Hello, and welcome to BD's Third Fiscal Third Quarter 2008 Earnings Call. At the request of BD today's call is being recorded. It will be available for replay through Thursday, July 31st on the Investors page of the bd.com website or by phone at 800-642-1687 for domestic calls, and area code 706-6459-291 for international call using conference ID 52522900. I would like to inform all parties that your lines have been placed in a listen-only mode until the question-and-answer segment. Beginning today's call is Ms. Patricia Spinella, Director of Investor Relations. Ms. Spinella, you may begin.

Thank you. Good morning, everyone, and thank you for joining us this morning. During today's call, we will make some forward-looking statements. And it's possible that actual results could differ from our expectations. Factors that could cause such differences appear in our third quarter press release and in the MD&A sections of our recent SEC filings. We will also discuss some non-GAAP financial measures with respect to our performance. A reconciliation to GAAP measures can be found in our press release and the related financial schedule. A copy of the release which includes the financial schedule is posted on the bd.com website. Joining us this morning are John Considine, Vice Chairman and Chief Financial Officer, Bill Tozzi, Vice President of Finance, and BD Executive Vice President, Gary Cohen, Vince Forlenza, and Bill Kozy. I will now turn the call over to Bill Tozzi.

Thanks, Pat, and good morning, everyone. I assume you all have our earnings release and the attachments that we send out this morning and have had an opportunity to review them. Since we would like to devote as much time as possible to answering your questions, my opening comments will be brief. We would like to address three primarily topics. First, since all items that affect the comparability of our diluted earnings per share and continuing operations for the third quarter and nine months period ending June 30, 2007 and 2008. We want to review the analysis of these results provided in the press release. Second, we'll describe some of the key drivers of our revenue and earnings growth for the third quarter. And third, we'll review our increased guidance for the full fiscal year. Starting with earnings, I suggest you turn to table one in the press release. As you can see reported diluted EPS from continuing operations for the third fiscal quarter of 2008 is $1.18. For the third fiscal quarter of 2007, we were rating back to our reported diluted EPS for continuing operations of $0.95 the charge of $0.03 resulting from an in-process research and development charge related to Plasso Technology acquisition. This gives us diluted EPS from continuing operations excluding the specified items of $0.98. Comparing the $1.18 in this quarter to the $0.98 in the prior year's quarter, this is an adjusted EPS increase of 20%. Moving to our nine month period ending June 30, 2008 results, reported diluted EPS from continuing operations was $3.34. For the nine month period of fiscal year 2007, we are rating back to our reported diluted EPS from continuing operations of $2.38, a $0.03 charge just mentioned plus the $0.45 charge resulting from the in-process research and development…

Thank you, Bill. Now, before we open the line for Q&A, I would like to make three brief comments regarding, how we are thinking about our next fiscal year. As you all know, we will provide our yearly guidance as part of the final year-end analyst call in November. However, given some of the forward-looking assumptions we have seen in certain of the more recent analyst reports, we thought it would be helpful to provide a directional context around which our revenue and earnings trajectory might be built, as well as the impact of raw materials in a particular oil based resins might have on our gross margin. First in building upon bills discussion regarding the oil based resins, we are anticipating that our average resin cost will be about 8% to 9% higher than that of 2008. That would infer that an increase of about $20 million over the 2008 base of approximate $230 million that Bill reference would occur. Second, this along with other raw material cost increases will once again impact our gross margin. However, we will continue to leverage our SSG&A through disciplined cost control measures, and beyond that we are considering other options, including price increases. Finally, overall we continue to believe that our earnings growth will fall between the 7% to 9% range that we have discussed in the past... I'm sorry, that was revenue growth. I was well corrected by the audience here. Similarly, we also believe that we will achieve EPS growth in the 10% to 12% range. Now, we will not be going beyond these boundaries at this time in terms of talking about fiscal 2009. However, we hope that they should clarify some of the questions you may have had regarding that next year. With that operator, we can open the line for Q&A. And as always we'd appreciate if you would limit your questions to one plus the follow-up. Question And Answer

Thank you. The floor is now open for questions. [Operator Instructions]. Thank you. Your first question is coming from David Dreman [ph] with Morgan Stanley. Please go ahead.

