NYSE:BAX Baxter International Q2 2021 Earnings Report $30.20 -0.21 (-0.69%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$30.21 +0.01 (+0.02%) As of 04/25/2025 06:00 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Baxter International EPS ResultsActual EPS$0.80Consensus EPS $0.75Beat/MissBeat by +$0.05One Year Ago EPSN/ABaxter International Revenue ResultsActual Revenue$3.10 billionExpected Revenue$3.11 billionBeat/MissMissed by -$14.70 millionYoY Revenue GrowthN/ABaxter International Announcement DetailsQuarterQ2 2021Date7/28/2021TimeBefore Market OpensConference Call DateThursday, July 29, 2021Conference Call Time5:11PM ETUpcoming EarningsBaxter International's Q1 2025 earnings is scheduled for Thursday, May 1, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Baxter International Q2 2021 Earnings Call TranscriptProvided by QuartrJuly 29, 2021 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to the Baxter International Second Quarter 2021 Earnings Conference Call. Your lines will remain in a listen only mode until the question and answer segment of today's call. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be rerecorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. Operator00:00:39I would now like to turn the call over to Ms. Claire Trackman, Vice President of Investor Relations at Baxter International. Ms. Trachman, you may begin. Speaker 100:00:48Good morning, and welcome to our 2nd quarter 2021 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer and Jay Zaccaro, Baxter's Chief Financial Officer. On the call this morning, we will be discussing Baxter's Q2 2021 financial results and full year 2021 financial outlook. With that, let me start our prepared remarks by reminding everyone That this presentation, including comments regarding our financial outlook for the Q3 and full year 2021, new product developments, Business development and regulatory matters contain forward looking statements that involve risks and uncertainties. And of course, our actual results could differ materially from our current Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. Speaker 100:01:44In addition, on today's call, non GAAP financial measures will be used to help investors understand Baxter's ongoing business performance. A reconciliation of the non GAAP financial measures being discussed today to the comparable GAAP financial measures is included in our earnings release issued this morning and available on our website. Now I'd like to turn the call over to Joe. Joe? Speaker 200:02:06Thank you, Claire. Good morning, everyone, and thank you for joining us. I will begin with a review of Baxter's 2nd quarter results And I'll also share a few words about our upcoming investor conference. Jay will then provide a deeper dive on our financial performance and outlook. And we will wrap up with Q and A. Speaker 200:02:27Baxter delivered 2nd quarter sales growth of 14% as reported, 9% on a constant currency basis and 8% operationally. Growth was driven primarily by the ongoing global recovery From the COVID-nineteen pandemic resulted in favorable performance comparisons for a number of our businesses versus the prior year. As the pandemic affect the patient treatment dynamics and demand mix in the prior year. On the bottom line, 2nd quarter adjusted earnings per share were $0.80 Up 25% year over year and exceeding our original guidance. All three of our geographic segments contributed to the positive quarterly performance. Speaker 200:03:11The Americas and EMEA achieved high single digit growth and APAC achieved low double digit growth, All at constant currency rates. While we are clearly experiencing recovery from the pandemic across all three of our The situation on the ground varies considerably by market. As always, we salute the healthcare workers Who continue to face enormous challenges every day on the front lines of care. I also want to express my personal gratitude To all the Baxter employees who tirelessly support these clinicians and caregivers, while helping to ensure we address the needs The patients across our vast life sustaining portfolio. Turning to our performance by business, 5 of our 7 product categories achieved growth on a constant currency basis. Speaker 200:04:05Performance was led by biopharma solutions and advanced Surgery, which delivered 49% 48% constant currency growth, respectively. Growth in BPS was fueled by contracts to assist in the manufacture of COVID-nineteen vaccines. Advanced Surgery growth reflects a favorable comparison to the prior year spurred by improving Surgical volumes as pandemic recovery advances globally. As you saw in this morning's press release, We are building on our momentum in advanced surgery with the acquisition of PerClot Polysaccharide Hemostatic System. PerClot marks our entry into the global hemostatic powder segment, which will allow us to serve surgeons and their patients With an even broader range of options to control intraoperative bleeding across active and passive solutions. Speaker 200:05:05Our medication delivery business grew 12% at constant currency rates, also benefiting from a favorable comparison, Driven by improving rates of admissions at hospitals as compared to the prior year. Looking ahead, Medication delivery is continuing to position for the U. S. Launch of our Novum IQ infusion platform, including Dose IQ Safety software in our IQ Enterprise Digital Connectivity Suite. Following up on our recent FDA resubmission, We're now in the process of responding to an additional information request from the agency. Speaker 200:05:46We continue to expect to launch Novomy Q in the U. S. Before the end of the year. Our clinical nutrition category advanced single digits At constant currency rates, reflecting ongoing strength in the U. S, Pharmaceuticals Also grew at single digits constant currency. Speaker 200:06:07Adjusting for the recent Calyxt and Doxil acquisition, Pharmaceuticals was flat Year over year, although we expect competitive pressures to continue in this marketplace, we remain focused on launching molecules with We have several projected launches of new generic injectables in the coming years that will help to fuel growth in this business and mitigate some of the competitive pressures we are experiencing. Performance in Renal Care was comparable to the prior year at constant rates with growth in the U. S. Offset by a decline across international markets. On a global basis, the market continues to be dampened by the impact of the pandemic, which has Contributed to a higher mortality rate for patients with kidney disease, combined with a slowing of new patient diagnosis. Speaker 200:07:03As we said last quarter, we expect the recovery of this market to continue, returning to its pre COVID dynamics over the next 1 to 2 years. In this quarter, we positive year over year PD patient growth globally, including mid single digit PD patient growth in the U. S. The pandemic has highlighted the vital importance of the home dialysis therapy option. And as a leader and recognized innovator in this Space, it has never been more urgent to support education, awareness and access. Speaker 200:07:37Our global Safe at Home campaign, which has been Underway for more than a year is dedicated to helping clinicians, patients and other stakeholders learn more about the benefits of home care, particularly amid pandemic conditions. Lastly, performance in Acute Therapies declined Mid single digits at constant currency rates year over year. This decline was expected given the extremely challenging Following last year's historic surge in demand for continuous renal replacement therapy in light of the pandemic, We remain excited by the prospects for the advanced treatment options in the CRRT market. In fact, Q2 marked the launch of PrisMAX through the latest version of our next gen platform for CRRT and organ support With embedded TrueView Digital Health Technology. From an ESG perspective, earlier this month, We announced our 2,030 corporate responsibility commitment, which will help to drive Baxter's environmental social governance efforts over the next Decade and beyond. Speaker 200:08:47This work is integral to how we advance our mission to save and sustain lives and serve All of our stakeholders from patients and clinicians to our communities and investors. Our 2,030 commitment is built around the 3 overarching objectives: Briefly looking ahead, we continue operating in an environment Of some uncertainty, we fully anticipate the broader trend of pandemic recovery to sustain, but geographic disparities and emerging variants Could slow or undermine the pace. Also, just like our healthcare peers in countless other companies, Baxter is subject to the impact of inflation In the rising cost of freight, fuel and other raw materials and commodities, we will continue to look for opportunities to offset the impact From these incremental expenses. As I wrap up, I want to highlight that our 2021 investor conference will be held on Monday, September 20, in Deer At the conference, we plan to focus on our key strategic objectives to enhance growth and drive innovation. In addition, as a critical part of our Ongoing business transformation, Jim Borze, Senior Vice President and Chief Supply Chain Officer, will outline the next Phase of our manufacturing supply chain journey, which is expected to enhance our operational effectiveness and drive margin improvement. Speaker 200:10:22Now I'll pass it to Jay, who will share a closer look at our results and our outlook for the balance of the year. Thanks, Joe, and Speaker 300:10:32good morning, everyone. As Joe mentioned, we're pleased with our strong second quarter performance. 2nd quarter 2021 global sales of 3 $1,000,000,000 advanced 14% on a reported basis, 9% on a constant currency basis and 8% on an operational basis. Sales growth this quarter reflects the ongoing recovery in hospital and surgical volumes, along with the benefit from COVID vaccines. We estimate these factors contributed just over 4.50 basis points of sales growth in the quarter. Speaker 300:11:04OUS sales of Calyxtoxel to $0.80 per share, exceeding our guidance range, driven by disciplined operational execution and a lower than expected tax rate. Now I'll walk through performance by our regional segments and key product categories. Starting with our 3 regional segments, sales in the Americas increased 8% on both the constant currency and operational basis. Sales in Europe, Middle East and Africa Grew 8% on a constant currency basis and 5% on an operational basis and sales in our Asia Pac region advanced 10% on a constant currency basis and 9% operationally. Moving on to performance by key product category. Speaker 300:11:53Note that for this quarter, constant currency growth is equal to operational sales growth All global businesses except for our Pharmaceuticals business for which we will provide both constant currency and operational growth adjusted for the Acquisition of rights in select territories outside the U. S. To Caelus and Dobzhil. Global sales for Renewal Care were 964 $4,000,000 was flat on a constant currency basis. Performance in the quarter was driven by our PD business where we observed both the sequential and year over year improvement in global patient volumes. Speaker 300:12:27This was partially offset by declining international sales of in center HD dialyzers, Reflecting the impact from the pandemic as well as competitive dynamics, we continue to monitor the impact of excess mortality among Our deep patients and delays in new patient diagnoses resulting from the pandemic, our expectation remains that PD patient volumes will continue to ramp over the course of the year, Although the pace may vary by market, in particular, we are monitoring COVID resurgences in Asia Pac and parts of Europe. Sales and medication delivery of $697,000,000 increased 12% on a constant currency basis. Strong global growth in this business reflects the recovery in the pace of hospital admissions in many markets following the height of the pandemic last year. We estimate that in the Q2, the rate of U. S. Speaker 300:13:16Hospital admissions was down approximately 7% as compared to pre COVID levels, A market improvement from the Q2 of 2020, which saw U. S. Admissions down approximately 20%. Pharmaceutical sales of $546,000,000 advanced 5% on a constant currency basis and were flat to prior year on an operational basis. Performance in the quarter benefited from the recovery in surgical procedures and hospital admissions, demand for our international pharmacy compounding business And the contribution from OUS sales of Calyxtosil. Speaker 300:13:50This growth was partially offset by declines in our U. S. Generic injectables portfolio, Which faced a headwind from prior year sales of select injectable drugs used to treat critical COVID-nineteen patients, as well as increased competitive activity for certain molecules. Moving to clinical nutrition, total sales were $237,000,000 increasing 3 on a constant currency basis. Performance in the quarter was driven primarily by growth in the U. Speaker 300:14:18S, partially offset by lower