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Executives

Monique Dolecki

Vincent A. Forlenza - Chairman, Chief Executive Officer and President

Mark Sebree

Suketu Upadhyay - Acting Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Controller

Analysts

David H. Roman - Goldman Sachs Group Inc., Research Division

Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division

Amit Bhalla - Citigroup Inc, Research Division

Jonathan P. Groberg - Macquarie Research

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

Matthew Taylor - Barclays Capital, Research Division

William R. Quirk - Piper Jaffray Companies, Research Division

Jeffrey Frelick - Canaccord Genuity, Research Division

Robert M. Goldman - CL King & Associates, Inc., Research Division

David Lin

Richard Newitter - Leerink Swann LLC, Research Division

Konstantin Tcherepachenets

Becton, Dickinson and Company (BDX) BD Simplist Product Line Launch Conference March 28, 2013 8:00 AM ET

Operator

Hello, and welcome to BD's call to discuss the just-launched Simplist line of prefilled generic injectables. At the request of BD Inc., today's call is being recorded. It will be available for replay through April 4, 2013 on the Investors page of the bd.com website or by phone at (800) 585-8367 for domestic calls and area code (404) 537-3406 for international calls, using conference ID 28786781. [Operator Instructions]

Beginning today's call is Ms. Monique Dolecki. Ms. Dolecki, you may begin.

Monique Dolecki

Thank you, Jackie. Good morning, everyone, and thank you for joining us today. We are hosting this conference call to introduce our new BD Simplist product line. As we referenced in our press release, we are presenting a set of slides to accompany our remarks on this call. The presentation is posted on the Investor Relations page of our website at bd.com.

During today's call, we will make forward-looking statements, and it is actual -- it is possible that actual results could differ from our expectations. Factors that could cause such differences appear in our first fiscal quarter press release and in the MD&A sections of our recent SEC filings.

Leading the call this morning is Vince Forlenza, Chairman, Chief Executive Officer and President. Also joining us are Suky Upadhyay, senior -- Chief Financial Officer, Senior Vice President and Controller; Bill Kozy, Executive Vice President and Chief Operating Officer; Gary Cohen, Executive Vice President; and Mark Sebree, President of BD Rx.

It is now my pleasure to turn the call over to Vince.

Vincent A. Forlenza

Thank you, Monique, and good morning to everyone. It's great that you're able to join us today. Similar to our quarterly conference calls, we'll walk you through several slides and then open up the call for Q&A.

As we stated in our press release yesterday, we're very pleased to announce our BD Simplist line of generic injectable drugs available in ready-to-administer glass prefilled syringes. This marks BD's entry into pharmaceutical manufacturing, which is complementary to our long-standing presence in injection and infusion-based drug delivery. As many of you already know, we're a global leader in this area. This opportunity is highly aligned with our broader strategy of enabling safer, simpler and more effective parenteral drug delivery.

We continue to make progress delivering against that strategy and believe that the BD Simplist product line is the next improvement to reduce the spread of infection and simplify drug delivery. During our Analyst Day, we shared with you some new exciting opportunities that we have in our pipeline. However, this is an area that we have not discussed with investors in the past. We would like to take this opportunity to provide you with the framework on how we are thinking about this product line going forward.

Over the past several years, BD has made a significant investment in drug device R&D in Pont-de-Claix, France, in our pilot manufacturing facility. We have also completed the state-of-the-art manufacturing facility in Wilson, North Carolina, as you can see on Slide 5. Our injectable drugs will be formulated, produced and packaged at this North Carolina facility. We believe this is a logical extension of BD's filling capability and manufacturing capabilities. We have demonstrated this expertise with our efficient prefillable syringe manufacturing capabilities in our Pharmaceutical Systems business, along with our filling expertise in the prefilled IV flush products within Medical Surgical Systems. We're pooling these together and taking the next step into manufacturing our own line of generic prefilled injectable drugs.

BD Simplist is a logical outgrowth of existing core competencies, combined with a new competency for BD: drug formulation. We believe the resulting product line is competitive in the marketplace and [indiscernible] efficient U.S. health care system. BD Simplist prefilled injectables will be manufactured and commercialized by BD Rx Inc., a wholly-owned subsidiary of BD. We will continue to invest in this area to develop a broad line of products to serve our hospital customers.

