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

All right. Good afternoon. We're getting ready here in day 1 to start the afternoon sessions. And this is med tech again. My name is Amit Hazan. I'm the medical technology analyst at Goldman. From my team, you have, as always, Jamie Perse and Phil Coover with me. And the next presenting company will be Becton, Dickinson. And before I introduce them, I just wanted to remind folks that we've got a survey out there. As we've gone in years past, we've got a very quick survey just being hosted on the conference page and in your e-mail inbox and who have the live polling, and we would be grateful to get your feedback and really appreciate your participation this year. All right. So with that, we have Becton, Dickinson as our next presenters. We've got both Tom Polen, the Chief Executive Officer; and Chris Reidy, the Chief Financial Officer. And first and foremost, both of you -- we're really thankful that you can join. We know it's an extremely busy time. So thanks for making the time for us, and welcome.

Thanks for having us.

Thank you.

And Tom, I thought I would start with you and just talk about this current period. You obviously have been at BD for a while, and I think investors know you quite well. But here you are at this role, and you outlined the strategy at the start of the year and things changed. So we already know a lot about how BD has responded, and I think investors would love to know for you how it's been in your new role as you've kind of had to evolve and deal with this war-like scenario.

It was certainly not in the initial 30-, 60-, 90-day plan. I'll have to write a book on that eventually at some point. But I would just say that, first off, going into the role, which was at the very end of January, knowing that I had a long road ahead and I spent a lot of time reflecting on the BD journey, what capabilities we built, obviously, we're coming to the end of the Bard integration phase, thinking about how we continue to evolve our strategy in this next phase of value creation, I had shared a high level of that at JPMorgan, and then we were planning, of course, on ramping up the communication of that strategy but we very purposely, of course, after JPMorgan, took a pause as we pivoted and I pivoted to focus all of the company's efforts on helping the world and that the company respond to the COVID pandemic. But as we've been responding, and we'll talk about some of the impacts we've made there, which we're really proud of, our execution on our strategy has been ongoing. So maybe let me just give a quick summary, I mean, about what is that strategy, what our goals are and how we have adjusted it in the face of the crisis. And it's really not been changing our strategy. It's been more of how we've been executing specific to the crisis as we've gone through the last couple of months. So first off, our strategy is built to achieve 3 main goals. The first is to drive consistent durable revenue growth of 5-plus percent on a normalized basis as we move past this pandemic phase. Second is to drive consistent margin expansion of 10%-plus EPS growth. And the third is to continue to improve our balance sheet and flexibility going forward. And if you think about the 5 strategies that we've put in place to achieve those goals, let me just walk through those. And I think in doing so, I'll just point to how we've been flexing those to address the crisis as well. So the first strategy, which is really aimed at driving that durable top line revenue growth is our focus on innovation. And we're focused, and we have been and continue to be focused on innovation areas where we're strongest, where we see the disproportionate new growth opportunities and that are aligned to key health care and technology trends we see. We've always said we leverage organic innovation as well as things like collaborative R&D, licensing and tuck-in M&A to drive that. And I made it very clear before the pandemic, and I'll make it very clear now in the middle of the pandemic and I'll make it very clear after the pandemic. That means that large-scale M&A is not a focus for us over the next couple of years. And we can talk about that further. As you think about our strategy on innovation, again, we have -- we're not straying from that at all. Well, what we've done is we've added in some new products into our innovation funnel in the last couple of months that we wouldn't have done before. We've had 3 BD MAX assays launched during that period of time, which weren't on the radar at the beginning of my tenure in the role at the -- going into February. Obviously now, Veritor assay, which we can talk about later on, is very actively in our funnel, which wouldn't have been pre-pandemic. And a number of other areas that we've -- continuing to drive innovation in as we think about that going forward, doubling down, for example, on innovation within point-of-care molecular, an acquisition -- tuck-in acquisition that we did last quarter, that we're putting in more money to accelerate that to market because we see increased need will exist for those platforms even greater going forward than there was pre-pandemic. So innovation and how we adjusted that a little bit. Second is -- part of our strategy is we're very focused on leveraging our broad global footprint to expand and deepen our presence internationally. Everyone knows BD's strength globally, 45% of our revenue ex U.S. We've been expanding our growth there by registering products like Bard's products, ex U.S. Even with the pandemic at this point, we remain on track to deliver those $250 million in revenue synergies. We continue to invest in locally tailored innovation that address local needs of the marketplace. And we've been doing that before the pandemic. Q1 was a great example of a custom DCB that we launched for Japan. They have a rapid exchange system there that they use for their traditional balloons and cardiology products, where you rapidly can exchange the products over the wire. We launched the first-ever rapid exchange DCB in Q1, which was about a quarter ahead of schedule. And in the last 7 months, since then, we've taken about 50% market share in the Japan DCB market with that product because it's locally tailored innovation, the only type of its kind. And we've continued to -- because of that, we've actually continued to overdeliver even during the pandemic with that product. An example of how we would -- adjusted that strategy a bit or really leveraged that strategy a bit is we announced last quarter we accelerated a deal with Medcaptain that allows us to bring in a very tailored infusion pump for the European market to expand our Medication Management suite there. We were on track to do that anyway, probably later in the year. But we accelerated that relationship and began already shipping those pumps