ICU Medical at Morgan Stanley Conference: Strategic Growth and Challenges

On Wednesday, 10 September 2025, ICU Medical (NASDAQ:ICUI) presented at the Morgan Stanley 23rd Annual Global Healthcare Conference. The company provided a strategic overview that highlighted its growth trajectory and operational challenges. While the company is optimistic about its innovation in infusion systems and consumables, it faces hurdles such as tariff impacts and regulatory compliance.

Key Takeaways

• ICU Medical reported a 4% growth in its consumables segment for Q2.
• The company anticipates mid-single-digit sales growth for the year.
• A $30 million tariff impact is expected in the latter half of 2025.
• Focus on innovation with new product filings and a joint venture with Otsuka Pharmaceutical.
• CEO Vivek Jain emphasized a commitment to regulatory compliance and shareholder returns.

Financial Results

• Consumables segment saw a 4% increase in Q2.
• Vital Care division experienced a -4% growth in Q2, with expectations of flat growth in 2025.
• Updated 2025 guidance reflects a $17 million EBITDA reduction due to divestiture.
• Costa Rica’s tariff rate increased by 50% as of August 1, significantly affecting the company.
• Goals include achieving over 100 basis points of gross margin expansion next year.

Operational Updates

• Focus on innovation in consumables and IV systems.
• Recent filings include a 510(k) for Medfusion syringe pump and CAD ambulatory pump updates.
• The joint venture with Otsuka Pharmaceutical aims to enhance IV solutions.
• Plant and logistics consolidation is underway to boost operational efficiency.
• Plum Duo received first-pass FDA approval.

Future Outlook

• ICU Medical targets reliable mid-single-digit growth.
• The company plans to generate real cash and return it to shareholders.
• Continued growth is expected in consumables and IV systems.
• Efforts to mitigate 2026 tariff impacts through internal manufacturing and cost savings.
• Strategic focus on the Home Care space with the CAD Connect system.

Q&A Highlights

• Discussions on the financial impact of tariffs and strategies to mitigate them.
• Exploration of growth opportunities in the home care segment.
• Queries about the regulatory landscape for infusion pumps.
• Questions on M&A priorities, with a focus on organic growth.
• Inquiries about the company’s comfort with 2026 consensus figures.

In conclusion, ICU Medical’s presentation at the conference highlighted both its strategic initiatives and the challenges it faces. For a detailed understanding, readers are invited to refer to the full transcript below.

Full transcript - Morgan Stanley 23rd Annual Global Healthcare Conference:

Peter Harrison, Analyst, Morgan Stanley: Did you give me the disclosure? I didn’t say it anymore? No. No. Okay. Perfect. Great. We don’t need to send a disclosure anymore. I had Peter Harrison from Morgan Stanley on. We welcome Vivek Jain from ICU Medical with us today. I’ll just get started right now. Vivek, as I look at the story, it’s been evolving over time. It’s hard not to notice that you bought stock personally for the first time in a long while recently. What was the impetus for buying stock, which shows some enthusiasm and momentum for the story, more so than as you have restructured and integrated Smiths Medical?

Vivek Jain, CEO, ICU Medical: Sure. Thanks, Peter. Thank you to Morgan Stanley for once again including us in this great event. We have a perfect schedule upstairs. Appreciate it. I don’t think, just to be very direct on that, I don’t think it was the first time in a long while. The year before, I’ve put up a lot of capital, exercising some options for cash effectively. It looks like a sale reported wisely. There was some stuff in 2023 and 2024 too. It wasn’t quite so sporadic. I think it was just we have a sense of what the company’s capable of earning, and it’s the thing we understand the best. It imputes a rate of return that I didn’t think was achievable anywhere else. There were moments where I did, I held virtually every piece of equity I’ve received in my entire time here.

All I’ve done over the years is exercise options when available. We did those at very different prices, and it was available to buy today. It felt logical.

Peter Harrison, Analyst, Morgan Stanley: Great. Why don’t we start with some of your business segments? Let’s talk about consumables. It grew 4% in the second quarter, and you expect sequential sales growth to average mid-single digits for the year. What is driving that business, and how durable do you see that mid-single digit growth?

