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Becton Dickinson & Co. (NYSE:BDX)
Q4 2020 Earnings Call
Nov 6, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to BD's Fourth Fiscal Quarter and Full Fiscal Year 2020 Earnings Call. [Operator Instructions] It will be available for replay through November 12, 2020, 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 confirmation number, 4475229. [Operator Instructions]

Beginning today's call is Ms. Kristen Stewart, Senior Vice President of Strategy and Investor Relations. Ms. Stewart, you may begin.

Kristen Stewart -- Senior Vice President of Strategy and Investor Relations

Thanks, Crystal, and good morning, everyone. Welcome to BD's review of our fiscal fourth quarter results. Joining me today, we have Tom Polen, Chief Executive Officer and President; and Chris Reidy, Executive Vice President, Chief Financial Officer and Chief Administrative Officer. During the Q&A portion of the call, we will have three segment presidents joining us. Alberto Mas, President of the Medical segment; Patrick Kaltenbach, President of our Life Sciences segment; and Simon Campion, President of Interventional segment. A few logistics before we get into the call. This call is being made available via a webcast at bd.com, where you can also find accompanying slides. Unless otherwise specified, all comparisons will be made on a year-over-year basis versus fiscal 2019 and percent changes are on an FX-neutral basis. During the call, we will be making some forward-looking statements, and it is possible that actual results could differ from our expectations. Risks, uncertainties and other factors that could cause such differences can be found in our SEC filings, including our 2019 Form 10-K and subsequent Forms 10-Qs.

In particular, there continues to be significant uncertainty about the duration and contemplated impact of the COVID-19 pandemic. The commentary we are providing today includes our best estimate based on the information that we currently have. We have made certain assumptions in how we are managing our business, but that could change as we move forward. We will also discuss some non-GAAP financial measures with respect to our performance. Reconciliations to GAAP measures that include the details of purchase accounting and other adjustments can be found in our press release and its related financial schedules and in the appendix of the Investor Relations slides. These are all available on the bd.com website.

With that, I'll turn it over to Tom. Tom?

Tom Polen -- Chief Executive Officer and President

Thanks, Kristen. Good morning, everyone. I hope you're doing well, and thank you for joining us. For today's call, I want to address three main topics: first, my high-level perspective on the quarter and full year performance; second, I'll give an update on several hot topics we're fully focused on; and finally, I will share progress on BD's strategy. Then I'll turn it over to Chris for a review of the P&L and an update on our outlook. So let's jump right in. First, I'll start with the quarter and the full year performance. In Q4, we had better-than-expected revenue and not only our COVID-related diagnostics testing, but also our core business. That allowed us to not only deliver EPS upside, but also importantly, gave us the opportunity to make some strategic investments aligned to our BD 2025 growth strategy. Revenues were up 4.4% on a reported and FX-neutral basis as we were able to offset the overall impact of COVID-19 and grew despite the Alaris ship-hold. I want to acknowledge the exceptional execution by our Integrated Diagnostic Solutions business this quarter, particularly the BD Veritor team. The team exceeded our commitments, successfully developing the BD Veritor COVID-19 assay in an accelerated time frame, securing several regulatory approvals, scaling up manufacturing, and continuing to advance the science behind the utility and effectiveness of rapid antigen point-of-care testing. Total COVID-19 testing revenues allowed us to offset the ongoing COVID headwinds in other businesses from lower hospital utilization, surgical procedures, routine lab testing volumes and research spending.

In fact, because of our COVID testing revenues, we were able to move from a net negative COVID impact in Q3 to a net positive COVID impact in Q4. If you exclude COVID-19 testing and look at performance of the base businesses, we are very pleased with the sequential improvement across all of our three segments during the quarter. As you'd expect, the pace of the recovery varied by both product category and by geography. So all in, the BD team was able to deliver Q4 mid-single-digit sales growth, overcoming the headwinds from COVID-19 and the Alaris ship-hold, the latter we estimate to be 240 basis points in the quarter. Our Q4 adjusted EPS was $2.79, down 15.7% on a year-over-year basis. While our revenues returned to growth, we did continue to see some COVID-related pressure, dilution from our May equity issuance and headwinds from the last quarter of the Gore royalty contributed to our EPS decline. As I look back on the year, we faced a number of challenges from the Alaris ship-hold to COVID-19 and its significant impact on healthcare utilization globally. In our fiscal Q3, COVID-19 had about a $600 million negative impact to our top line. However, the BD team executed strongly, swiftly launching multiple innovative COVID-19 diagnostic solutions and focusing on execution to return to growth in Q4 and finish the year with revenues flat on an FX-neutral basis. I'm proud of the team for their hard work, closing the year strong and offsetting the continued COVID-19 headwinds. Now I want to turn to several hot topics. Let's start with a review of our COVID testing in the quarter.

As I said, I was very pleased with the IDS team's execution this quarter, with COVID-19 testing sales coming in at approximately $440 million, with Veritor revenues at over $340 million in the quarter. We were able to ramp up Veritor manufacturing capacity faster than originally expected, a testament to BD's world-class manufacturing excellence. We were also able to sustain a higher average selling price for longer than we anticipated. Looking ahead, we do expect price erosion as additional competitors have come to market and more may do so. We continue to work diligently to expand our BD Veritor and BD MAX manufacturing capacity. Our previously communicated capacity expansions remain firmly intact. We continue to monitor the supply and demand dynamics of the market, and we'll provide you with updates on additional capacity expansions to the extent any further new capacity comes online. On the customer side, we continue to see very strong demand for BD Veritor and BD MAX COVID-19 tests. Regarding BD Veritor, we've seen strong adoption and interest from both traditional and nontraditional accounts in the U.S. Since the last quarter, we have doubled our U.S. installed base of active Veritor readers to over 50,000 units, and we continue to see strong instrument demand, further extending our footprint. We believe that this broadened Veritor footprint will provide us with additional future growth opportunities beyond COVID-19 testing for current and future planned assays. On September 30, we received the CE Mark for our COVID-19 assay on BD Veritor.

And we've been very pleased with the reception of the assay in international markets. We've signed a number of contracts and are actively leveraging one of BD's strengths, which is our large international footprint. And in fact, we're now shipping Veritor instruments and assays to customers across Europe, Asia, Latin America and Canada. As we head into the flu season, we recently launched a combination COVID-19 flu RSV test in Europe on our BD MAX system with our partner, CerTest. We continue to work toward the launch of combination flu and COVID-19 assays on our BD MAX and BD Veritor platforms globally. Now let me take a minute and walk through our thinking on the outlook for Veritor. You've heard me say before that there are a number of variables at play. There's the ramp-up of our manufacturing, the number of competitive products and ASPs, and then you have to take into consideration many variables around COVID-19 vaccines like their timing, availability, effectiveness and how widely they are adopted. But taking all of that into consideration, we are comfortable forecasting fiscal 2021 Veritor testing in a range of $1 billion to $1.5 billion, with the weighting of these revenues being more in the first half of the fiscal year than the second. I know many of you also have questions on the long-term durability of COVID-19 testing and the outlook for fiscal '22 and beyond. Again, there are many factors at play. And there are a variety of scenarios that we're planning for and we'll be ready to execute. I would say though that we do now believe that there is a higher likelihood for testing to continue into fiscal '22.

However, given the uncertainty around demands and ASPS, we believe it would not be prudent to model a continuation of revenues at the same level as fiscal '21. This leads me to our next topic, our COVID-19 testing reinvestment plans. We are electing to reinvest a portion of our FY '21 COVID-19 testing profits back into the business to ensure long-term durable growth. These profits will be invested consistent with our strategy and value creation framework of grow, simplify and empower. Our top focus is investing in growth. We activated the organization and investment plan in Q4, initiating a bottoms-up process to identify high-impact projects and programs based on risk-adjusted returns and our capacity to execute. As part of this initiative, we increased investment in the recently launched BD Innovation and Growth Fund. We've also kick-started other programs that accelerate go-to-market investments in the U.S. and internationally and ongoing R&D projects. You've heard me talk about our simplification efforts around Project Recode. We plan to look for ways to optimize that program even more. We're also using COVID-19 profits to accelerate further investments in our Inspire Quality program and enhance our risk management systems. We believe these investment programs should generate returns beginning in late FY '22. Our current reinvestment plans contemplate fiscal 2021 Veritor testing revenues of, as I said, $1 billion to $1.5 billion. If Veritor testing revenues are above this level, we plan to make additional investments toward long-term growth, yet still allow a portion of the higher revenues to flow through to the bottom line. Next, I'd like to take a moment to update you on our readiness for a COVID-19 vaccine campaign, where we continue to make great progress.