to respond to helping countries around Europe respond to the pandemic. And so that was an example of how we're leveraging our global footprint there. Of course, we've been at the frontlines from early days in China. They were using BD MAX, the Chinese CDC, to develop an assay for COVID. Right on through to Europe, and then it's attractive to the U.S., be it infusion pumps or diagnostic tests, are now, of course, almost every corner of the world, we're in discussions with varying governments around preparing for vaccination. So we've really leveraged that global footprint. We're very proud of that in helping societies around the world respond and have the best outcomes that they can have to COVID because of our role in diagnosis, treatment and eventually prevention. Of course, the third strategy that we're focusing on is how we leverage our extensive manufacturing infrastructure and capabilities. We talk often about the BD production system, which we see as a competitive advantage in driving another level of efficiency and quality in the industry. In many of our product categories, particularly basic medical supply, scale and cost matter a lot in those spaces. And so we view, right, our manufacturing capabilities and infrastructure as a significant competitive advantage. An example of that kind of that we had already started pre-pandemic is, of course, we've been investing $900 million to $1 billion a year in capital each year to advance our plants and our supply chain. That includes over $500 million invested, for example, in Pharm Systems over the last 3 years to add capacity there. That capacity has allowed Pharm Systems last year to be the fastest-growing business in the company. It's going to continue to be right up in that tier this year. We expect it will continue to outgrow kind of the company average over the next several years. And it's because we have that capacity and those quality products and innovation to meet the trends in biologics. Now, of course, we're starting to have discussions with many of the companies who are working on COVID vaccines. They won't launch in a prefilled syringe, but many of them are looking at putting that product in a prefilled syringe and are already starting stability on that, so they could have that 1 or 2 years after they launch in a multi-dose vial. They put it in the alternative form factor. And again, those investments that we've made allow us to participate in that opportunity. A couple of good examples of how we've leveraged that strategy to respond to the pandemic. We've put in more capacity on BD MAX. We can talk about that later on. In the middle of this, we're doubling our capacity on MAX to help respond to COVID. We've increased our production on the MAX instruments as well. We've significantly increased production, ten to a hundredfold in many cases, be it on IV sets, syringes, assays collection, transport devices, but those are all capabilities that we're able to deliver. And we've had 0 plants go down during this pandemic. We've maintained all -- nearly 90 of our plants continuing to produce and respond to the increased demands in health care, specifically for COVID-related products. And I think that says a lot about our strength in that category. Now the fourth area that we're very focused on is very specific to our goal around EPS growth, 10% plus, and that's around our goal to simplify the company. So everyone knows that we got really big really fast. We went from $7 billion to $17 billion in about 6 years. That comes with complexity. And we took out about $650 million by the end of this year, $650 million in cost synergies, but a lot of opportunities still remain, efficiencies in the organization and our business processes, still our manufacturing network as well as SKU offerings. And so we've talked about project [ ReCoDe ], which is essentially our internal simplification initiative. We expect that to deliver about $300 million in savings over the next 4 years. And we haven't stopped that at all during the pandemic. Project [ ReCoDe ], we've continued to make investments in our simplifying our manufacturing network. We've actually accelerated as some of our marketers are sitting at home and our sales team have been sitting at home. We've had them working through our SKU simplification, which products can we consolidate into a narrower offering. Some of the talent that wasn't as readily available became readily available. And so we've doubled down on that initiative, actually over the last couple of months, taking advantage of this window. And so that's something that we're proud of, making sure we're using our resources efficiently. And then last but not least, our fifth focus of our strategy is disciplined capital allocation and increasing flexibility of our balance sheet. And so we went in already into the pandemic very focused on cash. We already had initiatives going around focusing on inventory reduction, tightening our accounts payable and other capital efficiency efforts. We literally had work streams and leaders, teams focused in each of those areas. And so that actually has suited us as those were efforts we would have had to get going anyway in the pandemic, and we were able to leverage the momentum of the work that we had already started, I think, to have a much tighter inventory management in this window, keeping inventory levels for the company essentially flat, to potentially even improving by the end of the year despite a lot of volatility in the demand patterns. And so that's something we're proud of doing in this period of time, and in fairness, if we hadn't had that as a focus, we wouldn't have been in that position. Same thing on accounts payable, we're doing better there because we had already started, and actually accounts receivable, we're doing a little bit better than we thought because we had already started those efforts in that space. The other thing I would just say is as we think about disciplined capital allocation, we also are very focused on balance sheet flexibility. And you saw us take a number of actions because of the pandemic to make sure that we maintain that. And it was a strategy of ours going in. And so at the very beginning, we did the term loan financing in March to bolster liquidity when there was a lot of uncertainty in the marketplace. And then, of course, you saw us do the equity raise, which was not a plan at the beginning of the year. But we did that to permanently replace the temporary term loans and strengthen our balance sheet for future growth and to deliver on our strategy and help us achieve that increased balance sheet flexibility. So that's maybe just a quick summary of our strategy and how we've been leveraging that very consistently, no change in our strategy, but leveraging the momentum that we had and the pillars of our plan to help the world respond to COVID.

