Becton Dickinson at Wells Fargo Conference: Strategic Growth and Innovation

On Wednesday, 03 September 2025, Becton Dickinson (NYSE:BDX) presented at the Wells Fargo 20th Annual Healthcare Conference 2025. The company outlined its strategic focus on growth and innovation, highlighting plans for a significant business separation and continued investment in R&D. While optimistic about margin expansion and shareholder returns, BD acknowledged challenges such as headwinds from China and the need for operational adjustments.

Key Takeaways

• BD is finalizing the separation of its Life Sciences business with Waters, expected in early 2026.
• The company plans to use half of the $4 billion from the Waters transaction for share buybacks.
• BD projects mid-single-digit growth, driven by biologic drug delivery and smart connected care innovations.
• The Alaris platform is undergoing upgrades, with a new AI-enabled Pyxis Pro platform launching soon.
• BD anticipates high-single-digit to double-digit EPS growth, despite some pricing and tariff challenges.

Financial Results

• Revenue Growth:

- Q3 growth for new BD was 4%; full-year growth expected to be similar.

- Q4 organic growth is forecasted to accelerate to 5%.

• Margin Expansion:

- Strong margin expansion achieved through BD Excellence, with operating margins expected to remain stable post-separation.

• EPS Growth:

- Midpoint EPS growth of 9.5%, with potential for double-digit growth in Q4.

• Capital Allocation:

- $4 billion expected from the Waters deal, with at least $2 billion allocated to share buybacks.

- Total shareholder returns of $2.2 billion this year, including dividends.

Operational Updates

• Alaris Platform:

- Upgrading a fleet of 2.2 million units over three years, with next-gen development underway.

• Life Science Business Separation:

- On track for completion in early 2026.

• BD Excellence Program:

- Significant improvements in waste reduction, quality, and service levels.

• APM and Bactech:

- APM saw 13% growth in Q3; Bactech continues to perform well.

• Pyxis Pro:

- New AI-enabled platform with enhanced drug capacity and management features.

Future Outlook

• Revenue Growth:

- Fiscal 2025 guidance of 3% to 3.5% organic growth, with a 5% exit rate.

- Long-term ambition for mid-single-digit growth.

• China Market:

- Expected declines in China, stabilizing post-2026.

• Capital Allocation:

- Continued focus on share buybacks and strategic acquisitions.

• Macro Environment:

- Monitoring potential impacts from Medicaid cuts and exchange subsidies.

Q&A Highlights

• Margin Profile Post-Separation:

- Operating margins expected to remain within 50-100 basis points of current levels.

• Growth Drivers:

- Q4 growth driven by APM and Bactech.

• Recovery of Headwinds:

- Improvements expected in Biosciences and Farm Systems by 2026.

• Pyxis Pro:

- Anticipated market share gains and increased product integration.

For a more detailed account of Becton Dickinson’s strategic plans and financial outlook, please refer to the full transcript below.

Full transcript - Wells Fargo 20th Annual Healthcare Conference 2025:

Operator: All right. Good morning, everyone. Welcome to the twenty twenty five Wells Fargo Healthcare Conference. This is the first fireside chat we’re hosting, and I’m pleased

Unidentified speaker, Interviewer: So let’s jump right in. Tom, thanks for being here. Thanks for being a supporter of our conference for Great any conference. Great to be here. So Tom, let’s start with the big picture question or a couple.

A couple of years ago, Alerus’ return to market was a top priority for you. You’ve successfully accomplished that. Talk about your top priorities over the next twelve months as you create the new BD.

Tom, CEO, BD: Sure. Thanks. Again, thank you for having me, and thanks to everyone for kicking off the conference here. So you’re right. Aleris was a key focus on getting that back to market.

We’re really pleased with how we not only executed the return, but how we’ve been executing commercially since then. We committed to upgrade the entire 2,200,000 fleet of Alaris within a three year window. That was a commitment we made to the FDA when we returned to market. We’re in the second full year now wrapping that up, and we’re very much on track to complete the upgrade within the three year commitment. At the same time, right, we’re back to gaining share in Aleris.