Good morning, everyone. Thank you, for taking the question. Just first, on gross margin, you've talked briefly about 2009, but in 2008 there are a number of start-up cost that also ran to the gross margin line. Can you give us a sense of when those were often and if there are anymore we should be expecting in 2009, and then I have a quick follow-up?

Why doesn't Bill take that?

Okay. This year again every quarter we did have a couple of million in there. We're not projecting any for next quarter nor at this point what we project any for next year. For the third quarter, our productivity and mix gives around 60 basis points. We did see FX, again if you remember back to the first quarter, we had negative FX. We saw about 20 basis point improvement this quarter. Year-to-date we're about flat, which is about what we would expect. And then as we said on the call about 50 basis points was related to the reclass, as well as some of these one-timers. And then finally resins cost us about 60 basis points. With that said, this one-time adjustments again things that don't reoccur. The start-up this quarter was about 20 basis points, we are thinking about I think it's 30 basis points for the year. Overtime that will go away. So there could be some of that, but none of the one-time inventory adjustments that we certainly not projecting.

And there anymore facilities expected to come in line next year, either in Mexico or Florida?

Yes, there's... some of that we had started in pharm systems is a couple year rollout. So there will something that, some of those will start to come into operation, but there will be continuations of start-up for next year.

Okay. Then lastly on diagnostics numbers again looked pretty strong. Can you give us a sense what's going on, in the TriPath side, both on the liquid path market and also maybe give an update on FocalPoint?

Sure, this is Vince. So I think the pattern is consistent with what we've been saying over the last several quarters, in that we continue to gain some share, one or two share points, and expected over the year. So we are growing slightly faster than the liquid path market number one. So you know, worldwide you know, we were up 8...on a performance basis 8.7, 9.7 on a reported growth basis. In terms of the FocalPoint, we have received an approvable letter for the FocalPoint GS, that's the Guided Screening. Now, that is the next to last step in the process, the final step in the process is to finalize the labeling on a particular claim that usually takes about 30 to 45 days, somewhere in that range, but we're very excited about where we are in the process and we look forward to launching that product probably some time during next quarter.

Okay. Thank you very much.

Thank you. Your next question is coming from Mike Weinstein with JPMorgan. Please go ahead.

Thanks. Let me start by following up on the gross margin commentary which by the way was all very helpful. So first if we'd look at if this quarter you mentioned in the commentary that it grow down $6 million of inventory so gross margin this quarter if that would have flat, is that right?

That's right, that's the... the reclass in the 6 million right.

Okay. And we think about the whole oil resin commentary, we're talking... you basically said $10 move in oil is basically translates into what would be that 10 basis point to gross margin. Right, if I think about that right, and if you are saying?

It's certainly more or less here.

Yes, and you're saying that your cost off of your '08 base that $230 million base, you're expecting $20 million increase in your medical rate resin cost for 2009, and that's, as you see with your contracts that's your visibility on that's the full impact?

Based on oil relative price of... the 125 range.

Yes. Mike, you have to think about this...this is John ...in terms of the reference to oil is a convenience. It's not an absolute proxy for it as we've said many times. So if you went back and look that average costs in 2007 they were about 65 bucks a barrel. You know, it rose dramatically in 2008, in-process is going to be let's say about 115 plus or minus oil. That you know, as Bill said drove our cost in '08 up to $230 million versus $200 million round dollars. When we think about '08 right now, we are looking at average oil of let's say about 125 a barrel, you know, which is pretty close to what the price is today, and that would indicate that we would be you know, about 2.50, so that's about $20 million. Now, as Bill said, it gets complicated, because obviously when we buy resins right now at their highest price or over the last, let's say month, you know, it takes X you know, three months to five months or something to roll through the P&L. So you get a lag if you will in terms of those higher prices or if you know, we were so fortunate to see oil come down to see the benefit roll through. But, when we thought about the numbers that I gave you in terms of... albeit, there is one correction I needed to make, but the numbers that we thought of thinking about for next year in '09, we have fully loaded... we fully considered that. The roll off of the higher prices and kind of an average of 125 reference point for the entire year, so the $20 million.

Okay. That's helpful. And I mean I think you have the opportunity here to put some of these concerns to bed [ph], and you're basically saying that the negative pressure, if you would from higher medical rate resin as you look at '09, is 25 basis points. That's basically the math, right?

Yes.

