Robbie Marcus: Appreciate it. Thanks a lot.
Operator: Danielle Antalffy of UBS is on the line with a question. Please state your question.
Danielle Antalffy: Hey good morning everyone. Thanks so much for taking the question and congrats on a good start to the year here. I just wanted to ask about Novum. Obviously, that’s probably the biggest event that has happened now since we were all asked on the phone together. So, just curious what you’re seeing. I know it’s early days, but with Novum, how much of that is factored into the Q1 outperformance or maybe drove some of the Q1 outperformance and into the higher guide? And just sort of what you’re seeing from a competitive dynamic now that you do have Novum out there?
Joe Almeida: Good morning and thank you for the compliment opening the question, it was very nice of you to recognize that, we agree with you. Novum has had no impact in the first quarter. As a matter of fact, that performance is driven by strong volumes all around the MPT portfolio, but Novum. So, Novum is going to be — will have an impact on the company in the second half of the year when we start shipping. As we noted in the prepared remarks, we have two large accounts that just order the product. One is a full conversion from our competitor, our largest competitor, and we’re going to continue to see that as our technology is modern, is new. The equipment was designed with a significant amount of productivity built in. It comes with the best drug library on the market.
And we’re going to continue to have a combination of good alternatives to our customers between Spectrum and Novum. So we — as we transition between one technology and the other, we will have customers will continue to use Sigma Spectrum with our award-winning version 9 of the pump and the ones who will have the need for Novum to go there. But our objective right now is competitive conversions. And I think we can make a significant impact there, some in 2024 and more so in 2025.
Joel Grade: Yes. And if I could just add a couple of things to that. Number one, keep in mind, as Joe talked about, we continue to see really strong performance in our Spectrum pump. And so throughout the course of the year, we’ve anticipated still strong double-digit growth in Spectrum. As we head into the second half of the year, again, we will start rolling out Novum. We talked about them from the prepared remarks, we’ve anticipated some cannibalization of Spectrum with the Novum rollout, but we’ve included certainly $25 million in the fourth quarter of the year as an anticipation of incremental impact from the Novum rollup — rollout and as Joe said, much more heading into 2025.
Danielle Antalffy: Got it. Thanks so much.
Operator: Patrick Wood of Morgan Stanley is on the line with a question. Please state your question.
Patrick Wood: Amazing. Thank you. I’ll keep it to one given the amount going on this morning. So, thank you for taking it. Pharmaceuticals, obviously, again, very strong growth. I’m just trying to think bigger picture. The drug shortage list is still very high. You’ve got some onshoring certainly of the syringe side of things. And I think the Civica experiment didn’t really work and some of the Indian manufacturers have been having a difficult time. I guess what do you see as a long-term opportunity there within that business to keep pushing out ANDAs and potentially either benefit from onshoring or pulling back some capacity and better pricings of the drug shortages? Just curious for the outlook there. Thanks.
Joe Almeida: Patrick, we are in an injectable space that is — it’s called a specialty generic. We take ANDAs, and we create premixes, they’re very safe, they have good shelf life and they can be deployed to hospitals very quickly. So as we think about drug shortages, we continue to explore drugs that can be put into that format. But we have also a different — we have two technologies, one we call Calix, but we have another one that we call technology also allows for premix even better without having to refrigerate for the most part. So, our portfolio and [indiscernible] who runs that business has brought in a significant amount of opportunities for us to look at more drugs, more molecules. We revamped our portfolio of new molecules that is going into premix and put more relevant ones.
So, they see the five we just launched. We have a really good effect in 2024 and 2025 for Baxter. That business is launching probably three to four, five relevant molecules a year. And between expansion of markets outside the U.S. and the U.S., we will have more than 25 different launches in 2025. So we continue to accelerate the innovation, but it’s the quality of the innovation. In terms of making the product available, we will continue to invest in the technology. As you know, all Galaxy technology is U.S. base is made here in Illinois, and we have some of our products made in Puerto Rico as well as Ireland, but most onshore. So, there should be of a good value proposition for our customers who look for security of supply.
Patrick Wood: Appreciate the color. Thanks Joe.
Joe Almeida: Thank you.
Operator: Travis Steed of Bank of America Securities is on line with a question. Please state your question.
Travis Steed: Hey thanks for the question. I wanted to ask some of the segment margins, like Renal margins were really strong this quarter, HST margins were lower. I assume that’s the revenue stuff, but I just wanted to make sure any other color you can provide on kind of those segment margins this quarter just given they were kind of way off trend?
Joel Grade: Yes. Thanks for the question. Yes, you’re correct in your assumption on that. And then on the Kidney side in particular, there is a lot of impact on that, and some of it I referred to you earlier in terms of closing our plant. So, again, in that — in the first quarter, there was — I call there’s a lot of increased production that drove a fairly significant amount of margin in our Kidney business in Q1 in particular. So, I think that’s really the main driver of that business that you saw that looked like a bit of an outsized margin. We’re certainly not anticipating that to continue in Q2.
Travis Steed: Okay. And then just kind of bigger picture, when you think about the core Baxter business kind of excluding the Renal business, just the opportunity for continued margin expansion. You’re getting good margin expansion this year. But just in general, like what are the line of sight that you have? Is it cost rolling off? Is it based on revenue growth acceleration, cost opportunity that you can take out of this business just to kind of keep this margin trajectory and expansion kind of going longer term?
