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: 48,500
GLOBAL HEADQUARTERS: Deerfield, Ill.
Baxter International has had its share of challenges during the past few years—from tainted heparin manufactured in China to ongoing difficulties with its Colleague line of infusion pumps. Despite running into hurdles, the company seems to leap them in a strong stride, as financial performance for the year was surefooted.
For fiscal 2008, the company’s sales increased 10 percent to $12.3 billion. Double-digit growth is no small achievement in a financial market that has recently hit historic lows (though the positive effect of currency exchange accounted for 4 percent of sales growth). Net income also showed strong growth, increasing 18 percent to $2 billion.
“While no company, including Baxter, is immune to the issues affecting the global economy, Baxter is well positioned for 2009 and beyond as a result of our diversified healthcare model, strong market positions and, most important, the critical nature of our products,” CEO Robert L. Parkinson, Jr. said in a letter to shareholders.
According to Parkinson, the firm has made “significant progress” over the last few years to strengthen its financial position, renew its commitment to research and development (R&D) and grow globally. For example, the company increased its research and development spending from $760 million in 2007 to $868 million in FY08. 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 require a device component for delivery. Therefore, it is difficult to separate the company’s revenues purely by device and non-device product lines.
For fiscal 2008, the company’s BioScience division sales increased 14 percent ($5.3 billion); Medication Delivery rose 8 percent ($4.6 billion); and Renal sales showed slower growth at 3 percent ($2.3 billion). Overall, the bulk of the company’s sales came from overseas sources—a total of $7.3 billion of revenue was generated internationally.
The company’s ongoing R&D focus is evident in its new product releases and new clinical studies launched. Over the course of the year, Baxter received approval for or launched several new products, initiated eight major clinical trials, advanced numerous early stage internal programs, and established several new partnerships. The company also broke ground on a new 150,000-square-foot R&D center in Belgium, which the company expects to complete in 2010.
In 2008, Baxter launched its Gelfoam Plus, a hemostatic product for use in surgical procedures. In addition, the company completed a home hemodialysis device prototype with development partner DEKA, an R&D company based in Manchester, N.H. During the year, the company also began a Phase III trial combining its Gammagard Liquid with Enhanze, a proprietary drug delivery technology from Halozyme, a San Diego, Calif.-based biopharmaceutical company. The product is for the subcutaneous delivery of immune globulin intravenous (IGIV) for patients with primary immune deficiency, which could allow patients to administer their dose of IGIV once monthly at home.
The company also received U.S. Food and Drug Administration (FDA) approval of Artiss (fibrin sealant—human), which the firm claims is the first slow-setting fibrin sealant indicated for use in adhering skin grafts in adult and pediatric burn patients. Baxter also released the V-Link Luer-activated device with VitalShield protective coating. According to Baxter officials, it is the first needleless intravenous connector to contain an antimicrobial coating that kills 99.9 percent of specific common pathogens that cause catheter-related bloodstream infections.
On the manufacturing side, in early 2008, the company’s plant in Cartago, Costa Rica, was recognized with the Shingo Prize for Operational Excellence. In past years, several Baxter facilities have been awarded the Shingo prize, most recently in North Carolina and Mexico in 2007. The award, which recognizes businesses and researchers demonstrating outstanding achievements in manufacturing and the supporting business processes that lead to outstanding quality, cost, delivery and business results, is administered by the College of Business at Utah State University.
It is named in honor of Dr. Shigeo Shingo, the renowned engineer who helped create the highly regarded Toyota Production System. Approximately 1,200 employees at the 152,000-square-foot Cartago plant produce a range of products, including IV administration sets, along with subassemblies for other Baxter plants. Also noteworthy, the company’s plant in Bloomington, Ind., won the 2008 North American Contract Manufacturing Customer Service Leadership of the Year Award from Frost & Sullivan.
To shore up its infusion pump business, in early 2009, Baxter International Inc. paid $100 million for a 40 percent stake in and a distribution agreement with privately held infusion pump maker Sigma International General Medical Apparatus LLC, based in Medina, N.Y.
Baxter has experienced longstanding problems with its line of medical infusion pumps. Most recently, in early March, the FDA issued a Class I recall—the agency’s most serious recall level—for the company’s Colleague infusion pump. The firm hasn’t sold Colleague infusion pumps in the United States in more than four years. The device has been plagued with battery failures, problems with false alarms, alarm failures and inadequate infusion.
Some pumps, however, remain in service with hospitals and clinics. Baxter continues to monitor the existing inventory. As part of the deal, Baxter also may make payments of up to $130 million for “milestone” achievements Sigma reaches in R&D or regulatory matters, as well as acquiring the outstanding 60 percent stake in Sigma. The agreement will allow Baxter to provide Sigma’s Spectrum brand of large-volume infusion pumps. Baxter also will have a stake in Sigma’s product development pipeline. According to Baxter officials, the deal will complement the company’s current infusion systems portfolio and next-generation technologies.
“Baxter is pleased to team with Sigma to expand our portfolio of infusion pumps, including the U.S.-cleared Spectrum, which is equipped with advanced safety and clinician-friendly features,” Kevin McCulloch, general manager of Global Infusion Systems, part of Baxter’s Medication Delivery business, said at the time of the deal. “This agreement enables us to immediately support our U.S. customers and will reinforce our position as a leading global provider of infusion systems products.”
The Spectrum pump was launched in the United States in August 2005 and is developed and manufactured by Sigma. According to the company, there are more than 35,000 Spectrum pumps currently in use domestically. As the distribution agreement covers international markets, Baxter may seek approval for the Spectrum pump in additional geographies.
Results for the first quarter of 2009 have been a mixed bag. Baxter’s worldwide sales totaled $2.8 billion in the first quarter and declined 2 percent.
Excluding the impact of foreign currency, worldwide sales increased 6 percent. Sales within the United States increased 5 percent to $1.2 billion, while international sales declined 7 percent to $1.6 billion. Excluding the impact of foreign currency, Baxter’s international sales grew 7 percent. Compared to the first quarter of 2008, first quarter net income this year increased 20 percent to $516 million, an increase of 20 percent from $429 million reported in the first quarter of 2008.
In the first quarter, Medication Delivery sales of $1 billion declined 3 percent (and excluding foreign currency increased 6 percent). Renal sales of $515 million declined 8 percent (and excluding foreign currency increased 1 percent). BioScience revenues totaled $1.3 billion, increasing 3 percent. Excluding foreign currency, BioScience sales advanced 11 percent. For the full year, Baxter officials expect sales growth, excluding the impact of foreign currency, of approximately 7 percent. Based on current foreign exchange rates, Baxter expects reported sales growth to be approximately flat.