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

Hey, good afternoon. Happy Friday, everyone. Thanks for joining our Corporate Access event. I know it's a busy time of conferences and meetings, so we appreciate you being with us today. This is Jason Bednar. I'm pleased to have with me today the senior management team from Becton, Dickinson, including President and CEO, Tom Polen; CFO and CAO, Chris Reidy; and Kristen Stewart, who runs Investor Relations and Strategy. Just some quick housekeeping items. We have 45 minutes here for our discussion. For those tuning in, there is no audio Q&A. So, if you have questions, you can take them in the box at the bottom of your screen or you can e-mail them to me at jason.bednar@psc.com, and I'll ask management on your behalf. So, with that, why don't we dive right in. Tom, Chris, Kristen, thanks for joining us today. And are there any opening comments you want to make before we get into questions?

Kristen would.

Yes. Sure. I have some fabulous disclaimers to read here. So, let me get started with that. Just as a reminder, during today's discussion, we may make some forward-looking statements, and it is possible that actual results differ from our expectations. There continues to be significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic. Risks, uncertainties and other factors that could cause such differences can be found in our recent SEC filings, including our 2020 Form 10-K and subsequent Form 10-Q. The statements made in this presentation are made as of today's date, and BD undertakes no responsibility to update any such statements to reflect events or circumstances occurring after such date. So, without further ado, I will turn it back over to you, Jason, and thanks again for having us here.

Great. Thanks, Kristen. So, Tom, why don't I start with you here. I mean I'm not sure anybody really could have anticipated what the world was going to throw at you in your first year as CEO. But I think it'd just be great to kick it off just to have you reflect maybe, first, on your time in the seat. What would you say that you're most pleased with thus far? And then maybe the biggest challenge you faced aside from COVID?

Sure. It's -- certainly, the world is definitely not what anyone anticipated over the last 1.5 years. I don't know if there's probably a person on the planet that could say that. So, we actually, just last month, 2 weeks ago, we -- I was able to finally get the BD executive team together in person, the first time in 15 months where we really got to get off site for several days and focus on just reflecting on the last 1.5 years. Kind of what do we achieve as a team, what progress have we made in our transformation? What have we learned? And so that was a great kind of reflection on your exact question. And we've got a lot of things to be proud of in how we advanced our strategy. And in many ways, we advanced it faster than we thought originally at the time that we established BD 2025 about 15 months ago when I took over the role. So, I'd say, right off the start, we've enhanced our quality and our risk processes. We've transformed our culture in a meaningful way, and we can talk about that in a bit, with a very clear focus on growth mindset. We've strengthened our team, particularly the leadership team. We've reinvested in R&D and we've set up the growth in innovation fund. We've accelerated our tuck-in M&A strategy, always part of our growth initiative. While at the same time, we've been focusing on simplifying the company. We've made significant progress on strengthening our balance sheet as well as our cash flows. We have been driving Project Recode, which we've been talking about, and that's very much on track. And of course, as part of both our growth strategy and our portfolio transformation that we've been doing, and simplification, we've announced the intention to spin our diabetes business to create shareholder value through that. And so already, in this period of time, we're seeing what is a stronger and a higher-performing company. And I think we're seeing that in our core business today, but we're really going to see the impacts of that change start to shine even more so as we emerge through the COVID pandemic here as we go into FY '22 and in the years ahead. But as I look back, certainly, in my first 3 days as CEO, I had a new priority that I didn't plan on when I came in as CEO, and that was to get Alaris 510(k) submitted. And we're also very pleased we got that submitted in late April when we said we were going to. And so, we're now in the review process to get that cleared and back to fully selling that product in market. And that's not just important from a shareholder and a value creation perspective for BD, but that's important because there's 1 million infusions that go through Alaris every day across the country. 70% of every patient in a hospital to get an infusion get it on an Alaris device with our set. And so, we want that cleared for our customers and patients as well as they continue to use that and rely on trust on that product, which we do as well.

