Monique Dolecki - VP, IR Vince Forlenza - Chairman, CEO and President Chris Reidy - CFO and EVP, Administration Tom Polen - EVP and President, Medical Alberto Mas - EVP and President, Life Sciences

David Lewis - Morgan Stanley Andrew Hanover - JP Morgan Brian Weinstein - William Blair Larry Keusch - Raymond James Vijay Kumar - Evercore ISI Doug Schenkel - Cowen Jonathan Gorberg - UBS Derik de Bruin - Bank of America Bill Quirk - Piper Jaffray Brandon Couillard - Jeffries Rich Newitter - Leerink Partners

Hello and welcome to BD's first fiscal quarter 2017 earnings call. At the request of BD, today's call is being recorded. It will be available for replay through February 09, 2017, on the Investors page of the BD.com website or by dialing 1800-585-8367 for domestic calls and area code 404-537-3406 for international calls, using confirmation number 51388884. [Operator Instructions]. Beginning today's call is Monique Dolecki, Vice President of Investor Relations. Ms. Dolecki, you may begin.

Thank you, Crystal. Good morning, everyone, and thank you for joining us to review our first fiscal quarter results. As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at BD.com. During today's call, we will make forward-looking statements and it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our first fiscal quarter press release and in the MD&A sections of our recent SEC filings. We will also discuss some non-GAAP financial measures with respect to our performance. A reconciliation to GAAP measures can be found in our press release and its related financial schedules and in the slides. A copy of the release, including the financial schedule is posted on the BD.com website. The first quarter comparable revenue growth rate and fiscal 2017 comparable revenue guidance provided today excludes the revenues of divestitures, most notably the respiratory solutions business that was divested in October of 2016 just after our 2016 fiscal year end. In the first quarter, the company recorded a reversal of certain reserves related to a court decision which among other things reversed an unfavorable anti-trust judgment in the RTI case This item along with the details of purchase accounting and other smaller adjustment in the comparable basis revenue results can be found in the reconciliations to GAAP measures in the financial schedule in our press release or the appendix of the investor relations slide. Leading the call this morning is Vince Forlenza, Chairman, Chief Executive Officer and President. Also joining us are Chris Reidy, Chief Financial Officer and Executive Vice President of Administration; Tom Polen, Executive Vice President and President of the Medical Segment; and Alberto Mas, Executive Vice President and President of the Life Sciences Segment. It is now my pleasure to turn the call over to Vince.

Thank you, Monique, and good morning, everyone and Happy Groundhog Day. Let’s get started on slide 4, most of you participating on today’s call attended our analyst day back in November and more recently the JP Morgan Healthcare Conference. At these events you heard us detail our strategy for sustainable growth with a pathway to a target of 5% plus revenue growth and 10% plus earnings growth. At analyst day, you were also able to see first-hand, many of the exciting products and solutions that we believe will help us drive more sustainable healthcare globally. As we partner with healthcare systems to address their key priorities, we are broadening our served markets through our focus on major healthcare challenges, where we believe we can have the greatest impact. To achieve our objectives, we laid out a comprehensive plan centered on three key components. First, it’s the broad array of new products that we are either launching now or we plan to launch over the next two years. Second, it’s our move to solutions. As we do that and move in to adjacencies, we are becoming more impactful across our businesses on these major healthcare issues. And third, is our geographic expansion including revenue centered synergies from CareFusion. I’m pleased to say that we’re on track with that plan that we laid and we are off to a strong start in fiscal year 2017. Moving to the first quarter highlights, performance from both the medical and life science segments contributed to revenue growth that was ahead of our initial expectations. Our results this quarter continued to demonstrate the benefit of our diverse product and geographic portfolio. We continue to drive strong underlying margin expansion with the achievement of synergies, operational efficiencies and continuous improvement. Looking forward to the total year, we are reaffirming our fiscal 2017 currency-neutral revenue guidance. Our first quarter performance along with our current outlook for the total year, gives us confidence to raise our currency neutral EPS guidance. Since we provided guidance in November, the dollar has strengthened broadly relative to the euro and other currencies and a negative impact from foreign exchange is now more pronounced. Chris will give you more details on this in just a moment. In summary, we are delighted with our strong start to fiscal year 2017 and are confident in our outlook for the full fiscal year. I’ll now turn things over to Chris for a more detailed discussion of our first quarter financial performance and our updated fiscal year 2017 guidance.