That pretty much covers it. I think we can end it right there. No. That was great. That was a lot of info and a lot for me to follow up on. Let's start with the equity raise, and maybe I'll just focus on the reaction I got. We've got a number of reactions, but I'll focus on one kind of dominant question of a couple that came up. And that is, with regard to M&A, are they signaling they need M&A sooner rather than later to basically hit prior organic growth targets? And maybe that ties into just how you're thinking about the current environment and whether with -- given the uncertainty out there, but given more certainty for companies like yours that have benefits from COVID as well, could you strike a deal right now? And is that something you would take on, or do you need more visibility before you do that?

So let me go into that, Amit. It's really not that complex. It really was all about the financial flexibility going into uncertain times. And I know there was some pushback in certain areas. But let me confirm, there's no change in our strategy and really no -- particularly no change in our M&A strategy. It's still a tuck-in acquisition strategy. To your last comment, it's something that we're always looking at through a screen of our metrics. And we'd probably defer to a point where we look at valuations, et cetera. So there's nothing imminent at the moment, but there's no change in strategy. And think, tuck-in, as we've done, we've done about half in the last couple of years than we did prior to that, and that's because we were delevering. But it's still the same strategy. And in addition, there's no mystery around something that we might have been worried about, what did we know that no one else did. There was none of that. We feel really good about the strategy, the opportunities in front of us, the durability of the portfolio and our ability to navigate the pandemic well. In terms of delevering kind of naturally over time in a short period, really, over the last couple of years, we've been appropriately managing the business tight on cash. And I mentioned M&A, we were doing M&A through a very tight screen. We're also tight on CapEx and other investment areas as well. And we entered FY '20 with the end in sight. We were on target to hit our leverage by the end of calendar 2020. And then we faced further pressure from the pandemic and to a lesser extent, Alaris. And as a result, we would have been living with deleveraging and limited financial flexibility well into FY '22, and we just didn't think that was a prudent way to run the company through FY '22.

So Chris, let me stay with you and just ask one more question on a little bit longer-term than just the current environment. And that is just thinking through what margins, operating margins might look like post COVID, you get back to where your top line pre-COVID, let's say, and just how does the margin profile look then? Are there structural changes in operating efficiency coming out of this, cost reductions you can hold onto or increases that are going to be more permanent and with us for a while?

