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As a major manufacturer of medical supplies, from injection devices to the medication delivery systems used in ICUs, BD has been in overdrive lately—in some cases making more of a product in a single week that it had during the whole previous year, to meet COVID-19 demand. But BD has gone beyond merely ramping up. It has installed medical equipment at emergency field hospitals; it has provided infection surveillance data to the CDC; and it has worked with governments and NGOs worldwide to get immunization supplies ready for the eventual arrival of a vaccine.

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Becton Dickinson develops, manufactures, and sells a wide range of medical devices, lab equipment, diagnostic products, surgical products, sharps disposal systems, and other medical supplies, serving health care institutions, researchers, and the general public worldwide.

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Becton Dickinson (BDX): Company Profile, Stock Price, News, Rankings

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Hello, and welcome to `BD's first fiscal quarter 2026 earnings call. At the request of BD, today's call is being recorded and will be available for replay on BD's investor relations website at investors.bd.com or by phone at 800-753-5212 for domestic calls and area code 1-402-220-2673 for international calls. For today's call, all parties have been placed in a listen-only mode until the question-and-answer session. I will now turn the call over to Shawn Bevec, Senior Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to BD's earnings call. I'm Shawn Bevec, Senior Vice President of Investor Relations. Thank you for joining us. This call is being made available via audio webcast at bd.com. Earlier this morning, BD released its results for the first quarter of fiscal 2026. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's call are Tom Polen, BD's Chairman, Chief Executive Officer, and President, and Vitor Roque, Senior Vice President and Interim Chief Financial Officer. Before we get started, I want to remind you that we will be making forward-looking statements. You can read the disclaimer in our earnings release and the disclosures in our SEC filings on our investor relations website. Unless otherwise specified, all comparisons will be made on a year-on-year basis versus the relevant fiscal period.

Revenue percentage changes are on an FX neutral basis, unless otherwise noted. Also, references to adjusted EPS refer to adjusted diluted EPS. As a reminder, beginning October first, we began operating under our previously disclosed New BD segment structure that includes Medical Essentials, Connected Care, Biopharma Systems and Interventional, and a fifth Life Sciences segment comprised of Biosciences and Diagnostic Solutions. The financials discussed here and included in the earnings release and 10-Q have been recast to reflect this reorganization. Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation. With that, I will turn it over to Tom.

Thank you, Shawn, and good morning, everyone. Before we get started, I'd like to take a moment to welcome Shawn to BD. We are very excited to have Shawn join our team, and I look forward to partnering with him as we continue to communicate our strategy, performance, and growth opportunities. Turning to our Q1 performance, we delivered stronger-than-expected results, which reflect our disciplined execution, including accelerated commercial initiatives and strength in our key growth platforms. Revenues of $5.3 billion increased 0.4%. New BD grew 2.5%, with broad-based growth across the markets where we've been doubling down on investments. This includes double-digit growth in Biologic Drug Delivery, PureWick, Advanced Tissue Regeneration, and Pharmacy Automation, and high single-digit growth in APM.

We delivered mid-single-digit growth across 90% of New BD's portfolio, partially offset by 10% of our portfolio, Alaris, vaccines in China, undergoing challenging market dynamics that were in line with our expectations. We delivered adjusted gross margin of 53.4% and adjusted EPS of $2.91, both of which were also ahead of our expectations on the strength of revenue, performance, and operational execution. Later this morning, we expect to close the combination of our Life Sciences business with Waters via Reverse Morris Trust transaction. This is a significant milestone as we fully pivot to New BD and the next chapter of the company's growth. I want to thank both the BD and Waters team, whose exceptional hard work and transaction experience are enabling us to close nearly two months ahead of schedule.

We believe this transaction unlocks significant value for our shareholders through both participation in the new Waters entity and value creation in the New BD. As part of the transaction, we will receive a $4 billion cash distribution. I'm pleased to announce $2 billion will be deployed towards share repurchases through an ASR and $2 billion will be deployed towards debt paydown. Both are expected to be executed in the near term, subject to market conditions. This is in line with our enhanced capital allocation strategy, which prioritizes share repurchases, a reliable and growing dividend, and focused tuck-in M&A in targeted high-growth markets, all designed to steadily increase return on invested capital. With the completion of our Life Sciences transaction, BD enters this next chapter as a far more focused, pure-play med tech company.

This transformation builds on several years of deliberate portfolio shaping, including divesting 3 substantial non-core assets and the more than 20 strategic tuck-ins we've completed to strengthen our presence in some of the most attractive areas of healthcare. We recognized early on how the world of healthcare is changing rapidly. Providers everywhere are seeking partners who not only deliver high-quality products, but who can help them transform care pathways, improve outcomes, and reduce cost. As we've previously discussed, we've identified three key trends shaping the future of healthcare that have guided our portfolio strategy. These include, one, the rise of smart, connected devices, robotics, AI, and informatics that transform the cost and quality of care. Two, the shift of care towards lower cost, more convenient settings, including outpatient facilities and the home. And three, rapid growth in technologies to address chronic disease, one of the fastest-growing segments in healthcare.

