(BAX) Baxter Presents Study Outcome

Baxter International (BAX) recently revealed critical Phase I/III study outcomes analyzing the efficacy and safety of BAX 326. This is an investigational recombinant factor IX protein, which is utilized for prophylaxis and therapy in bleeding situations for victims (over 12 years of age) of hemophilia B. The information was tabled at the 54th Annual Meeting and Exposition of the American Society of Hematology (ASH) held in Atlanta, Georgia.

BAX 326 has received orphan drug designation from the Food and Drug Administration, which is a special designation granted to an offering that upon approval may suffice for an unmet requirement for individuals with the uncommon ailment. Supporting information for the prophylaxis case (important for the orphan drug status) was a part of the biologics license application.

The scientifically conducted Phase I/III study evaluated the efficacy, safety and pharmacokinetics of BAX 326 on 73 patients (with prior history of treatment) with moderate to severe forms of hemophilia B. The results of the study showed that over 40% of patients utilizing BAX 326 in the form of prophylactic therapy did not suffer from bleeds.

Baxter announced earlier in 2012 that it had teamed with Chatham Therapeutics to form a gene therapy oriented care for hemophilia B. The future treatment of hemophilia B partly relies on successful gene therapy.

The news regarding Baxter still remains somewhat mixed. On the positive side, Baxter’s focus on life-sustaining products which are not commoditized partly insulate it from an economic downturn. The company is able to generate recurring revenues and consistent cash flow, due to its focus on chronic diseases. Among other positive factors, Baxter retains a strong product pipeline with several products in late-stage clinical development.

On the flip side, despite resilience in certain sub-segments, we are concerned about relative stagnation in sales, a slightly somber outlook for hospital spending and tightening of reimbursement.

Improved execution has lifted sentiment somewhat toward Baxter. It is a good bet for value investors willing to wait as fundamentals improve further. Among others, the company competes with Becton, Dickinson and Company (BDX) in certain niches.

We currently have a long-term Neutral recommendation on Baxter. The stock carries a Zacks #4 Rank, which translates into a short-term Sell rating.

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