) is holding talks to acquire Sweden-based medical technology
company Gambro AB for about $4 billion, according to a
Wall Street Journal
Baxter shares rose 4.07% to close at $68.81 on November 26, 2012
amid buyout speculation. The bullish momentum helped the stock
soar to a new 52-week high of $68.91 on the aforementioned date.
Moreover, the shares posted their highest price since August
The speculated buyout will enhance Baxter's kidney dialysis
franchise as Gambro is a leading global provider of equipment and
therapies for the purpose of kidney and liver dialysis. In 2011,
Baxter's renal portfolio contributed 32% to its Medical Products
segment revenues of $7.8 billion. The compounded annual growth
rate (CAGR) for the segment is estimated at 4% through 2017. The
actualization of the rumor might result in a faster growth
profile for Baxter's renal franchise.
Fresenius Medical Care
) is spearheading the dialysis market with a share of roughly
33%, followed by Baxter and Gambro with market shares of 19% and
13% respectively (as of 2011). If the speculation is to be
believed, Baxter is set to become a giant in the kidney dialysis
The company was on an acquisition spree in 2011. In an effort to
expand its available portfolio, Baxter acquired Baxa Corporation,
Prism Pharmaceuticals and Synovis Life Technologies. These
acquisitions are already having a positive impact on the
Baxter witnessed cash outflows of $590 million in 2011 for
acquisitions and investment compared with $319 million in 2010.
This reflects the company's increasing focus on acquisition
strategy to add depth and dynamism to its product portfolio. In
our view, an eye on the uncertain economy has led to Baxter
resorting to the acquisition route. It is expected that
acquisitions will help to harness its strength and diversify its
Going forward, we do not expect Baxter's acquisition activity to
slacken. Moreover, we expect a significant pick up in
collaborations and alliances for the development of pipeline
Baxter is one of the largest pure-play med tech companies in the
world in terms of sales. The news regarding Baxter still remains
somewhat mixed. On the positive side, the company's focus on
life-sustaining products which are not commoditized, partly
insulate it from an economic downturn.
The company is able to generate recurring revenues and
consistent cash flow, due to its focus on chronic diseases. Among
other positive factors, Baxter retains a strong product pipeline
with several products in late-stage clinical development.
BAXTER INTL (BAX): Free Stock Analysis Report
BECTON DICKINSO (BDX): Free Stock Analysis
FRESENIUS MED (FMS): Free Stock Analysis
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On the flip side, despite resilience in certain sub-segments, we
are concerned about relative stagnation in sales, a slightly
somber outlook for hospital spending and tightening of
Improved execution has lifted sentiment somewhat toward Baxter.
It is a good bet for value investors willing to wait as
fundamentals improve further. Among others, the company competes
Becton, Dickinson and Company
) in certain niches.
We currently have a long-term Neutral recommendation on Baxter.
The stock carries a Zacks #3 Rank, which translates into a
short-term Hold rating.