C. R. Bard, Inc. Q1 2010 Earnings Call Transcript

C. R. Bard, Inc. Q1 2010 Earnings Call Transcript
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C. R. Bard, Inc. (BCR)

Q1 2010 Earnings Call

April 22, 2010 5:00 pm ET

Executives

Timothy Ring - Chairman and CEO

John Weiland - President and COO

Todd Schermerhorn - SVP and CFO

John DeFord - SVP - Science, Technology, and Clinical Affairs

Analysts

Rick Wise - Leerink Swann

Seth Damergy - Deutsche Bank

Kim - JPMorgan

Joanne Wuensch - BMO Capital Markets

Tom Gunderson - Piper Jaffray

Gregory Hertz - Citi

Michael Matson - Wells Fargo Securities

Ben Andrew -William Blair

Kristen Stewart - Credit Suisse

Lawrence Keusch - Morgan Keegan

Robert Goldman - CL King

Douglas Tsao - Barclays Capital

Brooks West - Craig-Hallum Capital

Presentation

Operator

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Ladies and gentlemen, welcome to the C. R. Bard, Inc. first quarter 2010 earnings results conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded and will be available for future on-demand replay through the Bard website.

Today's presentation will be hosted by Timothy M. Ring, Chairman and Chief Executive Officer, along with John A. Weiland, President and Chief Operating Officer and Todd Schermerhorn, Senior Vice President and Chief Financial Officer. Also in attendance today are John A. DeFord, Senior Vice President - Science, Technology, and Clinical Affairs and Eric J. Shick, Vice President, Investor Relations.

Today, Bard's management will discuss some forward-looking statements the accuracy of which are necessarily subject to risks and uncertainties. Please refer to the cautionary statement regarding forward-looking information and the information under the caption "Risk Factors" in Bard's 2009 10-K, including disclosure of the factors that could cause actual results to differ materially from those expressed or implied.

During the call, references will be made to certain non-GAAP measures, which management believes provide an additional and meaningful assessment of the core operating performance of the company and its individual product franchises.

Reconciliations of non-GAAP measures to the most comparable GAAP measures are provided in Bard's earnings press release and on the company's website at www.crbard.com.

All information that is not historical is given only as of April 22, 2010, and the company undertakes no responsibility to update any information. Unless otherwise noted, all comparisons are to the prior year period.

At this time, I'll turn the call over to Mr. Timothy Ring. Please go ahead.

Timothy Ring

Thanks, Paul. I'd like to welcome everybody to Bard's first quarter 2010 Earnings Call. Thanks for taking the time to join us today. We expect the presentation portion of the call to last about 40 minutes.

The agenda today will go as follows. I'll begin with an overview of the results for the first quarter of 2010; John Weiland, our President and COO, will review the first quarter product line revenue; Todd Schermerhorn, our Senior VP and CFO will review the first quarter income statement and balance sheet as well as our expectations for Q2; John DeFord, our Senior VP of Science, Technology, and Clinical Affairs, will provide an update on our product development pipeline; and then we'll close with Q&A.

First quarter 2010, net sales totaled $650.8 million. That's up 9% over Q1 last year on an as reported basis and 6% on a constant currency basis. The currency impact for the quarter was favorable by 270 basis points.

Net income for the first quarter of 2010 was $120.9 million and diluted EPS were $1.24. Excluding items that affected the comparability of results between periods, which Todd will get into later, first quarter 2010 net income and diluted earnings per share were $122.4 million and $1.25, up 3% and 7%, respectively, which was at the top of our guidance range for the quarter.

Looking at our sales by business growth in the vascular category, it was up from Q4, but below the range of our guidance for the full year. Oncology was within its guidance range, while surgery grew above full year guidance. The urology category is at the high end of the range reflecting a favorable impact of a distributor destocking that occurred in Q1 of last year.

Looking at revenue growth on a geographic basis compared to the first quarter of last year, again on constant currency basis, first quarter net sales in the U.S. increased 8%, Europe was up 2%, Japan decreased 3% and all the other international businesses grew 15%.

Looking at our business development activities in early April, we acquired a small company called FlowCardia located in Sunnyvale, California for approximately $80 million. Their products and technologies for crossing chronic total occlusions or CTOs represent an important advancement for our lower limb arterial business strategy, complementing our PTA products and our peripheral vascular stents. The acquisition will advance our relationships with interventional cardiologists, which are the primary call point in endovascular lower limb arterial cases.

Additionally, with the acquisition comes an experienced R&D and marketing team with deep knowledge of the CTO market.

Looking ahead, we have several more deals currently in negotiation and a healthy pipeline of prospects in the assessment phase.

And finally, we received notification from the FDA in January that the warning letter for our Davol facility in Rhode Island had been closed down. And then, late last week, the FDA notified us that the warning letter for our Puerto Rico facility had also been closed.

This is certainly welcome news as these events are important milestones in our ongoing efforts to develop best practices around our product quality and regulatory capabilities and making them both competitive advantages for us.

Now, let me turn you over to John Weiland for a review of the product line revenue.

John Weiland

Good afternoon everyone. Before I start let me point out that I will be giving all percentage growth data in comparison to the prior year period on a constant currency basis unless noted otherwise.

So let's start with Vascular. Growth in this category improved to 6% in the first quarter. Total net sales were $172.4 million, up 10% over last year on an as reported basis. Our United States business was up 5% for the quarter; internationally, we grew 7%.

Our Electrophysiology sales, which represented 19% of our vascular business, grew 7% for the quarter. EP Lab Systems were up 70% versus a low base in the first quarter of last year. While we would attribute this increase in part to the typical unevenness in system sales, we have experienced three solid quarters in a row.

Revenue and our disposable EP product lines was about flat versus the first quarter of last year. While our steerable diagnostic catheters were up 7%, sales in the balance of our disposables were down, so no change in the trend here.

Sales in our surgical graft category were down 8% in Q1. Excluding OEM sales which are historically lumpy, sales were down 3%, which is in the typical range for this product.

Our endovascular business increased 9% in the first quarter with a nice improvement in performance in PTA and a more modest improvement in the stents. Within endovascular, our biopsy products were up 6% fueled by growth in our VISICLIP marker here.

Sales in our peripheral PTA line increased 26%, a key driver in this step up in our growth rate was the launch of our new VascuTrak catheter, which was acquired in late Q4, as part of the purchase of Y-Med. This product line is highly differentiated with balloons that contain external wires to deliver focused longitudinal force to help crack calcified lesions at low inflation pressure. These catheters are compatible with 0.014 and 0.018 inch guidewires and are available with balloons up to 300 millimeters in length. So they give us a significant offering in the below-the-knee PTA market for the first time.

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