José (Joe) E. Almeida, Chairman and CEO
Giuseppe Accogli, Corp. VP and President, Renal
Brik V. Eyre, Corp. VP and President, Hospital Products
Scott Pleau, Corp. VP, Operations
James K. Saccaro, Corp. VP and CFO
Marcus Schabaker, M.D., Ph.D., Corp. VP and Chief Scientific Officer
Paul Vibert, Corp. VP and President, International
NUMBER OF EMPLOYEES: 48,000
GLOBAL HEADQUARTERS: Deerfield, Ill.
2016 ushered in a number of firsts for global renal and hospital products giant Baxter International. It was the company’s first full year of operation after the successful spinoff of its BioScience business, Baxalta Incorporated. The exchange offer for Baxalta’s common stock owned by Baxter officially concluded on May 18, 2016, completely severing ties and establishing Baxter as a dedicated medical technology company.
It also marked the first full year of José (Joe) Almeida’s tenure as CEO of the company. Almeida was named chairman and CEO of Baxter in October 2015, and took the helm on Jan. 1, 2016. He had previously served as chairman, president, and CEO of Covidien from 2012 through 2015, when he wrapped up the company’s $50 billion sale to Medtronic plc. He faced a number of challenges in taking the reins, including recharging a widespread operation dealing with layoffs, restless investors, and a sluggishly growing sales base following Baxalta’s spinoff. In addition, Baxter’s dialysis machines and drug delivery systems exhibit low margins for profit and sell into a slow-growing replacement market. Almeida was forced to work with some urgency to overcome the challenges of struggling 2015 sales and Baxalta’s split.
However, as one of the key negotiators of Covidien’s sale to Medtronic, Almeida had already proven he could oversee complex operations and close deals that expand a company’s size and influence.
“Baxter’s management team faces numerous execution challenges ahead to improve profitability, but we think Almeida’s familiarity with the medical instrument and supply markets should enable him to smoothly transition into the leadership role,” Michael Waterhouse, an analyst with Morningstar in Chicago, wrote in a research note.
Would he be able to return Baxter to its former glory? At the time, he had no plans to shake things up. “I’m not going to make wholesale changes to the company,” Almeida told the Chicago Tribune, although some wondered whether Almeida might be tailoring the company for a sale, as he had done with Covidien.
“I guess I would say a sale of Baxter is certainly not out of the question,” Lawrence Keusch, an analyst with Raymond James in Boston told the Tribune. “But keep in mind Joe is young, only 53. I don’t think this is one of those situations where you’ve got a guy ready to retire in the next two years. He’s got a big job on his hands, and I think making the company strong again is the only thing he’s focused on.”
ANALYST INSIGHTS: Joe Almeida is transforming Baxter from a reactive company to a pro-active player in the marketplace. Watch for both new organic innovations and bolt-on acquisitions to make a positive difference in Baxter’s outlook for the future.
—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors
Though not quite back up to Baxter’s 2014 career high revenue of $10.7 billion, Almeida was able to steer the company back from its 7 percent decline in 2015. Baxter posted fiscal 2016 (year ended Dec. 31) sales of $10.2 billion, a slight climb of 2 percent from the year prior. The revenue was fairly evenly spread between the company’s domestic and international sales, each posting $4.6 billion and $5.9 billion, increasing 6 and 1 percent, respectively.
Baxter’s Renal segment develops peritoneal dialysis (PD), hemodialysis (HD), and continuous renal replacement therapies (CRRT), as well as additional dialysis segments. Total Renal sales in 2016 amounted to $3.9 billion, a 2 percent bump from the previous year. The slight gain was triggered by the continued global patient growth, a number of new product launches, and improved pricing in the United States in the PD business—the latter of which supplied about 2 percentage points to 2016’s growth rate. Increased CRRT sales to treat acute kidney injury also contributed 2 percentage points to the rise. A September 2016 recall of all unexpired lots of 50 mm 0.2 micron filters (due to the potential for a missing filter support membrane and potential presence of particulates) slightly offset this gain.
The Renal division saw the launch of several new technologies in 2016, including the AMIA automated peritoneal dialysis (APD) system and Homechoice APD system, which both feature Baxter’s Sharesource Connectivity Platform two-way telemedicine technology. As of October 2016, according to the company, the Sharesource Telehealth System has securely managed 150,000 home dialysis treatments globally. The two-way remote patient management system lets healthcare providers securely view patients’ recent dialysis-related treatment data and remotely adjust device settings as needed. Further, the AMIA system touts animated graphics and automated step-by-step instructions with voice guidance in order to streamline home PD therapy. Baxter’s launch of the Theranova dialyzer, which allows high-performance HD treatments with filtration that closely mimics the biological kidney, added to the suite of Renal products. Theranova extends the range of molecules able to be filtered from the blood using therapy.
Baxter’s Hospital Products division includes four franchises: fluid systems (IV therapies, infusion pumps, and administration sets), integrated pharmacy solutions (premixed and oncology drug platforms, nutrition products, and pharmacy compounding services), surgical care (inhaled anesthesia and critical care products as well as biological products and medical devices used in surgical procedures for hemostasis, tissue sealing, and adhesion prevention), and other (primarily from the company’s pharmaceutical partnering business). Overall, the Hospital Products division achieved $6.3 billion in revenue, a 2 percent increase from the year prior.
The fluid systems division displayed the highest growth among Hospital Products, rising 9 percent to $2.3 billion. The ascension was induced by favorable pricing and sales volume for IV solutions, as well as increased sales of the company’s Sigma Spectrum pump. The next-generation Sigma Spectrum infusion system was also released in 2016, featuring a master drug library and enhanced patient safety features. The gains in fluid systems were slightly offset by two voluntary nationwide recalls initiated by the company—four lots of IV solutions were pulled due to the chance of leaking containers and particulate matter in January, and one lot of 0.9 percent sodium chloride solution for irrigation was withdrawn because of the presence of particulate matter.
The integrated pharmacy solutions segment was flat from 2015 with sales of $2.2 billion. Adding a suite of essential generic injectable medicines to this division, Baxter acquired Claris Injectables Limited for $625 million in December. The surgical care business was also flat with $1.3 billion in 2016 revenue. Baxter was awarded a CE mark for the Hemopatch surgical patch for tissue sealing and dura replacement in March 2016. The expanded indication allows the patch’s use to close dural defects including dura mater excision, retraction, or shrinkage following traumatic injury. It was also approved as a hemostatic device and surgical sealant in cases where body fluid or air leakage cannot be staunched by conventional surgical techniques. The “other” category’s sales fell 2 percent to $442 million as a result of lower demand for products manufactured by Baxter on behalf of a pharmaceutical partner.
It remains to be seen whether Almeida can continue the trend of positive growth for Baxter. He is certainly optimistic in this regard, closing his chairman letter with “Our accomplishments in 2016 demonstrate that sustained top-quartile performance is within our reach. I am energized by our progress and confident in our prospects. I look forward to providing further updates as we continue this journey.”