Becton, Dickinson and Company (BDX) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Robbie Marcus, the medical device analyst at JPMorgan. I'm happy to introduce the President and COO and incoming CEO of Becton, Dickinson, Tom Polen, for his first presentation at JPMorgan.

Great. Thank you, Robbie.

Thank you.

Okay. Thank you, Robbie. And as always, it's a pleasure to be here, and thanks, everyone, for joining us. As many of you know, I'm Tom Polen, BD's President and Chief Operating Officer, and in 2 weeks, I'll transition to my new role as the next CEO of BD. It's truly an honor to lead BD in such an exciting time, and I'm happy to be here to share our plans for BD's next phase of value creation. Before I get started, I'd like to remind you that I will make some forward-looking statements. Factors that could cause our actual results to differ appear in our fourth quarter press release and our recent SEC filings. I will also discuss some non-GAAP financial measures related to our performance and reconciliations to GAAP measures. It can also be found in our earnings press release and the related financial schedules and slides. So moving on. At BD, we are incredibly proud of our strong track record of financial and operational performance and the lasting impact we're making in health care systems around the world. And just as a health care industry has transformed over recent years, so have we. And that's why I want to start by reintroducing the BD of today. Today, BD is a med tech leader, focused on advancing the continuum of care from discovery and diagnosis to the process of care and to the treatment of disease. We're a leader in each of our 3 segments, with approximately $17 billion in global sales and $70 billion in addressable market opportunities. Our BD Life Science segment is dedicated to improving the diagnosis and treatment of infectious disease and cancer as well as empowering new research discoveries in immunology and cell therapy. Our medical segment is focused on optimizing core health care delivery processes from reducing the risk of health care-associated infections to improving medication management and drug delivery. And our interventional segment is focused on advancing the treatment of high-burden diseases and conditions, such as vascular disease, renal disease and neurological conditions. Our business is extremely global in scale, with about 45% of sales outside the U.S. and $2.5 billion of revenue in emerging markets. One of the drivers that I think everyone is familiar with that has made BD so strong today is the positive impact of the CareFusion and Bard deals. We've advanced our strategy through these 2 transformational acquisitions that have doubled BD's revenues and brought important new capabilities. It's hard to believe, as I look back, we're coming up on our fifth year anniversary of the CareFusion acquisition, which created new solutions in medication management and infection prevention and provided market-leading capabilities in automation, informatics and product connectivity. We're now in the last year of the Bard deal model, and so I'd like to spend a little bit of time giving some detail as to the value we've created with the BD Bard combination. The Bard integration has strengthened our strategy around clinical outcomes and disease management through new capabilities in interventional technologies for treating very specific high burden disease. And in addition to broadening our core strategy, we said when we first announced the deal that we would be entering BD into new higher-growth markets. And today, our market opportunity has expanded by about $20 billion in spaces that are growing faster than legacy BD. On an underlying basis, both companies are driving strong revenue growth, with legacy Bard growing over 6% and legacy BD growing over 5%, creating durable 5% to 6% revenue growth. We've also leveraged our global scale to fuel revenue synergies, bringing hundreds of Bard products to new geographies. We remain on track to achieve $250 million in Bard revenue synergies by 2022, which is the fifth year of the deal model. And our teams have done what I think is a phenomenal job in integrating the 2 companies. We're on track certainly to achieve our goal of $300 million in cost synergies by the end of this fiscal year. We're very, very proud of these integrations, and it's especially rewarding to see how we're starting to apply the informatics capabilities and the connectivity platforms from CareFusion to actually also start digitizing the Bard portfolio. So for example, this year, we're going to launch 2 new products in critical care that wirelessly connect to the patient's electronic medical record. One is a new automated urine output measurement solution, and the second is the Arctic Sun Stat, which includes safety guardrails and monitoring features which are very common in some of our medication management platforms as well. The success of these acquisitions, combined with BD's long-standing strengths, make up what I call the DNA of the new BD. We truly believe that over the last 8 years, we've built a company with capabilities that ideally position us in what is an evolving health care landscape. The BD of today really has 5 distinct elements in our core: world-class manufacturing; global scale; strong category leadership; a robust innovation pipeline; and deep capabilities in software and informatics. And so let me just spend a moment saying a few words about each of those. First, world-class manufacturing excellence continues to be a very core competency for BD. We make over 40 billion disposable or consumable medical devices each year. That's roughly 6 devices per person on the planet. We continue to be the best in the world at producing highly cost-effective, high-quality medical devices through the BD production system and by advances in production technologies. Second, our global scale is nearly unparalleled. We reach almost every country in the world. In fact, we're incredibly proud by the fact that nearly 90% of patients entering a health care setting are touched by a BD product. Third, we hold category leadership