So, I'm with if you think about step-up cost in this year. If we think about the inventory write-downs that you talk in, and obviously the natural mix progression of your business I would assume based on this, this is probably contrary way the people were thinking about '09, that gross margins should all like it would be up next year?

Wellas I said I think that would be too much of a leap right now. I think that it will be somewhat mitigated by lesser impact on oil, if you just use the two numbers we read talked about $30 million this year versus $20 million in next that $10 million that's right. However, other raw material costs how fast they come down other things we still think gross margin will be impacted negatively although I don't think it will be. It's not anything that significant and we believe that the cost containment efforts that we have around SG&A, as well as some reasonable price increases will more than take here and therefore we are comfortable to leave our earnings range in the kind of 10% to 12% range.

Okay, last question and then I will jump back in queue. The net if you recall medical had a weaker first half of the year, the weaker second quarter a bit and you guys have said that, that should rebound down and obviously did, so outside of pharm systems could you spend a another minute talking about the reacceleration we saw this quarter? Thanks

Gary, are you going to take that?

Sure yes that the areas that contribute to the rebound were very strong grows in international safety and that's going even better then we had expected when we start the year very strong growth in pen needles, and as you noted strong growth in pharm systems, that was in Europe and there was a little bit, is that came a little faster in this quarter so some of that as Bill mentioned will be reflected in the next quarter, but all three those with the primary contributors to the faster growth and pretty much as we'd indicated in the last call also, diabetes care in general as driven by pin needles is doing well.

Next question operator?

Thank you. Your next question is coming from Larry Keusch with Goldman Sachs. Please go ahead.

Hi, good morning guys. So just coming back to John the comment that you made or may even Bill regarding the price increases I think John you have made it actually when you are talking about '09. Can you just discuss a little bit sort of what historically has been your ability to raise price in the business is that you are in my sense is it is a bit more challenging but, if you could just touch on that it will be great?

Well, keep in mind that I said we are not going to get outside the boundaries that I can't laid out I would say this that hear fore in our revenues, so think about the last 3, 5 years. You haven't seen anything substantial in the way of price increases. In fact there have been some price decreases. There are some, but net-net they would... they might be plus 0.5% down 0.5% for the whole company. And you know, as we think about this, you know, we've been able to work diligently over a long period of time without you know, having to take advantage of price increases. You know, as you guys know more than anyone, you know, the continued resin increases, as well as other raw material increases you know, have impacted us and you know, now I think some reasonable and judicious prices increases are in order and you know, we will pursue that with our partners as we go forward. Nobody, in general, likes price increases. We don't like them when we get them. I'm sure that everyone won't be in favor. We will certainly go after them.

Okay. And, then just a couple of other things. Again, John or Bill, since you sort of brought up the oil and the resin costs, I'm wondering if you can just sort of help us understand how this works for the company. Do you buy, it sounds like you've given your comment around it takes awhile to flow through from your inventory out the door. It sounds like you probably buy three or four or five months in advance, and I'm wondering if you can just provide some color on is that correct, do you buy it sort of spot prices, or are there contracted amounts over longer periods of time, can you hedge against any of the stuff? Just again just some help so everybody really understands how this all works for you guys? And then the last question is, just pharm systems and ex-U.S safety what drove the better than expected ex-US safety, was something going on anything country specific and then the pharm systems you obviously said that some of that rolled into the 3Q more so than you had anticipated again just any events that we're going on there to provide some color on that that would be excellent?

So, why doesn't Gary take that and why doesn't Bill Tozzi just give you a little bit more flavor on the buying patterns?

Sure, well starting with the ex-US safety the good news there is just happening pretty much across the board. We had strong growth in Europe. We had strong growth in Asia. We had strong growth in Canada. The growth in Europe was complemented by some new product introductions that we had made over the past year...within the past year such as side port safety catheter. We're getting good growth in Nexiva also in the U.S by the way, just doesn't show up as much because of the rest of the market, but safety isn't growing as well in the U.S. But international safety is going well and pretty much all locations and driven not only by new products, but particularly in Europe two products that we had designed for the European market are doing very well. And then pharm systems, as we had indicated in the last call, the U.S has slowdown, they will continue to. So you shouldn't look for much growth at all from U.S pharm systems for now. And then it will come back in the future. But, Europe was very strong in part of that was driven by the issues with Heparin and they need to build more level like the way it happens, so that actually benefited us in Europe in the quarter. On the other hand the delays in approval of generic or molecular weight heparin have or one of the things is negatively impacting our U.S sales. That will eventually come back, but they have been a stock up among the manufacturers of those devices and they had anticipated earlier approvals so they already have a large stock waiting for approval. And then they'll have to work to that before that grows in the U.S comes back. We're also affected a little bit in the U.S by the situation with Ivo. So there's little bit less people [ph] business for us.

