Becton Dickinson and Co (BDX) 2008 Q3 法說會逐字稿

Hello, and welcome to BD's third fiscal quarter 2008 earnings call. At the request of BD, today's call is being recorded. It will be available for replay through Thursday, July 31, on the Investors page of the bc.com website, or by phone at 800-642-1687 for domestic calls, and area code 706-645-9291 for international calls, using conference ID 52522900. I would like to inform all parties that your lines have been placed in a listen-only mode until the question and answer segment.

Beginning today's call is Ms. Patricia Spinella, Director of Investor Relations. Ms. Spinella, you may begin.

Thank you. Good morning, everyone, and thank you for joining us this morning. During today's call, we will make some forward-looking statements and it's possible that actual results could differ from our expectations. Factors that could cause such differences appear in our third 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 the related financial schedules. A copy of the release, which includes the financial schedules, is posted on the bd.com website. Joining us this morning are John Considine, Vice Chairman and Chief Financial Officer; Bill Tozzi, Vice President-Finance; and BD Executive Vice Presidents Gary Cohen, Vince Forlenza, and Bill Kozy. I will now turn the call over to Bill Tozzi.

Thanks, Pat, and good morning, everyone. I assume you all have our earnings release and the attachments that we sent out this morning and had the opportunity to review them. Since we would like to devote as much time as possible the answering your questions, my opening comments will be brief. We'd like to address three primary topics. First, since there are items that affect the comparability of our diluted earnings per share from continuing operations for the third quarter and nine-month periods ending June 30th, 2007 and 2008, we want to review the analyses of these results provided in the press release. Second, we'll describe some of the key drivers of our revenue and earnings growth for the third quarter. And third, we'll review our increased guidance for the full fiscal year.

Starting with earnings, I suggest you turn to Table 1 in the press release. As you can see, reported diluted EPS from continuing operations for the third fiscal quarter of 2008 is $1.18. For the third fiscal quarter of 2007, we are adding back to our reported diluted EPS from continuing operations of $0.95, the charge of $0.03 resulting from in-process research and development charge related to the Plasso Technology acquisition. This gives us diluted EPS from continuing operations, excluding the specified item, of $0.98. Comparing the $1.18 this quarter to the $0.98 in the prior year's quarter gives us an adjusted EPS increase of 20%.

Moving to our nine-month period ending June 30th, 2008 results, reported diluted EPS from continuing operations was $3.34. For the nine-month period of fiscal year 2007, we are adding back to our reported diluted EPS from continuing operations of $2.38 the $0.03 charge just mentioned, plus the $0.45 charge resulting from in the-process research and development charge related to the TriPath acquisition. This gives us EPS from continuing operations, excluding the specified items, of $2.86. Comparing the $3.34 in this fiscal year's nine-month period to the $2.86 in the prior year's nine-month period gives us an adjusted EPS increase of 17%.

Moving to our growth drivers for the third quarter, our revenue increased by 14.5%, which included a 7 percentage point favorable impact from foreign currency translation. This positive translation effect was related primarily to the Euro, and to a lesser extent the Canadian dollar and certain Asia Pacific and South American currencies. As you can see from the financial tables in the press release, all three segments benefited from positive foreign exchange of about 6 to 7% for the quarter.

In the Medical segment, third quarter revenues grew about 15%, led by sales of prefillable drug delivery devices in pharm systems and by diabetes care products. We would like to point out that pharmaceutical systems grew about 29%, and we estimate about $5 to $6 million or approximately 3% is due to timing that will come out of the fourth quarter. Global sales of safety engineered products in the segment grew 14% to $191 million.

Revenues in the BD Diagnostics segment grew 13% in the third quarter. Sales of safety engineered devices, TriPath products, and infectious disease testing systems contributed to the growth. Global sales of safety engineered products in this segment grew about 14% to $213 million. Looking at the combined Medical and Diagnostic global safety, sales grew about 14% to $404 million. The U.S. growth rate was about 6% and the ex-U.S. was about 31%.

In the BD Biosciences segment, worldwide revenues grew 16% for the quarter. Clinical and research instruments and reagents were the primary growth contributors. Turning to the quarterly gross profit, our margin percentage for the third quarter was lower than that of the prior year by 60 basis points. During the quarter, we wrote down $6 million of inventory. Absent this write-down and the impact of the previously disclosed reclassification of certain costs for the year 2007 related to the GeneOhm and TriPath acquisitions, our overall gross margin would have been about flat. This reflects favorable productivity mix and FX, which is offset by start-up and higher raw material costs, primarily resins. SSG&A as a percentage of sales improved 170 basis points, primarily due to disciplined expense management. R&D spending increased about 8%, which is lower than our guidance and a result of timing within the year. Our operating margin was 140 basis points higher than prior year's adjusted margin, due to favorable SSG&A offsetting the slightly lower gross margin impact previously discussed.