Thanks Vince and good morning everyone. As Vince said we are off to an excellent start to fiscal year 2017. Moving on to slide 6, I’ll review our first quarter revenue on EPS results, which I will speak on a currency-neutral basis. Total first quarter revenues of approximately $2.9 billion grew 6.1% on a comparable basis which was ahead of our expectations. Adjusted EPS of $2.33 also exceeded our expectations, growing at 19.4% over the prior year. EPS growth was driven by revenue outperformance, coupled with strong operating performance. We are also pleased that we have continued to de-lever as we reduce the debt associated with the acquisition of CareFusion. During the first quarter, we paid down a $500 million debt maturity and are currently at approximately 3.1 times gross leverage. We remain on track to achieve our commitment 3.0 times gross leverage by March of this year. Looking forward to the total year as Vince mentioned, we are reaffirming our fiscal 2017 currency neutral revenue guidance. Our first quarter performance along with our current outlook for the total year gives us confidence to raise our currency neutral EPS guidance to a range of $9.70 to $9.80, which represents growth of 13% to 14%. Since we’ve provided guidance in November, the dollar has strengthened broadly relative to the euro and other currencies and a negative impact from foreign exchange is now more pronounced. We expect to be able offset about half of the increased currency pressure and now expect adjusted EPS to be in the range of $9.35 to $9.45 which represents growth of 9% to 10%. Moving on to slide 7, I will review our revenue growth by segment on a comparable currency-neutral basis. Performance from both segments drew first quarter revenue growth of 6.1% which was ahead of our initial expectations. Growth was positively impacted by the timing of certain revenues that occurred in the first quarter, which we originally anticipated would occur later in the fiscal year. I’ll discuss this as I take you through the business results. Adjusting for these timing related items, revenue growth was in line with our full year guidance range of 4.5% to 5%, which exceeded our expectations for the quarter. In the quarter, pricing was about flat. Moving on to revenue growth by segment, BD Medical first quarter revenues increased 7.5%. Medication and Procedural Solutions or MPS growth was 4.3%, which reflects strength in Flush and continued growth in infection prevention. Revenue growth in Medication Management Solutions or MMS of 11% was driven by capital installation in both dispensing and infusion. Growth was positively impacted by increased installation efficiency and the timing of placements that occurred in the first fiscal quarter earlier than originally anticipated. Diabetes care grew 4.5%; this reflects strength in pen needles which was aided by the timing of customer orders in the US, which occurred in the first quarter earlier than initially anticipated. Pharmaceutical systems growth of 15.5% was driven by strong performance in Europe, which was favorably impacted by the timing of customer orders that occurred earlier than anticipated. In addition, we experienced continued strength in our self-injection platform. Adjusting for the timing related items, BD Medical revenue growth in the first quarter was at the high end of our full year guidance range. BD Life Sciences first quarter revenues increased 3.2%. Growth was driven by performance in pre-analytical systems and diagnostic systems. Biosciences revenue declined slightly as growth from favorable customer ordering patterns and advanced bioprocessing and strength and research instrument sales in the United States was offset by a difficult comparison for the prior year and other geographies. Revenues in diagnostic systems grew 6.4%; this reflects continued strength in core microbiology including Kiestra, BD Max and an increase in flu-related sales. Pre-analytical systems growth of 4.2% was driven by safety engineered products, primarily in emerging markets. Moving on to slide 8, I’ll walk you through our geographic revenues for the first quarter on a comparable currency neutral basis. US growth was very strong at 5.5%. This was comprised of BD Medical growing 6.5% and BD Life Sciences growing at 2.8%. Performance at BD Medical reflects strong growth in capital placements in our dispensing and infusion businesses in MMS and a wide range of infusion disposable products in our MPS business. Growth was also driven by our diabetes care business. BD Medical growth in the US was aided in part by the timing of capital installation in MMS and customer ordering patterns in diabetes care as previously mentioned. BD Life Sciences growth reflect strong performance in our Biosciences business, driven by favorable customer ordering patterns in our advanced bioprocessing business and sales of research instruments and reagents. Growth in our US diagnostics business was driven by core microbiology including Kiestra and an increase in flu related sales. Revenues in (inaudible) medical system declined slightly due to limited US availability in one of our product lines. Moving on to international, revenues grew 6.8%. Medical segment grew 9.1%. Growth was driven by our pharmaceutical systems business which was favorably impacted by the timing of customer orders as previously mentioned and performance from infusion disposable and infection prevention products in the MPS business. Capital installation in our dispensing in MMS also contributed to growth in the quarter. Growth in the Life Science segment was 3.5% driven by sales of safety engineered products in emerging markets, as well as strength in Latin America and Asia Pac in diagnostic systems, which included a favorable comparison the prior year in China. An increase in flu-related sales also contributed to growth in diagnostic