To date, we now have commitments for over 800 million needles and syringes, which includes commitments from countries like the U.S., U.K. and Canada and various nongovernment organizations around the world as they prepare for COVID-19 vaccination campaigns. Last June, we estimated the total vaccine syringe and needle opportunity over a 12- to 18-month period could be in the $100 million to $150 million range, and we continue to feel this is an achievable objective. Now I'd like to update you on Alaris. The highest priority of the organization continues to be preparing for a comprehensive 510(k) filing, obtaining clearance for Alaris and returning our market-leading infusion pump franchise to growth. Over the last quarter, the team has made further progress in retired risk. We are systematically working our way through various testing stages, and we continue to engage in open dialogue with the FDA about our progress. My confidence level today is higher than it was last quarter that we will be able to submit our 510(k) in late fiscal Q2 or early fiscal Q3 2021. As I mentioned in the past, our focus remains on ensuring a comprehensive submission that will ultimately help enable timely FDA review and clearance. While it's not our intention to predict the FDA's time lines, given the size and complexity of the submission, we do not assume any revenue contribution from a 510(k) clearance in fiscal 2021. The last item on my hot list is I want to comment on innovation in our growth -- in our product pipeline. Category innovation remains one of the core drivers of our growth strategy. We have been focused on improving our pipeline execution and R&D effectiveness, and we continue to make great strides to that end. This quarter, R&D spending increased 8% year-over-year, the first meaningful increase for the company in many years.

Looking ahead, we will continue to focus on driving new innovation and a higher level of R&D investment, including through our new BD Growth and Innovation Fund, which we established earlier this year. Through the fund, projects are funded for a maximum of two years and give the completely new product development opportunities, unfunded or underfunded line extensions that have significant incremental revenue opportunities or commercial programs designed to accelerate product adoption. We received a lot of great submissions across all three segments, and we initiated the first round of funding in Q4. Looking ahead to the next year or so, we are advancing a robust product portfolio with many singles and doubles, like we've long been known for. We also have some more notable programs in the pipeline, and I'd like to highlight a few of those for you now. The IDS team is acutely focused on advancing our combination COVID and flu assays on both our BD Veritor and BD MAX platforms as soon as possible for the benefit of patients. I also want to highlight the great strides of our women's health and cancer franchise that they're making. In July, we received FDA approval of the BD Onclarity HPV Assay for extended genotyping, which can improve risk stratification and support risk-based patient management. We're receiving great customer feedback on this assay. And in fiscal 2021, we look forward to bringing this assay and BD COR, which is our new high-throughput molecular diagnostic system with fully integrated specimen processing. We look forward to bringing that -- both of those to customers in the United States.

The BD COR system and our Onclarity assay are both available in Europe, and we've been receiving very positive feedback on the initial rollout. In BD Medical in Q4, we launched the BD UltraSafe Plus 2.25 ml passive safety system, which adds to our proven high-growth safety portfolio in Pharmaceutical Systems. It has been designed to deliver up to a two ml dose volume while enabling an ergonomic and safe injection experience for both patients and healthcare providers. We have launched -- we have secured a number of pharmaceutical partners that plan to commercially launch our new product toward the end of fiscal 2021. Also in BD Medical, during fiscal '21, we'll launch the BD Pyxis ES 1.7, which adds new capabilities and deeper integration of pharmacy and nursing by enhancing automation in the operating room with the Pyxis Anesthesia Station. In BD Interventional, we had a robust year of product launches across its three businesses. Of particular note, the Peripheral Intervention team launched the 0.18 and 300-millimeter Lutonix DCBs in the U.S. and launched Lutonix in Japan. PI also launched the EleVation Single Insertion Multiple Sample Breast Biopsy device in addition to the Caterpillar embolization device, which represents our first foray into the world of interventional oncology.

Our Surgery business launched a completely robotic compatible version of our market-leading anatomically configured 3DMax inguinal hernia mesh as well as the PurPrep infection prevention product. Finally, our UCC business capitalized on our developing position in female incontinence by launching Dry-Doc 2.0, which is designed to help women who suffer from incontinence to use PureWick at home. Fiscal 2021 promises to be another year of innovative product launches across the Interventional segment. The team worked hard to minimize the impact of COVID on our product launch schedule, leading to further commercialization of products across all businesses. For competitive reasons, we won't share any specifics with you. But suffice to say, you should expect further commercialization activity of new products in our oncology, infection prevention and acute urology platforms, in particular. Finally, I want to provide an update on our FDA PMA submission for the Lutonix drug-coated balloon and its use in below the knee. The FDA has recently notified us that our PMA supplement remains non-approvable. We are working collaboratively with the FDA to determine what our next steps may be, if any. As a reminder, our entire Lutonix business today represents less than 1% of our overall sales, and we do not include any revenues in our forecast related to this submission. Before we move on, I want to take a moment and acknowledge John DeFord, who will retire from BD at the end of the calendar year.

As you all know, John has had a remarkable career and has made a tremendous and lasting impact since joining BD three years ago. While we continue to -- while he will continue to serve as an advisor and a consultant for us, of course, we're going to miss John's leadership and we're going to miss his humor. But we're very excited for Patrick's appointment to the Chief Technology Officer, and we're confident that he is the right leader to deliver on our innovation strategy and product pipeline in our next phase of value creation. And as Patrick takes on this important new responsibility, we could not have asked for a better successor than Dave Hickey to lead BD Life Sciences and build on Patrick's track record of success. Dave has been leading the IDS team and the BD Veritor COVID-19 launch. Finally, I want to provide a quick update on our strategy. When I became CEO earlier this year, I outlined my vision for BD's next phase of value creation. It's what we call BD 2025, which included three drivers: grow, simplify and empower. And the drivers build upon BD's strengths, our world-class manufacturing, global scale, our strong category leadership and deep capabilities in software and informatics. And we've made great progress in fiscal 2020 in building the foundation and beginning to execute against our new playbook. As I mentioned, we've been steadfast in strengthening our R&D capabilities and continuously improving our R&D effectiveness.

And I'm excited about what is to come from the BD Growth and Innovation Fund. We also look to augment our internal innovation strategy through tuck-in acquisitions. In fiscal 2020, we executed on six tuck-in transactions in higher-growth markets, and I'll highlight just 3. The first is NAT Diagnostics, which is an early stage privately held company, developing a molecular diagnostic platform for point-of-care testing. This acquisition broadens our point-of-care testing capabilities in infectious disease. And while this product is still under development and a few years from launch, we are very excited about the technology and our point-of-care diagnostics business more broadly and how this adds in a molecular capability to that. Another acquisition we closed on this year was Straub Medical, a privately held medical device company that markets mechanical atherectomy and thrombectomy devices that treat peripheral arterial diseases. This acquisition expands our robust portfolio of PAD and venous solutions within our BD Interventional segment. And the third acquisition I'd like to highlight is Adaptec, an innovative start-up company that developed the Sensica UO, which is an automated urine output measurement solution. It captures hourly urine output measurements and integrate this into the electronic medical record through the BD HealthSight platform. This is actually going to be BD Interventional's first connected smart device, which leverages BD's interoperability position that we have today in about 70% of all U.S. hospitals. We have a robust funnel of deals, and we continue to increase our focus here as we move into fiscal 2021.

