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

Good morning, everyone, and welcome to Becton Dickinson's BD Innovates Series webcast. [Operator Instructions] Later in the call, BD sell-side analysts will have the opportunity to ask questions during the question-and-answer session. Please note that this call is being recorded, and an operator will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Greg Rodetis. Sir, please begin.

Thank you, operator, and good morning, everyone. I'm Greg Rodetis, Senior Vice President, Treasurer and Head of Investor Relations at BD. I hope everyone enjoyed that short video. I know it's difficult to encapsulate what makes our Pharmaceutical Systems business so unique in 2 minutes. But hopefully, our audience got a flavor for the scale and global nature of this business. With that, thank you for joining us for our third episode of BD Innovates, highlighting Pharm Systems. Today's call will be recorded and will be available for replay on our website, investors.bd.com. The BD Innovates Series is a deep dive into our end markets business units, products and leadership. During each episode, we will spotlight an innovation topic, be it 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 management teams leading these businesses and products. As a reminder, this call is intended for the investment community including our sell-side analysts and institutional investors. If you were unable to join our prior webcast on pharmacy automation and single cell analysis, you can find replays in the News & Events section of the Investor Relations website. I also want to remind you that we will be making forward-looking statements. I encourage you to view Slide 2 in our presentation as well as the disclosures in our SEC filings, which are both available on the IR website. Finally, our next episode of BD Innovates will spotlight innovation from our Interventional Segment. More details to come there. Now for today's event, we are pleased to feature our Pharmaceutical Systems business. I'm joined by Mike Garrison, EVP and President of the Medical segment; Laura Boros, Worldwide President of Pharm Systems; and Matt Schabacker, VP GM of Advanced Drug Delivery Systems. And for completeness, the full IR team is on this call as well. I have some prepared questions for Mike, Laura and Matt. Then we will leave some time for our sell-side analysts to ask questions at the end. So let's just jump right in. I think a great way to start the call would be for Mike, Laura and Matt to give brief introductions of themselves. So let me turn it over to Mike, and we'll get started.

Thanks, Greg. And hello, everyone. Thanks for joining. This is Mike Garrison. I'm the Executive Vice President and President for BD Medical. I've been with the company for about 19 years in a number of roles in R&D leadership and general management. I am an engineer by training. Most recently, those included being President of our surgery business after the acquisition of C.R. Bard. And then also the President of our Medication Management Solutions business, leading to the clearance of the Alaris System and the acquisition of Parata. Really excited to have everyone here and also very excited to introduce our new President of Pharm Systems, someone who that has joined us recently and is already making a great impact. So Laura, if you could just introduce yourself, that would be wonderful.

Sure. Thank you, Mike, and hello, everyone. Excited to be here. The difference from Mike have been only 6 months with BD and BD Pharm system. My background is a mix of consumer goods, health care and nutrition. I started my career in Proctor & Gamble, and I held various roles in country, regions and global. Then I held leadership roles at Novartis and GSK and more recently, working in nutrition business, led that business for Reckitt. I'm very excited to be in Pharm System at BD. And I'm looking forward to introducing you to some of our insights of our business today alongside with Matt. So I will ask Matt to just briefly introduce himself.

Thanks, Laura, and good morning, everyone. So I have the privilege of leading our Advanced Drug Delivery Systems business with in Pharm Systems. I guess I split the difference between Mike and Laura. I've been with BD for 12 years now. Prior to joining BD, I worked as a pharmacist and also spent some time at McKinsey focused in health care. I actually joined BD in the Pharm Systems business unit and since then, I've had the opportunity to work across 4 different businesses in a variety of leadership roles. Really thrilled to be back in farm systems again, definitely feels very much like home for me. Also eager today to have the chance to share more about what we do in Pharm Systems and particularly some of our newer innovations to support our customers.

Matt, thanks for that. So just starting off, I'm going to start off with Mike. For those who may not be as familiar with the Pharm Systems business, can you give the audience just a brief introduction to this business? And what exactly it does?