systems. Biosciences revenues declined due to a difficult comparison to the prior year, related to instrument sales in certain geographies. On slide 9, developed market revenues grew a strong 5.8% and emerging markets grew 7.7%. The first quarter growth rate in emerging markets reflects a strong performance in China and Latin America, partially offsetting this growth are declines in the Middle East and in our Biosciences business in Africa, as we anticipated and communicated in our last quarters’ earnings call. And Middle and Africa had a negative impact of approximately 200 basis points on growth in the quarter. Excluding these regions emerging markets grew approximately 10%. China growth for the first quarter was in line with our expectations at 9.1%. Revenue growth was driven by capital equipment purchases and higher reagent sales and diagnostic systems, as well as continued strong demand for consumables in both segments. Growth was partially offset by a difficult comparison to the prior year in Biosciences as expected. For the total year, we continue to expect China to grow in the low double-digit range. We continue to anticipate emerging markets growth of high single digits. Now moving on to global safety on slide 10, currency neutral sales increased 4%. Safety revenues in the US grew 1.6%. This is below our normal growth rate and reflects a decline in pre-analytical systems as previously mentioned. International sales grew 7.6% currency-neutral, driven by strength across emerging markets, which grew 18.1%. Medical safety sales grew 3.7%, driven infusion disposables and diabetes care. This growth was partially offset by a decline in the Middle East as anticipated and a tough comparison to the prior year and Asia-Pac. Life Sciences safety sales which are driven by our pre-analytical systems unit grew 4.4% in the quarter, as strong growth across emerging markets more than offset developed market revenues that were about flat. Slide 11 recaps the first quarter income statement and highlights our currency neutral results. As discussed, revenues grew a strong 6.1% in the quarter on a comparable currency-neutral basis. As we move down the P&L, I’d like to point out that our result from the prior year include the respiratory solutions business, while the current period does not, as the business was divested in October 2016. BD’s ownership interest in the Vyaire joint venture will be recorded with another income beginning in our second fiscal quarter. Gross profit was strong growing 1.7% despite the loss of gross profit related to the Respiratory Solutions business. On a comparable basis, gross profit would have grown in excess of revenue growth as the divestiture of respiratory business resulted in an estimated 6% headwind to gross profit growth. I’ll provide more details on gross profit in just a moment. SSG&A as a percentage of revenue was 24.3%; we’re very pleased with the continued leverage we’re getting in SSG&A. R&D as a percentage of revenues was 6.2% as we continue to invest in innovation to drive future growth. Operating income grew 9.8% reflecting strong P&L leverage. Our tax rate declined to 17% in the quarter, which is in line with our full year expectation of 17% to 19%. In the quarter adjusted earnings per share were $2.33. This represents a 19.4% increase versus the prior year which is very strong growth even after the dilution impact from respiratory solutions. The impact of currency in the quarter was a headwind to EPS of about one penny. Turning to slide 12 in our gross profit and operating margins for the first quarter. As we just discussed, the impact of currency was not meaningful in the first quarter though we do expect currency headwinds for the balance of the year. On a performance basis, gross profit margin improved by a 190 basis points. This growth was driven by a continuous improvement initiatives, cost synergies and favorable mix, which includes the positive impact of divestitures. On an operating margin basis, we are extremely pleased to have delivered about 250 basis points of margin expansion, as we continue to drive cost synergies. In addition, margin expansion was positively impacted by the divestiture of the respiratory solutions business. Moving on to slide 14, our strong performance in the first quarter and our full year outlet, gives us the confidence to raise our currency neutral adjusted EPS guidance for fiscal 2017 by 1 percentage point to a range of 970 to 980. Offsetting this increase performance, our incremental currency headwinds of approximately 2 percentage points that resulted from the US dollar strengthening relative to the euro and other currencies since we’ve provided guidance in November. Our guidance assumes a euro to dollar exchange rate of $1.06. On an adjusted basis, we expect to achieve of $9.35 to $9.45, which represents growth of 9% to 10%, which as a reminder include dilution of approximately 1.5% from the respiratory divestiture. Turning to slide 15, I’d like to walk you through the balance of our guidance expectations for the full fiscal year of 2017. We continue to expect total company revenue growth of 4.5% to 5% on a comparable currency neutral basis with growth of 4.5% to 5% in BD Medical and 4% to 5% in Life Sciences. Based on our current view of the environment, we continue to expect a small amount of pricing pressure for the year. As a result of our strong first quarter performance and outlook for the year, we now expect underlying operating margin to improve by 200 basis points to 225 basis points. This excludes the unfavorable impact of foreign currency and also excludes slight pension headwinds. Beyond revenues, EPS and underlying operating margin, all other P&L guidance from November remains unchanged. Now I’d like to turn the call back over to Vince, who will provide you with an update on our key initiatives and product portfolio.

