships throughout the pandemic, we regularly engage federal state and local government officials around the world to help safeguard operations and minimize the risk of supply chain disruptions. It's clear the strength of our global operations network is a significant advantage for BD and the health.

Care providers, who rely on us.

Turning to slide eight.

Another advantage unique to Bds, the strengthened diversity of our portfolio, which I believe as I've said in the past is unmatched in our industry.

We are leveraging our expertise and capabilities deliver solutions across the continuum from research to understand immune response to diagnosis and surveillance to medication management delivery in critical care and ultimately to prevention as we look ahead to a potential vaccination campaign.

First in order to treated disease, you have to better understand it.

And that's why scientific research on Cobot 19 continues to move forward, even as many labs and institutions pause or postponed other important studies.

Her bio science business has been helping researchers better understand how the immune system responds to covert 19, and why some people are more affected and other show only milder no symptoms and we believe this scientific research is key to better understanding and ultimately battling.

Covert 19.

Turning to slide nine we've launched a full portfolio of covert 19 diagnostic solutions, which help health care providers answered to basic questions, who hasn't who had it.

And so as you think about who has covert 19, we've leveraged our strength in molecular diagnostics to bring to market three molecular tests to as a CE mark and to that have received eway approval from the FDA in the U.S.

These tests are designed exclusively for the BD Max system, which is already in use at over 1000 laboratories worldwide.

The tests are conducted on onsite, mostly at hospital labs and increase time to result.

So just two to three hours of up to 24 samples at a time.

We have now shipped test kits to more than 500 hospitals around the world and moving forward, we're able to provide approximately 250000 tests per week were about a million a month.

We're also hard at work developing a force diagnostic point of care antigen test it leverages, our veritor platform targeted the diagnosed cobot 19 in less than 15 minutes.

Theres broad interest in this test and with nearly 30000 very toward devices already in mostly non acute care centers across the U.S.. We expect this could be a real game changer protesting capacity and helping in restoring the economy.

This test is still under development and we're evaluating performance with samples now.

Pending that outcome, we would submit for easy way authorization and we'll keep you updated as this progresses.

To test for who had cove at 19.

Partner with Biomet don't mix to market, a surajit testing can detect antibodies in blood to confirm current or past exposure to covert 19 in as little as 15 minutes.

In fact, the published data in the journal of Medical Virology was one of the world's first for a cobot 19 serology test.

Given the latest guidelines from the FDA on performance characteristics for easy way approval of Surajit tests. We're currently validating performance of a second generation enhanced version of this kit.

Which is produced and we are testing moving forward with that testing now.

We are proud of the portfolio of Cobot 19 diagnostics, we've built in launch in record time to help address this urgent public health needs.

Turning to slide 10, and our solutions for treatment and care Bds Global scale is nearly unparalleled enhancing patient enabling patient care in almost every country around the world in fact about 90% of patients at enter an acute care setting or touched by beauty products.

Although overall hospital utilization is down due to cobot 19 countries in health care providers have been preparing for the worst setting up surge feel hospitals and expanding I see you beds.

The teams around the world answered the call working to help set up these facilities and ensure access to critical to covert medical technologies.

For example, we recently saw increased demand for our pyxis rapid emergency deployment offering where we can deploy an install pyxis med stations in about a week to help set up temporary field hospitals like we did at Mccormick centre in Chicago.

We've also seen high demand for our portfolio of vascular access devices infusion sets, an injection devices, which are critical to safe and effective medication delivery hospitals have also turned to our town targeted temperature management devices to helping the care symptomatic coated 19 patients and we've seen strong demand.

For our acute dialysis catheters as one of the complications of serious cobot 19, using multiple organ failure, including acute kidney injury.

I also want to comment on infusion pumps, which as you know our critical devices in acute care and especially the I see you as each patient on the ventilator is often a connected to multiple infusion systems.

Outside the U.S., we have more than tripled manufacturing and customer shipments of our infusion pumps for EMEA in response to covert 19.

We've accelerated the distribution agreement that will expand bds offering in infusion and help address rising demand for infusion pumps and select countries throughout Europe and I'll speak to this further detail later on.

In the U.S., we've established a process for existing customers of the BD alaris system to receive additional alaris pumps upon certification of medical necessity.

Our team is continuing to work diligently and with urgency to prepare the comprehensive five 10-K filing we discussed in February.

And while our team has been driving to submit that filing in the fourth quarter due to challenges associated with the global pandemic. Among other factors, we anticipate extending our initial timing for submission until after Q4.

We don't have a more precise timing at this point and we're actively continuing to collaborate closely with the FDA to ensure we meet their expectations.

I want to assure you that we are committed to getting this done and done right.

It is our top priority and we've added significant dedicated resources, we're making significant incremental investments and were rotating in top talent from across BT to drive this program to completion.

My executive team has directly engaged on this on a daily and weekly basis to ensure that we are best positioned to work through any potential obstacles that might challenge our progress.

And as I said this is the critical priority for the company.

In connection to the charge that Monique described we're working with the FDA following their onsite inspection of our MMS facility in San Diego during the quarter. The FDA made a number of observations in the form 83 notice we received in April and why we're early in the process, we're already beginning to implement certain corrective actions to address the observations.

We're also taking this seriously and we're working collaboratively with the FDA and making necessary investments and keeping our focus on quality doing what's right for our customers and patients.

We're going to continue to keep you posted on our progress here.

Finally, looking ahead to the development of a potential vaccine we're in active and ongoing discussions with multiple countries around the world to provide the maximum support possible for the world's response to covert 19, including production of syringes for potential potential large scale vaccination campaign.

As the world's largest manufacturer of needles and syringes, we have already ramped up production of injection devices in anticipation of a surge in demand for these products.

It's important to acknowledge of course that BT is not immune to the financial impacts of the Corona virus, which we certainly saw in China This quarter.

And while our underlying pre covidien business remains strong as evidenced by our solid Q2 results. We expect to continue to see significant pressure on certain businesses as we move forward.

On slide 11, I want to give you a better sense of these headwinds in the uncertainties around the pace of recovery, which Chris is going to explain in more detail.

So elective and non urgent procedures are down significantly, which is having a direct impact on our surgery and peripheral intervention portfolio.

There's a wide range here with elective procedures for oncology, an end stage renal disease being leased impacted and our hernia and peripheral arterial disease and biosurgery businesses being the most impacted.

At some states begin to allow elective procedures to resume this month, there's clear interest a willingness by hospitals and physicians to restart elective procedures in a controlled and phased way.

Survey of our top accounts that we've done indicates that 80% of our customers want to begin resuming these elective procedures by some degree by early June.

And while our customers clearly want to restart procedures. There are some questions of patients readiness to return we're monitoring that closely as well. We certainly have to date have seen sentiment among patients mix, particularly for procedures that fall in the mid range of procedure prioritization.

Secondly, with Noncovered hospitalization down we're monitoring the impact of our business. Both in terms of products used in inpatient care as well as to capital budgets.

Since China and several other countries or a few months ahead of the U.S., we're closely monitoring their recovery in utilization to see what we can expect as we look forward.

In diagnostics, we're seeing strong demand for our comprehensive portfolio of cobot 19 offerings. However, the deferral of routine care as you know is having a significant negative impact on diagnostic testing overall, which of course leads to temporarily lower use a sample collection devices.

