Baxter International Annual Report 1998

Plain-text annual report

(cid:32) (cid:32) (cid:32) (cid:32) BAXTER INTERNATIONAL Annual Report 1998 All of Baxter’s businesses hold leading positions in growing global markets. Driving this leadership are talented, dedicated people, all pursuing a common vision—to be recognized worldwide as the leader in providing critical therapies for life-threatening conditions. contents 2 12 PROFILE: Baxter participates in four major businesses: Blood Therapies, CardioVascular, I.V. Systems/ Medical Products and Renal. This proﬁle provides an overview of each of these businesses. TREATING HEMOPHILIA: Baxter has a long history of leadership in the treatment of hemophilia. The company is expanding its production capacity to meet the growing needs of the hemophilia community. 4 14 TO OUR SHAREHOLDERS: Baxter Chairman Vernon R. Loucks and President and CEO Harry M. Jansen Kraemer discuss highlights of 1998, goals for 1999 and Baxter’s exciting future. PERITONEAL DIALYSIS: Baxter’s leadership in peritoneal dialysis (PD) is unquestioned. The company pioneered PD in the late 1970s. Today, PD continues to grow primarily due to the cost and lifestyle advantages it provides. 7 16 FOCUSED ON GROWTH: Since 1931, Baxter has pioneered medical technologies to treat kidney failure, heart disease, hemophilia and many other conditions. Today, Baxter continues to drive growth by advancing these therapies. STATE OF THE HEART: Baxter is the world’s leading provider of tissue heart valves. The company continues to broaden its product offering to meet a full range of patient needs in heart-valve surgery. 8 18 NEW PRODUCTS: Technological innovation continues to be one of Baxter’s key growth strategies. One example is the Colleague® volumetric infusion pump, one of Baxter’s most successful new products. GLOBAL EXPANSION: The need for quality health care worldwide continues to drive growth, particularly in developing countries. Continuing to expand its presence outside the United States is one of Baxter’s key growth strategies. 11 20 ACQUISITIONS: In the last two years, Baxter has added to its capabilities in anesthesia products, renal and intravenous solutions, therapeutic proteins, recombinant technology and other areas through selective acquisitions. BUSINESS EXCELLENCE: Baxter and its employees continue to earn high marks for environmental leadership, quality manufac- turing, community involvement and employee work-and-life programs. B A X T E R I N T E R N A T I O N A L 1 9 9 8 A N N U A L R E P O R T BAXTER Profile: The Businesses of Colleague® triple-channel pump Recombinate™ Antihemophilic Factor CORE BUSINESS: Baxter provides a range of products that deliver ﬂuids and drugs to patients. The company introduced the ﬁrst commercially manufactured intra- venous (IV) solutions in 1931, and remains the world’s leading manufacturer and marketer of IV products for use in hospitals and other health-care settings. These products include IV solutions in ﬂexible, plastic containers; IV tubing sets; electronic infusion pumps; IV nutrition products; anesthesia products and pharmaceutical agents; and ambulatory IV delivery systems. CORE BUSINESS: Baxter develops and processes thera- peutic proteins from plasma and through recombinant methods. These proteins are used to treat hemophilia, immune deﬁciencies and other blood-related disorders. The company manufactures blood-collection containers and automated blood-cell separation and collection systems used by hospitals and blood banks to collect blood components. These components are used to treat patients undergoing surgery, cancer therapy and other treatments. Baxter also manufactures products used by plasma centers to collect plasma for fractionation. CORE BUSINESS: Baxter provides products and services for kidney dialysis. The company is the world’s leading manufacturer of products for peritoneal dialysis (PD), a home-based therapy pioneered by Baxter in the late 1970s. Baxter also manufactures products for hemodialy- sis (HD), a therapy which takes place in a hospital or clinic. Baxter’s Renal Therapy Services (RTS) unit operates dialysis clinics in select countries outside the United States. Renal Management Strategies Inc. (RMS) is a HomeChoice® automated peritoneal dialysis machine kidney-disease management company that partners with U.S. nephrologists. CORE BUSINESS: Baxter develops and manufactures products to treat late-stage heart disease and vascular disorders. These products include replacement heart valves and valve-repair products; perfusion products, used to provide oxygen to the blood while the heart and lungs are stopped during open-heart surgery; vascular products, which remove clots from peripheral blood vessels; cardiac-monitoring systems; heart-assist systems; and contract perfusion services. Carpentier-Edwards® pericardial heart valve I.V. Systems/ Medical Products 1998 Sales: $2.3 billion Blood Therapies 1998 Sales: $1.9 billion Renal 1998 Sales: $1.5 billion CardioVascular 1998 Sales: $0.9 billion 2 INTERNATIONAL KEY PRODUCTS: Baxter’s Viaﬂex® container was the PRODUCT DEVELOPMENT: In the area of automated GLOBAL STRATEGY: