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

Good morning, everyone, and welcome to Baxter's 2022 Investor Conference. My name is Clare Trachtman, and I'm the Vice President of Investor Relations for Baxter. We are very excited to be here with you today to share Baxter's story for creating compelling value for all our stakeholders and how that translates into our new financial outlook. Before we begin the presentation today, I would like to remind everyone that some of the statements being discussed today contain forward-looking matters regarding future events. We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties and that actual results or events may differ materially. Please refer to the forward-looking statements contained within the presentation materials available on our website for more details concerning factors that could cause our actual results or events to differ materially. These materials also contain reconciliations for non-GAAP measures being used as part of today's presentations. As part of today's presentations, you will hear from members of Baxter's executive leadership team regarding the next phase of Baxter's transformation journey. This includes strategies to continue creating compelling value for patients, clinicians and investors through leading-edge innovation, market development, operational efficiency and other vital growth factors. Joe Almeida, Baxter's Chairman and CEO, will kick off the presentations today, followed by Jay Saccaro, Baxter's Chief Financial Officer; and then Jim Borzi, Baxter's Chief Supply Chain Officer. Following those 3 presentations, we will host a brief Q&A session. The next group of presentations will begin with Giuseppe Accogli, Baxter's Chief Operating Officer. Following him will be presentations by all of our Global Business Unit presidents. After the completion of these presentations, we will host another Q&A session with all of the GBU presidents. For those of you that are listening to this via the webcast, we do have the ability to submit questions via our webcast portal. Please note we will first take questions in the room before addressing the online questions. And for any of those questions that we aren't able to answer today, I will follow up within the coming days. In addition, we encourage you to visit our Innovation Hall during the break and after the completion of the formal presentation. And for those of you that are on the webcast, there is a link to a video of the Innovation Hall available on our website. With that, I will now turn it over to Baxter's CEO, Joe Almeida, to discuss the company's strategy to transform healthcare and create value for all of our stakeholders. Joe?

Good morning. So my mic working? Perfect. Good morning, everyone, and welcome to the Chicago land. And for you at home or at your offices, I hope that you can enjoy our meeting today. Listen, we haven't been here for about 4 years with this. The last time we did it was almost 4 years ago to the date and was in New York City. And now it looks like it was yesterday. But COVID went through and it's still going through, and I think we've got the right window to have everybody together. So we have an event that is safe and good for everyone. We're very excited about being here today. We're going to give you an insight and a window into what Baxter is doing and what is being delivered -- we'll be delivering in the future. As you know, Baxter is a company that is almost 100 years old. They had evolved through many different phases and transformation, and we're looking forward to get to the next phase. At Baxter, what we do is essential to healthcare. Our brand is extremely recognized and is associated with the safety and quality of our products. Everything we do at Baxter is with ethics and compliance, is what we call our One Baxter Force Multiplier, and that is something that we tell our employees quite often and consistently is about our ability to do business is only valid when we do it ethically and compliant to the laws and regulations and our own policies. If you think about what is a company, we have 60,000 employees. It's all about the culture and the talent that we have because everything else is just a result of it. So we are very focused in 4 cultural levers that are driving the company since I joined the company as a CEO in January of 2016, which is a sense of urgency, get to it. It doesn't mean you're going to do faster, but you're going to have the sense of urgency to do it right but do it at the right time. Also, the sense of collaboration, simplification, which is so important in a company that has so many years of history. So we want to make sure that the bureaucracy is simplified and we have the ability to deliver on every operational excellence lever that we have. And also the most important is the coverage of our employees to stand up and be themselves and express themselves. So this drives to the diversity, equity and inclusion because the inclusion is one of the things that I always say is the enabler for diversity. If you have a diverse workforce, they will be there with you for as long as you can give them the inclusion sense that they belong to the company without thinking that they need all to act the same. So if you think about bringing themselves to Baxter, our company is very much into the inclusion part, which is the retention of employees within Baxter. And we do this in a manner that is all encompassing in all regions of the world that we do business. So if we think about what were the phases of transformation of Baxter, how did we get here is worthwhile looking backwards for a minute and think about how do we transform or how did we transform Baxter to a Baxter of today. We started in '16 to '18 -- to '17, looking at primarily the strength of the financial operations of the company. So we went after free cash flow. We went after expenses. We went after cost reductions. Also, we started to put the foundation in the most important thing of patient safety and quality that became our #1 tenet in the company. I'm going to speak later about our tenets. But the first one that we put in place was patient safety and quality. We strengthened our financial position. We invest in our operations and also created a base for innovation. So if you think about that phase of transformation, set us up for the second phase of '18 and '21, which was to actually execute on innovation. Today, we launched 20 -- just the Baxter legacy products, 22 new products a year. If you think about our operations that created our device design group within the company was created here in Northern Illinois. We have almost 600 employees in Bangalore, India, software testing, cybersecurity. We have to create the ecosystem so important to develop new products, our medical affairs, our clinical trials, our regulatory affairs, all these have to be put together. The company was very focused on pharmaceutical, but prior to '16, very few products were launched on the [ market ]. As a matter of fact, in '15, just one product was launched by Baxter versus today, we have a cadence of new products and you're going to be able to see that. So that was the '18 to '21, closing it with a commitment to our social responsibility. I hope you had an opportunity to read the 2020 report that came out in July, August of 2020. We have an update coming out this year. So the results of this transformation were clearly and evident in our financials from the reported sales growth of 4-plus percent in CAGR. So you think about our market growth rate, this is about 50 to 100 basis points higher than that. Our operating margin also went from 10% to almost 19%. Our EPS, 22% CAGR, and our free cash flow, which was one of the tenets of the company to be able to transform its portfolio was to bring from $300 million to $1.6 billion, which gave us the ability to move the next phase of the company, if you think about. The next phase was how do we transform the portfolio because if you don't have the right financial structure, if you don't have patient safety and quality, we used to have 5 to 6 warning letters And we have Jackie Kunzler here and her team and working with Jim Borzi in integrated supply chain, who really did a lot of work to get the company to a place where today, we still have a pending warning letter in Ahmedabad came with the acquisition of the company, but the legacy bags or warning letters were all addressed. This was a big deal for us, but to be able to move to the next phase of portfolio management, you had to get altogether done. So you think about how do we unlock the innovation going forward, we need to expand into adjacencies. How do you create the ability to grow above market is with innovation, is with the talent and the culture of the company and the integration of the products and the next phase of connected care in critical therapies that we're developing? So you think about how do you get there and that was when we decided to bring Hillrom into Baxter. And that acquisition was extremely important to Baxter, we closed in December, and it has become the [ tenet of our vector ] that's pushing the company forward in creating the innovation opportunities to expand the markets that we're in. So when we acquired Hillrom, we had altogether about 10 business units. We're now down to about 8. We're going to report those our reporting segments, and that created our new Baxter. So the new Baxter welcome 10,000 to 12,000 employees at Hillrom to make it a strong 60,000 people company. But when we start looking at this and said, our mission is so strong. It's one of the things that I did not change in Baxter. I spend a lot of time reflecting what should be the mission of the company and the mission of the company was well established for many, many decades, and that is save and sustain lives. If you ask any employee of ours from operations, from our manufacturing, distribution to research and development to the back office of the company is very clear, what is important to us, is save and sustain lives. And with the pivoting of the company into more connected care, understanding where the markets are going, we had to restate our vision. And our vision now says that we're going to transform healthcare with a customer focus in improving patient outcomes and enhancing the workflow efficiency. That's very important because you're going to see throughout the presentation today, how do we create the future by not only connecting devices, but also create intelligence behind them, enabling cost-effective care and the cost-effective care is 2 very specific vectors. The first one is the ability to provide effective clinical outcomes. The second is at a cost effectiveness. So that combination becomes more and more important as we go forward and pivot the company in a new direction. So when you bring both companies together, what you have, we touched 350 million lives a year. That is impressive and incredible number of people that we touch and with intent on making them better after they are treated with one of our therapies. We work and deliver care and products in over 100 countries with sales close to $16 billion in 8 business units sold in all the regions of the world. So it's an impressive global company with 60,000 committed employees under one very specific and strong mission to save and sustain lives. Another area that we actually had broadened is our sites of care. If you think about Baxter was very strong always in the acute care market and in the home care with peritoneal dialysis in our parenteral nutrition therapies to some extent, we now become more present with other business such as PSS, GSS and Front Line Care, which are the legacy Hillrom businesses. But also to the right, you have the alternate site care markets that now are creating further opportunities for the company. Once we went through COVID-19, we found that a significant amount of care has moved away from the hospital. We know, for instance, that [indiscernible] company that we co-invested with 2 very large providers, is driving the change of site of care with 2 -- those 2 very large providers will give force to this not trend, but certainly a for sure change that will occur in the next 5 years to a decade. You're going to see a lot of those changes [ and best ones ] to be present. And to be present there, you've got to have products and innovation that create that opportunity for us to be a participant in those markets. When we think about how to set the strategy of the company, first thing we do is to look at the trends that are currently in front of us. And if you think about the number of more complex disorders, the digital health transformation post COVID-19. I'm not saying that COVID-19 or COVID per se is gone, but that transformation took place. And when people think about, well, we compare to '19. It is okay to compare to 2019 volumes. It's okay to do that, but the circumstances of [ healthcare ] is delivered today is very different. The era of 2019, 2018, [ healthcare ] was delivered, is pretty much behind us. We've got to look forward and look at the vectors that we're driving better healthcare and better access. The outcomes and how things are reimbursed are changing significantly as well as shift from hospital, as I said, to lower cost settings and the ability to access healthcare in many different countries. You know access to healthcare is not equal across the globe. And Baxter is driving to create products and technologies that are more accessible in many more countries in the world, so people can get treated more effectively. One significant change that we never spoke about in the past was integrated supply chain, how the supply chain plays a role because we always look at supply chain to deliver first patient safety and quality and then cost effectiveness in making the products and be able to get the right product at the right cost at the right time. To be able to do this today, things have probably most radically change in this area than anything else. What we, as executives, grew up with was putting manufacturing locations to drive lower cost and tax effectively. That's what we did. You see many companies that have worked for and including here Baxter was putting factories in place as they were actually very cost-effective and very tax effective. When you look at the trend going forward is you've got to put the plants where you sell the product and you've got to buy the components where you have your plants because the supply chain, the cost of moving things around the world and when things get really clogged up in ports, the next thing you do is put in the belly of an airplane, and that costs a lot of money. And you end up eroding your profit to a point that you cannot make up in any cost reduction because of the location of the plant. So you're going to hear from Jim Borzi today how Baxter has moving -- is moving very quickly to alleviate that kind of issue that we have. So those are the trends that are ahead of us. So when you think about those trends and the influence from the outside in the world is telling us the signals and how do we react to it is to put a strategy they're robust in place with 4 strategic pillars that you're going to be hearing throughout the day today, how are we going to address in every single business of ours is starting with innovation in those 2 principal vectors here are the connected care in the core therapies. Market expansion, our ability to go geographically to different places, use the Baxter network with Hillrom to create expansion and growth of the market and market development as well, operationally efficient, digital transformation [indiscernible] So we have new things that we're doing, bringing Hillrom into it will give us really good leverage on synergies going forward. So we've got to make sure that, that is put in place. But something that we do is understand how capital allocation really will drive growth in the future. But the first thing that we think about capital allocation, and this is in every meeting, if you could be at a meeting of Baxter, you would see the patient safety and quality takes #1 priority when we allocate capital within the company. So we will put every money that is needed in that area. We will remediate plants need remediation. We're going to continue to improve assets that we have, continue to invest money for facilities where we are single source or double source into a market, we will fulfill our responsibility and obligation as a market leader in healthcare. So patient safety and quality is our #1 priority. And then we take the rest of the money, and we're going to put that to work in many different forms, allocating internally to a business that are growing faster, business that can provide for the future, also return shareholder money to shareholders via dividend as well when appropriate share buyback. But I want to caveat that saying that M&A is our preferred way to deploy cash once we start repaying our debt and share buyback will be an alternative to that if we have not encountered a good M&A target, and we have done this in the past until recently when we found that Hillrom and Baxter will make a powerful combination. So if you think about these strategies derived from our market dynamics, how does that affect our market growth and what markets are we in? So what we're finding is the acquisition of Hillrom uptick our -- slightly our weighted average market growth rate. So today, we have a sustainable market growth from 3% to 4%. And if you think about the opportunities and the CAGR of growth of our businesses are disproportion now allocated to the Hillrom businesses that came into Baxter because the markets are shifting into more a connected health than solely captive products, but also you have some really good, strong business of Baxter coming in. So in the total market of $130 billion, we have a WAMGR of 3% to 4% in each -- in our businesses today. And you're going to see from our executives today that we have in every single case, market Baxter growth, rather Baxter growth is above or at market growth in every single category. So -- but how are we going to do this? How are we going to pivot the company? What you're going to see today is a very remarkable shift from 2018, when you were in New York, you see that we are using 2 very powerful vectors. First one is connected care so -- and then core therapies. But the connected care is not just a jargon, is an enablement for better insights. So you think about how we're going to create smart devices, and I hope you had an opportunity to see in our display yesterday or this morning, how we're planning to connect devices. So smart devices and then the ability to communicate and integrate with hospital systems and integrate amongst themselves to be able to do what to create insights. Because at the end of the day, there is advantage of connecting devices and put them to work and moving data around. But the ultimate goal, the aspiration is actually to create intelligence behind them with algorithms that help clinicians in such a tough market in terms of human resources, the resources in hospitals are difficult to come by. The expensive -- nursing is expensive, technicians that are expensive to hospitals. If you've been to a hospital lately, you'll see that there's significant load, overload of nursing staff. So what you do, you've got to create a pathway, the opportunity for them to do their jobs in a more effective way, and that is to actually create insights, more so than just connecting devices. You're going to see throughout the day to day, a phenomenal lineup of new products from our presidents and how we're going to execute through our current initiatives, primarily with revenue synergies they are coming about, geographic expansion, channel expansion and market development. All those 4 driving tenets will create a $300 million incremental sales through market expansion efforts by 2025. Just another box in our 4 strategy pillars. Also you're going to hear from Jim about $1 billion in anticipated gross savings by 2025. They are coming from G&A efficiencies, the synergies from Hillrom, digital transformation and integrated supply chain. You're going to see that the company has committed and shifted very rapidly into digital transformation of its own operations, independent of being a connected health company that is driving that -- the new products to adapt to the market conditions. We ourselves have changed quite a bit how we operate our company. And we were going to deliver on not only the anticipated and discussed synergies of Hillrom, Jay is going to cover how we're going to deliver [ debt and ] a bit more. So it's all about getting it together, and the capital allocation is key. As I said before, patient safety and quality takes #1 priority, also how we put money in business units. You're going to see an uptick in R&D expenses today. Big why? Because we're allocating more money to business that are growing faster. We also are going to be repaying our debt as we promised and be able to continue to increase dividends early as you just noticed, we had a modest increase in dividends. We're going to continue to increase. And when we feel that the debt repayment had reached the point that we want, we're going to accelerate that growth of dividends and share repurchase, as I said, I prefer M&A, the share repurchase. But if we don't find the right targets, we're not going to let money accumulate in the balance sheet, we're going to return it to you. And when we think about M&A, it's very important to delineate that our markets have expanded quite a bit with the acquisition of Hillrom, creating opportunity for adjacencies that were not here before. So just a few of them, there will be very thematic going forward as we continue to repay the debt. We're going to get into M&A again. And that is -- cardiology is one of them, decision support systems, point of care diagnostics, things that will be bolt-on and into adjacencies that continue to expand our market with one objective, the objective of increasing our weighted average market growth rate. So become more participant in more attractive markets that drive growth for the company through its markets. So it's our commitment in how we're going to deploy our cash. One thing that has become extremely important to the markets, but has been in Baxter for many, many years is our commitment to social responsibility. As I said, if you had an opportunity to read our 2020 report, you please look at our report coming out this year, probably July, August timeframe, we will be able to give you a snapshot of progress, but we are in a very specific programs to support and protect our planet, our patients and our people and communities and our commitment to carbon neutrality, carbon footprint neutrality, our commitment to clean water, our commitment to being environmentally not only conscious, but environmentally protective of what we do and making sure that the communities that work -- that we work in are protected. Empowering our patients to understand best therapies and also to improve our capabilities and the quality of our products in championing our people and creating an environment of people want to come to work for Baxter, but also support the communities with, for example, $275 million in underserved communities grants to create the base that will make Baxter a better company in the future and be socially responsible that together, we can have a better place for all of us. We are recognized as a top employer in -- for many, many different publications. Recently, we just got a 3BL Media, 100 Best Companies -- Corporate Citizens, rather, Disability Equality Index, Dow Jones Sustainability Index. We've been in that index for many, many, many years, and Corporate Equality Index, 100% score on human rights campaign LGBTQ, plus Inclusion Index. So the company has -- these are just a few examples of how we are recognized as a good corporate citizen. So all of this together, these strategies driving our behaviors, driving how we deal with our culture and how we retain our talent, will create a long-term value for our shareholders. Starting with innovation and operational efficiency, as I said to you, this is the 2 out of 4 strategic pillars we'll deliver in 2022 to 2025, a WAMGR of about 3% to 4%. And with our deployment of capital, our innovation into adjacencies, we aspire to be a 5-plus percent beyond 2026. And I -- as I close, I want you to be clear about what are the top priorities of Baxter. These are not only for our investors. This is spoken to our employees every quarter. It's all about the ability to produce patient -- to produce products that deliver patient safety and the quality of the products. We do that every single minute of a day throughout our 60-plus facilities across the globe and is embedded in our culture. We're going to grow through innovation. Like I said to you, we're increasing our spend in innovation, we want to have best place to work. When people, when they get up in the morning, they have to go to work or go to their home offices or go to our office, to our plants, distribution centers, R&D labs that they feel this company socially responsible that is an inclusive company that values diversity in equity [ and has ] all ingredients to make this a place that I want to go to work. If we do those things right, we fulfill our mission with ethics and compliance and our culture levers we will deliver on the results of the company. And the results are consequence. They don't drive the first thing that we do. They are as a consequence of a good company with 60,000 great employees that wake up every day with one mission, save and sustain lives. So we are excited about the future. You're going to see today through our executives speaking, we had advanced very quickly the integration of Hillrom. We're delivering new products, primarily in connected care in new therapies. We're also creating expansion of the markets that we currently serve in operational efficiency more than ever is so important to the company and think about capital allocation as a very strong lever the company has to continue to grow into adjacencies. You're going to see a group of people today that I consider being a veteran in the industry, one of the best, if not the best, I worked with. Starting with Jay Saccaro, who is going to follow me; Jim Borzi, who joined us about almost 2 years ago; Giuseppe Accogli, our COO; Reaz Rasul, who's been in Baxter for 5 years and moved from Acute Renal Care into Medication Delivery with Acute Renal Care and today is to present Front Line Care that came with Hillrom; Amy Dodrill, who is leading our 2 business units, GSS and PSS, Hillrom, came with the acquisition; Jorge Vasseur, who is today Acting President for Pharmaceutical; Lean Schuette, who has been with us for a while, worked closely with Reaz, today is the President of our Renal business; and Heather Knight, who worked with me for many years before Baxter, and she is the Medication Delivery, Acute Renal and Nutrition President as well. She runs most of the U.S. business with Canada and Latin America. So you'll be in great hands today. And now I would like to welcome our CFO, Jay Saccaro.