international Sales of vitamins resulting from supply constraints. Sales in advanced surgery were $256,000,000 increasing 48% on constant currency basis, within the quarter, we estimate surgical procedures were at or slightly above pre COVID levels, contributing to strength in the quarter. Sales in our Acute Therapies business were $188,000,000 declining 4% on a constant currency basis, reflecting the challenging year over year comparison Due to surging product demand this time last year related to the COVID pandemic. As Joe mentioned, we anticipate that COVID related demand for CRRT will moderate this year, But we'll improve over time through the launch of new products and increased awareness of the therapy. Biopharm Solutions sales in the quarter were 183,000,000 Representing growth 49% on a constant currency basis, reflecting incremental sales related to the manufacturing of COVID-nineteen Speaker 200:15:16vaccines. Moving through the rest Speaker 300:15:19of the P and L, our adjusted gross margin of 42.6 percent increased by 100 basis points over the prior year, Reflecting operational improvements in manufacturing and a favorable product mix as the impact from COVID recedes. Adjusted SG and A of $649,000,000 increased 12% on a reported basis, reflecting the impact from foreign exchange, The improvement in sales and resulting increase in commissions and increased promotional spend in support of new product launches. Adjusted R and D spending in the quarter of $139,000,000 increased 18% on a reported basis, driven by the impact of foreign exchange and investments in our new product pipeline. Both adjusted SG and A and R and D spending reflect level of spend as certain expense categories were depressed last year as a result of the pandemic, particularly those related to employee bonus accruals. Adjusted operating margin in the quarter was 17.2 percent, an increase of 120 basis points versus the prior year. Speaker 300:16:20Net interest expense totaled $34,000,000 in the quarter and other non operating income contributed $2,000,000 in the quarter. The adjusted tax rate in the quarter was 17.8%, an increase over the prior year driven by lower stock based compensation award deductions as compared to the prior year period. The tax rate was favorable to our expectations driven by a favorable change in earnings mix. As previously mentioned, adjusted earnings of $0.80 per diluted share exceeded our guidance of $0.72 to $0.75 per share. Within the Q2, we repurchased approximately $300,000,000 or 3,700,000 shares of common stock. Speaker 300:17:00Year to date, we have repurchased 600,000,000 or 7,300,000 shares of common stock, which has been partially offset by option related dilution. On a net basis, our outstanding share count has declined by approximately 5,000,000 shares through the Q2. In addition, during the second quarter, we announced a 14% increase in the company's quarterly cash dividend rate, the strength of our financial position has fueled our ability to increase our capital allocation that is balanced between inorganic and organic initiatives with the objective of accelerating growth and expanding margins, Driving innovation and returning value to our shareholders. With respect to cash flow in the first half of twenty twenty one, we've generated $854,000,000 of Our outlook for the Q3 and full year 2021. For full year 2021, we expect global sales growth of approximately 8% on a reported basis, 5% to 6% on a constant currency basis and 4% to 5% on an operational basis. Speaker 300:18:14This assumes a benefit of approximately 100 basis points to both reported and constant currency revenue growth for the acquisition of Calyxt Dosto, As well as approximately 250 basis points of positive top line impact from foreign exchange on reported growth. Our expectation remains that on a full year basis, Hospital admission rates will stay below pre COVID levels with rates improving throughout the year and exiting down low single digits. Based on surgical procedure data in the U. S. To date, we now expect surgical procedures will continue to be at 100% of pre COVID levels for the remainder of the year. Speaker 300:18:48Moving down the P and L, we continue to expect adjusted operating margin to expand between 40 to 60 basis points. For the year, we expect an adjusted tax rate of approximately 17.5% and a full year diluted average share count of approximately 510,000,000 shares. Based on these factors, we now expect 2021 adjusted earnings, excluding special items, of $3.49 to $3.55 per diluted share. Specifically, the Q3 of 2021, we Global sales growth of approximately 9% on a reported basis, approximately 7% on a constant currency basis and approximately 6% on an operational basis. And we expect adjusted earnings, excluding special items, of $0.93 to $0.95 per diluted share. Speaker 300:19:36With that, We can now open the call up for Q and Operator00:19:41A. Thank you. We will now begin the question and answer session. We appreciate everyone's patience I would like to provide as many of you as possible the opportunity to ask a question. I would like to remind participants that this call is being recorded and a digital replay will be available on the Baxter International website for 60 days at www.bechter.com. Operator00:20:34Our first question comes from the line of Bob Bob Hopkins with Bank of America Securities. Speaker 400:20:41Thank you and good morning. Can you hear me okay? Speaker 200:20:43Yes, we can Bob. Good morning. Speaker 400:20:45Great. Good morning. So, yes, I just have two questions and I'll just state them upfront in the interest of time. So, I guess, first for maybe for Jay. Just wondering if you could flush out the renal performance in the quarter a little bit more, what happened internationally and how quickly you think renal could get back to Better growth rates. Speaker 400:21:06So that's question number 1. And then follow-up or question number 2 is more strategic for Joe. And Joe, I realize you won't talk about market speculation, but I do think it'd be helpful for investors to hear Maybe a little bit of an update on your thoughts on M and A generally and maybe talk about what the circumstances would have to be for you to pursue a larger deal, How important it is that M and A improve the company's growth rate, things of that nature. I just think an update there would be much appreciated. So those are my two questions and thank you Speaker 300:21:40Great. I'll address the renal question first from a Q2 performance standpoint and then turn it over to Joe for the second question. Overall, as you mentioned, the U. S. Had solid performance in renal growing 4%. Speaker 300:21:54We ended up PD was a little bit in excess of that 5% with the HD business slightly below that. And then internationally, you're right, we had a decline in the quarter, which we do not expect to continue. There were a couple of drivers of that. One is we've talked historically about patient census challenges and that being a headwind that we're facing and contending with this Which has kind of disrupted the normal orderly cadence of patient growth that we see internationally, and that was pronounced in the second quarter. Our PD business Actually slightly declined, so 1% decline in the quarter. Speaker 300:22:31We do expect that to return starting in the Q3 and the Q4. And frankly, we've seen in certain markets delays in procedures of establishing new PD patients, like for example in Japan, Along with this patient census issue, all of these things came together to impact the growth rate in the quarter. Like I say, in the second half of the year, we do expect to see an acceleration And feel solid about that. And then in the HD business, we did have some pricing competition on dialyzers. We see that from time to time. Speaker 300:23:04So the HD business declined mid single digits and we will expect that to normalize in the second half of the year. While the renal business has been a fairly consistent performer for us internationally, and if you look at that over a series of multiple quarters, I think you can expect or you can gain some confidence in the second half of the year. We'll grow that business internationally, roughly 3%. I'll turn it over to Joe to address the other questions. Speaker 200:23:30Thank you, Jay. Let me give you how I think about M and A To answer your question, Bob, first is, size being a secondary conversation. First is strategically fit for the company. We look at the areas of growth for the future. We look what is going to make a difference in the healthcare in 5 to 10 years, Where does Baxter is going? Speaker 200:23:55It's not where the puck is, where this puck is going. Sometimes we've got it attached to growth rates and things Of where things are, we've got to look where things are going. And Baxter is doing a lot in Connected Health, and we need to make sure That we have the ability to deploy capital in that area as well as adjacencies. Going into areas of no Correlation to Baxter to create a new lack of this tool presents a much more challenging Environment for the company in terms of M and A, not impossible to do it, but it's something that is more difficult. 2nd Yes, how do we see returns? Speaker 200:24:36The returns are always the same. We look at internal rate of returns to be above Our cost of capital, a few hundred basis points as well as we look at ROIC very similarly on a 5 year basis post the deal. We look also the ability for the company to generate cash flow and our ability to bring the company integrated into Baxter, Which I feel confident that we, through our digital transformation, have a much better Our ability of bringing companies in than a few years ago. And the third and last one is that not every deal is created the same, And we examine multiple opportunities at all times. So the company has a significant amount of cash And it doesn't go against deals, it goes back to the shareholders in terms of buybacks As we have done, you saw we just did some buyback this quarter. Speaker 200:25:39And for the year, we are around $600,000,000 So this is how I think about M and A. That's great. Speaker 300:25:48Thank you very much. Thanks, Bob. Operator00:25:52Bobby Marcus of JPMorgan is on the line with a question. Please state your question. Speaker 500:25:58Great. Thanks. Appreciate it. Jay, maybe I could start with you. I wanted to touch on guidance. Speaker 500:26:05You guys had a really nice EPS In the quarter, you have admissions trending towards pre COVID levels over the back part of the year. Maybe you could just walk us through the updated guidance and how you ended up where you did especially on EPS? Speaker 300:26:25Sure. You're right, Robbie. Thus far, we're seeing a fairly stable admissions environment relative to our expectations. Underlying our guidance, we're expecting roughly 98% of admissions in the United States in the Q4 of We watched that of course very carefully and I've talked about the risk and the sensitivity around that in the past and we're particularly watching given the delta variant, but Feel solid that we've got our hands around this at this point. And so then as we translate that to the rest of the P and L, Let me talk first about a full year basis and then maybe make some comments on the second half. Speaker 300:27:05On a full year basis, We are seeing some challenges in the Pharmaceuticals business related to competition and pricing. And so, on a full year basis, probably $0.06 of a headwind From pharma, offset by $0.06 of a benefit from our biopharma solutions business, which is performing better than our So those items kind of sort of counteract each other. And then we have roughly $0.08 or so a full year basis of global supply chain costs that we're contending with. And so essentially, we're seeing things like Freight and premium freight costs, that's roughly $0.03 We actually have a fairly substantial manufacturing facility in Colombia. We've had a couple of sense of impact from Colombia unrest and ensuring we're getting product to our patients and product out of the country in an expeditious manner. Speaker 300:28:00And then of course, there's some purchase price variations, which there is some inflation in that, rounding out the $0.08 But offsetting that, We're committed to really using resources efficiently as a company. And so we're able to counteract the vast majority of that. So roughly $0.07 of benefit from measures that we have in place that are enhanced versus our expectations, Really looking at all of the spending categories and challenging ourselves to make sure that we're using resources as efficiently as possible. Of course, when we do those exercises, we don't touch things like quality or critical R and D programs, but we really do look hard at the cost base To ensure we're being efficient and offsetting where possible. So that's really the story on a full year basis. Speaker 300:28:52But if you think about it and then there's financial assumptions that kind of wash out. We had some benefit in the first half from a number of assumptions and then we had some headwinds in the second half. But if you look at it exclusively from a second half standpoint, I'll say that FX is actually $0.03 of impact. So that is really one of the big drivers of the second half performance. We've seen dollar strengthening And so that has an impact on our translation back of our overseas business. Speaker 300:29:22That's roughly $0.03 BPS and Pharma again kind of wash out in the second half. Speaker 200:29:27I mean, then we have Speaker 300:29:28a couple of sense of supply chain expenses. But I think really the most notable impact of the second half Is this foreign exchange impact that we're contending with right now. Speaker 500:29:40Great. And Jay, I don't know if you want to take this or Joe, Speaker 600:29:45I think it is worthwhile spending Speaker 500:29:46a little more time on the $0.06 Pharma headwind, What's driving that? What drugs? What makes you feel better if you could overcome it in the second half? And just any detail there would be great. Thanks. Speaker 200:29:59Robbie, when we think about pharma, what's the value proposition of our pharma business is complex formulations And delivery in novel ways, premixes and ways that have not been yet Launched or a combination of both. So we are in process All delivering on our portfolio. The conditions of the market have deteriorated in terms of pricing headwinds As well as COVID with the patients that have not gone to a hospital and the budget of the pharmacies, right? So when we look at this whole thing, where do we stand today? We still see the headwinds that, that business has. Speaker 200:30:48Don't confuse the whole category that we have, which has 2 very separate businesses. 