Over the last several years, we've built multiple growth platforms, each with billion-dollar-plus potential, that position New BD squarely at the center of these trends. From our nearly $5 billion Connected Care business, with AI-driven advanced patient monitoring and connected medication management, to advanced pharmacy robotics, to leading platforms for biologic drug delivery at home, urinary incontinence, vascular disease, and tissue regeneration. New BD is positioned to lead in advancing the future of care. We have leading positions in more than 90% of the markets we serve, with over 90% of our revenues driven by recurring consumables. Every year, we manufacture more than 35 billion devices that reach healthcare providers across more than 190 countries. Few companies in healthcare are as foundational to the daily delivery of care, and that scale powers the strong free cash flow that underpins our strategy.

While these trends guide where we innovate and invest, BD Excellence guides how we execute. Together, they shape our strategy for the New BD, Excellence Unleashed, which is expressed through our three strategic priorities: compete, innovate, and deliver. We've begun executing on these priorities and enhancing the speed and agility of the company. I'll share some examples of where we're seeing early positive momentum. Compete reflects how we're elevating our commercial capabilities to win in the fastest-growing parts of the market and deliver an exceptional customer experience. We made significant progress across our commercial initiatives this quarter, including planned sales force expansion in APM, PI, and Advanced Tissue Regeneration, while accelerating initiatives to make PureWick at home available for our veterans. We're also seeing broad-based commercial success across the company.

The Pyxis Pro launch is off to a good start, with 85% of initial orders coming from competitive conversions. Alaris delivered our strongest quarter of competitive wins since the relaunch, increasing our category share by approximately 100 basis points. Our Medical Essentials business also gained share across multiple categories and with major U.S. health systems, including in flush, PICCs, and catheters. Pharma Systems delivered significant GLP-1 wins, with now over 80 novel and biosimilar GLP-1 molecules contracted in BD delivery devices. And BDI saw continued strength, with notable conversions in oncology and peripheral arterial disease and strong adoption of recent launches of PureWick Flex and GalaFLEX. These results reflect the strong execution of our teams and the growing impact of our commercial initiatives. Turning to our second priority, innovate.

Innovate focuses on how we bring high-impact solutions to market, executing a pipeline that's now stronger, more focused, and more productivity-driven than ever. This quarter, we strengthened our innovation pipeline by completing the reallocation of $50 million of central R&D to the businesses to fund multiple new product innovations in our high-growth platforms. We also continued to scale BD Excellence into R&D, reducing development times and accelerating future launches by 6-12 months across several areas. In surgery, we entered several new markets, increasing our served markets by over $550 million in categories that offer higher growth, higher margin, and long-term strategic value. This includes the U.S. launch of Avitene Flowable, a next-generation flowable hemostat that strengthens our position in biosurgery and enters us into a nearly $400 million market, growing approximately 5% annually.

We also advanced our global wound irrigation portfolio with the European launch of Surgiphor, a ready-to-use wound irrigation system that simplifies operating room workflows. In addition, we submitted Surgiphor Pulse to the FDA, a pulse lavage system, which can expand BD's presence in this nearly $200 million market by approximately 40%. Finally, in Connected Care, HemoSphere Stream began targeted market release in the US and Europe following October's 510(k) clearance. Stream's smart cable compatibility can expand its addressable market tenfold, and early feedback has been very positive. Finally, our third priority, deliver, represents our commitment to operational excellence across safety, quality, delivery, and cash flow.

As a result of the Life Sciences transaction and the network consolidation initiatives that we began in FY22, we've created a meaningfully simpler manufacturing network, reducing our network by nearly half to under 50 global sites, lowering costs, improving resiliency, and enabling scaled smart factories. We have actions underway to improve this even further. BD Excellence continued to drive meaningful productivity improvements of 8% in the quarter, contributing to gross margin and cash flow. Finally, we achieved good progress on the $200 million cost out program communicated last quarter. Already executing actions representing $150 million, or 75% of the target, with clear line of sight to the balance. We are pleased with our strategic progress, yet we recognize there's more work to do.

This is an exciting moment for the New BD as we focus actions and raise our standards to out-compete, out-innovate, and out-deliver. With that, I'll turn it over to Vitor.

Thanks, Tom. Starting with revenue. Total company revenue of $5.3 billion grew 0.4%, with 2.5% growth in New BD. In Medical Essentials, MDS performance reflects expected order timing dynamics and volume-based procurement in China that was partially offset by continued share gains in the US in our Vascular Access Management portfolio. Within Specimen Management, solid growth in BD Vacutainer portfolio in the US was offset by expected market dynamics in China, order timing, and a tough comparison to the prior year. Connected Care delivered solid mid-single-digit growth. Performance was led by APM, which grew high single digits on strong volume across the portfolio. In MMS, growth was led by pharmacy automation, with double-digit growth in our Rowa platform. In our Infusion business, growth was driven by sets, which were up strongly on increased utilization against last year's fluid supply shortage.

