07.22.14
$15.26 Billion
KEY EXECUTIVES:
Robert L. Parkinson Jr., Chairman & CEO
Philip L. Batchelor, Corporate VP, Quality
Jean-Luc Butel, Corporate VP and President, International
Brik V. Eyre, Corporate VP and President, Hospital Products
Ludwig N. Hantson, President, Bioscience
Robert J. Hombach, Corporate VP & Chief Financial Officer
Global Headquarters: Deerfield, Ill.
No. of Employees: 61,000
Baxter International Inc. makes a wide range of products to treat hemophilia, immune disorders, infectious diseases, kidney disease, trauma and other chronic and acute medical conditions. The company’s product portfolio is combination of medical devices, pharmaceuticals and biotechnology—very often overlapping with combined drugs and delivery systems, or creative and specially designed packaging that become part of the complete treatment solution.
The company (throughout fiscal 2013 and into 2014) operates two primary divisions: Medical Products and BioScience. The company (see details below) recently announced plans to split into separate entities.
One of the many ways Baxter—and indeed the majority of companies on MPO’s annual list of top medical technology companies—goes about its business of improving value for patients and healthcare providers is through a robust research and development (R&D) pipeline.
In FY13, Baxter increased R&D spending by 8 percent, investing more than $1.2 billion for both internal programs and new collaborations, a record level for the company.
Baxter utilized that money by funding a number of new product releases throughout the 2013 fiscal year.
In the medical device area, the company received CE mark in Europe for the Vivia hemodialysis (HD) system, designed to deliver more frequent, extended duration, short daily or nocturnal home HD therapy, known as high-dose HD therapy. Vivia is designed with the potential to deliver enhanced clinical outcomes and greater patient convenience, and provides a number of unique safety features, wireless connectivity, an integrated water system and extended-use consumables, according to the company. Baxter began introducing the technology in a limited number of European dialysis clinics this year and plans to expand the launch to other European countries in 2015.
Also in Europe, Baxter launched the Hemopatch sealing hemostat (a tool used in surgical procedures to control bleeding). The collagen-based resorbable hemostatic device is used for surgical procedures when control of bleeding by pressure, suture or conventional procedures is ineffective or impractical. The development of Hemopatch combined Baxter’s expertise in collagen, internal coagulation processes, and polyethylene glycol technology platforms.
‘‘Hemopatch is a valuable addition to the tools in the surgical suite, as it provides fast hemostasis and strong tissue adherence. Surgeons will appreciate that the product works quickly and effectively, does not require preparation time, and can be used in a range of surgical settings,’’ said Frank Ulrich, M.D., head of surgical oncology at Goethe University in Frankfurt, Germany.
Hemopatch is a soft, thin and flexible collagen pad that is designed to allow surgeons control during application to gain hemostasis and firm adherence of the hemostatic pad to the bleeding tissue surface. In preclinical tests, Hemopatch achieved fast and effective hemostasis, reaching 97.5 percent success by fully controlling bleeding at two minutes, according to the company.
The pad consists of a specifically formulated porous collagen matrix, coated on one side with a thin protein bonding layer that gives the pad a dual-method mechanism of action, in which two components interact to achieve hemostasis by sealing off the bleeding surface and initiating the body’s own clotting mechanisms. The product was part of Baxter’s BioSurgery franchise, which began with the acquisition of Immuno International AG in the 1990s and the first launch of a hemostatic device in the United States in 1998. Today, Baxter’s BioSurgery portfolio consists of a range of biological and synthetic products and delivery devices used for hemostasis, tissue sealing, adhesion reduction, hard tissue regeneration, as well as soft-tissue repair and microsurgery products.
But growth doesn’t only come from R&D. Medical device firms are famous for expansion through acquisition. For FY13, Baxter’s management wrapped up a deal to expand its hemodialysis business.
