1. Becton, Dickinson & Co.
Tyson Banbury (an independent analysis for consideration)
2009 Annual Report:

2. Agenda Summary Industry Overview Company Overview Competitors1 2 3 4 5 6 7
Summary
Industry Overview
Company Overview
Competitors
SWOT Analysis
Valuation
Recommendation

3. Summary Leading global medical technology company
Develops, manufactures, and sells medical devices, instrument systems and reagents
Founded in 1897
Headquarters in Franklin Lakes, NJ
Employs over 29,000 associates in over 50 countries
Ticker: (NYSE:BDX)
Current Price: $81.43 (12/05/2010)
2009 Annual Report:

4. Industry Overview Key Issues Medical Equipment and Supplies
Aging population has lead to increased levels of medical treatment and hospital admissions
Diabetes mellitus has reached epidemic status according to the US Center for Disease Control (CDC)
Accounts for more than $130 billion of healthcare spending in US annually
Market for diabetes diagnostic, monitoring, and treatment devices will increase rapidly
High crude oil and natural gas prices has driven up the cost of plastic resins used for the manufacture of many disposable medical supplies
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

5. Industry Overview Significant Trends
Consolidation – US medical equipment and supplies market favors large companies
Better able to negotiate with Group Purchasing Organizations (GPOs)
Can better afford high cost of product development including FDA approval process
Smaller companies often targeted by large firms looking to acquire new technologies
E-Procurement – Growth in internet sites featuring medical products and purchasing information has introduced price transparency
Increased purchasing power of healthcare institutions and GPOs
R&D Expenditure – Maintaining a healthy product pipeline is key to protecting market share and maintaining revenues
Many companies continue to increase R&D expenditures in an attempt to stay at the forefront of this industry
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

6. Company Overview Recent Performance
Significantly outperformed market over last 5 years
Held even with market during financial crisis

7. Company Overview History
1897: BD founded by Maxwell W. Becton and Fairleigh S. Dickinson as a medical device import company
1904: First acquisition of Philadelphia Surgical Company enables BD to manufacture its own surgical instruments
1950: Sale of first sterile disposable product to American Red Cross marks successful transition from reusable to disposable products
1954: BD produces first completely disposable syringe for use in a field test of the Salk polio vaccine
1962: BD goes public, offering stock at $25/share
1973: BD produces first fluorescence-activated cell-sorting system
1999: Goal of becoming as universally recognized as the Red Cross

8. Company Overview Segments – BD Medical
Focus: Products that reduce spread of infection and enhance diabetes treatment, drug delivery, and ophthalmic surgery
(FY 2009)
Insulin syringes and pens
Needles and syringes
Intravenous catheters
Safety-engineered and auto disable devices
Prefillable drug delivery systems
Surgical blades and scalpels
Ophthalmic surgical instruments
2009 Annual Report:

9. Company Overview Segments – BD Diagnostics
Focus: Products that improve the accuracy and efficiency of diagnosis
(FY 2009)
Blood collection systems
Automated blood culturing systems
Molecular testing systems for STDs
Microorganism identification systems
Rapid diagnostic assays
Plated media
2009 Annual Report:

10. Company Overview Segments – BD Biosciences
Focus: Products that help with cellular analysis and growing living cells and tissues
(FY 2009)
Fluorescence-activated cell sorters
Monoclonal antibodies
Reagent systems
Cell imaging systems
Cell culture media
Tissue culture supplies
2009 Annual Report:

11. Company Overview Segment Performance ($ in millions) 2006 2007 2008
2009
2010
BD Medical
Revenue
3,106.2
3,343.8
3,720.0
3,730.8
3,796.4
% Growth
7.7%
7.6%
11.3%
0.3%
1.8%
% Tot. Rev.
54.1%
53.2%
52.6%
52.1%
51.5%
BD Diagnostics
1,715.1
1,905.1
2,159.8
2,226.2
2,318.9
5.1%
11.1%
13.4%
3.1%
4.2%
29.9%
30.3%
30.5%
31.1%
31.5%
BD Biosciences
916.3
1,033.9
1,195.1
1,203.8
1,257.0
11.2%
12.8%
15.6%
0.7%
4.4%
16.0%
16.5%
16.9%
16.8%
17.1%
Combined Segments
5,738.0
6,282.8
7,074.9
7,160.9
7,372.3
7.4%
9.5%
12.6%
1.2%
3.0%
Data Source: 2010 and K’s, Notes to Financial Statements (Segment Data), pages 72 and respectively

12. Company Overview Segment Performance
Maintained positive revenue growth in all segments despite financial crisis
Segment revenues maintain stable proportion of total revenues
Stable growth in BD Medical and BD Diagnostics consistent with industry drivers of aging US population and continued growth of diabetes epidemic
High growth in BD Biosciences reflects growing emphasis on biotechnology as the market recognizes the applicability of these medical technologies
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

