Baxter International (BAX)
Q4 2011 Earnings Call
January 26, 2012 8:30 am ET
Robert L. Parkinson - Chairman, Chief Executive Officer and President
Robert J. Hombach - Chief Financial Officer and Corporate Vice President
Norbert G. Riedel - Chief Scientific Officer and Corporate Vice President
Mary Kay Ladone - Vice President of Investor Relations
Matthew S. Miksic - Piper Jaffray Companies, Research Division
Michael N. Weinstein - JP Morgan Chase & Co, Research Division
Frederick A. Wise - Leerink Swann LLC, Research Division
Robert A. Hopkins - BofA Merrill Lynch, Research Division
David H. Roman - Goldman Sachs Group Inc., Research Division
Kristen M. Stewart - Deutsche Bank AG, Research Division
David R. Lewis - Morgan Stanley, Research Division
Lawrence S. Keusch - Morgan Keegan & Company, Inc., Research Division
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Good morning, ladies and gentlemen, and welcome to Baxter International's Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded by Baxter and is copyrighted material. It cannot be recorded or rebroadcast without Baxter's permission. If you have any objections, please disconnect at this time. I would now like to turn the call over to Ms. Mary Kay Ladone, Corporate Vice President, Investor Relations of Baxter International. Ms. Ladone, you may begin.
Mary Kay Ladone
Thanks, Sean. Good morning, and welcome to our Q4 2011 Earnings Conference Call. Joining me today are Bob Parkinson, CEO and Chairman of Baxter International; Bob Hombach, Chief Financial Officer.; and Dr. Norbert Riedel, Chief Science and Innovation Officer.
Before we get started, let me remind you that this presentation include comments regarding our financial outlook, new product developments and regulatory matters contain forward-looking statements that involve risks and uncertainties, and of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more details concerning factors that could cause actual results to differ materially.
In addition, in today's call, non-GAAP financial measures will be used to help investors understand Baxter's ongoing business performance. A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures is included in our earnings release issued this morning and available on our website.
Now I'd like to turn the call over to Bob Parkinson.
Robert L. Parkinson
Thanks, Mary Kay. Good morning. Thanks for calling in. As I've had the opportunity to reflect on 2011, I can tell you that I'm very pleased with the progress our company continues to make financially, operationally and scientifically. In fact, despite the global macro environment, competitive landscape and ongoing uncertainty, Baxter continues to report strong financial results. This includes record sales and earnings for 2011, as you saw this morning, while accelerating investments in innovation, advancing our new product pipeline and pursuing other initiatives to enhance long-term growth while returning significant value to our shareholders.
As you saw again our press release issued earlier this morning, adjusted EPS in the fourth quarter increased 5% to $1.17 per diluted share. For the full year, adjusted EPS was $4.31, which exceeded our original guidance range provided last January of $4.15 to $4.25 per diluted share. On a reported basis, worldwide sales in the fourth quarter increased 3%, and after adjusting for the U.S. multisource generic injectable divestitures, sales growth was 4%.
For the full year 2011, worldwide sales increased 8% or 5% after adjusting for foreign exchange and the divestiture. And we're particularly pleased with our continuing ability to generate significant cash flow, which exceeded $2.8 billion for the year while maintaining our disciplined capital allocation strategy of returning value to our shareholders through increased dividends and share repurchases.
As some of you may know, in October, Baxter achieved an important milestone in celebrating our 80th anniversary, providing an opportunity to reflect on our great heritage as a pioneer and innovator in the development of life-saving, life-sustaining therapies for patients and customers around the world. As you've heard me say many times, innovation is our most important strategic priority, and 2011 was an outstanding year, as we significantly increased our R&D investment to a record level.
This has resulted in a meaningful new product pipeline that's as strong today as at any time in our company's history, one that's focused on enhancing clinical outcomes, improving the safety and cost effective of treatments and expanding access to care. I'm specifically encouraged with our pipeline achievements in 2011, as we advanced more than 20 key R&D programs within late-stage clinical development. Many of these programs have the potential to profoundly improve the treatment and delivery of care for chronic diseases like hemophilia, immune deficiencies, Alzheimer's disease and end-stage renal disease.
So let me take just a moment to highlight a number of these accomplishments. Within our leading hemophilia franchise, we have achieved a number of milestones. For example, we've now completed the global Phase I/II clinical trial of BAX 817 or recombinant Factor VIIa therapy and plan to advance into Phase III in early 2012. We've also completed enrollment in the Phase I/III clinical trial of BAX 326 or recombinant Factor IX treatment for hemophilia B and expect to conclude the trial and file for U.S. approval in 2012.
We initially announced the initiation of the Phase III trial of BAX 111, the first and only recombinant bundle of brent [ph] factor, which provides an alternative treatment option to currently marketed therapies that are plasma derived. This is an exciting opportunity for Baxter with global market potential in excess of $300 million.
In December, ADVATE was approved by the FDA as the only Factor VIII prophylactic treatment for both children and adults. The approval was based on a Phase IV prophylaxis study demonstrating that ADVATE significantly reduced median annual bleed rates in hemophilia A patients by 98%, representing a reduction from 44 bleeds when treated on demand to 1 when treated prophylactically.
Of the 2 prophylactic regimens approved for use, the pharmacokinetic-driven dosing schedule of every 3 days offer some patients the choice of fewer infusions versus the current standard prophylaxis regimen. And earlier this month, we announced the dosing of the first patients in a Phase I clinical trial of BAX 855, a longer-acting PEGylated Factor VIII therapy based on the full-length ADVATE molecule. The Phase I results will serve as the foundation for advancing these important programs for clinical development in determining whether BAX 855 can offer a treatment regimen requiring fewer infusions than ADVATE.
In the area of immune deficiencies, we continue to be successful in driving differentiation of GAMMAGARD LIQUID by offering various dosage forms, enhancing delivery options and expanding the number of approved indications. As you know, early in 2011, we introduced the first and only 30-gram dose vial for GAMMAGARD LIQUID in the U.S., the most frequently prescribed dose for primary immune deficiency patients, which enhances user convenience.