In September, the company closed on its acquisition of Gambro AB, a privately held maker of hemodialysis equipment based in Lund, Sweden. The $4 billion deal was announced in December of 2012, but had to jump regulatory hurdles in Europe. In July 2013, the companies finally satisfied European antitrust regulators, who were concerned that an effort to buy Gambro would leave Baxter too powerful in the European market. As a result, Baxter agreed to divest its global continuous renal replacement therapy business unit, which accounts for approximately 2 percent of its overall revenue.
“The combination of these two respected renal leaders—Baxter and Gambro—will enable Baxter to better serve healthcare providers and patients through a collective offering of innovative renal products and therapies,” said Robert L. Parkinson, Jr., chairman and CEO of Baxter. ”Together, we will advance the state of dialysis care for patients with kidney disease worldwide.”
The acquisition provides a number of long-term growth opportunities for Baxter around the world. With a broad and complementary dialysis product portfolio and global footprint, Baxter can accelerate product sales in established markets such as Europe, where Gambro has an extensive presence. Baxter also will be able to expand Gambro’s reach in high-growth regions of Latin America and Asia-Pacific, where Baxter has steadily grown its peritoneal dialysis (PD) business. In addition, Baxter will be able to build its pipeline of investigational home hemodialysis and automated PD systems by adding Gambro’s dialyzers, devices and dialysis solutions, monitors, and acute therapies to treat patients with serious kidney, liver and lung conditions.
Following the completed acquisition, Brik Eyre was named president of the combined renal business and elected a corporate officer. Eyre joined Baxter in 2008 and previously served as the general manager of U.S. Medication Delivery. Prior to his new role, Eyre served as general manager for Baxter’s BioPharma Solutions business.
Bottom-Line Bump
Baxter’s net income totaled $2 billion, or $3.66 per diluted share in 2013. Excluding special items, the company’s adjusted net income increased 2 percent to $2.6 billion, and earnings per diluted share of $4.67 advanced 3 percent. Baxter’s worldwide sales in 2013 totaled $15.3 billion and rose 8 percent. Excluding revenues of $513 million associated with the Gambro acquisition, Baxter’s revenues increased 4 percent to $14.7 billion. BioScience sales of $6.6 billion advanced 5 percent (or 6 percent excluding the impact of foreign currency), while Medical Products sales of $8.7 billion grew 9 percent from the prior-year period. Excluding revenues associated with the Gambro acquisition, Medical Products sales increased 3 percent (or 4 percent excluding the impact of foreign currency) on a full-year basis.
During 2013, the company generated cash flows from operations of approximately $3.2 billion and returned significant value to shareholders. Baxter returned more than $1.9 billion to shareholders during the year, through share repurchases of $913 million (or approximately 13 million shares) and dividends totaling more than $1 billion, reflecting a 27 percent increase in dividend payments versus the prior year.
“We continue to meet our financial objectives while navigating a challenging and complex macro-environment,” Parkinson said.
“We remain focused on the company’s strategic priorities of advancing the new product pipeline, investing in future growth opportunities, and strengthening our operational execution, which will result in enhanced value for patients, healthcare providers and shareholders.”
Splitsville
In April this year, Baxter officials unveiled plans to create two separate, independent life-science firms—one focused on biopharmaceuticals and the other on medical products.
“Baxter has an established history of executing successful spin-offs, and we have continued to evaluate the separation of these two businesses in response to diverging business dynamics and the rapidly changing macro-environment,’’ said Parkinson. ‘‘This decision underscores Baxter’s commitment to ensuring its long-term strategic priorities remain aligned with shareholders’ best interests, while improving our competitive position and performance, enhancing operational, commercial and scientific effectiveness and creating value for patients, healthcare providers, and other key stakeholders.”
According to company officials, the spin-off will create two, “well-capitalized independent companies with strong balance sheets, investment grade profiles, and disciplined approaches to capital allocation.” Baxter’s brass also believes the separation will result in other tangible benefits, including:
“The news represents a significant milestone that will result in material benefits for key stakeholders,’’ said Ludwig N. Hantson, Ph.D., president of Baxter’s existing BioScience division. ‘‘We are confident that this decision not only strengthens our outlook, it positions us well to execute on our future growth prospects, new product pipeline and other opportunities as we enter a new era in the journey to achieve our aspiration as a premier biopharmaceuticals company.’’
