DEERFIELD, Ill., July 19, 2007 – Baxter International Inc. (NYSE:BAX) today reported stronger-than-expected financial results for the second quarter of 2007 and raised its full-year 2007 earnings guidance.
Baxter reported second quarter net income of $431 million, an increase of 39 percent over the $309 million reported in the second quarter of 2006. Net earnings per diluted share increased 38 percent to $0.65. These results include an after-tax charge of $46 million ($0.07 per diluted share) primarily for costs and asset impairments associated with the consolidation of certain commercial and manufacturing operations outside the United States. On an adjusted basis, excluding special items in the current and prior-year periods, Baxter reported net income of $477 million or $0.72 per diluted share, an increase of 28 percent and 26 percent respectively. These results compare favorably to the earnings guidance previously provided for the quarter of $0.66 to $0.68 per diluted share, and were the result of solid revenue gains, strong operational performance led by margin expansion, as well as lower interest and income tax expense.
Baxter's worldwide sales totaled $2.8 billion in the second quarter, an increase of 7 percent (or 3 percent excluding the impact of foreign exchange). Sales within the United States totaled $1.2 billion, an increase of 1 percent over the same period last year, while sales outside of the United States grew 12 percent (or 5 percent excluding the impact of foreign exchange) to $1.6 billion. As previously announced, the company completed the divestiture of its Transfusion Therapies business during the first quarter of 2007. Excluding Transfusion Therapies revenues from both years, Baxter's worldwide sales increased 10 percent (or 7 percent excluding the impact of foreign exchange) to $2.8 billion from $2.5 billion recorded in the prior year.
Baxter's BioScience business generated a 20 percent increase in revenues, with sales totaling $1.2 billion. This performance was a result of robust growth across multiple products, including ADVATE® [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] , a therapy used in the treatment of hemophilia A, antibody therapy products for the treatment of primary immunodeficiencies, and other specialty plasma therapeutics such as FEIBA (an inhibitor therapy indicated for the control of spontaneous bleeding episodes in patients with hemophilia A and hemophilia B) and ARALAST (a human alpha-1 proteinase inhibitor (A1PI) for patients with hereditary emphysema). This business also posted record vaccine sales in the quarter driven by continued demand in Europe for its vaccines that prevent tick-borne encephalitis and group C meningococcal meningitis.
In the second quarter, Medication Delivery revenues increased 3 percent as a result of strong international performance of anesthesia and parenteral nutrition products, and Renal revenues increased 7 percent to $553 million as the company continued to realize solid gains in the number of peritoneal dialysis patients, primarily in developing countries.
"We continue to meet or exceed our short-term financial objectives while investing to create long-term value for our shareholders," said Robert L. Parkinson, Jr., chairman and chief executive officer. "Our strong financial results in the first half of this year not only validate the strength of our diversified healthcare model, but also reinforce our confidence in achieving our longer-term objectives."
Baxter's investment in research and development increased 21 percent in the quarter, and the company achieved a number of commercial, clinical and regulatory milestones during the period, including:
- Expansion of R&D capabilities through the acquisition of MAAS Medical, LLC, a design firm specializing in infusion systems technology. The acquisition of talent and certain assets from this private company based in Irvine, Calif. brings expertise in technology integration that will create value across a number of Baxter's infusion systems platforms.
- Initiation of clinical trials comparing the safety, tolerability and pharmacokinetics of various injectable therapeutic agents administered subcutaneously with and without HYLENEX recombinant, and intravenously. HYLENEX is approved by the U.S. Food and Drug Administration (FDA) for use as a spreading agent to increase the absorption and dispersion of other injected drugs and for subcutaneous fluid administration.
- Receipt of FDA approval for the self-manufacturing of ARALAST by Baxter. ARALAST is a human alpha-1 proteinase inhibitor (A1PI) indicated for chronic augmentation therapy in patients with hereditary emphysema, a genetic condition caused by a deficiency of A1PI in the lungs.
- Launch of ADVATE in Argentina and receipt of FDA approval for a new 3000 IU dosage strength. ADVATE is used for the prevention and control of bleeding episodes in people with hemophilia A and is the only factor VIII therapy free of blood-based additives.
Six-Month Results
For the first six months of 2007, Baxter's net income totaled $834 million and increased 41 percent, with earnings per diluted share increasing 40 percent to $1.26. On an adjusted basis, excluding special items, Baxter's net income of $880 million increased 34 percentfrom $655 million last year. Adjusted earnings per diluted share for the six-month period of $1.33 increased 33 percent, from $1.00 per diluted share in the prior year period.
Baxter's worldwide sales grew 9 percent in the first half of the year to $5.5 billion, up from $5.1 billion last year. Excluding the impact of foreign exchange, organic sales growth for the first six months of the year was 5 percent. Sales within the United States totaled $2.3 billion, an increase of 4 percent over the same period last year, and international sales grew 13 percent (or 7 percent excluding the impact of foreign exchange) to $3.2 billion. Excluding revenues related to the Transfusion Therapies business, Baxter's worldwide sales increased 12 percent (or 8 percent excluding the impact of foreign exchange) to $5.4 billion from $4.8 billion recorded in the prior year.
Cash flow from operations totaled $946 million for the six-month period, compared to $848 million in the same period in 2006. Free cash flow (cash flow from operations, less capital expenditures of $258 million for the first six months of 2007) was $688 million, reflecting an improvement of $38 million from the same period last year.
Third Quarter and Full-Year 2007 Outlook
Given its strong financial results for the first half of the year, Baxter is raising its earnings outlook for full-year 2007. The company now expects to achieve earnings per diluted share of $2.65 to $2.70, compared to its previous range of $2.60 to $2.65, both excluding special items . Baxter continues to expect sales growth of 4 to 5 percent for the year, excluding the impact of foreign exchange. In addition, Baxter continues to expect cash flow from operations for full-year 2007 to total approximately $2.3 billion.
For the third quarter of 2007, Baxter expects sales growth of 3 to 4 percent, excluding the impact of foreign exchange, and earnings per diluted share, before any special items, of $0.64 to $0.66.
The financial outlook for the third quarter and full-year 2007 reflects the divestiture of the Transfusion Therapies business and excludes recommercialization of the company's COLLEAGUE infusion pump in the United States, which may occur before the end of 2007.
A webcast of Baxter's second quarter conference call for investors can be accessed live from a link on the company's website at www.baxter.com beginning at 7:30 a.m. CDT on July 19, 2007. Please visit Baxter's website for more information regarding this and future investor events and webcasts, including investor presentations.
Baxter International Inc., through its subsidiaries, assists healthcare professionals and their patients with the treatment of complex medical conditions, including hemophilia, immune disorders, cancer, infectious diseases, kidney disease, trauma and other conditions. The company applies its expertise in medical devices, pharmaceuticals and biotechnology to make a meaningful difference in patients' lives.
This release includes forward-looking statements concerning the company's financial results. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts, that could limit or suspend product development, manufacturing or sales or result in sanctions; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; product development risks; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the impact of geographic and product mix on the company's sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; reimbursement policies of government agencies and private payers; the availability of acceptable raw materials and component supply; the ability to enforce company patents; patents of third parties preventing or restricting the company's manufacture, sale or use of affected products or technology; and other risks identified in the company's most recent filing on Form 10-Q and other SEC filings, all of which are available on the company's website. The company does not undertake to update its forward-looking statements. Financial schedules are attached to this release and available on the company's website.
Print this page