In established markets, such as ﬁrst ﬂexible, plastic IV container and remains the electronic IV infusion systems, Baxter has made advance- North America and parts of Europe, Baxter uses its recog- standard for IV therapy worldwide. The company’s ments to its Colleague pump technology, introducing nized leadership in IV solutions to introduce specialty Mini-Bag™ containers carry the industry’s broadest line the new triple-channel Colleague pump in 1998. The products that increase productivity and reduce costs for of premixed drugs for IV delivery. The Colleague® triple-channel pump allows for the infusion of up to customers. In new markets, Baxter’s strategy is to establish volumetric infusion pump provides accurate, cost- three IV solutions to a patient from a single pump. The a presence with its basic products and then broaden effective electronic infusion at a wide range of ﬂow rates. company also continues to expand its industry-leading its offering as the focus on health care increases. The The company also provides solutions and automated line of premixed drugs in Mini-Bag containers, and company has a strong IV manufacturing presence in compounding equipment for IV nutrition; ambulatory- the acquisition of Bieffe Medital S.p.A. adds new cost- many parts of the world, and also continues to form joint infusion devices; and a full range of anesthesia-delivery effective technology for manufacturing IV solutions in ventures to market or manufacture IV products in the devices and anesthetic agents. non-PVC containers. Latin American, Asian and Eastern European regions. KEY PRODUCTS: Therapeutic proteins include PRODUCT DEVELOPMENT: Baxter is pursuing a GLOBAL STRATEGY: Baxter continues to develop Recombinate™ Antihemophilic Factor (recombinant); Gammagard® S/D IGIV, which boosts weakened immune systems; and Tisseel® ﬁbrin sealant, used to 100-percent protein-free manufacturing process for a technologies that result in enhanced safety and purity of recombinant blood-clotting factor and other recombinant blood therapies, and expand the use of these technologies proteins, as well as new plasma fractions, wound-man- around the globe. In 1998, more than a third of the control bleeding in surgery. Baxter also manufactures agement products and vaccines. In blood collection, sales of Baxter’s blood-therapy products were in Europe. vaccines, including the leading vaccine for tick-borne encephalitis; the Fenwal Blood-Pack® unit for blood collection; the Autopheresis-C® system for collecting plasma for fractionation; the Amicus® separator for Baxter is developing technology to automate the collection These products also have strong positions in North of red cells, and has partnered with Cerus Corporation America and Japan. Established products like blood- on pathogen-inactivation technologies. Baxter also is collection containers and plasma-derived clotting-factor developing a recombinant solution to replicate the func- concentrates continue to drive growth in developing collection of platelets and plasma for transfusion; tion of the hemoglobin molecule in carrying oxygen to markets in Asia and Latin America. and leukoreduction systems. vital organs in cases of severe blood loss. KEY PRODUCTS: Baxter’s Dianeal® solution is the PRODUCT DEVELOPMENT: Baxter continues to develop GLOBAL STRATEGY: There are more than 800,000 world’s leading PD solution. Baxter also provides solu- new PD solutions to manage speciﬁc patient conditions known dialysis patients worldwide. Many more people tions developed for speciﬁc patient needs, such as and advanced hardware systems for both PD and HD. with end-stage renal disease, particularly in developing Nutrineal™ solution, which provides extra nutrition to The company also is investing in transplantation, the only countries, are not treated. Baxter’s strategy is to increase patients, and Extraneal™ solution, which draws more alternative to dialysis in the treatment of end-stage renal PD penetration in developed countries, and expand waste from the bloodstream. Baxter’s UltraBag™ twin- disease. Baxter’s Nextran unit leads research-and-develop- rapidly in developing countries, where PD is the preferred container system simpliﬁes solution-exchanges and lowers ment efforts in xenotransplantation—animal-to-human treatment due to its low start-up costs. Baxter also will infection rates for patients on continuous ambulatory peritoneal dialysis (CAPD). The HomeChoice® automated transplants. Researchers are working to develop genetically continue to invest in hemodialysis products, its RTS modiﬁed pig organs that will be transplanted safely into business and its RMS business. PD machine is a lightweight, compact PD system that humans someday. This research extends beyond kidneys cleanses the blood overnight while the patient sleeps. to livers, hearts and other organs. KEY PRODUCTS: The Carpentier-Edwards® pericardial PRODUCT DEVELOPMENT: Baxter works with leading GLOBAL STRATEGY: Heart disease claims more lives and heart valve is the world’s leading tissue heart valve. The company’s Swan-Ganz® catheters, used to measure pressures in the heart as well as cardiac output, and