Thank you Chris. Moving on to slide 17, I’ll walk you through updates on new product innovation and strategic and business initiatives, starting with a few quick updates in our recent product launches. Some of you already know that as part of our pilot launch, we temporarily paused shipments for our insulin infusion sets. The customers who have already received the product have been told they can continue to use it. During our initial pilot, we received a moderately higher than anticipated rate of complaints associated with insertion. If you recall, we initiated a limited launch to gather customer insights prior to broad commercialization and to detect opportunities for improvements like this. These early learning’s which are not unusual are invaluable to ensure that patients ultimately realize the full benefits of BD FlowSmart technology. We are continuing to work closely with Medtronic towards full commercialization. In Life Sciences, we have received very positive feedback from customers on our Barricor blood collection tubes since launching in September this past year. We’re also pleased that we continue to see strong growth in BD Max across our portfolio of assays including CT, GCTV and our extended Enteric Bacterial Panel in Europe, both of which launched in the fourth quarter of fiscal year 2016. Our menu expansion continued in the first quarter with a MAX vaginal assay launch in the US. The vaginitus panel is the first FDA cleared PCR based panel in the US. We have over a dozen accounts in various stages of validating the new assay. We also anticipate the launch of extended Enteric Bacterial Panel in the US later this fiscal year. Moving on to our more recent new product launches, within our medical business, we recently launched the BD Neopak 2.25 ml pre-filled glass syringe. This syringe is specifically designed for high value and sensitive biologic drugs that require higher quality levels and performance. This new syringe enables the development of drug-syringe combination products with extended injection intervals which will provide patients with more time between injections and decrease the frequency of injections. Within our Life Science business, we recently announced the commercial availability of the new BD Precise WTA kits that provide an easier method to identify and quantify genetic information in individual cells for genomic based research. These kits provide researchers with more accurate and easy to use genomic tools to enable more efficient identification of genetic markers for disease. The combination of our reagents, sales orders and data analytics enables BD to support researchers from sample preparation to any data analysis. We’re also pleased that BD was recently named the 2016 Top Global Innovator by Clarivate Analytics, a distinction that honors the most innovative corporations and institutions in the world. Within strategic and business initiatives, we’re pleased with the successful launch of Vyaire Medical, a respiratory solutions joint venture. Vyaire will enable more strategic focus and investment to build a leading global respiratory company. We’re also pleased that we continue to make strong progress achieving revenue synergies related to CareFusion. We now have over 160 product registrations either approved or in process. Moving on to our business update on slide 18; we continue to make progress with our cross synergy capture. Our G&A functional transformation continued in the first quarter. We are pleased to have implemented a new global HR and payroll systems in January. We also remained focused on ongoing supply chain optimization in our distribution centers. Our manufacturing related synergies remain on track and we continue to expect a majority of these to be achieved in the later part of our deal of Horizon. We continue to expect 325 million to 350 million in total cost synergies related to the CareFusion acquisition, as we exit fiscal year 2018. Starting with operating margin expansion, we have driven significant operating margin expansion on a multi-year trajectory. Starting with fiscal year 2015, we delivered 100 basis points of operating margin expansion followed by another 200 basis points in fiscal year 2016. In fiscal year 2017, we expect to deliver another 200 basis points to 225 basis points of margin improvement. The consistent performance of our business, combined with operating efficiencies, cost leverage and cost synergy capture is driving continued, underlying operating margin expansion, which will result in over 500 basis points of cumulative margin expansion over the three year period. Moving on to slide 19, I would like to reiterate the key messages from our presentation today. First, we remain on track with a comprehensive plan we laid out at our recent analyst day and we are very pleased with our strong start to fiscal year 2017. Second, both segments performed ahead of our initial expectations and our results highlight the benefit of our diverse portfolio, both from a product and a geographic standpoint. Third, operating efficiencies, cost leverage and cost synergy capture are generating significant operating margin improvement, as evidenced by our increased guidance for the total year. Finally, we are confident in our outlook for the full fiscal year and our ability to drive currency neutral revenue and earnings growth. We remain very optimistic about BD’s prospect for the future and our ability to continue to drive shareholder returns. Thank you, we will now open the call to questions.