In terms of cash flow, we generated approximately $540 million in the quarter of net cash from operations. $78 million was used to repurchase 900,000 shares of common stock, and we invested $152 million in capital expenditures. In summary, we had a strong quarter, with 20% EPS growth that includes about 2 to 3 percentage points related to timing.

The last topic we would like to cover is the revised guidance for fiscal year 2008. We expect diluted earnings per share from continuing operations for fiscal year 2008 to increase approximately 16% from last year's adjusted base of $3.84, which excludes $0.48 of in-process research and development charges related to the TriPath and Plasso acquisitions. This reflects an increase from our prior guidance of 13 to 14%. Our full-year reported revenue growth is expected to be about 12%. We expect BD Medical to grow around 11%, BD Diagnostic about 12 to 13%, and BD Biosciences about 13 to 14%. This would include about five percentage points of positive foreign currency. Our overall safety is expected to increase by about 12 to 13%. U.S. sales of safety engineered products are estimated to increase about 6%, and international safety should grow about 28 to 30%. Our gross profit margin percentage is expected to decline by about 50 basis points year on year. We expect productivity and product mix to contribute about 70 basis points, offset by higher raw material costs, primarily resins, of about 60 basis points, start-up of about 30 basis points, and all other of about 30 basis points.

During the past three months, as the price of oil has increased, we have received many questions related to the impact on BD's earnings. To help you understand the impact of oil prices on our resin costs, we expect to spend about $230 million on resins in fiscal year 2008, or $30 million more than fiscal year 2007. This is based on an estimated average price of oil of plus or minus $115 per barrel in fiscal year 2008 versus an estimated average of $65 per barrel in 2007. This relationship suggests about a $6 to 7 million increase in the cost of resins for every $10 per barrel increase in oil. However, we believe this is somewhat low due to the lag in price increases for resins affecting our production costs, and believe that at $7 to 9 million range is more representative.

Continuing with our earnings guidance, SSG&A is expected to improve by about 90 to 100 basis points as a percentage of revenues. Our R&D spending is expected to increase about 10 to 11%. Our overall operating income margin is expected to improve about 60 basis points over the adjusted 2007 operating income margin of 20.8%, which excludes the 190 basis point impact of the in-process R&D charges previously discussed. Our effective tax rate is projected to be about 27.5% for the year. We expect to generate about $1.6 billion of net cash from operations and invest about $650 million in capital expenditures. We expect share repurchases to be about $450 million, and the average number of fully diluted shares outstanding to be about 252 to 253 million. I will now turn the call over to John.

Thank you, Bill. Now before we open the line for Q&A, I would like to make three brief comments regarding how we are thinking about our next fiscal year. As you all know, we will provide our yearly guidance as part of the final year-end analyst call in November. However, given some of the forward-looking assumptions we have seen in certain of the more recent analyst reports, we thought it would be helpful to provide a directional context around which our revenue and earnings trajectory might be built, as well as the impact of raw materials -- and in particular oil-based resins -- might have on our gross margin.

First, and building upon Bill's discussion regarding the oil-based resins, we are anticipating that our average resin cost will be about 8 to 9% higher than that of 2008. That would infer that an increase of about $20 million over the 2008 base of approximately $230 million that Bill referenced would occur. Second, this, along with other raw material cost increases, will once again impact our gross margin. However, we will continue to leverage our SSG&A through disciplined cost control measures, and beyond that we are considering other options, including price increases. Finally, overall, we continue to believe that our revenue growth will fall between the 7 to 9% range that we have discussed in the past (company corrected). Similarly, we also believe that we will achieve EPS growth in the 10 to 12% range. Now, we will not be going beyond these boundaries at this time in terms of talking about fiscal 2009. However, we hope that this should clarify some of the questions you may have had regarding next year. With that operator, we can open the line for Q&A. And as always, we'd appreciate it if you would limit your questions to one plus a follow-up.

Thank you. The floor is now open for questions. (OPERATOR INSTRUCTIONS). Thank you. Your first question is coming from David Roman with Morgan Stanley. Please go ahead.

