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Baxter’s Integrated Pharma Solutions May Be Solid Growth Driver

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Integrated Pharma Solutions business

In 1Q17, Baxter International’s (BAX) Integrated Pharma Solutions (or IPS) business reported revenues of about $552.0 million, which is an operational growth of around 4.0% on a YoY (year-over-year) basis. Revenues earned from sales of nutritional products, premixed injectable therapies, oncology drug platforms, and pharmacy compounding services are categorized in this business. In 1Q17, IPS benefited from its increased adoption of Baxter’s nutritional therapies around the world as well as increased demand for the company’s premixed injectables and pharmacy services in the United States.

If these demand trends continue in the rest of 2017, they may have a favorable impact on Baxter stock as well as the Vanguard Total Stock Market ETF (VTI). Baxter makes up about 0.12% of VTI’s total portfolio holdings.

The above table shows the various product offerings of Baxter’s IPS business and their market worth.

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Major acquisitions

Baxter International has been focused on leveraging both organic and inorganic growth opportunities for its IPS business and specifically its generic injectable pharmaceutical business, a market growing globally 9.0%–10.0% YoY. Baxter has chosen generic injectables for inorganic growth in order to change the company’s weighted average market growth rate and bring it closer to the long-term target of a mid-single-digit YoY growth rate.

The acquisition of Claris Injectables, expected to be completed in the second half of 2017, is projected to add 150 to 175 molecules to Baxter’s portfolio. Claris is expected to have a minor impact on Baxter’s financial performance in 2018. In 2019 and 2020, the company is expected to witness a 50 to 100 basis point incremental growth due to Claris’s manufacturing capabilities and Baxter’s plan to expand them further. Baxter aims to market more than 300 molecules as well as accelerate its biosimilar development by 2021. The acquisition is thus expected to help Baxter compete effectively with other generic pharmaceutical companies such as Akorn (AKRX), Mylan (MYL), and Teva Pharmaceutical Industries (TEVA). To find out more about this deal, please refer to Baxter Advances Portfolio with Acquisition of Claris Injectables.

In the next part, let’s look at the 2017 growth projections for Baxter’s businesses.

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