Great. And it's a great kind of foundation here going to go off and a lot of things I want to dig into here over the next 40 minutes or so. But you mentioned, Tom, like kind of the growth simplification empowerment strategy here. Some of the elements maybe are a little bit difficult to measure real time or for The Street to fully appreciate. I mean we see things like the diabetes spin that maybe we can talk about later. But there's other things that I'm sure take time to realize. So maybe just wondering if you can talk about the things that maybe we don't see going on, the seeds that are being planned right now that maybe you're going to bear fruit or that would be harvested down the road? Just if we could talk about some of those things before, we get into some more detailed questions.

Sure. Maybe let me just start by saying what exactly BD 2025 entails and walk through each of those components, which I think will answer your question, which is a great one. So, as we -- we were coming out of a period of essentially 6 years of integration, right, 2 very large transformational acquisitions that takes a tremendous energy of the company and mindset of the company on integration. And so, it's very purposeful that our primary strategy that we're focused on is growth. And that's why we're -- we've been training and focusing our culture on growth mindset. And you could feel that very tangibly through the organization. We actually just finished our voice of associate survey this past week. I just saw the results yesterday. We had almost 90% of our associates give feedback in a number of key areas. And we can see very tangibly the progress in our culture, which includes growth mindset progress. Big difference from even just a year or so ago. So, as we think about growth, we started off, right as I moved into the role, looking at our portfolio and where we wanted to reshape the portfolio into higher-growth markets. What we wanted our portfolio in BD to look like 5 or 10 years from now. And we've talked about them, we can talk further about those areas that we're investing in. But as we looked at those right from the start, the next step we did was we looked at the $1 billion of R&D spend that we already have, and we made some very purposeful choices to move from areas that we're no longer going to be a focus into the higher-growth spaces. And we shifted those R&D dollars very actively at that time a little over 15 months ago. Next thing that we did was we set up the growth in innovation fund, right? And so again, looking back at where we're coming from, R&D had been flat for about the last 6 years during that integration phase. And so, if you're growing revenue and R&D is flat, R&D as a percentage of sales had gone down. I view we should be at about 6% of sales R&D, which is where we've gone to now. And we got there by setting up this growth in innovation fund, which will be recurring, and we give those dollars out to those high-priority, higher-growth markets on the best innovation opportunities in the company. We actually were able to double down on that this year utilizing some of the COVID proceeds. So that was next. Next thing that we did was, of course, through our focus on strengthening our balance sheet, we made great progress there. We're now a turn lower than we were a year ago. And that's given us the ability to pivot onto our front foot when it comes to tuck-in M&A. And that's part of our growth strategy, and you've seen us do 11 tuck-in M&A deals over the last 12 months or so, including 5 in just the first 2 quarters of this year, with a very strong pipeline and very high activity level there. We see our ability to continue that going forward. And so that's the other way that we've been fueling our growth strategy. And then finally, more recently in that same category, we had looked originally at -- when we made those decisions of where are the areas we're going to be doubling down on, what priority markets for BD. And in that process, we decided diabetes care was an area that is a great market, but it's got a different customer group than the rest of the company. And it's one that would drive much better if they will focus independently, in moving into those higher-growth diabetes spaces with a dedicated management team where they can redirect their funding into those spaces and not compete or distract from the core markets that the RemainCo BD was going to be focused in. And so, we made that decision and we announced it. Obviously, we announced it at a time after we had gotten Alaris submitted, after we had made the progress on strengthening our balance sheet, after we had momentum in driving that core innovation and reinvesting behind that and our tuck-in M&A strategy. And we felt that those were moving with very good momentum, then we took this action as well. But that's really good progress on the growth strategy. And we're going to continue to drive that innovation agenda. We're going to continue to drive the tuck-in M&A strategy, and we're very confident that the spin will create value for shareholders as our diabetes business now, as a focused team, works on their own next level of innovation and opportunity, and we'll be talking about that as we approach the spin, obviously. On the simplification agenda, we've gotten to be a very big company very quick, right? We just got out the, for now, 170s on the Fortune 500. We were $7 billion not that long ago, 6 years ago in that same time. We'll be nearing $20 billion here this year. So, with that comes complexity. And I'm a firm believer that complexity can be the biggest enemy of growth, right? It gets in the way of growth. And our primary strategy is growth. And one of the ways that we help keep our mind on growth is simplify everything that could distract us from that agenda. And so, having too many plants and having to manage those, right? We're focusing Project Recode allows to simplify our architecture, having multiple different processes that are different across different business unit or functions or regions adds a complexity that doesn't add value to our customers or shareholders. We're focusing on automating those and simplifying them, our business processes. And in doing that, it also creates -- unlocks value that we can reinvest behind growth and create margin expansion as well, which we've committed to $300 million of savings through Project Recode over the next several years through 2024. And that's all very much on track. First part of simplification as well is simplifying our processes around our inventory management. How do we get better at inventory management? We've made great strides in that. This is a year where, as I look out over the goals that we put on inventory for the next several years, we've achieved those already this year. We pulled forward that goal quite substantially. And we were able to do that through utilizing some of those COVID profits to overcome what's normally a challenge when you stop producing for a bit and you're producing less than you're selling because you're letting inventory come down, that creates a negative variance. We absorbed that this year. And that's going to benefit us in the future as now we've got stronger cash flows. We're strengthening our cash flows through improving our accounts payable, accounts receivable processes. That's all part of our simplification agenda. And then the last part of our strategy, which we talk a lot, lot more about inside the company than we do outside, is our Empower strategy. And that has 2 parts. We're powering our growth and our simplification strategy through digitalization, smart devices, informatics. AI are a big part of our growth agenda. And then part of simplifying our processes is digitizing them, digitizing the way that we do business inside the company or with our customers. And there's lots of great examples of how we've been doing that over the last year. That's part of how we're empowering our strategy. And then we're empowering our strategy through our culture change. And that's really our focus on a growth mindset culture, a strong team's culture where we're empowering teams across the world to solve complex problems independently that advance the business. And again, we're really happy with how we're seeing the culture evolve in very tangible and meaningful ways over the last year.

