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

Good morning, everyone, and welcome to Becton, Dickinson's inaugural BD Innovate Series webcast. [Operator Instructions] Please note that this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Francesca DeMartino, Ma'am, please begin.

Thank you, and good morning, everyone. I'm Francesca DeMartino, BD's Senior Vice President and Head of Investor Relations. On behalf of the BD team, thank you for joining us for our inaugural BD Innovate's audio webcast. Today's call will be recorded and will be available for replay on our website at investors.bd.com. We're very excited to kick off BD Innovate. These calls will serve as a deep dive into our end markets, business units and products. Each call will spotlight an innovation topic such as a specific business unit, product, suite of products or growth initiatives. Additionally, we want to give you an opportunity to hear from and interact with the people leading these businesses. As a reminder, this call is intended for the investment community, including our sell-side analysts and institutional investors. We intend to host at least 1 episode per quarter. I want to note that on today's call, we may be making forward-looking statements. I encourage you to view Slide 3 in our presentation for additional information. Also, please mark your calendars and save the date for our second episode of BD Innovate, which will be on September 8 at 11:30 a.m. Eastern Time and will feature Steve [ Cole ], our Worldwide President of our Biosciences business and highlight our B2B business. Now for today's event, we are pleased to highlight our pharmacy automation business and end market, which is part of our Medication Management Solutions business. I am joined by Puneet Sarin, Worldwide President of MMS and Jason Strohm, Worldwide VP and General Manager of Pharmacy Automation. I have some prepared questions for Puneet and Jason, and then we will leave time for our sell-side analysts to ask questions at the end. For context, Pharmacy Automation is a $1 billion end market growing at about 10% and is an exciting space that BD plays in. As you may know, last year, in our Medication Management Solutions business, BD acquired Parata Systems, which added to our BD ROA business out of Europe. Parata has allowed BD to enter the new area of high-growth pharmacy automation in the U.S. and marks an important step towards advancing our BD 2025 growth strategy around smart connected care and enabling new care settings. Our Pharmacy Automation business, which is the largest in the world now is growing in the mid-teens. With that, let's jump right in. Let's start with some introductions. Puneet and Jason, welcome, and thank you so much for joining me on this inaugural BD Innovate call. Can you start by introducing yourself and giving a brief overview of your current role at BD and your previous experience?

Thanks, Francesca. Hi, everyone, and thank you for your time today. I am Puneet Sarin, and I'm proud to serve as the President for MMS. I've been in my role for 9 months and was previously the President of Biosciences here at BD. While I'm new to MMS, I'm not new to health care. I've got 20 years of experience across the health care continuum. Prior to BD, I spent almost 7 years with Danaher and 14 years with GE in the med tech, life sciences and diagnostics space. That said, my role in MMS has been an exciting transition from high science to high technology. In many ways, the work we're doing in MMS is the tip of the spear for BD particularly when you think about the company's focus on driving transformative solutions and smart Connected Care and in new care area settings. I have to say it's been a fast phase and exciting first 9 months. And with that, I'll turn it over to Jason.

Thanks, Puneet, and hello, everybody. I'm Jason Strohm, the General Manager of the Pharmacy Automation business in MMS. Prior to this role, I was the General Manager of the Pyxis Dispensing business in MMS. It was about leading the business that we saw the need for Medication Management solutions in non-hospital settings, like long-term care, surgery centers and retail pharmacies which really lead to few of our recent acquisitions, including Parata, to build out our pharmacy automation portfolio today. I've been with the company for 20 years and came to BD through the CareFusion acquisition in 2015. And for me, coming to BD through an acquisition has proven to be incredibly helpful, giving me a perspective during the past year as we integrate Parata into our culture and business here at BD.

You both bring great experience to your roles and Puneet, congrats on this newest adventure with MMS and Jason an impressive number of years with the company, and it's great to have you leading Pharmacy Automation. Puneet, now that you've been in your role for about 9 months, can you talk about your vision for MMS and how it fits into the BD 2025 strategy?