All right. Welcome. It's so nice to see everybody in person. It's my pleasure to be here with all of you. And it's so nice to be in Glenview, Illinois, which is a place of real historic significance to our company. Baxter was founded in Glenview, Illinois. The first plant was here on the corner of Waukegan and Glenview. We made IV solutions in glass bottles. Incidentally, in 1941, Baxter's revenues were $1 million. We've come a long, long way. And I think as we think about the next chapter and what we're so excited to build and how we are so excited to take this mission of this company for the next 90 years, it's exciting to be back here in Glenview. For those in the audience, we have an Innovation room where we're displaying all of the technology of this great company. And what I hope jumps out at you is the coherency how these products work so well together. I know that Don Baxter would be very excited to see a room like this with the legacy of this great company, intact and, in fact, flourishing. So let's summarize all of today and what I'm going to share with you. For me, this is all about a set of financial projections, I'll share, which are very solid, solid sales growth, accelerated operating income growth and even faster free cash flow growth. All of that built on durable end markets, all of that built on our commitment to innovation and game-winning strategies. That's what today is all about. And what happens as a result of that is a really interesting thing. Joe talked a little bit about this idea of capital deployment. As we move through this plan, we have tremendous opportunities for capital deployment as we build the balance sheet of this company up based on the solid financial performance that I'm going to talk to you about. Before we get to that, let's just highlight a few things. I think that there are 3 components that I would share that are highly relevant. Number one, this is all about innovation. We're going to add over $800 million in incremental products, and so much of it is based on connected care. The idea of we take a product, link it with technology, link it with intelligence and solve outcomes in a unique and differentiated way for our customers. We have that with the durable end markets supporting revenues. And then we're going to get back to what we know how to do so well, which is cost transformation and operating efficiencies and P&L improvements. What you can see in this middle box is we're expecting to target $1 billion in gross savings by 2025. That's a big number. But I can tell you, we're going to use the same methodology that we used to deliver $1.2 billion from 2015 to 2020. I'm so excited to work with my colleague, Jim Borzi. We've already made great progress on this, but we have so much more to do. And the savings are going to come in 2 flavors. Some of it will be manufacturing related and supply chain related, and some of it will be related to synergies from the Hillrom standpoint. And then finally, as I said, we've always been focused on capital allocation. We have high returns for the deals that we expect. We like to return capital to shareholders. I'll make some comments later in the presentation in terms of how we will continue this disciplined approach to capital allocation for the years to come. As always, I'm going to share with you financial projections, but before I do, I wanted to share some ins and outs. What are we assuming and what are we not assuming? And I think this actually has become a much more important page than in past years, given the highly volatile world that we are living in today. From an assumption standpoint, our outlook assumes constant foreign exchange rates. We do expect the price of oil to decline to roughly $70 by 2025. We expect that on a linear basis, and we can talk more about what the implications of that are. The supply for electromechanical devices has been incredibly challenging over the last couple of years. And I think so much of our time as a management team is working with our suppliers to secure critical components. We expect that to moderate in the second half of 2023 and be much more normal. Inflation, which has been unprecedented, begins to normalize in 2023. From a new product standpoint, that $800 million is a risk-adjusted number. As far as financial assumptions, we have share repurchases only to offset dilution. So what that means, what that implies is there is a very substantial cash build that is attached to this long-range plan. And as Clare mentioned, we're displaying adjusted financial results. We have the safe harbor statement available at the beginning of this presentation on our website. The comparable GAAP reconciliations are in the appendix of the presentation. Now we understand the current situation with COVID. We -- I feel like we've well modeled that. We're assuming no new highly disruptive variant. We're familiar with the rolling lockdown situations. I believe that we've reflected this appropriately in our forecast for 2022, but we're not modeling in a new variant. We're not including any M&A in this presentation, no acquisitions, no divestitures. We've talked about doing both. We've talked about doing both. And in fact, we expect to do both. But neither of those are included in these numbers for obvious reasons. We are also assuming a stable macro environment. I think our company does pretty well despite lots of different conditions. But for purposes of this, we've assumed a stable macro environment. And finally, there's been a lot of talk about tax reform in the U.S., global minimum tax. These are discussions that are ongoing. For the purposes of this presentation, we've assumed no major changes to tax laws. So here it is. In 2022, we expect roughly 3% sales growth because of massive supply chain challenges and escalating price of oil, we guided adjusted operating margin flat to the prior year with adjusted diluted EPS of $4.12 to $4.20. That's this year. We shared that on our most recent earnings call. As we move forward, the story gets really exciting. 4% to 5% compounded sales growth. We expect 350 to 400 basis points of adjusted operating margin expansion by 2025. There is a lot of work, the innovation growth, the work that Jim and I are doing, the work that Giuseppe, all of the work that we're doing on the cost profile of the business, the efficiency, all of that will feature in that operating margin expansion. Now I will say it's not a linear progression. In 2023, there are some overhangs that continue to exist with respect to inflation, with respect to the supply of critical raw materials that we've assumed in our numbers. So we anticipate a minimum of 75 basis points in a given year, totaling 350 to 400 basis points by 2025. From an EPS standpoint, low double-digit CAGR. And again, that does not include any capital deployment and free cash flow conversion greater than 80% by 2025. Let's talk a little bit about the components of this. First, sales. Because that we have these durable end markets, I've talked a lot for years. I've talked about durable end markets. And I think in no year was that more on display in 2020, when despite a global pandemic, our business grew. That base business will deliver 230 basis points of growth, roughly half the growth requirement comes from our base. From an innovation standpoint, all of the exciting innovation that we've talked about will add 160 basis points of sales growth with market expansion, yielding another 60 basis points. We'll talk throughout the day about market expansion and how excited we are to take products from one geography and put them in another to take products from one channel and put them in another. This idea of market expansion is a real opportunity for us and will feature in this 4% to 5% compounded growth. Against this -- this is all delivered against the weighted average market growth of roughly 3% to 4%. So we are outpacing our markets by 100 basis points at the midpoint. In every single category of Baxter, we are at or above the market growth rate. And our business leaders, my colleagues will share with you why we are so strongly convicted that, that will be the case in the coming years. I won't walk through these in detail, but I will point out 2 lines, PSS, GSS and Front Line Care. We're so thrilled to bring the Hillrom businesses into Baxter because it's so fundamentally related to what we're trying to do from a portfolio standpoint. Clearly, there are great benefits from an ecosystem from a product tie-in standpoint, those are unassailable. But what's interesting is in those 2 simple cases, the WAMGR of these businesses is higher than Baxter's and the growth rates of these businesses are also higher than Baxter. In both cases, they contribute in a very positive way to the Baxter economic profile. So against that solid top line, we get to work. Jim, most prominently in the manufacturing and supply chain area. We have fought through hundreds of millions of dollars of headwinds. And we've done so while focusing on job #1, which is to save and sustain lives. I am so proud of the work that our supply chain team has gone to. I'm so proud of the lengths they have gone to, to serve our patients. We have been so focused on that. At the same time, though, we've done a lot of work in terms of enhancing the margin of the company and offsetting some of these impacts. And what happens in this plan as the inflationary environment stabilizes, as the availability of products stabilize, we get to put on full display all of this great work that Jim will talk to you about in these 5 areas, these value improvement programs we've undertaken, all of that will be on full display in conjunction with this idea of Hillrom synergies. And I think for me, you never know what you're going to get when you buy another public company. There's a limited amount of diligence that you can do. I am so excited about what Hillrom has brought to the table. I think for me, most prominently is the employees of the company are fabulous. And to those in the audience, please check out the Innovation Hall, where you get to meet some of the Hillrom employees. The products are outstanding, and the innovation connectedness with Baxter really unlocks a new set of opportunities for us as a company. So all of those things are fabulous. But in the meantime, from a financial outlook standpoint, we're doing better than we expected on the cost synergy side. We anticipated that deal closed $250 million in synergies, we'll do better than that. In 2024, we'll do $300 million, and that ramps to $350 million in 2025. And why is that? As we've come to understand the footprint, the real estate footprint, for example, there are more opportunities than we previously anticipated. And we intend to put those in place and capitalize on those. All of this is managed using the same program methodology that we did with Baxter's original cost transformation, both the supply chain and the Hillrom cost synergies. In fact, Jim and I were in a meeting, my last meeting before we came to prepare for this session was with Jim and the team going through the supply chain set of initiatives that yields this $650 million gross improvement. And so here's how it shakes out. 2022 guidance, you're all familiar with, we had 180 basis points due to operational growth. The ISC transformation adds 170 basis points. Now the obvious question, if it's $650 million, how does that only translate to 170 basis points? We have continued inflation assumptions built into our numbers. The value capture programs in excess of the 2022 level will add 140 basis points. One of the most important boxes in this presentation, in my view, is this red box. For us, we will increase the level of R&D in the coming years. Historically, we've drawn down R&D a little bit as we focused on efficiencies and there were a lot of opportunities there, but we will escalate the amount of R&D investment as a percent of sales in our business. We'll target certain sales and marketing investments to really accelerate growth. So this 115 basis points of reinvestment is more about setting the stage for what Joe shared with you, this idea of 5-plus percent WAMGR in 2025. Because for us, I hope you can appreciate the story doesn't end in 2025. It goes far beyond. And we will be able to create enormous value in that period beyond solving problems for clinicians in ways that they don't even realize through some of these investments that my colleagues will talk to you about during their presentations. In summary, this yields 350 to 400 basis points of margin expansion. A large sum, but a sum that we're committed to and focused on delivering. I will say this, Joe and I both -- when I first met with Joe in 2015, his question, one of his questions to me was, "Well, what about free cash flow?" And we both agreed 7 years ago that the most important metric around the health of a business is sustained free cash flow generation. This plan reflects that commitment. We expect 80-plus percent conversion by 2025. We'll invest roughly 5% to 6% in CapEx over the years as a percent of sales to do things like ensure the quality and supply of our product to support volume growth, all of those aspects. That's the level that we anticipate. But we do expect this conversion to tick up to 80%. And I will say that I haven't talked a lot about cash flow over the last couple of years. For me, cash flow optimization has taken a back seat to fulfilling the mission of the company, and we had to do that over the last couple of years. We've carried more inventory than we anticipated. Why? Because with uncertain demand patterns and with a very challenging supply chain situation, we had to carry extra inventory to ensure that we get product to our patients. The patient is always in the front seat, but never more so than in the last couple of years. And furthermore, versus optimization of days payable, our conversations with our suppliers was more about how do we get product from you, not payables terms. All of that changes and will start to change. And we're pleased to report the 76% expectation in 2022, but also will tick up above 80% by 2025. And I believe that personally, that supports the long-term valuation of this great company. Portfolio management is something that we are incredibly focused on. We have a very disciplined approach to this. We reinvest in the business to enhance innovation. We're very focused on organic investments where we can support and deliver to our patients new and exciting therapies that are differentiated. We'll strategically execute on targeted acquisitions. The business development environment is very rich. Over the next 1.5 years, we are somewhat limited to more tuck-in style acquisitions, and over time, we can open up the aperture on broader business development, but it's safe to say this will continue to be an important aspect of what we do. And then we have and are assessing areas that have lower long-term strategic fit, areas where we can't differentially pursue our mission to save and sustain lives, areas that have less attractive economics, and you can expect to see some divestitures or business exits along the way. But at the heart of this is this idea of disciplined portfolio management, that's the hallmark of everything that we do. Along the way, and I've had the opportunity to meet with all the rating agencies over the last few days, we're very committed to this solid investment-grade credit rating. It has served us well over the 90-year history of this company. It serves us well in good times, but even better in more challenging times. So we're focused on that. We're focused on maintaining pro forma liquidity, getting to a very flexible capital structure, which we intend to do in the near term, all the while returning value to our shareholders. Now when we think about returning value to shareholders, we talked about the dividend in the past. And I will tell you that in the face of the pandemic, we raised the dividend. In the face of the largest acquisition in the history of the company, we raised the dividend. And so you can expect continued dividend raises, we'll probably have one more year of a lower growth dividend before we start to accelerate to at or above earnings growth as we approach a higher payout ratio. But that's a really important aspect of our returning value to shareholders. In addition to that, we will buy back shares. We will buy companies. None of that is reflected in the financials that I've shared with you, and all of that will support a robust capital allocation approach. In the meantime, and in the short term, we are rapidly deleveraging. We've started to pay down some of the debt that we have so that by 2024, we achieve this 2.75x net debt to EBITDA. So what's the summary? Sitting here in Glenview, Illinois. The summary is we have robust sales growth on the back of very durable end markets, along with some really exciting innovation. Through our commitment and disciplined program methodologies, we'll expand operating margin 350 to 400 basis points by 2025. We'll, over this period, unlock low double-digit EPS growth compounded with no deployment of the balance sheet. We're committed to strong cash flow generation. In my view, that's the ultimate metric, how you value businesses. We'll get to 80-plus percent by 2025, and we expect that to continue thereafter. And as always, we'll focus on returning value to our stakeholders with a very strategic and disciplined approach to capital allocation, which I hope you've come to expect from us. I'm really excited for the rest of the day. I'm so proud of all of the colleagues that you'll get to see and the strategies that they're going to share, so excited about the pipeline and the portfolio and so excited about the work that the next presenter is doing in terms of transforming Baxter's cost structure to take out $650 million in gross cost. I used to watch -- as a child I used to watch the Bionic Man. Most of the people in this room don't remember the Bionic Man. Steve Austin was The Six Million Dollar Man. Jim Borzi is the $600 million man. So my new best friend without further ado, Jim.

So good morning, everyone. Thanks for joining us here. Thanks for everybody that's here live as well as all those joining us virtually. I've been thinking a lot about what's on your mind from the investment community. And I confirmed a lot of those assumptions last evening as I had a chance to talk with some of you and this morning in the Innovation Hall. And for me, I think the 3 things that resonated were, hey, what's different this time? What's different? We've heard this before. And hopefully, through my presentation, you'll see what's different. Also, do we have a plan? I can confidently guarantee we have a solid plan to deliver the numbers that Jay just reviewed with you. And lastly, can we execute? I think in my 2 years, over my tenure here at Baxter, I think we've proven that we can execute. We've built a great team, and I'm really excited this morning to share some of this with you. From an organizational perspective, the 36,000 employees that make up the integrated supply chain team across the globe are some of the best employees in the world, and I am extremely proud of these folks. These are the frontline people that never got a break all through COVID. We're on the front lines. These 36,000 folks, along with the quality team, had to be there day in and day out to support the patients that we serve. And I just want to take a moment to publicly thank all of the ISC and quality team for the great work that they've done, and they continue to do. We have an organization that is truly an end-to-end organization, covers planning, sourcing, manufacturing and fulfillment. In addition, the supporting functions within the ISC manufacturing engineering, environmental health and safety and sustainability and our operations excellence team, which is really driving the value that I'm going to talk about here today along with the operations team and the fulfillment teams. We have about an $8 billion spend in procurement. We have over 800,000 freight lanes. I think that's the complexity I want you to take away that we're dealing with here as we serve those patients around the world that Joe talked about. We have 65 manufacturing plants in 27 countries and have COGS of approximately $8 billion. We have a leadership team within the integrated supply chain team that bar none is the absolute best team I've ever worked with. Phenomenal leadership team, grounded and true experience, 27 years on average across my leadership team, 100% new to Baxter within the last 2 years. As we talk about transformation, I think it's important to focus on the bottom of the slide because these are the key things that the foundation of this transformation is built on: our people, compliance and resilience. And everything that we do from an integrated supply chain team is grounded there. We're well into the transformation. We've started this look across a true end-to-end look. We've built a strategic cost reduction, which I'll talk more about in a couple of slides, called value improvement process. And the fundamental difference of, I'll call it, pre-Jim Borzi and current state, was we were really starting every year in January, January 1, looking at what we needed to do. That's no longer the case. We have a pipeline of projects that span the LRP. In fact, I would tell you, we have projects that cover our commitments through over 65% in 2025. We are fully covered in 2023, and we have over 85% covered in 2024. We've never been that grounded in solid project management and execution. And I think it's going to deliver not only on what Jay said, but this culture, this DNA that we're building into the organization will deliver huge margin incretion post this inflationary cycle. Jay told you we have some of those inflationary pressures built into the plan. But I would ask you to think about the post inflationary cycles and what happens with that margin accretion as these cost initiatives really start to take form. Joe talked a little bit about the digitization. I will tell you, innovation does not just exist on the product side. It also exists on the process side. Every time I visit a plant, I am thoroughly amazed at the adoption rate of digitization tools and automation. And I'll talk a little bit more about that. I think the key things that really I want you to take away from this is, this is a solid plan. It's a transformation that's not just starting. It's well underway and will really deliver huge bottom line improvement for the company as we move forward. I've been doing this a long time, over 38 years. And I got to tell you, the culmination of challenges that COVID brought: the semiconductor shortage, oil prices, the war in Ukraine, all of those challenges culminated together in really driving over $600 million in gross inflationary pressure between 2020 and 2022. So as you talk to anyone that works in supply chain and has had to deal with these challenges over the last 2 to 3 years, it doesn't feel like 2 to 3 years. It feels more like dog years to me. And it's significant when you think about the impact that it's had, resin prices, the dextrose that we buy. Just dextrose alone, we've seen a 65% increase, driven by record high corn prices and energy costs. We've had significant challenges with semiconductors. And we're not the only ones dealing with those. But the team has really pulled together, the business has pulled together. The businesses, the R&D organization, along with the ISC, really working hard to mitigate our way through those challenges. Labor inflation and freight, the congestion in the ports, the closure of countries, just the increase in fuel costs alone. We spend over $1 billion in freight. So you can imagine the impact that oil has on our freight costs. And I'm going to talk a little bit about what we're doing to address some of that. You heard Jay talk a little bit about the value improvement process and the value drivers, across materials, productivity, architecture, automation, and digitization and analytics. This process that we've built, and Jay talked a little bit about the review we had a couple of days ago, I think for me, really grounded us in how achievable this plan is and how bright the future is. We're building this process into the DNA of the company so that this becomes a year-on-year improvement. It becomes a natural muscle for us. We'll deliver, as Jay said, over $650 million of gross savings by 2025, and you can see the cumulative effect over the LRP. I can tell you, when I joined Baxter, we were below 2%. And we'll reach a point where we can deliver year-on-year over 5% of gross savings. That more than offsets any inflationary pressures that we get and gives us great confidence in the performance of not only the ISC, but the company. As we look at the value drivers, material over the LRP will deliver over 30% or roughly $200 million over the LRP. We're focused on dual sourcing. We're also playing to our strengths. Our process technology and our molding capability within the company allows us to in-source a lot more of those parts that are currently with third-parties. So we plan to in-source a lot of that along with the process technology. And from an automation perspective, over the LRP, just in the Americas alone, will deliver over $75 million of cost reduction through automation and digitization. Things like automated filling, packaging, inspection, a lot of these integrated vision systems, which are far superior to any human-inspecting product. We're adapting this technology at a rapid pace. And I'm very proud of the team for the great work that they've done. The analytics tools that we brought, we invest a lot of money in the operations each and every year. And the tools that we've brought into the planning organization, the sourcing organization and the fulfillment organization really give us great ability to control our cost. It gives us great ability to see things that we haven't been able to see in the past. Our control tower, for example, will give us the visibility to see across the entire supply chain, from raw material, to work in process, to our fulfillment centers, and to those deliveries to our customers. It will not only deliver cost savings, and you heard me talk about how much money we spend on freight. But it will also improve our service levels to our customers and the patients that we serve. And that's the most important thing. So we have this disciplined governance in place to drive to the savings that we've talked about here this morning. And Joe mentioned our manufacturing footprint and our distribution footprint. Times are different. And we need to be managing much differently than we have in the past. We are adopting a strategy of make where you sell and buy where you make. We're changing that footprint. And as you can see in this chart, these percentages really represent the localized production levels within each of the 3 regions that we operate in. So over the LRP, we will have 92% of our manufacturing footprint located in Americas, it serve the Americas, 89% in EMEA and 87% in Asia Pac. What that does is not only helps us reduce our freight cost, but it improves our service levels to our customers. And in times like we're dealing with now, this is a huge advantage for Baxter. So over the LRP, we'll see about a 10% improvement in our network architecture between manufacturing and our fulfillment centers across the globe. So with that, it's really about the supply chain becoming a competitive advantage for Baxter. We're accelerating our transformation. And that transformation is both cultural and operational in nature. We're simplifying our processes to be -- to build speed and agility through Lean. The adaptation of Lean and Flow and day-to-day management within our factories and fulfillment centers are driving a lot of cost opportunities that, quite frankly, weren't visible before. And again, this margin accretion that we get from these initiatives, think about it post inflationary cycle, because everyone in the room understands these things also turn the other way. Right now, they're not necessarily in our favor. But when this turns, this part of our culture that's built into the DNA of the operations and in the supply chain will drive significant competitive advantage for Baxter. So with that, I want to close just by thanking you again for your attendance here this morning and online. And I'll ask Clare to come on up, and we'll start the first Q&A session. Thank you.

Thanks, everyone. [Operator Instructions] So Janet and Joe are on the sides, and so they'll do it and we'll address the questions, too. So why don't we start over with Joe over there, Joe, if you want to grab.

And thanks for putting together the Investor Day. It's really helpful.

Travis, do you want to introduce yourself so we know, yes.

Yes. So Travis Steed, Bank of America. And so Jay, I guess I'll start with you. Looking at the margin progression over the LRP, wanted to talk about 2023 specifically, not surprising, given that's the first year out of the gate. It sounds like 75 basis points is probably the right place to be for 2023, given it's a transition year. And on EPS, are you still committed to double-digit earnings growth in 2023?

So thanks for the question, Travis. Thanks for joining us here in person. It's great to see you. From an operating margin standpoint, basically, we said 350 to 400. We have clear line of sight to that. And minimum 75 in a given year. At this point, it's a little hard to discern exactly how that's going to shake out in 2023. There's a lot of different variables in play. Is there a recession? How sustained is it? What's happening with interest rates? What's happening with overall tax reform? So -- but we feel very good about a minimum 75 basis point expectation for 2023. And then as far as earnings goes, we'll have to watch. And things like when we choose to refinance debt and how we choose to do that becomes an important gating factor as far as earnings growth in 2023. So I think it's a bit premature to get into specifics on 2023 EPS. But we are totally committed to working so hard to deliver this plan, compounded annual growth of double digits on the EPS line, with 350 to 400 basis points of margin expansion, minimum 75 in a year.

And on 2022, it looks like you're reaffirming the guidance for 2022 on margins. Has there been any incremental changes on the inflationary pressures to the positive or negative since you gave the guidance? And I did want to ask on divestitures as well. Trying to think about, like how you're thinking about? Is that something going to happen more near term in the LRP or later in LRP?

