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

Good morning. I'm Larry Biegelsen, the medical device analyst at Wells Fargo. It's my pleasure to host this fireside chat with the management team from BD. With us, we have Tom Polen, Chairman, President and CEO and Chris DelOrefice, Executive Vice President and CFO. In terms of format, as I said, it's going to be a fireside chat. If anybody has a question they want to ask, just raise your hand. And so with that, we'll jump in. Tom and Chris, thanks so much for being here.

Great to be here.

So Tom, let's start with Alaris, which was cleared recently by FDA. It was obviously a very important milestone for the company. I think you said in the past it was your #1 priority. So congratulations on that. I'd love to hear Tom about the next steps in returning Alaris to the market.

Sure. So as you said, it's been our #1 priority for the last several years. And so it was a huge achievement, we've got Mike Garrison here as well, who really led that effort heading up our Medical segment had formerly run MMS. So with now Alaris cleared, which is fantastic. And just a reminder, Alaris was cleared against the most cutting-edge standards for the FDA so this has all the most advanced cybersecurity, wireless connectivity, WPA 3 and a number of other upgrades. This isn't just the product that got put on hold is now cleared, there are significant upgrades across many different attributes in this product. So we really feel great about the performance of the product. Of course, the attributes of connected medication management are stronger than ever for the platform, and it remains the only truly single platform for infusion that can do all modalities and one and there's nothing else from anyone even in the pipeline that will end up being able to do that less well, all the connection to all of our other medication management systems. So that's fantastic. The other thing is, of course, as we are focused on remediating getting the 510(k), we had to put innovation on Alaris on hold. Now with the new 510(k) that baseline Alaris where we're now reaccelerating innovation on the platform. And so we already have next 510(k) submissions planned. We already have additional innovations in the pipeline that we've added in. And so we're really extremely excited about not only that platform, but continuing to drive the connectivity between Alaris and Pyxis and the rest of our medication management solutions. As we had shared on our call, we've already contacted essentially all of our customers on Alaris, extremely positive feedback, and we've begun discussions around remediation process. And so that was now our #1 focus is implementing the remediations. We've been advancing those discussions with the FDA for our discussion on the quarterly call. And again, the customer feedback continues to be positive. So remediation, we makes our focus.

That's helpful. We've got a ton of questions, and I don't want to make sure we don't spend the whole time talking about Alaris, but I think people are trying to understand kind of the financial impact. You've had $100 million a year in medical necessity in the past few years, you talked about $200 million in sales next year. What goes into that $200 million and the questions I've gotten around remediation. If you -- are you replacing the pumps for free? And are you able to charge? And if you were place like remediate a large number of pumps, is that essentially eliminating the backlog?

Yes. So if you think about the backlog typically comes and the majority of Alaris sales historically have been from people replacing aged fleets, right? So the pumps after 7-, 8-plus years, typically, they would then purchase new pumps. And so aged pumps in that 7-plus year time frame will continue to be replaced and paid for by the customer in most cases. So that would be normal upgrade to the new Alaris product, right, as it reaches end of life. Pumps that are earlier in their life, we would be able to, for the most part, field upgrade those to the current version of the pump. And so that's our approach. Of course, there's -- there are many of them, but not as many as they normally are because we weren't actively selling for the last 3 years. And so as you think about how what portion of the fleet is under 7 years versus older than 7 years is kind of the way we think about it. So replacement versus field remediation by our service.

So if a pump is over 7 or 8 years old, and it has to be remediated, can you charge for that? Like where...

We replace those pumps.

You would replace them for free?

Not for free, no.

There is a charge?

Just like it would be normal, of course, as has always happened.

Okay. And so why only $200 million next year? Why only $200 million?

So we're obviously early in the process, as we said last time. It is going to take some time to ramp up engaging with customers. Again, we're starting from a spot where we weren't able to actively engage with customers around expected timing of a 510(k), et cetera. And so as soon as we got the 510(k), we could start that discussion. We can start capital planning. We can obviously start ramping up manufacturing, et cetera. So again, we'll continue to give updates as we progress, but we think that's a good number as we start planning for '24.

