Hello and welcome to BD's Second Fiscal Quarter 2018 Earnings Conference Call. At the request of BD, today's call is being recorded. It will be available for replay through May 10, 2018 on the Investors page of the BD.com website or by phone at 1-800-585-8367 for domestic calls and area code 404-537-3406 for international calls using confirmation number 2857189. 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 Monique Dolecki, Vice President of Investor Relations. Ms. Dolecki, you may begin. Monique N. Dolecki - Becton, Dickinson & Co.: Thank you, Crystal. Good morning everyone and thank you for joining us to review our second fiscal quarter results. As we referenced in our press release we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at BD.com. During today's call, we will make forward-looking statements and it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our second fiscal 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. Reconciliations to GAAP measures can be found in our press release and its related financial schedules and in the slides. A copy of the release including the financial schedules is posted on the BD.com website. The details of purchase accounting and other adjustments can be found in the reconciliations to GAAP measures, in the financial schedules in our press release or the appendix of the Investor Relations slides. As a reminder, our second quarter P&L results reflect the new BD which includes the results of…

Thank you. Our first question comes from the line of David Lewis with Morgan Stanley. Vincent A. Forlenza - Becton, Dickinson & Co.: Morning, David. David Ryan Lewis - Morgan Stanley & Co. LLC: Good morning, guys, a very solid quarter. Vince, one for you and then maybe one for Tom. Just, Vince, discussing the outlook in the back half of the year, if I back out the flu benefit this quarter, I think maybe it was 75 bps. Momentum was very stable first and second quarter. At the high-end of your range guidance for the back half of the year seems to bet rough stability, maybe slight momentum deceleration. How do you see momentum into the back half of the year relative to the guidance range? Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah, we see momentum continuing in the back half of the year. The only change I really see from momentum standpoint is really the flu, as you just mentioned. But we're feeling very good across all three segments. And we raised the Life Sciences guidance, but we think that we're going to see good momentum in the other two segments as well towards the upper end of the range. David Ryan Lewis - Morgan Stanley & Co. LLC: And, Tom, the big change this quarter for Bard, obviously, underlying Bard was up about 1 to 2 points, kind of 8.5% versus 7% last quarter. Can you just discuss some of the drivers behind that reacceleration here in the second quarter? And how you see the Bard outlook for the remainder of the year? Thanks so much. Thomas E. Polen - Becton, Dickinson & Co.: Yeah. Hi, David. So I think as you saw strong performance across all three of the Bard businesses, Peripheral Intervention, Surgery, and Urology/Critical Care driven by a lot of new product launches in each of those areas. As we think about the back half of the year as you noted, we do expect growth in the back half to continue strong, and we're very confident in our full year range. We did benefit from some timing in the first half, some orders in temperature management in Urology. And we're going to begin to lap several key product launches in the back half, specifically the Lutonix AV and LIFESTREAM covered stent in the back half. So we may see the back half slightly lower than the first half, but that's just due to that timing topic and the lapping those key product launches. But very solidly within the range, feel very confident about that. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. Thanks so much. Vincent A. Forlenza - Becton, Dickinson & Co.: Thanks, David.

Our next question comes from the line of Isaac Ro with Goldman Sachs. Isaac Ro - Goldman Sachs & Co. LLC: Good morning, guys. Thank you. Just on the Bard integration process, it looked like you guys reiterated your synergy goals. Just hoping to get a little more color on where the integration team is currently focused, kind of key initiatives over the next 12 months just from a step-by-step process? Thank you. Christopher R. Reidy - Becton, Dickinson & Co.: Sure, Isaac. So as we have said before, the initial focus on synergies is the public company costs, which are pretty much behind us, as well as then the initial procurement savings, and that's typically the first bucket of synergy savings that you get. I talk about this kind of as three separate buckets of $300 million, think about it as $100 million, $100 million, $100 million. In the current year we'll get something like – because it's only three quarters – $70 million to $80 million and then you can think about it as ratable over the next two years. But in the third year, let's say, that's when you start getting your manufacturing and operational synergies. They take a little bit longer to plan, so that's why it takes that long. And then in the second bucket, in the second year, you can think about getting some of the process kind of improvements, things like shared service centers, integration of IT and the like, and the integration of functions. That's kind of a general sense of how to think about that. Vincent A. Forlenza - Becton, Dickinson & Co.: And this is Vince. So in addition to that, as I mentioned in my remarks, we've started to work on the revenue synergies. And so we're doing the…

