07.23.08
$11.3 Billion
Robert L. Parkinson, Jr., Chairman and CEO
Joy A. Amundson, President, BioScience
Peter J. Arduini, President, Medication Delivery
Bruce McGillivray, President, Renal
Robert M. Davis, Chief Financial Officer
J. Michael Gatling, VP, Global Manufacturing Operations and
Supply Chain Operations
John J. Greisch, President, International
Though 2008 may be turning into the year of heparin for Baxter International, the company delivered solid financial performance for 2007, reporting a 22% increase in net profit.
With an eye toward its robust product pipeline, Baxter International managed to expand its geographic presence while accelerating its R&D investments in 2007—achieving success in the process. With total net sales of $11.3 billion, the drug and device manufacturer posted an increase of 9%, compared with $10.4 billion for 2006; of the 2007 total, $4.8 billion came from US sales, with the rest coming from international sales. Furthermore, net income was $1.7 billion, or $2.61 per diluted share, including after-tax special items of $119 million or 18 cents per diluted share. On an adjusted basis, excluding special items, the company reported net income of $1.8 billion, or $2.79 per diluted share, an increase of 25% compared with 2006.
Given its strong financial position, Baxter broke its own record for R&D spending, increasing its investment to $760 million, a 24% increase from $614 million in 2006. As a result of its pattern of year-over-year increases on R&D expenditures, the company gained approval for or launched more than 12 new products and advanced many of the programs in its product pipeline.
“2007 was a very successful year for our company,” said Robert L. Parkinson, Jr., chairman and CEO. “We met or exceeded expectations on all key financial metrics throughout the year. We are also particularly pleased with the improved profile of our earnings, the strength of our overall financial position, and most importantly, the progress we have made in accelerating innovation. We’re very well positioned to continue to meet our commitments, leverage the benefits of our diversified healthcare model, and deliver enhanced value to our various stakeholders in 2008 and beyond.”
Each of the company’s three major units—BioScience, Medication Delivery and Renal—sells non-device products such as drugs, though many are marketed with a device component or in conjunction with a device. Baxter does not break down revenues by device and non-device product lines.
For 2007, net sales were $4.6 billion for BioScience, representing 6% growth compared to $4.4 billion in 2006. Medication Delivery sales were $4.2 billion, compared to $3.9 billion previously, marking 8% growth. The Renal segment posted a sales increase of 8% as well, with 2007 total net sales of $2.2 billion, compared to $2.1 billion in 206.
Bioscience mostly is non-device-related products, as it manufactures recombinant and plasma-based proteins for treatment of hemophilia and other bleeding disorders; plasma-based therapies for treatment of immune deficiencies; biosurgery and other products for regenerative medicine; and vaccines. The major drivers of BioSciences’ growth in 2007 included sales volumes for Baxter’s advanced recombinant therapy, Advate—sales of the blockbuster drug exceeded $1.2 billion. In the company’s regenerative medicine product line, Floseal and Coseal sealants, classified as medical devices by the FDA, were the primary growth drivers.
The Medication Delivery segment, which includes IV Therapies ($1.4 billion, 9% growth), Global Injectables ($1.5 billion, 4% growth), Infusion Systems ($860 million, 5% growth), Anesthesia ($422 million, 33% growth) and “Other” products ($43 million, a 4% decrease from 2006), had marked progress in 2007 compared with 2006—that year, total net sales had decreased 2%.
In the Infusion Systems segment, increased international sales of disposable tubing sets used for IV administrations played a role in 2007’s growth achievement. In addition, international sales of Colleague infusion pumps rebounded.
The Colleague line of infusion pumps are used to give controlled amounts of medications or other fluids to patients intravenously or other direct line into the bloodstream. In 2005, the FDA sent warning letters and seized the devices (including Syndeo infusion pumps) from the company’s Illinois warehouses due to problems including under-infusion by the device, battery failures, false alarms and failure to alarm. The company signed a consent decree with the agency and agreed to stop manufacturing and distributing in 2006. Before resuming sales in the United States, the company had to agree to continue to service pumps currently in use and supply additional pumps to customers when medically necessary.
