Robert L. Parkinson Jr., Chairman & CEO
Philip L. Batchelor, Corporate VP, Quality
Jean-Luc Butel, Corporate VP and President, International
Robert M. Davis, Corporate VP and President, Medical Products
Ludwig N. Hantson, President, Bioscience
Robert J. Hombach, Corporate VP & Chief Financial Officer
John Quick, Director, Manufacturing
NO. OF EMPLOYEES: 51,000
GLOBAL HEADQUARTERS: Deerfield, Ill.
“Getting there is half the fun.” How many times have you said that before heading out on a road trip—perhaps one taken with less than a plan in place for how you’ll get to your destination. That may work for a summertime trip with the top down, but for a multinational medical technology firm, a destination is best reached when there’s a roadmap and a structure in place to follow it.
That’s been the case for Baxter International, a maker of medical products and bioscience technology. Under its medical products umbrella, Baxter makes devices for fluid and drug delivery (such as infusion pumps and other intravenous technology), and renal home-based therapies, such as peritoneal dialysis and other products for people with end-stage kidney disease.
The company has identified four key areas—the company calls them “Strategic Growth Vectors”—that it follows to reach its goals. The four areas of concentration are Core Portfolio, Research and Development, Business Development, and Public-Private Partnerships. According to President and CEO Robert L. Parkinson Jr., the solid financial performance in 2012 “demonstrates the soundness of the company’s underlying strategic priorities” and the vectors “provide a clear roadmap for making it happen. They reflect key pathways to drive innovation and advance the business for the long term.”
And it doesn’t appear to be just talk.
Baxter increased its investments in research and development to $1.2 billion, an increase of 22 percent. The company has R&D centers in Austria, Belgium, Japan and the United States. One of the most promising technologies to come out of the company’s aggressive R&D funding—according to analysts familiar with the technology—is the Vivia home dialysis system. During 2012, Baxter entered the final development stages for Vivia. The company also recently completed the first clinical trial in the United States for the device and initiated a second in-center nocturnal hemodialysis trial in Canada. Baxter officials expect approval in Europe later this year. The technology supports the administration of high-dose hemodialysis, a more frequent and/or longer-duration form of hemodialysis that, clinical studies suggest, offers potential benefits in patient survival, heart health, blood pressure and health-related quality of life. Vivia has a user-friendly interface, safety features and wireless connectivity designed to help make patients and their healthcare providers comfortable conducting high-dose hemodialysis in the home setting.
The company also entered into a number of partnerships, such as a novel public-private partnership in Brazil to expand patient access to vital hemophilia therapies, and executed several business development initiatives to enhance future growth, including the proposed acquisition of Lund, Sweden-based Gambro AB, a global medical technology company focused on developing, manufacturing and supplying dialysis products and therapies for patients with acute or chronic kidney disease.
The $4 billion deal for Gambro was announced in December last year, but as of press time was still pending approval of antitrust regulators in the European Union. There appeared to be some movement toward resolution in mid-July when, to make the deal more palatable to EU authorities, Baxter offered to sell a unit to ease competition concerns.
Baxter’s acquisition of Gambro would make it the second-biggest manufacturer in the dialysis market, a sector set to expand in line with rising obesity and diabetes, according to industry analysts. Baxter’s machines are used for peritoneal dialysis, which can be done at home. Baxter, according to a report from Reuters, pledged to sell its global continuous renal replacement therapy business, including contracts, customer orders and manufacturing facilities, which accounts for about 2 percent of its renal product sales. The company submitted the same offer to regulators in Australia and New Zealand.
A spokeswoman for the company declined to comment as of press time. Baxter and Gambro compete against U.S.-based DaVita and Germany’s Fresenius Medical Care AG & Co KGaA, the biggest player in the hemodialysis market. Once the deal is complete, sales from Gambro should add significantly to the company’s medical products bottom line.
But the company is no stranger to a healthy profit picture.
For fiscal 2012 (ended Dec. 31), Baxter’s worldwide sales totaled $14.2 billion for the full year and increased 2 percent versus 2011 (or 5 percent excluding the impact of foreign currency). By region, sales within the United States of $6.1 billion advanced 6 percent in 2012, and international sales declined 1 percent to $8.1 billion (but increased 4 percent excluding the impact of foreign currency). Bioscience division sales improved 3 percent (or 6 percent excluding the impact of foreign currency) to $6.2 billion, while sales from the medical products division increased 1 percent to $8 billion (or 4 percent excluding the impact of foreign currency). This is the reverse of last year, when the company’s medical product unit generated stronger sales gains—though the Medical Products division continues to represent a larger slice of the company’s sales at 56 percent. Slower sales of infusion
devices partly were to blame for weaker performance. Baxter battled recalls for its Colleague infusion pump system throughout 2010 and 2011.
The company reported marginal growth in net income of $2.3 billion or $4.18 per diluted share, compared with net income of $2.2 billion or $3.88 per diluted share in 2011. On an adjusted basis, excluding special items in both years, net income was $2.5 billion in 2012, which represents an increase of 2 percent, and earnings per diluted share of $4.53 rose 5 percent from earnings per diluted share of $4.31 reported in 2011.
Baxter generated strong cash flows from operations in 2012 and returned significant value to shareholders in the form of dividends and share repurchases. Cash flows from operations rose 10 percent and totaled more than $3.1 billion in 2012, a record level for the Deerfield, Ill.-based firm. Baxter returned approximately $2.3 billion to shareholders during the year, through dividends totaling $800 million and share repurchases of approximately $1.5 billion (or approximately 25 million shares).
“Baxter’s core portfolio continues to benefit from our focus on life-saving therapies, and the increased level of R&D investment has transformed our new product pipeline into a robust portfolio of products and therapies directed at improving the quality of care while addressing key, high-potential areas of unmet medical need,” Parkinson said. “We’ve also entered into a number of partnerships and executed business development initiatives that align with our core strengths, position Baxter for future success, and enhance shareholder value.”
Early in the 2012 fiscal year, Jean-Luc Butel was appointed corporate vice president and president of Baxter’s international operations. Most recently, Butel was executive vice president and group president, international, at Medtronic Inc.
“Geographic expansion continues to be a key growth driver for Baxter. Our global presence and the strength of our country and regional organizations position us to meet the ever-increasing demand for healthcare worldwide, particularly for the medically necessary products that we provide,” Parkinson said. “Jean-Luc brings significant international expertise to Baxter, and he will be a tremendous asset to the company in his new role leading our international business.”
Butel served in a variety of senior management positions at Medtronic since 2003, including leading the company’s international business operations and the Asia-Pacific region. Prior to Medtronic, he spent 13 years with Johnson & Johnson in roles of increasing responsibility, and eight years with Becton Dickinson in leadership roles, including general manager of the Microbiology business in Japan, president of the Japanese division, and president of the Worldwide Consumer Healthcare business. Butel received his bachelor’s degree in international affairs from George Washington University, and his M.B.A. in international business from the American School of International Management (Thunderbird).