This story has been updated to include comments from a call with investors.
NEW YORK – Becton Dickinson plans to use its diverse global business to adapt to reduced research funding support, tariffs, and other headwinds as it continues to suss out buyers for its biosciences and diagnostics business, the firm said on Thursday as it also reported its fiscal second quarter financial results.
On a call with investors, Tom Polen, president and CEO of BD, said that Becton Dickinson is mitigating the current volatile macroeconomic environment by relying on its global supply chain capabilities and its regionalized manufacturing footprint.
In terms of tariffs, less than 1 percent of BD's US revenues are from products sourced from China, Polen said, while 80 percent are from its US manufacturing network and other tariff exempt sources. He noted that BD is the largest US manufacturer in medtech, with a network of 28 plants that produce more than 10 billion devices each year.
BD is assuming a $90 million tariff-related expense in 2025 and is currently shifting supplies and leveraging "dual sourcing options" to mitigate the effects of tariffs beyond this year.
For example, Polen specified that the Vacutainer brand tubes it ships from Sumter, South Carolina, can ship to China from a site in Plymouth, England, and Flush brand catheter products from Columbus, Nebraska, can be sourced from a new plant the firm just opened in China.
In addition, "right off the bat, we actively started positioning inventory in the right geographies to get ahead of the tariffs and create a buffer against near-term cost impacts," Polen said. Specifically, BD moved enough inventory of its China-manufactured Veritor system to the US for the rest of the year, for example.
BD CFO Chris DelOrefice said on the call that including all the mitigation efforts to date, the tariff impact to adjusted diluted EPS will be about 2 percent, or $.25, predominantly weighted to the fourth quarter. Despite this, the firm is still projecting growth of about 8 percent at the midpoint, he said.
The firm also announced on Thursday that it will invest $2.5 billion in US manufacturing over the next five years.
Regarding the planned separation of biosciences and diagnostics business units within BD's life science business, the process remains on schedule, and there continues to be "very strong interest in the assets," according to Polen.
While two of BD's three business divisions reported year-over-year revenue increases, the life sciences division, in particular, was negatively impacted by current market dynamics, leading the firm to lower its full-year organic revenue guidance.
Polen said that the firm was "not satisfied" with the lower-than-expected top-line growth in the quarter, adding that BD is now investing in reaccelerating its organic growth.
For the biosciences business within the life sciences unit, BD had previously projected "a depressed but stable environment with modest improvement throughout the year," Polen said on the call.
However, given more recent changes in US policy and cuts to US research grants, "it's become clear that pressure on research spending increased in Q2 and will likely persist through FY '25," Polen said.
The impact was seen in the quarter particularly on instrument sales, with reduced National Institutes of Health (NIH) funding in the US leading to freezes on capital purchases and shifts in research support in Europe related to increased defense spending there.
Nevertheless, Polen asserted that where funding is available, BD is seeing a strong win rate for its FACS Discover portfolio and expects a boost from the launch of the Discover A8 later this year. Also, following a US government ban imposed in January, Polen said BD obtained an export license effective in April to resume selling high parameter flow cytometers to China.
And, with biosciences reagent sales humming along, "we believe this business remains well positioned for growth as the market begins to stabilize," Polen insisted.
Situated within the diagnostics unit of the life science business, BACTEC blood culture system revenues have also faltered of late due to "supplier challenges," Polen said, adding that the issue is resolved and the firm is working with customers who have been slow to return to prior testing levels.
Going forward, Polen said that the firm expects to tackle tariffs — and the inflationary environment they may precipitate — with its ongoing mitigation efforts and a program of continuous improvement called BD Excellence, but he added that pricing changes are also part of its multipronged approach should tariffs persist.
Fiscal Q2 results
Becton Dickinson also reported that its fiscal second quarter revenues increased approximately 5 percent year over year.
For the three months ended March 31, BD posted revenues of $5.27 billion compared to $5.05 billion in the year-ago quarter. Revenues grew 6 percent on a foreign currency neutral basis and increased 1 percent on an organic basis. The results were below analysts' average estimate of $5.35 billion.
"Amid a difficult operating environment impacting near-term organic revenue growth, our Q2 results reflect the strength of our business model and ability to exceed our earnings expectations through quality gross margin improvement," Polen said in a statement.
BD's medical segment revenues were up around 13 percent to $2.76 billion from $2.45 billion a year ago. Meanwhile, BD life sciences revenues decreased approximately 4 percent to $1.25 billion from $1.30 billion in the prior-year quarter.
Within the life sciences segment, diagnostic solutions business revenues declined 6 percent to $440 million from $468 million, while biosciences revenues dipped 7 percent to $352 million from $377 million, and specimen management revenues contracted less than 1 percent to $456 million from $458 million.
The diagnostic solutions results reflected an impact of prior supply chain disruption for the BACTEC blood culture system and customers' slow return to prior test volumes, BD said, adding the decline was partially offset by double-digit growth in the BD MAX IVD system.
Results in the biosciences sector reflected lower global research instrument demand in the government and academic sectors impacted by research funding levels, partially offset by continued growth in reagent sales for research use.
BD interventional segment revenues declined 2 percent to $1.26 billion from $1.29 billion.
Geographically, revenues from the company's US business were up approximately 7 percent to $3.11 billion from $2.91 billion a year ago, while revenues from international markets increased 1 percent to $2.16 billion from $2.14 billion in fiscal Q2 2024.
In the quarter, BD obtained US Food and Drug administration 510(k) clearance for its advanced microbiology solution integrating the BD Phoenix Automated Microbiology System, BDXpert System, and BD Synapsys Informatics Solution to support detection of antimicrobial resistance.
BD's net income for the quarter was $308 million, or $1.07 per share, compared to net income of $537 million, or $1.85 per share, a year ago. Adjusted EPS for the recently completed quarter was $3.35, beating the consensus Wall Street estimate of $3.28.
BD's R&D expenses increased 1 percent to $302 million from $299 million in Q2 2024, while its selling and administrative costs increased 7 percent to $1.27 billion from $1.19 billion a year ago.
BD finished the quarter with $667 million in cash and cash equivalents, $80 million in restricted cash, and $16 million in short-term investments.
The company raised the lower end of its full-year guidance and now expects revenues to be between $21.8 billion and $21.9 billion compared to a previous range of $21.7 billion to $21.9 billion, reflecting its updated organic revenue growth guidance of 3.0 percent to 3.5 percent and an improvement in the estimated impact of foreign currency.
Before the impact of tariffs, BD expects full-year adjusted diluted earnings per share to be consistent with prior guidance of between $14.30 and $14.60 per share, representing growth of 8.8 percent to 11.0 percent and absorbing an anticipated foreign currency headwind of approximately $.05 due to strong operational performance.
The impact of tariffs is expected to be about $.25 per share, the firm said, and adjusted EPS is now anticipated to be in the range of $14.06 and $14.34. or year-over-year growth of 7 percent to 9.1 percent.
BD's shares on the New York Stock Exchange were down 16 percent at $174.02 in Thursday afternoon trading.