By February 2007, Baxter received clearance from the FDA to resume sales. But in July 2007, the FDA issued a recall of Colleague and Flo-Gard infusion pump models related to the falsification of service and repair data. The recall initially pertained to 534 infusion pump devices in the United States brought in for routine maintenance or corrections at the company's Phoenix, AZ service center. In the course of ongoing quality control processes, the company discovered falsified repair, test and inspection data sheets, which included electrical safety data. Consequently, it is possible that pumps sent to be serviced, repaired or corrected were returned without service being performed on them. As a result, three employees in the Phoenix service center were dismissed. In August, Baxter extended the recall to include an additional 986 Colleague devices.
Final 2007 sales figures for the device were not “significant,” according to the Baxter’s annual report. But, “resolving issues with the Colleague infusion pump has been Baxter’s top priority,” said Peter Arduini, corporate vice president and president of Baxter’s Medication Delivery business, after the FDA granted 510(k) pre-market notification clearance to Baxter. “Baxter remains committed to our infusion systems customers and will continue to invest in this business to enhance the delivery of lifesaving medications.”
The Renal segment’s product lines are broken down into two categories: those for peritoneal disease (PD Therapy) and hemodialysis therapy (HD Therapy). PD Therapy reported net sales of $1.8 billion, a 10% gain from $1.6 billion in 2006, while HD Therapy had net sales of $448 million, a 4% increase from $431 million in the prior year. Latin America, Asia and the United States were the top sales regions for PD Therapy. HD Therapy attributed its sales growth to higher revenues stemming from Baxter’s Renal Therapy Services businesses, which operate dialysis centers.
Looking specifically at the company’s overall medical device portfolio, some of the notable 2007 product introductions included the V-Link Luer-activated device with VitalShield protective coating (the first needleless IV connector containing an antimicrobial coating) and the Gelfoam Plus Hemostasis Kit (for control of bleeding during surgical procedures). In the United States and Canada, Baxter also launched Baxject II, a needleless transfer device with built-in filters for Advate. In February 2007, the FDA also cleared Baxter’s upgraded Ipump Pain Management System. In terms of product development activities, the company completed enrollment in a Phase II clinical trial using Baxter’s proprietary Isolex technology to select CD34+ adult stem cells from patients with chronic myocardial ischemia re-infusion into their hearts as a means to restore blood flow.
During the year, strategic alliances and acquisitions also played a role in Baxter’s continued gains. For example, Baxter signed an agreement with Nycomed to market and distribute its TachoSil patch (a collagen sponge coated with lyophilized clotting fatters used for hemostasis and tissue sealing) in the United States upon FDA approval. Baxter also expanded its relationship with Halozyme to include the use of Hylenex (a subcutaneous delivery technology that enhances absorption of injectable products) and the use of Halozyme’s Enhanze technology in the development of a subcutaneous route of administration for Baxter’s liquid formulation of IV immune globulin. In the HD and PD Therapy categories, Baxter collaborated with DEKA for the development of a next-generation home HD machine for renal disease. Finally, the company acquired just about all the assets of MAAS Medical, a provider of infusion systems technology.
On the organization front, the 2007 fiscal year included a little bit of streamlining. In March, Baxter completed the sale of its Transfusion Therapies business to Texas Pacific Group (TPG) and Maverick Capital Ltd. (private investment groups) for $540 million. TPG and Maverick Capital, Ltd. established a new independent company called Fenwal Inc. With the acquisition, Fenwal becomes one of the world's largest suppliers of products and services to the transfusion medicine industry, with a product portfolio of manual and automated blood-collection products and storage equipment, approximately 3,500 employees and five manufacturing facilities worldwide.
