Q3 2023 Baxter International Inc Earnings Call
Participants
Brian Stevens
Clare Trachtman; VP of IR; Baxter International Inc.
Joel T. Grade; Executive VP & CFO; Baxter International Inc.
Jose E. Almeida; Chairman of the Board, President & CEO; Baxter International Inc.
Danielle Joy Antalffy; Analyst; UBS Investment Bank, Research Division
Frederick Allen Wise; MD & Senior Equity Research Analyst; Stifel, Nicolaus & Company, Incorporated, Research Division
Joanne Karen Wuensch; MD; Citigroup Inc., Research Division
Matthew Stephan Miksic; Research Analyst; Barclays Bank PLC, Research Division
Philip Chickering; Research Analyst; Deutsche Bank AG, Research Division
Robert Justin Marcus; Analyst; JPMorgan Chase & Co, Research Division
Travis Lee Steed; MD; BofA Securities, Research Division
Vijay Muniyappa Kumar; Senior MD and Head of Medical Supplies & Devices and Life Science Tools & Diagnostics Team; Evercore ISI Institutional Equities, Research Division
Presentation
Operator
Good morning, ladies and gentlemen, and welcome to Baxter International's Third Quarter 2023 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time.
I would now like to turn the call over to Ms. Clare Trachtman, Senior Vice President, Chief Investor Relations Officer at Baxter International. Ms. Trachtman, you may begin.
Clare Trachtman
Good morning, and welcome to our third quarter 2023 earnings conference call. Joining me today are Joe Almeida, Baxter's Chairman and Chief Executive Officer; Joel Grade, Baxter's newly appointed Executive Vice President and Chief Financial Officer; and Brian Stevens, Baxter's Senior Vice President, Chief Accounting Officer, Controller and former Interim CFO.
On the call this morning, we will be discussing Baxter's third quarter 2023 financial results along with our financial outlook for the fourth quarter and full year 2023. Please note that we closed the sale of our BioPharma Solutions or BPS business at the end of the third quarter and results in the current and prior periods have been adjusted to reflect BPS as discontinued operations.
Restated schedules reflecting net discontinued operations presentation are included in the appendix to our earnings presentation and available in the IR section of our website.
With that, let me start our prepared remarks by reminding everyone that this presentation, including comments regarding our financial outlook for the fourth quarter and full year 2023, new product developments, including the impact and status of pending regulatory approvals, the status and potential impact of our ongoing strategic and recent pricing actions, business development, regulatory matters and the macroeconomic environment, including commentary on continuing supply chain challenges and evolving customer capital spending trends, contain forward-looking statements that involve risks and uncertainties and, of course, our actual results could differ materially from our current expectations.
Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Baxter's ongoing business performance. A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in the accompanying investor presentation and in our earnings release issued this morning, which are both available on our website.
Now I'd like to turn the call over to Joe. Joe?
Jose E. Almeida
Thank you, Clare, and good morning, everyone. We appreciate you taking the time to join us today. I am pleased to be joined this morning by Chief Accounting Officer and Controller, Brian Stevens, and to welcome our new Chief Financial Officer, Joel Grade, to the call.
I will begin the call today with an overview of our third quarter performance and the continuing momentum of our ongoing transformational initiatives. I will also share a perspective on the progress and potential of our proposed Kidney Care spin-off, including some context around recent developments in that therapeutic area.
Brian will provide a more detailed account of Baxter's third quarter and financial outlook. And as always, we will close with your questions. To get started, Baxter reported solid third quarter results that came in ahead of our projections, both on the top and bottom line, sales from continuing operations rose 3% on a reported basis and 2% on a constant currency basis.
As Clare noted earlier, sales from continuing operations exclude Baxter's BioPharma Solutions, or BPS business, which Baxter divested at the close of the quarter. Sales in the aggregate, including discontinued operations also increased 3% on a reported basis and 2% on a constant currency basis.
Our better-than-expected topline performance was driven by positive demand for many of Baxter's products combined with continued abatement of supply chain challenges. On the bottom line, third quarter aggregate adjusted earnings per share totaled $0.82, comprising EPS of $0.68 for continuing operations and $0.14 for discontinued operations. Adjusted EPS from continuing operations exceeded the top end of our outlook range of $0.65 to $0.67, driven by end market stabilization and good sequential margin improvement across our business, which reflects strong execution against our strategic priorities.
Overall, and especially when compared to what we've seen in recent quarters, we view the current market environment as relatively stable, though we continue to monitor hospital capital spending, particularly in light of an elevated interest rate environment.
While we have seen sequential improvement in orders within our Care and Connectivity Solutions division, we continue to expect hospitals to exercise some degree of caution with their capital budgets.
The momentum we are building in financial performance is also reflected in the progress we're experiencing across the strategic priorities we laid out for you earlier this year, these initiatives, in combination are focused on enhancing strategic clarity, increasing operational efficiency and accelerating innovation to deliver greater value for all of our stakeholders.
During the third quarter, we achieved some pivotal milestones towards driving this improved performance. First, we've been hard at work realigning the businesses to simplify and streamline our operating model. These efforts are resulting in a more agile company with better visibility to our global markets and customers.
