Baxter International Inc. (BAX) Earnings Call Transcript & Summary

Okay. Good afternoon, and welcome to our next session here in the medtech track of the UBS Global Healthcare Conference. I'm Matt Taylor, the U.S. Medical Supplies and Devices Analyst for UBS. And I'm really pleased to be joined by the management team from Baxter. And today, we have 2 special guests, Jay Saccaro, the EVP and CFO of Baxter; and Clare Trachtman, VP of Investor Relations. Jay and Clare, thanks a lot for joining us, and welcome to the webcast.

Matt, thanks very much. It's nice to meet you as always. This year, virtually, maybe next year, we'll get to meet in person.

We're getting there, hopefully soon, we'll keep our fingers crossed for Laguna in August. Let's hope.

All right.

Okay. So we're going to have a fireside chat session. As always, if you have questions, you can submit them through the presentation here and we can weave them into the conversation, but I have a bunch of questions set up here for Jay and Clare.

So, Jay, just to get started, why don't you give us some high-level thoughts on how the business has been performing. Talk about the trends that you saw in Q1 with regards to recovery. And let's just start there, keep it simple.

Great. Thanks, Matt. And again, thank you for the invitation to the conference. We appreciate your interest in the company and to those folks dialing in. Yes, overall we were pleased with the first quarter performance. The sales came in strong and largely in line with our expectations, but really strong across the board. And then from an operating margin standpoint, as a result of some of our measures with respect to SG&A spending, and certain other controls we put in place, ended up delivering a solid EPS number on the bottom line. So it was a great start to the year. I would say that the area that did a little bit better than expected in the first quarter. We saw a little bit better performance in terms of admissions to hospitals, in particular in the U.S, a little bit better than we expected. And so that was one of the drivers of outperformance. I mean we did start to see some of the benefit from pandemic vaccines in the first quarter. So overall, we were pleased with the first quarter. Frankly, from my perspective, I was pleased to see that broadly speaking, it was trending in line with our expectations and what we had anticipated for the rest of the year from an admission standpoint. So that's pointing in the right direction. And now we'll watch as things go forward. But a nice start to the year in a number of different areas.

Good. Yes. And obviously, people are very focused on admissions and procedures, and you've talked about having kind of a proprietary in-house model and view on how that's going to trend over the course of the year. Can you, a, send that around to everybody on the webcast. No, just kidding. But maybe talk a little bit about how you developed that. It seems like it's turning out to be fairly accurate. And how does that inform your view for how procedures and utilization are going to trend through the rest of the year?

Well, Matt, this -- I think we have a good modeling capability at this point, but we saw a 20% decline in the second quarter of last year, and that was a real surprise for us and frankly, something that we just could not possibly anticipate. So based on that, we started aggregating the sources of information that we get on a real-time basis and then starting to think about how those relate to some of the diagnostic factors and inputs so that we could predict a little bit better. What I will say is I think by and large, we have a good handle on what's -- what the future holds. But what I will say is we're not counting on any major resurgence or anything like that. And things like that, would certainly be something that's almost impossible to model or predict. So basically, if you look at some of the IMHE projections, if you look at how our business relates to things like hospital admissions and then you look at how things like hospital admissions relate to COVID prevalence, you can get a sense of what's going on. But nobody has a really great crystal ball here. And I think what we've modeled is a steady recovery over time. And not necessarily an end to the pandemic, but a real normalization that occurs starting in Q3 and then into Q4. And so if that holds, then I think the admissions that we've laid out will be largely in line with what will hopefully be -- prove to be realistic assumptions that we've put forward. And furthermore, that our revenue projections will prove reliable. But it's a big if, still. And while I think that we've got a good sense. There are still things like variants, new waves emerging in different geographies. So far, it's been fairly well contained and hasn't impacted some of our major markets, but something that we watch really closely. Because that could have a very material impact on our expectations going forward. Did I freeze, Matt?

No, you did not freeze.

Okay.

And maybe Matt froze.

