ICU Medical, Inc. (ICUI) Earnings Call Transcript & Summary

Very good. All right. All right. Good afternoon everyone. Thank you so much for joining us. I'm Danielle Antalffy. I'm the med tech analyst here at UBS. Very lucky to have with us ICU Medical, which is a company that is newer to me. So I'm excited to -- here, we have CEO, Vivek Jain; and also CFO, Brian Bonell. I'm so sorry. I'm so embarrassed. -- sorry. So Vivek, why don't you take it away, and we'll go through the presentation and then have some Q&A.

Sure. Thank you for having us. Appreciate being here. I know it's California, where we live, and we get to see that sunset every day, but it's 30 minutes away. We'll try to beat you. We'll try to beat that so people can get out there and see it. ICU Medical is a company that's focused on infusion therapy. And think about that as the plumbing next to a hospital bed that essentially gets a medication to a patient. And we break that infusion business down and simplifies it a little bit into 3 primary areas. Part of that is the pipes. That's what we call Consumables, the open pipes. That's a business that's been our original business that we started in 25 years ago, where we've been the innovator around those pipes. And the most valuable portion of that pipes, those pipes are the ones near the patient, where if the pipe blocks, bad things happen. And we are the global market share leader in a category called needlefree connectors that keep those pipes open. So that's our Consumables business. The second business is really the motors that push the fluid through the pipes. That's the infusion pump business. We're the only player that crosses really all different modalities of infusion. And so the largest and most valuable portion of the infusion market is LVP pumps, large volume parenteral pumps. The other smaller portions that are important are the syringe pumps and then ambulatory pumps that are used for pain management or in the home care environment. And we participate in all 3. That's about 30% -- just under 30% of our business. And then the third of our business is kind of more traditional staple critical care items. We call that Vital Care. That's everything for IV fluids, where we announced a transaction with yesterday that I'll talk about a little bit as well as a series of respiratory products, temperature management products, critical care products, et cetera. So that's just a quick snapshot. The company adds up to about $2.3 billion, $2.4, it was $2.2 billion last year in '23. We're getting towards the end of this year, we need to update that. But the Consumables business is about $1 billion. The bottom 2 bars in Consumables are our legacy ICU businesses. The top 2 businesses, Tracheostomy and Vascular Access came from our acquisition of Smiths Medical, which was difficult -- has been difficult a couple of years ago, and we're almost finished working our way through that. In Infusion Systems, the LVP Infusion came from legacy ICU. The top 2 businesses, syringe pumps and ambulatory came from Smiths Medical. And on the right-hand side, IV Solutions came from ICU historically and the top buckets came from Smiths Medical. 75% of what we sell are single-use disposables, $10 or less, right? We don't overly extract value from this system. And revenues are almost 70% North America, 30% international. Profit is probably even disproportionately slanted to North America. Market cap up a little bit, about $4.4 billion. Net debt, we took on leverage for the first time in the Smiths acquisition 2 years ago. We have worked that down to about $1.3 billion of net debt, frankly, more than we expected to be holding at this moment in time, but some of the elements of the transaction yesterday help improve the balance sheet also. Slide we've been using for years. The reason there's a lot of energy around this infusion space, and there's a couple of big companies that talk about it all the time is because it's a very consolidated industry structure and a lot of high regulatory barriers, so it's not easy for somebody to step into the market. The manufacturing assets, which relate to the IV Solutions discussion are not easy to create or reproduce. And so that's a big barrier to entry. And people don't want to switch the categories unless they absolutely positively have to. That's our advantage. That's also our challenge. That speaks to everything. That statement applies whether it's getting someone to switch an infusion pump or to source an IV Solutions from a different person. The same stickiness occurs. There are some guidelines around the delivery of medications. And for us, an important growth area has been our oncology products and there are some tailwinds to the delivery of medications. We want a medication delivered safely from the minute that drug comes into a hospital dock and it's delivered to the patient. We don't want it exposed to the air or clinician, anybody who doesn't need it outside of the patient. Software is becoming a bigger part of our business. And so the ability to translate for these razor blades that are used with dedicated sets, ultimately, a business where we can guarantee uptime, run time, more subscription-oriented, and that's all about having innovation around the software side. And there's some very unique things that have gone in the industry, both on the pump side and that are going on, on the IV Solutions side right now that lead to unique opportunities for share shift or share change. For us, our pitch is to the customer, first and foremost, the customer, to our own employees and then ultimately to investors, we're the focused pure-play company. And so if you work at our place, it's all about understanding this infusion market the best. If you're a customer of ours, we need to innovate for you the best. We've taken on a number of hard acquisitions. That was sort of our lot in life was to be the cleanup person, and we had to turn around assets that came out of legacy Hospira, out of Smiths and rebuild the customer trust. We've finally gotten to a point where we have very stable operations. '23 was sort of the toughest year, probably the toughest year in certainly my working career through this acquisition, but it led to opportunities to improve our profit. We are underearning relative to our peers. And we did a transaction that was probably more risk than we should have onboarded with the Smiths deal, but we're getting that in line, and that's really reflected in our margins and our rates. This slide is now out of date. We talked about portfolio optionality. Yesterday's transaction was about that a little bit. And if you read our proxy, you'll see the way we have incentives for a decade are deeply aligned with shareholders' interests. Our largest and most valuable business is our Infusion Consumables. You can look at these at your leisure on our website, but really the backbone of that stack of $1 billion is our infusion therapy franchise, which is needlefree connectors and extension sets or the oncology businesses with the safe handling