In line with this realignment, today is the first time we formally report our results under the new operating model as 4 global vertically integrated business segments; Medical Products & Therapies, Healthcare Systems & Technologies, Pharmaceuticals and Kidney Care. Each segment now has global profit and loss accountability, dedicated commercial operations and fully aligned research and development, manufacturing, supply chain and functional support teams.
This reorganization is already creating meaningful advantages in helping us set priorities, build alignment and operationalize our strategy, advantages they have already and our expected to continue to pay dividends going forward. Our new segments are also a reminder of our highly diversified portfolio with strong brands, a global presence and high trust among clinicians and patients.
The diversity and durability of our portfolio focused on essential healthcare needs helps fuel sustained demand on multiple fronts, allowing us to better weather challenges that can emerge while continuing to deliver on our mission of saving and sustaining lives.
As discussed, this quarter, we also completed the divestiture of our BioPharma Solutions business, further streamlining our focus on our core businesses. We are deploying substantially all of our estimated net after-tax cash proceeds of approximately $3.7 billion to pay down debt in accordance with our stated capital allocation priorities.
The third transformational actions we laid out at the start of the year was the planned separation what is now our Kidney Care segment. We are making significant progress and currently expect to launch Kidney Care as an independent publicly traded company by July 2024.
I continue to be impressed with the leadership of Chris Toth, who joined us in June as President of our Kidney Care segment and designated CEO of Vantive. In just 5 months, he has already proven himself as an astute, decisive, engaging leader. He has already surrounded himself with an outstanding team of experienced direct reports drawn from across Baxter and externally, and we expect to finalize the organizational structure for the new company by the end of the year.
Meanwhile, the hard work of separating Kidney Care from Baxter is ongoing across commercial, legal, regulatory, supply chain and numerous other key operational channels.
Just like Baxter, post-separation, Kidney Care will be positioned to benefit from heightened focus and the ability to pursue its unique investment priorities to serve patients and clinicians drive growth and innovation and create added value for shareholders.
With this as context, I wanted to briefly share some perspectives on recent headlines regarding GLP-1s including Novo Nordisk's October announcement about its Flow study and broader speculation about the future of dialysis therapy.
We, like the rest of the dialysis community, continue to follow developments closely. And we are eager to see the Flow study results, which are expected to be published in the first half of 2024. Given Baxter's life-sustaining mission, we welcome any new therapeutic approaches that have the potential to improve the lives of patients, particularly those with chronic conditions.
We also believe that it's premature to assume that these drugs, particularly given the full trial results have yet to be published, will bring about any material shift in the need for dialysis services from a global market perspective. We believe that dialysis therapy will remain in demand and a critical element of patient care for the foreseeable future.
Let me highlight a couple of data points that we believe are relevant. The existing data on demographics and disease patterns continue to consistently suggest that the global incidence of end-stage kidney disease or ESKD will continue to rise over the next 15 to 20-years. To provide a bit more context, current data suggests that the global ESKD incidence, overall, will continue to grow, driven by a greater than 35% expected increase in the prevalence of diabetes by 2040.
At the same time, global demographic data show that the number of people over 65-years old should be increasing by approximately 75% globally between now and 2040, which is also expected to increase the number of potential patients at risk of developing ESKD. Collectively, these macro changes suggest the global incidence of ESKD is expected to continue to rise over the next 15 to 20-years, even with important innovations in CKD therapeutics.
We also believe these new drugs are doing important work in raising the awareness and prevalence of primary care discussions about CKD diagnosis and management. We welcome this focus because better informed and empowered patients drive better preparation for dialysis. And studies have shown that the more informed the patient is about their treatment options, the more likely they are to choose home dialysis over other forms of dialysis when given the option.
To that end, we are looking forward to seeing the new study data and understanding how it may provide additional options and benefits for patients with CKD. My excitement for the trajectory of Kidney Care remains high. Our thesis and sense of opportunity for an independent stand-alone Kidney Care business remain unchanged from the day we first announced the spin.
This has been a year of investment of transformation of important and sometimes difficult steps taken to strengthen our present and redefine our future. We knew when we first laid out this transformation in January that we had to get it right. And less than a year later, our progress is evident and our path forward is clear.
We have delivered on our BPS divestiture. We have implemented our verticalized segment structure, and we are well on our way towards achieving the planned Kidney Care separation. Our continued progress on this transformational journey is a credit to the exceptional hard work and commitment of our Baxter colleagues worldwide, who, as always, have my profound thanks.
I'm confident that these actions are strongly positioning Baxter and in turn, Kidney Care to unlock meaningful long-term value for all stakeholders.
Now before we take a closer look at our third quarter financials and outlook for the remainder of the year, I want to recognize Brian Stevens for serving so well as interim CFO for over the past 5-months. We're also pleased to welcome incoming CFO, Joel Grade, whose wide-ranging experience and track record make him an outstanding fit at this time of transformation. I will first hand the call over to Joel for a few introductory comments before Brian then provides a more detailed overview of our results for the quarter.