Yes. That's great. It all sounds great. And again, more things we want to talk about here, too, and then pack a little bit. A couple of questions that did come in that I just had is you were going through some of the high-level overview there and digging in on some of those topics. So, Tom, you're talking about a growth mindset. Was BD constrained, do you think, by the balance sheet to invest in growth projects in the past? Or was it just, I guess, a different mindset of investing for growth? How would you characterize that?

So, growth mindset has 2 aspects of it. And I can talk a lot about growth mindset because I do -- in the company, pretty much anytime I talk to associates, I'm talking about growth mindset. It has 2 aspects. So, what you described as a revenue growth mindset, and as an -- their -- call it what it is, R&D was flat for 6 years. There's no way to say that, that didn't have -- we weren't -- because we have spent more in R&D, it went down as a percentage of revenue. We were creating efficiencies in R&D, and so we were funding programs, but we think we want R&D at a bit -- at a higher level at 6%. And there is a bolus of programs that were teed up waiting for funding that we were able to fund right away. And so that was helpful. At the same spirit, we were -- the company basically was being run on 2 weeks of cash for the last many, many years because we are utilizing all of our cash to pay down debt. We hadn't done share buybacks in 6 or 7 years. We hadn't done much tuck-in M&A because we did 2 large transformational deals. And so yes, there's opportunity through having a stronger balance sheet and being able to invest behind that, to reinspire a growth agenda. As you can imagine, if you don't have cash, people stop looking for deals in the same way if you can't invest it. That mindset has radically changed today, if you look at the activity level and the engagement level of the businesses, both on new exciting opportunities. We've also changed, the businesses have to compete much more aggressively for the funding through the growth and innovation fund that we've set up, which creates a competitive spirit. But the other side of growth mindset is, I'll best describe it, I was down in one of our businesses at a manufacturing site earlier this week and we're having a discussion with the team and the team -- that platform was doing great this year. It was growing double digits. They've got a great outlook. And in the middle of that, they were describing the great performance this year, they're over budget. They're having a decent outlook for next -- a strong outlook for next year, and they said -- and there is this 1 challenge that we're going to have to manage through next year. And so, we've made some adjustments to our growth plans to make sure that we continue to deliver on our commitment. And I just said, let's stop the discussion there. We said a lot of great things in this dialogue. One was that you're having great performance this year. You said something great about having performance next year. But the most important thing you just said is you had a growth mindset that when you had a challenge, you automatically said that -- so we had to adjust some of our strategies to make sure we still deliver on our numbers and find a way. And that's the growth mindset, right? That's really at the heart of those mindset is that there's not things that we can't do, there's just things that we haven't done yet. And it's about instilling that culture across the organization. And again, I used that example just from a couple of days ago, where you can see that mindset coming in, which ultimately leads to higher growth, but it leads to higher performance as well.

