Thank you, everybody in the room and on the webcast, for joining us today at City Unplugged. Thrilled to have the next presenters from Baxter, Joel Grade—sorry?
Grade.
Grade. Uh-huh. Oh, I got it wrong twice.
That's all right.
All right, how do you say my last name?
It's a lifetime of my mispronunciation.
It's okay. Like I said, how do you say my last name? That's always fun. The CFO and Clare Trachtman.
Thank you, both of you. So Joel, you've now been the CFO for a little over four months, and I would love for you to talk about what has surprised you the most and what where you're like, "Yeah, I got this.
Sure. Yeah, no problem. I, I guess I'd start by saying, look, it's, it's been an amazing journey for these first four months. The people at this company are just incredibly passionate about the mission of this business, and it's, there's some tremendously talented people in this organization. And, so I would say, you know, one of the things that, you know, it's—you want to say incredibly pleasantly surprised me is coming in from a different industry to this one, into this company. It's been a, been a really great transition for me from that standpoint. You know, I'd say from a surprising standpoint, you know, I think—I don't know if I'd call it surprising, but in the sense that, you know, where I came from was a very operationally driven business. It was very, it was, again, a large, large complex, you know, global distribution business.
I think just from industry in general, and somewhat Baxter, operationalizing things in terms of how we work, specifically around things like driving, you know, for, you know, for cash flows, for example, would be one of those areas that I think that we at Baxter need to do a better job of just operational rigor around, driving working capital performance, around just certain areas that we can optimize from an operational perspective. I think, you know, we made good progress on our supply chain, for example, but probably surprising was the amount of opportunities we had in the procurement side where a lot of our, you know, sourcing is single source. Things like that were, I'd say, surprising to me, but opportunities for us.
and probably the other piece I would say is even from a pricing standpoint, you know, we typically, in this industry and in Baxter, we'd enter into longer-term contracts that doesn't offer necessarily a lot of flexibility around things. Input costs go up. We don't pass those along to our customers as easily. Those are things that I think, as we move forward, we're going to do a better job of. And so that's where I'd call a few of the things maybe that are just initial reactions to my first four months here at Baxter.
Four months. So that leads me to, you had the pleasure of putting together the 2024 guidance. And I would love to know what the factors were. We'll start on the revenue side.
What were the factors that brought you to the revenue guidance? And you've divided it up between base or core Baxter and then, in anticipation of the renal care spin.
Right.
Let's start from the top.
Yeah, I would say a couple of things. One is, just to reiterate, we talked about a 3%-4% from, you know, ex-kidney and obviously their own, you know, the 1% kidney. And I think the, you know, what you see there is the building on some of the momentum that we had starting in the fourth quarter into some of the businesses, you know, ex-kidney. I think that's reflected in some of the view that we've taken going into Q1. You know, I'd say that's both a, again, reflective of the momentum and, and candidly giving ourselves some cushion in terms of, you know, hey, what things could go wrong in the year. There's always going to be something. There's nothing specifically to call out there. But I think those opportunities exist.
You know, I would say one of the, you know, maybe the follow-up questions on it as well, what do you see as different upside opportunities potentially on the other side?
Downside. Talk about both.
Yeah. And again, I think, you know, look, downside opportunities, you know. I think, you know, as I said, I think some of that, there's some of that that's built into our forecast, somewhat risk-adjusted.
That's the best suggestion.
For our forecast. Yeah.
Okay. Okay.
Yeah.
The potential downside risk.
I think on the upside, I guess I'd point out maybe three things that are just thought starters as much as anything. I mean, one is that we've taken potentially somewhat of a more conservative view on hospital capital spending than maybe others in the space have. And I think that's one. I think the second is that we do have a fair number of product launches that the company has come out with. And you know, I think our view on what the new business generation from those is is something that may have you know, could potentially have further upside. And then I think the third is just as a reminder that we actually don't have anything built into our 2024 view for Novum .
And so in the event that, you know, we were to receive something positive on that, that would obviously be upside as well because that's not built into our 2024 model. So that's a view on the top.
Well, we will get to that. Despite sort of low single-digit revenue growth for the combined company, EPS guidance is for double digits.