Absolutely. So let me first talk about how we're thinking about the MMS vision, and then I'll make that connection to BD 2025 strategy. Simply put, our vision in MMS is to make Medication Management safer, simpler and smarter. So the providers can focus on what matters most, and that's patient care. When we consider how we can test and act this vision, we focus on meeting the biggest challenges and priorities our customers are facing today. First, it's addressing ongoing labor shortages from employee burnout in the hospitals to baby boomers retiring to fewer new workers entering the field, the industry at large is seeing shortages all the way from pharmacy [ PACS ] to bedside nurses. And that is where our industry-leading solutions with Pharmacy Automation can help reduce costs and make it simpler for pharmacists to attend to their patients. The second challenge our customers are facing today is the cost of medication errors. According to National Center of Biotech information, the U.S. spends more than 40 billion each year on patients who have been affected by medication errors. The other brutal reality we see is that the accidents happen, preventable errors occur. In U.S. alone, between 7,000 and 9,000 Americans die every year because of medication errors. The good news is that with that dispensing portfolio, we are working with caregivers from hospitals to clinics to now pharmacies in finding a better way to package, deliver and administer medications, really making it safer to store and administer medicines. And finally, the third biggest challenge is improving patient outcomes and quality of care. Just imagine [ enough on ] receiving a chemotherapy where drugs must be delivered in a controlled way into the bloodstream in small volumes and the care providers lack the confidence around precision. That is where our pump with Connected Solutions can provide smart solutions with alerts and analytics to improve patient care. So when I talk about safer, simpler and smarter, we here at MMS are really addressing the industry problems around cost, quality and access to better health care. When you think about the med tech, we really are the embodiment of this industry. Our solutions utilize best-in-class technology through every stage of medication management. And to the second part of your question in terms of linkage to BD 2025 strategy, we're highly aligned with the BD 2025 strategy, particularly the grow and simplify pillars. Regarding the growth, our existing leadership in dispensing and infusion positions us incredibly well in pharmacy automation. We have the leadership and capabilities to tackle the challenges our customers are currently facing in the health care environment. So having all these products under 1 umbrella in MMS, there's a key differentiator and something that many of our competitors can't offer. Given the breadth and depth of our portfolio, we really have the opportunity like no one else in the industry to deliver on a vision of improving medication management across the full care continuum. I'd say it's equally important that it's incumbent upon us to maintain this category leadership positions in the markets we play in. We have a great growth story to tell, and you will see that specifically within the pharmacy automation today. As you know, Simplify is also a key focus for BD right now, and that distills into MMS as well. We're highly focused on simplification and embracing the customer experience in terms of implementation and ease of doing business. As we evolve MMS more broadly towards digitization and connectivity, we must also evolve our services strategy and we see this as a key opportunity. So overall, in MMS, we can meet the most critical needs of our customers in today's environment by addressing the labor shortages in the industry, improving outcomes and medication safety by really helping provide us ensure that the right drug gets delivered to the right patient at the right time, and that's our promise.

Puneet, thank you. That's a great overview of your vision. I would say that it's evident that there's a clear call to action and it's a really timely opportunity to address the challenges you laid out and especially given your comments on where it fits in the BD 2025 strategy. If we can just go a level deeper now, how does pharmacy automation fit into the strategy?

Yes. So we believe our vision to make medication management, say, for simpler and smarter extends beyond the hospital, and that's where Pharmacy Automation comes into play. Historically, our work was mostly concentrated within the hospital segment. With Pharmacy Automation, we're now able to expand our impact way beyond just the hospital market across all care area settings, including retail, long-term care, ambulatory surgery center just as a few examples. And I'd say Pharmacy Automation isn't a new concept. It actually started with a portable and digital pill counter somewhere around the 1970. However, the market truly started to evolve and rapidly grow within the last 10 to 15 years, and we see a significant opportunity to further expand adoption of Pharmacy Automation. You've heard me mention about the ongoing challenges with labor shortages. It's something we all see in the headlines and daily news. So as a result, there is a growing problem as it relates to workplace culture and morale in pharmacy settings. With fewer hands and growing responsibilities, many pharmacists feel their work has become mundane. The typical pharmacist actually gets to spend just 10% of their working day counseling patients. In particular, pharmacists at the retail chains spend the largest proportion of their time filling prescriptions. We couple these trends with the fact that care is increasingly moving outside the hospital with more medications being distributed in alternate sites of care. There is now a greater need to manage the medication packaging and distribution process more efficiently. So we see time as the ultimate value added in the pharmacy right now, and this is where our Pharmacy Automation and our solutions come in. So we're automating what was done manually yesterday. We're actually empowering pharmacists to shift away from counting pills and focus more of their time on providing higher value clinical care.

