Baxter Reports Fourth Quarter 2013 Financial Results In Line with Expectations
Sales Growth of 16 Percent Driven by Strong Demand for Hemophilia Therapies, Medical Products & Gambro Acquisition
Company Provides 2014 Financial Outlook, Advances New Product
Pipeline & Collaborations
DEERFIELD, Ill. - Baxter International Inc. (NYSE:BAX) today announced financial results for the fourth quarter of 2013, and provided its financial outlook for the first quarter and full-year 2014.
For the fourth quarter, Baxter reported net income of $326 million and earnings per diluted share of $0.59, compared to net income of $494 million and earnings per diluted share of $0.89 in the same period last year. These results include after-tax special items totaling $366 million (or $0.67 per diluted share), primarily for costs associated with Baxter’s acquisition of Gambro, business optimization programs and recent collaborations with Coherus Biosciences and Cell Therapeutics, Inc. Fourth quarter 2012 results included after-tax special items of $206 million (or $0.37 per diluted share).
On an adjusted basis, excluding special items, Baxter’s net income totaled $692 million, or $1.26 per diluted share, in line with the company’s previously-issued earnings guidance.
Worldwide sales totaled $4.4 billion and increased 16 percent from prior-year levels. Excluding the contribution of Gambro revenues in the quarter, Baxter’s sales increased 5 percent to $4.0 billion (or 6 percent excluding the impact of foreign currency). Sales within the United States totaled $1.8 billion and advanced 13 percent, and international sales of $2.6 billion increased 19 percent (or 20 percent excluding the impact of foreign currency).
BioScience revenues of $1.8 billion grew 5 percent from the prior-year period (or 6 percent excluding the impact of foreign currency), driven primarily by double-digit growth and solid demand for the company’s hemophilia therapies, including ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] and FEIBA (an inhibitor therapy) in the United States and Europe, as well as for biosurgery products.
Medical Products sales of $2.6 billion increased 25 percent from the prior-year period (or 27 percent excluding the impact of foreign currency), and included revenues associated with the Gambro acquisition of $413 million. Excluding foreign currency and the contribution from the acquisition, Medical Products sales grew 7 percent, driven by strong growth across the entire business portfolio.
Baxter’s net income totaled $2.0 billion, or $3.66 per diluted share in 2013. Excluding special items, Baxter’s adjusted net income increased 2 percent to $2.6 billion, and earnings per diluted share of $4.67 advanced 3 percent.
Baxter’s worldwide sales in 2013 totaled $15.3 billion and rose 8 percent. Excluding revenues of $513 million associated with the Gambro acquisition, Baxter’s revenues increased 4 percent to $14.7 billion. BioScience sales of $6.6 billion advanced 5 percent (or 6 percent excluding the impact of foreign currency), while Medical Products sales of $8.7 billion grew 9 percent from the prior-year period. Excluding revenues associated with the Gambro acquisition, Medical Products sales increased 3 percent (or 4 percent excluding the impact of foreign currency) on a full-year basis.
During 2013, Baxter generated cash flows from operations of approximately $3.2 billion and returned significant value to shareholders. Baxter returned more than $1.9 billion to shareholders during the year, through share repurchases of $913 million (or approximately 13 million shares) and dividends totaling more than $1.0 billion, reflecting a 27 percent increase in dividend payments versus the prior year.
“We continue to meet our financial objectives while navigating a challenging and complex macro-environment,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “We remain focused on the company’s strategic priorities of advancing the new product pipeline, investing in future growth opportunities, and strengthening our operational execution, which will result in enhanced value for patients, healthcare providers and shareholders.”
In 2013, Baxter continued to transform its new product pipeline into a robust portfolio of products and therapies that improve the quality of care and address key, high-potential areas of unmet medical need, while also expanding its business portfolio. This is evidenced by:
Increased spending in research and development by 8 percent, investing more than $1.2 billion for both internal programs and new collaborations, a record level for the company.
Achieving a number of clinical and regulatory milestones, including the progression of several key programs into late stage clinical trials; completion of regulatory submissions for new hemophilia and immune globulin products; and approval of an array of new indications and treatments for end-stage renal disease and hemophilia, as well as immune globulin, biosurgery and parenteral nutrition products.
Establishing several collaborations that leverage Baxter’s proven expertise and extend the company’s pipeline in new therapeutic areas including hematology, oncology and immunology.
Enhancing Baxter’s global leadership in renal therapies with the acquisition of Gambro AB, providing the company with a comprehensive product and therapies portfolio to meet the needs of patients, as well as a number of long-term growth opportunities.
“We are building upon the proven expertise and leadership we have across a number of therapeutic areas by capitalizing on our significant global presence and differentiated brands, pursuing innovation and establishing a robust new product pipeline, and improving access and standards of care around the world while enhancing patient outcomes,” said Parkinson.
Fourth Quarter Highlights
Momentum accelerated in the fourth quarter as Baxter advanced its late-stage pipeline with a number of regulatory filings, product approvals, and collaborations. Highlights include:
Submission of an amended biologics license application (BLA) to the United States Food and Drug Administration (FDA) to re-initiate the review process for approval of HyQvia [Immune Globulin Infusion 10% (human) with Recombinant Human Hyaluronidase], a subcutaneous infusion for the treatment of adult patients with primary immunodeficiency (PI). HyQvia was approved and then launched in a number of European countries in the second half of 2013.