The end of 2007 and beginning of 2008 brought Baxter a new challenge in the form of a recall of the blood thinner heparin. The main ingredient in some of Baxter's heparin, made in China from pig intestines, was found to be contaminated. Some medical devices contain or are coated with heparin. In June 2008, the FDA updated the number of deaths of patients who took heparin, nearly doubling it to 149, but said a link could not be established between the deaths to contaminated forms of the blood-thinning drug. An earlier FDA probe found chemical contaminants in some batches of Baxter's heparin. Officials previously had said there were 81 deaths among patients treated with heparin since January 2007. Baxter began recalling lots of the drug in January.
The contamination has resulted in numerous lawsuits against Baxter and other companies that manufacture heparin. The problem also has spurred multiple hearings on Capitol Hill regarding the industry’s and the FDA’s review of foreign suppliers to the pharmaceutical and medical device industries. The FDA also said in a posting on its Web site that contamination could lead to inaccurate test results from diagnostic devices that monitor heparin or use it as part of the device itself.
Baxter has said the main ingredient for its heparin probably was contaminated before reaching its supplier in China.
Despite the setbacks, the company seems off to a good financial start in 2008. The first quarter of 2008 showed steady progress for Baxter, which recorded $2.9 billion in sales, a 13% increase from $2.7 billion reported for the same period in 2007. The largest sales gain, at 13%, was achieved by the BioScience segment, with sales totals for the quarter of $1.2 billion. Medication Delivery sales grew 8% to $1.1 billion for the quarter, and Renal sales increased 6% to $558 million.
“Our strong and improving financial position reflects the continuing momentum in our business,” said Robert J. Parkinson, Jr., chairman and CEO. “Our favorable outlook for the full year allows us to continue to accelerate our investments in research and development programs that will improve treatment for patients, expand access to care and enhance the quality of life for people around the world.”
As such, Baxter raised its earnings outlook for 2008 (excluding the impact of foreign exchange) to sales growth of 5% to 6%.
KEY EXECUTIVES:
Robert L. Parkinson, Jr., Chairman and CEO
Joy A. Amundson, President, BioScience
Peter J. Arduini, President, Medication Delivery
Bruce McGillivray, President, Renal
Robert M. Davis, Chief Financial Officer
J. Michael Gatling, VP, Global Manufacturing Operations and
Supply Chain Operations
John J. Greisch, President, International
NO. OF EMPLOYEES:
46,000GLOBAL HEADQUARTERS:
Deerfield, ILThough 2008 may be turning into the year of heparin for Baxter International, the company delivered solid financial performance for 2007, reporting a 22% increase in net profit.
With an eye toward its robust product pipeline, Baxter International managed to expand its geographic presence while accelerating its R&D investments in 2007—achieving success in the process. With total net sales of $11.3 billion, the drug and device manufacturer posted an increase of 9%, compared with $10.4 billion for 2006; of the 2007 total, $4.8 billion came from US sales, with the rest coming from international sales. Furthermore, net income was $1.7 billion, or $2.61 per diluted share, including after-tax special items of $119 million or 18 cents per diluted share. On an adjusted basis, excluding special items, the company reported net income of $1.8 billion, or $2.79 per diluted share, an increase of 25% compared with 2006.
Given its strong financial position, Baxter broke its own record for R&D spending, increasing its investment to $760 million, a 24% increase from $614 million in 2006. As a result of its pattern of year-over-year increases on R&D expenditures, the company gained approval for or launched more than 12 new products and advanced many of the programs in its product pipeline.
“2007 was a very successful year for our company,” said Robert L. Parkinson, Jr., chairman and CEO. “We met or exceeded expectations on all key financial metrics throughout the year. We are also particularly pleased with the improved profile of our earnings, the strength of our overall financial position, and most importantly, the progress we have made in accelerating innovation. We’re very well positioned to continue to meet our commitments, leverage the benefits of our diversified healthcare model, and deliver enhanced value to our various stakeholders in 2008 and beyond.”