Vivek Jain, CEO, ICU Medical: Yeah. I think if you study our investor materials, you’d see that our consumables segment has compounded at 5% or 6% a year for more than half a decade. There’s a couple of different reasons. The first has, you know, not so much maybe a bit being luckier than smart. Our end-market demand at our customers is pretty good. Volumes are still high, at least in the key geographies of hospital admissions. Demographics are in our favor. Independent of anything we’ve done, the rising tide has helped. I think that’s sort of the first point. Then there’s some specific things around the business, the quality, brand, value prop of the products themselves. Even more specifically, there was a national shortage in IV solutions in this country last fall. We were able to obtain some business there that we’ll have for the next few years.

That’s additive to that. There are some specialty markets within that IV in the consumables buckets, niche markets that we create out of whole cloth that are growing faster than the core. That’s probably the second specific driver. The third one is to the extent we win pumps in the middle segment, which I’m sure we’re going to talk about. Sometimes when we win the pump, it pulls the consumables. That’s sort of the third lever. The fourth has, yes, we have achieved a little bit of price, probably more impact this year than next year, but as the GPO contracts reset over the last couple of years, we still haven’t recouped all the inflation that we had over the period from 2021 to 2022, 2023, but we started to get some back. That’s helpful. Those are probably the four or five drivers.

Peter Harrison, Analyst, Morgan Stanley: Okay. You also highlighted some clearances with the FDA, 510(k)s. Do those give you a competitive advantage, and how are those going to drive your consumables segment?

Vivek Jain, CEO, ICU Medical: Yeah. I mean, I think the discussion in our earnings script around new products in general, we haven’t talked about them unless they’ve actually been approved. A lot of our energy the last few years has been in the money we’ve allocated towards the new products in the infusion pump business, and we felt like we haven’t allocated enough for our own taste to the core consumables business. The innovation there isn’t necessarily sort of breakthrough. It’s the little things we do every day, the incremental things. We did have an important approval on the core Clave family earlier this year. That did two things.

One, at least from an FDA perspective, the thing that’s gotten all these infusion companies, including us, into trouble from a regulatory perspective is that the product iterations over the years really meant that the product that one was selling didn’t necessarily reflect what the original approval was about. This brought everything up to standard of our most important core franchise we make our money around. It also referenced the study that showed this, the product, as we know, and people know that’s why we have the brand we have, significant clinical improvements. The ability now to say that and point to something in addition to being probably the most cost competitive, the best outcomes, best brand, etc., we think is additive to solidify that. We were trying to say money’s been going down to consumables.

Stuff will start to happen there too over the next year or two, in addition to what has been pretty good growth over the last half a decade.

Peter Harrison, Analyst, Morgan Stanley: Very exciting times for the business. Moving on to IV systems. Look, that’s a business you’ve spoken about double-digit growth in your LR LVP revenue. You know, what’s driving that growth, and how do you think that compares to the overall market in that space?

Vivek Jain, CEO, ICU Medical: I mean, the brain damage that we’ve put our shareholders through and ourselves through since the last transaction we did was to really try to create the world’s best infusion hardware platforms. We felt like the core rationale for undertaking the Smiths Medical transaction, the number one reason was to get the best pump in every single pumping modality. We wanted the best LVP pump, which we had developed on our own, the pump family. The acquisition brought the number one syringe pump and the number one ambulatory infusion pump. Our goal long-term was to have all of those products modernized, meaning, and by best, we mean most accurate, easiest to use, easiest to repair, best software, best cybersecurity, and have all of them connected with a single instance of IT.

Anybody who implicitly was using a legacy ICU Medical Hospira pump or the other player’s pump, not the market share leader, had to run two separate drug libraries, two separate software systems, etc. They now have a chance to get all of that integrated into a single solution, and that’s a very different competitive footing for us. To be on LVP, to answer the second part of your question, market share, market growth, and our growth rate, it’s really hard. Obviously, most of these markets in a normal census environment are 3% to 4%. We’d be happy with 4% underlying growth markets. I’m not sure they’ve quite been there yet.

We’ve been growing faster because the infusion pump market, particularly the LVP market, has had a lot of kind of self-inflicted harm that’s led to a faster refresh of the market over the last two years as vendors have had to remediate their own devices. That’s created an acceleration crash.

Peter Harrison, Analyst, Morgan Stanley: When you think about Plum Duo, then what does replacement upgrade cycle kick in versus competitive share gain right now for you, given the backdrop of recalls, etc.?

