Q2 2023 Baxter International Inc Earnings Call

Good morning, ladies and gentlemen, and welcome to Baxter International second quarter 2000, twenty-three earnings conference call. Your lines will remain any listen only mode until the question and answer segment of today's call at that time. If you have a question you will need to press Star then one on your Touchtone phone.

If anyone should require assistance during the conference. Please press start then zero on your Touchtone phone as a reminder of this call is being recorded by Baxter and is copyrighted material it cannot be recorded or rebroadcast without baxter's permission. If you have any objections. Please disconnect at this time I would now like to turn the call over to Miss Claire Trackman.

Vice President Investor Relations at Baxter International Miss Jacqueline you may begin.

Good morning, and welcome to our second quarter twenty-five earnings conference call, joining me today or until Almeida Baptist Chairman and Chief Executive Officer, and Brian Stevens, That's an interim Chief financial Officer, and Chief Accounting Officer.

On the call. This morning, we will be discussing back the second quarter twenty-five refinance the results along with our financial outlook for the third quarter and full year of 2023.

Please note results in the current period and prior period.

Dr to reflect the pending sale of art, Biopharmacy fifth or bps business.

While the closing of the transaction is subject to the satisfaction of customary closing conditions.

Business is now reported as a discontinued operation we have posted restated scheduled reflecting that presentation for fire period.

Our website.

We will be providing a walk to reconcile our prior guidance for full year 2023 are updated finance outlets for continuing operations and in the aggregate.

With that let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlets for the third quarter and full year of 2023, new product development, including the impact of pending regulatory approval <unk>.

Potential impact of our in flight strategic and pricing accents business development regulatory matter and the macro economic environment, including commentary on continuing supply chain challenges and evolving customer capital spending.

We're looking statements that involve risks and uncertainties and of course, our selves could differ materially from current expectations.

Please refer to today's correctly and I think he filing for more detail concerning factors that could cause actual results to differ materially.

Then on today's call non-GAAP financial measures will be used to help investors understand that cause I'm sitting business performance a reconciliation of the non-GAAP financial measures being discussed today for the comparable GAAP financial measures is included in the accompanying investor presentation and in our earnings release issued this morning, which are both avail.

<unk> on our website now I'd like to turn the call over to Jo Jo.

Thank you Claire and good morning, everyone. We appreciate you joining today's call I will begin with an overview of Baxter second quarter of 2023 performance.

By a lot of the progress, we're making a crosby strategic cat since we announced earlier this year.

Turn it over to our interim Chief Financial Officer, and Chief Accounting Officer, Brian Stevens will walk you through our poorly performance and outlook in more detail. Finally, there's always we will welcome your questions second quarter sales rose three per cent on the reported basis and 4% on a constant.

Currency basis, both measures exceeding our private guidance of 1% to 2% and 2% to 3% respectively.

<unk> M. S. Glare noted we are reporting results, so far biopharma solutions or B P. S contract manufacturing business has been discontinued operations in light of <unk>, which I will touch on Fort Lee.

Note there was no impact in the quarter on top one growth rates from discontinued operations on either a reported or constant currency basis alright.

<unk> outperformance was driven by solid demand across the portfolio.

On the bottom line second quarter adjusted earnings per share from continuing operations totaled 55 cents and discontinued operations total to 11 cents in the aggregate adjusted earnings per share totaled 66 cents and exceeded our outlook ranch of 59 cents.

The 61 cents driven by a combination of top one performance and operational efficiencies.

Several factors combined to help bolster both top and bottom line results first and foremost I want to highlight positive demand in greater stability across most corners of the health care marketplace. Following the erotic impact of the pandemic and its recurrence.

Sir just over the past few years.

Overall, we are continuing to see sustained recovery hospital admissions and procedural volumes as well as an alternate sites of care, which are contributing to solid performance across the portfolio.

The more stable place in their environment is also contributing to unimproved macroeconomic backdrop further help into his study our operational performance wild positive signs are emerging we remain cognizant of the potential for you place in there with disruptions consist.

With our approach this year.

General we have tried to capture as these potential risks in our updated by national outlook.

