Q3 2020 Becton Dickinson and Co Earnings Call

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Ladies and gentlemen, this is the 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.

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[laughter], Hello, and welcome to Bds third fiscal quarter Twentytwenty earnings call.

At the request the BD today's conference is being recorded.

It will be available for replay through August 13th Twentytwenty on the investors page at BD Dot com website or by phone at 805 858367 for domestic calls at area code 4045373.

406 for international calls using confirmation number 3197917.

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

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

Thank you Stephanie good morning, everyone and thank you for joining us to review our third quarter results. We hope that everyone continues to be healthy and things.

The safety in mind, we are again, taking them where virtual approach to our call today, while also exercising social services thing.

Joining me I'm personally as Tom Polen, our Chief Executive Officer in President and Chris Three D. Executive Vice President and Chief Financial Officer, and Chief administrative officer, joining by phone, we have Alberta, Hamas Executive Vice President and President of the medical segment, Simon Campion Executive Vice President and President of Intervest Interventional.

Segment, and Patrick Kaltenbach, Executive Vice President and Chris Fine. Thanks.

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

During today's call, we will make forward looking statements and as possible to actual results could differ from our expectation.

Factors that could cause such differences.

Third fiscal quarter press release, and then and DNA sections of our recent SBC filing.

Particular, there continues to be significant uncertainty about the duration and contemplated impact of the cobot 19 handling the commentary that we're providing today include information regarding the July trends, we're seeing in our businesses.

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

We will also discuss some non-GAAP financial measures with respect to our performance reconciliations to GAAP measures. They include the details of the purchase accounting and other adjustments can be found in our press release and its related financial schedules and then in appendix of the Investor Relations lies a copy of separately include.

During the financial schedules is posted on the BD Dotcom website. It is now my pleasure to turn the call over to Tom Okay. Thank you money and good morning, everyone. I Hope you and your families are doing well and staying healthy.

But I just summarize Q3 into words, it would be execution and impact I'm very proud of our team for the performance they delivered in the third quarter given the challenging environments.

What stands out to me. The most is the progress to be team made executing and delivering on both a short and long term agenda, creating value for patients customers and shareholders.

We lost the Kobin 19 assay on very toward secured injection device orders for future future vaccination campaign.

And skilled manufacturing to ensure continued supply of critical medical technologies across the continuum of care.

We announced several U.S. government collaborations to expand U.S. capacity and critical to coated product areas. We work closely with our customers as they resumed medical procedures throughout the quarter and we saw those procedures continue to increase as we exited the quarter.

At the same time the team never lost sight of the long term advancing our growth strategy driving innovation pipeline and executing on our cost savings and simplification initiatives.

Confident the steps, we're taking now will help BD emerged from the pandemic strong and put us in the best position for the long term.

Let's jump into the quarter on slide four our third quarter results reflect the impact of Koby 19 on health care around the world.

We saw strong demand for koby 19 related diagnostics and significant pressure on the parts of our portfolio that support elective procedures research routine care in lab testing.

We anticipated we see the biggest negative impact from Kogan 19 in Q3, it's largely played out that way.

All then koby 19 had a net negative topline impact of $600 million in Q3.

Chris is going to provide more detail on performance during the quarter and our perspectives on recovery.

But let me share a high level summary of what we're seeing starting with BT interventional.

Cross Interventional segment, we saw sequential improvement each month during the quarter at hospitals and patient started to resume elective and urgent procedures.

In June trend delivered positive year on year growth in all three VDI businesses. We continue to watch trying to closely since they are further along in their postcode restart.

We exited Q3 seeing VDI procedure volumes at approximately 80% pre coded levels.

Moving onto the medical segment, we're really pleased with the continued strengthen our pharmaceutical systems business, which is growing high single digits on a year to date basis.

If you both the farm systems business and diabetes care businesses as more insulated and less impacted by coping 19th.

As you know the rest of the segments portfolio is closely tied to overall health care consumption.

So naturally the impact of lower hospital utilization was very pronounced across the medical device consumables portfolio, even more so than we had initially anticipated.

That said, we're encouraged that we saw demand for medical device consumables improve in June.

Lastly, early demand for infusion pumps that are medical necessity did spike in April as expected and then taper down throughout the quarter.

Now looking closer at life Sciences.

As expected we saw very strong demand for koby 19, diagnostic tests and supplies during the quarter, which was offset by a deferral of routine lab work as well as delays in capital investments on both the research and the diagnostic side.

In Q4, we expect continued strong demand for our cobot 19 diagnostic solutions with the addition of the meritor assay to the portfolio.

In addition, we did see reagent orders begin to pick up in June for both research and clinical applications, which demonstrates the researchers continued to get back into the labs.

Well this remains a dynamic situation, we're providing revenue and EPS guidance for Q4 in the total year as we have improved near term visibility.

Based on what we know today, we believe our guidance range reflects the trends we saw in June and July and accounts for expectations as we close out the year and Chris will go into more detail later on the call.

Despite the challenging environments, it's clear that Bds durable capabilities and critical to health care portfolio have been and we'll continue to be a vital part of the cobot 19 solution.

And I'm confident that the actions, we've been taking position BD increasingly well to support our customers through the pandemic and returned to growth as the global economy in health care industry continue to stabilize and recover.

Turning to slide five.

On our last call, we discussed how the strength and diversity of beauties portfolio.

Enables us to support the world's response to covert 19 across the full continuum of care.

The BD team made significant progress executing this agenda during the quarter positioning us well to finished the year with momentum. So let me share a few highlights with you starting on slide six.

First today marks one month since we launched the Sars koby to antigen assay for the Meritor plus system, which we see the FDA you weigh in early July.

We believe this platform is a real game changer dramatically expanding access to covert 19 testing at the point of care and reliably diagnosing Sars koby two in 15 minutes.

In the first month since launch we've received very strong demand for both the Veritor plus system and the stars coded to assay, including from our traditional customers as well as non traditional accounts.

In our first month of launch Weve shipped more visits were readers than we normally do an entire year.

This is a strong indicator of the unprecedented interest and demand for near real time point of care Cobot testing.

As one example, we're proud to partner with the U.S. Department of health and human services on their efforts to expand access to rapid point of care testing in nursing homes through.

Through their initial order of 2000 visits were plus systems and 750000, Sars koby to antigen test kits.

To support the very strong demand were seeing we are leveraging our world class manufacturing scale and expertise to significantly increase supply capacity and we're feeling good about both our original goal of producing 10 million test in Q4, and our scale up to our initial 8 million tests per month run rate by the end of the fiscal year.

In addition last week, we announced a 24 million dollar investment from the U.S. Department of defense in collaboration with HHS to support the additional scale up of U.S. manufacturing.

It is expected to bring global production of the Varityper assay to 12 million tests per month.

At the end of February 2021.

We're putting the full capabilities of BD behind this including not just those in our life Sciences segment, but we're pulling in talent from both BD medical and interventional to support the scale up.

Detecting and containing Corona virus globally take a collaborative industrywide response.

And we're proud to partner with advent Ed on the National diagnostic supply registry to help ensure widespread availability of testing.

The Veritor assay joins a portfolio of three molecular solutions for our coven 19 testing that BT has already delivered for use with the BD Max molecular system that includes two with E ways and to a CE mark.

We're now producing 1 million Kobin 19 rapid molecular diagnostic test each month for use on BD, Max and as I've shared.

We're investing in further expanding BD Max capacity. So we can produce an additional 900000 test per month.

The installation of these additional production lines as well underway and remains on track to be at our new 1.9 million BD Max test per month run rate by the end of the calendar year.

Cumulatively, we have produced more than three and a half million rapid molecular tests for BD Max.

In addition to investing to expand capacity, we're also investing to expand our portfolio.

Our R&D teams are actively advancing our work to develop flu plus cobot assays for both our Veritor and Max platforms. So we can better support healthcare providers and patients.

I'm very proud of the entire BD team for driving scale and impact through October 19 diagnostic solutions.

We move on to slide seven.

To date, we've now received orders for 470 million needles, and syringes from the US Canada and the UK and other entities in anticipation of vaccine programs. We expect late this year or early 2021.

These orders represent a mix of safety unconventional device types.

We anticipate initial shipments to the UK Nf why 20.

Majority of these orders will be delivered and Thats why 21.

In addition, we formed a strategic public private partnership with the Biomedical advanced research and development authority known as BARDA.

BARDA, we'll invest an estimated $42 million into a $70 million capital project to expand U.S. manufacturing capacity for injection devices.

The new capacity is expected to be online within 12 months.

And once completed BARDA will have priority access to injection devices from these new manufacturing lines to support Max bass vaccination campaigns for coven, 19, and future potential pandemics.

As the world's largest manufacturer of syringes and needles, we are focused on fulfilling routine customer demand such as for annual flu vaccination programs. While also ensuring we can support surge demand for pandemic response.

We are continuing active discussions with governments around the world about the need to place injection device orders quickly.

To ensure timely delivery for 2021.

As expected I also want to provide an update on alaris.

We're working diligently and with urgency to prepare the five 10-K filing.

Our focus is on ensuring a comprehensive submission that will ultimately help enable timely FDA review and clearance.

We expect to submit the updated five 10-K in late fiscal Q2 for early fiscal Q3 2021 based on ongoing dialogue with the FDA.

We recognize there is a focus on the timeline for the five 10-K submission and that's important.

Taking a step back we feel really good about the overall collaborative process, we are engaging in with the FDA.

In our pre submission conversations the focus has been on having a complete and robust submission and we have been spending additional time on aligning the testing protocols upfront, which is time and effort well spent.

We believe the more work, we do upfront to ensure the most robust submission the better we are enabling a timely review and clearance process.

As expected our team has completed quite a bit of the testing and other work required for the submission and we have a much better visibility to our submission timing now than we did when we last updated in may.

When it comes to human factor testing, we've completed 100% of our formatted formative testing, which is a significant milestone involving 12 different human factor tests in the middle of the pandemic.

We're pleased with the data and outcomes.

We've also completed substantial software system verification.

Completion affirmative human factor testing and software verification retire significant risks to the submission.

We are taking a bit longer to ensure full alignment with the FDA on the final phase of human factor testing, which is referred to as assume active testing and again, we feel this investment in time now best serves us in meeting our ultimate goal of the timely by 10-K clearance.

We have submitted our sumitomo of testing protocols to the FDA and expect feedback shortly.

Currently we are continuing to recruit committed clinicians for the next phase of human factor testing and once we have that feedback from the FDA, we will be able to complete the sumit of testing.

In addition, and our ongoing feedback discussions with FDA. We made a decision to include an update to our specialty echo to module, which is important for clinical care and especially coded response.

As CEO to module is used to help monitor patients on ventilators on medication is being administered.

We believe this is the right decision for the Alaris system over the long term the patients we serve and far outweighs. The additional timeline of a few weeks. It takes two included again, providing the most comprehensive submission to the FDA to help enable a timely review.

Clearance.

I can't emphasize enough how seriously we take this matter.

As with any project of this magnitude and complexity there are always obstacles along the way, but we're confident that we have the right resources the right plan and the right team in place.

We will continue to address any issues that may arise in a way to ensures the most comprehensive submission to achieve our ultimate goal of a timely clearance. This dedicated team is executing well and we will keep you updated as we make further progress on key milestones.

Moving onto slide eight and our innovation agenda each of our segments are focused on driving consistent durable growth for the long term.

They are doing this through innovation in areas, where we are strongest where we see disproportionate new growth opportunities and that are aligned with emerging healthcare and technology trends.