positions in 90% of the markets we serve, many of which have large barriers to entry and have ongoing consumable streams. In fact, about 85% of our revenue is recurring. Fourth, we have a strong product portfolio with a robust innovation pipeline across each of our 3 segments, and I'll discuss that more in detail later on. Finally, we've invested in the most consequential digital capability shaping our industry. We now have informatics that connect our products to 70% of all U.S. hospitals. We now have more than 1,500 software engineers working on leading-edge informatics, automation and robotics that will continue to tie very closely with our consumable medical devices. And these capabilities, they position BD well not just to address today's pressing health care challenges, but to continue to lead the industry as health care moves forward. And I truly believe that right now is the most dynamic time in what I think is the most dynamic industry in the world, health care. And we see trends and changes to where and how care is going to be delivered in the future. First, we continue to see acute care customers are transforming at a rate that's never been seen before. In the U.S., the top 125 IDNs now control over 60% of health care spending, and we see the same trend in Europe. We believe health care providers are going to continue to consolidate as they shift to value-based care across both the acute and the nonacute settings. Second, we continue to see the globalization of health care. And although we also see that marketed by a rise in local regulations as well as protectionism, we see that in every corner of the world, particularly in emerging markets, everyone is looking to improve health care. Third, we're in an unprecedented time of innovation in med tech, where we see data, AI, informatics, robotics are increasingly shaping health care delivery and chronic disease management. And lastly, we see patients are increasingly seeking care outside of the hospital, including in virtual or even -- or retail settings. Treating patients on-the-go through different channels and offerings for home, retail and ambulatory care, we think, will be essential. And so these trends further strengthen my conviction that our strategy and capabilities have uniquely positioned BD to continue to grow, continue to thrive and lead the way. And so as we prepare for our next significant period, as we come to the conclusion of this significant period of integration and we look ahead to our next phase of value creation, we're focused on how we harness these capabilities to unleash the potential of the new BD through 3 key strategies: to grow, to simplify and to empower. And our top priority and lead strategy is to grow. And we're going to enable growth by simplifying BD and by empowering our associates to better serve customers through digitizing our internal processes and by fostering stronger, more agile teams. And this is truly a key enabler to how we grow, and I'm going to turn to that now. So we're always going to drive growth through category innovation. And that starts in our mind with product leadership, maintaining a strong portfolio of leading products in growth markets that address significant unmet clinical needs. We invest about a little over $1 billion a year in R&D and innovation. And today, our pipeline focuses on markets that are growing 1.5% higher than the existing served markets of the company. We're proud of our robust pipeline of launches for FY '20 across each of our 3 segments. And as you can see, we're focused on developing solutions for both the acute and the nonacute settings and bringing to market products that meet patients where they are, whether that's at the home, the physician's office, outpatient surgery or the pharmacy, the retail pharmacy. Our innovation pipeline also reflects our commitment to developing products that meet the unique needs of local markets. And it's great to see the elements of new automation and informatics capabilities now expanding across each of our 3 segments. We'll increasingly drive growth and innovation from category innovations by leading -- building on our industry-leading products with informatics, automation and robotics. We're focused on reinventing the market categories we serve by building what we call ecosystems of technology solutions that deliver greater outcomes than any one individual product could. And we're actively working on this across our entire portfolio, and we've made significant advancements already in areas like integrated microbiology, laboratory automation, vascular access management and in dialysis access management. Another great example that many of you may be familiar with is in our medical segment, where we've redefined medication management. Our HealthSight informatics platform enables an enterprise-wide integrated medication management system that provides customers with advanced analytics and informatics and intelligence that they can use to improve the safety and efficiency of that process. So for example, just last year, we launched our BD HealthSight diversion analytics platform, which uses unique data fields from our Pyxis Logistics or IV Prep or Pyxis ES and our Alaris platforms, combined with advanced artificial intelligence to help health care systems identify potential narcotic drug diversion. And we've built very similar HealthSight applications now using data from all of our product portfolio in medication management to take that data and optimize drug inventory levels to improve medication safety and to simplify workflow. And this shift from stand-alone products to an ecosystem of technology solutions has helped us drive growth that's 2x faster than the market. At the same time, we aim to be not just a reliable product and solutions provider to our customers, but we're working to become a true partner, an indispensable part of how they deliver quality care for patients. For strategic customers, we're focused on transforming our go-to-market approach from a more traditional selling business model to a more collaborative, multifunctional team-focused approach, focused on delivering outcomes. And so