Our next question comes from the line of Brian Weinstein with William Blair. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning, Brian. Brian David Weinstein - William Blair & Co. LLC: Talk a little bit about flu real quickly. Can you talk about success with Veritor, where you are in terms of placements at this point? And also is there anything going on with new menu there or any other feature sets that you're going to be adding to Veritor as we get ready for the next flu season? Vincent A. Forlenza - Becton, Dickinson & Co.: Alberto, would you like to take that? Alberto Mas - Becton, Dickinson & Co.: Yes, we've continued to put more and more placements out there in terms of the flu. We're up to approximately 30,000 units out there that are currently working. We are taking share primarily from the manual segment, so we're doing well from that perspective and we launched our connected version of Veritor, if you like, recently as well, which has enabled us to penetrate more on the retail segment as well. Due to the broader menu, we are working on additional assays, but I think it's a little bit too early to be specific about it at this point. Brian David Weinstein - William Blair & Co. LLC: Okay. And then as a follow up, we talked a lot about overall BD and kind of where you guys are going, but I'm curious within your entire portfolio where do you see the best chance of the next 12 months for meaningful share gains, if anywhere? Thank you. Vincent A. Forlenza - Becton, Dickinson & Co.: Well, there's a number of businesses that are doing quite well, Brian, and in the Medication Management Space, you really saw a…

Our next question comes from the line of Vijay Kumar with Evercore ISI.

Hey, guys. Congratulations on a nice quarter here. And maybe I'll start with a high-level question, Vince. When you look at the strength in the quarter, right, obviously I think people are looking at next year in a sustainability of strength. So Bard is coming in better, your dispensing impact goes away, Biosciences, it looks like that business is inflecting. It looks like one of your supply chain peers this morning had a little bit of disruption in their supplies business. So is there some share gains going on, and what's the visibility confidence that we have on the sustainability of strength we are seeing now flowing through for fiscal 2019? Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah, I think we feel good about fiscal 2019. There are some additional share gains going on even in our core business, if you look at MDS, certainly in the hypodermic area we have also been taking share. We continue to do really well with our flush product line. So it goes back to the question that was just asked, I'd come back to that answer which is, across the portfolio, across all three segments we're feeling good with the product launches that we have just started with that we've been talking about today, but also the products that are coming behind them. So we continue to expect in line with the way we have been talking over the last 12 to 18 months in terms of good momentum from both the BD core and the Bard core, so across all three segments.

And just may be one on the guidance. First, when you look at the guidance, gross margin, that has to step up meaningfully in the back half, and I am assuming that's because of your dispensing impact goes away. It looks like tax rate is coming down meaningfully in the second half and maybe could you just talk about, because I know you had spoken about synergies on the Bard side and whether that's helping you guys here a little bit? Christopher R. Reidy - Becton, Dickinson & Co.: Yeah, so I'll take that last one first on the tax rate. Our guidance is 17% to 19%. You saw the 16.9% quarter. I think you can expect the tax rate to be at the low end – very low end of our guidance range. And then gross profit, we were thrilled with the gross profit performance in the second quarter, 340 basis points expansion versus the prior year and right in line with where we expect it to be. We do expect the gross profit to continue to accelerate in the back half, as you expect – as you mentioned. And there's a couple of things driving that. We have the anniversary-ing of the U.S. dispensing headwind which sometimes gets lost in terms of the impact that it has on margins as well is the top and bottom line. We have the synergies beginning to ramp, the Bard synergies, the conclusion of the CareFusion ones obviously, but the Bard synergies continue to ramp. And then you've got the full second half of rich Bard margins. We've only had one quarter in the first half, and so we'll have the full half of that. So we expect those margins to grow very nicely, and that flows down to operating margins as well. So we're feeling very comfortable about our guidance range on both gross profit as well as operating margin. As I said my script, 200 basis points, 250 basis points this year on top of 500 basis points over the last three years; we're feeling pretty good about our margin performance.

Thank you, guys. Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah. Thanks, Vijay.

Our next question comes from the line of Larry Biegelsen with Wells Fargo.

