Rank: #12 (Last year: #10) $10.64 Billion
Prior Fiscal: $10.36 Billion
Percentage Change: +2.7%
R&D Expenditure: $590M
Best FY24 Quarter: Q2 $3.81B
Latest Quarter: Q1 $2.62B
No. of Employees: 38,000
Global Headquarters: Deerfield, Ill.

It was the imperfectly perfect storm.

A storm of imperfect timing but of perfect size, strength, and speed.

On its own, Hurricane Helene probably would not have been the super-soaking savage that killed hundreds of southeastern U.S. residents last fall and caused $78.7 billion in property damage.

It most certainly would have been disastrous for parts of the Southeast, but it wouldn’t have caused such biblical amounts of rainfall. That unfortunate by-product came courtesy of a stubborn low-pressure system that was drifting east across the southern United States just as Helene scurried ashore on Florida’s Big Bend coast.

The (im)perfectly-timed meeting of both systems led to a “perfect storm” system that dumped 40 trillion gallons of rain on an already waterlogged portion of the U.S.—enough to fill more than 60 million Olympic-size swimming pools or Lake Tahoe just once.

“Hurricane Helene wasn’t just one of the strongest storms we’ve ever tracked,” CS-17 meteorologist Lance Blocker noted earlier this year, “it was one of the most destructive because of how it interacted with another weather system in the wrong place at the worst possible time.”

Perfectly imperfect timing.

“The problem wasn’t just Helene’s power,” Blocker continued. “It was the combination of the upper-level low which drew in flooding rains well in advance of Helene’s arrival. And, as Helene approached the Gulf Coast, it carried trillions of gallons of water with it. So the upper level low unfortunately was in position to tap into Helene’s moisture field. It was like connecting a firehose from Helene directly into the low, triggering over 30 hours of relentless tropical downpours—what meteorologists call a predecessor rain event. This primed the landscape for widespread floods by the time Helene finally passed by.”

In its wake, Helene (with help from her imperfect party crasher) left a 500-plus-mile swath of America underwater. A massive storm surge in Tampa Bay sent water up to residents’ attics, and floodwaters submerged an eastern Tennessee hospital so quickly that patients had to be rescued by helicopter.

Helene was particularly cruel to western North Carolina, turning entire cities and Appalachian Mountain towns into humongous heaps of sludge, floating debris, downed trees, and toppled vehicles. Asheville homes floated away, while roads and bridges crumbled from the several feet of rain that fell. Elected officials in Chimney Rock likened the storm to a “blender that was just taking out anything in its path,” and said it would take years to rebuild the area.

Among Helene’s multiple casualties in the Tar Heel State was a manufacturing plant in Marion (northeast of Asheville) owned by Baxter International. Employing roughly 2,500 workers, the facility produces 60% of the U.S. IV fluid and peritoneal dialysis supply, generating 1.5 million bags of IV solutions daily.

Baxter closed the 1.4 million square-foot plant after Helene’s heavy rain and storm surge damaged bridges in the area and triggered a levee breach. The company evacuated employees ahead of the storm and moved products to higher ground or secure storage areas, but the plant’s closure left the healthcare industry scrambling to fill a gaping hole in the supply chain. Baxter announced updated IV solutions allocations to ensure product availability and other companies like B. Braun increased their IV fluid output. However, production at the Marion facility did not return to pre-Helene levels until mid-February this year.

Considering the slow crawl back to normalcy for many western North Carolina communities, Baxter’s four-and-a-half month recovery time from Hurricane Helene was notably swift. “The pace of recovery and dedication of the team have been nothing short of remarkable,” Chairman and Interim CEO Brent Shafer told stockholders in March (2025).

While remarkable, Helene proved to be the defining challenge in an already imperfect year for Baxter, as the company grappled with the storm’s financial fallout, hospital resource constraints, a long-anticipated business divestiture, and a series of product recalls.

The first recall, in February 2024, yanked the ExactaMix Pro 1200 and ExactaMix Pro 2400 from the market over a software error that could have caused more ingredients than needed to be added to the final admixture. The software error in both automated compounding systems did not result in any injuries or deaths, according to Baxter.

Following a brief respite last spring, Baxter’s recall troubles returned in force over the summer—the company issued two Class I recalls within a single week in mid-July, and a voluntary U.S. recall three weeks later in early August.

ANALYST INSIGHTS: “In the past 12 months, Baxter has (1) divested their kidney care business; (2) been having regulatory challenges in their infusion pump business; and (3) parted ways with (now former) CEO Joe Almeida. It’s clear that Baxter is somewhat in disarray. It will be interesting to observe whether interim CEO Brent Shafer can re-direct the ship in the right direction for future growth.”

—Dave Sheppard, co-founder and managing director, MedWorld Advisors

The first July recall involved Baxter’s Life2000 ventilator, a portable device for patients suffering from chronic respiratory failure or other breathing issues. The company issued the recall—the product’s second in as many years—after detecting damaged battery charger dongles, which could affect the ventilator’s internal battery charge and potentially cause the device to fail. The defective dongles also could leave patients without proper respiratory support, threatening their oxygen levels, a U.S. Food and Drug Administration (FDA) recall notice warned.

Baxter advised Life2000 users to check their ventilators for damage and ensure it charges properly. It also suggested that customers maintain backup devices and promptly replace any faulty chargers. Moreover, the company offered to provide replacement ventilators for any devices with damaged dongles or charging issues.

Less than a week after pulling the Life2000 ventilator off the market, Baxter recalled certain lots of its Volara system single-patient use circuit and blue ventilator adapter assembly due to a potential defect. In a news release, the company attributed the recall to reports of the product’s handset plug disconnecting from the blue ventilator adapter’s nebulizer port. The handset plug helps support the “proper operation and ventilator gas flow” when using the Volara system with a ventilator, according to Baxter. Without a nebulizer attached to the blue ventilator adapter, patient care/treatment could be interrupted or delayed if the handset plug disconnects without notice before or during therapy. In such a scenario, the ventilator would leak gas from the blue ventilator adapter’s nebulizer port, reducing ventilation and oxygen flow to the user, Baxter’s recall notice warned.

As was the case with the Life200 ventilator, customers affected by the Volara recall were entitled to a replacement. The impacted accessories—distributed in the United States between Aug. 26, 2022, and Dec. 30, 2023—did not lead to any injuries or deaths, Baxter said.

Last summer’s Volara field action was the second in two years to impact the brand. Baxter recalled 259 Volara patient circuit kits in June 2022 upon discovering the devices might stop home-use patients from receiving enough oxygen from their ventilators. The issue was linked to one complaint, one injury, and two deaths.

Baxter’s summertime recall sorrows continued in August (2024) with a voluntary consumer level recall of one lot of heparin sodium injection due to issues with the lot’s bacterial endotoxin test. Heparin sodium is an anticoagulant used to maintain catheter patency. The use of heparin with higher than acceptable endotoxin levels could cause significant health consequences ranging from febrile reactions to toxic shock, multi-organ failure, and death, Baxter said. No adverse events related to this issue were reported.

Baxter issued its final recall of 2024 in late December upon discovering four lots of its Solution Sets with Duo-Vent Spikes were incorrectly assembled with inverted side clamps. The solution sets are used in conjunction with infusion pumps or vascular access devices to administer fluids to patients; the slide clamp is designed to shut off fluid flow and interact with the infusion pump to correctly load the set into the pump.

FROM THE TOP: “Baxter emerges today as a more strategically focused and operationally efficient company. We also remain grounded in the same fundamentals that have helped fuel our success and channel our passions for nearly a century—starting, as always, with our Mission to Save and Sustain Lives. Our sustained emphasis on medically essential products and the diversity of our portfolio also supports durability of demand and help us navigate challenges that may affect sectors of our portfolio at any given time.”

—Brent Shafer, Chairman/Interim CEO

The FDA said the impacted solution sets could injure patients undergoing infusion and identified the recalled items by product code and expiration date. No patients were injured by the mis-assembled solution sets, the FDA noted.

Interestingly, Baxter’s revolving door of recalls did not affect last year’s financial performance (no impacts that executives were willing to admit, anyway). Helene made more of a mark on 2024’s sales haul, impacting the company’s fourth-quarter revenue by approximately $110 million and full-year growth by more than 100 basis points.

Baxter’s adjusted gross margins fell by 10 basis points in Q4 compared with the same period in 2023, courtesy of Helene and increased manufacturing costs.

For the full year, Baxter generated $819 million in operating cash flow from continuing operations and $373 million in free cash flow. Gross margin fell 4% to $3.98 billion but overall proceeds climbed 2.6% to $10.63 billion.

“…we are very pleased with…how we ended the year,” executives said on Q4/full-year 2024 earnings call earlier this year. “Our results came in ahead of our prior guidance on both the top and bottom lines, driven by better-than-expected sales and solid operational performance.”

A solid performance from a more streamlined organization. Baxter shed its Vantive kidney care business last summer, selling it to the Carlyle Group for $3.8 billion. The company netted an estimated $3 billion in cash (after taxes) from the sale, which closed earlier this year. The money is being used to pay down the debts Baxter incurred with the $12.2 billion purchase of Hill-Rom in 2021.

Vantive’s sale culminates more than a year of in-depth discussions and contemplations about its future. Baxter first announced spinoff plans for its renal care and acute therapy units in January 2023 and then began separation discussions with private equity firms last spring.

Vantive offers products and services for peritoneal dialysis, hemodialysis, and organ support therapies, including continuous renal replacement therapy. The business employs more than 23,000 workers globally and generated $4.5 billion in 2023 revenue.

“…the recently completed sale of our Kidney Care business concludes a range of transformative actions announced in early 2023,” Shafer said in reviewing Baxter’s 2024 finances earlier this year. “Today, as a streamlined, agile Baxter, we have new opportunities to redefine healthcare delivery and drive profitable growth.”

Those new opportunities—by means of new products—helped drive profitable growth last year. Baxter gained regulatory approval of large volume infusion pump safety software and an expanded indication for its lipid injectable emulsion, Clinolipid. The company also launched its next-generation airway clearance system as well as nearly a dozen new injectables.

The FDA’s April 2024 clearance of Baxter’s Novum IQ large-volume infusion pump (LVP) with Dose IQ safety software adds LVP modality to the Novum IQ platform, which includes the company’s syringe infusion pump (SYR) with Dose IQ Safety software, powered by the IQ Enterprise Connectivity Suite. The bolstered modality integrates the user experience across Baxter’s LVP and SYR pumps and helps reduce the burden of non-critical tasks for clinicians.

Six weeks after scoring the Novum IQ software clearance, Baxter won approval of an expanded indication for Clinolipid use in pediatric patients, including preterm and term neonatal infants. Clinolipid is a proprietary mixed oil lipid emulsion used to provide calories and essential fatty acids in parenteral (intravenous) nutrition when oral or enteral nutrition is not possible, insufficient, or contraindicated. The product has been available for U.S. adults since 2019.

The Novum LVP and Clinolipid regulatory authorizations helped solidify Baxter’s long-term growth potential in its Medical Products & Therapies segment. Full-year revenue in the segment rose 4% last year to $5.2 billion, driven by solid gains in its two reporting divisions. Infusion Therapies & Technologies proceeds climbed 4% to $4.1 billion, while Advanced Surgery sales expanded 5% to $1.1 billion due to solid growth in hemostats and sealants, as well as increased sales volume.

Baxter’s Pharmaceuticals segment leveraged the 10 injectable product launches last year to grow sales 7% to $2.41 billion. Injectables and Anesthesia’s 2% rise in net revenue (to $1.37 billion) was partially offset by decreased demand for inhaled anesthetics. Drug Compounding sales, on the other hand, ballooned 15% to $1.03 billion as a result of higher demand for the company’s international pharmacy compounding offerings, due in part, to customer capacity constraints that prompted increased outsourcing of compounding activities.

“Our momentum is demonstrated in our positive company-wide financial performance for continuing operations,” Shafer boasted to stockholders in a letter earlier this year. “Our sustained emphasis on medically essential products and the diversity of our portfolio also supports durability of demand and helps us navigate challenges that may affect sectors of our portfolio at any given time.”

Portfolio diversity didn’t help Baxter’s Healthcare Systems & Technologies segment much last year, even with a new product launch. Segment sales fell 2% to $2.95 billion, weighed down by a 6% slide in Front Line Care proceeds that offset a 1% increase in Care & Connectivity Solutions. The $14 million boost in the latter division was driven by increased order volume associated with U.S. capital spending, while Front Line Care was impacted by lower demand in the primary care market, fewer government orders, certain product exits, select supply constraints, and a backlog reduction in the prior year period that bolstered 2023 sales.

The Front Line Care division’s growth prospects may improve with the U.S. availability of the next-generation Vest Advanced Pulmonary Experience System. Debuting in late September, the Vest supports daily therapy for adults and children with certain chronic lung conditions and retained secretions. The upgraded system incorporates several new design features, including an expanded selection of colors, playful options for kids, a wicking fabric to keep patients cool, a Velcro brand closure for optimal fit, and user-friendly, intuitive navigation on a touch screen that enables patients and caregivers to start therapy with one button push. Moreover, the control unit is 19% smaller and 30% lighter than the previous version and comes with a carrying case.

$14.81 Billion
Prior Fiscal: $14.50 Billion
Percentage Change: +2.11%
R&D Expenditure: $667M
Best FY23 Quarter: Q4 $3.88B
Latest Quarter: Q1 $3.59B
No. of Employees: 60,000

In professional sports, they’re known as rebuilding years.

Most, if not all, teams have experienced this phenomenon, suddenly thrust at one point or another into a bumbling surreal-like limbo triggered by key personnel changes or an exceptionally bad (translation: losing) season.

“The pain is excruciating, bringing the strongest men in the sport to their knees, wondering just how long it will last,” USA Today baseball insider/columnist Bob Nightengale wrote in a May 2023 article. “It is cruel. It is heartless. It is insensitive. It’s ‘The Rebuild.’”

Yes, the dreaded Rebuild. Awkward and unpleasant, but survivable. Definitely survivable and perhaps even beneficial: Think the 1992 New York Yankees, the 1993 New England Patriots, or the 1998 Indianapolis Colts. More evidence: the 2005 Los Angeles Lakers, the mid-2010s Denver Nuggets, the 2016 (and 2024?) New York Yankees, the 2017 Los Angeles Rams, and the 2019 Baltimore Orioles.

Maybe not so dreaded after all.

Rebuilds also are common in business. Ford Motor Co., Federal Express, Apple, and Netflix all endured—and benefited from—overhauls early in their existence. Ford was born amid a rebuild of the Detroit Automobile Co., whose pricey, low-quality vehicles never caught on with consumers. FedEx, on the other hand, abandoned its electronic delivery service (Zapmail) in 1986 and refocused its energies on its core delivery business. Steve Jobs, of course, rescued Apple from bankruptcy during his second stint as CEO, and Netflix recognized the irrationality of DVD mailings during the Internet’s early days, switching to its more lucrative streaming service business model in 2007 (the company also wisely began offering original content with 2013’s “House of Cards” debut).

Baxter International gained membership to the Rebuild guild last year with the decision to spin out its Kidney Care and Acute Therapies units and sell its BioPharma Solutions business amid a broader corporate reorganization.

“We are confident that the strategic actions…will help ensure that each of these entities…are on the best possible trajectory moving forward,” Baxter Chairman, President, and CEO José (Joe) E. Almeida said upon announcing the reorganization plans last January. “Realizing the full impact of these decisions will take time, but we believe they are essential to enhance our focus, fuel our innovative spirit, and, most crucially, deliver optimal results for the patients, clinicians, shareholders, and other stakeholder communities that depend on us.”

With an original due date falling in the first half of 2024, Baxter worked diligently last year to equip its impending offspring with the necessary tools for independent living: In May 2023, the company tapped former Varian CEO Chris Toth to lead the spinoff (with former NuVasive Inc. CFO Matt Harbaugh as finance chief), and in July, revealed its new name—Vantive. Toth said the moniker reflects employees’ commitment to patients and the company’s passion for “helping them [patients] lead full and meaningful lives…”

Vantive’s date of birth has been pushed back to sometime in July this year, though its delivery could be different than originally anticipated. Baxter said in a U.S. Securities and Exchange Commission filing this past spring that it would consider selling its Kidney Care unit rather than spinning it off. “…Baxter disclosed that it has been in recent discussions with select private equity investors to explore a potential sale of the Kidney Care asset in lieu of the proposed spinoff of that business,” the March 4, 2024, filing stated. “No final decision on the separation structure has been made and Baxter continues to make progress on the previously announced proposed spinoff of the Kidney Care business. Regardless of the separation structure ultimately selected, Baxter has expressed its commitment to separating the Kidney Care business in the second half of 2024.”

Regardless of its birthing method, Vantive’s international portfolio will consist of products for the hospital, clinic, and home, including dialysis machines, supplies and services, organ support hardware for intensive care units and self-performed peritoneal dialysis. Its offerings also will complement digital platforms for inpatient and remote monitoring.

Vantive’s eventual independence, coupled with the divestment of Baxter’s BioPharma Solutions business, will sire a considerably slimmer corporate parent. Still headed by Almeida, the post-Vantive Baxter will consist of three reporting segments: Medical Products and Therapies, Healthcare Systems and Technologies, and Pharmaceuticals—whose combined product catalog generated more than $10 billion in 2023.

Along with a more svelte organizational structure, Baxter’s Vantive-free persona also will be less bloated by debt. The company used the $4.25 billion it received from the BioPharma Solutions business sale last May (to Advent International and Warburg Pincus) to reduce its debt load, which surged following its $10.5 billion acquisition of Hillrom in December 2021.

Under its new owners, Baxter’s BioPharma Solutions division now operates as an independent contract development and manufacturing organization, with facilities and approximately 1,700 workers in Indiana and Germany. Almeida labeled the divestment “an important step in Baxter’s ongoing transformation journey” as it strives to achieve its strategic goals.

An equally important step in that journey arguably was the enlistment of new recruits to Baxter’s executive team. The company bid farewell to Boston Scientific Corp. Chairman, President, and CEO Michael F. Mahoney, an eight-year veteran of Baxter’s Board of Directors, and added Boeing bigwig William A. Ampofo II and former Quest Diagnostics Chairman, President, and CEO Stephen H. Rusckowski to the governing body over the summer.

Ampofo has worked for the Boeing Company since 2016, and currently leads the Parts & Distribution Services business and the Global Services Supply Chain function for Boeing Global Services. Before joining Boeing, Ampofo spent 22 years at United Technologies Corporation. He was assigned to Baxter’s Quality, Compliance and Technology Committee.

Before leading Quest Diagnostics, Rusckowski was CEO of Philips Healthcare, and earlier in his career worked for Hewlett-Packard and Procter & Gamble Company. He is a director of Tenet Healthcare Corporation and Qiagen Inc., and previous board member of Xerox Holdings Corporation, Covidien, and MedQuist Inc. Rusckowski serves on Baxter’s Compensation and Human Capital, and Quality, Compliance and Technology committees.