Alaris performance was slightly ahead of our expectations, despite the expected revenue decline due to tough comparison to the prior year. Biopharma Systems grew low single digits, with continued double-digit growth in biologics, led by GLP-1s. This was partially offset by lower demand for vaccine products in line with our expectation. Interventional delivered solid mid-single-digit growth. This includes high single-digit growth in UCC, driven by double-digit growth in PureWick. In surgery, we delivered mid-single-digit growth, led by strong performance in our Advanced Tissue Regeneration and Infection Prevention Portfolios. Low single-digit growth in PI reflects strength in peripheral vascular disease and oncology, partially offset by China market dynamics. Life Sciences declined in the quarter. In the LS, results were impacted by US point-of-care headwinds, a difficult prior year comparison, and market dynamics in China.

In BDB, growth was pressured by market dynamics in China, lower Life Sciences research funding, and a difficult compare from prior year licensing revenue. Turning to the P&L. Adjusted gross margin of 53.4% was down 140 basis points versus the prior year, driven by approximately 170 basis points of tariffs, partially offset by productivity initiatives through BD Excellence. Adjusted operating margin of 21.2% was down 240 basis points versus the prior year due to the impact of tariffs and increased commercial investments in key growth areas. Despite these declines, both adjusted gross and operating margins were ahead of our expectations. Adjusted EPS of $2.91 was down 15.2%, driven primarily by the impact of tariffs.

However, earnings exceeded our expectations on the strength of both revenue performance and operational execution. Free cash flow was $548 million in the quarter. Free cash flow conversion improved to 66% versus 59% in the prior year, driven by working capital discipline and capital efficiency. During the quarter, we returned approximately $550 million to shareholders, including dividends and $250 million in share buybacks. We ended the quarter with net leverage of 2.9 times and remain committed to our 2.5 times long-term net leverage target. Moving to our fiscal 2026 guidance for New BD. All guidance we are providing today is on a continuing operations basis and reflects the expected closing of the combination of our life science business with Waters.

Following the closing, the separated business will be treated as discontinued operations for the full fiscal year. Our guidance includes deployment of $4 billion cash distribution we will receive as part of the transaction. For fiscal 2026, we continue to expect New BD to deliver low single-digit revenue growth. Based on current spot rates, currency is estimated to be a tailwind to revenue of about 120 basis points. Moving down to the P&L, we continue to expect adjusted operating margin of about 25%, inclusive of the impact of tariffs. Interest other net is expected to be between $600 million and $620 million. Our adjusted effective tax rate is expected to be between 16% and 17%. Weighted shares outstanding for the full year are expected to be approximately 282 million shares.

Given these considerations, we are establishing an adjusted EPS guidance for New BD in a range of $12.35-$12.65. This reflects growth of approximately 6% at the midpoint, including an impact of 370 basis points from tariffs. The net estimated impact of the closing of the Waters transaction, including the deployment of associated $4 billion cash distribution, is approximately $2.40. Therefore, our adjusted EPS guidance for New BD remains operationally unchanged. As you think about fiscal 2026 phasing, we expect Q2 revenue growth of approximately 2%, consistent with our full year guidance assumption, with the balance of the year also expected to be within the low single digit range. We expect Q2 adjusted EPS to be in the range of $2.72-$2.82. Finally, we are pleased with our Q1 performance.

However, with just one quarter behind us, we are maintaining a prudent approach to our guidance for New BD. With that, let's start the Q&A session. Operator, can you please assemble the queue?

Absolutely. At this time, if you have a question, please press star one. If at any point your question is answered, you may remove yourself from the queue by pressing star two. In order to allow for broad participation, please limit yourself to only one question. Lastly, to provide optimal sound quality, please pick up your handset while you ask your question. Thank you. Our first question is coming from Travis Steed with Bank of America. Please go ahead. Your line is open.

Hi, everybody. Congrats on the RMT and getting that done ahead of schedule. I wanted to ask about the guidance, both the Q2 revenue guide, the step down in Q2 and the EPS guide, as well as kind of the full year, some of the assumptions on the cadence of the year and how you're going from Q2 to the second half on both revenue and earnings.

Yeah, thanks for the question, Travis, and good morning. So we're really pleased with the start of the year and Q1 performance. I think you saw our team executed well, and we saw strength across several of the high growth areas of the portfolio. We can talk about those in just a bit. When it comes to Q2, you know, nothing's fundamentally changed in our Q2 outlook. As you mentioned, the core growth drivers supporting New BD growth in Q1, they all remain intact, and we feel really good about the trajectory of the business. Our Q2 outlook does reflect some modest timing benefits in Biopharma Systems and MMS that we saw in Q1. And if you adjust for that, basically Q1 and Q2 are in line with each other.