Good morning, everyone. Thank you for taking the question. Just first on gross margin, you talked briefly about 2009; but in 2008, there were a number of start-up costs that also ran through the gross margin line. Can you give us a sense to when those roll off and if there are any more we should be expecting in 2009? Then I have a quick follow-up.

Yes, why doesn't Bill take that?

Okay. This year -- again, every quarter we did have a couple million in there. We're not projecting any for next quarter nor at this point would we project any for next year. For the third quarter, our productivity and mix gave us around 60 basis points. We did see FX -- again, if you remember back to the first quarter, we had negative FX; we saw about a 20 basis point improvement this quarter. Year to date we're about flat, which is about what we would expect. As we said on the call, about 50 basis points was related to the reclass as well as some of these one-timers; and then finally, resins cost us about 60 basis points. With that said, these one-time adjustments, again, are things that don't reoccur. The start-up this quarter was about 20 basis points. We're thinking about -- I think it's 30 basis points for the year. Over time, that will go away. So there could be some of that, but none of the kind of one-time inventory adjustments that we are certainly not projecting.

And are there any more facilities expected to come on-line next year, either in Mexico or Florida?

Yes, there's -- some of that that we had started in pharm systems is a couple year rollout, so there will be some in that. Some of those will start to come into operation, though, but they will be continuations of start up for next year.

Okay, and then lastly, on Diagnostics, the numbers again looked pretty strong. Can you give us a sense what's going in the -- on the TriPath side, both on the liquid Pap markets and also maybe an update on FocalPoint?

Sure, this is Vince. So I think the pattern is consistent with what we've been saying over the last several quarters, in that we continue to gain some share -- one or two share points -- and expected over the year. So we're growing slightly faster than the liquid Pap market, number one. So, you know, full worldwide, we were up on a performance basis, 8.7, and 9.7 on a reported growth basis. In terms of the FocalPoint, we have received an approvable letter for the FocalPoint GS. That's the guided screening. Now, that is the next to the last step in the process. The final step in the process is to finalize the labeling on the particular claim. That usually takes about 30 to 45 days, somewhere in that range. But we're very excited about where we are in the process, and we look forward to launching that product probably sometime during next quarter.

Okay. Thank you very much.

Thank you. Your next question is coming from Mike Weinstein with J.P. Morgan. Please go ahead.

Thanks. Let me start by following up on the gross margin commentary -- which, by the way, was all very helpful. So first if we look at this quarter, you mentioned in the commentary that you wrote down $6 million of inventory, so gross margins this quarter ex that would have been flat, is that right?

That's right. That's the reclass and the $6 million, right.

Okay. And we think about the whole oil resin commentary. We're talking -- I think you said a $10 move in oil basically translates into what would be about 10 basis points to gross margin. Right? Am I thinking about that right? And if you're saying --

More or less, yes.

Yes, and you're saying that your cost off of your '08 base -- that $230 million base -- you're expecting a $20 million increase in your medical grade resin cost for 2009, and that's -- as you see it with your contract, that's your visibility on it? That's the full impact?

Based on an oil relative price of -- in the $125 range.

Mike, you have to think about this -- this is John -- in terms of -- the reference to oil is a convenience. It's not an absolute proxy for it, as we've said many times. So if you went back and looked at average costs in 2007, they were about $65 a barrel. It rose dramatically in 2008, and for us it's going to be -- let's say about $115, plus or minus for oil. As Bill said it drove our costs in '08 up to $230 million versus $200 million, round dollars. When we think about '09 right now, we're looking at average oil of -- let's say about $125 a barrel, which is pretty close to what the price is today. And that would indicate that we would be about $250, so that's about $20 million. Now, as Bill said, it gets complicated, because obviously when we buy resins right now at their highest price -- or over the last, let's say, month -- it takes ex three months to five months or something to roll through the P&L, so you get a lag, if you will, in terms of those higher prices or if we were so fortunate to see oil come down, to see the benefit roll through. But when we thought about the numbers that I gave you in terms of -- albeit the one correction I needed to make -- but the numbers that we thought -- thinking about for next year in '09, we were -- we have fully loaded -- we fully considered that. The roll off of the higher prices and kind of an average of $125 reference point for the entire year. So the $20 million.

Okay. That's helpful. I think you have the opportunity here to put some of these concerns to bed, and you're basically saying that the negative pressure, if you would, from higher medical grade resin as you look at '09 at this point is 25 basis points. I mean, that's basically the math, rate?

