Advisor, Baxter International Inc
Baxter CEO Sees New Products, Expansion Driving Growth
May.22 -- Baxter International Chairman and Chief Executive Officer Jose Almeida discusses his company's growth forecast and strategy on "Bloomberg Daybreak: Americas." (Video edited to remove incorrect graphic.)
About Jose Almeida
In a May 2018 interview, Baxter International Chairman and CEO Jose Almeida discussed the company's growth strategy, stating that about two-thirds of projected revenue growth would come from new products and one-third from geographic expansion into markets like Japan and China. Almeida noted that while trade disputes were a concern, he said Baxter would be less affected because 90% of its products in China are made there. He described Baxter as a company focused on basic healthcare products such as injectable saline, glucose, antibiotics, and dialysis, which he said have more stable pricing than some other medical sectors. Almeida identified his biggest internal concern as shifting Baxter's culture to one of "agility, courage, and speed." He said investment decisions hinge on demographics, market size, and the company's ability to grow with the market, and that geopolitical risks are considered but do not deter investment in countries like China due to patient demand. Almeida also stated that Baxter supports broader healthcare coverage and that the volume of patients needing hospital treatment remains stable, which he said supports demand for the company's products.
Transcript (24 segments)
A
Analyst0:10
Of your international base that you don't have yet, how much is going to come from your current portfolio?
J
Jose Almeida0:14
I'd say about two-thirds coming from new products and about a third in geographic expansion. So we're into places like Japan and China; we have a good presence, but our product portfolio is not complete.
A
Analyst0:27
How do you view then all the trade disputes that we're seeing in DC with China, with Europe, etc.?
J
Jose Almeida0:33
You know, we hope that this gets resolved, and it seems that the news is getting there. But we are a Chinese company in China; we make 90 percent of our products in China for China. So despite the fact that we import some of the products, it will not affect us to a great extent. It may affect other companies.
A
Analyst0:55
As we showed in the chart, you've had quite a run. You've been very... you touched our products if you've been in a hospital. You may have come into contact with one of our injectable products. So we are in every hospital, in every clinic. We also are in chronic disease with dialysis products there.
J
Jose Almeida1:28
What's your comparative advantage as opposed to your competitors? We have positions number one and two because we have the ability to produce this product on a global basis and we also have the ability to deploy a supply chain across the globe.
A
Analyst1:42
How much of your growth in earnings has been because of top-line growth revenue, as opposed to you've been very effective in cost-cutting, as I understand as well?
J
Jose Almeida1:50
Yes, we've been... our growth in the top line is always important because that was... we...
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Analyst2:10
That's a lot, and I guess this follow-up question: that the first 900 million is usually easiest, the next 900 million gets a lot harder.
J
Jose Almeida2:18
That's correct. But if looking at a company, how do you do that? You go and do zero-based budgeting exercise, you go in and take layers out of the organization, make the organization simple, less bureaucratic, more pleasant for employees to be engaged. But at the same time, you remove things that are not necessary. And I'm sure that many companies around the globe have the same opportunity; it's just the courage to do it sometimes that they don't have.
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Analyst2:43
Along the same lines, how much money are you planning on spending on your business this year?
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Jose Almeida2:44
We are spending about 600 to 700 million dollars in capital in our business, in improving plants and creating more capacity.
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Analyst2:55
And then along those lines, what about your hiring costs?
J
Jose Almeida3:11
Opportunities to continue to improve our supply chain. Clearly, we're a company that also makes a lot of plastic products, our PVC and non-PVC products, so we always have a chance of being affected by oil price, but that has been minimized because our cost reduction programs have offset that tremendously.
A
Analyst3:31
Tell us about the overall size of the pie that you're taking a piece of. Is that growing? Is it static? Are you taking market share, or is the overall market growing?
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Jose Almeida3:39
The market is growing 3 to 4 percent, and Baxter is growing 4 to 5 percent, and then accelerating into 2020: 3 to 5 to 6. So we're growing a hundred to 200 basis points above our market growth rates. We are very happy with the markets that we currently compete in, but we are...
A
Analyst4:10
Baxter believes that we should have coverage for more people; more people should be entitled to coverage in the US and every place in the world. We have the ability to service all these patients if they are covered or not, because we're in the hospital business, we are in a chronic disease business. So when you come to the hospital, paying the bill or not paying the bill, being covered or not being covered, our products are central to healthcare.
J
Jose Almeida4:40
But if fewer people are covered, doesn't that mean they're seeking and obtaining less medical services, and doesn't that mean that not as many people are using Baxter product?
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Analyst4:46
When people get sick, they get sick; they've got to go to the hospital either through an emergency room access or through a primary care physician. So if you don't have a primary care physician, you end up crashing the... they only have instead of having 20 beds, they're going to have ten. I mean, that's going to be a marginal reduction. There is a shift between acute care into more of the home, into less expensive annals. This is one of the abilities for the hospitals to come together and merge, but the volume of patients is not changing. And we still have people getting sick, getting the flu, going to the hospital, getting treatment, and this is when people use Baxter products. Our products are used in ICU for people who are really sick. No matter their mergers in hospital, we still have ICU, you still have beds, people still need to be treated. The merger of hospitals is a way of creating synergies on the infrastructure cost, not necessarily removing beds from...
J
Jose Almeida6:13
For healthcare, we are not in the pacemaker business; we're not in the... of business. We're in basic healthcare: injectable, saline, glucose, antibiotics, dialysis products. So those products usually have more stable pricing.
A
Analyst6:30
What is the biggest worry that you have right now as a CEO?
J
Jose Almeida6:32
Internally, it's about our ability to really shift the culture permanently to a culture of agility, courage, and speed. If we can do that, we're going to continue to evolve into a company that is innovative, a company that continues to deliver the bottom line, but through good growth on the top line.
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Analyst6:54
When you're debating whether or not you're going to come down the pipe from there, not any geopolitical risk? How do you as a CEO view that lens?
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Jose Almeida7:16
Geopolitical reasons: if you ask me, 'Are you going to invest money in Venezuela today?' I would say no. But you can invest money in China for sure, because the demographics are that no matter what the trade war and where the stake is, there are patients in China needing our treatment. So geopolitical changes are part of the conversation, but more importantly, it's about the therapies that we can bring innovation to the market.