Hello, and welcome to BD's First Fiscal Quarter 2020 Earnings Call. At the request of BD, today's call is being recorded. It will be available for replay through February 13, 2020, on the Investors page of the bd.com website or by phone at 800-585-8367 for domestic calls and area code 404-537-3406 for international calls, using confirmation number 6886458. 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. Monique Dolecki, Senior Vice President of Investor Relations. Ms. Dolecki, you may begin.

Thank you, Pasha. Good morning, everyone, and thank you for joining us to review our first 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 fourth 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. Our first quarter results include a charge of $59 million related to a voluntary recall in the MMS infusion business to address certain software and alarm prioritization matters. This item along with 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 and in the appendix of the Investor Relations slides. A copy of the release including the financial schedules is posted on the bd.com website. Leading the call this morning is Tom Polen, Chief Executive Officer and President. Also joining us are Chris Reidy, Executive Vice President, Chief Financial Officer and Chief Administrative Officer; Alberto Mas, Executive Vice President and President of the Medical segment; Simon Campion, Executive Vice President and President of the Interventional segment; and Patrick Kaltenbach, Executive Vice President and President of the Life Sciences segment. It is now my pleasure to turn the call over to Tom.

Thank you, Monique. And good morning, everyone. You saw in our earnings release this morning where we brought down revenue and EPS guidance for the year, and let me just say that resetting expectations is certainly not how I want to start my first call as CEO. And so, before we jump into what's happening with Alaris, I want to say that how we're going to discuss topics on today's call is what you can expect from me – straight talk, accountability, and an unwavering commitment to quality and regulatory compliance, our values and doing what's right. At our core, BD is a very purpose-driven company. It's what defines who we are, how we operate, and what actions we take. And you can expect that our purpose and values will be at the heart of how we respond to the current situation with Alaris. Every company is going to face challenges, and the real measure of the company’s strength isn't whether or not we face challenges, it's how we respond. And I'm personally focused, along with my entire leadership team, on fully resolving this situation. So, let me take you through what happened starting with what we said in November and even more recently and how our conversations with the FDA have continued to evolve, even specifically this week. In November, we told you we were planning to make some improvements to our Alaris pump software, including upgrades to alarm prioritization and optimization. We indicated then that we were in active discussions with the FDA about the timing and implementation of these improvements. Relying on our quality process within the infusion business and how we've managed Alaris software updates over time, the team believed we could take a phased approach to releasing Alaris software updates and that these releases did…

Thanks, Tom. And good morning, everyone. Before I take you through our first quarter results and guidance for the full year, I'd like to reinforce Tom's remarks on the Alaris pump issue. As you would expect from us, we take this matter very seriously. We did not anticipate the current Alaris pump situation to materialize the way that it has and I assure you that the senior management team is fully committed to resolving the situation. So with that, let me review our first quarter results. As Tom mentioned, we delivered solid performance in the first quarter. First quarter revenues grew 2.5% on a currency neutral basis. Revenue growth was in line with our expectations. I'll provide more color on the first quarter revenue growth in a moment when I take you through the results by segment and geography. First quarter adjusted EPS was $2.65, which is at the high-end of our guidance range. Adjusted EPS declined about 2% year-over-year and was about flat on a currency neutral basis. As expected, adjusted EPS growth reflects solid operating performance, offset by the expiration of the Gore royalty and a very tough compare to last year's first quarter tax rate of 11.2%. Operating margins of 24% were in line with our expectations for the quarter. We also continued to de-lever during the first quarter, paying down approximately $90 million of debt. At December 31, our gross leverage ratio was 3.5 times and we remain on track to achieve our commitment to de-lever to below 3 times this calendar year. Moving on to slide 10, I'll review the medical segment revenue growth. BD Medical revenues declined 1.1% in the first quarter, in line with our expectations. As expected, first quarter performance in the Medical segment was impacted by the new volume-based procurement process…

[Operator Instructions]. Our first question comes from the line of Robbie Marcus with JP Morgan.

Great, and thanks for taking the question. Maybe we could just start with the pump impact, and help us understand of the $400 million plus or minus that you lowered guidance by, how much exactly is for the pump? Will this linger into fiscal 2021? I'll just ask all my questions here. Maybe as you walk us down through the P&L, it seems like there is a 40% contribution margin hit from that $400 million to the $0.60. Help us get to that number.