of dangerous medications. Those businesses have compounded at 6% a year for 5% or 6% a year in a row. We don't see any change to that. We had great results we announced yesterday again on that, that it will be at that rate for this year. And it's really about the combination of brand, innovation, scale, customization for the customer and ultimately, economic bundling as it's -- as they are dragged through with other parts of the portfolio. And so there's been a lot of consistent growth here, a lot of history, a lot of brand. The parts of the Consumables business that came from Smiths were really most in the infusion area was around this Vascular Access category. I described this as a plumbing system where we had the IV solution, the pipe, the motor. What we lacked also was the last mile into the patient, which are catheters. And the only independent company out there in catheters was Smiths Medical. That business was really challenged the first 2 years of our acquisition where we lost a bunch of share as we -- Smiths was unable to supply on a regular basis. We fixed that, and that business, frankly, just stabilizing last year and starting to grow this year with what was going on our regular Consumables has led to pretty attractive Consumables growth. And it's nothing about innovation there. It's the basic blocking and tackling, making the product getting where it needs to be, et cetera. There's another business that's not an infusion business, but is a respiratory business called Tracheostomy for us. It shares a lot of similarities to the rest of our business, deeply customized, very clinical. It is a single-use consumable, and we've included it in our Consumables results. We can debate it's not an infusion consumable, but it's certainly a very, very high-value category with a lot of the same traits of a consolidated supplier structure, et cetera. So that's really the Consumables business. The pump business is the second piece of this. And if you went back in history and our team came from sort of the market share leader many years ago. Hospira, the pump platform that was the distributor of ICU products was actually an innovator originally on software and connectivity and safety. And Hospira was very much about delivering closed systems and that whole medication management safety story I just went through. ICU was the key component to help deliver that safety. But for many years, that was the leading pump platform in the United States. It lost its way as did other suppliers over a 10-year period and a lot of that value accrued to a different competitor that's ultimately a multiline supplier now. We have, frankly, innovated over the last 3 or 4 years to bring that Hospira platform up to a modern device called Plum Duo, which you'll see in the center of the page here. And there's a lot of unique things going on with the pump market in terms of the customers' needs to modernize and refresh because they haven't been able to get access to the market share leading product for a number of years. We're bringing that innovation at a moment where what I would call a normal year of sales has the potential to double or triple up over the next 2 or 3 years because there's been a backlog build. And then ultimately, we want to take that system and deliver it to the customer all the way through the entire cycle of care. So ultimately, even to the home, where the other product family we got from Smiths were the CAD ambulatory infusion pumps, which are the leading ambulatory infusion pumps in the world and half of those are used in the home care environment. It is more and more about software, and LifeShield is the center of our kind of software offering. We've recently got approval on a new software package. There's another approval that's in right now for a next-gen version of that. And the goal is to have that LifeShield software talk to the pump, no matter what modality of pump it may be. And so the reason I'm belaboring this a little bit, ultimately, while these are called smart pumps, ultimately, the smarts is really in the connectivity around them. And I think the difference, our philosophical view versus a number of the competitors is, we want customers to use the right tool for the right job and the right tool is the most accurate, the most precise, the safest, and we want the software to be the same no matter what the use case may be. The alternative in the market is sort of a one-shot solution, which I give you this device that does everything all in one. And we believe that compromises accuracy, training, safety, et cetera. And so there's a number of these devices that are either on the market or coming down very quickly in development. On the large volume side, it's the Plum Duo that we've gotten approval for already, which basically takes the guts of what was great in the product that was the market share leader, the ability to not break a circuit. So you have closed drug management all the way through to have the ability to use a single cassette to deliver 2 drugs, but multiplexes that with the fit and finish of a 2024 medical device. On the heels of that is a simpler version called the Plum Solo, which is a great product to refresh our own installed base. We have a next-generation syringe pump coming to market. We have a next-generation CAD pump in development. The syringe on yesterday's call, we reaffirm that the Solo Plum (sic) [ Plum Solo ] with the FDA right now. The syringe is a quarter or 2 away from filing. And after that, will be at the -- on the ambulatory pumps and informatics is -- every time you get one of these things, you have to refresh the informatics on the way through. And then our last segment is the Vital Care segment, which is a bit of a hodgepodge of different things. The biggest tenant there is IV Solutions. Those are IV fluids. Obviously, there's a big story around that in the last 6 weeks in this country, a variety of respiratory products, pain kits, critical care. Every one of these sort of fits in the grand scheme puzzle. I think we're pretty transparent on these where it makes sense and connects to some of our other product lines, they're more core, where they're farther away, they're probably less core to us. But in general, they're all things that are a different margin profile than the first pillar and the second pillar. We announced a strategic transaction yesterday with a Japanese pharmaceutical company called Otsuka, and Otsuka is the leading IV solution supplier in Asia. And Otsuka has, for many years, desired to come into the United States market, but it's very difficult to enter the United States market because the U.S. market, to a large degree, runs on multiyear GPO contracts and because the product itself isn't sold as a stand-alone item. It's sold with an infusion set or an infusion pump in an aggregated bundle. And so this was an opportunity right now with us to come into the market first really as a manufacturer and create some optionality. Maybe it could be a commercial entity down the road, could take a decade to do