Baxter's (NYSE:BAX) revenue and earnings fell year over year, but shares are up today because the decline wasn't nearly as bad as investors had feared.
Sales declined 2% year over year to $3.76 billion in the first quarter, but all of the decline and then some could be attributed to the stronger dollar. Excluding changes in currency on international sales, which make up more than half of Baxter's sales, revenue increased 4% year over year.
Baxter's Bioscience business, which is scheduled to be spun out as Baxalta later this year, was the star of the show with sales growing 8% at constant currencies. The company doesn't break out sales for individual products, but does break them into four groups of products. The smaller two groups -- inhibitor therapies and Biotherapeutics -- had the largest year-over-year gains at 18% and 36% respectively at constant currencies.
Baxter's hemophilia franchise, its largest group in the Bioscience division, grew only 2% at constant currencies, but that should probably be considered a win since Biogen (NASDAQ:BIIB) recently gained FDA approval for two competing hemophilia drugs. We'll get to hear how the biotech says the launches of Alprolix and Eloctate are going when Biogen reports earnings on Friday.
On the medical products side, which will stay with Baxter, sales increased 2% at constant currency. Baxter touted sales of products for peritoneal dialysis, intravenous therapies, anesthesia products, and demand for injectable drug compounding services as drivers of the moderate growth.
On the bottom line, Baxter reported adjusted income of $550 million or $1 per share. That was substantially down from the $652 million or $1.19 per share in the year-ago quarter, but since Baxter had previously guided for earnings of $0.85-$0.90 per share, investors weren't complaining.
Management guided for revenue in the second quarter to decline 9%-10% depending on how the dollar holds up this quarter -- at constant currencies that would be an increase of 1%. Adjusted earnings are expected to fall to between $0.92-$0.96 per share.
It's curious that management bothered to give earnings guidance since the Baxter-Baxalta split is expected to occur mid-year, and the two companies will report separate second quarter earnings in late July. In the middle of next month, the separate management teams plan to hold investor meetings to break out their individual outlooks for the companies, including financial guidance.
On the Baxalta side, look for management to tout BAX 817 for patients with hemophilia A or B that have developed inhibitors. In March, the drug passed a phase 3 trial, although it needs to expand manufacturing before it can submit marketing applications to regulators.
On the Baxter side, the company recently gained European marketing authority for its automated peritoneal dialysis system, Homechoice Claria, which is connected to the Internet so healthcare providers can see how the dialysis is going.
Let's hope the new companies can get future wins by beating guidance while guiding for growth.