Thursday, July 19, 2012

Baxter Pharmaceuticals Q2 Earnings Release

Baxter Pharmaceuticals:
Baxter Pharmaceuticals released moderately positive Q2 earnings today.
Adjusted EPS Came in at 1.12, in line with management’s range of 1.10 to 1.12
Q2 revenue increased by 4% on a constant currency basis*, in line with management’s sales growth forecasts. This growth was boosted by a net benefit from recent acquisitions and divestitures of 130 basis points.

On a segment basis:
Bioscience sales of $1.6 B increased by 1% in Q2, on a constant currency basis, 4%. Continued growth on top of last year's 10% growth shows that Bioscience is still a strong segment.

Most other segments experienced an increase of approximately 4% on a constant currency basis with the outlier being regenerative medicine which saw an increase of 18% or 21% on a CCB. This was predominately from a double digit growth of FLOSEAL (a drug that helps to stop hemophilia related bleeding) and Synovis (soft tissue repair products).

Gross margin increased to 51.8%, an improvement of 100 bps from last quarter, but moderately lower than same quarter last year due to foreign currency resulting in a loss of 50 bps

SG&A Totaled $789 Million and increased 3% as a result of recent acquisitions, pension expense, and marketing

R&D spending advanced 15% to 276 Million in order to fund a series of projects including investments in their hemophilia franchise, Alzheimers’s program, and phase III adult stem cell trial. In addition it reflects continued focus on a variety of early-stage initiatives.

Operating margin was 21.9%, 160 Bps below last year due to ramped up R&D and FX exposure

Interest expense was $22 Million, up from $15 million due to incremental expense of a $500 Million debt issuance in Dec. of last year and lower interest income

Forward projections:
Full year growth is expected to be approximately 2% after the impact of foreign currency.  EPS is on track to meet guidance of between 4.50 and 4.56. Third quarter EPS is within an expected range of 1.12 to 1.15

*Constant Currency basis: An exchange rate that eliminates the effects of exchange rate fluctuations and that is used when calculating financial performance numbers. Companies with major foreign operations often use constant currencies when calculating their yearly performance measures

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