Our efforts around simplification and Project Recode and Inspire Quality all remain on track. If anything, we have the opportunity to accelerate some projects with some of the COVID-19 test reinvestment proceeds. As I reflect on FY '20, I am proud of how the company worked to navigate through the headwinds of COVID and the Alaris ship-hold. Our response to these challenges, along with the successful launch of COVID-19 testing, enabled BD to deliver flat revenue performance on an FX-neutral basis for the year. As I look ahead, there are some challenges that we face as a company, namely COVID and the Alaris remediation, the latter of which I am confident we will resolve. But there are many more opportunities ahead to drive growth and accelerate our impact on healthcare around the world. We have the right strategy, and we're making the right investments.

And with that, I'd like to hand the call over to Chris Reidy, and then I'll make a few concluding remarks.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Thanks, Tom, and good morning, everyone. Thanks for joining us today. We are pleased with our fiscal fourth quarter revenue and adjusted earnings per share performance. Overall revenues were $4.8 billion, up 4.4% on both a reported and an FX-neutral basis. We estimate the net impact of COVID was a positive 210 basis points as COVID-19 testing revenue more than offset the ongoing negative impact from lower utilization across our businesses. Even after adjusting for the net COVID-19 effect, we are pleased that we are still able to grow our revenues despite the Alaris pump ship-hold. We estimate the negative impact of the Alaris ship-hold was 240 basis points. BD Medical revenues totaled $2.3 billion and were down 4.9% year-over-year. We estimate COVID negatively impacted the business by about 370 basis points. We estimate the Alaris ship-hold negative impact was 450 basis points. Medication Delivery Solutions saw a sequential improvement consistent with healthcare utilization trends, but still continue to be impacted negatively by COVID-19 on a year-over-year basis. Internationally, MDS' decline largely reflected the impact of China's volume-based procurement as well as inventory reductions we took in the quarter. In Medication Management Solutions, the Alaris ship-hold continues to have a negative impact on the business unit's overall results, and there was a difficult comparison with the prior year. International MMS sales were very strong, driven by infusion pump sales in Europe. In U.S. dispensing, we saw a solid growth and closed the year with strong new committed contracts.

In Diabetes Care, sales declines reflected ongoing market price pressures. Pharm Systems sales were up double digits this quarter and ended the fiscal year with a strong 9.4% growth driven by our prefilled and safety syringe portfolios. BD Life Sciences revenues totaled $1.5 billion and were up 31.4%. We estimate the net positive impact of COVID was 26.2 percentage points in the quarter. Our Preanalytical Systems business was down 3% year-over-year. We have seen sequential improvement as routine lab testing volumes improved. Our Diagnostic Systems business was up 97.3% driven by just over $440 million in COVID-19 testing. Biosciences sales were down 9% globally. However, we saw a sequential improvement in reagent sales as research and testing continues to resume. BD Interventional revenues totaled just under $1 billion and were down 3.5% for the quarter. We estimate the net negative impact from COVID was 11.2 percentage points. Our Surgery and our Peripheral Intervention businesses both saw a solid sequential improvements as elective procedures continued to return closer to pre-COVID levels in several geographies, most notably in the United States. The Peripheral Intervention business was particularly strong in Japan on the heels of a successful Lutonix launch. The Urology and Critical Care business performed well, with the U.S. returning to growth though offset by an international decline. Now turning to the P&L.

Gross margins were 54.8% or 55.1% on an FXN basis, the latter down 200 basis points year-over-year. While we benefited from higher-margin COVID-19 testing revenues, it was more than offset by the continued drag from lower volumes, which drove unfavorable manufacturing variances. We are actively managing our cash and inventory balances globally, and we expect to see more COVID-related manufacturing variances in fiscal 2021, negatively impacting our gross margin line. SSG&A expense of $1.2 billion was 25.1% of revenues, up 110 basis points year-over-year. SSG&A includes a $25 million investment to the BD Foundation this quarter, in support of our long-standing commitment to advancing the world of health and supporting the communities where we live and work. We continue to see higher shipping costs related to the pandemic, and we also had elevated levels of spend related to Veritor in the quarter. R&D expense of $279 million, representing 5.8% of revenues, was up 20 basis points year-over-year. In dollar terms, spending was up 8% on a year-over-year basis as we invested in COVID diagnostics and other growth initiatives. We expect fiscal 2021 spending on R&D to continue to be higher as we continue to focus on innovation and implement some of the reinvestment plans Tom mentioned earlier.

Operating income was $1.1 billion, resulting in an operating margin of 23.9%. On an FX-neutral basis, margins decreased 320 basis points, mainly reflecting the contractions in gross margin as well as higher SSG&A and R&D. Interest/other expense net was $110 million, resulting in a decline of $4 million on a year-over-year basis. We had favorability in interest expense this quarter as we repaid debt. The adjusted tax rate came in as expected in the high teens at 18.7%. Preferred dividends in the quarter were $22.8 million. Adjusted earnings per share were $2.79, as previously discussed, and this includes a $0.02 headwind from FX. For the year, we generated $3.5 billion in cash flows from operations, and our free cash flows were $2.7 billion, net of $810 million in capital expenditures. In line with our goal of continuing to increase the strength and flexibility of our balance sheet, we paid down $950 million of debt in the quarter, bringing our total debt repayment to $1.7 billion for the year. This resulted in a net leverage ratio of 3 times as -- 3.1 -- 3.0 times as of September 30, 2020. Now we wanted to share some broad thoughts on fiscal 2021. As we look ahead, the greatest uncertainty we see is the recent COVID-19 resurgences around the world and the potential impact this may have on general healthcare utilization, procedure volumes and diagnostic testing, including COVID testing. Our guidance assumes no major systemwide shutdowns of elective procedures.

Assuming no significant changes in utilization and procedure volumes associated with COVID-19 resurgences, we are comfortable forecasting low- to mid-single-digit FX-neutral revenue growth, excluding the COVID testing revenues. Our COVID testing revenues in fiscal 2020 were approximately $580 million. On a total company level, inclusive of COVID testing, we expect FX-neutral revenues to grow in the high single to low double-digit range. Using current exchange rates, we expect FX to add approximately 100 basis points to revenue growth on a reported basis. We expect our adjusted non-GAAP EPS for fiscal 2021 to be in the range of $12.40 to $12.60. Again, our guidance assumes no significant changes in utilization and procedure volumes associated with COVID-19 resurgences. This also does not assume any potential upside to our $1 billion to $1.5 billion in Veritor testing revenues. While we're not giving quarterly guidance, I want to point out some quarterly phasing as you think about the upcoming year. Given that we're a September year-end, we will not anniversary the initial COVID-19 impact into our fiscal Q3. In addition, U.S. Biosciences also has difficult comparisons in fiscal Q1 due to licensing revenue in the prior year. And in Medication Management Solutions, our Infusion business has tougher comparisons throughout the year given the timing of the ship-hold and shipments under medical necessity as well as European sales related to COVID. As Tom mentioned earlier, we do not assume any revenues associated with the Alaris 510(k). However, offsetting these headwinds I just discussed, we would expect our COVID-19 testing revenues to be more heavily weighted to the first half of our fiscal year. In addition, we'll anniversary the launch of our COVID testing in the fourth quarter. In taking all of the above into consideration and looking at the Street consensus, we would suggest a phasing that shifts earnings from Q4 into the first half of the year. I also want to take a moment to address FY '22 by making a few observations.

Regarding our COVID-19 testing revenues, we see this as perhaps the biggest variable to our fiscal '22 outlook. Depending on the level of success of Veritor in fiscal 2021, it could make for a difficult comparison to our revenues and earnings in fiscal 2022. And regarding Alaris, as Tom mentioned, we have a higher level of confidence today in our ability to submit the 510(k) at the end of fiscal Q2 2021 or early Q3. We would assume a contribution beginning sometime in fiscal 2022. Keep in mind, we shipped pumps under medical necessity in fiscal 2020. Thus, we would not necessarily assume there is a one-for-one pent-up demand when we obtain 510(k) clearance. Regarding the remainder of our business and assuming a more normal healthcare utilization environment, we would assume the business will return to an underlying mid-single-digit growth rate in fiscal 2022.

And with that, let's move on to Q&A.

Questions and Answers:

Operator

Thank you. We will now open the call for questions. [Operator Instructions] Your first question comes from Bob Hopkins with Bank of America.

