Baxter International (BAX)
Q1 2011 Earnings Call
April 21, 2011 8:30 am ET
Robert Parkinson - Chairman, Chief Executive Officer and President
Robert Hombach - Chief Financial Officer and Corporate Vice President
Mary Ladone - Vice President of Investor Relations
Matthew Miksic - Piper Jaffray Companies
James Francescone - Morgan Stanley
David Roman - Goldman Sachs Group Inc.
Michael Weinstein - JP Morgan Chase & Co
Rajeev Jashnani - UBS Investment Bank
Lawrence Keusch - Morgan Keegan & Company, Inc.
Danielle Antalffy - Leerink Swann LLC
Catherine Hu - Deutsche Bank AG
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Thanks, John. Good morning, and welcome to our first quarter 2011 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 expectation. 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. We're pleased today to announce our financial results for the first quarter and also to provide you with an update for our full year 2011 outlook. As you saw in our press release, which was issued earlier this morning, EPS of $0.98 per diluted share, exceeded guidance for the quarter and increased 5% versus the prior-year on an adjusted basis. This performance was the result of better-than-expected sales in gross margin, operational leverage and the benefit from our ongoing share repurchase program.
First quarter sales growth after adjusting for FX [foreign exchange], was also up 5%, as growth improved on a sequential basis across multiple product categories. And we benefited from the sales of our Generic Drug business, which we had expected to divest in the first quarter, and therefore did not include in our original guidance for the year. We now expect to close this transaction within the next few weeks.
While Bob will provide some more details on our first quarter financial performance in just a few minutes, I'm pleased that our -- that given our current outlook, we're in the position to raise our full-year sales and earnings guidance. Our strong financial position continues to provide us the flexibility to invest in and pursue opportunities that expand our diverse product portfolio, with innovative products that save and sustain patient lives and position our company for enhanced growth. Always with an eye toward delivering increased value to our shareholders.
Innovation remains our most important strategic imperative and will continue to be the driving force behind our future success. Although R&D [research and development] spending in the quarter was somewhat below the prior year, we do continue to fund all major R&D programs and have made significant progress in advancing our pipeline over the last several years.
I'd like to take a moment just to update you on a few key programs and some recent highlights. First, during the quarter, we submitted a Biologics License Application or BLA to the FDA [Food and Drug Administration] for the U.S. approval of TISSEEL Fibrin Sealant as a hemostatic agent in vascular surgery. This is an expansion beyond the current marketed indications and completes the necessary clinical requirements for a broad hemostasis label, which represents a very significant opportunity for our Regenerative Medicine business.
Secondly, we announced approval in Europe of PREFLUCEL, a seasonal influenza vaccine utilizing our proprietary Vero cell technology, under the mutual recognition process. The 13 participating European Union countries including Germany, Spain United Kingdom and the Nordic countries, will formally implement the license on a national level, making the vaccine available for the 2011 and 2012 influenza season.
And lastly, we continue to be successful in driving differentiation of GAMMAGARD LIQUID, by offering various dosage forms, enhancing delivery options and expanding the number of indications. For example, we recently introduced the first and only 30-gram dose vial for GAMMAGARD LIQUID in the United States. This dosage form is the most frequently prescribed dose for primary immune deficiency patients and enhances user convenience. As you know, we're currently awaiting FDA approval for GAMMAGARD LIQUID subq [subcutaneous], which we submitted to the agency last year. We continue to expect approval in the second quarter of this year, allowing us to launch in the U.S. and participate in this fast growing segment of the market.
In addition, late last year, we completed the Phase III clinical trial of HyQ, which allows for enhanced delivery of GAMMAGARD LIQUID subcutaneously, facilitated by recombinant human hyaluronidase. We're currently in the process of preparing our submission for approval in both the U.S. and Europe, and expect to communicate final top line results later this year.