That's the math.

Yes. Okay, so if we think about the step up costs in this year, if we think about some of the inventory write-downs you took -- and obviously the natural mix progression of your business -- I would assume, based on this -- this is probably contrary to what people are thinking about '09 -- that gross margins should in all likelihood be up next year.

Well, as I said, I think that would be too much of a leap right now. I think that it will be somewhat mitigated by lesser -- somewhat lesser impact on oil. If you just use the two numbers we talked about, $30 million this year versus $20 next -- that $10 million -- that's right. However, other raw material costs -- how fast they come down, other things -- we still think gross margin will be impacted negatively, although I don't think it will be anything that significant, and we believe that the cost containment efforts that we have around SG&A, as well as some reasonable price increases, will more than take care of that. Therefore we're comfortable to leave our earnings range in the kind of 10 to 12% range.

Okay, last question, then I'll jump back in queue. You'll recall Medical had a weaker first half of the year and a weaker second quarter, and you guys had said that that should rebound, and obviously it did. So outside of pharm systems, could you just spend another minute talking about the reacceleration we saw this quarter? Thanks.

Gary, are you going to take that?

Sure. Yes, I think that the areas that contribute to the rebound were very strong growth in international safety. That's going even better than we had expected when we started the year. Very strong growth in pen needles -- and as you noted, strong growth in pharm systems. And that was in Europe. That came a little faster in this quarter; so some of that, as Bill mentioned, will be reflected in the next quarter. But all three of those were the primary contributors to the faster growth, and pretty much as we had indicated in the last call. Also, diabetes care in general as driven by pen needles is doing well.

Next question, operator.

Thank you. Your next question is coming from Larry Keusch with Goldman Sachs. Please go ahead.

Good morning, guys. So just coming back to John, a comment that you made -- or it may have been Bill, regarding the price increases. I think, John, you made it actually when you were talked about '09. Can you just discuss a little bit sort of what historically has been your ability to raise prices in the businesses that you're in? My sense is it is a bit more challenging, but if you could just touch on that, that would be great.

Well, keeping in mind that I said we're not going to go outside the boundaries that I kind of laid out, I would say if you think about the last three to five years, you haven't seen anything substantial in the way of price increases. In fact, there have been some price decreases. There are some, but net-net, they would -- they might be plus a half percent, down a half percent for the whole Company. And as we think about this, we've been able to work diligently over a long period of time without having to take advantage of price increases. As you guys know, more than anyone, the continued resin increases, as well as other raw material increases, have impacted us; and now I think some reasonable and judicious price increases are in order, and we'll pursue that with our partners as we go forward. Nobody, in general, likes price increases. We don't like them when we get them. I'm sure that everyone won't be in favor of them but we will certainly go after them.

Okay. And then just a couple of other things. Again, John or Bill, since you sort of brought up the oil and the resin costs, I'm wondering if you can just sort of help us understand how this works for the Company. Do you buy -- it sounds like, given your comment around it takes awhile to flow through from your inventory out the door -- it sounds like you probably buy three or four or five months in advance, and I'm wondering if you can just provide some color on is that correct, do you buy it sort of spot prices, or are there contracted amounts over longer periods of time, can you hedge against any of this stuff? Again, just some help so everybody really understands how this all works for you guys. And then the last question is, just pharm systems and OUS safety, what drove the better than expected OUS safety? Was something going on -- anything country specific? And then the pharm system, you obviously said that some of it rolled into the 3Q, more so than you had anticipated. Again, just any events that were going on there to provide some color on that would be excellent.

So why doesn't -- Gary, will take that, and why doesn't Bill Tozzi give you a little bit more flavor on the buying patterns.

Sure. Well, starting with the ex-US safety, the good news there is this is happening pretty much across the board. We had strong growth in Europe, we had strong growth in Asia, we had strong growth in Canada. The growth in Europe was complimented by some new product introductions that we had made within the past year -- such as the side port safety catheter, we're getting good growth in Nexiva. Also in the U.S. by the way -- it just doesn't show up as much because the rest of the market for safety isn't growing as well in the U.S. But international safety is going well in pretty much all locations, and driven not only by new products, but particularly in Europe, two products that we had designed for the European market are doing very well. And then pharm systems, as we had indicated in the last call, the U.S. has slowed down. It will continue to. So you shouldn't look for much growth at all from U.S. pharm systems, for now, then it will come back in the future. But Europe was very strong. And part of that was driven by the issues with Heparin, and the need to fill more low molecular weight Heparin, so that actually benefited us in Europe in the quarter. On the other hand, the delays in approval of generic low molecular weight Heparin are one of the things that are negatively affecting our U.S. sales. That will eventually come back, but there had been a stock-up by the manufacturers of those devices and they had anticipated early approval so they already have a large stock waiting for approval. And then they'll have to work through that before that growth in the U.S. comes back. We're also being affected a little in the U.S. by the situation with EPO, so there's less EPO business for us.