Moving on to Slide 6. I'd like to review the ways in which BD Simplist addresses unmet needs. Currently, health care professionals need help improving medication delivery and also need to have a trusted, reliable source for an inventory of the most commonly used injectable medications. With the traditional vial and syringe drug prepping process, health care professionals often find the injection process to be inefficient, with too many time-consuming steps. There's also the potential to have unlabeled or mislabeled syringes that are [indiscernible] have an increased risk of contamination. All of these challenges increase the potential risk for medication errors.

With this new product line, we're aiming to notably improve clinical practice and envisioning improved patient care and more efficient clinical applications. BD Simplist prefilled injectables will help improve patient care by enabling clinicians to efficiently and safely provide patients with what they need, reducing the potential risk of human error and providing commonly used medications from a trusted source. We're well positioned [ph] to take this next step based on our manufacturing capability, the high quality of our products and our history of reliable delivery to our customers.

We believe BD Simplist ready-to-administer prefilled injectables will be important in the marketplace for a number of reasons. In addition to the clinical benefits, there are many design features which you can see on Slide 7.

I'll highlight just a few. They include ease of delivery, the labeling is easy to read, they are individually packaged and they also have bar coding for easy identification. In addition, the BD Simplist product line can help reduce the injection sequence by up to 8 fewer steps in injections given by a vial and syringe, allowing for more focus on the patient and less on injection preparation.

On Slide 8, I'll discuss BD's addressable opportunity with this product line. We estimate the addressable U.S. opportunity for 1- to 2-ml fill volume for generic injectable products to be about $1.2 billion. BD is targeting drugs that comprise about 55% to 70% of that volume. Our initial focus is on therapeutic categories of anesthetics, cardiovascular agents, pain management and antiemetics. We're targeting hospital pharmacies, surgicenters, GPOs, integrated health networks and drug retailers as our key customers. The biotechnology contract manufacturing and vaccine markets are not part of our business plan.

With respect to our financial performance, we are forecasting incremental revenues of about $100 million to $200 million by the end of fiscal year 2017. Our revenue range is contingent on product launch timing and other environmental factors. Revenues for fiscal year 2013 will not be material, and this product line was contemplated when we provided our fiscal year 2013 guidance.

Our first product just approved by the FDA is Diphenhydramine. Diphenhydramine is an injectable antihistamine. We have submitted an additional 6 drugs to the FDA, which are in various stages of the approval process. We expect a few of those drugs will receive approval within the near future. Over the next few years, we plan to launch 20 to 30 drugs in total. Of course, we'll update you on our progress with this product line, and we will update you on product shipping dates as we move further along with our manufacturing plans.

Before we open up the call to questions, I'd like to summarize the key messages from our discussion today. First, we're excited about this opportunity with our new BD Simplist product line. This opportunity is highly aligned with our broader company strategy of enabling safer, simpler and more effective parenteral drug delivery. Second, we will continue to provide health care practitioners with innovative solutions to help reduce the spread of infection, help reduce medication error and advance drug delivery. Third, we believe this is a long-term investment that will be an important growth driver in the future. In the shorter term, we're expecting modest revenues until we broaden the product line. Finally, we believe we're well positioned to take this next step to improve drug delivery based on our manufacturing excellence, the high quality of our products and our service delivery to our customers.

So thank you, and we'll now open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from David Roman with Goldman Sachs.

David H. Roman - Goldman Sachs Group Inc., Research Division

Thank you for hosting the call so that we hopefully get a little bit more perspective on it than what was in the press release. I guess I have 2 questions. The first would be, Vince, obviously we're all very familiar with BD's competency in manufacturing, distribution, health care worker safety, et cetera, but the drug development business is obviously a little bit different from where, I would say, your core business has been focused the past several years. Could we just talk about the development of this business, where you hired people from and who are the people involved and to what extent you sort of plan to become more of a drug development company?

Vincent A. Forlenza

So our focus -- let me just start. Our focus is in generic injectables, so not broader than that, number one, and we think there's plenty of opportunity for us there. In terms of the capabilities and whatnot, you heard on the call that we set up our own subsidiary to do this. Obviously, there are different regulatory pathways, quality systems. As we were doing this, we were going out to consultants from the pharmaceutical industry, as you would expect, to get the best advice on how to do that. And at the same time, I think we were very fortunate to be in a situation where a lot of the pharmaceutical industry was restructuring, and this is a very attractive opportunity for people from the pharmaceutical industry. And I believe that we've been able to attract multiple pharmaceutical companies, some really top-class talent, so we've got a very strong core group. We've been working at this for a number of years. So we've had a few years now of experience with this group working together before the launch of the product. So Mark, is there anything else you'd like to add to that?