Again, we're closely watching China here to see what we can learn about the pace of recovery for routine testing sample collection.

And in research were temporary lab closures of had an immediate and significant impact on demand for our bioscience reagents and research instruments. We expect recovery is going to take some time.

We're paying attention to win researchers going to be able to head back to work and how long, it's going to take for lab testing and experiments to restart.

In anticipation of the pressures, we're now seeing in our business, we've been very prudent and proactive taking swift action to reduce costs and reinforce our strong liquidity position and Chris is going to speak in greater detail to those in just a few moments.

At the same time, we're taking proactive measures were also continuing to advance our long term growth strategy and prepare for our next phase of value creation.

In each of our segments were deeply focused on executing our strategy is to grow simplifying and power as shown on slide 12.

We're always going to drive growth through category innovation, and we're not taking our foot off the gas when it comes to R&D.

Across each of our segments, we have a strong portfolio with a robust innovation pipeline, that's weighted toward solutions for faster growing markets.

During the quarter, we continued our strong cadence of delivering our R&D pipeline, introducing nine new products in the quarter.

Let me share a few highlights of our strategic progress to demonstrate why I'm confident we're seizing the right opportunities to emerge from this pandemic strong.

In medical I mentioned earlier, we had accelerated the distribution agreement with Med Captain Medical Technology Company, who developed in CE marked an innovative new infusion pump platform its tailored for the European market.

We're very pleased with the first steps in this collaboration and it's enabling us to help advance our medication management presence in the region as well as our global expansion strategy.

In interventional, we're continuing to execute our strategy and advanced solutions for faster growing markets.

During the quarter, we release, both the 300 millimeter and Avi low profile Lutonix balloon supported by these launches we continue to see sequential improvement in the use of drug coated balloons prior to covert.

We're also early in our launch of Drydocked 2.0, which is a technology designed to enable the continued use of the pure wick female condom device in the post acute and in the home.

Shortly after the close of the quarter, we completed the acquisition of strong medical which is a privately held company focused on devices that treat will restore blood flow to clotted or block vessels. This acquisition further expands our portfolio with a proven device.

With that approved with dual indications for our Tyrol atherectomy and thrombectomy in the U.S.

Our solid existing sales in Europe and China.

Well be leveraging our strong existing channel and expertise and Endovascular technology as we bring this product.

To the U.S. and accelerate existing sales around the world.

Finally within VDI last week, we completed the submission of additional data for Lutonix BTK filing.

This is now continuing FDA review.

Turning to life Sciences. This quarter, we launched the Facsymphony Essex system, our new cell sorter with six way sorting and up to 60 panels of detection.

The Essex enables an end to end solution for high parameter cellular analysis and reinforces our commitment to research solutions.

We also launched the BD Kiestra Rita instrument in Europe, and we submitted the five 10-K filing with the FDA this quarter continuing to execute on our strategy of modular laboratory automation solutions.

The BD read a read a system the BD keys to read a system transforms the manual hands on workflow plate reading into a fully automated in digital process that enhances lab efficiency and reduces time to result.

I also want to give you an update on our launch of the BD core system in Europe, which as you'll recall as a fully automated molecular platform for high volume labs.

When we announced this new innovation last quarter, we were still very early in the launch, but BD core continues to exceed our expectations and installations move forward even in light of Cobot 19, I think reinforcing the customer interest in this platform.

Also during the quarter, we completed the acquisition of net diagnostics and early stage company with a very innovative platform in the fast growing molecular point of care market.

This acquisition will ultimately extend the breadth of BD solution offerings into molecular point of care testing.

We are advancing this new molecular point of care platform in development and we'll keep you updated as this system advances closer towards launch in the next few years.

I'm excited about the progress, we're making and the three agreements we've completed the strong medical Nat diagnostics in med Captain which are evident that we continue to invest in growth in all three segments. Even during this pandemic.

And while we're navigating real near term pressures I'm confident the steps, we're taking now we'll put being the best position for the long term.

With that let me turn the call over to Chris.

Thanks, Tom and good morning, everyone I'd like to begin my comments by addressing Bds response to the covert 19 pandemic first as the Corona virus emerged as very proud to see the response in collaboration across our team in the immediate focus on ensuring the safety and well being of our BD associates around the world.

Also vital to our crisis response was our focus on taking care of our customers and the communities we serve.

The on the actions we took it accompany level I've been truly amazed by the reaction from our associates from our front line to our back office staff and everywhere in between our associates have put the well being of our customers and our communities above their own personal priorities.

Second from a cash perspective, we took early and prudent actions to protect our business during a time when liquidity is paramount.

And lastly, as we contemplated these actions we did so with the continued focus on our long term strategy.

We're confident that BT will emerge from this global health crisis from a position of strength and we'll continue to create and deliver value to all stakeholders.

With that context, let's move onto our results for the second quarter, including a review of the covert 19 impacts.

As Tom mentioned earlier outperformance in the second quarter was ahead of our prior expectations revenues grew 2.4% on a currency neutral basis, despite a larger than anticipated impact from covert.

As you're well aware the virus worsened significantly in China during February and subsequently spread beyond China's borders quickly, becoming a global pandemic by mid March.

Ill provide more color on second quarter revenue growth and the impact from Kogut in a moment when I take you through the results by segment.

Second quarter, adjusted EPS was $2.55.

Which represents a decline of 1.5% year over year, 1.9% on a currency neutral basis.

EPS performance was above the high end of our guidance range due to revenue over performance and lower operating expenses as well as a small benefit related to foreign currency.

As expected the expiration of the Gore royalty impacted adjusted EPS growth by about 600 basis points.

Operating margin of 24.7%. We're also ahead of our expectations for the quarter, largely driven by lower deferred compensation expense due to weak stock market performance in the quarter and lower operating expenses.

Turning to slide 16, I'll provide an update on cash and liquidity in the early imprudent actions, we took during the quarter to reinforce our strong liquidity position.

In March we successfully completed $1.9 billion of term loan funding at very favorable rates. This resulted in an increase in our good gross leverage to 3.9 times at March 30 Onest.

During the second quarter, we also increased capacity available under our revolver by $381 million to $2.63 billion to further strengthen our liquidity position.

It's also important to note that we remain committed to achieving our below three times gross leverage target.

Continuing to de lever remains a very important commitment to the company and we currently plan to pay down approximately $1 billion in debt UNEV why 20.

However, due to the near term anticipated pressure on EBITDA, given our current focus on cash comp conservation and the importance of liquidity. We now expect it will take longer to recharge the leverage target.

In addition to our Treasury related actions, we have instituted a number of cash conservation measures. This includes lowering capital expenditures as well as working capital initiatives with a focus on inventory management.

From an operation standpoint, as I mentioned earlier, our employees are going above and beyond to serve our customers and their patients and this includes keeping our plants operational.

Manufacturing teams are ramping up much needed products and we're making additional investments as a result of the increased demand we're seeing in some of our businesses due to cover the 19.

In other areas, where scaling back and have made the difficult decision to temporarily furlough some employees as we manage inventories and adjusted near term demand levels.

