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Baxter International Inc. (BAX)
Q4 2009 Earnings Call
January 28, 2010 8:30 am ET
Mary Kay Ladone – VP IR
Bob Parkinson – CEO
Rob Davis - CFO
Mike Weinstein - JPMorgan
Larry Keusch – Morgan Keegan
Bob Hopkins – Banc of America
David Lewis – Morgan Stanley
Bruce Nudell – UBS
Matt Miksic – Piper Jaffray
Ben Andrew - William Blair
Rick Wise - Leerink Swann
Previous Statements by BAX
» Baxter International Inc. Q3 2009 Earnings Call Transcript
» Baxter International Inc. Q2 2009 Earnings Call Transcript
» Baxter International Inc. Q4 2008 Earnings Call Transcript
Mary Kay Ladone
Good morning everyone and welcome to our fourth quarter 2009 earnings conference call. Joining me today are Bob Parkinson, CEO and Chairman of Baxter International, and Rob Davis, our Chief Financial Officer.
Before we get started, let me remind you that this presentation including comments regarding our financial outlook, new product developments, and regulatory matters, contain forward-looking statements that involve risks and uncertainties, and of course our actual results could differ materially from our current expectations.
Please refer to today’s press release and our SEC filings for more details concerning factors that could cause actual results to differ materially. In addition, in today’s call non-GAAP financial measures will be used to help investors understand Baxter’s ongoing business performance.
A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures, is included in our earnings release issued this morning and available on our website.
Now I’d like to turn the call over to Bob Parkinson.
Thanks Mary Kay, good morning everyone, appreciate you calling in this morning. We are very pleased with our fourth quarter and full year 2009 financial results that were reported earlier this morning. As you saw 2009 was another great year for our company as we again achieved record sales, earnings, and cash flow despite an uncertain macro environment and we continue to believe that we’re very well positioned for 2010 and beyond.
Worldwide we succeeded in driving growth through geographic expansion, leveraging the benefits of our diversified healthcare model, while selectively pursuing business development initiatives and increasing our investment in research and development.
While we met or exceeded expectations in virtually all key financial metrics for the year, we’re particularly pleased with the quality of the results and the strength of our overall financial position which affords us the flexibility to continue to invest in R&D and select promotional activities to enhance future growth and shareholder value.
While Rob will provide more detail on our fourth quarter financial results and also the outlook for 2010 in just a few minutes, I’d like to take a moment at the outset to highlight just a few key points. First as you saw in the press release issued this morning, adjusted EPS of $1.03 per diluted share increased 13% versus the prior year and was in line with our prior guidance.
Full year adjusted EPS of $3.80 per diluted share increased 12% which exceeded our original guidance of $3.70 to $3.78 per share and is also in line with our longer-term growth objective of 11% to 13%.
Our 2009 performance was primarily the result of continued margin expansion, derived from favorable product and business mix, price improvements, and enhanced manufacturing and cost efficiencies as well as expense leverage and benefits derived from our ongoing share repurchase program.
Fourth quarter sales growth excluding FX was 6% and excluding transfusion therapies for both years, sales increased 7%, very consistent with our sales growth over the last few quarters. I continue to be pleased with the improvement in two key value metrics, gross margin and operating margin.
On an adjusted basis gross margin in the fourth quarter was 51.8% and operating income as a percentage of sales was 23.4%. For the full year both metrics showed significant year over year improvement and represent new record levels for our company.
As we previously mentioned and highlighted in detail at our investor conference just this past September, we’re advancing and expanding our product pipeline with continued investment in R&D which totaled $917 million for the year, an 8% increase over last year’s levels on an adjusted basis and an increase of 11% excluding currency.
Over the last 12 to 18 months we’ve initiated 14 Phase III clinical trials and advanced numerous early stage programs that have the potential to profoundly impact the treatment and delivery of care for chronic diseases like Alzheimer’s, hemophilia, end stage renal disease, immune deficiencies, as well as public health threats like pandemic and seasonal influenza.
A few key highlights from 2009 include the following. First, we completed patient enrollment in a pivotal Phase III trial for the subcutaneous administration of Gammagard liquid with [enhance] to treat primary immune disease. We expect to complete the trial later this year and file for approval in 2011. We continue to actively enroll patients in our Phase III clinical trial of Gammagard Liquid as a possible treatment for Alzheimer’s disease.
More than 50% of the patients have now been enrolled in the 360 patient study and we expect to complete enrollment by the end of this year. Preliminary results are expected in late 2012.
In hemophilia, we advanced the development of the first recombinant therapy for people with von Willebrand disease. This is the first and only recombinant replacement protein for von Willebrand disease and we expect to complete the Phase I study by the end of this year.
In our regenerative medicine business we initiated a Phase III study evaluating Tisseel, fiber and sealant as a hemostatic agent in vascular surgery and completed a Phase III study evaluating the use of Artiss fiber and sealant in facial surgery in the United States.