over the last year, we've started piloting this new collaborative approach in the U.S., in Europe, in other parts of the world, and we've included starting to incorporate risk-based terms in several pilots. And while we're still early in this journey, we are excited about the opportunity, and we expect to continue to expand these pilots as we transform how we partner with our customers moving forward. At BD, and as I said before, our global scale is nearly unparalleled. We continue to expand globally by selectively investing in strong regional channels, local innovation as well as in local manufacturing. As an example, in China, we're going to launch more than 10 products developed and manufactured in China for China over the next 3 years. And this year, we're opening our fourth manufacturing facility in the country. We're also going to leverage our scale to selectively bring the legacy Bard portfolio to new markets, which we've been doing. But this year, we're going to submit an additional 250 international registrations for BD Interventional or legacy Bard products this fiscal year, FY '20. We've also just completed our second full year of the European biosurgery incubator, where we continue to see great momentum. And we're now starting to expand this concept into other regions. So that's how we're going to drive growth: by advancing category innovation, delivering meaningful customer outcomes and very intentionally expanding geographically. Our second area of focus, as I mentioned earlier, is to simplify. As BD has grown in our capabilities and size, we've also grown in complexity. And I believe that ultimately, complexity can kill momentum. And so because of that, simplicity is the driver that BD is really focused on to make us a company that's even easier to do business with for our customers, easier for the BD team to get work done and make an impact within. And while we've made tremendous progress during the integration period, we still see many opportunities to further optimize our network and portfolio to improve our efficiency and our effectiveness. Later this year, we're going to kick off a company-wide initiative we call Project ReCoDE. It stands for reduced complexity to drive experience. Some of you may remember a project from many years ago we called ReLoCo, very similar. This new initiative that we're talking about will benefit our customers. It's going to make it easier for our employees to make an impact, and it will generate significant savings. In the coming months, we'll share more about how we simplify and how we will simplify and in the process, deliver efficiencies, drive underlying margin expansion and fuel our investments in future growth. And so I'm very energized about the opportunity to grow, to simplify, empower and the difference that we're going to continue to make in the lives of patients around the world. So let's take a look at how our initiatives will drive our long-term growth profile starting in FY '21. We expect to deliver sustainable and consistent revenue growth of 5% to 6%, supported by the growth strategy I just walked through. In addition, we're targeting underlying margin expansion of 50 to 100 basis points each year as a result of Project ReCoDE and other operational excellence initiatives. Strong revenue growth, coupled with margin expansion and efficient capital and tax structures, will result in 10% plus earnings growth. And last but not least, we remain very committed to building upon our long tradition of increasing our dividend. So before I move on and discuss our capital allocation strategy, let me just pause and make a quick comment on the results for our first quarter. We're off to a really solid start for FY 2020. We just closed our books. And of course, we will provide a complete update in February, but I'd say our first quarter is consistent with the guidance we've provided in November, and we remain very much on track for the full year. So let's go ahead and turn to our capital allocation framework. By the end of this fiscal year, FY '20, we'll have paid down $5 billion in debt. As many of you know, that puts us at a significant milestone where we return to below 3x gross leverage. At that point, we expect to have $2 billion to $3 billion in cash each year available for new value-creation activities. And so going forward, we see our capital allocation priorities will be to continue to invest in the business, invest in tuck-in M&A focused on high-growth areas, plan to reinstate our share repurchase program, and we will continue our history of dividend increases, which is now in its 48th consecutive year. Taken together, these capital deployment actions will fuel our long-term double-digit earnings growth. As we look forward beyond FY '20 and the Bard integration, we'll also focus on returning to our historically strong free cash flow conversion. As we wrap up, I hope I've made it clear why I'm so enthusiastic about BD's potential to thrive in an evolving health care landscape. As we complete the integrations of Bard and CareFusion, we've built a new company with capabilities that are ideally positioned to tackle health care's biggest challenges. We will leverage our core strengths and new capabilities to build innovation ecosystems that will enable us to grow and help our customers achieve greater outcomes for their patients. We will simplify BD, creating an even better experience for our customers, more value for shareholders and a more empowering environment for associates to advance the world of health. I've been with the company now nearly 20 years, and I believe we've never been positioned better than we are right now to make a more meaningful impact for our customers and for our patients as well as our associates and our shareholders, and I'm honored to lead this very special company at such an exciting time. I look forward to welcoming many of you to our Analyst Day on May 28 in New York City. There, we'll discuss in more detail our strategy to grow, to simplify and empower BD as well as our capital allocation priorities and our long-term outlook. Thank you, and I look forward to having you join us in Q&A.