The board’s summertime switches was followed by a change to Baxter’s finance chief last fall. Twenty-five-year Sysco veteran Joel Grade replaced Jay Saccaro as chief financial officer, relieving interim CFO Brian Stevens (senior vice president, chief accounting officer and controller) of his additional duties.

FROM THE TOP: “We are at a major inflection point in Baxter’s ongoing transformation journey. The healthcare landscape has never been more dynamic. Our learnings over the past year and beyond require a fundamental rethinking of our profile and operating model. These decisive actions are necessary to help deliver future performance and innovation at the levels we demand of ourselves in pursuit of our Mission to Save and Sustain Lives.”

—José Almeida, chairman, president, and CEO

“Joel is a seasoned global financial executive with decades of deep operational and broad business experience as well as a proven record of results-driven impact,” Almeida said of Grade’s appointment. “I am confident we will benefit from Joel’s leadership as we continue to advance the transformational actions announced earlier this year to help fuel enhanced growth, innovation, and value…”

Baxter closed in on those targets last year but fell a bit short of the finish line: Net sales climbed 2.1% to $14.81 billion but gross margin slipped 1.85% to $4.97 billion, according to 2023 annual report data.

Revenue rose in three of the company’s four business segments, with Pharmaceuticals posting the largest hike—6% (to $2.25 billion). Baxter attributed to increase to demand for U.S. injectable products, driven by the launches of Zosyn, Bendamustine, and Norepinephrine. Growth was somewhat inhibited by lower sales of inhaled anesthesia products.

The Medical Products and Therapies segment scored the second-highest FY23 sales increase—4% to $5 billion—thanks to gains in both of its reporting divisions. Infusion Therapies and Technologies proceeds swelled 4% to $3.96 billion based on solid demand for infusion systems, administration sets, IV solutions, and international nutrition compounding. The year’s gains, however, were muted by weaker parenteral nutrition product sales in the United States.

Advanced Surgery leveraged the continued recovery in surgical procedures to grow sales 5% last year (to $1.05 billion). Revenue was negatively impacted by foreign currency exchange rates, temporary supply constraints, and the exit of a product distribution agreement, according to Baxter.

The Advanced Surgery division bolstered its offerings (and profit potential) last summer with the U.S. launch of its ready-to-use PERCLOT absorbable hemostatic powder. Designed for patients with intact coagulation, Baxter developed PERCLOT to stop mild bleeding. The powder is made from absorbable polysaccharide granules that quickly absorb water and generate a gelled adhesive matrix that acts as a mechanical barrier against future bleeding. The barrier causes platelets, red blood cells, and coagulation proteins (thrombin and fibrinogen) to accumulate, forming a clot. Once the clot is formed, the PERCLOT granules are broken down and absorbed by the body.

Baxter’s Healthcare Systems and Technologies segment emulated its better-performing sibling with new product releases and revenue gains in both reporting divisions. In late June (2023), the company launched its new Hillrom Progressa+ ICU bed in the United States. Designed to ease patient care, the bed is equipped with several features that address pulmonary and mobility challenges:

• • In-bed percussion, vibration, and continual lateral rotation therapies aspire to help reduce pulmonary complications associated with immobility. Also, the Progressa+’s frame provides easier access to the bed’s head for intubation and other procedures.

• • Enhanced support surfaces help to better protect skin and facilitate wound healing. Plus, the bed’s new top cover is easier to clean.

• • Used with an integrated lift system, Progressa+ helps caregivers support patient mobility protocols while minimizing clinician injury risk. One-button FullChair with sit-to-stand Chair Egress helps clinicians safely and easily move patients.

“We asked ICU care teams how we could make their jobs easier, and then designed the next generation of our ICU bed with features that help address challenges, such as reducing strain on nursing resources, lessening risk of pressure injuries, and simplifying patient positioning,” Julie Bower, president of Baxter’s Patient Support Systems, Global Surgical Solutions and Care Communications businesses, noted upon the bed’s launch.

Four months after debuting Progressa+, Baxter introduced digital capture capability for eye exams through its Welch Allyn PanOptic Plus Ophthalmoscope (another pickup from the Hillrom deal).

The PanOptic Plus Ophthalmoscope with iExaminer Pro System adds a smart device connection for capturing images and enables clinicians to move quickly from optical exam to adding digital image capture. When used with the iExaminer Pro app, clinicians can securely save and share eye images for tracking and trending, and conduct more informed consultations with specialists. The iExaminer Pro System has been in use with Baxter’s Welch Allyn Macro View Plus Otoscope since 2021.

The PanOptic Plus Ophthalmoscope enhances the product offering of the Healthcare Systems and Technologies segment’s Front Line Care division, which grew sales 6% last year ($1.21 billion) due to increased demand for cardiology devices, patient monitoring systems, and physical assessment tools. Care and Connectivity Solutions revenue improved as well, rising 1% ($9 million) to end fiscal 2023 at $1.8 billion.

Both divisional gains beget a modest profit for the Healthcare Systems and Technologies segment—FY23 proceeds climbed 3% to $3 billion.

Baxter’s least profitable segment last year was Kidney Care, where sales remained flat at $4.45 billion (improving only $4 million compared to FY22) despite a 5% gain in Acute Therapies revenue amid strong demand for the company’s CRRT (continuous renal replacement therapy). Chronic Therapies proceeds slipped 1%—$31 million—to $3.68 billion due to lower China sales and the end of U.S. distribution agreements, according to the 2023 annual report.

Baxter’s recall troubles probably didn’t help Kidney Care’s finances any (or the company’s for that matter), though such a deduction is difficult without official confirmation in the annual report.

The company issued three urgent medical device “corrections,” with the first occurring in March for the Life2000 Ventilator System, manufactured by Hillrom. Baxter issued the notice over possible oxygen desaturation, warning that users could experience low blood oxygen levels under certain conditions when the device is connected to a third-party concentrator. No deaths related to the issue were reported.

The second “correction”—later deemed Class I by the FDA (the most serious)—involved some Spectrum V8 and Spectrum IQ infusion pumps in the United States. Baxter issued the correction in July 2023 over false upstream occlusion alarms, noting the alarms could be activated in the absence of an upstream occlusion. Such an occurrence could interrupt or delay therapy, the company warned.

Baxter received 131 complaints about the false alarms after upgrading the pumps’ software versions v8.01.01 and v9.02.01. The company promised to revert the software to its previous version on all affected pumps and recalled 22,769 of the devices. It received three reports of serious injuries potentially associated with the false alarm issue but no deaths.

Baxter’s second Class I recall occurred in late November last year, about a month after it initially warned customers about potentially incomplete infusions with its Novum IQ syringe infusion pump.

Specifically, the pump could display an “Infusion Complete” alarm despite the presence of fluid in the syringe. Baxter developed a software fix for the problem and reported no injuries associated with the malfunctioning alarm.

“In summary, 2023 was a year of rebuilding and renewing our momentum,” Almeida told analysts on an earnings call earlier this year. “We made significant progress on an ambitious slate of strategic initiatives coupled with a solid financial performance, while never losing focus on our foundational commitments to our customers and patients. Additionally, we have created a new potential to embrace more exciting opportunities to come.”

$15.11 Billion
Prior Fiscal: $12.78 Billion
Percentage Change: +18.23%
R&D Expenditure: $605M
Best FY22 Quarter: Q4 $3.88B
Latest Quarter: Q1 $3.64B
No. of Employees: 60,000

Call it the Year of the Recall.

Product withdrawals in the medtech industry jumped 8.8% to 911 in 2022, up from 837 the previous year, according to a report by Sedgwick, a global provider of technology-enabled risk, benefits, and integrated business solutions. And while the number of impacted devices sank 27.2% to 438.7 million, the data show total Class 1 recalls hit a 15-year high, spiking 49% to 70 from a five-year annual average of 47.

Mislabeling was the main recall culprit in three of the five most recent quarters through the end of 2022, including Q4. Quality was another perpetrator, as was software, the top recall offender in Q3 and the root cause of 46 market callbacks between Q4 2021 and the end of last year, the report concluded. Software comprised 21% of Q4 2022 recalls, or 15 actions.

A quarter of all Class 1 recalls last year (18) occurred in the final three months. Among the cited products was Philips Respironics’ BiPAP and CPAP machine masks (hardly surprising), Insulet’s Omnipod DASH Insulin Management System Personal Diabetes Manager, Teleflex and Arrow International’s Arrow MAC Two-Lumen Central Venous Access Kits and the Pressure Injectable Arrowg+ard Blue Plus Three Lumen Central Venous Catheter Kits, and Baxter Hillrom’s WatchCare Incontinence Management System.

The latter product was the fifth to be pulled from the market by Baxter International last year—an unusually high total given the multinational firm had accrued only two such actions in the previous five years, U.S. Food and Drug Administration (FDA) records indicate.

News of Baxter’s recall raft garnered little attention in light of Philips Respironics’ very public, very problematic, very persistent struggle to remove millions of flawed ventilators and sleep apnea devices from circulation. Yet the relative obscurity of Baxter’s recalls last year was also by design: There was no mention of them anywhere in the company’s 2022 annual report, nor were they addressed by top management (take note, Roy Jakobs, Philips N.V. CEO and board chairman).

ANALYST INSIGHTS: After a rough 2022, CEO Joe Almeida rapidly began making changes in 2023 including spinning off their $5 billion kidney business unit, selling their biopharma processing business, and re-organizing the remainder of the company into three distinct business segments with their own leaders. These three new groups are (1) Medical Products and Therapies; (2) Pharmaceuticals; and (3) Healthcare Systems and Technologies. Once these new business units get traction, expect Almeida to become acquisitive once again to enhance their growth within these units or to add a new one. Joe is not known for “standing still” for too long.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Instead, executives focused on the macroeconomic forces (inflation, geopolitical events) and supply chain pressures that shaped Baxter’s 2022 earnings and beget both a cost reduction program and an operating model redesign (scheduled for 2023). “…as we reflect back,” former CFO James Saccaro said during an earnings call in early 2023, “it was a highly volatile and dramatic environment that we were faced with and that we were operating through over the course of the year.”

Product recalls undoubtedly contributed to that volatility and drama. All of Baxter’s Class 1 recalls occurred within a seven-month span; the first—in mid-March—pulled from the market the company’s Spectrum V8 and Spectrum IQ infusion pumps, which are used to deliver IV medications, blood nutrients, and other fluids to patients.

Baxter first disclosed problems with the pumps two days before the new year (2022), warning of their potential failure to alert clinicians to a blockage between the IV bag and pump (upstream occlusion). Potential patient harm depended on several factors including therapy delay length, medication, infusion volume/rate, and underlying status and co-morbidities, Baxter noted in its Urgent Safety Communication.

The FDA’s Class 1 recall designation was most likely prompted by the 51 serious injury reports and three patient death reports Baxter received over the previous five years. The recall affected 277,450 pumps sold between Feb. 5, 2015, and early 2022, according to the FDA.

Despite the potential for “serious adverse events,” the pumps can continue to be used provided all on-screen and safety manual instructions are followed. The company is neither replacing the pumps nor accepting their return.

Three months after the Spectrum pump callback, Baxter gained Class 1 status for its recall of the Volara lung therapy system. Initiated on April 26, 2022, the recall affected 268 devices distributed in the United States between May 28, 2020, and April 19, 2022.

Baxter recalled the Volara devices upon discovering they could prevent home-use patients from receiving adequate oxygen from the ventilators. The problem was linked to one complaint, one injury, and two deaths.

The affected products were brought to market by Hillrom, which Baxter acquired for $10.5 billion in 2021 to expand its digital health and connected care offerings.

Although the Volara devices could still be used as prescribed, Baxter advised caregivers and/or patients to monitor for signs of respiratory distress during therapy when used with a ventilator. To ensure correct usage, Baxter’s Hillrom updated the device’s instruction manual and arranged home visits with a clinical patient trainer to provide more training to customers.

Baxter’s recall woes intensified last summer with bookended market actions in June and August. The former targeted the firm’s Abacus Order Entry and Calculation software, which is used for compounding liquid medications. Baxter recalled three versions of the software over labeling mistakes, and promised to resolve the issue with an upgrade that would no longer allow users to modify label templates. The product withdrawal affected 1,114 customers.

The August recall impacted 511,728 Clearlink Basic Solution Sets with Duovent distributed between Oct. 14, 2020, and June 30, 2022. Increased customer reports about leaks prompted the field action, and the FDA warned in its Class 1 designation notice that leakage from the Clearlink sets could expose medical staff, patients, and others to potentially dangerous medications that can be poisonous or irritating. The Clearlink with Duovent system is mostly used to deliver hazardous drugs like chemotherapy to patients.

Baxter’s final Class 1 recall occurred in September 2022 with the market removal of its WatchCare Incontinence Management System (IMS) following reports the product’s radiofrequency (RF) emissions could interfere with other medical devices. The recall affected 8,550 Centrella, Progressa, and VersaCare hospital beds and disposable incontinence pads distributed from Aug. 1, 2018, to Sept. 1, 2022, according to the FDA notice.

Designed to discreetly alert caregivers to incontinence events, the WatchCare system is mainly used in critical care and medical/surgical settings.

Baxter based the WatchCare recall on 96 complaints, though no injuries or deaths were reported. The system reputedly could have caused erroneous readings or malfunctions with such critical medical equipment as infusion and insulin pumps, blood glucose sensors, fetal monitors/dopplers, telemetry devices, and bladder scanners, the FDA noted.

Baxter sought to locate and remove the WatchCare system where possible from clinical care areas.

‘Not Satisfied With Results’

Though Baxter’s finances held up relatively well in light of its recall troubles, company bigwigs expressed their disappointment with the firm’s fiscal 2022 performance.

“…top line growth was offset by weighing of macroeconomic and supply chain factors that has continued to put pressure on the cost of doing business,” Baxter Chairman, President, and CEO Jose E. Almeida said during a Q123 earnings call in February. “And as I have stressed many times, we will never pursue reduced costs in ways that could compromise our fundamental mission to save and sustain lives. But even factoring in these headwinds, we did not perform at the level we expected and demand of ourselves.”

Almeida’s disappointment seemed justified, considering the scarcity of year-over-year gains. Although total sales spiked 18.2% to $15.1 billion and gross margin rose 5.7% to $5.39 billion, Baxter lost $1.94 billion in operating income and $2.42 billion in net income last year.

Adjusted earnings slipped 3% to $3.50 per diluted share, and operating cash flow from continuing operations amounted to $1.2 billion. The Front Line Care, Patient Support Systems, and Global Surgical Solutions businesses acquired in the Hillrom deal contributed $2.9 billion to Baxter’s FY22 sales on a reported basis but were flat on a pro-forma basis after adjusting for foreign exchange.

“We’re not satisfied with our results and as such, we’re taking a number of actions to improve our performance,” Saccaro said during the Q123 earnings call. “Some of these initiatives are already underway and will be further enhanced with the cost reduction program that we are in the process of finalizing, in parallel with our operating model redesign. These actions are necessary and are expected to accelerate future performance.

We were disappointed with our performance in 2022, clearly.”

Clearly, the disappointment was rooted in the losses suffered within most product categories. Acute Therapies sustained the largest deficit—revenue fell 10% from 2021 to $701 million due to lower COVID-19-related demand for continuous renal replacement therapy systems and a 4% negative impact from foreign exchange.

Pharmaceuticals experienced the second-largest loss, surrendering 7% of its previous year’s sales to negative foreign exchange rate impacts, increased competition, and supply constraints for certain molecules. Those forces, however, were partially offset by higher international sales for inhaled anesthesia products. Pharmaceuticals proceeds totaled $2.12 billion.

BioPharma Solutions and Renal Care revenue each slid 4% to $644 million and $3.75 billion, respectively. Each were negatively impacted by foreign exchange, though BioPharma Solutions also fell victim to lower sales of manufacturing services and supply packaging for COVID-19 vaccines.

Renal Care, on the other hand, encountered lower in-center hemodialysis sales, but that decrease partially was offset by global peritoneal dialysis patient growth and $28 million of incremental revenue from a customer that failed to meet its contractual minimum purchase requirements.

Clinical Nutrition proceeds declined 3% to $931 million due to negative foreign exchange rates and lower vitamin sales, but the losses were tempered by U.S. growth in parenteral nutrition (PN) therapies and related products, including PN multi-chamber bags.

Medication Delivery sales were flat at $2.88 billion. Improved demand for IV administration sets and solutions were offset by lower infusion pump sales, negative foreign exchange rates, and sales headwinds in China driven by COVID-19 lockdowns. Revenue in this category also was thwarted last year by supply chain constraints for semiconductor components and other parts used to produce Baxter’s infusion pumps, as well as the ongoing FDA review for the company’s infusion pump distribution platform.

Advanced Surgery was the only product category to grow sales in 2022, thanks to the continued recovery in surgical procedures (particularly in Europe, the Middle East, and Africa), and competitors’ supply chain snafus. Revenue climbed 2% to $998 million.

Net sales for the Patient Support Systems, Front Line Care, and Surgical Solutions product categories were impacted by ongoing supply chain constraints—particularly those related to components used in Front Line Care offerings—as well as hospital budget constraints and delays in product installations. Patient Support Systems sales totaled $1.48 billion, while Front line Care revenue constituted $1.14 billion, and Surgical Solutions proceeds came to $304 million.

Despite disappointing sales, demand for Baxter’s products remained solid in 2022, Almeida said. Such a bullish market will be essential as the company redesigns its operating model to ensure future growth. “We think innovation’s a path forward [for] Baxter,” Almeida noted.

Baxter improved that path last year with several new product clearances and introductions, including the April FDA 510(k) clearance of its ST Set in continuous renal replacement therapy (CRRT). The ST Set is a pre-connected, disposable, extracorporeal circuit that purifies blood through a semipermeable membrane and is designed for use with the PrisMax or Prismaflex control units. The platform received FDA emergency use authorization in August 2020 to provide CRRT in acute care environments during the pandemic.

Baxter also received FDA 510(k) clearance last summer for its new Novum IQ syringe infusion pump with Dose IQ Safety software. Used together with compatible administration sets, syringes, and medications, the Novum IQ syringe pump delivers small amounts of fluid at low rates, and can deliver infusion via IV, arterial, enteral, or subcutaneous. It also can be fully integrated with hospital electronic medical records through Baxter’s IQ Enterprise Connectivity Suite.

The company ended 2022 on a positive note, giving clinicians a sneak peek at its ExactaMix Pro Automated Compounder, a product that builds on Baxter’s ExactaMix Compounding System. The latest ExactaMix iteration helps defend against cyber threats, as it is designed to communicate with file servers using validated digital security certificates. ExactaMix Pro also runs on a customized version of Linux that incorporates secure boot.