As I think everyone knows, prior to the ship hold, we had a very strong trajectory of taking share. I I think on the Q3 call, we highlighted a number of recent IDN wins, and we continue new wins that we’re posting here in Q4 and feel really good about the momentum in that platform. We continue to innovate on that platform. We actually have a next gen in development that we’ll talk about in the future, but we really like where we’re heading there. Of course, the last big thing that we were focused on that we made a commitment on in the spring was we said, come summer, we’re going to announce the separation form for our Life Science business.

And we’re extremely pleased to have delivered on that commitment as well, having recently announced, of course, the separation and the RMT the first RMT in the history of the medtech industry with Waters for that. A great organization, one of the fastest growing life science companies, extremely complementary portfolio with both flow cytometry, but also in the diagnostic space, and a very meaningful value creation opportunity for our shareholders as we look forward. And so our first, when it comes to our priorities over the next twelve months, certainly number one is completing the execution of that transaction. So and we can get into that, but it’s very much on track to be completed in the first part of calendar twenty six. We have our separation teams fully up and running with their integration teams on their side.

We’ve begun filing with the SEC, the required documentation. So, everything’s hitting stride on the time line just as we had committed there. Second major priority that we’re focused on is executing our commercial strategy. And in Q3, we talked about incremental investments in our selling organization as well as behind new innovations in our pipeline. And we can talk more about some of those.

We’ve got a really exciting pipeline. Second focus is on optimizing the growth from those and through the commercial investments that we’ve been making, setting us up for FY 2026 and beyond. Third priority is continuing to execute our margin expansion strategy of BD Excellence. You’ve seen us deliver very strong margin expansion over the last couple of years at a best in class in industry, and you’re seeing that drive strong earnings growth from margin expansion gross margin expansion, right? This year is no exception, right?

While there’s dynamics in the macro environment that we see impacting revenue a bit, we’re still delivering 9.5% EPS growth at the midpoint, including absorbing tariffs, right? Strong, driven by margin expansion, driven by BD excellence. So continuing to drive that, which is enabling those investments that I described as well as well as our fourth priority, which is continuing to execute our capital allocation strategy. You heard us we’re going to have a really tremendous opportunity as we create the new BD with $4,000,000,000 of cash coming in. Of course, our shareholders will own almost 40% of the New Waters organization.

BD will also receive $4,000,000,000 of cash, which we’ve committed to allocate at least half of that to share buybacks. So, we’ll be executing upon that as we enter into FY 2026. But beyond that, we’ve also recently communicated an updated capital allocation strategy, utilizing our very strong cash flow as well with a preference in share buybacks. We recently completed the $1,000,000,000 share buyback for this year. We had indicated we were going to complete that in Q4 on the last earnings call.

That has now been completed. That will bring up our total return to shareholders this year to about $2,200,000,000 of capital return to shareholders, about $1,000,000,000 through share buybacks, dollars 1,200,000,000.0 through our dividend policy. So those are our focuses for the next twelve months.

Unidentified speaker, Interviewer: That’s helpful, Tom. So can you talk about the growth algorithm for the new BD? And you’ve talked about buybacks beyond the majority of the $4,000,000,000 cash you’re going to receive being a big component of that. Is that the right capital allocation strategy? When are you going to be in a position to talk about kind of what the EPS kind of targets are?

Tom, CEO, BD: Yes. So just as we think about the new BD today, the new BD Q3, right, new BD grew about 4%. And we expect actually full year is going to be relatively similar to that for the new BD. Mid single digit growth profile, we’re highly that’s our outlook for the new company. And we can get into the key catalysts that we see there.

We’ve got quite a few new innovations coming to the market. And new BD is going to be positioned in extremely attractive markets, whether or not it’s biologic drug delivery, smart connected care, whether it’s APM or our new AI solutions around medication management, a series of interventional spaces that we play in and are delivering very strong growth in, like urinary incontinence and tissue reconstruction, etcetera. So we’re really excited by the portfolio of the new BD, by our innovation pipeline of the new BD that supports that mid single digit growth profile. You follow down the P and L with a very strong margin expansion that we see. And as we’ve shared before, BD Excellence is in early innings.

