Baxter's Fourth Quarter Financial Results Exceed Expectations
Deerfield, Ill. -
Company Achieves Record Sales and Earnings For 2014Performance Sets Solid Foundation for Planned Separation in Mid-2015
Baxter International Inc. (NYSE:BAX) today announced fourth quarter 2014 financial results that exceeded expectations and reported on its progress toward its planned separation into two independent, leading healthcare companies in mid-2015.
For fourth quarter 2014, Baxter reported net income of $953 million and earnings per diluted share of $1.74, compared to net income of $326 million and earnings per diluted share of $0.59 in the same period last year. These results reflect both earnings and an after-tax gain from its recently divested vaccines franchise of $429 million (or $0.78 per diluted share), as well as
after-tax special items totaling $209 million (or $0.38 per diluted share) for intangible amortization, costs associated with business development and contingent milestone payments, integration of the company's acquisition of Gambro AB, and Baxter's planned separation. Fourth quarter 2013 results included a loss from discontinued operations and after-tax special items, totaling $401 million (or $0.74 per diluted share).
On an adjusted basis, excluding special items and discontinued operations, Baxter's fourth quarter income from continuing operations totaled $733 million, or $1.34 per diluted share. These results reflect strong revenue growth across several key franchises, and continued investments in commercial and manufacturing operations, as well as research and development.
Worldwide revenues totaled $4.5 billion and increased 3 percent from prior-year levels (or 7 percent excluding the impact of foreign currency). Sales within the United States totaled $1.9 billion and advanced 6 percent, and international sales of $2.6 billion increased 2 percent (or 7 percent excluding the impact of foreign currency). BioScience revenues of $1.9 billion rose
9 percent from the prior-year period (or 12 percent excluding the impact of foreign currency). Performance was driven by double-digit growth across the company's broad Hemophilia and BioTherapeutics franchises. Medical Products sales of $2.6 billion were comparable to the prior-year period (or up 3 percent excluding the impact of foreign currency) resulting from strong U.S. performance across intravenous therapies, specialty pharmaceuticals, and products to treat end-stage renal disease.
Baxter's net income totaled $2.5 billion, or $4.56 per diluted share, in 2014. Compared to the prior year, excluding special items and discontinued operations, Baxter's adjusted income from continuing operations increased
4 percent to $2.7 billion, and earnings per diluted share of $4.90 advanced
4 percent, exceeding the company's previously issued guidance for the year.
Baxter's worldwide revenues in 2014 totaled $16.7 billion and rose 11 percent (or 13 percent excluding the impact of foreign currency). After adjusting both periods for the contribution of Gambro, Baxter's worldwide sales rose
4 percent (or 5 percent excluding the impact of foreign currency).
Compared to the prior-year period, BioScience sales of $6.7 billion grew
7 percent (or 8 percent excluding the impact of foreign currency), while Medical Products sales of $10 billion advanced 15 percent (or 16 percent excluding the impact from foreign currency). After adjusting both periods for the contribution of Gambro, Medical Products sales increased 2 percent (or 4 percent excluding the impact of foreign currency) on a full-year basis.
During 2014, Baxter generated cash flows from operations of approximately $3.2 billion and invested record levels in research and development and capital improvements. The company's investments in research and development grew 22 percent to more than $1.4 billion, while capital expenditures increased 24 percent to $1.9 billion, reflecting investments in manufacturing capacity to support future demand and growth opportunities across the company's global portfolio.
"Throughout 2014, we executed on our financial and strategic priorities while positioning both companies for sustained success with investments to enhance our commercial, operational and scientific capabilities," said Robert L. Parkinson, Jr., chairman and chief executive officer. "As we chart distinct and unique paths forward as separate global healthcare leaders, we look forward to unlocking value for our shareholders, partners, employees, and the patients and healthcare providers we serve."
In 2014, Baxter reached a significant milestone in the company's history with the announcement of plans to create two separate, independent global healthcare companies – one focused on developing and marketing innovative biopharmaceuticals and the other on life-saving medical products. This decision supports Baxter's evolution and underscores its commitment to ensuring long-term strategic priorities remain aligned with shareholders' best interests, while creating value for patients, healthcare providers, and other key stakeholders.