How long will it take to get back to the $400 million run?

We've said over a couple of years' time frame to get into that. Not in '24, it's not our expectation.

Yes. I think let's see how '24 plays out, right? It is early. We're just a month over this. I think engaging with customers is going to be the critical factor here. The readiness on their side, the scale-up activities that Tom articulated. I think the nice thing to -- if you step back, right, one, to your lens, this provides a high degree of certainty, a critical kind of uncertain item that was out there. So not only does it derisk, but it's a key enabler to our 5.5% plus. I would always elevate it back up and think about how do you think of the BD growth profile. You get the balance of reliable, durable growth with an outsized strong growth profile with what we're doing from a transformative solutions. So I think we talked about this happening over a multiyear period. And you should think of Alaris as contributing to that plus side of the 5.5% over a multiyear period. In addition to that, it gives us a platform to innovate against as well. So if you think of kind of future runway. Now we have a clear pump in the marketplace, we can continue to drive our innovation agenda. And I think the other thing is in addition to Alaris on its own, bringing the power to bear of our connected care strategy, right, in our broader medication management portfolio, whether it be Pyxis, HealthSight, et cetera, there's more opportunity there as well. And when you think about the value of solutions that can help make things safer, simpler and smarter. When you think of nursing shortages, labor, et cetera, this is sort of in the sweet spot of that. So I think it offers a needed solution in the health care system as well. So I view this as a longer-term growth catalyst. I don't think you'll see necessarily a big spike. It goes away like you should actually I think feel good about a nice growth catalyst over a multiyear period.

I think one of the other things we're seeing is, of course, not only did we -- this is by far the most comprehensive complex 510(k) in the history of infusion pumps, right? And it's very likely almost positive, it will be because again, it's the central PCU, the LVP, the syringe pump, the PCA pump and interoperability, all simultaneously cleared in a single 510(k). There's nothing even remotely even than anyone's road map. And so what does that include this interoperability which we were on hold also for 3 years. Again, we have, by far, the largest footprint from an interoperability with electronic medical records more so than I think everyone combined. But tremendous opportunity with still relatively low penetration of our customer base. And with nursing shortages and the focus on labor efficiency, that's a tremendous opportunity. There's a great study out of Hackensack, for example, just before we put the product on ship-hold. There's 1 million key strokes per year savings for nurses. That's 1 million chances to get an error now prevented for hospitals. It's a lot of time that's just any time I was actually out in the field last week traveling and speaking to a number of nurses who had interoperability. They love it. And once they get in there, they will not let that go. So we're seeing a lot of great interest to not only in just Alaris itself being back, but in okay, how can we now drive interoperability with the electronic medical record, taking advantage of this additional 510(k) that we just got for EMR and around.

So one more financial question. There are people who have long enough memories to remember when the ship-hold occurs and the EPS, the earnings impact and the margin assumed on that. How are you thinking about like giving that back to shareholders?

Yes. So we had talked about and obviously, a lot has changed since the ship-hold. We did go through a pandemic macro complexity, inflation. We haven't been sitting idle as well during that time. Our most recent communication we had talked about, they're being about 80 basis points of margin opportunity to get back as a result. If you remember when Alaris went on ship-hold, we did maintain our sales service organization and had other investments we had to make. So that 80 basis point is something that we had talked about that had been a headwind to our margin historically, something that would come back over time. It was part of our BD 2025 strategy. So again, I think that you'll -- over a multiyear period, there'll be a normal ramp-up as Alaris comes back. And over time, you'll get that 80 basis point of margin improvement back in. So the way to think of it is we're well on track to our 25% margin goal by 2025. As we exit this year, we'll be about 70% of the way towards that goal. We now have Alaris, which is another added catalyst that was always part of that. In addition to that, we have a strong pipeline of simplification initiatives. So I think in addition to the growth profile, we talked about this, this is also a nice catalyst from a profitability. In the short-term standpoint, as I had shared on the earnings call, the -- it is dilutive to GP just when you think of consumables versus capital installations, which is typical, right? So dilutive to GP and there are -- while we maintained a lot of costs, there are some additional new variable costs, obviously, shipping. There's marketing-related costs and communication-related costs and continuing to actually maybe early on ramp up service activities, there's labeling changes that have to occur. So it won't all just drop through, but it'll be an important contributor to earnings even next year and then certainly beyond next year, I would expect it to further ramp up. So again, I think a nice derisking and add to our 5.5% plus on the growth, but also certainly a big important enabler to achieving our margin goals.