BD Excellence didn’t exist two point five years ago, right? It’s actually pretty phenomenal, the momentum that we’re getting from that across our very large scale manufacturing facilities of just driving Kaizen and engaging our associates in continuous improvement. I mean we’re seeing waste drop by half in our plants over the last couple of years. We’re seeing quality and recalls down meaningfully. We’re seeing service levels now at record levels, which allows our sales team to not have to deal with back orders, but to focus on gaining share.

And of course, we’re seeing productivity improvements that are very meaningful. Things like you’re seeing our CapEx spending come down, but we’re actually getting because of the productivity on the lines, we’re producing 2,400,000,000 units more than we did just two years ago, or we had the capacity to do that because of the productivity improvements on the line. So all of those things are driving margin improvement. And that flows down to strong EPS performance, high single digits, obviously, this year, very, very high single digits, right on the cusp of double, and we’ll see where we get in Q4, maybe we cross that mark.

Unidentified speaker, Interviewer: That’s helpful. But the share buyback beyond the $4,000,000,000 you’re talking about using, I think, at least 50% of free cash flow going forward for So share buyback, the why is that the right approach as opposed to spending more on tuck in M and A to

Tom, CEO, BD: Two drive things. One is, first off, just at our share price today, we think we’re meaningfully undervalued. And as we look at our internal plan, there’s no better return than buying back our shares. We’re highly confident in our plan. And again, it’s a very good return for us from an investment perspective to buy back our shares and for our shareholders.

So that’s number one. As long as we’re in and around anywhere near this space, we’ll be buying back shares. Second is we’ve done about 22 tuck in acquisitions over the last five years. And as you look at one of the things that BD is extremely good at is serial innovation. Once we bring in a technology, we do extremely well at serially innovating it.

And a number of the new exciting pipeline projects that we have that we’re investing behind actually are coming from tuck ins that we’ve already done. So if you think about in our Surgery business, for example, we bought the Tifa business, a biomaterial. We started with hernia. We then proliferated, and you’ve seen us launch just this year, umbilical hernia, kind of rounding out those options. Next year, we’re launching the first GI application with that biomaterial.

We announced that we’re enrolling women already for a breast indication with that biomaterial. And we have three or four additional indications that we have underway there. The same thing in APM. We bought APM just about a year ago this week, and we’re now delivering new products into the pipeline, combining it with Alaris as an example. We’re doing the same thing.

We bought SurgiFore. We’re iterating SurgiFore. Obviously, PureWick, we’ve got a tremendous number of new innovations in PureWick. We bought Straub Medical. We have new indications for below the knee that we’re investing in behind there.

And so we’ve built this very strong pipeline, and we want to continue to really get the value out of the tuck ins that we’ve done. We will continue to do tuck ins, right? Our team remains very active in tuck ins. I think the point is focused tuck ins. As we continue to execute on the exciting innovation pipeline that we have today, we’ll continue to supplement that with tuck ins.

I consider that inorganic R and D. We’ll continue to spend north of 1,000,000,000 on R and D, which is what we do today and maximize the value that we get out of that, again, supplementing it with tuck ins, but with a bias towards share buyback.

Unidentified speaker, Interviewer: Got it. That’s helpful. One of the most common questions I get on the new BD is the margin profile post separation. Chris, your CFO, has talked about it being similar. And I think he’s talked about it more on the operating margin side.

So the questions I’ve gotten from investors are, a, how do you define similar? We’re assuming within 100 basis points, maybe even within 50 basis points. And this is all in after stranded costs, And PSA, then gross margin is something you haven’t commented on. Is that similar as well? Also very similar.

Yes. And so it’s within kind of call it 50 or within 100 basis points is the right way

Tom, CEO, BD: to think about it? I’ll let Chris stick to the one who’s kind of, but it’s very it’s almost on top of Okay.

