Thursday, July 22, 2010

EU Pricing Pressure Sure To Impact Hemostasis Market

"European governments grappling to reduce large budget deficits are focusing their cost-cutting on a large spending item - pharmaceuticals," The Wall Street Journal reports. "Several countries in recent weeks, including Spain, Germany and Italy, have proposed or enacted reductions in what they will pay or taken other cost-control measures for various drugs. ... In Europe, state healthcare systems pay for the bulk of drug purchases. European governments have long been known for their frugality when negotiating prices with drug companies, but the latest cuts are more severe than usual. Europe is the second largest market after the U.S. for many drug companies."
The European Federation of Pharmaceutical Industries and Associations, the industry's main lobbying body in Europe, is warning of the economic consequences. In a statement, the group said the cuts would "sharply diminish revenues to manufacturers...with an impact on their R&D investments. This in turn will impact European economic recovery and employment"
The dollar's climbing value threatens to pressure sales in coming quarters for U.S. medical-device and drug makers that are big exporters to Europe.
The greenback's rise--it's up about 15% against the euro this year--compounds worries already brewing that cash-strapped European governments, pressured by a debt crisis on the continent, will cut back on health-care spending.
For device companies, Piper Jaffray analyst Matt Miksic called the currency impact "manageable for most" because of hedging plans. He sees a 1% to 2% earnings impact this year.
The currency effects can be very complex. Many companies routinely give sales estimates that exclude the currency impact so that the business' performance isn't shrouded. Also, they typically employ a mix of natural and financial hedges to protect earnings, even if sales take a big hit.
Natural hedges can include overseas manufacturing capacity, which can put the cost of production in the same currency as sales. For big multinational companies doing business around the globe, currency values in different countries can sometimes have an offsetting effect. Then there are foreign- exchange contracts companies can enter to manage risk.
But the dollar's strength still adds strain. JPMorgan noted a trend over the past decade of device stocks performing better than the broader market when currency rates add to sales, but worse when currency is a negative factor. "In short, MedTech stocks seldom outperform in the face of an FX headwind," analyst Michael Weinstein said.
Some of the dollar's gains have come since companies reported first-quarter results in April; however, device-maker Medtronic's recent report offered some fresh perspective. The company, which posted sales of $15.8 billion for its year ended April 30, said exchange rates at Monday's level would dent sales by $400 million to $500 million in the new fiscal year.
But the company also said its hedging strategy should mostly shield earnings.
The backdrop to currency concerns is the threat European sales also will decline because of government spending cuts. But some big companies have downplayed this risk.
This is "spooking investors," Abbott Laboratories (ABT) Chief Executive Miles White said at a recent conference. He explained that Abbott factored pressure in Europe into its 2010 financial forecasts and that he doesn't plan to change them directly due to European woes.