The medical products business has a portfolio of intravenous (IV) solutions and nutritional therapies, drug delivery systems and administration sets, premixed and other injectable drugs, as well as inhalation anesthetics and hospital-based biosurgery products.
The corporate headquarters of both companies will remain in the affluent Chicago suburb of Deerfield.
Parkinson will serve as chairman and CEO of the medical products company, which will retain the Baxter International name.
Hantson will be named CEO of the new biopharmaceuticals company, which will be named at a later date. Hantson joined Baxter in 2010 from Novartis Pharmaceuticals Corporation where he served in a number of roles of increasing responsibility, the most recent of which was CEO, Pharma North America. Prior to Novartis, Hantson spent 13 years at Johnson & Johnson. Wayne T. Hockmeyer, Ph.D., who joined Baxter’s board in 2007, has agreed to serve as non-executive chairman of the board of the new biopharmaceuticals company. Hockmeyer founded MedImmune Inc., and served as its chairman and chief executive officer.
The split will come via a tax-free distribution to Baxter shareholders of a new publicly traded stock in the new biopharmaceuticals company. The transaction is expected to be completed by mid-year 2015, subject to market, regulatory and certain other conditions, including final approval by Baxter’s board of directors.
This isn’t the first time Baxter has spun off parts of itself. Other companies that Baxter has spun off in the past three decades include Edwards Lifesciences Corp., Caremark Corp., and Allegiance Healthcare Corp.
It’s also part of a larger industry trend of refocusing on core businesses. Baxter’s Illinois neighbor, Abbott Laboratories, spun off its pharmaceutical arm to create a new firm—AbbVie Inc.—at the beginning of 2013. Covidien plc also completed the spin-off of its pharmaceutical business in 2013 to concentrate on medical devices (it’s now merging with Medtronic Inc.).
KEY EXECUTIVES:
Robert L. Parkinson Jr., Chairman & CEO
Philip L. Batchelor, Corporate VP, Quality
Jean-Luc Butel, Corporate VP and President, International
Brik V. Eyre, Corporate VP and President, Hospital Products
Ludwig N. Hantson, President, Bioscience
Robert J. Hombach, Corporate VP & Chief Financial Officer
Global Headquarters: Deerfield, Ill.
No. of Employees: 61,000
Baxter International Inc. makes a wide range of products to treat hemophilia, immune disorders, infectious diseases, kidney disease, trauma and other chronic and acute medical conditions. The company’s product portfolio is combination of medical devices, pharmaceuticals and biotechnology—very often overlapping with combined drugs and delivery systems, or creative and specially designed packaging that become part of the complete treatment solution.
The company (throughout fiscal 2013 and into 2014) operates two primary divisions: Medical Products and BioScience. The company (see details below) recently announced plans to split into separate entities.
One of the many ways Baxter—and indeed the majority of companies on MPO’s annual list of top medical technology companies—goes about its business of improving value for patients and healthcare providers is through a robust research and development (R&D) pipeline.
In FY13, Baxter increased R&D spending by 8 percent, investing more than $1.2 billion for both internal programs and new collaborations, a record level for the company.
Baxter utilized that money by funding a number of new product releases throughout the 2013 fiscal year.
In the medical device area, the company received CE mark in Europe for the Vivia hemodialysis (HD) system, designed to deliver more frequent, extended duration, short daily or nocturnal home HD therapy, known as high-dose HD therapy. Vivia is designed with the potential to deliver enhanced clinical outcomes and greater patient convenience, and provides a number of unique safety features, wireless connectivity, an integrated water system and extended-use consumables, according to the company. Baxter began introducing the technology in a limited number of European dialysis clinics this year and plans to expand the launch to other European countries in 2015.
Also in Europe, Baxter launched the Hemopatch sealing hemostat (a tool used in surgical procedures to control bleeding). The collagen-based resorbable hemostatic device is used for surgical procedures when control of bleeding by pressure, suture or conventional procedures is ineffective or impractical. The development of Hemopatch combined Baxter’s expertise in collagen, internal coagulation processes, and polyethylene glycol technology platforms.