Great, thank you.

You're welcome.

Larry, about our contracts, they vary. Some are one year, some are three year, so there's different degrees of how far we can go out on those. They all -- around the resins, a lot of them have indexing on monomer prices, so if monomer goes up, we do feel the impact of that. We do have several months' worth of inventory, but it's not an unusual amount of inventory -- maybe three, four months -- and we still have not been able to find a financial measure to do any hedges on. So that's kind of where we are in this. So we do feel the impact; but as we said, there is a lag but over time they will -- they do catch up.

Got you. That's really helpful. Thanks very much, guys.

You're welcome.

Thank you. Your next question is coming from Bruce Cranna with Leerink Swann. Please go ahead.

Hi, good morning, everyone.

Good morning, Bruce.

John, you had mentioned, I think, the possibility of some pricing next year in the U.S. And thinking about that, can you give us some sense as to what percent of your contracts actually might come up for renewal in any given year in the U.S.?

Actually, Bruce, as -- you might have joined after-- but as I said, I'm going to kind of stay within the four corners of what I said. Understandably, we'll work with our customers. And quite frankly, I don't have right now any sense of which contracts come to term and which don't. And as Bill said, some of these actually have monomer pricing indexes in them that allow us to do certain things.

Okay, and then secondarily, typically you give us an actual number for GeneOhm and TriPath. Can you give us those sales numbers?

Sure. TriPath sales in the quarter were $30.1 million, and GeneOhm was 10.3.

Okay. Thank you for that. Then on TriPath, you guys -- do you have any concerns at all with your competitor, I guess, potentially acquiring an HPV asset going forward?

Concern, no. But obviously, you know, we take all of our competitors seriously. And they're an excellent competitor. And we're still following the same strategy in terms of moving ahead on our molecular PAP clinical trial, as I talked about last time -- we're restarting that trail in the fall. I told you that we were adding an automated stainer to that trial, and that's on track. So we think this is a very unique approach to the business. On the HPV side of things, we do have an internal program, and it's several years out.

Okay. And then I guess lastly, for me, I know at ASM back in June, we were thinking maybe you guys would show your new rapid instrument -- let's call it the -- I guess the new GeneOhm product for lack of a better term.

Sure.

Any chance of that being at AACC?

It's not going to be at AACC. It's going to be AMP, which is October 30th in Dallas, which is the Association of Molecular Pathology. And so that's the timing to see that one.

Okay. Thank you.

Sure.

Thank you. Your next question is coming from Peter Lawson with Thomas Weisel Partners. Please go ahead.

-- how the hospitals have shaken out and if you've seen increased traction for your microbiology products as well?

Peter, we could not hear the beginning of your question. Could you give us the whole question again?

Yes, it's just really an update on the GeneOhm business and how the hospitals are kind of shaking out, if you're seeing increased traction for your molecular biology as well as the microbiology products?

Yes, so let me start with the GeneOhm then. And I'm going to stay with the guidance I gave last quarter, which is we expect to finish the year at about $40 to 41 million. So we continue to gain traction with the system, both in the United States and OUS. UK would be the second market that we see starting to take off and then finally, Germany is also doing fairly well. The other European countries are lagging a bit, as well as Japan, but we remain bullish on the overall market growth rate. Now, in terms of microbiology, you're bringing up a good point in that there's also a product that is a media-based product that is faster time to result than the traditional product, and that's a product line called CHROMagar. And we are seeing good growth in CHROMagar. So we're benefiting both on the molecular side and the standard media side.

And then just on the Life Sciences business are you seeing any weakness in large pharma? Could you sort of add color on the growth you're seeing in your cell analysis business and the discovery labware businesses.

We had commented the last time that there was a little bit of restructuring activity going on in the industry and it's slowed some things down. And I guess that in this quarter if you looked at one of our businesses, you'd look at the advanced bioprocessing business, where things have slowed down a little bit. You know, we're a large biotech supplier, and so we saw some things slow down there this quarter. That would probably be the most relevant topic.