that, but this is a way for us to be entirely seamless to the U.S. customers. And selfishly from an ICU standpoint, our IV Solutions business and a criticism of us could be even though we've served customers incredibly well, we're reliant on a single manufacturing site. And now we get to combine that with 16 sites around the world that has total production capacity of 1.3 billion to 1.4 billion pieces. That's more than double the U.S. market needs. And the infrastructure in the rest of the world, frankly, is a lot newer than the U.S. infrastructure, ourselves included, right? The U.S. has been using older assets to produce these products compared to a lot of other places on the planet. So this joint venture is estimated to be effective in Q2 of next year. ICU Medical will provide all the commercial services to ensure exactly seamless to the customer. We ship it, we bill it, we price it, we serve it, we run all logistics, et cetera. Some services will deliver on a transition basis to the joint venture. But ultimately, this market concentration that happened in this country, which is kind of the crisis of the moment, it didn't happen by accident. It happened because there was limited choice on another set of products that were only available from 1 or 2 places. Innovation needs to bring here to let the market fix this, and we believe our partner, Otsuka, has the best innovation in this category across not only IV Solutions, where the innovation is about PVC and DEHP-free. There's this California legislation, AB 2300, if anybody has seen it. People want to change the items the plasticizers that are in the bag. The big U.S. manufacturers haven't had that everywhere. They have a leading position. Everything they make is free of PVC, et cetera. They have unbelievable technology in packaging, which is a huge part of the nutrition market. And they have a lot of reconstitution devices that are very novel that takes on some of the established products. And so for us, at ICU, we consider ourselves an innovator in the pumps and software. We consider ourselves an innovator in Consumables, but it was hard on the quasi-drug products to really differentiate ourselves. And so this did -- first and foremost, this transaction did 2 things for us. It aligned us with somebody who's a real innovator, and it created a redundant network where we can't -- we no longer are a single point of failure. And then from a shareholder perspective, it did a couple of other things. It's optics. It doesn't create new cash, but it does improve our gross margins by -- we're going to deconsolidate the income statement, so to speak, that we had from IV Solutions. Our gross margins will go up a bit. The margins of the rest of our portfolio are in a tighter range. Therefore, our EBIT margins or EBITDA margins will also move up. The transaction, we were able to do this. We were able to get the transaction framework to be EPS neutral or breakeven, whatever word we want to use for 2025. We did get $200 million of after-tax cash upfront that will be used to repay our term loan A. We deconsolidate $350 million of revenues. In the short term, we'll pick up 300 to 400 basis points of gross margin improvement because we still have to provide some services. When we're done with that, there'll be another 100 or 200 basis points that come through. And the reason it's breakeven is because the interest expense on [ $200 million ] essentially is equal to the EBIT of the business we are offsetting. The other part of ICU, our story has been very much a self-help story. I think we've demonstrated now for a couple of quarters, we were stabilized and had decent revenue growth. We obviously need to do that longer. There was a period in our history we did that for 4 or 5 years in a row. We need to get back to that. The other part has been a margin improvement story of getting all the synergies out of the transaction and ultimately about cash. We had said earlier this year, we were underearning by 400 or 500 basis points. That's the fancy way of saying our 36% gross margin should be 40% and maybe a little bit of cost on the OpEx side. These are the various programs we've been working. Some of those we've already gotten our gross margins crept up a bit. These are the various programs around plant closures, logistics, service, real estate, all the things we mentioned in our call that are also additive to the gross margin equation for us. And so one piece is sort of just the math of the IV Solutions piece. That's all well and good, but doesn't create more cash. These choices actually create more cash. And the combination of both of them moves our gross margin to a very different place than where it is. today. And so these are all things that we've been actively working on for the last 2 years. Frankly, we -- normally, we would -- in a year or 2 into an acquisition, not 2.5 years in, we would have done all of these things already. I think what we bought was harder than we expected on the revenue side in the world we're going through, we had to first produce enough, stabilize the revenues, find that footing before we could spend as much time as we wanted on these activities. And then to close with, this has also been a can slide. These were our goals in the beginning of the year. I think we feel reasonable what we said that we could get all parts of our portfolio growing. We had a number of contract renewals as these GPO agreements, you must be familiar with as we were coming up. I think we've done okay during the contract renewal process over the last couple of weeks. The supply chain, our service level to the customers is the best it's been in 2.5 years. We've gotten new product approvals with the Duo. We need to get Solo done where you need to execute to get these synergies because there's a couple of points of gross margin just on the self-help side, independent of pricing and the other things that are also going in the right direction. Free cash flow has improved. Ultimately, the original idea of the Smiths transaction was we never had leverage. We levered up. We thought we'd be generating cash and/or monetizing assets. It didn't turn out that way in the first year, but it's finally turning out that way. And it was to transfer value from debt to equity. And I think we have a better chance of doing that. We talked about the $200 million, that would put -- the $200 million plus our mandatory prepayment, et cetera, next year would put net debt towards the end of '25 at around $1 billion. We would expect that would mean for '26, leverage in the 2x, 2.5x range, which is probably more appropriate for our type of company. And if we get to a level, at a responsible level there in a different interest rate environment, the question is, can we return capital to shareholders in a more effective way. There's no other real M&A needed or something like that. And so that's the story of ICU. We feel like we're in a much better place. We appreciate people's interest here versus the sunset and happy to answer whatever we can for you, Danielle.

