Baxter International's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Baxter International (BAX)

Q1 2012 Earnings Call

April 19, 2012 8:30 am ET

Executives

Mary Kay Ladone - Vice President of Investor Relations

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

Analysts

James Francescone - Morgan Stanley, Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

David H. Roman - Goldman Sachs Group Inc., Research Division

Michael N. Weinstein - JP Morgan Chase & Co, Research Division

Matthew S. Miksic - Piper Jaffray Companies, Research Division

Rajeev Jashnani - UBS Investment Bank, Research Division

Robert A. Hopkins - BofA Merrill Lynch, Research Division

Frederick A. Wise - Leerink Swann LLC, Research Division

Matthew J. Dodds - Citigroup Inc, Research Division

Presentation

Operator

Good morning, ladies and gentlemen, and welcome to Baxter International's First 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 at Baxter International. Ms. Ladone, you may begin.

Mary Kay Ladone

Thanks, Sean. Good morning, and welcome to our First Quarter 2012 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, including comments regarding our financial outlook, new product developments and regulatory matters contain forward-looking statements that involve risks and uncertainties; and of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more detail 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. We're pleased today to announce our financial results for the first quarter and also provide you with an update on our full year 2012 outlook. As you all saw in our press release that was issued earlier this morning, EPS of $1.01 per diluted share exceeded our guidance and increased 3% versus the prior year on an adjusted basis.

First quarter sales after adjusting for FX increased 4% and exceeded our sales growth guidance of approximately 2%. Our strong financial position continues to provide us the flexibility to make investments to grow our core product portfolio, expand further in developing and emerging markets, advance our pipeline, and pursue opportunities that will position us for the future all with an eye toward delivering enhanced value to our shareholders.

R&D increased 10% this quarter, as our sustained focus on innovation has afforded us with a meaningful new product pipeline that's as strong today as any time in our history. And I remain encouraged with the progress we're making, which has resulted in a number of recent accomplishments that I'd like to briefly highlight this morning.

First of all, within our leading hemophilia franchise, we've achieved a number of milestones. As you know ADVATE was approved in December by the FDA as the only recombinant Factor VIII prophylactic treatment for both children and adults. This approval was based on a study demonstrating that ADVATE significantly reduced median annual bleed rates from 44 bleeds when treated on demand to 1 when treated prophylactically, and included the approval of a new dosing schedule that offer some patients the choice of fewer infusions versus the current standard prophylaxis regimen.

The initial response from customers has been very positive as evidenced by the strong double-digit growth of ADVATE in the United States during the first quarter. We remain encouraged regarding the long-term growth prospects of our hemophilia franchise as we've secured both competitive gains and conversions from on-demand therapy to prophylaxis, and will continue to invest in additional marketing activities to promote our competitive advantage and drive awareness of this expanded label.

Also in hemophilia, we announced the initiation of 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 this important program through clinical development and determining whether BAX 855 can offer a treatment regimen required in fewer infusions than ADVATE.

In our regenerative medicine business, we initiated a Phase III trial to evaluate the efficacy and safety of an individual's own CD34+ stem cells to increase exercise capacity in patients with Chronic Myocardial Ischemia or CMI. CMI is one of the most severe forms of coronary artery disease causing significant long-term damage to the heart muscle and disability to the patient. It's often diagnosed based on symptoms of severe chest discomfort that do not respond to conventional medical management or surgical interventions.

In addition, in the quarter, we received approval for TISSEEL fibrin sealant for vascular surgery providing a broad hemostasis label in the United States. This is an expansion beyond previously marketed indications and represents a significant opportunity for this franchise going forward.

In Antibody Therapies, we filed GAMMAGARD LIQUID for use in treating multifocal motor neuropathy or MMN, representing our first neurological indication in the United States. If approved, GAMMAGARD LIQUID will be the first and only licensed immunoglobulin therapy for MMN in the U.S., where we've been granted orphan drug status by the FDA. This will complement the approval we received last year for MMN in Europe.

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