On Becton Dickinson & Co. (NYSE: BDX). We expect revenue from products to combat COVID-19 to offset headwinds from other medical and interventional products that are seeing lower demand. In particular, the company is ramping up production of testing solutions and medication delivery devices. While the delayed 510(k) filing for the Alaris infusion pump is a setback, we see other growth drivers for the company in fiscal 2021.
BD is ramping up production on several fronts in the campaign against COVID-19. It has thus far received orders from governments around the world for some 470 million syringes and other vaccine delivery devices. It also scaling up production of its rapid point-of-care antigen test, which can confirm an active COVID-19 infection in 15 minutes. The company plans to deliver 10 million of these tests, which have an emergency use authorization from the FDA, by September, and then to ramp up to 12 million tests per month by the end of February 2021.
Additionally, BD is expanding production of its real-time PCR test, which runs on the BD MAX diagnostic platform. This test, which has an emergency use authorization and is CE-mark approved in Europe, can confirm active COVID-19 infections in 2-3 hours. BD is currently producing one million PCR-based tests per month, and plans to ramp up production to 1.9 million tests per month by the end of 2020.
Revenue from these programs will offset headwinds from other medical and interventional products that are seeing lower demand during the pandemic. The company has also delayed its 510(k) filing with the FDA to seek clearance for returning the Alaris infusion pump to the commercial market. It now expects to submit the 510(k) filing by late 2Q21 or early 3Q21, based on ongoing dialogue with the FDA. The revised version of the device will include a number of software and feature upgrades.
The company reported fiscal 3Q20 results on August 6. Adjusted EPS of $2.20 . Adjusted EPS included an $0.11 negative impact from foreign exchange. Revenue was $3.855 billion, down 11.4% on a reported basis and 9.4% operationally.
By segment, the Medical segment posted revenue of $2.122 billion, down 6.0% on an operational basis, as fewer hospital admissions in April and May resulted in fewer procedures and lower demand for certain products. This was partly offset by shipments of infusion pumps on a medical-necessity basis. This medical-necessity volume will decline sequentially in 3Q20.
The Life Sciences segment posted revenue of $951 million, down 7.8%. Sales in the Preanalytical Systems and Diagnostics unit declined due to lower levels of routine diagnostic testing, as physician offices were largely shut down due to social distancing mandates. Sales in the Biosciences unit also declined, reflecting lower demand for research reagents and instruments. While academic research labs were closed in April and early May, reducing research activities, the company saw a modest recovery as the third quarter progressed.
The Interventional segment had revenue of $782 million, down 19.2%. Sales fell in the Surgery and Peripheral Intervention units, reflecting the continued deferral of elective procedures due to COVID-19. Procedural volume improved as the third quarter progressed, but remained below pre-COVID levels.
BD has launched a number of products over the past six months that will contribute to future growth. These products streamline procedures in academic labs and increase safety in the handling of materials during drug discovery and manufacturing.
In all, COVID-19 was a revenue headwind of $600 million in 3Q, reducing growth by about 1,400 basis points. Management said, however, that it saw sequential improvement from May to June and into July. It also said that 3Q20 would be the bottom of the curve in terms of the impact of the pandemic on revenue.
EARNINGS & GROWTH ANALYSIS
BD has reinstated its financial guidance. It now expects adjusted fiscal 2020 EPS of $9.80-$10.00. This represents a decline of 14.0%-16.0% (12.5%-14.5% on an operational basis). This guidance includes the 500-basis-point impact of the expiration of royalties received from Gore. August represents the one-year anniversary of the expiration of these royalty payments, so fiscal 2021 EPS will no longer reflect the impact of the royalty expiration. The company expects fiscal 2020 revenue to decline 2.5%-3.0% as reported and 1.5%-2.0% on operational basis.
We are maintaining our fiscal 2021 estimate of $13.00. We see stronger top- and bottom-line growth next year, driven by new product launches as well as by increased demand for vaccine-delivery devices and test kits.
With nearly half of revenue coming from overseas markets, the company also faces a range of regulatory and market risks.
In response to pricing pressures, BDX is lowering manufacturing and sourcing costs. It is also adding new product features that enhance profitability.
Headquartered in Franklin Lakes, New Jersey, BD is a diagnostic and medical device company engaged in the manufacture and sale of a broad range of medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions, life science researchers, clinical laboratories, industry, and the general public. Its operations consist of three worldwide business segments: BD Medical, BD Life Sciences and BD Interventional.
Despite headwinds from COVID-19, we believe the company has strong growth prospects, driven by new product launches and global demand for vaccine-delivery devices and testing products. We also see elective procedural volume recovering, which should benefit the Interventional business.