Q2 trends
Baxter International is moving forward with plans to spin out its kidney care and acute therapies units, and sell its biopharma solutions business, amid a broader reorganization. The company currently expects the spinoff to take place by July 2024, and the biopharma solutions sale to happen in the third quarter of this year.
Deerfield, Illinois-based Baxter acquired connected care company Hillrom two years ago for $10.5 billion and makes products for dialysis, IV access and surgery. Like other medical device companies that have reported earnings this quarter, Baxter has benefited from a rise in procedure volumes, supply chain improvements and stabilizing macroeconomic conditions, the company said Thursday in an earnings statement.
Hospital budgets have remained a question for providers of medical equipment. “Our current expectation is for hospital capital spending to improve in the second half of the year as compared to the first half of the year as hospitals reevaluate their budgets and reprioritize areas of spend,” Baxter CEO José Almeida said in a Wednesday call with investors.
Baxter’s revenue for the quarter outpaced expectations, Stifel analyst Rick Wise wrote in a research note. However, the company also posted a wider net loss, driven by $476 million in costs for business optimization and intangible amortization.
Planned divestments
Baxter recently gave the standalone company that will be formed from its kidney care and acute therapies segments a name: Vantive. The publicly traded company will be led by Chris Toth, who was previously CEO of Siemens Healthineers subsidiary Varian. Other specifics of the business are still being finalized, including its operating model and organizational design.
As for Baxter’s biopharma solutions business, the company plans to sell it for $4.25 billion to private equity firms Warburg Pincus and Advent International. The sale is expected to close by the end of September, acting CFO Brian Stevens said in the investor call. Baxter plans to use the proceeds of the sale to pay down its debt.
Forecast
Baxter reported two sets of forecasts, depending on whether the sale of its biopharma solutions business closes this quarter, as expected. If the business sells, the company expects no change in sales growth from continuing operations, and adjusted earnings per share of $2.87 to $2.95 for 2023.
If the business does not sell this quarter, the company expects 2023 sales growth from continuing operations of 1% to 2% year-over-year, and adjusted earnings per share of $2.92 to $3.00.