ExactaMix Pro also supports trend analysis with the ability to store up to 15 months of data—10 times that of ExactaMix. Other features include wireless capabilities to simplify device installation and file-sharing to reduce the need for Baxter onsite servicing and downtime.

$12.78 Billion
Prior Fiscal: $11.67 Billion
Percentage Change: +9.5%
R&D Expenditure: $534M
Best FY21 Quarter: Q4 $3.51B
Latest Quarter: Q1 $3.71B
No. of Employees: 60,000

Another year, another blockbuster medical device industry deal.

Baxter international proclaimed an agreement to acquire global medical technology leader—and previous top 30 member—Hillrom for about $12.4 billion last September.

“Baxter and Hillrom share a common vision for transforming healthcare to better serve all patients and providers,” Baxter chairman, president, and CEO Joe Almeida told the press. “Patients increasingly want to receive their care at home or nearby, while hospitals and other care providers are increasingly using digital health technologies to expand access, improve quality and lower costs. Baxter and Hillrom are uniting to meet the challenges of a rapidly evolving global healthcare landscape, while also creating significant value for all the stakeholders we serve.”

The Baxter-Hillrom combo creates a product offering that can support patients in hospitals, at home, and alternate care sites. Their combined therapeutic delivery, monitoring, blood purification, diagnostics, and communications capabilities stand to boost connected care opportunities to improve outcomes, workflow efficiencies, and data-driven insights—all while lowering the overall cost of healthcare.

Baxter will use its combined expertise in connectivity technology and integration, digital health solutions, data visualization and analytics, therapy development, and monitoring and sensing for a connected system that surrounds the patient and care team.

The deal was completed just 12 days before Christmas last year, creating a global medtech leader worth about $15 billion.

“We are invigorated by the potential to create value for patients and customers in new ways as a combined company,” said Almeida, “and we are energized by the power we bring together as one team united in our Mission to Save and Sustain Lives. We are very excited to welcome our Hillrom colleagues to Baxter.”

The deal created three new Baxter businesses: Patient Support Systems (connected care solutions: devices, software, communications, and integration technologies), Front Line Care (integrated patient monitoring and diagnostic technologies for respiratory therapy, cardiology, vision screening, and physical assessment), and Surgical Solutions (surgical video technologies, tables, lights, pendants, precision positioning devices, and other accessories). Integrating Hillrom aided the firm’s 10% revenue growth in 2021 and landed Baxter with $12.78 billion in sales for the year. U.S. sales captured $5.18 billion—rising 6% over the year prior—and international proceeds rose 12% with $7.6 billion.

The company’s Renal Care business posted $3.9 billion in sales last year, rising 4% over the prior year. This was mainly driven by positive foreign exchange rates and global peritoneal dialysis patient growth, according to Baxter’s annual report.

The next-gen Artificial Kidney 98 (AK 98) dialysis machine earned U.S. Food and Drug Administration (FDA) clearance last March. The latest version has encrypted, two-way connectivity so prescriptions can be pulled directly from an electronic medical record. Automatic alert resolution self-clears already corrected pressure alarms and helps avoid treatment stoppage due to brief pressure fluctuations related to patient movement. AK 98’s stable base design permits easy concentrate or portable reverse osmosis storage and transport as well.

Last June saw the release of the Sharesource Analytics 1.0 premium module, a digital health tool for home-based peritoneal dialysis (PD). The clinical management resource provides a dashboard with simplified trend data from home dialysis treatments to identify slow-building issues over 180 days of therapy. It also gives evidence-based guidance to resolve potential complications home patients may experience. The data offers clarity for patient adherence, catheter function, and therapy fatigue.

Medication Delivery revenue increased 4% in 2021, garnering $2.9 billion. The growth was due to favorable comparison over the COVID-stifled 2020 results, which came because of lower infusion system and related IV administration set demands. The business was also impacted by two Urgent Medical Device Corrections.

The first went out last June with an update in August and concerned Spectrum IQ infusion pumps. Two customers had informed Baxter of system errors happening in multiple pumps in their fleets after they had implemented changes to their network and server configurations. Performance anomalies caused multiple pump connectivity errors and placed stress on the pump’s processor, initiating a “watchdog” system error alarm and causing the pump to enter a fail-safe mode stopping all processes.

The customers’ issues were resolved by restoring network and server system performance to expected levels. To date, there had been no reports of adverse events or injuries. In response, Baxter developed a software upgrade for all Spectrum IQ pumps to assist how the pump responds to unstable network and server systems by reducing stress on pump memory and processing functions. The updated software became available in Q4 2021.

The second notice came last August with an update a month later concerning the Dose IQ Safety Software desktop application. The defect created a mismatch between linked drug identifiers in the Dose IQ interface and binary drug library loaded on the Spectrum IQ pump. Due to this, a linked drug ID may appear on the user interface but not the pump’s drug library. At the time, Baxter had received one report of a serious injury possibly associated with the issue. Baxter released a standalone validated software tool to identify linked drug IDs within each drug library related to the issue in Q4 2021.

Pharmaceuticals revenue climbed 9% last year to reach $2.3 billion. The growth came from Baxter’s buy of Caelyx and Doxil rights outside the U.S., which contributed $108 million in sales.

The company’s premix norepinephrine bitartrate in 5% dextrose injection, indicated to raise blood pressure in severe, acute hypotension patients, was released last September. Baxter’s formulation of norepinephrine has a shelf life of up to 21 months in a refrigerator, or up to 90 days at room temperature in overwrap and can be stored in automated dispensing cabinets at the point of care.

Clinical Nutrition proceeds rose 6% to $964 million, driven by U.S. PN therapy growth as well as positive foreign exchange rate changes. This was partially curtailed by lower vitamin sales internationally due to supply constraints.

Advanced Surgery sales climbed 10% to $977 million last year. The recovery of elective surgeries after the crux of COVID-19 mainly fueled this growth. The company’s February 2020 acquisition of Seprafilm also contributed $8 million in sales in Q1 2021.

Last July, the company also acquired assets related to the PerClot polysaccharaide hemostatic system from CryoLife for $68 million. The plant starch-based powder is used as an adjunctive hemostat to facilitate capillary, venous, or arteriolar vessel bleeding during multiple open and laparoscopic gynecologic, general, cardiovascular, and urology procedures. PerClot rapidly absorbs water from blood to create a gelled matrix that adheres to and forms a mechanical barrier with the bleeding tissue.

Acute Therapies raked in $782 million last year, rising 6%. Strong demand for continuous renal replacement therapy (CRRT) systems during COVID-19 were the main driver, as well as positive foreign exchange rates.

PrisMax 2 hit the market last May. The next-gen platform aims to simplify continuous renal replacement therapy (CRRT) and other organ therapy delivery. The system features new tools in the TruVue digital health portfolio and PrismaLung+ blood-gas exchanger to deliver extracorporeal carbon dioxide removal (ECCO2R) therapy to manage acute respiratory dysfunction. New advancements also improve critical information visibility and offer step-by-step onscreen instructions. Integrated safety features combine preventive measures to reduce clinical risk and human error with smart alarms to alert users.

The NEPHROCLEAR CCL14 test to predict persistent acute kidney injury (PS-AKI) gained CE mark approval in October with partner bioMérieux. Recently published studies have suggested CCL14 is the most predictive biomarker of PS-AKI compared with other AKI biomarkers like NGAL, CHI3L1, L-FABP, Cystatin C, Proenkephalin, and KIM-1. The test can help determine personalized treatment approaches including level of care and need for appropriate interventions.

BioPharma Solutions experienced the most meteoric rise last year, growing an impressive 38% to $669 million due to positive foreign exchange rates and, most notably, two new manufacturing partnerships with COVID-19 vaccine makers.

The business began a partnership last January for sterile manufacturing services in its Halle/Westfalen, Germany, facility for NVX-CoV2373, Novavax’s COVID-19 recombinant nanoparticle vaccine. The agreement expanded commercial-scale manufacturing to distribute the vaccine in the U.K. and Europe.

“The quest to develop vaccines for COVID-19 has reinforced the opportunity for industry partners to work together and contribute their unique capabilities and expertise for the benefit of all,” Marie Keeley, VP of BioPharma Solutions, told the press.

Last March, Baxter partnered with Moderna to provide fill/finish sterile manufacturing services and supply packaging in its Bloomington, Ind., facility for about 60-90 million doses of Moderna’s COVID-19 vaccine. The site has capabilities and expertise in parenteral delivery systems and clinical and commercial vaccine manufacturing, including preventive and seasonal vaccines.

The new Patient Support Systems, Front Line Care, Surgical Solutions businesses acquired from Hillrom earned $115 million, $70 million, and $27 million respectively, last year. Remaining revenue (categorized as “Other” in the firm’s annual report) collected $109 million, rising 4% over the prior year.

Last August Baxter extended its existing partnership with Amazon Web Services (AWS) to enable cloud technology solutions for the company’s ongoing digital transformation. The companies have been working for years to move Baxter’s physical data centers to the cloud, and the work is nearly complete. The benefits from this transformation are potentially increased speed to market for new tools and solutions; the ability to quickly expand technology solutions to new geographies; and significant cost savings.

“Baxter is using AWS’s broad and deep portfolio of cloud services to deliver new insights and digital health solutions for the millions of patients and caregivers that use their portfolio of medical products,” Greg Pearson, VP of worldwide commercial sales at AWS, told the press. “Baxter’s digital transformation is helping the company unlock the potential of healthcare data and develop a more personalized approach to care, using the unmatched reliability and proven security of one of the world’s leading cloud providers.”

$11.67 Billion
Prior Fiscal: $11.40 billion
Percentage Change: +3%
No. of Employees: 50,000

During a year as challenging as 2020, one might think a company wouldn’t choose that time to publish its first Sustainability Accounting Standards Board index, but that was exactly what Baxter did. According to the company, this is a voluntary public disclosure that provides transparent and relevant corporate responsibility information to investors and other key stakeholders. The report highlights items including ethical marketing, product safety, affordability and pricing, business ethics, and several other areas growing in importance to a rapidly increasing number of members of the public.

“As we strive to address the environmental, social, and governance issues that matter most to our stakeholders, transparency is key—and has been a cornerstone of our work for decades,” said José (Joe) E. Almeida, chairman and CEO of Baxter. “This includes demonstrating the connection between our corporate responsibility initiatives and our business priorities. We are proud of the increasing sophistication of our sustainability efforts and will continue to evolve and broaden our disclosures to best meet stakeholder interests and needs.”

Baxter also found itself, like so many other medical device manufacturers, putting forth significant effort to produce products at a rapid pace to supply healthcare workers with the critical solutions they needed in the fight against COVID-19. The company obtained several emergency use authorizations (EUA) from the U.S. Food and Drug Administration (FDA) for its products during the pandemic.

One such device was its Oxiris blood purification filter. As part of a COVID-19 treatment protocol, this technology is used with patients who had been admitted to the intensive care unit with confirmed or imminent respiratory failure in need of blood purification therapy to reduce pro-inflammatory cytokine levels, including use in continuous renal replacement therapy (CRRT). During the therapy, the patient’s blood passes through the Oxiris filter set, where it then removes cytokines, endotoxin, and fluid and uremic toxins simultaneously, before returning the patient’s blood to the body. Oxiris is the only filter set available in the U.S. that can be used to perform multiple blood purification therapies simultaneously, including CRRT and cytokine removal, according to Baxter.

The firm also obtained EUAs for its HF20 Set and ST Set used in CRRT. Under the EUA, the HF20 Set is authorized to deliver CRRT to treat patients of low weight (8 to 20 kg) and low blood volume who cannot tolerate a larger extracorporeal circuit volume in an acute care environment during the COVID-19 pandemic. The ST Set is authorized for use under its EUA to provide CRRT to treat patients in an acute care environment during the COVID-19 pandemic. Both the HF20 Set and ST Set can be used with the Prismaflex or PrisMax control units (monitors).

Baxter also received an EUA for Regiocit, the company’s replacement solution that contains citrate for regional citrate anticoagulation of the extracorporeal circuit. Under the EUA, Regiocit is authorized to be used as a replacement solution only in adult patients being treated with CRRT and for whom regional citrate anticoagulation is appropriate during the COVID-19 pandemic.

The organization also presented a number of new products to address other areas of healthcare during the 12-month period that would help ensure organic growth in future fiscal years. Such products included a range of solutions, from a bone graft to a surgical staple reinforcement product.

It announced FDA clearance of the Homechoice Claria automated peritoneal dialysis system with Sharesource connectivity platform. Homechoice Claria combines a simple user interface with the benefits of Sharesource—the only two-way remote patient management platform for patients on peritoneal dialysis in the U.S. The system is cleared for both adult and pediatric populations.

ANALYST INSIGHTS: Due to the market segments in which it participates, Baxter has had revenue challenges due to COVID. Baxter will most likely continue with a steady pace in 2021 with the likelihood for low organic growth and possibly some tuck-in M&A activity.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Approval was also granted for new formulations of Clinimix (amino acids in dextrose) Injections and Clinimix E (amino acids with electrolytes in dextrose and calcium) Injections. These formulations contain up to 80 g/L of amino acids, the highest protein in any multi-chamber bag available in the U.S. (according to Baxter), making it easier to reach patient protein targets while delivering less fluid and dextrose than provided by existing formulations.

A De Novo Authorization was issued for Theranova, Baxter’s novel dialysis membrane. Theranova was designed to deliver expanded hemodialysis therapy, which filters a wider range of molecules from the blood than traditional hemodialysis (HD) filters, like high-flux membranes, by targeting effective removal of conventional (500 Da to 25 kDa) and large middle molecules (25 kDa to 45 kDa). These middle molecules may be associated with inflammation and cardiovascular disease in patients with kidney failure.

The Altapore Shape Bioactive Bone Graft—designed to enhance bone growth and help achieve fusion, which can lead to reduced pain and other improved clinical outcomes for patients—gained FDA clearance during the fiscal year. A 2019 prospective, open-label, non-randomized clinical study evaluated 102 patients with degenerative disc disease, spondylolisthesis, and spinal stenosis undergoing instrumented posterolateral fusion (PLF) procedures per protocol using Altapore Bioactive Bone Graft. The study found that successful fusion was achieved in 86.3 percent of those patients at month 12.

Altapore Bioactive Bone Graft and Altapore Shape share similar properties and handling characteristics, and the study indirectly supported the FDA submission for Altapore Shape. At month 12, patients reported a 60 percent improvement in total pain from baseline using the Visual Analog Scale and a 48 percent improvement in disability from baseline using the Oswestry Disability Index.

The Evo IQ Syringe Infusion System obtained a CE mark and Australian Regulatory Approval during 2020, as well. The system can be used to deliver small volumes of medications and other fluids to patients in a controlled manner. The device joins the Evo IQ large volumetric pump as part of the Evo IQ Infusion Platform, a suite of smart pumps that helps enable clinicians to utilize the technology that helps meet a patient’s specific needs. With patient safety and clinician efficiency central to its design, the Evo IQ Syringe Infusion System is supported by Baxter’s web-based Dose IQ Safety Software and wireless IQ Enterprise Connectivity Suite to help reduce potentially harmful infusion programming errors.

Baxter also announced 510(k) clearance from the FDA for a new generation of its Peri-Strips Dry with Veritas Collagen Matrix product, known as PSDV with Secure Grip. Made available with “peel and secure” technology, PSDV is a staple line reinforcement material that bariatric surgeons have used to mitigate staple line complications for more than 15 years. This new generation of PSDV is two times faster to prepare compared to the previous version and another staple line reinforcement product.

In addition to its new product announcements, Baxter also coordinated with a number of other companies to deliver care and technologies to regions around the globe. These partnerships mark another revenue stream for the firm, although with many of them, the specific financial details were not disclosed.

One such arrangement found Baxter signing a distribution agreement with bioMérieux, a global provider of in-vitro diagnostics, for the NEPHROCLEARTM CCL14 diagnostic test. The test was developed for use in assessing the risk of persistent severe acute kidney injury. The agreement was part of another collaboration, announced during the previous fiscal period, between the two firms to improve identification and treatment of AKI.

Baxter teamed with Ayogo Health, a behavioral science-based digital health company, around unique digital health solutions for home dialysis. Ayogo combined LifePlan—its unique behavior-based digital platform—with Baxter’s expertise in renal care to build mobile apps and digital solutions that bring personalized, relevant, and timely support to patients with kidney failure. Baxter also made an equity investment in Ayogo in exchange for minority interest in the company.

Collaborating on the effort to commercialize VIPUN Medical’s gastric monitoring system to help enhance clinical nutrition, Baxter aligned with the Belgium-based firm. The VIPUN Gastric Monitoring System features a “smart” enteral feeding tube designed to measure stomach motility in order to help clinicians identify enteral feeding intolerance and make better informed nutrition therapy decisions in the intensive care unit and other settings. As part of the agreement, Baxter supported clinical studies required to achieve regulatory approval in key markets worldwide and gain global distribution rights.

Baxter and COSMED collaborated on an FDA 510(k) cleared indirect calorimetry device. The Q-NRG+ metabolic monitoring device can help inform prescription and administration of nutrition therapy, which may include parenteral nutrition, the intravenous administration of nutrients. Per the agreement with COSMED, Baxter has the rights to bring the Q-NRG+ to at least 18 markets around the globe, with the potential for further expansion.

Another partnership brought Baxter together with Spectral Medical for the distribution of MYXIN PMX-20R, a hemoperfusion filter, and the Endotoxin Activity Assay (EAA), an on-market companion diagnostic tool that aids in the risk assessment of ICU patients for progression to severe sepsis. Baxter agreed to pay Spectral a series of milestone payments including a $5 million upfront rights payment. As a result, Baxter was named Spectral’s exclusive distributor of the PMX filter in the U.S. and Canada and gained non-exclusive rights to distribute the EAA globally.

All of these actions will contribute to the continued growth of the firm in the near and distant future. The 2020 fiscal year saw another modest increase for Baxter, which rose from $11.36 billion in 2019 to $11.67 in the latest annual report. The result marked another year of steady growth since at least 2016.

Diving into the specific businesses of Baxter reveals little variation from the single digit changes the organization experience in its annual revenue. Unfortunately, not all units saw increases, however.

The Renal Care segment mirrored the company’s 3 percent gain, increasing from $3.64 billion to $3.76 billion. Medication Delivery went in reverse, shrinking 2 percent between 2019 and 2020 ($2.80 billion to $2.74 billion). Pharmaceuticals decreased only 1 percent, bringing it from $2.16 billion to $2.12 billion. Clinical Nutrition climbed six percent from $872 million to $922 million. Advanced Surgery bumped up 1 percent from $877 million to $888 million. The standout among all businesses was Acute Therapies, which gained 38 percent year over year. The segment went from $535 million to $740 million. The rise was attributed to the significant increase in global demand for Baxter’s CRRT systems to treat acute kidney injuries that emerged during the COVID-19 pandemic. Its Other unit, which includes contract manufacturing services, grew 5 percent ($485 million in 2019 to $508 million in 2020).