During the quarter, we launched four new products and we remain on track to deliver our robust innovation innovation pipeline for the year as shown on this slide.

Taking a closer look in BD life Sciences, let me call out a few milestones in our bio sciences business. This quarter, we launched an upgrade to the BD facsmelody to expand from two way sorting to four way sorting, enabling customers to capture more cell types.

This capability is available as an upgrade to our existing installed base and helps to further strengthen our position in a fast growing entry level softer market.

During the quarter. We also launched software version 1.1 for facts duet. This software enables the automated preparation of antibody reagent cocktails, which is traditionally a manual time consuming and error prone step in clinical flow cytometry workflows.

This release enables our team to continue driving the successful launch of the facts Duexis duet based model as well as extend into the larger leukemia lymphoma and mix lab markets.

In BD medical we continued to see good traction with BD for seal Optima.

Our next Gen close system drug transfer device, we launched late in F. Why 19.

Customers are increasingly choosing optima to protect healthcare workers handling hazardous drugs because of the product safety ease of use and demonstrated performance.

As an device minimizes residual drug loss in vials compared to other similar systems.

Sales of optimized grown sequentially throughout fytwenty, despite the challenging pandemic period and the launch has helped drive high single digit growth across our CS TV platform.

I also want to comment on our farm systems business, which is a great example of the diversity of Bds portfolio.

And how it's a real strength and strategic advantage.

Farm systems continues to perform very well growing high single digits on a year to date basis.

We continue to be positive about the outlook for this business. In addition to favorable market trends, enabling strong growth in the Prefilled syringes platform. We've also being that been investing in advancing our self injection systems to meet the needs of our pharmaceutical customers.

And lastly, and BD interventional, we recently received FDA clearance for a next generation targeted temperature management system.

The stat temperature management system offers a way to noninvasively control temperature within a narrow range for all appropriate patients.

We have now leverage and integrated Bds capabilities around IBM, our integration and data analytics into the stat system, which also incorporates advanced algorithms and capabilities to enhance the patients and the physician experience.

In our peripheral intervention business, which is a global market leader in biopsy and plan to report.

We recently launched our first interventional oncology product caterpillar.

This novel Technology is used for embolization of the artery serving tumors.

While commercializing new products during the pandemic has been challenging the device has been used in more than 50 interventions to date with excellent feedback on its deliverability visibility under.

And geographies and ability to cause rapid and sustained embolization of the artery.

While still early we believe the positive response from customers is a good indicator of the growth opportunity ahead.

Before I pass it over to Chris.

I want to briefly comment on slide nine and the other drivers of our long term growth strategy simplifying and power.

As we discussed last quarter, we've been extremely focused on cash and expense management throughout this pandemic period and this discipline was reflected in our SSG and eight this quarter.

In addition to helping to strengthen our bottom line. These efforts ensured we flow investments for the most significant opportunities.

In addition project recall remains on track.

As you'll recall project Recode as our comprehensive internal simplification initiative.

We expect to deliver approximately $300 million in savings over the next four years.

We're focused on operating the business with discipline, including how we can best reef deploy resources to maximize or impact.

And lastly in power.

In July we released our F. why 19 sustainability report.

Sharing our latest progress against our 2020 sustainability goals and reinforcing that SG remains a fundamental element of our strategy.

We look forward to announcing our 2030 impact goals later this year and as always you can find our quarterly sustainability updates in the appendix of today's presentation.

All in I'm proud of the progress that our team is making.

With a successful launch of their tour and a significant injection device orders from multiple governments. We are clearly delivering on our short term Koby 19 response plan.

We are making the necessary investments and are working as quickly as possible to fully resolved the alaris matters to ensure the completeness of this complex system to the FDA review and clearance.

At the same time, we continue to execute against our strategy for long term value creation.

While we continue to navigate a challenging environment I'm confident the steps, we're taking now we'll put BD and 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 with some comments regarding Bds ongoing response of the coated pandemic.

First I'm very proud of our organization as we have continued to adapt to the rapidly changing environment and evolving needs of our customers and associates.

We have responded with both strength and agility to ensure the continued safety and well being of our BD associates to also best serve our customers in their patients as stay battle the pandemic.

Second we continue to see strong demand for our covered related solutions. This includes diagnostic test on our BD Max platform, where we are continuing to increase capacity to meet demand. We're also actively ramping our efforts around the recently launched rapid antigen test on be BD Veritor point of care system.

And we continue to grow our pipeline of orders for syringes and needles to support future global vaccination campaigns.

Third as we continue to adapt and meet our customer needs. We also remain focused on the execution of our long term strategy, which positions us well for the future.

In addition to the covert related solutions, we launched four additional products in the quarter and we remain on track to execute against our new product pipeline for fiscal year 2020. We're also continuing our work on project Recode as part of our plans to simplify BD, which will help drive future operating margin expansion.

We are 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 third quarter, including a review of the covered impacts.

As Tom discussed our third quarter performance reflects the impact of the global Coven 19 pandemic.

Revenues declined 9.4% on a currency neutral basis. This was driven by approximately $600 million, a net cobot headwinds, which impacted gross in the quarter by approximately 1400 basis points.

As we shared previously we saw a significant impacts to our results in April and May.

We were pleased that the sequential improvement we saw from May to June across our businesses continued into July with Q3, Q3 being the trough in terms of negative impact of covert to our businesses.

I will discuss more regarding the trends across our businesses later in my presentation.

Third quarter operating margins were 20.1%. This reflects the impact of high direct decremental margins on lost revenues due to covert 19, as well as coated related investments.

Adjusted EPS was $2.20, which represents a decline of 28.6% year over year or 25% on a currency neutral basis.

Following our 3 billion dollar equity issuance in May we retired both the 1.9 billion dollar term loan and the $695 million, we had outstanding on the revolver.

Our liquidity position remained strong with $2.9 billion of cash as of June thirtyth.

Prior to the equity offering we plan to pay down approximately $1 billion and debt in fiscal 2000, and we remain on track to do that combined with the revolver pay down in May we will have paid down a combined $1.7 billion by the end of fiscal 20.

Moving forward, we believe it's more meaningful to talk about our leverage on a net basis with leverage being 3.1 times net of cash as of June thirtyth.

Moving to slide 13, before I discuss our revenue performance by segment I'd like to provide some color on the cobot impact on the third quarter.

As we expected continued insurance to cover to related stay at home measures, resulting in a decline in elective procedures and lower hospital admissions and procedure volumes as well as fewer routine lab test and related specimen collection.

In addition, we saw reduced demand from research labs due to closures.

We're also some delays and capital instruments installations as facilities in Steph, we're not easily accessible due to covert.

During our third fiscal quarter. These headwinds resulted in a gross impact of approximately $800 million to revenues.

In terms of recovery, we're pleased to see sequential monthly improvement from May to June across our businesses and in some cases like elective procedures, we saw sequential improvement throughout the quarter.

Gross headwinds in the quarter were partially offset by approximately $200 million and covered related Tailwinds. This was driven by strong demand for covert 19 diagnostic testing and infusion pumps as we anticipated demand for Alaris infusion pumps on the medical necessity was significantly higher in the month of April.

Compared to May and June.

Now turning to slide 14 in the medical segment.

Bidding medical revenues declined 6% than the third quarter, including a net headwind from covert of approximately 600 basis points.

And the medication delivery solutions unit, our performance reflects the impacts of declines in hospital admissions due to covert which resulted in fewer procedures. The majority of RMBS portfolio catheters flush and the like tracked closely to hospital admission trends. If we look at the US as an example admission.

Rates were down most significantly in April we saw sequential improvement over the quarter exiting with admissions at approximately 80% to 85% of pre coveted mission levels.

Lower procedure volumes drove reduced customer demand and resulted in distributors rebalancing inventories in may and June following distributor stocking that took place during March and into April in the us in Europe.

Mds performance also reflects distributor inventory reductions and lower volumes related to the ongoing volume based procurement process in China, which were in line with our expectations similar to the US in Europe, we saw an improvement in the impact related to covenant, China as the quarter as the quarter progressed.

Revenues in the medication management solutions unit reflects strong demand for infusion pumps in the us on the medical necessity and strong growth outside the us, particularly in Europe.

Within the quarter the majority of the US medical necessity demand occurred in April as expected. The strength was partially offset by delayed capital installations of dispensing systems due to covert as anticipated and similar to RMBS portfolio Lower hospital admissions also impacted sales of infusion sets and MMS.

Pharmaceutical systems performance reflects our continued ability to meet high demand for Prefilled Syringes farm systems third quarter revenues also reflect some timing of customer orders within the year.

Year to date farm systems revenues grew a strong 8.1% and we expect continued momentum in the fourth quarter.

Third quarter performance in our diabetes care business reflects distributor in retail or reductions to inventories as expected after inventory increases that occurred towards the end of the second quarter due to customer stocking related to the covert pandemic.

Now turning to slide 15, and the BD Life Sciences segment revenues declined 7.8% of the third quarter included in net headwind from Covance 19 of approximately 1700 basis points.

And diagnostic systems growth was primarily driven by strong demand for covered 19 diagnostic test things on the BD Max platform. This was partially offset by a decline and routine diagnostic testing due to covert.

Results in Preanalytical systems were impacted by fewer specimen collections due to lower routine diagnostic testing.

And then the bio Sciences units performance reflects lower research and clinical lab activity due to covered 19 that led to reduced demand for instruments and reagents.

Now turning to slide 16, and the BD interventional segment.

Revenues decreased 19.2% in the third quarter, including in that headwind from cobot of approximately 3000 basis points.

Revenues in both the peripheral intervention in surgery units were impacted by the deferral of elective procedures due to covert.

Within peripheral intervention in the impact of covered was most notable within oncology across the us Europe and China as women delayed mammography is in an R.S.J.D. and Phd platforms in the us in Europe.

The improvement was seen during the quarter across all platforms revenues in China were flat year over year as with declines in oncology were offset by solid performances and state kidney disease and fee.

Within the surgery unit the impact was primary primarily related to hernia repair and infection prevention in the us and Europe as well as biosurgery in the U.S.

Third quarter performance in urology and critical care reflects the impact of covered 19 on the acute urology portfolio due to lower hospital admissions. We continued to see solid performance in our targeted temperature management and homecare portfolios.

As Tom mentioned, China delivered positive growth in the month of June and all three VDI businesses, we are continuing to watch China's recovery closely.

For your reference we have included a slide in the appendix of today's deck that provides our total company third quarter results by geography.

I'll now turn to slide 17 in our gross profit and operating margins for the third quarter.

Gross profit margin of 51.7% declined 340 basis points on a currency neutral basis. This reflects the impact of decremental margins of approximately 80% on lost revenues due to covert headwinds in the quarter.

This was driven by the mix of impacted revenues as well as a high quality high fixed cost nature of our business, which resulted in unabsorbed manufacturing variances, which were expensed in the quarter.

The cobot impacted gross margin also reflects investments we made in PDP.

Facilities and the like to ensure the health and safety of our associates to covert impact was partially offset by gross margin leverage of approximately 50 basis points, driven by our ongoing synergy and continuous improvement initiatives.

Currency had negative impact of 50 basis points on gross margins in the quarter.

Operating margin of 20.1% declined 480 basis points on a currency neutral basis. This reflects the covert impact to gross margin as well as additional operating expenses and investments related to covert.

This includes increased shipping cost investment in areas, such as I T to support associates working from home as well as new product development, including our BD Veritor a rapid diagnostic test.

