Becton, Dickinson and Company (BDX) Q4 2021 Earnings Call Transcript

Becton, Dickinson and Company (NYSE: BDX) Q4 2021 earnings call dated Nov. 04, 2021

Corporate Participants:

Nadia Goncalves — Senior Director, Investor Relations

Tom Polen — Chairman, Chief Executive Officer and President

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Dave Hickey — Executive Vice President and President, Life Sciences Segment

Alberto Mas — Executive Vice President and President, Medical Segment

Simon D. Campion — Executive Vice President and President, Interventional Segment

Analysts:

Vijay Kumar — Evercore ISI — Analyst

Bob Hopkins — Bank of America — Analyst

Robert Marcus — J.P. Morgan — Analyst

Matthew Mishan — KeyBanc Capital Markets — Analyst

Larry Biegelsen — Wells Fargo Securities — Analyst

Joshua Jennings — Cowen and Company — Analyst

Matthew Taylor — UBS — Analyst

Presentation:

Operator

Hello and welcome to the BD’s Fourth Quarter and Full Year Fiscal 2021 Earnings Call. At the request of BD, today’s call is being recorded. It will be available for replay through November 11, 2021, on the Investors page of bd.com website or by phone at 800-839-1246 for domestic calls and area code +1, 402-220-0464 for international calls. The replay bridges are now dedicated. You no longer need a conference ID to hear the replay. [Operator Instructions]

Beginning today’s call is Ms. Nadia Goncalves, Senior Director of Investor Relations. Ms. Goncalves, please you may begin.

Nadia Goncalves — Senior Director, Investor Relations

Good morning, and thank you for joining us today. This call is being made available via webcast at bd.com. This morning, BD released its results for the fourth quarter and full-year of fiscal 2021. You can find the press release along with an accompanying presentation on the Investor Relations website, investors.bd.com. Leading today’s call are Tom Polen, BD’s Chairman, Chief Executive Officer and President; and Chris DelOrefice, Executive Vice President and Chief Financial Officer. Following the prepared remarks, Tom and Chris will be joined for Q&A by our segment presidents: Alberto Mas, President of the Medical segment; Simon Campion, President of the Interventional segment; and Dave Hickey, President of the Life Sciences segment.

During the call, we will be making forward-looking statements, and it is possible actual results could differ from our expectations. Risks, uncertainties and other factors that could cause such differences can be found in our earnings release and in our latest SEC filings, including our Form 10-K and Form 10-Qs.

We will also discuss non-GAAP financial measures regarding our performance. Reconciliations to GAAP measures including the details of purchase accounting and other adjustments can be found in our earnings release and financial schedules and the appendix of the Investor Relations presentation. Unless otherwise specified, all comparisons will be on a year-over-year basis versus the relevant period. Revenue percent changes are on an FX-neutral basis, unless otherwise noted. When we refer to any given period, we’re referring to the fiscal period, unless we specifically noted as a calendar period. I would also call your attention to the basis of presentation slide which defines terms you will hear today, such as base revenues, base margins, NewCo and RemainCo [Phonetic].

With that, I’m very pleased to turn it over to Tom.

Tom Polen — Chairman, Chief Executive Officer and President

Thank you, Nadia, and good morning, everyone, and thank you for joining us. Before I get started, I would like to officially welcome Chris DelOrefice, BD’s recently appointed Chief Financial Officer. Chris brings deep healthcare and medtech experience to BD across both operations and corporate finance. Many of you already know Chris from his most recent role as Head of Investor Relations at J&J. We are thrilled to have Chris join the team and while he has only been with us for two months, he is already immersing himself and making a very positive impact. I look forward to Chris sharing his perspective with you both today and at our Investor Day next week.

I would also like to welcome Dr. Carrie Byington, who is recently appointed to the BD Board of Directors. Dr. Byington is Executive Vice President and Head of University of California Health, where she leads the nation’s largest academic health system. Dr. Byington brings deep and highly relevant experience to BD as we work to advance our BD 2025 strategy and accelerate innovation in smart connected care, enabling the transition to new care settings and improving chronic disease outcomes.

On today’s call, I will provide highlights of our performance and the continued progress we have made on our BD 2025 strategy. I’ll then turn it over to Chris for the financial review and outlook for fiscal 2022. After our prepared remarks, Chris and I will open the call up for Q&A.

Now, let’s jump into our results and key highlights for the year on Slide 7. We were very pleased with the strong close to fiscal 2021, which drove full-year revenues, EPS and cash flows ahead of our expectations, despite the volatile environment. This reflects our continued laser focus on execution and the strength and expansiveness of our diversified business and geographic model. Revenues grew over 15% to more than $20 billion in fiscal 2021 with $2 billion in COVID testing revenues and strong 8.1% growth in our base business. Our adjusted EPS increased 28% to $13.08. And through continued execution of cash flow initiatives we instituted in fiscal 2020, we further improved our operating cash flow by over $1.1 billion compared to the prior year. Overall performance reflects strong momentum in our base business with a return to more normalized growth rates across all three segments versus pre-pandemic revenue levels.

As hospitals have been able to return to serving both COVID and non-COVID patients and the overall healthcare utilization levels increased, we saw strong demand for our broad portfolio of products that were essential to patient care, including new products delivered across our innovation pipeline. At the same time, we are proud to have supported our customers and the patients they serve by bringing to market and scaling a broad range of innovations to help the world diagnose, treat and prevent COVID.

Turning to Slide 8. At the highest level, our strategy has been deeply rooted in helping healthcare systems balance four key priorities and those are improving outcomes, driving efficiencies, expanding access to care and more important than ever, improving the clinician experience. BD is uniquely positioned to help our customers deliver against these three key priorities across discovery and diagnosis, Medication Delivery, and interventional treatment. And through our innovation-driven growth strategy, we’re investing in our broad foundational durable core portfolio, while also shifting a larger portion of our business into higher growth, higher impact areas and those three higher growth, higher impact areas that we’re focused on, that you’ve heard me talk about before, our smart connected care, enabling the transition of treatments in new care settings and improving chronic disease outcomes. In addition, by simplifying our product portfolio, we’re driving growth through increased efficiency and margin expansion.

Turning to Slide 9. Importantly, we significantly advanced our strategy this past fiscal year, taking bold steps to position BD for the long-term. Beginning with the actions we took to strengthen our balance sheet and enhance our working capital and cash flows. These actions have positioned our cash and net leverage well, giving us the capacity to increase investments in R&D and tuck-in M&A, accelerating our innovation pipeline and advancing our strategy to drive growth in fiscal 2022 and beyond. In FY’21, we invested over $1.2 billion in R&D, 21% more than last year, with increased funding for key projects through our new growth in innovation fund. We also continued our increased pace of tuck-in acquisitions, completing seven acquisitions in fiscal 2021, as well as a number of additional early phase investments as we also began to build our long-term inorganic funnel.