Similar with last quarter. We are also seeing continued improvement in the availability of key electromechanical components.

Reflects a combination of overall environmental impact any steps, we have taken to shore up supply within our own integrated supply chain operations Wow. There is still work to do with these factors and actions are contributing to enhanced cost management and greater <unk>.

<unk> on the supply chain fronts.

Yes, we have previously commented we continue to see a degree of caution in hospital capital spending which has infected patients support systems or P. S. S performance.

Can we we saw a significant sequential improvement in the second quarter four orders.

Building momentum with a recent launches off our progressive plus ICU bed any <unk> features to our segment, leading <unk> Progressive plus is the latest version of our unique iced tea you focused bed, which now offers a range of additional features developed it to help health care professionals.

The address the complex critical needs of Ico patience. Our current expectation is for hospital capital spending to improve in the second half of the year as compared to the first half of the year S hospitals reevaluate their budgets and reprioritise areas <unk>, we're building momentum and.

Making significant progress across the transfer made a strategic actions, we announced to kickoff 20th twenty-three.

Proposed a spin off of Ah Reno care and acute therapist businesses and.

An independent publicly traded company.

<unk> a R. B P S business and the implementation of a new operating model for the remainder of our Baxter businesses.

As I noted at the time these three initiatives with a single agenda enhance our focus on patients and clinicians with the goal of creating incremental value for our shareholders. While all are stealing progress. These airports are already enhancing your strategic clarity.

Across the company, increasing accountability in helping bring the businesses, even closer to the patients clinicians and customers they serve.

Proposed kidney care to spin off is moving ahead on multiple fronts last month, we welcomed christoff, who will ultimately service C. E O of the Standalone kidney care business upon its separation next year.

I couldn't be more excited to have cruised on board and I can assure you that our leaders and colleagues across or kidney K O T do the same.

He was a passionate and proven leader and his experience as a longtime executive at varying a Siemens health <unk> company makes him an outstanding fifth as the seal off the new publicly traded company I look forward to extending the opportunity for you to meet him at our upcoming <unk> events.

As you May also be aware, we have just announced vindictive is the name of our kidney spin off formalizing. The brand name is an important milestone.

That's the stage for a range of unnecessary regulatory legal answered the I T and branding work there are essential to successfully establishing the new company.

<unk>, we are finalizing the organization strokes in the financial model put in a new company, we expect to file a form them publicly with the <unk> early next year, which will provide additional details on the financial this drug free and all the important information for the new entity as a stand alone entity will benefit from increased.

Management focus ended pursue <unk> priorities better position to accelerated growth and innovation emphasize it's distinct market drivers. We continue to be on track to launch Vantiv as a stand alone company by July 2024 or earlier.

Moving onto the developments in our Biopharma solution business email, we announced entry into a definitive agreement to divest V. P. S. The private equity investors advent international and Warburg Pincus B P S as an outstanding and profitable business, but as a contract manufacturer it isn't that <unk>.

The strategic fast forward, our current expectation is that the transaction will close towards the end of the third quarter subject to receipt of required regulatory approval skills satisfaction off all their customary closing conditions. As previously stated we intend to utilize the after tax proceeds.

To reduce debt consistent with a chapter allocation priorities and lastly in future. We initiated the launch of Bachelors, New operating model realigning our portfolio of businesses into for global vertically integrated business segments medical products and therapies healthcare system.

<unk> technologies Pharmaceuticals, and kidney care under just new reporting structure. Each segment will have global Brooklyn losses accountability dedicated commercial operations and hopefully a line research and development and manufacturing supply chain and functional support teams. While these guys too early days I believe.

<unk> that this approach is already driving clear meaningful benefits, including enhanced market responsiveness through greatest strategic clarity eider alignment faster decision, making and on any big rated innovation mindset across all aspects of our operations not coincidentally.

Has also you that is streamlining and efficiency opportunities that I expect to benefit our bottom line, we plan to complete our transition to the new operating model and report under this new segments struck the beginning in Q3, which will provide additional perspective on the financial metrics of each of the four segments.

Assessing both alright ear to date performance and the progress of our strategic actions I'm excited and optimistic about our trajectory. We are responding to a rapidly evolving marketplace with perhaps the size of thinking that will redefine how we operate and serve our stakeholders we are positioning.