1 is our anesthesia business, which are gases, Anesthetic gases and that has declined consistently over the last 24 months because the type of Delivery systems that anesthesiologists are using across the globe for gas from our pharmaceutical business. So I'd tell you that we just had 3 products conditionally approved. We're going to be launching 3 in the next 6 to 9 months. We are excited about the portfolio and follows the same recipe of difficult to formulate and novel ways of delivering. Speaker 200:31:33So if you think about that, it is still a good business, has very, very, very strong and healthy profitability. So what we need to do is to make sure that our innovation will just stop and we continue to bring products Organically and sometimes inorganically to the portfolio to be able to augment the growth of this business and keep ahead of the competition. Baxter So he has put together a very good group of R and D scientists in the United States as well as India. And together, They are working 24 hours a day in tandem to be able to deliver on that. I'm still Fan of that portfolio, understanding the headwinds that portfolio can have every so often as Some drugs will go down in contribution based on competition, but then we're able To launch new products, remember, of our 22 new product launches this year, probably around half of them are pharmaceutical products. Speaker 200:32:45So we do not see a long term issue for this business, but more so Every so often, the issue that you have when you have competition coming into your market that has It just happened in the last 12 months. Speaker 500:33:05Appreciate it. Thank you. Speaker 300:33:07Thanks, Robbie. Operator00:33:09Peter Chickering of Deutsche Bank is on the line with a question. Please state your question. Speaker 700:33:15Hey, good morning. Thanks for taking my questions. 2 on renal. The first one is, the U. S. Speaker 700:33:21Grew sequentially by about $1,000,000 Can you walk us through sequential PD growth versus non PD? And how much January excess mortality from COVID impacted that sequential growth? Speaker 200:33:36So, Peter, I will start and Jay will pick up from there. Our sequential growth has improved from Q1 to Q2 In the overall U. S. Market, from 3.3% To about 4% in Q2 and going then to peak about 6% in Q4 For a pretty good performance on a post 2020 year, Which was really hit hard in terms of new patients and the death of patients on COVID. I would say that the PD market is still Very much a good market to be in, and it has grown above the overall renal Dialysis business across the globe. Speaker 200:34:37Particularly in the U. S, we're still very optimistic On the vector of the growth, that despite all that happened In 2020, we're able to have growth this year and expect to return to a high single digit patient growth Double digit patient growth, probably towards the end of 'twenty two going into 2023. Speaker 100:35:06Yes. And Tito, just to add to that. Basically, by the end of the year, we would expect the dialysis population in the U. S. To grow just under 1%. Speaker 100:35:17So it is starting to recover after being down more than 2%. Again, this is the treated dialysis population in 2020. So it will return to grow up this year and then continue to grow even faster in 2022 and beyond. Speaker 700:35:32Okay, great. And Then a follow-up question on the renal OUS. How much of the impact that you guys saw in this quarter was from excess Mortality from COVID, like you mentioned to Bob that I think you expect it to normalize the back half of the year. I just want to understand how is purely temporary like the procedures in Japan for PD versus more permanent nature? Speaker 300:35:56Yes. So, what I would say is, it is really a mix of those two items and we don't differentiate we don't split that out for a number of different reasons, but Understand those drivers internally. The 1% decline, we're going to expect to see in the second half of the year 4% growth As we start to see procedures normalize and then we start to lap the headwind of the very unfortunate patient mortality situation. So, Again, if you look at as I commented earlier, if you look at the international business on a rolling 12 month basis in PD and Renal internationally, It's a solid grower for us. We expect that story to continue moving forward. Speaker 500:36:39Great. Thanks so much. Speaker 300:36:41Thank you. Operator00:36:43Vijay Kumar of Evercore ISI is on the line with a question. Please state your question. Speaker 800:36:49Hey, guys. Thanks for taking my question. Maybe my first one, a high level big picture question for Speaker 600:36:57Joe. Joe, when Speaker 800:36:58you think about the business pre pandemic versus post pandemic, At a very high level, has anything changed fundamentally for the business, right, whether when you look at your end markets, margin structure? And by fundamental, I mean, there are obviously some temporal issues here, but these all seem to be workable, solvable, Temporal in nature, but fundamentally has anything changed when you think about the pre and post pandemic even worse? Speaker 200:37:32Vijay, I think that there is changes in how patients are being treated And how hospitals are seeing the influx of patients. When you think about 2019, You saw and you see how we are looking at for the rest of the year. We see this year as a recovery year where your admissions Towards the end of the year, the exit into 2022 will be probably 100%, 90% to 100% All going back to the admission flow rates that we've had before. So if you think about the major dynamics of the market, I would say there's a move from the acute care to the less acute care. And what is the impact for Baxter? Speaker 200:38:22If you think about Baxter as a healthcare supply company With products that are a must have, independent of Versedis, we follow the patient with our products in many places. If you go to a less acute site, you will need a pump no matter what. You still need fluids, you need medicines, injectables, you still need things that I needed to treat that patient. To the home side, we have that advantage and have spoken about the PD advantage That is a positive for the company, not only by the rule in the U. S. Speaker 200:39:01With the kidney dialysis and transplant changes that were done during President Trump's tenure, but also The place to be if you have sick patients that don't want to go to acute sites or dialysis clinics. So That is a positive. When we look at what I see is temporary, the inflation that we are seeing and the disruption in supply chain, I think not only Baxter is working hard to offset that, but also I don't believe those are fundamental changes That will alter completely the going forward dynamic of our logistic costs As well as raw material costs. We will face headwinds in this area. We have spoken about the cost of containers Very extensive feel and everything else. Speaker 200:39:55We're offsetting that, as you could see this quarter and we have done for the year, and we plan to continue to do it. The thing is, how do you see that? Is that a fundamental change in the cost structure? We don't think so. We think that, that will eventually subside. Speaker 200:40:12But at the moment, we don't have that in our numbers. In our numbers, what we have is us offsetting Headwinds coming in from the cost point of view. Market wise, as I said, there are changes a significant amount of Telehealth, connecting the dots of information coming from ICUs. So the better off We will be better off, but continue to develop our digital health products as we're doing. If you think about our share source With the mobile companion that we just launched earlier this year, TrueView In our CRT as well as half of the portfolio with the FDA today regarding our new pump is not a mechanical Pump is actually software that is going with it that will be installed in the hospital's networks as H-ray to be able to manage Traffic and bringing information back and forth. Speaker 200:41:16So that boat has shipped. That boat has sailed. There's no way to not be in the connected market going forward. Speaker 800:41:28That's extremely helpful, Joe. Jay, one quick one for you. You take a lot of pride in free cash flows. Obviously, the pandemic There's been a lot of moving parts. Year to date, free cash conversion is up 70%. Speaker 800:41:43I'm curious what are temporal items here? And Should we think about Baxter when should we think about Baxter getting back to being a premium free cash conversion company? Speaker 300:41:57Thanks for the question, Vijay. As you know, Joe and I are both really focused on driving free cash And driving free cash flow performance sustainably. And frankly, we've made a series of decisions over the last couple of years To sub optimize the base case to protect against severe situations that could emerge, All these things were absolutely the right thing to do, carrying extra inventory into the pandemic. As we sit here today, carrying select inventory of incremental As we look at a hurricane season, which could be a challenge. And so these things have we've had a little bit excess Inventory relative to our normal expectations. Speaker 300:42:42As we move towards the end of the year and as we've been able to improve the predictability Of sales by product line in a post pandemic world, we'll start to be able to optimize cash Well, a little bit more carefully and closely. And so I think as we move to 20 '22 and 'twenty three, we'll start to see more normal years for cash flow. Obviously, 2020 was a huge anomaly. 