In addition to the temporary furloughs, we felt it was important and consistent with our values to share the impact across our global team.

So we've taken actions more broadly across the company to reduce salaries at the management and board levels and also for senior leaders the executive team and board took the largest percent reduction.

The decision was also made to suspend the company match for the four went to another benefit plans for the remainder of the calendar year until limit hiring to critical positions.

The medical necessity approval, where approximately $10 million.

Alaris pending order volume under medical necessity was high at the end of March. However, these orders were not filled before the quarter end as a result, the revenues associated with those orders were recorded in April.

Currently anticipate demand for Alaris Palm Sunday medical necessity will continue in the third quarter as hospitals respond to the covitz situation, albeit to a lesser extent in April as we expect demand to follow the evolution of the virus curved.

And pharmaceutical systems growth of over 11% reflects our continued ability to meet high demand for prefix mobile syringes and it was also aided by the timing of shipments.

Within our diabetes care business, we saw an increase in sales of insulin pen needles, and syringes as distributors and retailers increase their inventories on hand, as a result of the code that pandemic.

<unk> care performance also reflects a tough comparison the timing of what is that drove a strong chew to last year.

Turning to slide 19 in the B.D. life Sciences segments.

Revenues increased 7.1% in the in the second quarter, including a net headwind from covert of approximately 120 basis points.

Revenue growth was driven by strong performance in diagnostic systems and Preanalytical systems units.

Growth and diagnostic systems was driven primarily by a point of care beady very to our flew essay and our swab collection and transport systems.

This was due to a stronger flu season in comparison to the prior year and.

Over 19.

We also continue to see strong growth of our beady, Max instruments and essays for routine testing as well as an increase demand globally to use uncovered 19 testing.

It was partially offset by a decline in routine testing in our microbiology and women's health and cancer products due to the covered 19 pandemic, particularly in China.

Performance in Preanalytical systems reflex solid growth and winked sets and developed markets as well as favorable comparison due to distributor ordering patterns and the prior year.

Within Europe, we saw some stocking of specimen collection devices related to coven.

This was partially offset by a decline and routine specimen collections due to the covered 19 pandemic, particularly in China.

Performance in the Bio Sciences unit reflects a tough comparison to pry year, driven by the timing of licensing revenues in penders in emerging markets.

Results on the Bio Sciences unit also reflect reduce demand for instruments and reagents as research lab activity slowed significantly do the covered 19 pandemic, particularly in the U.S. in Europe as well as in China.

Turning to slide 20, and the Beady interventional segment.

Revenues increased 3.3% and the second quarter, including a net headwind from covert of approximately 350 basis points.

Excluding the impact of covert on elective procedures revenue growth and peripheral intervention was broad based including continued strong performance in our wavelength <unk> and been over products.

Additionally, there was an improvement in the year over year decline in D.C.B. related revenues driven by continued commercialization of D.C.B.'s in Japan and sales related to to new product launches in the U.S.

Within P.I., the decline and elective procedures and China resulted in reduce demand to cross our portfolio.

Revenues in the surgery unit, we're broadly impacted by the global slow down an elective procedures due to cover.

Particularly related to hernia repair across the U.S., Europe, and China as well as biosurgery in China.

Prior to the outbreak of covert 19 growth was strong and both hernia an infection prevention.

Revenue growth in your algae and critical care continue to be driven by performance and targeted temperature management homecare and pure away.

Well now turn to slide 21 in our gross profit more and operating margins for the second quarter.

As you've already heard from some of our appears in Med Tech Coven, we'll put pressures on margins in the near term given the high fixed cost nature of our business.

In addition, we'll see an impact from the lost revenues carrying a gross margin rate that is higher than the company average.

We expect this pressure on margins to improve as the revenues return.

In this quarter gross profit margin of 54.7% to quite 110 basis points on a performance basis.

We had anticipated a year over year declining gross margins due to the impact from lower Lehrer sales and volume based procurement in China, particularly partially offset by our continuous improvement and synergy and initiatives.

Due to a larger than anticipated impact to revenues from covert and the related impact to mix gross margin Cayman slightly below our expectations.

Currency had a positive impact 50 basis points on gross margin in the quarter.

Operating margin of 24.7% increase to 110 basis points in the quarter or 70 basis points on a currency neutral basis. This was driven by lower deferred compensation expense recorded with an S.S.G.N.A. that is offset in the <unk> in the other income net line item.

Excluding the hundred and 10 basis point benefit from deferred compensation operating margins decreased 40 basis points currency neutral.

Unfavorable gross margin performance was partially offset by lower by lower ongoing initiatives two initial to reduce expenses, particularly within G.N.A.

Currency had a positive impact of 40 basis points and operating margin in the quarter.

Now turning to slide 22 were tree caps, the second quarter income statement.

As discussed revenues grew 2.4%.

Includes 10 basis points with positive pricing in the quarter.

For the full fiscal year, we expect pricing decline approximately 40 basis points versus our previous estimate of 50 to 60 basis points.

Gross margin was 54.7% as I discussed a moment ago.

S G.N.A. as a percentage of revenues was 24.2%, including the benefit from deferred compensation on an underlying basis, excluding deferred comp S.S.G.N.A. expenses grew at a rate below sales and reflect our ongoing focus on discipline spending and the achievement aboard costs energies.

R. and D. as a percentage of revenue was 5.8% as we continue to invest in innovation and future growth. Despite covered 19 pressures.

Our tax rate was 16% on the quarter in line with our expectations and our full year guidance range of 14% to 16%.

As expected, we paid prefer dividends of $38 million in the quarter and as a reminder, that preferred shares converted on may 1st.

Busted earnings per share with $2.55 as previously discussed.

And these in uncertain times, we believe it's critical to maintain our unwavering commitment to transparency and to share with all of our stay code stakeholders. The anticipated financial effects of covert 19 on our business to the best of our ability.

Unfortunately, despite having April results as we navigate these unprecedented times there are still too many variables guide the fiscal year or even the third quarter.

As we look forward, we are considering the following macroeconomic factors.

First we're in the early stages of recovery and there's still great uncertainty regarding the scope and duration of the pandemic.

He did the recovery and the impact to B.D. is the return of general health care utilization.

While we have begun to see some improvement in China as they are earlier in the recovery phase the U.S. in Europe are lagging and this can be seen in our April results, which I'll speak to and just a moment.

Second we are clearly operating in a much weaker macro economic environment and as you know a weaker environment generally puts pressure on the overall health care system utilization and consumer spending.

And finally, the pace at which differed procedures return to normal is the biggest variable. This will depend on several factors, including disease condition and acuity covert 19 testing availability reopening of countries around the world and state by state within the U.S. and patient willingness to see care.

It's too early to call how that wall play out.

And that brings me to the bottom of the slide.

As we move forward, we expect to see the biggest unfavorable impact of covert 19 in our surgery and peripheral intervention businesses, because surgeries or other procedures in which our products are used are being deferred.

We cannot anticipate the pace at which those procedures will return and how our customers will manage pent up demand.

Moving onto the cute and non acute area, where R.M.M.S.M.D.S. and you see see businesses participate we see some pluses and minuses. We expect these dynamics to shift going forward and I'll provide more details on the next slide.