Mm-hmm.
Walk us through the levers that get you from revenue to EPS growth.
Yeah. So I think the couple of things that I would call out, I mean, A is that there is, there's a pricing component that we have looked at and said, you know, we've, we're going to continue to make some progress there. Now, there's a little bit of an offset to that in the sense that we took some temporary part pricing measures in 2023 that fell off at the end of 2023. But I think, again, we do see pricing as some further upside as we head into 2024. You know, I think from a, I think the so our independent supply chain is really an area that has, I'd say, one of the larger opportunities from a margin expansion space. So there's, you know, a couple of different categories of so what is that?
Well, I think, you know, number one, I think, we have as we have a series of margin improvement programs that are everything from automation in the warehouse to just generally, you know, productivity opportunities that are part of that work. We're continuing to work on the procurement and purchasing side of our business, where I think there's continued opportunities for upside. And as well as, you know, just generally speaking, I, I call it network optimization in terms of how we think about our, our supply chain logistics distribution world. And so I think those are, those are some of the areas I'd say are the, the largest opportunities for, for upside in, in our margin during the course of this year. And, and then obviously some of the volume growth as well.
Okay. And just to put a final point on that, so kind of, you know, a lot of those things that Joel referenced, we did guide to at least 50 basis points of margin expansion. But to your point, to kind of get to that double-digit growth, that EPS, we do have a benefit in our non, you know, operating expense line items, in particular on interest expense, which will be lower in 2024 versus 2023. That does help our EPS growth in 2024. The pricing that you took in 2023, could you quantify it?
I would say it was north of 100 basis or north of 50 basis points, probably approaching around 100 basis points.
Okay. And that's fallen off.
So, pricing is still positive in 2024. It's probably closer to about 50 basis points in 2024.
I know, one of the things we've, we've spent some time talking about with you is the contracts which are up, the GPO contracts which are up for renewal. Can you walk us through how many contracts, when does that become implemented? Is that multi-year versus one year? How, how do we think about that benefit?
Yeah. I'll start and Clare can chime in. I mean, you'll recall that we have really three primary GPO contracts that are what you're referring to. Two of those were things that we actually entered into the negotiation of and have essentially completed the negotiation of, that will apply now to the benefits in 2025. And so I think the good news is, we had a successful negotiation in those. Again, we won't give, you know, obviously specific views on specific customer pricing implications, but certainly guidance you'll see going forward will include what we see as margin, as overall margin, enhancement from that space.
So I think, and just as one other reminder, the GPO contracts have been negotiated, but then from there, we do need to continue to negotiate with each of the individual IDNs to actually implement. I would think about this as both a, both a pricing but also a volume opportunity within those contracts. Obviously, there's, there's tiers within the GPO contracts, and so we certainly would look to leverage both the opportunities to, to take pricing but also to, to continue to drive volume in those.
So two to three, what products are they related to? And is there a way to think about the financial impact? So I would say it's primarily, the renegotiation is around our Medical Products and Therapies business, also a little bit of our Pharmaceuticals. And again, these are centered in the U.S. A good portion of our business in the U.S. does run through GPO contracts, so it does account for, you know, a good percentage of that. But I think to Joel's earlier point, we're not going to get into the specifics in terms of what the actual pricing is. We will frame it, similar to how I just did earlier in terms of what we believe the overall pricing benefit is across our portfolio, inclusive of these renegotiated contracts.
Because again, we are focused on getting pricing in every market that we can and on every product that we can. So this is not something we are just limiting to the U.S. I know in the U.S., we were somewhat constrained previously because we were locked into these longer-term contracts. I would say one of the key elements with these new contracts that we are, that we're in the process of finalizing is that we have like, put in new terms and conditions to prevent, being stuck like that in the, in the future. Okay. I want to talk a little bit about, or a lot of it, depending on how much you want to spend on this, Kidney Care and Vantive. And, wow, so much to cover. How is the organization preparing for the spin-out? And at what stage will we get additional information?
Why don't I take the first, and I'll turn.
Yep. Yep.
Over to Clare for the second. I think.
Okay.
