Baxter International Inc.'s (BAX) second-quarter earnings fell
8.9%, including a charge, as it faced macroeconomic headwinds and
individual product issues.
The Deerfield, Ill., based maker of products for conditions such
as hemophilia and kidney failure, tightened its 2010 earnings
guidance and backed sales expectations, but warned that issues in
key markets will continue.
"Clearly 2010 has been a challenging year," said Robert
Parkinson, Baxter's chairman and chief executive, noting pressure
from U.S. healthcare reform, economic pressures, and softness in
its plasma protein-based business.
Notably, Parkinson said the company continues to operate
"through a transition period in the plasma proteins
environment."
The slowdown in the plasma-based business has been a source of
uncertainty for investors, as it is a key component in Baxter's
largest business unit. For the remainder of the year, Parkinson
projected plasma protein sales to decline in the mid-single digits,
and antibody therapy sales to decline about 10%.
Despite the ongoing challenges, the results seemed to comfort
investor concerns about further surprises. Shares of Baxter
recently traded up 4.8% to $43.81.
In its last earnings call in April, Baxter cut its 2010 outlook
and said there was a surprising slowdown for plasma-based medical
products. The news sent the stock down 13% for the day; as of
Wednesday's close the shares were down 30% since the day before its
first-quarter results.
Parkinson said that Baxter has implemented some new commercial
strategies to counteract market share loss in sales of a
plasma-based drug called Gammagard. He said that there are "some
early positive signs" that the company's share position, and the
U.S. market as a whole, are stabilizing.
Looking ahead, the company narrowed its 2010 adjusted earnings
guidance to $3.93 to $3.98 a share, from a previous view of $3.92
to $4.00 a share. It projects sales growth of 1% to 3%, which
amounts to $12.7 billion to $12.9 billion, compared to Street
expectations of $12.9 billion.
Analyst earnings estimates for 2010 have steadily come down
since late March, when projections stood at $4.23 a share.
Baxter also forecast third-quarter earnings of 96 cents to 99
cents a share on revenue growth of 1% to 3%. Analysts expect a
98-cent profit on 1% sales growth to $3.17 billion.
Earnings for the three months ended June 30 dropped 9% to $535
million, or 90 cents a share. The company recorded a $22 million
write-down related to an expected settlement with the Greek
government. Excluding items, the company earned 93 cents a share, a
penny about Wall Street expectations, according to Thomson
Reuters.
Sales in the period rose 2.3% to $3.2 billion, in line with
analyst expectations, with the change primarily coming from the
effects of currency exchange.
The company's biggest business unit, Bioscience reported a 4%
revenue drop to $1.4 billion, mostly because of increased Medicaid
rebates required by the U.S. healthcare overhaul in the spring, as
well as lower revenue derived from antibody therapies, vaccines,
and some international hemophilia products.
Sales in the Medication Delivery unit rose 9% to $1.2 billion,
helped by its intravenous and injectable therapies, along with
sales of the Sigma Spectrum infusion pump.
The company is in the process of recalling about 200,000
Colleague brand drug-infusion pumps in the U.S. while offering
customers either refunds or replacement devices over the next two
years.
Problems with the pumps, typically found bedside at hospitals
where they deliver intravenous fluid and drugs, have been a
long-running issue for Baxter amid problems linked to reports of
patient injuries and deaths.
Baxter is offering Spectrum brand pumps from a private company
called Sigma International, where Baxter has a 40% ownership stake.
On Thursday, it said it continues to work with Sigma to increase
manufacturing capacity to meet expected demand.
The ability to meet demand is key, as the company faces
competition from rival pump makers CareFusion Corp. (CFN) and
Hospira Inc. (HSP).
Parkinson said it is too early to tell how the company's market
share for the products will change, but it will have a better view
by the end of the year.
Baxter's renal unit, which includes products for managing
advanced kidney failure, saw sales rise 6% to $585 million.
In the quarter, the company repurchased 15.2 million shares for
about $677 million.
-By Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com
(Jon Kamp in Boston contributed to this story)
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