Prior Fiscal: $11.10 Billion
Percentage Change: +2%
No. of Employees: 50,000
Global Headquarters: Deerfield, Ill.
José (Joe) E. Almeida, Chairman, President, and CEO
Giuseppe Accogli, SVP and President, Americas
Laura Angelini, GM, Renal Care
Wil Boren, President, Advanced Surgery
Stacey Eisen, SVP, Global Communications, and President, Baxter International Foundation
David Ferguson, Ph.D., GM, Medication Delivery
Cristiano Franzi, SVP and President, EMEA
Andrew (Andy) Frye, SVP and President, APAC
Heather Knight, GM, U.S. Hospital Products
Jacqueline Kunzler, Ph.D., SVP, Chief Quality Officer
Sumant Ramachandra, M.D., Ph.D., President, Pharmaceuticals, and SVP, Chief Science and Technology Officer
Reaz Rasul, GM, Acute Therapies
James (Jay) Saccaro, EVP and CFO
Jorge Vasseur, GM, Clinical Nutrition
One of the challenges of writing the MPO top company reports each year is the task of converting foreign currencies to U.S. dollars so revenues can be compared in an apples to apples manner. One must ensure to use the currency conversion rate of the report at the close of a company’s fiscal period to determine the figure as accurately as possible. While it’s easy to make an error in the calculations, we hope if a mistake is made, it will be caught in a later review before publication. Fortunately, these reports are not being used as the basis for stock investments or evaluations (at least not exclusively) and do not fall under the critical eye of an oversight body like the U.S. Securities and Exchange Commission (SEC).
Unfortunately for Baxter, their annual report and financial figures are under such scrutiny. As a result, when Baxter found errors in its reporting from years past tied to foreign currency exchanges, it notified the SEC and made arrangements to resolve the issue. The company brought in outside attorneys and consultants to aid with its internal investigation.
The inaccuracies were present in the reporting for years 2016 through the first half of 2019, totaling $276 million in gains. While the errors amounted to small figures when compared to Baxter’s annual revenue tally of more than $11 billion (in 2019), the initial news of the error was enough to frighten investors such that the stock plummeted 10 percent.
“Baxter takes this matter very seriously, and the board along with the company’s leadership team fully supports a comprehensive investigation,” José (Joe) E. Almeida, chairman and CEO stated in prepared remarks that announced the company’s preliminary third quarter 2019 results. “The company is taking steps to strengthen and enhance its internal controls, and we look forward to sharing our full financial results as soon as possible.”
Past financial reporting difficulties aside, Baxter enjoyed modest growth in 2019. Posting $11.36 billion in 2019, the tally represented a 2 percent rise over prior the year, which finished at $11.1 billion. Domestically, the company’s revenue increase paralleled its overall gains for the year. The 2 percent growth translated into a $4.83 billion tally in the U.S. Internationally, where Baxter generates more sales, finished the fiscal year at $6.54 billion, which represented a 3 percent increase over 2018.
ANALYST INSIGHTS: Baxter will continue to “reinvent itself” under CEO Joe Almeida’s leadership in three areas: 1) cost cutting to increase profits to be used elsewhere; 2) organic growth initiatives; and 3) inorganic activity to drive both market opportunity and market share.
—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors
The Baxter organization is home to seven business units of which it shares the financials in its annual report. Leading the pack by almost a billion dollars in sales is Renal Care, which finished the year at $3.64 billion. This was flat compared to the previous year for the segment that focuses on peritoneal dialysis, hemodialysis, and additional dialysis therapies and services.
Medication Delivery and Pharmaceuticals came in at $2.80 billion (5 percent rise versus 2018) and $2.16 billion (3 percent rise versus 2018) respectively in the ’19 fiscal. The Medication Delivery business includes sales of intravenous (IV) therapies, infusion pumps, administration sets, and drug reconstitution devices. The Pharmaceuticals unit is home to Baxter’s premixed and oncology drug platforms, inhaled anesthesia and critical care products, and pharmacy compounding services.
The remaining businesses, while important, achieve sales at much lower figures than the first three. Clinical Nutrition was flat against 2018 but has shrunk just slightly in real dollars, decreasing from $885 million in ’17 to $875 million in ’18 to $872 million in ’19. The segment reports on sales of parenteral nutrition therapies and related products.
On the other hand, Advanced Surgery has enjoyed substantial growth over the same time period. It noted $708 million in 2017 and has blossomed to $877 million in 2019, growing 10 percent in the most recent fiscal year. The offerings in this unit include biological products and medical devices used in surgical procedures for hemostasis, tissue sealing, and adhesion prevention.
Rounding out the seven divisions are Acute Therapies and Other. The former includes sales of continuous renal replacement therapies and other organ support therapies focused in the intensive care unit. The business saw an increase of 4 percent in 2019, putting the final sales figure at $535 million. Other, which primarily includes sales of contract manufacturing services from Baxter’s pharmaceutical partnering business, saw diminishing sales of $485 million, which was a 5 percent decrease over the prior year.
Perhaps seeking to spark growth for the years to come through a targeted M&A strategy, Baxter made a pair of noteworthy moves in 2019, both occurring in the second half of the year. Announced in September, the first was the purchase of Cheetah Medical, a provider of non-invasive hemodynamic monitoring technologies. Cheetah was viewed as a natural complement to Baxter given the acquirer’s breadth of infusion and IV systems, as well as its presence in critical care and IV therapy. The monitoring technologies of the firm provide dynamic measurements of fluid responsiveness. This information empowers clinicians to make better decisions in treating patients to ensure they are utilizing the proper amount of fluid required to maintain organ and tissue perfusion.