The cobot impact to operating margin was partially offset by operating expense leverage of approximately 70 basis points, a reflects our ongoing discipline and initiatives to reduce expenses, particularly within DNA I'll provide more details on that and just a moment.

Higher deferred compensation expense due to strong stock market performance in the quarter also negatively impacted operating margin in the third quarter. As a reminder, deferred compensation expenses recorded within SSG in a and is entirely offset in the PML in the other income net line item.

Currency had a negative impact of 50 basis points on operating margin in the quarter.

As we look forward, we continue to expect covert pressure on gross margins to improve as revenues return. However in the immediate term looking to the fourth quarter. We continue to anticipate decremental margins of approximately 80% related to covert headwinds.

Turning to slide 18, which recaps the third quarter income statement as discussed revenues declined 9.4%. This includes a 10 basis point decline and pricing in the quarter, which was slightly better than anticipated.

Gross margin was 51.7% as I discussed a moment ago.

SSG M&A as a percentage of revenues was 25.4%, including the expenses related to deferred compensation. As a reminder, this is fully offset in other income.

SSG in a expenses were down 6.7% year over year on a currency neutral basis were 8.9%, excluding the impact from deferred compensation.

This decrease reflects our ongoing expense discipline and the proactive measures we took to mitigate the impact of coded.

Some of these items include compensation reductions at the management level and suspension of the company's for one k. match as well as hiring restrictions the decrease in SSG in a also reflects lower TNF expenses as the majority of our associates continue to work virtually.

R&D as a percentage of revenues was 6.3% as we continue to invest in innovation to support our coated response plan and our long term growth strategy. Despite cobot 19 pressures.

Our third quarter tax rate was 5%. This was driven by discrete items that occurred within the quarter that work contemplated in our prior guidance range for the full year. We continue to expect our tax rate will be between 14 at 16% with a high teens rate in the fourth quarter.

Preferred dividends on our BDX B shares that were issued during the quarter were $9 million.

Adjusted earnings per share was $2 in 20 cents as previously discussed. This includes an FX headwind of 11 cents in the quarter, which was more than we anticipated.

As expected the exploration at the Gore royalty impacted adjusted EPS growth by about 580 basis points. As a reminder, we will anniversary the expiration of the Gore royalty this month.

As we look forward, we continue to monitor several macroeconomic factors and the potential impacts to our businesses.

First countries states uneven localities or in various stages of the covered 19 pandemic. As a result, there are still great uncertainty regarding future in June and infection levels recovery rates and resurgence as well as general have healthcare utilization.

Second a continued weak macroeconomic environment will likely key pressure on the overall healthcare system utilization and consumer spending.

Third the pace at which deferred procedures return to normal Conns continues to be one of the biggest variables. This will depend on several factors, including disease condition and acuity covert 19 testing availability reopening and resurgence in countries around the world and state by state within the us and patient.

Willingness to see care, it's difficult to predict how that will all play out over the long term.

And finally, the timing effectiveness and timeline for potential covidien team vaccines around the world and the impact of the vaccine on surveillance testing is all yet to be determined.

Looking forward, while we are encouraged by the sequential improvement we expect to continue to see unfavorable impacts from coven 19 in our surgery in peripheral intervention business due to elective procedures and we cannot anticipate the pace at which those procedures were fully returned to normal.

Diagnostics, we're continuing to monitor monitor covered and non Kobe testing volumes globally as I mentioned earlier, we anticipate continued strong demand for a beady Max diagnostic test for Coven 19.

Also as we expected we have seen very strong demand that R. Rapid point of care antigen test on the <unk> to our platform and we are working to Scaleup manufacturing of both are very to our readers and assays.

And lastly in our Biosciences business the peso recovery will continue to depend on levels of research activity in clinical testing and how quickly they scale up to normal operations and capital spending.

Now moving on to slide 20, before we move on to our guidance for the fourth quarter and fiscal year I'd like to spend a moment highlighting the trends we saw during the third quarter related to the impact of Cove it across our businesses.

We shared this slide with you on our May earnings call, which at that time depicted our results for April the slide has been updated to reflect the third quarter Cove. It impact when comparing the Q3 slide to the month of April you'll note several things and I'd like to speak to two of those.

First the quota shows an improvement versus the month of April and as a recovery continues to progress the other trend worth noting as in our Mds business, we saw a larger cove it impact and May versus April.

We saw improvement sequentially in June from the May low point in total the coven impact to our Mds business was approximately 200 million.

On average and the third quarter businesses, where impacted by approximately 25% to 40% versus or pre covid expectations.

We exited the quarter with the month of June approximately 20% to 25% below pre covered expectations or set another way June had recovered to 75% to 80% of freak of its expectations.

We were encouraged to see that exiting the third quarter and into July covid headwinds started to abate and tailwind started to improve.

Note that we saw a sequential improvement in recovery rates in July versus June.

Recovery rates across elective procedures hospital admissions and routine testing range from 80% to 85% versus or pre covid expectations and the month of July.

We're also seeing strong early demand for our very to a rapid point of care antigen testing and continued demand for Covid 19 test on Beady Max.

As expected there was a small amounts of demand for infusion pumps on the medical necessity.

As well as continued delays and large capital installations.

Turning to slide 22, despite the continued variability and uncertainty due to the pandemic, we're providing a view into our revenue in EPS expectations for the remainder of the year based on what we are seeing today.

For the fourth quarter, we expect revenues to be down low single digits, and adjusted EPS to be between $2 and 40 and $2 60.

As the results, we expect a revenue decline of a negative 2% to a negative one 5% and EPS of $9 80 to $10 for the full fiscal year 2020.

As a reminder, our fourth quarter of fiscal year, 2019 was a record quarter with over $730 million in sales in MMS, creating a very tough comparison.

All in we feel good about the remainder of the year based on the latest view of our business and assessment of macroeconomic environment.

Before we open the call for questions I'd like to summarize the key messages from our presentation. Today first we continue to be uniquely position. So responsive cove at 19 by leveraging our core capabilities across research diagnosis and patient care.

Despite a challenging and dynamic environment or third quarter results reflect encouraging trends across our businesses in June.

We have established a solid guidance range for the fourth quarter and the full fiscal year as we have improved near term visibility into our expected results based on what we know today covid covered related headwinds appear to be abating, and <unk> are improving driven by high demand for <unk>.

And lastly.

Main focus on executing on our long term strategy and continue to deliver value to customers their patients and our shareholders around the world.

Thanks, and I'd like to know open the call up for Q&A.

The floor is now open for questions. At this time. If you have a question are comment. Please press star one on your catch telephone if at any point. Your question is answered.

Have yourself from key by pressing the pound key in order to allow for broad participation. Please limit. Your question is two one and one follow up we ask that while you pose your question. Please pick up your handset to provide optimal sound quality.

Our first question comes from the line of Bryan Weinstein with William Blair.

Hey, guys morning, right. Thanks for taking good morning, thanks for taking the questions.

I'll start out on antigen.

Can you give us an idea.

I'll get a bit more about the demand and where it's coming from me when we saw the HHS deal and we saw the news from the Governor's consortium I guess that was on Monday, or Tuesday, but beyond that can you talk more about where you're seeing the demand start to come from and your thoughts on the size of what that market can be considering between you.

And the other player there there's going to be about 30 million test per month and the market by next spring.

Hey, Brian This is Tom.

Good morning, So as we mentioned earlier on the call certainly.

Demand is expected as I think it's been said by others.

Exceed supply in the foreseeable future at least.

And we certainly see that ourself demand as I mentioned before is coming from any of our traditional customers healthcare provider's themselves, we've had quite strong demand there as well as non traditional.

Accounts nursing homes for us would've been a non traditional account.

You've seen announcements come out recently from state looking to to acquire rapid antigen tests and.

Using in other settings, I think the value of near realtime 15 minutes testing.

Is gotten increasing traction I'd say, we really seen the awareness of that increase over the last.

Couple of weeks, either even more so than that probably also coincides with increases in.

Right across the country. So.

Again, very very strong demand as I mentioned, both on the instrument side, which would be shipped already in the first month more than we normally with chip in a year.

And.

And our supply plans are on track to our ramp plans that we've shared before.

But the demand is broad.

Cross both traditional and non traditional segments.

Great.

Thanks for that and then.

As we think about a little bit longer term here and start thinking about 2021 based on what you're seeing can you talk about some things that we should be thinking about when evaluating how things could play out, especially considering the extended timeline non hilarious. The recovery rates that you just mentioned currently being at about 80% to 85% of Frito.

Expectations in July and.

How cover 19 testing can play out can you kind of give us some goalpost to be thinking about.

Those things and other things as we think about trying to factor in 2021 here.

Sure Brian This is Chris and I'll I'll start with that and and obviously normally on this call we get questions about the following year.

At this time of year and.

Hesitate to give any.

Indications this is probably even and tougher year to do that.

We're giving guidance for the next two months because we have a sense of the near term visibility, but when you think about where things end up with with hospital utilization and and elective procedures of where does the top off that that's a tough wanted call clearly we're seeing.

Good trend, we talked about that and are prepared remarks.

June was better than made July was better than June.

So that's a good indication.

But where that tops out at U C. A hospital utilization in that 80% to 85% range does it stay there does it get back to 100% those are the calls at Jeff to make so so that's a that's a high variable.

And will be monitoring that obviously as we approach November call.

When you think about margins.

Clearly the detrimental headwinds from the.

From Cove, it impact are strong, 80% and so we're going to continue to see that.

With the into the fourth quarter.

And then we will have some lapping next year, but as that comes down.

Headwind will lessons certainly over time.

And then on the more traditional stuff that we look at FX right now looks like a pushed a slight tailwind.

Resins looks like it's a slight tailwind.

We would expect to see some headwind then 21.

As we continue some of the Covid investments from this year and the full year impact of that and <unk>. We are seeing some favorability from lower TNA and we would expect that to to carry over into the beginning of next year and then we will see with what kind of recovery.

People, maybe coming back from virtual work that might increase and have a little bit of pressure. Those some of the things that you can start to think about but it's but it's.

Tough one to call. This early.

Thanks for the question Bryan.

Your next question comes on the line of David Louis with Morgan Stanley.

Okay.

Good morning, Thanks for taking the questions. So I guess, Chris I Wonder.

If you could help us better understand some of the key drivers into the fourth quarter and then we obviously have very tour intervention on recovery and some comparable issues to consider but when did you just customer to comment on some of the headwinds and tailwind such as stocking dynamics things that are harder for us to model and we have the net covid impact and the third quarter $600 million what is it impact look like in the.

And the fourth quarter, and then I had a quick follow up.

Sure So as we said.

We are seeing those headwinds abate and you can see that trend through June and July. So we would expect that 600 to come down significantly, but there's still will be a headwind.

So we have that in those headwinds do go down at the the 80% level. So I think.

With giving you a lot of transparency into that and so.

That should help with the model's the biggest thing that I would 0.2 in the fourth quarter.

That I think.

People have to remember is the tough compare that we have.

Particularly in MMS and MMS at a record quarter at $738 million as I mentioned in the.

Prepared remarks last year, and that's that's a real tough grow over and.

So with that.

The decremental margins being <unk>.

80% on the cover to impact that's significant I think the other is that there are covered operational investments that we have those will continue and dragons quarter and the other thing to remember about the fourth quarter is.

Generally if you think about.

The Alero Schipol, that's that's certainly impacting us again.

Demand on the medical necessity, we're not expecting that to be what it was in the third quarter.