In diagnostics as I mentioned earlier, we expect to see strong growth regard beady, Max instruments and essays for use in covert 19 testing.

In addition, we had good traction with our Surajit test in April and it's Tom mentioned were currently validating performance of an enhanced version of the kit.

Additionally, we currently have pointed cared test for Corona virus in development, leveraging the beatings, where a tourist system.

The team's working 24 seven to get this test to market as early as possible, but it's Tom mentioned, we could still face some unforeseeable issues during the clinical evaluation phase.

As a result, it's too early to talk about a specific timeline this potential product and what the market opportunity may be but it could be a meaningful driver of growth.

And lastly in our bio sciences business or recovery will largely depend on when research labs and institutions reopened and how quickly the scale up to normal operations and resumed capital spending.

Also seeing some impact on clinical flow applications like leukemia, and lymphoma testing because hospitals are focused on coated 19 on the positive side. There is potential for a modest benefits should and I age or other covert 19 stimulus programs received funding.

They're moving on to Slide 24. This is if you into what we saw in the month of April which includes our per preliminary sales results.

Going forward are surgery, and P.I. businesses will continue to see significant pressure as a result of election elective procedure deferrals.

In the month of April the decline and procedures impacted surgery revenues by 50% to 70% interventional revenues by 30% to 40%.

In China surgery revenues are still approximately 50% of priests covert expectation and across the U.S. in Europe surgical intervention or revenues are down 60% to 90%.

In terms of lost revenues, we saw a decline of approximately $60 million in our surgery business and $50 million and peripheral intervention.

And moving on to M.S., we saw or increase demand for infusion pumps under medical necessity, which we do not expect to continue at the same pace moving forward.

This was partially offset by continue delays and pictures and row or installations, which we do expect to continue going forward. This resulted in a net tailwind to M.S. of approximately $70 million.

In our M.D.S. business and the United States, we continue to see reduce demand in our acute and non acute businesses due to continued softness in routine an elective procedures.

But then the month of March these negative impacts were upset by a tail wind from covered related surged demanding distributist docking.

Conversely in April as the virus curve began to flatten the covitz search demand began to a bait and the distributors acted accordingly as a result in April we saw a revenue in the U.S. that was approximately 15% to 20% below Creek covert expectations.

In China, while hospital volumes and April broadly returned as isolation restrictions have been lifted revenues was still approximately 30% to 40% below pre covert expectations.

And lastly in Europe, we saw the continuation of some coded search demand with revenues approximately 5% above our our pre covered expectations.

Combined we saw a decline of approximately $50 million in April and Mds, largely driven by lower volumes in China and the U.S.

Responding Lee in U.C.C., we saw a decline of approximately $20 million related to kohli fully catheter demand in April.

Moving on to diagnostics and Preanalytical systems continued lower routine testing by M.'s resulted in fewer specimen collections and lower Noncovered diagnostic testing.

Adversely demand for covered related testing remain tie in terms of revenues, we saw a decline of approximately $40 million for the month of April.

In addition, we expect more meaningful delays enlarge capital installations, such as keystrokes as we move forward.

And lastly in our bio Sciences business, we saw a decline of approximately $20 million in April Doodle lab closures, we expect that continued negative impact on capital spending related to ongoing reduced research activity.

If we aggregate the pluses and minuses across a portfolio, we estimate that covert 19 had a negative impact of approximately $240 million in the month of April and this impact was partially offset by a tailwind of approximately $70 million related to increase demand for Alaris Palm Sunday medical now.

<unk> in MMS that we do not anticipate will continue at the same pace moving beyond April.

I'd also like to remind you once again have my earlier comment regarding the pressure on margins to the high fixed cost in our operations and lower sales on high margin products.

We hope this level of transparency is helpful. As you think about the diversity and enduring nature of the beady portfolio.

And as you can see there are a number of variables, which make it very difficult to provide guidance.

As the Coven 19 situation continues to progress and we get more clarity around each of these variables will keep you informed.

Before we open the call for questions I'd like to summarize the key messages from our presentation today.

The World faces the code with 19 pandemic, we are uniquely positioned to respond by leveraging our core capabilities and expertise to deliver solutions across the full continuum of care from research the diagnosis and surveillance to medication management delivery and critical care.

Our second quarter results reflect the strength and diversity of our portfolio. Despite the increased impact from cope with 19.

Going forward, we have put initiatives in place to actively manage our business as we navigate the near negative near term impact of of the virus.

Importantly, these measures include the actions, we took to reinforce our strong cash and liquidity position.

As we look for would we remain confident in our ability to deliver value for all stakeholders and emerged from this crisis in a position of strength.

Thanks to that now like to open the call up <unk>.

Well, there's nothing for questions at this time, if you had a question or comment. Please press start one on your catch 10 thumb. If at any point. Your question is answered you may or may 1st half from Q. by pressing the pound key in order to allow for broad participation. Please limit your questions to one and one follow up we ask that.

While you pose your question. Please pick up your handset to provide optimal sound quality.

Thank you are first question comes from.

<unk> with Barclays.

<unk>.

A Christian you there.

Are you on mute.

When we okay.

Yes, we can now Oh good.

[noise] Hi, Kevin morning. Thanks, So much send thanks for you guys are doing out there on the front line and I'm really thank you for on the transparency. The slide deck has really fantastic I really appreciate all that he has put into that insurance and a lot of work.

Just wanting to.

Kind of ask a little that morning guidance had just kind of what you're seeing just kind of on the on medication management side.

Just put the pets and take Ferris just kind of curious to send terms have with medical necessity and just kind of what you're saying with the increase on on Saturday and whatnot.

Talked about 70 million and kind of and ferret that Dallas not something we should extrapolate going forward just kinda curious as to I guess wine not a seemed kind of that continued benefit for that kind of product line I guess, yeah. We all hope that since you were getting medical necessity that that could be.

Something that we could expect to continue for the rest a year and maybe just any additional details that you could get it on a that a little bit of slippage on that 510 k.

If there's anything.

An AD that'd be helpful. Thank you.

Christian This is Tom good. Good question. So let me talk talk about maybe the the 510 K. piece first and then I can turn it over to Chris to get a little bit more color on the on the financial components. There. So on the 510 Qaeda the main factor there that that really drove the commentary around the delay is of course at one of the biggest areas of.

Testing, which we have to complete as part of the filing is human factor testing so that for those not familiar with it that's going to all the variety of people who could be using the pump.

Training naive healthcare workers people, who aren't familiar with using the pump having them use the instructions for use and be able to to successfully made confusions of course in in a pandemic <unk>. We're it's more challenging to access the nursing staff et cetera to get that testing done in a timely way. So that that's the number one main item and then in addition, we.

Evaluating feedback that that we got from that for 83 to understand are there any implications to the 510 K. submission, it's too early to comment or there's nothing that specific from that but it's something that we're evaluating again, we're continuing to work very collaboratively with the F.D.A.

And will provide you an update on the August earnings call again, we're we're very focused on getting that in as soon as possible, but we're also extremely focused on making sure that it gets done right. So that once it does get submitted it can go through the process as fast as possible.

So that let me turn it over to Chris just to give an update on the the numbers and and just maybe one caveat is I think the 70 million that you referred to that's a net number within N.N.S. that has a higher number four infusion, it's partially offset by some takes in other areas. That's exactly right. So you know I guess the way to think about this is in the <unk>.