‘‘Hemopatch is a valuable addition to the tools in the surgical suite, as it provides fast hemostasis and strong tissue adherence. Surgeons will appreciate that the product works quickly and effectively, does not require preparation time, and can be used in a range of surgical settings,’’ said Frank Ulrich, M.D., head of surgical oncology at Goethe University in Frankfurt, Germany.
Hemopatch is a soft, thin and flexible collagen pad that is designed to allow surgeons control during application to gain hemostasis and firm adherence of the hemostatic pad to the bleeding tissue surface. In preclinical tests, Hemopatch achieved fast and effective hemostasis, reaching 97.5 percent success by fully controlling bleeding at two minutes, according to the company.
The pad consists of a specifically formulated porous collagen matrix, coated on one side with a thin protein bonding layer that gives the pad a dual-method mechanism of action, in which two components interact to achieve hemostasis by sealing off the bleeding surface and initiating the body’s own clotting mechanisms. The product was part of Baxter’s BioSurgery franchise, which began with the acquisition of Immuno International AG in the 1990s and the first launch of a hemostatic device in the United States in 1998. Today, Baxter’s BioSurgery portfolio consists of a range of biological and synthetic products and delivery devices used for hemostasis, tissue sealing, adhesion reduction, hard tissue regeneration, as well as soft-tissue repair and microsurgery products.
But growth doesn’t only come from R&D. Medical device firms are famous for expansion through acquisition. For FY13, Baxter’s management wrapped up a deal to expand its hemodialysis business.
In September, the company closed on its acquisition of Gambro AB, a privately held maker of hemodialysis equipment based in Lund, Sweden. The $4 billion deal was announced in December of 2012, but had to jump regulatory hurdles in Europe. In July 2013, the companies finally satisfied European antitrust regulators, who were concerned that an effort to buy Gambro would leave Baxter too powerful in the European market. As a result, Baxter agreed to divest its global continuous renal replacement therapy business unit, which accounts for approximately 2 percent of its overall revenue.
“The combination of these two respected renal leaders—Baxter and Gambro—will enable Baxter to better serve healthcare providers and patients through a collective offering of innovative renal products and therapies,” said Robert L. Parkinson, Jr., chairman and CEO of Baxter. ”Together, we will advance the state of dialysis care for patients with kidney disease worldwide.”
The acquisition provides a number of long-term growth opportunities for Baxter around the world. With a broad and complementary dialysis product portfolio and global footprint, Baxter can accelerate product sales in established markets such as Europe, where Gambro has an extensive presence. Baxter also will be able to expand Gambro’s reach in high-growth regions of Latin America and Asia-Pacific, where Baxter has steadily grown its peritoneal dialysis (PD) business. In addition, Baxter will be able to build its pipeline of investigational home hemodialysis and automated PD systems by adding Gambro’s dialyzers, devices and dialysis solutions, monitors, and acute therapies to treat patients with serious kidney, liver and lung conditions.
Following the completed acquisition, Brik Eyre was named president of the combined renal business and elected a corporate officer. Eyre joined Baxter in 2008 and previously served as the general manager of U.S. Medication Delivery. Prior to his new role, Eyre served as general manager for Baxter’s BioPharma Solutions business.
Bottom-Line Bump
Baxter’s net income totaled $2 billion, or $3.66 per diluted share in 2013. Excluding special items, the company’s adjusted net income increased 2 percent to $2.6 billion, and earnings per diluted share of $4.67 advanced 3 percent. Baxter’s worldwide sales in 2013 totaled $15.3 billion and rose 8 percent. Excluding revenues of $513 million associated with the Gambro acquisition, Baxter’s revenues increased 4 percent to $14.7 billion. BioScience sales of $6.6 billion advanced 5 percent (or 6 percent excluding the impact of foreign currency), while Medical Products sales of $8.7 billion grew 9 percent from the prior-year period. Excluding revenues associated with the Gambro acquisition, Medical Products sales increased 3 percent (or 4 percent excluding the impact of foreign currency) on a full-year basis.