[Operator Instructions] Your first question is coming from the line of David Lewis with Morgan Stanley.

Vince and Chris, I wonder if we could just start with the outlook for the year. I think there’s two elements people are focused on, your strong first quarter revenues, but maintaining currency neutral revenue guidance and lowering earnings by $0.10 despite much stronger quarter, better underlying margin strength. So can you walk us through these two dynamics and your confidence in the remainder of the year? Thank you

So I’ll start-off David. From a revenue standpoint, we are delighted with the start that we had and we feel very good about the outlook for the year. We just thought it was a little early to take up the revenue guidance. Now looking at the underlying markets, they do seem to have stabilized, so we’re feeling good about that. We just think that from a much broader perspective we are in to an uncertain environment. So, it was the first quarter, we feel good about it, we have confidence in the year, and we’ll come back in the second quarter and take another look. Now in terms of the impact of currency and what now, I’ll turn that over to Chris.

So looking at our EPS guidance, we feel really good about the performance in the first quarter as well, and we think a portion of that is going to flow through to the year. As you see we raised the FX and guidance which is what we control and we feel really good about where that stands. We don’t control the currency. Now we did do all of this based on a 30 day average which is what we’ve always done and that was $1.06. As you saw over the last couple of days, it’s moved up to a $1.08. It’s been very volatile, we haven’t adjusted for that so clearly there’s some upside effect continues and it would be a pleasant surprise to see currency finally moving in the other direction and being at our back instead of in our face. So, our guidance does not take that in to consideration, because whatever it is its going to flow through. So we feel good about the fact that we raised the FX and guidance and then currency is going to be what currency is and we’ll walk through that as we go forward, as we it settle out. But wasn’t too long ago that people thought the dollar was going to go to parity, now it seems to be heading the other direction. Who knows, we hope for the best.

Your next question comes from the line of Michael Weinstein with JP Morgan.

Hey this is Andrew Hanover in for Mike, thanks for taking the question. I just wanted to follow-up on that specific question just to understand the cadence based on what guidance is today. And obviously you had the one-time items in this quarter that were pulled further, came in earlier than expected. But anything that would change what you were expecting for the rest of the year, and how should we think about the cadence for the second to fourth quarter? And the as a follow-up I just wanted to get an idea on the status of the Barricor launch and how that is going?

On the first piece of that I would say, clearly ahead of expectations in the first quarter. If you remember we said that going to have a little bit more of a difficulty comparing the first quarter primarily because they grow over in the Middle Eastern and Africa. Middle East was about what we expect; Africa was just actually a little bit better because of the timing of some contracts. But clearly we blew that 4% kind of guidance in the first quarter out of the water. I’d say about two-thirds of the revenue over achievement was timing related. You can look at pharm systems growing 15.5%, that’s a lumpy business, it’s not a 15% grower, but it’s a good grower, but it’s mostly timing or a chunk of that is timing. So we about two-thirds, one-third breakout at this point. So clearly revenue is moving up in the range, and as Vince said it’s a little bit up early in the year we still have things like flu ahead of us, it’s still not clear where that’s going to go, although it’s somewhat encouraging but that could turn on a dime. So we’ll see where that goes, pricing is still a bit ahead of us. So it’s early in the year, but clearly feel a lot better about our revenue guidance and a lot more confident in that guidance range. So we’ll see how it goes, but we’re off to a great start.

And for Barricor?

Yes, as Vince mentioned we do feel very positive about the feedback that we’re getting from our customers. We’ve seen some early wins around 30 accounts have now converted to Barricor. We have a healthy pipeline of just over 150 accounts; they are validating and evaluating the product. It is a product that takes quite a long time to validate between three and five months. So although all the signs are positive, this is going to be a slow conversion process that we’re going to see.

Your next question comes from the line of Brian Weinstein with William Blair.