<unk> quarter, we had 10 million of medical necessity that really wasn't covert related that was kind of normal medical necessity that we would have expected when we gave guidance last quarter.

We had something similar to that in in the month of April as well, but above and beyond that we had a spike in a medical necessity for alaris pumps as you might imagine in you know the peak of of the the fight against the pandemic and so that Spike we did have.

Bit of offset from you know the pyxis installations and row installations et cetera, but the bulk of that was was the spike in in the Alaris now as we look going forward, we would expect that that spiked to abate someone not completely but we would expect it to a bait in may and June.

Not be at the same levels as it was in April we would also expect to see a little bit of the spike in in the different pyxis and row installations.

And keep that you know that would keep going so that would offset so as you think about the next few months. We just wanted to make sure people were clear that you know we would expect that 70 million to come down in May and June and but but again that that just based on assumptions that coven 19, we'll date.

Over that period of time and the hospitals, you know may recognize that the need for in this additional building of I.C.U. beds may not need to continue at the same pace, but that were to change of course, the situation would change <unk>.

<unk> and then I guess, what what can you tell us a little bit about what what you're seeing in terms of early days now just across.

The contrary here in the United States, you guys <unk> unique spot to spend all your touch points at hospitals, just for American very perspective.

Seeing signs that in some places things are starting to kind of a little better you know just in terms of surgeries and what you're saying maybe within the intervention business or just in terms of hospital assets is starting to pop back up or you starting to <unk> opt.

<unk> or you know our things I'm sure things are very regionalized anything you can kinda AD there that'd be interesting.

So.

Good good question I think that your last comment there is is very accurate. It is very regionalized and we certainly we're doing a lot of primary research surveys of our customers directly to have have that that real time data and what are our data shows is again, a very regionalized kind of healthcare recovery areas like Texas.

A few other states we see.

I like to procedures really ramping backup.

Strongly again, you'll see that though in pockets, you'll see certain hospitals could be back at 90% of of elective procedures in in her need to where they were before and then the hospital down. The road is is saying we're not doing that for another 30 days and they're basically still at at a 90% drop off.

But we we are seeing it generally begin to to increase in certain regions early on in in late late April <unk>.

In particular, and I think we've reflected that a a bit but it's still early days.

I think the other thing is is I'm getting increasing calls probably fair to say over the last couple of weeks. If you step back a month or two a lot of the dialogues that I was having with C.E.O.'s of of many of our largest customers were around getting access for diagnostics for patients in need of of current a virus diagnosis.

Today I get a lot more of those calls where those needs are being better met today and people are looking at and now getting.

Access to test to start screening patients prior to them coming into elective surgery and that is happening I'd say much more on a national basis. So even if they haven't actually started doing the procedures yet.

<unk> standard across the nation I I see that people are starting to think about and putting in place timeline for how they're going to get those elective procedures back up and running and they're thinking about how testing is going to be used to actually test people before they come in and so we're seeing that that occur and I think that's a sign of positive sign.

Of other People's intentions, and the timing of those intentions. So we'll continue to keep you updated as as that progress is but just a few of the things that maybe help.

Thank you so much ticker okay. Thanks, Christen be safe you to your next question comes from line, David Lewis with Morgan Stanley.

Hey, David one Devon.

It seems to be a pause.

With US there you are can you hear me, yes weekend.

Oh, great. That's good news got one thing right. This morning. So just so quick diagnostic question a diagnostic follow up you there for Tom Roberto So the first questions just on a appreciate the update embarrassed for this morning, I Wonder I know, it's kind of a fluid situation, but are we talking weeks away or months away and then if you could get approved what type of potential manufacturing capacity.

Can we think about post a U.A. approval than Ida quick follow up a good question, David So I. It's it's.

We're in clinical testing right now with patients samples sort that face we have an essay that we've developed and we're testing for performance to generate data that if it works we could submit free you a approval.

So that's where we are I always <unk> cautious and one of the things. We always talk about internally is of course typically it's a three year process to develop you know these assets and get them clue through clinical studies and approved we're doing that in in three months essentially and so you know even what we're could be a couple of weeks away from submitting the way in in the.

General timeline of what you can learn in that window you're learning.

Just a year of what you would normally learn cause that also includes manufacturing scallop et cetera, and so it's a why we're a bit cautious to give specifics yet because there's still a lot to learn even though it's a relative could be a relatively short period of time, so more to <unk> as we complete our clinical testing we started that clinical testing last week I can can share that.

And again pending the results of that testing, we've already had discussions with the F.D.A. on a pre <unk> filing discussions and so we know what it takes to to get that product through.

And again pending the <unk>.

The testing results. The study results will be in a position to file concurrently we have been working to ramp up our our production of that I say to our manufacturing teams are ready with actually started to invest in some additional equipment as well so that we would be in a position the scale that over the balance of the year in in a meaningful way okay.

Oh.

We're going for millions of tests right millions of tests, not that a million million a week.

Okay. So production capacity is not gonna be limited to their thank you and then just that we're kind of related questions few Tom or or others it'd be d. mass production right now is sort of a third of your peers for the net testing can anything be done to ramp up beady mass production capacity and then just love to get your kinda macher views on <unk> immunity testing what do you think there so.

Inefficient demand from point of care immunity test, where you see most of that demanded so we're going to get filled by some of the larger IBT analyzer companies. Thanks, So much for all all you're doing this morning.

Thanks, Dave So on Max you're right. There are appears that have much higher volume on very different platforms of course.

<unk>, they're high throughput platforms, which are designed for that obviously the benefit of B.D. Max is that it is is more of a real time system. That's much more useful in in in select hospital settings that aren't going to have those high high throughput platforms. So yeah. At this point in time, I'd say that million test a month is.

It's where rat with our current systems and and and instrument.

Instrumentation that we have in manufacturing we have a approved in our proceeding to invest in additional capacity there.

So, but the timing of that coming on line not ready to share that we are investing for additional capacity you know recognizing that that will need that in the future as well, but about a million test them. On this is what we're saying right now in terms of immunology testing, we are seeing strong demand for point of care.

<unk> testing and we think that will continue certainly a a central lab based approaches.

Is a good one.

Does use a different specimen a whole blood obviously the convenience of the the Fingerstick, we see interested in that from an employer's as well as a health care providers being used from screening think about patients coming in and being able to do testing much more real time than having to send samples out and maybe a less invasive sample collection procedure as.

Well, so we are seeing strong demand and we expect that will continue.

Thanks, so much.

Your next question is from Richard Neat later.

Hi, Richard morning, Hi, can you hear me that's region. Okay, great. Thank you and thanks for all of detail in this morning's presentation or release very helpful. I I wanted to just maybe go back to the testing question pop on the Oh by the questioning here so.

Very helpful on on color with respect to how your portfolio fits and perhaps on the on the hospital testing site can you give us any sense at the how you think the back to work on the you know more the private sector and and and just kinda employers in general what the algorithm.

Potentially going to be either at international level or or whatever you're seeing out there as the conversations are being had just trying to get a sense for house or all you could said.

With pointing care testing and or and I throughput testing on so it with other automated systems. Thanks.