That's helpful. All right. So let's shift gears. Tom, you guys, given your size and scale, you have a global presence, you have a unique perspective on the health care environment. So I'd love to hear an update from you on just the macro trends. It sounds like on the fiscal Q3 call, things were generally getting better. I'm sure not everything is going at the same pace, but I'd love to get an update from you.

So I think very similar to the last quarterly call. We continue to see stabilization in the U.S. non-acute continuing to outperform the hospital inpatient sector. Capital equipment, we've discussed that we haven't seen really any barriers pop up from a capital equipment at least within the spaces that we've been serving. We see with the strong value propositions associated with labor savings and efficiency, which a lot of our capital solutions are on the pharmacy robotics and automation. As a reminder, right, we have a $500 million plus pharmacy robotics business now growing teams. We see strong value propositions there is that's helping customers face the labor challenges that they have. Same thing with laboratory automation, our laboratory robotics business and microbiology is doing very well. We're continuing to see strong demand for those types of capital solutions. We talked about dispensing last quarter that had a phenomenal quarter. We're continuing to see strong capital placements in those areas. I know not everyone may be seeing that, but at least in the spaces we're in, we've seen that. As we look beyond the walls of the U.S., I'd say Asia, we continue to see in China, and we're watching that area carefully. I was just in China a month or 2 ago. We are seeing value-based procurement, and we talked about this on the last earnings call, start to ramp back up after COVID, right? And so just generally across the industry, and these are comments just industry-wide. If you look at the number of VoBP tenders that are coming out, they're higher than they were before COVID, the numbers of provinces participating in a given tender has gone up since COVID the numbers of different products and each tender has gone up since COVID. And so we expect that trend, not only that we're seeing that industry-wide in '23, we expect that's going to continue in '24. We also watch very carefully some of the new anticorruption policies that were put in place. And it's just on the team with our team in China yesterday. We are hearing -- again, this is an industry-wide comment, we're hearing physicians starting to do less overtime in the country with some impact on doing lower procedural volume as a result of that policy. The crackdown has been on physician and hospital executives as a result of that. And so they're being more cautious to not look why are you doing extra over time and why are you doing additional procedures. So they're kind of pulling that down a bit. We're watching that carefully. I think that's -- again, that's an industry dynamic, not something specific to DB, but industry-wide, we are seeing that, and we'll watch how that evolves.

So China is about 7% of sales for you guys. I think you guys had a good fiscal Q3, good growth.

Very strong growth.

You've talked about 6% growth in Q4. And I think it's 6% next year, Chris 5.5%, with the fiscal '24 base organic. 5.5% you said or...

Base organic. With Alaris, it was around 6% is what we had said. Obviously, that's early. We mentioned that we're watching these various dynamics as we put together our final plan. There were 2 other adjustments to make sure everyone is clear. We also have absorbed -- we expect COVID-only testing to continue to go down. There was maybe about 30 basis points headwind there that would moderate that a little bit. And then, of course, we have the surgical divestiture that we executed, that's an inorganic adjustment of about 70, 75 basis points on growth. But yes, our base organic growth of about 6% with the tailwind of Alaris.