Sure. So in simple terms, Pharm Systems designs, develops and manufactures injection devices used by pharma companies for prefilled drug device combination products. So a common example of these that you might be aware of are vaccines. These are the combination products similar to the flu shot that you likely got this year or a Covid vaccine, most likely came to your health care provider or clinic in a prefilled syringe. Years ago, they may have come in a vial. Now, in a ready-to-use format just provides the benefit for clinician efficiency and the ease of use. The vaccine is the drug, the syringe and the needle is the device. And together, they are a drug device combination that is viewed as one product by the FDA and regulatory bodies when going through the approval process. So the pharma company actually handles the regulatory and the approval and they own the approval. We do work very closely with pharma companies to determine the best type of prefillable injection device for their type of drug across a full spectrum of drugs. After the pharma company secures regulatory approval of the drug device combination, BD delivers our product to them, where then they perform what's called a fill and finish operations. So we provide them trays and tubs of syringes, some with needles attached, some without. And then they fill them in their operational line. In this process, the customer fills the devices with their drug. They would then package it, sterilize it and sell the final product as a drug device combination product. To get to the next level of detail, that's a very high level. But to get to the next level of detail, I'll turn it over to Laura and Matt. Laura will talk about the business in general, and then there's some very specific things in Matt's Advanced Drug Delivery area that he'll be able to speak to. So Laura, if you can just maybe take the next level down and double click on the Pharm Systems business, that will be great.

Sure, Mike. So let me talk a little bit about the portfolio of products and services. I think on this slide, you see some of our products includes many kinds of refillable syringes, including some bestsellers like BD Neopak and BD Hypak. And these are the devices that the pharma company that -- as Mike was saying are filling with their injectable drugs. Now the key benefit of a prefilled syringe is that the clinicians, as Michael saying, don't have to pull the drug from the vial and mix it -- and sometimes mix it themselves. So it's not only a time saving, which is actually substantial, but it's also safer and reduces the human error because the prefilled syringes come with the dosage -- the accurate dosage for prefilled. Now what is important to understand is that each drug is very different. It has a specific formulation, molecular structure, concentration, volume, viscosity, has a very unique way that it interacts with the container or the syringe material, not only the glass itself, but actually the other elements like the [indiscernible]. And as you can imagine, this creates a very high level of complexity for the product development, for a drug device combination. And all the time and continuously, BD Pharm System is investing in a lot of technology. Things like types of syringes, the type of coating for the syringe, the type of needle, the type of stopper, all the way to the type of manufacturing processes that are important for the integrity of the device and for this co-invest device -- drug device combination that benefits customers and patients. And this is where the fact that we have experienced, if you wonder decades in working close relationship with Pharma makes this type of expertise and the technical expertise a necessity and imperative. Now beyond prefillable syringes, we also have other type of devices. And Matt is going to detail a little bit more what we do in the advanced drug delivery system. We have devices like BD Vystra. That's a pen and BD Physioject, in fact it's an auto injector and the next generation of injectors, which we call wearables. I like BD Libertas and BD Evolve. And I think I mentioned at the very beginning that we also offer services, services that support Pharma from early development all the way to registration and to the commercial phase.

Laura, that was great. We really appreciate that insight. Just taking a step back for a minute. Can you talk a little bit about the market we serve and our position in it?

Sure. Let me start with the market, and I'll talk a little bit about our position. So in 2021 at the Investor Day, we have shared that Pharm Systems has a market of approximately $3 billion with about 7% weighted average market growth. Now we are focusing on several multiple rapidly growing high-value categories or, as we call them therapeutic segments. And if you're looking at our performance in the past 2 years, this is actually a result or a testament of the breadth of our portfolio as well as the expertise and ability to execute. We see the market continue to evolve. And part of this growth is driven by the rise of demand for drug therapies at GLP-1, which I'm sure everybody is familiar with. At the same time, we see other therapeutic segments growing, and we continue to aim as we consistently said, for sustainable high single-digit revenue growth. Now that was the market. If you're looking at our position in the market, I would say that our position in the market is what is enabling our growth. Now BD is the global leader in prefillable syringes. Our devices are used by more than 500 pharma and biotech companies in the world, including over 70% of the top 100 biopharma companies with over 50 years of expertise in the industry. And as you can imagine, related to what I said earlier, that kind of expertise means that we have exposure and expertise with almost any type of drugs out there. We also manufactured billions of prefillable syringes. We have 8 manufacturing facilities in Europe, Americas and Asia, and that actually is also an expertise in manufacturing an inject and related efficiencies. In fiscal year 2023, we finished the revenue over $2.2 billion.