Hey, Robbie, this is Tom. I'll take the first two questions and then turn it to Chris for your last one. So, of the $400 million, that is essentially pump capital that we're unable to ship. Of course, we have a very large install base in the field. We aren't expecting any meaningful impact on our consumable business there. We actually have seen some increase in consumable demand certainly because of the flu season. And as we mentioned, we stand very strongly behind the quality of the products and its continued usage in delivering 70% of infusions, particularly in the US. Lingering into 2021, what I could say at this point is, look, we know what we need to do to address this situation, and that's to submit the updated 510(k) within Q4, as I shared. So, that's what we're focused on right now. The timing in which we're going to get – we're working collaboratively with the FDA, and I'd say we'll give you updates as that progresses in terms of our ability to open up and resume shipping. So, as we continue that collaboration with the FDA, we'll have more visibility and we'll keep you updated.

I would just add to provide clarity to the guidance change. Up until the infusion pump issue this week in our meeting with the FDA this week, we were fully planning to reaffirm our guidance for fiscal year 2020. The 2.5% to 3.5% revenue growth guidance assumes essentially, on the low-end, that we sell virtually no pumps. And of our 450-ish kind of US infusion pump business, the range above that would expect the normal range of guidance that we would've had prior to this issue as well as the potential of selling some pumps under medical necessity.

And so, maybe just quickly, what's the breakdown of how much you're lowering for pump versus coronavirus and for the increased reimbursement?

So, what I would say is, it's 100% pumps because as you think about the puts and takes that we had this year, we are seeing upside on the flu side. We're seeing better performance in DCBs as we talked about. So, we have some strong performance in the rest of the business. China, outside of the value-based – volume-based procurement is doing extremely well, strong double digits across Interventional and Life Sciences. So, we had some upside. We did take into consideration the acceleration of the volume-based procurement. That stepped up. Just to kind of give you a sense, that's $200 million peripheral catheter business for us. Last quarter, we took it down by about $40 million. We've accelerated that by about $60 million, partly because of accelerations in the province tenders that we are seeing, but even more dramatically, the distributors taking down inventories in anticipation of these tenders. And so, that's an additional $60 million. So, we've taken down an additional $60 million. So, that takes us down to about $100 million left in that business going forward. That $60 million, plus the coronavirus of about $20 million to $30 million, we're offsetting with the strong performance, as I talked about, in other parts of the business. So as I said, going into this week, we had all of that in the mix and would have still reaffirmed our guidance for the year. So, you can think about the takedown as entirely the Alaris pump issue.

Thanks a lot.

Our next question is coming from the line of David Lewis with Morgan Stanley.

Good morning. Thanks for taking the question. Just wanted to start initially, Tom, if you go back historically and look at the Baxter Colleague recall, that share loss built, Tom, over a series of years. So, do you have any early comments on what can be done to support customers and incentivizing them to wait for resolution? Or how customers are going to evaluate this, buy from another provider or wait decision during this interim ship-hold period?

Hey, David. So, what I would say is, of course, customers have been increasingly selecting the Alaris product, as you know, for many years and we've seen that in continued share gains in the category. I would say, going into FY 2020 this year, we've had really – that momentum is continuing to be very, very strong. So, high level of customer engagement and interest, going right up to this point, and continuing to convert to the platform. So, I think people's conviction in terms of they see the value of the product, obviously, not only the power of having one integrated system, but the interoperability ability which we have. We'd expect nearly 90% of all interoperable pumps in the US are BD pumps today. It's a capability that we have that we think is at another level than others are able to offer. And we also, of course, have the integrated medication management solution that connects more broadly. And so, feedback early on is that customers still see that value and will be working to help people as possible to wait for that. Of course, we have a very, very large install base, and that normally takes – we see people upgrade every – let's say, 10 years in general. We see people begin to refresh their fleet. So, we also recognize people have flexibility in terms of do they do that right now or do they wait until we get our updated 510(k) in place. Of course, we'll have a better sense of how fast we'll be able to re-engage with customers as we continue our dialogue with the FDA and as we get that 510(k) updated and submitted. And that's our number one focus right now, is getting that filing done, which will reflect not only the upgrades that we're making right now, but it's going to reflect the changes to the software that have also been made historically, will all be included in this updated 510(k) that we'll be submitting.