I guess what I'm wondering is the anticorruption initiative or policy came up for most companies after they reported calendar Q2 earnings, right? So how much -- I guess, how much did you take into account? I know you did say in the fiscal Q3 call, China is a bit of a wildcard. How much conservatism for China was embedded in the Q4 guidance and the fiscal '24 initial color?

I think we'll continue -- obviously, it wasn't even out when we gave that guidance. We'll continue to watch how that evolves. I think we've got a strong team in China, but it is a very dynamic environment. So any other comments on that, but it is something that we're -- we're seeing VoBP continue, but we are seeing this policy in place. And again, just yesterday was the first I had heard of -- and I think probably everyone in the industry is starting to see, okay, what's the impact of this policy, and I'd say the initial impact that we're seeing -- that we're starting to hear about is less over time by physician, which means less procedure volumes in certain locations. What other dynamics happen? I think that it's going to continue to evolve in terms of what actions are happening to the physicians and the hospitals, right? The anticorruption policy is not necessarily only that tech companies that's on physicians and hospitals which is by nature, going to change their behavior as to how they operate. And I think that's what everyone's -- the policy just came out, so everyone is watching to see how that is going to be changing position and institutional behavior. There's obviously also been an impact and number of conferences have already been shut down in China, right, where med tech companies and physicians would typically get together. They've canceled a number of those. Again, physicians not wanting to have a perception of engaging with companies in an appropriate way. So those things are typically ways where they learn about new products and new technologies and get trainings. And so we'll watch to see is that something that's going to continue? Is it going to start back up. I think everyone is watching.

Tom, you talked about VBP ramping up. Are there any new -- you went through a period of VBP, like most large companies have and that said you're certainly not unique in that regard. Are there any new categories popping up that impact you directly.

I mean there certainly are new categories that pop up. Probably for every company, there's new categories popping up because they're doing more than they did in the past. Again, that's something that we're managing and working through. But we do have -- we've had catheters in the past. We've had flush now that's going through in some areas of VoBP and then there will continue to be areas, no doubt, that they'll be added in the future as it will be for other companies.

Chris, you wanted to add something just?

I mean, bigger picture, right? China, like it's obviously an extremely attractive market. BD has always differentiated ourselves from a performance standard. I don't think anyone is going to be immune from the dynamics that could play out in the market. So we're watching it. We're probably a couple of months in. I think the last earnings season, folks started talking about some reaction to the economic dynamics in the country and seeing some market softening coupled with some of these other nuances, but those are going to be pervasive across. It's still only 7%, 8% of your sales, right? Like you're not talking about -- you're talking about growth adjustments on the fringe, depending on what happens. And I think the key thing is BD has always -- our kind of posture has always been one. We have a big portfolio, right, whether it's reliable, durable growth profile. We still have significant opportunities in other areas. And how do you best position yourself and lead through these other dynamics. So even as things played out, like go back to China, for example, as we went through shutdowns in various aspects, BD always sort of help perform given the capabilities we have there. So that is our goal, control what you control. Long term, we're also invested. It's an attractive market that has growth opportunity when you think of the population dynamics there. I think the other thing we've been very focused on is ensuring that we don't let -- we're not relying on capabilities in China that could affect other parts of our market. So we've done a nice job from a tool sourcing. We're not dependent on China from a sourcing standpoint. So we've protected our other core growth outside of China for sure. So I think more to come. I think over the next quarter, you'll see more we can give a more robust update but I just would remind folks of kind of that bigger picture.

Just as a reminder, right, we do manufacture quite a bit in China exclusively for China. And so as you think about syringes as an example or sorry, catheters, they're mostly all made in China for China. There's really no products that are exclusively made in China and exported to other markets. It's actually of the tens of thousands of products we make, there's one product that we export out of China, for example, to the U.S., and it's -- we also make that product in Boston. So we're not reliant on China at all for other markets from a finished goods perspective.

Yes. You're the first large cap company to present here and the anticorruption initiatives are relatively new, and we haven't heard too many companies publicly yet about it. So it was a helpful update. And maybe we spend a couple more minutes on it because I think people are hungry for information on what's going on.