In addition, we reinvested over $200 million in profits from COVID testing to drive our growth strategy. Through investments in our commercial organization [Technical Issues] and accelerate our simplification strategy by investing to speed up our Recode portfolio and architecture program. And today, these investments are meaningfully advancing our strategy to expand in higher growth spaces across smart connected care, new care settings and chronic disease outcomes.

And just a few recent accomplishments that I can share here underscore our growing momentum, and we’re looking forward to sharing a lot more of those accomplishments next week at Analyst Day. These include new manufacturing lines that are now operational and will support demand for vaccination devices globally and this investment is in addition to our $1.2 billion commitment to expand capacity for our pre-fillable syringe and advanced drug delivery systems, which represent high-growth opportunities in our durable core. Emergency Use Authorization for BD Veritor At-Home, which is the first at-home COVID antigen test to use a smartphone to interpret and report results. This platform is a great example of how we’re applying digital capabilities to bring new first-to-world innovations to market and expanding care to new settings. We also received 510(k) clearance of expanded indications for Rotarex atherectomy system to include treatment of in-stent restenosis, which is a first-of-its-kind label expansion and it’s a great example of how we expand optionality for physicians and customers in the treatment of chronic disease.

We also received US FDA approval of our new high throughput molecular system, BD COR. In today’s challenging labor environment, BD COR’s advanced robotics and software algorithms provide customers a way to do more testing with less available staff, while providing important new clinical insights for cervical cancer screening and management through our BD Onclarity HPV Assay. Now, beyond BD COR, as you know, we have a portfolio and pipeline of unique automated solutions that help our customers perform in a tight labor market from helping nursing staff and pharmacists to be more efficient with medication management, to increasing efficiency and diagnostic testing for labs experiencing staffing shortages, we’re engaging with customers in these markets and are seeing great interest in our solutions. At our Investor Day, we’ll share more about how we are well positioned, not only capitalize on this opportunity, but how we’ve been very actively optimizing our investment mix to both expand our durable core platforms and simultaneously add technology and platform innovation in higher impact and higher growth spaces that we expect to enhance our long-term growth profile.

Through our disciplined capital allocation framework, we are balancing these investments in future growth with the return of capital to shareholders through our competitive dividend, while also resuming our share repurchasing program, having repurchased $1.75 billion in fiscal 2021. We also just announced our 50th consecutive year of dividend increases and we’re very proud to be one of only 16 companies across all industries to achieve that milestone.

Turning to Slide 10. We will remain disciplined in our approach to portfolio management as we systematically advance and deliver against our strategy. And earlier this year, we announced the decision to spin-off our Diabetes Care business. The proposed spin represents a value creation opportunity for all stakeholders. It is intended to enable growth acceleration for both BD RemainCo and NewCo with more efficient business processes and allocation of resources and capital. NewCo will be able to invest its capital in growth opportunities, including high-growth geographies markets and next-generation products. We continue to make good progress and the spin-off remains on track for the first half of calendar 2022.

Regarding our BD Alaris Pump, we recently received CE Mark and Health Canada approval for the updated BD Alaris System. We also achieved a significant milestone earlier this year with the filing of our BD Alaris 510(k) submission. We have dedicated resources supporting this and continue to make progress. Alaris is an important tool for clinicians and there continues to be strong demand for our platform during the pandemic.

Turning to Slide 11. I’d like to share some details about our enhanced ESG strategy, Together We Advance. BD has been a long-standing leader as a case study for sustainable business models and innovating for shared value. Our strategy serves as a framework through which BD addresses the most relevant ESG issues for the Company and its stakeholders and aims to further our leadership role and build on our commitment to improve and advance individual and public health at a global scale. The health of our Company, our planet, our communities and the people we serve are directly connected and when we successfully address the health of one, we often solve for challenges of another.

And under our strategy, we announced a suite of goals for 2030 and beyond with commitments in five areas that are most important to BD and our stakeholders and where we have opportunities to create meaningful measured change over the next decade, and those specifically are climate change, product impacts, responsible supply chains, healthy workforce and communities and transparency. And we’re acting on these commitments and, for example, we recently signed on to the United Nations Race for Zero campaign. We look forward to sharing more about the advances and impact we are having in each of these areas.

Before I turn it over to Chris, as we look ahead, we expect the greater resiliency exhibited by healthcare systems during Delta will continue, along with continued recovery in patient demand post-Delta. While there are inflationary pressures occurring across most every industry, we have been very active in addressing these challenges. We have put specific, defined, actionable plans in place to help mitigate these pressures, which are coordinated through an inflation task force that we’ve established with work streams across procurement, shipping, cost structure and continuous improvements in our plans. And in this environment, it’s also required to initiate pricing actions, which we have begun.

Looking ahead, while we believe there will be longer-term macro solutions like expanded shipping and resin capacity, we’re not waiting for those to occur. Our aim is to be best-in-class in navigating the current environment, we believe we have a clear path to accelerating margin recovery. We are proud of the progress we are making advancing our BD 2025 and ESG strategies. We have excellent momentum in our base business heading into fiscal 2022, a stronger balance sheet and steadily increasing cash flows, despite inflationary pressures, all positioning us well for the future.

With that, let me turn it over to Chris to review our financials and outlook. And again, Chris, welcome.

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Great. Thanks, Tom. Appreciate it. Before I jump in, let me first say, I couldn’t be more excited about joining BD. BD is a purpose-driven Company, that is both a deep and broad portfolio that includes leadership positions in many important areas in healthcare. Combined with our innovative pipeline of products and solutions, we have a tremendous opportunity to shape the delivery of healthcare and make a meaningful impact on healthcare outcomes around the world. I look forward to engaging with the investment community next week during our Investor Day and sharing more specifics around our strategy and the actions we are taking to support our growth agenda and deliver long-term value.

So with that, let’s get into our results. Echoing Tom’s comments, we delivered on our commitments in 2021, have strong momentum as we enter 2022 and we are well positioned for the future. Slide 13 summarizes our high-level revenue performance. Fourth quarter revenues of $5.1 billion increased 7.3% on a reported basis and 5.9% on an FX-neutral basis and were ahead of our expectations. Our base business revenues increased 9.8%, driven by strong performance across all three segments. In Q4, we saw continued improvement in overall healthcare utilization levels and routine testing and lab activity and higher acuity. The breadth and diversification of the total BD portfolio, including COVID diagnostic testing provides insulation against COVID-driven procedure fluctuations. For the full fiscal year, our revenues grew 15.6% or 8.1% excluding COVID testing, which demonstrates the strength of our business and the momentum of our strategy across our segments with base growth of 6.8% in the Medical segment, 8.4% in Life Sciences and 10.7% in the Interventional segment. Base business growth was also strong regionally, particularly in the US, China and Latin America. Compared to fiscal 2019, base business revenues grew 4.5%, or about 7% when adjusting for the Alaris ship hold.

