Baxter Reports Strong Q1 Growth, Hints At Innovative Pipeline
Baxter CEO Jose Almeida — the former CEO of Covidien — is making good on his promises to drive growth by cutting costs and investing in innovation, as the company announced a worldwide 4 percent increase in revenues in the first quarter of 2016. Baxter also will host an innovation hall at its 2016 Investor Conference, which will showcase the company’s recent R&D efforts.
Over the past year, Baxter has undergone a number of restructuring efforts. Last July, the company split off its biopharmaceutical businesses — noted by the Chicago Tribune to be some of the company’s riskier assets — into a new company called Baxalta, leaving Baxter to focus on its core businesses: hospital products, renal care, and biosurgical products.
In October, Baxter announced the appointment of Almeida as CEO, replacing former CEO Bob Parkinson, who retired in January. In a statement, Parkinson noted Almeida’s distinguished track record, including his efforts to build the profitability of Covidien, which sold to Medtronic in 2015 for $43 billion.
So far, Almeida is following the plans laid out by Parkinson last October, when he announced a three-pronged approach to accelerating growth for Baxter that included cost reduction, a more disciplined approach to all product segments, and an expansion of the company’s product pipeline.
The strategy, according to Almeida in a press release, is working. Worldwide sales grew of 4 percent represent a sharp turnaround from the company’s 9 percent decline in the second half of 2015. Two of Baxter’s core businesses — hospital products and renal care — grew by 4 percent and 5 percent, respectively. While biosurgical product sales slowed in the first quarter, Almeida expressed his confidence in an earnings call that the segment will turn around later this year.
“Surgical care remains an attractive area and we are prepared to accelerate performance through innovation,” said Almeida. “In the first quarter, we received approvals for expanded indications for Hemopatch in the EU and FloSeal in Japan. Both offer great utility among surgeons using these hemostatic agents.”
Baxter’s expanding product pipeline is a “key growth catalyst,” according to Zacks, which noted both the Sigma Spectrum infusion pump and the AMIA APD cycler, made with Sharesource two-way connectivity, have driven and will continue to drive topline growth. Almeida commented in the earnings call that the Amia APD cycler is “trending better than our expectations,” and said the company has received excellent feedback from clinicians.
Though R&D spending was reduced 5 percent to $136 million for the quarter, Almeida argued that innovation remains a significant priority for Baxter, and reductions can be attributed to efficiency-driving consolidations, rather than decelerations in research. Baxter will roll out some of those R&D innovations at the Investor Conference, slated for May 9.
“We’re not going to show you everything, but we’re going to show a portion of what we think the future holds for Baxter and a significant amount of R&D innovation that is coming through the pipeline,” said Almeida. “We are well positioned to leverage our greatest opportunities and prepared to retool where necessary.”