Joel T. Grade
Thanks, Joe. Let me start by saying how excited I am to join all of you today for my first earnings call as Baxter's new CFO, and more importantly, how motivated I am to be joining Baxter during such an important point in its transformational journey.
For many years, I've admired Baxter as an iconic company with an incredible mission to save and sustain lives. When the opportunity arose to join the team, I recognized that this is the right next step in my career. The position presented me with the ability to utilize my broad experiences in finance, operations, strategy and transformation to help the company deliver on its strategic actions that Joe outlined earlier.
While early, I've been extremely impressed with the talented and dedicated employees at Baxter and their unwavering passion for and commitment to our mission. In addition, I'm very optimistic about the numerous opportunities that exist for the company to increase long-term value for our stakeholders.
Finally, I look forward to both speaking with and meeting many of you over the next coming months. Your perspective on our business and the surrounding market landscape will be incredibly valuable as we move forward in our transformation journey. With that, I'll turn it over to Brian to take us through the Q3 results. Brian, over to you.
Brian Stevens
Thanks, Joel, and good morning, everyone. I'm happy to be joining the call this morning to provide some additional details on Baxter's third quarter financial performance as well as commentary on our updated financial outlook.
As Joe mentioned, we are pleased with our third quarter results, which came in ahead of our expectations. Third quarter 2023 global sales included $3.71 billion from continuing operations and $191 million from discontinued operations. Sales in the quarter increased 3% on a reported basis and 2% on a constant currency basis and compared favorably to our guidance.
Sales performance in the quarter benefited from better-than-expected sales in Medical Products & Therapies, particularly our infusion systems and IV Solutions products as well as continued strength in our Pharmaceuticals business, driven by injectables and drug compounding.
On the bottom line, adjusted earnings from continuing operations totaled $0.68 a share, decreasing 4% versus the prior year period and reflecting the ongoing operational improvements, primarily offset by the impact of increased interest expense.
Adjusted EPS from continuing operations for the quarter came in ahead of our expectations of $0.65 to $0.67 per share, primarily driven by sales and operational performance and partially offset by higher-than-expected tax rate. In the aggregate, inclusive of both continuing and discontinued operations, adjusted EPS was flat year-over-year and totaled $0.82 per share.
Now walk through the performance by our new reportable segments. Sales in our Medical Products & Therapies segment were $1.26 billion, increasing 4% on a constant currency basis. Within Medical Products & Therapies, sales from our Infusion Therapies and Technologies division, which includes our former Medication Delivery and Nutrition businesses totaled $1 billion and increased 4% on a constant currency basis. Sales in the quarter benefited from strong growth in our infusion systems portfolio, driven by continued demand for our infusion pump hardware, including the spectrum LVP.
Sales from Advanced Surgery totaled $255 million and grew 3% on a constant currency basis, in line with expectations and surgical procedure growth.
Moving on to Kidney Care. Sales in the quarter were $1.1 billion and were flat year-over-year on a constant currency basis. Within Kidney Care, global sales for chronic therapies were $921 million, declining 3% on a constant currency basis. Sales performance in the quarter was impacted by a difficult comparison to the prior year period which benefited from certain discrete items that totaled approximately $20 million.
In addition, and consistent with our plans to enhance performance in our HD business, sales in the quarter reflect the exit of a distribution agreement in the U.S. earlier this year.
Finally, performance in Chronic Therapies continues to be impacted by government-based procurement initiatives in China and the lower patient census in the region due to the pandemic. We estimate that collectively, these region-specific factors negatively impacted sales by more than $40 million in the quarter.
Sales in our Acute Therapies business were $188 million, representing growth of 12% on a constant currency basis, with double-digit growth across all regions and reflecting a more stabilized environment for this business following significant heightened demand during the pandemic. For our Healthcare Systems & Technology segment, sales in the quarter were $744 million and were flat to the prior year on a constant currency basis.
Within this segment, sales in our Care and Connectivity Solutions division, which includes our former Patient Support Systems and Surgical Solutions businesses were $443 million, decreasing 4% on a constant currency basis, primarily driven by a lower contribution from rental revenues and lower hospital capital spending as compared to the prior year period. Orders within our Care and Connectivity Solutions division continued to improve sequentially, increasing more than 10% as compared to the second quarter.
Front Line Care sales in the quarter were $301 million, increasing 8% on a constant currency basis and reflecting the continued benefit of easing supply constraints. During the quarter, the business was able to continue to reduce its backlog, and we expect to exit the year with a more normalized backlog level.
Sales in our Pharmaceuticals segment were $580 million, increasing 9% on a constant currency basis. Performance in the quarter reflected continued strength in our U.S. injectables portfolio driven by new product launches as well as continued strong demand for our services within our hospital compounding portfolio internationally.
Other sales, which represent sales not allocated to a segment and primarily include sales of products and services provided directly through certain of our manufacturing facilities, declined more than 50% during the quarter. This lower level of sales reflects reduced demand in 2023 for certain contract manufacturing volumes and the termination of a royalty arrangement following our acquisition of the rights to the underlying product. BPS third quarter sales reported as discontinued operations, were $191 million, increasing 11% on a constant currency basis.