Ourselves to emerge as two leading companies emphasizing a range of medical essential products focused on delivering outstanding results for our patients shareholders and the many other stakeholders communities that rely on us before concluding I would like to point you to Baxter Dot com.

Where you can review Bachelors, most recent corporate responsibility report published last month.

Highlights meaningful actions taken in 2022.

Port of our goes to empower our patients protect our planet and champion are people and communities bachelors well recognized emphasis on sound corporate citizenship is another important way that we advance our mission to save and sustained lives now passed it onto Brian to provide more <unk>.

<unk> on our performance and health.

Thanks, Joe and good morning, everyone I'm happy to be joining the call. This morning to provide some additional details and the extra second quarter financial performance as well as commentary on our updated financial outlook.

Joe mentioned, we are pleased with our second quarter results, which came in ahead of our expectations.

Second quarter of 2023 Global sales included 3.71 billion from continuing operations in $142 million from discontinued operations sales.

Sales in the quarter increased three per cent on a reported basis and 4% on a constant currency basis and compared favorably to our guidance.

Performance in the quarter benefited from better than expected sales across nearly every business line with particular outperformance realized medication delivery pharmaceuticals and patient support systems.

On a year over year basis, we recognize solid growth across much of the portfolio, which was partially offset by a 1% decline in patient support systems, primarily reflecting lower rental revenues and reduced hospital capital spending as compared to prior periods. We also generated lower sales M. B P. S, which is now reported and discontinued operations due to a reduction in revenues.

From Covid vaccine manufacturing.

And the bottom line adjusted earnings in the aggregate inclusive of both continuing and discontinued operations.

24% to 66 cents, reflecting the impact on a result of the increased cost of materials labor and freight we've absorbed due to the significant inflationary environment experienced over the past few years.

Justin E. P. S for the quarter came in ahead of expectations of 59 cents to 61 cents per share primarily driven by sales and operational performance lower than expected tax rate offset the negative impacts from foreign exchange and losses on equity investments.

Now I'll walk through performance by our original segments and keep product categories, starting with sales by operating segments.

Sales in the Americas group, 5% compared to the prior year on a constant currency basis.

Sales in Europe , the Middle East and Africa, with three per cent that a constant currency basis, and sales and our APEC region increased four per cent constant currency.

As we look to the second half of the year, we expect performance in APAC to be negatively impacted by a decline in China sales, resulting from the effective excess mortality and E. S. R. D patient volumes due to the pandemic as well as the impact from the ongoing implementation of value based procurement initiatives.

Moving on to performance by key product category.

Sales for renal care for $936 million, increasing two per cent on a constant currency basis.

Performance in the quarter was driven by mid single digit growth and R. U S. P. D business, partially offset by lower U S. In center H D sales following the exit of a distribution agreement at the end of last year consistent with our optimization plans for this business.

Globally, both P D and incenter Ht sales advanced low single digits.

Results in the quarter or partially offset by lower sales in China due to the factors just mentioned, including government procurement initiatives and a lower patient census in the region due to the pandemic.

Sales and medication delivery of $761 million for 7% year over year of constant currency rates driven by strength globally for both infusion systems and Ivy solutions products, we continue to experience healthy demand in the U S for a spectrum LBP pump as we can.

Continue to work to improve the availability of components for spectrum, we expect sales to ramp in second half of the year and we also continue to focus on growing our novum syringe base.

Pharmaceutical sales of $550 million increased 6% on a constant currency basis performance in the quarter reflected strength in our U S. Injectables portfolio, driven by new product launches, including cause Olson <unk> room temperature and Bendamustine as well as increased sales internationally for a hospital compounding portfolio.

Total sales for clinical nutrition, where $243 million, increasing 7% unaccustomed currency basis.

Performance in the quarter was driven by a strong performance internationally, partially offset by declines in the U S, reflecting a difficult comparison against the prior year period.

Sales in advance surgery for 272 million advancing 4% unaccustomed currency basis.