Bob Hopkins -- Bank of America -- Analyst

Hi. Thank you and good morning.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Good morning, Bob.

Bob Hopkins -- Bank of America -- Analyst

So just a first question is maybe a clarification on the 2021 guide that you're giving. Can you just sort of sum all that up for us in terms of what does it imply for revenue dollars and how much is assumed in there in terms of total COVID testing, not just Veritor? And then I know you said you're going to reinvest some of that. Like what is sort of maybe the net EPS impact of COVID testing, including that reinvestment?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. So on the issue of the guide related to -- you know that we guided Veritor at $1 billion to $1.5 billion. When you add BD MAX, that's running at around $400 million, in that area. So you can add that on top of that.

Bob Hopkins -- Bank of America -- Analyst

Okay. And then, any clarity on just the thoughts on reinvestment? Just trying to get -- because what we're trying to do, obviously, is get a sense of the underlying business versus EPS contribution on the underlying business versus total testing. So what are the kind of reinvestment plans imply?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

So the way to think about how much is within the $1 billion to $1.5 billion of revenue that we're forecasting, our guidance assumes a certain amount of reinvestment of that. So we're not letting it all flow through. As you think about -- if Veritor is looking like it will be above $1.5 billion, we would look to invest more than that going forward. And we would likely have some investment depending on the investments in the pipeline, and we'll talk to that in a moment and let some of it flow through to the bottom line as well. So we'll assess that as we're going through the year. But if it's over the $1.5 million, we would look to invest more, but still allow a portion of that flow to the bottom line as well.

Tom Polen -- Chief Executive Officer and President

I think it's fair to say we plan to reinvest, among the initial $1 billion to $1.5 billion range, we're investing roughly 20% of the profits back into the business, Bob.

Bob Hopkins -- Bank of America -- Analyst

Okay. Thank you very much.

Operator

Your next question comes from the line of David Lewis with Morgan Stanley.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Good morning, David.

David Lewis -- Morgan Stanley -- Analyst

Good morning, guys. How are you? So I appreciate it is a very tight guidance in a very uncertain environment. So I think a lot of investors will largely view this as a floor. But I did want to come back to the underlying business theme one more time here. I think everyone's trying to compare the forward year for 2021 to a base year, which is 2019, and I appreciate you, all kinds of different comparisons there. But I think what people want to try to get to is, if we take out some level of Veritor, we get to sort of some earnings number that's sort of in that 10, 10.50 range. With reinvestment, maybe it's an 11 range. But if we look at the implied revenue growth of 2021 over 2019, it's sort of low single digits adjusted for pumps.

And if you look at the margins, they seem kind of down in 2021 versus 2019. So for Tom and Chris, I think what investors want to hear is, it could be suggested that there's a problem in the underlying business or considerably suggested that you're being conservative to begin the year. Help us understand the strength of that core business and whether you think 2021 underlying margins can be up over the base year '19. And how you think that underlying business is sort of performing relative to that classic 5% BD growth rate that you're trying to get to? And then I have a quick follow-up.

Tom Polen -- Chief Executive Officer and President

Yes. David, good question. So I think if you look at it on an underlying basis, we are in that range that we're talking about that we've talked about around that 5% plus. We're in that -- so if you look at -- we're in the low to mid-single digits in the core. Of course, that has, and then maybe on that lower side of that. You've got the Alaris headwind, of course, which is still annualizing in the year as well. So that is a headwind that is built into the core. If you take that out, you're back in right in that range that you mentioned before. So I'll let Chris add some more commentary on that. But just a reminder on that, we still do have annualization of the Alaris impact built into that.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. I would say, David, the core is strong. You saw that in the fourth quarter as well. It's doing well. The margins are improving. To your point around the 2019 to 2021, there are a number of things. We are seeing synergies from the Bard transaction over that period of time kicking in. Then obviously, it's impacted. You have to take out the COVID impact, the drag and then the add-back for Veritor. But keep in mind, we had a bit of a drag during that period in the China VBP and the Alaris. And when you adjust for that, we are seeing growth in the margins, and feel very comfortable with the long-term view of the underlying 5% and 10% on the bottom, and that's very consistent with what we've seen.

Kristen Stewart -- Senior Vice President of Strategy and Investor Relations

And David, the only thing I would add is that our assumption is that we still are not getting back to a normalized level throughout fiscal 2021. So our guidance and margin forecast would still assume that the overall business continues to see headwinds on a margin perspective as we're still not back to pre-COVID levels overall.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

And I think to your point, we are looking -- you're seeing some depression of the margins from the investments that we're making as well. So we're not letting it all flow through. We're making the investments that we outlined.

David Lewis -- Morgan Stanley -- Analyst

Totally understand. So there's some COVID adjustment factor there. Okay. Very good. I think the investors will appreciate that clarity. And then just, Tom, as you think about COVID testing for next year, obviously, it's this year for you guys. First half, obviously, higher than second half. That's very consistent what some of the PCR providers have suggested in terms of what their assumptions are for peak testing. Can you sort of help us understand your capacity expansion plans, sort of first half and second half? And what is embedded in terms of price pressure for next year? And where is that coming from? Thanks so much.

Tom Polen -- Chief Executive Officer and President

Sure. Good questions, David. So as you think about what we've shared before, we've shared eight million tests per month by October, which we're in; 12 million tests per month starting in March of 2021. That's our capacity ramp on Veritor. And so those capacity plans remain firmly intact. And so that's the basis of our outlook that we've shared. I made the comment, of course, we do continue to monitor the supply/demand dynamics of the market. And we'll provide you with any updates on additional capacity expansions beyond that if we were to make those, but we won't provide those until that capacity were to come online. So that's just a little bit of background there.

As we've come to the ASPs, we had said $20 ASP. We did a little bit better than that in Q4, as I mentioned. But we do expect to see pricing headwinds, ASP erosion as there are more competitors in the market now than there were at the start of Q4. And we expect that there will be other entrants. And so we would expect that, that $20 ASP could come down as we move through the year.

Operator

Your next question comes from Amit Hazan with Goldman Sachs.

Amit Hazan -- Goldman Sachs -- Analyst

Good morning.

Tom Polen -- Chief Executive Officer and President

Hey, good morning.

Amit Hazan -- Goldman Sachs -- Analyst

Good morning. Just one clarification for this coming fiscal year on utilization. Can you just talk a little bit more to what you're assuming in the guidance for underlying hospital admissions and utilization versus what you've been seeing? And what the impact would be, not just on BD Medical, but just on the entire business, routine diagnostic testing as well?

Tom Polen -- Chief Executive Officer and President

Yes. Great question, Amit and good morning. So during the quarter, as I mentioned, we did observe sequential improvements across our businesses that are more elective procedure oriented as well as in lab testing volumes, right? We saw them through the quarter evolve to around 90%. We've got -- obviously, we have access to some pretty unique information through our BD MedMined platform, right, which is in about 338 hospitals that gives us literally real-time insights into hospital trends on inpatient admissions, ICU admissions, ER trends, ER outpatient versus inpatient. We can see that literally on a daily basis, what happened yesterday in these institutions, which are broadly distributed across the U.S. And so, as we look at that, we see hospital inpatient admissions trending around 85% to 90%. And we've posted some of this data in our deck so that we can share that more broadly. We thought there would be some information that you'd be interested in.

So our projections and outlook do not assume any significant change to that on the positive nor on the downside as we think about the potential of a COVID resurgence. We do see, and as we talk to healthcare providers around the world, there's been a lot of preparation and learnings from the initial COVID surge, how to better keep facilities open, how to make patients more comfortable. They're still coming in for elective procedures. So I think -- we certainly don't expect that it would retrench back if there is a significant resurgence, retrench back to the lower utilization levels that we saw last year. But of course, that's difficult to predict. And could it be somewhere between where it is today and there? Could be. Could it stay where it is? Could be. Could it get better if there's not a large resurgence? Could be. But we've taken a more moderate, kind of middle-of-the-road assumption that it will be relatively stable as it is today as we think about our forward-looking guidance.

Kristen Stewart -- Senior Vice President of Strategy and Investor Relations

Simon, do you want to share some of your survey work that you've done too?