I think, you know, a few things, we're really pleased to be starting the year at our full year run rate. Q2 has no ramp versus Q1. And, you know, really importantly, there's no ramp from first half to second half either, right? Which is a much better spot and something that we really wanted to have this year, that, as you know, we had that topic last year. And so just where we want to be, no ramp in the year, strong start to Q1 and executing, as you said, the RMT transaction ahead of schedule. Really excited about the New BD.

Thank you. We will move next with Patrick Wood with Morgan Stanley. Please go ahead. Your line is open.

Fabulous. Thank you so much. Tom, maybe just, you know, a midterm one around the categories you're looking at. Obviously, this year, a bit of a transition year. There's a few things like China VBP and, you know, Alaris, that are kind of affecting numbers. But I guess as you look across, you know, new core BD's categories, is there any structural change that's happened recently or in the past that would preclude you from sort of hitting that normalized mid-single digit growth rate, you know, as a general framework? Anything that's changed one way or the other that would make you feel better or worse about that than how you feel about that? Thanks.

Yeah. Good morning, Patrick, and thanks for the question. Absolutely not. We feel really good about our portfolio. As we talked about, we've been extremely active over the last several years in very purposely reshaping our portfolio. We've done 3 significant divestitures, starting with diabetes, obviously V. Mueller, and most recently, our life science business. We've very purposely brought in, you know, 20 tuck-in acquisitions, everything from our Parata Pharmacy Automation to APM and a number of others, all reshaping the portfolio in those high growth areas that we've been talking about, that we identified some time ago. You know, today, as you mentioned, we do have some known headwinds that are in 10% of our portfolio. The fundamentals across the remaining 90% remain very strong, and they continue to perform at a solid mid-single digit growth.

We're continuing to lean in behind those areas. You're seeing us put meaningful commercial investment behind those. The $30 million of incremental sales investments, all 100% on track. You heard that update on the call, investing behind areas like VA, the Veterans Administration, PureWick now, that's purely fully reimbursement for veterans, launching a number of plastic surgery products in Europe and Brazil, expanding our sales forces by 15% in PI and APM, right? All investing behind those growth areas, which is, again, you saw strong growth, double-digit growth, in fact, this past quarter in areas like PureWick, biologics, tissue reconstruction, and others. You saw high single-digit growth in areas like APM. Pharmacy automation grew double digits in the quarter. So again, we feel really good. Those aren't slowing down.

We expect them to continue strong through the year, and we've got a great innovation pipeline that's going to continue to fuel growth in those over the next several.

Thank you. Our next question comes from Larry Biegelsen with Wells Fargo. Please go ahead. Your line is open.

Good morning. Thanks for taking the question. Congrats, Tom, on the closing of the Waters deal. Hey, Tom, maybe we could talk about the other, the 10% of the portfolio, you know, that's not growing mid-single digits. It, you know, China VBP, you know, what's the expected impact in, in fiscal 2026? You know, when do these-- the vaccine headwind lap in, in farm systems? And any change to the Alaris expectations this year and next year that you gave us on, on the last call? Thanks for taking the question.

Yeah, thanks for the questions, Larry. Everything's playing out as we expected it in Q1, and we expect that to continue for the balance of the year. China was in line with our expectations in the quarter. Vaccines were relatively in line with expectations in the quarter, as was Alaris. If anything, we're seeing some really strong competitive momentum in Alaris. I think as we shared on the prepared remarks, we had a record in new competitive wins in the quarter. We gained about a full point of share just in the quarter. Those take some time to come through in our run rate as we implement those and see the consumables revenue pick up. But in terms of actual, you know, contract signed, deals closed, it was a really strong quarter in Alaris, right?

Which is exactly what we wanna see. We're coming to the tail end of course, remediation, so our whole sales force is focused now on competitive gains, just as we said. And so we're pleased with that. You know, vaccines, on the counter side of vaccines, we continue to see biologics grow, you know, very solidly. You know, vaccines, we expect that will continue to play out for the year as we expected, and we'll have to look at that in, as we go into 2027. Certainly, it'll be a smaller portion of our revenue, and biologics will be a larger portion of our revenue. So its absolute impact in 2027 likely will not be anywheres near what it would be in 2026, but we'll continue to monitor that very closely.

China, the market, I was just there at the beginning of January. You know, I think we've shared before that we expect that VBP will have gone through 80% of our portfolio by the end of 2026. You know, we don't see any change to that assumption, and we do continue to see, you know, positive volume growth happening in, in China, despite the, the price compression in the few areas that we've discussed where VBP is happening. So, you know, overall, we, we said at the beginning of the year when we gave guidance for the, the old BD, we expected those combined areas to be about 250 basis points of headwind in the, the full year, and that's consistent with, you know, what we, what we outlined and how we think about it going forward.

Thank you. Our next question comes from Robbie Marcus with J.P. Morgan. Please go ahead. Your line is open.

Good morning, and thanks for taking the questions. I'll add my congratulations on the RMT going effective today. Two quick ones for me. I'll ask them both up front. One, just on second quarter, it's the easiest comps of the year, both on a one- and two-year stack basis. So, a lot of people just wanted to get help on why 2% is the right starting point for fiscal 2Q and any considerations there. And then, you know, as we get to the 25% operating margin, which I think is a touch better than people were thinking, you know, any one-time considerations or TSAs, MSAs, anything we should be aware of as we try and build up our models to get there? Thanks a lot.