Growth in the quarter reflects an improvement of surgical procedures globally with particular strength internationally, partially offset by the impact from exiting a distribution agreement in the U S as well as select supply constraints that hampered performance in the quarter.

Sales in our acute therapies business for $180 million, representing group of 6% on a constant currency basis and represented a return to growth in the U S and strengthen our APEC region.

<unk> and our patients support systems business for 359 million decreasing one per cent on a constant currency basis, primarily driven by lower contribution from rental revenues and lower hospital capital spending as compared to the prior year period.

In the quarter, we realized that it was unexpected sales for I C. U beds in the U S driven by the launch of Progressive plus we have experienced positive demand for that new entrants to our smart fed portfolio since its debut.

Joe mentioned, we saw a significant sequential improvement in orders, increasing approximately 30% driven by demand for our segment, leading hospital beds and care communications products we.

We currently expect this momentum to continue with orders increasing in the second half of the year as compared to the first pet.

Frontline care sales in the quarter, where 307 million increasing 9% on a constant currency basis. This growth reflects demand for our intelligent diagnostics respiratory health and connected monitoring portfolios.

We saw continued improvement in supply availability of electromechanical components during the quarter, which enabled us to address the portion of the backlog associated with the frontline care business.

While we are pleased to see improvement at our supply constraints. The business continues to have an elevated backlog level, which we will continue to work down over the course of the year is anticipated demand remains strong for this portfolio of products.

Global surgical solutions sales in the quarter were $77 million, increasing 9% unaccustomed currency basis performance in the quarter was driven by continue geographic expansion and increased hospital access.

P. P. S second quarter sales, which are now reported is discontinued operations for $142 million decreasing seven per cent unaccustomed currency basis.

Klein with in line with expectations due to lower Covid vaccine related revenues of approximately $27 million compared to the prior year period.

Underlying business momentum continues to build strong growth, excluding the vaccine impact realized in the quarter.

Moving through the rest of the piano are adjusted gross margin from continuing operations totaled 40.4% in line with our expectations and represented a decline of 160 basis points over the prior year. The year over year decrease reflects increased cost of goods sold primarily driven by material and labor inflation.

<unk> and supply constraints, partially offset by favorable pricing in select areas of the portfolio the.

The impact of discontinued operations reduced Q2, 2023, adjusted gross margins at 40 basis points and Q2 2022, adjusted gross margins by 50 basis points.

Adjusted SG&A total $844 million or 22.8% as a percentage of sales a decrease of 40 basis points versus the prior year period performance in the quarter benefited from our ongoing transformation initiative to enhance the operational efficiencies, partially offset by higher bonus accruals under our annual employee incentive compensation plans versus the prior.

A year.

<unk> basis inclusive of discontinued operations adjusted SG&A was 22.1% as a percentage of sales and Q2, 23, and 22.4% as a percentage of sales and Q2 22.

Adjusted R&D spending in the quarter totaled $165 million and represented 4.5 per cent as a percentage of sales an increase of 40 basis points versus the prior year we.

We have ramped up our R&D efforts, particularly increasing our investments and advancing are connected care technologies and an aggregate basis inclusive of discontinued operations. Adjusted R&D was 4.3% as a percentage of sales and Q2 23, and 4.0 per cent as a percentage of sales and Q2 22.

These factors resulted in and adjusted operating margin of 13.2% a decrease of 150 basis points versus the prior year on an aggregate basis inclusive of discontinued operations adjusted operating margin was $14, 4% as a percentage of sales and Q2 of 23 and 16.2% as a percentage of sales.

And Q2 of 22.

Operating margin came in ahead of our expectations, primarily driven by top line performance and enhanced execution at our transformational initiatives driving improve operational efficiency.

Net interest expense totaled $124 million in the quarter, an increase of $35 million versus the prior year driven by the impact of increased interest rates on our variable rate that.

I just did other non operating expense totaled $22 million in the quarter compared to $33 million of income in the prior year period results were unfavourable expectations and driven by losses in both foreign exchange and marketable securities compared to games in the prior year.

The adjusted tax rate in the quarter was 17.8% compared to 20.5% in the prior year period. The year over year decrease was primarily driven by changes in geographic earnings mix.