Now moving to the rest of the P&L. Our adjusted gross margin from continuing operations totaled 41.7% and represented a decline of 70 basis points over the prior year, but improved 130 basis points sequentially. The year-over-year decline in gross margin reflects the impact of higher costs for raw materials overhead and labor driven by the elevated inflationary impacts we've absorbed over the last couple of years. We were able to partially offset these cost increases through pricing and ongoing margin improvement programs in our integrated supply chain network.
Adjusted SG&A totaled $820 million or 22.1% of sales, a decrease of 50 basis points versus the prior year period. Performance in the quarter benefited from our ongoing transformation initiatives to enhance operational efficiencies, partially offset by higher bonus accruals under our annual employee incentive compensation plans compared to the prior year.
Adjusted R&D spending in the quarter totaled $161 million and represented 4.3% of sales, an increase of 20 basis points versus the prior year. We have ramped up our R&D efforts particularly increasing our investments in advancing our connected care technologies.
And like SG&A, R&D expenses include the impact of higher employee incentive accruals as compared to the prior period. These factors resulted in an adjusted operating margin of 15.2%, a decrease of 50 basis points versus the prior year but a sequential improvement of 200 basis points in operating margin as compared to the second quarter. Operating margin came in ahead of our expectations, primarily driven by topline performance and enhanced execution on our initiatives focused on driving improved operational efficiency.
Net interest expense totaled $128 million in the quarter, an increase of $24 million versus the prior year, driven by the impact of higher interest rates on our variable rate debt. Adjusted other non-operating income totaled $7 million in the quarter compared to $4 million in the prior year period. Results were unfavorable to expectations driven mostly by losses in foreign exchange.
The adjusted tax rate in the quarter was 21.8% compared to 22% in the prior year period. The year-over-year decrease as well as the unfavorability versus expectations was primarily driven by changes in geographic earnings mix. And as previously mentioned, adjusted earnings from continuing operations totaled $0.68 and declined 4% versus the prior year, primarily reflecting the increase in cost of goods sold due to inflation as well as higher interest expense and foreign exchange headwinds.
With respect to our prior guidance, earnings favorability was driven by better-than-expected sales and operational efficiencies, partially offset by negative impacts from FX and a higher-than-expected tax rate in the quarter.
Total company adjusted earnings of $0.82 per diluted share, which includes discontinued operations, was flat versus the prior year period. With respect to cash flow, in the first 9-months of 2023, we've generated free cash flow of $666 million, including discontinued operations, compared to $293 million in the prior year period. And we remain on track to more than double our free cash flow in 2023 from prior year levels.
Now let me conclude my remarks by discussing our outlook for the fourth quarter and full year 2023, including some key assumptions underpinning that guidance. For full year 2023, Baxter expects total sales growth from continuing operations of 1% to 2% on a reported basis and approximately 2% on a constant currency basis.
Foreign exchange is expected to be an approximate 50 basis point headwind to reported results on a full year basis. On a continuing operations basis, we expect full year adjusted operating margin of 14.3% to 14.5%. With the closing of the BPS transaction and related debt paid down, we expect a reduction of net interest expense of approximately $45 million in the fourth quarter. For the full year, we expect net interest expense to be approximately $450 million.
We anticipate a full year adjusted tax rate of 20.5% to 21%. And lastly, we expect diluted average share count of 508 million shares. We now expect full year adjusted earnings from continuing operations of $2.57 to $2.60 per share.
Specific to the fourth quarter of 2023, we expect global sales growth of approximately 1% to 2% on a reported basis and approximately 1% on a constant currency basis. And we expect adjusted earnings, excluding special items, of $0.85 to $0.88 per diluted share.
With that, we can now open up the call for Q&A.
Question and Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Matt Miksic from Barclays.
Matthew Stephan Miksic
Congrats on a really strong quarter here. I appreciate all the color around dialysis and your position on all these concerns around GLP-1, that's super helpful.
Wondering if you could talk a little bit about the hoops and hurdles such that they are in front of you still to complete this spin of Kidney Care that if you could maybe just comment on where you're at, what the next steps are? And I would follow up.
Jose E. Almeida
Matt, our preparations for the proposed spinoff of the Kidney Care segment into its own company, Vantive, continues to progress well. We've made significant progress in Vantive's operating model. We are designing the organization, finished actually, and we are allocating personnel to the company in our operational levels, and so it continues to progress well.
But consistent with Board's exercise of its fiduciary duties, we'll continue to pressure test the related financials, including as a result of the evolving market conditions, to ensure we proceed in the interest of maximizing shareholder value.
Matthew Stephan Miksic
Of course. And any timeline for that sort of approval presentation? Does that happen in the first half of next year around the time of the Board meeting? What should we expect?
Jose E. Almeida
Matt, July 2024 is -- the end of July 2024 is where we stand today as the date. As far as we know today, the plan is July 2024.
Matthew Stephan Miksic
Fair enough. And then maybe just if I could ask a business line question. The Hillrom businesses had been kind of been under some pressure last year. Obviously, everyone is aware of that for a variety of reasons. I'm just wondering if you could speak a little bit about how the back half is shaping up relative to your expectations and if we should expect things to continue to improve into year end. Can you give us some idea of the cadence into the fourth quarter here or any sort of puts and takes or updates as to how the sort of the bounce back in that company in that part of the business has progressed?
