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Baxter CMO business to decline 10% after loss of ‘major customer’

By Zachary Brennan

- Last updated on GMT

Baxter CMO business to decline 10% after loss of ‘major customer’

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Baxter’s contract manufacturing business is expected to take a nearly 10% hit as one of its "major customers" has elected to self-manufacture products previously made by the CMO (contract manufacturing organization), Baxter CFO James Saccaro told investors last week.

The expected decline comes as Baxter’s Biopharma Solutions group reported $116m in sales for the second quarter, which represents a 6% decline. On a constant currency basis, however, the company reported a 2% sales increase driven by international demand from clients. The company did not respond to a request for comment.

Sales for the CMO business’ same quarter last year totaled $249m​ as the business saw delayed shipments and declining demand for about the last year. A spokesman told us that the $249m is an older figure "that is not restated for all the sales changes we made during the fourth quarter of 2014, including removing compounding and moving those sales to Baxter’s Integrated Pharmacy Solutions​."

Baxter Biopharma Solutions offers both small and large molecule fill/finish and lyophilization services from US sites in Indiana, California and Illinois. Back in 2013, German facility gained additional capacity​ as the outsourcing of cytotoxic manufacturing increased.

The slow decline of Baxter’s CMO business comes as worldwide sales of the total company’s business hit $3.9bn -- a decline of 6% from the same quarter last year. Excluding the impact of foreign currency, worldwide sales grew 3%, exceeding the company’s guidance of 1%. By region, sales in the US grew 1% to $1.8bn, and international sales of $2.1bn represented a 12% decline. 

On Tuesday morning, rare-disease drugmaker Shire offered to pay about $30bn for Baxter spin-off Baxalta, which would benefit from the lower tax rate of a UK-based company.

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