You know, one of the things I actually have been really impressed with is the rigor around the preparation for the spin. As you know, this is a business that's been part of Baxter for 60-plus years. Obviously, there's a. I'll call it an entanglement, if you will, of the.
Yep.
Manufacturing capabilities in particular in this space. So, you know, I would say, look, the teams have been working tremendously hard in focus of the separation here in 2024.
They have been focused extensively around this point of how do we what is the post-spin world of how the manufacturing business is looking, again, both from who's going to control sort of what piece of it and the MSAs associated with that to ensure we have a clean separation with those companies. So I would just say that that's been a tremendous amount of work. We've, you know, there's been a lot—a number of legal entity conversions that have happened and waves that have already been successfully moved. So I'd say we're on a good path towards that. The work's been rigorous. I'll turn over to Clare for the second part of the question.
Yeah. Yeah, I think to echo everything that Joel's saying, I mean, as we've continued to make progress against the separation, I think our basically our confidence that the separation really will result in incremental value for all of our stakeholders has really just been further enhanced and further reinforced. So, I want to start with there. So, you know, obviously, we announced this in January of last year, and we've put a lot of effort. I think all of that work has just further reinforced that thesis that we had starting last year. So in saying that, the teams have made meaningful progress towards the separation. So I think that we're, you know, we're on track for the separation in 2024.
You know, well, the plan would be that we do provide incremental information, you know, whether it be from a filing or capital markets day, you know, prior to the separation occurring. So we'll do that.
If I could go on one thing Clare just said, I mean, I think the, the strategic rationale of separation is something that, again, I think is, has become very clear in terms of how, you know, we and, and to me, it's really about a it's really a capital allocation story as much as anything. I think within, you know, within Baxter, I think the, you know, the returns on a highly capital-intensive business, you know, that business may not get as much attention or investment as it could or should. But on its own, I think it's again, it's able to focus those investments and its own capital allocation priorities. Therefore, Baxter as well, post-separation really has the ability to actually think about our capital allocation and how we drive our ultimate remaining portfolio.
You talked about spinning it out in 2024. I had originally had in my mind mid-2024. Is that still the right time frame?
So, I think we are committed, and I'll let Joel in. Like, we believe that we can occur this separation will occur in 2024. So we are marching towards that. And I think to reinforce our earlier comments, the teams are making meaningful progress towards that.
Okay. I almost don't want to ask this question, but I'm going to GLP-1s and renal care. Well, there's so much I could say on this, but I'd like to hear what you have to say on it. Upcoming data, any thought process along that?
You let me say, yeah. So, with respect to the GLP-1s, obviously, you know, we've made some public comments on it. I think that, I, I do hopefully, the noise has died down a little bit with respect to it. The FLOW data will be released. You know, the Novo Nordisk has commented on the first half of this year. You know, one of the things I would, you know, say is we don't there were multiple endpoints with the trial, so we don't know exactly kind of what, what was met as part of it. We do know that there are, certain classes of drugs out there already that have been, you know, shown to slow the progression of CKD. Obviously, not stop the progression, but slow the progression. And they have been available for over a decade.
We haven't really seen any significant impact on overall, I would say, patient volume growth for that ESKD population during that time, despite that. So again, this is something that is part of it. One of the endpoints was just to slow the progression of it. Obviously, there was a mortality endpoint as well. So, you know, as we look at it, there could be, you know, a balancing of things because more patients, unfortunately, pass away prior during their CKD stages, prior to even reaching ESKD. So if you're able to prevent some of that, you might have actually more patients eventually going into ESKD, than you would have because of, obviously, reduced mortality. In addition, if you're slowing the progression, you will still end up with patients going into ESKD.
So I think that from our perspective, we've seen no near-term impact on our business as a result of GLP-1s. This would be something that would obviously play out over decades. But there is potential that, you know, if we are starting to treat patients, patients are healthier, there are more patients, patients are living longer, that you might actually eventually see an influx of patients within to that disease state.
Certainly, as a company, obviously, we're in favor of all things as a federal health.
Yes. Exactly. Mm-hmm.
So.
Which makes sense. When you're thinking about things such as capital backorders, things like that, help us quantify what the impact has been so far on Baxter. And I'm going to also add supply.