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

Yes. And so just to wrap that, I think we shared some survey work on the August call, and we've repeated that survey work with about 600 physicians in our Surgery and PI business. And they are seeing volumes rebound, I would say, significantly. Their capacity is at, I think, quite significant level compared to pre-COVID. Their office-based volumes are increasing for the most part, so the funnel of patients is pretty robust. And there's still some -- what we term rollover patients as well that are in the mix, patients that were scheduled earlier this year, but had the procedures postponed. And so they're still in the mix as well. So it's pretty robust on the elective side right now.

Kristen Stewart -- Senior Vice President of Strategy and Investor Relations

Thanks for your question, Amit.

Operator

Your next question comes from the line of Vijay Kumar with Evercore ISI.

Vijay Kumar -- Evercore ISI -- Analyst

Hey, guys. Good morning. Thanks for taking my question. Chris, maybe on the guidance here. I guess, if I just look at the gross COVID tailwinds, right, $1.5 billion at the high end on Veritor; $400 million of MAX, that's about $1.9 billion here. And I think we had somewhere -- something north of $600 million in 2020. So on a net basis, we're looking at $1.2 billion, $1.3 billion of net diagnostic tailwinds for fiscal 2021.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

That's right.

Vijay Kumar -- Evercore ISI -- Analyst

So you get high singles, you pick up high singles just on the tailwind. FX is another point. Is that implying like the base is going to be flattish for next year? And the reason I ask is, you had $800 million of headwinds in 3Q. And assuming just that normalizes, right, shouldn't the base be up -- contribute a few hundred basis points to top line next year?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. No, it doesn't imply that. We'd have to look at how you're doing the math, but it would imply more in that mid-single digits on the underlying ex COVID testing. So thinking that 4% to 5% kind of percent range, which is very healthy. We do still see the drag. As I pointed out in some of the prepared remarks, we see that tough compare in Alaris against the first quarter. We do still have the tough compare against the first half of the year in the base business until we overlap the COVID period, but then rebounding in the second half of the period. So when you cut through all of that, you think in the mid-single digits for the underlying business.

Tom Polen -- Chief Executive Officer and President

I think that's just an important point to reiterate, Vijay, as Chris mentioned, right? Because of the timing of our fiscal year, we don't anniversary the lower utilization rates from a COVID impact until Q3, right? The first and second quarter, our compares are still at a pre-COVID basis of utilization. And so that obviously has an impact on that. And so it will still be, even despite that, at the -- in those mid-single digits, low single digits and the base business is actually quite strong.

Vijay Kumar -- Evercore ISI -- Analyst

Understood. And then one quick on margins and free cash flows here. Is -- maybe I just want to check if I'm doing the math right. Is the implied operating margins for fiscal 2021, is that close to a 26%, 26.5%? And free cash flow conversion, we're back north of 90%. Were there any timing impact? Or is this now getting back to historical trends of BD printing north of 90% free cash conversion? Thank you.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. So we'd have to work with you on the math there, too. But I think, what we're saying is, if you use Q4 as a jumping-off point of the year, we're likely to have some headwinds as we talked about. But -- and we are making adjustments for the investments that we were talking about, what have you, Veritor does lift that. But taking all that into consideration, we would expect to see some good margin growth compared to the baseline of where we were in 2020. But it doesn't quite get to the 26% number that you're talking to.

Vijay Kumar -- Evercore ISI -- Analyst

And so just on the free cash, Chris. Was there any one time effect?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

I'm not sure what your question is there. We did give the free cash flow. What was your question on that, Vijay?

Vijay Kumar -- Evercore ISI -- Analyst

Were there any timing elements that benefited free cash flow? Is this a normalized free cash conversion metric we should be looking forward to?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Nothing looking forward, but obviously, a lot of impacts throughout the year, lumpiness from the COVID drop-through, and what have you. We did a lot to offset that. We reduced inventory levels as we talked about. So it did feel like a lot of lumpiness, but we were able to offset a good portion of the drag to be in a solid position as we exited the year. So -- but going forward, I don't see anything that would be lumpy in nature.

Vijay Kumar -- Evercore ISI -- Analyst

All right. Thank you.

Operator

Your next question comes from the line of Robbie Marcus with JPMorgan.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Hey, good morning, Robbie.

Tom Polen -- Chief Executive Officer and President

Good morning, Robbie.

Robbie Marcus -- JPMorgan -- Analyst

Hi, good morning. Two questions, both on free cash flow and capital allocation. Maybe just to follow up on Vijay's question. I think part of the question is, there is a number of exclusions in the fiscal 2021 guidance that some of them appear to be cash exclusions. I just want to see -- should free cash flow conversion next year take a step-down on legal and some of those other items? Or are there further offsets in the working capital to make it look more normal?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Good question, Robbie. So no, I think some of the cash impacts that we consider kind of below the line, have in the past been integration spending and EUMDR. And those were the biggest ones. And the integration spending has been -- will be lower going into 2021. EUMDR is still with us. We continue to invest to make sure we're in good shape with the regulations there. So there will be a portion of that. But the free cash flow conversion will increase in 2021 from where it was.

Robbie Marcus -- JPMorgan -- Analyst

Got it. That's helpful. And maybe a broader question just on your theory and thought process behind guidance. I don't envy you having to give guidance here in the middle of a pandemic for forward 12 months. This is -- we've seen guidance that we've had a lot of beats, but then lowered guidance over time. How did you approach fiscal 2021 guidance here with what ends up to be a pretty narrower range? How should we assume -- what's your tolerance levels around it? What were some of just the strategic thinking that you and the Board did? And I'm really trying to get at how confident are you that this is more of a floor and a beatable target rather than it could be better, could be worse in certain areas?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Sure. Great question. Obviously, we've been following things very, very closely. We do see, as we said, sequential improvement in our businesses. And so we took that into account. Obviously, we're watching the potential for resurgence very closely. And I think we were very clear when we gave the guidance that we're not assuming a major resurgence that would have a big impact on utilization and in elective surgeries. So we are not assuming that. And that's something that we'll have to wait and see. But at the same time, as we look at the course of the business and the way hospital systems are able to handle the current level, that gives us a certain amount of comfort and visibility as we go forward. I think the other thing that we have in here is the fact that Veritor gives us some natural offset. If there is some level of utilization impact, it would probably go hand in hand over the course of the year with a bit more incremental Veritor testing. So there's some opportunity there. And obviously, we have built in some piece of our investment of the Veritor revenues in, and we can gate that to some extent. And so with all of those things, we felt comfortable, again, assuming that there's no major change in the resurgence that we could achieve the guidance that we gave.

Robbie Marcus -- JPMorgan -- Analyst

Appreciate the color.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yup.

Operator

Your next question comes from the line of Brian Weinstein with William Blair.

Brian Weinstein -- William Blair -- Analyst

Hey, guys. Thanks for taking my question. Just a couple of questions on Veritor and testing. I'll kind of rapid fire a couple of these. So first, are you guys looking to kind of expand your offering there? And are you thinking about anything on the non-instrumented side? And then, you mentioned that you doubled the installed base here recently to over 50,000 units. Does that include the roughly 11,000 into the nursing homes? And I'm curious what the utilization you would expect in total for Veritor post pandemic in order to help us gauge the long-term value creation that you're driving there. So a few on Veritor. Thanks.

Tom Polen -- Chief Executive Officer and President

Yes. Good questions, Brian. So yes, the doubled installed base of over 50,000 does include those that have been put in the nursing home. As I mentioned, we are looking at what additional menu we can put on that platform. We have a number of opportunities that we think are pretty exciting. Of course, we've never had an installed base in the nursing home segment itself. And so part of that work that we've done is actually identifying what specific assays are relevant to the nursing home segment. There's other segments that we now have Veritor placements. And we wouldn't have looked at before in terms of is there some unique menu that is more relevant to these segments that haven't been traditional call points for us. And so, we're actually just wrapping up -- we've just wrapped up that work. And again, we'll be using -- that will be an area of investment is in additional menu expansion on Veritor, where you reinvest some of those profits to add additional menu that we think are relevant to some of the new call points that we have Veritors placed in so that we see longevity there beyond the COVID-19 testing itself.