Yes. Great. Well, thank you for that.

I'm going to sit, if that's okay.

Yes. Please do. Please make yourself comfortable even though it's freezing on the stage. But, yes, so maybe let's talk about the infusion pump piece of the business and the Plum Duo when you get the Plum solo. I actually did cover Hospira in my past life with -- so I'm familiar with these. But how do you think about those as a growth driver? I mean a competitor is launching one of their LVP pumps now. And they're talking about gaining a few points of share every year. Is the story any different for ICUI or...

I mean I think we are probably a little less vocal on what the share gains opportunities, we believe, are because we'd like to talk about it once we do it. Obviously, you have a number of -- you have 3 really large companies outside of us all talking about this because there's value in the category, and there's obviously a lot of action going on. For us, we think we have a team that's been 15 years in the industry, all of us. We're deeply ingrained in the technology and the safety story, and we think we're holding the best innovation. The market share leader will, by far and away, hold still a leading position when this whole cycle is through. For us, it's the -- our business is not that big. And so every share point is very valuable, and we're very focused on that.

Yes. Okay. And just trying to think about as we look ahead to 2025, how much of a growth -- incremental growth driver could Plum Duo be?

Again, I don't think people in the market do things like they have to. And as it relates to -- as much as we want them to believe in the technology, they still have to have a catalyst to do it, right? And we believe the technology is superior. It's enough to get them there, but to get them over the line, the mandates help, and the mandate that they have currently is that the devices in the market need to be repaired by the end of '26. And so I don't -- we don't know that it's -- it's still -- we still think there's plenty of opportunity for next year. But this may take 2 years, may take 3 years to play out, but it's incredibly valuable. And it's -- I think -- even if it takes 2 years, it easily offsets and recoups all the investment we made to get the technology here. And for our company, our core is really that Consumables business. When we win the pumps, we normally get the Consumables.