With respect to cash flow and the first half of 2023, we generated free cash flow of $485 million, including discontinued operations compared to $171 million in the prior year period.

We expect to remain on track to more than double our free cash flow year over year in 2023.

And as previously mentioned adjusted earnings from continuing operations totaled 55 cents and declined to 25% versus the prior year.

Adjusted earnings, including discontinued operations of 66 cents per diluted share declined 24% versus the prior year period, reflecting the increased cost of raw materials and labor as well as the impact of higher interest rates on variable rate that foreign exchange headwinds and higher bonus accruals with respect to our original guidance.

Favorability was driven by better than expected sales and Sg&a's savings at the benefit from the lower tax rate offset the negative impacts from FX and losses Unmarketable Securities.

Let me conclude my comments by discussing our outlook for the third quarter and full year of 2023, including some key assumptions underpinning the guidance as mentioned we are pleased with the operational performance to date and positive momentum we have seen for the first half of the year, while we continue to work to mitigate the macroeconomic challenges that have impacted our results to date.

The latest signs of reassuring our business fundamentals remain solid and demand for the portfolio is broad base.

Taking into account are positive second quarter results I'll know walk through our updated guidance. Our current expectation is that the pending sale of vps is likely to close towards the end of the third quarter. However is the ultimate timing of completion is uncertain. We are providing adjusted operating margin in EPS guidance for full year 2023 that contemplates two scenarios.

One where the deal does not close in 2023 and another that assumes it closes at the end of the third quarter.

Assuming that P. P. S were to remain a part of Baxter per year and 2023, our outlook for sales growth in the aggregate, including discontinued operations would be the same as continuing operations growth and both are reported in constant currency basis. If P. P. S were to remain a part of Baxter three year and we will continue to expect full year adjusted operating margin in the Agra.

That's super helpful. Just wanted to click follow up for banks Uhm, obviously, the the Pfizer injectable plant the damage definitely I've got a lot of media accomplished last couple of weeks. It seems like it was more just the warehouse that was negatively impacted did you see any potential benefit from that or is Thursday.

<unk> thanks for taking the question.

Larry I'm not gonna comment on on Pfizer's status, they have to answer their own questions. I can tell you that from the portfolio that they sell we have a little bit of competitive products that we can ramp up in the second half of the year will depend a law.

Bart how much inventory and to change, but I'd say, probably a little bit north of $10 million is one opportunities that we have maybe a little bit more than that politically last <unk>. What's in the change of <unk>. This is gonna be a theater. One important thing is Bachelor will be there for the patience when they needed and an issue to customer needs.

Will be there to sort of them was a products that we have just to clarify that we have not included any uhm upside in the guidance that we provided obviously, we're continuing to evaluate the situation. As you mentioned, we do believe there is some overlap into the team is working and how we can interact and tell those gas in the marketplace to ensure the customers get those products.

Thank you.

Here's your next question comes from a line of Danielle and tells me from you B S. Your line is open.

Good morning. Thank you so much for taking the question.

To be at too greedy here I know.

2023 guidance and.

Talk about 2024 at this point given you know all the moving parts.

But I would like to get some thoughts maybe at a qualitative or high level.

As we look ahead to 20th 24 in the you know remain Cal pieces.

<unk> what is the key Croft drivers will be obviously, hopefully nails on my key with <unk>.

<unk> if you can talk about.

Oh for the next 12 19, what you see <unk> grow strawberries piano, who might be in that we should be focused on here.

Thanks, so much.

I wanted to highlight will recall H S T, which is our former here called up your own business, but Ah H S. T. I think that is a great opportunity is two and the <unk> frontline care is is is really driving single all high single digit growth I think that will.

Continue and I think the recovery and and the potential gain a market share in bad is it.

I'm not claiming anything on the label I'm, just saying that when we do it looks like the product has a performance that pleases dark customer bye.

By the speed and the completeness of the the humor hemostasis products do system first.

First product that is baxter's passive.

He must at we don't have a pet so if he is what he she must debt and we're now to Australia just by the capacity of the company to make the products. While we are working to supply chain took it a second's supplier and which is gonna come in line hopefully 2024, but the demand is really good and that's a good driver.