And to build on Puneet's points, if I can, to bring it home to the audience, think about the last time you were in a retail pharmacy. There's a high chance you experienced very long wait times or at least saw them in the back of the pharmacy. That's why we're focused on addressing labor shortages and advancing the increasingly important role that pharmacists are now playing in their communities as health care providers. Automation can play a bigger role by reducing manual labor of counting pills, but can also equally play a role in producing manual errors with pill discounts. We were watching Parata for many years, and we're extremely impressed with the capabilities in the way they were creating solutions to meet the needs of the most critical needs in the industry. Over the past few years, we started focusing on the need for medication management and care settings outside of the hospital, and that's where Pharmacy Automation comes into play is a key driver of our strategy. A lot of focus and discussion recently on new care settings has been on the shift from the hospital to the home. Let me share a quick perspective on another care setting we're focused on. That's long-term care. As the long-term care landscape evolves to accommodate aging population, pharmacists in these settings have unique needs and challenges. Our packaging solutions like the blister cards and pouch packaging are helping drive medication adherence for patients in these settings who often need additional support and guidance in managing multiple and sometimes complex medication plans. And that's another important aspect of our work. Pharmacy Automation is not just about workflows and efficiency. It's about compliance and making it easy for patients to take their medications exactly as prescribed.

Let me start over. My mic is off. That's really helpful, and I think we can all appreciate how beneficial this all is for the health care industry and for us as individual consumers, especially Jason, when you mentioned the wait times at the pharmacy, which I think to your point, we've all seen or experienced. And I also think it speaks to why the Parata acquisition made so much sense for BD. So if we can turn to our Pharmacy Automation portfolio and talk about what some of the key products that we have within it.

Yes, of course. Thanks, Francesca. Broadly speaking, the portfolio offers robust medication packaging and medication storage solutions. First is Medication Packaging, which is the Parata acquisition, which was brought to BD. Here, our core offering includes vial, blister and pouch packaging. A vial is a small pill bottle that you've all received from your local pharmacy. Blister cards are typically made in a 28-day medication card with 1 or several medications in each blister in the card. These are typically used in nursing home settings. Pouch packaging is a method of packaging either a single or multiple pills in a single strip pack like a [ mini block bag ]. Pouch Packaging is used in nursing homes today as well, but also in hospitals and growing in the retail segment as a compliance packaging solution. I think now I'm going to turn it over for a brief video highlighting our Parata Max 2 machine, which is a high volume -- high speed and volume Vial Filling Robot. [Presentation]

Okay. So hopefully, that was helpful to give you a perspective on the type of automation the product is bringing to the market. And again, that was an example of our vial filling machine, but all 3 of these solutions can provide a stand-alone offering like in a retail pharmacy or a hospital pharmacy or as part of a more comprehensive central field location, which I can best describe is like you think of a mail order site or a hospital medication replenishment facility, packaging med centrally, but then distributing back to their hospitals within their network. The second broad solution is our medication storage and retrievable solutions, which is our Rowa business. These large robots, which think about can be as wide as 8-feet tall, 12-feet long and 6 feet deep sit in the back of a pharmacy and store and manage all the products and bringing those products in inventory to the pharmacists to provide to the patient. This offering is mostly outside North America because medications outside of North America are packaged and manufactured in packs, not in bulk form. Thus, this creates a different workflow in need. And so our robotics elevate the standard of service and reduce potential for human error. So you can see the portfolio is driving the need for efficiencies for our customers and the millions of patients they serve globally and doing so in settings beyond just the hospital market.

Yes. And just building on what Jason said, let me add saying Pharmacy Automation is not entirely a new concept to BD. We expanded our footprint in this market through the acquisition of Parata which, of course, generated a lot of interest in our ability to grow in this area, but Rowa first establish our footprint in the market and then the acquisition of Parata marks the next logical step in our journey. With Parata, we've added a new range of automation solutions like vial filling and pouch and blister packaging. So as you can see from what Jason just laid out, our offerings are comprehensive and each meet our vision of helping make medication management safer, simpler and smarter.

I agree. And the video truly brings it all to life in terms of what automation can do in this particular space. And so I want to just take a step back now and take a look at the market, Puneet and Jason, starting with the trends that are driving demand for Pharmacy Automation solutions? And also if you can touch on how big the market is and what market growth looks like?

Absolutely. So Pharmacy Automation is a greenfield opportunity for BD. In broad strokes, I would highlight that the demands placed on clinicians along with the market consolidation are driving a $1 billion end market with a 10% [indiscernible]. We see this as a space that we can truly own and grow over time. Our solutions are designed to create efficiencies and empower pharmacists to do more meaningful work. I'll turn it over to Jason to provide a bit more granularity on why we're positioned to address these 2 critical trends that makes us better than anyone else.

