Baxter (BAX) Banks on Portfolio Strength, Strategic Buyouts

On Mar 26, we issued an updated research report on Baxter International Inc. BAX. The company rides high on a series of regulatory approvals and strategic acquisitions. However, generic competition and pricing pressure loom large. The stock carries a Zacks Rank #2 (Buy).

Baxter has been witnessing positive tidings on the regulatory front. Recently, the company announced the approval of Bivalirudin in 0.9% Sodium Chloride Injection (bivalirudin). Management at Baxter has confirmed that the FDA has granted two new approvals for temporary importation of certain drugs in Canada and Mexico. Furthermore, the FDA approval of new premixed injectables is a key catalyst. The company’s new product, the home PD technology, also received a go-ahead from the FDA.

Baxter has been enhancing its product portfolio through strategic collaborations. Lately, the company took over RECOTHROM Thrombin topical and PREVELEAK Surgical Sealant product lines from Mallinckrodt. Earlier, Baxter had closed the acquisition of India-based Claris Injectables Limited, which is expected to prove accretive to adjusted earnings. In 2017, Baxter had signed an agreement with India-based Dorizoe Lifesciences for the expansion of its generic injectables pipeline.

Baxter has a solid product portfolio, including the Arisure Closed System Transfer device and the SIGMA Spectrum Infusion System. Furthermore, the company launched the DeviceVue Advanced Asset Tracking System and the first 3-in-1 oXIRIS set in acute therapies. The company also recently launched a version of its AK 98 hemodialysis (HD) system to help dialysis providers

However, generic competition for cyclophosphamide is a concern. Cyclophosphamide is part of Baxter's Hospital Products segment, which has been posting lackluster performance for the most part of the last five years. The drop in cyclophosphamide sales poses a threat to the company’s Integrated Pharmacy Solutions franchise business.

In the past six months, Baxter’s shares have gained 5.1% compared with the industry’s 3%. The primary factor backing the solid share performance is the company’s presence in the life-sustaining and critical care products category that is cushioned against economic downturns.

A few other top-ranked stocks in the broader medical space are athenahealth, Inc. ATHN, Bio-Rad Laboratories, Inc. BIO and Centene Corporation CNC. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

athenahealth has expected long-term growth rate of 17.7% and earnings per share growth rate of 21.5%.

Bio-Rad has expected long-term growth rate of 20% and earnings per share growth rate of 20%.

Centene has expected long-term growth rate of 14.4% and earnings per share growth rate of 14.4%.

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