So as far as the 2022 margin, we have no change to guidance at this point. We've been hard at work really trying to isolate and identify the impacts as far as margin drivers and inflationary pressures go. And we've been looking at this for a long time. I know as you all know that. So I think we've got it pegged correctly at this point. We'll continue to watch it as we move forward here, but no change to guidance at this point. As far as divestitures, we don't really get into the timing of when divestitures are going to take place. Our expectation is there are a couple of areas that we're looking at. And we're really refining our views on those businesses and how they fit with overall Baxter. We'll pursue it as swiftly as possible. But you never want to sort of put a time line on a divestiture, because for us we're optimizing economics not time line, in terms of the approach to the portfolio optimization.

The -- there is a specific -- a couple of specific programs right now. It's being run primarily by our FP&A group in the company, and Bloomer is running that, as well as our strategy and M&A group. We have specific programs addressing, and it's all about capital allocation. So where we're going to put the money and what does not belong to Baxter. So we should have more news that towards the middle to the end of the year. .

Thanks. Gino, I won't come to this room, this side of the room. Vijay, we'll start with you. We'll go back and forth. Right up here, yes.

Joe and Jim, this is Vijay from Evercore. It's good to see people in person. So one, maybe Joe a big picture for you. The LRP doesn't assume a global recession. And there's also been some concerns in hospital CapEx environment. Maybe could you address from a big picture perspective, if we did get into a global recession, if the hospital CapEx environment did tighten, what would be the sensitivity to Baxter in such a scenario?

So we have a pretty diverse portfolio, but you notice that we have products now that are getting into the more expensive side of the expenditures in hospitals. So what is actually capital for a hospital? And I would like to think a little different. I think about, what is a large expense for a hospital. Even if the one product specifically doesn't qualify as capital it's still a large investment. So that cycle, we're watching very closely. I believe with some of the results that we've seen lately from hospitals indicates that there will be tightening the belt, we don't know yet. But so far, remember, we still have a health care crisis that has not abated much despite the fact that hospitalizations are down, but we see waves probably in the future of more issues with the current virus. So I would say that we're watching very closely. What we have accounted is, like Jay said, not a major disruption, a recession is -- would be large expenditures for hospitals, being shut down, that will affect part of our business, and we'll keep our eye on it. But so far, we haven't seen this. We have -- we're going to have some of the presidents here today and the session after me -- after us today. At the very end, we have a Q&A with the presidents. You can ask the question more specifically. You have Heather here. You have Amy who can give you more specific. But from the company point of view, if there is a recession, there is a capital reduction in hospitals, will impact some of our sales. But what I can tell you is we are not owning capital sales. We have a significant amount of medically necessary products in our portfolio. And well, the question here is, did Baxter learn the lessons of the past in terms of what products should we be putting in inventory making? And to that end, I think we have, and we're working very hard to stock up the shelves. That's where you see inventory going up. But I think we're going to be more prepared this time. It's a long, long answer for a very simple question. And the answer is, it would affect Baxter if comes in a large volume, but not -- the company is not 100% dependent on those products.

And the only thing to add to that, Vijay, is if you recall the last recession, the price of oil went from $130 to $40, and the inflationary environment radically changed. So what Jim talked about, this state where we get to a different inflationary environment, that would clearly be accelerated by a recession. So that's just another factor in play.

That's helpful, Jay. So one for you on the EPS trajectory, low double digits. So the model is not assuming any capital deployment. Even at 80% conversion, you should be having cumulative 8 plus go into free cash to play over the next 3 years. Is there -- are there any below-the-line items when you think about interest rate sensitivity? Is there any floating rate debt that could change the model? Anything on the tax line? Because it seems like just with that amount of free cash, there should be a teens earnings outlook for Baxter.

Look, I was very deliberate in my comments. We're not assuming any deployment of the balance sheet in the projections that we're sharing. And you've done the math. I don't -- I didn't hear -- quite hear your figure. But there's a very substantial buildup of cash at the end of this plan, to the billions. And so we're going to use that to pay down some debt, to buy companies, to buy shares. All of which will change the complexion of this company by 2025 in potentially a meaningful way. So I think that's -- and what I said earlier was I think one of the more interesting things that this plan will deliver for us is the options. There's going to be tremendous options from a business development standpoint. There will be opportunities to buy shares as there typically is. And so I think that's a really exciting aspect of what this plan allows us to look at in the coming years. In the very short term, it's a little more limited because our first port of call is to achieve in this 2.75 net debt, which we will do swiftly. But beyond that, we have this -- a significant cash build that makes things quite interesting for our capital allocators.

Thanks. [Operator Instructions] So Joe, we'll go over to you. Pito next.

It's Pito Chickering from Deutsche Bank. So a quick question on the 2025 guidance. It's about a little over $1 billion of operating income from 2022. We still have 45% gross margin on the $200 million of additional Hillrom revenue synergies. Plus, the Hillrom synergies, it gets about $440 million of OI from Hillrom in 2025 from 2022, which implies sort of core operating income of growth of about $650 million. Can you just sort of walk us through the $600 million of inflationary pressure from 2020, 2022 versus sort of that non Hillrom growth embedded within 2025 guidance?

Okay. That's a -- that was a complicated question there, Pito. But maybe I'll just try to give you a little bit of guidance. Clearly, Hillrom is an accelerant to our performance, both the base market base growth of those businesses, along with the synergies from a sales standpoint, along with the cost opportunity that we've identified and are getting after. And then beyond that, you look at the base business. And when we talk about Jim's programs, we have embedded from 2023 on a couple of hundred basis points of inflation per year that's dragging down the true gross nature of the savings that he's getting after. In addition to that, we are also really deliberately protecting investments in R&D along with investments in certain sales and marketing areas that does -- it's another thing that's impacting the margin in 2025. Said another way and put simply, if we were to just optimize for 2025, we could save a lot more than we've put on the page. But for us, those reinvestments are something that are extremely important to guaranteeing the long-term value of the company and something we're very focused on delivering on. So I think those are a few things in play. And then when you couple that with the idea that we're going to -- the core base Baxter business, you can do the math. But it's still in excess of the WAMGRs that we're faced with. And so roughly 3% to 3.5% WAMGR, I think, for core base Baxter. So that base business growth also contributes. So all of that together is the margin story of Baxter. I'm not sure if that answered your question. I may have to read the transcript to really get at what you were after there.

I think the good question is, are you -- when you do the math, the number that you arrive is higher than what we're presenting. And the question is, Jay just explained, some of the things that we built in to be able to offset, if I understood, was a little run about mathematics, but I think.

So which is a great segue sort of R&D. Historically, R&D has been a source of margin expansion for you guys versus the margin contraction. I guess, what led to this change as you think about R&D investments and ROIC? How do you guys think about ROIC and R&D today versus 3 years ago, and so why just making the change?

Maybe I'll take this on. You have to think about relentless capital allocation going forward as you look at the growth of the business. The business is quite diverse. So where do you actually vest is in the place they're going to grow faster. And some of the -- and if you take a very legacy Baxter, the R&D cycles are very long versus what we're seeing now with connected care, a much quicker cycle. But you need to invest fast and you need to invest upfront versus a traditional R&D program with multiyear several gates. The gates are still there, but they're much shorter. So we believe that we achieve -- we can achieve the top line growth if we continue to invest. If you look at and say, well, we were close to 5% in 2015, 2016, and it went down. Don't forget that we had a lot of arbitrage of labor in the numbers as well. We took some -- out some very large programs, like in Home HD was one of them that was very expensive and some other things that we did. And also, we put a lot of employees and software engineers in lower-cost country with arbitrage. So if you look at our efficiency in research and development actually went up, our expenditure came down. Now is the point now that we need to invest faster. So you're going to see the 4% going north, as Jay just highlighted. So it's all about a combination of optimized R&D when I first came in. Now is, let's deploy more cash to R&D because we have high confidence in the research groups of the company.

Sorry, I saw Joanne go first. Sorry. I saw Joanne go first.

Joanne Wuensch from Citibank. So I'm curious about something. There's a slide you put up there where you're showing market growth rates of 3% to 4%. But your LRP is for 4% to 5%. And then at the end of the 2025 period, you're looking at 5%-plus markets. Do we extrapolate from that you think your revenue growth should grow higher than it?

Joanne, in my slide, if I recall, it says the aspiration is to be in -- with a WAMGR of 5-plus percent beginning '26. Okay? So that will depend on our capital deployment. So we're going to go into adjacent markets is faster growth and look what Hillrom did to Baxter. So we're going to continue to look for opportunities to go with higher WAMGR than Baxter legacy as always. So -- and also getting into other markets organically. So, we will push that number up. Aspiration is where we want to get. We will depend, once we have the debt repayment at place we want, as Jay said about making sure our credit ratings are where we want, and that's important to us. That deployment of multibillion-dollar balance sheet has to be in places that will help the number get. That's the aspiration. That's the plan. And then -- excuse me. And then as you move to that level, what is the next frontier? You continue to -- our aspiration is to move the company north of that as -- if we deploy capital correctly.

My follow-up. You mentioned twice cardiology. Is there anything specific you're thinking about? Or how do you invest that capital in your next step?

Great question for Reaz Rasul, but I'm going to try to give a less competent answer than he would. It is an area of growth, not cardiology in general. I don't think about us as interventional cardiology company, but it's the part that creates the monitoring the connection and the predictability of getting data that will prevent somebody from having a cardiac event. So you think about us as the next step. We're going to talk about in the cloud processing of cardiology data that is collected from people walking around. You can do as our sensors. What is after that? And what is after that? So some adjacencies in that. You -- so as soon as we start getting in a position to deploy capital, we will deploy capital. I'm sure in targets, they are in the cardiology. So we like that. It's high margin, high growth. And goes right into our mission of saving and sustaining lives.

So we're going to go back to the side, Matt Mishan and then...

Matt Mishan, KeyBanc. Looking at some of the slides, when I think about Hillrom and Front Line Care and then PSS and GSS, I think about that pre-COVID is a 4% to 5% grower, striving to be 5%-plus, maybe 5% to 6%. You guys have it accelerating to 6% to 7% and kind of 8% to 9%. What have you guys seen in the portfolio that's giving you the confidence to like to change the growth profile from those areas?

It is a great question for Amy, and we have saved those there. I don't want to preempt them. So this will be the first question. We're going to hold this question when they are sitting here, that I want them to answer. I can answer as always less competently than they can. So I wanted them to give you a wholesome answer. There are some specific programs, our surfaces, our contactless, monitoring, our cardiology aspirations and other things that are really good that will make those numbers. But we will -- they'll be the right people.

And just as part of their presentation, they'll walk you through what the growth drivers are for those businesses.

Okay. Excellent. And the other side of that is, last September, you said the core Baxter over a 3-, 4-year period would be growing at 4% to 5%. Clearly, Hillrom is coming accelerating growth. What part of core Baxter is coming a little bit slower and maybe decelerating a little bit?

One of the things that we noticed and -- is the step back, the peritoneal dialysis took and dialysis took in just renal with COVID, there was a significant impact in reduction of current patients. And so that business has good prospects for growth. But there was a reduction in that, and then going forward, it will pick up again. So some parts of the business, that is one of them, the competition in pharmaceuticals. You're going to see that, clearly, when George comes up here, he will tell you, what is the decision -- what are the decisions that we made in terms of portfolio, because that is a highly competitive business. And it's a business that is tough. We're good at it, at what we do. Specifically, we're not good at everything, but exactly what we do. And that's how repositioning portfolio will help go forward. But if I think about, these are the 2 major changes that we had from then to now.

We'll go with Robbie next, Joe, and then Jayson.

Robbie Marcus, JPMorgan. Jay, I appreciate the guidance, especially on operating margin, you made the comment, 75 bps or more in any year. I imagine that means it's a nonlinear progression. How should we think about -- a 2-part question, the cadence? Are there certain years that should be a lot more? Is it back-end weighted? And how do we think about the split of contribution between SG&A and gross margin? .

Sure. So next year, there are still some overhangs that we're grinding through: the availability of electronic components, the continued inflationary environment that is kind of annualized into next year. So there are a couple of things that impact 2023, which is why I said minimum 75 basis points, accelerating thereafter. I think 2024 and '25 are a little more similar in terms of the expansion that we'll see in those years. And we haven't finalized 2023 yet. We're far away from that. And so we are hard at work identifying different vehicles to accelerate margin improvement in that particular year. As far as the complexion between gross margin and operating margin or gross margin and SG&A, what I will say is the lion's share, the vast majority of the programs that Jim has outlined will accrue to the gross margin line. And the majority of the Hillrom savings will accrue to the SG&A line. So that's really that. And then beyond that, it's kind of normal business growth and improvement that you would see with Baxter. So with those things, I think you can safely model both gross margin and SG&A percentage.

It's 50-50 split a good place to start?

I think that's a decent ballpark.

And Joe, you talked in the release today about $200 million in sales synergies between Hillrom and Baxter. I'm sure we'll hear a lot more about this later on. But any of the programs or products specifically that you'd highlight that you're most interested in seeing?

Robbie, I'm going to answer your question, but I want to preempt. Our COO has phenomenal data to talk to you about. But I'd tell you, let's think about a couple of things. Think about our pumps communicating to the nursing. I was at a ER the other day, and it was COVID actually. And the alarms behind me were going crazy. Their hospital specific doesn't have Voalte. You should have because if they had Voalte, they would have been notified. And I would silence my own alarms and dealing with this stuff in the back and -- because it was so annoying. So think about a pump that needs to be attended to. Depends -- pump or alarm for multiple thousand different reasons. But there's a few reasons why you need to be really quick in attending. So imagine that pump alarming, connect to a Voalte that is specific, tell the nurse, go see this, this is important. Think about that connected to a hemodynamic monitor. The nurse telling you are overloading the patients with fluid, you should stop, go see this. Why? Because that is an indication of potential sepsis. So just think about this basic stuff that I just told you. So there's more than that. There's geographic expansion, is another one. This ability to create top line growth in Asia Pacific and Europe, Middle East and Africa and South and Latin America and Canada. So there are just a few things that we can actually do to accelerate. We didn't promise this in the beginning as we needed to understand more about the portfolio. But we feel excited about the prospects. And the aspiration is actually to go in and start connecting these devices. It is handpicked examples, and we have programs that will enhance that. And one last comment I would like to make about research and development, because you asked the question, we have a pretty significant increase in spending. Don't think that, that is 100% going to new products. One thing that we are doing, Jim needs a lot of support from every R&D function in the company because we are going in and redesigning boards, redesigning component usage, redesigning resins and getting back up. All these programs that we're doing with such thoroughness right now requires significant research and development sign off. And so we need to increase expenses in R&D. With no visible expectation that, that's going to change the top line, more so will guarantee that the top line doesn't get affected by the [indiscernible] of supply chain. So today, we control the lowest level of components. In any products of ours, we know where it goes, who is making it, before it goes to a Flex [indiscernible] or a benchmark, anybody assembling the product. That kind of control, we never had to worry about because Flex was doing their job, and Flex is a great job, it's not about Flex. It's about us understanding that. So think about R&D, not only in innovation, but also creating sustainability of the current products.

We'll take one more question from Jayson over here.

Jayson Bedford from Raymond James, I wanted to ask a question maybe to the most important person on stage, and that's Jim. Yes. Jim, you kind of highlighted the increase in material labor freight cost over the last years. Outside of the ongoing chip issues and crude, are you still seeing other input cost increase? And when do you think we'll start to see some stabilization? And what needs to happen before we see that stabilization?

Yes. I think oil drives a significant impact for us. For every $10 of price oil increase, it's about $25 million of impact for us between material and freight. I think as oil goes, that will help us significantly. And as Jay said, we're hopeful that it returns back to a $70 a barrel level in 2025, and we'll show -- or we see a gradual decrease across the LRP. So that's a significant driver for us. And that's the one we watch the closest quite frankly, is price of oil.

And just one moment on the oil. You've got to understand, there's a difference between diesel and oil. They are detached prices right now. You're going to see diesel going through the roof as you see right now gasoline. But the price of oil affects us in different ways. Diesel affects how we transport goods, but the price of oil affect our resins. And there is something that we are considering, is decoupling of them. Second is the dislocation of oil supply. Because if Europe is buying the significant amount of oil from Russia, who will that oil be positioned to? As Europe continues to reduce their dependency, is that immediate? Is there an embargo right away? Is a transition into 6 months where the oil -- the dislocation actually creates an opportunity for oil to stabilize in price? So we have modeled many different ways. And -- but we don't -- we're not clairvoyants. So we're trying to get as much as we can. But think about oil in different dimensions. It's not oil in general. It's oil for diesel, which we consume a lot, as well as resins.

Okay. Just a follow-up. On the chip shortages, a little surprised that's going to continue into -- or you anticipate it continuing into '23. Is there a top line impact on that? And then, Jay, you've talked about a backlog of orders. At what point does the backlog of orders stop going higher? And when does it normalize?

Sure. I think that we anticipate the situation to be much more normal in 2023. But in many areas, we are hand to mouth with supply of electronic components. I think we've accurately reflected in the sales forecast that we've put together. But if you think about even this year, we had the delay of Novum. And historically, we have offset those sales with sales of Spectrum. Because of the availability of electronic components, we were unable to do that to any large extent. We do expect that to change. And it may -- depending on general macroeconomic conditions, it may change even faster than the second half of next year. But as we look at our overall modeling, I think that's the underlying assumption. And we've reflected it primarily in the sales line as we look at it. Jim, I don't know if you want to add anything.

No. I think you said it right. I think it's largely driven by like semiconductor availability. And I think that, depending on those macro level indicators, what happens, it could be sooner. And we're hopeful that it's sooner. But we're also not looking forward to a recession either by a long shot.

So it's recession dependent. Can play in our favor or not. The recession actually creates less necessity for semiconductors. And that the foundries are -- have changed quite a bit their mix. And -- but once we start on one line, it takes 3 to 6 months to change the mix of like a TCMC, for instance, which is a supplier into ITI, into ADI, into Qualcomm. And that is an issue. So I think we don't wish a recession. But a recession has a couple of levers, including labor cost, which has escalated tremendously in the last 24 months.

Thanks, everyone, for your questions. We're going to take a very short break as we gear up for our next presentation, so about 5 minutes. So if anyone wants to get up, stretch their legs. And then we're going to start with Giuseppe Accogli. [Break]