Just coming back in to FX a little bit, last year you guys were very successful at offsetting all of the FX headwind that you had. It sounds like you’re thinking you can offset about 50% of them this year. Can you be a little more specific on where you’re able to offset those FX headwinds this year and did you sort of fully exhaust some of those options last year. And I guess as part of that, can you just talk about where we are specifically in the 325 million to 350 million in cost synergies that you guys are targeting from CareFusion, thank you?

If I take you back 12 months ago, we were getting the same kind of questions in terms of had we exhausted what we could do at the end of the first quarter, you can’t do anymore and then of course we actually exceeded and overcame the FX. So this is early in the year. We were expecting some volatility in FX, we were very careful in our expense in terms of how we role that out in the first quarter and I think we did an excellent of managing. But we’re feeling very good about the P&L as we look across the rest of the year. Chris anything else you’d add to it?

Yeah I just did on that before I get to the second part of your question. That it’s our job to offset as much of that FX headwind as we can, and I think we’ve done a great job with that last year. We continue that with our first quarter guidance raising the FX and neutral. So that’s our job to do that, and its - basically the cost synergies, the continuous improvement, all of those things go in to our ability to do that. We feel really good about where we are in cost synergy. We have the 325 to 350, we feel very good and confident with that. As you know some of the cost synergies come towards the backend and as we get increasing visibility towards that we’ll address where the total cost is going come out. But the traction that we have is terrific and it’s still a little bit early to give any more specificity to where we’ll ultimately end up, but we feel really good about the synergy progress that we’ve made and continue to expect that to be strong.

Your next question comes from the line of Larry Keusch from Raymond James.

Chris perhaps for you, the 3.1 times gross leverage obviously impressive in tracking right to the three times that you were targeting by the end of March. I guess the question is, and I sort of will wrap in the billion dollars of stranded cash that you have overseas. To the extent that you to get that money back and you leverage comes down to that three times target, how do we think about the cadence of broadly capital deployment and specifically share repurchase and dividend. And then the second question is and it’s sort of been touched on, but given the outperformance in the first quarter on sales on a constant currency basis, how we specifically think about the cadence of the remaining quarters, given some of that timing pull forward. Does that imply that the 2Q would not be below the 4.5% to 5% outlook for the year?

On that last point, I think in terms of the cadence I think somebody else asked that too. As we look out, it’s going to be pretty ratable. I don’t think there’s going to be any spikes in the second, third, or fourth quarter, and so it will be within the range that we had provided for the year. And obviously because of the timing, it’s probably towards the low-end of that range to keep us within the 4.5 as you do the math. The other part of the question capital deployment, sure, my favorite. So the way to think about that, one of the things you said Larry was the billion dollars of stranded cash. Remember that a company our size needs certain amount of working capital, so I don’t see all of that as a billion dollar, some of that is just normal working capital needs. As we pay down to the 3.0, we’re going to get down to vey historically low levels of cash. It will take a little while to kind of go back up to normal working capital levels. And then a little while longer to actually start accumulating the cash that you need for further deployment. So as I look out, the impact this year of any share buybacks would be de-minimus because of what I just subscribed in building back up the cash balances. But clearly we’re not going to let cash build upon the balance sheet and we will deploy that as that cash starts building up again. But the way you should think about it for this year is that the impact of any share buybacks which would occur later in the year would be de-minimus to the year.

Your next question comes from the line of Vijay Kumar with Evercore ISI.

So maybe just one housekeeping question on the guidance here. It looks like FX was an incremental $0.17- $0.18 headwind, but the reported EPS was only lowered by $0.10. So could you maybe just walk me through on where you’re getting the offset from, I think that would be helpful.

Yeah, we’re actually seeing a little bit strength in the revenue side, and our margins as you can see were very strong in the first quarter as well. So the combination of those two things, the beat in the first quarter some of that’s going to flow through. So we see about a third of the revenue, about a third of the bottom line flowing through and that’s where we’re seeing it.

And maybe one more for Chris. What is the net impact of corporate tax reform and border tax? Is that a net neutral, net positive?

Well on the border tax we certainly - we are a net exporter. So that’s positive, certainly as the lowering of the US rate would be positive. It all depends on all of the other factors that go in it, and that’s very volatile in terms of what other factors there might be such as the interest expense and the price of repatriation of unremitted foreign earnings. So it’s too quick and too soon to know because it’s anybody’s guess as to what will actually end up in the ultimate rules, and we still got a way to go. But there’s some positive, there’s some negative, we’ll see where they come out. But the one thing that I would want you to take away is that we are a net exporter. We do have over 30 plants in the US, so we feel good about that aspect of it.