Vivek Jain, CEO, ICU Medical: Most of our efforts to date have been on the competitive front, right? In the infusion pump industry, on a quarter-to-quarter basis, most vendors, certainly the other two large vendors, when they report results, are getting the benefit of devices they sold to existing customers, right? Because that counts in period-to-period revenues. I think we would argue that it doesn’t necessarily create NPV because you’re already getting the consumables, the dedicated set, that flow of that. Obviously, it helps, right? It’s margin and cash in a given quarter. Our results for the last few years haven’t had the opportunity for that because we stepped into this business in 2017, 2018, as Hospira was just launching the Plum 360. We’ve never really had refresh in our pump numbers. Our devices finally become nine years old next year, with sort of a useful life cycle.

Unfortunately, we built some of them like tanks, of nine to ten years. The efforts to date and for, I think, the early part of next year are 100% focused on the competitive opportunities. We benefit from that same incumbent inertia we talk about in our earnings calls in the infusion industry for our own install base. As the year progresses next year, the replacement cycle will start in more areas.

Peter Harrison, Analyst, Morgan Stanley: How would you classify the kind of regulatory landscape for pumps right now? Is it a challenge? Do you think it gets harder from here, easier, any sense of where the FDA is?

Vivek Jain, CEO, ICU Medical: I mean, I think everybody’s, you know, to some degree, learning on the job and trying to do the right thing. We appreciate the high regulatory barriers to entry, because it keeps the riff-raff out, right? It requires that manufacturers are committed and serious. It’s fair because that pump, that pipe is the last mile of delivering a drug to a patient, right? If that little event doesn’t go right, bad things happen. I think the regulatory scrutiny is fair. I don’t think anybody’s been spared. I think we all live in a glass house, and we’re very sensitive to making sure we are leading in that area.

Peter Harrison, Analyst, Morgan Stanley: Okay. As I think about innovation, we talked about in the consumable space, I think innovation is driving in the IV systems business. You filed a 510(k) for a Medfusion syringe pump, an update for the CAD ambulatory pump, and some software updates. How important are each of those filings as growth drivers, and what’s your expectation on approval timing for the products?

Vivek Jain, CEO, ICU Medical: Yeah. I mean, back to the regulatory question, it is a real-time dialogue, right? Things evolve there as new information on these devices comes out. On the Plum, on the LVP, the large volume pumps, the Plum Duo and Solo, Dan, who’s sitting here in the front row, ran the business for years. We received first pass approval, which means from the original submission date, everything happened on the exact timeline, nine months. It took us a year and a half longer to file because we wanted to do more testing for the submission, but that turned out to be a good use of time. We filed these other devices, the five Medfusion 5000 syringe pump and the CAD ambulatory pump on July 1. Best case that we could stick to that same first pass in nine months, but it’s subject to the give and take of the process.

Strategically, we think it’s incredibly important because, again, in the difficulties of the last few years, there were moments we looked at ourselves as we undertook this huge project bringing these pumps together. Are we seeing the benefits from a customer perspective? I think now for the last year, we’ve really seen the benefits, and particularly at this moment with what’s going on in LVP, it brings together a much more holistic discussion that all of your infusion can be solved with one IT system, one set of user interfaces, a common user interface across devices, and ultimately a vision around that of even one day that stuff will connect to the patient home and home care, right, in the same connected fashion.

Peter Harrison, Analyst, Morgan Stanley: You purposely built everything. It takes some time on a single platform. How big a competitive advantage is that, and where are your competitors on that spectrum also?

Vivek Jain, CEO, ICU Medical: I think, again, it’s different for each of the other competitors, right? I think the market share leader has offered an all-in-one system with enterprise-wide software, with different pumping modalities integrated into a single software package. At a minimum, we’re now on parity, and we can debate the merits of our software package or our devices. It’s a little bit of a different setup where the competitors have an all-in-one system, and we’re saying we’re a little bit, we have the right tool for the right job, right, and deliver precision and accuracy for the specific clinical use case that’s needed. Ultimately, it’s like phones, right? The pumps, while accurate, inherently, the pumps will be dumb, and the smarts sit above the software layer above it, right? Our job is to make sure that that’s very effective in helping people run a better enterprise.

Peter Harrison, Analyst, Morgan Stanley: Right. The CAD Connect at Home Care is an interesting business you’re developing. It’s a differentiated offering from your competitors. Talk a little bit about that business, and then maybe frame who the competitors are in that space.