Hi, Robbie, this is Vitor. So regarding Q2, first, I think we were very pleased with Q1 performance. I think we started the year solidly, and it puts us in very sound grounds for the rest of the year. But for the Q2, as Tom mentioned on his remarks, nothing fundamentally changed on Q2. We have our core drivers supporting the New BD growth in Q1, actually continuing in Q2, and we expect that trajectory to continue for the rest of the year as well. In Q2, the only thing that happened is slight change timing situations in both Pharm Systems and MMS. But if you normalize for those factors, we actually had a little bit of a more normalized growth between Q1 and Q2. But I think the most important piece is that nothing fundamentally changed on our Q2.

We feel very confident about the numbers going forward as well.

Both very much in line with our full-year guidance.

Exactly. Very aligned with our full-year guidance. From a margin perspective, there is no specific one-timers that we're expecting, so we are still holding the 25% as we committed before. This is on the basis of our margin performance, which is strong execution of our BD excellence, and also the favorable mix that we are driving through intentional investments in strategic areas like high growth, high margin areas like APM, UCC, surgery, among others. So we feel good about the 25, and there is nothing specific that changes the number from 25.

Robbie, maybe just to share a little bit more color on the margin performance, right? We're continuing to be very focused. Our innovation pipeline and the areas where we're putting commercial investment are all. Both the innovation pipeline has a notably higher gross margin than our average portfolio, and the areas that we're putting commercial investment behind that we've talked about also have a notably higher gross margin than our broader portfolio. So those help fuel margin. At the same time, obviously, BD excellence in our operations organization is continuing to gain momentum, right? We've been at it for a couple of years. We're still in relatively early innings. You saw us talk about 8% productivity improvements in the quarter. That's world-class levels. We're really proud of the teams there and how they're executing.

You also heard us talk about, I think, for the first time, share some statistics around our plant network. When we started the last phase of BD strategy, we talked about investing behind the network simplification. And you're seeing the outputs of that, combined with obviously the separation of our life science business, more than cutting our manufacturing network in half. So when we started the journey several years ago, we had a little over 90 manufacturing plants, and we're under 50 today. And so these are fewer plants, more scaled plants, where we're getting more leverage, you know, more costs being spread over higher volume in these sites, also all helping to contribute to our operating margin. So that's been something systematic that we've been working on. We're really pleased with that.

When you think about that, that drop from, you know, nearly 90 to under 50 plants, about half of that, over 20, that's over 20 plant closures and a little over 20 plants going to Waters as part of the RMT. But a dramatically simplified network that we're investing behind as we go forward as well, which just helps us further on the op margins. Thanks for the question.

Thank you. We will move next with Joanne Wuensch with Citi. Please go ahead. Your line is open.

Good morning, and congrats on getting to this phase. Two questions. The first one has to do more macro, if you're seeing anything in the quarter on things like nursing shortages, weather impacts, or anything on the ACA. And then, I was hoping you could maybe flesh out some of the contracts you have in, for the GLPs and if there's anything noteworthy you can share with us there. Thank you.

Yeah. Good morning, Joanne, and thanks for the question. So utilization, as we think about just the broader, you know, hospital demand trends, we continue to see steady utilization levels in line with hospital surveys that we monitor. I'd say the CapEx environment, we also see remaining solid. We haven't seen any weather effects, you know, through January and into February. And then I would just say, you know, overall, too, as we think about utilization, over 90% of our revenue is consumables, particularly for New BD, which provides a very resilient, you know, base. And the portion that is CapEx, we're seeing that solid as well. You saw that come through very clearly in MMS.

If you exclude kind of the dynamic of Alaris and the growth over, MMS grew nearly 6% in the quarter, and that includes CapEx there, so really strong. Pharmacy Automation is actually one of our largest percent businesses of CapEx, and it grew double digits, 10% in the quarter. And that's a mix of both strong CapEx purchases in Europe and in the US there, as we think about pharmacy automation. Again, that's a big labor savings play, and that's a big part of our CapEx spending as well, is helping where there are shortages of pharmacists or other clinicians. You know, a lot of our solutions help in that environment. When it comes to GLP-1s, you know, we're in a really good position there.

Certainly it's a, it's a modest portion of our business today, about 2% of our revenue, but it's a high-growth area and certainly a, a growth opportunity as we look forward. Today, we support some of the largest molecules that are on the market. We continue to have a, a very high win rate on both new novel molecules that are coming to market and on biosimilars. We updated some information today on the call. We now have more than 80 novel and biosimilar GLP-1s contracted in our devices, and we're continuing to see, you know, momentum in injectables. Obviously, there's always the question in the, in the news, I know some investors of ours have asked a question about, you know, how do we think about oral injectables? Reality is, is we're seeing continued momentum in injectable GLP-1s.