Yes. You did right at the end there. Okay. I got. Maybe just remind us, I think you're [ guiding ] on low single-digit [Technical Difficulty ] It's in procedures flattish, but it's mostly a U.S. comment.

That's right. So what we've said is on a full year basis, we expect admissions down kind of mid-single digits and procedures a little bit better than that, but kind of in that line. And I think it will be interesting to see because by year-end, we expect both of those metrics, and this is really in the U.S., to be close to pre-COVID levels. So that's kind of the expectation that we've laid out. As far as we can tell, it seems like a valid assumption, but it's something that -- it's an important driver for us, and it's something that we'll continue to watch going forward. Now while we've seen severe COVID impacts outside the U.S., and certainly, our hearts go out to the folks in India. We have a lot of employees in India. In a market like India, we don't have a very large business. We do have a bigger business in Brazil, but it's something that thus far has been manageable. We'll have to watch as we go forward. Matt?

Got it. Could you be any more specific. I mean -- sorry, can you hear me okay?

Yes.

Okay. I'll try again. So On OUS, I know probably some lag. Could you talk about what the guidance implies for OUS trends? Or maybe just cover some of the dynamics that you're seeing outside of the U.S. if you can do that?

It's harder to say outside the U.S. because we -- our -- the quality of our data is simply not as good. And so while we did see a surge in Europe towards the end of the first quarter, and into April, that is coming down along the lines of our expectations. So I would say that the COVID assumptions in developed Europe are largely in line with what we've expected. We'll continue to watch that. But I can't provide the same level of precision in terms of the data like the data that we have in the U.S. It's just very different. And in developing markets, it's even harder to tie things down, like admissions and procedures and so on. So it's a lot -- the data is much less reliable.

Got it. Well, you did beat in Q1 and you basically raised annual guidance by the beat. Maybe talk about the decision to do that versus raise guidance further? Is it just early in the year and you're being conservative? Or are you not seeing the development of improving trends like you'd like?

No, we're happy with the top line performance. I think one of the things that did surprise us in the first quarter of the year was the severe movement that we saw in certain input prices and freight costs. So for example, the spot price of resin, which is a good indicator of certain of the raw material inputs of Baxter, really increased from December to March. And that's a big driver of cost for us. The cost of corrugate, similar increases that we saw over the course of that several month period. And then furthermore, the price of freight, that was another driver for us in the short term. We saw really big increases January, February to March in freight costs as well. And so we had to actually raise our manufacturing and supply chain costs about $70 million on a full year basis, in large part as a result of those price increases that we saw and that we experienced. And so now, the price has been kind of trundling along. We haven't seen further severe increases since the end of the quarter. So I think that's a good thing and something that we're watching very carefully. But really, that was a big driver of our performance and the fact that we did offset some of the strong performance in Q1 with some of those incremental costs that we expected later in the year.

I want [ to talk ] a little bit more about margins and margin [Technical Difficulty] and start it with this discussion around some of the increasing input costs, that could flex up and down. But margins have been a huge focus for the company since the spin with your zero-based budgeting and a lot of improvements you've been able to drive in SG&A is actually really impressive. Maybe talk about bigger picture, COVID, there are a few things that inflated your costs even before this more recent spike in transport and resin, like having to do PPE in the factories or over time or taking care of some of the workers and burn off through this year. So can you talk about how some of those costs will burn off versus linger in the context of that $70 million as well?