Great. Well, thanks, everyone. I'm happy to have the Becton, Dickinson management team here. Tom Polen, the incoming CEO; Chris Reidy, CFO; Simon Campion, President of Interventional; John DeFord, Chief Technology Officer; and Patrick Kaltenbach, President of Life Sciences. So thanks for bringing the whole team. I appreciate it.

Pleasure.

So there's a lot to talk about. But maybe we could start with the topical. We've seen a number of different companies report calendar fourth quarter results here. We had Baxter on Sunday night had a big benefit from the flu season. We've seen strong Australia flu season earlier in the year. We've seen -- we all see the trends in the U.S. here. Anything that you can comment on in the quarter here? You've had really strong revenue trends throughout the fiscal year. Anything you can comment on the quarter here?

I'll let Chris take that.

Yes. I think as Tom said in his prepared remarks, we saw a very solid, strong first quarter. Clearly, we saw a pickup from the flu as well, and so we'll go into more detail on that in a couple of weeks, but off to a solid start.

So sort of think of in or at the upper end of the guidance range might be a good way to interpret that?

It's a good way to think about that, yes.

Great. As we look out, Becton has 3 different businesses, all sort of playing in different areas, but all have similar core competencies. As you look out over the business, why do you have these 3 different items there? Especially you coming in, you're not fresh eyes to the business, but you're fresh in the seat here. And you evaluate all the businesses. Why are they all the right ones to have within the Becton, Dickinson family?

They really address the main issues and topics that our customers want to address at the end of the day. The majority of those 3 businesses are focused on professional health care providers, first off, largely focused in the acute care. And then where we call it the not -- the affiliated nonacute, we're also, though, starting to provide some offerings into the retail pharmacy. But they are all very much in line with what the natural cadence of health care, which is to diagnose disease, which is our life science sector; ultimately, treat disease, which is our BD Interventional segment; and then while you're undergoing care, the underlying processes of delivering medications, of preventing infections, that's our BD Medical segment. And so we find that our customers really resonate with those suite of solutions that we have, and we think it uniquely positions us. As you said, we leverage the same informatics capabilities, large volume manufacturing capabilities, automation capabilities across all 3 of those sectors as well.