Good. So let me start with what I talked about on the earnings call, and that is the added pressure on margins in the near term from COVID. And obviously, we have a high fixed cost business, and so therefore, the revenues that we lose are generally at a higher-than-company average. The way to think about it is the areas most impacted by COVID would be like surgery and CI, where we're actually fortunate to have very high gross margin profiles, so think in the 70-plus kind of range. In addition to that, you've got to consider manufacturing variances as going to impact P&L. We're adjusting the lower revenue and adjusting our inventories accordingly, which is the right thing to do. So we'll take a bit of a hit from manufacturing variances. In addition, we're making COVID-related investments. We've talked about investing in safety and health of our associates. We're making our own PP&E. We're doing facilities cleaning and those kind of things. So those are some additional costs. And it probably wouldn't come as a surprise here. We're also seeing higher shipping costs. Offsetting that, we've taken some actions we've talked about. We've limited travel, and we've put a hiring freeze early in the second quarter even before the pandemic went full tilt. And we saw the benefits of that. We've also taken salary reductions from management and the Board, eliminated the 401(k) match this year and those kinds of things, so that had an offset to the impact. When you net all of that out, we're in the area of about 75% drop-through of the revenues we lose. Now to your question, as we come back from that, those revenues will come back at the higher margin. And we see ourselves being able to deliver on the 50 to 100 basis points of margin improvement that is inferred by 5-plus on the top and 10-plus on the bottom. We don't think that, that changes. There are some additional costs, obviously, the cleaning and that kind of thing, that we would continue to have, maybe shipping up a little bit. But we've also learned to manage more efficiently. I could see reductions coming out of COVID for that reason and in the real estate footprint, those kinds of things. So I think that all nets out, and we're back to that 50 to 100 basis points of margin...

Nothing structural. And eventually, obviously, with the vaccine we'll get past, we wouldn't expect to need cleaning of the facilities, and I don't expect to be wearing this, hopefully, 3 -- in 3 or 4 years from now as we get the vaccine. Yes, I think the other thing maybe just to comment on is back to the manufacturing strength that we have. We routinely, and it's been in our annual goals every year for many, many years, we look through every year and say, okay, what are the products that we have, our highest medical criticality on. And we actually have our medical department physicians go through and say, these are the products that BD makes where we particularly have high category shares, that if we had a supply interruption, it would be tragic for the health care systems around the world. And we review that list every year. We also review a parallel list that says what are the products making the highest gross profit for the company. And then we go through all of our suppliers, and we see where their potential vulnerabilities in that supply chain, where do we have sole-source suppliers. And we invest tens of millions of dollars, we've invested, to qualify secondary suppliers to help mitigate, to start having secondary sites, to make sure even our sites in hurricane zones, as we look at global warming, we've looked at our water levels raising, that could impact the plant, that could impact our supply chain over time, and we've been making adjustments continually on that basis. And so I know we often get questions around could there be a change in your manufacturing network as a result, as we think about a post-COVID world. For us, it's much more we purposely will adjust our manufacturing network as part of [ ReCoDe ], which we're doing, and we have that plan, but we're quite comfortable because of what we had already set up in terms of having a robust supply chain. That's not a focus. We often also get asked, could you be sourcing products from China that you have to rethink and that could change your cost base? Today, we're very committed to the China market. We remain very committed to the China market. We've got 4 plants in China, but almost -- actually, all of those 4 plants, with the exception of just one product, those products we manufacture exclusively for China that we export very, very little from China to the rest of the world. We only export one product. That's Veritor reagents. But beyond that, everything that's made in China is consumed in China.

So Tom, let's move on to testing. And before we get into Veritor and BD MAX, you seem uniquely positioned, just given that you have a kind of a lab-based solution and also potentially an antigen test to talk to what might happen in the fall as demands start to increase and what your sense is of what that demand might look like. In the last month, we did about 10 million tests in the U.S. and we kind of know that, where that might go. And roughly speaking, how you're thinking about the breakdown between lab-based viral tests and things like antigen tests.