Okay. All right. That's helpful. And maybe touching on some of this, the M&A topic. I mean you mentioned doing 11 deals, we've seen those. They're all smaller in size. They're tuck-in deals, but they're theoretically accretive to growth over time. No one individually going to move the needle. But I mean, collectively, what's the right way on these deals materially shifting growth higher for BD. It's hard to quantify, I know. But just again, philosophically, how do you think about shifting that growth rate higher via M&A versus how you might approach that via R&D?

Yes. So, we're going to continue to do both. Again, we think -- if you were to ask, do I think that 6% organic R&D number needs to go up, the answer would be no. I think that's the right number at this point for us to make trade-offs within that number and supplement it with our tuck-in M&A or what we call inorganic R&D, acquiring products that are supplementing our organic portfolio because there's a lot of great innovation out there and a lot of -- we're in a lot of exciting high-growth, high innovation spaces, whether or not that's immunology and single cell sorting or point-of-care diagnostics or molecular in our life science business, or smart devices and non-acute med management and drug delivery devices in our Medical segment. Or looking at BD Interventional end-stage renal disease, peripheral vascular, tissue reconstruction within our BDI. There's a lot of high-growth spaces that technology is creating opportunities to grow faster in. And so, we see tuck-in M&A as very relevant to that and leveraging what are very strong commercial channels with very strong market development capabilities in essentially every major market in the world. Best-in-class manufacturing capabilities and distribution capabilities in every major geography around the world and being able to take assets and put them through and leverage what we have. We see a tremendous opportunity to create value from that. And so, we're not going to be looking at transformational M&A. I've made that very clear when I've taken over the role. Tuck-in for us is also a number that sometimes makes folks just -- it's good to reinforce. That's a couple of billion dollar deal for us that can be, right? A $2 billion deal for BD given our cash generation and size, I'd still call it tuck-in. So, we've been doing tuck-ins, more -- largest tuck-ins we've done over the last year to be more in a couple of hundred million dollar tuck-in size. But we certainly would consider a tuck-in up to that couple of billion dollar size. And again, we've got a robust funnel that's very active and deeply engaged organization on that.

All right. Great. One more, Tom, and just from a high-level standpoint, a question that came in, and I do want to bring Chris in on some margin questions that I know have been very topical for you all lately here. But -- so Tom, maybe aside from the obvious indicators that are out there, whether it's earnings or free cash or what have you. I mean what are the main KPIs that you're going to measure to know if your strategy is delivering here when we look out 1 year, 3 years, 5 years?

Yes. We have those that we look at internally at our -- I mean ultimately, if you go to the furthest piece, it's delivering consistently and durably our mid-single-digit revenue growth and double-digit TSR, right? Those are the ultimate metrics that we're looking at. And behind that, of course, in our growth strategy, we're measuring the exact amount we have goals this year around number of new products, the value of new products going into our pipeline. The value of launches each year. The percentage of revenue from new products. On the simplification, we have our savings and CI goals, the value of Project Recode and us executing against that. That we know that if we do each of those, we're delivering that mid-single-digit revenue growth and that double-digit TSR. And so, we have those, we call them our key driver goals. We have those specific sets of metrics. that we track religiously and deep dive on every single month. We're making great progress on those. But ultimately, it's that -- all of that is aimed to that mid-single-digit revenue growth and double-digit TSR.