Prior Fiscal: $11.10 Billion
Percentage Change: +2%
No. of Employees: 50,000

One of the challenges of writing the MPO top company reports each year is the task of converting foreign currencies to U.S. dollars so revenues can be compared in an apples to apples manner. One must ensure to use the currency conversion rate of the report at the close of a company’s fiscal period to determine the figure as accurately as possible. While it’s easy to make an error in the calculations, we hope if a mistake is made, it will be caught in a later review before publication. Fortunately, these reports are not being used as the basis for stock investments or evaluations (at least not exclusively) and do not fall under the critical eye of an oversight body like the U.S. Securities and Exchange Commission (SEC).

Unfortunately for Baxter, their annual report and financial figures are under such scrutiny. As a result, when Baxter found errors in its reporting from years past tied to foreign currency exchanges, it notified the SEC and made arrangements to resolve the issue. The company brought in outside attorneys and consultants to aid with its internal investigation.

The inaccuracies were present in the reporting for years 2016 through the first half of 2019, totaling $276 million in gains. While the errors amounted to small figures when compared to Baxter’s annual revenue tally of more than $11 billion (in 2019), the initial news of the error was enough to frighten investors such that the stock plummeted 10 percent.

“Baxter takes this matter very seriously, and the board along with the company’s leadership team fully supports a comprehensive investigation,”  José (Joe) E. Almeida, chairman and CEO stated in prepared remarks that announced the company’s preliminary third quarter 2019 results. “The company is taking steps to strengthen and enhance its internal controls, and we look forward to sharing our full financial results as soon as possible.”

Past financial reporting difficulties aside, Baxter enjoyed modest growth in 2019. Posting $11.36 billion in 2019, the tally represented a 2 percent rise over prior the year, which finished at $11.1 billion. Domestically, the company’s revenue increase paralleled its overall gains for the year. The 2 percent growth translated into a $4.83 billion tally in the U.S. Internationally, where Baxter generates more sales, finished the fiscal year at $6.54 billion, which represented a 3 percent increase over 2018.

ANALYST INSIGHTS: Baxter will continue to “reinvent itself” under CEO Joe Almeida’s leadership in three areas: 1) cost cutting to increase profits to be used elsewhere; 2) organic growth initiatives; and 3) inorganic activity to drive both market opportunity and market share.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

The Baxter organization is home to seven business units of which it shares the financials in its annual report. Leading the pack by almost a billion dollars in sales is Renal Care, which finished the year at $3.64 billion. This was flat compared to the previous year for the segment that focuses on peritoneal dialysis, hemodialysis, and additional dialysis therapies and services.

Medication Delivery and Pharmaceuticals came in at $2.80 billion (5 percent rise versus 2018) and $2.16 billion (3 percent rise versus 2018) respectively in the ’19 fiscal. The Medication Delivery business includes sales of intravenous (IV) therapies, infusion pumps, administration sets, and drug reconstitution devices. The Pharmaceuticals unit is home to Baxter’s premixed and oncology drug platforms, inhaled anesthesia and critical care products, and pharmacy compounding services.

The remaining businesses, while important, achieve sales at much lower figures than the first three. Clinical Nutrition was flat against 2018 but has shrunk just slightly in real dollars, decreasing from $885 million in ’17 to $875 million in ’18 to $872 million in ’19. The segment reports on sales of parenteral nutrition therapies and related products.

On the other hand, Advanced Surgery has enjoyed substantial growth over the same time period. It noted $708 million in 2017 and has blossomed to $877 million in 2019, growing 10 percent in the most recent fiscal year. The offerings in this unit include biological products and medical devices used in surgical procedures for hemostasis, tissue sealing, and adhesion prevention.

Rounding out the seven divisions are Acute Therapies and Other. The former includes sales of continuous renal replacement therapies and other organ support therapies focused in the intensive care unit. The business saw an increase of 4 percent in 2019, putting the final sales figure at $535 million. Other, which primarily includes sales of contract manufacturing services from Baxter’s pharmaceutical partnering business, saw diminishing sales of $485 million, which was a 5 percent decrease over the prior year.

Perhaps seeking to spark growth for the years to come through a targeted M&A strategy, Baxter made a pair of noteworthy moves in 2019, both occurring in the second half of the year. Announced in September, the first was the purchase of Cheetah Medical, a provider of non-invasive hemodynamic monitoring technologies. Cheetah was viewed as a natural complement to Baxter given the acquirer’s breadth of infusion and IV systems, as well as its presence in critical care and IV therapy. The monitoring technologies of the firm provide dynamic measurements of fluid responsiveness. This information empowers clinicians to make better decisions in treating patients to ensure they are utilizing the proper amount of fluid required to maintain organ and tissue perfusion.

“The robust capabilities and innovative monitoring technologies we will gain with the acquisition of Cheetah Medical will be additional strategic growth drivers as we work to eliminate preventable harm and enable personalized therapy for hospitalized patients around the world,” said David Ferguson, general manager of Medication Delivery at Baxter. “We are enthusiastic about the opportunity to bring these products to more patients and clinicians and look forward to building upon Cheetah Medical’s expertise and technology to enhance our leadership in medication delivery and critical care.”

The industry was made aware of the second transaction in the final month of Baxter’s fiscal year. The deal with Sanofi for its Seprafilm Adhesion Barrier technology was accomplished to bolster Baxter’s Advanced Surgery portfolio. Valued at $350 million, the deal was completed in February 2020.

“Seprafilm will be a strong complement to our leading hemostat and sealant portfolio, helping us continue to advance the art of healing with optimized patient care in the operating room,” said Wil Boren, general manager of Baxter’s Advanced Surgery business. “While Seprafilm is clinically recognized among surgeons globally, we plan to provide commercial support for the product through our dedicated surgery salesforce and pursue opportunities for expansion in certain countries.”

At the time of the announcement, Seprafilm was commercially available worldwide, with sales in the U.S., Japan, China, South Korea, and France. Baxter expects the acquired products to represent approximately $100 million in sales in the 12 months following the close.

The corporate entity also sought additional means to spur growth, including partnerships with other organizations. One such arrangement, announced at the International Symposium on Intensive Care and Emergency Medicine, saw Baxter collaborate with bioMérieux, a global provider of in-vitro diagnostics for more than 55 years, in an attempt to develop future biomarkers for acute kidney injury.

Reaz Rasul, general manager of Baxter’s Acute Therapies business, explained, “By working with the team at bioMérieux, we’ll be able to combine their expertise in diagnostics with our experience in bringing the latest medical advancements to the ICU.”

Baxter also announced it was teaming with COSMED, designer of metabolic systems for clinical and human performance applications, on an indirect calorimetry (IC) device to support clinical nutrition. The resulting Q-NRG+, which obtained U.S. Food and Drug Administration (FDA) clearance in February 2020, leverages IC to accurately measure a patient’s calorie needs, or resting energy expenditure. This type of information helps prevent hospital malnutrition, which is traditionally calculated with estimations using predictive equations based on weight, height, age, and gender. This method is often found to be inaccurate.

Under terms of the agreement, Baxter has the rights to bring the device to at least 18 markets throughout the world, with the potential for further expansion. At the time of the FDA’s 510(k) clearance of the device, it was already available in 12 other countries within Europe, in addition to Canada, Australia, and New Zealand.

In an effort to link its Prismaflex system to hospitals’ electronic medical records, Baxter paired up with NantHealth, a connected care solutions provider. Prismaflex is used in the intensive care unit (ICU) to treat patients with acute kidney injury and certain blood and autoimmune conditions. Since ICU systems are often disconnected, NantHealth built a device driver to allow integration of its DeviceConX platform with the Prismaflex system. The resulting solution relieves nurses of having to manually document treatment data, thus reducing the risk of transcription errors. Baxter stated it was working with NantHealth on two additional solutions for medical devices designed for the ICU.

Baxter also realized the critical nature of achieving growth through more organic means; in June, Almeida stated he was anticipating launching more than 20 new products over the course of the next year.

“If they can introduce some new products, there may be a way to grow out of this malaise,” Morningstar analyst Julie Utterback said in a Chicago Business article, referring to the stall in revenue growth.

The firm has responded with a series of noteworthy product news announcements beyond the aforementioned results of strategic partnerships. (Some within the following list were announced prior to Almeida’s statement in June 2019.)

• U.S. clinical trial for on-demand peritoneal dialysis solution system
• Received FDA approval for faster preparation of its hemostatic product, Floseal Hemostatic Matrix
• Launched Sharesource 2.0 telehealth platform to support greater clinical insights and personalized peritoneal dialysis care
• Brought PrisMax, a platform for continuous renal replacement therapy, to the U.S. market to maximize care for critically ill patients

COVID-19 Consequences

Q1 2020 Revenue: $2.80 Billion
Q1 2019 Revenue: $2.64 Billion
Percentage Change: +6%

Every medical device company has been impacted by COVID-19. As frontline suppliers in the fight against the virus, these firms have not closed and instead, in many cases, actually increased production while maintaining measures to help enhance employee safety. Unfortunately, exposure can happen just about anywhere there are other people present and even the strictest efforts are only attempts at safeguards. Baxter learned this firsthand when it announced its CFO, James Saccaro, as well as a member of its board of directors (who had to be hospitalized) contracted the virus. The company stated Saccaro was going to continue working from home as he battled COVID-19.

The company has also been affected in terms of demand for products that can be used to battle the disease. In April, Baxter announced it was hiring 2,000 permanent and temporary workers, including 800 in the U.S., to aid with the fabrication of supplies in higher demand. Among the devices being sought were kidney dialysis machines and infusion pumps for critically ill patients.

The rise in sales of the company’s essential products was reflected in its Q1 2020 report, which showed revenue of $2.8 billion. This total reflected a 6 percent increase over the same time period from 2019. Joe Almeida, Baxter’s chairman, president, and CEO, attributed the increase to higher demand for its PrisMax and Prismaflex blood purification systems, as well as drug delivery and infusion technologies. In total, five of the company’s business units saw increased demand near the end of the company’s first quarter due to COVID-19, with estimates putting the sales dollar amount at approximately $45 million. The company expressed concern, however, for the second quarter due to the decline of elective surgeries. As a result, it was withholding any predictions on the time period or for the full year.

AT A GLANCE
$11.12 Billion
Prior Fiscal: $10.56 Billion
Percentage Change: +5.3%
No. of Employees: 50,000

Founded in 2006, the University of Southern California (USC) Center for Body Computing (BCB) was one of the county’s first academically-based digital health research and innovation centers. Over the last 13 years, the USC BCB has been working on the digital health frontier, honing expertise in implantable and wearable sensors, smartphone-enabled virtual care, big data, artificial intelligence (AI)/machine learning, and virtual reality to build patient-centric applications and services. For example, the USC BCB’s ambitious, ongoing “Virtual Care Clinic” connects patients with an AI-powered avatar of their real-life doctor via the “Doc On” app to answer patient and caregiver questions.

Last September, USC BCB began a collaboration with Baxter International to develop life-sustaining digital solutions. Though more specific information was scarce, the two will focus on open innovation around the continuum of care, establish further business collaborations as they go, and build software solutions. As a USC BCB member, Baxter joins a team of leading companies, non-profit organizations, and government agencies working to modernize healthcare.

A few days later, the Mayo Clinic and Baxter joined forces to build a renal care center of excellence at the Mayo Clinic Dialysis Center in Jacksonville, Fla. The dialysis clinic, the first launched initiative from the five-year agreement the two had made in 2017, will combine Baxter’s clinical service model and chronic kidney disease (CKD) management program with Mayo Clinic’s state-of-the-art dialysis services in a comfortable, home-like facility.

“The collaboration between Mayo Clinic and Baxter combines the best of our clinical, research and innovation expertise, and is rooted in the shared goal to improve the way we care for patients with serious and complex illnesses,” Gianrico Farrugia, M.D., CEO of Mayo Clinic in Florida and president-elect of Mayo Clinic, told the press.

The partnership also opens the possibility for trials of new, co-developed renal care products and services. In the meantime, the outpatient clinic will offer CKD management, home dialysis, and in-center dialysis services.

Renal Care is Baxter’s largest business, making up nearly a third of the firm’s $11.12 billion proceeds last year (which were up 5.3 percent from the year prior). The Renal Care segment posted $3.7 billion in revenue last year, jumping 5 percent over the previous year’s total. Worldwide growth of the company’s peritoneal dialysis business and increased hemodialysis international sales drove Renal Care’s expansion last year.

Medication Delivery—which encompasses IV therapies, infusion pumps, administration sets, and drug reconstitution devices—fell a mere 1 percent in sales from the prior year, achieving $2.7 billion in revenue.

2017’s Hurricane Maria caused supply constraints for Baxter’s small volume parenterals as well as lower international sales resulting from reallocation of volume to the U.S. Those supply constraints caused some customers to change protocols for use for those products, or else switch to competitive products.

Last January, Baxter launched the Arisure Closed System Transfer Device, which consists of several components working together to prevent contaminants from entering the IV delivery system and stop hazardous substances from leaving it during drug preparation and administration. A closed vial adapter helps provide closed access to liquid or powder vials for reconstitution, a closed male Luer valve for closed diluent or drug transfer from a standard male Luer tip, and an IV dry spike for closed access to an IV bag for drug/solution addition or removal.

The Spectrum IQ Infusion System with Dose IQ Safety Software obtained FDA clearance last May. It was the first device of its kind meant specifically for bi-directional electronic medical records (EMR) integration. Embedded on-screen barcode technology removes the need for a sticker barcode, providing clinicians with scan prompts to maintain or increase auto-programming compliance and automatically document infusion data in the EMR. The Spectrum IQ pump also features a visual notification matching the infusion pump and medicine being infused. Baxter partnered with First Databank to integrate its evidence-based IV medication library into Dose IQ safety software to make infusion delivery safer.

The Evo IQ Infusion System won CE mark approval last August. Evo IQ’s scalable platform and user-centric design includes an advanced drug library, Dose IQ error reduction software, and One Set technology, which allows easy switch between gravity and pump applications without changing sets. Evo IQ also alerts clinicians if programming exceeds limits specified for that medication, stopping delivery if necessary.

ANALYST INSIGHTS: CEO Joe Almeida continues to transform Baxter into a more aggressive company across its business segments. Watch for implementation of digital healthcare solutions to strengthen key portions of its portfolio—which will lead to the possibility of expanding their relationship with patients to create additional ‘consumer health’ opportunities for Baxter.

—Dave Sheppard, Co-Founder and Managing Director, MedWorld Advisors

Baxter also began moving Spectrum infusion pump repair operations from its Medina, N.Y., facility to Illinois last August. The decision impacted about 130 employees, who were fortunately able to apply for other positions in the company. Spectrum infusion pump manufacturing operations, which were also located in Medina, were unaffected.

The Advanced Surgery franchise, which houses biological products and medical devices used in surgical procedures for hemostasis, tissue sealing, and adhesion prevention, ballooned an impressive 13 percent in sales last year to reach $800 million. This increase was mainly provoked by the acquisition of two hemostat and sealing products early last year, as well as improved core hemostat and sealant sales.

Baxter began the deal to purchase Mallinckrodt plc’s RECOTHROM and PREVELEAK products last January. Collecting these two products expanded the firm’s portfolio of surgical solutions to address intraoperative bleeding. At the time, RECOTHROM Thrombin topical (Recombinant) was the first and only standalone recombinant thrombin. It aids hemostasis when oozing blood and minor bleeding from capillaries and small venules is accessible, and standard surgical techniques to control the bleeding are impractical or ineffective. PREVELEAK Surgical Sealant is used to seal suture holes formed during surgical repair in vascular reconstruction procedures. The acquisition of these was completed last March, contributing $52 million to last year’s sales.

Last September, the FDA cleared the Actifuse Flow Bone Graft Substitute for a variety of orthopedic surgical procedures. Actifuse Flow helps accelerate bone growth with a prepackaged delivery system for precise placement in small bony voids or skeletal system gaps, making it compatible with open and less invasive techniques. The latest addition to the firm’s osteobiologics surgery portfolio, Actifuse Flow is well-suited for filling small bone defects and complex geometries. Its first applications are expected to be for orthopedic procedures in the pelvis, extremities, and posterolateral spine. ALTAPORE was officially unveiled at last year’s North American Spine Society annual meeting.

The ALTAPORE Bioactive Bone graft gained FDA clearance as an autograft extender in posterolateral spinal fusion last September as well. Previously cleared for orthopedic surgical procedures in the extremities and pelvis, ALTAPORE’s enhanced porosity allows earlier vascularization, increased cellular activity, and improved volume of new bone growth.

The Disposable Curved Application to improve delivery of Baxter’s Floseal Hemostatic Matrix launched last December. Its atraumatic design minimizes tissue damage during ENT procedures, addressing intraoperative bleeding during skull base surgery, functional endoscopic sinus surgeries, septoplasties, and control of bleeding during nasal and sinus surgery.

Acute Therapies generated $517 million last year, leaping 13 percent over the previous year. The significant bump was due to higher demand for the company’s continuous renal replacement therapies systems to treat acute kidney injuries, as well as higher demand for other products from an intense flu season last year.

The PrisMax system and TherMax blood warmer won CE mark approval last October. PrisMax, combined with specialty dialyzers, delivers a complete range of extracorporeal therapies to remove waste products, excess fluids, and inflammatory mediators from the blood. It is intended to make therapy delivery simpler and more efficient while boosting ICU treatment accuracy. Once purified outside the body, the TherMax warmer ensures blood is the correct temperature to return to the body. Advanced safety features in TherMax also detect leaks and ensure the proper setup.

The Tisseel Prima syringe was unveiled at last November’s American Association of Gynecologic Laparoscopists meeting. Carrying Baxter’s Tisseel fibrin sealant, the Prima syringe comes fully assembled and, according to Baxter data on file, is eight times easier to push than the previous Tisseel syringe. The firm also introduced the Tisseel 40cm Duplotip Rigid Applicator, an extended length applicator for hard-to-reach areas in laparoscopic surgery.

Shortly thereafter, at last year’s American Society for Metabolic and Bariatric Society—Obesity Week meeting, the Peri-Strips Dry with Veritas (PDSV) Circular Staple Line Reinforcement with Secure Grip technology was revealed. PDSV Circular lets a circular stapler to advance across the incision site during bariatric surgery with minimal tissue injury while protecting the buttress. Secure Grip technology provides secure PDSV placement onto a circular surgical stapler.

