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Baxter's Acute Therapies Profile Strong, Competition Rife

Zacks Equity Research

On Feb 13, we issued an updated research report on Baxter International Inc. BAX. While solid Acute Therapies profile is a positive, generic competition for Cyclophosphamide and lackluster sales in a few sub-segments are key concerns.

The stock currently carries a Zacks Rank #3 (Hold).

Solid Acute Therapies Profile

Baxter’s performance in Acute Therapies has been consistently driven by improving utilization for CRRT globally and increased demand for multi-organ support products. In Acute Therapies, Baxter launched the first 3-in-1 oXIRIS set for continuous renal replacement therapy and sepsis management protocols. This adds to Baxter's multi-organ therapy offering, utilizing the Prismaflex system.

For the Acute Therapies business, Baxter expects approximately 7-8% growth on a year-over-year basis in 2019.

In fourth-quarter 2018, net revenues at the Acute Therapies business totaled $137 million, representing 12% growth on a constant-currency basis. Increased global demand for Baxter's continuous renal replacement therapieshelped the business to perform exceedingly well.

This apart, management at Baxter expects an upward trend across most of its segments in 2019. Also, it expects acquisitions to be accretive. Renal Care is expected to witness 2-3% growth. In Medication Delivery, management at Baxter expects sales to increase approximately 6%.

Moving to Clinical Nutrition, Baxter expects sales growth of approximately 3%. In the Advanced Surgery business, the company anticipates sales to increase 3-4% on a constant-currency basis.

Generic Competition for Cyclophosphamide

Cyclophosphamide is a part of Baxter's Hospital Products segment. Over the last five years, cyclophosphamide has been displaying disappointing performance for the most part. Lower cyclophosphamide sales pose threats to the Integrated Pharmacy Solutions franchise business.

Despite a promising portfolio, the company has failed to grab market share and substantially boost its top line due to generic competition for cyclophosphamide.

For 2019, Baxter expects U.S cyclophosphamide sales of approximately $95 million compared with $166 million registered in 2018.

Price Performance

In a year’s time, shares of Baxter have gained 10.1% comparing favorably with the industry's 6.5% growth. The current level also compares favorably with the S&P 500 index's decline of 6.9% over the same time frame.

 

Key Picks

A few better-ranked stocks in the broader medical space are Surmodics, Inc SRDX, Abbott Laboratories ABT and Cardiovascular Systems, Inc. CSII.

Surmodics has a long-term expected earnings growth rate of 10%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abbott’s long-term earnings growth rate is projected at 11.7%. The stock carries a Zacks Rank #2 (Buy).

Cardiovascular Systems exceeded the Zacks Consensus Estimate in the trailing four quarters, the average being 77.1%. The stock sports a Zacks Rank of 1.

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Abbott Laboratories (ABT) : Free Stock Analysis Report
 
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