Turning to Slide 14. Our Medical segment delivered $2.5 billion in revenues in the fourth quarter, growing 7.7%, led by our Medication Delivery Solutions and Pharmaceutical Systems businesses. MDS revenues increased 11.3% that reflects strong demand for our core products, driven by higher acuity and increased utilization in the US, in Europe and competitive gains in catheters and vascular care devices. In MMS, Q4 revenues were comparable to the prior year, despite the high number of infusion pump placements in Europe last year to support hospital needs. We continue to see solid growth in our dispensing platform and a high number of committed contracts with Q4 being one of our strongest quarters to date for committed contracts. Revenue growth of 5.4% in Diabetes Care benefited from the timing associated with certain sales and slightly better-than-expected market demand. On a normalized basis, we see diabetes growth about flat. Pharm Systems growth of 12.3% reflects continued strong growth, driven by demand for our pre-filled devices and enabled by capacity expansion. Demand for pre-filled devices is being aided by the fast-paced vial to pre-filled device conversion for biologics, vaccines and other injectable drugs.

Turning to Slide 15. BD Life Sciences revenues totaled $1.5 billion in the fourth quarter, increasing 1.5%. However, excluding COVID testing, Life Sciences grew 15.8%. Performance reflects strong double-digit growth in our base business in both Integrated Diagnostic Solutions and Biosciences, partially offset by a decline in COVID testing revenues. In IDS, 16.2% growth in the base business was driven by specimen management and microbiology, as lab utilization improved and demand increased for both core products and products used during the care of COVID patients. We’re also seeing strong growth in sales of BD MAX IVD assays which were up about 20% year-over-year. IDS base revenues also included sales of our combination flu COVID assays for both Veritor and BD MAX that began shipping in Q4. Early demand is robust and we believe the combination test will become the standard of care for symptomatic testing across laboratory and point of care testing as we enter the flu season.

Despite increased demand driven by the Delta variant and shipping our highest quarterly volume of over 30 million tests, COVID testing revenues declined in Q4 from $452 million to $316 million due to lower pricing in the market. Biosciences revenues increased 14.6%, driven by research solutions as lab utilization is returning to normal levels. We continue to see solid demand for research reagents globally. Our recently launched e-commerce site is a new vehicle for growth and has been well received with strong traffic.

Turning to Slide 16. BD Interventional revenues totaled nearly $1.1 billion in the fourth quarter, growing 8.3%. As we previously communicated, we began to see an impact from the Delta variant on elective procedures in certain US states in July and August, while we contemplated some continuation of that impact, it was slightly greater than anticipated in our Surgery and Peripheral Intervention businesses as hospitals reduced access and restricted elective procedures. Our Surgery business grew 16.8%, reflecting the year-over-year recovery in elective procedures with double-digit growth in infection prevention and biosurgery and strength in hernia despite some impacts from the Delta variant. Growth in infection prevention also reflects continued market adoption of our sterile ChloraPrep product. Revenues in Peripheral Intervention increased 5.5%. We saw continued strong performance in atherectomy as we have leveraged the capabilities of our PI sales force and in oncology as more people completed cancer screenings. PI also continues to be impacted by a product recall which impacted growth by about 300 basis points.

Urology and Critical Care revenues grew 3.8% driven by continued strong demand for PureWick, as well as continued adoption of the recently launched Arctic Sun with our Targeted Temperature Management platform. Partially offsetting this growth was a temporary supply disruption within acute urology that is now remedied. We expect shipments to be caught up within the first quarter of FY’22. For the full fiscal year in 2021, UCC grew 7.6%.

Turning to Slide 17 and our Q4 and full-year adjusted P&L. For the quarter, we delivered adjusted net income and EPS above our expectations, with net income of $770 million and diluted EPS of $2.59. On a currency-neutral basis, net income declined 7.8%, primarily by lower COVID testing pricing and testing-related one-time costs and reinvestment in the business, as well as higher shipping costs due to inflation and increased R&D levels. EPS declined slightly less or 6%, reflecting a lower share count due to share repurchases.

Our full-year adjusted net income and EPS were $3.9 billion and $13.08, respectively, with growth of 31% and 28%, driven by strong revenue growth and operating margin expansion of over 100 basis points on an FX-neutral basis. We delivered Q4 and full-year operating margins in line with the expectations we previously communicated for the Company and for the base business.

Turning to Slide 18, cash flows from operations totaled $4.6 billion in fiscal 2021, an increase of over 30% versus fiscal 2020. This improvement in our cash flows has allowed us to advance our balanced capital allocation framework and support our BD 2025 growth strategy through investments in capital, R&D and M&A. During fiscal 2021, we invested in capital expenditures to support high-growth opportunities, including the new manufacturing lines Tom previously mentioned. In addition to investing in R&D at over 6% of sales to advance our pipeline of innovative programs, we also invested $500 million in tuck-in M&A across our businesses that will support our strong growth profile in 2022 and beyond.

Beyond our investments in growth, we returned capital to shareholders through $1 billion in dividends and $1.7 billion in share repurchases. We ended the fiscal year with $2.3 billion in cash and an adjusted net leverage ratio of 2.6 times. Our current cash and leverage position gives us flexibility to create value through multiple levers and I look forward to sharing more with you about our capital allocation strategy during our upcoming Investor Day.

Now, turning to our fiscal 2022 guidance on Slide 20. First, the macro assumptions that support our guidance range. While we recognize there will continue to be some variability, we assume there will be continued easing of COVID-19 restrictions as vaccination rates continue to increase and that’s expect to see continued stabilization of procedures and are not assuming significant disruptions to procedure volumes. Additionally, while we do not expect conditions to return to normal levels, we do not anticipate worsening macro supply chain constraints or inflationary pressures. Finally, we’ve not assumed any impact of legislation changes that would impact the broader market.

Given the significant sales and income generated from testing in fiscal 2021, we previously provided a preliminary guidance for that excluded testing. To help you model our underlying base business performance, we will continue to provide our revenue guidance split between base and COVID-only testing through this year, along with context regarding testing margins relative to our base business.

So, a few specific comments on testing assumptions. Our base business revenue assumptions include sales of our combination flu COVID assays at a level comparable to a normal flu season which you should think of a $75 million to $100 million. For COVID-only testing, which is in addition to our base business combo test revenues, we assume the demand would be significantly less in fiscal 2022. Given the variability in the COVID environment driven by uncertainty around the length and intensity of outbreaks, our current assumptions are largely based on confirmed orders. We are assuming about $200 million of COVID-only testing revenue. If testing revenues were to be substantially higher, we first will compensate for any resulting procedure softness impacting our base revenue and income, which positions us well to manage through this period of uncertainty. Any further upside would be used to create value through either reinvestment or allowing incremental profits to flow through.