Our next question is coming from the line of Brian Weinstein with William Blair.

Hey, guys. Thanks for taking the question. Can you be a little bit more specific here on the steps that are required with respect to submission of the 510(k)? The software upgrades that that you're doing, can you tell us kind of where you are there, why that would take so long to maybe submit sometime in the fourth quarter? It seems like some of these software upgrades were kind of already done and you've got to kind of repackage them? I just want to dig into what specifically did the FDA come in say that they didn't like about your quality systems. What changes do you think you need to make more broadly on the quality system side? Thanks.

Yeah. Hey, Brian. It's Tom. So, let me start with your last question and then work our way forward. So, as I mentioned, based on the quality system in our infusion business, we've made software upgrades over time to the Alaris system. And over that period of time, and we're talking – not this year, we're talking a number of years, our quality process determined that those upgrade that we've been making in that business did not require a 510(k) clearance. And so, most recently, on the most recent changes and updates that we've made, we follow that same process and our team determined based on that process that those recent updates in November also did not require an new 510(k) clearance. And so, we released that software improvement in December and we resumed shipping, as we had shared with you last month. Since what we've learned – and as I mentioned, we had a key meeting with the FDA as recently as this Monday. Through our ongoing dialogue with the FDA, we learned that the FDA disagreed with that determination about the need for a new 510(k) clearance for the updated software. And that applies not just to the upgraded software that we're talking about in November, but that decision process that had occurred over time. And so, as I said, we're collaborating with the FDA on their request to combine all the Alaris software enhancements and remediation upgrades with the additional changes made to be Alaris system over time, over years, into a more comprehensive regulatory filing which is going to be submitted this summer. And so, while you're right, we are ready to – we have the information ready for the recent software upgrades, the work that has to take place between now and the submission date is more referenced to the historical changes that have been made over multiple years going back and some additional testing that we need to do on those historic changes to reflect the testing requirements today. So, that's the work that has to be done.

Our next question is coming from Bob Hopkins with Bank of America.

Hi. Thanks for taking the question. And good morning.

Good morning.

Morning. On Alaris, I guess the question I have is a little bit bigger picture. In your view, is this 100% Becton-specific issue with the FDA or is the FDA changing their requirements for pumps broadly? The reason I ask the question is I'm struggling to understand kind of how you got caught off guard and how this went from sort of a software upgrade to something much more significant?

Bob, this is Tom. I can't comment on other organizations, but what I can say is that it's not unprecedented where there are situations where over time a product evolves and then the FDA looks and says, wait a minute, your current 510(k) needs to be updated to reflect those series of changes over time. And in this case, there was a process in the business and there's a specific quality process within the infusion business, within the consent decree that the team was following that said, each of those individual changes didn't require a 510(k) process. Again, when the FDA looks back at it over a 5, 10-year period, they say, wait a minute, you actually need to put in a 510(k) given that series of changes that have been made. And that's the exact work that we're doing.

Our next question is coming from the line of Kristen Stewart with Barclays.

Hi. Thanks for taking the question. I guess just to not to beat a dead horse, but on Alaris, I guess once you do submit the software upgrade platform, I guess, in the summer, what would be the timeline that you would expect for this package to be approved by the FDA? And then, what would be your expectation for it to be rolled out to customers? I'm just trying to gauge again, going back to the impact for FY 2021 and, I guess, how should we just think about this in terms of customer waiting on the sidelines and just the degree with medical necessity? How difficult is that for customers to qualify for? Thanks.

Yeah. thanks, Kristen, for the question. So, let me answer your last question first. When it comes to medical necessity, we are working collaboratively with the FDA to put in place a process for customers to continue to get access to new Alaris pumps under medical necessity. And that's again as required for medical necessity and that process is getting finalized now. We'll be reviewing that process with the FDA and then providing that to customers. Of course, it is a life sustaining product in many cases and there will be needs for medical necessity pumps, we expect, and we have requests for those now, certainly in house. When it comes to clearance and timing for that, I'd say, of course, we're very focused right now on getting that 510(k) submitted. Clearance timing, we're working again with the FDA. I think it's probably not prudent to speculate until we get the feedback from the FDA. In parallel, though, I would say that the work on the catch-up 510(k) that I've described, we've started that work in full and have momentum well underway. That's why we have a good sense of and confidence in the timing of submission. Thanks, Kristen.