So those are the kinds of things that we.

Look at in the fourth quarter to get to the guidance that we gave.

Okay, and then Tom just a quick question on <unk>.

Following and sort of six months push versus the prior September which is actually kind of consistent with our our expectation, but with factor testing.

Kind of in the bag here what are the biggest outstanding deliverable and the submission and timing aside I think investors are most focused on what's your level of confidence you can return safe pump to market. Thanks, so much.

Okay. Thanks for the question.

So we as I mentioned before we have completed quite a bit of of testing and other work required for the submission and we have a much better visibility submission timing and we did and only gave the update last and May I think from a human factor testing, we still have.

Alright, the other part of it we did the and knit we've completed 100% of our formative testing, which is the initial phase.

12 different human factor test is I described and we are pleased with the data an outcome now we've got it progressed to that next stage, which is a broader set of testing. So that's.

Still in front of us.

Little bit of some of the other testing that we have completed we've completed a retrospective risk assessment on the changes that it every changed it's been made to the layer system. Since the initial 500 10-K that works almost complete we see that is retiring significant risk to the submission.

We've completed software verification based on the original scope closing outmost outstanding anomalies of course that software is not going to be released until all of our integrated testing is complete.

That's a tremendous amount of work in a testament to the team being actually working from home I think the other area is <unk> reliability testing. So we're pleased with our progress they're good progress made on both fronts, but we were at we've begun testing on selected components in certain types of tests.

And we await feedback from the FDA on the overall set a protocol and so it at this point that testing is it's not necessarily that works cream on the critical path for the overall project, but still more testing that's in front of us just to get a little bit more color of the testing that that remains so.

Thanks for the question, Okay, and Tom your confidence you can return to save pumped to market here timing aside and regardless of timing.

We don't we remained very confident the safety of the <unk> product and as I said, we've been working very collaborative Lee with the FDA on advancing this submission so.

We will feel good about that progress that we're making.

Okay. Thanks, so much.

Your next question comes from the line of Kristen Stewart with Barclays.

Hi, Thanks for taking my question Christmas I was wondering how we should think about gross margins going forward. This is the balance.

Deeper mental margins as you've talked about just with.

And their tour assay coming.

ZIP talked about the different.

It has to be coming online and then thinking about kind of a pet can take safety talked about with that back and resin and everything else. Thanks I appreciate you've had.

A lot of moving parts here, but it seems that we should have continued pressure, but obviously I'm moving parts, particularly as we think about modeling.

Next quarter and I'm thinking about trying to anyone.

Sure so.

Thanks for the question Kristin, we're looking at Q4 margins in the 54% to 55% kind of range.

And when you when you're thinking beyond that also remember that there's continued higher shipping cost as well.

We've been able to continue to drive leverage in the charts that we gave on the third quarter, we broke it out where you could actually see the impact from the decremental margins.

From.

<unk>. So we will still have some of that.

As we as we've described earlier.

We will have some.

So that impact will lessen as the impact of Covid lessons in the fourth quarter.

And that's why we get from that 50 wanted to kind of range up to the mid 50 fours.

And in the mix as well as the <unk> investments that we have.

As well as our ability to continue to drive underlying leverage through continuous improvement. So that gets you kind of to that 54% to 55% range. One other thing that I neglected to mentioned earlier in the question regarding Q4 is also you saw the lumpiness of our tax rate.

Those discrete items were anticipated for the year, but a lot of them fell into the.

The third quarter, so as your modeling the fourth quarter.

You would expect to see a high team cute for tax rate.

And then also keep in mind the preferred shares in the dividend.

And that's what lead you to that 240 to 260 kind of EPS range.

Okay, and then that 50 455 does that seem like a reasonable number to think about jumping off point as we think about 2021 as well.

Obviously recognizing there.

A lot going on with Colby and whatnot, but.

Reasonable to look forward. It certainly is a lot going on but yesterday I think that's a reasonable jumping off point.

So that's why we're trying to give you on the on that chart, we're trying to break down the.

The various contributors so as as the the Cove it impact debates.

You can.

That's a big driver at 80%. So is that goes away it starts coming.

It starts improving again and again, we feel really good about the fact that we're able to on an underlying basis continued to drive improvements through continuous improvements and synergies and as we mentioned re code is a project that we will continue and think about that as a continuation of this.

<unk> of the combinations of the companies that with that over the number of years.

Okay. Thank you very much.

Thank you. Thanks Christian Your next question comes from the line of Rick Wise with Stifel.

Good morning, Good morning, Hi, How're you doing.

Chris.

Okay.

You're going to be surprised.

I'd like to talk about fiscal 22.

[laughter], that's a first forward Lucky that's right.

Gotcha.

Alright.

Looking for guidance more just reflect reflect on thing it seems reasonable to think that physical 22 might be year when that can get.

More back to normal economy, hopefully recovering.

Returning maybe a vaccine all sorts of things testing in better shape.

My question really revolves around that with tons of growth and how you Tom and question of thinking about.

How would you have about.

Maybe a more normal Europe.

Does that if we assume that physical 22 in the morning on what you're you return for fiscal 19, or 18 kind of mid single-digit topline bow double digit bottom line or.

Do you think for things like project code all the cost of about.

The new products expanded testing.

That actually.

Your normalized.

I think a little longer term about the company is actually a little better you're a little more optimistic.

I think.

Here's your fault.

Sure I'll take a started that and then I'm sure it tumbled chime in with a view.

But you're absolutely right 21 is going to be a mixed bag and.

That compares very different so as you think about 22.

As we think about it we're still very much focused on the five plus on the top.

Plus on the bottom and.

All of what you talked about and some of the gross drivers go towards getting to that five plus on a sustainable basis. So we feel really good about the underlying business. The sustainability of that mid single digits kind of five plus kind of growth on the top and things like Rico to our design.

And to to get us that kind of multiple to get you to the 10% on the bottom.

On a sustainable basis, so we feel good about it getting back to that kind of level.

And we feel good about the fact that.

Where the businesses on an underlying basis performing extremely well.

In the face of of.

The Cove it impact that we've had and that that is lessening as we said, we see those headwinds abating, though obviously that could change with the change in the course of the pandemic, we're just calling that based on what we see today.

And so that does seem to be abating somewhat and you've seen some of the <unk>.

That have been.

Increasing but again how much of that continues into 22.

Play out over time.

Yeah, I think that Chris that was very well said I think Rick maybe the only thing I could add is.

Our we are running the company obviously, we're managing it through Covid, but we are very much executing not only are short term opportunities areas like their tour and <unk>.

Max and helping on the vaccination campaign around the world that very much executing or long term strategy and so yeah. As we think about for example are new product development pipeline and how we've been executing it I've shared in the past we've been really focused on continuing to improve our on time delivery of products are on time milestones.

This year, despite covid, we're going to improve we're very much on track to improve our performance year on year again this year, even better than we had last year really proud of how the teams executing that.

Just finished our strategic portfolio review and and we went through all the segments that we're making those tough tradeoffs in terms of which programs give us the best returns and growth profiles going forward and allocating and making sure those investments are continuing or adding in new opportunities that we see and we're executing those.

Pipelines on the re code as I mentioned.

<unk> allocated resources to that this year, they're executing there on track and even in areas like our plan I continue to be astounded in the middle of managing.

A large manufacturing scale you can imagine the complexity that cove. It adds in we watch our supplier base.

Huge team that just watching suppliers in any economic challenges they have and how do we can start preparing for backup suppliers to make sure. There's no interruptions in our supply chain and a lot of that is incremental going on in cove, it and even during that.

Our operations team is very focused on continuing to deliver the routine Ci savings and again doing very well on that this year.

Incremental to the work that they're doing on Cove it in so.

Hopefully they take away from that is is that we are managing and navigating covid with a high level of discipline, while at the same time, maintaining very much so our execution disciplined on a long term strategy.

The only thing I would add from a slightly different perspective to is.

Given the level of uncertainty.

What you can count on us as a a high level of transparency and I think.

I Hope you would agree that what we just gave on the third quarter and into July.

Very transparent with been very clear as to what we expect in the fourth quarter from very tour for example.

Go to great pains to break that out so that as we navigate through that.

It'll be very clear what's coming from from.

<unk> and what's coming from the base business.

Yeah.

<unk>.

Issue.

Follow up if I could.

Great you highlight of it.

Three one.

Net leverage.

Give me 30.

Last quarter U.

Post.

Leverage reduction timing was pushed out maybe just help us understand.

What's your maybe thinking there where you're heading in what's that'll mean for capital allocation. Thanks, a bunch.

Sure. So nothing's really changed from a standpoint of our intent to two delever the company I think with the pandemic.

As we've discussed right now we're focused on cash.

Continuing to pay down debt.

But at the same time.

Net leverage the gross leverage has been pushed off a little bit, but we will continue to to work that down over time.

We feel good about the fact that the net leverage is where it's at so that really hasn't changed.

See we feel really well positioned.

And this time of uncertainty from a cash in liquidity standpoint, and as we've talked about that that gives us the firepower to invest in.

And.

And new products invest in.

Things like very to our protection for example, and so it gives us the firepower to do that.

Will continue to fuel.

Mmk tucked in acquisitions et cetera, So we feel a really good about balance sheet.

Now as we come out.

As you think about 20 to for example.

Our overall capital allocation really hasn't changed the good news is we do throw off a lot of cash and so we feel good about our our dividend.

<unk> had a long history pretty long history of increasing the dividend we've continued that.

Through everything.

Thank you can expect that from us going forward as well.

I look forward to the day when when Pandemics in the sort of behind us and that strong cash generation. They just to a point, where we can start buying back shares again.

And we will come to that.

And get through this period, but the overall capital allocation really hasn't changed.

Thank you again.

Your next question comes from the line of Ravi Marcus with J P. Morgan.

Good morning, Robert Great. Thanks, Good morning.

We can I'll take your supply territory antigen and Max out against the ISP and we can come up with really big numbers over the next 12 plus months.

How should how do you want to frame the revenue potential fourth quarter, even into next year. As you are sitting here I know you haven't given guidance for next year, but.

What's what's your your latest space case thinking on antigen testing for Cove. It over the next 12 months or so.

So I'll start with just to be very clear on the fourth quarter, we have talked about $10 million test.

And that is what is in our guidance as the 10 million tests. So.

<unk> said that the demand for that is very strong <unk>.

We feel good about our ability to produce that.

At that level, but that's what's in the guidance for the fourth quarter and longer term alternative.

And we shared as we think about the fourth quarter, we assume the $10 million test July through September at about $20 Aspie per protest, which is what we shared in the.

Historically as you think about 21 <unk>.

<unk>, it's going to depend upon.

The number one factor will be the.

The intensity of the Covid pandemic, and it's duration timing of vaccine et cetera, and so I think the most and that we can focus on is is that we will the the 8 million test per per month by the end of September and then they will be ramping up production of more than right at.

12 million tests per month at the end of February those are the numbers that percent utilization of those to be determined as things evolve.

That we don't want we don't think that's appropriate for us to comment on that at this point in time.

Okay, Thanks, and maybe it's a quick follow up.

Entered that briefly before and capital allocation, but you raise some capital during the quarter harder that.

Central firepower to go on the authentic for emanation at that come up.

What's your latest view on where M&A would be appropriate in the portfolio what user current environment like do you think there are willing sellers out there right now.

Okay. Thanks, Roddy, So I would just say as we've shared in the past we always are evaluating and has historically, it's tucking M&A. It's been a long part of Bd's history, and how we've grown may need the businesses that exist and the company from bvb to Vacutainer too of course.