Another interesting thing. You talked about some of the ReLoCo type of cost synergies in the presentation out there. We've seen you have really good operating margin expansion, particularly since the Bard acquisition. Maybe you could just flesh out where the cost savings are going to come from exactly going forward. You don't have another integration to go. You've taken a ton of cost out of the business. You're already running pretty lean. Where is that next leg of operating margin expansion?

So we are very proud of having driven about 1,000 basis points of margin improvement, including the CareFusion deal, the Bard deal as well as our normal continuous improvement that we did underlying even before synergies. But as we take a step back, we're right on target to finish that last year of the Bard deal and finish the $300 million that was promised. But as we take a step back, we see that we really still have put 3 very large companies together. We've gone from $7-plus billion, up to nearly $20 billion. And as a result, there's still a lot of complexity in the business. The number of SKUs that we have, the number of plants that we have, distribution centers, there's still a lot more to do. We have the infrastructure. We have the teams that have gone after synergies, are still in place. The governance model is still in place to invest to get the synergies. So we're going to continue that, and we see the opportunity to continue that in both the manufacturing and operations space as well as in the basic G&A end-to-end processes. So think about simplifying BD to make it easier to do business with. So you have not 10 different customer call centers, but a consolidation of those, leveraging some of our shared service centers around the world even more than we have. So we see that as an underpinning to be able to drive 50 to 100 basis points ongoing for the foreseeable future.

Great. I have a lot of questions on the different products. But I want to see, just before I jump in, if anybody has questions.

And there's 2 prime seats up here in the front.

Well, great. Maybe we can start with the interventional business. One of the incremental potential movers this year is below-the-knee. Right now, it's assumed to not be in guidance. We saw Medtronic get approval for an AV fistula, which was the first new paclitaxel approval since this all came to light in December of 2018. Maybe you could just give us an update on where below-the-knee stands? And what are the odds of a potential approval? Or what would be holding it up? What are you waiting for?

So as we communicated in the Q4 earnings, we continue to work with FDA. We had a further data set that we are examining. We've agreed a statistical analysis plan with FDA. That analysis is being executed on that additional data that we have. We expect to conclude that in the very near future and submit sooner rather than later a PMA supplement to FDA. And that will start the 180-day clock. As you rightly said, the FDA continues to approve DCBs. We had some low-profile Lutonix AV approved here in the recent past, so they continue to approve it. And we've got this additional data set. We haven't seen that data yet, but we expect to be filing that with FDA. And then the clock will restart.

And in your discussions with the FDA, what do you think they're looking for in the additional data? What would you have to show to get them comfortable with an approval?

Yes. So John DeFord here. Good question. And just to step back first. So FDA really hasn't approved a new paclitaxel technology, in a new vascular bed. AV was already out there with us. So below-the-knee is kind of a new space. FDA initially had said, "Hey, we want to see some more long-term durable results." We think we have data sets to provide them to show that. But we also know that there's this overhang of paclitaxel safety that, although more and more data keeps coming out that shows that that's really not an issue, our own data, in fact, in a couple of weeks at the LINC meeting, we'll have 3-year below-the-knee safety data that will be out, we think we're answering all of those questions for FDA. And as Simon said, we're putting that in the PMA supplement that's going in, in the near term. And then we'd expect to have a very interactive review with FDA and hopefully result in an approval sometime in the future. But like you said, it's not in the guidance for right now. And we just don't know what the overhang of some of the safety questions, what FDA's views really are in entering new vascular beds.

But maybe just to put expectations in check, the earliest we could see an approval, should the data turn positive, should you not take too long to submit it once you get in-house, we're thinking something in the back half of calendar 2020 at the earliest.

Sure. No, I think that that's fair, and that would be kind of the likely time line. We don't know. I mean that sort of best case would be there. It's possible this could go to panel, which would push that out further, or there could be other questions that FDA has.

And in your discussions with physicians over the past few months, have you seen any sort of change to the positive in physician tone and willingness to use paclitaxel devices?