Hey. It's a great question. And maybe what I could do is give you a little bit more color on not only that, but also how we're thinking about our broader offering in that diagnostic space and beyond. So as you said, certainly, we launched the MAX product, as you know. We've got about 1,400 MAX instruments out in the field today. Today, we're producing a little under 1 million tests a month. We've ramped that up but are at that steady state now. I mentioned at the start of our discussion that we're adding capacity, another line. It's an automated line. I had shared historically that, that line, we expected to go live at the very end of calendar 2020 into potentially early 2021. Our team has been executing really well there, and we expect to have that line fully go live within mid-Q1 now of our fiscal year. So in time for the fall and in time for really the ramp-up of the flu season, which is -- our assumption is when a potential second wave could be of greatest risk, COVID second wave. So that capacity that we're adding, just to clarify too, that we're adding 900,000 tests a month. So in addition to the little under 1 million, we're almost doubling our MAX capacity starting in Q1 of FY '21. So that's step 1. The other one is you mentioned our antigen test that we're working on. And maybe before I get there, we certainly see very high demand for the molecular test right now. We can sell every BD MAX instrument we can make, even though we've doubled and tripled our production output on the instrument. And we can sell every assay we can make on BD MAX. And what we see certainly and what we've seen over the last couple of months is when I was talking at getting a lot of calls from governors and CEOs of health care institutions from around the world, it was -- we've got patients in crisis, we need MAX tests to diagnose patients coming in symptomatic. That is certainly reduced today. I don't get those same calls now. The calls that I get today, and I think this is representative of the demand shift, now I get the calls, governors, CEOs still of health care providers, but it's much more around we have -- our economy is opening. We are opening parts of our system and we need to start screening workers coming back in. I think about a call I had last week of opening up the nation's largest park system and needing to start screening as floods of people were going to start coming into what is normally a small town, except for during the summer. Or starting to resume elective procedures and needing to ramp up testing for people before they come in for the test. They want to do 100% screening of those patients prior to them entering the health care facility. So we're certainly seeing the demand pattern shift. I think as I look at Veritor, which, of course, we've been investing in heavily and we're making good progress there, we get interest from not only our health care provider customers, but from governments around the world and from employers there. As you know, we've got about 27,000 MAX instruments already placed in the U.S. today. It's a fast platform, 10 minutes. It's a connected platform, so it can upload its data and you can do surveillance on it, on the data. But how I think about the use of that test, probably more so on helping to open up the economy surveillance, et cetera. At the end of the day, and there was a great article, I thought it was a great article, it was published showing the performance of BD MAX and it ranked it as the most sensitive assay molecular, right, by a couple of fold, two, threefold above the next closest in the publication. So that's a very, very high sensitivity. You can use it. If you've got clinical symptoms, I think it should be run on a BD MAX test, right, if you really want to know if you have that and your life could be changed. Plus or minus, either way, if you get the right diagnosis there, you're going to want a BD MAX test. Veritor, I think point-of-care antigen testing, they're never the reality as they're never going to be as sensitive as molecular, not amplifying the DNA like you're amplifying it in a platform like BD MAX. So you physically just aren't going to have the same amount of load to test for, so you're going to have lower sensitivity. Still acceptable sensitivity, sensitivity very similar to what you see with the flu. It's what we've seen from Quidel, is what we would expect from Veritor. But more to come there, I think, on how they can be used. But certainly, screening, opening up the economy, we'll be using it for those applications, I think will be quite interesting. Maybe just a quick update on where we stand on that. We've got our best team working on our Veritor assay. We've brought in some of the best experts in the world, working now hand-in-hand with our team 24/7 on the program. We've evaluated hundreds of antibody combinations, and we're progressing an optimized assay through our pipeline at this point. We are collecting samples from a network of over 30 collection sites that we've set up. As we collect those, we freeze them, we run the molecular test on them. And so as soon as our optimized assay is ready for trials, we'll be able to pull those out and run the trial in a pretty expedited manner. At the same time, we've been taking steps to make sure that we have a strong manufacturing network to ramp up production, not only out of our Suzhou facility in China, which is normally where we make Veritor for flu strep and RSV. But also, we'll be producing out of our San Diego facility, which is where we do R&D. And we've set up a third-party OEM provider to be able to scale as soon as we're ready to do so. So I've shared in the past that we are targeting to do millions of tests a week. That remains well on track once we have our assay complete. And of course, I always get asked, okay, when is that date going to be, and the reality is, of course, we won't -- you can expect that we'll share that information. There's a lot of key stakeholders who that data is really important to, not only our investors but also governments and providers. And so once we get the assay locked down, the clinical data is physically in our hands and our EUA is submitted. That's when you can expect you'll be the first to know.