Vivek Jain, CEO, ICU Medical: We thought the crown jewel of the acquisition was the CAD infusion system. There are two parts to the CAD infusion system. Part of it is about the hospital that we just talked about, which is really for post-operative pain management, a hip or knee replacement or something, right? You’re on one of our ambulatory pumps. You can move around with it for the time you’re in the hospital, and you can leave the hospital with it. The other part of that business is the delivery of the majority of anti-infectives or biologics in the U.S. home care environment. We are the market share leader there. Even we don’t know exactly what that means, right? Today, we provide a device, a tool, and a pipe to deliver that medication. That pump operates today in a home, in someone’s home without a radio, without connectivity.

There is obviously competition for that real estate, right? The right way to grab that real estate. Could the pump be the backbone, whether wireless or Bluetooth-enabled, whatever, could that pump also gather patient-specific data, vitals, other monitoring during the infusion event? Would a payer care to know that the drug was taken? Would a hospital system like to know what happened to the patient during that? I’m not sure we know it completely yet. We have high market share. We’re sitting in the middle of very expensive drugs and a very fragmented end customer. We’re kind of focused on first how do we get the IT to connect that and say what other revenue streams can we build and create out of that.

Peter Harrison, Analyst, Morgan Stanley: Is growing more in the home one of your strategic imperatives in the next handful of years? How do you think of that versus the acute space?

Vivek Jain, CEO, ICU Medical: I think the opportunity that you talked about just in consumables and pumps is in front of us today, and it’s in front of us for the next two or three years. We have to execute. It’s a great value. We have to execute on that. We’re very focused on it. I think in other countries around the world, we’ve seen home care grow faster than the core hospitals, and we can’t ignore it. We think in our core infusion business, it’s the next natural adjacency for us where we’re already holding the real estate and market share.

Peter Harrison, Analyst, Morgan Stanley: Makes sense. Pivoting to the final business, Vital Care division, maybe give a little bit of, you know, flavor how that business is performing and how you think about the second half of this year with the backdrop of, you know, organic growth of about 4% in Q2 and flattish in 2025.

Vivek Jain, CEO, ICU Medical: With Vital Care, for us, was about a $600 million division until we announced the joint venture with a Japanese pharmaceutical company called Otsuka last fall, which we closed this year. Our priority was really to figure out what to do with IV solutions because it was a, it just didn’t look like the rest, right? At some level, not only was it a pharmaceutical business, it was more capital intensive, and sort of in need of more technology and maintenance than we felt we could feasibly deliver, right? I guess we felt very lucky that we were capable of finding a really good partner who brought more technology and more innovation and hopefully more capital to the party than we could on our own, i.e., the kind of the classic better owner discussion.

That left the remainder of Vital Care as about a $300 million segment, obviously very different than the other two big segments. I don’t think it was positive for us.

Peter Harrison, Analyst, Morgan Stanley: Minus four.

Vivek Jain, CEO, ICU Medical: I think it was minus four. I think that’s the issue.

Peter Harrison, Analyst, Morgan Stanley: Yes.

Vivek Jain, CEO, ICU Medical: It was minus 4% in Q2. I think even in our guidance, the business would be flattish. I just think if you look at our track record and our history, for all these things we’ve done, it’s clear to me that in those businesses, either we need to have more scale and more innovation and be more differentiated, or maybe we shouldn’t be participating, right? Which is easier said than done. Nothing was more important than figuring out IV solutions first. We did that, and now we have a little bit of mental capacity to exert on figuring out what to do with those pieces.

Peter Harrison, Analyst, Morgan Stanley: You’ve, throughout your career, been good stewards of the portfolio, obviously looking at all time. Can you talk a little bit about your perception of the buyer’s appetite for Vital Care and how they think about those businesses? Do they all fit into one package? Are they different buyers to different businesses? What do you think about the landscape there?

Vivek Jain, CEO, ICU Medical: First and foremost, the reason it hasn’t happened, something hasn’t happened because it takes two to tango, right? There hasn’t been the right situation to make happen yet. That tells you something itself, plus the fact we haven’t had that much time. I think it’s a bit situational, right? If you are a purist, I think one would say the team feels very proud about what we were able to achieve with the Japanese on the IV solutions joint venture where we were able to thread a very narrow needle of something that we did, a transaction that was accretive to revenue growth, accretive to gross margins, accretive to EBITDA margin, and EPS break even, whatever that means going forward, right? Because I think if you’re unable to monetize something on a break-even basis, you spend the next portion of your life talking about stranded costs, etc.