Of course, as you know, we are expanding the menu there, very actively working on our COVID-19 flu assay. As we've always said, we'll provide timing on that when we're ready to -- when we get EUA and we launch that. Same thing on BD MAX beyond the assay that we've already launched in Europe with our partner, CerTest. So we feel really good about the momentum on Veritor. We hear great feedback from our customers on that. And again, we do see longevity on the installed base, not only for COVID-19, which as I mentioned before, we think we'll have more longevity. If you ask me this time last quarter, said how much testing is going to happen in Fiscal Year 2022, I would just say that I feel more confident today that there will be longer testing runway beyond 2021 of COVID testing into 2022 and potentially beyond. Obviously then, our work on adding menu to that will prolong the growth opportunities for Veritor beyond the COVID window. Thanks, Brian, for the question. Oh, go ahead. Go ahead.

Brian Weinstein -- William Blair -- Analyst

And then -- yes, I was going to say anything on the non-instrument? Or are you guys looking to develop anything that would be an antigen test that would not be on the Veritor platform?

Tom Polen -- Chief Executive Officer and President

We're looking at that, Brian. And again, if we decide to do that, we'll share that when we're ready to launch it. But I would just say at this point, particularly in developed markets, we are very confident in the value that the instrumented platform brings. Again, just as a reminder, our instrumented platform is at a very different cost base than most any other instrumented platform, right in that $250, $300 range. So it's not a significant -- capital is not a challenge for any customer when it comes to that. It wouldn't even be a challenge significantly to bring it into the home necessarily. But that's -- and we get the benefits, right? Remember, we were one of the original inventors of lateral flow testing. Our first technologies were manual, as we're all, and all of those technologies moved to instrumented platforms because they got higher performance on flu and RSV. And COVID is, of course, even a more critical assay to get right, and we see the benefits of an instrumented platform when it comes to sensitivity specificity. We still believe strongly in that. We continue -- you've seen us put out a number of -- support a number of publications.

Whether or not it's comparisons of technologies or a recent publication, you probably saw around the role of antigen testing versus molecular testing when it comes to projecting infectivity. And that was relative to cell culture methods, which are the reference for ability for a patient to be infective. So we're going to continue to invest very heavily behind scientific evidence, and you can expect more of that from us. Again, it would support the value of Veritor and the technology that we're deploying.

Brian Weinstein -- William Blair -- Analyst

Great. Thank you.

Tom Polen -- Chief Executive Officer and President

Yup.

Operator

Your next question comes from the line of Larry Keusch with Raymond James.

Tom Polen -- Chief Executive Officer and President

Hey, Larry. Good morning.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Good morning, Larry.

Larry Keusch -- Raymond James -- Analyst

Yes. Good morning, everyone. Two questions. I guess, first, Tom, for you. You obviously said in a couple of spots during the call that you are more confident in the timing for the filing of the Alaris 510(k). So just, again, want to get a little sense of what makes you more confident than where we were three months ago? Is it just -- again, you've knocked off some of the key objectives there that were in the way? And as part of that question, given the -- some of the hardware recalls that you've had recently, how does that get handled? Does that have to find its way into a filing as well? And then, I guess, Chris, for you. Obviously heard the commentary around pulling some of the 4Q for 2021 into the first half as you talked about the various headwinds and tailwinds. As you look at the first quarter numbers that are out there for the consensus, do you have any -- just any high-level thoughts as sort of how those feel?

Tom Polen -- Chief Executive Officer and President

Okay. Good questions, Larry. So when it comes to -- let me take the first two, and then I'll turn it over to Chris for the third. So in terms of what gives us more confidence, I think you nailed it. It's the fact that we are systematically working our way through the various testing stages. And so we've completed that much more testing since the last update, and that gives us confidence. We also continue to have very active and ongoing dialogue with the FDA around our progress. And that's why, as I made earlier, we do have greater confidence in the timelines that we had shared last, which is late Q2, early Q3 of this fiscal year. When it comes to the hardware recalls, that's really part of our remediation of the Alaris franchise. It's us looking at all the different complaint history. And are there any further improvements we can be making to the platform? That's also part of our 483 response and activities. And so, there's no other filings or anything. Those are all built into the current 510(k) submission work. They do not have any impact on the timing of the 510(k) submission. Okay?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. And then, in terms of your question regarding the phasing, I'd say we commented in our prepared remarks that as we looked at the consensus, we did feel that consensus was a bit high in Q4. We wanted to correct that. And that we think that some of that should be moved to the first half, I would say, move a little bit more of that to the Q2 than to Q1. But Q1 is still a bit light given what we're looking at. And so that -- we just wanted to kind of get the quarterly phasing right upfront out of the box as we enter the year. And that's why we were very specific around, take it out of the fourth quarter, put it in the first half, and I would add a little bit more in Q2 than Q1.

Larry Keusch -- Raymond James -- Analyst

Thanks, guys. Really appreciate it.

Operator

Your next question comes from the line of Larry Biegelsen with Wells Fargo.

Larry Biegelsen -- Wells Fargo -- Analyst

Good morning. Thanks for taking the question. One on just -- one on international, one on fiscal 2022. We heard a lot of good color commentary on this call about what you're seeing in the U.S., but obviously, we're seeing things deteriorate in places like Europe. How do your comments about the COVID impact in the U.S. compared to what you're seeing outside the U.S.? And I have one follow-up.

Tom Polen -- Chief Executive Officer and President

Yes. For the -- so we're seeing still strong performance in Asia in terms of utilization. We're seeing very strong control of COVID across pretty much all Asian nations at this point. But as you mentioned, Europe, we are seeing quarantine measures tighten. I would say that, again, European countries are much better prepared this time to continue to deliver care through that period of time. Can there be an impact on procedure volumes as we look forward? Yes, out of Europe. It may be slightly less prepared. Obviously, there's different factors in public versus private healthcare systems as well that influence that. But I think from what we're seeing now, we're definitely seeing better management and continued use of procedures early in this resurgence. But again, that's one of the caveats that we had to make. We can't predict the extent of everything on a forward-looking basis. And so our assumptions, we do recognize that, particularly in Europe, there can be some increase. But if it's a significant increase, that would be something that's not in our current assumptions.

Larry Biegelsen -- Wells Fargo -- Analyst

Thanks for that, Tom. And Chris, in your prepared remarks, you gave some good color on fiscal 2022. I heard that with the 5% plus top line growth and double-digit EPS growth, the algorithm. It sounds like you expect to return there in fiscal 2022. But in your prepared remarks, I heard kind of the top line on an underlying basis. So I'm assuming you kind of want us to adjust for the COVID testing delta there. But I didn't hear anything on how to think about EPS. Should the starting point be the guidance you gave for $12.40 to $12.60? Or is there some different way we should be thinking about EPS growth beyond fiscal 2021? Thanks for taking the question.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. I think you got, for the most part, I think you are talking about it right. Obviously, we feel good about -- there's going to be a lot of movement in 2022 from a number of things on the top line. And the biggest variable, obviously, is what happens to Veritor. And you heard Tom say that we feel better about the testing going into 2022. But we've also said it's -- wouldn't be prudent to assume the same level of testing in 2022 from 2021. And we'll obviously update you as we go from quarter-to-quarter. But you would expect to see some drop-off in that piece. And obviously, that slope, whether it's a cliff, it doesn't look like it's a cliff in 2022 right now. But it's certainly a downward slope as we think about it. And some of what we're doing in terms of the investing of the Veritor spending will help mitigate some of that slope to a certain extent.

So we're watching that very closely. But as we look at it, the other variable is when does Alaris revenue start coming back to pre ship-hold kind of levels. And we were very clear. We did not include anything in our 2021 guidance for that, and we're not predicting where that's going to be in 2022. But at some point in 2022, we would expect that to start kicking back in. It's probably not as big of a pent-up demand because of the medical necessity amounts that we've had in 2020 and potentially into 2021, but those are the things to keep in mind. But we do feel that the base business in 2022 on an underlying basis will be very solid and continue to be solid. So that's just some ways to think about it.