Thanks, Puneet. So with the ongoing market consolidation, which obviously includes our core hospital customers that goes beyond in the retail setting as well, there's a greater need for standardization of workflows, which can be accelerated through technology in our portfolio as well as the need for automation to drive efficiencies with scale. We don't see the issue of labor shortage and wage inflation going away anytime soon. And this is driving more demand for technology that addresses the most time-consuming and mundane tasks in the pharmacy, like pill counting and sorting. This is particularly critical right now given the challenges of hiring and frankly, retaining pharmacy technicians. A good tangible example I can share is with our blister card automation. Small pharmacies make these medication cards manually by literally placing pills in each of the 28 blisters in a card. You can imagine, this is not scalable and can lead to human errors when picking up to over 150 pills for just 1 individual patient card. Our automation provides a higher level of safety and we can reduce the chance of human error.

Okay. So a large and growing market, and again, a very compelling case for automation in part to avoid human error when you have so many pills to count. So we've talked about what Parata brings to BD. But what do you think BD brings to pharmacy automation?

That's a great question. What's great about this story is that we brought together 2 organizations who share a relentless passion on making health care more efficient for our customers. That is in a large part why the integration has gone so well. BD has a 125-year history of solving problems and driving innovation for our hospital customers. Traditionally, Parata has been driving growth in the retail and long-term care settings. So we saw this very real and immediate opportunity to help expand adoption of Parata solutions into the hospital setting. Our integration of Parata into the BD way has also centered on enhancing both scale and scope. I'll turn it over to Jason, who can share a few impressive operational examples here.

Thanks, Puneet. So here in San Diego, we recently convened our customer advisory group, which really consists of some of our largest geographically dispersed hospitals in the U.S. This group identified the need for a more sophisticated centralized Pharmacy Automation solutions as one of the top key priorities. So we know the needed demand is there in the hospital market, and we're taking steps to add to our ability to supply the market and commercialize these solutions. A key focus has been on creating simplicity and predictability in product supply chain. We've certainly been able to leverage the depth and breadth of BD supply chain and footprint to add to Parata's manufacturing capacity. We also see a longer-term opportunity to commercialize Parata on, frankly, a global scale. For example, Parata's blister card packaging offerings are mostly sold today through Parata in North America, but we know that Europe, parts of Asia, we have customers who are already using blister packs. So there's a real opportunity for us to put some of these product products in the existing bag of our sales associates around the globe. I'd also like to emphasize that culturally, our organizations are very similar. And now for Parata employees being part of BD, there's significant more opportunities for professional growth and development.

Thanks, Jason. We've been saying for some time since the acquisition that the integration has gone really well. So I'm glad that everyone can hear it firsthand from both of you that this is indeed the case and that there's more to come. So Jason, just staying with you, let's turn to the competitive landscape. What can you tell us about the competition and what differentiates our pharmacy automation portfolio from the others?

Yes. Thanks, Francesca. So on its own, no one in the industry offers the breadth and scale of Parata's offerings. Integrating these into MMS enables us to provide a more comprehensive and seamless workflow for our customers from filling, packaging and ultimately storing the medications like in a Pyxis machine in a hospital. There are distinct competitors and some of the unique products within the pharmacy automation portfolio like ScriptPro, for example, has a vial filling automation, Innovation Associates with central fill solutions and vial filling and even Omnicell with blister card automation. But no single competitor in the market has the breadth and depth of our portfolio. I shared about our core product areas with the Pharmacy Automation platform earlier, which, maybe just a little bit more detail on what we're seeing among our hospital customers. And these customers operate outpatient pharmacies, clinics, long-term care facilities. Our portfolio allows us to support medication management in a much broader way than our traditional competitors do. Regarding scale, what we really liked about Parata is the scalability of the offerings and how that strategically complemented our business. The packaging technology we talked about can be utilized in a stand-alone site like a retail store or a hospital pharmacy, but we can also offer a much broader central fill facility that might include both vial and pouch packaging for mail order pharmacy or those serving long-term care patients. The breadth and scale are a true competitive advantage. There are smaller players in the industry, but no one can serve customers across the care settings with customized solutions unique to the environment the way we can.

Thanks, Jason. That's really helpful. Puneet, just coming back to you and thinking broadly again, are there opportunities to integrate Parata's offerings with some of the other MMS offerings?

