Sales of Baxter's medication delivery devices declined 6% in the first quarter on the back of weak demand, particularly in the U.S. market.
The unit has struggled since Hurricane Maria hit Puerto Rico in September 2017 and dragged on Baxter's performance again in the first quarter, contributing to a 2% dip in company-wide revenue on a reported basis.
Despite the decline, Baxter beat analyst sales and earnings expectations as a result of falling costs and high-single-digit growth at the advanced surgery unit.
The long-anticipated turnaround at Baxter's medication delivery unit is yet to arrive. Baxter's problems began in 2017 when Hurricane Maria affected manufacturing of its small IV bags. Output at the production plants returned to normal last year but Baxter found the market had changed in its absence, resulting in sales continuing to fall.
Baxter CEO José Almeida attributed the 6% decline in medication delivery sales seen in the first quarter to "a challenging comparison to our first quarter of 2018," noting that demand for the devices spiked in the first half of last year as buyers stockpiled in the wake of Hurricane Maria.
However, medication delivery sales were also down on the first quarter of 2017. Sales over the first three months of 2017 came in at $664 million, compared to $634 million in the most recent set of financials.
The destocking and market struggles the medication delivery unit faced later in 2018, which included a third quarter Almeida called "frankly disappointing," mean Baxter will face easier progressive comparisons throughout 2019.
With Baxter also saying efforts to recapture lost small volume parenteral business business are "on track," the company expects the medication delivery unit to perform better as the year goes on and hit its 6% growth target for 2019.
"I feel comfortable with our ramp up in medication delivery. We have a good pipeline of either conversions or replacements. We have a plan to get there and right now I have nothing otherwise telling me the plan is in jeopardy," Almeida said on a conference call with investors.
For now, Baxter is relying on other franchises for growth. The advanced surgery unit posted another quarter of growth. Demand for products including the Preveleak surgical sealant Baxter bought from Mallinckrodt last year drove the unit to 9% growth in the quarter, leading Almeida to state that it is doing a "pretty good job in getting market share."
Baxter responded to a first quarter it described as "solid" by raising its guidance for the year. The company now expects earnings to come in at $3.27 to $3.35 per diluted share, as compared to its previous forecast of $3.22 to $3.30.
Shares in Baxter fell 2% in premarket trading.