Okay. All right. So I wanted to go there. So Chris, just a quick follow-up for you then on both Veritor and MAX. Would you just give us a sense, we were kind of thinking about a $15 ASP for Veritor and thinking that it's just intuitively a higher-margin product relative to the BD average. And maybe you can help us with pricing for BD MAX as well. We know what some of your competitors are pricing these tests at. In that too, just is margin accretive to maybe given what we know about the platform? Am I thinking about it the right way?

Well, we generally don't give margin on specific products. And you might imagine that, in this case, it's particularly sensitive. So we're going to pass on talking about specific margins.

BD MAX, I think your ASP may not be that far off. And for Veritor and BD MAX, our ASP is well-known to be kind of in that $35 to $40 range.

Okay. Got it. So let's move to the vaccine. This is just another area that seems to us could be very exciting for you and maybe underestimated. So it seems like every few weeks, you guys as well, your language gets more bullish on this and demand for various countries. So how much can you help us quantify the near-term demand and potential demand that you're expecting here in the coming months?

Yes. So I think we had shared in the past that, first off, we are -- we've been very actively engaged with a number of governments from around the world helping to prepare for the vaccination campaigns, and we continue to do that. Since our last discussion, we had also shared that we've progressed very nicely in discussions with the U.S. government. We have our first significant order for syringes and needles. From the U.S. government, we expect more, and those discussions are continuing very actively. As we think about the size of the opportunity globally, we make about 6 billion syringes and 6 billion needles a year on a global basis. If we think about what we have capacity to produce incremental to that volume, think about up to a billion additional products in, call it, an 18 -- 12- to 18-month window. So those products typically sell for about $0.15 per injection, best deal in health care, I would argue. But -- so take $1 billion or somewhere between $750 million and $1 billion, depending on if you're looking at kind of a 12- to 18-month horizon, and you put it in that $100 million to $150 million opportunity over, let's call that, 18-month window. Consistent with what we've shared in the past, no change.

Yes. So if I think about that, just to push back a little bit, guys, you got to bring operation and work speed into this, obviously. And I think about the vaccine companies, what they're doing, going at risk, backed by the administration, they're building inventory ahead of results. The plan is to advance 3 to 5 candidates prior to results, and we know you need 2 doses, at least. And so all of that, just in the U.S. alone, suggests a very high number potentially in the very near term. And I suspect outside the U.S., obviously, you have similar dynamics playing out. And so the question is, is what you just outlined for the next 12 to 18 months, I mean, is that the absolute maximum for you because it actually feels like the demand over these next 12 to 18 months could be more significant than that?

Yes. I think, I mean, a billion units is a lot of product, right, over that period of time. I think that's a reasonable number. We'll have -- we're having some discussions with folks who are interested in potentially funding additional capacity build that is automated. You don't build syringes and needles by hand. Of course, you have to put in capital, that it takes some time to build the capital and install it to add capacity. But we would have to add capacity. Now that's normally not a category that we keep large amounts of excess capacity in due to the general nature of the product category. It's not among our highest margin products. And it has a very steady growth trend traditionally, so it's not an area that you want to run economically at a -- having a large available capacity normally. And so again, for us, we've actually -- I'm really proud of the team to be able to leverage what we've got and find a way to get a billion units out of it in that 18-month window. But I wouldn't see it as a significantly larger opportunity than what I already stated.

Okay. Let me jump -- we got about 5 minutes left. I want to make sure we hit a couple of the recovery type of questions. And so let's go to Interventional and talk about trends there. I think you guys have said surgery down 50% to 70% in April, Peripheral down 30% to 40%. We've heard a lot of folks even here at this conference today and up until last week, in med tech, all reporting basically better numbers. Elective procedure isn't what they expected coming off of the trough. Are you -- how much are you able to say about just the recovery in electives and office visits that you've seen?