If I had talked to our China team yesterday morning, I wouldn't have known about the physician topics. I'd say it's real-time information that's happening across the industry. Our Head of China has also been the head of AdvaMed China for many, many years, I think, over a decade. He has a great perspective on what's happening just industry-wide as well, which is what we had a good discussion.

Okay. That's helpful. Turning to one of your key growth drivers, which has been farm system, mid-teens growth last year, mid-teens growth this year. What's driving that? And how much can you benefit from these new GLP-1s?

Sure. Now we were really excited about the performance in Pharma Systems and we're up to 14 consecutive quarters of double-digit growth. So I think that's actually 3 years. So that we feel really good about that momentum. So there's a couple of things as we look at Pharm systems. So and I'll build up to the -- probably the most significant growth driver but start with vaccines continue to actually do very well converting into prefilled devices. So where vaccines have traditionally been in vials. We're seeing a lot of the big vaccines, whether meningitis or HPV or RSV vaccines going straight into prefills. People see the value of prefills in the vaccine space. So that continues to do well. Our self-injection business continues to do well with a lot of exciting new products in the pipeline there. So self-injection is biotech continue to make up a predominant portion of the pipeline for most of pharma today. You're seeing people's desire to want to deliver those drugs at home by the patient themselves. Not going to infusion centers, not have to go back to the physician for injections. But these are typically people managing chronic illnesses, could be Alzheimer's, could be cancer, it could be diabetes, could be lifestyle could be in the future, obviously, and it is today, things like weight loss, et cetera. And so the ability to self-inject is very important. And so our self-injection device portfolio, we have variable dose 10. So for example, 60% of biosimilar insulins are coming out in our variable dose 10. We have wearables for more viscous. So a number of the Alzheimer's or new oncology drugs that people are looking to convert from infusion into injection, we have wearables that would inject those molecules over a 15-or-so minute time line by the patient at home. We also have electromechanical devices that a doctor would put on you and then you would go home and it will inject you at a predetermined period of time later on, like 24 hours later, it will inject you so that you don't have to come back to the physician office. So we're seeing strong demand in that portfolio and really see -- that is a big trend going forward and is only going to accelerate that shift into auto injector space and self-injection devices. And then finally, just biologics overall. Of course, we have the preeminent portfolio when it comes to biotech drug delivery. We've really innovated in that space more so than anyone with custom coatings of our syringes meant for a very delicate biotech drugs to prevent interactions with certain molecules in the glass. We've developed specific types of needle technology, that's thin wall, that allows more viscous drugs, for example, to be injected in shorter periods of time into the body, which is typically something that's highly desired, shorter is better in terms of injection duration. And so this portfolio combined with what is by far and away the largest capacity, right, 5, 6x larger than the #2 competitor in the space, you have a big blockbuster drug that you're coming to market, right? You can multisource across facilities we have in the U.S. and Mexico, in Europe, in Asia, derisk supply chain. And if you think your drug is going to be a blockbuster, there's a company with 5 plus -- 5x more than -- compared to competitor, you've got much more runway in terms of making sure that you -- the devices themselves never are something limiting your growth profile as they're focused with, I think, what are probably a number of drugs that will potentially go down as the largest drugs of all time as we look at new indications that are coming out, for example, for GLP-1s. And so we have devices that are perfectly suited in that category, and we are certainly seeing some benefits of that today and are well positioned in the future.

Mid-teens growth you feel?

We're not committing to -- we don't give guidance by business unit by any means, but we feel good that Pharm Systems will continue to outgrow the BD average for sure.

Got it. And then just switching gears maybe back to the outlook, Chris, the margins from Q3 to Q4. It's a pretty deep ramp. What gives you that confidence?

