On Sep 2, we have updated our research report on
Baxter International Inc.
). Although expensive, the Gambro acquisition has long term
prospects for Baxter. Further, a solid product pipeline and
strategic collaborations, represents key value drivers for the
Baxter operates in the life-sustaining and critical care products
category that should remain relatively insulated from economic
downturns. Its products are not commodity-like in nature and
provide a recurring revenue stream.
The Gambro acquisition strengthens the company's role in the
hemodialysis market. It will be able to serve both acute and
chronic dialysis patients. With the takeover, Baxter gains an
established set of products, which strengthen its existing line of
Apart from Gambro, Baxter made two acquisitions in the recent past,
which are expected to boost its Medical Products segment results.
They include Chapel Hill, NC-based gene therapy-mediated cures
developer Chatham Therapeutics, LLC and privately-owned orphan drug
(pharmaceutical drug used for treating rare disease) producer in
the U.S. AesRx, LLC that will help it address a highly unmet
clinical need of patients suffering from blood-related disorders.
However, Baxter depends on the EU for about a third of its sales.
This is a cause for concern given recent fiscal tightening, a glum
outlook for hospital spending and tightening of reimbursement.
Further, Baxter faces pricing pressure due to the advent of group
purchasing organizations (GPOs) in the U.S. GPOs act as agents that
negotiate vendor contracts on behalf of their members.
Currently, Baxter carries a Zacks Rank #3 (Hold). Some
better-ranked stocks in the medical products industry include ICU
Medical, Inc. (
), Neogen Corp. (
), and NuVasive, Inc. (
). ICU Medical sports a Zacks Rank #1 (Strong Buy), while both
Neogen and NuVasive carry a Zacks Rank #2 (Buy).
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