Conclusion of enrollment in the Phase III clinical trial of BAX 855, an investigational extended half-life, recombinant factor VIII (rFVIII) treatment for hemophilia A. The ongoing trial is aimed at assessing the efficacy of the compound in reducing annualized bleed rates (ABR) in both prophylaxis and on-demand treatment schedules, and will also evaluate its safety and pharmacokinetic profile. BAX 855 was designed based on the full-length ADVATE [Antihemophilic Factor (Recombinant) Plasma/Albumin-Free Method] molecule, and modified with PEGylation technology designed to extend its duration of activity in the body. To date, no inhibitors or safety issues have been reported in the study.
BLA submission to the FDA for the approval of OBI-1, a recombinant antihemophilic porcine sequence factor VIII, in patients with acquired hemophilia A. OBI-1 has been granted orphan-drug designation by the FDA, and the application has also been granted a priority review, which is intended to expedite the review process of drug candidates with the potential to fulfill an unmet medical need.
Submission of an application to the FDA for a pediatric indication for RIXUBIS [Coagulation Factor IX (Recombinant)] to treat hemophilia B. The company has also submitted a marketing authorization application (MAA) for the treatment of patients of all ages in Japan and to the European Medicines Agency (EMA). RIXUBIS was approved in the United States for adults with hemophilia B earlier in 2013.
FDA approval of Baxter’s FEIBA [Anti-Inhibitor Coagulant Complex], the first and only treatment in the U.S. for routine prophylaxis to prevent or reduce the frequency of bleeding episodes in patients with hemophilia A or B who have developed inhibitors. The presence of an inhibitor makes response to treatment more challenging, and patients with inhibitors have an increased risk of developing complications. In clinical trials, FEIBA prophylactic regimen showed a 72 percent reduction in median annual bleed rate (ABR) compared to treatment with an on-demand regimen. FEIBA is approved in more than 60 countries worldwide and is indicated for prophylaxis in more than 40 countries.
CE marking in Europe for the VIVIA hemodialysis (HD) system, designed to deliver more frequent, extended duration, short daily or nocturnal home HD therapy, known as High Dose HD therapy. VIVIA is designed with the potential to deliver enhanced clinical outcomes and greater patient convenience, and provides a number of unique safety features, wireless connectivity, an integrated water system and extended-use consumables. Baxter will introduce VIVIA in a limited number of European dialysis clinics in 2014 and expand the launch to other European countries in 2015.
Execution of an exclusive worldwide licensing agreement with Cell Therapeutics, Inc. (CTI), to develop and commercialize pacritinib, a novel investigational JAK2/FLT3 inhibitor with activity against genetic mutations linked to myelofibrosis, leukemia and certain solid tumors. Pacritinib is currently in Phase III development for patients with myelofibrosis, a chronic malignant bone marrow disorder. Under the terms of the agreement, Baxter gains exclusive commercialization rights for all indications for pacritinib outside the United States and Baxter and CTI will jointly commercialize pacritinib in the United States.
Outlook for First Quarter and Full-Year 2014
Baxter also announced today its outlook for the first quarter and full-year 2014. Baxter expects sales growth for full-year 2014 of 9 to 10 percent, before the impact of foreign exchange. Also, for the full year, Baxter expects earnings, before special items, of $5.05 to $5.25 per diluted share and cash flows from operations of approximately $3.5 billion.
The 2014 earnings guidance excludes approximately $0.25 per diluted share of intangible asset amortization expense. Reconciling for the inclusion of intangible asset amortization results in GAAP (Generally Accepted Accounting Principles) earnings of $4.80 to $5.00 per diluted share, before other special items. Historical financial results (restated for the exclusion of intangible amortization) are available on the Investor Relations page of Baxter’s website at www.baxter.com.
For the first quarter of 2014, the company expects sales growth of approximately 13 to 14 percent, excluding the impact of foreign currency. Baxter expects earnings, before special items, of $1.06 to $1.09 per diluted share in the first quarter (or GAAP earnings of $1.00 to $1.03 per diluted share including approximately $0.06 per diluted share of intangible asset amortization expense).
A webcast of Baxter’s fourth 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. CST on January 23, 2014. Please visit www.baxter.com for more information regarding this and future investor events and webcasts.
Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, 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, business development activities, R&D pipeline and outlook for 2014. 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 of risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities 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; future actions of governmental authorities and other third parties as U.S. healthcare reform legislation and other austerity measures are implemented globally; additional legislation, regulation and other governmental pressures, which may affect pricing, taxation, reimbursement and rebate policies of government agencies and private payers or other elements of the company’s business; product development risks, including satisfactory clinical performance; the company’s ability to realize the anticipated benefits from its business development and R&D activities, including the ability to successfully integrate the Gambro acquisition; 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; the availability of acceptable raw materials and component supply; fluctuations in supply and demand and the pricing of plasma-based therapies; 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; the impact of global economic conditions on Baxter and its customers, including foreign governments in certain countries in which the company operates; 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.
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