On July 29, 2015 Baxter International Inc. (NYSE:BAX) reported second quarter financial results that exceeded the company’s previously issued guidance, and provided its complete financial outlook for the second half of 2015 (Filing, 8-K, Baxter International, JUL 29, 2015, View Source [SID:1234506745]). The results for the second quarter of 2015 include the company’s BioScience business, which was officially spun-off on July 1st and is now operating as a publicly traded biopharmaceutical company, Baxalta Incorporated (NYSE: BXLT). Starting in the third quarter of 2015, the BioScience business will be presented as a discontinued operation in Baxter’s results.

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For the second quarter, Baxter posted net income of $332 million and earnings of $0.60 per diluted share. Second quarter 2015 results included net after-tax special items totaling $218 million (or $0.40 per diluted share) primarily related to costs associated with the company’s spin-off of Baxalta, select business development initiatives and intangible asset amortization, partially offset by a benefit from a litigation settlement in which Baxter was the beneficiary. Second quarter 2014 results included net after-tax charges totaling $172 million or ($0.31 per diluted share).

On an adjusted basis, excluding special items, Baxter’s second quarter net income totaled $550 million, or $1.00 per diluted share, exceeding the guidance the company previously provided of $0.92 to $0.96 per diluted share.

Worldwide sales totaled $3.9 billion, a decline of 6 percent from the same period last year. Excluding the impact of foreign currency, Baxter’s worldwide sales grew 3 percent exceeding the company’s guidance of 1 percent. Sales within the United States grew 1 percent to $1.8 billion, and international sales of $2.1 billion declined 12 percent. Excluding the impact of foreign currency, Baxter’s international sales grew 4 percent in the quarter.

By business, sales within Medical Products totaled $2.5 billion, a decline of 9 percent. Excluding the impact of foreign currency, Medical Products sales were comparable to the prior year. Growth in the quarter was negatively impacted by approximately 3 percent due to increased competition in the United States for the company’s generic oncology injectable, cyclophosphamide. Medical Products performance in the quarter benefited from strong sales of inhaled anesthetics, infusion pumps and peritoneal dialysis products as well as increased demand for the company’s injectable drug compounding services.

On a reported basis, BioScience sales of $1.4 billion declined 2 percent compared to the prior-year period. Excluding the impact of foreign currency, BioScience sales increased 7 percent driven by solid growth across the portfolio. Additional details on Baxalta’s performance in the second quarter will be provided by Baxalta in a press release and investor webcast to be held on July 30th. See www.baxalta.com for more information.

"The spin-off of Baxalta was a historic event for the company, and we are excited to embark on this new chapter for Baxter with a newfound focus and vision that furthers our mission to help save and sustain lives," said Robert L. Parkinson, Jr., chairman and chief executive officer. "As the new Baxter evolves, we are intensely focused on accelerating profitable growth and expanding margins through disciplined portfolio management, implementation of cost reduction initiatives and the near-term launches of innovative new products. These efforts will drive meaningful value, both in the near and long terms, for our shareholders, partners, employees, and the patients and healthcare providers we serve."

Six-Month Results
For the first six months of 2015, Baxter reported net income of $762 million, or $1.39 per diluted share. Excluding special items, Baxter’s adjusted net income for the six-month period totaled $1.1 billion, or $2.01 per diluted share.
Baxter’s worldwide sales for the six-month period totaled approximately $7.7 billion, declining 4 percent from the prior-year period. Excluding the impact of foreign currency, Baxter’s sales increased 3 percent during the first six months of the 2015.
Medical Products sales of $4.9 billion declined 7 percent from the prior-year period, and increased 3 percent after adjusting for the impact of foreign currency and increased competition for cyclophosphamide.

BioScience sales of $2.8 billion through June 30, 2015 were comparable to the prior-year period on a reported basis, and advanced 8 percent excluding the impact of foreign currency.

Recent Highlights
In addition to completing its spin-off of Baxalta during the quarter, Baxter achieved a number of additional milestones, including:

• Completion of 510K submission with the U.S. Food and Drug Administration (FDA) for AMIA with SHARESOURCE, Baxter’s next generation peritoneal dialysis cycler which incorporates several benefits designed to improve the patient experience and increase the adoption of peritoneal dialysis. In addition, the SHARESOURCE functionality provides secure two-way connectivity so healthcare professionals can effectively monitor their patients’ home treatments.

• Successful launch of Baxter’s next-generation SIGMA SPECTRUM infusion pump in the U.S., Puerto Rico and Canada. The SPECTRUM platform has been honored with the Best in KLAS customer satisfaction award for four consecutive years, and the latest generation pump includes several innovative features, including an enhanced Master Drug Library, which helps to reduce pump-related adverse drug events and improve patient safety. Customer response has been very positive, and the SIGMA SPECTRUM is currently being used or in the process of being placed in six of the top seven hospital systems in the U.S. as ranked by U.S. News & World Report.

• FDA acceptance of Baxter’s Investigational Device Exemption, or IDE, for VIVIA, a home-based hemodialysis (HD) system. This milestone allows Baxter to initiate its final U.S. study in the coming months. VIVIA has the potential to transform home hemodialysis and allow more patients to benefit from high-dose HD in their homes.

• Launch of the AK98 in-center hemodialysis monitor in several markets in Eastern and Central Europe, the Middle East and Africa. The AK98 is the latest monitor in the AK series and improves the usability, reliability and total cost of operation for customers.

• Baxter’s BioPharma Solutions contract manufacturing business was recognized as Best Contract Manufacturer at the annual Vaccine Industry Excellence (ViE) Awards, held at the World Vaccine Congress in Washington, D.C. This is the fourth time that Baxter’s BioPharma Solutions business has been recognized for this honor.

Outlook for Third Quarter and Second Half 2015
Baxter also announced today its outlook for the third quarter and second half of 2015.
For both the third quarter and second half of the year, the company expects sales to be comparable to the prior year periods, excluding the impact of foreign currency. Including the impact of foreign currency, the company expects

BAXTER REPORTS 2nd QUARTER FINANCIAL RESULTS

sales to decline approximately 9 percent in both periods. After adjusting for the impact of foreign currency and increased competition in the U.S. for cyclophosphamide, Baxter expects sales growth of approximately 3 percent in both the third quarter and second half of 2015.

Baxter also expects earnings from continuing operations, before special items, of $0.29 to $0.31 per diluted share for the third quarter and $0.58 to $0.62 per diluted share for second half of 2015.

The third quarter and second half of 2015 earnings guidance excludes approximately $0.29 per diluted share and $0.35 per diluted share, respectively, of projected intangible amortization expense and a loss on extinguishment of debt, net of gains from the unwinding of interest rate swaps related to the company’s debt tender offers. Reconciling for the inclusion of intangible asset amortization and the loss on extinguishment of debt results in expected GAAP (Generally Accepted Accounting Principles) earnings of $0.00 to $0.02 per diluted share and $0.23 to $0.27 per diluted share, before other special items, for the third quarter and second half periods.