2021 continues to be anomalous because of again, just really being sensitive to Having enough product available to support patients in a very challenging situation. But as I said, I think as we emerge in 2022 and 'twenty three, we'll be able to optimize inventory a little bit better, Continue our focus on accounts receivable and then furthermore on the days payable really work to optimize that working closely with our And then finally from a CapEx standpoint, there are certain investments that we always make and we'll continue to make those, Especially those that support growth in businesses like our TD business. Speaker 300:43:57So, we'll continue to look for those value creating opportunities And those exist. So we'll have more CapEx and that will be a continued area for us A great investment, but I think 2022 starts to become a more normal year and then even more so in future beyond that. Speaker 800:44:17That's helpful, Jan. Thank you, guys. Operator00:44:21Larry Biegelsen of Wells Fargo is on the line with a question. Please state your question. Speaker 600:44:26Good morning. Thanks for taking the question. One on BPS, one on Nova MyQ. Obviously, Joe, BPS was really strong this quarter. I'd love to understand The contribution from the COVID vaccine and how sustainable that is, how should we think about it? Speaker 600:44:42Is that still $50,000,000 to $100,000,000 annual opportunity. And Joe, you signed a contract last year with a partner on a non COVID Vaccine, so when can we start to see that contributing? Just trying to understand the outlook for BPS? And I had one follow-up. Speaker 200:45:01The outlook has been improving because of the necessity for vaccines. So right now, we're looking at about North of $100,000,000 this year of contribution from DPS. Specific to the COVID vaccine. Specific COVID vaccine, not BPS as a business is larger than that, Just beat GasVax in north of $100,000,000 Speaker 600:45:28And in terms of the sustainability of that, Joe, I guess there's no way to comment on that at this point? Speaker 200:45:34It's tough, Larry. We on one side, we hope that we don't ever need to produce another File a vaccine, so this disease goes away and the world is back to normal. On the other hand, we're doing what we can to help the world get through this. So I would say that you're probably going to have some residual production in 2022 because as you can see, I was overseas About a few weeks ago, and the scarcity of vaccine is remarkable. So there's still a lot of places in the world that don't have vaccines, and I think eventually those vaccines will reach there. Speaker 200:46:11So we're not making a prediction 2022, We think there will be residual production in 2022 for vaccines. Speaker 100:46:19And we do have some of our contracts to extend out for 2022 as well. Speaker 600:46:25Thank you for that. And on Nova MyQ, Joe, obviously, it's a very important product for you. I'm wondering if you'll talk a little bit about the nature of the questions you received and the timing of the response and your confidence in the 2021 approval. Speaker 200:46:42Larry, I'll give you an update overall, but the nature of the questions is a little too much. We're not going to get into it. But I would say all the questions are answerable and all the questions are not out of this world in terms of Complexity to put them on a piece of paper and get back to the FDA. I don't comment, all of you know on Call and outside the call that I don't comment on behalf of the agency. The agents will do what the agents will do. Speaker 200:47:12What we can do is Make sure that our engineers and scientists and the regulatory folks are focused We have a lot of people focused on getting those answers to the FDA. We hope that they will be happy with the answers And we can have the product launched this year as we're planning at the moment. I also want to Just to make sure that you all know, we're having pretty good demand for our spectrum pump, our current pump. So it's not all or nothing. We do have really good demand for our pump and very large contracts Coming about. Speaker 200:47:57So I just want to make sure that we feel very comfortable with what we are in terms of Our technical responses to the FDA, we think we have it. We are very happy with the design of The pump and the future that holds because a very different platform that will hit the markets when approved And hopefully, bring this industry at a different level of technology. Nevertheless, Baxter has 3 different groups of pumps, EVO IQ, Spectrum Version 9 as well as the pump that is yet to be approved by the FDA. Speaker 400:48:39Thank you, Joe. Operator00:48:42Danielle Antalffiev, SVB Leerink is on the line with a question. Please state your question. Speaker 900:48:47Hey, good morning, everyone. Thanks so much for taking the question. Just a follow-up to Vijay's question. Jay, this is for you on what's fundamentally changed. You did have pretty strong SG and A control this quarter. Speaker 900:49:00And just wondering, is that something that's sustainable going forward? And should we be thinking about that as a more meaningful Lever going forward as we head into the analyst meeting and I have one more higher level follow-up. Speaker 300:49:15Sure. I think the controls that we had in place, we're pleased that we were able to save a substantial amount in the second quarter, roughly $0.06 relative to our expectations on the OpEx line. And as we move to the full year, There's probably a couple more sense relative to our expectations. We'll always look to optimize spending for sure. And we were pleased that we were able to drive an impact in the face of a challenging worldwide supply chain environment in the second quarter. Speaker 300:49:50But there is part of the savings that we experienced this year that are related to a slower resumption of activity. And so as we look at the Q2, we had sort of anticipated a very substantial increase in SG and A. You'll note that we did have a nice sized increase in SG and A, but it was just not quite at the pace that we anticipated. So, we'll expect that to resume. Here's what I would say about SG and A and other spending categories and cost of goods going forward. Speaker 300:50:21At the Investor Day, We'll talk about things like the work that Jim Borsey is doing to really optimize manufacturing and supply chain And really taking a cutting edge approach in that arena. And then the other thing that we'll tell you about is the digital transformation that we're undertaking. And that will have a nice impact in terms of Really spending across the company, and I think that's something that will feature prominently. In the meantime, we were pleased to drive a short term result, But I don't think all the changes that we're making are the ones that we'll be talking about with you when we get together in September. Speaker 900:50:56Understood. Thanks for that, Jay. And then Joe, I guess the question is for you. And again, back to shifting fundamentals, you mentioned site of care, things like that. How are pricing conversations or contracting conversations different between the two sites of care, talking A more ambulatory or outpatient versus hospital and inpatient. Speaker 900:51:19And is that something that we need to consider as we look over the long term Thanks so much. Speaker 200:51:25Danielle, I would say that a lot of these sites are owned by large hospital systems. They are not just independent sites. The configuration of products in some of those sites are different than used in hospitals, So price points may differ for products used in non acute or Step down significant step down facilities that are not part of a hospital campus, but that is not There's no 2 different conversations going on. We believe that our products are have price consistency across Across customers, and we negotiate every single contract with the intent To have as much penetration as we can within that integrated supply chain for the hospital. So if you think about Negotiations are all about class of products and quality availability of products. Speaker 200:52:28And evidently, Price is a big deal. No pest price usually wins. So I don't see tremendous distinction. Speaker 100:52:40Okay. Thank you. You're welcome. Operator00:52:43Martin Mitsub of Credit Suisse is on the line with a question. Please state your question. Speaker 1000:52:49Hi, thanks so much. I wanted to ask a follow-up for Jay on some of the environmental trends that you're seeing. And then I had one Question for Joe as well, if I could. So on January remarks, you mentioned this sort of sustained High level of surgical volume performance you're expecting in the U. S. Speaker 1000:53:12Throughout the rest of the year. And just wondering where Speaker 800:53:17what gives Speaker 1000:53:17you that confidence or visibility that that's kind of where we'll stay? And And I mentioned one follow-up. Speaker 300:53:26Sure. Yeah, in my prepared remarks, we commented that we're seeing roughly at historic Surgical procedures, roughly 100% of prior level. We have some line of sight in the short term, but our crystal ball gets murky as we look towards year end. That's very clear. And so I would say that one point of procedure volume in the U. Speaker 300:53:53S. Is roughly $500,000 of impact Per month. And so that's something that we watch carefully. I think when we put together the sales guidance for the year, we have the ability to withstand A little bit of softness in surgical procedures and admissions as it relates to Delta variant. But this is an uncertainty that we're contending with, Not only on the surgical procedure side, but also on the admission side. Speaker 300:54:19Now, my talk historically about a lot of the work that we've done in terms of Forecasting and modeling, and I think we've done a really good job kind of relating our business to some of these fundamental drivers. But you're right, there are this is a evolved world that we're living in today, and we'll have to watch carefully As we move through the rest of the year, if the virus changes course substantially. At this point, we don't have any reason to believe that will be the case I feel good about the numbers. I've sized the downside risk, it's not enormous. So I think we're in okay shape. Speaker 1000:54:56That's great. And then just one follow-up for Joe. I think to Bob's question, you had mentioned that size was not so much of Consideration or determinant, but that I'd love to get your sense of just 2 things on the M and A environment. 1 is sort of asset pricing or The challenges that you faced in making a med device or supplies acquisition in this environment, it's been a part of the conversation for Baxter for a number of years. And then also the balance that you see, the pluses and minuses of putting more capital to work in a large deal, the risks associated And continuing with some of the trucking acquisitions that you've done before? Speaker 200:55:37If you think about In acquisitions, they're always going to be there because it's a way for us to augment product lines and adjacencies, which is announced actually one today. And that is a good way. We don't have the kind of product. We need that kind of product to compete. So there's a really good thing we saw in our pharmaceutical Speaker 300:55:56business with Doxil Speaker 200:55:56and Calyxt. So business with Doxil and Calyxt. So it is needed. But then you think about Where the future of healthcare is going, where the confluences of the forces are coming about, how do we look at our portfolio Going forward and what would be a good complement for the portfolio. So the size doesn't play a role, Obviously, if it's something enormous and unachievable, we don't discuss that. Speaker 200:56:27But the size by itself will never be a determinant. As I said before, it's a strategic strategy or a strategic appeal. 2nd is 2nd is the returns. The 3rd would be our ability to integrate well. And if we don't find anything to deploy We deploy the cash back to the shareholders. Speaker 200:56:51So don't think about size ever being determinant. Think about the strategic fit and future of healthcare. Speaker 1000:57:05Got it. Thank you. Speaker 300:57:07Thank you. Operator00:57:08Your last question comes from the line of Joanne Wuensch with Citigroup. Please state your question. Speaker 100:57:13Thank you for taking my question. Just a couple of pieces Clarification. What was the COVID vaccine benefit in the quarter on a dollar basis? It was just over 40,000,000 I'm sorry, dollars 30,000,000 dollars 40, four-zero, December $40,000 Excellent. And how much Innovium IQ dollars and cents is in the current guidance? Speaker 300:57:36Yes, we have approximately a little north of $25,000,000 in the 4th quarter. Speaker 100:57:42And thank you. And just to confirm, you're expecting hospital volumes to be at pre COVID levels exiting the year? Speaker 300:57:49No, at 90 8% in the 4th quarter. And so if we were to split it at the very end of the year, the run rate would be basically at Prior year levels, so into Q1 of next year. Speaker 100:58:04Excellent. Thank you so much. I appreciate it and have a Speaker 200:58:07great I just want to make sure that you all know that we are not predictors of disease here, neither infection rates. So We do the best we can in putting our models in place. We base our numbers on that. We will all Hopefully, the delta variant will be contained in most places in the world and we move on. But at the moment, the emissions in U. Speaker 200:58:34S. Costs for 98 exiting the year, hopefully 2022 at 100%. Things can change, as you can see by the infection rates, But the debt was still much smaller than they were before. So if we do the best we can when we look into these numbers, it's what we think is going to happen. Speaker 100:58:56Thank you. That will conclude our call. Operator00:58:59Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for participating.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallBaxter International Q2 202100:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Baxter International Earnings HeadlinesComparing PolyPid (NASDAQ:PYPD) & Baxter International (NYSE:BAX)April 25 at 2:45 AM | americanbankingnews.comBaxter International Inc (BAX) Stock Price Up 3.39% on Apr 23April 23 at 1:46 PM | gurufocus.comTrump’s treachery Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 26, 2025 | Porter & Company (Ad)Baxter International Inc. (NYSE:BAX) Given Consensus Recommendation of "Hold" by BrokeragesApril 23 at 2:39 AM | americanbankingnews.comBaxter: Messy, Yet Appealing, If New Management Can DeliverApril 21, 2025 | seekingalpha.comAttorneys for more than 100 international students argue in court against revoked visasApril 18, 2025 | msn.comSee More Baxter International Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Baxter International? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Baxter International and other key companies, straight to your email. Email Address About Baxter InternationalBaxter International (NYSE:BAX), through its subsidiaries, develops and provides a portfolio of healthcare products worldwide. The company operates through four segments: Medical Products and Therapies, Healthcare Systems and Technologies, Pharmaceuticals, and Kidney Care. The company offers sterile intravenous (IV) solutions; infusion systems and devices; parenteral nutrition therapies; generic injectable pharmaceuticals; surgical hemostat and sealant products, advanced surgical equipment; smart bed systems; patient monitoring and diagnostic technologies; and respiratory health devices, as well as advanced equipment for the surgical space, including surgical video technologies, precision positioning devices, and other accessories. It also provides administrative sets; adhesion prevention products; inhaled anesthesia; drug compounding; chronic and acute dialysis therapies and services, including peritoneal dialysis (PD), hemodialysis (HD), continuous renal replacement therapies (CRRT), and other organ support therapies. The company's products are used in hospitals, kidney dialysis centers, nursing homes, rehabilitation centers, ambulatory surgery centers, doctors' offices, and patients at home under physician supervision. The company sells its products through direct sales force, as well as through independent distributors, drug wholesalers, and specialty pharmacy or other alternate site providers in approximately 100 countries. It has an agreement with Celerity Pharmaceutical, LLC to develop acute care generic injectable premix and oncolytic products; and a collaborative research agreement with Miromatrix Medical Inc. aiming to advance care for patients with acute liver failure. Baxter International Inc. was incorporated in 1931 and is headquartered in Deerfield, Illinois.View Baxter International ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Market Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step In Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 11 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to the Baxter International Second Quarter 2021 Earnings Conference Call. Your lines will remain in a listen only mode until the question and answer segment of today's call. As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be rerecorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. Operator00:00:39I would now like to turn the call over to Ms. Claire Trackman, Vice President of Investor Relations at Baxter International. Ms. Trachman, you may begin. Speaker 100:00:48Good morning, and welcome to our 2nd quarter 2021 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer and Jay Zaccaro, Baxter's Chief Financial Officer. On the call this morning, we will be discussing Baxter's Q2 2021 financial results and full year 2021 financial outlook. With that, let me start our prepared remarks by reminding everyone That this presentation, including comments regarding our financial outlook for the Q3 and full year 2021, new product developments, Business development and regulatory matters contain forward looking statements that involve risks and uncertainties. And of course, our actual results could differ materially from our current Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. Speaker 100:01:44In addition, on today's call, non GAAP financial measures will be used to help investors understand Baxter's ongoing business performance. A reconciliation of the non GAAP financial measures being discussed today to the comparable GAAP financial measures is included in our earnings release issued this morning and available on our website. Now I'd like to turn the call over to Joe. Joe? Speaker 200:02:06Thank you, Claire. Good morning, everyone, and thank you for joining us. I will begin with a review of Baxter's 2nd quarter results And I'll also share a few words about our upcoming investor conference. Jay will then provide a deeper dive on our financial performance and outlook. And we will wrap up with Q and A. Speaker 200:02:27Baxter delivered 2nd quarter sales growth of 14% as reported, 9% on a constant currency basis and 8% operationally. Growth was driven primarily by the ongoing global recovery From the COVID-nineteen pandemic resulted in favorable performance comparisons for a number of our businesses versus the prior year. As the pandemic affect the patient treatment dynamics and demand mix in the prior year. On the bottom line, 2nd quarter adjusted earnings per share were $0.80 Up 25% year over year and exceeding our original guidance. All three of our geographic segments contributed to the positive quarterly performance. Speaker 200:03:11The Americas and EMEA achieved high single digit growth and APAC achieved low double digit growth, All at constant currency rates. While we are clearly experiencing recovery from the pandemic across all three of our The situation on the ground varies considerably by market. As always, we salute the healthcare workers Who continue to face enormous challenges every day on the front lines of care. I also want to express my personal gratitude To all the Baxter employees who tirelessly support these clinicians and caregivers, while helping to ensure we address the needs The patients across our vast life sustaining portfolio. Turning to our performance by business, 5 of our 7 product categories achieved growth on a constant currency basis. Speaker 200:04:05Performance was led by biopharma solutions and advanced Surgery, which delivered 49% 48% constant currency growth, respectively. Growth in BPS was fueled by contracts to assist in the manufacture of COVID-nineteen vaccines. Advanced Surgery growth reflects a favorable comparison to the prior year spurred by improving Surgical volumes as pandemic recovery advances globally. As you saw in this morning's press release, We are building on our momentum in advanced surgery with the acquisition of PerClot Polysaccharide Hemostatic System. PerClot marks our entry into the global hemostatic powder segment, which will allow us to serve surgeons and their patients With an even broader range of options to control intraoperative bleeding across active and passive solutions. Speaker 200:05:05Our medication delivery business grew 12% at constant currency rates, also benefiting from a favorable comparison, Driven by improving rates of admissions at hospitals as compared to the prior year. Looking ahead, Medication delivery is continuing to position for the U. S. Launch of our Novum IQ infusion platform, including Dose IQ Safety software in our IQ Enterprise Digital Connectivity Suite. Following up on our recent FDA resubmission, We're now in the process of responding to an additional information request from the agency. Speaker 200:05:46We continue to expect to launch Novomy Q in the U. S. Before the end of the year. Our clinical nutrition category advanced single digits At constant currency rates, reflecting ongoing strength in the U. S, Pharmaceuticals Also grew at single digits constant currency. Speaker 200:06:07Adjusting for the recent Calyxt and Doxil acquisition, Pharmaceuticals was flat Year over year, although we expect competitive pressures to continue in this marketplace, we remain focused on launching molecules with We have several projected launches of new generic injectables in the coming years that will help to fuel growth in this business and mitigate some of the competitive pressures we are experiencing. Performance in Renal Care was comparable to the prior year at constant rates with growth in the U. S. Offset by a decline across international markets. On a global basis, the market continues to be dampened by the impact of the pandemic, which has Contributed to a higher mortality rate for patients with kidney disease, combined with a slowing of new patient diagnosis. Speaker 200:07:03As we said last quarter, we expect the recovery of this market to continue, returning to its pre COVID dynamics over the next 1 to 2 years. In this quarter, we positive year over year PD patient growth globally, including mid single digit PD patient growth in the U. S. The pandemic has highlighted the vital importance of the home dialysis therapy option. And as a leader and recognized innovator in this Space, it has never been more urgent to support education, awareness and access. Speaker 200:07:37Our global Safe at Home campaign, which has been Underway for more than a year is dedicated to helping clinicians, patients and other stakeholders learn more about the benefits of home care, particularly amid pandemic conditions. Lastly, performance in Acute Therapies declined Mid single digits at constant currency rates year over year. This decline was expected given the extremely challenging Following last year's historic surge in demand for continuous renal replacement therapy in light of the pandemic, We remain excited by the prospects for the advanced treatment options in the CRRT market. In fact, Q2 marked the launch of PrisMAX through the latest version of our next gen platform for CRRT and organ support With embedded TrueView Digital Health Technology. From an ESG perspective, earlier this month, We announced our 2,030 corporate responsibility commitment, which will help to drive Baxter's environmental social governance efforts over the next Decade and beyond. Speaker 200:08:47This work is integral to how we advance our mission to save and sustain lives and serve All of our stakeholders from patients and clinicians to our communities and investors. Our 2,030 commitment is built around the 3 overarching objectives: Briefly looking ahead, we continue operating in an environment Of some uncertainty, we fully anticipate the broader trend of pandemic recovery to sustain, but geographic disparities and emerging variants Could slow or undermine the pace. Also, just like our healthcare peers in countless other companies, Baxter is subject to the impact of inflation In the rising cost of freight, fuel and other raw materials and commodities, we will continue to look for opportunities to offset the impact From these incremental expenses. As I wrap up, I want to highlight that our 2021 investor conference will be held on Monday, September 20, in Deer At the conference, we plan to focus on our key strategic objectives to enhance growth and drive innovation. In addition, as a critical part of our Ongoing business transformation, Jim Borze, Senior Vice President and Chief Supply Chain Officer, will outline the next Phase of our manufacturing supply chain journey, which is expected to enhance our operational effectiveness and drive margin improvement. Speaker 200:10:22Now I'll pass it to Jay, who will share a closer look at our results and our outlook for the balance of the year. Thanks, Joe, and Speaker 300:10:32good morning, everyone. As Joe mentioned, we're pleased with our strong second quarter performance. 2nd quarter 2021 global sales of 3 $1,000,000,000 advanced 14% on a reported basis, 9% on a constant currency basis and 8% on an operational basis. Sales growth this quarter reflects the ongoing recovery in hospital and surgical volumes, along with the benefit from COVID vaccines. We estimate these factors contributed just over 4.50 basis points of sales growth in the quarter. Speaker 300:11:04OUS sales of Calyxtoxel to $0.80 per share, exceeding our guidance range, driven by disciplined operational execution and a lower than expected tax rate. Now I'll walk through performance by our regional segments and key product categories. Starting with our 3 regional segments, sales in the Americas increased 8% on both the constant currency and operational basis. Sales in Europe, Middle East and Africa Grew 8% on a constant currency basis and 5% on an operational basis and sales in our Asia Pac region advanced 10% on a constant currency basis and 9% operationally. Moving on to performance by key product category. Speaker 300:11:53Note that for this quarter, constant currency growth is equal to operational sales growth All global businesses except for our Pharmaceuticals business for which we will provide both constant currency and operational growth adjusted for the Acquisition of rights in select territories outside the U. S. To Caelus and Dobzhil. Global sales for Renewal Care were 964 $4,000,000 was flat on a constant currency basis. Performance in the quarter was driven by our PD business where we observed both the sequential and year over year improvement in global patient volumes. Speaker 300:12:27This was partially offset by declining international sales of in center HD dialyzers, Reflecting the impact from the pandemic as well as competitive dynamics, we continue to monitor the impact of excess mortality among Our deep patients and delays in new patient diagnoses resulting from the pandemic, our expectation remains that PD patient volumes will continue to ramp over the course of the year, Although the pace may vary by market, in particular, we are monitoring COVID resurgences in Asia Pac and parts of Europe. Sales and medication delivery of $697,000,000 increased 12% on a constant currency basis. Strong global growth in this business reflects the recovery in the pace of hospital admissions in many markets following the height of the