Okay. Can you hear me? Go on. Let's wait a few seconds, and then start. I think we can start. Good morning, everyone, and welcome to the One Baxter vision and strategy. My name is Giuseppe Accogli. I'm the COO of Baxter. Accelerating Baxter Transformation To Deliver Better Outcomes, that is the phrase that summarizes at best our vision and plan. So it's a very simple one. Two things to remember is accelerating the transformation to deliver better outcomes. What we're going to do in the next 30 minutes or so is understand how, and those were some of the questions that we already received, how Hillrom can help us to accelerate this transformation we were going already through. Giving you examples of how we are going to do that. And what that means. How we monetize that, right? So first of all, why accelerating transformation? Because, as Joe shared with you, we were already going through a transformation at Baxter. Now we think with Hillrom, we have a unique opportunity to accelerate that transformation to deliver outcomes, which are outcomes for the patients, being clinical outcome, outcomes for the customers, giving them more cost-effective therapies and products, and outcomes for you, being the shareholders of the company, giving accelerated profitable growth. So you have seen this slide with Joe, right, where we have the vision, the mission, the vision and the strategic pillars. And you have seen the strategic pillar for innovation, market expansion, operational efficiency and capital allocation. The GBU presidents will go through each strategy for each GBU in a vertical way, saying and explaining and sharing with you what they are going to do in each of the pillars. I'm going to do something a little bit different. I'm going to focus on the 3 catalysts that are common to all the GBUs. And these 3 catalysts are: connected care. I'm sure you're asking yourself what that means, how do we monetize that, how that works, right? And we will go through that. The second one is site of care expansion, which is very, very exciting. And you will understand the opportunity behind that. And the third one is portfolio management, which is one of the lever of the capital allocation. Let's go a little bit more into the details here. Portfolio management, as Joe shared, we will continue our optimal capital allocation by disproportionately investing in products that play in high-growth therapies or underpenetrated opportunities. Okay. We are already a legacy Baxter, some of those. We have PD. We had acute. Businesses that we're playing in markets that we're growing. Now we are adding with Hillrom many more of those franchises. You will see the details. Which are the franchises? One of these being cardiology. And we're going to explain what cardiology means for us, right? The second catalyst is site of care expansion. Why is that important? Baxter has historically been focused on hospital, okay, acute setting. Now with Hillrom, we strengthen our position there. Think about what we can do in med surg department. Okay? And we will go a little bit more into detail of that. But we also expanded in site of care that are growing faster, like home care, like alternate site of care. Now we'll have a bigger role there. And what is also exciting is the overlap of the therapies in those sites. Think about a PD patient. 20% to 40% of those patients have cardiac complications. Now we play in cardiology. And what is even more exciting is not only the strengthening of the position in the hospital, the presence in the different site of care, but it is the aspiration through our technologies, sensing technology to serve and follow the patient across the continuum of care when you think long term. And this is not reflected in the LRP numbers that Jay shared with you. Last but not least is connected care. What's connected care? Is that a market? How much it's growing? It's not a market. It's an ecosystem of 3 things: smart devices, communication and connectivities. So smart devices are devices that are able to capture data. Communication and connectivity, for those data to be delivered to the caregivers in the right way at the right time, which is real time. And insights and analytics, to drive and to guide the medical decision. So when we do not, if we do that, but when we do this, we think we will play in markets that had a WAMGR of 5%. We have demonstrated that usually we beat with our CAGR the WAMGR we play in. Let's go a little bit more into the details of each single pillar. Let's start with portfolio management. I want you to focus on the left side of the slide of this large blue box. Because there, you have the journey and you have the aspiration. What this says is that we aspire to have 50, 5-0, percent of our sales coming from high growth categories, products, which we define categories that are growing more than 5% in market growth. So once you read in the middle there -- the names of those franchise, you understand where we want to put our money. We say disproportionately invest in these high-growth franchises. And you see an interesting mix of legacy Baxter products, like acute and PD, one being an example of high-growth business, the other one being an underpenetrated therapy versus the medical need. But you see as well a lot of products coming from legacy Hillrom. This tells you how Hillrom is accelerating the transformation of our portfolio, how Hillrom is impacting the WAMGR of the company. You have connected care. You have intelligence diagnostic. You have respiratory health. You have vision care that is underpenetrated versus the market need, versus the medical need. Okay. By investing in new product development in these therapies and investing in market development, because many of those therapy are underpenetrated. Think about PD. Think about vision care. Only 1/3 of the patients that are diabetic, they go through the annual check of their retinal health. What if we can expand that underpenetrated therapy? So hopefully, you -- in this slide, what you get is the potential -- the potential of the transformation. How we will impact our WAMGR in the future and the CAGR? Let's move now to the site of care. I want you to read these slides starting from the top in a horizontal way. So that you will appreciate the journey we are going through. So, Baxter has always and historically been focused on hospital care, right? Acute settings. Why we are better now? Because now with Hillrom, we strengthen our position there. You were looking for examples, right? Think about a low acuity department, a med surg department. What can we offer there? We can offer the two most broadly used products in a hospital. That are pumps and beds. And by the way, the beds are not a piece of furniture. The beds are smart now, means they capture data, they have sensors, they can tell you the cardiac rate, the heart rate, the respiratory rate. They can triangulate this data and predict potential complication, and avoid that. So we can give these 2 things in a med surg department. We can complement that offer with monitoring. We are a leader in monitoring in multiparameter monitors, thanks to Hillrom. So now you see how Hillrom can transform our offering in med surg department. And what we can do even more? This is connecting the dots between all the franchises that we have. We can communicate this data with Voalte communication. Where? To the mobile of the caregiver. So they know in real time what's going on with the patient. What that means is better treatment and better workflow efficiencies, which is the goal that we said at the beginning, transform to deliver outcomes. So I'm very excited about what we can do together with Hillrom portfolio in hospital care. Even more excited when I think about home care. Now I want you to follow me in the -- in one of the example. I mean you were asking, how that will work, the portfolio and so on? One of the example being a PD patient treated at home. Why Hillrom can be important for that patient? That's a PD patient, right? I mean doing PD treatment, peritoneal dialysis treatment. What's the deal with Hillrom? Think about the journey of that patient. That patient few years back,had a cycler, which is a machine, right? Delivering fluids for peritoneal dialysis. That machine was reliable, not yet smart. We made that machine smart, that machine available and capable to collect data. And what we added to that was Sharesource, which is a system dual way that interacts with the clinic, send data to the clinic and receive data back from the clinic. What can we do now with Hillrom? You know that 20%, 40% of the PD patients have cardiac issues. Can we treat them -- help the caregiver to treat them better? We can. Why? Because now with Hillrom, we have the blood pressure data. We have cardiac data. Some of these patient need to be monitored from a cardiac point of view. Do we have those product? Yes, in what we call our cardiology franchise. And think about the last step that now we can do with Hillrom is care communication. We can take all this data, and we can keep that patient to interact with the clinic. Now we are using Voalte communication all in hospitals. But if we can use that at home in the future, we have much more compliance that drives outcomes. And we go back to the vision, why we are doing all of is, is to deliver better outcomes for the patients. So I'm excited about this. And last but not least, alternate site of care. The name to remember is Welch Allyn, right? Now we have a presence there in a segment where we were not playing here. We have a strong commercial organization. We have a critical mass of product to play in growing segments like hospital at home. And you know that we have invested in that. So you put everything together, you see how we can play a stronger role in the hospital. We expanded our input in home and alternate site of care. And longer term, we have the aspiration to connect the dots and follow the patient across the continuum of care, which is an additional opportunity. The third catalyst we are going through is connected care. Again, let's ground ourselves on what connected care is. It's not a market. So the question is now not how much connected care is growing as a market? Connected care is an ecosystem of 3 things: smart devices, able to capture data, communication and connectivity. So that we can drive, we can send those data to the caregivers, and then analytics of data. What's behind the data that we want to deliver to the caregivers? Was Baxter working in that? Or is something new? If we are coherent with what we are telling you, right, an acceleration of transformation, you can understand that Baxter was already working on that. Look at the product that we launched in the last few years. The vast majority of those products were connected smart devices or connectable smart devices. This is where we have put a lot of money. Was Baxter successful in the second element of communication and connectivity. We were the first one developing something like Sharesource for dialysis patient treated at home. Were we successful with that? We were. We have right now 32 million therapies captured with Sharesource. And we were able to deliver better outcomes for the patient. In fact, now the patients stay on therapy, 3.4 months more. And why is that important? It's important for the patient because better quality of life for patients that are in PD versus going into the hospital, into the clinic 3 times per week for 4 hours. But it's important as well for our company, think about a patient in PD stays between 2 or 3 years in therapy. Now we are prolonging that therapy by 10%, right, almost 3 months, 3 months plus. That is very important. Again, it's very important for the patient first. And by the way, the patient in PD have a better bridge to be transplanted, which is very good to keep staying in PD, and it's good for the company as well. So connected care is not new to Baxter. But with Hillrom, we can accelerate the pace, look at the number in the middle of the slide, we have today 2 million smart devices installed in the field, 2 million smart devices that capture a lot of data with a lot of value, right? And are we better now with Hillrom on communication and connectivity, we are. Think about Voalte Communication. You know what Voalte Communication is, I will put it -- sorry for that, Amy. In a very simple way, what do we do is we capture data and we send the data in real time to the mobile tools of the caregiver so that they can have a better workflow efficiency and they can treat the patient better and better outcome. We have those competencies now, thanks to Hillrom. The third element is the analytics. Are we good in analytics? We are. We are developing that internally, predictive analytics. You think about our beds, they capture data and they analyze the data. They can predict early complication for the patient. So we are very excited. If you are looking for a number, there is an important number there in the middle of the slide. We expect to generate 60% of the new product sales by 2025 coming from Connected Care. And what is even more exciting is how connected care can change our business model. In the past, we were selling products. In the future, we are going to sell solutions. We are going to have much more recurring sales because the customer, they understand the value of the data, and they are ready to subscribe for the services that we are giving them. Think about MyPD, and we have that in our [ books ] here. So we are excited about Connected Care as well for the impact that, that is going to have on our business model. So if you want an example, there are many, right? One example is fluid management. This is an interesting one. Okay? What is fluid management? Why the balance of the fluid is important in an ICU because you have too little fluid level in a patient, you're going to have kidney issues. You have too much fluid, then you have heart issues. So you want to have a balanced position. I want you to focus on the extreme right of the slide. You see all those small pictures of products. That is in reality, big stuff. All those products can drive a better fluid management for the patients. What we have at Baxter, you were looking for synergies, how the product will work together. This is a good example. We have pumps that give fluids. We have CRT monitors that take out fluids, and we have the Starling product that we bought from Cheetah Medical that monitor that. We have the beds that can add other critical data to fluid management and we can send those information, thanks to Voalte Communication to the caregiver at the right time. And we can do analytics on that. We can impact fluid management and reduce organ complication, a lot with our portfolio. And that portfolio is a mix of legacy Baxter and legacy Hillrom products. it's that long-term, can we do something in short-term? Yes, we can. You move on the left side now of the slide. We can connect our pumps and our beds to Voalte Communication and deliver this data starting now. By the way, we are already investing in that. We put aside money in R&D to do that now. So I think you share the same background my old friend, [indiscernible], right? So when I present this is always like, is this a PowerPoint presentation or there are numbers behind that okay? So the numbers, unfortunately, we shared already in the press release, right? $200 million in sales by 2025, coming from the pillars I told you, channel expansion, meaning presence in different segments. Geographic expansion, you know that Hillrom is not as present as Baxter is outside of U.S. Services in R&D, new projects, new product development, putting the products together. So if I would retitle or rebrand this slide, I will use the title more to come because as you can imagine, this is the short-term impact, right, $200 million. But many of the R&D projects and NPD projects, they need more time to deliver results. So again, more to come here. But we are excited because the more we go into how the product portfolio fit together, the more excited we are. So in conclusion, you remember the phrase I shared with you at the beginning, accelerate Baxter's transformation to deliver better outcome. If we focus on portfolio management, and now we have a different portfolio than we had before the Hillrom acquisition. And we focus on the right capital allocation. If we focus on the different site of care opportunities that we have, if we focus when it comes to innovation to connected care, we are going to have a vanguard in the future that is higher than 5%, and we usually beat that in our CAGR. So I hope you share with me the excitement. And you have with some example, a better understanding of how Hillrom is already contributing and will contribute to transform Baxter and to transform health care. So we are now going to switch gears. And after this high-level view of the One Baxter strategy we are going to go into the GBUs, right, into each of the GBUs. And we will start with advanced surgery. We recently announced a new President of -- Global President of Advanced Surgery, Steve Wallace that comes to Baxter from Stryker and brings to Baxter a lot of experience in surgeries, in the surgical market, but he's too new. It was really [indiscernible] line because he joined us on Monday. We thought if you just were faster a couple of days, you would be here presenting [ advanced surgeon ]. But we thought that being too new, I will share with you the strategy of advanced surgery at global level. So we maybe can start with a video, and then we'll go into the details of this strategy. [Presentation]

Okay. So Advanced Surgery, I think we can start with this who we are. Why advanced surgery for us is exciting. At the end of the day, it is not a lot of connected care, as you can imagine, right? But so why that is exciting because despite the perception that we play in a mature market, in reality, we play really in underpenetrated market opportunities. I will give you 2 examples of those, and we will go a little bit more into the details. Think about hemostats, right? How you stop the bleeding in a surgical procedure. You can do that in 2 ways, One is more natural. The other one is the most used. The more natural one is using active methods to stop the bleed. So what you want to do, you want to use products that are made by thrombin, so that you mimic the coagulation that happened in our body normally during this surgical procedure. This is what we have. We have active methods of stop the bleed versus what we see in the market is more passive methods, mechanical compression to stop the bleed. So we see there an underpenetrated opportunity as we see an underpenetrated opportunity being the adhesion prevention, which is a big deal. We will go a little bit more into the details. That is a $2 billion cost for the health care system in U.S. only. So you think about that. You think about surgeries, you are like, hey, you are in a mature market. We're not. We are in underpenetrated market, and we have a portfolio that is very diversified and is clinically proven. Seprafilm has 21 clinical studies. TISSEEL, 2,500 publication, a lot of publication with FLOSEAL. We serve 14 surgical specialties, and we have, again, clinical proof and prove that our product can contribute to efficiencies in OR. This is a $3.5 billion market growing CAGR 3% to 4%, getting to almost $4 billion by the end of 2025. We see the typical market opportunity. Customers are looking for cost efficiencies, medically proven product. We have those solutions. Customers are really focusing on blood management because not all the bleeds are the same, right? And the patients are getting more complex with more co-morbidities, more use of drugs, we see that as an opportunity for active sealants usage. And we see that the procedures going up to pre-COVID level by the end of 2022. The challenges are the typical challenges of healthcare, financial pressure and most recently, staffing shortages. But this translates into the opportunities, right? Because as we have that, the customers are looking for more cost-efficient solutions, which we have. So this is a $1 billion business for us. The big side of the business is on your left, okay, hemostats and sealants and adhesion prevention. Hemostat and sealants being the way you stop the bleed and you close the wound. right? And we have big brands there. We have FLOSEAL. We have TISSEEL, we acquired RECOTHROM. And we have a lot of clinical data supporting these products. And we see, again, the opportunity of this product being underpenetrated versus the medical need. Adhesion-prevention, I told you up to 93% of the abdominal surgery has complication additions that brings an additional cost to the system of $2 billion. And we bought a product called Seprafilm, which is a bioabsorbable film that help us to play in this interesting segment. We have also Microsurgery that came to Baxter through an acquisition in tissue and bone repair, both of them cover almost 15% of our sales. Let's go to the strategy. How we are going to deliver 4% to 5% CAGR versus a market we said is a 3% to 4% growth. We are going to deliver through innovation which kind of innovation we have, it's very simple to memorize. We have 2 drivers of innovation. One is extending the usage of our current product into new specialties. So think about developing applicators, okay, so that you can use the product in different specialties or think about increasing the cost effectiveness of our product, having products that are more ready to use in the OR. The second driver of innovation is using recently acquired technology like RECOTHROM for our products. So instead of using human thrombin, if you use RECOTHROM, you have faster prep products and less expensive products. In the middle of the slide, you have market expansion. We said underpenetrated therapies, right? We said, a, active method to stop the bleed are underpenetrated. The issue in this segment was there were no guidelines to guide the surgeons to use the right product for the right bleed. Now we have VIBe Scale is validated by FDA by the way, intraoperative bleeding Scale that helps and drives the surgeon to use the right product for the right bleed. And that gives us opportunity in using more active sealants. And we have adhesion prevention. We discussed about that. That is a big deal. Now we have the product but we need to develop the market, the awareness of the hidden cost of this complication. Needless to say that we will continue to focus on geographic expansion, which is big you will see in the next slide. We acquired a lot of molecules and products that now we are selling in more countries. And we will continue to focus on operational efficiencies. So you remember the 2 drivers of the innovation, right, expansion of the current product in new specialties and using newly acquired technology for the current products. So here, you see some of the innovation that we delivered and we are going to deliver in the near future and in the long-term. You see in the recent launches, Fast Prep. FLOSEAL what does it mean Fast Prep to be used in OR, which is great because we reduce the length of the surgery. And then you see 2 acquisitions, Seprafilm and PerClot that were very strategic because with Seprafilm, we entered the adhesion prevention segment. With PerClot, we are going to play in the powder segment, which is another important segment in the market. So we entered 2 segments we were not really playing in with this strategic acquisition. In the near-term, we have the FLOSEAL with RECOTHROM. I told you we bought RECOTHROM. Now we can use that technology in FLOSEAL to make it less expensive for us to produce and faster to be prepared. And we have also an example of connected care in OR that is the flow coupler monitor. That is a monitor to the flow of blood in a vessel during the surgical procedure. Longer term HEMOPATCH is very exciting as well, exciting is the TISSEEL ready-to-use development. On the bottom, you see another element of the innovation, which is geographic expansion, which is big for this [ GBU ]. So in conclusion, Advanced Surgery does not play in a mature market. We have a big opportunity to outpace the growth of the market because we still serve underpenetrated segment versus the medical need. And I share with you the excitement we have for the active sealants for the adhesion-prevention products that we have. The key driver all of this is execution on market developments, it's education, it's raising the awareness and it's doing that across the globe as well geographic expansion. When we do this, we are really confident we can grow this business over the LRP. 4% to 5% versus a vanguard that is 3% to 4%. So next time on the stage will be Steve, and we will update you on the next step in this very exciting [ GBU ]. So thank you for the time you are dedicating to Baxter for your attention, and we will see each other again in the Q&A, I think, on the stage. And now we have the next GBU, President. Thank you.

Good morning, and great to see all of you here today. My name is Reaz Rasul, and I lead the Front Line Care business. And as Joe had mentioned earlier today, I recently took over this business earlier this quarter. And previously, I was leading our medication delivery and acute therapies global businesses, which you'll hear more about a little bit later on today from my colleague, [ Heather Knight ]. Even with my recency in the Front Line Care business, I'm incredibly excited about all of the different innovations that we have in this space. And today, I plan to spend time with you to share why I believe this to be one of the most dynamic businesses in Baxter's portfolio. In Front Line Care, we group our businesses into 3 core categories: connected monitoring, intelligent diagnostics and respiratory health. All 3 of these categories play across multiple sites of care, including the acute setting like hospitals, primary care, think physicians' offices and of course, the home setting. We develop products, which allow us to improve care coordination, predict patient deterioration and treat patients where they're the most comfortable, which is at home. You heard Joe, Jay and [indiscernible] today talk about the continued digitization of the portfolio and connectivity. In Front Line Care, we have a broad suite of products, which were in the connected care space. And we define connected care as devices or software that allow you to collect, communicate or analyze data in order to transform health care. In fact, when we take a look at the Front Line Care connected products today, we have roughly half of our products that utilize some form of algorithms, predictive analytics or artificial intelligence to support clinicians, caregivers and patients. As you can see, with this broad portfolio of connected products, we have very strong capabilities to continue our growth trajectory. Next, I want to share with you a bit about the markets that we play in. Overall, we are participating in markets that are approximately $8 billion that are spread across 4 different segments. The aggregate CAGR of those segments is approximately 5% to 6%, making them incredibly attractive for us to participate in. As we look at the long -- as we look at the end of the long-range plan period, we expect to be playing in a total addressable market that is approximately $9 billion. Now as we take a look at our core categories of connected monitoring, intelligent diagnostics and respiratory health, we see that we are not immune to the challenges and macro trends that the entire health care industry is facing that you've heard many of my colleagues already speak about today. We are seeing an acceleration of digital health which is shifting care to more nontraditional delivery models. We additionally see continued global staffing shortages, including in specialty areas like cardiology and pulmonology. And lastly, there is the continuous pressure to have higher productivity as well as reduce the overall cost of care that's being delivered. Now when you have all of these different kinds of challenges, it brings a host of opportunities. And we've put in place strategies that allow us to capitalize and solve these specific challenges faced by our customers. Very specifically, we are putting in platforms digitally that allow us to enable earlier diagnosis as well as support disease prevention, thereby reducing patient deterioration and readmission rates. Next, we are building a connected ecosystem of products to deliver on better patient outcomes as well as better clinical and operational efficiency for our customers. And finally, we are on the continued journey to simplify our technologies to enable a shift from more specialty settings to primary care settings, thereby reducing the cost of overall care that's been delivered. As you can see, we have very solid strategies in place to help us capitalize on these very attractive markets that we play in. So now I want to spend some time talking about our business. In 2021, our revenue was approximately $1.1 billion. We have a very balanced revenue profile in Front Line Care that is approximately 50% in the acute setting and 50% in the non-acute setting like primary care and the home. As we look at this year in 2022, we are very excited and expect to deliver high single-digit growth for the balance of the year. So what allows us to deliver that kind of growth? It's a leading portfolio. So I'm going to touch on a few of the key elements here. I'll first begin with connected monitoring. In connected monitoring, we have a portfolio that spans from low acuity to mid acuity vital signs monitoring. And in fact, Baxter is a global leader in multiparameter, low acuity vital signs monitoring. In the mid acuity space, we are building on the innovations like our Connex Vital Signs monitor enabling us to believe that we can monitor more patients, thereby allowing us to understand patient deterioration earlier. I'm going to shift gears and go to respiratory health. In Respiratory Health, we have a portfolio that spans the home all the way to the acute setting. And specifically in the home, there's a couple of different products I'll highlight here. our Monarch Airway Clearance System as well as our Life2000 ventilation system. Both of these products are used by patients in the home to support them with respiratory disorders. I had the opportunity to speak with one of our product managers in Respiratory Health last week in Minneapolis. And he actually has cystic fibrosis and utilizes these products. It was incredible to get the insights from him around how these products have changed his quality of life as well as insights on how we can continue to do more patient-centric innovations. We are continuously gathering information from patients like him and many others that we have in order to inject into our innovation pipeline. Another area that I'll highlight that differentiates Baxter in the home setting in respiratory health is our large patient support services organization. This organization allows us to train patients directly in their homes on our entire portfolio of home respiratory products. Now as we take a look at the acute setting, we have leading innovations like our Volara and Synclara oscillating lung expansion systems. I'm going to shift gears and now go to the consumables portion of our portfolio, which makes up roughly 1/3 of our revenues. In this space, we have tools that enable physical exams every day. Specifically, we have thermometry in which Baxter is a global leader as well as blood pressure devices, blood pressure consumables and a host of women's health disposable products as well. All of these products are fundamental to physical exams that are being delivered around the world every day. So lastly, I'll touch on Intelligent Diagnostics. Intelligent Diagnostics, we have 3 different subsegments. We have diagnostic Cardiology, which we've spoken about a little bit today already as well as Digital Physical exam and our Vision Care portfolio. Going a bit deeper into diagnostic cardiology. As you know, we've completed the recent acquisitions of Bardy Diagnostics and Epiphany Healthcare. These 2 acquisitions, in addition to our existing portfolio, has now given us a robust suite of products that span from stress to rest the ECG to long-term ECG testing. And now with Epiphany, we're able to collect all of the data from those different devices and utilize them for better and seamless communications with caregivers. As we think about the future in this space, we have the opportunity to take that collected data and have artificial intelligence run on it in order to be able to earlier predict patient issues in the cardiac space. We're very excited about our prospects in diagnostic cardiology and consider this to be one of our growth areas in the long-range plan. Next, I'll talk a bit about our physical exam portfolio. Here, we have been on the journey to take 1 static physical tools and transform them into dynamic smart tools for physical exam. A couple of examples of this are recently launched products like the PanOptic ophthalmoscope as well as the MacroView Plus Otoscope, both of these products enable a greater field of view almost 20x greater than what we see in a manual product. And they additionally allow you to capture the images and share them amongst clinicians, thereby enabling a more rapid and accurate diagnosis. Lastly, I'll touch on our Vision Care portfolio. Here, we have 2 different products that I'll highlight. The first is a Spot Vision Screener. This is a product that we use for objective pediatric screening for -- for early childhood visual disorders. The other product here is our RetinaVue 700. This product is the world's most advanced handheld fundus camera. This is a product that allows us to screen for diabetic retinopathy. And in particular, the portability of this product has allowed us to take an exam that once was primarily happening in the specialty arenas and bring them into the primary care as well as the retail settings, thereby enabling much broader access. As we capture these images, we were able to send them to our RetinaVue network so that they can be overread by ophthalmologists all across the country. As you can see, we have a strong digital thread that goes across our entire portfolio. And as a result, I want to share with you a bit more about that digital journey that we've been on. In 2021, approximately 40% of our revenue came from connected care products. This is almost 2x greater than what we saw in 2019. And as we look at 2022, we have the opportunity to accelerate our growth in connected care by 2.5x that of our non-connected products, thereby enabling us to reach our aspirational targets of being north of 50% revenue during our LRP period for connected care products. As you can see, we've been making a marked shift from moving to nonconnected to connected. And as I look across our 3 core categories of connected monitoring, intelligent diagnostics and respiratory health, we have a host of solutions in the digital space. I now want to take a quick moment and share with you a video that highlights some of these great innovations in our portfolio today. [Presentation]