“The robust capabilities and innovative monitoring technologies we will gain with the acquisition of Cheetah Medical will be additional strategic growth drivers as we work to eliminate preventable harm and enable personalized therapy for hospitalized patients around the world,” said David Ferguson, general manager of Medication Delivery at Baxter. “We are enthusiastic about the opportunity to bring these products to more patients and clinicians and look forward to building upon Cheetah Medical’s expertise and technology to enhance our leadership in medication delivery and critical care.”
The industry was made aware of the second transaction in the final month of Baxter’s fiscal year. The deal with Sanofi for its Seprafilm Adhesion Barrier technology was accomplished to bolster Baxter’s Advanced Surgery portfolio. Valued at $350 million, the deal was completed in February 2020.
“Seprafilm will be a strong complement to our leading hemostat and sealant portfolio, helping us continue to advance the art of healing with optimized patient care in the operating room,” said Wil Boren, general manager of Baxter’s Advanced Surgery business. “While Seprafilm is clinically recognized among surgeons globally, we plan to provide commercial support for the product through our dedicated surgery salesforce and pursue opportunities for expansion in certain countries.”
At the time of the announcement, Seprafilm was commercially available worldwide, with sales in the U.S., Japan, China, South Korea, and France. Baxter expects the acquired products to represent approximately $100 million in sales in the 12 months following the close.
The corporate entity also sought additional means to spur growth, including partnerships with other organizations. One such arrangement, announced at the International Symposium on Intensive Care and Emergency Medicine, saw Baxter collaborate with bioMérieux, a global provider of in-vitro diagnostics for more than 55 years, in an attempt to develop future biomarkers for acute kidney injury.
Reaz Rasul, general manager of Baxter’s Acute Therapies business, explained, “By working with the team at bioMérieux, we’ll be able to combine their expertise in diagnostics with our experience in bringing the latest medical advancements to the ICU.”
Baxter also announced it was teaming with COSMED, designer of metabolic systems for clinical and human performance applications, on an indirect calorimetry (IC) device to support clinical nutrition. The resulting Q-NRG+, which obtained U.S. Food and Drug Administration (FDA) clearance in February 2020, leverages IC to accurately measure a patient’s calorie needs, or resting energy expenditure. This type of information helps prevent hospital malnutrition, which is traditionally calculated with estimations using predictive equations based on weight, height, age, and gender. This method is often found to be inaccurate.
Under terms of the agreement, Baxter has the rights to bring the device to at least 18 markets throughout the world, with the potential for further expansion. At the time of the FDA’s 510(k) clearance of the device, it was already available in 12 other countries within Europe, in addition to Canada, Australia, and New Zealand.
In an effort to link its Prismaflex system to hospitals’ electronic medical records, Baxter paired up with NantHealth, a connected care solutions provider. Prismaflex is used in the intensive care unit (ICU) to treat patients with acute kidney injury and certain blood and autoimmune conditions. Since ICU systems are often disconnected, NantHealth built a device driver to allow integration of its DeviceConX platform with the Prismaflex system. The resulting solution relieves nurses of having to manually document treatment data, thus reducing the risk of transcription errors. Baxter stated it was working with NantHealth on two additional solutions for medical devices designed for the ICU.
Baxter also realized the critical nature of achieving growth through more organic means; in June, Almeida stated he was anticipating launching more than 20 new products over the course of the next year.
“If they can introduce some new products, there may be a way to grow out of this malaise,” Morningstar analyst Julie Utterback said in a Chicago Business article, referring to the stall in revenue growth.
The firm has responded with a series of noteworthy product news announcements beyond the aforementioned results of strategic partnerships. (Some within the following list were announced prior to Almeida’s statement in June 2019.)
- U.S. clinical trial for on-demand peritoneal dialysis solution system
- Received FDA approval for faster preparation of its hemostatic product, Floseal Hemostatic Matrix
- Launched Sharesource 2.0 telehealth platform to support greater clinical insights and personalized peritoneal dialysis care
- Brought PrisMax, a platform for continuous renal replacement therapy, to the U.S. market to maximize care for critically ill patients
Q1 2020 Revenue: $2.80 Billion
Q1 2019 Revenue: $2.64 Billion
Percentage Change: +6%
The company has also been affected in terms of demand for products that can be used to battle the disease. In April, Baxter announced it was hiring 2,000 permanent and temporary workers, including 800 in the U.S., to aid with the fabrication of supplies in higher demand. Among the devices being sought were kidney dialysis machines and infusion pumps for critically ill patients.
The rise in sales of the company’s essential products was reflected in its Q1 2020 report, which showed revenue of $2.8 billion. This total reflected a 6 percent increase over the same time period from 2019. Joe Almeida, Baxter’s chairman, president, and CEO, attributed the increase to higher demand for its PrisMax and Prismaflex blood purification systems, as well as drug delivery and infusion technologies. In total, five of the company’s business units saw increased demand near the end of the company’s first quarter due to COVID-19, with estimates putting the sales dollar amount at approximately $45 million. The company expressed concern, however, for the second quarter due to the decline of elective surgeries. As a result, it was withholding any predictions on the time period or for the full year.