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

Hey, guys. Thanks for taking the question. Tom, just one on – just trying to go through the math. The $400 million cut to pump revenues, is that assuming no placements at all, pump placements? If the market is $2 billion, I'm just trying to map work here on the impact for the back half there. Or if this is just a software, given you guys are so deep in the connectivity part, on the digital part, this is connected to your Pyxis. Cancustomers purchase an older version of the pump and then upgrade the software once the FDA, I guess, approves the new 510(k)? And related to that, do you think this has any impact on Pyxis at all now because I know you have some bundled up sales going on? Thank you.

Hey Vijay. Tom. Thanks for the question. So, we don't expect any impact on Pyxis. We continue to have strong momentum there. And again, we have late stage ongoing discussions with customers who we think many of them will wait for the Alaris product to be able to resume shipping in order to either convert or to upgrade their fleet. Again, we stand by the safety of the products, and so this is a delay in terms of when we can ship new pumps is what we're focused on. By the way, when we ship under medical necessity, we will be shipping, we expect, the prior version of the software, to your question, and we can't ship – I think you had alluded to, can we just go back and ship the prior version of the pump more broadly. And, no, the answer is no, we can't do that. We're limiting shipments of pumps exclusively to that under medical necessity as we work with the FDA. And again, we'll keep you updated as we progress and once we get past the 510(k) submission.

And I would just say, in response to your first part of your question, just again for clarity, that the low end of our range, the 2.5%, would assume that there are essentially no pumps sold and the entire amount of revenue was taken out. And we would have to assume that there would be – pumps sold under medical necessity would be limited, but the rest of the range up from the low end of the range would account for some sales of pumps under medical necessity, as well as the normal range that we would have in the guidance.

As you can imagine, given the situation, we want to be particularly prudent and make sure that, again, as we work collaboratively with the FDA here, we'll know more as those discussions progress.

Our next question is coming from the line of Lawrence Keusch with Raymond James.

Thanks. Good morning. Just a two-part question here. So, I guess, once you have this new software package cleared by the FDA, I'm curious as to where that puts you relative to overarching FDA desires within the pump space? It's my sense that the FDA has been a little bit frustrated that a lot of the pumps out there really are not up to the standards that they would like. So, I'm trying to get a sense of where this ultimately puts you once you kind of go through the pain of getting this all done. And I guess the second part of the question is, in other areas of the business where there have been software upgrades over time such as Pyxis, have you gone back and had a review there or might you need 510(k) filings there as well? Thank you.

Hey, Larry. Thanks for the question. So, in terms of the question regarding the overall pumps, this catch-up 510(k) is going to be extremely comprehensive. And so, to your point, we feel that this will put us actually a good spot in terms of getting full compliance. Again, we're working with the FDA, so that, at the end of the day, once we get this 510(k) established, the new one, we'll be fully meeting the expectations of the FDA and we're having that active dialogue, obviously, understanding their expectations, how our process may have led us to make some different decisions there. But we're getting all of that reflected and put into an FDA that will be completely comprehensive with the latest expectations and requirements. And that's the reason for that submission timeline because we are being prudent and fully comprehensive to the full expectations of the FDA. So, you could say that should put us in a good position going forward. On Pyxis is not a 510(k) approved product. It's not regulated in the same way as it's a dispensing system. So, certainly, on other products in the company, we are assessing that, but it doesn't pertain to Pyxis.

Thank you, guys.

Our next question comes from the line of Rick Wise from Stifel.

Good morning, Tom. Hi Chris.

Good morning.