As you can see, we have an incredible foundation of connected care products that already exist in our portfolio. Now earlier, we got a question around what -- why do we believe that we can outgrow the market by almost 300 basis points. And now I want to actually share with you why I do believe that to be the case. It's around our strategy, which is broken into 3 different areas: innovation, market expansion and operational efficiency. Innovation for us is the lifeblood of our business. We are continuing to invest organically as well as in external partnerships and inorganically. And a great example of this from an external partnership standpoint, is what we're doing with digital diagnostics. We are working with them in order to develop artificial intelligence in order to overread the images that we get from our RetinaVu camera, thereby enabling a diagnosis in minutes directly at point of care. Another innovation is in our Respiratory Health business. You heard me talk about patient-centric innovation. We are working on the next generation of mobile noninvasive ventilator, which also includes a portable oxygen concentrator. These kinds of innovations enable us to increase the ambulation for our patients as well as give them more freedom of mobility, thereby improving quality of life. Next, I'll touch on our market expansion. We have opportunities with all of the different innovations that we're bringing to market to continue to generate clinical evidence to drive the adoption of these critical technologies and therapies. Additionally, when we think about geographic expansion, we have a multitude of offerings in our portfolio that we can leverage Baxter's large commercial footprint around the world to help us continue to accelerate that growth. One example here is our Smart Care device monitoring. We have the ability today to monitor devices in our customers' fleets and understand what the preventive cycle -- preventive maintenance cycle should be as well as give them early warning signals to any operational issues that they may face. Lastly, I'll touch on what we're doing as a business in terms of operational efficiency. We are continuing to digitize the way we sell, so that we can expand our reach to more customers in more locations in various geographies. And lastly, I've talked about diagnostic cardiology a bit. We have the opportunity to continue to build on our capabilities there commercially and expand our footprint in order to capitalize on the robust portfolio that we have today. With the successful execution of all of these strategic priorities, we expect to grow between 8% and 9% to our long-range horizon. This is 300 basis points above the current market CAGR. And so as I touched on innovation, I want to give you a bit of a deeper view here. We have 10 different innovations that are going to be coming to market over the course of our long-range plan period. I'll highlight a few of the items in each phase. In recent launches, we've got our Connex Spot Monitor. Today, we now have the capability to add automated respiration rate, both for existing customers and for new customers. This is important because respiration rate is 1 of the leading indicators of patient deterioration. And having this in an automated fashion versus today where it's calculated manually ensures that we'll have more accuracy going forward and thereby delivering better patient care. Next, in the near-term launches, we have our ELI 380 Epiphany workflow. This is taking our ELI 380 cardiology ECG product and connecting it with Epiphany. This allows us to have more seamless integrations in the electronic medical record space with our cardiology customers. And lastly, in the future launches, we are continuing to build in diagnostic cardiology. As you know, today, we have the ambulatory cardiac monitor with Bardy Diagnostics. We are building on that in the future with mobile cardiac telemetry to allow us to have a product which we can continuously monitor patients and provide near real-time diagnostics for arrhythmia and cardiac issues. As you can see, we have a robust pipeline of innovation, and we're very, very well-positioned to continue our growth journey. In closing, I want to leave you with 3 key points. First, -- we have an incredibly broad and strong portfolio of connected care devices today. And those devices participate in multiple sites of care. Second, given that we have the opportunity now with broader Baxter to leverage the large commercial footprint that exists, we expect to be able to take our devices all over the world in multiple markets around the globe. And lastly, we have an incredibly strong innovation pipeline that is going to allow us to continue to solve the fundamental problems that our customers face. All of these in concert will allow us to continue to outpace the market growth. And most importantly, it allows us to support Baxter's mission of saving and sustaining lives. So thank you very much for your time today, and I look forward to seeing you in the innovation hall a little later on. [Presentation]

Good morning. My name is Amy Dodril, and I'm the President of Patient Support Systems and Global Surgical Solutions. I'm so excited to be here today to walk you through how we are empowering caregivers by connecting every moment of care. It's also so exciting to be a part of Baxter and expand on how we are going to transform health care via these connections. But before we get into that, I'd love to talk through what might be on your mind as an investor. I'm sure you're wondering how are we going to grow in this ever-changing environment. Where is that growth going to be coming from? And more specifically, how are we going to be transforming health care within Patient Support Systems and Global Surgical Solutions. I spend a tremendous amount of time out in the field talking to customers globally. We talk about what's happening in their day-to-day, what their future looks like and ultimately how our product portfolio is helping them focus on the patient and truly sustain and save lives. But we'll also talk about what are the biggest challenges? What are the gaps and how can we bring and accelerate solutions to enable them to better serve those patients. So what I want to do today is I want to talk through with you, number one, how are we going to accelerate that growth and really drive those solutions to the customers. How -- I'm so excited to be a part of Baxter. And how, by being a part of Baxter, it's truly going to help us accelerate bringing those solutions to our customers. And lastly, how we're truly going to be transforming health care. So as I said, we empower caregivers by connecting every moment of care. The environment. You heard this from Jim, you heard this from Jay, the environment that we're playing in is an ever-changing environment. It's one where customers are being faced with challenges that they've never experienced before and how they're able to serve and be in front of that patient and then also communicate to the family members. At Baxter, we're uniquely positioned because we're at the center of where that patient resides throughout that entire journey within the hospital. Between our smart beds, our stretchers and our surgical tables, we hold that patient throughout that journey. And because those are all smart devices, as [ Giuseppe ] indicated earlier, we are able to get unique insights that are coming off that patient and then via our care communications platform send information that is contextual and it truly enables caregivers to treat and be in front of the patients in a way that they've never been able to before. And if you look at this graphic here, the beauty of it is we follow them. So if you think about transitioning from caregiver to caregivers, you start in the emergency care, go to the surgical care and then end up in critical care. That journey is with our patients and with our products throughout that path. And it's very exciting to be a part and lead the way in that space. So let's talk a little bit about the market and how we are leading that way. So we're playing in currently a $13 billion market, growing at 6% to 7%. So ultimately, it will get to about $16 billion through the LRP. And if you look at it at a more granular level, though, so you've got patient support systems growing at a low double digit -- low single-digit growth. But what's so exciting about that space is I truly believe that it's underpenetrated. Now don't get me wrong, there are a tremendous number of hospital beds out on the market. But what they don't have is a tremendous number of connected or connectable [ frames ] out in the market, meaning that smart device, that smart bed hasn't been out on the market in the global market at the rate that we would like it to be, and we believe it will, based upon what happened during the pandemic. So we believe that's accelerated it. You go on to Surgical. Surgical is more of a mid- to single-digit growth. But it's the same. In fact, we believe that it's the least mature from a digital perspective. There are a tremendous amount of devices surrounding that patient. In fact, it's probably the most densely populated area in a hospital when you talk to devices. And imagine that environment, if you could actually connect them all. And so we believe that we can accelerate that growth using smart devices and a communication strategy. So then, of course, the most exciting is care communications at a 16% to 18% growth. And when without talking to customers, there are 2 biggest challenges they talked about, it's understaffed, under resourced that the pandemic just exacerbated. The second one was the interoperability of all the devices and how challenging it is because they don't talk to each other. And so if you think about what care communications is, that is what that brings to the table. It enables us to connect those devices -- it enables us to really change the game of how a hospital and a caregiver can use the devices that really help keep that patient safe. So now let's talk a little bit about the product portfolio that we have today. Each 1 of these segments stands on its own, and we're at about a $2 billion to just under $2 billion revenue number last year. But what I'd like to do is I'd like to take you on a journey on how important it is not to have these products individually, but how the connection of the products is truly where the difference comes. So I want you to imagine a digital ecosystem where everything is connected, where a patient and a caregiver talk to each other in a completely different way, where a patient is lying on a smart bed with a surface that can help prevent falls or pressure injuries that can detect incontinence real time. And the true game changer, as Giuseppe talked about, is continuous -- contact-free continuous monitoring. where we can monitor the respiratory rate and the heart rate, which are the 2 leading indicators of an adverse event. Now if we take all those products, and connect them to a technology that can analyze that data that can then identify those risks earlier and communicate actionable insights to those caregivers at the moment in which that moment -- that event occurs. That enables us to truly help increase patient safety, patient satisfaction, workflow efficiencies. And ultimately, if you think about that staff shortage, [indiscernible] sources, or even understanding that the tenure of the nurses and caregivers that are out there is not as robust as it used to be. It simplifies how they understand what they need to do at the right time for that patient. So it's a really exciting environment to be in. But that's what connected care is. It's not a single product that happens to be able to send data. And it's not analyzing the data. It's the combination of the product, the data, the analytics and then ultimately, the ability to communicate contextual information to caregivers to really change that experience, not only for the patient but for the caregivers as well. That is truly connected care. And we are the only company out there that has this breadth of products, when you combine them together, that can deliver that kind of intervention and experience for your patients. So let's talk a little bit about the strategy. You asked the question about why we believe in the growth. We truly believe in the growth, right? And all of my colleagues will talk about innovation, market expansion and operational efficiency. As Reaz says, innovation is paramount. Without innovation, we would become stagnant and that growth rate would never be something we could realize. So our focus is right there on innovation. And as I indicated already, we're deeply passionate about our caregivers and our patients and how we can bring innovation that can change that outcome and sustain and save that life. And so we're going to continue to develop smart patient support devices that are giving us more information, more information and data that allows analytics and insight that can truly change that overarching experience. So we're also going to, as I indicated, that the other biggest challenge is interoperability. We're going to work on how do we harmonize that, no matter whether it's a Baxter device or another device out there that would bring information or data that is pertinent for a caregiver to make a decision. We're going to figure out how do we harmonize it. How do we bring it into our open architecture and really change the dynamics of how devices are put in front of patients and caregivers. I'm going to combine innovation and operational efficiency here. Now this is a little bit different. We certainly are going to drive the financial operational efficiencies that you heard from Jay within our business unit. But operational efficiency and innovation really come together as you become more of a software company. As you think about what you need to do and the number of iterations and the number of software launches you have to have to keep up with what's happening in technology, as well as the solutions that our caregivers and customers are asking for, you have to become very aggressive in what your cadence is and what you're doing with your software platforms. And so we have to be really efficient and drive that cadence to deliver upon what our customers need. So geographical expansion, Hillrom, if you look at our revenue as a whole, it mainly came from the U.S. The beauty of the combination of Baxter, as you've heard multiple times today is that Baxter has a much broader footprint, and it will enable us to take products that we have in the U.S. that are very valuable outside the U.S. into that space with a footprint and a team of very excited folks out into the market. So it's incredibly excited to think about how we're going to take connected beds and then the Voalte platform. right? If you look at the global market, there really is not a strong connected story yet. And we believe that we can lead the way with the products that already exist. And then with a few enhancements, we can take it further. So very excited about all the innovations and all the market expansion that is truly going to drive that 6% to 7% growth that we've been talking about. So let's talk -- sorry, let's -- if you don't mind, if we could please go to the video. [Presentation]

So much like Reaz indicated, our business unit, just like Front Line Care, has over 40% of our revenue coming from Connected Care products. And also, we're going to continue to see that revenue growth at over 2x our '22 growth rates. So very exciting to see what that's going to bring to the table. But let's talk a little bit more about that video. And what is it that we do that's so powerful and unique to the others out there? If you saw and noticed there is a patient who started to get anxious, start to get nervous. So let's imagine that that's you, that's a family member, your mother, your father, your sister, brother. If we didn't have the solutions that we have today, that patient could have gotten up. They could have waited and then they're alone in that room for some time. But because of the solutions we had, that particular patient was on a sepsis protocol, as soon as their heart rates started to go up or down, so the trending, depending on the trending and what that patient was looking for, our continuous contact-free continuous monitoring enabled us to notify that caregiver that something had changed and that they needed to address that patient's needs. So instead of that patient either being alone and nervous, or getting up and possibly falling that caregiver immediately knew what they needed to do. And that's via our Voalte Mobile Alert & Alarm management, which you can see on that. A couple of other things that were used is our smart view [indiscernible] Centrella. So Centrella is where you have that contact-free continuous monitoring, but also you can see those lights that are coming off of that bed in the top picture. Those lights are indicators that tell you whether that patient is in a safe position. So as an example, let's say, at night, we're all familiar if you've ever been in a hospital, every 2 hours, someone walks into your room has to check on you. In some cases, depending upon the situation, that's not necessary as long as you know that patient is safe and you know that their heart rate is good, their respiratory rate is good. And what this product enables via those lights is for a caregiver not to have to walk in as often. And so it gives you a visible signal that, that patient is safe. Another piece that was shown in that video is our Helion ORI or OR integration. Historically, OR integration has been a video analytics or video monitoring or storage system. The reality of what our Helion system is, it changes the dynamics. It's not just about video. It's about how do you simplify bringing those devices in the OR in a way that is easy to use. So 1 example outside of just managing the videos is actually using and bringing in diagnostic images into that environment, being able to manipulate them hands free. As you saw in the video, you saw a hand coming down and manipulating that image. So instead of getting out of the sterile field, you can actually visualize and adjust and monitor those images in a way that you never have before. The other thing is, is if you want to consult with another physician, anywhere around the world, it is a matter of actually making a phone call as long as that physician has the Anywhere app on their phone where you could actually see those diagnostic images and you could actually see those images from the real-time surgery, game changing in the environment. And it doesn't require any additional equipment outside of that OR except for your mobile phone. And so it's a very exciting launch that we just recently had in the U.S., we were already having great success. So now let's talk about -- a little bit about our innovation pipeline and where we're headed in the future. Smart devices are always going to be a part of our world because it's incredibly important to be able to, number one, monitor that patient and have something that keeps them comfortable. So as you can see here, we have a number of different products that are going to be in our smart devices. But I want to talk about 2 of them. First, Baxter has been an innovative company for decades and actually has been transforming health care. If you think about it, we're the first and we're still the only company that has a surgical table that synchronizes with the robotic table, with a robot -- a surgical robot. And we're going to continue to enhance that product. We're actually going to take it to the next level. We're going to make it future-proof, so as we have innovations in robotics, it can live on with that robotics solution so a customer won't have to the hardware. Maybe some software, but it makes it future-proofed and just upgradable, which is really exciting. It's also going to change a number of things from the surgeon in regard to easy access to the target area and being able to understand where the robot is in a different way than it does today. The second one that we're working on is our ICU platform. Our Progressa is leading in the market, but we're going to take it to the next step because if you think about the burdens that we have on health care workers and turn assist, the reality is, our patients where you have skin that's at risk, you want to be able to turn them every 2 hours. In the environment we're in, that's incredibly challenging. And so one of the products that we have here is Turn Assist, where you're able to actually do it with a single caregiver. Typically, it takes multiple caregivers. So when you think about that burden, you think about the staff shortage, it really will help our caregivers in a better way to utilize the staff in the most efficient way while still focusing on that patient and ensuring that patient is very safe. Next one I'd like to talk about is our Precision Locating. Precision Locating is a very unique product in that we use a technology called ultra wide [ brand ], which is what really differentiates us from what's out on the market today. And what it does is it really pinpoints into a sub-meter distance where something is. So if you look at all the surveys that have been done, caregivers spend 30 minutes or even 20% to 30% of their time, on an hourly basis, looking for things. So if we are able to pinpoint where things are so that they can have the right equipment at the right time and not have to calling around and figuring out where it is and what it is, they'll have the right equipment at that right moment which is incredibly important, and we'll continue to drive that. And then lastly, I'm going to talk about the Virtual Care. Virtual Care is something that really focuses on not only the caregiver, but the patient and then the family. The pandemic just made it very obvious that our need to do it differently and communicate differently with family members, it had to change because family members weren't allowed. They didn't know what was going on with their loved one. So what Virtual Care enables is it enables us to keep everybody informed about the progress via updates, via text, video and a number of different ways. So now, the anxiousness of a family member can go down. That experience for that patient can be much more positive. And then also, let's think about those that are non-English speaking. It also enables translation. So if you have a communication gap, what our solution will enable is that translation. And so we'll understand what's really happening with that patient that otherwise we might not have fully understood. So incredibly exciting, where we're headed and what we're doing. But I'd like to even dive deeper on this next slide into what care communications is, and we've talked about Connected Care. And Connected Care, as Giuseppe said, is a full ecosystem. But when you get down to what Care Communications is and where we're going to be growing at a 16% to 18% [ club ] or even faster is via our Care Communications. And what is that? I want you to think of a rain forest, right? It's probably the earth oldest ecosystem where each living item is vital to the well-being in the whole. Well, similarly, our Care Communications platform takes every device that it can integrate with, and via the open integration and architecture that we have, we can integrate with just about everybody if they're willing. And then take a bit analytics, and then you send it through this Care Communications platform. And we leverage 4 different things in our Care Community cations platform: Our Nurse Call, our Voalte Mobile, our Family & Patient Engagement, and then we take analytics. And the analytics allow us to get the right information to the right person at the right time and in the right way. I think Joe was the one that highlighted, how it is in an OR and everything was beeping around him. We want to minimize that, right? Alarm fatigue is huge, and if we know contextually what is needed and how to minimize those alarms, this solution can enable that. So we're helping to automate workflows and simplify tasks. We are sustaining and saving lives with these solutions that we have today, and we're going to continue to transform what those look like into the future. We're going to help identify risks sooner, we're going to allow clinicians to truly respond faster to ease that patient burden. And then we're going to bridge those connections for caregivers to caregivers, caregivers to patients, and then ultimately, patients and caregivers to the family members. It truly is so powerful. If you have all of these capabilities, very few in the industry have. And so our plan is to truly grow on this and expand upon it with the Baxter portfolio. So in summary, we truly are empowering caregivers by connecting every moment of care. The world is changing around us, and we're going to change with it. we're going to break down the 4 walls of a hospital room. We're going to break down the walls of a hospital and offering solutions that truly work in synergy and Connect Care across the entire hospital and beyond. And as you can see and you've heard, when you add the broader Baxter portfolio, we are truly going to change and sustain and save lives every day. So thank you.