Good morning. Thanks for taking the question. One on Bard, one on Life Sciences. So on Bard, Vince, where do you think you are in the integration process? Do you think you're past the time when you would see disruption or dis-synergies? Could you talk a little bit about how PICCs and midlines did? I think that's in MDS now. And when you expect Progel to return? And I just had one follow-up on Life Sciences. Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah. Sure. So let's start with the integration process. We have the organization set up, and so we feel good from that standpoint. And so people are implementing. They're in that mode. So I think I'd feel pretty confident about we're not in disruptive phase. You're always doing new things over three years, but as long as we have them well-planned and understood, then we can avoid that and that's been the history on CareFusion. We expect it to be the history on Bard as well. But in terms of the specifics you were asking on Interventional, Tom, do you want to take that? Thomas E. Polen - Becton, Dickinson & Co.: Yeah, hi, Larry. This is Tom. So first on the PICCs and midlines, we continue to see very strong growth in both of those platforms, particularly ex-U.S. in line with prior performance. I'd say we're seeing some very early positive signs of the opportunity and vision that we had set out to be able to offer customers a more integrated vascular access solutions, combining not only short-term peripheral access with our peripheral catheters but also with the longer-term value that PICCs and midlines offer in terms of longer-dwell catheterization. And so we're seeing our commercial teams in the U.S., ex-U.S., begin putting those value propositions together, beginning to have discussions with customers and we're hearing very positive receptivity there. So we're quite excited about the future and the opportunities with that combined portfolio. On a Progel perspective, we're making good progress on the relaunch, and we expect relaunch at the end of calendar year 2018.

Thanks. That's helpful. And then on Life Sciences, I am trying to understand what you expect in the second half versus the first half on an underlying basis. So you did 7.3%, I think, in the first half. But I know you benefited from flu, but you had the headwind from the Preanalytical manufacturing issue. The guidance implies only about 3.5% growth in the second half. So help us understand first and second half in Life Sciences on an underlying basis. Thanks for taking the question. Christopher R. Reidy - Becton, Dickinson & Co.: Larry, I'll go first. This is Chris. Your calculation of the implication on the second half is off by a lot. It would imply over 5% growth in the second half. So that's...

Well, that helps. Sorry about that. Thanks for taking the question. Christopher R. Reidy - Becton, Dickinson & Co.: Sure. Vincent A. Forlenza - Becton, Dickinson & Co.: We can go through the details with you later.

Thank you.

Our next question comes from the line of Bob Hopkins with Bank of America.

Thanks, and good morning. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning. Christopher R. Reidy - Becton, Dickinson & Co.: Good morning.

I just wanted ask a question on the new EPS guidance. It sounds like really the only thing that's changed is an assumption on currency. But I'm asking the question because currency, obviously, has been incredibly volatile from here. So just what do you sort of assume for currency for the rest of the year? And if the dollar continues to strengthen, would that matter to this guidance? Just trying to put that in perspective because, again, the dollars are all over the place lately. Christopher R. Reidy - Becton, Dickinson & Co.: Sure. So a couple of things on that, Bob. As we've said in the prepared remarks, our assumption is based on $1.23 to the euro, but as we noted, the $1.20 that it is today does not have a material impact on the rest of our year, and we're very comfortable with what we've seen already flowing through. And you're right that we did flow that $0.05 through on an FX. But there were a couple puts and takes there. Clearly, the performance on the top line is benefiting us in the remainder of the year, and we do have some investments that we need to make in the second part of the year. We talked about some additional clinical trials and investments in quality systems in our PAS business, and we're consciously making those investments. And so when you flow that all in, that keeps FX in neutral and raises the FX. So there's a couple of moving parts there.

Okay. Thank you for that. And then just one other thing I want to quickly ask about is with the leadership change on the Interventional side, just maybe give us some color on the process for coming up with a sort of a full-time solution there. Is that likely to be internal? And just how long will that take? Thank you. Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah. We don't think it's going to take all that long. We're talking maybe a couple of months, something like that from a process standpoint. It is likely to be internal, and you certainly want someone who has a background in devices who will understand the business quickly, the differences in the business model, but who also understands BD. And we think we have some excellent candidates. Thomas E. Polen - Becton, Dickinson & Co.: Bob, and this is Tom. Just a note. I think one of the things that, as Vince mentioned, we're going to be relatively quick in that over the next couple of months. And in that time, because we have extremely strong leadership teams in each of the individual businesses that are continuing to run those which gives us confidence to – and actually the luxury, particularly with Bill stepping in as the Interim President, to take the time to make sure we appoint the right leader there.