Jose E. Almeida
Yes. Matt, we've made a lot of progress. We redesigned the organization. We put some really good people. We had to replace key positions as we thought that we needed higher caliber in some areas of the business, and we have those folks in place. We put Reaz Rasul as the Segment President.
We had Julie Brewer, came in and brought a new team in place. So we feel that we've seen steady momentum in our Front Line Care business as well. The Front Line Care managed by Jim O'Connell is doing well with improved supply chain availability for electro-mechanical components, up 8% in the quarter and 7% year-to-date and is doing well.
CCS, which is -- we have the PSS and GSS and the care communications, the former group that we used to call, it's called CCS today, as you see in your financial, has been impacted by lower rental revenues and a bit of softness in the capital spending. We're seeing improved in order sequentially and expect that to continue in the fourth quarter into 2024.
We have increased our investments in HST. As you notice, our research and development has increased. And we're going to continue to increase to get more innovation out. But I have to say that the whole overall business of HST is going to have a very large fourth quarter in terms of growth compared to the rest of the year and bring them more in line with our expectations, including its profitability, which will increase in the fourth quarter as the rest of the company.
Operator
Your next question comes from the line of Vijay Kumar from Evercore ISI.
Vijay Muniyappa Kumar
I had one financial question and one on fiscal '24. On -- the updated guidance here, what is fourth quarter assuming for interest expense, is that stepping down? I'm getting to implied operating margins of close to 18%. That's a pretty big sequential step up. Does that math make sense to you?
Clare Trachtman
So Vijay, I'll just quickly -- obviously, interest expense would be kind of below the line item, so it would not be part of our operating margin. But we are expecting -- I'll let Brian get into the details in terms of what we're expecting. But as we said in the prepared remarks, we expect interest to be down about $45 million, net interest expense about $45 million in the fourth quarter.
Brian Stevens
Yes. And speaking to operating margin, you're correct. Our full year operating margin guidance that we gave of 14.3% to 14.5%, implies a fourth quarter adjusted operating margin that exceeds 16% versus the 15.2% adjusted operating margin we landed at in the third quarter.
Really, the primary driver of that increase is the sequential improvement in our sales, which is typical seasonally that provides us a lot better operating leverage against our cost base, and we're really encouraged to see the progress we've made in significantly expanding our margins in the second half of the year compared to the first half.
And as we discussed on our last 2 earnings calls, that expansion is driven not just by the higher sales but also by cost favorability in our supply chain network as we sold through a lot of our higher cost inventory during the first half of the year, and we're starting to see the savings from our margin improvement initiatives, we think, is going to begin to slightly outpace inflation starting in the fourth quarter. And then finally, driven by cost savings from the operational efficiency initiatives we've been undertaking in recent periods.
Vijay Muniyappa Kumar
Understood. And maybe just off of that question, Joe, for you on fiscal '24. Can you talk about the big variables, like what gets better, what gets worse in '24? When can Baxter get back to a mid-single LRP (inaudible), I think the Street's modeling 100 basis points of margin expansion based on some of Joel's comments here. Does that seem reasonable for you for the Street to be modeling 100-basis points margin expansion?
Jose E. Almeida
So Vijay, let's start with the topline. We see stability in the market in admissions, market growth rates. You saw some of the published numbers from other companies, and hospitals. We're starting to -- we see that as well. And we continue to have a pretty stable topline growth and consistently into 2024. So I'm confident about that. We have, ex our Kidney Care, the other 3 business of Baxter have steady growth into next year. They will probably be higher than in 2023.
Talking about the bottom line. If you see the sequential improvement in our bottom line, that will continue into 2024. We continue to have cost reductions in our manufacturing facilities. We also get more stable volume and growth in volume, absorption of overhead and some pricing opportunities in couple of our business as I just highlight, for instance, the turnaround that we are seeing in our Pharmaceutical business that we'll continue with new product launches from '23 into '24 and also the good demand for a SIGMA SPECTRUM pump from '23 into '24. Just to mention a couple of things.
And also with stabilization of our HST business that we see in terms of anniversarying some of the differences, in end of fiscal years, between Hillrom and Baxter, we start seeing the stabilization and the successful launch of our Progressa+, Just to give you a couple of things that give us more confidence in 2024 in terms of top and bottom line.
Operator
Your next question comes from the line of Rick Wise from Stifel.
Frederick Allen Wise
It's a funny place to start maybe, but -- and I know that Joel is fairly new to the job, but it's hard to resist asking, both from your perspective, Joe, what did you charge Joel, what are you tasking him. Maybe talk about your requests of him as he's stepped into the role. And Joel, I'd be curious to hear what kind of special sauce you're going to bring to the job and where your priorities lie? And just your initial thoughts there?
Jose E. Almeida
Rick, good to hear your voice. Listen, when we're in the process of selecting the CFO for the company, we're looking for the ability for the person to get operationally into the details and continue to help the transformation of the finance organization.
