Baxter Reports Sales and EPS for Fourth Quarter 2010 In Line With Guidance

Baxter Reports Sales and EPS for Fourth Quarter 2010 In Line With Guidance  
Company Achieves Record Cash Flow Exceeding $3.0 Billion in 2010

Baxter Provides Financial Outlook For 2011

DEERFIELD, Ill., January 27, 2011 - Baxter International Inc. (NYSE:BAX) today announced its financial results for the fourth quarter of 2010, and provided its financial outlook for the first quarter and full-year 2011.

Baxter reported net income in the fourth quarter of $423 million, which declined 26 percent from $572 million reported in the prior-year period.  Earnings per diluted share of $0.72 compares to $0.94 per diluted share reported in the fourth quarter of 2009.  These results included special after-tax charges totaling $227 million (or $0.39 per diluted share) for costs and asset impairments primarily associated with the company's business optimization initiatives, increased litigation reserves, as well as in-process research and development charges associated with recent transactions.   The company also recorded an after-tax special charge in the fourth quarter of 2009 of $56 million (or $0.09 per diluted share).

On an adjusted basis, excluding special items in both years, Baxter's net income of $650 million increased 4 percent in the fourth quarter from $628 million in the prior-year period.  Adjusted earnings per diluted share increased 8 percent to $1.11 per diluted share from $1.03 reported in the fourth quarter of 2009.  These results were in line with the company's previously issued earnings guidance of $1.09 to $1.11 per diluted share.

Worldwide sales in the fourth quarter totaled $3.5 billion and increased 1 percent over the same period last year.  Excluding the impact of foreign currency, worldwide sales advanced 3 percent.  Sales within the United States increased by more than 1 percent to $1.4 billion and international sales of $2.1 billion were comparable to the prior-year period.  Excluding the impact of foreign currency, international sales increased 3 percent.

By business, BioScience revenues exceeded $1.5 billion and increased 1 percent from the comparable prior-year period.  Excluding the impact of foreign currency, BioScience sales increased 4 percent.  Contributing to this performance was strong demand for GAMMAGARD LIQUID [Immune Globulin Intravenous (Human)] (marketed as KIOVIG outside of the United States), several specialty plasma-based therapeutics, and biosurgery products, resulting in double-digit sales growth across these product categories.  This strength was partially offset by the expected decline in recombinant protein and vaccine revenues.

Medication Delivery sales also increased 1 percent to $1.3 billion (or 3 percent excluding the impact of foreign currency), driven primarily by growth of intravenous therapies (including the company's parenteral nutrition products), injectable drugs and anesthesia products.  Renal sales of $626 million were comparable to the prior-year period (and increased 1 percent excluding the impact of foreign currency), as the company continued to post solid gains in peritoneal dialysis patients, particularly in the United States, Latin America and Asia.

Full-Year 2010 Results
For the full year, Baxter reported net income of $1.4 billion or $2.39 per diluted share, compared to net income of $2.2 billion or $3.59 per diluted share last year.  On an adjusted basis, excluding special charges in both years, Baxter's net income in 2010 was $2.4 billion which represents an increase of
2 percent, over the prior-year period, while earnings per diluted share of $3.98 increased 5 percent from $3.80 reported in 2009.

Baxter's worldwide sales increased 2 percent and totaled $12.8 billion for full-year 2010, including a first-quarter revenue adjustment of $213 million associated with the COLLEAGUE infusion pump recall.  On an adjusted basis, excluding the COLLEAGUE charge, Baxter's worldwide sales totaled $13.1 billion in 2010, an increase of 4 percent over the prior year revenues of $12.6 billion (and increased 3 percent excluding the impact of foreign currency).  Sales within the United States (excluding the COLLEAGUE adjustment) increased 3 percent to $5.5 billion in 2010, and international sales grew
5 percent to $7.6 billion.  Excluding the impact of foreign currency, international sales rose 3 percent.

"2010 was an unusually challenging year for our company; however, we continue to benefit from the diversified and medically-necessary nature of our portfolio, broad geographic reach and strong financial position," said Robert L. Parkinson, Jr., chairman and chief executive officer.  "We also executed on our key commercial, operational and organizational strategies intended to enhance our effectiveness, competitive position, and growth profile with emphasis on creating sustained value for our shareholders over the long-term."

In 2010, Baxter delivered record cash flow and returned significant value to shareholders in the form of dividends and share repurchases.  Cash flow from operations totaled $3.0 billion (including pension contributions of $350 million to the company's U.S. pension fund during the year).  Excluding pension contributions from both years, cash flow from operations increased 11 percent versus the prior-year period.  In addition, Baxter returned approximately $2.1 billion to shareholders through dividends totaling $688 million and share repurchases of approximately $1.5 billion (or 30 million shares).