Tom Polen -- Chief Executive Officer and President

And maybe, Larry, this is Tom. Let me just maybe add on a little bit to Chris' good comments there is. I'd say what you're seeing us do is, right, from -- in the face of a pandemic and the utilization impact. You're seeing us work our way back to that driving durable, sustainable growth, right? We all recognize the markets are anything but predictable. And we worked hard as is -- earlier question was, spent a lot of time thinking about that range. You can debate, should you have a wide range or a narrower range that at least keeps people from getting on either end of it, which is where we ended up at. But we believe we've executed well against the challenges in remarkable times. You can see us doing that as we offset the COVID headwinds this quarter. And I think if you take, for example, this year in our worst months, we saw significant headwinds across our business. We developed COVID testing. We saw the return of procedures, and we turned a negative headwind into a tailwind, and we showed mid-single digits growth. As we think about -- prior to COVID, we thought about our end markets growing about 4%.

And our investments in R&D being in higher-growth markets and select investments in tuck-in M&A, further supplementing that growth. We felt and feel, still strong about that path forward to 5%-plus growth that you've heard me talk about. And of course, what we're doing now is, this year in fact with Veritor, of course, we're going to be nearly double that level. But what we're doing is we're taking a portion of those profits and we're further investing in our Growth and Innovation Fund, we're investing behind further growth opportunities. And right, we're continuing that work on accelerating inorganic innovation or our tuck-in M&A, again, all in the spirit of driving that durability and consistency of our growth profile. So just to summarize that, we feel good about our capabilities, our innovation and the factors that are in our control as we think about the business going forward.

Larry Biegelsen -- Wells Fargo -- Analyst

Thanks so much.

Operator

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

Rick Wise -- Stifel -- Analyst

Hi. Good morning, everybody. Tom, you -- it's -- nothing else is clear. It's very clear that innovation is a top priority for you. And one element of that, as you discussed, is R&D spending and you emphasized strongly the 8% growth there. So my question really is, how do we think about R&D going forward? I mean, you've historically or in recent years has been more around that plus or minus the 6% of sales range. Are you suggesting that -- I mean, that we should think about that either as a percentage of sales or growth as meaningfully higher going forward? Just again, any perspective there would be great. Thanks.

Tom Polen -- Chief Executive Officer and President

So let me comment on just, at a high-level perspective and then turn it to Chris to talk about kind of, how we think about it within the P&L. So obviously, you're going to see R&D at, what we'll call, higher than a normalized level in 2021 because of the reinvestment of the Veritor proceeds. I would expect it to see that. Of course, we're -- as I mentioned, that 8% growth that you saw in Q4 were coming off of relatively flat R&D growth over the last five, six years during the synergy window. And so it is, as you mentioned, it's a notable step-up, and we will be continuing to increase R&D because of not just our base strategy has that in it, but we're using this opportunity to reinvest those Veritor proceeds and leveraging that Growth and Innovation Fund. And the way that we're selecting incremental projects through that process, which was a process that was very successful, obviously, at Bard and that John has helped implement here at BD. So as we think about going forward on the P&L, beyond what we're going to see in 2021, I'll turn that over to Chris. But you would expect to see R&D growing in line with revenue on a forward basis beyond 2021, at least in that level.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Sure. So, I would say and reemphasize, we clearly are, as you said, focused on innovation, and you would expect R&D to increase. You're absolutely right that we did emphasize that 8% growth year-over-year because we need to get back to that 6% mark. We had fallen below that over the last few years, and it's important that we get back there. I think that is probably a good proxy for 2021 to use because that 6% is off of a much higher revenue base as well. So from a dollar standpoint, that's a pretty big step-up. So that's a good proxy to think about, is that 6% of revenue going forward.

Rick Wise -- Stifel -- Analyst

Thank you. And just last for me. First, just wanted to make sure I understood, I don't think you said. What assumptions are you making about flu as you give us your first half and fiscal 2021 projections? And just last, Chris, congratulations, leveraged down to three times. Is that where you both want to be? Where are we heading? Just help us think through, at a high level, your balance sheet goals as well. Thanks so much.

Tom Polen -- Chief Executive Officer and President

Yes. Great, great question. And let me take the first one on flu and then Chris, on leverage. So flu is certainly light in the Southern Hemisphere. So it's unclear what the impact will be this season. I think it -- for us, COVID obviously overwhelms the whole thing. I mean we're selling every Veritor test we can make. So the whole balance between are we making Veritor tests or COVID tests, we're selling at this point, obviously, a lot of COVID tests. We are making flu tests, and we are shipping flu tests. But if flu tests aren't being utilized at the level, we'll make more COVID tests at least for the first couple of quarters. And then obviously, we do have a combination assay in development that we look forward to launching later this year.

And again, we'll give more color on that. So I think it is fair to say that, I mean, the reality is, if people are isolated more, and are wearing masks, and are doing things, will there be a lighter flu season in the Northern Hemisphere as well? Logic would say so. But the impacts on our business, I think, will be different this year because of the role of COVID and the presence of COVID.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. And I would say the -- in terms of the 3 times leverage, just we're proud that we got down to the 3.0 this past quarter on a net basis. And as we've always said, that was the initial commitment, but then we would expect that to continue to float down with increasing EBITDA as we go forward. And so that is still the commitment. We wouldn't want to operate just at the three times level. We think a company like ours should be in that two and a half-ish kind of range at least, and so we would expect that to float down that way over time.

Rick Wise -- Stifel -- Analyst

Thanks so much.

Tom Polen -- Chief Executive Officer and President

Thanks for the question.

Operator

Your next question comes from the line of Jason Bednar with Piper Sandler.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Good morning, Jason.

Andrew Stafford -- Piper Sandler -- Analyst

This is Drew on for Jason. Thank you for taking the questions. I just wanted to refer back to a slide you guys -- you have in your deck where you point out that procedures have rarely trended above that 100% of normal range. Obviously, pretty interesting data set. Just wondering if you had any feedback on whether that would be primarily related to patient willingness or challenges of processing those patients through the hospital. And then, I guess, any thoughts on the relative outperformance of the inpatient versus outpatient as it seems to show?

Kristen Stewart -- Senior Vice President of Strategy and Investor Relations

Let me take this. Yes, it's Kristen. Just to comment on that. I mean we don't have any further data on this. This just comes from the MedMined data set. We'll say just obviously, anecdotally, just because of the data that we see, which is the data that you see, certainly would say that there has been general apprehensiveness around patients going into care settings in the United States, which this is. This is a data set of 338 U.S. hospitals. Just to be clear, this is a U.S. data set, so that likely is influencing some of the trends here.

Tom Polen -- Chief Executive Officer and President

Maybe Simon, as well.

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

Yes. Thanks, Tom. Yes. And again, referring to that survey that we've just completed, certainly the majority of physicians we spoke to reflected on patient sentiment being one of the driving factors moving here. And you would have seen some significant data that came out about the oncology patient set, breast cancer and colon patients in particular. But the decline in screening that's happened in the early phase of COVID is going to contribute to an extra 36,000 deaths -- 33,000 deaths in the U.S. from cancer because of a lack of screening in the early phases of COVID. And so as you walk around different cities in the U.S. and certainly where I live in Rhode Island, you'll see billboards now with hospitals and practices encouraging patients to go and attend. And I think the protocol that they've implemented are certainly establishing great framework for patients to feel comfortable about it. But still, I think hospitals want to do procedures, physicians want to do them. And the big variable here is getting the patients back in for screening and subsequent procedures after that.

Andrew Stafford -- Piper Sandler -- Analyst

Thanks for taking my questions.

Operator

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

Tom Polen -- Chief Executive Officer and President

Good morning, Matt.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Good morning, Matt.