Okay. All right. Very fair. Okay. So, Chris, shifting over to the margin discussion here. You've pointed to the elevated spending and investments here in '21 as being onetime or temporary things that are going to come off as we move into fiscal '22. You've got a lot of different crosscurrents that you've probably discussed ad nauseam here just the past few weeks. These include the kind of reinvestment of the testing profits, you had inventory adjustments, quality remediation and so on. But what about some of the lesser discussed items that could influence gross margins looking forward? I'm thinking here about maybe inflationary or cost impacts in your sourcing and/or supply chain. Maybe could you also talk about the impact of flu testing and what that could have on the business or the numbers from, again, gross margins when we start returning to maybe a bit more of a normal flu season this year?

Sure, Jason. So, before I get into that details of those kind of things, let me kind of just provide a baseline, I think, is the way to think about where we are and what to expect for the rest of this year and then how to think about that going into '22. So, if you just look at second quarter, our gross margin was at 53.8%. A number of things going on there. We did get a lift from COVID testing of about 70 basis points. But that was fully offset by the investments that we're making with the COVID profit. So, the 2 of those kinds of cancel each other out. And we also had a 70 basis point drag from quality-related spending that was onetime in nature. And so, when you look at the gross margin, you're kind of in that mid-54% kind of range. Now we did say that, that is going to go down in the rest of this year. Think about that as the benefit that you're getting that lift from COVID testing is going to go down as we expected, but our spending of the Veritor profits is going to continue. So that naturally puts pressure. And that is conscious pressure that goes away next year as those costs aren't recurring. And if you take that down to the operating margin line, we were at 24.5%. And we said that a number of things would drive that down to the low 20s. The continued spending of the COVID profits would be one of those. The continued fact that the utilization isn't at 100%, that would continue through the second half of the year. So, the thing to keep in mind is that those investments that we're making of the COVID profits are onetime in nature. They were designed to go away. They are things like taking down our inventory levels, which have an impact on margin absorption It's increasing R&D in certain projects, quality spending, those kind of things that are designed to go away. So that will lift. Then when you get past that, those Veritor investments, you get to some of the things that you were pointing to. And I think every company is seeing certain pressures on shipping costs, for example. You can pick up the paper and watch the boats back up at the LA port to see that. We do have some pressure in raw materials and particularly in resins. So those are flowing through. They'll flow through in the back half of our year because right now, they're kind of flowing through inventory, if you would. So, we do expect to see some pressure in the back half of the year. And lastly, as we think about this year, we would continue to see FX pressure in the back half of the year, mostly in the third quarter, and then kind of going away in the fourth quarter, and we wouldn't expect to see that going into next year. So, as we think about next year, again, the #1 thing to remember is you can't look at the second half of this year's margins and use that as a proxy for next year. We're consciously spending Veritor profits. And so those will go away next year. The manufacturing variances should start to return. We'll continue to focus on the rest of this year. You got to keep in mind, we haven't -- actually just started our budgeting process, so we're going through that. And we're looking at the pressures we're seeing in shipping and raw materials, see how can we offset those going forward. Are they going to be recurring? Will they continue at the same level? Will we be able to do things around shipping, more ocean freight than air freight than we were able to do this year. So that's all work that we're doing as we go forward into next year.

Okay. All right. So maybe, I mean, kind of have a decent baseline then about some of the factors that are impacting this year. I mean -- but I guess is it -- when we think about some of the good guys maybe coming back for and hitting next year, I mean it seems like you got delayed gratification of Veritor, I don't know if you'd characterize it that way, but that's kind of how I'm thinking about it just as you're investing the profits this year and then pulling those back. It's a little bit of delayed gratification. You possibly have flu coming back in. You've talked about Alaris, that might possibly have independent timing and volumes possibly having some positive margin impacts in the back half of next year. I think Project Recode should have some positive impacts, maybe starting to hit in the back half of next year. So, I guess, are there any other pushes or pulls or anything maybe you'd have investors or myself kind of moderate the thinking on just, one, what I just laid out there?

