Inside the OEM: Becton Dickinson (BD)

Becton Dickinson (BD), a global leader in medical technology for many years, is strategically positioned to drive innovation, operational excellence, and sustainable growth. As part of its BD 2025 strategy, the company is focused on enhancing its portfolio, scaling up new technologies, and optimizing its operations to deliver value across the healthcare landscape. With strong revenue growth, robust cash flow, and a commitment to advancing the standard of care, BD continues to solidify its leadership in the medtech industry while preparing for future challenges and opportunities.

A Focus on Innovation and Growth

To grow its innovation pipeline, one such area is the strong cadence in BD’s connected medication management suite. “Q2 was the second full quarter since clearance of our new alert system and first half Alaris sales have already eclipsed our total FY23 performance,” said Tom Polen, chairman, CEO, and president of BD (Becton, Dickinson and Company). “Our return to market is ramping faster than initially planned, which wouldn’t be possible without our manufacturing team. We have executed extremely well in scaling Alaris production. Q2 set an all-time record in both the number of BD Alaris pumps manufactured and the number of pumps shipped to upgrade our customers to the cleared version of the pump.”

Polen noted that BD has seen an acceleration of committed contracts that included competitive conversions. He attributed this to healthcare systems taking advantage of the Alaris’s capabilities as well as looking to standardize their fleets. “This offers confidence in the planned second-half contribution to growth and will support momentum heading into FY25. The Alaris 510(k) clearance is just the beginning. As we have shared, we are excited about our innovation road map, and we are planning upcoming Alaris 510(k) admissions to further strengthen our capabilities like best-in-class interoperability with over 800 live sites.” Polen says the company intends to introduce a steady flow of new innovations such as over-the-air technology for efficient software updates and improved cybersecurity.

Innovation Pipeline and Operational Excellence

Beyond Alaris, BD’s portfolio includes a market-leading connected medication management portfolio across inventory management, compounding, pharmacy automation, medication dispensing, and infusion, for which it is planning future innovations and development.

New products will include new medication dispensing and informatics innovation, including the next generation of its Pyxis dispensing platform, which innovates on the company’s hardware design and advance BD’s cloud connectivity. The informatics platform is now live in over 1000 sites. “We have upcoming launches to integrate hospital medication data from Pyxis with nonacute medication data from our MedKeeper platform to bring visibility to medication flows across the customers care network.” BD acquired MedKeeper in 2022 to enhance the company’s connected care offerings.

R&D Milestones

In Q2 2024, BD made meaningful progress toward achieving other key R&D milestones, including several in its peripheral vascular disease (PVD) platform, which Polen said is one of the company’s key growth areas. “Longer term, these technologies are each expected to deliver over $50 million in incremental fifth year revenue and will broaden our leadership in the $5 billion PVD category, it is growing high single digits.

“In our Venus portfolio, we have now enrolled over 60 patients in a pivotal IDE for BD Liverty TIPS stent graft. This novel self-expanding covered stent improves the standard of care for portal hypertension, building on our success in launching venous products that help deliver better clinical outcomes for patients and strengthening our presence in the Danish market,” said Polen.

In its arterial portfolio, BD enrolled the first patient in its agility pivotal IDE study for our low-profile arterial stent craft, a differentiated technology that minimizes access site complications with precise stent placement. Polen said that the device could provide an important new treatment option for over 18 million patients with peripheral arterial disease in the United States alone.

BD has also filed its SCION SA pivotal IDE submission with the FDA for its new Sirolimus DCB for the treatment of peripheral artery disease. “We see this new alternative drug platform as a key growth catalyst for both SFA and below-the-knee applications. We are also executing well on our simplification strategy to drive margin expansion,” said Polen.

BD’s growth momentum comes at it scales BD Excellence operating system and builds lean management systems and cultures throughout the company. Polen notes that this strategy drove strong performance in areas such as waste reduction and production efficiency, contributing to the company’s margin goals.

Financial Strength and Capital Allocation

BD’s focus on cash flow also continues to deliver positive results, generating about $1.1 billion in free cash flow in the first half of 2024, said Polen. “This strong start to FY24 positions us to deliver double-digit growth in free cash flow for the full year. It also enables continued execution of our disciplined capital allocation strategy, including accretive M&A opportunities in higher growth categories and opportunistically returning cash to shareholders,” he said

Corporate Sustainability and Social Impact

BD continues to make advancements in its corporate sustainability strategy. The medtech giant was recently named among Fortune magazine’s “Most Innovative Companies list,” which Polen said is a testament to BD’s 70,000 associates who work every day to deliver innovation that meaningfully advances the standard of care around the world. “We continue to forge partnerships that expand access to these critical innovations and most recently, we announced the first ever option in Singapore for women to self-collect a sample for cervical cancer screening in the privacy of their own home.”