Two questions from me and I'll just ask them upfront. I was last night rereading your comments at the BD annual meeting where you very clearly restated/emphasized your goals for a 5% to 6% durable top line growth, I think was your language, and low double-digit bottom line. I guess I'm wondering how you're thinking about those goals today. Two, what impact do we imagine this has on your goal of 50 basis point to 100 basis point annual improvement in operating margin? And last part of this, it's sort of all of a piece. We're all going to have to contemplate what to do with our fiscal 2021 and beyond numbers. I'm sure you're not ready to give guidance. But do we imagine that wherever we end up this year – and obviously, I hope it a little better than you're shaping today. But the longer-term guidance, should we imagine that you'll frame – taking these long-term goals, framing the longer-term outlook off this year or would we imagine, no, fiscal 2021, if all goes well, could be a year of accelerated growth relative to these targets? Thank you.

So, let me take a shot at that, Rick. Thanks for the question. I'd say that we're only a quarter into this year. So, clearly, it's a little tough to talk about 2021 at this point. This is very recent developments that occurred this week with the FDA which we're addressing. With size of the impact for FY 2020, keep in mind that a big chunk of the revenue base is coming out this year which does create a bit of an easier compare year-over-year. That's not our focus. Our focus is getting through this issue and working with the FDA to get the pumps shipping again. And I think there's nothing about this situation that changes are 5% to 6% double-digit growth going forward, the underlying business is extremely strong and continues to be strong and will continue to be strong. As I said, the only thing taking our guidance down is this issue. We'll get past this issue and be back to that same standard of delivering value going forward.

Our next question is coming from the line of Richard Newitter with SVB Leerink.

Thank you for taking the question. I just was curious on the – going back to the China volume-based pricing pressure that you've kind of – took that guide a little bit more conservative based on what you saw between the two quarters. I guess what gives you confidence that this is the right level of headwind to put in there for that issue? And just remind me again, sorry if I missed it, what was contemplated in the full year outlook and what gives you confidence this doesn't kind of become a moving target. Thanks.

Richard, let me just start and then I'll turn over to Chris. Certainly, as we've shared, it was just getting started when we gave guidance. It hadn't started really rolling out across the provinces. It was in discussion. Very few of them had at started their processes and others were beginning the dialogue. And so, the pace of that happening and the number of provinces was still uncertain. And we made that very clear, I think, when we shared that at that time. So, we've had another quarter to understand how that's involving and I would say it's evolving a bit faster than we had originally thought it would. Again, we've seen – this has happened in the generic drug industry. So, we have surrogates to see the model, the pace at which it goes and we've also seen some of the tenders now go through in the last quarter and we've been able to see exactly what pricing changes are being finalized in those tenders. And so, now we've been able to say, okay, here's the exact pricing reductions that we're going to see and the number of provinces and we've built that in. As we mentioned, as Chris said, so the $200 million business today in China, again, that's out of a $1.2 billion total China business, it is a significant drop in that $200 million business. We've built that in. At the same time, we are redirecting resources from that portfolio of businesses into some of the areas and opportunities we see in Life Sciences and Interventional and we see some opportunities for acceleration in China in those two. It's not a level to offset fully, as you've heard from Chris, but it's certainly that combined with the increased level of flu testing, DCBs and other areas that are doing better than expected. It offsets it for us across the company, and thus why Chris' comment that the complete change in guidance here is 100% associated with the Alaris pump.

The only thing I would add to that is that the other thing that we saw as the situation developed is the distributors taking down their inventory levels much quicker than we would have originally anticipated as they saw this issue develop as well. So, a big chunk of that happened since the last time we spoke. And we really see that mostly impacting the second quarter. And so, the biggest hit from that additional $60 million that we took China down will hit us in the second quarter and then moderate somewhat in the third and fourth quarter. But, again, just to kind of go through the math, $200 million business. The last time we spoke, we took it down by $40 million, $200 million being the FY 2019 number. We took it down by $40 million and we're now taking it down an additional $60 million. So, the impact this year across that is $100 million just for that specific item, taking that business down to $100 million going forward. And there will be some spillover into next year, but as you might expect, to a somewhat lesser extent.

