Baxter International (BAX) recently reported that the Food and Drug Administration (“FDA”) approved Gammagard Liquid 10% — Immune Globulin Infusion (Human) — as a therapy option for multifocal motor neuropathy (“MMN”). This treatment earlier received a regulatory nod in Europe in 2011. It is the first immunoglobulin therapy for MMN patients in the U.S. for which Baxter has received Orphan Drug Designation. Gammagard Liquid is called Kiovig outside North America.
MMN is characterized by weakness in the upper limbs thereby having a debilitating impact on the victim. MMN is difficult to diagnose and hard to manage with relatively few treatments options. Following FDA approval, doctors may offer Gammagard Liquid as a treatment option for MMN patients.
Baxter received the approval for Gammagard Liquid for treating MMN following a randomized, placebo controlled study to consider the safety, tolerability and efficacy of Gammagard Liquid on 44 patients with MMN. The results of the study were tabled at the annual meeting of the American Academy of Neurology in April 2012.
The news regarding Baxter still remains mixed. On the positive side, Baxter’s focus on life-sustaining products, which are not commoditized, partly insulates it from an economic downturn. The company is able to generate recurring revenues, and consistent cash flow, due to its focus on chronic diseases. Among other positive factors, Baxter retains a strong product pipeline with several products in late-stage clinical development.
Baxter, in November 2011, completed its acquisition of Baxa Corporation. The takeover highlights the company’s continued commitment toward patient safety and nutrition. It also permits Baxter to provide a wider set of solutions for the safe preparation and delivery of IV medication. Baxa’s know-how will benefit patients across the globe.
Moreover, Baxter struck a deal, in December 2011, to buy Synovis Life Technologies, a well-known provider of mechanical and biological products for the repair of soft tissue utilized in a large number of surgical operations. The acquisition will further expand Baxter’s offerings in the area of biosurgery and regenerative treatment.
On the flip side, despite resilience in Plasma Proteins and Antibody Therapy sub-segments, we are concerned about stagnation in sales, a slightly somber outlook for hospital spending and tightening of reimbursement. We also account for the unfavorable impact of foreign exchange translation and possible dilution associated with the company’s acquisitions of Baxa and Synovis.
Improved execution has lifted sentiment somewhat toward Baxter. It is a good bet for value investors willing to wait as fundamentals improve further. Among others, the company competes with Becton, Dickinson and Company (BDX) in certain niches. We currently have a Neutral long-term rating on Baxter. The stock currently retains a Zacks #4 Rank, which translates into a short-term “Sell” recommendation.
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