For it and we have in the pharmaceutical abusive has new launches, our new management and pharmaceuticals is really improve our ability to launch process and get this time too big sales. So we have some really good stuff happening clearly we will we will like to count on no home, we're gonna do everything we can to.

Get that on the market, but as a backup to delta we have a very solid platform with respect initiative, taking market share, so and and and the syringe pump really makes it easier for us to penetrate the hospitals that otherwise would never available to us before so I think Baxter all in all as we execute all those.

Changes to steal a b P. S. The then the spinoff arena you still create a company that is a smaller driven by innovation and the ability to actually impact lives. So far patience this up as well where it started getting for 2024.

Maybe if I could add to that a little bit Joe you know another item that we're really excited about is the recent launch of our progressive plus I C U bed, where ceiling. It seemed really good demand from that even though it's in the early stages and we're also excited about some of the new features that we just came out with for our central bed platform as well the other item I'd like to highlight that's a big internal <unk>.

Because for us in terms of driving growth going forward, it's really the impact of the new operating model that we're transitioning to you know as we've talked about previously earlier. This year. We started the process of shifting from a regional a focused organization to really a vertical focused organization we.

We have leaders of our of our.

New segments, they're really like many C. E O is that all in the entire business from top to bottom, including the supply chain aspect of that and I think as we mentioned before we're planning to transition to our new segment reporting in the second half of the year right now we're actually expecting that that's gonna be coming up this coming quarter. So we're really excited to be able to share some of the financial <unk>.

Performance at that cut with all of you at that time.

But as part of this transition uhm, our new segment leaders are very much focused on developing portfolios of initiatives that we're looking to to to really grow the business going forward.

Thank you guys.

And your next question comes from the lineup Patrick.

Morgan Stanley Your line is open.

Amazing. Thank you so much for taking the questions I'm just curious in renal if.

If we make the adjustment, obviously and H D for that distribution agreement, how you're seeing the relative to human to P. D buses H D. If you're seeing any kind of a ship that or if you're saying you know comparatively similar trends in patient flow across.

Process to instead of vertical it's very curious.

Our P D business.

With exception of China, which I think we in the prepared remarks or spoke about the the two things affecting them being <unk> and also the mortality due to COVID-19.

Covid if you isolate at the rest of the business is just starting to recover from Dakota, we're starting to see station gross some some geography as with mid single digit growth.

<unk> with a low single day jokes, but coming up from negative growth last year. So we're starting to see is that going well. We also took all their initiatives to augment that business. We C. H D is a portfolio.

Rotation for us so we're looking at where to be how to make the business. Okay.

Accretive us to Baxter and we are in full fledge optimization process. So we have we will look into our dialyzer business were logging hour H D monitors and making sure that we are in the right place at the right time competing the right way.

We want to make sure that that is a supplemental business two Bachelor dervish profitable and is growing up while we're we're we're starting to see with optimism.

The exception of China, gross and <unk> and recapture off of the P. T marketing remember dishes a business that we <unk>.

Post Covid project longterm to be a mid single digit growth business in terms of patient. So we want to make sure that as the situation's Stabilised in China were prepared 100% to continue to grow into market.

Amazing Super helpful. Thank you.

Thank you.

Your next question comes from the line of Travesty from Bank of America Securities. Your line is open.

Thanks for taking my question and good quarter I I did want to follow up Joe on November it. It sounds like you have to upgrade the Canada pump first and that takes a few months and then after that finished then you can move with it and it worked with the F. D. A I just want to make sure I understand the nuances there.

Earlier response trucks pumping candidates on market. The U S doesn't have novus not approved so what's your point is we have some software updates were making make we have some available to go through working with health, Canada to make sure they're okay with us moving forward. We also have other changes that we're gonna be may.

And an extra couple of months to make sure. It's at a depth pump is is all the potential upgrades and improvements are in place and then as we work with the F. D. Eight hour application has dose changes factor and what we want.

Make sure that we Wanna, we execute them in Canada, and we work with the F. D. A we Wanna make sure that.