Mark Sebree

No, I think...

Vincent A. Forlenza

Mark Sebree, by the way, who's running the initiative.

Mark Sebree

Thanks, Vince. I think, as you pointed out, there was the significant investment that we made in Pont-de-Claix, France for the drug development expertise, so we did bring people in from a wide variety of pharmaceutical companies who have that experience base.

Vincent A. Forlenza

Both in the U.S. and in Europe. And David, just to point out to you, we mentioned it in the speech but step-wise, of course, we've been making the glass syringes for years and years, and we're state of the art in that piece of it from the device side. The part that you may not have focused on because we don't talk about it that much, of course, has been the Flush business, where we have been filling syringes and selling them to the hospital markets, and we've been doing that for 12 years. So that gave us a real leg up on the next step in this whole process in building upon that comp. So the real new competence, the next one, really was this drug formulation and bringing in individuals from the pharma industry to do that piece of it.

David H. Roman - Goldman Sachs Group Inc., Research Division

Okay, that's helpful. And then the final question I guess on sort of the market opportunities/go-to-market strategy. I just want to be -- make sure I understand this. My impression is that a fair amount of the market was actually infusion delivery, but maybe that's incorrect. Are you only going after the prefilled segment of the generic injectable market and is that the $1.2 billion that you're talking about? And then, maybe how do you sort of -- maybe just to clarify that then, how do you sort of plan to compete with the incumbents like Hospira or Fresenius?

Vincent A. Forlenza

So we're actually going after the injectable piece of the marketplace, but that is not in prefills. So Mark, you might want to add.

Mark Sebree

Sure. I think, as Vince said, we're really going to focus on trying to redefine how injectable drugs are delivered. And clearly, there is a subset of the market that is infusion-based, but there's also a large subset of the market that is bolus-dosed, and the drugs are far more standardized in the drug delivery for those particular drug administrations. So it is a subset of the market, it is just liquid drugs that we're going to focus on, obviously, and I think that answers that question.

Vincent A. Forlenza

Just to make sure we're clear. Those drugs -- the market that we're targeting that we were talking about in terms of the $1.2 billion and whatnot and the 55% are generally in vials in the hospital. So what's happening in the hospital is you have to take the vial and you have to draw the drug up into a syringe, and that's why we think we're bringing something much more efficient to this marketplace. So is that clear for you now?

David H. Roman - Goldman Sachs Group Inc., Research Division

Yes, yes. That's, yes, very clear.

Vincent A. Forlenza

Okay. So the injectable drugs are then bolus in an IV push, so maybe that's where some of the confusion was coming.

Operator

Your next question comes from the line of Rick Wise with Stifel, Nicolaus.

Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division

Vince, can you talk a little bit about -- I guess, 2 things I've been curious about. First, how do you build the pipeline of approved drugs? Or maybe you already have these agreements stacked up and lined up. And maybe talk a little bit about the margin profile and the potential operating leverage. Sounds like you've built the plant, the investment's in place, it's on leverage, so it sounds like getting to that $100 million or $200 million could actually have a more dramatic impact on operating profitability. Or is that not the right way to think about it?

Vincent A. Forlenza

So let me start with your first question which is, I think what you were asking was, okay, in building the pipeline, so number one, do we have a pipeline of submissions? The answer is yes. We have a pipeline of submissions that are at the FDA, and that's 6 in total. And as we said, those are in various stages of moving through the FDA, but we do expect some approvals in the near future. So we've been working hard on the number of these submissions. That's the first thing. The second thing on the margin profile, Suky can to talk it. What you are right about is in terms of capital. We've put the capital in over the last couple years. The plant is up and functioning. So for us, in terms of how the economics improve going forward, there are a couple of issues, of course, which is going to be the volume ramp for this. We do have a sales force in place. But Suky, do you want to talk to the margin profile a little bit?