Yes. I think, certainly since September, when we published the independent analysis of all our data, where we, again, unequivocally showed that our device is safe, we've seen a modest uptick in [ ADS ]. I think others have suggested that they've seen that, too. So we haven't seen any deterioration in utility within given accounts. In fact, we would suggest that in -- to some extent, we've seen a modest rebound in daily sales with respect to [ other tie-in ] products.

And maybe sticking within interventional, one of the businesses that probably surprised me the most over the past year was the urology business. I mean that -- I think, when was it was in Bard's hand, it was doing 2% to 3% growth, and we're seeing what, high single digits over the past year? What have you done differently? What's driving that growth? And how do we think about the sustainability?

Well, we've got 3 strong platforms there with home care, acute urology and targeted temperature management. All of them grew in the high singles and doubles last year. I think that was in TTM and home care. That was driven by renewed focus on execution and really driving efficiency and execution on disposable sales. Within acute urology, we made the acquisition of PureWick about 2 years ago. And again, that's come back to the old mantra of absolute execution. And we've been really pleased with that over the past year or so. And we would expect that we will begin to see incremental new products being introduced in the not-too-distant future within the acute urology platform. We've reinvigorated the R&D funnel within UCC. And as you rightly said, I think that was the quieter of all the funnels within legacy Bard. I think it's fair to say now that it's a lot less quiet from an R&D perspective.

Yes. And I was just going to say, to kind of get a plug for R&D, there were 7 new product launches out of the urological critical care business last year, which was really a step-up in launch cadence and a real focus by that team in execution and driving through their portfolio. And again, we're looking at a good portfolio of new opportunities to explore.

So another plug for R&D is -- actually, it's interesting. That's probably the #1 business in Bard that's been leveraging some of the innovation capabilities within BD. So the 2 products that I mentioned that are going to be leveraging CareFusion capabilities in Bard are both within UCC, right? So the automated urine output. It's a product that Bard was looking at for a while. Wondering how are we going to connect this to the electronic medical record, we don't have those capabilities. We don't have the system. We took the product from MMS that we use in medication management. It's now being deployed there to automate urine output to load up. Same thing on the Arctic Sun Temperature Management. It's utilizing the same EMR connectivity platform and capabilities as well as some of the cybersecurity capabilities and concepts for alarm management, et cetera, that we see in MMS, guardrails are moving over, being applied in a product that's launching this year in UCC as well. So great to see that.

And I think that's a great point because it's not a huge revenue driver per se, the integration within the hospital yet arguably, you're the best at that or one of the best, where all of your products are connected. It creates such a durable infrastructure, very difficult to move away from you once you've bought into it. It's sort of like the Apple infrastructure. What percentage of your products across the different businesses are, would you say, integrated in some sort of solution or connected? And part 2 of that question is, I know you do have an informatics business that overlays, it's, I think, $100 million plus business.

Couple hundred million.

Couple hundred million dollars. How do you think about maybe monetizing that even further since it is such a differentiated benefit for you?

Well, of course, that's gone from a 0 to a couple hundred million dollar business growing double digits for us just over the last 5 years. So we've clearly been doing that. Obviously, everyone is familiar with the change in the business model for Pyxis that happened a couple of years ago, which really moved that from a capital sales model to much more of a Software as a Service model, and that's gone phenomenally well. The exact percentage of the business that's in software, informatics connected today, I don't know that exact number off the top of my head. But I could certainly say that it's increasing in every one of the segments. We shared the example in BDI, which is the one that's getting -- just getting started. Kind of in the middle is the life science sector where you see Kiestra, now Synapsys, which is their version of HealthSight, right, the connectivity platform and informatics platform for life sciences is Synapsys, and you're seeing all their instruments connecting through there and leveraging data in new ways. And then, of course, in BD Medical, you're very familiar with what we're doing already there, and we've talked about that quite a bit.