And and and but I wanted to tell you that we don't speak on behalf of the F D. A and yet the health, Canada will work with both of them trying to and we will address all those problems as well confidence that our our technology and our platform is solid we continue to upgrade like we would have done so any other products.

Dress any concerns on the market.

Perfect. Thanks for that clarification and then the other question I had was on those <unk>.

To announce that by your man any color on the type of person you are looking for progress you're making without search.

Well first of all we have Brian doing a great job here sitting and foresee a fall and.

Always a great great contributor to Bachelor and and done during this quarter.

A tremendous amount of work our teams were able to do to be able to provide your guys with discontinue operation Solider reconciliation. We are in process continued to interview internal and external candidates and we will be hopefully in that position in the next 30 to 45 60 days to make a final call.

For the first one the one thing I just want to add a nankeen jealous comments I know of them is to remind everyone that know of them is a brand new innovative plat plan that has some of the most advanced safety features on their cell again to Joe's point, we're gonna look at that and obviously work with that today, we can't.

Speak on behalf of that day, but this is a brand new innovative platform and you'll be mentioned to know of them. So range is doing really well on the market alrighty. So we're gonna look at you know obviously, if that's the situation with health, Canada and some of the issues you you find when you launch a brand new platform those issues can come up so we're gonna <unk>.

<unk> with an obviously work with both agencies to get this <unk>. This is not a a lego ship pump, which is decades old in the market. They had issues to be Remediated does this a brand new pump like Claire said it is a complex technology and we have the competency and Bachelor to address those issues.

And as I said I'm very confident in the technology and we are cautiously optimistic about how we would have disapproved.

Great. Thanks, a lot.

Thank you.

Sure next question comes from the line of Vijay Kumar from Evercore ISI. Your line is open.

Hi, Joe Congrats good furniture, maybe my first question on the products I joke take you mentioned 30 per cent orders froze.

How does it translate to revenue growth for Ya PSS segment.

You know you it's farm up double digits are we seeing in a pricing being stable in the U S. At this point in time.

B J will take one thing at a time.

We are seeing the order between Q1 and Q2 growth.

Four four PSS and that has encouraged us.

We're gonna crossed the threshold on growth, but just gross now was this lively negative for this quarter, what's ahead of our expectations.

We're looking at sequential growth. So this product line, yeah, so here's what I like Uhm, let me add went down a little bit so to just plainly did see you know around 30% sequential infringement across all of PSA asked which it obviously is both our furniture put dark hair communications products.

In the third quarter Uhm, how wrong did have their ear and in the third quarter. So we do face obviously, we continue to kind of anniversary that did you say, it's a little bit more of a challenging cop from just an overall sales dollar in the third quarter, but the the order right are improving and as we go into the second half we expect.

The second half orders to be ahead of what the first half of it. So we're kind of thing that continued momentum second half versus the first half of the area and I think the kids that bolt on the progressive clock in the central <unk>, we're seeing a lot of positive momentum there and we're gonna continue to augment that with a lot of the features that we have within the connected care.

Faith for the HSE business.

And in terms of pricing I think you referred suppression in general are you talking about pricing BSS.

Sorry for U S pharma pricing for U S. Pharma, we we see continuing pressure what Baxter is doing using by launching new products that we call with the specialty generics, which you are pre mixers like we did with norepinephrine and and and and.

Bendamustine he has been a phenomenal execution of launches and those products carry significant gross margin. So as we continued to face.

Price pressure on more generic molecules, we're able to offset that as you can see by the growth of this business in the in the second quarter and how we're going to go forward with this business, we are making huge progress of gas suppressed erosion.

Can only be done can only be done with launched yourself and your products and we've been executing extremely logging all of them.

Yeah, I I, you know, what I would say to that D. J in within our U S injectable fitness.

This is really curling mm double digits low you know kind of low that will take it really driven on the success of these lunches. So we have been able to now fully upset that price it rose and that will go on but we will be upsetting it with our new product launches.

That's helpful. And then maybe one on March and shipped back have 200 basis points step up.

How much of that is related to the valium leverage on on higher revenues for this.

<unk> you supply chain in Costa actions.

And those supply chain contacts you should get to you those are structural entered floats root for next year.

