Jeff Johnson

Jeff Johnson asked about the significant 8% growth in Align Technology's adult business, the best since 2021, and the contributing factors such as NoAA, HFD tailwinds, and ClinCheck Live. He also sought clarification on the performance of the North American retail (non-DSO) business, which showed improvement.

Answer

President and CEO Joseph Hogan attributed the adult business growth to DSOs (both GP and OSO channels), financial credit options, a broad product portfolio, and the practice of scanning every patient for digital visualization. Regarding North American retail, Joseph Hogan described it as achieving 'more stability' due to focused team execution and a broader portfolio, with DSOs also contributing significantly. CFO John Morici added that North America improved due to less negative retail performance combined with DSO growth.

Jeff Johnson asked about the drivers behind the significant improvement in Align Technology's adult business, which saw 8% growth, the best since 2021. He questioned if it was due to NoAA, HFD tailwinds, or ClinCheck Live, and also sought commentary on the North American retail (non-DSO) business performance.

Answer

President and CEO Joseph Hogan attributed adult business growth to DSOs, financial credit platforms like HFD, a broad product portfolio, and the strategy of scanning every patient for digital visualization. He described the North American retail business as having achieved 'more stability' due to team focus and a broader portfolio, rather than improved economic conditions. CFO John Morici clarified that North America's overall improvement was due to less negative retail performance combined with DSO growth.

Jeff Johnson asked for more details on the softer capital environment observed in Europe during the quarter. He also inquired about the impact of MDR (Medical Device Regulation) challenges in Europe on the MedSurg business and whether new proposals to simplify MDR could accelerate product approvals there.

Answer

VP of Finance and Head of Investor Relations Jason Beach noted that capital businesses experience quarter-to-quarter fluctuations but expressed confidence in a healthy order book for Europe in 2026. CFO Preston Wells welcomed the proposed changes to EUMDR, acknowledging it has stunted innovation and delayed patient access, expecting it to accelerate product launches across the portfolio, particularly for implants like Insignia and Pangea.

Jeff Johnson asked for more details on the softer capital environment observed in Europe during Q4 2025. He also inquired if EU MDR challenges impacted Stryker's MedSurg business in Europe and if new proposals to simplify EU MDR could accelerate product approvals there.

Answer

Preston Wells, CFO, Stryker, stated that Europe has 'woken up' to the issues with EU MDR stunting innovation, and Stryker welcomes proposed changes that could accelerate product launches across its entire portfolio, particularly for implants. Jason Beach, VP of Finance and Head of Investor Relations, Stryker, noted that capital business in Europe experiences normal quarter-to-quarter fluctuations but the order book for 2026 is healthy.

Jeff Johnson inquired about the performance of the clariti product line, its current annualized revenue, and the potential floor for its decline. He also asked if MyDay gross margins are expected to reach clariti levels within the next one to two years.

Answer

President and CEO Al White stated that clariti was down a couple of percent this quarter, approaching $400 million for the year, and discussed repositioning efforts in Asia-Pac. EVP of CFO and Treasurer Brian Andrews noted that daily silicone hydrogel lens gross margins are currently below CooperVision's overall gross margins, expecting continued pressure but anticipating operating margin expansion and earnings growth through leverage.

Jeff Johnson asked for Insulet's early thoughts on how it plans to protect and extend its competitive moat in the patch pump market, especially with potential two-piece patch pump entrants expected in the next 18-24 months.

Answer

Ashley McEvoy, President and CEO, stated the primary focus is expanding the market by converting MDI users. She highlighted Omnipod 5's differentiated technology, strong competitive sourcing in Q3, frictionless customer experience, pipeline investments (like phone control and next-generation products), and a diversified, resilient supply chain as key elements of their competitive advantage.

Jeff Johnson asked about Insulet's strategy to protect and extend its competitive moat in the patch pump market, particularly in anticipation of potential two-piece patch market entrants over the next 18-24 months.

Answer

Ashley McEvoy (President and CEO) emphasized expanding the market by transitioning MDI users to AID, highlighting Omnipod 5's differentiated technology, strong competitive sourcing in Q3, a frictionless customer experience, pipeline investments (e.g., phone control adoption from 45% to 55%), and continuous capacity investments for a resilient supply chain.

Jeff Johnson asked about the phasing of the $200 million operating income cost savings, specifically if it's a net number and how it will be distributed over the next three years, and whether a similar remeasurement gain is expected in 2026.

Answer

Ron South, Senior Vice President and Chief Financial Officer, confirmed the $200 million is a multi-year, net operating income improvement, but the specific phasing for 2026 is still being assessed. Regarding remeasurement gains, he noted they have been a regular part of the business but no significant ones are expected in the near future, with clarity to be provided in the 2026 guidance.

Jeff Johnson asked about the phasing of the $200 million operating income cost savings, specifically if it's a net number inclusive of reinvestments and how it might be split over the next three years. He also inquired whether a similar remeasurement gain should be expected in the model for next year.

Answer

Ron South, Senior Vice President and Chief Financial Officer, stated that the $200 million is a multi-year, net operating income improvement, with phasing details for 2026 to be provided with future guidance. He noted that remeasurement gains have been a regular part of the business but did not commit to a significant one for 2026, promising clarity in future guidance.

Jeff Johnson from Robert W. Baird & Co. asked about the phasing of VBP tailwinds in China for the implantables business and whether the flat Q1 growth represented a trough. He also inquired about the pricing strategy for PanOptix Pro versus the original PanOptix.

Answer

CEO David Endicott attributed the flat implantables growth to the soft U.S. market and expects the VBP tailwind to last until mid-2026. CFO Tim Stonesifer added that the VBP comp normalizes in Q2. Regarding pricing, Mr. Endicott declined to share specifics but acknowledged the strategic flexibility offered by having two distinct premium products.

Questioned the feasibility of the back-half guidance, which implies significant year-over-year EPS growth, and asked for the key drivers behind this expected ramp-up. He also requested factual details on the operational overlap between Patterson's dental and veterinary businesses in light of the strategic alternatives review.

Answer

The expected back-half EPS growth is attributed to lapping the significant negative impact of the Change Healthcare disruption from the prior year's Q4. Additional tailwinds include lower year-over-year interest expense and a reduced share count. Regarding the operational overlap between the dental and vet businesses, it's described as a 'mixed bag,' with some shared distribution and service centers, but also many facilities that are specific to each segment.

Sought clarification on the ongoing Change Healthcare impact, asking if it's due to lower monetization on new platforms or continued disruption to consumable orders. Followed up by asking if any customers were permanently lost and requested quantification of the separate impacts from Change Healthcare and the prior-year UPS issue on consumables.

Answer

The ongoing impact is primarily due to the new claims processing platform having a slightly lower revenue per customer than Change. The disruption to consumable orders is viewed as a temporary timing issue. No customers were permanently lost, though a small number found alternative claims processing solutions not integrated with Patterson's software. The UPS issue was quantified as less than a 1-point impact, with the Change issue being larger.