2nd UPDATE: Baxter Posts 1Q Profit, Raises Full-Year Outlook
April 21 2011 - 10:53AM
Dow Jones News
Baxter International Inc. (BAX) swung to a first-quarter profit,
following a charge-addled period last year, while posting
better-than-expected sales helped by "robust demand" for a
plasma-based drug for treating immune system disorders.
That drug, known as Gammagard, is a closely watched product in a
market that showed unexpected softness early last year. But Baxter
cited recent strength there as a driver behind sales growth in its
bioscience business--which has been helped by a competitor's
recall--and it topped company and Wall Street forecasts for the
quarter.
The Deerfield, Ill., medical-products company also boosted its
sales and earnings expectations for the full year. Shares traded up
1.1% to $55.10 early Thursday.
Leerink Swann analyst Rick Wise said the first-quarter
performance "leaves us even more encouraged that BAX is
successfully moving past last year's" issues in the plasma
market.
Baxter is also coming off a challenging year due to economic
weakness, costs pegged to the U.S. health-care overhaul and some
product-quality and regulatory challenges. "We continue to
implement measures to improve our commercial, operational, and
scientific effectiveness in response to an evolving and challenging
environment," Chairman and Chief Executive Robert L. Parkinson Jr.,
said in a release.
The company reported a first-quarter profit of $570 million, or
98 cents a share, from a prior-year loss of $63 million, or 11
cents a share. The year-earlier results were stung by charges,
including a $588 million charge pegged to a recall of "Colleague"
infusion pumps. Excluding these impacts, Baxter said earnings rose
to 98 cents from 93 cents.
The company in January projected first-quarter earnings of 92
cents to 94 cents, below analysts' estimates at the time.
Revenue increased 12% to $3.28 billion. Excluding a sales
adjustment linked to the Colleague pump issue, revenue was up 5%.
Analysts recently expected $3.17 billion.
Sales in Baxter's bioscience unit, which includes plasma-based
medical products such as drugs for treating hemophilia and immune
disorders, grew 3% and were up 4% excluding currency fluctuations,
as sales increased 12% in the U.S. The company has benefited from a
recall at Octapharma AG, for a product that competes with
Gammagard, and Baxter officials said on a conference call Thursday
they are assuming a mid-year relaunch for Octapharma.
William Blair analyst Ben Andrew said Baxter looks like one of
the "largest winners" following that recall, but added "we remain
cautious in the near term as the return of its competitor into the
market over the next two quarters makes us question whether the
company will be able to sustain this growth rate."
The company's other big unit, medical products, posted a 20%
sales gain due to the Colleague hit last year. Excluding that issue
and the impact of foreign currency rates, sales rose 5%. Though
Baxter had planned to divest its U.S. generic injectables business
through a sale to Hikma Pharmaceuticals PLC (HIK.LN) in the first
quarter, the sale didn't happen as soon as expected, giving Baxter
an unexpected extra $40 million in first-quarter sales.
"We now expect to close the transaction within the next few
weeks," Parkinson said on the call. The company said there was
little earnings contribution from the delayed sale because this is
a low-margin business.
Baxter raised its 2011 per-share earnings forecast to $4.20 to
$4.28 on revenue growth of 3% to 4% from its January estimate of
$4.15 to $4.25 on sales growth of 2% to 3%, excluding currency
impacts.
For the current quarter, the company expects per-share earnings
of $1.01 to $1.03 on revenue growth of 4% to 5%, excluding
currency.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
-Tess Stynes contributed to this article.
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