We continue to see, you know, the largest pharma companies putting billions of dollars, some very recent announcement in multibillion-dollar investments in injectable capacity, including in the U.S. And people really view that, orals as complementary rather than, you know, displacing injectables at scale. So you know, we're continuing to be, you know, bullish on that and continue to, to focus on having a very high win rate on both new novel and biosimilar molecules in the space. Thanks for the question.

Thank you. We will move next with Matt Taylor with Jefferies. Please go ahead. Your line is open.

Hi, thanks for taking the question. Tom, as a follow-up to that question, I think previously you had talked about the potential for the GLP-1 franchise within BD to get to about $1 billion by the end of the decade. Do you still feel the same way about the trajectory long term, given all these deals that you've signed? And maybe you could address that and where it is now and where it is today.

Yeah, we still feel very much with that on track. Our growth rate continues to be very strong as we share double digits. You know, we're nearing that halfway point on that, that journey now. So and again, you haven't seen the number of new novel molecules coming to market that will be over the next several years. And of course, as you look at the back half of this decade, you start really hitting stride on the biosimilars. And when we talk about our biosimilar portfolio, it's very broad geographically, right? So our biosimilar portfolio includes biosimilars across China, Southeast Asia, Europe, Latin America, Canada, and the US. It's a very broad global. And so as you think about certain patent expiries varying geographically, we have good exposure across those different time points. Thank you for the question.

Thank you. We will move next with Matt Miksic with Barclays. Please go ahead. Your line is open.

Hey, good morning, Tom. Thanks so much for taking the questions, and congrats on getting to the starting line, I guess, is one way to think about it. So, when you mentioned just a question on the innovate part of your plan and the investments you're making in R&D. Maybe some sense of when I understand the commercial investments this year, execute and compete, but when do you think we'll start to see things come through the pipeline or maybe come through at a faster pace from these R&D investments that you're making and the kind of innovate segment of your strategy? Thanks.

Yeah, thank you. You're gonna see those continue to come through. You know, this year, we've got a lot of great launches happening. We talked about some of the very recent ones that are just ramping up, like Pyxis Pro. We couldn't be more pleased with how that one's been going. As we mentioned, really strong competitive share gain. HemoSphere Stream just launching now. You're gonna continue to see throughout this year and into next, 2027 is quite a big year for launches, as is 2028, across the portfolio. At the same time, we've shared, we've put $50 million that we took from efficiencies and reshifting from corporate expenses, moving that into R&D. And we just started quite a few new R&D programs as well this fiscal year.

Not only what we would normally start with our traditional increase, but that bolus of money, starting more projects in tissue regeneration, some adjacencies in PureWick that we're really excited about, additional Biologic Drug Delivery investments and also in the Connected Care space. The other thing that we're seeing some really positive, still early, but very positive results. As we shared, we're taking BD Excellence into commercial and into innovation. We actually have some dedicated resources now that go across, working with our different R&D teams, doing kaizens to accelerate our innovation timelines. We've been doing quite a few of those. We started that really in late last year. We've been doing those throughout Q1, and we've seen a number of R&D projects where we've accelerated timelines to launch by six and even up to 12 months on that.

And so we're gonna continue to get after that. We've got a goal to do all of our key development programs. We're focused on driving those kaizens and accelerations this year. They're all scheduled with the teams. And so, you know, that capability and that momentum that we saw in operations through BD Excellence, we're really pleased with some of the early signs that we're seeing, taking those same processes and systems into innovation and also into our commercial organization. So we'll continue to provide updates on that as it progresses, and we'll look forward to sharing more through the year and eventually at an Analyst Day, you know, in the future on that innovation pipeline. Thanks for the question, Matt.

Thank you. We will move next with Shagun Singh with RBC Capital Markets. Please go ahead.

Thank you so much. I just wanted to get a better handle on the three areas of headwinds, Alaris, vaccines in China. It seems like vaccines in China will, you know, hopefully be behind us this year, but how should we think about Alaris beyond this year? Do you get to that 5% or mid-single digits next year, or will Alaris be a headwind? And then just very quickly on M&A, you know, is there an opportunity for you guys to be more aggressive under the New BD strategy on M&A to help raise the weighted average market growth here? Thank you for taking the questions.

Yeah, thank you for the question, Shagun. So on vaccines and, and China, you described those. Alaris, we communicated at the end of, as we gave the guide to start this year, the, the whole COVID guide, that we do expect Alaris to step up in 2027, a 100 basis points headwind this year, stepping up to a 200 basis point headwind in 2027. That's just again, as the, as we've fully completed the remediation. We expect to actually be at, at record share levels. As that dynamic is happening, it's just the grow over from the remediation, that's happening there, but we expect to be in a stronger than ever competitive position on Alaris. As it comes to tuck-in M&A, so as we've communicated, you know, for New BD, we're very focused on a balanced capital allocation strategy.