pandemic last year. We estimate that in the Q2, the rate of U. S. Speaker 300:13:16Hospital admissions was down approximately 7% as compared to pre COVID levels, A market improvement from the Q2 of 2020, which saw U. S. Admissions down approximately 20%. Pharmaceutical sales of $546,000,000 advanced 5% on a constant currency basis and were flat to prior year on an operational basis. Performance in the quarter benefited from the recovery in surgical procedures and hospital admissions, demand for our international pharmacy compounding business And the contribution from OUS sales of Calyxtosil. Speaker 300:13:50This growth was partially offset by declines in our U. S. Generic injectables portfolio, Which faced a headwind from prior year sales of select injectable drugs used to treat critical COVID-nineteen patients, as well as increased competitive activity for certain molecules. Moving to clinical nutrition, total sales were $237,000,000 increasing 3 on a constant currency basis. Performance in the quarter was driven primarily by growth in the U. Speaker 300:14:18S, partially offset by lower international Sales of vitamins resulting from supply constraints. Sales in advanced surgery were $256,000,000 increasing 48% on constant currency basis, within the quarter, we estimate surgical procedures were at or slightly above pre COVID levels, contributing to strength in the quarter. Sales in our Acute Therapies business were $188,000,000 declining 4% on a constant currency basis, reflecting the challenging year over year comparison Due to surging product demand this time last year related to the COVID pandemic. As Joe mentioned, we anticipate that COVID related demand for CRRT will moderate this year, But we'll improve over time through the launch of new products and increased awareness of the therapy. Biopharm Solutions sales in the quarter were 183,000,000 Representing growth 49% on a constant currency basis, reflecting incremental sales related to the manufacturing of COVID-nineteen Speaker 200:15:16vaccines. Moving through the rest Speaker 300:15:19of the P and L, our adjusted gross margin of 42.6 percent increased by 100 basis points over the prior year, Reflecting operational improvements in manufacturing and a favorable product mix as the impact from COVID recedes. Adjusted SG and A of $649,000,000 increased 12% on a reported basis, reflecting the impact from foreign exchange, The improvement in sales and resulting increase in commissions and increased promotional spend in support of new product launches. Adjusted R and D spending in the quarter of $139,000,000 increased 18% on a reported basis, driven by the impact of foreign exchange and investments in our new product pipeline. Both adjusted SG and A and R and D spending reflect level of spend as certain expense categories were depressed last year as a result of the pandemic, particularly those related to employee bonus accruals. Adjusted operating margin in the quarter was 17.2 percent, an increase of 120 basis points versus the prior year. Speaker 300:16:20Net interest expense totaled $34,000,000 in the quarter and other non operating income contributed $2,000,000 in the quarter. The adjusted tax rate in the quarter was 17.8%, an increase over the prior year driven by lower stock based compensation award deductions as compared to the prior year period. The tax rate was favorable to our expectations driven by a favorable change in earnings mix. As previously mentioned, adjusted earnings of $0.80 per diluted share exceeded our guidance of $0.72 to $0.75 per share. Within the Q2, we repurchased approximately $300,000,000 or 3,700,000 shares of common stock. Speaker 300:17:00Year to date, we have repurchased 600,000,000 or 7,300,000 shares of common stock, which has been partially offset by option related dilution. On a net basis, our outstanding share count has declined by approximately 5,000,000 shares through the Q2. In addition, during the second quarter, we announced a 14% increase in the company's quarterly cash dividend rate, the strength of our financial position has fueled our ability to increase our capital allocation that is balanced between inorganic and organic initiatives with the objective of accelerating growth and expanding margins, Driving innovation and returning value to our shareholders. With respect to cash flow in the first half of twenty twenty one, we've generated $854,000,000 of Our outlook for the Q3 and full year 2021. For full year 2021, we expect global sales growth of approximately 8% on a reported basis, 5% to 6% on a constant currency basis and 4% to 5% on an operational basis. Speaker 300:18:14This assumes a benefit of approximately 100 basis points to both reported and constant currency revenue growth for the acquisition of Calyxt Dosto, As well as approximately 250 basis points of positive top line impact from foreign exchange on reported growth. Our expectation remains that on a full year basis, Hospital admission rates will stay below pre COVID levels with rates improving throughout the year and exiting down low single digits. Based on surgical procedure data in the U. S. To date, we now expect surgical procedures will continue to be at 100% of pre COVID levels for the remainder of the year. Speaker 300:18:48Moving down the P and L, we continue to expect adjusted operating margin to expand between 40 to 60 basis points. For the year, we expect an adjusted tax rate of approximately 17.5% and a full year diluted average share count of approximately 510,000,000 shares. Based on these factors, we now expect 2021 adjusted earnings, excluding special items, of $3.49 to $3.55 per diluted share. Specifically, the Q3 of 2021, we Global sales growth of approximately 9% on a reported basis, approximately 7% on a constant currency basis and approximately 6% on an operational basis. And we expect adjusted earnings, excluding special items, of $0.93 to $0.95 per diluted share. Speaker 300:19:36With that, We can now open the call up for Q and Operator00:19:41A. Thank you. We will now begin the question and answer session. We appreciate everyone's patience I would like to provide as many of you as possible the opportunity to ask a question. I would like to remind participants that this call is being recorded and a digital replay will be available on the Baxter International website for 60 days at www.bechter.com. Operator00:20:34Our first question comes from the line of Bob Bob Hopkins with Bank of America Securities. Speaker 400:20:41Thank you and good morning. Can you hear me okay? Speaker 200:20:43Yes, we can Bob. Good morning. Speaker 400:20:45Great. Good morning. So, yes, I just have two questions and I'll just state them upfront in the interest of time. So, I guess, first for maybe for Jay. Just wondering if you could flush out the renal performance in the quarter a little bit more, what happened internationally and how quickly you think renal could get back to Better growth rates. Speaker 400:21:06So that's question number 1. And then follow-up or question number 2 is more strategic for Joe. And Joe, I realize you won't talk about market speculation, but I do think it'd be helpful for investors to hear Maybe a little bit of an update on your thoughts on M and A generally and maybe talk about what the circumstances would have to be for you to pursue a larger deal, How important it is that M and A improve the company's growth rate, things of that nature. I just think an update there would be much appreciated. So those are my two questions and thank you Speaker 300:21:40Great. I'll address the renal question first from a Q2 performance standpoint and then turn it over to Joe for the second question. Overall, as you mentioned, the U. S. Had solid performance in renal growing 4%. Speaker 300:21:54We ended up PD was a little bit in excess of that 5% with the HD business slightly below that. And then internationally, you're right, we had a decline in the quarter, which we do not expect to continue. There were a couple of drivers of that. One is we've talked historically about patient census challenges and that being a headwind that we're facing and contending with this Which has kind of disrupted the normal orderly cadence of patient growth that we see internationally, and that was pronounced in the second quarter. Our PD business Actually slightly declined, so 1% decline in the quarter. Speaker 300:22:31We do expect that to return starting in the Q3 and the Q4. And frankly, we've seen in certain markets delays in procedures of establishing new PD patients, like for example in Japan, Along with this patient census issue, all of these things came together to impact the growth rate in the quarter. Like I say, in the second half of the year, we do expect to see an acceleration And feel solid about that. And then in the HD business, we did have some pricing competition on dialyzers. We see that from time to time. Speaker 300:23:04So the HD business declined mid single digits and we will expect that to normalize in the second half of the year. While the renal business has been a fairly consistent performer for us internationally, and if you look at that over a series of multiple quarters, I think you can expect or you can gain some confidence in the second half of the year. We'll grow that business internationally, roughly 3%. I'll turn it over to Joe to address the other questions. Speaker 200:23:30Thank you, Jay. Let me give you how I think about M and A To answer your question, Bob, first is, size being a secondary conversation. First is strategically fit for the company. We look at the areas of growth for the future. We look what is going to make a difference in the healthcare in 5 to 10 years, Where does Baxter is going? Speaker 200:23:55It's not where the puck is, where this puck is going. Sometimes we've got it attached to growth rates and things Of where things are, we've got to look where things are going. And Baxter is doing a lot in Connected Health, and we need to make sure That we have the ability to deploy capital in that area as well as adjacencies. Going into areas of no Correlation to Baxter to create a new lack of this tool presents a much more challenging Environment for the company in terms of M and A, not impossible to do it, but it's something that is more difficult. 2nd Yes, how do we see returns? Speaker 200:24:36The returns are always the same. We look at internal rate of returns to be above Our cost of capital, a few hundred basis points as well as we look at ROIC very similarly on a 5 year basis post the deal. We look also the ability for the company to generate cash flow and our ability to bring the company integrated into Baxter, Which I feel confident that we, through our digital transformation, have a much better Our ability of bringing companies in than a few years ago. And the third and last one is that not every deal is created the same, And we examine multiple opportunities at all times. So the company has a significant amount of cash And it doesn't go against deals, it goes back to the shareholders in terms of buybacks As we have done, you saw we just did some buyback this quarter. Speaker 200:25:39And for the year, we are around $600,000,000 So this is how I think about M and A. That's great. Speaker 300:25:48Thank you very much. Thanks, Bob. Operator00:25:52Bobby Marcus of JPMorgan is on the line with a question. Please state your question. Speaker 500:25:58Great. Thanks. Appreciate it. Jay, maybe I could start with you. I wanted to touch on guidance. Speaker 500:26:05You guys had a really nice EPS In the quarter, you have admissions trending towards pre COVID levels over the back part of the year. Maybe you could just walk us through the updated guidance and how you ended up where you did especially on EPS? Speaker 300:26:25Sure. You're right, Robbie. Thus far, we're seeing a fairly stable admissions environment relative to our expectations. Underlying our guidance, we're expecting roughly 98% of admissions in the United States in the Q4 of We watched that of course very carefully and I've talked about the risk and the sensitivity around that in the past and we're particularly watching given the delta variant, but Feel solid that we've got our hands around this at this point. And so then as we translate that to the rest of the P and L, Let me talk first about a full year basis and then maybe make some comments on the second half. Speaker 300:27:05On a full year basis, We are seeing some challenges in the Pharmaceuticals business related to competition and pricing. And so, on a full year basis, probably $0.06 of a headwind From pharma, offset by $0.06 of a benefit from our biopharma solutions business, which is performing better than our So those items kind of sort of counteract each other. And then we have roughly $0.08 or so a full year basis of global supply chain costs that we're contending with. And so essentially, we're seeing things like Freight and premium freight costs, that's roughly $0.03 We actually have a fairly substantial manufacturing facility in Colombia. We've had a couple of sense of impact from Colombia unrest and ensuring we're getting product to our