Baxter’s Pharmaceuticals franchise advanced 11 percent last year to reach $2.1 billion in sales, mainly thanks to the July 2017 completion of the Claris Injectables acquisition and increased premixed injectables and inhaled anesthetics sales. The Clinical Nutrition business fell 1 percent to reach $877 million last year as a result of Hurricane Maria-related supply constraints. “Other,” which houses the company’s pharmaceutical partnering business, rose 12 percent to accrue $510 million in revenue last year.

$10.6 Billion
NO. OF EMPLOYEES: 47,000

Something was missing.

Dick Stapleton kept looking for the large IV bag that usually housed his cancer treatment, but it wasn’t in sight. It wasn’t in the hands of the nurse approaching him, or with any of the other staff milling about the John Theurer Cancer Center at Hackensack University Medical Center in northeastern New Jersey.

The only equipment he noticed was a medication vial, catheter, syringe, and needle package. There was no IV bag, large or small.

Ben Boyer had a similar experience at Moore’s Cancer Center in San Diego, Calif., shortly after Christmas last year. Like Stapleton, Boyer was puzzled at the sight of an IV bolus containing his wife’s chemotherapy drugs.

‘“Wait—what’s going on?’ I asked, noting the change,” Boyer recounted in a Jan. 8, 2018, blog. “He [the nurse] answered, ‘I have to push this manually. Huge IV bag shortage.’ ‘Because of the Christmas holiday?’ I assumed. ‘No dude,’ he replied. ‘The hurricane in Puerto Rico. Like, all of the IV bags in the country are made in Puerto Rico, and nobody has any left. The factories are still a mess.’”

Such confusion was all too common last fall after Hurricane Maria raked Puerto Rico in September, crippling the island’s production of intravenous (IV) bags and fluids, and exacerbating an existing multi-year product shortage in the United States.

Puerto Rico produces about 44 percent of all IV bags and saline compounds used in U.S. hospitals, with most manufactured in factories owned by global medical products firm Baxter International Inc. Although the company’s three facilities sustained minimal damage in the storm and resumed limited production within a week of the deadly tempest, output was stymied by impassable roads and an agonizingly long recovery process that is still continuing.

Baxter’s Puerto Rican operations are mainly responsible for production of the MINI-BAG and MINI-BAG Plus Container Systems (50 mL and 100 mL small volume parenterals, or SVPs), which are used mostly in hospital pharmacies to compound or administer medication or to help deliver medicine, amino acids, and certain pre-mixed products. Baxter does not manufacture any large IV bags on the 5,320-square-mile island.

To help ease the nationwide bag and saline shortage, the U.S. Food and Drug Administration (FDA) permitted Baxter to temporarily import amino acid medical products from its facilities in Italy and the United Kingdom, and IV bags from factories in Australia, Brazil, Canada, Ireland, and Mexico. In addition, the University of Utah and the American Society of Health-System Pharmacists drafted guidelines for hospitals on the best use of existing supplies; the recommendations included administering medicine orally whenever possible, or through an IV “push” (injecting drugs directly into an IV line).

It took several months for Baxter to regain full power in its Puerto Rican factories and resume pre-hurricane production levels of its small IV bags. In its 2017 annual report, released in late February this year, Baxter heralded an impending return to “normal” inventory levels upon the waning of flu season.

“Baxter’s operations in Puerto Rico were affected by Hurricane Maria in late 2017. Additionally, an aggressive flu season in the U.S. significantly heightened demand for Baxter’s large volume IV solutions…” Baxter Chairman, President, and CEO Jose (Joe) E. Almeida told investors in the report. “Resulting supply issues created difficulties for the customers and patients who depend on us. Disruptions are an inevitable part of doing business. What matters is our ability to react swiftly and maintain our commitments to our stakeholders.”

ANALYST INSIGHTS: Baxter is a different company under the leadership of CEO Joe Almeida than it was two years ago. Watch for aggressive inorganic and organic investments to facilitate growth in their core businesses.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

Baxter upheld that commitment rather well last year despite the protracted manufacturing interruption and U.S. IV bag shortage. The company expected a $70 million hit to its fourth-quarter sales from the market tumult, but the annual report shows the final three months of 2017 was actually the most profitable period for Baxter. The $2.77 billion the Deerfield, Ill.-based firm generated in Q4 was 2.5 percent higher than its third-quarter sales of $2.7 billion and 12 percent greater than the $2.47 billion yielded in Q1.

“Two years ago at Baxter, we set our sights on achieving sustained top-quartile performance among our healthcare industry peers. We have made great strides since, building on the strength of our portfolio and global footprint while bolstering speed, efficiency, and discipline across our operations,” Almeida said in his letter to stakeholders. “Now we have arrived at a pivotal moment, where operational gains are helping revitalize Baxter’s culture of innovation. We are well-positioned to advance our mission to save and sustain lives while delivering enhanced value for our investors.”

That enhanced value included a 4 percent boost in 2017 sales (to $10.6 billion), a 27 percent increase in adjusted earnings per diluted share ($2.48), and a 240-basis point rise in adjusted operating margin to 16 percent. Moreover, free cash flow was up 35 percent to $1.22 billion compared with 2016, and the company returned roughly $879 million to stockholders last year through $315 million in dividends and $564 million in share repurchases.

Such a bountiful balance sheet was largely driven by Baxter’s three-pronged growth strategy that focuses on portfolio management/research and development (R&D); operational excellence; and capital allocation.

The company boosted R&D last year through research alliances with the Mayo Clinic and Ramot at Tel Aviv University/Tel Aviv Sourasky Medical Center. The latter partnership targets surgical care, while the former—lasting five years—initially centers on kidney disease.

Baxter relied heavily on product introductions and enhancements in 2017 to manage and grow its portfolio. For example, the company tweaked various items for safety or usability (AK 90 hemodialysis system, FLOSEAL Hemostatic Matrix, TISSEEL [Fibrin Sealant], SIGMA SPECTRUM infusion system), and added the enteral ENFit syringe and accessory line to its nutrition care lineup. It also launched a digital tracking solution (DeviceVue) for its Sigma Spectrum Infusion pumps, deployed its next-generation PrisMAX acute care technology in select European markets, and expanded the use of its oXIRIS blood purification set to include the removal of excess cytokines, endotoxins and other inflammatory markers from blood. The label expansion was implemented last fall in more than 30 European countries and certain Mideast and African nations.

Baxter also took steps to ensure future innovation, receiving guidance from the FDA on the regulatory pathway for its new home peritoneal dialysis solution. The system—likely to be submitted as a combination product—produces sterile PD solutions using a home-based water filtration device that integrates with the company’s Amia PD system.

“We continue to increase our investment in new product development, build R&D productivity, and advance the impact of Baxter innovation globally,” Almeida said in the 2017 annual report. “An accelerating pace of high-value innovation is essential to achieving our performance goals.”

Indeed, innovation is key to growth, but there’s more than one path to innovation. Baxter augmented its new product introductions and enhancements last year by finalizing its $625 million deal for global injectable drug firm Claris Injectables Limited, and purchasing Chanhassen, Minn.-based Wound Care Technologies Inc., developer of the DermaClose Continuous Tissue Expander. The device, used for suturing and stapling skin in moderate to large wounds, created a complementary offering within Baxter’s Advanced Surgery business.

Though it occurred in the first quarter of 2017, the Wound Care acquisition did not impact total revenue in Baxter’s Advanced Surgery business last year. Proceeds rose 2.5 percent to $707 million due to higher international sales, but were offset by lower demand for non-core surgical products Actifuse and Peristrips.

A similar counterbalancing act transpired in most of Baxter’s seven business units in 2017, though all segments generated solid profits. Renal Care revenue, for instance, climbed 1.7 percent to $3.48 billion on robust growth of PD patients as well as adoption of Amia PD cyclers in the United States and HomeChoice CLARIA systems overseas but proceeds were impacted by lower international hemodialysis sales.

Baxter lost $45 million in Medication Delivery sales from Hurricane Maria, but still increased revenue in that unit 3.9 percent to $2.69 billion. Executives attributed the increase to select pricing and improved volumes for U.S. IV solutions and higher sales of the company’s IV access administrative sets.

Maria also blew away $15 million in Nutrition revenue, but improved demand, new product launches, and ongoing geographic expansion for the company’s parenteral solutions helped grow sales 2.8 percent to $882 million. Pharmaceuticals suffered the same fate, losing $10 million in sales to Maria, but the loss was more than offset by a $57 million boost from the Claris acquisition as well as higher demand for pre-mixed injectable drugs, and better pricing for fast-acting IV beta blocker BREVIBLOC. Total Pharmaceuticals revenue jumped 9.3 percent to $1.88 billion, according to Baxter’s 2017 annual report.

Strong sales of continuous renal replacement therapy systems boosted Acute Therapies revenue 6.3 percent to $456 million, while higher product volume led to a 1.8 percent rise in Other proceeds to $455 million.

In addition to growing sales through new product innovations, portfolio management, and acquisitions, Baxter also fortified its profit-making prowess last year by changing its geographical reporting segments. The company now breaks down its world map into three regions: Americas (North and South America); EMEA (Europe, Middle East, and Africa); and APAC (Asia-Pacific).
Each of these new reporting regions posted gains in 2017, with the Americas leading the charge at 5.2 percent (to $5.72 billion), followed by APAC (4 percent to $2.11 billion), and EMEA (1.3 percent to $2.73 billion).

“We have arrived at a pivotal moment, where operational gains are helping revitalize Baxter’s culture of innovation,” Almeida said. “We continue to promote simplification and disciplined cost management to ensure every dollar we spend is making the greatest impact for patients and stockholders.”

$10.2 Billion
NUMBER OF EMPLOYEES: 48,000

2016 ushered in a number of firsts for global renal and hospital products giant Baxter International. It was the company’s first full year of operation after the successful spinoff of its BioScience business, Baxalta Incorporated. The exchange offer for Baxalta’s common stock owned by Baxter officially concluded on May 18, 2016, completely severing ties and establishing Baxter as a dedicated medical technology company.

It also marked the first full year of José (Joe) Almeida’s tenure as CEO of the company. Almeida was named chairman and CEO of Baxter in October 2015, and took the helm on Jan. 1, 2016. He had previously served as chairman, president, and CEO of Covidien from 2012 through 2015, when he wrapped up the company’s $50 billion sale to Medtronic plc. He faced a number of challenges in taking the reins, including recharging a widespread operation dealing with layoffs, restless investors, and a sluggishly growing sales base following Baxalta’s spinoff. In addition, Baxter’s dialysis machines and drug delivery systems exhibit low margins for profit and sell into a slow-growing replacement market. Almeida was forced to work with some urgency to overcome the challenges of struggling 2015 sales and Baxalta’s split.

However, as one of the key negotiators of Covidien’s sale to Medtronic, Almeida had already proven he could oversee complex operations and close deals that expand a company’s size and influence.

“Baxter’s management team faces numerous execution challenges ahead to improve profitability, but we think Almeida’s familiarity with the medical instrument and supply markets should enable him to smoothly transition into the leadership role,” Michael Waterhouse, an analyst with Morningstar in Chicago, wrote in a research note.

Would he be able to return Baxter to its former glory? At the time, he had no plans to shake things up. “I’m not going to make wholesale changes to the company,” Almeida told the Chicago Tribune, although some wondered whether Almeida might be tailoring the company for a sale, as he had done with Covidien.

“I guess I would say a sale of Baxter is certainly not out of the question,” Lawrence Keusch, an analyst with Raymond James in Boston told the Tribune. “But keep in mind Joe is young, only 53. I don’t think this is one of those situations where you’ve got a guy ready to retire in the next two years. He’s got a big job on his hands, and I think making the company strong again is the only thing he’s focused on.”

ANALYST INSIGHTS: Joe Almeida is transforming Baxter from a reactive company to a pro-active player in the marketplace. Watch for both new organic innovations and bolt-on acquisitions to make a positive difference in Baxter’s outlook for the future.

—Dave Sheppard, Co-Founder and Principal, MedWorld Advisors

Though not quite back up to Baxter’s 2014 career high revenue of $10.7 billion, Almeida was able to steer the company back from its 7 percent decline in 2015. Baxter posted fiscal 2016 (year ended Dec. 31) sales of $10.2 billion, a slight climb of 2 percent from the year prior. The revenue was fairly evenly spread between the company’s domestic and international sales, each posting $4.6 billion and $5.9 billion, increasing 6 and 1 percent, respectively.

Baxter’s Renal segment develops peritoneal dialysis (PD), hemodialysis (HD), and continuous renal replacement therapies (CRRT), as well as additional dialysis segments. Total Renal sales in 2016 amounted to $3.9 billion, a 2 percent bump from the previous year. The slight gain was triggered by the continued global patient growth, a number of new product launches, and improved pricing in the United States in the PD business—the latter of which supplied about 2 percentage points to 2016’s growth rate. Increased CRRT sales to treat acute kidney injury also contributed 2 percentage points to the rise. A September 2016 recall of all unexpired lots of 50 mm 0.2 micron filters (due to the potential for a missing filter support membrane and potential presence of particulates) slightly offset this gain.

The Renal division saw the launch of several new technologies in 2016, including the AMIA automated peritoneal dialysis (APD) system and Homechoice APD system, which both feature Baxter’s Sharesource Connectivity Platform two-way telemedicine technology. As of October 2016, according to the company, the Sharesource Telehealth System has securely managed 150,000 home dialysis treatments globally. The two-way remote patient management system lets healthcare providers securely view patients’ recent dialysis-related treatment data and remotely adjust device settings as needed. Further, the AMIA system touts animated graphics and automated step-by-step instructions with voice guidance in order to streamline home PD therapy. Baxter’s launch of the Theranova dialyzer, which allows high-performance HD treatments with filtration that closely mimics the biological kidney, added to the suite of Renal products. Theranova extends the range of molecules able to be filtered from the blood using therapy.

Baxter’s Hospital Products division includes four franchises: fluid systems (IV therapies, infusion pumps, and administration sets), integrated pharmacy solutions (premixed and oncology drug platforms, nutrition products, and pharmacy compounding services), surgical care (inhaled anesthesia and critical care products as well as biological products and medical devices used in surgical procedures for hemostasis, tissue sealing, and adhesion prevention), and other (primarily from the company’s pharmaceutical partnering business). Overall, the Hospital Products division achieved $6.3 billion in revenue, a 2 percent increase from the year prior.

The fluid systems division displayed the highest growth among Hospital Products, rising 9 percent to $2.3 billion. The ascension was induced by favorable pricing and sales volume for IV solutions, as well as increased sales of the company’s Sigma Spectrum pump. The next-generation Sigma Spectrum infusion system was also released in 2016, featuring a master drug library and enhanced patient safety features. The gains in fluid systems were slightly offset by two voluntary nationwide recalls initiated by the company—four lots of IV solutions were pulled due to the chance of leaking containers and particulate matter in January, and one lot of 0.9 percent sodium chloride solution for irrigation was withdrawn because of the presence of particulate matter.

The integrated pharmacy solutions segment was flat from 2015 with sales of $2.2 billion. Adding a suite of essential generic injectable medicines to this division, Baxter acquired Claris Injectables Limited for $625 million in December. The surgical care business was also flat with $1.3 billion in 2016 revenue. Baxter was awarded a CE mark for the Hemopatch surgical patch for tissue sealing and dura replacement in March 2016. The expanded indication allows the patch’s use to close dural defects including dura mater excision, retraction, or shrinkage following traumatic injury. It was also approved as a hemostatic device and surgical sealant in cases where body fluid or air leakage cannot be staunched by conventional surgical techniques. The “other” category’s sales fell 2 percent to $442 million as a result of lower demand for products manufactured by Baxter on behalf of a pharmaceutical partner.

It remains to be seen whether Almeida can continue the trend of positive growth for Baxter. He is certainly optimistic in this regard, closing his chairman letter with “Our accomplishments in 2016 demonstrate that sustained top-quartile performance is within our reach. I am energized by our progress and confident in our prospects. I look forward to providing further updates as we continue this journey.”

$10.0 Billion
NUMBER OF EMPLOYEES: 50,000

At first glance, Baxter looks like a company with serious financial issues, as it dropped five places from last year’s position on this list, where it came in at No. 4. The reason behind the significant move, however, is much less ominous. In July 2015, Baxter continued as a medical device company with a primary focus on providing renal and hospital products. At the same time, Baxalta Inc. was launched, birthed out of the company’s former biopharmaceuticals business.

The move marks the goal of a plan that Baxter had been sharing with the industry for some time. Company executives predicted both firms would remain as leading entities in their respective markets, each boasting a global presence. At an investor conference a couple of months prior to the July 1 split, company members outlined the expectations for growth in Baxter’s sales—approximately 4 percent on a compounded annual basis from 2016 through 2020. Expectations for Baxalta’s sales growth were even more positive, with figures of 6 to 8 percent increases on a compounded annual basis during the same timeframe.

Perhaps recognizing the turbulence and uncertainty that would immediately follow the split, the company did not provide expectations for the 2015 year (ended Dec. 31), which was probably best since Baxter finished down 7 percent over the prior year. Still, sales for the company were up when compared with the three prior years (2011-2013).

Company executives also expected the split to lead to more targeted research and development efforts that ultimately benefit each company in a much more effective way. In 2015, Baxter dedicated $603 million toward expenditures for these programs, which was just shy of the $610 million dedicated to R&D initiatives in 2014 (again, still over 2013, which saw $582 million put toward research and development expenditures). Further, Baxter anticipates at least 20 new product launches over the span of several years following the split; expected innovations will focus on improved clinical outcomes, lowering healthcare costs, and enhancing patient convenience.

“The spin-off provides us with flexibility to bring our product portfolio to market more effectively and capitalize on global opportunities and emerging trends to address patient needs while enhancing profitability,” Robert L. Parkinson Jr., Baxter’s former chairman and CEO, said in a release issued at the time. “Healthcare providers are being tasked with delivering better care to greater numbers of patients in a more cost-effective manner. Baxter is a valued partner in addressing the challenges faced by governments, payers, and healthcare providers around the world.”

Baxalta announced a similar dedication to innovation, also expecting more than 20 new products, which would ultimately contribute an additional $2.5 billion to sales by 2020. The company planned to further expand its product offerings through external partnerships and strategic acquisitions. In fact, rumors swirled that the company was eyeing Cambridge, Mass.-based Ariad Pharmaceuticals Inc., which focuses on oncology.

“Baxalta’s vision is to be a global biopharmaceutical leader striving for excellence in advancing innovative therapies that improve patients’ lives,” said Ludwig Hantson, who then served as president of Baxter’s BioScience business. “This is an exciting time for Baxalta, as we have a solid foundation and strong momentum. Our transformation is well underway and our compelling strategy, clinical and scientific expertise, and financial strength will position us well to drive enhanced value for patients, customers, and shareholders.”