Outlook and Guidance

BD exceeded both its margin and earnings goals and delivered very strong free cash flow growth, according to Chris DelOrefice, BD executive vice president and chief financial officer. He noted that Q2 revenue was $5 billion, with organic growth of 5.7 percent driven by strong volume. “Growth was led by double-digit growth in BD Interventional, with low single-digit growth in BD Medical, and BD Life Sciences. Total Q2 revenue growth of 4.7 percent reflects the divestiture of our surgical instruments platform. Regionally, organic growth was driven by the U.S., partially offset by expected market dynamics in China,” he said.

In BD Medical, growth was led by medication management, with strong performance in infusion systems driven by the BD Alaris return to market and mid-single-digit growth across the company’s medication delivery solutions portfolio in the United States and EMEA. DelOrefice also noted that strong demand in BD’s pharmaceutical systems pre-fill devices for biologic drugs offset transitory market dynamics across the industry, including customer inventory destocking.

BD Life Sciences performance was led by integrated diagnostic solutions, with high single-digit growth in its microbiology platforms, and mid-single-digit growth in specimen management, which offset a comparison to the prior year, and transitory market dynamics in select segments in biosciences.

BD Interventional organic growth was led by continued strong growth in UCC, with continued momentum in the company’s PureWick franchise delivering another quarter of double-digit growth, along with related licensing revenue.

Surgery delivered another strong quarter with double-digit organic growth, supported by global adoption of BD’s Phasix resorbable scaffold. The company also saw double-digit growth in its peripheral vascular disease platform where it drove market penetration with its Rotarex Atherectomy System and its venous portfolio. DelOrefice said the quarter’s performance reflects the breadth of the BD portfolio that delivers adorable growth profile.

Inventory Reduction, M&A

As planned, BD saw reduced impact from prior-year inventory reductions that increased cash flow, driven by strong expense reductions and leverage, said DelOrefice. BD’s adjusted operating margin increased sequentially by 410 basis points, and year-over-year by 160 basis points with Q2 being above its fiscal year 2023 full-year margin. “As a result of these items, we exceeded our Q2 operating income and adjusted diluted EPS expectations resulting in adjusted diluted EPS of $3.17, which grew double digits or 10.8 percent on a reported basis,” he said.

“Regarding our cash and capital allocation, year-to-date free cash flow increased more than $900 million year over year to over $1.1 billion. This reflects continued improvements around working capital, including our actions to optimize inventory levels, continued discipline around capital investments, and leveraging our fixed asset base as a result of the benefit from our BD Excellence Operating System.

DelOrefice said BD remains focused on free cash flow conversion and is on track to deliver another double digit step improvement in FY 24 to remain well-positioned to achieve its long-term cash goals. “With our strong cash flow, year to date we returned over $1 billion in capital to shareholders, including dividends and $500 million in share repurchases. We improved our net debt position ending Q2 with a net leverage ratio of 2.6 times.

“Our cash and short-term investments balance was almost $3.2 billion inclusive of about $2 billion in proceeds from debt refinancing during the quarter that will be utilize to repay maturing debt over the balance of the calendar year. Collectively, this positions us well to capitalize on accretive value-creating tuck-in M&A,” said DelOrefice

BD is focused on driving areas of momentum with Alaris, but also will continue to monitor transitory market dynamics. The company’s plan is to maintain organic revenue growth guidance range of 5.5–6.25 percent. Based on BD’s Q2 margin performance, DelOrefice said strong delivery in Q2 positions BD well to achieve its second-half earnings growth targets. Based on the strength of its portfolio and momentum in Alaris, DelOrefice said BD has “clear line of sight” to deliver its fiscal year 2024 revenue guide and another year of strong growth.

Conclusion

BD’s strategic initiatives are centered around innovation, operational efficiency, and market expansion, all aligned with its 2025 goals. In recent quarters, the company has achieved significant revenue growth, driven by key segments like BD Medical and BD Interventional.

The successful return of the Alaris system, advancements in connected medication management, and ongoing innovations in peripheral vascular disease are central to BD’s growth strategy. Additionally, BD’s focus on operational excellence and disciplined capital allocation is strengthening its financial position, enabling continued investment in innovation and shareholder value. As BD moves forward, its strategic vision is set to deliver sustained growth and transformative impact in healthcare.

This article was written Sherrie Trigg, Editor and Director of Content, Medical Design Briefs.

---