Perfect. Thanks for the color. Vincent A. Forlenza - Becton, Dickinson & Co.: Sure.

Our next question comes from the line of Robbie Marcus with JPMorgan. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning, Robbie.

Great. Hi, and thanks for taking the question. Vince, I know you touched on in a bit so far, but I was hoping you could just give us your early insights into how the integration is going, areas that you've been surprised by both on the positive and negative and what's been the reception from your customers in terms of the combined portfolio so far? Vincent A. Forlenza - Becton, Dickinson & Co.: Yeah, let me start on the customer side, because myself and Tom, and Chris, other members of the management team, we've been talking to the key accounts and I would say it's been very positive. And the conversations we're having about how to we now strategically partner with these accounts as they do things like improve their care management teams, that's been very exciting for us. We're in the process of setting up some top-to-top meetings and to follow up on those kind of conversations. So I would say from a customer standpoint, very positive, and that's not just in the U.S., that's in Europe as well that we've done some of those meetings, so feeling very good about it. In terms of surprises, I don't know that there has been any significant surprises. I think on the positive side, we thought the cultures were very similar, and they are more similar than we expected, very, very customer driven and focused and purpose driven and that's been a huge positive, and the way teams have come together even quicker than they did on the CareFusion integration has been a very strong positive. We had this philosophy about taking the best of either company, and we've been modifying some of our processes, some of them come from Bard, some go from BD as we look at running a…

Great. And then, Chris, one more for you, just on some of the onetime items in second quarter, you called out Kiestra placements, you called out timing of tenders in diabetes, flu was 80 bps. Can you just run through the different impacts of what was onetime in nature in second quarter? And then which will be either detracting or adding to third quarter, fourth quarter? Thanks. Christopher R. Reidy - Becton, Dickinson & Co.: Yeah, so in addition to the ones that you talked about, I would also say that we did have the advancement of some investments in R&D and selling, and so we made that decision consciously to invest earlier in some R&D programs. And so those, that's really more of a timing thing, that helps us in the back end. But then as we pointed out, we had some production issues in PAS, which we resolved within the quarter in the second quarter, so that won't carry forward. But we do want to make some investments in our quality system and add some clinical trials in the back half, again in PAS, so that would – does impact us in the second half as I talked about previously. The only other one kind of items, we talked about resin pressure on the last earnings call. If anything we see that pressure ticking up slightly from what we talked about. So just to refresh everyone's memory, in the beginning of the year we saw about $15 million pressure from resins. On the last earnings call we said it'd probably be about $15 million incremental to that. We're probably looking at another $5 million for the full year, just based on the way oil prices and the market in that area from a supply side. The only other onetime kind of item that you got is we were delighted to consummate the Vyaire joint venture and divestiture. It wasn't core to our strategy, it helps us focus on our core business. But with that comes a little bit of dilution in the back half of about $0.03. I think that's all the onetime items in addition to the ones that you talked about.

Okay. Thanks very much.

Our next question comes from the line of Rick Wise with Stifel. Rick Wise - Stifel, Nicolaus & Co., Inc.: Good morning to you both. Maybe, Chris, just starting off with you, you talked about the accelerated spending, the second half spending moving into first half on the SSG&A and R&D side. Maybe give us if you would be so kind, a little more color on where is this going? Is it U.S., is it OUS, is it Bard, is it Becton? And how should we think about the implications of those stepped-up investments? Christopher R. Reidy - Becton, Dickinson & Co.: Yeah, and we saw the opportunity, and it's really in the MMS business, and it's primarily R&D. We're just looking at some next-generation kind of items, too early to talk about. But we saw the opportunity to advance that spending, and we took the opportunity. As we said in the past, as we saw FX becoming a tailwind, we would take the opportunity to invest some of that if we saw that option. And we did, and we felt it was the right thing to do. Vincent A. Forlenza - Becton, Dickinson & Co.: And, Rick, the other piece of spending in the quarter was really in the PAS business. We mentioned that in the first half was some manufacturing issue. In the second half, we're doing some clinical trial work to resolve the warning letter. So it's a one-year spend is the way to think about that. Rick Wise - Stifel, Nicolaus & Co., Inc.: Okay. And two last ones, I'll just say them quickly. First, Chris, for you, you highlighted the 4.5 times gross leverage and the debt paydown and your three-year goal. Any reason that that couldn't happen faster? And maybe just reflect on all…