Richard, maybe just to give you a little bit more color because it can be a little tricky. The comment on the distributors, the way that works – and it has a little bit disproportionate impact in the first year – is of course we're selling, we and other companies in China, we sell our products to distributors who then sell them to the customers. And so, if we've been selling them at a certain price to the distributors and they have a large inventory of those, they see this process now happening and the ability to now – they don't get stuck with a bunch of inventory at a higher price if the market price is going down. And so, they're bringing down their days inventory on hand, both so that they wait to see the pricing of all because they don't have bought at high prices and selling at low, and the other thing is they're looking at who's going to win these tenders becomes more uncertain in this environment. And so, again, they don't want to get stuck with a large amount of inventory and you see the channel then taking down the inventory concurrent with the situation. That's all comprehended in the updated guidance that we've given, but just want to give a little bit more color on why we made the comment on distributors have an impact.

That's really helpful color. Thank you.

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

Good morning. Thanks for taking the question. Just one the pump and one on DCBs, Tom. So, first, on the pump side, is the consent decree new? I'm sorry if I missed that. And what's the status of your next generation pump? Alaris has, obviously, been very successful, but I think it's been in the market for a while. And I'll just ask my follow-up up now. On the below-the-knee refiling, what's the status there? And how do you think the 12-month data link and the new metanalysis could impact the chances of approval? Thanks for taking the questions.

Sure, Larry. I'll take the first question and I'll turn it over to Simon. So, the consent decree, of course, that's been in place from CareFusion at the time of acquisition. That does put certainly heightened regulatory oversight over that business, which also can influence certainly a dialogue with the FDA as well and expectations. And so, that's always been in place. That's nothing new and we're moving forward there. As we think about timing of our next generation pump, we do have a next generation pump in the pipeline. I'd say we – it's progressing well. We certainly don't want to talk about timing of submission of that today. The Alaris pump remains – it certainly is clearly the most preferred product by clinicians across the US and you can see that based on the trajectory over the last several years. And we remain very confident that it will be in a position to continue not only because of the benefits of the product itself, but how it's integrated across a broader medication management suite of solutions. It is very well positioned to be of continued preference going forward. We've got to get this 510(k) catchup submitted, so that we can return to making that available to our customers and for patients. So, Simon, on DCB?

Yeah. Good morning. Simon. With respect to the submission on BTK, I would say that we're well advanced in our preparation of that submission and I would say we'll be going into FDA sooner rather than later. So, that's about the size of things on that. And then, with respect to – I think you were asking about the more recent data that was published by Katanos, if you saw the information from Link [ph], a couple of weeks ago where we published three-year safety data, we continue to not see any safety signal with our data. And indeed, despite the limitations of the Katanos 2 paper, I think you will note that the significance with respect to the hand signal [ph] that they were seeing was not – or did not exist when you use a low dose DCB, which is what we have. So, is it going to material the impact FDA? I don't know. But we're well advanced in our preparation for that and the data that we continue to – really supports the safety of our products.

Our next question is coming from the line of Matt Taylor with UBS.

Hi. Thank you for taking the question. I just wanted to have two little follow-ups on this Alaris situation. The first is, for the comprehensive 510(k) that you are filing and you guided to the end of the year for that, can you talk about any risks or upside there could be to the timing? How is that progressing? Is that a date you're pretty confident about? Is there any risk that flips or could get pulled forward?

Yeah. Thanks, Matt. Again, we just had this – the most recent discussion with the FDA this Monday. So, I don't want to – certainly, we're very focused on – and we're already starting that work on the 510(k). We had had some of that momentum going well before then. But we're going to be in a better position to give you an update on that once we get through it. Our goal right now is to submit and seek clearance as quick as possible and to meet the expectations of the FDA. So, I think it will be premature to speculate on any timing of the clearance process. Thanks.

Assuming that you do file that…

Sorry, Matt. I think we lost you.

We go to the next question.

Our next question is from the line of Josh Jennings with Cowen.

Good morning. Thanks. I was hoping to just ask about the Interventional business. You commented about the paclitaxel drug-coated balloon headwind improving. Any details you can provide just relative to that 50% decline stake that you put in the ground historically? And then, also any details just around the shifting of products from vascular surgery into the peripheral and what those products were and any rationale for that? Thanks a lot for taking the question.

Josh, I would let Simon answer that.