So what I would say is, you know, during 2022, we were particularly supply-constrained on a number of products. And I'd say it was really focused on those electromechanical, componentry in semiconductors. We've been able to really address that. And I think, as we look at our frontline care business within our HST business, we were able to address really the elevated backlog levels that we saw. Another business that was impacted by that was our infusion pumps as well. So and again, we talked about with Spectrum last year being able to have incremental volumes for Spectrum as well, as a result of just increased supply availability. So I think that for both of those, we've been able to really start addressing that demand. Now, demand for infusion pumps remains high. Joel referenced this on our earnings call. We expect really continued demand for Spectrum into 2024.
We've been able to, you know, secure incremental componentry to address that demand. So I think that we feel pretty good about that. Within our CCS business, so our care and connectivity solutions, also within the HST business, what I would say is that business always runs with a backlog. So that's our beds, our care communication products, our surgical solutions business. That business is always going to run with a bit of a backlog. You know, it obviously had reached some height, and I'd say it's more, you know, normalized. And, you know, we've talked about the fact that our orders sequentially improved every quarter last year. We expect that and growing in the fourth quarter. And we expect that momentum to continue into 2024 with sequential improvement in orders, for that business in particular, the CCS business.
You walked right into Novum. So thanks.
Oh, that's fine. Yeah.
Perfect.
Yes.
I appreciate that. What is taking so long? Or is it not taking long? Is it on track given the process?
I mean, I think it's fair to say that this has been an extended process, with respect to Novum. You know, as we've commented on publicly, there was one outstanding issue, with this you know, with Novum. We did submit that to FDA, before the end of the year, you know, right at the end of the year. So right now, you know, we are awaiting FDA's decision. We've kind of said we're not we can't comment on their approval. I think to Joel's earlier point, we have nothing embedded in our guidance for that.
Yep.
But we did address the one outstanding issue. You know, I think these are very this is a brand new pump platform. There hasn't been a brand new pump platform really introduced for many years. So this is, you know, something that we built from scratch. So you know, I also believe that this is a space that you know, we have seen a number of recalls. So FDA's taking their time with it. I think, you know, one of the things we did we were, we did launch Novum in Canada. And so as things, you know, emerged as part of that launch, what we did was we brought those to the attention of FDA, and we were able to address all of those issues that came up. And that was part of the submission to FDA.
Now, from our standpoint, we've addressed everything, and we're cautiously optimistic that we'll, you know, hear something in 2024.
And the good news is we're continuing to sell, in the meantime, our Spectrum pump that is, it's certainly obviously we look forward to Novum. But Spectrum's been a really successful pump for us. I mean, we've had substantial growth last year.
Yep.
In that. We're anticipating some really strong growth this year in that pump as well, and including, I'd say, modest share gains in that space as it relates to the Spectrum pump itself.
If guidance does not include Novum and let's pretend Novum is FDA-approved tomorrow, I wake up.
Yes.
I run to write my note.
I like that idea.
I like that idea. I run to write my note. The first question someone's going to say to me is, "What's the upside?
So, again, I think that, to be clear, there will be some time involved. So it's not an immediate sale.
Yep.
There, you know, there will be some time involved post-approval that we'll have to actually touch some of these pumps and bring them in. But, and pumps in general do tend to be a longer sales cycle because you obviously have to meet with your engineers, your clinician, your nursing staff, all of that. But, you know, if it is tomorrow, can we have sales in 2024? Yes. That, that is within the time frame that we would be able to have sales. Now, I think, it's a little bit of a flip, Joanne, because, you know, we're we have Spectrum built in. We have some, you know, I would say, pretty, you know, meaningful growth for Spectrum this year. So it's, it's not totally incremental to that because you may then find customers want to, you know, you had planned on Spectrum.
That's what I'm trying to get to.
We're going to go to Novum. I think what it is, though, is we believe the opportunity set and for us to be much more competitive with the Novum platform is out there. So really to kind of go to some, you know, maybe non-Baxter customers today, go to them and really explore the possibility of moving over to Novum. So I think it's about, can we really gain some incremental market share for Novum? And we believe that that possibility really exists.
