Dive Brief:

• Baxter's second quarter revenue declined 4% as reported to $2.7 billion, the company disclosed Thursday. CEO Joe Almeida told investors during an earnings call the company's performance reflects the "evolving" impact of COVID-19 on its operations. “Three months ago, we were hoping to see some easing in the trajectory of this deadly pandemic by now. Sadly, while the hotspots may have shifted, the infection rates and impact remain staggering,” he said.
• Acute therapies delivered over 40% growth in the quarter. However, this increase only partially offset declines in Baxter's advanced surgery, medication delivery and pharmaceuticals businesses, all of which were negatively impacted by lower rates of hospital admissions and elective surgeries. Chief Financial Officer Jay Saccaro estimated there was more than $180 million in revenue downside in the quarter related to COVID-19, of which medication delivery sales were negatively impacted by $100 million.
• Going forward, Baxter expects full-year 2020 sales growth to be between -1% and 1% on a reported basis and to be flat or up by low-single-digits on both a constant currency and operational basis compared to the prior year. Nonetheless, Baxter cautioned that the prediction assumes a sequential quarterly improvement in both hospital admissions and surgical volumes, which remain uncertain. Analysts at SVB Leerink wrote in a Thursday note that they believe the guidance is "likely conservative given what sounds like more muted recovery assumptions in the back half of 2020 vs. competitors."

Dive Insight:

While the demand for certain pandemic-related treatments and technologies reached "historic highs" in Baxter's second quarter, Almeida told investors that the company ultimately experienced a negative impact on its financial results due to "significantly lower" rates of elective procedures.

"The implementation of various shelter-in-place initiatives globally, as well as patient concerns regarding potential COVID-19 infection risk in the healthcare setting, contributed to these trends," Almeida said, pointing to a more than 20% reduction in U.S. hospital admissions and a more than 30% decline in U.S. surgical volumes.

As a result, sales in the Americas dropped 7%, while sales in the Europe, Middle East and Africa region only declined 1%. The silver lining for Baxter in the second quarter was its Asia Pacific business, where sales grew 1% as reported.

"While we do expect sequential improvement in both admissions and elective procedures globally, our current assumption is that both metrics will remain below prior year levels and could be further negatively impacted by COVID resurgences in markets around the world," Almeida warned.

On the positive side of the ledger, the second quarter's year-over-year sales declines in advanced surgery, medication delivery and pharmaceuticals was partially offset by growth in Baxter's acute therapies, clinical nutrition and renal care businesses.

Baxter benefited from "significantly heightened" demand for its acute therapies driven by coronavirus care needs, according to Almeida, who attributed the more than 40% growth in the quarter for these products to the fact that nearly a third of COVID-19 ICU patients develop acute kidney injuries requiring treatment with a renal replacement therapy.

Almeida also said Baxter's chronic renal care business continues to deliver "sustained" low-single-digits growth, touting its peritoneal dialysis therapies and telehealth technology as people look to stay home and limit risk of exposure to the virus.

SVB Leerink analysts wrote that Baxter's revenue fell below $2.87 billion — what the average investment bank was modeling — largely because they miscalculated how the company's medication delivery and pharmaceuticals segments would perform.

"We can speak from our perspective, and we do think we got overly optimistic about the potential offsets in the need for a higher level of products like CRRT (Continuous Renal Replacement Therapy) and IV Therapies tied to COVID patient volume," the analysts wrote.

On the regulatory front, Baxter in May announced it received CE marking in Europe and regulatory approval from Australia's Therapeutic Goods Administration for its Evo IQ syringe infusion system, as well as FDA clearance in July for its Altapore Shape bioactive bone graft. The Evo IQ syringe infusion system, part of Baxter's suite of smart pumps, launched in recent weeks in Australia and the U.K. to deliver small volumes of medications and other fluids to patients in a controlled manner.