Company Bolsters Portfolio, Achieves Significant Pipeline Milestones and Progresses Toward Separation
Baxter's Third Quarter Financial Results Exceed Guidance
DEERFIELD, Ill., October 16, 2014 - Baxter International Inc. (NYSE:BAX) today posted strong financial results for the third quarter, which exceeded expectations and provided its fourth quarter and full-year 2014 guidance adjusting for the planned divestiture of its vaccines franchise. The company continues to bolster its business portfolios by establishing new collaborations and advancing its new product pipeline with the achievement of significant milestones, and remains on track for the anticipated separation into two independent, leading healthcare companies in mid-2015.
For the third quarter, Baxter reported net income of $468 million and earnings per diluted share of $0.86, compared to net income of $544 million and earnings per diluted share of $0.99 in the same period last year. These results reflect the income contribution from the vaccines franchise of
$21 million (or $0.04 per diluted share) and after-tax special items totaling $273 million (or $0.49 per diluted share) primarily for intangible amortization and costs associated with upfront and product development milestone payments, integration of the company's acquisition of Gambro AB, and Baxter's planned separation. Third quarter 2013 results included after-tax special items of $137 million (or $0.25 per diluted share).
On an adjusted basis, excluding special items in both periods, Baxter's third quarter net income of $741 million increased 9 percent from $681 million reported in 2013. Adjusted earnings per diluted share of $1.35 also advanced 9 percent from $1.24 per diluted share last year, exceeding the company's previously issued earnings guidance of $1.28 to $1.32 per diluted share. These results reflect strong revenue growth, continued investments in research and development, unplanned gains from equity investments totaling $0.03 per diluted share which will be reinvested in the business over the remainder of the year, and adjusted income from discontinued operations of $26 million (or $0.04 per diluted share).
Reported worldwide revenues, which do not reflect those from discontinued operations, totaled $4.2 billion and increased 13 percent from prior-year levels. Sales within the United States of $1.8 billion rose 7 percent, while international sales of $2.4 billion increased 18 percent. Including discontinued vaccines revenues, Baxter's global sales advanced 13 percent to $4.3 billion and when also adjusting both periods for the contribution of Gambro, Baxter's sales rose 5 percent, which was at the higher-end of the company's
previously-issued guidance. Foreign currency did not have a material impact on sales growth in the quarter.
BioScience revenues of $1.7 billion grew 8 percent from the prior-year period driven primarily by double-digit growth and continued strong demand for the company's hemophilia therapies, including ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] and FEIBA (an inhibitor therapy), as well as the benefit from government collaborations and the timing of international tenders. BioScience sales, including vaccines, rose 7 percent.
Medical Products sales of $2.5 billion increased 17 percent (or 18 percent excluding the impact of foreign currency) from the prior-year period, and excluding Gambro revenues from both periods, Medical Products sales grew 4 percent. Robust growth in the U.S. was led by double-digit gains in peritoneal dialysis patients, as well as strong sales of intravenous and nutritional therapies.
For the first nine months of 2014, Baxter reported net income of $1.5 billion, or $2.82 per diluted share. Excluding special items in both periods, Baxter's adjusted net income for the nine-month period increased 7 percent to
$2.1 billion, and earnings per diluted share of $3.81 grew 8 percent from $3.53 per diluted share reported in the comparable prior-year period. Year-to-date income from the Vaccines Franchise totaled $122 million (or $0.22 per diluted share) on a reported basis, or $135 million (or $0.25 per diluted share) adjusting for special items.
Baxter's worldwide reported sales for the nine-month period totaled
$12.2 billion and rose 15 percent. Including the discontinued vaccines revenues, Baxter's global sales advanced 14 percent (or 15 percent excluding the impact of foreign currency) to $12.5 billion, and when also adjusting both periods for the contribution of Gambro, Baxter's sales rose 4 percent
(or 5 percent excluding the impact of foreign currency). BioScience sales of
$4.8 billion advanced 6 percent, while Medical Products sales of $7.4 billion grew 21 percent. Excluding foreign currency and Gambro revenues from both periods, Medical Products sales increased 4 percent for the first nine months.
During the first three quarters of 2014, Baxter generated cash flows from operations of approximately $2.1 billion and returned significant value to shareholders. On a year-to-date basis, Baxter has returned over $1.3 billion to shareholders through share repurchases of $500 million (or approximately
7 million shares) and dividends totaling $813 million, reflecting a 7 percent increase in dividend payments versus the prior-year period.
"Our performance has afforded us the opportunity to accelerate investments in research and development and further enhance manufacturing, quality and operational excellence, while meeting our stated financial objectives," said Robert L. Parkinson, Jr., chairman and chief executive officer. "We also continue to position our businesses for sustained success as we strengthen the portfolios with new collaborations, advance our new product pipeline with the recent achievement of meaningful milestones, and remain engaged in our work to separate Baxter into two leading, global healthcare companies aimed at enhancing shareholder value over the long-term."
Recent highlights include:
Forming a new global innovation and research and development (R&D) center in Cambridge, Mass., for Baxter's biopharmaceuticals business, which positions the new company to accelerate innovation by building on its robust pipeline in core areas of expertise, strengthen and build upon R&D collaborations with partners in new and emerging biotech areas, and optimize R&D productivity while enhancing patient care globally.