Maybe Patrick, if we turn to Life Sciences, are you able to comment at all on the flu benefit in the quarter? I know it's -- we know it was a good quarter. Just maybe any framework. Fiscal 2018, I think we saw a pretty big flu benefit. Is it something the magnitude of that? Or is it something a little more muted? Anything you could add.

Well, look, I think Chris already made a comment at the beginning. It's too early to say how the flu season will really play out. We had a very good start to the flu season, a very strong peak. If you follow the CDC data, it looks very promising from that perspective. That said, at the end of the season, you have to look at the area under the curve right, when you look at that plot and say, how much of -- how long will this really last. So we are encouraged, so to speak, by the initial momentum. We have definitely seen an uptick in Q1. But we cannot project right now what it will mean for Q2 and the following quarters.

Right. And we've seen very stable mid-single-digit growth out of this business. You've had a number of new product approvals over the past few years. What should we be looking out for over the next 12 to 24 months to continue to maintain that growth?

Well, look, last year, for fiscal year '19, we guided -- we said the business will grow somewhere between 4% and 5%. And we ended at the high end of the growth, we ended at 4.9%. With the pretty strong momentum in Q4, we had 3.9% in Q4. Now for fiscal year '20, we said we'll grow between 6% and 7%. And this is built on our confidence in the product portfolio we have built over the last several years, and especially for all the new releases we had last year, whether it's in the microbiology business with the new modules that we have for the Kiestra platform, what we built out in life science researchers -- research with new agents, with what we do on the clinical side, with FACSDuet, et cetera. And now looking forward in fiscal year '20, we are planning to release really very promising new products on the high end, on the Symphony platform of the S6 order. So I think we have a very strong momentum, and we are confident that we will achieve the 6% to 7% in fiscal year '20, which I would say is significantly above the market on a comparable portfolio.

Tom, you'd mentioned Pyxis and the switch. We've seen great results since you've made that switch. Has that changed how you approach clients at all? Or has that changed how maybe when people look to reevaluate which platform they're using, it locks them in a little more?

Certainly, it is a very, very sticky platform, as you know, and we've doubled down since BD and CareFusion came together on -- we were losing some share in that category. We stabilized it. We now think, right, we're stable to up in that. More and more of our deals, the vast majority when we do conversions or even when we renew business, it's not just for Pyxis or Alaris, right? We do enterprise system, medication management deals, where it's almost always Alaris and Pyxis or Alaris and another piece of our software tool. So in our business model and medication management, it's not just about a pump or a Pyxis, it's about truly offering that end-to-end solution. And that's how we're seeing customers respond very positively. The majority of the time entering into a relationship with us for not just one element of that, but multiple elements at a single time.

If we look at the diabetes business, diabetes market is exploding. We're seeing a number of new technologies addressing insulin infusion. We're also seeing more and more global diabetes cases come on. How do you think about the balance of technology taking patients away from using insulin pens and the growing worldwide epidemic of type 1 and type 2 diabetes? Is this still a business that would be a positive growth driver over the coming years?

It certainly has come down for us over the last couple of years, right, low single-digit growth. And we see that business kind of in that trajectory for the foreseeable future. Of course, diabetes is such a big space. We often get, "Well, the diabetes market is growing." There are kind of 2 spaces in diabetes that are growing: the disposable pump space in a big way; and obviously, the CGM space. Other areas are growing, but maybe not nearly at those levels of rates. We have no plans to get into the type 1 pump space nor the CGM space. Obviously, we are continuing to be the leaders. 2/3 of all insulin is delivered through our devices on the planet. That still remains true. Great growth in emerging markets. It's a bit more of where we're seeing some of the expensive new drugs come that are longer shift from daily to once a week delivery. You see those typically more in the developed markets than the emerging markets. That's slowing down a little bit the growth in pen needles. But overall, we see that business as stable from that perspective moving forward.

Questions? So Becton has a big emerging markets presence in -- outside the U.S., and last quarter, we saw a little bit of a headwind in China where there were 2 or 3 provinces that took it upon themselves to get a little aggressive on pricing. Have you seen that progress over the coming months? I know when you originally provided fiscal '20 guidance, you assumed that, that would expand into a number of new territories. Has that happened? Or does it still remain at the 2 to 3 level -- province level?