Regarding Alaris, as Tom noted, we are confident in the progress we are making and the resources that we have invested behind this program. As we previously shared, infusion pump clearances are inherently complex, particularly our filing and that’s would not be prudent to predict timelines. Consistent with what we shared previously, we do not expect and our guidance does not include a 510(k) clearance in fiscal 2022. Additionally, it is difficult to predict how things will play out as shipments are only being made under the medical necessity process. But at this time, we’ve assumed that our Alaris capital revenues will be generally in line with fiscal year 2021.

Let me now share some perspective on what is underlying our base guidance. We are well positioned for strong growth across our three segments with a balance in robust innovation pipeline resulting from investments in increased productivity in R&D. Growth will be further enabled by the strategic acquisitions we have added to our portfolio that are positioned in high-growth categories. While we aren’t providing segment-specific guidance relative to total Company base growth, we do expect our Medical Segment growth to be slightly below, Life Sciences growth to be in line, and Interventional to be slightly above total Company based growth.

In the Medical Segment, We are continuing to extend our leadership position with competitive gains and significant categories, such as peripheral catheters and pre-filled devices while investing in solutions transforming healthcare through smart connected care, and new care settings. Life Sciences holds leadership positions in attractive and growing categories and is investing in higher growth spaces by enabling smart automated laboratory workflows with solutions such as BD COR. Improving chronic disease treatment with clinically differentiated assays, research tools and companion diagnostics, where we expect continued above market growth in research reagents and migrating point of care diagnostics to alternative care settings. Interventional is continuing its strategy of evolving from product to category leadership in chronic disease treatment, while continuing to invest in accretive high-growth spaces. These investments include increased product offerings, both organic and inorganic, expanded labeling and investments in the non-acute care space. Our PureWick product line and acquisition of Straub Medical are good examples of how we are driving growth through our BDI strategy.

Turning to Slide 21 and our guidance for fiscal 2022. We expect base revenues to grow 5% to 6% on an FX-neutral basis compared to $18.3 billion in fiscal 2021. For COVID-only testing, we are assuming $200 million in revenue. Based on current spot rates for illustrative purposes, currency would be a headwind of approximately 50 basis points, or about $100 million to total Company revenues. All-in base plus COVID-only testing and the illustrative currency, we expect reported revenues in the range of $19.3 billion to $19.5 billion in fiscal 2022. We expect operating margins in our base business to improve approximately 200 basis points over fiscal 2021 base operating margin of 21.7%. Due to the current COVID test pricing levels, we expect operating margin on COVID-only testing to be modestly above our base business margins.

A few additional items for your models, we expect up to $50 million in improvement in interest other given debt refinancing activities we completed in the fourth quarter of fiscal 2021. As you are aware, interest other can fluctuate due to deferred compensation which is offset in SSG&A. We plan for an increasing effective tax rate of 12.5% to 13.5% given discrete tax items, in 2021 will not repeat. And in terms of share count, while our priority remains tuck-in M&A, we expect share repurchases to also be a consistent part of value creation. In addition to the year-over-year benefit from share repurchases completed in fiscal 2021, where our ending shares outstanding were 288 million, our guidance assumes share repurchases that at minimum offset any dilution from share-based compensation. All-in, we expect adjusted EPS to be between $12.30 and $12.50 with EPS excluding COVID-only testing being well above the $12 floor we provided in August on our third quarter earnings call.

Turning to Slide 22. Regarding margins, let me first take a minute to re-ground everyone on where we are today. There are few key considerations that have resulted in some margin pressure, some of which will be naturally restored and others that will be addressed by existing margin improvement programs with further improvements through new initiatives we are pursuing. Our total operating margin of 23.9% for the full-year did improve versus 2020. In 2021, our total margin profile benefited by over 200 basis points from the COVID-19 testing margin net of investments we made to accelerate growth and other value-creating programs. So it’s best to look at our base operating margins excluding COVID-19 testing of 21.7%, which also improved on an FX-neutral basis versus 2020. However, they do lag pre-pandemic levels as our base operating margin was primarily impacted by four key factors: the Alaris ship hold; negative COVID-19-related volume utilization; above normal inflation in COGS and shipping, along with currency headwinds. Each of these items negatively impacted margin by under a 100 basis points and averaged about 80 basis points each. They collectively accounted for about 90% of the erosion from pre-pandemic levels. The remaining impact was small and driven by a few items including a decision to strategically increase R&D investments to more competitive levels at about 6% of sales to support long-term growth.

As I shared, we anticipate improving base operating margins by around 200 basis points in fiscal 2022, driven by the following: first, like all companies, we experienced short-term impacts from COVID-19, such as under-utilization in our plants. These impacts carried into fiscal 2021, but will be more than fully restored in fiscal 2022 given our strong base sales momentum and associated increased volumes and will drive about 100 basis points improvement in operating margin versus 2021.

Second, given our global manufacturing and distribution footprint, we faced the impact of currency fluctuations in our P&L, along with normal FX translation, the timing of inventory movements throughout our network can also impact our margins. Based on current spot rates and our inventory outlook, we expect to recapture about 50 basis points of the currency headwind to operating margin we reported in 2021.

Lastly, we realized unprecedented inflationary pressures in fiscal 2021, driven by increased resin, inbound and outbound transportation and labor costs. These inflationary pressures will carry into fiscal 2022 and we intend to be best-in-class in how we navigate this environment. We are expanding our existing simplification efforts such as Project Recode and intend to drive additional margin improvements through new spend optimization initiatives. These include actions across procurement and shipping, such as reduced airfreight and supplier cost control. In addition, we have actions in place to invest behind continuous improvement in our plants. And inevitably, in this environment, we know we need to offset these pressures through pricing actions, which are already being implemented. We also are focused on leveraging our SSG&A investments while maintaining competitive investments in R&D. In 2022, we are forecasting additional impact to operating margin from inflation above normal levels from 2021. However, with the significant progress we’ve made to date on margin initiatives that are already underway, we anticipate being able to more than mitigate the incremental inflationary pressures this year to drive an additional 50 basis points of operating margin improvement.

Increased utilization, reversing FX pressure and initiatives to offset inflationary pressure will also play a key part in restoring our base gross margin to pre-pandemic levels. Combined, we expect these to drive around 100 basis points improvement. We are committed to delivering against these goals and thus, margin improvement will be a key measurement for performance in this year’s compensation plan across the Company. Our fiscal 2022 operating margin improvement will be a significant step towards recovery of pre-pandemic margin levels. We look forward to sharing more about our longer-term margin recovery initiatives next week at our Investor Day, which includes exceeding pre-pandemic levels in fiscal 2024.

Turning to Slide 23, our fiscal 2022 adjusted EPS guidance reflects the year-over-year decline in COVID-only testing profit, net of reinvestment. In our base business, as we just discussed, we expect strong operational growth driven by revenue growth and margin improvement with EPS well above the $12 floor provided on our August call.