Your next question comes from the line of Doug Schenkel with Cowen.

My first question is on China and I just want to have a quick circle back to Brian’s question from a couple of minutes ago. So first on China, you grew over 9% in the quarter against a difficult compare. You didn’t call out CareFusion contribution specifically. So with that in mind, I was just hoping you could comment on how much products that have completed the registration process contributed to growth and what’s the right way to think about ramping over the coming quarters. And then just to go back to Brian’s question, one area of clear focus today seems to be the concern that you may be reaching a limit on your ability to keep offsetting FX with operating discipline without cutting into bone over the next several quarters. I’d say it’s a bit more pronounced that I would have expected largely because you didn’t reiterate reported EPS and I think a lot of folks thought that you maybe could have. Could you just comment more directly on how you feel about how much dry powder is left and kind of back that up with some data that tells us that there is or there isn’t a lot of operating discipline left to be had in offsetting some of the FX headwind thank you?

Okay, lets start with China first. And we did have a strong performance in China and a lot of it was on the medical side. So Tom why don’t you talk about a little bit about that and the CareFusion impact?

Sure. Hey Doug, this is Tom. As Vince mentioned earlier we have made really good progress on the registration as we were after revenue synergies up to 160 plus either approved or under active review. As we had always shared, of course China has one of the longest registration time, and so as we think about our synergies, we do have synergies coming in China but that’s certainly not the main source of them at this point. We’ll see those coming in over the next couple of years. As you think about revenue synergies overall, it was a good contributor to the segment in the quarter. Think about it in tens of basis points impact on BD Medical revenue growth in the quarter on a global basis.

Okay. So we’ll come back to this question about where do we get potential offset as we look forward through the P&L? And you’ve mentioned operating discipline and of course we will continue that. But Chris we have other levers that we can fall to?

We do, certainly as we talked about the synergies. In our ability to drive more synergies, we’ve gotten a lot of traction on that, there’s still a lot to come and so there’s potential to continue to drive more synergies and that would be a potential. We feel good about the fact that we are able to offset a good chunk of the FX headwinds in our guidance. As we go down to 106, its now 108, there’s certainly some upside there as well. It’s somewhat out of our control where FX goes, but our job as I said before is to offset as much of that as we possibly can and I think we have some options and opportunities particularly around synergy acceleration and those kinds of things that we would be pushing up.

And the only other thing I would add Chris is that, if we continue with a strong revenue, we saw a very good margin on that incremental revenue. So we have that as a looking forward as well. So those are the elements.

Your next question comes from the line of Jonathan Gorberg with UBS.

Can you give us, Vince I know one of the things from a new product standpoint investors had been anticipating was that insulin infusion set, and just maybe a little bit more color on what should investors be expecting given early feedback that you’ve gotten either from a timing or what you’re going to do from a product standpoint?

Yeah Tom can talk to that.

Hi Jonathan, this is Tom. So as Vince mentioned in October we began the initial pilot launch with Medtronic in the US to collect customer insights and inform about the rollout. As we said, we did put out a safety notification a few weeks ago and it stated that although the majority of customers are using the product successfully and we’re getting great feedback on that, there was a small percent that had reported some issues. And so we had an agreement with Medtronic temporarily pause the shipment so we could review that customer feedback. We also indicated that any customers who have the product, it’s okay to continue to use it. Again we’re getting overall very good feedback, and we recognize that it’s a new and different technology and we need to make sure that we’re rolling out the right training so that we’re getting our customers the right instructions for use a 100% are having that right experience. So we’ve been analyzing that feedback, we’re finding some of the training practices etcetera. Obviously we’re disappointed with the shipment pause, but as Vince also mentioned, we view this as part of a learning critical to maximize the potential of this over both the near and long term. It doesn’t change at all our outlook for the product. We continue to be very positive on the opportunity and extremely positive on the benefit of the flow-smart technology. We also don’t see any impact of this on the guidance for the medical segment of the company.

So we’re still working towards full commercial launch changing some of the training materials. Thanks Tom. Thanks John.

Your next question comes from the line of Derik de Bruin with Bank of America.

A couple of question, first, when you look at the respiratory JV on that other income line, how should we think about that for the rest of the year. And going forward on that is a low single digit sort of growth estimate for that a reasonable assumption on that business or in that contribution?

It’s not going to be very material and we’re not counting on it being very material for the rest of the year. And its’ on a lag just because of the reporting piece which is not unusual. So I wouldn’t expect too much there. I don’t think it’s going to really be a driver.

