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High Demand Caused by COVID-19 Helps Baxter Beat 1Q20 Expectations

High Demand Caused by COVID-19 Helps Baxter Beat 1Q20 Expectations
The Deerfield, IL-based company saw an increase in demand from some of its products because of the pandemic. Danielle Antalffy, an analyst with SVB Leerink Research, said Baxter is one of the companies the firm covers, that is relatively insulated from a negative COVID-19 impact.

Baxter International is experiencing significant revenue growth because of the novel coronavirus (COVID-19). Because of the virus’s impact, the Deerfield, IL-based company beat Wall Street expectations for its 1Q20 earnings.

Baxter reported results of $2.8 billion, a 6% increase from the $2.6 billion reported in 1Q19. The results beat out consensus, which came in at about $2.7 billion.

Higher demand for Baxter’s continuous renal placement therapy line, generic injectables and parenteral nutrition therapies, and intravenous solutions contributed to sales growth. Executives estimated that the COVID-19 related demand, which accelerated during the last two weeks of 1Q20 contributed to about $45 million in sales.

However, there were still some weak points in the company’s armor.

“As expected, given the slowdown in elective surgeries, demand for our Advanced Surgery portfolio declined and is expected to continue to decline throughout the second quarter,” Baxter’s CEO Joe Almeida said during an earnings call, according to a transcript from Seeking Alpha.

Danielle Antalffy, an analyst with SVB Leerink Research, said that the Advanced Surgery Portfolio is a relatively small business at less than 10% of the total Baxter sales in 2019. She noted that losses from the Advanced Surgery Portfolio would be offset by Baxter's other high-performing units.

“We continue to view Baxter as one of the companies within our coverage universe that are most relatively-insulated from a negative COVID-19 impact, as the company will likely continue to benefit within a number of its businesses as mentioned above, with relatively limited elective procedure exposure vs. the rest of the group,” Antalffy wrote in a research note. “And when looking at the non-COVID-19 fundamentals, we continue to view Baxter as a growth acceleration story with continued rollout of the company's robust pipeline of products and a number of long-term tailwinds.”

The impact of COVID-19 on medtech has varied and been widespread – much like the disease has been on the population. The coronavirus has caused companies operating in the realm of elective surgeries like Conformis to slow down to a crawl. The custom orthopedics company recently received a Paycheck Protection Program loan to help its furloughed employees come back to work as restrictions around elective surgeries during the pandemic look to loosen.

Second Sight announced in March it was laying off all of its employees and that it intended to wind down operations. However, about a week ago, the Sylmar, CA-based company gave a clearer picture of its strategy going forward and said it has been able to attract interest from unrelated third parties that could enable it to secure value from its intellectual property.

Carlsbad, CA-based Alphatec pulled out of a deal to acquire EOS Imaging, citing negative impacts on the market caused by COVID-19. The surgical spine specialist announced in late February that it would pick up EOS Imaging for $88 million, plus debt retirement for $33.9 million, in a combination of cash and equity.

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