Now, turning to Slide 24, our fiscal 2022 guidance also includes our Diabetes business. We continue to believe the spin-off is a significant value-creating opportunity for our shareholders and both RemainCo and NewCo are well positioned for success. Let me take a moment to reinforce some key items to make this compelling to all stakeholders. NewCo will be one of the largest pure play diabetes companies in existence today. With an ability to focus on its strategic goals, drive strong cash flow and allocate its capital more efficiently and effectively to drive higher growth. The proposed spin enhances RemainCo’s revenue and EPS growth profile as Diabetes Care’s revenue growth is slower than the corporate average and its margins are declining. Carve out financials will be available with the Form-10. RemainCo is expected to receive a cash distribution equivalent to multiple years of cash generated by the Diabetes Care unit. We plan to provide more details related to the proceeds and intended use at a later date.

The spin is intended to be tax-free for US federal income tax purposes and as is normal course for spends, we plan to restate our financials after the spin’s effective date to classify the Diabetes business as a discontinued operation. Given the higher margin profile of the Diabetes Care business, one should expect RemainCo’s margins to be lower as a percent of sales after they are restated but with a higher rate of growth. We are establishing transition services agreement that will offset stranded costs. We remain excited for what’s ahead for NewCo and making this a successful and value-creating opportunity for all.

Now, turning to Slide 25. Finally, I wanted to take a moment to share some phasing considerations for your models. First, we expect revenue growth to be normalized across the quarters with the exception of Q2 where we expect higher growth due to the easier comp resulting from the COVID resurgence in Q2 FY’21, primarily in Interventional. In addition, we expect COVID testing revenue to be weighted towards the first half of the year. Second, we expect gross margin to be lower in the first half given that increased inflation began earlier in fiscal 2021 and the benefit of cost improvement initiatives we have initiated will be on a lag as they flow through inventory. We expect the inflation flow through to inventory to be most prominent in Q2 and approve across the balance of the year.

Third, as we move past COVID variability, we expect SSG&A and R&D expense dollars to be fairly ratable by quarter. Fourth, for full-year — for FY’22, we anticipate our effective tax rate to be in the range of 12.5% to 13.5%. This rate includes assumptions around our jurisdictional mix of income and certain potential discrete items. Of course, the timing of realization of discrete items could result in variability in our rate quarter-to-quarter, including a potentially lower Q1 rate.

In summary, fiscal 2021 was a year marked by significant strategic progress and execution against our key priorities. As we look forward and as reflected in our 2022 guidance, we are well positioned for growth with excellent momentum in our base business, increased investments in our innovation pipeline, tuck-in M&A momentum, strong progress executing our balance sheet and cash flow initiatives and clear visibility to meaningful margin improvement. We are excited to share our long-term outlook with you at our Investor Day.

Let me now turn it back to Nadia to lead the Q&A portion of the call.

Nadia Goncalves — Senior Director, Investor Relations

Thanks, Chris. Ashley, we’re now ready to open up it for Q&A.

Questions and Answers:

Operator

[Operator Instructions] We’ll take our first question from Vijay Kumar with Evercore ISI. Please go ahead.

Vijay Kumar — Evercore ISI — Analyst

Hey, guys. Congrats on a good print this morning, and thanks for taking my question. And Chris, welcome to BD. I guess, to start with on the fiscal 2022 guidance here, maybe a little bit more clarity on what is being assumed for vaccine contribution? And I think you mentioned Alaris Pump sales in line with fiscal 2021. Maybe clarify what those numbers are? And on the combo test, is that — what sort of assumptions should be have an ASP for the combo test because I was curious on your pricing comment for COVID in fiscal Q4?

Tom Polen — Chairman, Chief Executive Officer and President

Yeah. Hey, Vijay. Good morning. This is Tom. Thanks for the good questions here and make sure I address all of them. So Alaris, as we said, we expect that to be essentially flat to 2021. Think about that as about $100 million contribution in 2022 and 2021. Put in perspective, that’s — as Chris mentioned, that’s about — 2020 was closer to $300 million. So even in our — as we think about the 8.1% growth this past year, that absorbs about a point of Alaris coming down from the — when we are getting very large numbers of additional medical necessity orders as people were adding to their fleets. So that’s the assumption on Alaris.

On vaccines, it’s — we still are towards the high-end of that $100 million to $150 million range that we had expected for vaccination campaigns. And so, we expect — and that’s just kind of part of the MDS business now. I don’t know if we’re going to call that out as a guide in that growth, but we don’t see it as a notable headwind in the growth rate of that business in 2022. We still have solid demand for those products. And as we said, we now have visibility to 2 billion units of syringes specifically for COVID vaccines, which we’re obviously proud of being able to help deliver 2 billion COVID vaccines around the world. And we’re — I think we’ve shipped about 1.2 billion to 1.3 billion of those so far, so that gives you a bit of color in terms of how much we’ll have to ship in 2022.

On the combo assay, great question. We’ve got Dave Hickey here, obviously, the President of our Life Sciences businesses. And so, let me turn that question over to him.

Dave Hickey — Executive Vice President and President, Life Sciences Segment

Thank you, Tom. Vijay, thanks for the question. So, yeah, just to reiterate on the combo, just to reiterate what Chris, etc., so if you think about what’s come back into the base business for 2022, we do expect that as we get into the flu season, the respiratory season for both BD Veritor and for BD MAX, that these combination tests will be the sort of the go-to tests, but particularly for people who might be symptomatic and for people who were sort of saying, do I have flu or do I have COVID? So, we do expect that to be the combo test. The installed base is out there to support that testing and we’ve put into the range for next year an estimate of around $75 million to $100 million back into the base business.

From a pricing perspective, we do expect it to be a premium price over the traditional test as we indicated. We’re just not sharing specific pricing at this time.

Vijay Kumar — Evercore ISI — Analyst

Understood. And Tom, I think I heard Chris mentioned, the goal is exiting fiscal 2024 operating margins to be above pre-pandemic levels. Your fiscal 2019 operating margins were 25.3%. So when you say above pre-pandemic, is that the target in — is exiting fiscal 2024, are you expecting to be about 25.3% or is that the annual goal fiscal 2024 overall margins to be about 25.3%? Maybe just give us some broad strokes on what your access there, is that Alaris coming back and then base business execution or something else that’s being built in?

Tom Polen — Chairman, Chief Executive Officer and President

I’ll turn that to Chris. Good question. And I think the exact term he used was above.

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Yeah, that’s right, yeah. And thanks for the welcome as well, Vijay. Yes, just to clarify, so you’re right, the pre-pandemic level was just over 25%. Fiscal year 2024 is our target to get above that level. We’ll certainly share more next week in terms of specific initiatives. I think the way to think of it is, we already had a lot of simplification efforts underway with Project Recode. This can contribute about $300 million. That’s one bucket. In addition to that, I articulated on the call, even as it relates to actions we’re taking, and demonstrated at the end of 2021 and heading into 2022, we’re increasing our initiatives, pricing mix, portfolio optimization and new initiatives on spend optimization as well.

And then, certainly, lastly, the Alaris ship hold, that was an 80 basis point drag on the business going back to then. So while we’re not being committal as it relates to timing, as you think through kind of the longer-term timeframe and that we’ll share next week you would expect that to have the benefit over time.

