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    Top30

    10. Baxter International

    ...

    Related CONTENT
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    07.26.18
    $10.6 Billion

    KEY EXECUTIVES:
    José (Joe) E. Almeida, Chairman,
    President and CEO
    Giuseppe Accogli, Sr. VP and President, Global Businesses
    Scott Pleau, Sr. VP, Operations
    James (Jay) Saccaro, Exec. VP and CFO
    Sumant Ramachandra, M.D., Ph.D., Sr. VP, Chief Science and Technology Officer
    Laura Angelini, General Manager, Chronic Renal
    Will Boren, General Manager, Advanced Surgery
    David Ferguson, Ph.D., General Manager, Medication Delivery
    Reaz Rasul, General Manager, Acute Therapies
    Scott Luce, General Manager, U.S. Hospital Products
    Brik Eyre, Sr. VP and President, Americas
    Cristiano Franzi, Sr. VP and President, EMEA
    Andrew (Andy) Frye, Sr. VP and President, APAC

    NO. OF EMPLOYEES: 47,000

    GLOBAL HEADQUARTERS: Deerfield, Ill.

    Something was missing.

    Dick Stapleton kept looking for the large IV bag that usually housed his cancer treatment, but it wasn’t in sight. It wasn’t in the hands of the nurse approaching him, or with any of the other staff milling about the John Theurer Cancer Center at Hackensack University Medical Center in northeastern New Jersey.

    The only equipment he noticed was a medication vial, catheter, syringe, and needle package. There was no IV bag, large or small.

    Ben Boyer had a similar experience at Moore’s Cancer Center in San Diego, Calif., shortly after Christmas last year. Like Stapleton, Boyer was puzzled at the sight of an IV bolus containing his wife’s chemotherapy drugs.

    ‘“Wait—what’s going on?’ I asked, noting the change,” Boyer recounted in a Jan. 8, 2018, blog. “He [the nurse] answered, ‘I have to push this manually. Huge IV bag shortage.’ ‘Because of the Christmas holiday?’ I assumed. ‘No dude,’ he replied. ‘The hurricane in Puerto Rico. Like, all of the IV bags in the country are made in Puerto Rico, and nobody has any left. The factories are still a mess.’”

    Such confusion was all too common last fall after Hurricane Maria raked Puerto Rico in September, crippling the island’s production of intravenous (IV) bags and fluids, and exacerbating an existing multi-year product shortage in the United States.

    Puerto Rico produces about 44 percent of all IV bags and saline compounds used in U.S. hospitals, with most manufactured in factories owned by global medical products firm Baxter International Inc. Although the company’s three facilities sustained minimal damage in the storm and resumed limited production within a week of the deadly tempest, output was stymied by impassable roads and an agonizingly long recovery process that is still continuing.

    Baxter’s Puerto Rican operations are mainly responsible for production of the MINI-BAG and MINI-BAG Plus Container Systems (50 mL and 100 mL small volume parenterals, or SVPs), which are used mostly in hospital pharmacies to compound or administer medication or to help deliver medicine, amino acids, and certain pre-mixed products. Baxter does not manufacture any large IV bags on the 5,320-square-mile island.

    To help ease the nationwide bag and saline shortage, the U.S. Food and Drug Administration (FDA) permitted Baxter to temporarily import amino acid medical products from its facilities in Italy and the United Kingdom, and IV bags from factories in Australia, Brazil, Canada, Ireland, and Mexico. In addition, the University of Utah and the American Society of Health-System Pharmacists drafted guidelines for hospitals on the best use of existing supplies; the recommendations included administering medicine orally whenever possible, or through an IV “push” (injecting drugs directly into an IV line).

    It took several months for Baxter to regain full power in its Puerto Rican factories and resume pre-hurricane production levels of its small IV bags. In its 2017 annual report, released in late February this year, Baxter heralded an impending return to “normal” inventory levels upon the waning of flu season.

    “Baxter’s operations in Puerto Rico were affected by Hurricane Maria in late 2017. Additionally, an aggressive flu season in the U.S. significantly heightened demand for Baxter’s large volume IV solutions...” Baxter Chairman, President, and CEO Jose (Joe) E. Almeida told investors in the report. “Resulting supply issues created difficulties for the customers and patients who depend on us. Disruptions are an inevitable part of doing business. What matters is our ability to react swiftly and maintain our commitments to our stakeholders.”


    ANALYST INSIGHTS: Baxter is a different company under the leadership of CEO Joe Almeida than it was two years ago. Watch for aggressive inorganic and organic investments to facilitate growth in their core businesses.

    —Dave Sheppard, Co-Founder and Principal, MedWorld Advisors



    Baxter upheld that commitment rather well last year despite the protracted manufacturing interruption and U.S. IV bag shortage. The company expected a $70 million hit to its fourth-quarter sales from the market tumult, but the annual report shows the final three months of 2017 was actually the most profitable period for Baxter. The $2.77 billion the Deerfield, Ill.-based firm generated in Q4 was 2.5 percent higher than its third-quarter sales of $2.7 billion and 12 percent greater than the $2.47 billion yielded in Q1.