Yeah. I would just say generally, the way to think about that, it's somewhat of an incremental bump, though, not necessarily just a step-change.
Yeah. Yep.
Growth, just to reinforce a little bit to what Clare just said.
It's really the opportunity set that it opens up. I think we've done a really great job with Spectrum, protecting our base, protecting our, you know, gaining some, to Joel's point, some flight share. But I think the opportunity set opens up with Novum much more.
So I was speaking with somebody else this morning. Yes, sir. And I was trying to think about this concept of a pent-up demand for in the hospital, when warranties are rolled off. I know you're still selling Spectrum. But how do you think about getting in with a new pump someone else, unnamed getting in with a new pump? And are you upgrading your fleet, or are you, you know, walk me through this sales cycle because I think this could be meaningful for you. And I want to make sure I don't overextend my thought process on it or I don't underestimate.
So, do I believe there's pent-up demand? I do believe there's some pent-up demand. I think you'll see, for probably the next couple of years, a larger turnover in the installed base than you would normally see. Part of it just driven by some of the issues that we have discussed and that have been present within this marketplace. So I think for the next couple of years, you'll see higher growth in infusion pumps. It is more of a, to be clear, though, it is more of a replacement cycle. The market, per se, is not growing. I mean, maybe you have some slight growth in your installed base. But it's more just about the replacement cycle. And what I would tell you is that the average age of pumps out in the field today is probably longer than what you have seen historically.
Anything else you want to talk about pumps?
No. I think that's yeah.
Program posed two years ago?
Yeah, at the end of 2021.
Yeah.
Mm-hmm.
Okay. Where are you on the integration of it? What has surprised you the most? And what, what did you like that worked out?
Yeah. So number one, I mean, we've made a substantial amount of progress on the integration of the Hillrom. I think it's fair to say there's still some work to be done as it relates to what I'd call a full integration of the business. Obviously, there's just I would, I'd call it in the spirit of competing priorities related to the separation of kidney, etc., etc. But, but certainly, I want to start with the fact that there's been substantial progress in that integration. You know, I think where the continued opportunities exist are on some end, from a technology and sort of a backend standpoint, but then also sort of how do we think about the go forward on really fully taking advantage and optimizing the connected care piece of that business?
Obviously, there's a set of capabilities that business brought into that space. And I think, you know, there's probably more to come at it in capital markets day on this. But I think there's an element of that what I would call a commercial aspect of that integration that I believe is still an upside opportunity for us in the longer term.
Products internally, where are you most pleased with that you're seeing most demand for on a product basis?
On a product basis? I mean, I think that the frontline care business obviously did well last year with the kind of addressing that backlog that they had. The CCS business, you know, I think that it did. There were some impacts. One, we have lower rental revenues that we experienced last year. That depressed growth there. But we launched our Progressa Plus , so our new ICU bed. We've seen some nice momentum there. Obviously, this is in the context where we did see some slower capital overall, you know, reduced hospital capital spending last year. So I think, again, we've started to see that stabilize to improving. We expect that to continue to improve. But I think, you know, continue to build off the Progressa Plus launch.
We've also, and Joel referenced this, kind of our the BARD business within frontline care has been a real nice little gem for us that's growing tremendously. We have some new innovation coming out within that space. I think we'll continue to build around that as well.
I might be stealing some of this from your Capital Markets Day. But in the pipeline, what is it you want us to be talking about? Because at some stage, we're going to be done with Vantive. We're going to be done with asking some of these other questions. How do we think about building a pipeline or understanding the pipeline?
Yeah. So I guess what I would say to that is I think in the longer term, our business is going to be growth in this company is going to be a combination of both organic growth and inorganic growth. And I think the.
Yeah.
I think, you know, this is a company that'll be constantly viewing our pipeline. And again, I want to be clear on that. I think that the inorganic growth is more in the tuck-in, fold-in type stuff as opposed to what I'd call, you know, large strategic transactions. I think, you know, we certainly have a good pipeline, good portfolio of products. We will continue to refine that, but all that's going to be post the opportunity for us to pay. You know, our capital allocation priority right now is paying down our debt. So I want to be really clear on that, is that when we think about what's the timing of some of that and again, we'll talk about more at a capital markets day.