Yes. I appreciate the question. So I think it's important to note throughout the past 2 years actually, we've executed exactly as planned every quarter. We had a strong line of sight to our simplification programs. We understood how inflation was going to play out, how that would flow through cost of goods was the predominant space as you think of another year of 200 basis points improvement. Obviously, our strong growth profile has been a key enabler to supporting our margin as well. So again, we're about 70% of the way towards our 2025 goal. This year, we committed to about a little over 100 basis points of margin improvement over the 2 years, we'll be just under 400 basis points improvement, and that includes us absorbing over 400 basis points of outsized inflation so just really strong execution on all dimensions. We've been focused on growth. We've been focused on portfolio mix, strong portfolio of simplification programs that are well underway and we've built on that inventory of programs that we have to enable that. As you think of how the year has progressed, we saw a really nice margin improvement as expected in Q3. Q4 has timing dynamics. So actually, the ramp looks much higher than it is. If you remember, in particular, R&D, we talked about investing in about 6%. We had some lumpiness in terms of timing of milestones and the programs, how they were executed throughout the year. So we were heavily invested in the first half versus the second half. You saw that moderate back in Q3. It's going to take another moderate step in Q4. So almost 45% of the margin improvement is just timing alone. Combination of not repeating prior year testing reinvestment that happened, the R&D timing. There was also some timing associated with selling as an example. We got back to bigger field in-person meetings that happen in the front half. So if you normalize for that, there's really 2 other factors that give us confidence. One is just the growth profile and natural leverage. That gets you to almost 75% of the margin goal. And then the balance is just a residual of to simplify programs. Again, they're basically fully executed, and it's more just the run rate of how those occur throughout the year. So we feel really good about that. And I think it sets us up nicely for '24 and '25.

In '24, basically, the initial color was 6% base organic, 10% base EPS or overall EPS growth.

Yes. So just unpacking that a little bit, a couple of things. I got asked the margin question a lot around like how do you see the rhythm of margin, '24, '25. The simple way to think of it is just we're committed to this 55-plus growth profile, we want to have 10% FX on the bottom line. Obviously, as the growth rate moderates, the higher we can get the growth rate, it gives you more flexibility on margin and margin becomes kind of the lever that's the solvent between that I can moderate. I can decide every year will have some degree of margin improvement to get to the 10%. But if I have a higher growth profile, we can invest more to keep fueling growth. Or if there's headwinds that come in like we were able to do during kind of these macro inflationary and complexity, right? You simplify programs to moderate them. You may need to deliver a bit more margin but to offset some of that. So I think there's a lot of flexibility in how we deliver that formula and feel really well positioned to that. As we look to '24, obviously, is an informal guidance, we're just trying to get some color around how we were thinking of the business. Obviously, there's -- we'll continue to assess various factors like we talked around, around China as a simple example. But we feel really good about the 5.5% plus that we've been doing, right? Our organic growth rate the past 2 years is actually 7%. So we've been outpacing that. Alaris gives us another 50 basis points of lift on the 5.5%. So that gets you to about to 6%. We will absorb about 30 basis points of the COVID-only revenue going away. So that gets you to about 5.7% and then we have an inorganic adjustment, which obviously doesn't affect the true underlying organic growth rate of the divestiture we did, which created a nice cash for us that we can reinvest. And the formula there is going to be -- you're seeing the benefits of our portfolio shifts within R&D, right? 60% of our portfolio is now towards transformative solutions. The tuck-in M&A that we've done has been super impactful. It's contributed 30 basis points to organic growth after anniversarying those assets. And we have more firepower that we can continue to execute that. And then we think -- with our margin improvement programs, we think we can get to, we said about 10%, but that 10% importantly includes absorbing the impact of the EPS loss from the divestiture we talked about in the COVID-only testing. So it implies, call it, a base EPS growth that would be just above 10%, and we think all in, we could be right around 10%. So I think it's a very compelling profile in this time.

All-in includes currency. It's not a 10% that's neutral.

That's an FX and neutral. I mean we'll adjust for currency as we see how that plays out. Right.

And any idea where currency is right now?