Yes, Francesca, that's a great question, and we get it from our customers, too. The short answer is absolutely. This is one of the core strategic values of the deal model. Let me share just a tangible example of what this looks like in practice. First, in U.S., we see a fast-growing trend across our hospital customers in centralizing the medication preparation process for the multiple hospitals. Earlier this year, we had a great win with Baptist Health in Kentucky, which will begin using our technology to build a central fill mail out of pharmacy that will serve each of the 9 hospitals. So with Parata, as Jason mentioned, their core offering includes automation solutions for medication packaging in these central fill distribution centers. And if you think about it, once package, the medications are stored in a Pyxis machine in the hospital, so we see a big opportunity to drive customer value in integrating these solutions to provide a much more streamlined value chain for medication management. And while a less mature market, I'd also say we see similar opportunities in other regions across the world with our hospital installed base with Rowa solutions today.

Yes, agreed. That's where the power of BD and our size and scale is a differentiator. Jason, I want to come back to you. As you think about some of the customers you've been able to attract since the acquisition, what is our value proposition? And how has it resonated in the marketplace?

Yes. Thanks, Francesca. The value proposition is pretty clear and simple. Really, we're automating what was previously done manually. With the wage inflation the market has seen in the last couple of years, this can help customers see really immediate and meaningful results. And as customers look to centralize medication filling across segments to drive economies of scale from traditional retailers to our hospital customers and closed door pharmacies, our solutions are relevant in this growing segment as well. I can just share a few tangible examples. So the CEO of Tyson Drugs was recently quoted in drug topics, reinforcing how our solutions have improved workplace culture. He said, the biggest difference between a pharmacy that's gained control of their workflow versus a pharmacy who hasn't is the work environment. With these processes and systems running efficiently, there's a calm that permeates the whole pharmacy. The chaos is gone. Our culture and team morale improved. And as Puneet previously mentioned, we see time is the ultimate value add in a pharmacy right now. Our customers are certainly aligned with this belief. One customer recently shared we're now able to service -- provide service to our patients that enhance the experience with our systems. Another set our staff can now be more patient-facing and provide more hands-on care. In summary, I'd reiterate the value proposition is clear as our automation addresses head on the labor shortages and inflation challenges our customers face across all these segments, and we can meaningfully impact patient care as well by both reducing errors as well with smarter workflow and allowing health care practitioners, frankly, more time to spend with their patients, and we don't see the industry drivers changing anytime soon.

Thanks, Jason. I think we could end on those great customer anecdotes you read. But instead, before we wrap it up and start Q&A, I want to ask you both what excites you about MMS and Pharmacy Automation in the next 12 to 24 months.

Yes, maybe I can go first. So look, at the highest level, Pharmacy Automation brings a net new growth vector for MMS and open doors in a faster-growing space. It's been nearly a year since closing the deal. And as you've heard from Tom and Chris, we're ahead of the model. The strong growth that we've experienced within MMS is prove that our strategy and investment in this area are paying off and also creating a solid foundation for future growth with new opportunities for our customers.

Fully agree, Puneet. It's been a really a great year. We've made so much progress and we can continue to build on in the future. Frankly, Parata's unlocking new opportunities for us, particularly in new care settings. And with BD's existing network, we're excited about the opportunity to expand product solutions outside retail and really more into the hospitals and with the central field facilities. So as we look ahead into next year, we can continue to scale the business and frankly, globalize it in a meaningful way.

Yes. And culturally, BD and Parata are stronger together. I want to recognize and thank Jason and the Pharmacy Automation team for further supporting our vision to help make medication management safer, simpler and smarter. Our acquisition of Parata has gone incredibly well. As you've also heard from Tom, it has demonstrated that BD can execute and win with similar-sized deals in the future. So to close, I wanted to highlight how Pharmacy Automation builds on BD's legacy of transforming health care and catalyze new phases of growth. Everything currently in BD's durable core today was once a breakthrough innovation, where we identified new forces with the potential to reshape health care and grabbed hold of the problem by bringing forward new solutions. So when you think about is today's transformative solutions like pharmacy automation becomes the durable core of tomorrow. That is the promise of Pharmacy Automation and there is truly so much to look forward to.

Great. Thank you both again for the comprehensive overview of MMS and Pharmacy Automation. Puneet to steal your words, I feel smarter now. And hopefully, our audience does as well. Since the acquisition of Parata, there's been a really high interest in the space and learning more about our acquisition and strategy. So I'm really thankful for this overview for our investors and analysts that are dialing in. I now want to give the sell-side an opportunity to interact with you and ask their questions. So I'll turn it over to the operator for instructions and to open the line up for Q&A.