But, our first priority right now is ensuring that we pay down, get ourselves to a leverage target that we've talked about that will then allow us to actually be more active in terms of our capital allocation towards growth. So.
Right. I mean, I'm jumping over you've, like, a lot to go.
Understood.
To do this conversation.
I just want to make sure there's no question on timing.
Time, yeah.
Of how I'm answering that question.
I can't quote "New Baxter." I want to think about, what is the revenue growth? What are the products inside of it? What makes it tick? Because in the very near term, the investors that we're speaking with are trying to work on some of the parts and what is.
Sure, of course.
Their worth and how do we think about the mechanics of that. But we're going to quickly get to the other side of it.
Yeah.
What does "New Baxter" look like then?
Yeah. I hate to not answer that question. But I'll be honest with you. That's really going to be the crux of our capital markets day that when we come out with on post-spin of sort of what does that next generation look like? What is almost a longer-term algorithmic view on how to think about our company?
Yep.
From a growth and margin standpoint, as well as what would be kind of the view of the composition of our portfolio in terms of those areas that we think are really going to drive, you know, again, the focus and prioritize you on this. And that's, again, I'll just need to say that for a capital markets day unless there's anything new.
No. I mean, I think everything, it will come down to a lot about reinvestment, though, from a capital allocation standpoint because this is about driving innovation and accelerating innovation as we go forward. So I think that's what we're going to be acutely focused on kind of in this, you know, post-separation world.
But if 2024 guidance expanded 3%-4%.
Yeah. Yeah.
Is 3%-4% the base case of what this business brought expanded?
Yeah. I think what you've heard Joe say in our previous,
Is on the, yeah, on the left column.
Install that actually we do see there's another potential step up in terms of growth acceleration.
Yes.
He had specifically quoted of 4%-5%.
four to five , yeah. I mean, I think one of the things if we think about just our overall HST business this year, we've guided to approximately 3%. Joe referenced on the call, we do have a number of products launching kind of towards the end of this year, but more into 2025 that should really help to accelerate that growth going forward.
You want to talk about those products?
So, I mean, again, I'd say there's a number of different ones. I think we'll get into that a bit more within the Capital Markets Day. But we have some new technologies within our Care and Connectivity Solutions business, some new monitors within our Frontline Care business. So within our Surgical Solutions business, there's some new, I would say, new technologies coming out there as well. Now, clearly, obviously, within pharma and Medical Products and Therapies, we've kind of talked; within Medical Products and Therapies, it's really focused on Novum and building out the Novum platform, continuing to have a steady cadence of product launches within the Pharmaceutical business. But then, yeah, both within Frontline Care and the CCS business, there's a number of product launches that occur in 2025.
In launching a new bed, the Progressive Plus.
The Progressive Plus.
Walk me through the sales cycle for Progressive Plus, why it's an important new bed. And I'm just using this almost as an example. And I'm going to assume it comes out at a price premium.
It, yes. It is at a price premium. And again, this is one, two, somewhat similar to a pump. It's a replacement cycle. You know, it is it is a replacement cycle. So, you know, I think that, our HST business and Hillrom in general was the market leader within the ICU beds. They, you know, both on the MedSurg, with our Centrella and then with the Progressa, on the ICU. And so it's about driving further enhancements. I think that particularly for large-scale ICU centers, this bed really kind of addresses a lot of their needs. It has a lot of capabilities, in terms of being able to care for the patients, and digital capabilities as well that kind of allow it to lock into the nurse call and the stage number.
The diagnostics.
Exactly. Then within the bed. So, and so there's a number of features that kind of went into the Progressive Plus as well that built off the existing Progressa. That was the market-leading bed that I think further drives, drives that. And again, so as you see hospitals went one, looking to upgrade their beds, you know, their ICU beds, they would look at Progressive Plus. But also, you know, we would clearly look at new opportunities as well to go into some existing markets that are non-Progressa, that are non-HST today and look for opportunities to kind of bring our bed and our portfolio offering there as well.
Okay. So this is a two-part question.
We're spending more and more time on that. We're talking about procedures moving into the ASC.
Yeah.