Yeah. So, Simon here, Josh. I think we've seen a sequential increase in performance here with respect to SSI DCBs. I won't give you the specifics, but it's – I would classify it as a material increase in our performance prior to what we saw in Q3 and Q4 last year. And then, with respect to sales force alignment, we transferred some of our PleurX business which is our drainage catheter business from the surgery business into the peripheral intervention business, and that's simply synergistic with the call points that we have there. We focus heavily on breast biopsy and implantable ports and delivery of chemotherapy. So, taking care of patients at the end of their life in relation to their pre-existing cancer, PleurX is a perfect fit for that sales force. So, that's what we've done.

Thank you, Josh.

Our next question is coming from the line of Matthew Mishan with KeyBanc.

Great. Thank you for taking the questions. Just a quick follow-up and then a broader one. Does this also expand to the syringe in the pain pump in addition to the LVP pump? And then, as I think about Becton, I think the broader value proposition in medication management you have in the hospital, on the good side, I think that probably allows customers to be patient as you kind of work through some of these issues, but on the other side of it, would this not also affect the overall conversation or conversion of some of the broader portfolio with some of your customers or is it not related and maybe some delays in the conversion in other areas?

Hey, Matthew. Thanks for the question. So, Alaris as a system it includes – it's all one system, right? So, the Alaris system which is – one of the reasons the customers do prefer it so much is that it includes an LVP, the syringe and the PCA. They all snap on as modules that you can choose from based on the patients and the types of medications that the patient requires and the administration route. So, those are all fully in scope and comprehended within the guidance that we gave you an update on. In terms of broader medication management strategy, I think you're exactly right that customers deeply value the full set of solutions there and that that provides an impetus that people want to move in that full direction and not necessarily say I want to just move to having an isolated product that's not helping me manage medications, it's just literally doing a pumping activity and I can't use the data to do things that I can, like how we're using data from pumps and Pyxis and other things to do diversion analytics that you just can't do with other solutions. So, I think you're right there. We don't see at this point impact even as we are doing broader medication management deals. Of course, there's multiple other products as part of that suite of solutions. There's Pyxis, there's Pyxis Logistics, there's Pyxis Prep, there's HealthSight, there's a number of other products. And those products, of course, can still be used with the existing Alaris space. So, there's nothing stopping people from continuing to add those products on as they continue to use their Alaris products and utilize the data coming off of Alaris to be used as part of that full solution. Thank you for the question.

Our final question is a follow-up from the line of Kristen Stewart with Barclays.

Hi. Thanks for taking the question. Just going back to, I guess, China, what's the risk that – I know you're talking about the $200 million business, but just that it continues to spill into other product categories within the broader China business for you. Maybe just talk about the number of provinces that you are seeing and, I guess, just risk that it spreads more broadly within medical products. Thank you.

Thanks for the questions, Kristen. I'll turn it over to Alberto to answer that.

Yes. The first thing that I'll say is that we're seeing no evidence of the [indiscernible] procurement applicable to any other category at this moment. The way that we tend to think about it is that there's probably three big variables for you to consider, whether they will consider any new categories that we're in. The first one will be the total spend of that category – is it in the top 10 or in the top 20 spend in the hospitals? And the two biggest parts of portfolio they have left, which is flush and PICCs do not fall into that category. The number of competitors – and again, the other categories within MDS, there's a significantly a less amount of categories. We're talking about a handful versus the peripheral catheters where there are over a dozen, approaching 20 plus small players. And then, the perception of commoditization as well is another factor. We do not think these conditions are necessarily all that applicable today to the other categories.

Thank you, Alberto. Thank you, Kristen.

There are no further questions at this time. I will now turn the floor back over to Tom Polen for closing remarks.

Great, thank you. So, as we close today, I want to reiterate BD's strong commitment to product quality, regulatory compliance and patient safety. You expect it, our customers deserve it and our patients depend on it. While I'm very disappointed that we had to lower our guidance today, I'm also confident that we'll look back on this moment as a catalyst for driving a better BD. Let me assure you that we are taking accountability, we're acting with urgency and we're proceeding with an unwavering commitment to our purpose and the patients we serve. I'm also confident that our broad portfolio, our global reach and our passionate team of associates provide an incredible opportunity to drive long-term growth and enable us to make a bigger impact on customers, patients and shareholders around the world. Thank you.

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