And then just one follow-up, you call that flu several times and historically flu has been anywhere if I think what 12 million to 15 million in a good flu season for you. Could you call up the contribution in Q1 and then sort of expectations for Q2?

Yeah, I don’t know that we can give you an expectation for Q2, but Alberto can comment on what we’ve seen so far and what happened in this quarter. Alberto?

Yes, flu seasons specifically in Asia. So Japan and Korea were earlier than last year as well as in the US, the last year’s flu season was late. So we saw strong demand in Asia in Q1, and very, very late in December. There was a little bit of a spike in the order from distributors in anticipation of what we’ve seen an increase in flu for the last three weeks or so. We don’t know exactly obviously how that’s going to, going forward how that’s going to evolve. But there was a very late buy-in of inventory by distributors in the US moderate still. It contributed about just over 1.5% growth rate to the DS growth rate for the quarter.

Your next question comes from the line of Bill Quirk with Piper Jaffray.

Couple of question I guess for Vince or Tom, just curious as there was a broadening of an EU sharps directive that might get expanded in scope to some non-healthcare workers like police and lab workers and such. Just kind of thinking about the potential size of this opportunity, I’m guessing this is more of an ’18-’19 sort of event, but would love any colors there. And then just a quick one for Chris share count, you got it to 219 for the year. We’re comfortably under that at this point, so just kind of help us think about some of the puts and takes there?

Tom do you want to comment?

Yeah, this is Tom. Certainly we see Europe is about 50% of the way through their safety legislation. I think the add-on that you’re talking about is not something that we see as fundamentally being a significant scale to move the needle beyond kind of the current trajectory. So we will continue to be very positive overall on safety growth in Europe and as well as in emerging markets.

And on the share count, so that assumes - and we’ve seen since we’re not buying back any shares we got a little bit of a lift from conversion of options, and we’ve seen that over the last several quarters. So it’s just a continuation of that and no assumption of share buybacks for the remainder of the year.

The next question comes from the Brandon Couillard from Jeffries.

Just curious if you could elaborate on the US safety weakness in the first quarter and whether or not that we should think that’s about the normalizing in 2Q, and then secondly, curious if the International Biosciences experience was actually in line with plan?

So first safety, and in the US there was a little bit of an impact on the Life Science side because we had some capacity constraints on one particular product in PAS and we’re working to add that capacity. So that’s what you saw there. We’re adding some capacity and we’re going to be tight for the balance of the year. But Tom?

We saw a pretty solid performance from a medical perspective in the US in the quarter, no change in that. I think as we think about safety overall in the quarter, we recognize that at the BDX level it was maybe a bit more of an impact from international safety, so also some headwinds in the Middle East and Asia, but we see those basically moderating as we go forward for the year as those annualize and overall see a positive outlook for safety to the balance in FY’17.

And Alberto international safety I think you did pretty well too.

Yes, and we did particularly well and above average because some of the supply in some of the constrained product and push-button recollection went outside the US. So we saw particularly high safety numbers.

So little less growth in the US, but more international. Okay, great.

And emerging markets over 18% growth asset.

Your last question comes from the line Rich Newitter from Leerink Partners.

This is Robby in for Rich. Just one on price, you mentioned the pricing environment a couple of times. How should we think about and how you are thinking about that. It sounds like you’re taking a little bit more of an incremental cautious approach there? And just a follow-up, could you just highlight what US growth would have been X the order pull through thank you?

So on the pricing piece, I think it’s very consistent with the way we always approach pricing. There’s no question that there is pricing pressure in different parts of the business. We tend to be able to offset a lot of that, and so we started this year opening guidance with tens of basis points of pressure. The first quarter was about flat as I mentioned and so we’re still having our guidance, the tens of basis points coming from the remainder of the year, that’s got some room for upside. If we’re able to outperform, but right now it contains that tens of basis points of pricing pressure.

Well thank you very much. May be to then go on and just wrap up the call. We are very pleased with the strong start to the year. We’re implementing our strategy that we laid out for you at analyst day. That whole plan is on track, we’re excited about the new product launches. You saw the increased performance on the margin as well. So when we step back and look at this in totality we’re viewing very good across the continuum of the entire P&L. So thank you very much for your questions and look forward to updating you next quarter. Thanks everyone.

Thank you. This does conclude today’s teleconference. Please disconnect your lines at this time and have a wonderful day.