Much of the Bard portfolio came in through tuck in acquisitions and licensing.

Inorganically and we continue to look at opportunities across all three of the segments.

We're very focused on deals that we would look at we're not as we made it very very clear we have zero interest in any any large transformational deals with it won't be doing those were looking at tuck in which is traditionally.

What <unk> done.

Going back in time, and what's been critical to bar.

Prioritize very much and I'm looking at accretive deals we're not looking at.

We have zero interest in any significant dilution at all.

Those are some of the key criteria I'd say, we're looking at specific areas as I've shared before.

We're not looking at area as far aside from our existing businesses, we're looking to leverage where we have strengths and competitive advantage and really rounding out those portfolios as we've done again in each of the three segments over time.

And Chris anything yeah, nothing add other than to emphasize the.

The metrics there are strategic fit in our in our core businesses.

And non dilutive.

Accretive deals.

Looking for a lot of dilution and.

Returns rois see greater than the cost of capital and year for those are the kind of standard metrics we looked at.

First and foremost a strategic fit.

Thanks Robert.

Your next question is from VJ Kumar with Evercore ISI.

Good morning, J J.

Tom morning craft, Thanks for taking my question.

One that just maybe.

Cleanup question on Q for Chris.

The tailwind with you guys <unk> 200 million, obviously, the pump revenues go away for Q for <unk>.

<unk> also bequeathing four Q4.

Thank you made a comment on.

The preferred dividends and share come perhaps could you just remind the speed on.

What we should be expecting for sure counting preferred dividends and cheerful.

So let me let me take the first part of that so just to make it clear I mean.

<unk> said that.

600, and the last quarter, where modeling in the area of 200.

Net impact in Q4, and we do expect.

The <unk> to go up with Feretory.

Tom gave the number 10 times 20.

So that's $200 million, we expect I think we noted in the charts, we expect beady Max to be another $100 million as well.

<unk> out there.

And you would expect the.

The.

<unk>.

Medical necessity to come down from from third quoted a fourth quarter. So when you're not all of that out and with the abatement of the the headwinds that we're seeing an elective procedures hospital utilization going up a little bit still not back to normal but abating.

That's kind of where are thinking is.

And I missed the last part of your your question, but I think it was Q for sure count and you could use in your models about $293 million.

So that's extremely helpful for us and just dump on.

Just the 21.

We can do them.

I'd like to reset on the regulatory antigen test.

But more up stepping outside of numbers.

Deals <unk> stepping up on capacity.

For these antigen test yeah.

It feels like you guys.

A little bit perhaps more incremented bullish on the prospects for any drink test.

Is that the right way to look at it it's been syringes, obviously you saw the orders with.

Is that a a number of sort of.

With the speed could move it for 21. Thank you.

Yeah on an agent test I think what's fair to say is is that we've seen as I mentioned very strong demand right after that and we're only.

Literally at a month today, it's the anniversary and we have very strong extremely strong demand on on that product.

Both on the readers.

Managing test themselves I think.

It's very very clear is there is a high need.

To know.

And this person have cultivated right now and I don't want to wait a day and I want to wait two days three days four days depending on.

How how the system how effective the testing system is if you're sending samples out.

Get up to those durations and.

There's a whole need where that just doesn't work that type of testing turnaround time and and people.

Hi value on this.

Getting an answer within.

15 minutes.

So that's in that ease of use there is unbeatable on the antigen testing approach. So we're very focused on.

And engaging a wide range of customers on that.

As I mentioned with what we're deploying not just the resources of life Sciences, but Ah beady against that opportunity on the scale up and making sure we have the right infrastructure to support the broader basic customers.

Even logistically shipping this volume out of product. So again, we're applying the full capabilities.

The company behind this.

So I think that's.

Their approach to how that evolves again from a disease prevalence right and consumption through 21 that no one knows the answer to that but as long as it exists I would expect there's going to behind it.

Four engine tests.

And saw miscellaneous dot com.

Yeah, and syringes as you said you heard US we gave a number on this call that was incremental to the number we gave last time.

Alright, so we have continued orders.

Coming in not only in in the U S. But in in other parts of the World. We think that's still relatively.

No changed from what we had shared historically alright that we have capacity to add 1 billion units over the next we had always shared 12 to 18 months and we still see that that opportunity side I did call out.

The devices that we're selling our mix of safety devices in conventional devices safety devices have a bit higher ISP than conventional devices. So we'll see how that mix evolves over time, but.

Overall right in line, we're still on track to be able to produce that billion units over the next 12 to 18 months and you can see right at.

Over $450 million.

270 million units.

Those orders are starting to to come in quite steadily.

I think I understand.

Okay.

Thanks for Ya.

Your next question comes from the line of ball, Bob Hawkins with Bank of America.

Oh, great <unk>.

Good morning morning, So thanks, I just have two questions.

Mm upfront.

Given the.

Kind of focus on testing I was wondering if you could just just to be clear.

It was the total covid testing revenue in Q3, and what is total Cove. It testing revenue assumed and and the Q4 guide and then the other thing I'd love to comment on is that the one.

Kind of incoming emails I've gotten on on this report more than anything else is just that Q4 earnings are way below where the street was guiding and it's about an 80 year over year decline, 25% year over year to clients. So if you wouldn't mind trying to just those sort of break that down for those Amy.

And that you've mentioned a bunch of things on the call today, but I was wondering if you could just summarize the factors.

That are leading to that kind of 80% year over year declined.

Kind of 50 cents below are so with the street was modeling. Thank you.

Sure. So let me start on the first part of your question was.

Covered related testing.

That we saw and Q3.

That was $100 million on Max So think about $100 million on Macs and 100 billion on.

On the <unk>.

<unk> medical necessity or thereabouts. So that was a 200 of <unk> that we were talking give or take.

Undo for.

We've talked I think you can think about that 100 going up to 300, because the Max is running at full capacity and so we expect that to be about $100 million in Q4 and.

And then you add in the very tour of 10 million times 20, So that's $200 million get get you too.

The 300 kind of thing so.

Moving onto the second part of your questions I think.

Again, the the revenue decline was still seeing.

Low single digits kind of a decline in the fourth quarter.

I think the the Cove it impact, particularly on the Mds business in Q3 was something that.

Folks had been missing.

Very much driven by by hospital utilization and you saw what that was so we would expect that to continue because although utilization is getting better.

Still under pressure and so.

We do expect that revenue decline of low single digits, then you drop that.

At a detrimental GP I think of the last call, we with signaling kind of in the 75% range, it's really coming in closer to the 80% range and again, that's a testament to the fact that these are very high margin.

Products that are that or.

Being impacted by Covid and then an addition.

Doing the right things in terms of not building inventory during this period of time.

And that's a very important point because as you are not building inventory you've got absorption of of variances.

Come in and hit the quarter and we're taking that charged this quarter, we're not <unk>.

Capitalizing in inventory and carrying it forward.

So that is a big part of what that you up to the 80%, obviously, we're making covid investments as well and those investments range from what you would anticipate in terms of of.

Cleaning and those kinds of things PPE those will continue but in addition that would include all the work with doing to scale.

Very store in the Max and so those are some investments, we're making I think the other thing that the would be new news compared to your models as the tax rate.

And as we think about Q3 earnings the 220, we acknowledge the fact that that's.

Probably 20 cents of of <unk>.

<unk> benefit there, but in addition, compared to what we were expecting and what I think the street was expecting the drag from FX was.

About twice, what we would've thought at 11.

So I think when you do that what kind of in line with.

The street for the third quarter, then as you think about the fourth quarter, though.

Range for the tax rate for the year is in changing so that just assumes.

A very high teens tax rate and the fourth quarter. So I think when you plug that in and then you do the calculation for the preferred shares all of that trying to get you into the range where we're at.

Great. Thanks for the detail hopefully that helped yep.

Thanks, a lot.

Thank you.

Your next question comes from the line of Larry D. Wilson.

Wells Fargo.

Hey, guys morning, Laura and thanks for taking the question mourning mourning Chris.

One on testing or just actually 221 testing I'll ask them both upfront.

People, who said on this call we can do the math on the potential sales.

I guess my question is we also know the margin is relatively high I don't know if you would blast kind of a 75%.

Incremental operating margin or not but that's kind of what people believe so to the EPS contribution could be quite high if the demand as strong. So I guess my question is.

Will you, let this dropped to the bottom line, how should we think about that versus reinvesting and then just.

I know you don't know how sustainable the testing is with long term once we have cove. It under control is there a tour for Covid similar to kind of flu, which is about $100 million per year, where is there any reason why are these could be a greater long term opportunity. Thanks for taking the questions.

Yeah, Let me start with the last question then.

Chris can can discuss that in the margins, which by the way we have shared.

Sure any specific margins are various where but we have said that they're higher than the company average I think it's a comment that we shared in the past and probably what we're comfortable to continue this year, which is to your point so on.

The long term opportunity for Covid testing I think again very difficult to predicted at this point in time.

I think there's still a lot of uncertainties even around the vaccine.

Are you is it going to be a permanent vaccine is it going to be.

A vaccine that you have to get every year more like the flu.

Those things will.

If it's something like polio that gets eradicated because of the vaccine.

That you get a.

Couple of shots of it upfront and then it's longer term.

Lead to a very different outcome and if it's something that you have to get annually and if you go that annual vaccination. Then now you are susceptible to get coveted. These things I think are still being understood and will evolve what I think we can say is is that.

Replacing a lot of area to our instruments right now and I shared shared that upfront my commentary around demand just for the instruments in the first quarter, we certainly see point of care diagnostics as an area of focus of investment for the company and we have I think an example, clear clear indicator that as we acquired a point of care molecular company earlier this year pre.

Pre cold it coming up because we saw the attractiveness of the space and we're continuing to invest in that area alright, very heavily I think the broader footprint a very tours out in the marketplace could you say regardless of how cold it evolves will that create a bigger opportunity for very tour of consumption of.

How long Cove, it will last as an unknown, but will they be using are there will there be more people out available to use flew strap other tests on their tour and will there be a societal.

Continued shift to want to have testing results faster than they were before cove, it happened and I think.

Are all trends that I do think are going to be more permanent after cove. It.

Carries an area that I would say we are increasingly bullish an overall as a market.

People understand now of course people a lotta people understand lab testing a lot more now than they did pre clothing, because they have a lot more interest and when you understanding to when you have to wait days to get a result, when you really need to know the answer I think people also understand the value of that point of care technology and so what we do see that as a long term trend and it's in <unk>.

Are you a continued investment and we see some.

Near term opportunities that could continue to prevail for their tour.

Do the large replacement base and then of course, we are continuing to invest in new technologies in that space as well.

And back to the first part of your question I think it is fair to say and we have pets.

The margins here would be higher than the company margins I think some of the numbers you're quoting seem a little rich to me.

Particularly.

And the short term.

Fourth quarter I don't think you can expect us to ramp production and immediately yet to those kind of margins.

The fourth quarter, So I think.

Muddles that I've seen just assumed we can get to those kind of margins. The one that's not practical.

Clearly building over time to to margins at a higher than the company average.

Thanks, guys.

Thanks.

Your next question comes from the line or admit Hassan with Goldman Sachs.

Hi, Thank you want to experiment.

Let me just a couple quick ones nowhere running late on time here just I wanted to ask the first one on just routine testing and get a sense from you if.

Covered.

There is.