All of this talk and excitement was relatively short-lived for Baxalta, however, as it was announced in 2016 that the company was to merge with Shire, a Dublin, Ireland-based pharmaceutical company. Shire had reached out to Baxalta almost immediately after the split from Baxter in July 2015, but company executives were reluctant to consider a merger so soon. Also, Baxalta executives thought the offer Shire was making represented an undervaluation of the company. Once the deal was assured in June 2016, Shire announced that it expected to carry out more than $500 million in cost-cutting or “synergies” within the first three years after the deal officially closed. Possibly in anticipation of the pending transaction with Shire, Baxter had made almost all of its portion of the stock it still held in Baxalta available, which originally (following the split) was just under 20 percent.

Business Units Overview

Following the split, Baxter was left functioning with two primary divisions—the hospital products business and the renal business. Products from the hospital side include IV solutions and administration sets, pre-filled vials and syringes for injectable drugs, infusion pumps, and biosurgery products. The renal division offers products and services to treat end-stage renal disease, irreversible kidney failure, and acute kidney injuries.

The hospital products division is the primary source of sales for the company, posting a figure of $6.17 billion in 2015. The unit is further broken down into three main product categories. Fluid systems—IV therapies, infusion pumps, and administration sets—was down a small amount, posting sales last year of $2.1 billion compared to $2.12 billion in 2014. Integrated pharmacy solutions reported sales of $2.29 billion versus $2.53 billion. Surgical care saw a similar decrease—$1.32 billion compared to $1.37. The renal business unit contributed $3.78 billion to the sales total in 2015. Both division’s sales (hospital and renal) were down from 2014, however, ($6.54 billion and $4.17 billion respectively).

Overall company sales were virtually flat in the United States in 2015 compared to 2014—$4 billion versus $3.9 billion. International sales, however, fell from $6.72 billion in 2014 to $5.96 last year. The company cited fluctuating exchange rates between foreign currencies and a strengthening U.S. dollar as a primary reason for the drop in sales numbers internationally.

$16.7 Billion
NO. OF EMPLOYEES: 50,000

For Baxter International Inc., the 2014 fiscal year began with a split. No, the company’s not going anywhere; it’s separating into two distinct firms. In March, the Deerfield, Ill.-based healthcare company unveiled plans to create two separate, independent life-science firms—one focused on biopharmaceuticals and the other on medical products.

“Baxter has an established history of executing successful spinoffs, and we have continued to evaluate the separation of these two businesses in response to diverging business dynamics and the rapidly changing macro-environment,” said Robert L. Parkinson Jr., chairman and CEO. “This decision underscores Baxter’s commitment to ensuring its long-term strategic priorities remain aligned with shareholders’ best interests, while improving our competitive position and performance, enhancing operational, commercial and scientific effectiveness and creating value for patients, healthcare providers, and other key stakeholders.”

According to company officials, the spinoff would create two, “well-capitalized independent companies with strong balance sheets, investment grade profiles, and disciplined approaches to capital allocation.”

Baxter’s brass said the separation would result in other benefits, including:

• • Greater management focus on the distinct businesses of biopharmaceuticals and medical products;

• • Ability to more effectively commercialize new and existing product offerings;

• • Ability to drive innovation across the franchises and allocate necessary resources to the areas presenting the highest growth potential; and

• • Flexibility to pursue respective growth and investment strategies resulting in revenue acceleration, improved profitability and enhanced returns.

In 2014, the company reported two product categories—BioScience and Medical Products. That changed after the split.

Baxter’s BioScience division consisted of a portfolio of recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders, and plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions.

“We are confident that this decision not only strengthens our outlook, it positions us well to execute on our future growth prospects, new product pipeline and other opportunities as we enter a new era in the journey to achieve our aspiration as a premier biopharmaceuticals company,” said Ludwig N. Hantson, Ph.D., who was president of Baxter’s BioScience division before the spinoff.

The Medical Products business consisted of a portfolio of intravenous (IV) solutions and nutritional therapies, drug delivery systems and administration sets, premixed and other injectable drugs, as well as inhalation anesthetics and hospital-based biosurgery products. This business also integrated the Swedish firm Gambro AB, which Baxter purchased in 2012 for $12 billion (the largest acquisition in Baxter’s more than 80-year history) and complemented the company’s existing renal therapies franchise.

The corporate headquarters of both companies will be located in northern Illinois.

Parkinson will serve as chairman and CEO of the medical products company, which will retain the Baxter International name. Hantson is CEO of the new biopharmaceuticals company, which was dubbed Baxalta (a combination of the Baxter name and a derivative of “altus,” which is Latin for “high” or “profound”). The division became official on July 1 of this year when Baxalta began trading as an independent company on the New York Stock Exchange under the ticker symbol “BXLT.” The split came via a tax-free distribution to Baxter shareholders of the new publicly traded stock.

Hantson joined Baxter in 2010 from Novartis Pharmaceuticals Corporation, where he served in a number of roles of increasing responsibility, the most recent of which was CEO, Pharma North America. Prior to Novartis, Hantson spent 13 years at Johnson & Johnson.

Wayne T. Hockmeyer, Ph.D., who joined Baxter’s board in 2007, serves as non-executive chairman of the board of Baxalta. Hockmeyer founded MedImmune Inc., and served as its chairman and chief executive officer.

This wasn’t the first time Baxter has spun off parts of itself. Other companies that Baxter has spun off in the past three decades include Edwards Lifesciences Corp., Caremark Corp., and Allegiance Healthcare Corp. It’s also part of a larger industry trend of refocusing on core businesses. Baxter’s Illinois neighbor, Abbott Laboratories, spun off its pharmaceutical arm to create a new firm—AbbVie Inc.

Once the split took place, Baxter separated into two new global business units: Hospital Products and Renal. The Hospital Products business manufactures products used in the delivery of fluids and drugs to patients across the continuum of care, including IV and other sterile solutions and administration sets, premixed drugs and drug-reconstitution systems, IV nutrition products, infusion pumps, and inhalation anesthetics. The business also provides products and services related to pharmacy compounding, drug formulation, and packaging technologies. The Renal portfolio addresses the needs of patients with kidney failure or kidney disease, and their healthcare providers, with a comprehensive range of therapeutic options across home, in-center, and hospital settings for better individualized care. The portfolio includes technologies and therapies for peritoneal dialysis, in-center and home hemodialysis, continuous renal replacement therapy, multi-organ extracorporeal support therapy, and additional dialysis services. Baxter’s research and development efforts also are pursuing a range of next-generation monitors, dialyzers, devices, dialysis solutions, and connectivity technology for home patients.

On the new product front in the medical products sector in FY14, the company received 510(k) clearance from the U.S. Food and Drug Administration in May for its next-generation Sigma Spectrum Infusion Pump with Master Drug Library. Enhancements to the infusion pump include increased capacity of the master drug library, which is safety software that enables a hospital to maintain a customized in-house library of facility-defined dosing parameters for infusions to minimize the likelihood of drug errors during care. In addition, new asset-tracking capabilities allow hospitals to effectively locate, manage and deploy Sigma Spectrum inventory, helping to ensure efficient allocation of hospital assets.

“Clinicians are looking for integrated systems that are efficient and cost effective, and allow hospital staff to focus on providing quality care for patients,” said Brik Eyre, president of Baxter’s Hospital Products business. “We are excited to bring the next generation of Baxter’s Sigma Spectrum Infusion Pump with Master Drug Library and its advanced, patient-centered safety technology to the U.S. marketplace.”

Infusion pumps are used throughout hospitals and other acute and chronic care settings to deliver fluids and medications. Baxter’s Sigma Spectrum Infusion Pump provides multiple safety features, including dose error reduction software and an automatic default to use of the drug safety library at the initial start of dose programming. It also offers an option for wireless connectivity to integrate data into a hospital’s electronic medical record system, to facilitate the transfer of data to and from the system for updating drug libraries, and to create continuous quality improvement reports.

Early in the fiscal year, European regulators greenlighted Baxter International’s Vivia hemodialysis system for the E.U. market. The device is designed for more comprehensive high-dose hemodialysis (HD), which can be performed during short daily sessions or at night while sleeping. The Vivia’s touchscreen interface was developed for patient use, since the system is intended to stay in the patient’s home, and instructions on the screen include graphical illustrations on setup, treatment, and cleaning. To help guarantee safety, the Vivia features a sensor that detects dislodged needles and sends a signal for the machine to stop pumping.

Additionally, as with many at-home medical devices coming to market, the Vivia features wireless connectivity to share its hemodialysis regimen data with the patient’s physician.

Baxter introduced Vivia in a limited number of European dialysis clinics in 2014 to allow patients and healthcare providers to become familiar with the system and its patient-friendly features. The company expanded the launch to other European countries this year.

“Globally, less than 1 percent of the estimated 1.9 million patients requiring hemodialysis currently perform high dose HD therapy,” said Bruce Culleton, M.D., senior medical director at Baxter. “Vivia will allow a greater number of hemodialysis patients access to high dose HD therapy in their home environment.”

As part of its filing for CE marking, Baxter submitted data from U.S. and Canadian clinical studies that evaluated the safety and efficacy of Vivia in more than 1,000 treatments.

An estimated 1.9 million end-stage kidney disease patients worldwide undergo hemodialysis, with the vast majority receiving conventional hemodialysis (CHD), which usually is performed three times a week for three to five hours per session in a center or clinic. High-dose HD therapy is a more frequent therapy, usually performed as short daily treatments at least five days per week for sessions that typically run less than four hours, or as nocturnal treatments where sessions are conducted for more than six hours while the patient sleeps. Data has shown high-dose HD therapy to improve survival and health-related quality of life compared with CHD.

For fiscal year 2014 (ended Dec. 31), Baxter’s net income totaled $2.5 billion, or $4.56 per diluted share. Compared to the prior year, excluding special items and discontinued operations, Baxter’s adjusted income from continuing operations increased 4 percent to $2.7 billion, and earnings per diluted share of $4.90 advanced 4 percent, exceeding the company’s previously issued guidance for the year. Baxter’s worldwide revenues in 2014 totaled $16.7 billion and rose 11 percent (or 13 percent excluding the impact of foreign currency). Compared to the prior year, BioScience sales of $6.7 billion grew 7 percent (or 8 percent excluding the impact of foreign currency), while Medical Products sales of $10 billion advanced 15 percent (or 16 percent excluding the impact from foreign currency). After adjusting both periods for the contribution of Gambro, Medical Products sales increased 2 percent (or 4 percent excluding the impact of foreign currency) on a full-year basis.

In April this year, Baxter announced plans to expand its medical device plant in Mountain Home, Ark.

Baxter will add 25,000 square feet and undisclosed equipment at the facility, spokeswoman Deborah Spak said. She did not disclose the cost of the project, due for completion later this year.

The Mountain Home factory, one of the largest in Baxter’s medical products division, has 550,000 square feet and employs about 900 workers. When the expansion is done, employment will rise by about a dozen. The facility has been a medical-oriented operation since 1964.

Spak noted the Mountain Home expansion is typical of Baxter’s frequent upgrades and expansions to “ensure that we are operating in a manner that delivers high quality products as well as efficiency and responsiveness to customer demands.” She did not disclose the types of medical devices made in the Arkansas plant. The Medical Products unit’s applications include intravenous equipment and nutrition products, drug reconstitution systems, infusion pumps and inhalation anesthetics.

In late summer last year, Baxter announced an expansion at its Opelika, Ala., manufacturing location that will cost $300 million. The project is focused on boosting production capacity for dialyzers, a component for hemodialysis therapy needed by patients with kidney failure. The unit will add more injection molding equipment and more than double current staff levels by about 170. Baxter is targeting project completion in 2016.

$15.26 Billion
No. of Employees: 61,000

Baxter International Inc. makes a wide range of products to treat hemophilia, immune disorders, infectious diseases, kidney disease, trauma and other chronic and acute medical conditions. The company’s product portfolio is combination of medical devices, pharmaceuticals and biotechnology—very often overlapping with combined drugs and delivery systems, or creative and specially designed packaging that become part of the complete treatment solution.

The company (throughout fiscal 2013 and into 2014) operates two primary divisions: Medical Products and BioScience. The company (see details below) recently announced plans to split into separate entities.

One of the many ways Baxter—and indeed the majority of companies on MPO’s annual list of top medical technology companies—goes about its business of improving value for patients and healthcare providers is through a robust research and development (R&D) pipeline.

In FY13, Baxter increased R&D spending by 8 percent, investing more than $1.2 billion for both internal programs and new collaborations, a record level for the company.

Baxter utilized that money by funding a number of new product releases throughout the 2013 fiscal year.

In the medical device area, the company received CE mark in Europe for the Vivia hemodialysis (HD) system, designed to deliver more frequent, extended duration, short daily or nocturnal home HD therapy, known as high-dose HD therapy. Vivia is designed with the potential to deliver enhanced clinical outcomes and greater patient convenience, and provides a number of unique safety features, wireless connectivity, an integrated water system and extended-use consumables, according to the company. Baxter began introducing the technology in a limited number of European dialysis clinics this year and plans to expand the launch to other European countries in 2015.

Also in Europe, Baxter launched the Hemopatch sealing hemostat (a tool used in surgical procedures to control bleeding). The collagen-based resorbable hemostatic device is used for surgical procedures when control of bleeding by pressure, suture or conventional procedures is ineffective or impractical. The development of Hemopatch combined Baxter’s expertise in collagen, internal coagulation processes, and polyethylene glycol technology platforms.

‘‘Hemopatch is a valuable addition to the tools in the surgical suite, as it provides fast hemostasis and strong tissue adherence. Surgeons will appreciate that the product works quickly and effectively, does not require preparation time, and can be used in a range of surgical settings,’’ said Frank Ulrich, M.D., head of surgical oncology at Goethe University in Frankfurt, Germany.

Hemopatch is a soft, thin and flexible collagen pad that is designed to allow surgeons control during application to gain hemostasis and firm adherence of the hemostatic pad to the bleeding tissue surface. In preclinical tests, Hemopatch achieved fast and effective hemostasis, reaching 97.5 percent success by fully controlling bleeding at two minutes, according to the company.

The pad consists of a specifically formulated porous collagen matrix, coated on one side with a thin protein bonding layer that gives the pad a dual-method mechanism of action, in which two components interact to achieve hemostasis by sealing off the bleeding surface and initiating the body’s own clotting mechanisms. The product was part of Baxter’s BioSurgery franchise, which began with the acquisition of Immuno International AG in the 1990s and the first launch of a hemostatic device in the United States in 1998. Today, Baxter’s BioSurgery portfolio consists of a range of biological and synthetic products and delivery devices used for hemostasis, tissue sealing, adhesion reduction, hard tissue regeneration, as well as soft-tissue repair and microsurgery products.
But growth doesn’t only come from R&D. Medical device firms are famous for expansion through acquisition. For FY13, Baxter’s management wrapped up a deal to expand its hemodialysis business.

In September, the company closed on its acquisition of Gambro AB, a privately held maker of hemodialysis equipment based in Lund, Sweden. The $4 billion deal was announced in December of 2012, but had to jump regulatory hurdles in Europe. In July 2013, the companies finally satisfied European antitrust regulators, who were concerned that an effort to buy Gambro would leave Baxter too powerful in the European market. As a result, Baxter agreed to divest its global continuous renal replacement therapy business unit, which accounts for approximately 2 percent of its overall revenue.

“The combination of these two respected renal leaders—Baxter and Gambro—will enable Baxter to better serve healthcare providers and patients through a collective offering of innovative renal products and therapies,” said Robert L. Parkinson, Jr., chairman and CEO of Baxter. ”Together, we will advance the state of dialysis care for patients with kidney disease worldwide.”

The acquisition provides a number of long-term growth opportunities for Baxter around the world.  With a broad and complementary dialysis product portfolio and global footprint, Baxter can accelerate product sales in established markets such as Europe, where Gambro has an extensive presence. Baxter also will be able to expand Gambro’s reach in high-growth regions of Latin America and Asia-Pacific, where Baxter has steadily grown its peritoneal dialysis (PD) business. In addition, Baxter will be able to build its pipeline of investigational home hemodialysis and automated PD systems by adding Gambro’s dialyzers, devices and dialysis solutions, monitors, and acute therapies to treat patients with serious kidney, liver and lung conditions.

Following the completed acquisition, Brik Eyre was named president of the combined renal business and elected a corporate officer. Eyre joined Baxter in 2008 and previously served as the general manager of U.S. Medication Delivery. Prior to his new role, Eyre served as general manager for Baxter’s BioPharma Solutions business.

Bottom-Line Bump
Baxter’s net income totaled $2 billion, or $3.66 per diluted share in 2013. Excluding special items, the company’s adjusted net income increased 2 percent to $2.6 billion, and earnings per diluted share of $4.67 advanced 3 percent. Baxter’s worldwide sales in 2013 totaled $15.3 billion and rose 8 percent. Excluding revenues of $513 million associated with the Gambro acquisition, Baxter’s revenues increased 4 percent to $14.7 billion. BioScience sales of $6.6 billion advanced 5 percent (or 6 percent excluding the impact of foreign currency), while Medical Products sales of $8.7 billion grew 9 percent from the prior-year period. Excluding revenues associated with the Gambro acquisition, Medical Products sales increased 3 percent (or 4 percent excluding the impact of foreign currency) on a full-year basis.

During 2013, the company generated cash flows from operations of approximately $3.2 billion and returned significant value to shareholders. Baxter returned more than $1.9 billion to shareholders during the year, through share repurchases of $913 million (or approximately 13 million shares) and dividends totaling more than $1 billion, reflecting a 27 percent increase in dividend payments versus the prior year.

“We continue to meet our financial objectives while navigating a challenging and complex macro-environment,” Parkinson said.
“We remain focused on the company’s strategic priorities of advancing the new product pipeline, investing in future growth opportunities, and strengthening our operational execution, which will result in enhanced value for patients, healthcare providers and shareholders.”

Splitsville
In April this year, Baxter officials unveiled plans to create two separate, independent life-science firms—one focused on biopharmaceuticals and the other on medical products.

“Baxter has an established history of executing successful spin-offs, and we have continued to evaluate the separation of these two businesses in response to diverging business dynamics and the rapidly changing macro-environment,’’ said Parkinson. ‘‘This decision underscores Baxter’s commitment to ensuring its long-term strategic priorities remain aligned with shareholders’ best interests, while improving our competitive position and performance, enhancing operational, commercial and scientific effectiveness and creating value for patients, healthcare providers, and other key stakeholders.”

According to company officials, the spin-off will create two, “well-capitalized independent companies with strong balance sheets, investment grade profiles, and disciplined approaches to capital allocation.” Baxter’s brass also believes the separation will result in other tangible benefits, including:

• Greater management focus on the distinct businesses of biopharmaceuticals and medical products;
• Ability to more effectively commercialize new and existing product offerings;
• Ability to drive innovation across the franchises and allocate necessary resources to the areas presenting the highest growth potential; and
• Flexibility to pursue respective growth and investment strategies, resulting in revenue acceleration, improved profitability and enhanced returns.