Unidentified speaker, Interviewer: Okay. Just a question that And

Tom, CEO, BD: I would just say on the stranded costs, as Chris mentioned, we have TSAs that will obviously transition where we’ll continue to provide those services for Waters at the beginning of the separation. Those will pair off. And we’ve actually already stood up teams and have them actively working. I spent a chunk of time yesterday on this of eliminating stranded costs. So we’re going to be extremely proactive on eliminating stranded costs as part of our separation plans.

Unidentified speaker, Interviewer: So that will be an opportunity over time because when you say the similar operating margin, that includes the stranded costs. So as you eliminate the stranded costs, obviously, it improves the margin profile.

Tom, CEO, BD: Sure. The faster you eliminate those, the better you get the ramp, yes.

Unidentified speaker, Interviewer: Let me transition to kind of the current business

Tom, CEO, BD: and a more short term oriented question, which is kind of the acceleration implied in the Q4 guidance going from 3% organic to 5% organic. Talk about the drivers of that and your level of confidence, please. Yes. So obviously, saw us have a meaningful acceleration Q2 to Q3 as we shared, driven by pretty much strength across the portfolio, as we mentioned. You saw very strong growth in BD Interventional.

We expect that strength in Interventional to continue. You saw double digit growth in UCC. You saw strong mid single digit growth in the rest of the businesses, overall Interventional, very strong mid single digit, almost high single digit profile. We expect that to continue. We expect continuation in our Medical businesses.

We saw mid single digit strong performance in MMS driven by Aleris as well as pharmacy automation. Dispensing, very strong order book coming in Q3, that’s continuing in Q4. We expect that will continue, solid performance there. As well as Pharm Systems, you saw acceleration as we expected in the back half of the year. We always mentioned that can be lumpy, but we certainly expect positive growth in farm systems in the quarter.

I think the two big things as we look at what are accelerating, it really comes down to two items. APM becomes organic. And so you saw us post a very strong, I think, a 13% growth in APM in Q3. APM is doing extremely well. We’re really pleased with the integration and how that’s gone.

We’ve been very purposeful in keeping them focused as an independent business because their strategy is working. And we’re just supercharging the strategy by putting more investment in selling. We’re putting more investment in R and D than they had within Edwards. There’s a whole reason why Edwards says recognize, right? This could get more focused attention and investment if it was part of a different company.

And we’re doing exactly that, which is part of our investment thesis and it’s working. And so that growth will become organic. The second thing is essentially the run rate that we had for Bactech, we assume that we would we need about 85% of the historical run rate of Bactech before the ship hold happened or before the supply shortage happened for Q4. We exited that at Q3, so we were already at that run rate. That needs to continue.

It is continuing. We’re seeing solid performance in Bactech so far in the quarter. But that is also a lift because there’s an easy comparison versus prior year when there was a supply issue.

Unidentified speaker, Interviewer: Any way to quantify the benefit from APM becoming organic? Those are over a point

Tom, CEO, BD: by themselves, right? The combination of those two is over a point. Got it.

Unidentified speaker, Interviewer: That’s helpful. And this year, you’re seeing 175 basis point headwind from three items, China, farm systems, some of the issues within that business on anticoagulants, I think, and then Biosciences. Talk about how much what kind of recovery you expect in Q4 and beyond in those three areas, please?

Tom, CEO, BD: Yes, absolutely. And those are our three macro secular issues that you see across the peer groups in all three of those sectors. So in Biosciences, obviously, we’re in the process of separating that with Waters. And we the positive thing is we saw about 200 basis points of sequential growth improvement in that business Q2 to Q3. We expect to continue to see sequential improvements as we think about that going into 2026 and beyond, but that will obviously transition into Waters, and they’re going do a phenomenal job.

It’s a great business. We have a very strong win rate. It’s really around market recovery and the research spending sector. You actually saw us talk about that all of our clinical reagent the reagent business actually grew mid single digits last quarter. It’s really that research sector and the timing of the recovery.

So that’s again, that’s going to do great in Waters’ hands. Farm Systems, we indicated that and you saw that across the sector, right? You saw destocking happening at essentially every peer experienced that. And I think most peers said we expect to see recovery beginning in the back half of our fiscal twenty twenty six. And we saw that.