To what you cited elsewhere, even if we think about getting into not too diagnostic, but even ti oncology and things like memo, whether you have any insight to the pace of that recovery all seems very relevant to downstream procedure revenue yeah.

Yeah, and we let me start with that this is Tom.

And.

Actually we do have Simon on the phone is as well we have all of our segment President's Simon I'll ask you to comment on the oncology piece in a moment I know that was one that we did see a little bit more impact in Colby and some of the other procedure areas.

As mammography would have been.

But just before we get too.

To that when it comes to actually it more laboratory based testing IBD testing.

That is one that we recognize that.

Non cold a diagnostic testing and specimen collection improved from about 75% in June two about 80% in July and one of the indicators that we look at very closely or the national referenced lab volumes and I think it's a fair to say that.

But the.

Information that they share in terms of overall underlying testing demand correlate to very well with demand signals that we see and our Vacutainer business, which is of course, a large business for us.

On the diagnostic testing side.

Obviously are <unk> business gets a little bit more fluctuated because it is in in Texas disease diagnostic testing and it's gotten both Max and now going forward Feretory and if you'll see more fluctuations there, but as we think about our.

<unk> business.

Very much we see the impact there correlated with what you would see in national reference labs and commentary that they have around increase.

Improvements from June July Great match, with what we've seen as as well Simon and maybe some further comments on the procedure side.

Yeah. So good morning.

Certainly with.

We did see we did see an impact.

Over the over the quarter, but month by month, we so we saw sequentially growth.

So it was it was slightly heavier impacted than than some other parts of the of the PLO business, but.

We also completed.

Survey.

Yeah actually survey 815.

Our intervention customers.

Of which 190 were involved in.

<unk> most of our business with you know an oncology as other than plans reports of biopsy and we've recently got into.

And to intervention oncology.

What they are what they're saying.

Interesting information that the patients that they've been treating.

Good mix between reschedule cases.

And a new cases.

<unk> customers are also saying that the office volume beginning to rebound on behalf of positive outlook.

Office volumes looked like over the next 62090 days so while it was while it was impacted the funnel with certainty impacted earlier on during cold with the outlook outlook remains reasonable reasonably positive.

Colleges possible.

That's great.

For you on the vaccination, if I can just understanding dynamics, a little bit better obviously, there's just a whole bunch of vaccine company now going at risk at the same time, they're building inventory ahead of data two doses for vaccine genuinely.

That could suggest demand for actual syringes that could be several multiples greater than population size.

Obviously made the comments today again about $1 billion, an incremental synergies syringes over the next 12 to 18 months in Nevada investment, taking 12 months and you obviously the biggest syringe player in the world.

So the question is are we heading for supply challenges with regard to syringes ejections injection devices for Colgate vaccination.

Yeah, I can't answer that.

We don't know at this point, we are we got visibility to supply. The orders that we received is fair way to say it right. We don't do as I mentioned that billion units, we've gotten 470 million.

Units worth of of demand on that and when I said, the 1 billion unit.

Mean that is truly incremental to just our ongoing demand remaining the same.

And so that is another factor of course, we make way more than 1 billion unit, we make billions of units a year of syringes.

On a global basis, and we're assuming all that base gets consumed normally that includes a strong flu vaccination campaign.

That we would have syringes sufficient to provide that and then this is incremental to that and so that people will have to make choices.

<unk> I don't know if that's true that all those.

The base arrange consumption would remain normal that people wouldn't reallocate the syringes for other purposes in that but there is a large base of other syringes that will provide into the market as well. So what we can say right. Now is the current visibility of demand it's coming in from governments around the world is still within our supply capabilities.

Thanks have a good question is that something we're obviously watching closely as well.

Your next question is from the line of Larry Cush with Raymond James.

Oh, hi, good morning, everyone.

Tom I wanted to just go back to <unk> and.

Kind of thing through the timeline, a little bit relative to the update that you provided today.

I think.

Sort of recount how this.

Came about when you when the issues first came up.

You were talking about an early fourth quarter FDA filing and then.

Of course, given the pandemic and challenges with human factor testing that pushed out again.

So I'm just trying to square now that we think about the revised timing what sort of changed do you need to do.

More testing then you initially.

Thought as you got into deeper discussions with with the FDA is there something that you're doing incremental that you believe put you in a better position you obviously talked about the entitled C O two.

And does the.

Observations at the manufacturing facility also sort of pointing to the timeline or if you think about it.

Okay. Good good question, Larry So first off we'd always shared that the original assumption was end of Q for right and obviously with that was pre covid pandemic and we indicated that that would have impacts on our ability to do the testing.

And it has and we recognize that as I shared we've completed quite a bit of the testing.

And we had shared that versus when we have given an update and may that we felt that we would have quite a bit of that testing done by now and that we'd have much better visibility in our submission timeline and that is the case and it's based upon which we've given the update today.

As I.

Answer I think it was David's question earlier on this topic I'd already walked through the testing that we've done on human factor testing as well as.

Some of the other testing that's been completed.

In terms of incremental things.

We have continued to get half dialogue with the FDA and I understand there feedback.

So that's been part of the process and that's been a really strong part of the process our collaboration with the FTA and it's something that that we think is very important to get aligned on the testing so that when again, we submit the actual 500 10-K that we're in a position to make it is.

As comprehensive as possible. So at the <unk> is put in a position to be able to.

To give us is timely of an approval hopefully as is as as possible that we do our best job and enabling that.

One thing that is added in.

Others, but.

Certainly one thing that I mentioned is the <unk> module, which was in development before.

But we did make the decision that based on feedback from the FDA.

And where the technology ultimately came out in development that.

As we were working in parallel with our product development roadmap. We made a decision to include that update.

Five 10-K module as I mentioned, it monitors patients on ventilators, while medications being administered.

Given the importance of having this.

Generation module in we felt that was the best decision and the FTA agreed to include that in the filing just on the 483 itself.

That you brought up.

I would say.

There is is that.

Yes.

To 40, resolving the 483 items.

The fact incase submission is not contingent upon that specifically.

So maybe I can just make a couple of comments on that is is that right. We have been separately from the <unk> K submission work, we've been continuing our media remediation efforts associated with that form for 83 that we mentioned on our last call and in addition to providing a comprehensive response to the FCA. We've already began taking actions that <unk>.

<unk> initiating a voluntary field action at the end of June and another earlier this week that we announced and so we're going to continue to take action, including initiating program changes process improvements in field actions when necessary in a way that provides the best in class support to our customers and minimize his directions disruptions to patient care.

Which is more important than ever given the coven 19 pandemic. So.

As I said before we continue to stand behind the safety of the product, which continues to provide significant clinical benefits to patients healthcare provider's and and as I said before it'd be clear the timing of our five 10-K filing is not dependent on resolving every item and the 483.

We are taking all appropriate actions to ensure that comprehensive five tnk's admission as we also work in parallel to resolve the 483 observations. Okay terrific. Thank you very much that's all I had.

Yeah.

Your next question is from the line of a mat Taylor with UBS.

Good morning, Matt Matt.

Good morning, guys. Thanks for taking the question.

I wanted to ask one about the installation progress in time, when you called out the fact that hospitals or not.

Lowering a lot of large capital installations, and there's been some tempering it'd be appetite there and I'm just wondering what the funnel looks like are you seeing any cancellations and when do you think that'll pick up relative to the improvement utilization.

Sure so clearly.

Where we saw that the most was access the facilities and installation and that was certainly true in April and May I think we commented that in June that we saw that getting better.

And we certainly saw that to be the case in July as well so.

It really has to do what we've seen thus far is really more access related.

Than any lack of appetite for installations, we haven't seen any any cancellations.

Or.

Other than deferrals.

And so we haven't seen that certainly that's something that is I talked about as our watch outs going forward.

But at this stage as we haven't seen that.

<unk> itself yet.

Really just about the installations at this point.

And then and then just to follow up on that Conversely, the negative impact on demand from hospital operation do you think that the continued stimulus.

Being given to hospitals could help you in some of these areas as they're encouraged to spend it uncovered related thing.

Yes, clearly that's the case and I think that's what's helped.

Bridge, a lot of hospitals from a cash flow standpoint, so I think those those programs are certainly helps from that standpoint.

Absolutely.

Alright, Thank you very much.

Thanks, Matt.

Your next question comes from the line of Josh Jennings with talent.

Hey, Josh.

Good morning, Tom Chris. Thanks, I was just wanted to ask about China.

I think it ahead of the curve in terms of Kobe recovery.

You guys were down 17% of the China business and fiscal <unk> seems like medic medical.

Was the biggest.

And China, just put anything you can do just division by division to help us understand the impact.

Physical three Q, and then let's assume for China guidance and physical fourth quarter.

One really quick follow up.

Okay. So one thing I had mentioned and I think we mentioned and.

And are prepared remarks is that.

Across Beady-eyed for example, we were positive in June and so we are watching China as we said very closely.

And we are seeing.

Some recovery there.

Bear in mind that we also have in China in the medical area that you mentioned.

And the medical segment.

We do have the.

Impact of the volume based procurements, So we did see.

And can also prepared remarks, we said.

That we continue to see some of that distributor stocking impact.

Destocking impact as as we go through that really know noon news on that volume based procurement.

That continues it's a continuous thing.

But.

Outside of that the.

The recovery is happening in China in improving across the businesses.

Alright, Thanks, and then just on the pump business.

Medical necessity was a tailwind in physical three Q I believe you mentioned when you called out April on your physical to to call that.

Run right in fiscal <unk> medical necessity was around $10 million per quarter is that is that normal run right outside of.

Kobe Tilman.

Yeah, I I'm not sure what what you're referring to their because.

There is no normal run right.

A medical necessity that was something new.

We did mentioned I think in the.

The quarter in April I think we might have.

Noted how much that was and I think we said it it was in the 70 million kind of range.

A medical necessity and as I mentioned the quarter was in the in the 100 kind of range and so obviously may and June were significantly lower than than April and I think.

So and we're not expecting.

Too much in the fourth quarter in terms of medical necessity and obviously, that's that's a function of resurgence that everything else, but we're not anticipating anything.

Significant there.

Alright. Thanks.

Okay. So your next question is from the line of Richard need Wigger at with SBB Leerink.

Thanks for screening again, guys just just one question.

I'm curious.

Could you give any color on where this initial demand that.

You said is very high point of care, where what factors the economy or what types of uses are you seeing the highest levels of of that elevated demand for this type of tests, just trying to get a feel for kind of where this is probably going to have the the biggest use.

If you have any initial comments thanks very much.

Richard This is Tom good question as.

Sure before it is abroad.

Set sector of both traditional customers and customers who are new to us.

This demand is coming from and we also of course a lot of this given the.

Of course, our traditional customers, we often are engaging with them directly.

So I think about the hospitals and.

<unk> and those types of location.

Dealing with them directly and we see strong demand from from those areas. We of course are also providing this product through most all the major distributors and they are mostly directly managing.

Broader non traditional customer base, who are approaching them.

Calling us and then we'll refer them through distributors. The ship twos are much broader than we would ever be setup to manage directly and that would be typically sell very two or three distributors anyway, but.

Is there.

As you saw I mean, HHS announced acquiring for nursing homes normally that's a whole new customer segments normally not doing very to a point of care testing as an example.

There are schools that.

In states that are buying them to test symptomatic kids when they're in.

Thinking about starting up school, what if a kid says I've got xyz symptoms that mimic.

Cove It what do you do.

Do you send them home and wait a couple of days to get a test results or is it really important.