If I can just comment on that. So when we did that, it was -- we're looking to get out ahead of a situation that's very dynamic and still evolving. So to that point, you won't see any impact of that in Q1 even because it’s just getting started, and expect to continue to see very strong growth in China in Q1. As we look forward, it is still evolving, right? So the tenders were just getting started when we started talking about it. Some of them are still working their way through the system. The first ones are just starting to get the results of those tenders into the hands of the customers. So the customers are just starting to realize the impacts of these tenders and are starting to give feedback back into the local provinces on is this acceptable or not, the products that are being proposed to them. So it remains an active situation. It remains something that we're literally -- our teams are engaged in on a daily basis, and we'll manage our way through. It still remains very, very focused within just our MDS business within China. Really very specifically to 2 product categories as it pertains to BD. By the way, there's dozens and dozens of other product categories that they're doing this to. Just no other categories that BD participates in. That's our catheter business and our flush business in China. Both of those fit in our MDS business, and we see continued strong double-digit growth in all the rest of the segments, including the rest of BD Medical.

Did you break out exactly what was built into guidance as a headwind for those assumptions?

I don't think we shared that.

Yes. I think we didn't really -- weren't specific, but we'll talk more about that over the next quarter.

Another issue from fourth quarter built into guidance for 2020 was in the pump shipments that you are holding off on some of the shipments as you await a guidance from the FDA around fixing some of the alarms. Any update on how that progressed?

Fully resumed shipping in the first quarter. So we're back to shipping in Q1 to the majority of our customers.

And so that played out as expected.

Exactly as expected.

Maybe sticking on the international side of the business. You've had -- you've been in China for one of the longest of any of the Western medical device companies. We continue to see elevated growth rates. It's different for a lot of companies that just go in and sell their devices. Becton is a bit more of a partnership in China with the hospitals. Maybe just expand on that. And why is Becton's presence and selling strategy in China different than everyone else's? And how has it allowed you to grow at such elevated rates over such a long period of time?

Yes. I think any society around the world is -- certainly values much more of a partnering approach we find. And certainly, in China, the ability to have a company like BD come in. We've trained over 1 million nurses in China over the last many years, and that's huge. Obviously, building relationships with the local government, with the provinces, with the health care system, where we're not just selling a product, but we actually created the category of catheters in China. When we entered there, everyone was using steel blood collection needles to do infusions, almost 100% of the market was steel needles in your arm giving infusions. We are the leaders who started that conversion process with a product that was custom-designed for China. If you look at our catheter in China, it looks totally different than any other catheter we sell in the world. It looks like a wingset blood collection needle. So the technique doesn't change, but it gives a lot of other benefits. Because it's soft, first off, not steel. And so we built upon that practice, advancing TB diagnostics. We have a big partnership with them. I think we're on our fifth or sixth memorandum of understanding around preventing antimicrobial resistance and helping prevent infections throughout their health care systems. Those are big issues in China. And so it's -- that tradition is continuing, and we do it around the world.

Maybe last, just to wrap it up. One of the things I find the most attractive about the Becton, Dickinson story is that you have such a broad portfolio, many lower-priced items. And the price headwind you face versus most of the other medical device companies, you're in the -- probably, what, minus 30 to 50 basis points in any given year, while some of your peers are 2% to 3% headwind. Is that a trend we should expect to continue going into fiscal '20 and beyond in that sort of almost flat?

Well, I think to your point, it's been that trend for the last 5, 6, 7 years, where it's between that 0 to 40 basis points, some years flat. And that's a combination of things. It's a combination of pressure that we do see around the world in pricing on some products, offset by the ability to take price and pricing from new product introductions or whatever. So the combination of those things comes to that 0 to 40 basis points. And I think that is a good proxy to use going forward.

I agree. Well, thank you very much.

Okay. Thanks, Robbie.

Thanks, Robbie.