Sure. So let's talk about different categories of costs. I think that first, let's talk about the $70 million of incremental costs that we saw. For me, one of the fundamental questions that I don't have an answer to yet is, are these more permanent? And can we expect further inflationary pressures? Or are these more temporary or onetime in nature increases. Because what I will tell you is, I think one of the reasons resin costs were pressured is because of some of the deep freeze that took place in the first quarter of the year. That put a lot of pressure on resin supply chains, for example. I mean I think some of our freight costs were impacted negatively by the Suez Canal situation that emerged. Again, I think that was another factor that came into play impacting freight costs and shipping costs. And so you put those things together and the recent hack definitely impacted some fuel prices in the U.S. So that's another thing as you think about home shipping to patients. So you put all those things together and that $70 million, it actually is an open question for me. Does that be -- are we at the beginning of an inflationary cycle? Or is it something different? We have not seen real wage inflationary pressure yet. And so that's something that we're watching for. And we haven't seen further increases in things like resin prices and some other key inputs for us. So the $70 million, the jury is still out in terms of what is going to happen long term with that? And do we need to brace for some sort of inflationary cycle? The second piece relates to "COVID-related costs". And we had some substantial COVID-related costs last year, and then we have some more this year. And I would characterize these in 2 buckets. One is permanent and two is temporary. A temporary, an example of that is giving employees incremental pay for child care so that they can go to our manufacturing facilities. So that kind of pay is something that we embarked on. We had some expedited shipping over the course of the year. Those kinds of things are more temporary. And the majority of the costs are temporary in nature. There are some permanent ones, maybe $30 million, $40 million, something along those lines in terms of things like PPE, which we will expect to continue to purchase for all of our manufacturing employees as they show up to the facilities. It's just critically important that we keep our employees safe. And so there are certain structural costs that we've added as a result of COVID. Those won't go away. But when we talked historically about $150 million of incremental COVID, the majority is temporary, but there is some level of permanent costs that will remain. Now the last piece as it relates to what I would characterize as "COVID impacts" is a little more nuanced, and that has to do with volatility in demand signals as a result of COVID and the attendant inefficiencies in our manufacturing facilities that we've experienced and start to roll into our financials and then roll off ultimately. And that was one of the factors we reflected in the budget this year. What I mean by this is we -- when you're short one product line, and so you have heightened demand and you're long another product line, meaning you have excess, there is excess supply available or something along those lines, your manufacturing network is suboptimized. And what that means is negative manufacturing variations. facilities running, some facilities running at 100% full out, others running at 70%, 80%. And those inefficiencies lead to incremental variations which roll out through your P&L. And we'll expect through the first half of this year to see some of that. And then as we move into the second half of this year, my hope is that normalized demand patterns emerge that we're used to planning against. And what we're able to do as a result of that is really plan more effectively, have the right inventory levels, not carry the excess cost and the excess variations associated with the volatile environment that we've seen. So those are a number of factors in play. And frankly, as we approach the second half of the year, one of the reasons why the second half margin is meaningfully higher than the first half is some of these COVID-related costs and COVID-related impacts start to roll off in the second half of the year, and so we see an improved picture. I gave you a lot there, but hopefully, that gives you some helpful context.

Yes. That's right. I have 11 follow-up questions on that. No, I did want to ask you a couple of things about how those things will roll off. So first, have you ever quantified the impact of the manufacturing variances? Or can you give us a sense for that? And if things normalize in Q3 like you're projecting, how quickly will those variances also start to come through and normalize in the P&L? Is it a quarter lag or so?

Normally, variations are about -- rolled out about 3 months later. That's our normal -- it's called cap and roll. That's the normal process that we undertake. And what I can tell you is if you go through the modeling of Baxter, the first half versus the second half is hundreds of basis points of difference. And you can do the math on what we gave as the kind of full year guidance on margin and what that implies first half to second half. But it's several hundred basis points. And what I can say is some of that has to do with normal seasonality. Second half margin is normally higher than the first half of the year, in part because you have a lot of spending programs you undertake in the first half, the yield benefits through the rest of the year, so sales kickoffs and so on. Part of it has to do with the fact that we have the largest sales quarter of the year typically in the fourth quarter of the year. So that has a nice absorption impact on all costs. So there is a normal seasonality. But in addition to that, there's an unexplained factor if you just simply look at it in that sense. And a lot of that has to do with less COVID-related costs and also less manufacturing rollouts in the second half of the year. So those are the factors that are coming in to bear. We haven't gone into more detail in terms of quantifying rollout and timing and stuff like that. That's not something that we do. But I think you can back into some of it, if you look at that first half to second half margin.

