Baxter Q2: Drop in demand hits CMO biz, despite overall sales growth

By Dan Stanton

- Last updated on GMT

Baxter Q2: Drop in demand hits CMO biz, despite overall sales growth

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Baxter BioPharma Solutions dropped four percent year-on-year for the second quarter 2014 due to a fall in demand for contract manufacturing services.

Total sales for the company’s bioscience business stood at $1.7bn (€1.3bn) for the quarter, up 7% compared with the same period 2013, yet overall growth did not reach Baxter International’s third-party manufacturing division which saw a decline in revenue.

“Sales in BioPharma Solutions, which is our pharma partnering business, totaled $249m and declined 3% on a reported basis or 4% on a constant currency basis,”​ CFO Bob Hombach said in a conference call discussing results Thursday.

“Performance can be attributed primarily to the timing of shipments and lower third party demand, which was partially offset by strong pharmacy compounding revenues.”

As the chart below demonstrates, the CMO (contract manufacturing organisation) part of the business has had a turbulent time over the past year with changing demand and shipment timings being blamed by the CFO in corresponding conference calls.

In Q1 2013, CEO Hombach said​ the company had suffered a 10% drop y-o-y due to temporary constraints which resulted in delayed shipments to customers but assured stakeholders the problem had been resolved, and the business lost would be caught up over the course of 2013.


Baxter Biopharma Solutions offers contract manufacturing services, including both small and large molecule form/fill/finish and lyophilisation, from US sites in Indiana, California and Illinois.

The firm also has a facility in Halle, Germany, which has seen a number of expansions in recent years in response to a rise in demand for cytotoxic manufacturing, the latest being a $77m investment​ last year.

Pharma spin-out

Baxter International is currently spinning out its biopharmaceutical business​ to create a separate entity to its core medical product business, in a move that replicates AbbVie’s spin-out from Abbott. Baxter’s CMO business, known as Baxter BioPharma Solutions, will not be part of the biotechnology business spinning off, a spokesman told Outsourcing-Pharma.com, but will remain part of Baxter.

CEO Bob Parkinson said last week, the company continues “to work diligently to prepare the organization for the spinoff separation,”​ and said he expects to finalise the transaction by mid-2015.

“One of the strategic motivations behind the decision itself was to increase the focus in both businesses,”​ he told investors, adding the deal is about “intensifying the focus in each of the businesses so that we can be better, both from an innovation point of view, as well as how we launch and commercialize our products and manage the portfolios in both business.”

UPDATE - The article has been updated to make it clear that the CMO business, Baxter BioPharma Solutions, will not be part of the new biopharmaceutical company Baxter International is spinning out.

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