Next, Pharmaceuticals and BioPharma Solutions. [Presentation]

Good morning. My name is Jorge Vasseur, and I'm the Interim President for Baxter's Pharmaceutical business. It's great to be here with all of you today. Thank you for your interest in Baxter, and thank you for being here this morning. Baxter got into the pharmaceutical business back in 1948, and today, we're recognized as a leader in pre-mix injectable drugs and inhaled anesthetics. As you know, we operate in the heavily competitive and very dynamic generic pharma market. Over the past few years, we've seen changes in the regulatory requirements and increase in the number of competitive entrants coming into the space and a higher demand for differentiated delivery systems. Our goal is to bring complex, differentiated products to the market that meet our customer needs and create greater value for Baxter and our shareholders. So what I'd like to do this morning is give you an overview of who we are, the market segments in which we play, and then share with you the key dynamics in the market that are shaping it and the strategic initiatives that we believe will lead to above-average growth rates for our business over the next 3 years. So let's get started with who we are. We have an over 80-plus year legacy in the pharma industry, and over that time, customers have come to trust Baxter for the quality and the reliability of the medications that are administered every day in hospitals around the world. Today, Baxter Pharma is -- has unmatched expertise in pre-mixed injectables. We have over 30 pre-mixes in proprietary Baxter IV containers. Our pre-mixes are truly off-the-shelf, ready-to-use products that customers can use to save time and labor when administering medications. We believe that in this environment where staffing shortages are the norm, pre-mix is going to be a part of helping mitigate that risk. We are also a leader in injectable -- I'm sorry, in inhaled anesthesia. As the inventor of Suprane, we have been pivotal in bringing inhaled anesthesia into the operating theater over the several years. Today, we count with the broadest portfolio of inhaled anesthetic agents on the market, and our anesthesia is used in 1 out of every 3 surgeries every day. We're also a leader in IV drug compounding. We operate 20 compounding centers outside the United States that deliver, in time, very customized dosage products in IV containers to local markets. We see a trend in outsourcing of the IV drug compounding as another way hospitals can better manage their staffing shortages. And finally, we're also a company that has tremendous expertise in pharma manufacturing capacity and abilities, and we're leveraging those abilities to provide contract manufacturing services to the pharma industry with a track record of quality and reliability, whereas a trusted source for -- as a pharma partner. Most recently, it's evidenced by the fact that we've partnered with the pharma industry in the manufacturing of COVID vaccines. So when you take our 80-plus year history plus our commitment to quality, we're well positioned to capture opportunities in the high-value segments of the generic market space. So let's take a closer look at that market. The chart on the left, the bar chart shows that we play in a $63 billion global market. We expect this market to grow at about 3% CAGR through 2025. But as you can see, not all the segments grow at the same pace. Our Specialty Injectables segment, which is our largest, it's also one of the slowest growing ones, and there's 2 big drivers for that. First, the shift to oral therapies and biologics means that there's less new small molecules coming on to the market, coming off a patent and going generic. What that means -- at the same time, we're also seeing an increased number of competitors coming into the space, including non-traditional players. So when you combine more competitors chasing fewer products coming off off-patent that generates and accelerating sales erosion and leads to slower growth, and that's what we're seeing in the specialty injectables market. Now, the good news is there's still stable and accelerating demand for our pre-mix injectables, which are considered differentiated type products, and I'll talk with you a little bit -- in a little while about the strategy that we have to compete in this particular segment. Next, you can see in the Inhaled Anesthesia segment, it's actually decreasing. Very similar, commoditization and an increased number of competitors coming into this space as well, as well as a shift towards regional injectable-type anesthesia is now being more the norm. There's an added concern about the government -- about the environmental effect that releasing anesthesia gas into the environment has, and we believe there's an opportunity to bring innovation into that space and extend the life cycle of our products there. When you add to that, the 2 service sectors, drug compounding and contract manufacturing, both were growing in the mid-single-digit range, and we'll continue to benefit from more outsourcing into these spaces. The combination in aggregate, our market is projected to be $69 billion, growing at that 3% CAGR by 2025. So how do we operate in this space? What does our portfolio look like in these product categories? Well, first of all, I think it's important to note that today, we're a $3 billion globally diversified pharma company, and that's very different than the past. Historically, this business was very U.S. centric and dependent on 1 or 2 products for growth, like cyclophosphamide. Today, thanks to acquisitions, several licensing agreements as well as our own development program and launches, we're much more diversified in our portfolio as well as in our geographies. That leads to a much more sustainable business that's less dependent on just one market or one product for growth. The $3 billion, you can see how it's broken up on the pie chart here, our largest business category is Specialty Injectables, and it's where the biggest market dynamics have happened over the past few years. Let me touch on the other 3 first, and then I'll tell you a little bit more about what we're doing in Specialty Injectables. Let me start with Inhaled Anesthesia on the upper right. This is 13% of our business today, and it's part of that declining market segment. I talked about the fact that we've got a broad portfolio and we will continue to offer that, as well as bring innovation on how they can administer gas more cost effectively. We provide training as well as vaporizer management to all of our customers, and that will continue as well. But the big challenge now that's top of mind from any customers is the environmental effect of releasing anesthetic gas into the atmosphere. That's why we're proud to have partnered with Zeosys Medical on their new innovative gas capture technology. Zeosys Medical's gas capture technology prevents the gas from being released into the atmosphere, contains it, and then removes it off site for safe disposal. We also believe that we can potentially recycle the gas in the future for reuse. Now, we're really proud of this, and we're looking to bring this innovation. We believe that innovating in this particular space not only will open up a new growth vector for us in this space, but will also allow to extend the life cycle of our 3 gases out there. We're really excited about promoting this in the upcoming summer congresses. We're already piloting it with several customers throughout Europe, and we fully expect to get ISO certification by the end of the summer. On the bottom left, you see our Biopharma Solutions business. This is actually our contract manufacturing organization. Biopharma Solutions has plants that serve the pharma industry as they move more and more towards outsourcing their manufacturing needs. And because of that, we've made an investment of over $100 million in our Halle Germany facility to increase the capacity of lyophilization as well as our pre-filled syringe technology, both of this to enable the expected growth that will continue in this particular segment. And finally, in Drug Compounding, I talked about the 20 compounding pharmacies that we own and operate, mainly in Canada, Western Europe and Australia and New Zealand. These pharmacies buy the pharma product directly from the pharmaceutical company and do the mixing in a sterile environment into an IV chamber, and then deliver it locally to the customers on a daily basis. We continue to see the trend here growing as hospitals look to offload the admixing from inside the hospital to third-party compounders. Now, let me go a little bit deeper into the Specialty Injectables area. This is where we've seen the single biggest changes in our market over the last 3 years. I want to point you to the dotted line that you see here on the graph, and that number of 138. That's 138 products that, back in the 2018 Investor Conference, we had said we would launch by 2023. Now, 50% of those products were what we call Standard or Basic Generics. Those are generics that are easy to copy. They're equivalent to the brand name product, and they're also easy to manufacture. Unfortunately, this is where we're also seeing the biggest increase in competitive new entrants, a lot of non-traditional players as well. So where we used to see maybe 4 to 5 competitors coming in at market formation, today, we're actually seeing 10, 12 and even 14 new competitors at the same time. What that does is created significantly lower market value for that particular segment of the generic business. Now, rather than us being competitor #15, we decided to take a step back and relook at our strategy here and our pipeline. We eliminated several of the low-value basic generics and have re-shifted our focus to the more complex, differentiated molecules where we have a competitive advantage. A Complex Generic is one that's usually an emulsion. It requires a special manufacturing process, and it's not as easy to copy, so we've got a competitive advantage in that particular space. An example of that is propofol, which is an emulsion, or Doxil, which is a liposomal product, right? And a differentiated molecule is one that usually has a value-add for the customers, similar to our ready-to-use or pre-filled syringe technology. So our pre-mixes would be a value-added differentiated type of product. Now, the solid line that you see there is our new revised pipeline. As you can see, we'll still get to 100 products, but we'll do it later in the LRP. And what we've done here is really shift the focus to more quality of our launches versus the quantity. So rather than going after a broad base of standard generics, focusing -- we believe that focusing on the complex and differentiated products, we will be able to outpace the growth of our segment by 2 to 3 percentage points. And this is the single biggest change that we've made in our strategy since the 2018 Investor Conference. So when we put all this together, what we have is our 3 strategic pillars. We're centered on innovation, market expansion and operational efficiency, just like my colleagues here. Innovation is all about bringing to market those complex and differentiated molecules and bringing them into market in a timely fashion where we can capture the greatest value. We'll augment that selectively with some basic generics where we can get to market quickly or where we have a competitive advantage. Market expansion is to continue building our portfolio outside the U.S. through geo expansion. A prime example of this is the investments that we made in Caelyx. Caelyx is a common chemotherapy drug that's used every day. It's well known and widely prescribed, so it doesn't require a lot of clinical detailing. It fits very nicely into our commercial infrastructure, and because of that, we're using that as an anchor product to build out our portfolio further. Then finally, channel expansion. We do see opportunities for our pre-mixes in alternate sites of care, particularly home infusion centers. When you're talking about ready-to-use, off-the-shelf products, those are perfect for these types of channels and we see growth coming from that space as well as that trend continues. And in operational efficiency, that's in everything we do. Our investments in capacity, our cost productivity programs of the drug compounding centers and an execution of our pipeline with our new regulatory requirements. And finally, everything we do is with quality and meeting our regulatory requirements that supports patient safety, including fully supporting the lifting of the Ahmedabad FDA warning letter. By executing on this strategy, we firmly believe we can outpace growth of the overall market by 1 percentage point -- 100 basis points. We believe it will be about 4% CAGR through 2025. Now, you've heard me talk about the value of our products, and rather than me continue to talk about it, I prefer to show you. We've got a short video of one of our recent launches, Myxredlin, human insulin for injection, and it will -- the video will speak for itself. So let's roll the video. [Presentation]

So as you can see, our premix products bring real value, not just to patients but also to the caregivers, and that's why we've made it a central part of our strategy going forward and built it into our pipeline. Today, our new revised pipeline has over 80% of it tied to differentiated or complex formulations. Right now, we've got 15 new molecules in development under the differentiated drug delivery system, usually pre-mixes, including an expected launch in the near term of pre-mix Zosyn in the U.S. as well as insulin -- IV insulin in the EU. We've got an additional 6 molecules under development in complex formulations that are also including a near-term launch of propofol in the United States. And as I said before, we're going to supplement that with some selective vials in basic generics that -- where we can get to market fast and capture value or where we have a unique competitive advantage. And when we couple that with the investments that we're making in gas capture technology as well as the investments that we're making to enable contract manufacturing growth, we feel very confident that we can deliver that above-market growth rate that we projected. So what do I want you to take away from the pharmaceuticals business? I think the first message is this is a growth business, and that's a change from the past. And in order to enable that growth, we're doing 3 things. We're increasing our innovation of complex and differentiated products. We're expanding the markets, and we're doing all that with operational efficiency. In order for us to be successful, we must launch these differentiated and complex molecules in a timely fashion to be able to capture the full value in the market and offset the erosion that we're seeing in the base business. We must expand our reach beyond the U.S. through geographic expansion as well as continue to find productivity in our drug compounding centers for incremental growth and sustainability. We must continue to finish the investments in our contract manufacturing facilities as well as our compounding centers to drive efficiency and profitability, and we do all of this always with quality and meeting our regulatory requirements with patient safety first. With this renewed focus in our pharma business, we feel very confident that we can not only deliver the above-market growth rate that we stated, but we can also generate greater value for Baxter, for our shareholders, all while living our mission of saving and sustaining lives. Thank you very much for your attention, and have a great rest of your day.

Next, Renal Care. [Presentation]

Hello everyone. I'm Lee Ann Schuette, and I lead the Renal Care business. I want to thank everyone who's here in person as well as those who are joining us online to learn more about the renal care growth strategy. So the overall renal market has multiple factors that are driving growth, and as you've heard already today, primarily in home therapies despite the recent challenges that have been created by COVID-19. So our strategy positions us to outpace market growth while enhancing profitability. And as I've been able to finally get out and travel and meet face-to-face with customers and our patients, I am more confident than ever that we are positioned to meet their changing needs now and into the future. So my goal for our time together is that by the end, you share that confidence. And so I'm going to talk about the market, how we participate today, our strategic priorities and then close with really our vision for an even more compelling future. Before we dig in, I just want to give you a quick snapshot of who we are. So we are really proud of our legacy of innovation and leadership in renal care. And we're truly a global business, and that our revenues are almost equally balanced across each of our 3 geographic regions. We are the clear category leader in peritoneal dialysis, which is primarily delivered in the home, as well as hemodialysis, which is primarily delivered in a clinic or in a hospital setting. And then the other piece I'd like to highlight is that we continue to expand on our Connected Care ecosystem, which includes connected devices as well as the insights that we gather from our remote patient management platform. So now let's talk about the market. If you look at the bar chart, you can see that this is a significant market at $14 billion, forecasted to grow to $16 billion over the LRP. And that 4% CAGR that you see is driven by factors like an aging population and increases in population with congestive heart failure and diabetes, which will increase the amount of patients that need dialysis. And if you see in the center of those bar charts, peritoneal dialysis, which again, is delivered in the home, is set to grow at 6%, which is double that of hemodialysis. And there are really 3 factors that are driving that shift towards home. So as we've talked about, COVID-19 certainly accelerated that as clinicians work to move these immunocompromised patients to home where they could -- where generally, they were safer than being treated in the clinic or in a hospital setting. So in addition to being immunocompromised, these patients typically have other comorbidities like congestive heart failure and diabetes. So they are, in general, more vulnerable to contracting and having more severe outcomes, excuse me, from these types of viral infections. The other piece that came with COVID-19 was the increased availability as well as adoption of telehealth and other Connected Care solutions, which made clinicians feel more comfortable treating patients at home. And it's also fueled the increased preference that we're seeing for patients to be treated at home. The last piece that I'd like to highlight is there are favorable policies that are being implemented by government agencies that are encouraging treatment in the home as well as encouraging innovation. So I'm going to share 2 examples from the U.S., and you would not be at a business meeting if I did not have acronyms. So I have 2 for you. So the first one is AAKHI, which stands for Advancing American Kidney Health initiative. And that has, as part of it, a mandatory payment model that impacts about 1/3 of end-stage renal disease facilities as well as managing clinicians, and they can receive either positive or negative payment adjustments based on their ability to increase home therapies as well as transplants within their Medicare population. So obviously, that's a significant driver for home therapies. The other acronym I have for you is TPNIES, and what that stands for is Transitional add-on Payments for New and Innovative Equipment and Supplies. And that does just what it sounds, it really gives an additional reimbursement for products that demonstrate innovation and substantial clinical improvement. So these factors are really setting us up for substantial growth in PD so that , that will grow to about a $4 billion -- $4 billion plus actually, forecasted by 2025, as a market. Now, what we talked about, this market has had its challenges in the near term with COVID-19 and primarily from the excess mortality within this fragile patient population. So we are starting to see patient treatments stabilize and normalize and anticipate that will continue over the course of year. And then obviously, the growth accelerating over the LRP. So the key takeaway from this slide is there is a significant shift towards home therapies where PD is the primary dialysis modality, where we are the clear category leader. So we are uniquely positioned to lead this shift to home with our broad and differentiated portfolio, our geographic footprint as well as our innovation pipeline. So now, I'll talk to you about this market-leading portfolio that we have. If you see in the center of the slide, we delivered almost $4 billion in revenue last year with most of that coming from PD. So let's talk about PD on the left-hand section of your slide. So again, we have different products and technologies that support this home therapy. You can see there, we have PD cyclers, and our automated peritoneal dialysis cycler is really important because that enables patients to do their treatment at night while they sleep. So their daytime is free to work, care for family or pursue whatever interest they would like. We also have solutions that are infused into the patient's peritoneal dialysis, which helps remove fluid, excess fluid and excess waste. And then along the bottom, you can see, and I'll talk more about our Sharesource ecosystem of Connected Care. And that consists of our remote patient management platform. And we have now actually implemented that across 70 countries around the world. We support about more than actually 50,000 patients every year. And as you heard Giuseppe say, to date, we have managed more than 32 million treatments. And we're excited that we are now, this year, launching 3 new digital health solutions that are listed here, and I'll talk more about, but it includes our analytics and decision making as well as our patient mobile app, and then finally, our adequate prescription management solution. And our strategy in PD is really focused around increasing PD penetration as well as extending time on therapy, and we're going to do that through innovation, market expansion as well as the operational efficiencies that I'll talk about. So now, let's shift to the right-hand side of the slide, and we'll talk about HD, which delivered almost $1 billion in revenue last year. And you can see our portfolio of our monitoring devices as well as our dialyzers, which filter the blood. And our key strategy in HD is really around increasing the therapy penetration for extended hemodialysis. You heard Giuseppe talk about, we have underpenetrated therapies. PD is certainly underpenetrated as well as our extended hemodialysis therapy, which is enabled by our premium and differentiated dialyzer, THERANOVA and we're also working to improve the overall profitability of the HD business. So just a quick note on THERANOVA. Remember, I mentioned TPNIES, which was additional reimbursement that you can get for innovative products. We have resubmitted our application for TPNIES at the beginning of this year, and we anticipate a proposed ruling coming out in the July time frame, with the final rule coming out at the end of the year. And since our last application, we have submitted important new information that substantiates the clinical advantage that THERANOVA provides to patients as well as to customers. So our strategy will position us to deliver above-market growth of 4% to 5%. Remember, I said the CAGR of the market is 4%, so we're looking to beat that at 4% to 5%. You've heard from my colleagues the 3 strategic pillars that we're focused on. I'm going to just briefly give you an overview now on all 3, but then I want to spend a little more -- a bit more time on innovation as well as market expansion. So from an innovation perspective, we are actually delivering innovations across both Connected Care as well as core therapies. So from a Connected Care standpoint, you heard me talk about our existing remote patient management platform, but I'll show you how we're expanding that to include other connected digital technologies to further monitor those patients at home with really focused on delivering 3 things. One, improving patient outcomes, improving clinical workflow. We have the same nurse shortage in this space that you've heard my other colleagues talk about, and it's really challenging. So delivering clinical workflows is absolutely critical. And then the last piece is extending time on therapy so that patients can get the benefits of PD longer. So that's our primary focus and what we're delivering with our Connected Care solutions. The other piece, while those are really exciting and we're all very excited about digital health, we also have a lot of opportunities to really enhance the standard of care, transform the patient and customer experience with our technologies in core therapies. One I'll mention briefly and then talk more about later is our new automated PD cycler that, again, is really designed to transform the patient and customer experience. For us, market development is really important, right? We talked about when you have underpenetrated therapies, investing in market development around awareness and education and policy evidence generation, that's really important. And those efforts for us are focused on increasing PD therapy and increasing the expanded hemodialysis therapy I mentioned that is enabled by THERANOVA. And operational efficiencies. Obviously, we're all aware of the increased cost that our patients -- our customers face and that we face, so we absolutely keep a focus on driving down the cost with efficiencies. I will note, though, we have made significant investments already to support the growth of PD so that we're ready, and we can serve our customers and our patients, and Jim and his team have done a fantastic job. And as you heard him talk about optimizing the supply as well as the manufacturing networks, so that we're doing that as cost effectively as possible. So now let's talk about innovation, my favorite thing to talk about. We'll first talk about it as it relates to Connected Care. So our Sharesource remote patient management platform that I mentioned to you, which is broadly used around the world, has a robust set of clinical evidence that demonstrates the value to customers and to patients. And so that makes customers choose us as their supplier and stay with us for their PD therapy because of all of the benefit that we're providing, with Sharesource being a key part of that. And so I wanted to just highlight 2 key pieces of supporting evidence around the value. One is a recently-published study that showed, and Giuseppe mentioned it, that patients managed with Sharesource stay on therapy 3.4 months longer than those who aren't managed. And why that's important is there are significant benefits of PD versus HD. Just as I mentioned, the quality of life, but they also have an early survival benefit and they have a better bridge to transplantation. And on average, with patients staying on 2 to 5 years, 3.4 months extension is really meaningful, so we're really excited to be able to share that out with the community. The other piece that's also critical is in a study, it showed that patients managed with Sharesource had 39% reduction in hospitalization and 54% reduction in hospital days. So from a patient perspective, obviously not being in the hospital is incredibly important for their quality of life, but the overall cost of the health care system is reduced by not having patients go into the highest site of care, which is the hospital. But we're not stopping there. We are very busy expanding our Connected Care and monitoring ecosystem, and we're focused on delivering 3 things. And first is moving from this reactive to more proactive and personalized care, making it easier to start and stay on PD, and then we've talked about the all-important increasing clinical operational efficiency. So I mentioned we have 3 new digital health launches this year. I'm going to highlight 2. And hopefully, you visit us in the Innovation Hall or you can come when we're done here today, and we'd love to be able to show you those in person. So the first one I'll talk about is analytics. So what that does is it provides the clinician with information on really 3 priority areas. First is around, is the patient adhering to their treatment prescription. Are they having any issues with their catheter, which may impact their treatment? And then finally, are there any alarms going on? And so quickly, that clinician can know who -- which patients they need to reach out to provide support, and these 3 pieces of information are important because those are typically the top 3 that lead to early patient dropout off of their therapy. And so once that nurse knows they need to reach out to whichever specific patient, they are -- they get from us evidence-based clinical decision support that helps them with any of those potential issues. The other product that I want to highlight is our MyPD patient mobile app. And what that does is it automates the collection of key vital signs like blood pressure, weight, glucose levels, and it does that through Bluetooth-enabled devices like our Hillrom - Welch Allyn scales and blood pressure cuffs. And it's important for clinicians to have this information in real time, accurate -- in real-time and accurate way so they can better monitor their patient while they're doing their treatment at home. And then the other thing I just want to highlight on this slide is our PD Telecare service. And what that is for the first 90 days of therapy, which you can envision your patient, you've just learned that you need to be on dialysis for an extended period of time until you get a transplant or for the rest of your life, that first 90 days is when they're just getting used to everything that's changing. So that's typically when we see the highest dropout rate. And so we support clinicians and patients during that time with the insights from Sharesource, and we actually have just shared a poster at ASN last year, which one of the top 5 dialysis providers in the U.S. use that in over 20 clinics with over 200 patients and saw an almost 50% reduction in patient dropout. So really taking care of those patients in that first 90 days really having an impact on how long they can enjoy the benefits of PD. The other part of our innovation strategy is around core therapies and how are we leveraging new therapy technologies to improve the standard of care. So in all of the research that we do broadly and extensively with both patients as well as clinicians, we continually hear, this needs to be simple. If you think about a patient, a typical dialysis patient, like my neighbor John, they're older. They have visual challenges, they may have dexterity challenges, so whatever therapy they're going to do at home needs to be really simple. We've talked a lot about the nursing shortage, so whatever therapy a nurse has to learn and then train their patient has to be really simple. So I'm really excited about our new automated PD Global Cycler platform, which is designed to really transform that customer and patient experience with its simplicity as well as how we're expanding our ecosystem of Connected Care support. The other piece that we're adding there is remote service. So we can use analytics to predict if there needs to be maintenance. We can, almost in real time, send out software upgrades as we continue to make improvements and add new benefits to patients as well as we can do remote troubleshooting if there is a problem, and we can do that super effectively. The other piece is, as you look at if we've simplified the product, we've simplified the service, we're moving to one global platform. So thus, we anticipate having a lower cost of therapy, which helps us bring the benefit of APD to more patients, so more patients around the world would have access to the benefits of that therapy. We also continue to stay focused on different technologies that would completely transform the standard of care, and we're focused on 2 areas. The first being at-home generation of PD solutions. So as we talked about the growth of PD, being able to generate solutions in a patient's home gives us more flexibility and is more capital efficient than shipping them bags of solutions. We can also help transform the patient experience because they have to receive and store less products in their home. So many of you may be aware of our previous efforts in this space, so we are leveraging the deep learnings from our previous efforts across research, development as well as from the clinical trial that we executed. Now, last area of focus is artificial kidneys, kidney space and technologies. Over the last 5 to 10 years, you've seen some of those technologies start to mature, so we have made multiple bets in what we believe are the leading technologies in this space and position us to be a part of transforming care in this ever-evolving space. So our pipeline, we believe, will really help strengthen the leadership position that we have in PD. So I talked about our 3 digital health products and services that we're launching this year. I also just want to spend a minute to talk about CLARIA, which we recently launched in the U.S., and we are actually continuing to exceed our expectations and receive fantastic customer feedback, and this adds to our AMIA connected cycler. So now, the customers and patients have 2 options, to have Connected Care and receive that remote patient monitoring and all the other digital health products that we're going to launch. And as we think about digital health products moving forward, we're focused on moving towards that more predictive state as well as adding other monitoring and sensing solutions that will improve the monitoring of these patients in their home. And then lastly, I touched on the different new therapy technologies that will really transform the patient and customer experience as well as care and as well as enabling us to do that in a really cost-effective way. The last strategic priority I want to focus on is market development. Again, we talked about how PD is underpenetrated as well as our extended hemodialysis enabled by THERANOVA, so for us, this is a really important part of our strategy. And so we talked about policy and we talked about AAKHI in the U.S., and we remain confident in the ability of that policy to drive increase in PD penetration and anticipate getting to 20% plus in the future of penetration in the U.S. The other countries you'll see setting goals for home therapy as well. The NHS in England has set a goal for 20% at-home therapy, and we continue to see that momentum in other countries around the world. And as that shift goes to home, we are focused on making sure education and training, so education that people are aware of the benefits of PD, and then training. We talked about how important it is that these nurses have quick, easy training. And so we've made that digital, so it's available readily whenever they need it. And then the last piece from an education that I'd like to focus on is patient education. Studies show that when patients have education around their treatment choices and engage in shared decision-making with their clinician, they are up to 4x more likely to choose PD. So we have executed digital patient education in over 40 countries around the world to help support them so that they can make the decision that best suits their needs. And then lastly, I just want to highlight, I'm really proud of the fact that we have a newly-launched corporate responsibility goal to double the number of PD patients in developing countries by 2030. So in closing, our strategic priorities across innovation, market expansion as well as operational efficiencies really enable us to outpace market growth and drive towards a vision in the future, and a vision that includes personalized and proactive care through connected solutions, patient and clinic experience is transformed by our new therapy technologies. And then finally, that PD penetration and growth is catalyzed globally. And we, as Baxter, as the clear category leader in PD with our large geographic footprint, our broad and differentiated portfolio of products as well as the innovation pipeline that I talked to you about, are really poised to deliver on that vision. So thank you.