Baxter’s biopharmaceuticals business consists of a diverse portfolio of recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders, and plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions.

“The news represents a significant milestone that will result in material benefits for key stakeholders,’’ said Ludwig N. Hantson, Ph.D., president of Baxter’s existing BioScience division. ‘‘We are confident that this decision not only strengthens our outlook, it positions us well to execute on our future growth prospects, new product pipeline and other opportunities as we enter a new era in the journey to achieve our aspiration as a premier biopharmaceuticals company.’’

The medical products business has a portfolio of intravenous (IV) solutions and nutritional therapies, drug delivery systems and administration sets, premixed and other injectable drugs, as well as inhalation anesthetics and hospital-based biosurgery products.

The corporate headquarters of both companies will remain in the affluent Chicago suburb of Deerfield.

Parkinson will serve as chairman and CEO of the medical products company, which will retain the Baxter International name.

Hantson will be named CEO of the new biopharmaceuticals company, which will be named at a later date. Hantson joined Baxter in 2010 from Novartis Pharmaceuticals Corporation where he served in a number of roles of increasing responsibility, the most recent of which was CEO, Pharma North America. Prior to Novartis, Hantson spent 13 years at Johnson & Johnson. Wayne T. Hockmeyer, Ph.D., who joined Baxter’s board in 2007, has agreed to serve as non-executive chairman of the board of the new biopharmaceuticals company. Hockmeyer founded MedImmune Inc., and served as its chairman and chief executive officer.

The split will come via a tax-free distribution to Baxter shareholders of a new publicly traded stock in the new biopharmaceuticals company. The transaction is expected to be completed by mid-year 2015, subject to market, regulatory and certain other conditions, including final approval by Baxter’s board of directors.

This isn’t the first time Baxter has spun off parts of itself. Other companies that Baxter has spun off in the past three decades include Edwards Lifesciences Corp., Caremark Corp., and Allegiance Healthcare Corp.

It’s also part of a larger industry trend of refocusing on core businesses. Baxter’s Illinois neighbor, Abbott Laboratories, spun off its pharmaceutical arm to create a new firm—AbbVie Inc.—at the beginning of 2013. Covidien plc also completed the spin-off of its pharmaceutical business in 2013 to concentrate on medical devices (it’s now merging with Medtronic Inc.).

$12.8 Billion
NO. OF EMPLOYEES: 48,000

Not long after assuming the top spot at Baxter International Inc., Robert L. Parkinson Jr. set forth to resolve the company’s longstanding problems with its Colleague infusion pump. The problems—mostly quality issues—had begun under Parkinson’s predecessor, Harry M. Kraemer Jr., in 1999, and dogged him throughout his five-year reign. Intent on avoiding a similar fate, Parkinson made the Colleague conundrum one of his top priorities in 2006, during his second full year as CEO.

Parkinson took some significant steps that year toward achieving his goal. By the start of his third anniversary as chief executive, Parkinson was hopeful that the company might finally be able to put its infusion pump nightmare to rest. But other crises were lurking on the horizon, each of them significantly more scary than the Colleague calamity: the tainted Heparin scandal, Wall Street’s meltdown and, the most frightening, the worst recession in eight decades.

Consequently, Baxter’s Colleague debacle languished. Then last spring, the U.S. Food and Drug Administration (FDA) brought the matter to an abrupt end. Frustrated with the “persistent safety problems” of all infusion pumps¬—including the Colleague—FDA administrators ordered the company to recall and destroy all Colleague pumps on the market; authorities said the action was based upon a “longstanding failure” on Baxter’s part to correct serious problems with the devices (battery swelling, inadvertent power-downs and service data errors, among others). Parkinson, however, claimed the design improvements suggested by the FDA were “close to impossible” to accomplish without fundamentally redesigning the pump.

Thus ended Baxter’s 11-year odyssey through the product quality looking glass. By July 2010, the company had put together a plan for collecting the estimated 200,000 infusion pumps still in circulation, as demanded by the FDA. The company offered customers its Sigma Spectrum pumps as a replacement or refunds, with the reimbursements ranging from the purchase price or the lesser of the pump’s depreciated value—a minimum of $1,500 for a single-channel pump or $3,000 for a triple-channel device. Baxter is executing its final Colleague recall plan through July 14, 2012, and will provide both service and support for customers still using the questionable pump during the transition period. The company incurred a special pre-tax charge of $400 to $600 million in the first quarter of 2010 to cover the cost of the recall. That charge lowered Q1 revenue by $213 million.

“We’re pleased to offer closure in definition to our customers as this has been a very high priority for our company over the last several years,” Parkinson said.

Finding closure to one of Baxter’s most trying and nagging problems of the last decade was perhaps the company’s crowning achievement in a year that created “significant headwinds” for the firm. In his letter to shareholders (included in the company’s 2010 annual report), Parkinson names the source of those headwinds—the global economic crisis, worldwide healthcare reform initiatives and continuing pressure in the plasma proteins market—and claims the convergence of those forces led the firm to lower its 2010 financial outlook to 1 percent to 3 percent from a range of 5 percent to 7 percent. Baxter also fine-tuned its adjusted earnings per share (EPS) to $3.92-$4, down from $4.20-$4.28.

The change was a wise move on Baxter’s part—the company’s adjusted EPS settled at $3.98, up 4.8 percent from its 2009 year-end adjusted EPS of $3.80. The numbers, however, do not include special charges that reduced net sales and net income in both years. When those special charges are taken into consideration, Baxter’s 2010 net income totaled $1.4 billion, or $2.39 per diluted share, a 36 percent drop in net income and 33 percent drop in earnings per diluted share compared with 2009. Executives said special charges last year reduced net sales by $213 million and net income by $946 million, or $1.59 per diluted share.

Though sales climbed 2 percent to $12.8 billion, revenue was tempered by healthcare reform legislation and the aftereffects of the worldwide financial crisis, which Parkinson claims slowed gross domestic product growth worldwide and curbed sales of plasma protein goods. Still, Baxter managed to eke out small gains in each of its three operating segments, with the Renal division garnering the highest increase (5 percent) followed by Medication Delivery at 3 percent and BioScience basically remaining flat compared with 2009. Revenue in each sector totaled $2.3 billion, $4.7 billion and $5.6 billion, respectively.

Strong sales of regenerative and recombinants products kept the BioScience division from losing ground last year and maintaining its sales lead total. Regenerative goods garnered $527 million for the segment, a 19 percent increase compared with 2009, while recombinant products (boosted by increased sales of Advate) amassed $2 billion for Baxter. The 2 percent hike in plasma protein sales was driven by strong international demand for Feiba as well as anti-inhibitor coagulant complex, and improved domestic sales of Aralast NP (Alpha 1-Proteinase Inhibitor [Human]). Offsetting that growth, however, was a reduction in foreign sales of plasma-derived factor VIII and lower U.S. sales of albumin. Overall, plasma protein product sales totaled $1.4 billion in 2010.

Healthcare reform helped stifle sales of Baxter’s antibody therapy goods, though this product category also suffered from the termination of a distribution agreement for WinRho SDF, an immune globulin intravenous product used to treat immune thrombocytopenic purpura.

While not as powerful an engine for growth as the BioScience segment, Baxter’s Medication Delivery sector nevertheless delivered strong results last year, amassing $4.7 billion in net sales, a 3 percent increase compared with 2009. Global injectables was the top revenue-generator with $1.8 billion in sales, followed by followed by intravenous (IV) therapies with $1.6 billion in sales, infusion systems with $655 million in sales and anesthesia products with $525 million in sales.

Infusion systems products was the only category to post a sales decline in 2010 and it was a significant one. Executives attributed the 24 percent loss in this product category to the Colleague recall as well as lower sales of disposable tubing sets used to administer IV solutions. Infusion systems product sales plummeted to $655 million, according to Baxter’s annual report.

The 11 percent growth in global injectables products last year came from the robust sales of “certain enhanced packaging products” as well as generic goods. Growth in Baxter’s international pharmacy compounding and U.S. pharmaceutical partnering businesses also helped boost sales, as did the $112 million sale of its U.S. generic injectables business to Hikma Pharmaceuticals PLC in October 2010.

Baxter’s renal segment bounced back from a disappointing 2009 performance with a 5 percent net sales increase last year. Two of the factors that had little effect on revenue in 2009—the purchase of Continuous Renal Replacement Therapy products from Edwards Lifesciences Corporation and the growing number of peritoneal dialysis patients throughout the United States, Latin America, Asia and Eastern Europe— largely were responsible for turning around the fortunes of this segment. Net sales totaled $2.3 billion.

The strengthening U.S. dollar helped boost international sales by 5 percent last year and offset the 1 percent slide in domestic sales. U.S. revenue totaled $5.2 billion for the year ended Dec. 31, while international sales rose to $7.5 billion, according to the annual report.

“The company has responded to an evolving and challenging environment with new strategies, organizational changes and programs aimed at enhancing our commercial, operational and scientific effectiveness,” Parkinson noted in Baxter’s annual report. “These efforts allowed us to weather the headwinds in 2010, and we ended the year a stronger company.”

That strength now lies not in Baxter’s finances, but in the investments it has made in its future. The $915 million the company invested in research and development last year went toward late-stage research projects, early stage and exploratory work and product development. Baxter advanced a total of 14 R&D programs into Phase III clinical trials, regulatory review or commercialization in 2010.

Among the most significant of these advancements was FDA approval of the company’s Investigational Device Exemption application for its home hemodialysis clinical trial, which was expected to start this year, and the agency’s endorsement of TachoSil, an adjunctive hemostatic agent that features a collagen patch coated with human coagulation factors. The coating is dissolved by saline, blood or other bodily fluids to form a fibrin clot, which helps the patch stick to a wound and stop the bleeding.

One of Baxter’s main focal points last year was the enhancement of its organizational, commercial and operational effectiveness. To help improve operations, the company combined its Medication Delivery and Renal businesses last fall and formed a new segment called Medical Products. Parkinson said the move was designed to help lower costs and drive productivity as well as more efficiently serve customers.

To enhance its product lineup and scientific capabilities, Baxter formed several new international business partnerships through both acquisitions and manufacturing supply and distribution agreements. Some of the more notable acquisitions include the $330 million purchase of ApaTech, an orthobiologics company in the United Kingdom that makes a synthetic bone graft material, and the procurement of the hemophilia-related assets of French biopharmaceutical firm Archimex SAS.

Baxter also extended its footprint on the other side of the world by signing a manufacturing supply and distribution agreement with Iraeli firm Kamada Ltd. The agreement gives Baxter exclusive distribution rights in the U.S., Australia, New Zealand and Canada for Glassia, a liquid alpha1-proteinase inhibitor for the treatment of alpha 1 antitrypsin deficiency.In addition, the firm finalized a collaboration with Takeda Pharmaceutical Company Ltd. for the development, production and supply of cell culture-based influenza vaccines, both pandemic and seasonal, for the Japanese market.

$12.6 Billion
NO. OF EMPLOYEES: 49,700

Ask Robert L. Parkinson about growth strategies for his company, Baxter International Inc., and he most likely will respond with a verbal thesis about the importance of research and development. “We [must] continue to improve the productivity of new product development so we are able to optimize our R&D investment,” the chairman and CEO declared in an interview published within the firm’s 2009 annual report. “Research and development [R&D] is our most important strategic priority…”

Parkinson’s words are ironic, considering research and development was not a top priority when he arrived at the Deerfield, Ill.-based firm in 2004. During his first year at the helm, Parkinson cut expenses throughout the company in order to jump-start weak sales, and no department was spared. He ended research on an anemia drug and eliminated almost all funding for a system that disinfected donated blood—endeavors he described at the time as “pet projects.”

“R&D, just like anything else, tends to become pet projects,” he told a reporter for chicagobusiness.com. “You have to know how to kill projects. On the surface, that sounds counterintuitive, but you have to optimize.”

The ensuing five years have been transformative for Parkinson as he righted the listing healthcare conglomerate and navigated it back to profitability. Spending cuts are still made—though not at the rate or intensity of Parkinson’s freshman year—and they are less likely to be made in R&D. In fact, just the opposite has occurred—R&D spending has risen 72 percent under Parkinson’s leadership, going from $533 million in 2005 to $917 million in 2009, the highest total in the company’s history.

Baxter executives credit the nearly $1 billion investment in R&D with helping the company achieve record net sales, earnings and cash flows last year. Global net sales, according to Baxter’s 2009 annual report, totaled $12.6 billion, a 2 percent increase compared with the $12.3 billion the firm posted in 2008. More than half of that revenue, or $7.2 billion, came from foreign customers, though that figure represented a slight (1 percent) drop compared with the $7.3 billion the company reported in 2008. Managers attributed the diminutive drop in part to fluctuating exchange rates that rocked markets last year and strengthened the U.S. dollar. Executives said the instability in foreign exchange rates unfavorably impacted net sales by 5 percentage points.

Still, oscillating currency rates were no match for the company’s BioScience segment—the engine responsible for driving 2009 profits. Prompted by increased demand and better pricing for Gammagard liquid (sold as Kiovig in most markets outside of the United States)—a fluid similar to the body’s antibody-replacement therapy—IGIV (immune globulin intravenous) and other plasma protein products, sales in the BioScience segment climbed 5 percent to $5.6 billion. Continued adoption of Baxter’s advanced recombinant therapy, Advate, largely was responsible for generating $2 billion in recombinant product sales last year, a 5 percent increase compared with the $1.9 billion those products garnered in 2008 and a 20 percent jump compared with the $1.7 billion posted in 2007.

Plasma protein and antibody therapy products virtually had identical sales ($1.3 billion) and growth rates (10 percent and 12 percent, respectively). Regenerative product sales grew 8 percent to $442 million, while sales in the segment’s “other products” category fell for the second consecutive year, due mostly to lower international sales of FSME-IMMUN, a tick-borne encephalitis vaccine and a reduction in advance purchase agreements for the H1N1 swine flu vaccine.

While not as powerful an engine for growth as the BioScience segment, the Medication Delivery sector nevertheless delivered strong results last year, amassing $4.6 billion in net sales. The top revenue-generator—which remained unchanged from previous years—was global injectables, with $1.7 billion in sales, followed by intravenous (IV) therapies with $1.5 billion in sales, infusion systems with $858 million and anesthesia with $492 million. Baxter’s leaders attributed the rise in IV therapy sales to increased demand and improved pricing for IV solutions and nutritional products.

Infusion system sales fell 5 percent as problems with the company’s line of Colleague infusion pumps continued to haunt the firm. Baxter has not sold the Colleague pump in the United States since 2005 due to various defects, including battery and alarm failures, false alarms and inadequate infusion. The pumps, however, are still used in hospitals and clinics for medical infusion treatments (official estimates put the number of pumps still in circulation at 200,000).

Baxter’s ostensible never-ending nightmare over the Colleague pumps lingered in 2009 as the company issued both an Urgent Device Correction letter to customers and a U.S. Food and Drug Administration (FDA)-ordered Class I recall within seven weeks of each other. The Urgent Device Correction letter notified customers about failure codes in Colleague pumps that could potentially disrupt infusion treatments and it warned them about the possibility of overheating and fires due to improper cleaning and/or compromised battery harness insulation.

Baxter’s Colleague nightmare, however, is far from over. Fed up with the recalls, repeated meetings with Baxter management, the seizure of pumps and the 56,000 customer complaints, the FDA earlier this year ordered the company to recall and destroy all models of its Colleague infusion pumps. The agency also ordered Baxter to provide refunds to Colleague pump owners or replace pumps at no cost to owners.

The litany of problems with the Colleague pumps also prompted the FDA to launch a new initiative earlier this year to address pump safety. Part of the initiative requires manufacturers to perform more testing on the devices before they can be sold to customers.

To offset dwindling international sales of the Colleague pumps and bolster its infusion pump business, Baxter shelled out $100 million in April 2009 for a three-year distribution agreement with Sigma International General Medical Apparatus LLC, a privately held infusion pump maker based in Medina, N.Y. The price tag also included a 40 percent equity stake in the firm.

Infusion system sales were not Baxter’s only weak spot last year, though. Sales in its Renal segment fell 2 percent to $2.2 billion for the year ended Dec. 31 despite rising numbers of peritoneal dialysis patients throughout the United States, Latin America, Asia and Eastern Europe. Executives blamed foreign exchange rates for the sales decline.

Net sales of peritoneal dialysis and hemodialysis products were flat but somewhat offset by revenue from the sale of Continuous Renal Replacement Therapy products (CRRT) from Edwards Lifesciences Corporation. Baxter purchased the CRRT product line from Edwards last summer for $65 million in an effort to expand its CRRT business into new markets such as Europe and Australia. Edwards’ CRRT products generated $50 million in revenue in 2008.

Despite disappointing sales in its Renal segment and infusion pump business, Baxter still managed to carve out a net income of $2.2 billion, or $3.59 per diluted share—an increase of 9.5 percent and 13.6 percent, respectively, compared with the previous year.

The company’s gross margin and cash flows grew by significant margins as well in 2009. Its gross margin climbed 6.4 percent to $6.5 billion and cash flows rose $394 million to end the year at $2.9 billion.

$12.3 Billion
NO. OF EMPLOYEES: 48,500

Baxter International has had its share of challenges during the past few years—from tainted heparin manufactured in China to ongoing difficulties with its Colleague line of infusion pumps. Despite running into hurdles, the company seems to leap them in a strong stride, as financial performance for the year was surefooted.

For fiscal 2008, the company’s sales increased 10 percent to $12.3 billion. Double-digit growth is no small achievement in a financial market that has recently hit historic lows (though the positive effect of currency exchange accounted for 4 percent of sales growth). Net income also showed strong growth, increasing 18 percent to $2 billion.

“While no company, including Baxter, is immune to the issues affecting the global economy, Baxter is well positioned for 2009 and beyond as a result of our diversified healthcare model, strong market positions and, most important, the critical nature of our products,” CEO Robert L. Parkinson, Jr. said in a letter to shareholders.

According to Parkinson, the firm has made “significant progress” over the last few years to strengthen its financial position, renew its commitment to research and development (R&D) and grow globally. For example, the company increased its research and development spending from $760 million in 2007 to $868 million in FY08. Each of the company’s three major units—BioScience, Medication Delivery and Renal—sells non-device products such as drugs, though many are marketed with a device component or require a device component for delivery. Therefore, it is difficult to separate the company’s revenues purely by device and non-device product lines.

For fiscal 2008, the company’s BioScience division sales increased 14 percent ($5.3 billion); Medication Delivery rose 8 percent ($4.6 billion); and Renal sales showed slower growth at 3 percent ($2.3 billion). Overall, the bulk of the company’s sales came from overseas sources—a total of $7.3 billion of revenue was generated internationally.