Baxter has not only progressed toward the establishment of these new healthcare companies, it is building on a solid foundation with a number of significant achievements, including:
- Naming of the executive management teams for both companies, unveiling of "Baxalta Incorporated" as the identity for the new biopharmaceutical company, and filing of a preliminary Form 10 with the U.S. Securities and Exchange Commission for Baxalta.
- Forming a new global innovation and research and development (R&D) center in Cambridge, Mass., for the biopharmaceuticals business, which positions the new company to accelerate innovation by building on its robust pipeline in core areas of expertise, establish and strengthen R&D collaborations with partners in new and emerging biotech areas, and optimize R&D productivity while enhancing patient care globally.
- Successfully integrating Gambro, which combined with Baxter's own global leadership in home-based peritoneal dialysis therapy, provides a comprehensive renal portfolio and global array of cross-therapeutic options.
- Enhancing manufacturing capabilities in Medical Products to support growth in demand for peritoneal dialysis solutions and dialyzers.
- Advancing innovation through achievement of key clinical and regulatory milestones including U.S. Food and Drug Administration (FDA) approval for:
- HYQVIA [Immune Globulin Infusion 10% (Human) with Recombinant Human Hyaluronidase]
- RIXUBIS [Coagulation Factor IX (Recombinant)] for routine prophylactic treatment, control and prevention of bleeding episodes, and perioperative management in children with hemophilia B
- OBIZUR [Antihemophilic Factor (Recombinant), Porcine Sequence] for the treatment of bleeding episodes in adults with acquired hemophilia A, a very rare and potentially life-threatening acute bleeding disorder
- 510(k) clearance for the next-generation SIGMA Spectrum Infusion Pump with Master Drug Library
- Submitting biologics license applications to the FDA for the approval of
BAX 855, an investigational, extended half-life recombinant factor VIII (rFVIII) treatment for hemophilia A based on ADVATE [Antihemophilic Factor (Recombinant)], and BAX111, the first highly purified recombinant von Willebrand Factor (rVWF), as a treatment for patients with von Willebrand disease, the most common type of inherited bleeding disorder.
- Augmenting capabilities in key therapeutic areas through new partnerships, collaborations and acquisitions, including new relationships with Rockwell Medical and Merrimack Pharmaceuticals, and the acquisitions of AesRx, Chatham Therapeutics and ICNet.
- Delivering significant value to shareholders through increased dividends and continued share repurchases. Baxter raised its dividend for the eighth consecutive year in 2014 and returned more than $1.6 billion to shareholders.
Outlook for First Quarter 2015
Baxter also announced today its outlook for the first quarter 2015. For the first quarter of 2015, the company expects sales growth of approximately
2 to 3 percent, excluding the impact of foreign currency. Including the impact of foreign currency, the company expects sales to decline approximately
3 to 4 percent. Baxter also expects earnings from continuing operations, before special items, of $0.85 to $0.90 per diluted share, which reflects traditional seasonality, the impact of foreign currency, increased generic competition, and additional manufacturing and operational costs which are expected to be most pronounced in the first quarter of 2015. The first quarter 2015 earnings guidance excludes approximately $0.09 per diluted share of projected intangible amortization expense. Reconciling for the inclusion of intangible asset amortization results in GAAP (Generally Accepted Accounting Principles) earnings of $0.76 to $0.81 per diluted share, before other special items, for the quarter.
With the separation of the two companies anticipated to occur mid-2015, company executives will be providing investors an in-depth overview of both companies' long-term, strategic outlook and financial guidance, on May 18, 2015 for Baxter International Inc., and on May 19, 2015 for Baxalta Incorporated. 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 29, 2015. Please visit www.baxter.com for more information regarding these upcoming 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, outlook for first quarter 2015, and the planned separation of Baxter's biopharmaceutical and medical products businesses. 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; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts; product quality or patient safety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; U.S. healthcare reform and other global austerity measures; reimbursement and rebate policies of government agencies and private payers; product development risks; the ability to successfully separate the biopharmaceutical and medical products businesses on the terms or timeline currently contemplated, if at all, and achieve the intended results; accurate identification of business development and R&D opportunities and realization of anticipated benefits; timely submission and approval of regulatory filings; inventory reductions or fluctuations in buying patterns; 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; 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.