Suketu Upadhyay

Sure, Vince. So as you alluded to, we're still very much in investment mode around this platform. We've made significant investments over the last few years. We continue to invest in 2013. It is dilutive to overall earnings in '13, but as Vince mentioned in his script, that was contemplated in our overall guidance. The way I would think about this is, as that plant gets up to scale, as we start to move through the approval process, the development process and get to commercial scale, we expect this platform to be at about $100 million to $200 million by 2018. At that time, we would see the margin profile having similar or slightly better characteristics than the overall BD margin profile. So that's kind of how we're thinking about it from a long-term perspective. How you might want to think about this from a modeling perspective, as you think about '14, we're not going to give explicit guidance on this. One, it's not our practice. And two, it really is too early to tell, given the very early nature of the platform. But the way we're looking at it is where we stand today, based on our current thinking on the approval flow of drugs, we don't see '14 as this product having a major headwind or tailwind impact on '14. But again, that's where we sit today. That could change, and we'll guide you accordingly.

Vincent A. Forlenza

Yes, and Rick, as we understand where we are with the approvals, obviously, that's going to change our view on the ramp, and so that's what Suky's saying. We'll come back and we'll talk more about that. And hopefully, by the end of the year, we'll be in a better -- this fiscal year, we'll be in a better shape to have -- give you some more direction.

Operator

Your next question comes from the line of Amit Bhalla with Citi.

Amit Bhalla - Citigroup Inc, Research Division

Vince, can you talk a bit about how entering this new area impacts your overall M&A strategy and your ability to take on any new business or product lines in the next 12 to 18 months, as you're focused on ramping up this opportunity?

Vincent A. Forlenza

I really don't think it has an impact on our ability to do other plug-in acquisitions. We have built this in a very focused manner with the Rx subsidiary in place. So just to make up a hypothetical, if we were going to do something in biosciences or diagnostics, it's not going to be a distraction because of the way we run the company in a very focused manner, global business by global business. And as you heard from Suky, everything -- as you've asked me the question and others have asked me the question about our M&A strategy, every time I've answered that question, I've had this in the back of my mind in terms of what we've been doing here, so there's really no change to the M&A strategy.

Amit Bhalla - Citigroup Inc, Research Division

And a question for Suky. I was wondering if you could put some numbers around the financial investment you've already made and what you need to put in on a capital basis and any time line you could put on when this is going to be accretive.

Suketu Upadhyay

Yes, sure. So we're not going to talk explicitly about our historical investments. Broadly, I think out in the public, we've said that we've invested about $100 million or slightly more into the actual physical plant. As Vince says, we've hired up from a people resource perspective. As you think longer term, again, I would think about that run rate or that at-scale margin profile of being at or slightly better than the overall company characteristics. Amit, it's really too early to tell on the overall accretion, dilution at this point because, again, we're still very much at the early stages.

Vincent A. Forlenza

I think you can get to where you need to get to, if you go back to what we said, about $100 million to $200 million by the end of 2017 and then build off Suky's comments from a margin perspective.

Operator

Your next question comes from the line of Jon Groberg with Macquarie.

Jonathan P. Groberg - Macquarie Research

Maybe just -- I'm not sure you'll give this number, but just explicitly what is kind of the breakeven revenue rate that you need, Suky?

Vincent A. Forlenza

So this is Vince. You guessed right, we won't give you that number. We admire you for trying, Jon.

Jonathan P. Groberg - Macquarie Research

All right. And what percent -- if you look at that $1.2 billion that you talked about that you said is mainly vials in your kind of 1 to 2 milliliter, is any of that already converted to prefilled? So like what percent is already converted? Or is that something that is basically 0% converted at this point and you think could, ultimately, 100% convert to prefilled?

Suketu Upadhyay

Yes, at this point, there's really only one small product category that's in glass ready-to-use prefillables, and that's the emergency syringe market. I don't have that number off the top of my head, but that's probably about a $50 million a year market. So...

Vincent A. Forlenza

Out of the $1.2 billion.

Suketu Upadhyay

Out of the $1.2 billion. So we feel strongly that we really have the only ready-to-administer prefilled syringe to cover the wide variety of needs in this marketplace.

Vincent A. Forlenza

So we think that $1.2 billion is addressable. We'll have to see how successful we are in terms of conversion.

Jonathan P. Groberg - Macquarie Research

Okay. And if I can, just one last one. Vince, it seems like if you read about this market, there's been a number of shortages, I guess, in some of these -- with some of these products and some of that, I guess, is due to just pricing and profitability. And so can you maybe talk about your understanding as you look to this market as to, one, why there were shortages and two, what your plans are with respect to being able to price in this market and how sustainable you think those prices are?

