Baxter International Inc. (NYSE: BAX) today announced its financial results for the second quarter of 2010, reporting earnings in line with the company's previously issued guidance of $0.90 to $0.93 per diluted share.
Baxter reported net income of $535 million, which declined 9 percent from $587 million reported in the second quarter of 2009. Earnings per diluted share of $0.90 declined 6 percent from $0.96 per diluted share reported in the prior-year period. These results included an after-tax charge of $22 million (or $0.03 per diluted share) for the write-down of certain accounts receivable in anticipation of a settlement with the government of Greece. On an adjusted basis, excluding the special charge, the company reported second quarter net income of $557 million or $0.93 per diluted share.
Worldwide sales in the second quarter totaled $3.2 billion and increased 2 percent over the same period last year. Excluding the impact of foreign currency, worldwide sales were comparable to the prior year. Sales within the United States increased 2 percent to $1.4 billion and international sales grew 2 percent to $1.8 billion. Excluding the impact of foreign currency, international sales declined 2 percent.
By business, BioScience revenues totaled $1.4 billion and declined 4 percent from the same period last year (or declined 5 percent excluding the impact of foreign currency), primarily due to the increase in Medicaid rebates required by manufacturers of drugs and biologics under recently enacted U.S. healthcare reform legislation, as well as lower revenues derived from antibody therapies, vaccines, and international hemophilia tenders. Partially offsetting this decline was continued growth of ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] for the treatment of hemophilia and ARALAST NP [Alpha 1-Proteinase Inhibitor (Human)] for the treatment of hereditary emphysema, as well as strong sales of biosurgery products.
Medication Delivery sales increased 9 percent (or 6 percent excluding the impact of foreign currency) to $1.2 billion, driven by growth of parenteral nutrition and intravenous therapies, anesthesia products, and sales of the Sigma SPECTRUM infusion pump and certain injectable drugs. Renal sales of $585 million increased 6 percent (or 1 percent excluding the impact of foreign currency), as the company continued to post solid gains in peritoneal dialysis patients, particularly in the United States, Latin America and Asia, and benefited from the recently acquired continuous renal replacement therapy business.
For the first six months of 2010, Baxter reported net income of $472 million or $0.78 per diluted share, compared to net income of $1.1 billion or $1.79 per diluted share from the same period last year. On an adjusted basis, excluding special charges of $649 million, Baxter's net income for the six-month period increased 2 percent to $1.1 billion, and earnings per diluted share increased 4 percent to $1.86 per share.
Baxter's worldwide sales totaled $6.1 billion for the first half of 2010, including the prior-quarter revenue adjustment of $213 million associated with the COLLEAGUE infusion pump recall. On an adjusted basis, Baxter's worldwide sales totaled $6.3 billion, an increase of 7 percent over the prior year (or a 2 percent increase excluding the impact of foreign currency).
Baxter generated strong cash flow in the first six months of 2010, with cash flows from operations totaling $1.1 billion, after a $300 million contribution to the company's U.S. pension fund in the first quarter. In addition, the company repurchased 23 million shares of common stock for approximately $1.1 billion, and paid dividends totaling $348 million, which represents a 12 percent per share increase versus the prior year period.
"Despite a number of challenges, we were pleased to deliver financial results in line with our guidance," said Robert L. Parkinson, Jr., chairman and chief executive officer. "We remain committed to accelerating earnings growth in the future by leveraging our diversified healthcare model, broad geographic reach, and strong new product pipeline."
Baxter continues to expand its pipeline through investments in research and development as evidenced by a number of recent achievements:
- Extending leadership in hemophilia with the initiation of a global Phase I/II clinical trial studying the safety and tolerability of BAX 817, an on-demand recombinant Factor VIIa therapy for patients with hemophilia A or B with an inhibitor.
- Initiation of a Phase I clinical trial for recombinant Factor IX, a treatment for patients with hemophilia B.
- Acceptance by the U.S. Food and Drug Administration (FDA) of Baxter's Biologics License Application (BLA) for its 10% liquid immunoglobulin therapy for subcutaneous administration in patients with primary immune deficiency. The BLA is supported by clinical trial data which demonstrated efficacy, tolerability and safety of the subcutaneous formulation that were comparable to intravenous therapy.
- Approval in Europe and Canada for the first and only 30-gram dose vial for GAMMAGARD LIQUID (marketed as KIOVIG in Europe). This new dosage form is the most frequently prescribed dose and will enhance user convenience.
In addition, the company recently announced final details from the FDA order to recall COLLEAGUE infusion pumps in the U.S. market. Baxter will offer replacement Sigma SPECTRUM infusion pumps or refunds to owners of COLLEAGUE pumps and will execute the recall over the next two years to minimize disruption to patient care.
Third Quarter and Full-Year 2010 Outlook
Baxter also provided financial guidance for the third quarter and confirmed its outlook for the full-year 2010. For the third quarter of 2010, the company expects sales growth of 1 to 3 percent, excluding the impact of foreign currency, and earnings of $0.96 to $0.99 per diluted share, before any special items.
For full-year 2010, Baxter's outlook includes sales growth of 1 to 3 percent, excluding the impact of foreign exchange and the first quarter COLLEAGUE adjustment, and earnings of $3.93 to $3.98 per diluted share, before any special items. In addition, the company reiterated its projection to generate cash flow from operations of approximately $2.7 billion.
Baxter International Inc.,