So Laura, building on the previous question. Really, what is it that makes us unique and sets us apart from the competition?

I would say a number of things. And I still have a fresh eyes. So I can look at this inside and outside. So I'll give you, if you want a summary of what I see and what we see and then maybe a bit more detail. So, we've been working with Pharma partners for decades and that level of expertise in drug device development. The largest installed capacity, the ability to scale manufacturing, reliability of supply chain, the track record and continuous investment innovation, it's what really sets us apart. And there is a reason why we supply over half of the glass pre-fillable syringes in the world. Let me make this a little bit real. So at times, what -- by giving an example what it means reliability of supplies and ability to scale up? At times, we have customers coming in and wanting 3 times, 3x the supply that they previously wanted because the demand has spiked up. And within a week, we can mobilize, look at -- scale up our manufacturing capability and capacity and able to meet the customer demand, which is extraordinary, and it's something that we pride ourselves on. Now another key advantage is that the extensive partnership and expertise and relationships we have with pharmaceutical -- in pharma companies is transit into expertise to innovate. So we can and know how to tailor and manufacture syringes and injection platforms for any type of drug. And some of them are very highly sensitive biologics, then you have vaccines, then you have pain medication, all the way to dermatology applications and hundreds of other drugs. In fact, maybe some of you know for me was really inspirational to know that BD in 1960 developed the BD Hypak glass-disposable syringe, which was, I believe, the first one for polio vaccine trial. And since then, we have developed renovation number of industry firsts. Now our expertise, and I mentioned at the very beginning, services, which is probably a little known fact, that we actually have expertise and decades of experience with regulatory agencies, for submission of ready documents, pre and post approval, support for pharma companies, technical testing, human factor studies and all kind of other services that we offer to our partners in their path to market.

So Laura, you talked about biologics, vaccines, dermatology. Is that how you look at the business across these categories? Or I think you referred to them as therapeutic segments?

It's a good question. So the way we look at the business is in 4 categories, and as we call them, therapeutic segments: biologics, vaccines, acute care and anticoagulants or antico for short. I'll give a very, very top line overview on each and then happy to divide if needed. Now biologics, again everyone knows about biologics. They have changed the face of treatment on many diseases. By their nature, they are derived from living organism. And because of that, they're also very complex. They have a wide variety of liquid viscosities. They tend to be high -- large molecules and highly sensitive molecules. And this is where the decades of experience I mentioned before, means that we are able to support the customers to find the best delivery solutions tailored for the specific molecule because every molecule requires a specific tailoring and adaptation. And within biologics, there has been a lot of attention recently to the GLP-1 and for good reasons. I would just mention that biologics is more than GLP-1. There are literally thousands of drugs, biologic drugs and molecules in various clinical development and clinical studies that look at a wide variety of treatment, autoimmune disorders, Alzheimer's, cancers and so many more. So that's -- it's a big segment in biologics. The second one, I mentioned is vaccines. And I think we mentioned the fact that delivering vaccines in a prefilled format takes steps away from the process. So you don't need to actually -- as a physician, you don't need to extract it from a vial. Initially, and some of you may be familiar with that. For example, the COVID vaccine may have been available in a vial. But as the vaccine matures, this is made available in prefilled format, and we are actually working with pharma companies to help with that transition. The two others that we have, acute and anticos. Acute care is a broad segment. Within that, those are drugs administered in traditional health care setting in half medication, half antibiotics, half pain relievers. And also, we serve a very large and growing dermatology market, which we also have consider under acute care. And last, anticoagulants or antico. I'm sure most of you are familiar. They were very well known during COVID times as the blood thinners, our anticos. They actually help patients that have a high risk of getting blood clots. And therefore, they are essential to help for serious conditions like stroke or heart attack.

So just stay with Laura for another question before transitioning over to Matt. How do we think about the growth in each of these categories or therapeutic segments?