Vincent A. Forlenza

So I'll approach it from the standpoint of -- in terms of do we think that we can get the margins that we're looking for, and as we've been detailing the last few minutes, working our way down from price all through gross margin and our manufacturing cost, we think that the capabilities we bring both in filling and device manufacturing put us in a very unique position to drive the economics that we're looking for in this business, and I make that statement based on the fact that we've also been in the Flush business. And so the pricing that you're talking about in that marketplace, quite frankly, is a big step-up on individual device prices. So our view may be a lot different than other companies and affected by the capabilities that we bring here, so we find it an attractive marketplace, number one. Number two is we think we're bringing substantial differentiation to this marketplace. Others have not invested because they had opportunities and were competing for new products coming off patent, and that is really the focus of the generic industry. We're not going there. But we think we've identified a segment where our capabilities really apply, so we're excited about it.

Operator

Your next question comes from the line of Jon Wood with Jefferies.

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

This is Brandon Couillard in for Jon, actually. Vince, how do we think about the competitive landscape in the 20 to 30 new drugs you expect to launch over the next several years, particularly around the pricing environment? And do you believe you're disadvantaged in any way with the relatively smaller offering compared to some of the peers in the market? And how do you think your existing GPO relationships help you drive uptake?

Vincent A. Forlenza

So I'll let Mark Sebree answer that, but we don't think we're disadvantaged. No, we do think we have to get to a reasonable product line. So in the short run, with 1 or 2 drugs, probably the answer is yes, but it's also mitigated by the fact some of these drugs are on the shortage list, so that improves our entry. But Mark, do you want to add anything to that?

Mark Sebree

So in terms of the GPO coverage, we've had a really, really good interest from the GPOs. In fact, we have already signed with a number of the major GPOs multi-source awards for these products, and the same on the wholesaler side. So from a competitive standpoint versus the competition and having the market access that we need, we feel like we're in a very good position starting out. And just to add to Vince's comment, the goal here is to have a big enough footprint so that we're not disadvantaged relative to the size and the offerings of the competitors. So we feel like, in the long run, we'll certainly be at parity in terms of the number of products and the presence in the marketplace.

S. Brandon Couillard - Jefferies & Company, Inc., Research Division

And it sounds like you'll initially focus on the U.S. market. But under what circumstances will you look to take the offerings internationally?

Vincent A. Forlenza

So you're right, we are starting with a focus in the U.S. We think it's wise to do this step by step, which is the approach we took in the Flush business, and then as we built our capability, we started to expand worldwide. Mark is focused on the U.S. for the moment, but we also have work going on to evaluate the opportunities x U.S.

Operator

Our next question comes from the line of Kristen Stewart with Deutsche Bank.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Just in terms of 2013, I know that you said it was contemplative, but can you help us, just a little bit more granularity on just exactly how dilutive this may be for this fiscal year? And then, going forward, from a revenue standpoint, are you planning to break this out separately within Medical? Or will this be rolling up into one of your other line items that you're reporting?

Suketu Upadhyay

Yes, so Kristen, we're not going to speak to the total amount of dilution. It was a slight step-up in '13 versus 2012. And as I talked about, in '14, the way to think about it is we don't expect a material headwind or tailwind going into that. And I'm sorry, your second question was around...

Kristen M. Stewart - Deutsche Bank AG, Research Division

Just in terms of how you'll be breaking this out from a revenue perspective. I know it's minimal this year and sounds like next year. But just longer term, will this roll into med service systems, prefilled, et cetera?

Suketu Upadhyay

Yes, this will roll into the Medical segment and from there, further down into our Medical Surgical business unit.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then, I guess, just taking a bigger step back, Vince. I guess, can you maybe just talk about why you chose to kind of build this in-house and establish BD Rx versus perhaps going out and making an acquisition? Because I know there's been some transactions in the generic injectable market, like Baxter sold their business. Just maybe talk about why build it versus maybe acquire and make a more meaningful footprint.

Vincent A. Forlenza

So the important part of this strategy was to build off of our core capabilities, number one, that we've been building for a number of years, as I was mentioning, in the Flush business, in the prefilled business. That's the first thing. The second thing was that when we looked at the dynamic in this industry, it was also clear that the marketplace had not invested in state-of-the-art manufacturing capability, which is a core part of this strategy, and one of the reasons that we have drug shortages is the lack of investment in this kind of core capability. So what we think we've done by building it internally, we've built it the right way from the bottom up. So we think that was a much better approach in terms of doing this.

Operator

Your next question comes from the line of Matt Taylor with Barclays.

