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Baxter International (BAX - Analyst Report) recently revealed that it accomplished its planned takeover of Baxa Corporation, in a cash deal amounting to $380 million. Baxa is a privately held, world-wide company, operating out of Englewood, Colorado, which produces pharmacy know-how that improves the safety and efficiency of IV and oral dose preparation and delivery.   

A spokesman for Baxter stated that this takeover highlights the company’s continued commitment toward patient safety and nutrition. It also permits the company to provide a wider set of solutions for the safe preparation and delivery of IV medication. Baxa’s know-how in this regard will benefit patients across the globe.

Baxa had yearly revenues of $157 million in 2010. Baxter forecasts that the sales growth of this unit will be accretive to its revenue in the future. On account of transaction-related charges and acquisition-accounting, Baxter projects the deal to be dilutive to earnings, for 2012, by 3 pennies to a nickel per share. Upon exclusion of these charges, the takeover becomes neutral to earnings for 2012.

The Medical Products segment of Baxter produces offerings utilized in the delivery of drugs and fluids to patients. Its products include such items as pre-mixed drugs, IV solutions and administration sets, IV nutrition products, and infusion pumps among others.    

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.

On the flip side, despite recent improvement 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.

Improved execution has lifted sentiment somewhat toward Baxter. Baxter is a good bet for value investors willing to wait as fundamentals improve further. Among others, it competes with Becton, Dickinson and Company (BDX - Analyst Report) in certain niches. We are currently Neutral on the stock, backed by a short-term Zacks #3 Rank (Hold).

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