Baxter Reports First Quarter 2010 Financial Results
In-Line With Guidance
Company Lowers Full-Year Outlook
DEERFIELD, Ill., April 22, 2010 - Baxter International Inc. (NYSE:BAX) today reported first quarter net income of $525 million, an increase of 2 percent from $516 million reported in the first quarter of 2009. Earnings per diluted share of $0.86 increased 4 percent from $0.83 per diluted share reported in the prior-year period. Baxter's first quarter financial results included a one-time, non-cash special charge of $39 million (or $0.07 per diluted share) related to a change in the tax treatment of post-retirement prescription drug benefits under recent U.S. healthcare reform legislation.
On an adjusted basis, excluding the special item, Baxter's net income of
$564 million increased 9 percent from $516 million reported in 2009. Adjusted earnings per diluted share of $0.93 increased 12 percent from $0.83 per diluted share reported in the prior-year period and were in-line with the guidance the company previously provided of $0.92 to $0.94 per diluted share.
Baxter's global sales of $3.1 billion advanced 11 percent from the $2.8 billion reported in the same period last year. Excluding the impact of foreign currency, worldwide sales increased 5 percent. Sales within the United States increased 4 percent to $1.3 billion in the first quarter, while international sales grew 17 percent to $1.8 billion. Excluding the impact of foreign currency, international sales grew 5 percent.
By business, BioScience revenues totaled $1.4 billion and advanced 9 percent (and excluding foreign currency, BioScience sales increased 3 percent) as a result of c ontinued growth of recombinant therapies, such as ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] for the treatment of hemophilia, biosurgery products and shipments of CELVAPAN, the company's H1N1 pandemic vaccine. This performance was partially offset by an increase in Medicaid rebates required by manufacturers of drugs and biologics under the new U.S. healthcare reform legislation, as well as weaker sales of antibody therapies and certain plasma proteins.
Renal sales of $584 million grew 13 percent (and excluding foreign currency increased 5 percent). Medication Delivery sales of $1.2 billion increased
14 percent (and excluding foreign currency increased 8 percent). Sales results from these two businesses were driven by growth across core components of the portfolios, including the peritoneal dialysis (PD) franchise, the newly acquired continuous renal replacement therapy business, anesthesia products, parenteral nutrition products, intravenous therapies and global injectables.
Baxter also improved cash flows from operations, generating $279 million, after contributing $300 million to its pension plan in the United States. This represents an improvement of more than $40 million in cash flows from operations from the first quarter of 2009.
"Despite a challenging global macro-environment and the impact from U.S. healthcare reform, we reported quarterly financial results in-line with our expectations," said Robert L. Parkinson, Jr., chairman and chief executive officer. "As we look to the future, we believe the diversified and medically-necessary nature of our portfolio, broad geographic reach, and strong new product pipeline provide a foundation for continued leadership in an evolving marketplace, both in the U.S. and abroad."
Recent Highlights
Baxter continues to advance its pipeline, business development initiatives and commercialization efforts, resulting in a number of recent achievements, including:
- The acquisition of ApaTech, a private equity backed, U.K.-based orthobiologic products company, which will enhance Baxter's position in the rapidly growing orthobiologics space. Through this transaction, Baxter acquired ACTIFUSE, a silicate substituted calcium phosphate synthetic bone graft material that is currently marketed in the U.S., Europe and other select markets around the world.
- The U.S. approval of TachoSil (Absorbable Fibrin Sealant Patch) for use as an adjunct to hemostasis in cardiovascular surgery. TachoSil is the first and only adjunctive hemostatic agent available in the U.S. that combines a collagen patch with a coating of human coagulation factors. Baxter, which was granted exclusive U.S. commercial rights by its partner Nycomed, plans to launch TachoSil during the second half of 2010.
- The announcement by Baxter and New York-Presbyterian Hospital/Weill Cornell Medical Center of 18-month data from a Phase II clinical study of GAMMAGARD LIQUID and GAMMAGARD S/D [Immune Globulin Intravenous (Human)] (marketed as KIOVIG outside of the U.S.) for mild-to-moderate Alzheimer's disease. The Phase II results represent the first study in Alzheimer's disease where all three measures - cognitive, functional and neuroimaging - had positive data and were statistically significant. Baxter also announced plans to initiate a second, concurrent Phase III study of GAMMAGARD for mild-to-moderate Alzheimer's disease to complement its ongoing Phase III trial and to confirm the Phase II results in more patients.
- The initiation of a Phase I dosing study in healthy subjects of BAX 513, an oral non-anticoagulant sulfated polysaccharide (NASP) being investigated for adjunctive therapy for hemophilia patients. BAX 513 involves a novel pharmaceutical approach for improving hemostasis in bleeding disorders.
- Resolution of the warning letter issued by the U.S. Food and Drug Administration (FDA) related to Baxter's production facility located in Lessines, Belgium.
Second Quarter and Full-Year 2010 Outlook
Baxter also announced today its guidance for the second quarter of 2010 and lowered its guidance for the full year.
Previously, Baxter expected full-year 2010 sales growth, excluding the impact of foreign exchange, of 5 to 7 percent (or 7 to 9 percent including foreign exchange); full-year earnings per diluted share of $4.20 to $4.28, before any special items; and cash flow from operations of approximately $2.9 billion.
For full-year 2010, Baxter's revised outlook includes sales growth, excluding the impact of foreign exchange, of 1 to 3 percent (or 3 to 5 percent including the benefit of foreign exchange) and earnings, before any special items, of $3.92 to $4.00 per diluted share. This outlook now includes the full-year impact of U.S. healthcare reform legislation enacted in the first quarter. In addition, Baxter now expects to generate cash flows from operations of approximately $2.7 billion.
"Our revised financial guidance primarily reflects the impact of recent healthcare reform legislation in the U.S. and our outlook for continued plasma market pressures," explained Robert M. Davis, chief financial officer. "Despite these factors, we will continue to pursue opportunities to enhance growth through the development of new products and business development initiatives, while maintaining an intense focus on managing costs throughout the company."
For the second quarter of 2010, the company expects sales growth, excluding the impact of foreign exchange, of 0 to 2 percent (or 3 to 5 percent including the benefit of foreign exchange), and earnings, before any special items, of $0.90 to $0.93 per diluted share.
A webcast of Baxter's first quarter conference call for investors can be accessed live from a link on the company's website at www.baxter.com beginning at 7:30 a.m. CDT on April 22, 2010. Please visit Baxter's website for more information regarding this and future investor events and webcasts, including the company's Annual Meeting of Shareholders on May 4, 2010.
Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.
This release includes forward-looking statements concerning the company's financial results and outlook for 2010. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts, that could delay, limit or suspend product development, manufacturing or sales or result in sanctions; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; future actions of governmental authorities and other third parties as recently adopted U.S. healthcare reform legislation is implemented ; additional legislation, regulation and other governmental pressures, which may affect pricing, reimbursement and rebate policies of government agencies and private payers or other elements of the company's business; production yields, regulatory clearances and customers' final purchase commitments with respect to the company's pandemic vaccine; product development risks; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the impact of geographic and product mix on the company's sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; the availability of acceptable raw materials and component supply; the ability to enforce company patents; patents of third parties preventing or restricting the company's manufacture, sale or use of affected products or technology; any impact of the commercial and credit environment on Baxter and its customers; foreign currency fluctuations and other risks identified in the company's most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company's website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company's website.