Becton, Dickinson and Company (NYSE:BDX) Q1 2023 Earnings Call Transcript

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Vijay Kumar: Understood. And then just one follow-up for me, Chris. And perhaps, Tom, you can chime in. One on, did you €“ a few questions here on combo and flu revenue contribution. I think on the prior call you had said you expect somewhere around 150-ish for the year. Did the estimate change? What was the China impact here in the quarter? And Chris, did I hear you correctly on gross margins? Should they be up sequentially here into 2Q? Or should gross margins be flattish or down?

Chris DelOrefice: Yes, real quick on gross margin, we didn’t give specific guidance on gross margin, we more €“ just to give you kind of an anchor how to expect Q2 to play out. We said it would be in line roughly with how we ended our full year fiscal year 2022, which when you think of the inflationary environment we’re in, in the first half of the year, right, we talked about peak inflation rolling through in Q1 and Q2. We had a 350 basis point impact of inflationary pressure in Q1. And so, a Q2 margin similar to how we exited the year is what we’re thinking. We did not specifically highlight gross margin.

Tom Polen: Vijay, on the other two questions that you asked, on China specifically, so China declined slightly in the quarter, obviously due to the COVID impact. We did see at the end of this month €“ last month, January, starting to see some recovery there. So, we’re optimistic for the year, we still €“ as you know, we delivered double-digit growth in China. Last year, we said high singles or near double or about that this year, and that’s unchanged. We think we will be able to recover in the back portion of this year. We still have our four-pronged strategy that we have in China we remain very confident in. We’ve got a very strong team there that’s been navigating that challenging environment. Again, they delivered 10% plus growth in 2022, and we expect another strong 2023.

And that strategy that focuses on bringing our global pipeline to China continuing to drive China tailored R&D. And you heard us talk about a new launch there in the midline of a product developed in China for China. We continue to move in to expand our market coverage into lower-tier settings, continue to manage through the BOBP where it exists, that’s in our run rate. And we continue to strengthen our local presence in China, both our manufacturing presence as well as clinical expertise as we continue to train thousands and thousands of clinicians each year. That formula has worked very well for us in the past, and we continue to double down on that. I think as we think about the combo test, I’ll turn that over to Dave to speak a little bit about what we’re seeing there.

Dave Hickey: Thanks, Tom. Hey Vijay, good to hear you. Thanks for the question. Yes, so just on COVID and combo, as I think about both of those. I mean, as you saw in the quarter, we posted COVID-only revenues of $32 million. And as we said on the call, we now expect COVID only for the full year to be between $50 million and $100 million. I think Chris commented right, we are seeing obviously stabilization in the market. We are seeing a decline in testing for COVID only. Actually, as that testing shifts to these combination tests, and actually, for us, in Q1, our performance in that area did actually help offset that COVID-only decline. We had anticipated that that’s the way that was going to become the standard of care. I’m actually very proud of the team in terms of the way they sort of anticipated and reacted and built these combination test supplies to support the Q1 performance.

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