Signing a definitive agreement with Pfizer to divest the commercial vaccines business, including NeisVac-C, which helps protect against meningitis caused by group C meningococcal meningitis (MenC), and FSME-IMMUN, which helps protect against tick-borne encephalitis. This decision enhances the biopharmaceutical business focus centered on core areas of expertise in hematology, immunology, and through technology platforms like gene therapy and biosimilars.
Announcing an exclusive license and collaboration agreement with Merrimack Pharmaceuticals for the development and commercialization of MM-398, an investigational compound in development for pancreatic cancer, a rare and deadly disease with limited treatment options. Through the agreement, Baxter gains exclusive commercialization rights for all potential indications of MM-398 outside the United States and Taiwan.
Obtaining approval from the U.S. Food and Drug Administration (FDA) for HYQVIA, a subcutaneous treatment for adult patients with primary immunodeficiency (PI). HYQVIA is the first subcutaneous immune globulin (IG) treatment approved for PI patients with a dosing regimen requiring only one infusion up to once per month (every three to four weeks) and one injection site per infusion to deliver a full therapeutic dose of IG. The majority of PI patients today receive intravenous infusions in a doctor's office or infusion center, and current subcutaneous IG treatments require weekly or bi-weekly treatment with multiple infusion sites per treatment.
Announcing positive results from a Phase 3 pivotal clinical trial of BAX 855, an investigational, extended half-life recombinant factor VIII (rFVIII) treatment for hemophilia A. The study met its primary endpoint in the control and prevention of bleeding, routine prophylaxis and perioperative management for patients who were 12 years or older. Patients in a twice-weekly prophylaxis arm experienced a 95 percent reduction in median annual bleed rate as compared to those in the on-demand arm.
Receiving FDA approval for a new pediatric indication for RIXUBIS, the company's recombinant factor IX treatment for hemophilia B, and approval of a 5% Solution for FLEXBUMIN, which expands Baxter's FLEXBUMIN product line with the first and only preparation of human albumin to be packaged in a flexible plastic container.
Entering an exclusive agreement with Rockwell Medical to commercialize their leading hemodialysis (HD) concentrate product line in the United States. This agreement enhances Baxter's comprehensive range of therapeutic options across the home, in-center and hospital settings for patients with end-stage renal disease.
Investing nearly $300 million to expand a state-of-the-art manufacturing facility in Opelika, Alabama, to address the growing global demand for dialyzers, a critical component used in hemodialysis therapy. The company expects to begin commercial production in 2016, augmenting other recent and ongoing capacity expansions across the network.
Outlook for Fourth Quarter and Full-Year 2014
Baxter also provided its financial outlook for the fourth quarter and full-year 2014, which now excludes income from discontinued operations of approximately $0.27 per diluted share for the year.
For the fourth quarter of 2014, the company expects sales growth of approximately 3 percent, excluding the impact of foreign currency. Including the impact of foreign currency, the company expects reported sales to be flat to 2013 levels. Baxter also expects earnings from continuing operations, before special items, of $1.30 to $1.33 per diluted share.
Baxter now expects sales growth for full-year 2014 of 11 to 12 percent, before the impact of foreign exchange, and growth of approximately 10 to 11 percent on a reported basis. Also for the full year, Baxter expects earnings from continuing operations, before special items, of $4.86 to $4.89 per diluted share and cash flows from operations of approximately $3.5 billion, excluding cash costs related to the spin-off of the biopharmaceutical business.
The fourth quarter 2014 earnings guidance excludes approximately $0.07 per diluted share of projected intangible asset amortization expense. The full-year 2014 earnings guidance excludes $1.03 per diluted share of special items comprising $0.96 per diluted share of items recorded year to date, and projected intangible asset amortization expense of $0.07 per diluted share for the fourth quarter. Reconciling for the inclusion of these items results in GAAP (Generally Accepted Accounting Principles) earnings from continuing operations of $3.83 to $3.86 per diluted share for the full-year 2014.
A webcast of Baxter's third 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 October 16, 2014. Please visit Baxter's website 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, business development activities including the planned divestiture of the Vaccines franchise, capital structure and expenditures including the planned expansion of the Opelika, Alabama manufacturing facility, R&D activities including the plan to open a new global innovation and R&D center for the biopharmaceuticals business in Cambridge, Mass., outlook for 2014, and the planned separation of Baxter's biopharmaceutical and medical products businesses. 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 of risks for new and existing products; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; U.S. healthcare reform and other global austerity measures; reimbursement and rebate policies of government agencies and private payers; product development risks; the ability to successfully separate the biopharmaceutical and medical products businesses on the terms or timeline currently contemplated, if at all, and achieve the intended results; accurate identification of business development and R&D opportunities and realization of anticipated benefits, including the ability to successfully integrate the Gambro business and achieve anticipated efficiencies; timely submission and approval of regulatory filings; inventory reductions or fluctuations in buying patterns; 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; the impact of global economic conditions on Baxter and its customers, including foreign governments; foreign currency fluctuations and other risks identified in Baxter's most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on Baxter's website. Baxter does not undertake to update its forward-looking statements.