Global medical products and services company,
Baxter International, Inc.
), recently inked a global agreement with Chatham Therapeutics,
LLC. Per the deal, Baxter will use Chatham's gene therapy know-how
to develop and market new products for curing hemophilia B.
Baxter believes that investment in research and development
(R&D) will further expand its BioScience segment's hemophilia
product portfolio and be accretive to future sales. Bioscience
sales were $1,462 million, up 4% (up 5% in constant currency) year
over year, in the most recent quarter. The performance was
attributable to higher demand for products utilized in the
treatment of hemophilia and immune disorders, such as Advate and
Gammagard Liquid (Immune Globulin Intravenous - Human), several
specialty plasma-based therapeutics and vaccines.
Baxter wishes to run clinical trials on Chatham's unique
Biological Nano Particles ("BNP"), a gene therapy technology, which
has generated successful results during initial trials. The company
paid $25 million for the program during its initial trials (which
it will record as a special pre-tax in-process R&D expense in
the second quarter of 2012) and plans to invest further, subject to
certain terms and conditions.
The company has already been conducting several researches in
hemophilia, including the BAX326 clinical trial for treating
hemophilia B. It plans to file for an U.S. approval of BAX326 by
Privately-owned Chatham Therapeutics, LLC is an associate of
Asklepios BioPharmaceutical, Inc. ("AskBio"), which focuses on
developing gene therapy based treatments for both hemophilia A and
The news regarding Baxter still remains mixed. On the positive
side, Baxter's focus on life-sustaining products, which are not
commoditized, partly insulates it from an economic downturn. The
company is able to generate recurring revenues, and consistent cash
flow, owing 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 struck a deal, in December 2011, to buy Synovis Life
Technologies, a well-known provider of mechanical and biological
products for the repair of soft tissue utilized in a large number
of surgical operations. The acquisition will further expand
Baxter's offerings in the area of biosurgery and regenerative
Earlier, in November 2011, Baxter completed its acquisition of
Baxa Corporation. The takeover highlights the company's continued
commitment toward patient safety and nutrition. It also permits
Baxter to provide a wider set of solutions for the safe preparation
and delivery of IV medication. Baxa's know-how will benefit
patients across the globe.
On the flip side, despite resilience in Plasma Proteins and
Antibody Therapy sub-segments, we are concerned about stagnation in
sales, a slightly somber outlook for hospital spending and
tightening of reimbursement. We also account for the unfavorable
impact of foreign exchange translation and possible dilution
associated with the company's acquisitions of Baxa and Synovis.
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 Neutral long-term rating
on Baxter. The stock currently retains a Zacks #3 Rank, which
translates into a short-term "Hold" recommendation.
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