During 2013, the company generated cash flows from operations of approximately $3.2 billion and returned significant value to shareholders. Baxter returned more than $1.9 billion to shareholders during the year, through share repurchases of $913 million (or approximately 13 million shares) and dividends totaling more than $1 billion, reflecting a 27 percent increase in dividend payments versus the prior year.
“We continue to meet our financial objectives while navigating a challenging and complex macro-environment,” Parkinson said.
“We remain focused on the company’s strategic priorities of advancing the new product pipeline, investing in future growth opportunities, and strengthening our operational execution, which will result in enhanced value for patients, healthcare providers and shareholders.”
Splitsville
In April this year, Baxter officials unveiled plans to create two separate, independent life-science firms—one focused on biopharmaceuticals and the other on medical products.
“Baxter has an established history of executing successful spin-offs, and we have continued to evaluate the separation of these two businesses in response to diverging business dynamics and the rapidly changing macro-environment,’’ said Parkinson. ‘‘This decision underscores Baxter’s commitment to ensuring its long-term strategic priorities remain aligned with shareholders’ best interests, while improving our competitive position and performance, enhancing operational, commercial and scientific effectiveness and creating value for patients, healthcare providers, and other key stakeholders.”
According to company officials, the spin-off will create two, “well-capitalized independent companies with strong balance sheets, investment grade profiles, and disciplined approaches to capital allocation.” Baxter’s brass also believes the separation will result in other tangible benefits, including:
- Greater management focus on the distinct businesses of biopharmaceuticals and medical products;
- Ability to more effectively commercialize new and existing product offerings;
- Ability to drive innovation across the franchises and allocate necessary resources to the areas presenting the highest growth potential; and
- Flexibility to pursue respective growth and investment strategies, resulting in revenue acceleration, improved profitability and enhanced returns.
“The news represents a significant milestone that will result in material benefits for key stakeholders,’’ said Ludwig N. Hantson, Ph.D., president of Baxter’s existing BioScience division. ‘‘We are confident that this decision not only strengthens our outlook, it positions us well to execute on our future growth prospects, new product pipeline and other opportunities as we enter a new era in the journey to achieve our aspiration as a premier biopharmaceuticals company.’’
The medical products business has a portfolio of intravenous (IV) solutions and nutritional therapies, drug delivery systems and administration sets, premixed and other injectable drugs, as well as inhalation anesthetics and hospital-based biosurgery products.
The corporate headquarters of both companies will remain in the affluent Chicago suburb of Deerfield.
Parkinson will serve as chairman and CEO of the medical products company, which will retain the Baxter International name.
Hantson will be named CEO of the new biopharmaceuticals company, which will be named at a later date. Hantson joined Baxter in 2010 from Novartis Pharmaceuticals Corporation where he served in a number of roles of increasing responsibility, the most recent of which was CEO, Pharma North America. Prior to Novartis, Hantson spent 13 years at Johnson & Johnson. Wayne T. Hockmeyer, Ph.D., who joined Baxter’s board in 2007, has agreed to serve as non-executive chairman of the board of the new biopharmaceuticals company. Hockmeyer founded MedImmune Inc., and served as its chairman and chief executive officer.
The split will come via a tax-free distribution to Baxter shareholders of a new publicly traded stock in the new biopharmaceuticals company. The transaction is expected to be completed by mid-year 2015, subject to market, regulatory and certain other conditions, including final approval by Baxter’s board of directors.
This isn’t the first time Baxter has spun off parts of itself. Other companies that Baxter has spun off in the past three decades include Edwards Lifesciences Corp., Caremark Corp., and Allegiance Healthcare Corp.
It’s also part of a larger industry trend of refocusing on core businesses. Baxter’s Illinois neighbor, Abbott Laboratories, spun off its pharmaceutical arm to create a new firm—AbbVie Inc.—at the beginning of 2013. Covidien plc also completed the spin-off of its pharmaceutical business in 2013 to concentrate on medical devices (it’s now merging with Medtronic Inc.).