There was a particular orthopedic company that talked about partnering with you guys for beds and things of that nature. Walk me through both sides of that discussion, moving into the ASC and then the partnering opportunity for those that are already there.
Yeah. I'll start.
Yeah.
You know, let Clare chime in. I mean, I think certainly, you know, obviously, the ASC being a trend that does, Clare is, you know, we've talked about actually part of our investment in, in our capabilities from the sales and marketing standpoint is targeted towards how do we how do we really, move into that space and, and start to be able to take advantage of those opportunities as well. And so one of the one of the things you've heard us talk about is some of the additional investments in our capabilities from a and from an SG&A perspective. And that and that really falls into some of that category. You know, partnership-wise, you know, we, we really haven't talked or we haven't said specifically, who specific partnerships.
Yeah.
As with, we have talked about the fact that we will be entering into different partnerships in that space. But again, from our perspective, we actually haven't been specific around what that looks like.
Yeah. What percentage of your revenue is in the ASC now?
I would say, you know, there's definitely a percentage. Where we are located right now within the ASCs would be the ASCs that are affiliated with hospitals that are covered under our current GPO contracts.
Okay.
Okay? So for those clinics that are already associated with it, on the independent side, I would say it's not as much, maybe a little bit more on the Hillrom, well-challenged side, things like that. But on the core Baxter side, we're somewhat limited within that, you know, ASCs associated with an acute care setting under our existing GPO contracts.
Okay. But you could under.
The plan is to move into those other independents where we're seeing, obviously, where you are seeing that growth go is into those independent clinics, a lot of that.
Right.
Building that out. That's, to Joel's point, where we've targeted. We've basically kind of built this entire commercial team to be able to go after and look at that space.
Okay. So you've built a team to go look at that.
Yes, we have. That's what we did last year. Citi Unplugged
Then you brought the potential for contracting with others.
For partnering. Exactly. Yes. And we have a great—I mean, we do have a nice portfolio that we can bring to the ASC setting with our pumps, with our solutions, with our pharmaceuticals, with our beds, with our monitoring equipment, with our—you know, obviously, our surgical tables, our light beams, all of that. So it's a—it's a very compelling. We even have waiting room furniture, so.
We need room furniture.
Which I didn't know we did.
Which is probably better than these things.
high-top chairs .
Yeah. Absolutely. We even have waiting room furniture. Yeah. Who knew?
Who knew? That's awesome.
Yeah. Yeah.
Good. Thank you for that. Switching gears just a little bit, how do we think about financial leverage over time?
Sure. So one of the things we've talked about is we've set a 2.75x net debt EBITDA target. That was something that we've publicly stated we'd be working towards. You know, I would anticipate that would be sometime in 2025. We'd either, you know, get at or near that number. You know, I would say a couple of key points. One, you know, investment grade is important to this company. I think the financial flexibility choices it allows for. And so I would say, you know, our long-term leverage target is something we'll talk about further at our capital markets day. But you should think about it somewhere around what we've targeted now or at or near that number.
In the last few minutes, when we're together this time next year, what do you think we'll be talking about?
You know, I guess what I would say a couple of things. I mean, number one, as we have this past year, you'll see the successful execution of some of our key strategic initiatives. You know, I think as we, you know, we think about the almost a year in review in 2023, we had four consecutive quarters of, "Here's what we said we were going to do. Here's what we did." And it was, you know, we meet or exceeded that. I think the execution of the sale of BPS, the execution of verticalization, and now as we head into 2024, these what I believe the successful execution of the separation of the kidney business. And so I guess my view of this would be. I'll say three things to summarize it. One is the consistent execution we've had.
That said, we said we were going to do, and we met or exceeded that, the idea that we've successfully executed on the strategic initiative of the spin and/or the separation. And at this point, then we will have come out with. We've had a capital markets day.
Yeah.
That would have said, "Here's what the next generation of Baxter looks like post-separation." Those would be the three things I would look at.
Yeah. That was good. Nope. That's exactly where I was going. So yeah.
Excellent. Joel and Clare, thank you so much.
Thank you.
Thank you very much.
Thank you. Appreciate it.
Thank you.
Thank you, everyone.