We'll keep watching it. I mean, I think it's easier to share that. Look, how much it changed at the end of last year, one quarter. I wouldn't even want to comment on that. I think the important thing is -- when we think of the economics under like FXN, I think, is the right way to look at kind of the true underlying economic value creation, right? It's more of a mathematical translation adjustment that doesn't change the underlying cash or earnings delivered in any particular market. So I think FXN is the right way to look at it, and we'll adjust that when we get to that point.

That's helpful. Tom, a few minutes left here, a couple of different places to go. One -- well, let me just ask you on '24, the assumption on price. I know you're not going to put up that numbers, but you do disclose it. How are you thinking about price in '24 relative to '23?

Yes. So what we've said before that we think '23 is the high watermark from a pricing perspective. Again, our pricing approach has always been -- it's been aligned with inflation and the cost that we've fared and passing through a portion of those increases to our customers. Not all of them, we've done significant restructuring, driving higher CI negotiations with our suppliers but we've passed through a portion of those. So -- and as you know, we've probably done among the best in med tech from that perspective this past year. As we look ahead, what we've said is that we expect that we'll do better than we have historically but certainly not at the '23 levels that we see. So we've invested in capabilities during the pandemic. We had already had some capabilities, but we've invested in additional IT systems. We use a standard pricing system called Vendavo across all businesses that they use to manage price and optimize margin in every business unit. We have dedicated pricing experts in every business unit, every region. We have a corporate function, just like we have a regulatory quality manufacturing function. We have a pricing function at BD. And so that's given us a level of capabilities and skills that we believe will allow us to, on an ongoing basis, continue to do better than we did pre-pandemic, which was call it flat -- flat to slightly down, which was better than kind of the med tech average always, but it certainly wasn't consistently on the positive side. So we think we'll do better than we did historically, but it won't be at a '23 level, which was an exceptional period of time, obviously, from an inflation perspective.

That's helpful. 2 minutes left. M&A. You seem to have kind of a nice rhythm going with tuck-in acquisitions, product seems to have been a successful deal for you. How are you thinking about kind of the cadence going forward?

Yes and Chris can jump in. We have a strong pipeline. We continue to be very focused on inorganic M&A as part of our strategy. We view it just as much as our organic pipeline. We look at inorganic additions to our innovation portfolio that we have. And again, Parata been a phenomenal addition to BD. We took our ROWA business, which was a pharmacy automation in Europe. Combine that now with the leading pharmacy robotics platform in the U.S. to end up with a $500 million plus pharmacy robotics business growing mid-teens, and we continue to see a strong runway ahead. It has relatively low penetration still as you think about not only hospitals, but the retail centers, long-term care facilities, et cetera, they all have opportunities to have pharmacy robotics in those locations. So we continue to, again, be very active. We have shared that the first couple of years of BD 2025, we were focused on kind of rounding out the portfolio across our businesses. And so you saw us do smaller tuck-in M&A. I'd say we're -- as we went -- move into the next phase of BD 2025, which we're in now, and this isn't the first time I've made this comment, we shared this before, is expect more Parata signs acquisitions, midsized tuck-in M&A. We're still not looking at transformative M&A. We're looking at tuck-in M&A. But we think that we have a really nice round out of our portfolio, and now we're looking at those kind of more solid size tuck-in acquisitions as we go forward. We'll still do smaller tuck-ins. We said, I think maybe 70% of our M&A capital would go towards the beef years tuck-ins with 30% still rounding out the portfolio, particularly in areas like BD Interventional which has always been the legacy Bard business, lived on smaller tuck-in M&As, bringing them in-house, iterating them and having phenomenal success. PureWick is probably one of the industry's best examples of that, a very small tuck-in M&A opportunity that's been a great addition and really transformed the UCC business and continues to do so today.

Great. Well, unfortunately, we're out of time. Tom and Chris, thank you so much.

Thank you, Larry.

Thank you, Larry.

Thanks everyone. Great team.