patients and product out of the country in an expeditious manner. Speaker 300:28:00And then of course, there's some purchase price variations, which there is some inflation in that, rounding out the $0.08 But offsetting that, We're committed to really using resources efficiently as a company. And so we're able to counteract the vast majority of that. So roughly $0.07 of benefit from measures that we have in place that are enhanced versus our expectations, Really looking at all of the spending categories and challenging ourselves to make sure that we're using resources as efficiently as possible. Of course, when we do those exercises, we don't touch things like quality or critical R and D programs, but we really do look hard at the cost base To ensure we're being efficient and offsetting where possible. So that's really the story on a full year basis. Speaker 300:28:52But if you think about it and then there's financial assumptions that kind of wash out. We had some benefit in the first half from a number of assumptions and then we had some headwinds in the second half. But if you look at it exclusively from a second half standpoint, I'll say that FX is actually $0.03 of impact. So that is really one of the big drivers of the second half performance. We've seen dollar strengthening And so that has an impact on our translation back of our overseas business. Speaker 300:29:22That's roughly $0.03 BPS and Pharma again kind of wash out in the second half. Speaker 200:29:27I mean, then we have Speaker 300:29:28a couple of sense of supply chain expenses. But I think really the most notable impact of the second half Is this foreign exchange impact that we're contending with right now. Speaker 500:29:40Great. And Jay, I don't know if you want to take this or Joe, Speaker 600:29:45I think it is worthwhile spending Speaker 500:29:46a little more time on the $0.06 Pharma headwind, What's driving that? What drugs? What makes you feel better if you could overcome it in the second half? And just any detail there would be great. Thanks. Speaker 200:29:59Robbie, when we think about pharma, what's the value proposition of our pharma business is complex formulations And delivery in novel ways, premixes and ways that have not been yet Launched or a combination of both. So we are in process All delivering on our portfolio. The conditions of the market have deteriorated in terms of pricing headwinds As well as COVID with the patients that have not gone to a hospital and the budget of the pharmacies, right? So when we look at this whole thing, where do we stand today? We still see the headwinds that, that business has. Speaker 200:30:48Don't confuse the whole category that we have, which has 2 very separate businesses. 1 is our anesthesia business, which are gases, Anesthetic gases and that has declined consistently over the last 24 months because the type of Delivery systems that anesthesiologists are using across the globe for gas from our pharmaceutical business. So I'd tell you that we just had 3 products conditionally approved. We're going to be launching 3 in the next 6 to 9 months. We are excited about the portfolio and follows the same recipe of difficult to formulate and novel ways of delivering. Speaker 200:31:33So if you think about that, it is still a good business, has very, very, very strong and healthy profitability. So what we need to do is to make sure that our innovation will just stop and we continue to bring products Organically and sometimes inorganically to the portfolio to be able to augment the growth of this business and keep ahead of the competition. Baxter So he has put together a very good group of R and D scientists in the United States as well as India. And together, They are working 24 hours a day in tandem to be able to deliver on that. I'm still Fan of that portfolio, understanding the headwinds that portfolio can have every so often as Some drugs will go down in contribution based on competition, but then we're able To launch new products, remember, of our 22 new product launches this year, probably around half of them are pharmaceutical products. Speaker 200:32:45So we do not see a long term issue for this business, but more so Every so often, the issue that you have when you have competition coming into your market that has It just happened in the last 12 months. Speaker 500:33:05Appreciate it. Thank you. Speaker 300:33:07Thanks, Robbie. Operator00:33:09Peter Chickering of Deutsche Bank is on the line with a question. Please state your question. Speaker 700:33:15Hey, good morning. Thanks for taking my questions. 2 on renal. The first one is, the U. S. Speaker 700:33:21Grew sequentially by about $1,000,000 Can you walk us through sequential PD growth versus non PD? And how much January excess mortality from COVID impacted that sequential growth? Speaker 200:33:36So, Peter, I will start and Jay will pick up from there. Our sequential growth has improved from Q1 to Q2 In the overall U. S. Market, from 3.3% To about 4% in Q2 and going then to peak about 6% in Q4 For a pretty good performance on a post 2020 year, Which was really hit hard in terms of new patients and the death of patients on COVID. I would say that the PD market is still Very much a good market to be in, and it has grown above the overall renal Dialysis business across the globe. Speaker 200:34:37Particularly in the U. S, we're still very optimistic On the vector of the growth, that despite all that happened In 2020, we're able to have growth this year and expect to return to a high single digit patient growth Double digit patient growth, probably towards the end of 'twenty two going into 2023. Speaker 100:35:06Yes. And Tito, just to add to that. Basically, by the end of the year, we would expect the dialysis population in the U. S. To grow just under 1%. Speaker 100:35:17So it is starting to recover after being down more than 2%. Again, this is the treated dialysis population in 2020. So it will return to grow up this year and then continue to grow even faster in 2022 and beyond. Speaker 700:35:32Okay, great. And Then a follow-up question on the renal OUS. How much of the impact that you guys saw in this quarter was from excess Mortality from COVID, like you mentioned to Bob that I think you expect it to normalize the back half of the year. I just want to understand how is purely temporary like the procedures in Japan for PD versus more permanent nature? Speaker 300:35:56Yes. So, what I would say is, it is really a mix of those two items and we don't differentiate we don't split that out for a number of different reasons, but Understand those drivers internally. The 1% decline, we're going to expect to see in the second half of the year 4% growth As we start to see procedures normalize and then we start to lap the headwind of the very unfortunate patient mortality situation. So, Again, if you look at as I commented earlier, if you look at the international business on a rolling 12 month basis in PD and Renal internationally, It's a solid grower for us. We expect that story to continue moving forward. Speaker 500:36:39Great. Thanks so much. Speaker 300:36:41Thank you. Operator00:36:43Vijay Kumar of Evercore ISI is on the line with a question. Please state your question. Speaker 800:36:49Hey, guys. Thanks for taking my question. Maybe my first one, a high level big picture question for Speaker 600:36:57Joe. Joe, when Speaker 800:36:58you think about the business pre pandemic versus post pandemic, At a very high level, has anything changed fundamentally for the business, right, whether when you look at your end markets, margin structure? And by fundamental, I mean, there are obviously some temporal issues here, but these all seem to be workable, solvable, Temporal in nature, but fundamentally has anything changed when you think about the pre and post pandemic even worse? Speaker 200:37:32Vijay, I think that there is changes in how patients are being treated And how hospitals are seeing the influx of patients. When you think about 2019, You saw and you see how we are looking at for the rest of the year. We see this year as a recovery year where your admissions Towards the end of the year, the exit into 2022 will be probably 100%, 90% to 100% All going back to the admission flow rates that we've had before. So if you think about the major dynamics of the market, I would say there's a move from the acute care to the less acute care. And what is the impact for Baxter? Speaker 200:38:22If you think about Baxter as a healthcare supply company With products that are a must have, independent of Versedis, we follow the patient with our products in many places. If you go to a less acute site, you will need a pump no matter what. You still need fluids, you need medicines, injectables, you still need things that I needed to treat that patient. To the home side, we have that advantage and have spoken about the PD advantage That is a positive for the company, not only by the rule in the U. S. Speaker 200:39:01With the kidney dialysis and transplant changes that were done during President Trump's tenure, but also The place to be if you have sick patients that don't want to go to acute sites or dialysis clinics. So That is a positive. When we look at what I see is temporary, the inflation that we are seeing and the disruption in supply chain, I think not only Baxter is working hard to offset that, but also I don't believe those are fundamental changes That will alter completely the going forward dynamic of our logistic costs As well as raw material costs. We will face headwinds in this area. We have spoken about the cost of containers Very extensive feel and everything else. Speaker 200:39:55We're offsetting that, as you could see this quarter and we have done for the year, and we plan to continue to do it. The thing is, how do you see that? Is that a fundamental change in the cost structure? We don't think so. We think that, that will eventually subside. Speaker 200:40:12But at the moment, we don't have that in our numbers. In our numbers, what we have is us offsetting Headwinds coming in from the cost point of view. Market wise, as I said, there are changes a significant amount of Telehealth, connecting the dots of information coming from ICUs. So the better off We will be better off, but continue to develop our digital health products as we're doing. If you think about our share source With the mobile companion that we just launched earlier this year, TrueView In our CRT as well as half of the portfolio with the FDA today regarding our new pump is not a mechanical Pump is actually software that is going with it that will be installed in the hospital's networks as H-ray to be able to manage Traffic and bringing information back and forth. Speaker 200:41:16So that boat has shipped. That boat has sailed. There's no way to not be in the connected market going forward. Speaker 800:41:28That's extremely helpful, Joe. Jay, one quick one for you. You take a lot of pride in free cash flows. Obviously, the pandemic There's been a lot of moving parts. Year to date, free cash conversion is up 70%. Speaker 800:41:43I'm curious what are temporal items here? And Should we think about Baxter when should we think about Baxter getting back to being a premium free cash conversion company? Speaker 300:41:57Thanks for the question, Vijay. As you know, Joe and I are both really focused on driving free cash And driving free cash flow performance sustainably. And frankly, we've made a series of decisions over the last couple of years To sub optimize the base case to protect against severe situations that could emerge, All these things were absolutely the right thing to do, carrying extra inventory into the pandemic. As we sit here today, carrying select inventory of incremental As we look at a hurricane season, which could be a challenge. And so these things have we've had a little bit excess Inventory relative to our normal expectations. Speaker 300:42:42As we move towards the end of the year and as we've been able to improve the predictability Of sales by product line in a post pandemic world, we'll start to be able to optimize cash Well, a little bit more carefully and closely. And so I think as we move to 20 '22 and 'twenty three, we'll start to see more normal years for cash flow. Obviously, 2020 was a huge anomaly. 