Great. Thank you.

You're welcome.

Thank you.

Larry to talk about the contracting, you know our contracts vary some are one year, some are three years, so there's different degrees of how far we can go out on those. They all... around the resins, index on monomer prices. So monomer goes up you know, we do feel the impact of that we do have several months worth of inventory but it's not an unusual amount of inventory maybe three/four months and we still have not been able to find financial measure to do any hedges on. So, that's kind of where we are in this. So we do feel the impact but as we said there is a lag but overtime they will... they do catch up.

Got you.That's really helpful. Thanks very much guys.

Thank you. Your next question is coming from Bruce Cranna with Leerink Swann. Please go ahead.

Hi, good morning everyone.

Good morning, Bruce.

John, you had mentioned I think the possibility of some pricing next year in the U.S. And thinking about that can you give us some sense as to what percent of your contracts actually might come up for renewal in any given year in the U.S?

Actually, Bruce, as you might have joined after, but as I said, I am going to kind of stay within the kind of the four corners of what I said. Understandably we'll work with our customers. And frankly right now I don't have right now any sense of which contracts come to term and which don't. And as Bill said some of these actually monomer pricing indexes and them allow us to do certain things.

Okay. And then secondarily typically you give us an actual number for GeneOhm and TriPath can you give us those sales numbers?

Yes. Sure TriPath sales for the quarter were $30.1 million and GeneOhm was 10.3.

Okay. Thank you for that, and then on TriPath you guys do you have any concerns at all with you... with your competitor I guess potentially acquiring an HPV asset going forward.

Concern no but obviously we take a whole of our competitor seriously and you know there is an excellent competitor and we are still following the same strategy in terms of moving ahead on our molecular path, clinical trial, as I talked about last time we were restarting that trial in the fall. I told you that we were adding a automated strainer to that trial and that's on track. So we think this is a very unique approach to the business. On the HPV side of things, we do have an internal program and it's several years out.

Okay. And then, I guess lastly from me, I know at ASM, back in June we were thinking maybe you guys would show your new rapid instrument, what's called, I guess the new GeneOhm product for lack of a better term.

Sure.

Any chance of that being at AACC?

It's not going to be at AACC, it's going to be at AMP, which is October 30th in Dallas, which is the association of molecular pathology and so that's the timing to see that one.

Okay. Thank you.

Thank you. Your next question is coming from Peter Lawson with Thomas Weisel Partners. Please go ahead.

How the hospitals are kind of shaking out, and if you're seeing increased traction for your microbiology products as well?

Peter, we could not hear the beginning of your question. Could you give us the whole question again?

It's just really an update on the GeneOhm business and how the hospitals are kind of shaking out, if you're seeing increased traction for your molecular biology, as well as the microbiology products?

Yes, so let me just start with the GeneOhm then. And I'm going to stay with the guidance I gave last quarter, which is we expect to finish the year about $40 million to $41 million. So we continue to gain traction with the system both in the United States. UK would be the second market that we see starting to take off. And then finally Germany is also doing fairly well. The other European countries are lagging a bit as well as Japan, but we remain bullish on the overall market growth rate. Now, in terms of microbiology bringing up a good point in that, there is also a product that is media based product that is faster time to resolve and the traditional product that's product line called marker. And we are seeing good growth in cromager [ph]. So we are benefiting both on the molecular side and the standard media side.

And then just on the life science businesses, are you seeing any weaknesses from large pharma. Could you sort of add color on the growth you are seeing in your cell analysis business and discovery that went in this?

We have commented the last time that there was a little bit of restructuring activity going on the industry and it slowed some things down in tend. I guess the... in this quarter if you looked at one of our businesses, you look at the advanced bio-processing business, where things had slowdown a little bit we are a large biotech supplier and so we saw some things slowdown there this quarter. That will probably be the most relevant topic.

Okay. Thank you so much.

Thank you. Your next question is coming from Sara Michelmore with Cowen.

