Baxter International (BAX)
Q4 2010 Earnings Call
January 27, 2011 8:30 am ET
Robert Parkinson - Chairman, Chief Executive Officer and President
Robert Hombach - Chief Financial Officer, Corporate Vice President and Treasurer
Mary Ladone - Vice President of Investor Relations
Matthew Miksic - Piper Jaffray Companies
David Roman - Goldman Sachs Group Inc.
Michael Weinstein - JP Morgan Chase & Co
Glenn Novarro - RBC Capital Markets, LLC
Kristen Stewart - Deutsche Bank AG
Frederick Wise - Leerink Swann LLC
David Lewis - Morgan Stanley
Lawrence Keusch - Morgan Keegan & Company, Inc.
Bruce Nudell - UBS Investment Bank
Previous Statements by BAX
» Baxter International CEO Discusses Q3 2010 Results - Earnings Call Transcript
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» Baxter International Inc. Q1 2010 Earnings Call Transcript
Thanks, Sean, and good morning, everyone. Welcome to our Fourth Quarter 2010 Earnings Conference Call. Joining me today are Bob Parkinson, CEO and Chairman of Baxter International; and Bob Hombach, 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. And thanks for calling in this morning. As you all know, 2010 was an unusually challenging year for Baxter that presented some unique obstacles in an evolving macro environment. The global economic landscape continued to exert intense pressure, U.S. Health Care Reform Legislation added additional complexity and further impacted our business performance, and healthcare austerity measures continued to be implemented around the world, as emphasis remains on providing increased access to care at a lower cost.
Finally, and specific to Baxter's, market dynamics in the Plasma Protein business had an adverse effect on our financial performance for the year. However, we're seeing encouraging signs that our competitive position is strengthening, and we continue to be optimistic about the growth prospects for this business over time.
Despite these challenges, there were an array of Baxter successes that I'd like to highlight this morning. First, while we were disappointed that we lowered our guidance in the first quarter of 2010, our financial performance was in line with our revised expectations for the remainder of the year. Earlier this morning, we reported our fourth quarter financial results with adjusted EPS that increased 8% to $1.11 per diluted share. For the full year, adjusted EPS was $3.98 per diluted share, at the high end of our revised guidance range of $3.92 to $4 per share.
On a reported basis, worldwide sales in the fourth quarter increased 1% and after adjusting for currency, sales growth was 3% and compares favorably to the guidance we provided of 1% to 2%. For the full year 2010, worldwide sales increased 4%, or 3%, after adjusting for foreign exchange.
Now we're particularly pleased with our sustained ability to generate significant cash flow, which exceeded $3 billion for the year, a new record level for our company, while continuing with our disciplined capital allocation strategy of returning value to our shareholders through increased dividends and share repurchases.
Over the year, we focused on enhancing our organizational, commercial and operational effectiveness. As you know, from an organizational perspective, we combined our Medication Delivery and Renal businesses to form a new business, Medical Products. This new organization aligns common areas of capability within Baxter, while creating increased capacity to pursue new growth opportunities.
Both the new Medical Products business and our Bioscience business also feature new leadership to help accelerate growth, with Ludwig Hantson now heading up Bioscience and Rob Davis leading Medical Products.
Commercially, we implemented new strategies in Bioscience to address issues and strengthen our competitive position in the Plasma Proteins business. I'm encouraged with the progress that we're making and remain confident that the Plasma business will be an attractive growth vehicle in the coming years. This is due to the under-diagnosis of primary immune deficiency globally, Baxter's introduction of new and proprietary administration technologies and the expansion of new indications, including the potentially significant opportunity related to the treatment of Alzheimer's.
And Renal, CMS began reimbursing clinicians for providing pre-dialysis education to patients with chronic kidney disease and a new bundle payment system became effective just a few weeks ago. These reimbursement changes in the U.S. are intended to promote growth of home dialysis, and momentum continues to build in this regard. We also continue to expand geographically and increase perineal dialysis penetration particularly in developing markets as more countries recognize the potential cost, clinical and quality-of-life benefits of this therapy.
And in Medication Delivery, we signed a new five-year contract with Novation. This new agreement provides hospitals access to Baxter's broad portfolio of products including IV solutions, drug delivery and perennial and nutritional products, large volume infusion pumps and IV administration suction components, resulting in share gains in core products across the portfolio.
From an operational perspective, we finalized the consent order with the FDA related to the COLLEAGUE infusion pump, and are in the process of offering the SIGMA Spectrum pump as an alternative to our customers. We continue to work with SIGMA to significantly ramp manufacturing capacity. And today, SIGMA has been successful, positioning us well to meet the anticipated customer demand.
I'm very pleased that over the last couple of months, we've seen accelerated demand for Spectrum with a record number of orders and minimal loss of the current COLLEAGUE customers. This is a result of our attractive offer to customers coupled with the cost effectiveness and clinical benefits of our standard set technology, allowing us to protect a significant portion of our installed base of infusion devices.
Throughout 2010, we continue to broaden our presence by introducing a number of new products and expanding geographically. For example, we launched ADVATE in Brazil; PREFLUCEL, our seasonal influenza vaccine in select European markets; TachoSil, an absorbable Fibrin Sealant patch for use in cardiovascular surgery in the U.S., and we introduced the first and only 30-gram dose vial for GAMMAGARD LIQUID in KIOVIG in Europe and Canada. This new dosage form is the most frequently prescribed dose for primary immune deficiency patients and enhances user convenience.