Joel Grade: Yes, I think it’s really a combination of things. First of all, it’s the volume, as you said, it is continued opportunities from pricing. As you know, we’ve had some pricing impact this year. And we’ve renegotiated some of our contracts with our GPOs as we head into next year. We’re anticipating continued favorability from a pricing standpoint. We also continue to — the IFC continues to be an area of strength for us that is going to be positively impacting our margins. I think the continued operations for execution, the operational efficiencies, some of the automation opportunities we’ve had, we continue to do work from a procurement standpoint and some of the buying opportunities we have both leverage our scale as well as for risk mitigation, we — I see continued opportunities in the IFC space.
And I think the other thing I would say is I’ve said this before, I’ll say it again, we’re not going to SG&A or way to prosperity. However, there are areas of opportunity there. For example, we’ll be hiring, even starting next week, a person that’s going to be leading our global business services. That is an opportunity for us to continue to think about how we — what our operating model is, as opposed to verticalization and how we can leverage some of the — those opportunities across our organization. So, I think, again, I see a variety of ways really up and down our P&L in terms of those type of opportunities to continue to expand our margins.
Travis Steed: Great. Thanks a lot.
Operator: Josh Jennings of TD Cowen is on the line with the question. Please state your question.
Josh Jennings: Hi, good morning. Thanks a lot. I was hoping to ask Joe and team just about the geographic expansion initiative for the Hillrom or HST portfolio. Has it taken a little bit longer than Baxter initially thought? Or are there challenges to bring Hillrom technologies into international geographies where Baxter are present and Hillrom didn’t? It sounds like some of the international softness was based on government order timing in Q1, but just wanted to get an update there as it was part of the strategic rationale for the Hillrom acquisition.
Joe Almeida: Yes. We have good performance in in Western Europe, we see that, and we see good performance in Latin America as well. So we see that Baxter combination with Hillrom has expanded Hillrom opportunity in those markets. We are making changes in our Asia-Pacific organization to bring more focus on capital sales to supplement what Baxter is strong, which is general acute market sales. So, we’re increasing talent in Asia-Pacific with some changes we just recently made. And Western Europe continues to be a strong market for us, and we continue to strengthen the group there, Latin America as well. So it has been a positive take on Baxter and Hillrom combined for outside the U.S. One market where things are not as strong is China, but China because specifically Made in China restrictions in VBP is known in the market, but our sales ambitions there were not very great as opposed to the fact that in Latin America, Europe, Middle East and Africa and the rest of Asia-Pac, they become very strong, including Australia.
We’re very successful in Australia, just closed some really good deals there. So, Baxter brought a lot of talent into that equation, and we continue to strengthen the team with new hires that we’re bringing on board.
Josh Jennings: Understood. And just one follow-up. Wanted to just ask about the Connectivity Solutions technology. It sounds like Novum IQ, the smart beds, they’re adding to that connectivity solutions portfolio. But maybe if you could just share with us any pipeline initiatives and how you think they can roll in and then start delivering bigger sales impacts as we move into 2025 and 2026? Thanks for taking the question.
Joe Almeida: Thank you. We, with Novum IQ, syringe and LVP, large volume parenteral, now we have a suite that connects with Baxter, gateway, overall gateway called Canexus. And the connect brings all these devices to talk to each other. So, right now, if you went to our center, our customer experience center in Batesville or in any other place that we have, you would see the pump communicating to devices like Volt, the bed communicating to Volt. You see the connectivity. And as it becomes more important to our customers, Baxter has the right solutions for the hospitals. Interestingly speaking that it has to bring productivity improvement to the hospital. The ability to connect by just connecting is table stakes. But what Baxter is seeking is continue to innovate to bring specific solutions to improve productivity in the hospital setting.
So, we — when we do our — later this year, we do our Investor Day, we’ll be able to bring a demo where you’re going to be able to see how these devices will be connecting to each other. But they are very important. And with Novum now, the last piece of this puzzle is complete.
Josh Jennings: Thank you.
Operator: We have time for one final question. Matt Miksic of Barclays is on the line with our final question. Please state your question.
Matt Miksic: Hey, thanks so much for squeezing me in. Caught me off-guard there. So, I’d love to understand one of the things that a question I get often on Baxter is sort of where is the sort of tall pole in the tent? Where is the sort of significant single growth driver, if there is one? And looking into the end of back half of this year 2025, maybe, Joe or if you could highlight which of the product lines or business lines do you think are going to emerge as something that we’re all going to look to, to sort of see lift in growth or lifting leverage into 2025? Thanks.
Joe Almeida: Matt, one of the advantages of Baxter, it’s diverse portfolio that brings things to a point where acute — the acute market, we provide significant amount of infrastructure products for those markets, IV solutions, pharmaceuticals, pumps. We also have the capital market with beds, monitors. And so when we think about Baxter in general, our — we have several of — several drivers of growth. You could see this quarter was a significant amount of growth and it was more than enough to offset some headwinds that we had in HST and HST is going to continue to — I’m cautiously optimistic about the business. And I think we have — we’re back into our cadence of growth for that business. We have innovation of every single part of Baxter.
We have significant drivers coming out of pharmaceutical, our injectable pharmaceutical portfolio. Our pump conversion rates will be what’s going to make that business grow is going to be competitive conversions to our biggest competitor because we have a product that is new and it fulfills significant market needs. We also have, in our HST portfolio, more than seven significant launches in 2025. So, innovation in Baxter is not dependent on one or two products, it’s a wide range of products that derisk the company and put the company in a good solid footing to achieve ex Kidney 4% to 5% growth.
Matt Miksic: That’s great. Thanks so much Joe.
Joe Almeida: Thank you.
Operator: Ladies and gentlemen, this concludes today’s conference call with Baxter International. Thank you for participating.
