Baxter International Annual Report 1998

FY1998 Annual Report · Baxter International

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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

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.

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.

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.

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.

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

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

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).