Unless it materially changes your growth rate or materially changes your gross margins, there has to be some compelling reason to do it. We obviously haven’t found that reason yet at a place where value and strategy kind of intersect. We’ll keep looking until we find it, right. In terms of appetite, it hasn’t been a particularly robust thing, but it feels like it’s changing a little bit, right? Rates and the rest of it matters in that.

Peter Harrison, Analyst, Morgan Stanley: Some of your competitors do have IV solutions in-house. I think historically, there might have been a perspective as a competitive advantage to have it in-house. Why is it not a competitive disadvantage to have jettison in a smart, you know, deal with Otsuka Pharmaceutical?

Vivek Jain, CEO, ICU Medical: Again, to the customer in the U.S., we are still the business. We are the distributor. We’re the contractor. We contract for it. We fulfill it. We bill it. We distribute it, right? It comes on the same trucks that our other products come with, for direct customers. To them, it really feels seamless. We’re just not necessarily the 100% manufacturer. We’re a partial manufacturer. For me, it’s just about other people allowing other people who have other products and a vision of what they could bring to the party into the manufacturing network, which accelerates their own strategic demands, was a good thing. It doesn’t mean from a customer’s perspective we’re not in the business. We’re still the owner, and we could be the owner for the next 10 or 15 years.

Peter Harrison, Analyst, Morgan Stanley: Gotcha. Do you see other competitors potentially in that space following suit?

Vivek Jain, CEO, ICU Medical: I’m not sure we really have thought about it, right? For us, it’s just, it’s hard. Part of this conversation is around home care, cybersecurity, software, pump hardware, electronic components, consumables, new category of consumables in consumable innovation. It’s really hard for us to do all of that and deliver the resources and innovation to drug manufacturing, packaging, nutrition, all these other markets where just sometimes you have to admit what you’re not.

Peter Harrison, Analyst, Morgan Stanley: Yeah. Moving on to the financials, starting with 2025, you updated your guidance with the Q2 report. Obviously, a lot of moving parts with the JV, tariffs, etc. Can you highlight the key changes to the guidance and what you said about high versus low end of the guidance ranges?

Vivek Jain, CEO, ICU Medical: Yeah. Obviously, whatever we did didn’t go over it particularly well. We didn’t actually, people called and said, "Oh, you, you, you overthought this." I was like, "Actually, we didn’t think about it that much." We’ve really had two changes that happened from when we laid out our original guidance in February. One was we closed our divestiture, and there was an adjustment to we gave up $17 million of EBITDA this year for the 7/12 of the year that we don’t have the business. That was kind of a factual adjustment. The other adjustment was we had $30 million of tariffs in the back half of this year. We get some FX benefit. It doesn’t cover all of it. We have some cost savings on activity, but it left a little bit of a gap.

We felt like we were updating our range to say, on the Q1 call, we said the impact of all those items would put us towards the bottom end of our range. On the call, we said, "Actually, we can be a little bit better than that." Oh, by the way, we had a bunch more headwind come towards us with Costa Rica, where we have the biggest tariff exposure, had a 50% increase in their tariff rate on August 1. We can absorb all of that and still do a little bit better. I think, however it was interpreted, it was a change, an officializing of the change or whatever the word is, the end of the range. We didn’t dwell on it that much. We’re very much like, we know what we should earn. We know how much cash we should generate. We’re focused on those items.

Peter Harrison, Analyst, Morgan Stanley: Tariffs longer term, how do you think about the, you update your guidance at $10 million given some outsets. How do you think about that moving to 2026 if you could predict it, if at all?

Vivek Jain, CEO, ICU Medical: We said, "Please don’t annualize the 30." Like all companies, we’ve been trying to figure out what’s permanent and what’s temporary, etc. There are some offsets to what we’ve been dealing with today. Just examples are where things, certain products aren’t qualifying for USMCA because we buy some componentry overseas. Of course, we can make those parts ourselves. There’s a reason we’re buying it from somebody overseas. They make it well and cost competitive, high quality, whatever it may be. You can’t ask that person to cut their price in half so you qualify, right? You have to bring the work inside. Bringing the work inside takes quarters. I think until a couple of months ago, we weren’t ready to make those moves. Some of them now, we’re investing capital to make those. It makes sense. If you can invest $200,000 to save $1 million in tariffs, you do it.