13. Management Effectiveness
Company Overview
Financial Strength
Profitability
Financial Strength
Management Effectiveness
Gross Margin1
Profit Margin1
Current Ratio
D/E
ROA1
ROE1
BD:
51.80%
15.26%
2.70
0.31
12.93%
22.43%
Industry:
56.54%
10.40%
3.04
0.42
6.07%
14.66%
Efficiency
Receivables Turnover
Inventory Turnover
Asset Turnover
BD:
6.21
3.08
0.78
Industry:
6.12
4.56
0.72
1 Based on 5 year average
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

14. Company Overview Management Ongoing investment in growth opportunities
Operational initiative to reduce costs of medical surgical products about 20% to 30%
Define functional transformation strategies to continue leveraging G&A cost structure, reducing costs going forward
Focus on productivity improvements
Continue expense management
BD Q1 FY 2010 Conference Call:

15. Competitors Baxter International, Inc.
Develops, manufactures, and markets products that save and sustain lives of people with hemophilia, immune disorders, infectious diseases, and other chronic and acute medical conditions.
Baxter manufactures products in 27 countries and sells them in more than 100 countries
Three business segments:
BioScience
Medication Delivery
Renal
Generates 60% of revenues outside US
FY 2010: Q1-Q3 Revenues up 3% but Net Income down 39% due to increased cost of sales, marketing expenses, and declining margins
Source: 2010 OneSource Information Services, Inc., Baxter International, Inc. Company Summary

16. Competitors Stryker Corporation
Medical technology company focusing on orthopaedics among other medical specialty areas
Two business segments:
Orthopaedic Implants
MedSurg Equipment
Orthopaedic Implants: Hip, knee, and spinal implant systems
MedSurg Equipment: Surgical equipment, communications systems, patient handling, and emergency medical equipment
In 2010, multiple acquisitions including Porex Surgical and Neurovascular division of Boston Scientific
FY 2010: Q1-Q3 Revenues up 9%, Net Income up 22% due to increased gross profit and decreased SG&A expenses
Source: 2010 OneSource Information Services, Inc., Stryker Corporation Company Summary

17. Competitors Zimmer Holdings, Inc.
Designs, develops, manufactures, and markets orthopaedic reconstructive implants, dental implants, spinal implants, and related surgical products
Operations in more than 25 countries and markets products in more than 100 countries
Three geographic segments:
Americas
Europe
Asia Pacific
FY 2010: Q1-Q3 Revenues up 3%, Net Income down <1% due to increased sales in Asia Pacific offset by higher SG&A, R&D and cost of production expenses
Source: 2010 OneSource Information Services, Inc., Zimmer Holdings, Inc. Company Summary

18. Competitors Relative Performance

19. SWOT Analysis Summary Helpful to Achieving Objective
Harmful to Achieving Objective
Attributes of Company
Strengths
Financial Strength
Focused R&D
Global Presence
Diverse Product Portfolio
Weaknesses
Product Recalls
FDA Warning Letter
Pending Lawsuits
Attributes of Industry
Opportunities
Growing Diabetes Care Device Market
Agreements and Collaborations
Strategic Acquisition
Global Expansion
Market Growth in Emerging Economies
Threats
Extensive Government Regulation
Competitive Environment
Government Funding
Industry Consolidation Challenges
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

20. SWOT Analysis Strengths
Financial Strength – Continued growth in sales, total assets, and current assets despite financial crisis
Strong cash & equivalents position: $830.5 million in 2008 to $1,216.0 million in 2010
This increase in cash is driven by cash from operations
Focused R&D – R&D activities conducted at operating units and at BD Technologies located in Research Triangle Park, North Carolina
Heavy investment in R&D to maintain innovation (greater than 5% of Total Revenues annually)
In addition to in-house R&D, BD collaborates with universities and medical centers to stay at cutting edge of technologies
High investment on product development allows BD to deliver new technologies early to the market, allowing it to gain significant market share
Global Presence – International operations organized into Europe (including Middle East and Africa), Japan, Asia Pacific, Latin America, and Canada
Diverse geography of manufacturing sites (16 countries) shields BD from macroeconomic risks associated with have production concentrated in a single area
Diverse customer base includes healthcare institutions, clinical laboratories, life science researchers, the general public, and the pharmaceutical industry worldwide
2009 Revenues: 44.8% from US, 34.6% from Europe, and 20.6% from other countries
Diverse Product Portfolio – Diverse set of products create segment revenues that are stable with strong future growth potential
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