Okay, thank you so much.

Thank you. Your next question is coming from Sara Michelmore with Cowen.

Yes, good morning, everyone. John, we talked a lot about gross margin. Can you just talk a little bit about operating expense lines, R&D and SG&A? And I know last quarter you talked a little bit about -- that you had a lot of ability to control the SG&A line, and those expense items were reasonably well controlled this quarter, and R&D grew a little bit less than you had been running the last several quarters. So can you just talk about conceptually where you are with those expense lines? How much discretion do you have to control expenses there in the event that some of this gross margin stuff continues to go the wrong way? Thanks.

Well, let me just start with R&D and the lower spending in this quarter. As Bill referenced, it was really just a timing matter between the fourth quarter and this. And so that, in addition to the certain sales that were accelerated into the third quarter, probably moved $0.03 into this quarter that otherwise would have been in the last quarter, mainly on the sales, but to a lesser extent on the R&D. So on the R&D, that's kind of out of bounds for us. We don't want to sacrifice innovation for the short term. But when we think about what strings we can pull on SSG&A, we have many. There are cost control containment initiatives across every one of the businesses, and obviously, therefore, every one of the segments. We control our base -- what we would refer to as core spending -- very well. With a spend in the $450 million range a quarter, there's a reasonable amount of control we can put there, plus, we start to leverage better. If you think about these businesses, we can -- as sales dollars get added, it's not a one to one relationship in terms of the SSG&A spend.

And actually, over a longer period of time we'll start to see that in the newer businesses, like GeneOhm and like TriPath, so -- once the markets are fully built and the products gain acceleration. So I would say that we have significant room in there to move. You can't do it just overnight. So they have to be -- the plans have to be laid in early, and they already are, and you can do certain of this stuff for the long term. You can't do it forever. But with our revenue growth, we feel very confident that we can get reasonable leverage for the foreseeable future. Okay?

Thank you. Your next question is coming from Kristen Stewart with Credit Suisse. Please go ahead.

Hi, good morning. I was wondering if you could just -- I just had a question on some of the resin numbers that you were giving. I had thought on the last quarter call you guys were expecting around $300 million in resin costs this year. I guess that's kind of the delta there, or was that just kind of a little bit being conservative?

I think the confusion over the numbers that were -- that's in part, Kristen, why we did this again with a little bit more amplification is, we had talked about resin costs, in particular, and other raw material costs. At one point in time we brought steel in because we're also susceptible to steel increases with the cannula, but kind of the seminal issue is resin, so we chose to take kind of our top resins and got as granular to go down to the seven main resins that we have, right down to poundage on them. And all we were doing is, if you just look at resins, and that's the dominant player in this regard, we had spent about $200 million in '07. We expect to spend about $230 this year, and based on what we have seen, we anticipate about $250 next year. So our fault for the confusion. Sorry about that, but that's really the answer.

Okay, and then just with respect to the Biosciences business, could we just get an update on what you're seeing with research spending and if anything has changed there?

Kristen, we really haven't seen anything change. I couldn't make any comments on that. Our instruments and reagents, particularly on the research side, are stable and consistent with what we've seen in the last several quarters.

Okay. And then just, I guess, looking at the operating margins on a divisional level, where do you think you might have the most room for improvement going forward, whether it be through driving mix or just kind of reducing some of the expense items?

Well, I wouldn't think I'd want to -- I'm not going to let any of these guys off the hook, so I think that there's ample room to move all the margins. And you should see the smiles around the table. But honestly, Biosciences is in that regard certainly different than big medical because there's such volume in medical, such a bigger sales basis. But there is room to expand margins on all of them. But I really couldn't say one over the other right now. It all gets to do with the timing of new products and like that.

Did you -- I know Bruce had had asked earlier about GeneOhm. Did you give the breakout between TriPath and GeneOhm, or was that combined?

We did, but I'll give it to you again.

Thanks.

So TriPath in the quarter -- hold on one second. Here it is. 30.1 million, all right? And GeneOhm was 10.3, and I reiterated the guidance on GeneOhm for around 40 to 41 for the year.

Okay. Thanks again.

Thanks. Sure.

There are no further questions. I would now like to turn the floor back over to Ms. Pat Spinella for any closing remarks.

Thank you, operator. I'll actually take this. And we just wanted to thank everybody for their attention; and for clarifying comments, certainly contact Pat, but we thank you very much and look forward to talking to you in November. Bye-bye.

Thank you.

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