Performance Reinforces Company’s Positive Outlook
DEERFIELD, Ill., October 16, 2008 – Baxter International Inc. (NYSE:BAX) posted strong financial results for the third quarter of 2008, which compared favorably to the guidance previously provided, and raised its full-year 2008 earnings outlook.
Baxter reported third quarter net income of $472 million, an increase of 19 percent compared to $395 million reported in the third quarter of 2007. Earnings per diluted share of $0.74 increased 21 percent from $0.61 per diluted share in the prior year period. The third quarter results include after-tax special charges totaling $91 million (or $0.14 per diluted share) for fixed asset write-offs associated with the discontinuation of the company’s CLEARSHOT pre-filled syringe program, additional remediation costs associated with the company’s COLLEAGUE infusion pump, and costs for in-process research and development (IPR&D) related to the company’s recently announced collaboration with Innocoll Pharmaceuticals Ltd. The company recorded after-tax special charges in the third quarter of 2007 totaling $63 million (or $0.09 per diluted share).
On an adjusted basis, excluding special charges, Baxter reported third quarter net income of $563 million and net earnings per diluted share of $0.88, an increase of 23 percent and 26 percent respectively, which compared favorably to the earnings guidance previously provided of $0.81 to $0.83 per diluted share. Strong financial performance was the result of accelerating sales, continued margin improvement, and a lower tax rate.
Baxter’s worldwide sales totaled $3.2 billion in the third quarter, an increase of 15 percent (or 9 percent excluding the impact of foreign exchange), driven by particularly strong performance from the company’s international businesses. Renal sales increased 6 percent to approximately $600 million due to the expanded use of peritoneal dialysis in many developed and emerging markets around the world, while Medication Delivery sales of approximately $1.2 billion increased 11 percent as a result of strong international sales.
Sales in Baxter’s BioScience business totaled approximately $1.4 billion, with record growth of 23 percent. Sales accelerated across the portfolio, resulting in double-digit sales increases for all major product categories. This performance can be attributed to robust growth from several products, including ADVATE [ Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method (rAHF-PFM)] and GAMMAGARD LIQUID [Immune Globulin Intravenous (IGIV)], marketed as KIOVIG in the European Union, as well as accelerated growth from other plasma-based therapies and biosurgery products.
“In addition to delivering strong sales and earnings for the third quarter, we continue to leverage our diversified healthcare model and capitalize on our broad global presence, while remaining committed to our strategic objective of accelerating the pace of R&D spending,” said Robert L. Parkinson, Jr., chairman and chief executive officer.
The company continues to increase investments in R&D, which totaled $230 million and increased 13 percent (or 30 percent excluding the impact of special charges taken for IPR&D in both the current and prior year periods). The company continues to make progress on a number of R&D and new product initiatives, including:
- Agreement with Innocoll Pharmaceuticals Ltd., a division of Innocoll, Inc., granting Baxter exclusive rights to market and distribute in the United States the company’s investigational gentamicin surgical implant. If approved by the U.S. Food and Drug Administration (FDA), the gentamicin surgical implant will be the first biodegradable, leave-behind antibiotic surgical sponge used as an adjunct (add-on) therapy for prevention and treatment of surgical site infections in the United States.
- Submission of an Investigational New Drug (IND) Application to the FDA for the evaluation of GAMMAGARD LIQUID combined with ENHANZE, Halozyme’s proprietary drug delivery technology that facilitates the absorption and dispersion of drugs subcutaneously.
- Initiation of a Phase III clinical trial evaluating the use of GAMMAGARD LIQUID for the treatment of multifocal motor neuropathy (MMN). Multifocal motor neuropathy is a rare neurological disorder characterized by progressive limb weakness, primarily affecting the upper extremities.
- Clearance by the FDA for expanded labeling of V-Link with VitalShield based on V-Link’s ability to combat three additional pathogens: vancomycin-resistant Enterococcus faecalis (VRE), Escherichia coli (E. coli) and Staphylococcus epidermidis (coagulase negative). These three pathogens improve upon the previously cleared labeling, which included methicillin-resistant Staphylococcus aureus (MRSA), Pseudomonas aeruginosa and Enterobacter cloacae.
Nine-Month Results
For the first nine months of 2008, Baxter’s net income totaled $1.4 billion and increased 18 percent, with earnings per diluted share increasing 21 percent to $2.26. On an adjusted basis, excluding special items for both 2007 and 2008, Baxter’s net income of $1.6 billion increased 18 percent from $1.3 billion in the same period last year. Adjusted earnings per diluted share for the nine-month period increased 22 percent to $2.47 from $2.03 per diluted share in the prior year period.
Baxter’s worldwide sales grew 12 percent in the first three quarters of the year to $9.2 billion, an increase from $8.3 billion in the same period last year. Excluding the impact of foreign exchange, sales growth for the first nine months of the year was 5 percent.
Cash flows from operations totaled $1.9 billion for the nine-month period, an improvement of more than $300 million compared to $1.6 billion in the same period in 2007.
“The medically-necessary nature of our product offering, our diversified portfolio and global presence, and our financial strength and flexibility, provide us with a solid foundation in this uncertain global economy,” continued Parkinson. “We remain committed to providing enhanced value to our shareholders through predictable and sustainable operational growth, commensurate with our competencies and long-range strategies.“
Fourth Quarter and Full-Year 2008 Outlook
Baxter raised its full-year 2008 earnings outlook and for the first time provided fourth quarter guidance. For the full year, the company continues to expect sales growth, excluding the impact of foreign exchange, of 5 to 6 percent, and now expects earnings per diluted share of $3.35 to $3.37, before any special items. In addition, the company now expects cash flow from operations to exceed $2.6 billion.
For the fourth quarter of 2008, Baxter expects sales growth of approximately 7 percent, excluding the impact of foreign exchange, and earnings per diluted share, before any special items, of $0.88 to $0.90.
A webcast of Baxter's third 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 October 16, 2008. Please visit Baxter's website for more information regarding this and future investor events and webcasts, including investor presentations.
Baxter International Inc. develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, cancer, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.
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 delay, 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; any impact of the commercial and credit environment on Baxter and its customers; foreign currency fluctuations and other risks identified in the company’s most recent filing on Form 10-K and other Securities and Exchange Commission 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