Right. Right. Okay. I mentioned the spot rates for resin and corrugate shipping has, temporarily at least, gone up. So how do we think about the [Technical Difficulty] weights in pricing around these items? So if they go down next quarter, are you still going to be locked in at some higher prices for some period of time? Or could you regain some of the $70 million. So I guess how much is kind of spot versus longer-term contracted?

Yes. Our prices are reset fairly frequently. So we don't lock in a price for an extended period of time. We've evaluated and we'll continue to evaluate hedging programs for some of these input costs and other things. And of course, in the past, we've evaluated how you can reflect this in pricing agreements that you have for your products. But what I would say is, while it's not exactly the spot rate, it's something that travels along with it fairly closely in terms of the pricing of some of these inputs. We'll -- and like I said, if it's economic to do so, we'll look at hedging programs, but we don't have a hedging program at this point.

No, understood. All right. So why don't we back out a second and think [Technical Difficulty] about the opportunities for you longer term, I guess we might get another update on that with the [Technical Difficulty] here in the second half of the year. But how do you think about how your markets have changed pre and post COVID? Are there fundamental differences that are going to be able to drive you higher in the range or to a higher range of growth? What are some of the puts and takes that we should think about pre and post COVID, post normalization for Baxter?

Yes. I think there are a lot -- there are a number of moving pieces with respect to COVID impacts. And I'll make a comment on the Renal business, for example. The -- I believe that long term, COVID will be a tailwind for peritoneal dialysis. And I believe that because ultimately, I think patients will want to conduct therapy in the safety of their home, particularly if the home therapy is a very, very viable, attractive alternative to them, as it is now today as a result of the technological advancements that we've put forth to the market. And so I think the whole Netflix phenomenon of wanting to embrace care in the home. I think people will want to stay home, and I think that's long term, a tailwind for renal. Now having said that, there is a short term, and it could be -- it could take several quarters, maybe even a year to wash out, is we have lost unfortunately a lot of end-stage renal disease patients to COVID. And so the patient census, in particular in markets like Latin America, was actually down meaningfully. And so that's a short-term headwind. And it's -- of course, it's such a tragedy. But the notion of movement to the home, I think long term is a tailwind for the renal business. In the case of medication delivery, it's -- there are some movements to alternate sites, and perhaps even the home, as a setting for care. I would say that, that's less of an impact on us in the short term for the next few years. I think we do sell products today to the alt site. And I think the vast majority of the products that we sell are products that need to be administered to patients who really don't have a choice in terms of where they seek care; they need to be in a hospital. So I think from a medication delivery standpoint, not a marked change in the coming years. But the interesting question that we have that still remains is, in our guidance, we said we'll end the year down a couple percent on admissions. And we said that because we thought people might still just sort of try to stay away from hospital as a setting for care. And so the question that remains is, is that something that persists into next year? Is this something that persists beyond that? Or do we see a resumption of normal activity to the tune of the 2019 levels? It's an open question that we don't exactly have an answer nor will we until we approach the end of the year. What I can say is Q1 was a little bit better than we expected. So that's great. But it's something that we'll continue to watch. And at this point, I don't know if that's a headwind that our business will face. Of course, the acute business has experienced extraordinary growth. We'll see declines in that business in the later quarters this year, along with the first quarter certainly of next year. Because that has been a real critical line of therapy for COVID patients. So that will be a headwind for a couple of years, more of a growth comp issue than anything else. So I don't know, that -- those are a few thoughts in terms of drivers. We're watching this very carefully, though, as we think about, have there been structural changes to end markets as a result of this? I think there are structural questions, but no real fundamental change at this point.

Okay. Okay. Great. Yes. That all makes sense. Maybe I'll follow up on a few of the things you brought up and kind of double-click on them. So in renal care, we know that census is down and maybe that takes some [Technical Difficulty] [ yield ]. But there have been a couple of things that could really push PD. Like we saw the American Kidney Health Initiative, that's sticking around, incentivizing people to move into PD. I did see DaVita, I think it was last week, announce that they're bringing in a home choice, and so I wanted to ask about that. How does some of these incentives and the fact that you're seeing support from the providers for PD play into your outlook for that segment?