Right, totally. Okay. All right. Let's talk about IV Solutions because that has been something that's been a hot topic of conversation with your competitor and the North Cove facility and what happened with the hurricane there. So how is that impacting you guys? How are you helping address some of the supply shortage in the market? And is this something that's going to continue to have an impact in 2025?

I think on yesterday's earnings call, we said the same words we've said for 4 years, which is for a long time, these IV Solutions, their intrinsic value have sort of been out of line with their real-world value, right? And so if you lose half a day of elective procedures, you really want to debate whether you pay $0.25 or $0.50 more per bag. But it's been a very difficult market that way, just like generic drugs or other things. For us to try to be a predictable public company and a good steward of solving the problem for the industry, we are ramping up, and we have been since the day this happened, but it takes time. We also learned some lessons when this happened with Maria. And those lessons where we ramped up. We had excess inventory in hand because of Hospira sale to Pfizer, et cetera. At the end of that, when the shortage ran out, our reward was getting to lay off hundreds of workers who staffed up to make it all happen. We don't want to do that again. And our financial results became incredibly inconsistent. So we are ramping up and have available capacity for people who want to sign a long-term contract at a market clearing positive price. That doesn't change even if those products are moving off of our income statement as part of the joint venture. So for us, we're interested in the business. We're interested in the business because it's connected to other parts of the business, but we want to do it in a responsible way or the problem never gets fixed.

Yes. Yes. No, that makes a lot of sense. Do you think this changes -- and this is, I guess, the last time we saw something like this was Maria. Do you think that something has to change in the industry? I mean, I asked the question to your competitor earlier today about diversifying manufacturing, something like that. So you're not reliant on one facility. Yes. I mean they said they feel like they've got redundancies in the system and things like that. So...

I mean my view is that everybody -- when there's a crisis [indiscernible] government, please help me, right? Government has no power to mandate diversification of suppliers. What means do they have to do that? It's a little bit like entitlement reform. Everybody wants it, and really like how do you actually make it happen? The same is true here. How do customers who know it's wrong, but contractually, they haven't had the flexibility to do that. How do they make it happen? I think for us, our belief, and we tried to say in our call yesterday, the market has to fix this. And the only way the market fixes this is by solving the product gaps that led to the concentration, right? We have to deliver innovation so that the product set is equal to or greater than. So then the market will naturally sort out how much share should go to each place. We, ICU did not have the skills to deliver all of that product innovation. And we, ICU still had -- were a single point of failure in that we were site too, even though we've served the heck out of customers. This partnership we made solves those issues. Because we partner with the person we believe is the best innovator on the planet, and we've stepped into a manufacturing network that this partner of ours now owns, which is 17 sites deep around the planet.

Okay. Okay. Got it.

But it's got to be the market that works. There's no other magic way of making it happen.

Yes. Okay. Understood. And you brought up GPO contract renegotiations and things like that. So can you talk a little bit about where we are in that process? Do you have more to come in 2025 and price versus volume for you guys right now and how you see that evolving?

Yes. And the GPO contracts have been done for months. The GPO is sort of like the hunting license, use less.

Working with the IDNs now.

I would use different words, but we have to work with the hospitals directly, and it's about trying to get what's been negotiated at the GPO level into the hospital. There was an all play kind of open resign season. All of our customers have resigned with us essentially minus maybe 1 or 2, given what's going on, probably not a surprise, right? And now it's a discussion of what happens to those people who haven't resigned with their vendor and what do they want to do. We're open for business. We just want to do responsible business. And we don't want to be a bridge because the bridge doesn't solve the underlying balance issue in the market.

Yes. And just in general, in your portfolio, how much is volume versus pricing?

I think on the GPO contracts, I mean, bigger picture for us as a company relative to our peer set, if we were really challenged with inflation in '22 and '23, there is no opportunity in the next year or 2 or 3, even with the price increase we're taking to offset the amount of inflation that we have absorbed. I think for us, it was only until we could reliably serve the customer with these products that we acquired, could we show up with a straight face and actually ask for price increases. And now we're finally at that moment, and we -- that's starting -- our growth over the last couple of quarters has been because those things started to kick in, right? You can't -- in straight face, go to someone you can't supply and say, and you need to give me more price. I think for next year, we assume that we would get 100 basis points of price, a portion of which was on this IV Solutions business, which is no longer going to be on our income statement. But we still think putting into the partnership was the right thing to do to solve those 2 issues that we couldn't address otherwise.