I don’t really necessarily think it’s productive work because it’s not necessarily adding a lot of people in manufacturing. It’s buying a machine, which probably doesn’t even originate here, but we’ll do it economically. That’s why I was saying, "Please don’t take the 30 and annualize it because there are offsets." There’s a whole other situation on the pumps where pump pricing has been adjusted, but it will not be reflected in our P&L until we start implementing the pumps we’re selling today. Those pumps are something they won’t be implemented until the back half of next year.

Peter Harrison, Analyst, Morgan Stanley: Okay. Helpful. I think it ties nicely to thinking about 2026. Can you talk a little bit about the key tailwinds and headwinds heading into 2026, both sales and gross margins?

Vivek Jain, CEO, ICU Medical: I think for us, we have the opportunity to grow, serve customers well, innovate, almost independent of what’s going on in the census side of the market, right? Even if there’s a little bit of employment compression or unemployment increases, which obviously pressures the bigger system, it’s been pretty good out there demand-wise. We think we have innovation in consumables, for the four or five reasons I went through first, that will carry on into next year. The pump business has some very specific issues with the remediations and replacement cycles happening. Our new technology, we believe, will carry a higher ASP than the historical technology. The combination of market share gains and ultimately supplanted or supplemented with a replacement cycle of a device that should be carrying a higher ASP can power that business. It’s sorting out that Vital Care division piece, right?

Peter Harrison, Analyst, Morgan Stanley: Right.

Vivek Jain, CEO, ICU Medical: Years have been done, but the goal, I mean, I don’t know, it’s a medical conference, but I think we don’t have a lot of shame in saying we’d be very happy, and that dovetails with the conversation we were having before we started. We’d be very happy being a reliable mid-single digit grower, generating real cash and returning that to shareholders, right, for the next number of years. We don’t, for all the pain we put people through the last two years, we didn’t skimp on CapEx in the factories.

Peter Harrison, Analyst, Morgan Stanley: Yep.

Vivek Jain, CEO, ICU Medical: We did not skimp on R&D, and we have enough new stuff to keep us busy for a number of years. We do not have to take on risky M&A, right? We have done that. We took a part supplier and turned it into this multi-billion dollar infusion company, and we have enough to power us for a while if we can be a reliable grower and make sure we generate the free cash flow we are supposed to generate.

Peter Harrison, Analyst, Morgan Stanley: It does feel like you’re at the start of an innovation cycle in consumables and IV systems. Any reason? Anything keeps you up at night that why those businesses can’t continue to grow mid-single digits?

Vivek Jain, CEO, ICU Medical: I mean, I think, again, back to the regulatory comment you made, right? We live in a glass house, and you’d like to make sure that we are the best we can be from a regulatory compliance perspective. I mean, if you just reflect on the infusion industry, that is the area that’s set people back. We’d like to make sure there’s no surprises there. I think anything else on the macro, right? If there were other changes or tariffs or something like that, that could change our very competitive cost position, and we would be sensitive to that. I think as the things under our control, what can we innovate, sell, make, commercialize, we’d feel pretty good.

Peter Harrison, Analyst, Morgan Stanley: How do you see pricing in the rest of 2025 and 2026?

Vivek Jain, CEO, ICU Medical: In 2025, we’re getting, we were able to amend some of the GPO contracts to try to recoup some of the inflation at all that we took in the previous periods. Some of that accrued to the benefit of our IV solutions business, and we only own a portion of that. I think there’s probably less price candidly in 2026 than there is in 2025, and then it picks up again in 2027. That was the way the contracts were structured. Again, our job is to grow enough that that’s a non-discussion.

Peter Harrison, Analyst, Morgan Stanley: Okay. Your gross margins have been improving. You know, can you continue to get the 100 basis points plus of underlying gross margin expansion into next year?

Vivek Jain, CEO, ICU Medical: Certainly, the actions that underpin that are all in flight, and that’s really about finishing our plant consolidation and our logistics consolidation, which together probably power a point. I don’t think we see the benefit of that, particularly from a plant perspective, until you finish selling out all the inventory you’ve made at the old factories. It’ll take probably two quarters for that to kick in. I think we set our goal pre-tariffs was to look like closer, even not even closer to a normal medical device company, right, in the mid-40%. Part of that is aided by the JV, but there’s a bunch of operational exceptions made cash that still need to happen. We think those will still happen. Tariffs obviously clause some of that back.