21. SWOT Analysis Weaknesses
Product Recalls – On February 8, 2010, BD voluntarily recalled some lots of BD Q-Syte Luer Access Devices and BD Nexiva Closed IV Catheter Systems
Recall initiated because devices may cause air embolism, leakage of blood, injury or death
Such recalls have the potential to impact BD’s reputation as well as projected sales and profits
FDA Warning Letter – The US Food and Drug Administration (FDA) issued a warning letter to BD identifying that BD sells products intended to diagnose, prevent, and treat the 2009 H1N1 Flu Virus that have not been approved for this treatment.
Such letters have the potential to negatively impact BD’s image and possibly its operations
Pending Lawsuits – BD is a defendant in several pending lawsuits, a majority of which involve direct and indirect purchasers of its products
Antitrust violations
Patent infringement
These lawsuits may negatively impact BD’s brand and image
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

22. SWOT Analysis Opportunities
Growing Diabetes Care Device Market – The frequency of diabetes among children and adults is increasing worldwide and is the 6th leading cause of death in the US
Global market for diabetes care devices: $5,432.4 million in 2000 to $12,201.9 million in 2009 (CAGR = 9.4%). This market is projected to grow to $21,777.0 in 2016 (CAGR = 8.6%)
Growing incidence of diabetes provides new avenue of revenue growth; however, market penetration of diabetes care devices is as low as 1% in emerging economies, 30% in Western Europe, and 35% in the US. This low penetration rate provides opportunities for future growth.
Agreements and Collaborations – BD has recently entered into strategic collaborations with ReaMetrix, The US President’s Emergency Plan for AIDS Relief, and Luminex Corporation
These first two of these projects focus on improving technologies for diagnosis and treatment of the AIDS virus as well as expanding BD’s reach into resource-limited settings such as Africa
Strategic Acquisitions – Acquisition of smaller companies has been one of the main growth strategies of BD in the past, and will continue in the future
Acquisitions will help bring in new technologies and allow BD to meet the demands of growing customer requirements
Global Expansion - Building new manufacturing facilities in Hungary, China, and Canada will continue to diversify BD across international markets
Market Growth in Emerging Economies – Medical equipment market in China, India, and Brazil has grown at a CAGR of 6.5% over the last 8 years and is projected to grow at a CAGR of 7.3% until 2015
Growth due to increased income levels and awareness of medical conditions
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

23. SWOT Analysis
Threats
Extensive Government Regulation – Subject to local, state, federal, and foreign laws and regulations
Regulatory bodies include the FDA, Drug Enforcement Agency (DEA), National Research Council (NRC), Department of Health and Human Services (DHHS), and other comparable agencies across the world
Regulation will likely increase in the US as the financial crisis eventually passes and individuals’ focus returns to the recently passed healthcare bill and the general state of healthcare in the US
Competitive Environment – BD operates in a highly competitive industry where technology changes rapidly along with customer expectations
Recent improvements in transparency have given customers more pricing power
Entry by manufacturers based exclusively in China and other low-cost manufacturing locations continues to put pricing pressure on BD and may inhibit BD’s ability to capture market share in emerging markets
Government Funding – Many customers depend on grants from US government agencies, such as the National Institute of Health (NIH), for projects that require the purchase of BD’s products.
These availability of these funds fluctuates, making the future demand for BD’s products uncertain
Industry Consolidation Challenges – Consolidation in the medical device industry is leading to intense competition with larger companies better able to negotiate price concessions with buyers
May force BD to lower prices to maintain competitive stance, decreasing revenues
Source: 2010 OneSource Information Services, Inc., Becton Dickinson OneStop Report

24. Valuation Drivers & Discount Rate CAPM yielded ~7% cost of equity
This value was not used in this analysis

25. Valuation Market Multiples Analysis
Market Multiples Valuation two ways:
DCF with terminal value determined by industry market multiples
Traditional comparable companies analysis

26. Valuation Market Multiples Analysis – Implied Growth
BD trades dead on the average multiples for the industry  Industry is trading at an excessive premium due to high growth prospects
Terminal value determined by industry market multiples yields implied long-term growth rate of 6.60%
This long-term growth rate is unreasonably high, even given BD’s history of consistent high growth

27. Valuation Discounted Cash Flow – Moderate LT Growth
DCF with a more reasonable long-term growth rate of 3.5% yields the following per share price range:

28. Recommendation Current Price: $81.43 (12/05/2010)
Average price using market multiples: $81.37
Price using moderate LT growth rate: $62.98
Recommend:
Add BD to the watch list
Monitor for opportunities to purchase at ~20% discount to current price due to market fluctuations or investor fears
Explore small and mid-cap firms in medical equipment and supplies industry that escape high analyst coverage and have high potential to be targeted by larger firms