Given the rise of -- rising global demand for treatment for chronic diseases, vaccines and probably not surprising to many of you, the beauty industry, we are seeing strong growth across multiple therapeutic segments, across biologics, vaccines and acute care. Interesting, we see growth both in clinical and nonclinical setting, which is why we are driving innovation in both areas, and Matt is going to touch on some of the really exciting innovations we have in that space. It is true that we're seeing the biggest growth in the biologics space. And we anticipate the biologics category to grow double digits for the next several years. This growth is driven both by the rise in popularity of GLP-1 and by the growth of more than 1,000 biologic drugs in various clinical testing I've just mentioned, anything from metabolic disorder, neurology, cardiology and oncology.

So Laura, thanks for that. So now switching to Matt. Matt, you lead our Advanced Drug Delivery Systems platform, which is a very important platform, not just for BD, but how you relate for the greater global health care system. The biggest buzzword in pharma is not surprising, it's GLP-1s. These are drugs that have become synonymous, if not only in lowering a patient's blood sugar, but also curbing hunger that can potentially lead to weight loss. Without mentioning any specific drugs by name, can you give a quick introduction of GLP-1s? Maybe talk about how they're delivered and how BD plays in this space?

Thanks, Greg. Of course. So GLP-1s are delivering real benefits for patients, but the way that they're delivered is not that different than any other injectable products on the market today. So currently, most are delivered either through pen injectors or auto injectors. So to better explain BD's role in supporting that growth today and in the future. I'll touch on the two major components of these types of devices. So for both, you need what's referred to as a primary container. You can think of that as the part that holds the drug. You're also going to need a secondary device, which is the mechanism that allows you to inject the drug. So the primary container for an auto-injector is a prefillable syringe. And as Laura mentioned, BD is the industry leader in this space. So pharma companies do not typically have in-house capabilities to develop their own PFS. So they're most likely going to source a prefillable syringe from a company like BD. And we do, in fact, currently serve the market with prefillable syringes to support the GLP-1 space and we supported that scale up through our expanding capacity. The other device that I mentioned is a pen injector. So these are different from auto injectors in that they use cartridges for the primary container, and they also allow for multiple doses from the same device. So BD does not manufacture a stand-alone cartridge for pen injectors today. So now we're going to move to the delivery device itself or the secondary device. So our presence in the GLP-1 space today is primarily with our prefillable syringes. That said, our BD Physioject Auto-injector and BD Vystra Disposable Pen Injector are currently supporting a wide range of therapeutic needs beyond GLP-1s. We continue to engage with our customers in the space to understand how we can further support the growth of GLP-1s and biologics more broadly and really leveraging our unique combination of primary container and secondary device know-how.

So Matt, this seems to be an exciting space to be a part of. And as we think about innovation across biologics, can you highlight some of the recent innovation that BD has brought to the market to both current and long-term trends of biologics? And then I think after you have a brief video you want to share with our audience.

Yes, that's right, Greg. So to answer the question around innovation, I'll keep the same framework that we just spoke about in terms of touching on both the primary container or prefillable syringe and then moving to our secondary device offering. So Laura mentioned BD Neopak earlier as our prefillable syringe offering that builds upon our legacy of innovation in the space and enables a range of sensitive molecules to be delivered. As an example, BD Neopak is also designed specifically for improved compatibility in auto-injectors which is another example of how we bring our deep understanding of the problems that our customers are trying to solve really built on that decades-long relationship, how we bring that to our design and manufacturing processes. Let me give another example of innovation in our PFS business that helps our customers and their patients, and this is on the needle side. So we've mentioned that many biologics have different injection characteristics like higher viscosities and we actually estimate that upwards of 60% of them are likely to be considered high viscosity molecules. And if you're at the receiving end of one of those injections, it can take much longer or in some cases, maybe even be impossible to inject. So our Neopak XtraFlow innovation is designed to enhance that drug flow, and therefore, improve the injection performance for the patient and caregiver, which also enables our pharma partners to formulate some of these newer next-generation innovative drugs with more flexibility. There are certainly some other trends that we're seeing as well. So just as we're innovating on the device side, our customers are continuously innovating for a next generation of biologics to drive improvements in care for conditions like Alzheimer's, immunology and certain types of cancer. And these molecules are increasingly complex and these molecules and proteins often will require much higher volumes per injection with higher viscosity than therapies currently on the market. And when we combine that with the broader macro health care trends that we see around care shifting into the home, along with the desire to enable patient self-treatment, it's really pointing to the need for a new type of delivery device. And we've developed and released two wearable injector products that support the larger volume and unique delivery needs, and that's BD Libertas and BD Evolve, and let's go to the video on Libertas now. [Presentation]