We posted a nearly 4.8% growth rate in Q3, which was a meaningful acceleration. Again, that business, if you look back over ten years, it’s never a linear business. And if you look back before the ship hold or before the slowdown in that market, the destocking, that business was growing double digits for three, four years in a row. And since we launched BD 2025, that business has grown $800,000,000 It’s a phenomenal business. So but it always had some lumpiness to it.

We expect that will continue, though, in a very positive direction as we head into ’26. So we feel good about that. And then China, VOBP. So you’re seeing VOBP go through our the legacy Bard business today, primarily within the surgery and the peripheral intervention business and a bit in our PICC business, which came from Bard. We expect that will have completed by the 2026.

So, we do expect China to decline high single digits this year. We expect it will continue to decline mid to high single digits next year and then stabilize thereafter. By the end of next year, and we spend a lot of time going into granular detail on this, 90% of BD’s portfolio new BD’s portfolio will have gone through VBP by the end of next year. And so that’s what gives us confidence in the stability. And we have seen that when product categories go through VBP, we then see more stabilized growth.

Because what is happening, like last quarter, we had negative growth in China. It was more low to mid single digit negative growth in China last quarter in Q3. Volumes grew double digits. So we’re seeing strong share maintenance. We’re seeing strong volume growth.

It’s that pricing from the bidding processes that are happening there through value based procurement. But then once those prices come down, that volume then lists sales. And we’re seeing that again in the categories that have gone through that.

Unidentified speaker, Interviewer: I think when you were talking about farm systems and the growth, you might have said fiscal twenty twenty six, I think you meant fiscal twenty twenty five in terms

Tom, CEO, BD: of I just mean that we expect continued momentum into 2026, the recovery of that space.

Unidentified speaker, Interviewer: Got it. That’s helpful. One follow-up question on Aleris. I guess, one of your competitors has a voluntary pause on their new pump. I think you said you’re in year two of remediation.

Is Alaris still accretive to your growth? And how is this the competitor issues potentially benefiting you? Yes. Look, we don’t comment on specific competitors. And but we do recognize that we’re here to support customers in need.

Tom, CEO, BD: I mean, it’s a serious issue that’s being faced there. And obviously, Aleris has a very strong track record, extremely strong preference by clinicians and nurses, very strong iteration from an innovation perspective. We’ve now submitted twice to the FDA for new innovations, some of which have already launched now since we got the initial five ten, and that’s something we’re going to continue to do as we look forward. So yes, we have a lot of active discussions with customers. As we mentioned, we signed quite a few in Q3, some meaningful contracts.

We’re continuing to do that in Q4, we’re just going focus on keep chopping wood, continue to execute as we do. And we’re maybe in that same category, we’re extremely excited by the new Pyxis launch and Pyxis Pro, which is the first new Pyxis platform, think, certainly ever since we bought CareFusion in 2014 and for a while since they had owned it. And so this is the first AI enabled Pyxis. It’s a new system, holds 30% to 40% more drugs in the exact same space than our current version and the competition, which means nursing stock outs happen a lot less, meaning that nurse can get the drug when they need it rather than hunting for it, big productivity improvement. But most transformational, it’s AI enabled.

And we have a large language model that we partner with Amazon, a third party on called BD Ancata, which we’re unveiling and now have installed at a number of sites. And what this allows one to do is it starts with Pyxis data, but we’re going to be plugging all the data from our APM instruments, all of the Lialyris instruments, all of our software in the central pharmacy, like Pyxis Logistics and our compounding platform, and utilizing all of that data to optimize the cost and safety and quality of the end to end medication management process. And we’re seeing phenomenal feedback from customers because what the AI is allowing them to do is just gain data immediately. It’s basically ChatGPT for medication management. So you can just say, Dear Ankata, please describe to me which wards are stocking out of medications at what frequencies and how should I change my Pyxis refill.