Matthew Taylor - Barclays Capital, Research Division

First question, I just wanted to understand, in terms of the ramp from here to the $100 million to $200 million that you called out, is that something that we should expect to be relatively linear? Or is there a big bolus a couple years out as you get some of these products? Or...

Vincent A. Forlenza

So it's really going to depend. The timing of the ramp is going to depend on the individual drug approvals, and so depending on how they move through the pipeline, those ramp characteristics will change. But what I'll tell you is, as we get these approvals, we'll update our view for you on what this looks like because it's impossible to predict exactly today.

Matthew Taylor - Barclays Capital, Research Division

And are you willing to give us any more specificity in terms of individual drugs or areas that you're looking at? And are you going to report this in Pharma Systems?

Vincent A. Forlenza

No, it's going to be reported in Medical Surgical Systems. And Mark, do you just want to comment on the areas we're focused on?

Mark Sebree

Yes. Again, as Vince said earlier, we're going to focus on a wide range of drugs that are amenable to this kind of drug delivery. Those include anesthetics, blood modulators, antiemetics, so antinausea drugs and a wide range of drugs that will be used mostly in the intensive care unit and critical care units of hospitals.

Vincent A. Forlenza

And Mark, mention what we're not going to do because this is complementary to what we do in Pharma Systems. It's not in competition with Pharma Systems. We're very careful about that, so if you could mention...

Mark Sebree

So -- exactly. At this point, biosimilars and vaccines are not contemplated in our business plan. There's obviously a lot of speculation that biosimilars is, based on the regulatory path coming into a clear focus, an area of significant future growth. But that is not something that we are focused on at this point.

Vincent A. Forlenza

So we're focused on areas that -- where we really think prefills make a big difference, and we've had a very positive experience with our Flush business that the customer base really likes the prefilled format. And with what's going on in hospitals today in terms of the pressure they're under from a staffing standpoint and the way that nurses have so many data requirements or so many other things that they have to do, we think that, just as we've told you with KIESTRA on the lab side, where lab automation and efficiency is really important, we see the same sort of opportunity here that the format that we're -- it's not just about the drug, it's very much about the format and the value that the format brings here. So I don't want us to lose that. We think there's a big difference between being in a vial and having to go through all of those steps and the potential errors versus doing this in a prefilled syringe format. So I don't want us to lose focus on that.

Operator

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

William R. Quirk - Piper Jaffray Companies, Research Division

First question is I certainly realize that it's going to vary a little bit by drug and by drug class, but can you talk a little bit about the price difference over the traditional syringe-and-vial approach? Is this a 20%, 30%, 40% premium?

Vincent A. Forlenza

Mark, you want to handle that?

Mark Sebree

Bill, the way I would phrase it is we're going to responsibly price these drugs. There will be a premium. It will vary a little bit by the drug that we're talking about. But to the earlier points that were made, the environment out there is one in which there are a number of drug shortages, and we feel that making sure that we right-price these products is part of what's going to enable us to reliably get the product to the customer. And obviously, if you talk to the directors of pharmacy of almost any U.S. hospital, they're going to tell you one of their biggest concerns is reliability of supply. So everything we're doing, including price, including quality, including control of the supply chain, is around that idea of making sure that we can reliably provide the products.

Vincent A. Forlenza

We don't want to telegraph the exact number to the competition. We've done a lot of work on this in terms of assessing the value. So getting to the -- kind of the long-term view, not the short-term view of what's happening with the shortage, but really pricing based on the value that Mark was talking about.

William R. Quirk - Piper Jaffray Companies, Research Division

Okay, great. And then just 2 last quick ones for me. And that is, first off, have you talked to your pharma systems customers and kind of made them aware that although you won't be competing with them, certainly you're moving into somewhat of an adjacent space? And then, secondly, given how attractive this appears to be for BD, why -- I guess, why hasn't this been tried before within the generic business? And maybe the answer is just that the price point didn't seem to be there, but I would love to hear that from you.

Vincent A. Forlenza

Well, I think to the first question, we have been having conversations, obviously. As you would expect, we would've planned that out with our pharmaceutical systems customers. There have been no negative reactions from what we've done. So I know -- as we said, we think this is very complementary, it's not in competition, and we think that everyone understands that. But we'll obviously continue to have conversations with that customer base to manage that situation, if something does arise. And what was the second part?

William R. Quirk - Piper Jaffray Companies, Research Division

Why hasn't it been done before?