Okay. That makes sense. And just to talk about the Smiths Medical acquisition a little bit. And maybe walk us through sort of what did go wrong there in a little more detail and how we got briefly. Well, we have 5 minutes. So well -- and I guess more importantly, though, what's been done now that makes you feel confident that you're at a stable position there, improving going forward?

I mean you have a hard time making it up, right? We obviously -- we knew it was a tough situation. We knew there was water in the basement. There was more water in the basement than we thought. I think it really -- it started with all the basics of just being a good manufacturing company, right, producing enough, understanding your value chain end-to-end, right? And then you have the supply chain turbulence around the world and not having a bulletproof supply chain, you get blown up by $0.01 parts all over the place. Then you have lapses in your quality system that leads to a warning letter, then you can't produce enough, you have a warning letter, you can't explain what's going on with these recalls as part of your warning letter customer, people lose confidence, right? And I think that was just the airplane announced one thing after another after another. And we've had to unpack all of that. And -- but to unpack all of that and fix it and repack it, it required a lot of capital. And that capital obviously hurt us cash off our balance sheet, hurt our returns. We made a mistake like we always do, we put the customer first. We tried to build inventory to stop the bleeding. But the reality is the business went away from us anywhere that there was a multiple choice opportunity to solve it where there wasn't on syringe pumps or ambulatory, we generally held on the business. Or where there was a competent or other supplier, the business went away, we built more inventory as the business went away. Then the economic consequence of that when you need to slow down your factories got to turn that back into cash. That pressured our P&L at the end of last year and the beginning of this year. Now we're at a point where we feel like we're almost caught up from a quality perspective. We had a clean bill of health in the most recent audit. We talked about that in the call yesterday. That doesn't necessarily guarantee a lifting of the warning letter, but it's an important step. The supply and demand equation into the plants is more predictable. The unfilled factories or the factories are getting closed and they're getting folded into other places because you have to profitize what's left. When it's all said and done, Smiths probably had 10%, maybe 12% less revenues than we thought, but it had far less earnings because of all these things going on, right? And we had to kind of -- you have to repackage that to get the value back out of it. So it's been a lot of different things. But I think we're through the woods.

Yes, yes.

Time, I mean, bad deals take time, and we lost 2 years.

Yes. Okay. But it feels like things are on the up and up. So -- okay. Just a question for you on go-to-market strategy for ASCs. Site of care has been a topic of conversation and that shift there and only saw that accelerate really with COVID. So what is your ASC strategy at ICU?

We have a direct [ all site ] sales force, and we have kind of an economic and clinical package of these goods that apply to it, just like some of the people who are incredibly successful in ASCs, right? They show up with a turnkey solution to turn the lights on the place. We have a little bit of a turnkey solution to run a certain set of procedures. But we're not big enough where you have like national coverage with your own people. And so our sales team, there's regional distributors who kind of focus on that. We have a bunch of intermediaries that help us a lot. We don't do it all ourselves.

Okay. And the other thing I wanted to follow up on from the presentation was the concept of connectivity and software in the infusion pumps. And it sounds like -- and tell me if I'm getting this wrong, but it sounds like that's where you see the most potential for future differentiation and ultimately share gain. A, am I right? And, b, so how are you approaching that from an R&D perspective? Like what are you focusing on?

I mean, the vast majority -- of our $80 million above-the-line R&D spend or $80 million and change, the vast majority is on the infusion pump portfolio. And the vast majority of that is actually on software development. There's only so much you could spend on the hardware development. I think the focus there for us is to make sure that we have a tool set for the device that adds value. Connectivity is just table stakes, right? Everybody is expected to have bidirectional connectivity to be able to program the pump from the pharmacy. What's valuable is any clinical utility that's coming out of those application. And that's where we're focused because people are going to pay for that, right? And to have an architecture that allows people to buy certain items off the software menu. Hospira was actually an innovator in that, right? They've lost their way. And so we've gotten back to a lot of those original concepts. But you have to first focus on getting the pump share and then you can talk about how do I get there.

Right. That's fair. All right. Well, we're almost out of time. So...

Thank you so much for having us.

Go enjoy the sunset.

We see it out here every day. You can see it from your.

No, I can't. I have another fireside chat.

Thank you, everyone, for your interest. Nice. I appreciate it.

Thank you all.