Baxter's Profit Drops 8.9%

Baxter International Inc.'s second-quarter earnings fell 8.9%, including a charge, as it faced macroeconomic headwinds and individual product issues. The Deerfield, Ill., based maker of products for conditions such as hemophilia and kidney failure, tightened its 2010 earnings guidance and backed sales expectations, but warned that issues in key markets will continue. "Clearly 2010 has been a challenging year," said Robert Parkinson, Baxter's chairman and chief executive, noting pressure from U.S. health-care reform, economic pressures, and softness in its plasma protein-based business.
Notably, Mr. Parkinson said the company continues to operate "through a transition period in the plasma proteins environment."
The slowdown in the plasma-based business has been a source of uncertainty for investors, as it is a key component in Baxter's largest business unit. For the remainder of the year, Mr. Parkinson projected plasma protein sales to decline in the mid-single digits, and antibody therapy sales to decline about 10%.
In its last earnings call in April, Baxter cut its 2010 outlook and said there was a surprising slowdown for plasma-based medical products.
Mr. Parkinson said that Baxter has implemented some new commercial strategies to counteract market share loss in sales of a plasma-based drug called Gammagard. He said that there are "some early positive signs" that the company's share position, and the U.S. market as a whole, are stabilizing.
Looking ahead, the company narrowed its 2010 adjusted earnings guidance to $3.93 to $3.98 a share, from a previous view of $3.92 to $4.00 a share. It projects sales growth of 1% to 3%, which amounts to $12.7 billion to $12.9 billion.
Baxter also forecast third-quarter earnings of 96 cents to 99 cents a share on revenue growth of 1% to 3%.
Earnings for the three months ended June 30 dropped 9% to $535 million, or 90 cents a share. The company recorded a $22 million write-down related to an expected settlement with the Greek government. Excluding items, the company earned 93 cents a share.
Sales in the period rose 2.3% to $3.2 billion, with the change primarily coming from the effects of currency exchange.
The company's biggest business unit, bioscience, reported a 4% revenue drop to $1.4 billion, mostly because of increased Medicaid rebates required by the U.S. health-care overhaul in the spring, as well as lower revenue derived from antibody therapies, vaccines, and some international hemophilia products.
Sales in the medication delivery unit rose 9% to $1.2 billion, helped by its intravenous and injectable therapies, along with sales of the Sigma Spectrum infusion pump.
The company is in the process of recalling about 200,000 Colleague brand drug-infusion pumps in the U.S. while offering customers either refunds or replacement devices over the next two years.
Problems with the pumps, typically found bedside at hospitals where they deliver intravenous fluid and drugs, have been a long-running issue for Baxter amid problems linked to reports of patient injuries and deaths.
Baxter is offering Spectrum brand pumps from a private company called Sigma International, in which Baxter has a 40% ownership stake. On Thursday, it said it continues to work with Sigma to increase manufacturing capacity to meet expected demand.
The ability to meet demand is key, as the company faces competition from rival pump makers CareFusion Corp. and Hospira Inc.
Mr. Parkinson said it is too early to tell how the company's market share for the products will change, but it will have a better view by the end of the year.
Baxter's renal unit, which includes products for managing advanced kidney failure, saw sales rise 6% to $585 million.
In the quarter, the company repurchased 15.2 million shares for about $677 million.

Use Your Own Blood In Transfusions During Emergency Operations

A new report in the July issue of Archives of Surgery, now provide information that a person using their own blood during transfusions is possibly now cost effective.
Trauma injuries is the leading cause of death in persons between the ages of one and forty four, a major player in this cause is major blood loss this is obtained from the background facts in the report. This seems to hold especially accurate in deaths which happen in the operating room or twenty four hours after the trauma had occurred. Patients that go into shock due to hemorrhaging need a transfusion, usually with packed red blood cells and plasma. Any transfusion of blood from another person (allogeneic) is linked to an array of problems which include having a reaction to the transfusion, infectious diseases being transmitted and being susceptible to antigens according to researchers. Additionally, transfusions of allogeneic blood products in trauma patients have solely been linked to heightened morbidity and mortality, specifically when using blood that has been stored awhile.
Dr. Carlos V. R. Brown, of the University Medical Center Brackenridge, Austin, Texas, and associates had examined forty seven adult trauma patients that had undergone an emergency operation and had been given intraoperative cell salvage, a method in which shed blood is gathered and prepared in order for red blood cells to be transfused back into the patient in 2006 or 2007. In everyone of these patients the researchers had chosen a corresponding patient who was the same age, sex, same system and identical severity of injury and had the same operation but did not have savage cells.
Patients that were in the savage cell group displayed an average intraoperative blood loss of 1,795 milliliters, and averaged a return of 819 milliliters of their own blood. They also had been given less intraoperative and total units of allogeneic packed red blood cells the associated group (two vs four units in surgery and four vs 8 in total units) and also had received less total units of plasma.
The amount from blood product transfusion which includes the complete cost of cell salvage, was lower in the group who had receive this particular procedure ($1,1616 vs. $2,584). The groups had alike of duration of stay in the intensive care unit (eight days for both) and in the hospital (18 for salvage group and 20 in comparison group), there was no dissimilarity in death ratios (6 in the salvage group and 10 in comparison group).
In closing, this current cohort study adjoins with the already present literature in reference concerning the benefit of outcomes in intraoperative cell salvage andautolgous transfusion in patients of trauma who undergo emergency surgical mediation according to the researchers writings in this study. They furthermore state that further studies are warranted to positively substantiate the safety of transfusing contaminated blood to per-operative determined patients that would get the greater advantages from autologous transfusion and also to maximize cost effectiveness. Meanwhile the centers that have avenues to a cell salvage program should frequently use autologous transfusion as a role in their intraoperative resuscitation. Most critically, centers that do not use intraoperative cell salvage and autotransfusion should establish and take away blockades to putting in use this life saving technique.