[Operator Instructions] We'll take our first question from Robbie Marcus with JPMorgan.

This is actually Alan on for Robbie. But just a quick question and then a follow-up. When we think about the market, a lot of the focus today was on what Parata brought to the equation and your efforts really outside of the traditional hospital setting. But I was just curious, when I think about that $1 billion and the 10% growth CAGR, how should we think about the role of Pyxis and your legacy portfolio and really driving that growth? Should we think of the hospital pharmacy automation section as still being an attractive growth driver? Or is the focus really more on outside of the hospital modalities now?

Yes. Thank you for the question. And maybe I'll start. So look, clear opportunity in the hospital central pharmacy, where we sell many Pyxis solutions today including the Pyxis Logistics, our inventory management, our C2 Safe and our narcotic control solution. Our customers also have pouch packaging solutions in the same pharmacy settings, and we can bring this incremental customer value by integrating the Parata packages with our Pyxis Logistics, as an example of innovation. Another point I'll highlight is many hospital customers also have central fill facilities to centralize the packaging, either mail order, outpatient pharmacies for their hospitals. And this is where the Parata brings solutions to the market. And in many instances, it's the same buyer of these technologies in the hospital. So we can add incremental value to the customer by integrating the central fill solution with Pyxis medications where the package medications are stored, if that makes sense. Yes.

And then as a quick follow-up, Parata was clearly a very interesting acquisition for Becton to really shore up their leadership position in the market. We've seen other competitors make their own strategic moves to move into the market. As you said, nobody is quite as comprehensive as you. But when I think about continuing to grow your presence in pharmacy automation either organically or inorganically, what are some of the needs that are still unmet beyond the ones that you are currently addressing with your portfolio today?

Yes, it's a good question. So most of our focus has been on the -- if you think about -- reflect on the automation I described earlier on the kind of the hardware automation piece of Pharmacy Automation from packaging and storing the medications where we probably see the biggest opportunity going forward is more on the software side to enable those better workflows for these customers. That was not a -- if we step back and look at what Parata's focus was, again, it was mostly on that hardware side. And so that's where we see an opportunity to combine with the capabilities that we have within Pyxis and Alaris in the MMS portfolio, how do we bring more intelligence. If you think about data and analytics, so that these large central fill facilities I described could be more efficient, drive, -- it's not just the hardware automation, but they need the software workflows to drive even more enhanced capabilities.

Yes. And just building on what Jason said, I mean if you think about this, there is software in terms of patient management software workflow solutions. But there is another element where there is in this industry, no state-of-the-art pharmacy today. In many industries we play in, there are benchmark that are done across different settings. Today, we lack that. So as we bring a notion of connected medication management, that is where we provide the analytics, the tools for pharmacies to really understand and provide visibility into their operational and clinical workflows, and that is an unmet need in totality where they know what good looks like through analytics and insights and then can start to benchmarking where they put their focus and emphasis on.

And we'll take our next question from Matthew Mishan with KeyBanc Capital Markets.

This is Brett Fishbin on today for Matt. I think you briefly just started touching on some of the software opportunities, was curious. I think around the time of the deal, you talked about how Parata Max 2 could lead to some increased integration with other connected solutions from [ back then ] like MedKeeper or HealthSight. Can you just talk about a little bit more how you're integrating from a software level with other platforms and how that advances the connected care strategy?

Yes. I can give a tangible example. This is Jason. So -- the MAX 2, again, it's our vial filling robot, right, traditionally used in retail. But if you think about an IDN, a hospital IDN, maybe 10 hospitals, they operate outpatient pharmacies as well, which are just like retail pharmacies. So in there, you could have a Max machine to fill -- to fill the vials to be dispensed to the patients. Well, that inventory is coming from the central pharmacy going to the outpatient pharmacy. So by better bringing connectivity and visibility so that they can manage the meds once it leaves central pharmacy to the outpatient pharmacy where it's going to be filled in the prescription for the patient. And a lot of these medications are narcotic medications, you can imagine. So there's a need for high visibility and control of that. Did that answer your question or give you a perspective?

