Baxter: Safe Haven in Troubled Times

Baxter International Inc. (BAX) recently announced its intention of acquiring the Continuous Renal Replacement Therapy (CRRT) business from Edwards Lifesciences Corp. (EW). The deal involves an initial cash payment of roughly $56 million and an additional payment of up to $9 million over the next two years based on achievement of certain milestones revenue. The acquisition is expected to close in Q309 and will have no impact on Baxter’s financial results for fiscal 2009.

CRRT, also known as hemofiltration, is a process of continuous and adjustable removal of excess fluid and waste products resulting from malfunction of the kidney. CRRT duplicates the function of a kidney for 24 hours. Baxter is presently supplying solutions that are used in CRRT treatment globally and is the lone distributor of Edwards’ product in the U.S., Latin America and China.

Baxter is a global medical products and services company with expertise in medical devices, pharmaceuticals and biotechnology. The CRRT acquisition adds a new leaf to the company’s existing renal business. Baxter’s main competitors include names like Becton, Dickinson and Co. (BDX) and Johnson & Johnson (JNJ).

Edwards Lifesciences, an Irvine, California-based company, specializes in heart valves and hemodynamic monitoring with particular focus on developing life-saving innovations.

Baxter reported its Q109 results with lower sales primarily due to an unfavorable currency translation. Excluding currency translation, net sales increased 6% year-over-year. Manufacturing efficiencies drove margins higher. We believe that Baxter’s product portfolio will remain relatively insulated from the current economic turmoil and provide investors with handsome returns on a risk-adjusted basis. As such, our recent report has a ‘Buy’ rating for the company’s stock.

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