Vincent A. Forlenza

Why hasn't it been done before? I think it hasn't been done before, it's not just the price point, it's also the device manufacturing capability. And we're unique in, I believe, in terms of what we have in capacity and ability to do this within the industry. So the people who were in the business would have had to OEM the device, and I think that gives them a very different set of economics than we have here.

Operator

Your next question comes from the line of Jeff Frelick with Canaccord.

Jeffrey Frelick - Canaccord Genuity, Research Division

Vince, will you entertain any partnering with some of the other generic drug manufacturers? Or is it strictly a go-it-alone strategy right now, specifically for the first 20 or 30 drugs you're targeting?

Vincent A. Forlenza

So right now, for the first 20 or 30, it's a go-it-alone strategy. But we would -- certainly, obviously, if it was attractive, we would entertain partnerships with other companies.

Jeffrey Frelick - Canaccord Genuity, Research Division

Okay. And just a quick follow-up, of the 6 FDA submissions you have currently in the agency, how many do you anticipate being approved in 2013?

Vincent A. Forlenza

So we think there's several more that will be approved during 2013. Hopefully, we'll be talking to you soon.

Operator

Your next question comes from the line of Robert Goldman with CL King.

Robert M. Goldman - CL King & Associates, Inc., Research Division

Just wanted to follow up a question somebody had asked, on why this hasn't been done before. Because I think to a certain extent it has been. Mylan has their EpiPen, by way of example, and I think Watson and Teva have prefilled generics as well. Is it that Becton, Dickinson believes it's in a unique position as a device supplier so that you can better drive economics? Or is it that these other folks now have proven that the market is ready for prefilled syringes and the time is right for BD? Or in fact, you are doing something substantially different than what Watson, Teva, Mylan have done in the past.

Vincent A. Forlenza

Well, we think we are doing something different. We do believe, number one, that all the market research that we have done on this says the time is right to do this, from meeting an unmet need in the customer base. And as we've said, right now, really in the market that we're targeting, the only piece of the market that is really in prefills is emergency medicine, and that was about $50 million. So number one, we think it's timely. And number two, we do think that the manufacturing capabilities that we bring, the fact that we're basic in the devices is an important piece of economics. And so we have both the capability, the reputation for reliable supply is strongly built with the customer base. If you go look at supply chain evaluations by independent third parties, we have ranked the highest of any medical device company the last 2 years by Gartner. So the only people who are higher in terms of reliability and efficiency in the supply chain were the distributors. So we think we're building upon a very strong base both in terms of reliable supply, manufacturing capability, and it is time. So it's more of an "and also" than an "either/or" in the way you posed the question. Mark, do you have something to say?

Mark Sebree

If I could just add to that, the other thing to keep in mind here is that from a drug device standpoint, there are a number of drugs that are readily compatible with devices in general and syringes specifically. But there's also a lot of drugs that are not compatible. So as we talked about the formulation expertise that we brought in to start this initiative, you should also keep in mind that from a pure drug device compatibility standpoint, as you get into a larger number of drugs, it becomes far more difficult to actually be able to manufacture those drugs with the stability needs that you need to be on the market.

Vincent A. Forlenza

So hence, we're going after those segments where these really apply.

Mark Sebree

Absolutely.

Operator

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

David Lin

It's actually David in for Derik. Just had a quick follow-up question on -- you mentioned that these kind of products would have a premium over your traditional vial injection. Just from the perspective of people keep on talking about keeping the hospital health care cost down, how is this premium going to be passed through? Is that something that the hospital would absorb? Or can that be passed down through the patient reimbursement?

Mark Sebree

So typically, these drugs do not have reimbursement concerns, so it would be additional cost that the pharmacy would absorb. But again, we feel strongly that when they look at the situation more holistically and start to think about the cost of medication errors, that this is a price premium that will be readily accepted.

Vincent A. Forlenza

It will be value-adding to the hospital, from a total cost in use and total value standpoint.

Operator

Your next question comes from the line of Richard Newitter with Leerink Swann.

Richard Newitter - Leerink Swann LLC, Research Division

Just 2 quick follow-ups. I wanted to maybe just see if you could provide a little bit more color. As you get to the kind of $100 million to $200 million revenue run rate in the out years, can you just give us a sense, is that -- you have 20 to 30 products that you cite as potentially coming to market or getting approval. Is that going to be achieved or potentially be achieved with 7 products? Is that possible on the market? Or would you need the majority of those kind of in the pipeline to kind of come to fruition to achieve that?