It will immediately pull up all the analysis, put charts out just like ChatGPT and tell you, please tell me which nurses in my hospital are most likely to be diverting narcotics. And it will tell you and then tell you exactly why, right? What recommendations would you have to reduce my inventory levels to improve my cash flow, which medications are overstocked? They’ll tell you all of that information. You can just open query, just like you would with ChatGPT on all data from BD Instruments in the future.

So we’re seeing a lot of excitement from customers, and that just shows the power. Our discussions with customers as they see that, they recognize that how do I put more and more platforms into that AI system, because the more BD platforms you have, the more powerful it becomes. So we’re really excited about that. Again, it’s launching on Pyxis, but we’ll be adding all of our platforms in the future.

Unidentified speaker, Interviewer: Is there any way to frame the financial opportunity for BD for Pyxis Pro? Any broad strokes you can share?

Tom, CEO, BD: Yes. So first off, Pyxis overall, it also has had it has lumpiness in that market. And I think you see us and really one main competitor in that space. We’re going into a large open contract period. So there’s a cycle coming up actually in 2026, 2027, 2028, where there’s a larger than normal amount of both our competitive business that comes up available.

And so, not by accident that we’re launching a really breakthrough new platform in that exact phase. So, we think there’s opportunities from a share perspective. There’s a value capture on upcharging for software, which is part of our model as well, as well as for the new instrument. And so those are kind of the three main categories that we see. And then on the third one is obviously the power of Ankata and pulling through more and more BD products, right?

Because again, the more value that you have, Ankata becomes more and more powerful. If you use our software that’s managing inventory in the central pharmacy, it knows what’s there. If you’re using our software that’s compounding medications, it has the data from that. If you’re using Alaris, it knows what’s being infused into the patient. If you have the data from our APM systems, you know how the patient is responding to the medications that’s being infused into them, obviously, and you know what’s available to the nurses and what’s happening, how nurses are engaging with those medications with our Pyxis.

And suddenly, you have an end to end view from the inventory through how actually patients are responding to those medications at the end of the day. There’s no one else on the planet that has that data set, which is extremely unique. And so again, applying AI now to that, we’re really excited by. And that, I think, provides us opportunities more of a portfolio play from a share perspective.

Unidentified speaker, Interviewer: So historically, your share has been relatively split with Omnicell, fifty-fifty, call it? Or higher than that, yes. Sixty-forty, maybe. Sixty-forty. How you think

Tom, CEO, BD: this impacts your win rate going forward? We won’t call out an exact destination point for that, but we feel good about our share momentum today. And we think certainly with the excitement that we’re seeing with Pyxis Pro and what that provides, the early feedback from our limited commercial release is extremely positive there. So, we’re going to be on the offense. And I mentioned our number two priority after getting the water separation complete was commercial execution and that will certainly be a focus of it.

Unidentified speaker, Interviewer: And you’re in limited launch now, not full launch?

Tom, CEO, BD: Correct. Full launch is in Q1 twenty twenty six.

Unidentified speaker, Interviewer: Q1 fiscal twenty twenty six. In a couple of two months. Got it. So Tom, let’s transition to fiscal twenty twenty six and beyond. The guidance there this year for fiscal twenty twenty five is 3% to 3.5 organic, you’re going be exiting at 5% organic, we talked about that earlier.

You have talked about on the Q3 call being prudent with the fiscal twenty twenty six guidance. So is 3% to 3.5% or something slightly better a good starting point for fiscal twenty twenty six?

Tom, CEO, BD: Yes. I think, as you said, you’re seeing us deliver increasing sequential growth Q2 to Q3, Q3 to Q4. And obviously, we’re very focused on we’re excited by the new BD and obviously creating the new Waters as well in partnership with them. I think as it comes to ’26, we’re going to be very prudent on our guide as it comes to that, right? We certainly recognize that it’s a dynamic macro environment.

And we had a strong track record of we had 14 quarters sequentially of delivering on our beating our revenue commitments, right, three years prior to when those three factors of China and the pharma market slowdown and the life science research spending slowdown happened that got us off of that trajectory. We don’t like that. We own that. And so we’re going to take a prudent approach. We are where we’re at today this year from those dynamics.