And maybe just to build on this, what Jason said, great question, by the way. I mean I'll paint the picture in kind of 3 frames. One is the scalability of central fill in how we think about higher scripts per shift that allows innovation to happen in this space. The second is the integration of Parata solutions with legacy Pyxis solutions in the hospital. Think about the ATP pouch packager with Pyxis Logistics, really providing that inventory visibility in the pharmacy settings. And then the last piece is this connected piece around data and analytics, combining our solution, HealthSight, that we have today with more Parata where they can be connected into the cloud in the future. So some elements of this are based on the infrastructure where we can provide those tools. Other elements are connecting Pyxis Logistics, med stations, with Parata offerings like ATP Pouch Packager, which provides better workflow visibility in that regard.

All right. I appreciate the color a lot. And then just as a follow-up, it seems like the value proposition to these different care settings is very intuitive, and it seems like there's a lot of natural demand in the market, but just curious kind of from, I guess, selling perspective, when you go out, are there ways to kind of frame or quantify levels of savings and efficiencies that customers are gaining through these solutions? Like how much -- like how much does that kind of play into the selling process?

Yes, I can answer that. So yes, for sure. Now it's going to vary depending on the scale and size and volume within a particular care setting, whether it's a closed door pharmacy, whether it's a retail store or a hospital inpatient pharmacy. But the reality is they can't find the workers today with all the labor shortages. So they can certainly calculate what the ROI will be to their specific circumstance based on the labor savings that we can demonstrate through the automation. But at the end of the day, a lot of times, they can't find the workers today. And so they need automation just to run the pharmacy and whether, again, that's for retail, hospital or a closed door pharmacy.

All right. Awesome. And then last question for me. I think you guys definitely clearly frame the U.S. opportunity as you see it today. You started talking a little bit about the OUS opportunity. Are there some initial data points you could provide around the market opportunity? Or is it a little bit early to go that far?

Yes, I can start. I'll start with that. So one, -- if you think about Pharmacy Automation business, about half of it today for us is with the Parata acquisition, but the other half our Rowa business, which is outside North America today. So same drivers are driving Rowa in retail and hospital pharmacies outside North America, which is labor shortages, wage inflation. It really, again, automates manual tasks. And so certainly, that we see that business continuing to grow. And for the Parata portfolio, I mentioned earlier, if you think of the 3 packaging formats they have, 2 of the 3, which are both pouch packaging and blister card packaging are used globally. Every country, region in the world, they drive compliance packaging with either blister cards or pouch packaging. So we have those 2 technologies now that we can globalize and leverage our broader BD commercial teams to drive growth there.

And to your question about the size of the market, I go back to this is a greenfield opportunity, right? I mean we see -- I'll just pick on one, U.K. as a great opportunity, developed market, similar challenges. This is where we have an opportunity to continue to shape the market through solutions like Parata and we're making progress on those fronts.

[Operator Instructions] We'll take our next question from Matt Miksic with Barclays.

This is super helpful. So I have 1 question and 1 follow-up. Maybe talking a little bit about the areas where you're seeing the most demand maybe kind of away from your traditional Pyxis footprint in the U.S. in particular in hospitals. Can you talk a little bit about the mix of either more centralized kind of sort of like capital installations for these platforms? Or -- on the other end of the spectrum, more ASC elements of installation just as the growth in ASCs is really kind of taken off here in the last couple of years? And 1 follow-up.

Yes. Thanks, Matt. So you -- a couple of questions there. About the ASCs, are you talking about ambulatory surgery centers, I assume?

Correct.

Yes. So we do see -- so we do have medication storage solutions for ambulatory surgery centers. I'd also categorize that as long-term care, behavioral health. So we are seeing a pretty significant increase in need there. And really, it's because as higher acuity care is moving outside the hospital setting, the needs for medication storage and management, but also narcotic storage in these settings is becoming dramatically more increased today than it was yesterday and largely because of regulatory requirements, et cetera. So we're seeing pretty significant need in the market there and actually, frankly, strong growth in that segment.

Great. And then just as a follow-up, I mean I think you mentioned a little bit about the sort of like what is good benchmarking yourself at hospitals against the -- against standards and things like that. You have in other segments, what might be considered the opportunity to sort of create a pretty significant ecosystem around the installed platform of Pyxis and the expanding utilization of Parata. This sort of connected care opportunity, 1 way [indiscernible] we want to analyze our information. We want to assess the organization, know where all this data is going. But in another way, there is a sort of a sticky interactive connected care opportunity, where and when, I guess, we got to hear a little bit more about that?