Matt Taylor -- UBS -- Analyst

Hey. Good morning, Tom and Chris. Thanks for taking my questions. So I just wanted to ask you about the forward years. You made some comments before. I guess, what I'm wondering is if there is a testing cliff at some point, you have a tough compare. Are there things that you would do proactively like a buyback? Or you could phase down some of those investments that you're making now and growth to kind of smooth earnings and help with that transition?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Sure. Great question, and thanks to allow us to add some clarity there. That's exactly the thought process. As we initially looked at this, we thought that it could be very much a cliff from 2021 to 2022. And that one way to mitigate that cliff would be to make investments in 2021 that help us drive long-term growth, but also our kind of one year investment boluses that will kind of mitigate that cliff to a certain extent. That logic still continues as we think about testing, extending into 2022 because it wouldn't be characterized, as I said, by a cliff, but it's certainly the potential for a downward slope. And by making some of these investments in 2021, it would help mitigate that slope to a certain extent.

The biggest variable is what that slope looks like. But I think we're very comfortable that we can do that in 2021, and then see where that testing in 2022 is going. So it's looking less like a cliff. Those investments certainly are the kinds of investments that we could make that would be an expense in 2021, but not only would go away in 2022 but would potentially drive increases in 2022 in earnings by investing in a variety of things: R&D, M&A kind of deals that become more accretive in year two, that kind of thing. So it's exactly what your question implies is what we're doing.

Matt Taylor -- UBS -- Analyst

I just had one follow-up on the pricing and testing. Have you actually seen any price pressure yet? Or is this just something that you're thinking could happen and so you're being conservative in baking in some potential pressure for Veritor especially?

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes, it's the latter. We haven't seen the pressure yet. But, as Tom mentioned, I think earlier, in Q4, the ASP was a bit higher than we had signaled. But we don't think it's prudent to continue to think that that would hold up as the competitors move into the market and the different dynamics that we'll be facing as we go throughout the year. So we had originally signaled the $20 ASP. We think it was -- it certainly was higher than that in our Q4. But we think that, that will be under pressure as we go through, and that is what we have in our guidance assumptions.

Matt Taylor -- UBS -- Analyst

Okay. Thank you.

Kristen Stewart -- Senior Vice President of Strategy and Investor Relations

We'll take just one more question given the time. Apologies for those left in the queue.

Operator

Thank you. Your last question comes from the line of Josh Jennings with Cowen.

Josh Jennings -- Cowen -- Analyst

Good morning. Thanks for taking my questions. I was hoping you may be able to share just the percentage of the revenue base delivered to hospitals' capital equipment budgets. And if you could talk about just the recovery of the camp -- capital franchise. Maybe hard to parse out, a lot of moving pieces with the Veritor instrument placements and the Alaris ship-hold. But anything you can share just about those non-Veritor instruments and Alaris pumps, but on the -- just how the rest of the capital franchise recovered in fiscal 4Q and the outlook for the chunk of the revenue base in fiscal 2021.

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

Yes. The -- and this is consistent with what we've said in the past, the percentage of revenue that are focused on capital is in that kind of 15-ish percent range. We've said that in the past. And you might imagine where that is. It's in areas like Kiestra and in the MMS side, for the most part, a little bit in Biosciences. We have seen pressure on capital during the third quarter, particularly, and we have seen that improve. A lot of it had to do with the inability to install during the third quarter because hospitals weren't allowing people to come in that were not patients appropriately. And so we did see that pressure. We saw that sequentially improve into Q4, and so we would expect that to continue to improve through 2021 as well. And we don't -- assuming that there's no major resurgence, as we said, we would -- our guidance contemplates that, assuming and being at normal levels in 2021. Yes.

Tom Polen -- Chief Executive Officer and President

I would say that we did see some improvements on the capital in the research area, BDB. We saw it across the board. I'd say dispensing is another area. Obviously, capital. Part of that is operating leases. We still do sell some in capital. But I'd comment, we did see the U.S. dispensing business returned to modest growth in Q4. And we ended the year with strong net gains in committed contracts. We had a very strong Q4 in committed contracts, and we ended the year net positive there from a competitive perspective as well. So we're seeing good signs there. As you mentioned, it's a little bit difficult with Alaris to fully compare that. But we're seeing the restarting of, and we're able to get back into labs now to do those installations, the Kiestra installations. There's a big complex -- those are big complex, move walls, change electricity sockets. That weren't happening in the middle of pandemic that are restarting now.

Josh Jennings -- Cowen -- Analyst

Great. Just one follow-up. Just on the -- I know Lutonix is a small piece of the overall corporate revenue pie, but a little bit more important for just the Interventional segment, the VOYAGER PAD analysis at TCT was probably the most compelling rebuttal of the Katsanos meta-analysis. Maybe you could help us -- or give an update on the state of affairs of the drug-coated balloon market, and relative to the high-water mark in the end of 2018. And really, just to my question, just trying to get a sense with this VOYAGER PAD data out there, the other data sets that have been presented over the last 12 months. I mean, could Lutonix, from where it sits today, become a growth driver for Interventional over the next 12 to 24 months? Thanks for taking the questions.

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

Yes. It's Simon. Listen, I think over the past pre-COVID certainly, we had seen, I think, a significant rebound in our Lutonix business in and around the 70% to 80% of Q1 2019 numbers, so before Katsanos and so on. Over the past several months or Q3, was our Q3, that obviously deteriorated quite a lot. But I would say, coming out of September, we were pretty much at the pre-COVID levels, which were in that 70% to 80% of pre-COVID levels, if that's all making sense. And again, some recent work that we've done a year ago, and I just repeated. A year ago, about 80% of physicians that we surveyed were less than comfortable with paclitaxel safety based on Katsanos and based on the FDA panel and so on and so forth.

And now that has flipped. The recent data that we got, that has flipped. That 80% are now comfortable with paclitaxel safety. And the VOYAGER data, and the data that was provided at panel, and so on and so forth, I think that reiterates the safety of paclitaxel in general and Lutonix specifically. So it was a significant driver for us in Q4 in the peripheral business, both domestically and in Japan, where we've had a really successful launch since we commercialized fully in December when we continue to get FDA approvals on 018 platform and the 300-millimeter balloon platform and the low profile AV platform. So we're pretty pleased with where we are right now on Lutonix.

Tom Polen -- Chief Executive Officer and President

Okay. Thank you for the questions. So thanks, everyone, for the good dialogue this morning. We've shared with you the challenges, opportunities, and successes that shaped Q4 and fiscal 2020 that are influencing our expectations for the year ahead. One thing we didn't talk about, though, were the people of BD, the 70,000 associates around the globe who rallied around our purpose of advancing the world of health at a time when the need was most urgent. So I want to close with a message to the BD team. Thank you for your focus on our purpose, for your resilience when it came to executing our most critical priorities, and your willingness to embrace bold new ideas.

You delivered a strong Q4 that exceeded our expectations to finish a trying year on a high note. By building on the bold actions we took in FY 2020 and by continuing to execute our long-term strategy to grow, simplify and empower, we will address healthcare's immediate needs while bringing more innovative new solutions that will support our growth across all three of our segments. In FY 2021, there will be no shortage of opportunities for you to think boldly, make a meaningful impact, and change more lives for the better. On behalf of the entire executive team, I want to say thank you to BD associates around the world for your efforts, sacrifices, and achievements over the past year. You showed the world and each other just how vital BD is to the delivery of healthcare. Thanks again, and let's keep going forward.

Operator

[Operator Closing Remarks]

Duration: 81 minutes

Call participants:

Kristen Stewart -- Senior Vice President of Strategy and Investor Relations

Tom Polen -- Chief Executive Officer and President

Christopher R. Reidy -- Executive Vice President, Chief Financial Officer and Chief Administrative Officer

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

Bob Hopkins -- Bank of America -- Analyst

David Lewis -- Morgan Stanley -- Analyst

Amit Hazan -- Goldman Sachs -- Analyst

Vijay Kumar -- Evercore ISI -- Analyst

Robbie Marcus -- JPMorgan -- Analyst

Brian Weinstein -- William Blair -- Analyst

Larry Keusch -- Raymond James -- Analyst

Larry Biegelsen -- Wells Fargo -- Analyst

Rick Wise -- Stifel -- Analyst

Andrew Stafford -- Piper Sandler -- Analyst

Matt Taylor -- UBS -- Analyst

Josh Jennings -- Cowen -- Analyst

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