2021 continues to be anomalous because of again, just really being sensitive to Having enough product available to support patients in a very challenging situation. But as I said, I think as we emerge in 2022 and 'twenty three, we'll be able to optimize inventory a little bit better, Continue our focus on accounts receivable and then furthermore on the days payable really work to optimize that working closely with our And then finally from a CapEx standpoint, there are certain investments that we always make and we'll continue to make those, Especially those that support growth in businesses like our TD business. Speaker 300:43:57So, we'll continue to look for those value creating opportunities And those exist. So we'll have more CapEx and that will be a continued area for us A great investment, but I think 2022 starts to become a more normal year and then even more so in future beyond that. Speaker 800:44:17That's helpful, Jan. Thank you, guys. Operator00:44:21Larry Biegelsen of Wells Fargo is on the line with a question. Please state your question. Speaker 600:44:26Good morning. Thanks for taking the question. One on BPS, one on Nova MyQ. Obviously, Joe, BPS was really strong this quarter. I'd love to understand The contribution from the COVID vaccine and how sustainable that is, how should we think about it? Speaker 600:44:42Is that still $50,000,000 to $100,000,000 annual opportunity. And Joe, you signed a contract last year with a partner on a non COVID Vaccine, so when can we start to see that contributing? Just trying to understand the outlook for BPS? And I had one follow-up. Speaker 200:45:01The outlook has been improving because of the necessity for vaccines. So right now, we're looking at about North of $100,000,000 this year of contribution from DPS. Specific to the COVID vaccine. Specific COVID vaccine, not BPS as a business is larger than that, Just beat GasVax in north of $100,000,000 Speaker 600:45:28And in terms of the sustainability of that, Joe, I guess there's no way to comment on that at this point? Speaker 200:45:34It's tough, Larry. We on one side, we hope that we don't ever need to produce another File a vaccine, so this disease goes away and the world is back to normal. On the other hand, we're doing what we can to help the world get through this. So I would say that you're probably going to have some residual production in 2022 because as you can see, I was overseas About a few weeks ago, and the scarcity of vaccine is remarkable. So there's still a lot of places in the world that don't have vaccines, and I think eventually those vaccines will reach there. Speaker 200:46:11So we're not making a prediction 2022, We think there will be residual production in 2022 for vaccines. Speaker 100:46:19And we do have some of our contracts to extend out for 2022 as well. Speaker 600:46:25Thank you for that. And on Nova MyQ, Joe, obviously, it's a very important product for you. I'm wondering if you'll talk a little bit about the nature of the questions you received and the timing of the response and your confidence in the 2021 approval. Speaker 200:46:42Larry, I'll give you an update overall, but the nature of the questions is a little too much. We're not going to get into it. But I would say all the questions are answerable and all the questions are not out of this world in terms of Complexity to put them on a piece of paper and get back to the FDA. I don't comment, all of you know on Call and outside the call that I don't comment on behalf of the agency. The agents will do what the agents will do. Speaker 200:47:12What we can do is Make sure that our engineers and scientists and the regulatory folks are focused We have a lot of people focused on getting those answers to the FDA. We hope that they will be happy with the answers And we can have the product launched this year as we're planning at the moment. I also want to Just to make sure that you all know, we're having pretty good demand for our spectrum pump, our current pump. So it's not all or nothing. We do have really good demand for our pump and very large contracts Coming about. Speaker 200:47:57So I just want to make sure that we feel very comfortable with what we are in terms of Our technical responses to the FDA, we think we have it. We are very happy with the design of The pump and the future that holds because a very different platform that will hit the markets when approved And hopefully, bring this industry at a different level of technology. Nevertheless, Baxter has 3 different groups of pumps, EVO IQ, Spectrum Version 9 as well as the pump that is yet to be approved by the FDA. Speaker 400:48:39Thank you, Joe. Operator00:48:42Danielle Antalffiev, SVB Leerink is on the line with a question. Please state your question. Speaker 900:48:47Hey, good morning, everyone. Thanks so much for taking the question. Just a follow-up to Vijay's question. Jay, this is for you on what's fundamentally changed. You did have pretty strong SG and A control this quarter. Speaker 900:49:00And just wondering, is that something that's sustainable going forward? And should we be thinking about that as a more meaningful Lever going forward as we head into the analyst meeting and I have one more higher level follow-up. Speaker 300:49:15Sure. I think the controls that we had in place, we're pleased that we were able to save a substantial amount in the second quarter, roughly $0.06 relative to our expectations on the OpEx line. And as we move to the full year, There's probably a couple more sense relative to our expectations. We'll always look to optimize spending for sure. And we were pleased that we were able to drive an impact in the face of a challenging worldwide supply chain environment in the second quarter. Speaker 300:49:50But there is part of the savings that we experienced this year that are related to a slower resumption of activity. And so as we look at the Q2, we had sort of anticipated a very substantial increase in SG and A. You'll note that we did have a nice sized increase in SG and A, but it was just not quite at the pace that we anticipated. So, we'll expect that to resume. Here's what I would say about SG and A and other spending categories and cost of goods going forward. Speaker 300:50:21At the Investor Day, We'll talk about things like the work that Jim Borsey is doing to really optimize manufacturing and supply chain And really taking a cutting edge approach in that arena. And then the other thing that we'll tell you about is the digital transformation that we're undertaking. And that will have a nice impact in terms of Really spending across the company, and I think that's something that will feature prominently. In the meantime, we were pleased to drive a short term result, But I don't think all the changes that we're making are the ones that we'll be talking about with you when we get together in September. Speaker 900:50:56Understood. Thanks for that, Jay. And then Joe, I guess the question is for you. And again, back to shifting fundamentals, you mentioned site of care, things like that. How are pricing conversations or contracting conversations different between the two sites of care, talking A more ambulatory or outpatient versus hospital and inpatient. Speaker 900:51:19And is that something that we need to consider as we look over the long term Thanks so much. Speaker 200:51:25Danielle, I would say that a lot of these sites are owned by large hospital systems. They are not just independent sites. The configuration of products in some of those sites are different than used in hospitals, So price points may differ for products used in non acute or Step down significant step down facilities that are not part of a hospital campus, but that is not There's no 2 different conversations going on. We believe that our products are have price consistency across Across customers, and we negotiate every single contract with the intent To have as much penetration as we can within that integrated supply chain for the hospital. So if you think about Negotiations are all about class of products and quality availability of products. Speaker 200:52:28And evidently, Price is a big deal. No pest price usually wins. So I don't see tremendous distinction. Speaker 100:52:40Okay. Thank you. You're welcome. Operator00:52:43Martin Mitsub of Credit Suisse is on the line with a question. Please state your question. Speaker 1000:52:49Hi, thanks so much. I wanted to ask a follow-up for Jay on some of the environmental trends that you're seeing. And then I had one Question for Joe as well, if I could. So on January remarks, you mentioned this sort of sustained High level of surgical volume performance you're expecting in the U. S. Speaker 1000:53:12Throughout the rest of the year. And just wondering where Speaker 800:53:17what gives Speaker 1000:53:17you that confidence or visibility that that's kind of where we'll stay? And And I mentioned one follow-up. Speaker 300:53:26Sure. Yeah, in my prepared remarks, we commented that we're seeing roughly at historic Surgical procedures, roughly 100% of prior level. We have some line of sight in the short term, but our crystal ball gets murky as we look towards year end. That's very clear. And so I would say that one point of procedure volume in the U. Speaker 300:53:53S. Is roughly $500,000 of impact Per month. And so that's something that we watch carefully. I think when we put together the sales guidance for the year, we have the ability to withstand A little bit of softness in surgical procedures and admissions as it relates to Delta variant. But this is an uncertainty that we're contending with, Not only on the surgical procedure side, but also on the admission side. Speaker 300:54:19Now, my talk historically about a lot of the work that we've done in terms of Forecasting and modeling, and I think we've done a really good job kind of relating our business to some of these fundamental drivers. But you're right, there are this is a evolved world that we're living in today, and we'll have to watch carefully As we move through the rest of the year, if the virus changes course substantially. At this point, we don't have any reason to believe that will be the case I feel good about the numbers. I've sized the downside risk, it's not enormous. So I think we're in okay shape. Speaker 1000:54:56That's great. And then just one follow-up for Joe. I think to Bob's question, you had mentioned that size was not so much of Consideration or determinant, but that I'd love to get your sense of just 2 things on the M and A environment. 1 is sort of asset pricing or The challenges that you faced in making a med device or supplies acquisition in this environment, it's been a part of the conversation for Baxter for a number of years. And then also the balance that you see, the pluses and minuses of putting more capital to work in a large deal, the risks associated And continuing with some of the trucking acquisitions that you've done before? Speaker 200:55:37If you think about In acquisitions, they're always going to be there because it's a way for us to augment product lines and adjacencies, which is announced actually one today. And that is a good way. We don't have the kind of product. We need that kind of product to compete. So there's a really good thing we saw in our pharmaceutical Speaker 300:55:56business with Doxil Speaker 200:55:56and Calyxt. So business with Doxil and Calyxt. So it is needed. But then you think about Where the future of healthcare is going, where the confluences of the forces are coming about, how do we look at our portfolio Going forward and what would be a good complement for the portfolio. So the size doesn't play a role, Obviously, if it's something enormous and unachievable, we don't discuss that. Speaker 200:56:27But the size by itself will never be a determinant. As I said before, it's a strategic strategy or a strategic appeal. 2nd is 2nd is the returns. The 3rd would be our ability to integrate well. And if we don't find anything to deploy We deploy the cash back to the shareholders. Speaker 200:56:51So don't think about size ever being determinant. Think about the strategic fit and future of healthcare. Speaker 1000:57:05Got it. Thank you. Speaker 300:57:07Thank you. Operator00:57:08Your last question comes from the line of Joanne Wuensch with Citigroup. Please state your question. Speaker 100:57:13Thank you for taking my question. Just a couple of pieces Clarification. What was the COVID vaccine benefit in the quarter on a dollar basis? It was just over 40,000,000 I'm sorry, dollars 30,000,000 dollars 40, four-zero, December $40,000 Excellent. And how much Innovium IQ dollars and cents is in the current guidance? Speaker 300:57:36Yes, we have approximately a little north of $25,000,000 in the 4th quarter. Speaker 100:57:42And thank you. And just to confirm, you're expecting hospital volumes to be at pre COVID levels exiting the year? Speaker 300:57:49No, at 90 8% in the 4th quarter. And so if we were to split it at the very end of the year, the run rate would be basically at Prior year levels, so into Q1 of next year. Speaker 100:58:04Excellent. Thank you so much. I appreciate it and have a Speaker 200:58:07great I just want to make sure that you all know that we are not predictors of disease here, neither infection rates. So We do the best we can in putting our models in place. We base our numbers on that. We will all Hopefully, the delta variant will be contained in most places in the world and we move on. But at the moment, the emissions in U. Speaker 200:58:34S. Costs for 98 exiting the year, hopefully 2022 at 100%. Things can change, as you can see by the infection rates, But the debt was still much smaller than they were before. So if we do the best we can when we look into these numbers, it's what we think is going to happen. Speaker 100:58:56Thank you. That will conclude our call. Operator00:58:59Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for participating.Read morePowered by