By Dow Jones Business News, October 17, 2013, 10:26:00 AM EDT
By Joseph Walker
Baxter International Inc.'s ( BAX ) third-quarter earnings fell nearly 7%, hurt by recent acquisition costs and higher
legal and tax expense.
The drug and medical-device maker is grappling with two major challenges--the successful integration of its new kidney
dialysis business that was acquired through its recent purchase of Gambro, and the upcoming launch of a competitive
threat to its largest product line by sales.
The $4 billion deal for Gambro, the Swedish maker of hospital equipment used in kidney dialysis, was completed in the
third quarter. Baxter, which already has a home dialysis business, is hoping the acquisition will help it exploit rising
obesity rates and the aging of the world's population, factors expected to lead to growing numbers of kidney disease
patients. Gambro contributed $100 million in sales during the quarter, helping to lift total renal sales 19% to $746
Meanwhile, the company's hemophilia treatments, representing nearly a quarter of total sales, are expected to face
increased pressure from the entry next year of competitive therapies made by Biogen Idec Inc. ( BIIB ) into the market.
Baxter's hemophilia sales rose roughly 9% to $851 million in the third quarter.
In a conference call with analysts, Chief Executive Robert Parkinson acknowledged that Baxter is expecting "downward
pressure as a result of competition" to its hemophilia products, but said that his long-term outlook is unchanged. The
company's existing renal products unit, meanwhile, "exhibited the most robust growth this year than it has in years."
Baxter narrowed its full-year earnings guidance, and expects earnings per share between $4.65 and $4.67, compared with
a range of $4.62 to $4.70 previously. For the current quarter, the company forecast per-share earnings between $1.24 and
$1.26 and sales growth of 12% to 13%; analysts polled by Thomson Reuters forecast a per-share profit of $1.26 and
revenue growth of 15%.
Total revenue in the third quarter increased 8.5% to $3.77 billion, slightly less than analysts had forecast. The "
miss appears almost entirely attributable to timing of the Gambro close," said Derrick Sung, a Bernstein Research
analyst, in a client note. Baxter said the acquisition closed later than expected because of "the regulatory process," a
reference to the anti-trust clearance Baxter had to receive.
Medical-products sales grew 10% to $2.2 billion, with a boost from Gambro. BioScience revenue, which includes plasma-
based therapeutics, was up 6.4% to $1.6 billion, primarily by improved demand for the company's hemophilia therapies.
Baxter reported a profit of $544 million , or 99 cents a share, down from $583 million, or $1.06 a share, a year
earlier. Excluding acquisition-related impacts, litigation charges and other items, adjusted earnings rose to $1.19 from
$1.14. The company expected per-share profit of $1.18 to $1.21 and sales growth of 9% to 12%.
-Tess Stynes contributed to this article.
Write to Joseph Walker at email@example.com
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