Our next question comes from the line of Doug Schenkel with Cowen. Vincent A. Forlenza - Becton, Dickinson & Co.: Morning, Doug. Doug Schenkel - Cowen & Co. LLC: I have a couple topics I want to cover. First, a follow up on PICCs and then a follow up on that last China question. So I'll just start on PICCs. Tom, following up on that earlier question, are your sales reps now fully trained to sell the full suite of catheters and recognizing it's very early, is there any evidence that having a broader product portfolio is already benefiting overall core Medication Delivery Solutions growth? Thomas E. Polen - Becton, Dickinson & Co.: Hey, Doug. This is Tom. So we have begun cost training some of our team members in the U.S. specifically. We expect that will continue through, though, the end of the fiscal year, and so we expect both U.S. and European teams to be cross-trained going into FY19. The training really ramps up in the June/July timeframe is our expectation there. So I think it's too early to say you're not seeing the results in this quarter of that combined opportunity, again, as I mentioned, we're seeing very positive feedback from customers, it's intuitive in many ways of course, in the future we'll have the same people talking about peripheral catheters and PICCs and midlines and being able to holistically work with the customer to get the best solution for the patient, right? Often there are questions on what device should I use? And we'll be in a position to be the leader in helping our customers figure that out the right way that's best clinically and economically appropriate for them. So I think more to come in terms of seeing the revenue impact, but we're hearing…

Our next question comes from the line of Richard Newitter with Leerink Partners.

Hi, Vince. Hi, Chris. This is Jaime on for Richard Newitter. Vincent A. Forlenza - Becton, Dickinson & Co.: Good morning.

Good morning. A quick question on the Lutonix below the knee trial. I was just looking for an update here. I know you guys in the past have cited end of calendar year 2018 for PMA submission, so is there any update that you can provide where you track on the submission and then how the trial is progressing? Vincent A. Forlenza - Becton, Dickinson & Co.: Okay. Sure. Tom will take that. Thomas E. Polen - Becton, Dickinson & Co.: Hi, Jaime, this is Tom. So as we announced earlier, we did complete enrollment in this past January and we anticipate completing six months follow up and submission of the PMA to the FDA in Q1 of FY19. So all that remains 100% on track.

Okay. Great. And then just one additional question with respect to the retail pharmacy initiatives going on, can you talk a little bit about what your expectations are here and potentially if you guys have any thoughts on what Amazon is attempting to do in this space? Vincent A. Forlenza - Becton, Dickinson & Co.: So from an Amazon perspective, I'll take that, this is Vince. We continue to have conversations with Amazon and it's kind of unclear what they want to do. Of course they just announced about 10 days ago or so that they were not going to move ahead on the drug side, we do not have – they've tried a few things in the acute-care marketplace, it doesn't look like they're moving ahead there anytime soon either. So we continue to see if there's some ways for us to work with them, but right now I would say there's not much happening in that space. On the retail pharmacy side of things, we continue to grow our Rowa automation business, and that business is growing double digits. We're excited about that, that growth of course is being driven by international, and we're excited about that product line. Thomas E. Polen - Becton, Dickinson & Co.: And we continue to have – this is Tom, we continue to have very strong relationships. Obviously on diabetes, we'll look to expand those as we launch Swatch (01:07:01) in the future and we certainly recognize as that marketplace evolves, could be increasing opportunities for us in a number of other ways. Veritor is another product platform, our point-of-care infectious disease platform which is widely used within the retail pharmacies today. And again opportunities as people look to shift care there in greater ways we'd look to partner with those institutions to help do that, so. Vincent A. Forlenza - Becton, Dickinson & Co.: And we are talking broadly retail when we say that. Thomas E. Polen - Becton, Dickinson & Co.: Yes, yes, yes.

Great. Thanks for taking my questions. Vincent A. Forlenza - Becton, Dickinson & Co.: Sure.

There are no further questions at this time. I will now turn the conference back to Vince Forlenza for closing remarks. Vincent A. Forlenza - Becton, Dickinson & Co.: So thank you very much for your questions. Just to sum up here, we are proud of our strong performance across the board, all three segments as we discussed. We're very pleased to have raised guidance our first quarter as a combined company with Bard. And lastly the integration has been going smoothly and we look forward to updating you throughout the year. So thanks very much. Have a great day. Thomas E. Polen - Becton, Dickinson & Co.: Thanks, everyone.

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