The company’s ongoing R&D focus is evident in its new product releases and new clinical studies launched. Over the course of the year, Baxter received approval for or launched several new products, initiated eight major clinical trials, advanced numerous early stage internal programs, and established several new partnerships. The company also broke ground on a new 150,000-square-foot R&D center in Belgium, which the company expects to complete in 2010.

In 2008, Baxter launched its Gelfoam Plus, a hemostatic product for use in surgical procedures. In addition, the company completed a home hemodialysis device prototype with development partner DEKA, an R&D company based in Manchester, N.H. During the year, the company also began a Phase III trial combining its Gammagard Liquid with Enhanze, a proprietary drug delivery technology from Halozyme, a San Diego, Calif.-based biopharmaceutical company. The product is for the subcutaneous delivery of immune globulin intravenous (IGIV) for patients with primary immune deficiency, which could allow patients to administer their dose of IGIV once monthly at home.

The company also received U.S. Food and Drug Administration (FDA) approval of Artiss (fibrin sealant—human), which the firm claims is the first slow-setting fibrin sealant indicated for use in adhering skin grafts in adult and pediatric burn patients. Baxter also released the V-Link Luer-activated device with VitalShield protective coating. According to Baxter officials, it is the first needleless intravenous connector to contain an antimicrobial coating that kills 99.9 percent of specific common pathogens that cause catheter-related bloodstream infections.

On the manufacturing side, in early 2008, the company’s plant in Cartago, Costa Rica, was recognized with the Shingo Prize for Operational Excellence. In past years, several Baxter facilities have been awarded the Shingo prize, most recently in North Carolina and Mexico in 2007. The award, which recognizes businesses and researchers demonstrating outstanding achievements in manufacturing and the supporting business processes that lead to outstanding quality, cost, delivery and business results, is administered by the College of Business at Utah State University.

It is named in honor of Dr. Shigeo Shingo, the renowned engineer who helped create the highly regarded Toyota Production System. Approximately 1,200 employees at the 152,000-square-foot Cartago plant produce a range of products, including IV administration sets, along with subassemblies for other Baxter plants. Also noteworthy, the company’s plant in Bloomington, Ind., won the 2008 North American Contract Manufacturing Customer Service Leadership of the Year Award from Frost & Sullivan.

To shore up its infusion pump business, in early 2009, Baxter International Inc. paid $100 million for a 40 percent stake in and a distribution agreement with privately held infusion pump maker Sigma International General Medical Apparatus LLC, based in Medina, N.Y.

Baxter has experienced longstanding problems with its line of medical infusion pumps. Most recently, in early March, the FDA issued a Class I recall—the agency’s most serious recall level—for the company’s Colleague infusion pump. The firm hasn’t sold Colleague infusion pumps in the United States in more than four years. The device has been plagued with battery failures, problems with false alarms, alarm failures and inadequate infusion.

Some pumps, however, remain in service with hospitals and clinics. Baxter continues to monitor the existing inventory. As part of the deal, Baxter also may make payments of up to $130 million for “milestone” achievements Sigma reaches in R&D or regulatory matters, as well as acquiring the outstanding 60 percent stake in Sigma. The agreement will allow Baxter to provide Sigma’s Spectrum brand of large-volume infusion pumps. Baxter also will have a stake in Sigma’s product development pipeline. According to Baxter officials, the deal will complement the company’s current infusion systems portfolio and next-generation technologies.

“Baxter is pleased to team with Sigma to expand our portfolio of infusion pumps, including the U.S.-cleared Spectrum, which is equipped with advanced safety and clinician-friendly features,” Kevin McCulloch, general manager of Global Infusion Systems, part of Baxter’s Medication Delivery business, said at the time of the deal. “This agreement enables us to immediately support our U.S. customers and will reinforce our position as a leading global provider of infusion systems products.”

The Spectrum pump was launched in the United States in August 2005 and is developed and manufactured by Sigma. According to the company, there are more than 35,000 Spectrum pumps currently in use domestically. As the distribution agreement covers international markets, Baxter may seek approval for the Spectrum pump in additional geographies.

Results for the first quarter of 2009 have been a mixed bag. Baxter’s worldwide sales totaled $2.8 billion in the first quarter and declined 2 percent.

Excluding the impact of foreign currency, worldwide sales increased 6 percent. Sales within the United States increased 5 percent to $1.2 billion, while international sales declined 7 percent to $1.6 billion. Excluding the impact of foreign currency, Baxter’s international sales grew 7 percent. Compared to the first quarter of 2008, first quarter net income this year increased 20 percent to $516 million, an increase of 20 percent from $429 million reported in the first quarter of 2008.

In the first quarter, Medication Delivery sales of $1 billion declined 3 percent (and excluding foreign currency increased 6 percent). Renal sales of $515 million declined 8 percent (and excluding foreign currency increased 1 percent). BioScience revenues totaled $1.3 billion, increasing 3 percent. Excluding foreign currency, BioScience sales advanced 11 percent. For the full year, Baxter officials expect sales growth, excluding the impact of foreign currency, of approximately 7 percent. Based on current foreign exchange rates, Baxter expects reported sales growth to be approximately flat.

$11.3 Billion
NO. OF EMPLOYEES: 46,000

Though 2008 may be turning into the year of heparin for Baxter International, the company delivered solid financial performance for 2007, reporting a 22% increase in net profit.

With an eye toward its robust product pipeline, Baxter International managed to expand its geographic presence while accelerating its R&D investments in 2007—achieving success in the process. With total net sales of $11.3 billion, the drug and device manufacturer posted an increase of 9%, compared with $10.4 billion for 2006; of the 2007 total, $4.8 billion came from US sales, with the rest coming from international sales. Furthermore, net income was $1.7 billion, or $2.61 per diluted share, including after-tax special items of $119 million or 18 cents per diluted share. On an adjusted basis, excluding special items, the company reported net income of $1.8 billion, or $2.79 per diluted share, an increase of 25% compared with 2006.

Given its strong financial position, Baxter broke its own record for R&D spending, increasing its investment to $760 million, a 24% increase from $614 million in 2006. As a result of its pattern of year-over-year increases on R&D expenditures, the company gained approval for or launched more than 12 new products and advanced many of the programs in its product pipeline.

“2007 was a very successful year for our company,” said Robert L. Parkinson, Jr., chairman and CEO. “We met or exceeded expectations on all key financial metrics throughout the year. We are also particularly pleased with the improved profile of our earnings, the strength of our overall financial position, and most importantly, the progress we have made in accelerating innovation. We’re very well positioned to continue to meet our commitments, leverage the benefits of our diversified healthcare model, and deliver enhanced value to our various stakeholders in 2008 and beyond.”

Each of the company’s three major units—BioScience, Medication Delivery and Renal—sells non-device products such as drugs, though many are marketed with a device component or in conjunction with a device. Baxter does not break down revenues by device and non-device product lines.

For 2007, net sales were $4.6 billion for BioScience, representing 6% growth compared to $4.4 billion in 2006. Medication Delivery sales were $4.2 billion, compared to $3.9 billion previously, marking 8% growth. The Renal segment posted a sales increase of 8% as well, with 2007 total net sales of $2.2 billion, compared to $2.1 billion in 206.

Bioscience mostly is non-device-related products, as it manufactures recombinant and plasma-based proteins for treatment of hemophilia and other bleeding disorders; plasma-based therapies for treatment of immune deficiencies; biosurgery and other products for regenerative medicine; and vaccines. The major drivers of BioSciences’ growth in 2007 included sales volumes for Baxter’s advanced recombinant therapy, Advate—sales of the blockbuster drug exceeded $1.2 billion. In the company’s regenerative medicine product line, Floseal and Coseal sealants, classified as medical devices by the FDA, were the primary growth drivers.

The Medication Delivery segment, which includes IV Therapies ($1.4 billion, 9% growth), Global Injectables ($1.5 billion, 4% growth), Infusion Systems ($860 million, 5% growth), Anesthesia ($422 million, 33% growth) and “Other” products ($43 million, a 4% decrease from 2006), had marked progress in 2007 compared with 2006—that year, total net sales had decreased 2%.

In the Infusion Systems segment, increased international sales of disposable tubing sets used for IV administrations played a role in 2007’s growth achievement. In addition, international sales of Colleague infusion pumps rebounded.

The Colleague line of infusion pumps are used to give controlled amounts of medications or other fluids to patients intravenously or other direct line into the bloodstream. In 2005, the FDA sent warning letters and seized the devices (including Syndeo infusion pumps) from the company’s Illinois warehouses due to problems including under-infusion by the device, battery failures, false alarms and failure to alarm. The company signed a consent decree with the agency and agreed to stop manufacturing and distributing in 2006. Before resuming sales in the United States, the company had to agree to continue to service pumps currently in use and supply additional pumps to customers when medically necessary.

By February 2007, Baxter received clearance from the FDA to resume sales. But in July 2007, the FDA issued a recall of Colleague and Flo-Gard infusion pump models related to the falsification of service and repair data. The recall initially pertained to 534 infusion pump devices in the United States brought in for routine maintenance or corrections at the company’s Phoenix, AZ service center. In the course of ongoing quality control processes, the company discovered falsified repair, test and inspection data sheets, which included electrical safety data. Consequently, it is possible that pumps sent to be serviced, repaired or corrected were returned without service being performed on them. As a result, three employees in the Phoenix service center were dismissed. In August, Baxter extended the recall to include an additional 986 Colleague devices.

Final 2007 sales figures for the device were not “significant,” according to the Baxter’s annual report. But, “resolving issues with the Colleague infusion pump has been Baxter’s top priority,” said Peter Arduini, corporate vice president and president of Baxter’s Medication Delivery business, after the FDA granted 510(k) pre-market notification clearance to Baxter. “Baxter remains committed to our infusion systems customers and will continue to invest in this business to enhance the delivery of lifesaving medications.”

The Renal segment’s product lines are broken down into two categories: those for peritoneal disease (PD Therapy) and hemodialysis therapy (HD Therapy). PD Therapy reported net sales of $1.8 billion, a 10% gain from $1.6 billion in 2006, while HD Therapy had net sales of $448 million, a 4% increase from $431 million in the prior year. Latin America, Asia and the United States were the top sales regions for PD Therapy. HD Therapy attributed its sales growth to higher revenues stemming from Baxter’s Renal Therapy Services businesses, which operate dialysis centers.

Looking specifically at the company’s overall medical device portfolio, some of the notable 2007 product introductions included the V-Link Luer-activated device with VitalShield protective coating (the first needleless IV connector containing an antimicrobial coating) and the Gelfoam Plus Hemostasis Kit (for control of bleeding during surgical procedures). In the United States and Canada, Baxter also launched Baxject II, a needleless transfer device with built-in filters for Advate. In February 2007, the FDA also cleared Baxter’s upgraded Ipump Pain Management System. In terms of product development activities, the company completed enrollment in a Phase II clinical trial using Baxter’s proprietary Isolex technology to select CD34+ adult stem cells from patients with chronic myocardial ischemia re-infusion into their hearts as a means to restore blood flow.

During the year, strategic alliances and acquisitions also played a role in Baxter’s continued gains. For example, Baxter signed an agreement with Nycomed to market and distribute its TachoSil patch (a collagen sponge coated with lyophilized clotting fatters used for hemostasis and tissue sealing) in the United States upon FDA approval. Baxter also expanded its relationship with Halozyme to include the use of Hylenex (a subcutaneous delivery technology that enhances absorption of injectable products) and the use of Halozyme’s Enhanze technology in the development of a subcutaneous route of administration for Baxter’s liquid formulation of IV immune globulin. In the HD and PD Therapy categories, Baxter collaborated with DEKA for the development of a next-generation home HD machine for renal disease. Finally, the company acquired just about all the assets of MAAS Medical, a provider of infusion systems technology.

On the organization front, the 2007 fiscal year included a little bit of streamlining. In March, Baxter completed the sale of its Transfusion Therapies business to Texas Pacific Group (TPG) and Maverick Capital Ltd. (private investment groups) for $540 million. TPG and Maverick Capital, Ltd. established a new independent company called Fenwal Inc. With the acquisition, Fenwal becomes one of the world’s largest suppliers of products and services to the transfusion medicine industry, with a product portfolio of manual and automated blood-collection products and storage equipment, approximately 3,500 employees and five manufacturing facilities worldwide.

The end of 2007 and beginning of 2008 brought Baxter a new challenge in the form of a recall of the blood thinner heparin. The main ingredient in some of Baxter’s heparin, made in China from pig intestines, was found to be contaminated. Some medical devices contain or are coated with heparin. In June 2008, the FDA updated the number of deaths of patients who took heparin, nearly doubling it to 149, but said a link could not be established between the deaths to contaminated forms of the blood-thinning drug. An earlier FDA probe found chemical contaminants in some batches of Baxter’s heparin. Officials previously had said there were 81 deaths among patients treated with heparin since January 2007. Baxter began recalling lots of the drug in January.

The contamination has resulted in numerous lawsuits against Baxter and other companies that manufacture heparin. The problem also has spurred multiple hearings on Capitol Hill regarding the industry’s and the FDA’s review of foreign suppliers to the pharmaceutical and medical device industries. The FDA also said in a posting on its Web site that contamination could lead to inaccurate test results from diagnostic devices that monitor heparin or use it as part of the device itself.

Baxter has said the main ingredient for its heparin probably was contaminated before reaching its supplier in China.

Despite the setbacks, the company seems off to a good financial start in 2008. The first quarter of 2008 showed steady progress for Baxter, which recorded $2.9 billion in sales, a 13% increase from $2.7 billion reported for the same period in 2007. The largest sales gain, at 13%, was achieved by the BioScience segment, with sales totals for the quarter of $1.2 billion. Medication Delivery sales grew 8% to $1.1 billion for the quarter, and Renal sales increased 6% to $558 million.

“Our strong and improving financial position reflects the continuing momentum in our business,” said Robert J. Parkinson, Jr., chairman and CEO. “Our favorable outlook for the full year allows us to continue to accelerate our investments in research and development programs that will improve treatment for patients, expand access to care and enhance the quality of life for people around the world.”

As such, Baxter raised its earnings outlook for 2008 (excluding the impact of foreign exchange) to sales growth of 5% to 6%.

$9.8 Billion
No. of Employees: 47,000

While it appeared that Baxter was climbing out of its former financial and regulatory doldrums, the medical device company hit some snags as more regulatory problems developed, especially in its infusion systems business.

The medical device manufacturer has been rebuilding over the last year-and-a-half, after CEO Robert Parkinson took over for Harry Kraemer, who experienced several quarters of poor earning results and accounting irregularities. And the company was still reeling from deaths of 53 patients in 2002 due to contaminated dialysis filters made by a Baxter subsidiary.

In October 2005, regulators seized 6,000 Colleague infusion pumps and approximately 850 Syndeo PCA syringe pumps that Baxter had withheld from shipping earlier in 2005. In March that year, Baxter reported to customers that the there were problems with certain Syndeo models that could disrupt infusions of intravenous therapies. Later, in July, the FDA had classified the recall as Class I, the most serious of the three classes. In all, three deaths and six serious injuries may have been associated with the devices.     For fiscal 2005, the company recorded a $77 million charge for remediation costs associated with correcting design issues for the infusion pump.

In the 2005 annual report, Parkinson (who came over from Abbott Labs in 2004) said that the company was working to resolve the issue with the FDA. “I believe we already have made substantial progress in addressing these challenges,” he noted. “This includes the establishment of a Device Center of Excellence focused on ensuring the quality of sophisticated, electromechanical devices like IV pumps.”

Despite the recall problems, the company was financially flourishing as its profit for 2005 almost tripled to $956 million—it appears the company’s reorganization plan to trim the fat from the corporation was working, since it reduced its debt by almost $1 billion. The company also registered a modest 4% rise in sales to $9.8 billion. It matched that in the first quarter of 2006, as it collected $2.4 billion in revenues.

“We made considerable progress during 2005, meeting or exceeding virtually all of our key financial objectives, despite the challenges with the Colleague Infusion Pump,” said Parkinson, who additionally noted that the company added 20 new R&D alliances. “During 2005, we also increased our spending on R&D and accelerated the pace of business development initiatives, which reflects our commitment to reinvigorating innovation within our company.”

Some of the more beneficial alliances include one with Nektar Therapeutics and Lioxen Technologies in developing longer-acting forms of Factor VIII and other blood-clotting proteins, as well as with Cangene Corporation to market and distribute WinRho SDE, an antibody therapy to treat immune thrombocytopenic pupura (an autoimmune disorder).

In addition to the problems with the Colleague, Baxter informed the FDA in November that it was withdrawing the 6060 Multi-Therapy Infusion pump because of problems occurring when the device was used to distribute pain and other critical medications. The pump delivers intravenous medications, commonly in home and non-hospital settings. According to Baxter, it had received reports of one death and two injuries that may have been linked with the pump. The company recorded a $49 million charge for fiscal 2005 for the costs of withdrawing the 6060.

The company has three major segments: BioScience, Medical Delivery and Renal. Although each unit sells products that also contain non-medical devices such as drugs, many of these are marketed in conjunction with devices. The company does not break out revenues by device and non-device products.

While the company’s largest segment is its Medication Delivery segment, the recalls reduced its revenues by 1%. And with the BioScience division growing by 10%, it put the two units almost equally in the sales leadership position at Baxter.

While Baxter is hurting in its infusion systems business, the company received a boost from sales of its Advate Antihemophilic Factor, a recombinant for treatment of hemophilia A that doubled to more than $600 million as part of its BioSciences segment.

Regionally, more than half of the company’s sales and earnings came from outside the United States. China is particularly lucrative, with some of Baxter’s products for peritoneal dialysis (PD) doing quite well and poised to do even better, since that industry is growing at 25% annually. Baxter is focusing on growing PD as a therapy of choice for people with end-stage kidney failure. In 2005, the company surpassed 7,500 PD patients in China. Also in China, Baxter launched sevoflurane, an inhalation anesthetic.

In the first quarter of 2006, the company started a $60 million investment to expand production capacity at its four manufacturing facilities in China to accommodate the expected growth in its PD and intravenous solutions products.

In 2005, Baxter launched several new products, many of which stemmed from the renal division, including the release of Extraneal, Nutrineal and Physioneal, all specialty PD solutions. The BioSciences division released Gammagard liquid, a ready-to-use intravenous immunoglobulin for treating immune deficiencies. In addition, the medication delivery segment launched sevoflurane.

On a sad note, former CEO William B. Graham, who was the head of the company for 28 years (1953 to 1980), died in January 2006. Graham led Baxter through some of the bigger innovations in the field, including the first flexible intravenous container system, the first artificial kidney, the first plastic blood-collection system, the first clotting factor for people with hemophilia and the introduction of continuous ambulatory peritoneal dialysis.