And if you look back at the finance organization in Baxter, we had a lot of things that we changed. We have initiated and have done successfully shared service organizations across the board. Also the development of new talent, the culture and the people are very important to Baxter. So Joel coming to the company needs to understand that we are a complex operating company. We have a lot of manufacturing sites. We have a significant amount of R&D sites across the globe. It is a company that spans over 100 different countries in terms of sales in more than 25 to 30 countries in terms of manufacturing and distribution alone.
So somebody who had the intellect to combine that ability to understand complexity and get through it and get operational efficiencies out of it, but continue to transform the finance organization and bring the talent and the culture to the point that we need the agility and the ability to cope with different inputs.
Also experience in the M&A space that would continue to rotate the portfolio of Baxter, look at opportunities to transform Baxter's WAMGR into a higher WAMGR to better value for our shareholders. But I pass on to Joel to answer the other side of your question.
Joel T. Grade
Thank you. Great to be on the call with you this morning, and I really look forward to meeting all of you in person hopefully in the near future. So look, first of all, I'm really excited to be here. I think all the things that I thought about when I was going through the process with Joe and with the team have only been reiterated to me as I've gotten here, I realized the wonderful opportunities that we have here at Baxter.
Yes, I'd say early impressions, certainly, as I said, lots ahead of us. There's lots to do, but we have great people here and incredibly passionate people as it relates to the initiative of this company. And again, really a lot of talent as well in my early view.
I'd say my really focus, first of all is about learning the business. As you know, I'm newer to the industry, but certainly, we'll be focused heavily on making sure I understand and learn this complex, interesting business, so I can really make the best decisions to support the team. And from there, we're going to focus a lot on how we continue to accelerate growth, how we accelerate our consistent execution of things. And how do we think about where those mechanisms are to ultimately fund growth and value creation.
Certainly, we're spending time understanding our talent and really just the focus of the organization, as Joe said, the background, I've gotten has both well rounded in finance, ops strategy, M&A, and in transformation. And so bringing all those things to the table here for all the opportunities we have at Baxter, just really thrilled to be here. And those are some of the areas I'm going to be spending time focusing on looking forward.
Frederick Allen Wise
That's great. And one quick follow-up if I could, sort of pick up on Vijay's question earlier on '24. Just from one angle, when we think about current consensus ex Kidney Care, how do we think about the impact of the spin relative to dyssynergy. Does consensus adequately reflect numbers inclusive of the dyssynergy costs for -- when you think about the separation of the 2 companies and stand-alone standup costs? Said differently, will numbers need to come down? That's what I think people are -- or I'm concerned about. I think that's what folks are concerned about.
Brian Stevens
Rick, maybe a few comments on that. As Joe mentioned earlier, the process of the spin is going between now and we're planning to wrap up in July of 2024. All the models are still in progress, and we are refining our dyssynergy and stand-alone cost estimates. We do plan to be providing additional information on this in connection with our 2024 guidance that we provide at year-end, as well as in connection with an Investor Day that we intend to have in advance of that spin taking place. So no specific guidance on the particular quantification of the synergies at this time.
Jose E. Almeida
And I want to underscore the fact that we're going to continue to see progress on Baxter's topline and bottom line ex those synergies because we continue to accumulate the cost improvements that we've put in place, also margin improvement programs, new product launches, the turnaround, the pharmaceuticals and the great demand that we're having for our SIGMA SPECTRUM pump.
So there are some really good catalytic -- catalyzers I would say, in place that will make '24 a better year than '23. But I want to make sure that you understand that we will have the dyssynergies, we're in process of putting them in place.
Operator
Your next question comes from the line of Pito Chickering from Deutsche Bank.
Philip Chickering
On the NOVUM IQ pump, you announced competitors with next-gen pump on the market right now. Your pump sales remain pretty robust in the quarter. At what point do you get worried about sort of losing market share to the other pumps? And then on your pump approval, any updates there? Is it worth pulling the 510(k) and refile it helps you to process? Or any updates there?
Jose E. Almeida
On the current infusion market, we have really good demand, really, really good demand. We haven't lost 1% of market share at all. As a matter of fact, we gained market share. Our growth, our infusion hardware growth has increased in the mid-teens. And for next year, the demand is pretty solid for our product.
Remember, our product has -- SIGMA SPECTRUM has the right precision. The pump has the right precision and it's very well liked in the marketplace, and we continue to get significant income interest from competitive accounts to our pump, okay? On specifically Novum, I want to make sure that we continue to work with the FDA. We have given them all the information required. We submitted with a package.
We also give them all the -- all the incremental changes that we've made to the product, and we are in continued and regular conversations with them during their review period. This is where we are with Novum. But I just want to let you know, we really want to get this pump approved, we're doing everything we can.
But in the meantime, we have a very capable and really good pump out there that continues to gain market share and has very good demand, as you see this year, and you're going to see next year as well. So it's altogether a good situation for Baxter. Of course, we are working very hard to have the other pump approved, we want to have that approved.
Philip Chickering
Okay. And then next question, oil and diesel have been very volatile over the last few months. And why aren't giving 2024 guidance. If oil and diesel stay in this range, can you help us quantify the headwind for 2024 as the costs roll through the balance sheet and on the P&L in any way, how you're going to offset those costs?