I noticed that Kid has has covid before they leave the building. So that you can determine what do you do with all the other kids and the teacher that we're in that classroom with that child. These are the questions that people are working through with that employers over the product.

Four.

Similar types of purposes and use of understanding again as employees come up with symptoms et cetera wallet work, how do you triage and and make decisions for the rest of the workforce. That's there in helping keep the environment safe. So those are just a few of the examples that that we see the testing, but hopefully just gives a color that it is much more diverse.

Based in which additionally, b b doing flu or strap or a normal.

Plenty of care test.

Thank you.

Your next question is from the line of Jason Bedner with Peppers Sandler.

Hi, Good morning, guys depends I want you run.

Thank you for taking the questions I just have to real quick ones here, an Alaskan bull upfront.

Any updated thoughts on the PTK, Bhutan X product how are you preparing for rollout strategy at this point and then the second one is I know, it's super early but any updated or any thoughts you can offer on.

Upcoming flu season, any challenges headwinds ceiling anything that we need to contemplated our motto. Thank you.

Yeah true good good question. So on okay. So we have nothing you know outlook in Q4, four four PTK sure that in the past, but just just to reiterate that of course, we have we at last week shared is is that we had submitted additional information as part of that PMA review and it continued continues.

To be under active review by the SDA, but we'll provide an update.

As we hear information from the FDA on that but definitely shared that point in time in terms of the flu season.

As I mentioned, we're making sure that.

First off that we have product to help support the flu vaccination campaigns. This year obviously.

We're also expect to continue to provide flew testing on the very to our platform and as I mentioned, we are we do have combination covid salute tests and development on both our Max and are very towards platform and so those are we have teams actively working on both of those to support.

Where we could have flu and covid needing differential diagnosis as that season intensifies going forward.

The other thing that we watches.

And no one knows the answer to this we have seen some of the evidence that the incidences of using PPE and social distancing in quarantine at reduced.

Right of the intensity of the flu season in other geography's around the world.

And the winter season.

That's going to actually happen in.

Northern Hemisphere is still to be determined out I think anyone knows the answer to that big variables on how society.

Effectively quarantining and.

And asking as well so.

But all factors that will watching closely and.

That we're preparing for them.

Thank you question. Please.

Thank you I would now I'd like to turn the floor back over to Tom pollen for closing remarks.

Okay, well, thank you operator, and thanks, everyone for the good discussion on today's call while our results. This quarter show the impact of Kobe 19 on the entire healthcare industry. They also demonstrate our focus on execution and making an impact during the consequential time.

I'm very proud of the way our team has rallied around our purpose of advancing the world of health defined impactful solutions to help the world respond to Kovar 19, and I'm proud of the beady team for their continued focus on executing or long term strategy. So we can emerge from this pandemic periods strong and well positioned to drive growth.

Thank you all for your time today.

Thanks.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day speakers. Please hold the line.

[noise].

[music].

[music].

Hello, and welcome to Bds third fiscal quarter Twentytwenty earnings call.

At the request of BD Today's conference is being recorded.

It will be available for replay through August 13th Twentytwenty on the investors page at <unk> Dot com website or by phone at 805 858367 for domestic calls at area code 4045373.

For zero six for international calls using confirmation number 3197917.

If I would like to inform all parties that your lines have been placed on listen only mode until the question and answer segment.

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

Thank you Stephanie good morning, everyone and thank you for joining us to review our third quarter results. We hope that everyone continues to be healthy and things.

Safety in mind, we are again, taking a more virtual approach to our call today, while also exercising social.

Thanks.

Joining me I'm personally as Tom Polen, our Chief Executive Officer, and President and Chris Three D. Executive Vice President and Chief Financial Officer, and Chief administrative officer, joining by phone, we have Alberto Mas Executive Vice President and President of the medical segment, Simon Campion Executive Vice President and President of Intervest Interventional.

Segment, and Patrick Kaltenbach, Executive Vice President encouraging sign.

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 will make forward looking statements and as possible to actual results could differ from our expectation.

Factors that could cause such differences in our third fiscal quarter press release.

In the end DNA sections of our recent SEC filing.

Particular, there continues to be significant uncertainty about the duration and contemplated impact of the cobot 19 pandemic. The commentary that we're providing today includes information regarding the July trends, we're seeing in our businesses.

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

We will also discuss them non-GAAP financial measures with respect to our performance reconciliations to GAAP measures that include the details at the purchase accounting and other adjustments can be found in our press release and its related financial schedules and any in appendix of the Investor Relations flies 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 Okay. Thank you money and good morning, everyone. I Hope you in your families are doing well and staying healthy.

I, just summarize Q3 into words, it would be execution and impact I'm very proud of our team for the performance they delivered in the third quarter given the challenging environments.

What stands out to me the most it's a progress the BD team made executing and delivering on both our short and long term agenda, creating value for patients customers and shareholders.

We launched the koby Nike it actually on Verity more secured injection device orders for future future vaccination campaigns and scale manufacturing to ensure continued supply of critical medical technologies across the continuum of care.

We announced several U.S. government collaborations to expand U.S. capacity and critical to cobot product areas. We work closely with our customers as they resumed medical procedure throughout the quarter and we saw those procedures continue to increase as we exited the quarter.

At the same time the team never lost sight of long term advancing our growth strategy driving our innovation pipeline and executing on our cost savings and simplification initiatives.

Confident the steps, we're taking now will help BD emerged from the pandemic strong and put us in the best position for the long term.

Let's jump into the quarter on slide four.

Our third quarter results reflect the impact of Kobin 19 on health care around the world.

We saw strong demand for Kobin 19 related diagnostics and significant pressure on the parts of our portfolio that support elective procedures research routine care in lab testing.

We anticipated we'd see the biggest negative impact from Kogan 19 in Q3, it's largely played out that way.

All then covert 19 had a net negative topline impact of $600 million in Q3 [noise].

Chris is going to provide more detail on performance, starting the quarter and our perspectives on recovery.

Let me share a high level summary of what we're seeing starting with BT interventional.

Cross Interventional segment, we saw sequential improvement each month during the quarter as hospitals and patients started to resume elective and non urgent procedures.

In June trying delivered positive year on year growth in all three VDI businesses. We continue to watch trying to closely since they are further along in their postcode restart.

We exited Q3 seeing VDI procedure volumes at approximately 80% of pre coded levels.

Moving onto the medical segment, we're really pleased with the continued strengthen our pharmaceutical systems business, which is growing high single digits on a year to date basis.

If you both the farm systems business and diabetes care businesses as more insulated and less impacted by coping 19th.

As you know the rest of the segments portfolio is closely tied to overall health care consumption. So naturally the impact of lower hospital utilization was very pronounced across the medical device consumables portfolio, even more so than we had initially anticipated that said, we're encouraged that we saw demand for medical device consumables improve in June.

Lastly, early demand for infusion pumps under medical necessity did spike in April as expected and then taper down throughout the quarter.

Now looking closer at life Sciences.

As expected we saw very strong demand for coated 19 diagnostic tests and supplies during the quarter.

It was offset by a deferral of routine lab work as well as delays in capital investments on both a research and the diagnostic side.

In Q4, we expect continued strong demand for our Koby 19 diagnostic solutions with the addition of the meritor assay to the portfolio.

In addition, we did see reagent orders begin to pick up in June for both research and clinical applications, which demonstrates the researchers continued to get back into the labs.

Well this remains a dynamic situation, we're providing revenue and EPS guidance for Q4 in the total year as we have improved near term visibility.

Based on what we know today, we believe our guidance range reflects the trends we saw in June and July and accounts for our expectations as we close out the year, Chris will go into more detail later on the call.

Despite the challenging environments, it's clear that Bds durable capabilities and critical to health care portfolio have been and we'll continue to be a vital part of the cobot 19 solution.

I'm confident that the actions, we've been taking position BD increasingly well to support our customers through the pandemic and returned to growth as the global economy, and healthcare industry continue to stabilize and recover.

Turning to slide five.

Our last call, we discussed how the strength and diversity of beauties portfolio.

Enables us to support the world's response to covert 19 across the full continuum of care.

BD team made significant progress executing this agenda during the quarter positioning us well to finish the year with momentum. So let me share a few highlights with you starting on slide six.

First today marks one month since we launched the Sars koby to attitude assay for the Vera tour plus system, which we see that FDA you weigh in early July you.

We believe this platform is a real game changer dramatically expanding access to covert 19 testing at the point of care and reliably diagnosing Sars koby two in 15 minutes.

In the first months since launch we've received very strong demand for both severity for plus system and the stars cobot to acetate, including from our traditional customers as well as non traditional accounts.

In our first month of launch we shipped more verity for readers than we normally do an entire year.

This is a strong indicator of the unprecedented interest and demand for near real time point of care covert testing.

As one example, we're proud to partner with the U.S. Department of health and human services on their efforts to expand access to rapid point of care testing in nursing homes.

Their initial order of 2000 visits were plus systems at 750000, Sars covert to antigen test kits.

To support the very strong demand were seeing we are leveraging our world class manufacturing scale and expertise to significantly increase supply capacity and we're feeling good about both our original goal of producing 10 million test in Q4, and our scale up to our initial 8 million test per month run rate by the end of the fiscal year.

In addition last week, we announced a 24 million dollar investments on the U.S. Department of defense in collaboration with HHS to support the additional scale up of U.S. manufacturing.

This is expected to bring global production of the Varityper assay to 12 million tests per month.

The end of February 2021.

We're putting the full capabilities of BD behind this including not just those in our life Sciences segment, but we're pulling in talent from both BD medical and interventional to support the scale up.

Detecting and containing Corona virus globally take a collaborative industrywide response.

So we're proud to partner with additive that on the national diagnostic supply registry to help ensure widespread availability of testing.

The various were assay joins a portfolio of three molecular solutions for our Koby 19 testing that BT has already delivered for use with the BD Max molecular system that includes two with E ways and to a CE mark.

We're now producing 1 million Kobin 19 rapid molecular diagnostic test each month for use on BD, Max and as I've shared.

We're investing in further expanding BD Max capacity. So we can produce an additional 900000 test per month.

The installation of these additional production lines as well underway.

And remains on track to be at our new 1.9 million BD Max test per month run rate by the end of the calendar year.

Relatively we've produced more than three and a half million rapid molecular tests for BD Max.

In addition to investing to expand capacity, we're also investing to expand our portfolio.

R&D teams are actively advancing our work to develop flu plus cobot assays for both our veritor at Max platforms. So we can better support healthcare providers and patients.

I'm very proud of the entire BD team for driving scale and impact through October 19 diagnostic solutions.

We move on to slide seven.

To date, we've now received orders for 470 million needles, and syringes from the U.S., Canada in the UK and other entities in anticipation of vaccine programs. We expect late this year or early 2021.

These orders represent a mix of safety unconventional device types.

While we anticipate initial shipments to the UK fytwenty. The majority of these orders will be delivered and Thats why 21.

In addition, we formed a strategic public private partnership with the Biomedical advanced research and development authority known as BARDA BARDA.

BARDA, we'll invest an estimated $42 million into a $70 million capital project to expand U.S. manufacturing capacity for injection devices.

The new capacity is expected to be online within 12 months.

And once completed BARDA will have priority access to injection devices from these new manufacturing lines to support Max that vaccination campaigns for coven 19 at future potential pandemics.

As the world's largest manufacturer of syringes and needles, we are focused on fulfilling routine customer demand such as for annual flu vaccination programs. While also ensuring we can support surge demand for pandemic response.