    “Two years ago at Baxter, we set our sights on achieving sustained top-quartile performance among our healthcare industry peers. We have made great strides since, building on the strength of our portfolio and global footprint while bolstering speed, efficiency, and discipline across our operations,” Almeida said in his letter to stakeholders. “Now we have arrived at a pivotal moment, where operational gains are helping revitalize Baxter’s culture of innovation. We are well-positioned to advance our mission to save and sustain lives while delivering enhanced value for our investors.”

    That enhanced value included a 4 percent boost in 2017 sales (to $10.6 billion), a 27 percent increase in adjusted earnings per diluted share ($2.48), and a 240-basis point rise in adjusted operating margin to 16 percent. Moreover, free cash flow was up 35 percent to $1.22 billion compared with 2016, and the company returned roughly $879 million to stockholders last year through $315 million in dividends and $564 million in share repurchases.

    Such a bountiful balance sheet was largely driven by Baxter’s three-pronged growth strategy that focuses on portfolio management/research and development (R&D); operational excellence; and capital allocation.

    The company boosted R&D last year through research alliances with the Mayo Clinic and Ramot at Tel Aviv University/Tel Aviv Sourasky Medical Center. The latter partnership targets surgical care, while the former—lasting five years—initially centers on kidney disease.

    Baxter relied heavily on product introductions and enhancements in 2017 to manage and grow its portfolio. For example, the company tweaked various items for safety or usability (AK 90 hemodialysis system, FLOSEAL Hemostatic Matrix, TISSEEL [Fibrin Sealant], SIGMA SPECTRUM infusion system), and added the enteral ENFit syringe and accessory line to its nutrition care lineup. It also launched a digital tracking solution (DeviceVue) for its Sigma Spectrum Infusion pumps, deployed its next-generation PrisMAX acute care technology in select European markets, and expanded the use of its oXIRIS blood purification set to include the removal of excess cytokines, endotoxins and other inflammatory markers from blood. The label expansion was implemented last fall in more than 30 European countries and certain Mideast and African nations.

    Baxter also took steps to ensure future innovation, receiving guidance from the FDA on the regulatory pathway for its new home peritoneal dialysis solution. The system—likely to be submitted as a combination product—produces sterile PD solutions using a home-based water filtration device that integrates with the company’s Amia PD system.

    “We continue to increase our investment in new product development, build R&D productivity, and advance the impact of Baxter innovation globally,” Almeida said in the 2017 annual report. “An accelerating pace of high-value innovation is essential to achieving our performance goals.”

    Indeed, innovation is key to growth, but there’s more than one path to innovation. Baxter augmented its new product introductions and enhancements last year by finalizing its $625 million deal for global injectable drug firm Claris Injectables Limited, and purchasing Chanhassen, Minn.-based Wound Care Technologies Inc., developer of the DermaClose Continuous Tissue Expander. The device, used for suturing and stapling skin in moderate to large wounds, created a complementary offering within Baxter’s Advanced Surgery business.

    Though it occurred in the first quarter of 2017, the Wound Care acquisition did not impact total revenue in Baxter’s Advanced Surgery business last year. Proceeds rose 2.5 percent to $707 million due to higher international sales, but were offset by lower demand for non-core surgical products Actifuse and Peristrips.

    A similar counterbalancing act transpired in most of Baxter’s seven business units in 2017, though all segments generated solid profits. Renal Care revenue, for instance, climbed 1.7 percent to $3.48 billion on robust growth of PD patients as well as adoption of Amia PD cyclers in the United States and HomeChoice CLARIA systems overseas but proceeds were impacted by lower international hemodialysis sales.

    Baxter lost $45 million in Medication Delivery sales from Hurricane Maria, but still increased revenue in that unit 3.9 percent to $2.69 billion. Executives attributed the increase to select pricing and improved volumes for U.S. IV solutions and higher sales of the company’s IV access administrative sets.

    Maria also blew away $15 million in Nutrition revenue, but improved demand, new product launches, and ongoing geographic expansion for the company’s parenteral solutions helped grow sales 2.8 percent to $882 million. Pharmaceuticals suffered the same fate, losing $10 million in sales to Maria, but the loss was more than offset by a $57 million boost from the Claris acquisition as well as higher demand for pre-mixed injectable drugs, and better pricing for fast-acting IV beta blocker BREVIBLOC. Total Pharmaceuticals revenue jumped 9.3 percent to $1.88 billion, according to Baxter’s 2017 annual report.

    Strong sales of continuous renal replacement therapy systems boosted Acute Therapies revenue 6.3 percent to $456 million, while higher product volume led to a 1.8 percent rise in Other proceeds to $455 million.

    In addition to growing sales through new product innovations, portfolio management, and acquisitions, Baxter also fortified its profit-making prowess last year by changing its geographical reporting segments. The company now breaks down its world map into three regions: Americas (North and South America); EMEA (Europe, Middle East, and Africa); and APAC (Asia-Pacific).
    Each of these new reporting regions posted gains in 2017, with the Americas leading the charge at 5.2 percent (to $5.72 billion), followed by APAC (4 percent to $2.11 billion), and EMEA (1.3 percent to $2.73 billion).

    “We have arrived at a pivotal moment, where operational gains are helping revitalize Baxter’s culture of innovation,” Almeida said. “We continue to promote simplification and disciplined cost management to ensure every dollar we spend is making the greatest impact for patients and stockholders.”
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