Fourth Quarter Highlights
Baxter continued to enhance its portfolio and new product pipeline in 2010 with investments in research and development that reflected funding of all key R&D initiatives, including 14 programs that progressed in Phase III clinical development throughout the year.  Recent commercial and pipeline achievements include the following:

  • The acquisition of the hemophilia-related assets from Archemix, and an exclusive license agreement for certain related intellectual property assets. The lead product associated with the acquisition and license agreement is ARC19499, a synthetic, subcutaneously-administered hemophilia therapy currently in a Phase I clinical trial in the UK. ARC19499 blocks Tissue Factor Pathway Inhibitor (TFPI) activity, thereby augmenting and improving blood clotting, potentially reducing replacement factor therapy for patients with hemophilia A and B.


•Presentation of interim data from Baxter's Phase I, multicenter clinical study at the Annual Meeting of the American Society of Hematology in December, suggest that recombinant von Willebrand factor (rVWF) may be safe and well tolerated in patients with type 3 and severe type 1 von Willebrand disease.  The data also suggest that rVWF has a pharmacokinetic profile comparable to plasma-derived von Willebrand factor.  Currently available treatments for von Willebrand disease are derived from plasma.  Baxter's rVWF is the only recombinant replacement protein in clinical development for von Willebrand disease and has received orphan designation from the European Medicines Agency's Committee for Orphan Medical Products and the U.S. Food and Drug Administration (FDA).


•FDA approval to market GAMMAGARD LIQUID 10% in a 30-gram vial for patients with primary immunodeficiency disorders (PID).  Baxter will be the first immune globulin manufacturer to offer a 10% product in a 30-gram vial size, which is designed to provide greater convenience to customers and will reduce the number of vials needed to fulfill dosing requirements.  Baxter is preparing to make the product available to the market within the next several months.


•Completion of the Phase III clinical trial of HyQ, an immune globulin (IG) therapy facilitated subcutaneously by recombinant human hyaluronidase, a dispersion and permeation enhancer.  Interim analyses presented in 2010 showed that 28 out of 29 HyQ treated study participants with primary immune deficiency were able to infuse immune globulin under the skin, using a single injection site, at infusion volumes, intervals and rates equivalent to their previous IV administration of immune globulin.


•Completion of a Phase III study evaluating TISSEEL fibrin sealant as a hemostatic agent in vascular surgery. This trial included 140 patients in the U.S. and is intended to support the approval of a broad hemostasis indication.  The company expects to file for approval with the FDA in 2011.


•The launch of GLASSIATM [Alpha1-Proteinase Inhibitor (Human)] in the U.S.  GLASSIATM is the first available ready-to-use liquid alpha1-proteinase inhibitor (Alpha1-PI) and is indicated as a chronic augmentation and maintenance therapy in adults with emphysema due to congenital deficiency of alpha-1 antitrypsin (AAT), an under-diagnosed hereditary condition characterized by a low level of alpha-1 antitrypsin protein in the blood and lungs.  GLASSIATM is administered intravenously once a week and augments the levels of AAT in the blood and lungs. Through a definitive agreement with Kamada Ltd., Baxter is the exclusive distributor for GLASSIATM in the U.S. and other select markets.

Outlook for First Quarter and Full-Year 2011
Baxter also announced today its outlook for the first quarter and full-year 2011.  For full-year 2011, Baxter expects sales growth of 2 to 3 percent, excluding the impact of foreign exchange.  This guidance reflects the previously announced divestiture of the generic injectables business, with 2010 annual sales of approximately $200 million, that is anticipated to close during the first quarter 2011.  Excluding the proposed divestiture and the impact of foreign exchange, sales growth is expected to be in the 4 to 5 percent range.   Also, for the full-year, Baxter expects earnings of $4.15 to $4.25 per diluted share, before any special items, and cash flows from operations of approximately $2.8 billion.

For the first quarter of 2011, the company expects sales growth of
2 to 3 percent, excluding the impact of foreign currency, and earnings of $0.92 to $0.94 per diluted share, before any special items.

A webcast of Baxter's fourth 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. CST on January 27, 2011.  Please visit www.baxter.com for more information regarding this and future investor events and webcasts.

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, outlook for 2011 and R&D pipeline. 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 with respect to the company's implementation of the COLLEAGUE recall, 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; Sigma's ability to build production capacity to meet customer demand; future actions of governmental authorities and other third parties as U.S. healthcare reform legislation and other austerity measures are 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; 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; fluctuations in supply and demand and the pricing of plasma-based therapies; 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 current economic conditions 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.

 

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