Next, acute therapies, clinical nutrition and medication delivery. [Presentation]

I think I get to be the first to wish everyone a good afternoon. We've officially transitioned from the morning to the afternoon, but it is great to be here with all of you today in person as well as those joining us remotely. I'm Heather Knight, and I recognize that I'm the last presentation (sic) [ presenter ] of the day. I hope that you've enjoyed hearing from my colleagues so far. I'm excited to be here to share the incredible momentum and the plans that we have in our acute therapies, our clinical nutrition and our medication delivery businesses. They are 3 very unique businesses that are large, meaningful and very dynamic in the marketplace that we play in. Last night, I had the chance to speak with many of you, and it was great to hear the things you're excited about, maybe you're curious about, the things maybe you're a little skeptical about and wanted to talk to me about. And it was great to just spend that time with you, and I want to share some of the exciting things that's happening across these 3 portfolios. You know more than anybody, the dynamic marketplace that we're playing in health care, and what the last 2 years have looked like. The industry has faced multiple challenges, many that you know and that we continue to face. But there's also some bright spots that have come out of that. The pandemic has brought us closer than ever to our customers, and it's also energized and mobilized the entire Baxter organization when they realize the impact that we can have on health care. So since assuming this newly expanded role, it's not quite been 1 month, I have been poring over materials learning about these 3 global businesses that, again, are large, meaningful and dynamic. And I've connected what I've heard in my daily conversations with customers, leading the commercial side of the business the last 3 years at Baxter, with my industry knowledge, spending about 30 years, growing up in this industry. And if there's one thing I can tell you and one thing that you take away from this presentation today, it's that these portfolios are set up to deliver what our customers value most. So what I want to cover today is the market dynamics that we're seeing, what we're experiencing in the industry and our plans not just to meet but exceed our LRP commitments. And specifically, as you've heard from my colleagues, our focus on innovation, market expansion and operational efficiency will allow us to deliver on those commitments. Are you guys ready to get started? I'll start with who we are. So we are a mission-driven organization. Above all else, everything that we do focuses on saving and sustaining lives, you've heard that theme throughout the day today. And we touch 75 million patients with our products every year. That's a huge number. We are inventors. We are often the first to deliver new therapies to customers and patients across the globe. We are recognized as a market leader, with our products being sold, you heard from Joe, in nearly 100 countries across the globe. And we are innovators, and you'll hear a lot more about our acceleration in that area today. It is the foundation of everything that we're doing today and transforming at Baxter. So let's talk a little bit about the markets that we play in. I'll start at the top of the page with Acute Therapies. So there is significant opportunity in acute therapies, and that business is expected to grow in the mid-single digits to $1.5 billion by 2025. Working in our favor are some of the market dynamics that we're seeing. Just increased awareness of blood purification therapies as well as sustained demand for these products and increasing numbers of patients globally being treated with these therapies but still highly underpenetrated. In the middle is Clinical Nutrition. That is expected to grow in the low single digits to $4.2 billion by 2025. We are seeing growing recognition through the pandemic and awareness of parenteral nutrition and its therapies with the treated number of patients increasing during various stages throughout the pandemic. And you heard a lot about the continued shift in the markets, that's another important factor in Clinical Nutrition as more and more patients being treated in the home as well as alternate sites of care. And at the bottom is Medication Delivery. It's a large dynamic business comprised of 3 primary categories. The first is IV therapies and reconstitution, that is expected to grow in the low single digits to a whopping $17.2 billion by 2025. Infusion systems, and we'll be talking a lot about that today is about a $6.6 billion category that's expected to remain relatively flat by 2025. And that hemodynamic monitoring is one of the growth areas of the portfolio and expected to grow low double digits to approximately $900 million by 2025. As you've heard from my colleagues in this portfolio, in particular, the focus on digital health, connectivity and personalized therapies is especially prevalent when you look at Medication Delivery. And as we've talked about, this business is not immune to the challenges that we've seen facing the market, including hospital admission variability and the ebbs and flows of COVID is it's impacted our global markets, resource and labor shortages as well as global supply chain issues that Jim and his team have been just such integral partners for us as we've maneuvered through that period. But despite this, we expect to see overall market growth of about $1.5 billion across these categories. And our focus on innovation, market expansion and operational efficiency and delivering what our customers value most will allow us to capture the lion's share of this market opportunity. So I now want to take a little bit of a deeper dive in to Baxter's business across these 3 categories. So Acute Therapies today for Baxter is about an $800 million business. And this portfolio includes our monitors, our sets and our solutions. And we help simplify the delivery of continuous renal replacement therapy, or CRRT, as well as our organ support therapies. This business, being new somewhat to it, is a real success story for Baxter. It has grown significantly the last few years. And since we were last together with you in 2018, this business has nearly doubled. So today, I want to highlight some of the plans that we have to continue growing this business as well as the innovation that we're focused on in organ support therapies which helps support improved patient outcomes. In Clinical Nutrition here at the bottom of the slide, that's about a $1 billion business today for Baxter. And we offer a comprehensive portfolio of parenteral nutrition offerings, that includes advanced nutrition compounding solutions, systems and technologies. When you look at the portfolio, our products are innovative, but they are also very accessible and that plays a key role in driving clinical outcomes in the care setting where care is delivered. They're also providing the necessary convenience for our customers. So we've talked a lot about staffing shortages, tightening of staffing. And when we see that globally, the convenience is a really important factor that our customers are considering versus compounding themselves. So I'm also going to share more with you today about our next-generation automated compounding solution that we're launching this year. And hopefully, some of you got to see that during the Innovation Hall. And last is Medication Delivery, that's about a $2.9 billion business for Baxter and includes 3 categories we talked about earlier. So our infusion systems, IV access and such portfolio is used for fluid delivery, nutrition, chemotherapy, antibiotics, blood products, just to name a few. And you'll hear more about how we're continuing to evolve that business as well as our infusion pump platform, not only with technology, but you've heard the importance of data and data sharing and generating insights for clinicians so they can personalize care at the point of care. Our IV therapies and reconstitution portfolio includes IVs, irrigation as well as drug reconstitution products. And we remain focused on growing this business through continued geographic expansion as well as building a sustainable, resilient supply. We want to provide our customers the product that they want when they want it. And finally, our hemodynamic monitoring portfolio. This includes the Starling Fluid management monitoring system as well as sensors and clinical decision support tools that you heard Giuseppe talk a little bit about earlier, that's for noninvasive specialized monitoring and a really important part of our fluid management strategy. So now I want to transition to talk about each of these businesses individually, and I'm going to start with Acute Therapies. So when you look at our business in Acute Therapies, we are a globally recognized leader in CRRT, and we are elevating our leadership in this portfolio by innovating around blood purification therapies as well as advanced filtration technologies. So I would be remiss if I was on this stage today, and I did not talk about how this team mobilized to service our customers throughout the COVID-19 pandemic, although some may argue that we're still in that. But I'm so proud of how not just my team but the entire organization mobilized to serve our customers and serve our patients for the critical demand that we saw for CRRT. We've invested in capacity expansion in CRRT solutions to serve our patients as well as obtained 4 U.S. emergency use authorizations to further provide demand and supply to our customers throughout the pandemic. I'd like to now talk a little bit just about the strategy in Acute Therapies. So you've seen this slide a lot of times today. I'm sure many of you are familiar with it. But I want to start with innovation because leading in connected care is a critical part of our approach in CRRT. Having a connected portfolio that can generate the clinical insights that our customers are asking for in real time to help them solve the challenges that they're facing and treating the sickest and most complex patients that are in the hospital. And one example of this is our TrueVue therapy management system. So TrueVue is a valuable program that we launched with our PrisMax 2. And what this program does is we have Baxter specialists that actually go into the hospital and they evaluate the data from our devices, the CRRT therapy data, and they partner with them to uncover key insights. So working with those clinical teams, they're able to figure out how to optimize their care quality programs, how to maximize the resource utilization in important areas like the ICU as well as help them deliver on their clinical goals. So this is especially important, again, when we see resource constraints in a critical area of the hospital like the ICU. And when staff has tightened, we're seeing greater pull for this improvement area with our platform. When you look at advancing our core therapies, that means elevating our market leadership in CRRT, while expanding the treatment possibilities for next-generation blood purification, which I'll talk more about in a moment. In the area of market expansion, this is a highly underpenetrated therapy. So market expansion is critical to what we're doing in Acute Therapies. We're using registry data to drive additional insights and adoption of our products and the life sustaining organ support therapies that we have. One example would be our Oxiris Net registry data, which tracks the treatment data of patients with multiple organ dysfunction who have undergone extracorporeal blood purification. That's a tongue twister there. We're also focused on delivering high value clinical training and education. And why is that important? That's important because research has shown us that education on CRRT is critical for driving, prescribing and adoption of the therapy. Without that, it leads to therapy downtime and a further lack of prescribing. So we have the BCCI, our Baxter Critical Care Institute, that offers on-demand training resources for clinicians, online, easily accessible where they need it most. So we're able to share our expertise, best practices and help them drive further adoption of the therapy. In the area of operational efficiency, there's a lot that we're doing across the portfolio. But the one area we're really focused on is ongoing capacity expansion projects, primarily across the Americas and Asia Pacific to meet these large increases in demand that we're seeing for our products. So Jim Borzi and his team have been instrumental in doing this, and I'm happy to report that capacity is online today and we're seeing significant relief in the market. Executing on these strategic pillars will allow us to continue our strong momentum across this portfolio and deliver above market growth of 7% to 8% by 2025. So I want to take a moment just to provide a little bit of a glimpse into the future state of Acute Therapies. So when we look at innovation, we've already launched our PrisMax 2 portfolio in multiple global markets. And that was the result of years of collaboration with our customers, and we're seeing a lot of great feedback from them already on the launch of that system. If you're familiar with PrisMax 2, we're able to see that in the innovation room. You saw our PrismaLung+ that was included, and that's our blood gas exchanger for patients that require extracorporeal blood purification removal of carbon dioxide. And that's important because it removes the excess CO2 from the bloodstream and is critical to managing acute respiratory dysfunction. Another area of critical significance that we saw throughout the pandemic also around removing these inflammatory mediators from patients or cytotoxins and endotoxins and cytokines. So both are found in the bloodstream of patients with COVID or conditions like sepsis, and we're focused on making sure that we're there to address these critical conditions for our customers. One of the ways we're doing this is partnering with companies like Spectra Medical, I think you're aware of, to help advance sepsis care through our exclusive distribution agreement in the U.S. and Canada for the PMX sepsis filter and sepsis diagnostic. So that helps us assess the patients at risk in the ICU for progression of this disease of severe sepsis. And when you look forward, you look at PrisMax 3, that is our new and improved citrate-based ecosystem for optimal delivery of CRRT therapy. So our intention with this whole platform is to generate more predictive analytics as well as use artificial intelligence and continue to use that across our capital platforms to further optimize and improve patient care. And just to go a little bit deeper on that, we see a very bright future in Acute Therapies. Today, we're a market leader that's focused on improving patient outcomes. But as a market leader, it's our responsibility and obligation to continue to define and grow and shape the market. And we're doing that in a few ways. First, we're continuing to grow in CRRT, while expanding the treatment possibility with next-generation blood purification. We're also focused on generating those necessary insights that our customers are asking for with greater precision, that includes enhancing their decision-making at the point of care and supporting the treatment approaches when they have, again, the sickest, most complex patients in the hospital. That leads to more personalized care and individual patient therapy that can be prescribed. And finally, we've made a number of small equity investments in early-stage companies that are doing exciting things to advance therapies and further elevate patient care and deliver more to our customers because that's what they're asking for. So this is just a snapshot of how our innovations in Acute Therapies are delivering what our customers value most to personalize therapy for patients, to provide ease of use for clinicians make things simpler for us and focus on additional therapies to address the comorbidities and critical areas of the hospital like the ICU. I'll now shift to Clinical Nutrition. When you look at our portfolio, we offer a comprehensive portfolio in Clinical Nutrition of PN solutions as well as devices. We are a global leader in PN compounding. And when you look at the systems and technologies, you might not know this. But over the past 25 years, we have compounded more than 100 million bags with our ExactaMix compounders and over 1,000 pharmacies across the globe. And we are also the originator of the ready-to-use multi-chamber PN bag, and we are the only company in the world that has a ready-to-use 3-chamber bag for neonates as well as pediatrics. When you look at the strategy for Clinical Nutrition, in innovation, our opportunities are pretty clear. We are broadening our portfolio by investing in our foundational platforms, including multi-chamber bags and our compounding systems as well as digital health. These innovations would help us do a few things. It will help us strengthen our already strong market-leading position. It will help us penetrate more deeply into existing customer accounts, and it will enable us to compete more robustly across the globe with a meaningful offering that will differentiate us from our competitors. And we're also working very closely with the pharmacy to connect into the EMR and make sure that we can solve for any gaps that show themselves for patient assessment as well as treatment and monitoring. This includes not just in the hospital, but also the home. That is a critical ask to make sure that we can do what we're doing in the hospital in the home setting as well. End market expansion, we're expanding into near adjacencies when you look at Clinical Nutrition, including pediatrics, as well as underserved patient populations like oncology or intradialytic parenteral nutrition, or IDPN. We're expanding into adjacent channels, and that includes the home and alternate sites of care. And we'll be leveraging and working with our Hillrom colleagues very, very closely on that. We're also very focused on EMEA where we're seeing a huge disparity in terms of certain markets where the access-to-home therapy is more diminished. When you look at geographic expansion, we have more than 40 geographic expansion projects already underway in Clinical Nutrition, primarily across attractive developing markets. These projects will help strengthen not, just our local commercial execution, but also help expand our treatment to more patients across the globe. And finally, in operational efficiency, we've identified several portfolio synergies that will allow us to reduce not just our internal cost but also free up capacity for high-value products and reduce complexity across our portfolio. We've taken numerous steps to improve our supply chain, increase redundancy and validate our third-party relationships with suppliers, giving us further confidence that we can deliver on our commitments over the long-range plan and continue to execute on our strategy for PN therapy. In Clinical Nutrition, executing on these strategies will allow us to drive above market growth of 4% to 5% by 2025. And when you look at the pipeline, we're developing foundational innovations across the portfolio that will help transform PN therapy and strengthen our product leadership across the portfolio, not just for today, but for decades to come. Our goal is to develop sophisticated solutions for our customers across the that not just benefit them, but also the patients that receive them across the care continuum in the hospital, in the home, in the alternate site settings. Our strategy comes to life, you can see down this page in 3 areas, one is formulation innovation. That's launching new micronutrient combinations that serve adult in pediatric patient populations as well as launching exciting new compounding ingredients that help improve pharmacy efficiency. We've also identified several next-generation products and molecules that are in the early stages of development. In the area of preparation and delivery, we have clear strategies to strengthen our market-leading position in both automated compounding as well as in multi-chamber bags. These platform innovations will enable growth and innovations like our ExactaMix Pro, which I'll share with you in a moment, which are our new-to-world platform for compounding. We're also launching new-to-world compounding platform that is ready to use that allows our customers and patients to receive a compounded dose that is standard, easy to use and delivered in a premixed container. When you look at our digital ecosystem and Clinical Nutrition, that's how our devices are connected, not just to the caregiver, but also to the patient. And we're developing new connected care modules in the pharmacy, the hospital and the home that allow us to bring better workflows, EMR integration and a better remote patient monitoring experience. When you look at ExactaMix Pro, we continue to expand our presence with a strong portfolio in this very exciting pipeline. And case in point is the launch of this new platform, ExactaMix Pro. That's our new next-generation platform for automated compounding, and it moves us away from a dated Windows-based system to a new platform with a new programming approach, enabling better use of resources, better cybersecurity, increased reliability and increased workflow efficiency. Part of that is a new command center that we're launching with a product that incorporates new design enhancements, including more processing speed, more power, stronger data reporting capabilities as well as a new user interface that will simplify very common, very pharmacy tasks. This is also designed for serviceability, which will greatly reduce the need for on-site Baxter resources and increase the uptime or reduce downtime for our customers. So we're preparing for controlled launches in both the U.S. as well as Canada with full commercial launches in North America and Europe starting later this year. I'd like to share a preview of the video that highlights ExactaMix Pro. Please scroll the video. [Presentation]