Yeah. It's a great question rich I I don't have the algorithm figured out a you know specifically yet.

I I would say that again is we're thinking as we're talking to our customers.

We're getting a lot of interest on antigen testing to screen patients at least before they come in for elective surgery. So I can say that make that comment that that they're more focused on antigen testing what I, what I'm seeing than a antibody for at least patient screening before they come in for surgery, certainly as we think about employers getting their associate base back to work it it'll be a mix I would imagine.

You know we are of course spending a lot of time ourself thinking through that question and we're very focused on prioritizing we actually just communicated yesterday the <unk> some phasing for starting to get some of our associates back to work next phase of of.

Commercial teams being able to support customers in the field starting made this month in the U.S. as an example, and then starting to get increasing numbers of R. and D. associates back to work as as the priority after that and then we'll be working on were office space Associates.

And extended period of time after that and so I think you also expect regardless of the use of testing some phasing of people getting back to work based on the importance of them really being in what do they have to access and a work setting that they can't access from home.

That's helpful. Thank you and just on the ramping production of the <unk>. The swab kit that that you referenced if he said millions per per week by June Alright, you know that's a substantial wrap from where you had been.

Do you think that that will know law or used to be a bottleneck for the testing situation at least in the U.S. by that point in time is that did that the right level and and can you go even further than that thank you.

Yeah. Good question. So just to clarify that 3 million a week by by June is is where we expect to be that's up from 500000, that's a a week at the start of the crisis or dramatic ramp and of course, yeah. We're we're heading strongly in that direction of already out a couple million a week.

So I the the big thing that's happened there is and we've been right in the middle of that working with the F.D.A. other partners from across the industry as well as organizations like the Gates Foundation at the start of the pandemic. There were very few products that were validated for testing and so that was clearly a constraint at the beginning what's happened now is there's been a lot of sister.

Majdic work across.

The swab manufacturers as well as the test providers and again organizations like the Gates Foundation has been driving some of that testing in collaboration with the F.D.A. to systematically expand.

To beyond viral transport media, which was it was limited to in the beginning to now other types of swabs, including dry swabs and swabs in sailing which have dramatically increase the capacity of the different types of devices that are available and so yeah, I I'm not hearing significant issues on swabs stopping testing today.

Yeah, I was getting a ton of those called a month ago and that that was a an issue and we were very actively managing to make sure. The testing didn't stop having you know our teams coming in you know at midnight on Sundays to the package things up and drive them to the hospitals around the country and regionally to make sure the testing didn't stop and we're really proud of the work.

That we did there we don't get those calls anymore at this point in time or they're they're much more rare if they do occur.

Thank you very much.

[noise]. Your next question is from the line of Bob Hopkins way the Bank of America.

Great. Thank you and good morning, what about yeah morning, I. It can I appreciate all the detail on on a.

So just maybe one follow up on on April and I realize it's a little bit short term, but we're all so hungry for information.

You know <unk> regarding the 70 million I realize we're saying that probably won't be sustained but I'm. Just curious if we sum up everything for the month of April the positives and negatives related to code and then just the other parts of the business.

My my math that maybe suggested in April the total company revenues or maybe down high single digits. Your every year is that ballpark or am I missing something no. We're we're <unk> teams down so you know.

In in total.

At the 240 level, that's mid teens, and then somewhat offset by the 70 million.

Okay. So that mid teens would not including 70 million dollar benefit that you're saying, okay. Okay. And then the other thing I wanted to ask about is thinking a little bit longer term. Tom you mentioned you know hopefully.

You know that the the progress being made on vaccine.

Obviously betting there'll be a part of the solution. There I'm just curious if we do get vaccine you know do you guys have the capacity to meet that demand or you know j. and j's out talking about a billion doses kind of how do you frame that for investors that that P.D. being part of.

The solution in your ability to meet potential command.

It's a great question, Bob and it's something that we've been very active in talking to governments around the world and what's important here is is that people have to be proactive in beginning to order and stockpile. These devices now.

Cannot be waited until the last minute and expect that those products will be able to be manufactured because to your point. This that scale is can't be produced in that period of time. So we are seeing some governments around the world. We've gotten very large orders already beginning that stockpile to cover the citizens in their country of vaccines.

Others are are haven't done that yet and we've been really pretty much on a daily basis, working with our public policy team to create greater awareness.

In governments or the need to start doing larger scale buys now.

We have presented our production capabilities over the next year there are opportunities for us to invest further and Capitol some of that we're doing practically ourself.

But it needs to be done from a stockpiling perspective, and again I think there's further actions needed.

To do that and again, we're working to to help ensure that happens that includes here in the U.S.

Just to be clear on your first question, but when you adjust for that 70 million. It comes out to load double digits impact on a year over year basis.

Thank you very much.

Your next question comes from the line, Larry Beatles, and with Wells Fargo.

Oh good morning, Thanks for taking the question and thank you for all the the color just a couple of question for me one Chris on the P.N.L. appreciate the color on on the margin impact of any other color you can provide on the P.N.L. for the second half it sounds like R. and D., you're going to maintain that spending.

How should we think about S.G.N.A. and maybe some of the other lines of the P. and all that I had one follow up.

Okay. Thanks, lower for the question and the way to think about it is you know the a lot of what's being negatively impact on the business such as surgery and and P.I.. We're fortunate have very high gross margin profiles, you know thinking the 70 plus kinda range.

In addition to that you know as you think about the impact.

Got to consider manufacturing variances.

Which are going to impact the the P.N.L. as we adjust for the lower revenue and and the and adjust or inventories accordingly.

Which is the right thing to do so.

You know as we think about it we're also making investments and <unk> related are ramping as we've talked about on the call here. So we're making those investments were also investing in in the safety and health of our associates. So you know are making her own P.P.N.E., which we talked about facilities cleaning.

And those kinds of things. So those are additional costs and then we're also seeing higher shipping cost as you are probably not surprised by.

So when you take that and then we're we're taking upsetting that we've taken cost mitigating actions that we've talked about in our remarks, you know, we we limited travel in a hiring freeze early in the second quarter and we saw the benefits of that but will also take in salary.

Since for management in the board the four one k. match, so that offsets thing so when you're not all of that out you should be thinking about the margin impact of the lost revenues going forward in that 75 per cent kind to range.

And your net everything together, so hopefully that gives you some more color.

Helpful. Thanks that if I follow up Tom how how are you thinking about the long term implications of of <unk>. You mentioned in this for B.D. in the industry you mentioned in the slides to shift of care to the non acute settings. For example, how how does that impact Beady act for taking the questions.

It's great question. So we we've been of course in our strategy, we've been very specifically developing additional solutions for the Nonacute sector B.S.R. Rella platform for retail pharmacy are very tore platform or even commercial teams that we've put in place, bringing our our medication management solutions and and including you know.

Catheters et cetera into the surgery centres and non acute so we've been shifting our resources in that direction as it's it's been a faster growing segment, but we'll certainly only increase in that direction going forward. I think you heard some of the announcements that we talked about today on our our new product development platforms like the the acquisition of of <unk>.

Which will give us a point of care molecular platform to supplement right. So they're tour will be a lateral flow base. This platform will be molecular based similar time to result, we would expect as as <unk> again, that's a an investment that we're making seeing that we expect diagnostics will continue to shift in in that direction.

