Baxter's new CEO, an industry veteran, drops clues about his vision for the company and why large M&A may not be part of the picture.

Marie Thibault

February 3, 2016

3 Min Read
New CEO Hints at Plan for Baxter

Baxter's new CEO, an industry veteran, drops clues about his vision for the company and why large M&A may not be part of the picture.

Marie Thibault

Just a month into his tenure as the CEO of Baxter, seasoned medtech executive José Almeida is already sharing parts of his plan for the company. This path is likely to include M&A transactions, though small deals are expected to be favored over large acquisitions. 

Almeida, who previously headed Covidien, joined Baxter as an executive officer in late October 2015 and filled the top seat at the company on January 1. Baxter's medical device business includes hospital products like infusion pumps and renal products like dialysis systems. The company spun off its biopharmaceuticals business as Baxalta Incorporated last year; in January 2016, Shire announced it would combine with Baxalta in an approximately $32 billion transaction.  

Details for Baxter's future direction came on the company's fourth quarter earnings call this week. A number of analysts asked Almeida to expound on his plan to increase Baxter's revenue growth and profitability. The CEO responded by expressing pride in the company's culture, but pointing to the need for faster-growing businesses, in addition to continued cost cutting. 

"We need to alter the weighted average market growth rate of our businesses," Almeida said, according to a Seeking Alpha transcript of the company's earnings call. This might be done both through company-driven efforts and outside acquisitions, keeping an eye on international regions as well, he said.

Any acquisitions are not likely to be massive transactions. Almeida underscored the importance of smooth integrations that increase market growth. "Those acquisitions will be singles and doubles. They will not be big things in one shot," he said.

According to the transcript, Almeida elaborated on this later in the call:

And why do I put a bracket around very large deals? Because very large deals are very difficult to find. We can keep looking for a deal like that. It will take a couple of years versus just creating a really good strategy by looking at adjacencies and pairing good businesses with acquisitions that makes sense. I don't discard size being large, but I'd just say, it's much more difficult to encounter that than something else that will create value almost instantly and you can execute a little faster. So I'm looking at this whole thing as a journey where we make sure that our cost is in place while we augment our internal innovation and supplement internal innovation with some really well thought out acquisitions."

Reflecting on Almeida's M&A comments in a February 2 research note, Rick Wise, analyst at Stifel, wrote, "We read this as an indication that the company is likely to have a series of small to medium sized bolt-on acquisitions over the next few years, of companies/assets with healthy, organic top-line growth profiles." 

As an example, Almeida singled out the company's Integrated Pharmacy Solutions (IPS) business as one of four or five areas worthy of investment: "We have a very good IPS business . . . and it's something that we probably can double down as an example. We will be making organic investments, possibly inorganic investments." IPS falls within Baxter's Hospital Products category and according to the company's SEC filings, consists of "premixed and oncology drug platforms, nutrition products, and pharmacy compounding services."

Almeida and the rest of Baxter's management team are expected to offer more concrete details on the company's plans at its investor conference in May. 

Check out the future of medical technology at the world's largest medical design and manufacturing event—register for the MD&M West Conference, February 9-11, 2016.

Marie Thibault is the associate editor at MD+DI. Reach her at [email protected] and on Twitter @medtechmarie

[Image courtesy of KROMKRATHOG/FREEDIGITALPHOTOS.NET]

About the Author(s)

Marie Thibault

Marie Thibault is the managing editor for Medical Device and Diagnostic Industry and Qmed. Reach her at [email protected] and on Twitter @MedTechMarie.

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