We're pleased, obviously, this year, you know, between the $200 million-plus share buyback that we did, $250 million buyback that we did in Q1, plus the $2 billion buyback that we're doing now through the ASR. But that's significant return of capital to our shareholders. We are, as part of that balanced capital allocation strategy, we have communicated that we're focused on tuck-in M&A. Our focus remains on tuck-in M&A, not transformational M&A. And we do have a robust pipeline from that perspective. When it comes to the criteria for those tuck-in M&A, they remain unchanged versus what we've shared in the past. That means accretive to revenue growth and accretive from an EPS perspective. We're not looking at dilutive M&A.

And we do see, with the New BD, there's a number of very attractive high-growth sectors that we're in, that we see the opportunity to supplement that WAMGR with tuck-in M&A. So, you know, more to come on that, but we'll continue to do it in a focused way and very much aligned with that balanced capital allocation strategy that we've communicated. Thank you for the question.

By the way, just for those who had congratulated earlier on, the deal with Waters is officially closed now. Operator?

Thank you. Thank you. Our next question comes from Rick Wise with Stifel. Please go ahead. Your line is open.

Good morning. Hi, Tom. Tom, you know, you seem very well set up for the rest of the year. I think Vitor said it, and I apologize if these are not the exact words, but I think you said, "Prudent guidance for fiscal 2026." You're well set up for a stable, predictable outlook without the usual second half ramp we've seen in the past. That's great. Sort of a variation, a little bit of Matt's question. I can't believe you're investing in Salesforce the way that you are, the M&A you've done, the focus on faster growth businesses, the cost cutting. My question is, if there would be some upside to this thoughtfully prudent guidance, in the next two, four, or six quarters, do you think it would be from all the above?

Is it more likely from the new products? Is it more likely to come from the expanded sales efforts? Is it, you know, that some of the growth drags are a little less? Just any color on how we should just reflect on that. And just as, since this is not exactly one question, I'll ask, add a half. When are you gonna—where are you with your CFO search, announcement, timing, and maybe talk to us a little bit about what you're looking for in your new partner. Thank you so much.

Yeah, thank you. Thank you for the questions. So when it comes to the CFO search, it is well underway, and we'll look forward to providing an update when that's complete. In the meanwhile, of course, Vitor is doing a great job stewarding the company and obviously doing a great job here on the call. So more to come on that, but you know, we're running a thoughtful process focused on you know, continuity of execution and financial discipline. And obviously, this is a really important moment in the company's evolution, and we're going to make sure we get the right person there. When it comes to upsides to guidance for the year. Look, again, we're really pleased with how we started the year.

As we think about the areas that we're investing behind, you know, those areas of high growth and higher margin, urinary incontinence, pharmacy automation, connected care, APM, tissue regeneration, biologics, right? Those are the areas that we're putting our investments behind, both commercially and disproportionately from an R&D perspective. So, you know, those are areas that could be natural areas of opportunity for us. I think, you know, as Mike Feld now also is Chief Revenue Officer, who's been running the Life Sciences segment, you know, essentially as of today, he's now full-time in that role. We see opportunity. You know, the reason we created that role, it's never existed in the history of BD, is we've been very good commercially.

You don't get to our category leading shares in 90% of the markets in which we compete without being good commercially. But we think there's another level of performance that we can reach, just like we've always been good operationally, but we're reaching and we're executing at levels that we've never executed at before operationally. We view that same opportunity exists commercially, and when we execute that, that will deliver higher growth. We're convinced of that. And so more to come there. As Mike's now fully in that role, we'll, you know, provide more exposure to our investors on the programs that he's executing. You know, it not only has to do with sales force expansion, but we've changed compensation plans for our selling organization around the world going into this year.

We're putting in new tech stacks for our sales teams to help them, you know, be more effective. We're optimizing our management systems and processes with our selling organization, and Mike's leading that, working with our teams around the world. So again, like we've seen in, in, in operations, we believe that there's opportunities, meaningful opportunities, to help accelerate growth as well through that commercial excellence. And complementing that with our innovation pipeline, the growth areas that we've been focusing on, and of course, complementary tuck-in M&A over time as well. So thanks for the question, Rick.

Thank you. We will move next with Josh Jennings with TD Cowen. Please go ahead. Your line is open.

Hi, good morning. Thanks for taking the questions and congratulations on officially breaking through the tape there on the Waters transaction. Wanted to just get help thinking about the pricing environment, hospitals' demands for concessions versus whether that's stepped up and just with all the innovation that's on tap from BD, you know, can that help drive price premiums and pricing, can pricing be a tailwind in fiscal 2026 and into the out years and help with organic revenue growth and gross margin expansion? Thanks for taking the question.

Yeah, thanks for the question, Josh. So we continue to see, I'd say a stable pricing environment, you know, relative. There's always pressure from our customers for pricing. That's something that we've, you know, obviously navigated for quite some time. And we're very focused on obviously articulating and delivering value to our customers, and outcomes, both clinical outcomes and financial outcomes through the technologies that we provide. You know, pricing, what we're seeing so far in Q1, details will come out further in the 10-Q that'll be filed later today. But overall, you know, pricing, generally flat to slightly positive. That's up a little over 50 basis points ex China, positive price, offset by the pricing dynamic that we see in China.