We’re going take a prudent approach as we look at giving our guide next year so that we account for just the macro environment in which we operate while we’re executing our strategy.

Unidentified speaker, Interviewer: Maybe just a follow-up to that. I mean, can we rule out a deceleration that should be

Tom, CEO, BD: at least No, you’re saying it’s continued sequential momentum. So we’re not correct. We’re not expecting.

Unidentified speaker, Interviewer: Okay. Got it. How do you thread the needle saying, hey, we’re a mid single digit grower versus the guidance being prudent? How do you strike the right balance?

Tom, CEO, BD: Yes. I think we’ll make it clear that from mid single digits is where we’re very confident that we’ll be over the long term. Obviously, this year, we’re just below that. We’re going to put out a guide, as I mentioned, is and look, we’re valued where we’re at right now. We want to make sure that we set up for success next year.

We’ll make it very clear. We’ve made it very clear where our ambition is and where we end is one thing, where we start is another thing to give us that space in room. So we’ll stay tuned for the November call, but I think the key takeaway is we want to be prudent in how we give our guide. That doesn’t mean that’s our ambition on where we end, but we’re going to be very prudent in where we start.

Unidentified speaker, Interviewer: That’s helpful. Price was something that was a tailwind for you a few years ago. Now it’s, call it, flattish. You disclosed that in your SEC filings. Why is it less than it was a couple of years ago?

And how do you see price contributing to growth going Yes. So we’re really pleased with the work that we’ve done

Tom, CEO, BD: on pricing, particularly since the COVID pandemic, right? We took the opportunity, as you saw the major supply chain interruptions during COVID and the spike in inflation immediately post COVID to build additional pricing capabilities in each of the businesses and centrally. And you saw us actually do what was best in class within the medtech industry at recovering margin from inflation during that period. You saw us at 3%, 4% price in some years early on. Obviously, we’re now past that immediate shock period of that, but we’re continuing to execute price in a very systematic way.

And what it’s been allowing us to do this year and will continue to allow us to do next year is, while it’s not now a tailwind, what it’s allowing us to do is with China VOBP having been an increased element. Again, we’ve got China volumes growing double digits. You’ve got China declining high single digits. Put in perspective, you do the math, that’s all price. So if you and we’ve shared this publicly before, that’s about $240,000,000 of negative price from China in ’twenty five and ’twenty four.

And you’re seeing us meaningfully expand gross margins in light of that. There’s not many companies that can absorb $240,000,000 of negative price from China, while meaningfully expanding their gross margin. And one of the reasons that we’re able to do that is that because we’re fully offsetting that China price with price from the rest of world, right? And so the pricing discipline and capabilities that we have in the rest of world are allowing us to fully offset the China price during this higher intensity period of VBP. As that wanes at the ’26 heading into 2027, we’ll be continuing that price discipline that we have, and we would expect that will return to a tailwind at that point.

Unidentified speaker, Interviewer: That’s helpful. On the Q3 call, Chris, your CFO, gave some helpful commentary on EPS in fiscal twenty twenty six. I mean, I think the message was basically the Street take where the Street is at today, which was 14.66 and kind of the incremental tariff benefit that we’re seeing, call it $85,000,000 I think you used that number, which is about zero two five dollars gets you to about $14.9 I guess, we interpret his comments correctly? Is the question.

Tom, CEO, BD: So, I think I don’t follow all the math on that one. But I think what the key point was from where consensus was, he essentially raised it up by about two percentage points on tariffs, right? And that was the takeaway that you just shared, all that math ended up being where consensus was at the time, basically said we’re going be better than where consensus was and it was about 200 basis points better than where consensus was. So, we’re really pleased to have done that on a forward look for FY 2026. That’s obviously a result of two things.

One is policy improved on China, one of our biggest areas, the biggest area for us from a tariff perspective. We’re the tariffs that China had instituted on U. S. Imports, we’re a very large net exporter from The U. S.

We are the largest manufacturer of medical devices in the world, but also in The U. S. And so that had an impact on us that obviously those rates went down. So that was an improvement. But we’ve also been extremely active with our teams internally mitigating tariffs.