Each of the company’s three major units—BioScience, Medication Delivery and Renal—sells non-device products such as drugs, though many are marketed with a device component or in conjunction with a device. Baxter does not break down revenues by device and non-device product lines.
For 2007, net sales were $4.6 billion for BioScience, representing 6% growth compared to $4.4 billion in 2006. Medication Delivery sales were $4.2 billion, compared to $3.9 billion previously, marking 8% growth. The Renal segment posted a sales increase of 8% as well, with 2007 total net sales of $2.2 billion, compared to $2.1 billion in 206.
Bioscience mostly is non-device-related products, as it manufactures recombinant and plasma-based proteins for treatment of hemophilia and other bleeding disorders; plasma-based therapies for treatment of immune deficiencies; biosurgery and other products for regenerative medicine; and vaccines. The major drivers of BioSciences’ growth in 2007 included sales volumes for Baxter’s advanced recombinant therapy, Advate—sales of the blockbuster drug exceeded $1.2 billion. In the company’s regenerative medicine product line, Floseal and Coseal sealants, classified as medical devices by the FDA, were the primary growth drivers.
The Medication Delivery segment, which includes IV Therapies ($1.4 billion, 9% growth), Global Injectables ($1.5 billion, 4% growth), Infusion Systems ($860 million, 5% growth), Anesthesia ($422 million, 33% growth) and “Other” products ($43 million, a 4% decrease from 2006), had marked progress in 2007 compared with 2006—that year, total net sales had decreased 2%.
In the Infusion Systems segment, increased international sales of disposable tubing sets used for IV administrations played a role in 2007’s growth achievement. In addition, international sales of Colleague infusion pumps rebounded.
The Colleague line of infusion pumps are used to give controlled amounts of medications or other fluids to patients intravenously or other direct line into the bloodstream. In 2005, the FDA sent warning letters and seized the devices (including Syndeo infusion pumps) from the company’s Illinois warehouses due to problems including under-infusion by the device, battery failures, false alarms and failure to alarm. The company signed a consent decree with the agency and agreed to stop manufacturing and distributing in 2006. Before resuming sales in the United States, the company had to agree to continue to service pumps currently in use and supply additional pumps to customers when medically necessary.
By February 2007, Baxter received clearance from the FDA to resume sales. But in July 2007, the FDA issued a recall of Colleague and Flo-Gard infusion pump models related to the falsification of service and repair data. The recall initially pertained to 534 infusion pump devices in the United States brought in for routine maintenance or corrections at the company's Phoenix, AZ service center. In the course of ongoing quality control processes, the company discovered falsified repair, test and inspection data sheets, which included electrical safety data. Consequently, it is possible that pumps sent to be serviced, repaired or corrected were returned without service being performed on them. As a result, three employees in the Phoenix service center were dismissed. In August, Baxter extended the recall to include an additional 986 Colleague devices.
Final 2007 sales figures for the device were not “significant,” according to the Baxter’s annual report. But, “resolving issues with the Colleague infusion pump has been Baxter’s top priority,” said Peter Arduini, corporate vice president and president of Baxter’s Medication Delivery business, after the FDA granted 510(k) pre-market notification clearance to Baxter. “Baxter remains committed to our infusion systems customers and will continue to invest in this business to enhance the delivery of lifesaving medications.”
The Renal segment’s product lines are broken down into two categories: those for peritoneal disease (PD Therapy) and hemodialysis therapy (HD Therapy). PD Therapy reported net sales of $1.8 billion, a 10% gain from $1.6 billion in 2006, while HD Therapy had net sales of $448 million, a 4% increase from $431 million in the prior year. Latin America, Asia and the United States were the top sales regions for PD Therapy. HD Therapy attributed its sales growth to higher revenues stemming from Baxter’s Renal Therapy Services businesses, which operate dialysis centers.