Jose E. Almeida
Yes. We have put a significant amount of operational efficiencies in place, primarily in our logistics and transportation and supply group. We see the headwinds in parts of the business about the cost of energy, primarily fuel. But that has been more than offset by the programs that we put in place. So our initiatives are expected to, as I said, more than offset an incremental impact from rising of oil and diesel prices.
Operator
Your next question comes from the line of Robbie Marcus from JPMorgan.
Robert Justin Marcus
Congrats on a nice quarter. Maybe to start, I know there's been a couple of questions on '24 that have been centered around margins. But I wanted to ask on the topline. At the Analyst Day, your long-range plan was for 4% to 5% organic topline growth. The Street is modeling 4% next year, coming off a year of around 2%. And what's your confidence level in being able to reach your long-range plan targets?
Jose E. Almeida
Robbie, we expect, as I said, ex our Kidney business, that our margin will be in line with the expectations, okay, of the short term. And our objective for mid to long-term for the company is 4% to 5% as we improve November as well. But we have plans ex renal to get back at a growth close to what is today expect. So it is a good story there as we have momentum in several different areas of the company with some product launches.
As I said, one of the biggest headwinds that we had experienced in the past few years have been our Pharmaceutical business that we were able to turn around with great launches. So not giving guidance in 2024, but our expectation is to be around the expectations of the market in terms of growth and our mid- to long-term expectations is to be 4% to 5%.
Robert Justin Marcus
Great. I appreciate that. And I want to say it's really helpful to get the segment margins. But I want to ask on sort of the trends here. We got year-to-date in third quarter and as well as '22. How should we think about maybe some of the past few years and your expectations for margins in the segments here?
And now with the four segments and more ownership on the leadership within each, what are some of the examples of things they could do that weren't able to be done before to help improve margins on a segment basis?
Jose E. Almeida
Robbie, we have a significant amount of programs in our manufacturing team and logistics team, also pricing initiatives as well as new product launches. So it's a mix volume and cost reduction story, we will be improving sequentially our margins. As you've seen, as we said, remember, we're executing on everything that we said we're going to do. We're improving our margins. You're going to see that in the fourth quarter as we have guided, as well as you're going to see that in 2024.
So our confidence in continuing to improve our margins. And once we have the business spun off, the remaining Baxter will have even further ability to continue to grow its margins, okay? So because it's all about mix and new products and also pricing.
So, our story is about the same, is the aspiration to 4% to 5% in the top and the bottom -- topline, I'm sorry. And the bottom line continue to improve sequentially and continue to find ways of getting productivity improvement through volume, mix, and pricing.
Brian Stevens
And Robbie, our plan right now, this third quarter, completing our verticalization and reporting out segment profitability was a big milestone for us, and we're extremely excited to be able to share that with you. And I think our long-term plan is when we get to year-end and we're putting out information, we do plan to go back and provide supplemental information on history to provide some better comparability as we've done in other situations in the past.
But I think the way to generally think about it, as you're looking at the overall directionality of where Baxter margins have trended from the first half of the year as we're selling through some of our higher cost inventory to the second half of the year, pretty much across all of our segments, you're going to see sequential margin increases in the back half contributing not just to the items I've pointed out before, but also to additional operating leverage just from higher sales in the back half of the year. So stay tuned and we will be providing you more of that information.
Operator
Your next question comes from the line of Travis Steed from Bank of America Securities.
Travis Lee Steed
I just wanted to follow up on something you said earlier in the call about on the renal spend pressure testing and evolving market conditions to maximize shareholder value. I assume current market conditions, you're still okay with the [renal] thing going forward given you're still talking about it. But maybe just talk about what's left of an analysis to pressure test the renal spend and kind of what you meant by that comment.
Jose E. Almeida
Well, as I mentioned before, it's the same answer. We are very much into the preparations. We have the team in place. We had to put all the things in place. The company is working very hard. It is a complex separation primarily not from the point of view of sales and marketing and the company itself, but it's all the manufacturing and distribution. So we're working on that. We have put people in place.
We always, always have the fiduciary responsibility and duty as our Board has it as well to continue to pressure test the related financials and including as a result of evolving market conditions in the interest of maximum shareholder value to ensure that we proceed with that in mind. That is our #1 responsibility when we do anything in Baxter. So yes, we're moving forward, but we are always making sure that, that step is taken and being analyzed and checked.
Joel T. Grade
Travis, one thing I would just say -- it's Joel. There's also an opportunity to get me up to speed on all this. Again, I think there's -- again a very sound strategic rationale on the spin. And that obviously, team is taking me through a lot of financial, a lot of those things. So part of it is also on bringing me up to speed in terms of some of the financial implications as well. So just to add that to this.
Travis Lee Steed
Helpful clarification. And then on 2024, I guess it sounds like you're confident in accelerating growth kind of above this 1% to 2% that you're doing now, but not quite back to 4 to 5. So is there any examples you can give on the reason we should believe in kind of a little bit better growth in '24. I guess Novum would be one of those. Anything else to really kind of point out that can give some confidence that '24 revenue growth can be above this kind of 1% to 2% that you're seeing right now?