Thanks for the question.

Vijay Kumar — Evercore ISI — Analyst

Thank you, guys. Thank you.

Tom Polen — Chairman, Chief Executive Officer and President

Thank you, Vijay.

Operator

And we’ll take our next question from Bob Hopkins with Bank of America. Please go ahead. Your line is open.

Bob Hopkins — Bank of America — Analyst

Well, thank you and good morning and thanks for taking the questions. And Chris, welcome. My one — really only have one question or one topic I wanted to cover. And Chris, this is probably for you because it seems like a key part of this call is your assumptions on the improvement in base business and operating margins from 2021 to 2022. So a couple of things I’d love you to comment on, Chris, if okay? One is, I’m struggling a little bit with how to think about the starting point because Q4 base business operating margins are obviously a lot lower than full-year 2021. So maybe help me understand what’s the right starting point?

And then secondly, I’d love you to talk a little bit about how much of that 200 basis point improvement in base business you’re assuming for the full-year is gross margin? And just what are your assumptions on pricing embedded in that? So, it’s a lot in there. That’s my one question, but would love you address those things, and thank you very much.

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Yeah. Thanks, Bob. I appreciate the question. Great question. So, look, I think going forward, we’re going to continue to provide transparency as it relates to kind of the base performance of the business. I understand your question as it relates to kind of jump off points as it relates to quarter, keep in mind, there are a lot of quarterly fluctuations as we navigated 2020 through COVID and 2021 with inflationary dynamics. I think it’s simplest to kind of normalize and just look at things on a full-year basis. So, as you think of our operating margins from 2021 of 21.7% on the base business, there is really a few key drivers. One is, we talked about through this about having our utilization levels impacted due to pandemic. Our strong growth profile through 2021 and 2022, we now anticipate being well above and driving almost 100 basis points of utilization upside 2021 to 2022, full-year to full-year. In addition to that, last year we had the impact of currency. There was a headwind on earnings. They got trapped in inventory, and is that leads through? We actually have about a 50 basis point improvement heading from 2021 to 2022 that goes through to operating margin.

Lastly, where we’re investing a lot of our time, of course, is navigating the inflationary dynamics and we talked about the net 50 basis point improvement in terms of outsized inflation, which we would anticipate being north of 200 basis points in full-year 2022, offsetting that will be a series of initiatives. There is not one thing, it’s actually a very well balanced plan. We talked about on the call we’re continuing to drive cost improvement in our plants. We’re taking actions on the procurement side of the business as well in terms of spend. We’re looking at things from an SSG&A standpoint as well and leveraging that. And then, yeah, there’s going to be a strong focus on pricing, portfolio mix, driving growth through higher GP areas and the net of all of those, we actually expect that 50 basis point improvement.

And maybe lastly, just to give you some color on kind of where we are, because I think this is important. We’ve entered the year with specific action plans against those goals. So we have risk adjusted plans, very detailed targeted actions to deliver the improvement we need to mitigate against the inflation. If you go a step further and look where we are from kind of an execution standpoint, 80% to 90% of those have been fully identified and the plans are moving and some of them were just more timing dynamics in terms of when we may take price or when we will evolve our portfolio. That number, almost half of that is actually already banked coming in the years, flowing through our inventory and P&L now. That’s quite a testament to the work that we did in the back half of 2021 and already have strong progress. So, we look forward to sharing more as the year progresses. But we feel good about the plan and the progress that we’ll achieve through the year.

Bob Hopkins — Bank of America — Analyst

Helpful detail. Thank you.

Operator

And we’ll take our next question from Robbie Marcus with J.P. Morgan. Please go ahead. Your line is open.

Robert Marcus — J.P. Morgan — Analyst

Oh, great. Nice quarter and thanks for taking the questions. Appreciate it. Maybe just on the Diabetes spend, you talked about higher than Company margins. Is there any color you could add to how much? And will we have the Form 10 by the Analyst Day next week?

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Hey, Robbie, how are you doing? It’s Chris. Yeah. As we said, the Form 10 will be later this year. That will — we don’t anticipate that being out by next week. Look, I — it’s a good question. It’s premature to share. We have to wait until the Form 10 is out. There will be much more detail there. But I really think the more important dynamic here is, right, this is actually just a portfolio transaction and there’s going to be sort of a reset of margin and by definition, we had shared that it is accretive. There will be a reset of margin, but more importantly, it’s been dilutive to both growth and margin growth — top line growth and margin growth. So, it can be an acceleration from that. And as we get into Investor Day, we can certainly share more as it relates to kind of the longer-term impact, as it relates to margin and what I just shared in terms of our longer-term margin improvement goals. We still feel really good about where we’re going to position margin over time. And all these efforts going against that.

And lastly, I think just the value creation opportunity this creates, I talked about the cash infusion of multiple years we get that gives us additional flexibility to think through how to reinvest and utilize those cash infusion. We can talk more about that as well over time.

Robert Marcus — J.P. Morgan — Analyst

Great. Appreciate it. And then maybe just one other, you talked about doing seven acquisitions this year, $500 million total. How do we think about the contribution of those two revenues in 2021 and 2022? And where do you put M&A in terms of capital allocation priority? How do you view the market right now in terms of asset availability and valuations, would be great to get your take on that? Thanks.

Tom Polen — Chairman, Chief Executive Officer and President

Yeah, Robbie, this is Tom and good morning. So, we’ll try not to share too much of the thunder from next week. But it’s good question, and we’ll get more into this. But we’ve spent so about $500 million this year if you look at the acquisitions that we made last year. Think about over the last 20 months or so, we’ve invested about $900 million. That drives about $100 million this year and $200 million next year roughly from those tuck-in M&As. So if you do the math that’s about a little under 5 times what we’re paying in terms of revenue that we’re getting from those acquisitions next year, and as you know that that’s good value that we’re getting, and we’re, obviously, performing above our cost of capital on those acquisitions. We’re clearly at those levels of multiples that we’re being able to get those assets for. We’re not buying growth. We’re absolutely growing what we by leveraging our channels, our global position, our manufacturing capabilities, etc., to scale these assets in ways that we’re uniquely positioned to do so.

We’ll also share with you next week the mix of how those break out into the amount of spend and acquisitions that are going towards kind of that durable core base portfolio that we have versus those more transformative solution areas that I’ve talked about those three categories that we discussed. And you’ll see the weighting of those. They’re highly weighted in high-growth markets. That revenue that I described is growing north of double digits as we go forward. We continue to see opportunities. As we look ahead, we have a robust funnel. You can expect us to continue to drive that strategy forward. Obviously it’s been important part of why we focus so heavily on cash flow. Actually, if you look at our cash flow over the last two years since 2019, it’s grown at 18% CAGR, that’s not by accident. We’ve had very focused programs driving that, that’s something we’re very proud of. And it positions us. As Chris mentioned. to drive a balanced strategy between tuck-in M&A strategy, to drive our growth, as well as continue to return value to shareholders, as you’ve seen us doing, so.