So Matt, that was a great video. Thanks for sharing with our audience. Just building on that a little bit, can you give us an example or 2 on when a wearable device might be preferred compared to maybe a more typical syringe or auto injector?

Yes, of course. And I think to do that, we can actually go back to the example that Mike had teed up around the flu vaccine as most folks are familiar with these. So these typically would come in a 1 ml syringe and your health care provider or at a retail clinic would deliver that vaccine in just a few seconds. We've also talked a few times around GLP-1s. These types of drugs are typically delivered in about 10 seconds. Now imagine a biologic where the medication has to be delivered with longer injection times, quite possibly for 5 to 10 minutes. Before a product like BD Libertas, a biopharma company might have had to develop an IV formulation for this biologic which is often more costly and complex for patients, for health care providers as well as the health care system overall. A wearable device like BD Libertas actually enables patients to receive best therapy at home instead of driving to an infusion sensor to receive treatment. And as you saw in the video, BD Libertas is focused on delivering a simple experience for users, feel stick and click. We believe it's a great solution for a variety of molecules across a wide range of chronic diseases. Including oncology, immunology and neurology. And also by leveraging BD Neopak technology and all the benefits which we've touched on, it's also a great example of how we're utilizing our decades of prefillable syringe expertise to support this next generation of delivery devices. BD Libertas is ready for clinical trials and is in the hands of our biopharma partners to consider as they develop and test their drugs with our product. Now BD Evolve was developed to meet a different need. BD Evolve is an electromechanical device enabling programmable drug delivery for up to 3 days. So a potential use case for a product like this is in delivering treatment as part of a cancer treatment regimen. So when a patient undergoes chemotherapy, they typically need to return to the physician one day later to receive a follow-up injection that will help them minimize potential side effects from their chemotherapy regimen. With a product like BD Evolve, the patient can save that return trip, often hours away and just 1 day after receiving chemotherapy and actually have a product applied at the physician office or infusion center at the time of their chemotherapy that will automatically deliver the medication when it is required. So the programmable nature of BD Evolve means that exactly the right moment, the drug will be injected for the patient, including confirmation of delivery. And as we think about supporting the industry and patients for the next 5, 10, 20 years, we're really excited about what these types of products can deliver in terms of hands-free and worry-free delivery of biologics to ensure that patients are getting the most advanced molecules available.

All right, Matt. I'm going to stick with you with one last question before switching back to Laura. So think about Libertas and Evolve, it's easy to see how BD is supporting some of the long-term trends in biologics. Are there any other investments BD has made, which have supported the overall trends in the market?

Yes, of course. And we've made and are going to continue to make bold choices in support of patients and customers to support the trends that we've spoken about here with biologics. As we shared at Investor Day, we have about 6x the capacity of the next prefillable syringe competitor with redundant manufacturing across geographies, as Laura had mentioned. But we're not standing by. We're going to continue to invest behind opportunities to serve that market. So in 2020, given the growing pipeline and the trends that we foresaw, we made the commitment to invest $1.2 billion in additional capacity by 2025 and more than half of that expansion is already operational. The investments that we're making will increase our biologics capacity by more than 50% over the next 3 years, which we expect will allow us to continue to serve the projected market growth.

Matt, thanks for that. So Laura, just switching back to you and even GLP-1s for a minute. On GLP-1 specifically, there are projections out there that billions of doses will be administered by 2030. Does pharm systems have the ability to support this kind of demand?