Jose E. Almeida
Well, we're going to anniversary some headwinds that we had in HST, primarily in the CCS business is one of them. Then we have some good launches in our Pharmaceutical business, and we have continued demand increase for our SIGMA SPECTRUM pump, not even taking into consideration Novum on this, okay? Just by what we currently have today, give us confidence in our growth next year, ex renal to be higher than what we have today across all the 3 segments, MPT, HST and Pharma.
Clare Trachtman
Travis, I want to just add a little context here because the 1% to 2% you're pointing out, remember, does have some of the Kidney Care impact in it this year from some of those one-time payments we've received last year. So that is kind of putting some pressure, if you think about just how much Kidney Care represents of Baxter contributing to that 1% to 2%. In addition, within our other segment, you'll see that down pretty significantly.
So I think for the base Baxter business, this is what Joe was alluding to, you are seeing nice progression this year. Within the HST business, I think you're seeing some momentum within the Front Line Care.
I think as we get to next year, within the CCS business, we'll see some of that momentum going into 2024. Now with respect to Kidney Care in 2024, that's one of the businesses we will anniversary some of those one-time payments, but we will have to continue to look at some of the other factors that impacted growth this year, including sales within our China region that have been impacted by the government procurement initiatives as well as just a rebasing following the pandemic last year.
Jose E. Almeida
Just underscoring that the growth in the remaining part of Baxter ex Renal is steadily improving and our MPT business has been growing above market every quarter and continues to do well. So I want to make sure that you appreciate the momentum that we are embarking and we have shown with the third quarter results, what we mean by that.
Operator
Your next question comes from the line of Joanne Wuensch from Citi.
Joanne Karen Wuensch
I have two. The first one is when I take a look at Medical products & Therapies year-over-year, the margin was down about 190 basis points. And I think someone was heading towards this question earlier. I'm trying to figure out the trend in that? And if we should look at that continuing to be pressured as we look into next year?
And then my second question has to do with some of your GPO contracts and pricing and how we should think about restructuring or renegotiating those and the potential for taking higher price.
Clare Trachtman
So Joanne, I'll first take the MPT question. I would say within this quarter, there was a little bit of mix coupled with some increased investments within MPT, but we should see sequential improvement within that business as well as we go into the fourth quarter, similar to what we will see with most of the businesses as well.
So kind of following the general trend of Baxter. But this quarter on a year-over-year basis, if you look at it, just face some differences within mix and some increased investments.
Brian Stevens
And I think adding to that, as Joe mentioned, we have a strong pump on the market right now, and we're seeing mid-teens growth in some of the equipment sales that are coming through that business. So I think that is something that has helped us that we'll be continuing to focus on next year.
Regarding the second question on pricing, there are some puts and takes here. We do have some of our GPO contracts coming up for renewal, and we are committed to negotiating pricing that reflects current costs that have increased in recent years. And it's fair to both parties. We did get some temporary price increasing during the -- in recent periods, it's going to be rolling off. But shortly after that, we'll be entering into a negotiation stage. So stay tuned on that, but we are committed to focusing on pricing as one of our levers in the future.
Jose E. Almeida
Just closing on the GPO contract, we're very engaged. The 2 out of 3 being negotiated at the moment. They are for 2025. And as Brian said, we are looking at all the opportunities to compensate the company for the significant cost increase that we had experienced in 2022.
Operator
And your final question comes from the line of Danielle Antalffy from UBS.
Danielle Joy Antalffy
Joel, excited to meet you. You have a great team over there with Clare and company. So very excited to work together. My question is around the new operating model and how to think about from a tangible perspective, how this changes the way Baxter invest in R&D? Should we be thinking about the real benefit of the operating model or on the accountability and cost side, or on the R&D side and elevating the TAM and WAMGR of the company over the next few years. I guess I'm trying to get an understanding of where the real benefit comes from this new operating model? And that's it for me.
Jose E. Almeida
Comes first from the accountability of each one of the segment Presidents, who are fully accountable for the profit and losses of their business, including all the allocations that got put on, as you saw, is a fully allocated P&L. So they make all the decisions on portfolio management within their spectrum of business.
Also all the decisions in investment research and development. So you look at HST, this year, we have been investing with higher intensity in the HST to get products out faster. There is no 2 different parties to talk to, it all sits within the business.
Also a great advantage is to have the manufacturing supply chain reporting into this business despite the fact we still have a coordination overall for the company, we do have this business in -- the plants and the heads of those plants in the business and they are on the same page. And that drives quite a bit of the cost reductions, the optimization of product design because it's all within the same group.
Some are fungible, some are not fungible. Some are qualitative improvements that we see by communication. The other is really communication when you have set growth targets for CAGR for the business, it's easier that way. There's no 2 different parties. We don't have a region of the world that will decide on growth versus a business line that goes across the globe, which is trying to negotiate those numbers. So it's a very simple conversation. It's very easy to do it and we're starting to see the effect in the creation of our annual operating plan at the moment, it's easier and better process.
Clare Trachtman
Thanks, everyone. Rob, this can conclude our call.
Operator
Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for participating.