We're thrilled about this. I think, first of all, the Advancing American Kidney Health initiative is -- I think it's a big improvement in care. I think it's a great -- and it's a great opportunity for our company and we're thrilled to support it. That -- we haven't seen a demonstrable impact from it yet. It's so early in terms of the program. But interestingly and over time, it does provide real incentives for folks like DaVita to move more patients to the home. And so I think it's a wonderful thing, and we're pleased and excited to support it. As we -- and in particular, what we want to do is have available in key markets like the U.S., all relevant technologies to support the therapy in the home. And what that means is, obviously, at the core of it, it's the consistent supply of solutions that's crucial. And if you think about our company, one of the real competitive advantages and one of the things we do extremely well, is manufacture and supply high volumes of fluids for our patients. Okay, so you have to have that as a baseline ingredient. But then you also have to have the distribution network and importantly, a cycler that works and works well with patients. And what we've done with bringing HOMECHOICE CLARIA to the U.S. is we had a lot of patients and nephrologists and nurses who had tremendous experience with HOMECHOICE. And so they wanted something very similar to that, but perhaps slightly upgraded with Sharesource. And so the HOMECHOICE CLARIA allows us to introduce Sharesource on the HOMECHOICE platform in the U.S. And then, of course, we have AMIA, which has been another really well-received cycler, and we've enjoyed great growth with that. And so right now, we have the full scope of cyclers available in the U.S. And I think some of our providers are really excited about the different alternatives that we've brought to the market. And we top it all off with Sharesource, because remember, in the past, with HOMECHOICE a patient is really, to some extent, alone in their home, in the sense that they conduct their therapy with limited oversight from the clinic, but for their monthly visits and the memory stick that they bring to the clinic to really report on how they did that month. Well, in the case of Sharesource, we're allowing for daily monitoring to take place. And so I think what's important about Renal in the U.S. and other developed markets and even in emerging markets is we have the full scope of solutions available, with it the Sharesource platform in many of these markets allowing for this oversight. So I think to your point, people ask me what launches are you most excited about? And there's a lot that I'm excited about. But I'm actually excited about a business that has all of the launches kind of under its belt at this point, which is our peritoneal dialysis business in markets like the U.S. and other markets because of all the great factors that will contribute to the [Technical Difficulty] [ group ] going forward.

Yes. Understood. I think you talked about [Technical Difficulty] the U.S. at one point you were talking about making a bigger investment in manufacturing. So I was just hoping you could clarify that and talk about how you might need to ramp manufacturing to meet the increasing demand?

Great. And Clare, I'll answer the manufacturing part. I missed the first part of the question. I don't know if you heard it.

No, I didn't hear it either.

Okay. All right. So Matt, you have to pay your Internet bill, Matt. But -- we're having some connectivity issues here. But basically, in terms of growth, we think this is an exciting growth opportunity for us. We think it's something that this business in the U.S., we should see steady performance for years to come, for the next 7 years, which I think is wonderful as PD penetration increases. Now we will have to make investments over time, and we're carefully thinking -- we've made some. We started to make some last year. We're continuing some this year. And we're just carefully evaluating the uptake rate in terms of patients, along with our capacity availability, so that we can monitor that and so that we can support that. And so what's the exact -- what's the exact investment? AT this point, it's too difficult to say, but a lot of this will depend on the uptake rate and how we support that in the most efficient way. But we're here as a manufacturer to definitely support the expansion of peritoneal dialysis in the U.S. We stand behind that and are excited about the opportunity and excited to play a key role. And we'll make sure we make the right investments. Exactly how that's titrated and what form it takes, I think, is an open -- a question that we're still working through.