Yes. No. I think, Jason, you did a good job of laying those out. We did take a hit from having relatively no flu season this year. You would expect that to come back next year. You mentioned Project Recode. That's something that will go forward for years to come. The nature of those costs that we take out in Recode tend to come back over time. So, think about that. We've said $300 million by FY '24. Think about that as back-end loaded. You get a little bit of benefit. We saw a little bit of benefit this year. We'll see a little bit more next year, but the predominant piece of that will be in '23 and '24. And then you touched on Alaris. The timing of Alaris, as we've pointed out, is the second half of next year. And you would expect that to take some time to ramp up. So, you really don't get the full benefit of the margin impact of that until '23, but you get a little bit of a lift in the second half of '22. So those are the key items.

Yes. And I think, Jason, the thing we -- you mentioned flu, it's a great call out that you made there is we would expect as well that there would be more of a flu season back in. We hope that it's not kind of beaten out again by COVID. Obviously, we hope COVID is moving behind the world. And in that spirit, we do think, though, that it will be a -- there will always kind of be a flu COVID season though, where people will wonder, when they get the sniffles or you get the chills and you get the fever, it's not -- maybe the first question will be, I hope I don't have flu -- I hope I don't have COVID. I hope it's just a flu. And they're going to want to go get checked though to see which one it is. And we've been one of the first companies, period, to have a combination, flu-COVID assay authorized under EUA, and we'll be -- we've transferred that to our manufacturing. Obviously, there's no need to test for flu today, there is no flu around. But we'll plan on starting to ship that to customers for validation this summer and be able to -- to enable stocking in the fall.

And Jason, the only other thing I would add is just some of the margin -- the impact of manufacturing variances, which we and other companies are seeing, just as you've seen the lower level of throughput going through the factories because the volumes are -- were and still are below the pre-COVID levels. Those are impacting the gross margins, have been last year and this year. We'll see as those kind of roll into '22. It is a delayed impact just because of how it works as you kind of put the cost through the inventory and inventory days. That should be lower as you get into '22. All of these things that we're talking about are more transitory costs that are kind of working through the P&L. And as Alaris kind of comes back on and as those margins ramp back up, and as you kind of look out through the P&L profile as Alaris ramps back in all the way, you start to look out to '23 and you kind of get to this state of where margins really become normalized. And with all the different efforts that we're working on with Recode and other things that we have, certainly, we're looking at the cost structure in a very close state to look at the margin opportunities across the...

Keeping with what you just said, nothing structurally has changed from before COVID. It's just we're working it through, obviously, with Alaris and COVID.

Yes.

Okay. And Kristen, just to be clear, I mean this -- it seems like that was very similar to the comments that were made on the most recent call. But obviously, there's been some news since then with some of your competitors. Are you kind of just reminding us of that? Or is it something you don't -- you want to be able to pay attention to, in light of testing probably even being lighter here over the last several weeks?

So, I'll take that one.

So, I'll let Tom address that. Yes.