Thank you for the question, Robbie, and looking forward to more discussion next week.

Robert Marcus — J.P. Morgan — Analyst

Great. And maybe just to clarify, is there any revenues associated with the deals we should be thinking about in the model for next year?

Tom Polen — Chairman, Chief Executive Officer and President

It’s — obviously, it’s built into our guidance. Chris, any other comments?

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

No. I think Tom shared the directional, right? These were about $100 million in the current year 2021 and we talked about essentially doubling that. So on an incremental basis, you can think of about another $100 million. So it’s a contributor to growth of 30 bps to 40 bps. It gives us a lot of confidence in our growth profile and then the capacity to do more of that over time. We’ll certainly, talk more about next year.

Robert Marcus — J.P. Morgan — Analyst

Great.

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Thanks, Rob.

Robert Marcus — J.P. Morgan — Analyst

Thanks a lot.

Operator

And we will take our next question from Matthew Mishan with KeyBanc. Please go ahead. Your line is open.

Matthew Mishan — KeyBanc Capital Markets — Analyst

Hey. Good morning, guys and thank you for taking the questions. Just first, how should we be thinking about the returns on the $200 million of investments you guys made from the bolus [Phonetic] of COVID testing? And when do you would expect to see something like that?

And then just one of those really one-time costs are successful programs, maybe just folding into more traditional M&A at this point. And I’m sorry, more traditional R&D at this point. Sorry.

Tom Polen — Chairman, Chief Executive Officer and President

Yeah. Matthew, this is Tom. Good morning. The — good question. So we are not — that spend is done. Right? So we’re not — that’s not recurring spend as we’ve always communicated that got cut off last year in Q4. So that is out of our P&L going forward. And we’ll share more details actually about exactly where that money was spent, and you’ll see throughout the discussions next week at our Investor Day, each of the different businesses highlighting the programs that they’ve invested in and you’ll see how that help to accelerate our growth outlook as we go forward over the long-term. It is mixed across both innovation, as well as accelerating our simplification strategy as well and we’ll share more details on that next week, but they are — it is balanced across both of those categories.

And when we say the growth agenda, how it’s balanced on that side. It is majority of the growth money that we’re spending is in R&D, but there is money that we spent on expanding channels. So specifically telesales in Europe, non-acute sales channels in the US and you’ll hear more about those specific investments from our leaders in the US region and from our European leaders next week as well and we’re excited to be able to share that. I know there has been a — we’ve been busy over this last year. We’re really proud of the progress that we’ve made on our strategy and we’re really looking forward to having our leaders share with you those details of that progress next week.

Thanks for the question, Matt.

Matthew Mishan — KeyBanc Capital Markets — Analyst

Yeah.

Tom Polen — Chairman, Chief Executive Officer and President

Go ahead.

Matthew Mishan — KeyBanc Capital Markets — Analyst

Just on the Pharma Systems business, I think you’ve announced and that’s been a very successful business for you. I think you’ve announced some capacity additions. I was wondering when do those capacity additions start to really benefit that area?

Tom Polen — Chairman, Chief Executive Officer and President

Yeah. Obviously, it’s a great business already. I think we’re three or four years of consecutive acceleration in that business. We have Alberto Mas on the line. Maybe, Alberto, if you could just comment on when do we start seeing some of that capacity benefit to business and where that stand?

Alberto Mas — Executive Vice President and President, Medical Segment

Yes. Hello, good morning. We’re going to see it along the way. So it’s not lumpy, it’s — because that is what we’re going to seeing capacity in 2022. In this business, you need about two to three years of advanced planning on these things. So, we’re going to see it along the way, it’s not going to be lumpy. So you’re going to see that in the next three to four years.

Tom Polen — Chairman, Chief Executive Officer and President

But it’s start — is it fair to say, Alberto, there is a little bit of a benefit of something that — some of that business continues to come online? The early phase does come online in the back half of next year?

Alberto Mas — Executive Vice President and President, Medical Segment

Or throughout next year? That’s what I’m trying to say, it’s — think of it as a smooth over the next three or four years, it’s going to be coming online quarter-by-quarter.

Tom Polen — Chairman, Chief Executive Officer and President

And, Matt, we — yeah, we see that helping to continue to fuel what is that high-single-digit, double-digit growth profile of that business.

Matthew Mishan — KeyBanc Capital Markets — Analyst

Perfect. Exactly the answer I was looking for. Thank you.

Operator

We’ll take our next question from Larry Biegelsen with Wells Fargo. Please go ahead.

Larry Biegelsen — Wells Fargo Securities — Analyst

Good morning. Thanks for taking the question. Welcome, Chris. So, one question for Chris, one question for Tom. I’ll ask them both now. Chris, maybe I’ll ask Bob’s question a different way. Can you talk a little bit about the margin and EPS cadence in fiscal 2022? How much below the operating — the base operating margin of about 23.7% do you expect Q1 to be? Is 100 basis points the right way to think about it and consensus is, I think, 2.84 for EPS right now? I’d love to get your reaction to that. Just to calibrate us correctly to start the year.

And Tom, you guys are doing really well in China, there are a lot of investor concerns about multinational companies ability to continue to grow there, given the value-based purchasing and the recent Document 551. How are you feeling about your ability to continue to grow strongly in China? And any reaction to some of those initiatives? Thanks for taking the questions, guys.

Tom Polen — Chairman, Chief Executive Officer and President

I’d start with Chris.

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Yeah. Thanks, Larry. I appreciate the question. Yeah. I’ll try to amplify some of the color that I provided earlier. So, as we think of the year, as the year progresses, first from a top line, just to reiterate, we do actually expect relatively normalized growth with the exception of Q2, like I had shared, because of the comparables and then there is a dynamic of COVID-only testing, which you’d expect to be more first half. So, I would consider that dynamic.

From a margin standpoint, certainly, first half, we anticipate to be lower. This is simply a matter of the inflationary dynamics that started in 2021 rolling through inventory and the peak of when that rolls through and those costs actually hit us is more like Q2. So kind of first half definitely less favorable margins versus the second half in Q2, in particular being kind of the high mark of that low, so to speak. And then, obviously, is the initiatives that we’ve already taken, again, there’s a lot of that banks, right? If you recall, I had shared about 50% of it’s already happening. But again, you get the dynamic of it flowing through inventory. So, you end up with kind of a second half dynamic in the margin improvement throughout the back half. So the last item was just more of the discretionary tax item I alluded to that could actually end up with some favorability in Q1, but those are very difficult to predict. So hopefully, that helps.

Tom Polen — Chairman, Chief Executive Officer and President

And, Larry, this is Tom. Thanks for the question and good morning. It was great to connect. For China, you’re going to hear from James Deng, our President of China actually next week. And so, I know he’s looking forward to sharing the progress there. As you said, we had a very good year in China this year and we think we’re kind of back to a strong growth rate looking forward.