So let me try to answer that for you. So think about an IDN customer that has 10 hospitals today, and they have Pyxis in all the hospitals up on the wards to manage the medications. Today, they might be packaging those medications and storing them in the 10 individual hospital pharmacies. What we're seeing when we talk about central fill facilities is where this IDN is going to open a 50,000-foot facility, do all their packaging centrally and then redistribute those back to the 10 hospitals. And if you think about that as just -- it's no different than a Walmart, another retailer in large distribution network. The value we can bring is with Parata solutions, where we run all the packaging in that central fill facility. But then those medications are delivered to the hospitals and stored in a Pyxis machine. So the better tighter integration we can provide, if you think about it from a logistics management perspective, we start all the way from packaging, all the way to where those medications are stored for the nurses on the wards. Does that help?

Yes. Yes, it does. And I guess I was thinking more in terms of also extending the edge of that network to points like the nurses or points like other elements that we see. We see other folks who have a footprint in hospital equipment sort of moving into sort of like more of a mobile connected care opportunity within the hospital care network. That's kind of what I was also kind of pointing towards. But I don't know if you have an opportunity there, if you see an opportunity there when you might start to hear more about it.

Yes. I mean I think it also comes back to focus, right? As we think about the Connected Care, I mean, certainly, when we think about it, Matt, the near-term opportunities, is building sustaining our strength in the retail channel, where historically, Parata has been very, very strong. The next frontier for us is also being equally strong in the hospital market. That's where BD's scale comes into play. And then the other piece, Jason alluded to it, where we see opportunities outside the 4 walls of the hospital is long-term care facilities. When you think about the blister and the pouch packaging that Parata brings into play, clearly, it's a big play with long-term care, baby boomers into these settings. So starting with retail strength, then moving into hospitals, continuing to expand our reach and long-term care facilities is the way we're thinking about this connected management coming into play.

And we'll take our last question from Jayson Bedford with Raymond James.

I apologize for the basic or naive questions here, but I had a few related questions on market sizing. I think at the time the Parata deal, I think you mentioned a $600 million U.S. pharmacy automation market. Is this now a $1 billion market? Or does the $1 billion include other segments beyond Parata. I'm just not sure if I'm comparing apples to apples. And then I'd love to know your share of this market.

So Jason, when we talk about the $1 billion market, growing 10%, [indiscernible] it's the Pharmacy Automation in totality, right? So -- and just to kind of put a context around it, the Pharmacy Automation includes Parata but also includes Rowa, which is predominantly our business in Europe. So that inclusive is the size of the market. Look, we don't talk about our share positions, but I go back to always that there is -- this is a greenfield opportunity. We look at how many pharmacies are struggling with wage inflation. We look at how many pharmacies are struggling with labor shortages. And it's incumbent upon us to shape those markets to continue driving up those solutions. It's not so much like the market exists like Pyxis and infusion, it's more greenfield in that regard, but we continue to see strong demands in different care settings, and we're working to increase our capacity in that order as well.

Okay. That's very clear. Maybe just as a follow-up, of the $1 billion market, how much of this is a capital sale versus some sort of recurring portion?

I mean maybe Jason can add color. So maybe if you think about the portfolio in totality, a large share is capital, but we also -- you think about the ATP Pouch Packager, that is where the consumable element comes in, where these medications are packed in a pouch that becomes the consumable. What we also see is a very strong service contract capture rate on the capital equipment. So in broad strokes, what I can say is consumables, along with service capture rates become a very attractive model for us in terms of recurring revenue that comes with the installed base. And I'll defer to Francesca and Adam to see if we can quote numbers here, but suffice to say that it is a recurring revenue that comes with this installed base as well.

Yes. And maybe just to add additional color on this from -- across the Pharmacy Automation portfolio, if you think about the automation we talked about and you saw the video, virtually 100% of every one of our customers signed a long-term service and support agreement. So that is a big portion of the revenue going forward, which is recurring in nature because these are long-term contracts.

And it appears that we have no further questions at this time. I will now turn the program back over to Francesca DeMartino, for any additional or closing remarks.

I just want to thank everyone for dialing in. I know it's a busy time, but we appreciate you taking the time to chat with myself and Jason and Puneet. As I mentioned, we'll continue to do these. And the next one will be on September 8 at 11:30 Eastern Time, and we're going to feature our BDB business. And then while I have all of you, just please keep in mind that we will go as a company, we'll go into our quiet period on the 16th. And so if you want to chat with us before then, please reach out to the IR team. Otherwise, have a great day, and we'll talk soon. Thanks again.

Thank you. This does conclude this audio webcast. On behalf of BD, thank you for joining today. Please disconnect your lines at this time, and have a wonderful day.