If you look at our investor deck that was posted for last week’s conference, in addition to our gross margin slide, there’s a dotted line under that saying here’s the impact of tariffs.

Peter Harrison, Analyst, Morgan Stanley: You’ve always, in my mind, run a pretty tight ship and manage OpEx well. Any reason that won’t continue to get leverage on the OpEx side of the ledger as we move into 2026?

Vivek Jain, CEO, ICU Medical: I think we’re asking questions like, a lot of these R&D programs are reaching fruition. Can we actually reallocate the spend into other areas? Can you move things from systems into pumps fast enough to make a difference, or can you put some of that back in the pot to offset tariffs, etc.? Those are the things we’re working through. I think it’s more a question of, you know, that we found a lot of commercial and other synergies in the early days of transaction. Who cares if you’re not earning what you’re supposed to earn?

Peter Harrison, Analyst, Morgan Stanley: Right.

Vivek Jain, CEO, ICU Medical: There were more coming in other areas, and we’re finally at a point where things are integrated now. We can kind of deliver those. Hopefully, those are all helpful to offset. Some IT vendors still extract a lot of value from us. They still have price increases, right? Mexican labor is still going, obviously, it’s a COGS item. There are other offsets we have to keep fighting through.

Peter Harrison, Analyst, Morgan Stanley: As we think about where consensus is for 2026, are those numbers you’re kind of comfortable with today? I know it’s early days, but is there anything in your mind that the street is missing as you continue to execute?

Vivek Jain, CEO, ICU Medical: I don’t think we’ve studied them that carefully, but I don’t think there’s anything at first pass that concerns us. I think the challenge for us is going to be really understanding the tariff number.

Peter Harrison, Analyst, Morgan Stanley: Right.

Vivek Jain, CEO, ICU Medical: Operationally, the revenue line, I think we get the pieces we get. It’s the tariff impacts on earnings, and what’s the best we can do to mitigate that.

Peter Harrison, Analyst, Morgan Stanley: If I think about the, you talked a little bit about M&A. You’ve acquired a handful of companies. How do you think about, and you mentioned it, how do you think about the priorities for capital in 2026? Is it continue to deliver? Is it return capital to shareholders? Is it M&A? How do you think about where you want to allocate capital in 2026 and onwards?

Vivek Jain, CEO, ICU Medical: I mean, it’s a much more fun discussion than when you’re feeling overlevered. Hopefully, you have that opportunity. I meant what I said before. I think we have no shame in saying, it doesn’t sound very aspirational, but to be a reliable mid-single digit grower with improving gross margins, generating more cash, and returning that to shareholders. We have enough. We didn’t skimp on our own R&D. We have enough innovation to keep ourselves busy. Unless it’s something super compelling, I don’t necessarily see us stepping into a new opportunity.

Peter Harrison, Analyst, Morgan Stanley: When do you think about getting to, you know, sub 2x leverage or about 2x leverage? What is the trajectory of that, and how important is that to you?

Vivek Jain, CEO, ICU Medical: I think it’s important. You can debate this. Obviously, rates and the cost of funding matters in this somewhat. It’s an industry where people have been penalized on the regulatory front. Not that we see anything brewing or of concern there, but it maybe requires a little bit of extra caution. That might be the difference why we keep saying two versus other people’s opinion on this situation. I think if we believe our own cash flow forecasts, we have a view of getting certainly, you look at it, as you know better than I do, you look at leverage on a historical basis, right?

Peter Harrison, Analyst, Morgan Stanley: Yeah.

Vivek Jain, CEO, ICU Medical: In the positive talk track, we’d say, okay, some quarter next year, we assume we’d earn enough to imply that. It wouldn’t add that way on the back four quarters. It’s close.

Peter Harrison, Analyst, Morgan Stanley: Any questions from the room? With that, any closing remarks? I do think it’s an exciting time for ICU Medical and at the cusp of innovation as you’ve been invested in the business. Any closing remarks you’d make?

Vivek Jain, CEO, ICU Medical: Yeah, I’d say one. It’s early in the morning. Thank you for making it out on the last day of the conference. We appreciate it. Thank you, Morgan Stanley, for having us. We’re happy and available here all day or online to answer any questions you may have. Thanks very much for the interest.

Peter Harrison, Analyst, Morgan Stanley: Thank you.

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