As we think about that going forward, we expect to continue to have positive pricing in the rest of the world, and as China VBP abates as we move into 2027, we would expect, and, and beyond, that pricing dynamic to continue to be more, more of a positive for us as we go forward, as VBP, you know, lessens from that perspective. I, I think, you know, as we think about new product innovations and, and, and pricing there, you know, we're entering into a lot of new product categories with our, our products, probably more so than ever before. Historically, we've done a lot of serial innovations where we're upgrading base products. We're continuing to do that in, in a number of cases, but in, more so than ever before, we're entering into new spaces.

I think actually all of the new products that we shared today are brand-new spaces for us. Avitene Flowable, a brand-new biosurgery space for us that we've never been in before, a $400 million market. Surgiphor, which is complementary to ChloraPrep, but it's for once you're in the surgery, ChloraPrep is before the surgery. That's a whole new market for us. And HemoSphere Stream is really extending the HemoSphere platform into the general ward, expanding it to about 30,000-300,000 monitors that we don't tap into today. So a brand-new market space for us with HemoSphere Stream. So, you know, there we make sure that pricing, you know, equals the value of the products and what they're delivering to our customers.

I think the other thing is in areas, and we have a number of new products launching in pharmacy automation, for example, for central fill, or the Pyxis Pro, which, by the way, Pyxis Pro launched at a premium to the base Pyxis. But it's all associated with very clear data that we have, that it's delivering greater economic value to our customers, right? Those areas, for example, it's meaningfully helping with nursing workflow by reducing drug shortages on the floor, or in the case of Pharmacy Automation, it's reducing labor costs, you know, associated with preparing, you know, medications and pills. And it's enabling many places, let's say, like online pharmacies that are delivering to your home, for them to do that in warehouses, and they're starting from scratch. They never even hired pharmacists in the first place.

They go straight to the robots and automation, and their warehouses are delivering, you know, medications to home and able to do that in a cost-effective manner. So I think our solutions are well-tailored to this environment that we're in and expect we'll continue to see, as is our innovation pipeline. So thanks for the question.

Thank you. We will move next with Jayson Bedford with Raymond James. Please go ahead. Your line is open.

Good morning, and congrats on the progress here. So I had a question on Alaris. It was down year-over-year, but you mentioned you gained 100 basis points of category share. I'm guessing the share commentary is on an installed base basis. So my questions are, one, is your expectation that you continue to gain share at this rate? And then, two, just to level set, what is your share position today? Thanks.

Yeah, thanks, Jayson, for the question and bringing us home here on the call. Our share position is nearing 60% overall. And yes, you're right. So obviously, through the remediation efforts that we've been doing over the last 3 years, you know, we've been upgrading about 20% of the market per year. And so as this is now coming to the tail end of that and peaked last year, you physically can't, even if we took all competitive share that's opening up this year, we still would see declining growth, and the same dynamic would happen next year just because of what it means for us in terms of the scale in which we just upgraded the marketplace. But yes, we are pleased with our performance on share capture in the first quarter.

We have a very strong funnel as we go forward, and we continue to innovate, you know, very rapidly on Alaris. Not only on the current platform, we've had, of course, new 510(k)s approved since the original one that allowed us to relaunch the platform, but we're continuing to bring new features to Alaris. We have another one planned for submission late this year, that'll add further new features to that. And of course, we also continue to have it in, we've shared in the past, a whole new Alaris platform, which is moving forward very nicely through our innovation pipeline, and we'll look forward to sharing more details on in the future. But we feel good about Alaris. We feel good about our overall connected medication management platform.

It's great to have Alaris and our new Pyxis Pro out there together as well. As we also shared, Pyxis had a really strong competitive quarter in Q1 with the launch of Pyxis Pro and has a really strong pipeline as we look forward as well. So thank you for the question, Jayson.

Thank you. That will conclude today's question and answer session. At this time, I would like to turn the floor back over to Tom Polen for any additional or closing comments.

Okay, thank you, operator. In summary, we delivered a solid Q1 results that exceeded our expectations and we believe positions us well to achieve our full year guidance. As we navigate transitory headwinds and contained areas within our business, our broader portfolio continues to perform well, and we're actively investing in high growth, high margin areas. To our Biosciences and Diagnostic Solutions colleagues transitioning to Waters, I want to thank you for your passion, professionalism, and the tremendous contributions you've made to BD. You're stepping into an exciting new opportunity with a strong, growth-driven life science leader, and we're proud of all you've accomplished and wish you every success in this next chapter. Of course, with the completion of the transaction this morning, we're very excited to fully pivot to our strategy for the New BD.

We look forward to updating you on our progress next quarter, and thank you all for your time today.

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

Becton Dickinson (BDX) Q1 2026 Earnings Call Transcript

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