551 for us, we don’t see specific impact in our categories. It’s something that we’ve spent a lot of time talking about. Obviously, we have four plants in China. They’re focused almost exclusively in China, for China and particularly focused in some of the categories that there is more local competition in like catheters, that container tubes, 10 needles, etc. But we make those businesses — those products mostly in China, for China as well, so we can compete as a local organization in those.

The other thing is, we have a record number of new product launches coming out in China over the next three years. You’ll hear from Simon and team in China. We’re really pleased that we ended 2021 having doubled the size of the Bard business in China since acquisition. So that was a big focus of ours on revenue synergies, and there continues to be the impact of those registrations that we’ve been making over the last several years. The impact of those will be continuing to rollout with new launches as we look forward, I know, again, Simon will talk next week maybe share a couple of comments now on some of the launches that you’re having in China that are occurring. So, we feel good about the outlook for China. s all, we’re watching the situation very cautiously, being prudent in our investments there. But we’ve got a great team. We saw strong performance this year, and we do have a strong outlook in China for next year as well.

Simon D. Campion — Executive Vice President and President, Interventional Segment

Yeah. Thanks, Tom. So, just some color, over the next three years, the Interventional Segment expect to commercialize further 22 to 25 new products in China and just an example of how we’ve been successful there in addition to what Tom said about doubling our business. But we recently just got approval or clearance for our Targeted Temperature Management technology in China and we’ve actually just got our first two purchase orders this month from that. Margins that are accretive to BDI, to BDX and the sustained and I would say, was a prolific growth of our business in China we expect to continue over the next period of time.

Larry Biegelsen — Wells Fargo Securities — Analyst

Thanks, guys.

Tom Polen — Chairman, Chief Executive Officer and President

Thank you for the questions.

Operator

And we will take our next question from Josh Jennings with Cowen. Please go ahead. Your line is open.

Joshua Jennings — Cowen and Company — Analyst

Hi. Good morning. Thanks for taking the questions. And just have one, sorry to keep focusing on the margin progression here but wanted to better understand the impact in fiscal 2021 and then how to think about the impact in fiscal 2022 of China value-based pricing. I felt like that was a bucket that was called out on the third quarter call as a big headwind for margin in this year. And just wanted to understand better the impact this year and whether that — with all the deposit momentum you’re experiencing, whether that turns into a margin tailwind in fiscal 2022? Thanks for taking the questions.

Tom Polen — Chairman, Chief Executive Officer and President

Hey, Josh, maybe just — let me comment on value-based procurement, I’ll turn it over to Chris for other items. We saw the bigger impact of VBP kind of is behind us. There is still some impact going forward. But the business and the market is — China is challenged with restructuring their cost base to manage through any of that. And so — and that’s exactly what they’ve been doing is restructuring cost basis, we think about that going forward to offset those headwinds.

So, Chris, any other comments?

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

No. Hi, Josh. I would just add that, yes, it was an impact. It was previously discussed. It was smaller relative to the main drivers that I framed as it relates to the progression from 2019 to 2021 and we always are doing continuous cost improvement initiatives that offset some of these things that happen. As Tom noted, China is well positioned and we’re thinking of that market more holistically. They’re strong double-digit growth in 2021, actually, it over 20%. And so, when you think of it from a total portfolio standpoint, we feel real — nicely positioned as it relates to both the growth profile and then have nice actually margin enhancement as a result of that as we go forward. So thanks, Josh.

Joshua Jennings — Cowen and Company — Analyst

That’s helpful. Thank you.

Operator

Your final question will come from Matthew Taylor with UBS. Please go ahead. Your line is open.

Tom Polen — Chairman, Chief Executive Officer and President

Hi, Matt. Good morning.

Matthew Taylor — UBS — Analyst

Hi. Thanks. I had –. Hey. Good morning, Tom. How are you doing?

Tom Polen — Chairman, Chief Executive Officer and President

Good.

Matthew Taylor — UBS — Analyst

Good, good. And Chris, welcome. And congrats on your new role at BD. So I just wanted to ask two questions are kind of related, just conceptually when you gave us the update in the $12 for a few months ago. Could you just talk about what’s changed to give you the confidence to now put out the guidance in the mid-$12 range and how things have developed here over the last couple of months?

Tom Polen — Chairman, Chief Executive Officer and President

Okay. Sure. I’ll turn that to Chris.

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Yeah. Thanks, Matt. I appreciate the question. Look, I think it really starts with our focus on growth. I think a strong base growth profile that we guided on, coupled with, if you look at the cash flow that we share through 2021, that gives us a lot of flexibility on tuck-in M&A, right? So we have strong organic growth profile, the enhancement we are making to our R&D portfolio and then that coupled with the tuck-in M&A capability that we will now be able to have it on an ongoing basis. Tom earlier talked about the acceleration of deals that we’ve done recently, those alone can contribute about 40 basis points to growth. So one I think there is just a very strong growth profile there. Two is, just the disciplined focus on margin improvement. We knew that was subject to focus on in addition to the cash management approach we’ve taken over time, that’s enhanced growth. And so, those are the two main drivers. As a matter of fact, we’re actually cycling over a headwind on tax, that’s been offset by some of the capital deployment we’ve been able to put it work with share repurchases. So, you’ll see us be more disciplined there with other value-creating levers, too, due to the strong cash flow that we have.

Tom Polen — Chairman, Chief Executive Officer and President

Maybe also, we’re finishing the year both stronger, right, than what we thought at the time. So we’re — and we had a really strong Q4. We’re seeing that strong demand in our base business. So we’re going in. The beat that we’re seeing here is a combination of, not only stronger COVID diagnostics, but stronger performance in our base business as we wrap up the year. So I think that’s an important point to — and contributor to that as well. Okay.

Christopher DelOrefice — Executive Vice President and Chief Financial Officer

Thanks, Matt.

Matthew Taylor — UBS — Analyst

Okay. Thanks for that comprehensive answer.

Tom Polen — Chairman, Chief Executive Officer and President

Okay. Well, operator if there’s no more –. I’m sorry, go ahead.

Operator

No. I apologize, that I’m going to turn the floor back over to Tom Polen for any closing remarks.

Tom Polen — Chairman, Chief Executive Officer and President

Just thanks everyone for the good discussion today. We obviously are really looking forward to discussing all the great work that the team has been doing here over the last 20-plus months as we’ve been advancing our BD 2025 strategy. I personally I’m really excited to — for next week’s event. We’re going to be able to share with you where we’ve been investing, how we’ve been refining and making significant changes in our portfolio, to optimize growth in margins and you’ll hear from a wide range of leaders on how they’re executing and bringing to life our 2025 strategy to create value for our customers and shareholders next week. So, everyone stay well and we’ll look forward to continued great dialogue next week. Thank you.

Operator

[Operator Closing Remarks]