Got it. The first part of the question, which is I know you've talked in the past about potential acceleration of U.S. PD growth to kind of the low double digits. Is that still how you're thinking about it?

The exact figure, it's hard to say, but we've talked about significant, even up to doubling of penetration over a 7-year period as a potential. But these are all things that we're kind of carefully watching. And one of the things that will be helpful for us when we do share our updated guidance, is we'll have 9 months of data on how this initiative is going and what we're seeing and hearing. And that will help further allow us to kind of fine-tune some of the longer-term projections. But yes, we believe it could grow in excess of what we've seen over the last few years, and can be a really nice driver for us.

Great. And I think people focus a lot on the U.S. dynamics change [Technical Difficulty] and do PD because of COVID and then just this desire to get treatment in the home.

I'm going to take a guess at what the question is. So outside the U.S. we do think there's really nice opportunity in terms of PD growth. And frankly, in a lot of markets, we've seen steady, solid PD growth for years. I do think that the desire to conduct therapy in the home will provide an important global backdrop for PD penetration. Now I will tell you that incentives matter. And so to the extent that a government chooses to incentivize PD therapy in the home, I think that will have a really meaningful impact. And so we'll have to watch how different governments do that. And many already do, and we've seen incredibly high PD penetration rates in markets, for example, like Singapore and Hong Kong, you have great penetration rates. And the -- and then also in a number of developing markets like China, you've got and some other places. You have wonderful PD penetration because it's a great therapy that works well. Now what I don't know is, will other governments change to a PD-first mentality or strong PD incentive mentality. That's something that we're working on. And I think COVID will support that. And I think even absent that, there will be some drive to the home as patients consider their options with respect to their own care.

Got it. Jay, that was a good guess. That was pretty spot on.

Excellent.

Okay. The next thing I wanted to cover was you talked about acute therapies, just because it's more dynamic. And I was hoping you could talk about how you see that playing out over the next few quarters. I mean we know we're not going to see the surgeons in demand for capital like you saw in the last year. But could you see more of the ongoing use of the disposables? And what's the typical mix of capital versus the disposables in that business?

Yes. So let's make some comments about acute. I think, first of all, our company's mission is to save and sustain lives. And so it was so exciting to be able to provide this life-saving therapy for so many patients. And the result of that is the greatest 4 quarters of growth in -- since we've owned the acute business. The -- but now what happens, though, is we will have negative growth at some point here and maybe even starting in Q2, Q3, Q4, into next year, based on a tough comp. The real question that we have is, we've had a number of new institutions adopt acute therapy as a result of the pandemic. And I think -- and they've seen the power and the benefit of the therapy. What's going to be interesting for us to see is what happens as a result of that? Or can we count on some of those institutions now having been educated in acute therapy, to continue the adoption of the therapy and provide a whole new expanded base of hardware to sell solutions on. And that's a real question that I think we're excited to watch the progress of that business. And I do think we'll convert some of these accounts to more kind of acute customers than they perhaps would have been in an alternative world. And so we're excited to support that growth. And I think this business is one where it's truly a life-saving product. And I think this is definitely one that we can count on for well above Baxter average growth, once we get past the normalization period with respect to COVID. Clare, I don't know if you would add anything to that.

No, I thought that was great.

The one follow-up I had there was how much of that business is typically capital versus the filters and disposables?

What have we said on...

So typically, Matt, it's about a 90% consumable, 10% capital. During COVID, that shifted slightly, but still was around 75% to 80% consumables, a little bit more on the capital side during COVID.

Got it. Thanks, Clare. Okay. And then I wanted to touch on biopharma solutions. You're breaking that out now. And you do have some things kind of developing there around the services you're providing for fill and finish. So I wanted to explore how durable you think that could be? Maybe remind us of the magnitude? And how do you expect that business to grow longer term?