Fogarty® catheters, used in vascular surgery, are industry standards. The Novacor® left-ventricular assist system, clinicians around the world to develop new products requires greater ﬁnancial resources than any other medical and services to treat late-stage cardiovascular disease. ailment. Baxter focuses on products and services for late- These include new heart valves, both tissue and mechanical, stage cardiovascular disease, when conditions are most likely and valve-repair products; vascular products to treat to have a devastating impact on a patient’s quality of life. diseased blood vessels; enhanced perfusion products, This business is most successful in countries such as North an implantable heart-assist device for patients in need and other technologies. A major emphasis in these America, Europe and Japan, where technological advance- of a transplant, was approved as a bridge to heart trans- development efforts is the trend toward products that ments are more widely accepted. An aging population and plant in the United States in 1998. It has been approved lend themselves to less invasive and less traumatic the progressive nature of cardiovascular disease will continue in Europe as both a bridge and an alternative to heart surgical techniques. transplant since 1994. to drive growth in these markets. Developing countries represent longer-term growth opportunities. B A X T E R I N T E R N A T I O N A L 1 9 9 8 A N N U A L R E P O R T 3 To our A Letter from Baxter Management: SHAREHOLDERS At Baxter International, we meet some of the world’s most chronic and critical health-care needs. It is important work. Important to the patients and health-care professionals who use our products. Important to our employees, who know they are in the business of saving and improving lives. And important to our shareholders, who invest in the opportunity to advance the frontiers of medicine around the world. A ll of us on the Baxter team are inspired by a very mean- life-threatening conditions. Millions of people around ingful mission: providing critical medical therapies for the world suffering from heart disease, kidney failure, hemophilia, Industrial Average return of 20 percent and the S&P Medical Products and Supplies Index return of 33 percent. The following represents our 1998 ﬁnancial commitments and our results: cancer and other illnesses count on us, our products, and our services n Increase net sales approximately 10 percent, before acquisitions to dramatically improve the quality of their lives. Often, we make the and the impact of foreign exchange. Sales rose 11 percent, including difference between life and death. acquisitions and before the impact of foreign exhange. Excluding acquisitions and foreign exchange, sales grew 8 percent. A YEAR OF SUCCESS Baxter had another strong year in 1998. We received approval from the U.S. Food and Drug Administration n Grow net earnings in the mid-teens, before the impact of foreign (FDA) to manufacture Recombinate™ Antihemophilic Factor (recom- exchange, and in the low double digits after absorbing the impact binant) at our facility in Thousand Oaks, California. We introduced a of foreign exchange. Excluding special charges, income from number of new products in the U.S., such as Tisseel® ﬁbrin sealant, a continuing operations increased 12 percent. Excluding special triple-channel version of our highly successful Colleague® volumetric charges and the impact of foreign exchange, income from infusion pump and our Novacor® left-ventricular assist system. We continuing operations exceeded our goal of mid-teens growth. added clinics to our Renal Therapy Services business in Europe, Asia and Latin America. We also made several acquisitions, such as Ohmeda n Generate at least $500 million in operational cash ﬂow, after Pharmaceutical Products Division of The BOC Group, which gives us investing approximately $1 billion in capital expenditures and a full range of products for use in anesthesia; and Somatogen, Inc., research and development. Baxter generated $515 million in which is developing a recombinant solution to deliver oxygen to vital operational cash ﬂow, and excluding special charges, invested $975 organs in cases of severe blood loss. These and other successes allowed million in research and development and capital expenditures. us to once again deliver strong returns to you, our shareholders. This year also presented some challenges. Foreign-currency ﬂuctua- 1998 FINANCIAL COMMITMENTS In 1998, Baxter generated a total tions had a negative impact on our ﬁnancial results. We experienced return to shareholders (including reinvested dividends) of 30 percent, manufacturing capacity constraints for some of our Blood Therapies which represents our ﬁfth consecutive year of strong ﬁnancial returns. products. We also decided to focus on the development of our Over the last ﬁve years, the annual return to shareholders (including recombinant oxygen-carrying hemoglobin therapeutic while discon- reinvested dividends) was 28 percent. This compares to the Dow Jones tinuing testing of our plasma-based product, HemAssist® (DCLHb). 4

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