Yes. I guess you may want a little bit more perspective than that, but the answer is, yes. Yes, we feel we are well positioned to continue to serve the needs of our customers GLP-1 and beyond. Now we have triangulated various GLP-1 forecast, external and internal data, and we believe that by the end of the decade, the market will be somewhere between 2 billion and 5 billion doses. There are a number of dynamics in the market that will impact not only the absolute volume or the number of doses, but the mix of drug delivery devices, the actual combination of devices that would be required to supply the market in the long term. I think it is understood and it is clear that the rapid rising the demand of GLP-1 obesity drug is requiring unprecedented scaling manufacturing. Now the fact that we start from the largest installed capacity is clearly a great foundation because it is actually adding to a great base. And Matt has mentioned that we continue to invest in capacity. And, you may have noticed, Matt has mentioned, we have started already in 2020. And that's important because it takes quite a number of years for a line to be installed and qualified in this space. Therefore, it's is our strategy has been started a while ago, we continue to invest as well as we continue to investment strengthening our portfolio, either the right mix of devices to be well positioned to serve the market and the customers for the next decade, and I would say beyond that.

Thank you for that. So we spent a lot of time talking about biologics and GLP-1. Before we wrap up, can we spend a few minutes talking about the vaccine segment and some of the products and innovation pharmacists brings to that market?

Absolutely, absolutely. I think it's a really exciting segment. And I mentioned that it's also a growing segment, the same as biologics in terms of multiple growth spaces we are playing into. Now we have a long legacy of supporting vaccine delivery. And today, we support about 90% of the leading vaccine manufacturers. And we also play a direct role in helping protect the role for vaccination and helping to reduce the burden of disease on the global health care system. The last, scale capacity, production capacity and flexibility, I mentioned before, it's actually instrumental in helping support the scale-up for vaccine companies. And these are actually vaccines ranging from COVID-19, RSVs and also some of the [indiscernible] mRNA vaccines. I think you see it on the slide, we have a broad portfolio of products to support vaccines and one of them, which is probably a little known is a device called BD Accuspray. This one delivers vaccines via mist into the notes versus an injection for certain type of vaccines. Now if you are a parent and -- parent of small children and obviously, not only for that, but you can imagine when this may be a preferred way of delivery of vaccine versus an injection for certain type of patients and for certain type of vaccines. We also have another exciting innovation, which is BD Effivax. This is a prefillable syringe well designed together with our leading pharma partners to meet a complex and also evolving needs on vaccine, it's a space that's evolving very fast and also can help create efficiencies on the manufacturing side on the end-to-end production. The last thing I'll mention on vaccines. It's very important for us as BD access to vaccine is important. We have now more than 20 years since we worked with our product, [ BD Inject ] to provide patients in low and middle-income countries, we save access to prefilled vaccines. And this is important because it is actually, we further help deliver easily through self-administration or by community health workers.

Thanks, Laura. That was a great summary. So this is my last question before we open it up to Q&A. Just if you kind of take a step back in closing, what are you most excited about in Pharm Systems and the Pharma Biotech Drug Delivery end markets?

Many things. There are many things. I'm excited to be in Pharm System, in BD Pharm System, especially. First of all, it's an exciting market to be in. We're seeing growth across all segments, and we're seeing unprecedented growth in the Biologics segment. Second, we are, and I truly believe that we are well positioned to meet the growing needs of our customers through the broad product portfolio, extensive capacity, strong innovation pipeline and this decades of expertise in combination product development. We are also very excited and proud of our strong partnerships. Recently, I was visiting some customers. And people struggle to remember when did the partnership start, some of them are 30-plus years old and even beyond that. Our partnerships are very strong and some decades. If I am to summarize, I guess, what I said and what we've talked so far is beyond decades of leadership and expertise in this industry, beyond being the world's largest company serving the pharma industry, we do believe we have the most breadth and depth of portfolio offerings. We have an exciting innovation pipeline, the largest manufacturing capacity, and I think this will enable us to serve an industry that is growing in aggregate, high single digits, really to low double digits annually. And at the end, this equates to serving hundreds, hundreds of millions of patients, which is really the primary reason we all wake up and do what we do.