Sure. I think this is an exciting business for us. And let's talk about why I think. The manufacturing competency that we have that we think is a real competitive advantage for Baxter is on full display in this biopharma solutions business. The quality system that we have, which is so fundamentally important to our company, again, is directly leveraged by this biopharma solutions business. And the fact that we're able -- a solid supply chain, also a competency of ours also leveraged by this business. So it really does leverage many of the aspects of those things that we do well. Why did we break it out? We broke it out because historically, we had this "other" category, but the majority of the sales related to other came from this particular business. So for -- in an effort to share some incremental information on a really important and strategic business for us, we decided to break this out into its own category. Now as we think about the business, yes, it's come into the spotlight as a result of the COVID vaccine manufacturing fill finish that we're doing. And again, it's back to the mission of the company, so excited to be able to do that. It's something that every person in every one of those facilities take such great pride in. So really happy to be doing that. And certainly, that has a financial impact. I think we said around $75 million or so for this year. Now there will be a headwind at some point as a result of COVID, if that -- does that occur in 2022 or 2023? It's hard to say at this point, and that's something that we will watch carefully. But we may continue manufacturing vaccines all the way through the end of next year. And that's something we don't have great line of sight to at this point. But what we can say is taking that to the side, it's a really nice business for us. It comes in with a gross margin kind of similar to Baxter's overall gross margin. But because of the limited selling and administrative costs, it really has a much higher margin than the corporate average. So we like the business a lot. I think it's an area we have expanded in, even outside of COVID. And it's one that we'll expect to continue to grow. And again, what we're really trying to do with this is provide differentiation in terms of manufacturing and service. If we can do that, then this could be a business that we talk about for the next 10 or 20 years.

Great. All right. So we just have a couple of minutes left. Let me ask you one about the NOVUM IQ launch in Med Del. So you're predicting second half launch after submission here earlier in the year. I guess, can you talk about the time line and your confidence in it? Do you think you get any benefit from having already submitted once? That's the first question. And then maybe just remind us how this really updates your portfolio and brings new capabilities for Baxter on the pump side?

Sure. So we definitely don't want to speak on behalf of the FDA. What I will tell you is we're doing everything we can to work closely with them. And I think we've learned a lot since the initial submission, and then all the work we've been doing since then. So I hope that our most recent submission was a very well informed submission that addresses any concerns, but we don't speak on behalf of regulatory agencies. So we're going to watch it carefully. And hopefully, we cross the finish line and are able to bring this important product to [ market ] [Technical Difficulty] As I've said on the earnings call, I think we penciled in around $30 million in sales in the latter part of the year related to this particular product. So that's something that hopefully we're able to deliver on. Now I think the more important aspect of this is the long-term opportunity, because now what we will finally have is a large-volume pump and a syringe pump on the same platform, with further pumps forthcoming thereafter. But those 2 pumps being on the same platform becomes a crucially important selling tool for us. We'll be able now to talk to hos -- because what happens today is if a hospital wants a large volume Sigma Spectrum pump, they actually have to have a syringe pump from another manufacturer. Well, automatically you're on 2 different platforms. And if you want a PCA pump, it's 3 platforms. Once we launch the large-volume pump, we will now allow for 3 pumps on the same platform. And so I think -- ultimately. Initially, it will be 2 pumps on the same platform followed by the PCA. So ultimately, we're very excited about what this does. It addresses a real need that our customers have raised to us in the past. We're very excited to address that and look forward to -- this is a long-term value driver for us. And it's something that comes to market. And I think we'll be able to sell pumps for many years on the back of this combined platform, along with a lot of the best-in-class features that we've incorporated into the pump. So stay tuned. We're optimistic, but we're watchful and we'll consider and stay very close, as close as we can and hopefully get this to market in the second half of the year.

Okay. Great. Well, I think we should end there. I've got to go pay my Verizon bill. Jay, thanks for the attention to the connection issues, and I appreciate all the thoughts. Very nice to go through all the different parts of your business, and we'll continue to watch the progress, and good luck the rest of the way.

Awesome. Thank you very much for the time. Really nice to see you, and we look forward to seeing you soon.

All right. Thanks, Jay. Take care. Take care, Clare.

Thanks, Matt.