Right. Yes, there's nothing for us on that regard. I think she was referring to, Jason, more of if you think about our big volume like medical plants, BD Medical. If health care utilization was 100% and now -- it was -- in Q2, it was about 90% of what it was pre-COVID, our plants -- we're making billions of units a year and absorption is key for us on that, on those asset bases that we have. And so, as you go back up towards 100%, you're flowing through at a higher GP margin because the cap -- the investment is already there. And so, it hurts us a little bit when that volume is not there when you're comparing it to where it was before. As it approaches back up, you're catching back up on the margin faster. I think that's what Kristen was referring to, nothing specific to Veritor. But since you brought it up, it's a common question that we get. I will address that question, and it's one that we're actually very pleased with in the spirit that when we went out and gave guidance at the beginning of this year, it was an area that we got a lot of questions on because we were giving maybe a differing view than others. And we set $1 billion to $1.5 billion for Veritor in the year. And we've developed that with a lot of expertise from our scientists. We've got a ton of infectious disease physicians as part of our team who are really, really good at what they do. We've got some world-renowned ones who gave us input into that. Of course, we have deep global health relationships around the world and with governments. We took that input into our thinking. And we have deep relationships with pharma partners, including -- remember, most vaccines are delivered with our devices, and we're involved in and we know vaccine development and deployment quite well. So, we had always assumed that the vaccines were going to be effective and would start rolling out in the first couple of months after -- in the new calendar year. And that's how we build. We said we believe that COVID diagnostics are going to have a very large peak in the first half of our fiscal year. And then it's going to drop off significantly in the back half of our fiscal year, and that's exactly what happened. Our $1 billion to $1.5 billion range, the only thing that changed is it was actually stronger at the beginning. And for us, it was driven by higher adoption of antigen testing in Europe, which we weren't sure in November how much Europe is going to adopt antigen testing since it hadn't been used there before for flu and other conditions like it was in the U.S. But they adopted it quite aggressively for the COVID pandemic. And so that gave us some upside, allowed us to say we're actually going to be at the upper end of our range. But the other couple of things that getting it right did for us is because we had that view from the start and we view that it was going to go up and immediately down in the back half, we made accounting decisions at the start of the pandemic that any asset that we're going to put in place, that we would depreciate them within the year, that we weren't going to depreciate them like normal assets over 8 years. And so, there's no write-offs coming from us on assets there. We're already depreciating them in an accelerated way. We had that assumption it was going to go up and come down. And so, our team was all over checking demand patterns versus inventory patterns to make sure that we didn't get stuck with inventory at the end of the process because we view it was going to be coming down hard. And so, our operations team and marketing and GMs in our infectious disease business, IDS, we're all over that and we're managing through that quite well. And then the other thing that it did is it allowed us to stay consistent in reinvesting those proceeds, right? It's -- our hypothesis, our outlook, we're hitting it exactly as expected. So, we're staying very consistent on our reinvestment model. One of the worst things you can do if you're trying to drive reinvestment in growth is to start and stop it. It confuses the organization, it loses the momentum. We're not doing that, right? We're sticking exactly to our $200 million reinvestment plan because the revenue and profits are coming through as expected from that regard. As we've shared in the last call, about half of the $200 million was in the first half. We're investing the other half in the second half, and that's unchanged because we're right in the range that we expect.

All right. Great. Just another question that came in that's kind of related to this topic. Just on Veritor, you've got a much bigger installed base, clearly, as one of the biggest beneficiary points of COVID for you that has some durability to it. I guess how do you capitalize on that installed base, kind of an open-ended question, but how do you capitalize on an installed base now that you have it out there?

Yes. A couple of things. One is we get flu and COVID assay out on it. They'll use it for flu, but we're really promoting the flu-COVID as the go-to assay. And so that's why we're one of the earliest to get that approved, and we're going to be available. If it was needed this year, the lack of the flu really made it not needed. So again, in the spirit of not building unneeded inventory, we didn't -- we haven't started producing it yet. We're providing it to customers for validation coming up this summer. And then we'll start shipping it towards the back end of the summer, ready for the next flu season, but it's approved and ready to go. In the same spirit, we're adding menu to Veritor. So, we've been expanding actually the size of our Veritor R&D team to do additional assays. We've done some partnerships as well. And we'll share more about the specific assays at our upcoming analyst meeting, which is late November, early December. We announced that on the last call. But think about we now have footprints in places we never had footprints, right? Veritor is now in 80% of all U.S. nursing homes. So, what are the assays that nursing homes would now want to do since they have a -- now they have diagnostic capabilities they never had before. We have a broader footprint ex-U.S. We have a broader footprint in even urgent care centers, et cetera. So, we're adding menu to Veritor. That's part of where some of the Veritor proceed reinvestments are going. We're doing the same thing, by the way, on BD MAX, which is a platform that we also have a much larger footprint on. But to your point, our footprint on Veritor is almost 400% higher, 4x what it was before. Yes.

Yes. Yes. Great. Okay. Maybe shifting over to Alaris here. Maybe a little bit of a tough question, but just something I've been kind of pondering on my side. I mean if the Alaris issue hadn't happened and if you didn't have to devote the attention and resources to remediation and resubmitting and whatnot, what do you think may have happened differently for BD? And what other projects may have been pulled forward or prioritized? And would we have seen better progress on the margin front? Or anything else that's just obvious in your eyes that like, again, if Alaris hadn't happened, you've been a spot x today instead of where you are?