So now you know why it's an exciting time in Clinical Nutrition. So last but certainly not least, I'll be talking about Medication Delivery. So when you think about Medication Delivery at Baxter, we bring more than 90 years of expertise in delivery of IV therapies. And when you think about this business, this is a cornerstone of Baxter and was our first business when the company was founded in 1931 and I learned from Jay here in Glenview, Illinois. We are globally recognized leaders in the delivery and safe preparation of medication. And going forward, we're building on this expertise to develop new ways of personalizing IV therapy with clinical data. And I said earlier, this is an important part of this franchise. When you look at innovation and Medication Delivery, delivering a digital-first and connected portfolio is essential. So connectivity is a crucial component of every program and every product that we're developing. With connectivity, we could harness the power of our infusion data and that's something our customers have been asking us for to make sure that we can deliver to them actionable insights and help ensure that patients remain at the center of care at all times. It's also important to save nursing time and clinician time, again, with the staffing shortages that we're facing. When you think about enhancing our medication safety software offerings with advanced drug libraries, that's a really important part of AI in advancing that platform. Our Dose IQ safety software, which is a program with Novum IQ is a customizable drug library platform and dose error reduction system. And it enhances infusion safety by creating one of the highest drug library compliances in the industry. And when you look at advancing our core therapies, we're developing hemodynamic monitoring and that business overall to inform those high-value clinical scenarios that are regarding fluid management and further complementing Baxter's therapeutic devices in departments like the ICU to give patients the very, very best chance of recovery. In market expansion, we're spending time educating clinicians on how to best optimize fluid management. You heard that from Giuseppe earlier today. One of those programs is our Equilibria program and the use of Starling. So we want to make sure that we can help deliver strong clinical outcomes by helping our clinicians deliver the right fluid to the right patient at the right time, which helps reduce patient complications and further offer strong economic benefits to our hospitals. We're also pursuing in this portfolio targeted geographic expansion of our IV therapies, one example would be Mini-Bag Plus and launching that in different configurations across new markets, across the globe to drive the standard of care at the point of care. And you heard from Jim earlier in operational efficiency, manufacturing products in the markets where they're sold is an essential part of our strategy here at Baxter, and we're strategically adding to our own supply redundancy across geographies. One recent example would be moving our production of products like Mini-Bag Plus to the Mainland U.S., which has been another critical ask of our customers, especially in markets like the U.S. highly focused on margin expansion. When you look at margin expansion in Medication Delivery, we're focused on things like price increases, cost reduction, portfolio mix and, of course, volume growth across the business. When you look at these 3 strategies, executing on these strategies will allow us to deliver above market growth of 3% to 4% by 2025. When you look at the pipeline across Medication Delivery, our pipeline includes 3 categories: infusion systems, IV therapies and reconstitution as well as hemodynamic monitoring. In infusion systems, you may be familiar with Evo IQ. So Evo IQ is the platform that we launched outside the U.S. to help our customers meet a specific patient need. Over the past few years, we've seen great success in markets like Australia, The U.K., Ireland, Colombia and Mexico, to name a few. You're also very familiar with Spectrum IQ, which is our proven perform, primarily in the U.S. and Canada, and that offers a very intuitive user experience and has really been a strong growth engine for the organization over the last couple of years. And as you know, we're looking forward to the launch of Novum IQ in the U.S. upon receiving FDA approval. Now we can't speak on behalf of the FDA, but I remain very, very confident in this platform because of the feedback we've gotten from our customers, because of the feedback our customers have given us into design of this platform and because our customers in Canada are already enjoying this platform today, and we're getting great feedback. So I'm very, very excited. And while it's been a long road, I'm optimistic as ever about the launch of Novum IQ. For IV therapies and reconstitution, we're investing in expanding critical areas of the portfolio like Mini-Bag Plus, which, as I said earlier, is delivering standard of care at the point of care. And our customers desire, they really want strong workflow efficiency and doing more at the bed and in the floor [indiscernible] ad mixing of our products and drugs. And hemodynamic monitoring here at the bottom, I'll just touch on that for a moment. We're bringing Starling to new global markets across the Americas, EMEA as well as Asia Pacific and launching new digital tools to help support its adoption and use. One of the areas that Giuseppe talked about earlier, which I think shows great promise and our customers are very, very excited about is integrating these platforms, integrating Starling and PrisMax 2 and Novum IQ and the potential that these platforms have to work in tandem to deliver better patient outcomes and enable patient care in the hospital. This will be a game changer for Baxter. And as Giuseppe said, we already have funding underway to start to connect many of these devices. And when you look at the future with Novum IQ and our innovation spotlight, yes, we're, first and foremost, focused on getting Novum IQ to market. And this infusion platform is so essential because we're known today in the market for our ease of use, our patient safety as well as our cutting-edge clinical safety software, but the Novum IQ builds further on our reputation in this space by combining our expertise in infusion therapy as well as marrying that with innovative digital health solutions and tools like IQ Enterprise for EMR integration or Dose IQ for drug safety software and reducing number of events and for device view, which is for asset tracking to better utilize the pump fleet all things that our customers have been asking us for. So moving forward, we're not just stopping with the launch of an LVP in a syringe. We're focused on launching a PCA as well as an ambulatory pump to give us a full platform and suite, enable better workflow across the hospital, improve the insights that we can give to customers and enable better patient care. That's what this is about. This plan comes together when you look at all of this in a few ways. When we look at the opportunities to integrate infusion pumps into other platforms, including Voalte, you saw that in a couple of presentations today from legacy Hillrom. Why we're so excited about this is it allows us to collect and analyze patient data and provide that insight in real time. It also shows great promise with better alarm management and helping enable caregivers to make decisions on how they manage patient alarms, which is a huge problem and annoyance and alarm desensitization that we hear about every day, especially -- again, amidst the staff shortages. So we will continue to advance this platform, an IQ Enterprise, including an infusion dashboard that our customers can see real time, the status and data of their pump fleet, better utilizing their resources and driving increased efficiency across the hospital. Those real-time insights are going to be essential for our customers, to make sure that we're increasing efficiency. We're also really excited about the use of predictive analytics and AI to generate those insights and be able to go back and analyze the data and provide our customers insights, the government insights about things that are happening across the universe, multi-systems. They can't see that data today, and they're not utilizing it. They're also asking for support on how do we reduce medication errors or number of events across our system. We'll have the capability to do that. We've also designed Novum IQ to be 95% field serviceable. That may not seem like a big deal, but to not have to deploy resources and further the uptime of that pump fleet as well as make sure that we're providing updates over the air. Those are game changers in the industry, and they will significantly differentiate Novum IQ as it comes to market in the U.S. And again, we're already seeing the benefits in markets in Canada. I'd like to show some of the highlights of Novum IQ before I conclude and not only why we're excited, but why our customers are excited for this launch to take place here in markets like the U.S. You can queue the video. [Presentation]

So to conclude, I want to share, it's a really exciting time at Baxter. And I hope you appreciate after my presentation and all of my colleagues that we are well positioned to deliver growth over the long-range planned. And specifically, I want to reiterate the Acute Therapies, Clinical Nutrition and Medication Delivery are ready to deliver what our customers value most. For Acute Therapies, that means personalizing therapy for patients and facilitating greater ease of use for clinicians. For Clinical Nutrition, that means enhanced reliability and efficiency and improving clinical outcomes. And in Medication Delivery, it's about enabling better workflow efficiency as well as improving patient insights with data and further enhancing patient safety. We are experiencing incredible momentum in the business and very focused on delivering on our commitments in innovation, market expansion as well as operational efficiency and execution on these strategies should allow us to deliver market growth across all 3 businesses. I want to thank all of you for your time today and listening to our strategy, our presentations, but I also would like to take a moment on behalf of this entire leadership team and thank our employees across the globe for their energy, their passion and their commitment to delivering on our mission to save and sustain lives every day, day in and day out. I also want to make sure that our customers and clinicians, if they're listening today, that they know that we appreciate them, and we thank you for your ongoing partnership and your trust. So we're leaving today energized. I hope you are too about the future of Baxter. I'd like to now bring Clare up to the stage, and we'll go right to Q&A. Thank you.

Thanks, everyone. I know it's been a long morning that has now stretched into the afternoon. So I appreciate everyone for sticking around, but we wanted to make sure we did allocate some time for your questions. So I apologize that we've gone a little over, but I want to make sure we get all your questions, and we have some online as well and give our leaders the opportunity to address some of these questions. They will also be available after the Q&A session ends. The Innovation Hall will still be open for those that can attend that and see the innovation that we're going to be bringing to the market in the next several years. So with that, we'll see if there's any questions in the audience. Vijay, I saw you first.

Vijay Kumar from Evercore. Maybe one for -- I'm not sure who the right person is, but if I go back to the last Analyst Day, when you guys had the WAMGR end market growths and Baxter's outlooks on the segments, clearly, the macro change pharma came in below. When you look at the 4% to 5% LRP across our segments, do you feel like there are areas where either that could surprise us to the upside or downside? What do you see you feel like there's the most potential for volatility or variability?

Yes. So I will start, okay. So if you go back to the presentation, there are areas that are growing much more than 5%. Care communication is growing 16% to 18%, okay. And then you have connected monitoring intelligent diagnostics, they are growing high or mid-single digit, but more than 5%. PD is growing 6%. So all these franchises will accelerate the WAMGR that we have seen so far. The pharma is the other side, right, of the picture where we have seen a deceleration in the market growth. Now what is interesting is as well, there are franchises like Smart Beds, and we are seeing there the market is growing 1% to 2%. But the Smart Bed penetration outside of U.S. is very small. In Europe, we're speaking about 15%. So there is a big potential there as upside to the WAMGR. I don't know if anyone wants to chime in.

I'd like to just add, I think our WAMGR because the 3% to 4%, you will have some opportunity and some upside and downside. So it will depend. We need to watch the pharmaceutical market as a more complex market, and I think some of the opportunities Giuseppe mentioned. So I think we estimated pretty well where we are in terms of WAMGR. If we go back to '18, the mix is not the same, but the 2 outliers would be the decrease of patients in PD, they will pick up in the pharmaceuticals market. And those are the 2 major changes for us in markets. So I think we'll get a pretty good estimate as this, and we're putting a challenge out there, which used to grow up to 100 basis points above the WAMGR.

Just maybe one on renal and acute. I saw that PD penetration was 20%. We had the AAKHI initiative, that seems to kind of imply 100 bps increase in penetration annually. That's what your model is assuming. I'm curious why AAKHI is not a bigger deal? And then on that, the pump side, I know you're hesitant to comment on the FDA's timing of approval. But what seems to perhaps be the hold up? Or is this just procedural or maybe give some color on the timing?

Lee Ann, do you want to start?

Sure. Yes. Thank you for the question. So AAKHI, as I talked about, is really set to from the mandatory payment model, right, that's applied to about 1/3 of the ESR facilities and clinicians. Really, the first measurement period happened last year. So this year, towards the end of the year, we'll start to see the financial impact. So we've started to see, if you look at our customer base, we have about 1/3 of our patients and customers who are in that kind of payment model piece, and we are seeing that growth higher than those who aren't. So we're starting to see that. As we talked about, ESRD patients were much more impacted with COVID-19. So I think that trend and the impact of AAKHI was slowed a bit, but we're starting to see that, that is growing and anticipate that, that will continue. So if you look at from kind of going 12% now to then to 20%, that really is a significant impact. And again, we're really anticipating as the payments start to impact how that can accelerate. And again, COVID is still with us and still unpredictable, and this is a very fragile community that's highly impacted by that. So that's the other piece that we always have to make sure we keep our eyes on.

And on the pump side, again, we can't comment on behalf of the FDA, but we're collaborating very closely with them and working to move swiftly to bring this to approval. So Clare, I don't know if we commented on that yet externally on timing?

We just said we'll respond to the FDA within the -- by the end of the year.

Right. And that's still the plan.

Robbie Marcus, JPMorgan. Just one question for me. You did a great job giving an overview of all the segments. There were a couple where the market growth rates ticked down a little bit from the last Analyst Day, Acute Therapies, Medication Deliveries, Surgery, Nutrition. Just maybe if you could give a very quick connect the dots from what happened, how much is COVID and current conditions and just fill in why it slowed down a little bit?

Do you want to start on the Medication Delivery?

Yes. So I can start with Medication Delivery. In 2018, when we presented that, I don't think some of the online capacity coming in was probably fully contemplated. So that's something that we're watching. And also, yes, a little bit of the hangover of COVID-19 that we're seeing. We saw a huge robustness of utilization and use, so trying to just normalize that over the LRP with what we expect to see across our global markets, not just the U.S., but that's a global growth rate as well.

And on the Advanced Surgery side, I think we expect by the end of the year to be a pre-COVID level and then grow the 2% to 3% until 2025 in terms of surgical procedure, which is kind of aligned to what we saw earlier.

I think for the nutrition market, that also just has to deal with some of graphic elements, particularly within China, where we've seen the China market come down significantly as a result of value-based procurement within that market. That is not a significant market for us. But again, this is a global market. And so that's really that. And then the other piece is obviously the pharmaceuticals market, which we've addressed really just increased competition and pricing within that market as well. We're going to go with Drew over there.

Andrew Ranieri, Morgan Stanley. For Amy, just a couple of questions on hospital beds and surgical tables. But just with the robotic surgical table update, is that to imply that you're going to be agnostic for whatever robotic competitor comes down the road in terms of your future development? And then 2, with Centrella, your Smart Bed, maybe can you remind us what penetration of the bed is today in the U.S.? And then with Voalte, just what's kind of the overlap of your Voalte accounts with Centrella because I think that was kind of one of the key drivers of Hillrom's growth in Connected Care. So just maybe what is it of a beachhead today? And how big of an opportunity is that to expand?

Yes. First, starting with the surgical question specific to robotics. So our surgical table is still very much an exclusive with intuitive, and we continue to anticipate that to stay true. There are no other robotic offerings out on the market today. And so -- and we anticipate intuitive to continue their development along with our development. So that would hit on the surgical piece. When you think about penetration in the U.S. and if you look at connected versus connectable and then advanced connectivity and if you go specific to Centrella but it could be Centrella or it could be our Med-Surg beds or our ICU beds, there's what I'd call connectivity and then advanced connectivity. I think from a connectivity perspective, and I'm going to get to your penetration piece here, but connectivity were pretty robust. Now advanced connectivity when you start combining with solutions, et cetera, that's where there's a tremendous opportunity. And we only have a small share of that and connecting Centrella to a Voalte, whereas if you think about that 16% to 18% growth, we actually think we can do better than that because of our Centrella market share and how -- when you have that better together story we can really optimize what's happening with our caregivers and our patients and that combination of technology.

Great. And then just as a follow-up, and maybe this is for Jay. But I think back in September, when you announced the deal, you talked about 100 to 150 basis points of pricing headwinds baked into the standalone plan. So just as you're looking at the current LRP, how are you kind of thinking about that today, especially as some of the commentary across the presenters today was talking about recurring revenue sources and maybe being a little bit more sticky?

Sure. As far as price goes, we really don't get into too much details in terms of specific areas or pockets. We have seen pricing pressure in the Pharmaceuticals business. We anticipate that to continue. We've modeled that accurately at least as far as best as we can at this point. As we look forward and across the portfolio, there are pockets of opportunity in terms of price increases. We'll look at those and work carefully with our customers to make sure we're respecting and capturing the value of what we provide in the price that we charge. So there's some opportunity there. And in this LRP, I would say. Outside of the pharmaceuticals area, there's probably a little bit of opportunity included in the long-range plan that we've put together. I don't know if the folks on the stage would add.

Yes. Yes. Just to add a little bit to that. So I think in general, inclusive of pharmaceuticals and also some pricing pressure we're seeing in our Asia Pac region, we are seeing pricing is somewhat of a negative impact over this time period, not as much as what you were referring to before, Drew, given by a lot of the initiatives that Jay has talked about, where we are looking for opportunities where we can to implement some pricing actions. There is Jayson.

Just a couple of quick questions on Medication Delivery. I guess, first, are you still planning on filing the syringe pump in 2Q? And then second, it looked like your goals implied 200 basis points of share gain. You have a pretty dominant share in solutions. So I'm guessing that the share gains stem from pumps or hemodynamic monitoring? Just a little bit of flavor on kind of the source of share gains over the LRP.

Yes. Thanks for the question. So we are anticipating some share gains. But we've also worked very closely with our customers the last 2 years to solidify our agreements over the term, and we had contemplated some share erosion in the past. So we feel like we've secured that and ensured our book of business. We are also anticipating some share gains in infusion pumps. There is a large volume of infusion pumps coming up for renewal over the next 5 years. So with the launch of Novum, we anticipate taking some share.

And we still do expect to submit the syringe pump in the second quarter.

Yes, second quarter is on track.

We're on track with that. So are there any more questions in the room? Okay. Vijay, one more and then I'm going to move to online quickly.

Jay, this one perhaps for you, I think you mentioned oil price of $70. What is -- maybe talk about the sensitivity to oil price movements in the model, what it means to a bottom line?

Yes. $10 of oil price represents a $25 million impact. And so basically, we've assumed a sort of linear progression from roughly where we are today to an end state of roughly $70. We've done some work with some macro advisers and concluded that that's a reasonable spot for us to land. Could there be upside or downside to that? There certainly could be, but we're watching that very carefully. And I think at this point, it's a prudent assumption.

I would add that we need to watch very closely what is happening to this dislocation of volume in -- with the Russian oil because if that is absorbed in other geographies in a longer period of time, it will be -- probably no anticipated huge spike in price. But if it is not, if it's blocked from being deployed, then you have less supply of oil for the world and then the price is going to go up. So this is -- our assumptions are based on a dislocation more naturally happening than a blockade that would prevent them from -- to prevent Europe from absorbing oil. Jim, is that correct?

This one is for Lee Ann. Lee Ann, what did you learn from the home PD solution study? And what are the next steps with respect to that?

Perfect. Yes. So previous efforts within the home PD solution generation were really around kind of the technology, right? And how can you create that to ensure the safety, we've talked so much about the patient safety and quality. And so there are technical pieces that we learned. The other piece was we worked really closely with the FDA and so learned a lot from a regulatory perspective, just kind of insights and questions. And then the final thing that I would highlight is we did get to a clinical trial. And so learning from that sort of in-home patient experience and learning from that. So I think for us, it's really about -- we talked so much about the cost pressure. So one, safety first, making sure from a technical perspective, we can get through regulatory approval as well as just making sure that it's a cost-effective solution because this is a significant patient population, so making sure that it's affordable and cost-effective. So again, we leverage learnings from the research, the development as well as the clinical trial. And so the next steps, I think was the other piece is we're continuing to advance to reach to concepts that we have. We continue to engage early to get feedback from regulatory bodies to make sure that we are thinking about everything that they would be concerned about.

Great. And this one for Heather. Heather, on your slide, you mentioned that you expect the infusion systems market growth to be flat over the long-range plan period. Can you address why it's flat? And also where you are with some of the supply constraints on Spectrum IQ? Have you been able to resolve any of those?

Yes. So on Spectrum IQ, I'll start there. So we've been able to actually try to secure additional products working with Jim's team electromechanical parts that are needed for Spectrum, but we're still constrained hand-to-mouth was the term that was used earlier but we're working very closely with our customers to try to get them the pumps that they need. It's important to note that demand is still very strong for Spectrum IQ. So we're working closely with our suppliers and integrated supply chain to make sure that we can address that. And then the first part of the question?

The infusion systems market growth market being flat?

So when you look at infusion pumps, they're good for 8 to 10 years when you look at the cycle of a pump. So we look at it based on when the pumps are going to be coming up, for renewals, so you could say roughly 1/10 of the market comes available every year. So it doesn't really necessarily expand, and we also had a number of customers who bought access during the pandemic. So that's really why we say that the market is flat.

Just 2 more here. Lee Ann, can you comment at all on the additional studies or additional information that you submitted to CMS for Theranova?

Yes. So we basically did a retrospective analysis to look at all of the additional clinical information that had been generated since our last submission. And one thing that I would highlight there is a recent study that shows that patients treated with Theranova had a 35% reduction in cardiac events. So a significant improvement there. We've also reached out to -- we've been using Theranova in the U.S. for the last 1.5 years. So we have testimonials from patients and/or clinicians around the value of that. So I think adding to the clinical data as well as sharing how this is impacting clinicians as well as customers because that's obviously a key piece is showing the substantial clinical benefit.

Great. And Lee Ann this last one is for you as well. How are you thinking about value-based procurement for peritoneal dialysis in China?

Yes. So there's been a lot more activity in value-based procurement in China. And so what -- the first thing is our local team has been working very closely with the Chinese government to help them understand and hopefully, you do too, it's a therapy. It's different than if you have a pharmaceutical and you take a pill and you trying to make sure that you do negotiations around reducing price in that space. There's a lot that needs to go into supporting delivery of PD patients. So having them think about it more as a therapy. I think the other piece that we've been doing is more of the volume-based procurement are in some more non-differentiated types of products. So we've been focused on bringing our differentiated portfolio to China. So in the first quarter of this year, we were able to bring our external product. And what that is, it's a non glucose-based product that has real clinical benefit over standard types of PD solutions. And so that's one. We also, in the beginning of last year, submitted for Theranova approval in China. So I think, one, helping them understand how we're different from some of the other products that they have within the scope of volume-based procurement, but as well making sure we're bringing our differentiated portfolio.

Great. Thank you, everyone. And I want to thank everyone for joining us here today, those here in person and those on the webcast. It's really been our pleasure to share the story of our ongoing transformation, and we hope you are as excited as we are. On behalf of the leadership team and all of my 60,000 Baxter colleagues worldwide, we thank you, as always, for your confidence and your support in Baxter. Now there is lunch available for those that are here in person and Innovation Hall is open as well. So thank you very much, and thank you to all our presenters here today as well. So...