Joe Almeida reflected on Baxter's progress and cultural changes during his first year as the company's CEO

Amanda Pedersen

A year ago, during Baxter's fourth quarter 2015 earnings call, CEO Joe Almeida put his newness to the company in perspective by telling analysts he knew where the cafeteria was because he ate there almost every day. But he hadn't been on the job long enough to have a good sense of Baxter's culture and had only just begun to develop a strategic framework for the company's future.

Fast-forward to a year later, Almeida not only has a handle on the culture but has already turned the company onto a path of consistently delivering top quarterly performance. In the fourth quarter 2016, for example, Baxter achieved net income of 57 cents a share (adjusted for one-time gains and costs), beating analysts' expectations of 52 cents a share. The Deerfield, IL-based company also met analyst forecasts on revenue of $2.65 billion for the quarter.

But to truly understand Baxter's progress under Almeida's leadership, it's important to first look at where the company was a year ago, because the former Covidien CEO took the reins at Baxter following a particularly rough year for the diversified company.

During 2015, a number of negative factors cut into Baxter's profitability, including currency exchange impact, regulatory and manufacturing issues, generic competition for one of its branded cancer drugs, and costs related to the spin-off of its biotech business, now known as Baxalta. And convincing the market of Baxter's stand-alone prospects appeared to be an uphill battle.

Just before bringing Almeida on board, Baxter cut about 5% of its non-manufacturing payroll, which equated to about 1400 workers.

"I was surprised by a culture that was ready to be changed," Almeida said during the company's most recent earnings call. "People here were looking for a change."

That openness to change allowed Baxter to reallocate its R&D resources and completely revamp its marketing organizations. "This has been a significant change in how people used to do business," Almeida said. "And folks here have adopted, and really didn't used to be in getting on with the program."

He said Baxter's business transformation over the past year has focused on three strategic levers: portfolio and innovation management, operational excellence, and capital allocation.

"This passionate portfolio management has meant taking a hard look at where we drive the greatest value expectations and the business across our vast portfolio and global footprint, and then invest according to the strengthened top line growth and [return on invested capital]," Almeida said. "We have made some very candid assessments that have been crucial to optimize our portfolio, go-to-market strategy, and commercial mindset."

He noted that some of those decisions will impact the company's top-line growth this year, but will position Baxter for accelerated growth as the company redirects resources to higher growth margin opportunities.

While it has been a year of rapid and meaningfully strategic execution across the board in advancing both the top line and bottom line, Almeida said he's not quite satisfied yet, but "we are off to a solid start, and there is more to come."

A year from now, the CEO said, he would like to see Baxter's surgery business start to transform itself and "look at some opportunities outside."

Execution in the company's biosurgery business has "not been the greatest," Almeida acknowledged, but the wheels of change are already in motion there, beginning with the renaming of that unit from biosurgery to advanced surgery, along with the addition of Wil Boren to the new role of president of that business. Almeida said he expects Boren to be able to quickly turn the unit around.

"We continue to view this business as a core growth platform and have significantly reallocated investments to biosurgery to improve performance," Almeida said. He also noted that the company is "looking at a nice licensing agreement right now," and sees opportunities for adjacency and acquisitions in the area.

Almeida also noted some changes he would like to see in the company's infusion pump business in order to better compete globally in that market.

"So I have significant expectations," he said. "And lastly is to make sure that we don't lose the sense of urgency and speed by which we transform the company."

Amanda Pedersen is Qmed's news editor. Reach her at [email protected]

[Image courtesy of Pixabay]