Hey, good morning. Yes, good morning everyone. John I was hoping you could just touch about gross margin. You just talk a little bit about operating expense lines, R&D, and SG&A, and I know last quarter you talked a little bit about that you had a lot of ability to control the SG&A line and those expense items were recently well controlled this quarter and R&D was grow a little bit less than you had been running the last several quarters. So can you just talk about conceptually where you are with those expense lines? How much discretion do you have to control expenses there are any events that some of this gross margin continues to go the wrong way? Thanks.

Right. Well, on the...let me just start with the R&D and that, you know, the kind of these lower spending in this quarter is still referenced is really just a timing matter between the fourth quarter and this and so, that in addition to the certain sales that were accelerated into the third quarter probably moved $0.03 into this quarter that otherwise would have been in to last quarter, namely into last quarter. But, mainly on the sales, but to a lesser extent on the R&D. So, on the R&D, we... that's kind of out of bounds for us. We're not... we don't want to sacrifice kind of the innovation for the short term. But, when we think about what strings we can pull on SG&A we have many that we can pull there are of course control containment initiatives across everyone of the businesses and obviously therefore everyone of the segments we control our base what we would referred to us of course spending very well, with the spend in the $450 million range a quarter there is a reasonable amount of control we can put there, nothing plus we start to leverage better if you think about these businesses, we can as sales dollars get added, it's not the one from one relationship in terms of the SG&A spending. And, actually over a longer period we'll start to see in that the newer businesses, like GeneOhm and like TriPath. Once the markets are fully built and the remaining product gain acceleration. So I would say that we have significant room in there to move. You can't do it just overnight. They have to be, the plans have to be laid in early, and they already are, and you can do certain of this stuff for the long term. You can't do it forever. And, but with our revenue growth we feel very confident that we can get reasonable leverage for the foreseeable future. Okay.

Thank you. Your next question is coming from Kristen Stewart with Credit Suisse. Please go ahead.

Hi, good morning. I was wondering if you could just...I just had a question on some of the resin numbers that you were giving. I had followed in the last quarter call; you guys were expecting around $300 million in resin cost this year. I guess what's kind of the doubt there, was that just kind of a little bit being conservative?

I think the confusion over that the number that were that impart Kristen why we did this again with a little bit more amplification is, you know, we had talked about resin cost in particular and other raw material cost at one point in time we brought steel in because we were so susceptible to steel increase with the granular, so but the kind of the seminal issue is resin, so we chose to take kind of our top resins in and got us granular to go down to the seven main resins that we have right down to the poundage on them and whilst we were doing is saying if you just look at resins and that's the dominant player in this regard, we had spent about $200 million in '07. We expect to spend about $230 this year and based on what we have seen we anticipate about $250 next year. So also lot of the confusion sorry about that but that's really the answer.

And then just with respect to the bio science business, could we just get an update on what you are seeing with resource spending and if there is anything exchange there?

Just we really haven't seen anything change I couldn't make any comments on that. Our instrument and reagent particularly on the research side is stable and consistent with what we have seen in the last several quarters.

Okay. And then just I guess looking at the operating margins on a divisional level where do you think you might have the most room for improvement going forward, whether it will be through driving mix or just kind of reducing down some of the expense items?

Well, I wouldn't think I'd want to... I'm not going to let any of these guys off the hooks. So I think there's ample room to move all the margins. As you should see the smiles around the table front, but, honestly, biosciences is in that regard certainly different than big medical because there's such volume in medical, such a bigger sales basis. But there is room to expand margins on all of them. But I really couldn't say one over the other right now. It all gets to do with the timing of new product and like that.

Did you...I know Bruce had had asked earlier about GeneOhm and TriPath. Did you give the breakout between TriPath and GeneOhm mergers or was that combined?

We did but I will give it to you again.

Thanks.

So try to ask in the quarter, one second, here it is 30.1 million right and GeneOhm was 10.3, and I reiterated the guidance on GeneOhm for about 40 to 41 for the year.

Okay. Thanks again.

Thanks.

There are no further questions. I would now like to turn the floor back over to Ms. Pat Spinella for any closing remarks.

Thank you, operator I'll actually take this and we just wanted to thank everybody for their attention and for clarifying comments certainly contact that but we thank you very much. We look forward to talking to you in November. Bye-bye.

Thank you.

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time, and have a wonderful day.