Totally agree, Laura. This is Mike. I think we had the opportunity recently where we were talking and there was demand signal that came in and you were like, how are we going to serve? And sort of working with the team operationally? And I was like, well, this is a great problem to have because this is where we get to serve patients, and there's a patient at the end of every one of those products that we're going to get lifesaving and like helping medicine, too. And to be able to be part of that is a big part of why people want to come to work at BD and want to stay at BD. The Pharm Systems associates working across the world, their depth of expertise, their dedication, their passion to that, that's sort of what we see almost every day. So I really appreciate that. I really appreciate them. So we just make the call out to all the efforts -- the collaborative efforts that they do each day to deliver for our Pharma customers. So Greg, do you want to give...

Yes. Mike, that was well said. So with that, I think we'll start the Q&A session. So operator, can you please assemble our queue.

[Operator Instructions]. Our first question will come from Matt Miksic with Barclays.

So I wanted to follow up on one of the comments that Laura made, I think, in answering one of your questions, Greg, about capacity. If you could, I understand that there are some very large opportunities to serve, and it sounds like you're confident in being able to serve those. I'm just wondering what's the process for scaling with those partners? How much is that capital? How much of that is expanding lines within existing facilities, maybe some sense of what that looks like to those of us who are trying to model the business from a sort of CapEx and maybe leverage perspective for this business?

I'll start, and then I'll let Laura comment. So from an aggregate capacity perspective, as we mentioned, we were in the process of that investment of about $1.2 billion, adding the support that's going to more than double our capacity for biologics. Some of the biologic syringes will be specific for specific applications. So we're constantly working with our partners to make sure that we identify what specific drug will be there and then make sure we have that line and build the redundancy around the world, so that we can serve from multiple of our facilities. Second point that I would make is one of the ways that we can bring capacity online quicker is to convert existing lines over. And so we are towards biologics. Our technology is somewhat ubiquitous across the lines. And so there's a little bit of just conversion that we're doing there. I wouldn't break it out in terms of any sort of percentage. What we do is we work with the customers. As Laura mentioned, she's been working directly through customer visits to help with some of that demand. That demand signal then tells us and the timing of that demand signal tells us, should we opt to convert a line or to install a new line. I'll let Laura sort of build upon that, but that gives you sort of the overview, Matt.

Yes. And I agree. I would add that there is, given the breadth of our customers, you mentioned that we work with over 500 of them and most of the top 100 companies, there is a lot of insight and data that comes in that allows us to model forward. And that actually allows us, as we look at the various scenario to be ready the high, mid and low scenario. And that helps in accelerating our installed capacity if we need to. Matt has mentioned that already half of that is installed, some of the new ones are coming online and also to consider which lines you may need to convert if we need to do. Therefore, we have, call it, a good foresight and a good understanding of what's coming, and we always model what's coming.

And our capacity plan, Matt, is contemplated in the overall capital allocation structure that Chris has articulated multiple times. So we don't foresee there being any sort of materially incremental sort of shift to that at this time. So it doesn't affect from a BDX perspective, how much capital we'll be allocating for capacity expansion.

Yes, it does. And if I could just read back to you, what I think I'm hearing is that this isn't so much, it isn't only about sort of committed capacity. It sounds like there's also a fair amount that has to do with sort of flexibility and being able to repurpose and rebalance your production against rising a falling demand rather than we need to build an underline, we need to roll out another facility or something like that. Is that a fair interpretation of what you're describing?

Yes. I think there's nuances here and there. There might be a bottleneck if we identify a bottleneck in some aspect of the production, we would deploy capital there, but not outside of our overall discipline around capital management.

[Operator Instructions]

All right. So it doesn't seem there are any further questions. Again, this is Greg from the Treasury and IR team. So we just want to thank everyone for their time today. We hope you found it helpful. Listen, we know it's a busy time of the year and time is always scarce. Just as a reminder, this replay will be available on our website and as well as they're also replays from previous BD Innovates sessions on pharmacy automation and single cell analysis. I encourage you to view those if you have not. So I just want to wish everyone to have a happy and healthy holiday season. And enjoy the rest of the week. We thank you for your time.

Thank you. This does conclude today's audio webcast. As a reminder, the replay of this podcast will be available on the website later today. On behalf of BD, thank you for joining today. Please disconnect your line at this time, and have a wonderful day.