So if we're looking at our overall operating margin improvement I think just sales growth alone is contributing 200 bits of that meant I think on the supply chain side with some of the stabilization of inflation and the continued savings initiatives I think we're seeing roughly about 78 basis points of Imp.

<unk> and then on the cost savings initiatives that we've been undertaken the impact for the back half of the year, we're expecting us and drive around 80 basis points and those three items are actually offset by the impact of FX versus where we're at and we gave our prior guidance, which is coming back about 50 basis points.

Extremely helpful. Thanks, guys.

We have time for one more question.

Our final question comes from a line of Matt.

Barclays. Your line is open.

Hey, Thanks, so much for squeezing me and so I guess, you know I'd love to ask just a couple of.

Broad questions, if I could and and the first I think the perception may be that you know I wanted to come up with editors Gotta hop approved.

You have not yet got your new public group.

The perception is that this is skewing the sort of the.

Competitive landscape in a way that that maybe disadvantages to get back to your back straight in the near term and.

I know you've just got through to a little bit of this that I'd love to get your sense of you know having stigma spectrum on the on the market you know.

And this being your next Gen Uhm, but you could talk a little bit about what the current competitive dynamics look like upfront and what you expect them to look like for now until when you're able to to introduce you sort of next Gen platform and then I have one follow up if I could.

Yeah. So I saw like gel you you know laying on this map, but as I just reiterated again no of them is a brand new innovative platform, but we also do have staff Jones, taking this action on version nine and we have been <unk> that is.

We've been successfully selling that we are ramping up production of that and to just point, we are going to make it backwards compatible with our gateway. So that it will have all the features and be able to integrate within the hospital EMR similar to like me all that much when I get to deal.

I think I think we said this multiple times Matthew Deus, we have on on market pump and we'd be converting market share as a matter of fact, we've just converted accounts from a competitor for the reasons of the marriage of spectrum by itself. So we do have.

<unk> do we have greater opportunity was November of course, we do because as a platform to have some safety features and integration that is a great opportunity for customers to have other software that we have come into play. So we're looking forward to that approval, but until then we continue to do well with a current platform and it's been.

Make that even more friendly by backward integrate into a new gateway, which is also no developed by Bachelor for our new platform that makes it easier to integrate between the syringe and the stigma spectrum.

That's super helpful and they're just not on growth you know I think we we understand you know.

The sale of biopharm in the deleveraging opportunity that that's provided.

Change positive change to your to your capital structure.

In terms of the the he'll run business and the girls trends I think you know we get the question often like what can that business grow I mean, it looks like.

It's already kind of accelerated from maybe down one per cent in the in the first quarter on a combined basis, So I got 4% or something like that here in <unk> I'm looking at the numbers right <unk>.

<unk> <unk>.

We on our way too is that is that current growth rate a representative grilled three to you know based on you know what you would say what you know about the business now or do you think there's there's more room to lift that that business and it just it back yet and it's a 2024 any color.

<unk> sorry, you're judged on these topics also during the call I just wanted to be clear about you know the growth potential as it as you look at it right now thanks, Yeah Man I'll just gave some of that the facts, you're you're exactly right in the first half of the year, there's a hell wrong or.

T business with low single digits, we expect that to accelerate timid single tickets in the back half of the air consistent with our higher expectations.

Driven by all the factors that we've talked about improvement in frontline care Uhm, both eight and then within the PSS business. The new product launches. So that we believe that that is that mid single digits that underlying run rate is what we will continue to see going forward, but.

Yeah, I think I think not only the product launches in PSS, but also some some of the success that we have in cardiology, which is smaller still in our front line care as well as some other new products that we have in store for 2024 I believe this business.

Is is.

Their growth is a ball.

Two mid single digits for our businesses and with a portfolio moves we're making we're gonna get there and and has been a really no last year was all about supply chain and which are real difficult period for both businesses as we see us making significant progress in.

And including receiving a suit to the business I see that PSS with great opportunity and don't discount or surgical business are GSS business, which also is a great a great potential source of growth in the future. So we are excited about that business.

And we have the potential to transform even further baxter with even more growth in adjacencies through that business.

Great Congrats on the corner. Thanks. Thank you.

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