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Becton Dickinson Q4 Revenues Up 39 Percent on Bard Acquisition

This story has been updated to include comments made by BD executives during its earnings call.

NEW YORK (GenomeWeb) – Becton Dickinson reported today that its fiscal fourth quarter revenues rose 39 percent year over year, driven primarily by the acquisition of C. R. Bard earlier this year.

For the three months ended Sept. 30, the company posted revenues of $4.40 billion compared to $3.17 billion in the year-ago quarter, and slightly higher than Wall Street analysts' average estimate of $4.36 billion.

"We finished the year with a very strong performance and momentum across our businesses, in both our core legacy BD and Bard portfolios," said the firm's Chairman and CEO Vincent Forlenza on a conference call to recap the earnings.

BD's Medical segment brought in $2.35 billion, a 21 percent increase over the $1.94 billion reported a year ago. BD Life Sciences recorded $1.11 billion in revenues, up approximately 6 percent from $1.05 billion in Q4 2017. Within the segment, preanalytical systems revenues were up about 4 percent at $393 million from $378 million, while diagnostic systems revenues were up around 7 percent to $384 million from $359 million, and biosciences revenues increased 6 percent to $331 million from $314 million.

Performance in diagnostic systems during the quarter was driven by microbiology platforms, according to the firm's executive Vice President, CFO, and Chief Administrative Officer Chris Reidy. This included growth in platforms for blood culture, tuberculosis testing, infectious disease, and antimircobial susceptibility testing, as well as strong installations of the firm's Kiestra system and BD Max platform.

Revenues from the company's US business was up nearly 49 percent to $2.45 billion from $1.64 billion a year ago, while revenues from international markets were up around 28 percent at $1.95 billion from $1.52 billion in Q4 2017.

BD's net loss for the quarter applicable to its common shareholders was $173 million, or $0.64 per share, compared to a net income of $289 million, or $1.27 per share, a year ago. The company attributed the loss during the quarter to purchase accounting expenses associated with acquisitions, as well as additional tax expenses related to new US tax laws.

On an adjusted basis, the company reported Q4 EPS of $2.93, in line with the consensus Wall Street estimate of $2.93 per share.

BD's R&D expenses rose nearly 26 percent year over year to $278 million from $221 million, and SG&A costs increased 43 percent to $1.10 million from $774 million, which the company attributed to Bard's higher SG&A profile.

In fiscal 2018, the firm also continued to focus its portfolio, Forlenza noted. The firm divested several assets, including its remaining interest in the Vyaire Medical joint venture, select product lines related to the regulatory approval of the Bard transaction, and its advanced bioprocessing business which was acquired by Thermo Fisher Scientific. BD also acquired TVA Medical, which Forlenza called "a great example" of the firm's continued strategy to pursue tuck-in acquisitions to advance category leadership and enter into additional high-growth segments.

For the full fiscal year, BD reported revenues of $15.98 billion, up 32 percent from $12.09 billion in 2017. On a currency-neutral basis, revenues grew about 6 percent year over year, the firm said. 

BD Medical revenues in 2018 were up 16 percent year over year to $8.62 billion from $7.42 billion, while BD Life Sciences revenues grew about 9 percent to $4.33 billion from $3.99 billion.

Within Life Sciences, preanalytical systems revenues were up more than 5 percent year over year to $1.55 billion from $1.47 billion, and diagnostics systems revenues grew more than 11 percent to $1.54 billion from $1.38 billion. Bioscience revenues rose 9 percent to $1.24 billion from $1.14 billion.

During the year, the firm launched its BD Max multidrug-resistant tuberculosis panel assay in Europe. "With the BD Max MDR-TB panel and BD Max BacTec MGIT products, BD is able to offer laboratories a suite of tools for effective and accurate patient diagnosis and management," Forlenza said. BD will launch a new enteric viral panel for BD Max in F2019, and the planned launch of BD Kiestra IdentifA in H2 2019 will extend that system's capabilities to include automated sample identification.

For 2018, BD's net income applicable to common shareholders fell to $159 million, or $0.62 per share, from $1.03 billion, or $4.70 per share, in 2017. The firm reported adjusted full-year earnings per share of $11.01, matching the consensus Wall Street estimate.

BD's R&D expenses for 2018 rose 30 percent year over year to $1.0 billion from $774 million, and SG&A costs were up about 37 percent to $4.02 billion from $2.93 billion in 2017. 

BD saw headwinds in the year that may continue in the near term, however. The firm is seeing an impact of higher resin costs due to a supply constraints on propylene, as well as the impact of new tariffs, totaling about $60 million and $35 million, respectively, in headwinds going forward, Reidy said. But the firm believes some of the headwinds are one-time in nature, and it can offset much of them. "The fundamentals are strong ... and we feel extremely good about the underlying business and the momentum," Reidy added.

Tom Polen, BD's newly-appointed president, noted on the call that the firm sees strong growth across all three business segments in the coming year. In the Life Sciences segment, the firm sees BD Max continuing to grow in the 20 percent range for the year, he said. Additionally, Kiestra, which has been strong internationally, is "really taking off now in the US," and the firm's Veritor system also "had a great year.  … We modeled a lighter flu season, but we did pick up share in the Veritor space for flu, so we have a larger footprint of instruments — regardless of the [strength of the] flu season we'll be able to capitalize on it further given the penetration," Polen said.

Patrick Kaltenbach, BD's executive vice-president and president of the Life Sciences Segment, also noted on the call that BD Max saw 35 percent growth worldwide, driven by the new panels the firm rolled out during the year. The BD Cor, a higher throughput molecular platform, will be launched for early access use at the end of next year. "That will accelerate our growth in molecular as well," Kaltenbach said.

For fiscal 2019, BD guided to revenue growth in the 8.5 to 9.5 percent range, or 5 to 6 percent on a currency-neutral basis.

The firm expects that 2019 EPS will be between $12.05 and $12.15, which would represent growth of 13 to 14 percent, and that adjusted diluted earnings per share will grow around 10 percent.

Forlenza said that factors that can influence BD's financial performance in 2019 include "a stronger or weaker flu season than expected, the performance of new product launches, emerging market growth and pricing, as well as an improving or worsening situation around tariffs."

In Tuesday morning trade on the New York Stock Exchange, shares of BD were down 5 percent at $225.67.