Are making other investments even in our P.A.S. business that allow a self blood collection and other types of of sample collection that are much more appropriate for the retail setting et cetera. So <unk>, we definitely see at a trend it's something we've been investing in and we're only continue to double down on that as as we go forward.

<unk>.

Thank you. Your next question comes from the line of Brian Weinstein with William Blair.

Thanks for taking the questions.

Probably not surprisingly coming from me some very toward questions here for you. It just kinda rapid fire. So time I wanted to confirm did you say millions per week I I think that's what you said I wanted to confirm that and then are we talking about a covert 19 ascertain are there any plans for a combo flew a b. covert essay on that they can you speak to the perform.

<unk> characteristics that you're expecting to be a scene on that especially relative to I know you have to compare relative to P.C.R. when you're doing. These these studies sure 'cause good questions Brian Good morning.

So yes, you heard right on on very toward that would be where we would be ramping up towards we wouldn't have that available necessarily at at launch we will have that ramping up towards that we have plans then we'll share those plans from a timing perspective later on from a a performance perspective again, we're in studies right now so it's inappropriate to say what our performances <unk>.

<unk> actually that right now in clinical specimens, obviously, we recognize the comparative to to P.C.R. is is typical obviously for anything we also recognize that that you know these essays they won't be as sensitive S.P.C.R. and a lateral flow I say is as sensitive as P.C.R., but no P.C.R.S.A. is.

As ease of use cost base mobile as what you see and and a platform like their tour, which is why you see you know wide use applications influence strep testing still today and it has a very important role we see and we hear also from the at the F.D.A. The White house other key constituents our customers see.

A very important role in need for a lateral flow based <unk>, we're focused on getting the the covert ass out first Brian.

The antigen test and then to your point can we add in a flute.

Bind that with our flew tested in a single strip absolutely. We thought it started to think about that that of course becomes much simpler to do once you can from the the <unk> is is secure done we've launched that than the ability to put that down with the flu test both of which are now well character characterized essays would be a next phase.

For us to think about.

Okay, Great and then follow up going back to the pump business for a second would you be willing to share some of the bigger observations that you are receiving the 483, just kind of broad strokes, the things that you're going to be a kind of looking to deal with here.

Yeah, <unk>, we don't share those <unk> at this point in time, obviously, we're in now we're working very closely with the F.D.A. and in that responsive actually already submitted our response plans on that we've already started taking actions on many of those and we'll share more as as we go forward.

Under said, thank you yep, okay. Thanks Bye.

Your next question is from <unk>.

<unk>.

Good morning, I'm going crazy.

Let me start again, if I quit with you are excellent.

What happened in April.

We are but I wanted to make sure I just had to apologize for the short term nature of it other large companies and commenting on.

We'd be trends about like that's what keeps them.

But.

Have it indeed did things get less bad or improve somewhat eight as you will at last meeting people may are you seeing that and we think about <unk>.

That 240 million dollar negative April impact.

<unk>.

We assume that that get less bad yeah. The 70 billion blog that will be left about poverty, but shouldn't we think that incoming month that things we opened up to.

Oh 40 go down a month by month.

Yeah. So it's really hard to predict there wasn't enough in the last week of April differential to really give us a sense of that and and when you think about it. It's you know really elective procedure. So we didn't see enough of a change in the elective procedures to to be able to call may.

And to to get any sense of anything changing it to your point around what might be up and down we think that the lab closures the impact.

And may might get a little bit worse and capital spending levels over the next couple of months.

You know would also be something that that could get a little worse and so it's it's just there's so many variables. That's what makes May and June you know very very hard to to predict and you know I think we'll learn more as time goes on as you said, but there was nothing about the last week of April.

That would give us a sense of where this is going is just too early to tell at this point <unk> and Rick maybe we we take advantage. We've got that we do assignment on the line maybe we turned over an assignment just for a quick comment on on what you're seeing on the procedure side at a high level.

<unk>. So you know in in certain pockets, we we did see a a an uptick putting in England <unk> their their their heavily have any reimbursed. They're also England. In particular is is very much outpatient base. So.

You know they they get the patient then they treat them to get reimbursed nicely in the and the patients that under patients go home. So that's getting a that's been but that was picked up nicely at the at the back end of April and also another.

Point worth noting of so they had the back end of April our sales force began to receive more colds from.

From the customers about the beginning to reopen cases so.

<unk> said, we're we're about to a about to let the those guys lose your again in the in the middle of the month.

Affect just yesterday, we be began shipping them all their P.P.E., so that they're going to 10 cases and go back into hospitals, where there are allowed so the the <unk>. There are several things in in certain pockets that are the the point in the right direction respect to some aspects or elective business and just to clarify our rest will not be going in just a.

Hospitals in less there specifically requested to attend a case and and I think as we see that while we're seeing that in some very small subsets. It Simon just described I'd say as we think about medical and life Sciences as as as Chris commented on not not seeing that at any real difference at the end of April for example, like and specimen collection or or M.D.S.

Anything notable their difference it yeah, that's great and Hum maybe just one for you your grow simplify.

Power initiative, just focusing on the simplify aspects from <unk> and now you're focusing prioritized.

Optimizing menu <unk> call reduction in Michigan, F.K.U. reduction et cetera.

What's happening.

Right now and you know.

He's just an appropriate time to accelerate those initiates actually ironically <unk>, we contemplate <unk> <unk>, it's called as you might as we recover from from.

Oh, but period and you say hey, Rick at Great question, absolutely. So near term over the last two months, we've actually the the work on the S.K.U. rationalization has in fact accelerated to your point with folks at at home the ability to engage actually the sales team in working through.

Box that that the product list of what we're looking to to remove from the portfolio the substitute products actually been able to number of teams have been able to engage them in a way which has been much more than we would have been able to do you know traditionally actually a number I think we had.

We had a number of businesses already starting that product a simplification initiative and that expanded pretty significantly across the company to other businesses. During this this window of time.

Or the marketing teams et cetera were also had had been with to accelerate that work. So that's been one that we've taken advantage of this period to to double down on in terms of the the manufacturing a network consolidation that does continue to move forward, we haven't been able to necessary accelerate that work. During this period of time, obviously the manufacturing teams focused primarily on on.

Supply right, now and and and navigating that it's it's of course, you can imagine every day, there's that items that we have to manage that in our supply chain as well as in our own facilities, but that is fully still moving forward in in all ways and we'll continue to keep you updated on that.

Thank you.

Your next question comes from Robbie markets with J.P. Morgan.

Great. Thanks for taking the question I'll ask both of them all and wine I noticed it took down your cat backs for the year by about 200 million, hoping you could just touch on your thoughts around pipeline delays that are art potential coming out of this.

It should and shouldn't be effected and then also how are you thinking about your ability down. The road is this reduction and cap x. temporary can we see something more permanent come out of this really just how you're thinking about capital.

Investing on your capital allocation in general plus the pipeline. Thanks.

Yeah, I'll I'll start with that rubber. Thanks for the question and as you might imagine the first.

Thing that we wanted to make sure of is that we were able to mitigate the cash impact from the the headwinds from coded and we've made great progress on that in a few short weeks and we're able to mitigate a substantial part of the what we see as the capital impact and.