Sure. I'll take that, Amit, and we did want to give a little bit more color on May. And so as we look at May, the overall results were pretty much in line with April when you adjust for the anticipated reduction that we talked about in COVID-related comp sales in MMS. May definitely exhibited early signs of continued recovery in health care systems in this country and around the world, particularly in Interventional and Life Sciences. So if we start with Interventional, we were encouraged by the fact that in the month of May, in Interventional, we saw our elective procedure volumes in both PI and surgery improve sequentially. That's consistent with the discussions we've been having with customers over the past month. And it aligns with the customers' plans to reopen health care around the country and around the world. And of course, with our portfolio, we have a unique perspective across the health care ecosystem. And I would say that the increased requests we're seeing in increased diagnostic screening ahead of elective procedures certainly supports what we're seeing in Interventional. Many of the customers have restarted elective procedures and are planning to continue to increase in the coming months. The other data point we have is when you compare April to May, we have seen an increase in the requests for our Interventional sales force to come in and meet with customers. So all in, Interventional certainly hit it in the right direction. In Life Sciences, we also saw our improvement in sequential demand in May. Lab testing and research began to improve. In Diagnostic Systems, we saw a sequential increase in COVID testing. We talked about the BD MAX COVID testing continuing to ramp. On the other hand, in Preanalytical Systems, as you know, our Vacutainer business is a pretty strong indicator of the overall non-COVID testing market. And while COVID testing is increasing, we're also seeing some continued impact from a slower recovery of certain non-COVID-related routine procedures. Moving on to Biosciences, both clinical and research agent orders, reagent orders began to recover in May, but it still really hasn't fully recovered to pre-COVID-19 levels. And then finally, in Medical, Pharm Systems, Diabetes Care, pretty much in line with expectations. MDS, we did see a rebalancing of distributor inventory levels in May. And in MMS, as I said, we continue to see medical necessity sales of the Alaris pumps, but they did come down as we expected by about $50 million from the April peak. And so after we adjust for that item, BD sales dollars between April and May are largely the same. As we look beyond the segments, we've talked a little bit about the regions. We're watching China very closely as a leading indicator for recovery of other geographies. We're seeing increased customer activity in China. Hospital volumes are broadly returning. And that's led to sequential improvement in China from April to May. But still, again, about 25% below pre-COVID expectations. So as you might expect, COVID is still very much a fluid situation. We're cautiously optimistic in what we're seeing in terms of the recovery. And we continue to watch all the sales indicators on a daily and weekly basis, and we'll continue to monitor it and update as we move forward. But feeling good about the momentum and the positive signs of recovery, as you might expect.

I would say, we have seen very similar improvements in our procedural volume as we've heard cited from some peers. And we also were actually pleased to see that in the research space, some recovery in May as well as on the diagnostic side as well.

That's a lot of color. That's great. We've just got about a minute left. Tom, just on Alaris, maybe you can just update us if there's anything to update in terms of timing, what the process is to get that back on the market. I think you said file in fiscal '21. I don't know how much more specific you can get there. But just your thoughts on progress with getting that back to market.

Yes. Yes, great question. So obviously, we've put a lot of resources. We've got over 150 people now full-time on that 510(k) submission. I think what's clear to us is we've got our arms around the submission. We know what needs to get done. We'll continue very constructive discussions with the FDA. We were up to 3 pre-sub meetings, getting feedback back and forth. We're going to have -- we're on track right now to have most of our testing done by our August earnings call, which is why we just said, hey, we're going to give you the update on our August earnings call because we know what retired any risks that could come up when you're doing the testing. If any of those could impact the time line, we don't have any that would at this point in time. But if any came up, we would have that well understood, we believe, by the August earnings call. And so we'll update then. But I would say, at this point, we had shared the only reason for the change from Q4 to give an update in August was because of a delay in human factor testing. There's nothing more than that at this point in time. It's literally directly proportionate to the human factor testing. We are now starting to get visibility. We're just now starting to get access to clinicians to do that testing. So that's starting back up now as the health care system is opening up. We're starting to be able to get clinicians to put hands on the pump and do that testing. We've got to get about 100 clinicians as part of our protocol to be involved in our human factor testing. So that's -- we see progress for that available now given as COVID-19 incidence is starting to pass or slow down in many parts of the country. So...

That's great stuff. And in the interest of time, we will leave it there. Tom and Chris, thank you so much, especially at this time, for taking the time, and we will see you soon. And everybody else, take care.

Thanks. Be well. Thank you.

Great. Thank you. Bye-bye now.