Vincent A. Forlenza

To get to the $100 million to $200 million. Trying to figure out...

Suketu Upadhyay

Yes, I'm trying to make sure I completely understand the question. We -- I mean, we are obviously working on the products that will make the largest contribution to that first. So if I'm understanding your question properly, we'll be on a path -- we'll be on a trajectory to get to that number well before we get to product #30.

Vincent A. Forlenza

Yes, so there's some larger ones earlier in the pipeline, okay?

Richard Newitter - Leerink Swann LLC, Research Division

Okay, that's helpful. So I mean, it's possible that the 6 that are probably with the FDA submitted right now are probably ones that in and of themselves, over time, if those are successful and they come earlier in the cycle, could be ones that get you to that number.

Vincent A. Forlenza

We're not saying that all the 6 are big, some smaller ones in there that were there for doability reasons and other factors. So -- but what we are saying is we don't have to get to the 30. We'll have the majority of the market that we're targeting served earlier than that. That's the way to think about it.

Richard Newitter - Leerink Swann LLC, Research Division

Okay, that's helpful. And then just on the -- kind of in the investment side, you said you're still very much in investment mode, and you're not expecting an incremental headwind or tailwind on the margin side in '14. Can you just describe beyond the -- you have your plant up and running now, where is the incremental spend from this point forward mostly aimed? Is it on the FDA-related or the marketing side?

Vincent A. Forlenza

So we have the plant up and running, number one, you're right there. We have the sales force in place as well. But of course, we have to promote these products, so -- and we will continue to spend R&D to build the pipeline. What Suky did say was that from a dilution standpoint, he's not expecting it to be any worse going into 2014, and the improvement is really going to be -- it's going to be the ramp that determines that. So that's what's going to gauge the financials going forward. We have the majority of the investment made. How fast we go from dilution to accretion is going to depend on the ramp-up. Now having said that, we do the U.S. marketplace. At the time that we start to go x U.S., when that happens, then, of course, we would make incremental investment at that time.

Operator

Your next question comes from the line of David Roman with Goldman Sachs.

David H. Roman - Goldman Sachs Group Inc., Research Division

I apologize for coming back in queue. I just had one really quick follow-up. Was just that -- on the 1- to 2-milliliter vial, is that all you plan to target in terms of this market? Or is that just the immediate-term expectation? Or do you plan to go bigger over the long run?

Vincent A. Forlenza

Mark?

Mark Sebree

Yes, at this point, we are only focused on the 1 to 2. And again, we will certainly look at growth opportunities in other sizes. But right now, we know that, that's the market that's most amenable to this bolus dosing that we think will be the real strength of our initiative in the early years.

Operator

Your final question comes from the line of Lawrence Keusch with Raymond James.

Konstantin Tcherepachenets

This is actually Konstantin for Larry. So just had a couple of quick questions. One, Vince, if you can maybe just talk about as you look at the o U.S. opportunity, can you maybe talk about are there any structural differences in o U.S. markets that essentially you would not be able -- the $100 million to $200 million that you're expecting in U.S., why won't you be able to double that if you go to the o U.S. markets?

Vincent A. Forlenza

It's really too early for us to say what the potential is outside of the U.S. There are structural differences in the marketplaces that, as we're studying them, there are differences in drugs, there's differences in pricing. So we're looking at those things and evaluating them. So it's not -- to your question, it's not a straightforward "take what you have in the U.S. and do it x U.S." And so that's why we're being thoughtful about how we might approach that.

Konstantin Tcherepachenets

Okay. And then in terms of -- just thinking about your manufacturing capacity, can you talk about your new plant, how much, essentially, revenue can it support?

Vincent A. Forlenza

I don't want to get into specifics like that from a competitive standpoint. I think we have built the plant with the capacity that we needed to implement this strategy is what I'd tell you.

Operator

That was our final question. And I'd like to turn the floor back over to Vince Forlenza for any closing comments.

Vincent A. Forlenza

Well, first, let me thank all of you for participating on the call. We are certainly excited about the opportunity. We think it's a natural move for us into an adjacency, very consistent with the company's strategy that we've talked about. We do think this is a timely entry in terms of the unmet need here, and we really look forward to updating you on the progress of this initiative as the submissions move through the FDA and as we ramp this up with the customer base. So thank you very much, and have a great day.

Operator

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

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