We think that was the prudent thing to do so one of those things that we did to get there. In addition to some of the the P.N.L. items that we talked about that clearly impact P.N.L. and cash but from a cash perspective, one of the items that we did take down was the cap x. and.

We're prioritizing mission critical capital spending and we're cutting a and basically delaying some of the investments that we're making a that or more discretionary and we're being very careful on that because we want to make sure that we're not cutting anything that would inhibit any capacity going for.

So we're being very targeted on that and it clearly is not a permanent adjustment than cutbacks, we would expect that when we come out of this pandemic that we would some of those things that we're cutting we will you know or just deferring and we'll have to spend that.

And so you can expect us to go back to the normal 900 to a billion dollars kind of thing and you know that is particularly true as we think about investing in in areas that are necessary for covert we continue to invest in those areas.

And ramp and make sure that we have capacity as as terms articulated on a number of fronts were ramping capacity, so think of that as a as a temporary reduction.

Thanks for the question.

Your next question comes from Matt Taylor with U.B.S.

I get morning. Thank you for taking the question. So I just wanted to circle back and and if we could revisit I'm a bob's question about a vaccine given that could be.

<unk> did you just remind US you know kind of share you have global syringe market you know how material that is for you today and when it could mean, if you were to get in order for say a billion syringes into one would you be able to get there and how material would that be.

Yeah. Good good question, Matt. So we don't we don't share our specific shares on a on a global basis. We are as we said the leader in in a worldwide clearly the leader in in the U.S. and we make.

Billions and billions of syringes and needles a year.

We make billions and billions of them that specifically just for the U.S. market it as well each year.

So to be able to provide it let's just say in your example of billion syringes spontaneously there's not capacity to just provide those in a month, we have provided plans to different governments around the world, where we can provide hundreds of millions of product over a a month's periods of time and there is opportunity to go.

Above that but it needs to be done in partnership with those government. So again some of those governments. We've engaged have strongly engaged with us to do that others are still working through their plans on that point. What's most important is you've got to get ahead of that and start to <unk>.

Start to get those those orders and things and now the other thing is it's it's just a little lot caveat areas and the reason I hesitate is there is global capacity as well there are certain products that we sell for example in the U.S. that we don't sell X.U.S. and there's many products that we sell X. you asked that we don't sell in the U.S. for example, we pretty much exclusively sell safety devices.

In the U.S., we have lots of capacity of non safety devices or X.U.S. in a pandemic vaccine delivery situation, one may not prioritize the need for safety needles on the end of a vaccine delivery and so you can free up additional capacity to come into the marketplace, but those again, that's working with the government's on the specific requests.

<unk> and the stockpiling against some governments have already state started taking those actions aggressively others. We're we're really focused on getting them to to act x. sooner. So.

Understood. Thanks for that and I'm one one follow up obviously are seeing Christa manfre infusion pumps I I was just wondering if you could offer some thought.

<unk> you touch so many points into acute care settings, whether you think that hospitals and providers will in the medium term or the long run actually permanently increase the size of their ice you or acute care capacity to be able to be responsive. If there is a second wave or just ongoing October.

Manage.

It's a good question I honestly don't know the the answer of of that that's something that that yeah, I would imagine that that many hospitals are thinking.

About what it could be a second wave in the the fall and and next winter and thinking about how they balance that you know, including somebody field hospitals that have been set up and and how you. How you think about those infants we haven't had deep discussions with our customers on on the long term implications of of I.C.U. beds, and and how how they may or may not maintain that.

Over a longer period of time, certainly I I, particularly in the U.S. I think that may be a little different in some areas like in Europe, where you've seen countries you've seen you've seen the stats of I.C.U. beds per capita in different countries in Europe and how disparate those are what we have heard.

Where some of those countries that it did not have as many I see you beds may want to permanently maintain a higher ratio of I.C.U. beds, but I think that's on some that were well below benchmarking levels.

Right. Thanks for the <unk> Yep.

Thank you. Your next question comes from Josh Jennings with Cow and.

[noise] hi, good morning, Thanks for taking the questions I had a a follow up similar question to maps. Most recent question, but just thinking about the potential need for hospitals to build out capacity, maybe individual fleets more picks the systems as they move forward to reopening.

And there's looking at distinct covert 19 words or units are floors versus noncorporate 19 units are floors and the than the central to avoid cross contamination, even of medication delivery or where these problems.

<unk>, we're not seeing widespread requests for that at this point in time and I think the question would be would they be reallocating remember overall hospital utilization in the U.S. is still relatively.

Right, it's not not 90% across the board in normal terms, so how much it would allocate to covitz specific wards et cetera, I think that still being figure it out obviously whole hospital.

Dedicated to that at this point in time, we don't see.

Not visible today that there would be some type of of spike in in pumper pyxis.

Growth is people are trying to build a separate coven.

Stems from their their main wards, but something we'll we'll monitor but we're not seeing that today.

Great and then just to follow up I.

Or do you mentioned that the tonics B.T.K. submission was.

It was put forward who filed.

No details you can share about back and forth with T.F.T.A. Oh, what was required what more was required from backed in for that submission in any comments on just your confidence for for approval. Thanks, a lot yeah, we can't comment really with many details at this point in time, obviously it includes a number of.

<unk> clinical data studies that were generated on on B.T.K.

And we submitted those various datasets to the F.D.A. So again, we believe that there remains a significant unmet need for that patient population that there's not strong alternatives for today. We we strongly believe in the safety of the B.T.K. product and it's it's Underactive review. So we'll continue to keep you updated as it.

Aggressive, but we we've submitted the data.

We believe is is.

Were complete and so it's it's now under the review process.

Thank you.

Mhm.

Thank you for your questions. We will now turn the floor back over to Tom Poland for your closing remarks, okay, well thanks, everyone for for the Great discussion today as I closed the days call I'm reminded of something a mentor of mine once shared which is that crisis doesn't make character. It reveals character and that's truly the way I I think that.

We've seen beady respond here that the Crow Cove in 19 crisis is really revealed the the best of B.D. reinforcing the commitment of our associate to never forget that there's a patient at the end of everything we do it's revealed the breaths adept the necessity of our product portfolio reinforcing the central role. We we played from discovery in diagnosis.

To the delivery of care and treatment of disease, and it's revealed our ability to adapt and innovate.

Clustering, our resources to bring new solutions to help solve healthcares biggest problem.

That track record is why health care providers and health officials worldwide.

Have put their trust enough during the most significant health crisis in the past century.

What it's what gives us the confidence that we will continue to drive growth innovation and value creation and the many categories. We serve long after coven 19 has been contained.

I think it's fair to say that the road to recovery for the healthcare industry in global economy is going to take some time.

Likely to have its own bumps, but I'm confident P.D. will navigate these near term challenges take the necessary actions and execute our strategy to emerge strong.

I've been so inspired by the response of B.D. Associates, we have an incredibly dedicated and committed team and I can't think the team enough for going above and beyond in these challenging times I want to think all you for your time today stay well.

<unk>.

Thank you. This does conclude today's teleconference. Please disconnect your lines of this time and have a wonderful day.

[laughter].

[laughter].