Looking specifically at the company’s overall medical device portfolio, some of the notable 2007 product introductions included the V-Link Luer-activated device with VitalShield protective coating (the first needleless IV connector containing an antimicrobial coating) and the Gelfoam Plus Hemostasis Kit (for control of bleeding during surgical procedures). In the United States and Canada, Baxter also launched Baxject II, a needleless transfer device with built-in filters for Advate. In February 2007, the FDA also cleared Baxter’s upgraded Ipump Pain Management System. In terms of product development activities, the company completed enrollment in a Phase II clinical trial using Baxter’s proprietary Isolex technology to select CD34+ adult stem cells from patients with chronic myocardial ischemia re-infusion into their hearts as a means to restore blood flow.
During the year, strategic alliances and acquisitions also played a role in Baxter’s continued gains. For example, Baxter signed an agreement with Nycomed to market and distribute its TachoSil patch (a collagen sponge coated with lyophilized clotting fatters used for hemostasis and tissue sealing) in the United States upon FDA approval. Baxter also expanded its relationship with Halozyme to include the use of Hylenex (a subcutaneous delivery technology that enhances absorption of injectable products) and the use of Halozyme’s Enhanze technology in the development of a subcutaneous route of administration for Baxter’s liquid formulation of IV immune globulin. In the HD and PD Therapy categories, Baxter collaborated with DEKA for the development of a next-generation home HD machine for renal disease. Finally, the company acquired just about all the assets of MAAS Medical, a provider of infusion systems technology.
On the organization front, the 2007 fiscal year included a little bit of streamlining. In March, Baxter completed the sale of its Transfusion Therapies business to Texas Pacific Group (TPG) and Maverick Capital Ltd. (private investment groups) for $540 million. TPG and Maverick Capital, Ltd. established a new independent company called Fenwal Inc. With the acquisition, Fenwal becomes one of the world's largest suppliers of products and services to the transfusion medicine industry, with a product portfolio of manual and automated blood-collection products and storage equipment, approximately 3,500 employees and five manufacturing facilities worldwide.
The end of 2007 and beginning of 2008 brought Baxter a new challenge in the form of a recall of the blood thinner heparin. The main ingredient in some of Baxter's heparin, made in China from pig intestines, was found to be contaminated. Some medical devices contain or are coated with heparin. In June 2008, the FDA updated the number of deaths of patients who took heparin, nearly doubling it to 149, but said a link could not be established between the deaths to contaminated forms of the blood-thinning drug. An earlier FDA probe found chemical contaminants in some batches of Baxter's heparin. Officials previously had said there were 81 deaths among patients treated with heparin since January 2007. Baxter began recalling lots of the drug in January.
The contamination has resulted in numerous lawsuits against Baxter and other companies that manufacture heparin. The problem also has spurred multiple hearings on Capitol Hill regarding the industry’s and the FDA’s review of foreign suppliers to the pharmaceutical and medical device industries. The FDA also said in a posting on its Web site that contamination could lead to inaccurate test results from diagnostic devices that monitor heparin or use it as part of the device itself.
Baxter has said the main ingredient for its heparin probably was contaminated before reaching its supplier in China.
Despite the setbacks, the company seems off to a good financial start in 2008. The first quarter of 2008 showed steady progress for Baxter, which recorded $2.9 billion in sales, a 13% increase from $2.7 billion reported for the same period in 2007. The largest sales gain, at 13%, was achieved by the BioScience segment, with sales totals for the quarter of $1.2 billion. Medication Delivery sales grew 8% to $1.1 billion for the quarter, and Renal sales increased 6% to $558 million.
“Our strong and improving financial position reflects the continuing momentum in our business,” said Robert J. Parkinson, Jr., chairman and CEO. “Our favorable outlook for the full year allows us to continue to accelerate our investments in research and development programs that will improve treatment for patients, expand access to care and enhance the quality of life for people around the world.”
As such, Baxter raised its earnings outlook for 2008 (excluding the impact of foreign exchange) to sales growth of 5% to 6%.