We are continuing active discussions with governments around the world about the need to place injection device orders quickly.

To ensure a timely delivery for 2021.

As expected I also want to provide an update on alaris.

We're working diligently and with urgency to prepare the five 10-K filings our focus is on ensuring a comprehensive submission that will ultimately help enable timely FDA review and clearance.

We expect to submit the updated five 10-K in late fiscal Q2 or early fiscal Q3 2021 based on ongoing dialogue with the FDA.

We recognize there's a focus on the timeline for the five 10-K submission and that's important.

But taking a step back we feel really good about the overall collaborative process, we are engaging in with the FDA.

And our pre submission conversations the focus has been on having a complete and robust submission and we have been spending additional time on aligning the testing protocols upfront, which is time and effort well spent.

We believe the more work, we do upfront to ensure the most robust submission.

Better we are enabling a timely review and clearance process.

As expected our team has completed quite a bit of the testing and other work required for the submission and we have a much better visibility to our submission timing now than we did when we last updated in may.

When it comes to human factor testing, we've completed 100% of our formatted formative testing, which is a significant milestone involving 12 different human factor tests in the middle of the pandemic.

We're pleased with the data and outcomes.

We've also completed substantial software system verification.

Completion affirmative human factor testing and software verification retire significant risks to the submission.

We are taking a bit longer to ensure full alignment with the FDA on the final phase of human factor testing, which is referred to as a sumitomo testing and again, we feel this investment in time now best serves us in meeting our ultimate goal of timely five 10-K clearance.

Have submitted our sumitomo testing protocols to the FDA and expect feedback shortly.

Currently we are continuing to recruit committed clinicians for the next phase of human factor testing and once we have that feedback from the FDA, we will be able to complete the sumit of testing.

In addition, and our ongoing feedback discussions with FDA. We made a decision to include an update to our specialty echo to module, which is important for clinical care and especially coterie spots.

As COO to module is used to help monitor patients on ventilators, while medication is being administered.

We believe this is the right decision for the Alaris system over the long term the patients we serve and far outweighs. The additional timeline of a few weeks. It takes two included again, providing the most comprehensive submission to the FDA to help enable a timely review.

Clearance.

I can't emphasize enough how seriously we take this matter.

As with any project of this magnitude and complexity there are always obstacles along the way, but we're confident that we have the right resources the right plan and the right team in place. We will continue to address any issues that may arise in a way that ensures the most comprehensive submission to achieve our ultimate goal the timely clearance.

Dedicated team is executing well and we will keep you updated as we make further progress on key milestones.

Moving onto slide eight and our innovation agenda each of our segments are focused on driving consistent durable growth for the long term.

They are doing this through innovation in areas, where we are strongest where we see disproportionate new growth opportunities and then are aligned with emerging healthcare and technology trends.

During the quarter, we launched four new products and we remain on track to deliver our robust innovation innovation pipeline for the year as shown on this slide.

Taking a closer look in BD life Sciences, let me call out a few milestones in our bio sciences business. This quarter, we launched an upgrade to the BD facsmelody to expand from two way starting to four way sorting, enabling customers to capture more cell types.

This capability is available as an upgrade to our existing installed base that helps to further strengthen our position in a fast growing entry level sort or market share.

During the quarter. We also launched software version 1.1 for facts duet. This software enables the automated preparation of antibody reagent cocktails, which is traditionally a manual time consuming and error prone step in clinical flow cytometry workflows.

This release enables our team to continue driving the successful launch or the facts do X duet base model as well as extend into the larger leukemia lymphoma and mix lab markets.

In BD medical we continued to see good traction with BD for CLL Optima.

Our next Gen close system drug transfer device, we launched late in F. Why 19.

Customers are increasingly choosing optima to protect healthcare workers handling hazardous drugs because of the product safety ease of use and demonstrated performance.

As of the device minimizes residual drug loss in vials compared to other similar systems.

Sales of optimized grown sequentially throughout fytwenty, despite the challenging pandemic period and the launch has helped drive high single digit growth across Rcs TV platform.

I also want to comment on our farms systems business, which is a great example of the diversity of Bds portfolio.

And how it's a real strength and strategic advantage.

Our systems continues to perform very well growing high single digits on a year to date basis.

We continue to be positive about the outlook for this business. In addition to favorable market trends, enabling strong growth in the Prefilled syringes platform. We've also being that been investing in advancing our self injection systems to meet the needs of our pharmaceutical customers.

And lastly in beauty interventional, we recently received FDA clearance for a next generation targeted temperature management system.

The stat temperature management system offers a way to noninvasively control temperature within a narrow range for all appropriate patients.

We have now leverage and integrated Bds capabilities around EMR integration and data analytics into the stat system, which also incorporates advanced algorithms and capabilities to enhance the patient and physician experience.

In our peripheral intervention business, which is a global market leader in biopsy and plan to report.

We recently launched our first interventional oncology product caterpillar.

This novel Technology is used for embolization of the artery serving tumors.

While commercializing new products during the pandemic has been challenging the device has been used in more than 50 interventions to date with excellent feedback on its deliverability visibility under.

And geographies and ability to cause rapid and sustained embolization the artery.

While still early we believe the positive response from customers is a good indicator of the growth opportunity ahead.

Before I pass it over to Chris.

I want to briefly comment on slide nine and the other drivers of our long term growth strategy simplify and power.

As we discussed last quarter, we've been extremely focused on cash and expense management throughout this pandemic period and this discipline was reflected in our SSG any this quarter.

In addition to helping to strengthen our bottom line. These efforts ensured we flow investments for the most significant opportunities.

In addition project recall it remains on track.

As you'll recall project Recode as our comprehensive internal simplification initiative.

We expect to deliver approximately $300 million in savings over the next four years.

We're focused on operating the business with discipline, including how we can invest re deploy resources to maximize our impact.

And lastly in power.

In July we released RF why 19 sustainability report.

Sharing our latest progress against our 2020 sustainability goals and reinforcing that SG remains a fundamental element of our strategy.

We look forward to announcing our 2030 impact goal later this year and as always you can find our quarterly sustainability updates in the appendix of today's presentation.

All in I'm proud of the progress that our team is making.

With a successful launch of their tour and a significant injection device orders from multiple governments. We are clearly delivering on our short term Koby 19 response plan.

We are making the necessary investments and are working as quickly as possible to fully resolved the alaris matters to ensure the completeness of this complex system to aid the FDA review and clearance.

At the same time, we continue to execute against our strategy for long term value creation.

While we continue to navigate a challenging environment I'm confident the steps, we're taking now we'll put beauty and 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 with some comments regarding Bds ongoing response of the covert pandemic first I'm very proud of our organization as we have continued to adapt to the rapidly changing environment and evolving needs of our customers and associates.

We have responded with both strength and agility to ensure the continued safety and well being of our BD associates and to also best serve our customers and their patients stay battle the pandemic.

Second we continue to see strong demand for our covered related solutions. This includes diagnostic test on our BD Max platform, where we are continuing to increase capacity to meet demand. We're also actively ramping our efforts around the recently launched rapid antigen test on be BD Veritor point of care system.

And we continue to grow our pipeline of orders for surrenders and needles to support future global vaccination campaigns.

Third as we continue to adapt and meet our customer needs. We also remain focused on the execution of our long term strategy, which positions us well for the future.

In addition to the covert related solutions, we launched four additional products in the quarter and we remain on track to execute against our new product pipeline for fiscal year 2020.

We're also continuing our work on project Recode as part of our plants, a simplified BD, which will help drive future operating margin expansion.

We are confident that btwob emerged 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 third quarter, including a review of the cold with impacts.

As Tom discussed our third quarter performance reflects the impact of the global Covenant 19 pandemic.

Revenues declined 9.4% on a currency neutral basis. This was driven by approximately $600 million and net covert headwinds, which impacted gross in the quarter by approximately 1400 basis points.

As we shared previously we saw a significant impacts to our results in April and May.

We were pleased that the sequential improvement we saw from May to June across our businesses continued into July with Q3 Q3 being the trough in terms of negative impact of co hit to our businesses.

I will discuss more regarding the trends across our businesses later in my presentation.

Third quarter operating margins were 20.1%. This reflects the impact of high direct decremental margins on loss revenues due to covert 19, as well as coated related investments.

Adjusted EPS was $2.20, which represents a decline of 28.6% year over year or 25% on a currency neutral basis.

Following our 3 billion dollar equity issuance in May we retired both the 1.9 billion dollar term loan and the $695 billion, we had outstanding on the revolver.

Our liquidity position remains strong with $2.9 billion of cash as of June Thirtyth.

Prior to the equity offering we plan to pay down approximately $1 billion and debt in fiscal 2000, and we remain on track to do that combined with the revolver pay down in May we will have paid down a combined $1.7 billion by the end of fiscal 20.

Moving forward, we believe it's more meaningful to talk about our leverage on a net basis with leverage being 3.1 times net of cash as of June thirtyth.

Moving to slide 13, before I discuss our revenue performance by segment I'd like to provide some color on the cobot impact on the third quarter.

As we expected continued insurance to cover to related stay at home measures, resulting in a decline in elective procedures and lower hospital admissions and procedure volumes as well as fewer routine lab test and related specimen collection.

In addition, we saw reduced demand from research labs due to closures.

We're also some delays and capital instruments installations as facilities and staff, we're not easily accessible due to covert.

During our third fiscal quarter. These headwinds resulted in a gross impact of approximately $800 million to revenues.

In terms of recovery, we're pleased to see sequential monthly improvement from May to June across our businesses and in some cases like elective procedures, we saw sequential improvement throughout the quarter.

Gross headwinds in the quarter were partially offset by approximately $200 million and cover to related Tailwinds. This was driven by strong demand for covert 19 diagnostic testing and infusion pumps as we anticipated demand for Alaris infusion pumps on the medical necessity was significantly higher in the month of April.

Compared to May and June.

Now turning to slide 14 in the medical segment.

Bidding medical revenues declined 6% that in the third quarter, including net headwind from covet of approximately 600 basis points.

And the medication delivery solutions unit, our performance reflects the impacts of declines in the hospital admissions due to covert which resulted in fewer procedures. The majority of RMBS portfolio catheters flush in the like tracked closely to hospital admission trends. If we look at the U.S. as an example admission.

Rates were down most significantly in April we saw sequential improvement over the quarter exiting with admissions at approximately 80% to 85% of pre coveted mission levels.

Lower procedure volumes drove reduced customer demand and resulted in distributors rebalancing inventories in may and June following distributor stocking that took place during March and into April in the us in Europe.

Mds performance also reflects distributor inventory reductions and lower volumes related to the ongoing volume based procurement process in China, which were in line with our expectations similar to the Western Europe, we saw an improvement in the impact related to covert in China as the quarter as the quarter progressed.

Revenues in the medication management solutions unit reflect strong demand for infusion pumps in the us on the medical necessity and strong growth outside the us, particularly in Europe.

Within the quarter the majority of the us medical necessity demand occurred in April as expected.

The strength was partially offset by delayed capital installations of dispensing systems due to carve it as anticipated and similar to RMBS portfolio Lower hospital admissions also impacted sales of infusion sets and MMS.

Pharmaceutical systems performance reflects our continued ability to meet high demand for Prefilled Syringes farm systems third quarter revenues also reflects some timing of customer orders within the year year to date farm systems revenues grew a strong 8.1% and we expect continued momentum in the fourth quarter.

Third quarter performance in our diabetes care business reflects distributor in retail or reductions to inventories as expected.