Baxter ups sales growth targets through 2020, to be driven by acute, at-home dialysis

Baxter ($BAX) is still working through its split from the therapeutics-focused Baxalta ($BXLT). The latter started trading publicly at the start of July--making the new Baxter a little less than a year old. The medical products company worked to convince Wall Street that it's on track at a May 9 meeting.

It offered up sales growth guidance of 3% to 4% on a compound annual basis from 2016 through 2018, kicking up to 4% annualized for 2016 through 2020. That's much better than the 1% sales growth it's guided for this year--which itself is an improvement on the decline of 1% for 2016 that it had previously forecast.

Baxter may be benefitting from the addition to its board of a representative from activist investor Third Point. The company expanded its board and added the firm's Munib Islam last fall. Third Point had been highly critical of Baxter's corporate strategy and its ability to see a path to growth.

Third Point's Munib Islam

The company's shares were up about 2% in the wake of the investor meeting--and have climbed a whopping almost 40% since Third Point's Islam was added to Baxter's board at the end of September.

Baxter has four main businesses--all of which have over $1 billion in annual sales: Renal, Surgical Care, Hospital Products and Integrated Pharmacy. It hopes growth will be balanced across these, but the Renal business is expected to take the lead with 5% annual growth while the others are each expected to contribute 3% to 4%.

Within Renal, Acute care, a $400 million business, is expected to grow by double digits. "Acute care renal is growing 15%, 20%, with great technology and we have started developing technology adjacencies to them, to be able to filter the blood and remove CO2. We have a technology for sepsis," said Baxter chairman, President and CEO José Almeida. Baxter brought on success story Almeida--the former head of Covidien, now part of Medtronic ($MDT)--last October as part of its efforts to create growth. He quickly instituted a massive cost-cutting effort.

Baxter CEO José Almeida

On the at-home dialysis front, Baxter offers peritoneal dialysis devices. These offer overnight treatment that the company says is equivalent to in-center hemodialysis. Almeida noted that only 13% of U.S. patients are treated at home, but he expects that at least 40% of patients should be doing so. He observed that nephrologists themselves largely say they would use at-home dialysis for themselves or their family members. In addition, the payer environment is improving.

"We're seeing a very interesting resurgence with payers in particular around home dialysis. So, in the United States, we saw the change in reimbursement in 2011, to equalize both home and in-center HD, which allowed us to really eliminate a barrier that existed in the past," said Almeida. "We also see that in parts of Asia as well as Latin America. So, payers really recognized the value of home dialysis. In the market right now, it's about a $13.4 billion market. Again we expect it to grow to $17 billion by 2021."

- here is the release