And so the combination of our own internal work on tariff mitigation as well as that change in tariff policy, right, allowed us to improve our outlook on tariffs for 2026 and thus improve wanted to signal that make sure that people updated their models in a

Unidentified speaker, Interviewer: positive way. Hopefully, I got the math right. I checked with Adam before. Think I’m And pretty sure I think this is a bit in the weeds, but I think that excludes currency, which is right now a tailwind. Yes, I think it did.

That’s fair. So that could be opposite. Okay. And you talked about, Tom, the environment and some of those issues, the macro issues that impacted you, China, etcetera. Investors are looking at some of the Medicaid cuts and some of the exchange subsidies going away and the impact that could have on the number of patients insured and capital equipment spending by hospitals.

How are you thinking about the macro environment going forward? Yes.

Tom, CEO, BD: It’s a great question. I spent a lot of time with customers, particularly the last couple of weeks, and with this topic, we bring up every time. We also have added one of the things I did since I’ve been CEO has added one of the actually, the largest U. S. Public health care provider in the country, the University of California Health System, the recent CEO to our Board of Directors.

And we had a lot of discussions on that topic as well since California is a key area for us about Medicaid reimbursement, etcetera. So I think one of the things that we see are focused people really focused on getting larger. Think a lot of our customers say, we know this is coming, how do we navigate it? One is having scale, we think, is going to be a continued benefit for us. Having technologies that make us more productive from a labor utilization because the reality is the number one cost that they can control is productivity costs, whether or not it’s G and A back office or upfront labor, you’re going to have to become more productive.

And we’re getting more and more discussions around our tools around productivity. As you know, we actually have one of the largest robotics businesses in medtech about $800,000,000 robotics business, but it’s very different than anyone else’s. Ours pretty much exclusively focuses on productivity improvements. It’s not clinical outcomes, it’s productivity, right? Doing things that pharmacists would do, but robots.

Obviously, our microbiology automation is another example of that. Our connected medication management is another example of that. It doesn’t use robots, but uses AI to, again, manage productivity across the process. And so I’d say we’re seeing heightened interest in those solutions as they are really beginning to consider how do I get after my cost base to manage what potentially could be a tighter funding environment. So I think that’s a positive for us.

The other thing is, obviously, as they look at consolidating purchases and, again, looking at who can they partner with to navigate that, we see incremental opportunity in that. And one of the investments, I think, we shared last quarter that we’ve been making additional investments in our commercial organization is we made additional investments in our mid market key account team. So we always have a single point of contact for the largest IDNs in the country. We’ve recently added a mid market team for the next year of IDNs. So as they’re navigating this type of environment, the opportunity to form very specific partnerships with us across our portfolio to help them as they do more business with us, to help them navigate, we see that as an opportunity for a company like us.

Unidentified speaker, Interviewer: That’s helpful. Tom, a minute left, I want to give you a chance

Tom, CEO, BD: to make some closing remarks, what you’re excited about, how you’re thinking about shareholder return with the new BD? Sure, I got forty five seconds to do that. So, we’re really excited by the new BD. I shared that earlier on. As you think about a strong mid single digit growth profile with positioned in extremely exciting markets, we addressed about a $70,000,000,000 served market, the new BD, markets like biologic, GLP, drug delivery, automation and AI, use of robotics and med tech to streamline processes and drive efficiencies across core things like medication management and pharmacy and patient advanced patient monitoring.

Obviously, in attractive end markets such as interventional with areas like urinary incontinence that you see doing extremely well, tissue reconstruction, etcetera, with a very unique gross margin expansion driven by our BD excellence program with significant momentum and still meaningful runway ahead, dropping down to strong earnings performance with a very specific capital allocation strategy that we think is highly focused on creating shareholder value as we look ahead that we articulated before. So again, we’re very focused on executing the four priorities that we started off the discussion with and appreciate the time.

Unidentified speaker, Interviewer: Thank you, Tom. Thanks for being Good luck with the new BD. Thank you.

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