Conference Jay Saccaro, EVP & CFO March 5, 2019 Safe Harbor - - PowerPoint PPT Presentation

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Conference Jay Saccaro, EVP & CFO March 5, 2019 Safe Harbor - - PowerPoint PPT Presentation

Raymond James Institutional Investors Conference Jay Saccaro, EVP & CFO March 5, 2019 Safe Harbor Statement This presentation includes forward- looking statements concerning Baxters financial results, business development activities, ca


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Raymond James Institutional Investors Conference

Jay Saccaro, EVP & CFO March 5, 2019

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Safe Harbor Statement

This presentation includes forward-looking statements concerning Baxter’s financial results, business development activities, capital structure, cost savings initiatives, R&D pipeline, including results of clinical trials and planned product launches, Baxter’s long range plan (which includes financial outlook for 2019, 2020, and 2023) and other growth strategies. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance of risks for new and existing products; product development risks; product quality or patient safety concerns; continuity, availability and pricing of acceptable raw materials and component supply; inability to create additional production capacity in a timely manner

  • r the occurrence of other manufacturing or supply difficulties (including as a result of a natural disaster or otherwise); breaches or failures of

the company’s information technology systems or products, including by cyberattack, unauthorized use or theft; future actions of regulatory bodies and other governmental authorities, including FDA, the Department of Justice, the New York Attorney General and foreign regulatory agencies; failures with respect to compliance programs; future actions of third parties, including payers; U.S. healthcare reform and other global austerity measures; pricing, reimbursement, taxation and rebate policies of government agencies and private payers; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; global, trade and tax policies; accurate identification of and execution on business development and R&D opportunities and realization of anticipated benefits (including the acquisitions of Claris Injectables and two surgical products from Mallinckrodt plc); the ability to enforce owned or in-licensed patents or the patents of third parties preventing or restricting manufacture, sale or use of affected products or technology; the impact of global economic conditions (including potential trade wars); fluctuations in foreign exchange and interest rates; any change in law concerning the taxation of income (including current or future tax reform), including income earned outside the United States and potential taxes associated with the Base Erosion and Anti-Abuse Tax; actions taken by tax authorities in connection with ongoing tax audits; loss of key employees or inability to identify and recruit new employees; the outcome of pending or future litigation; the adequacy of the company’s cash flows from operations to meet its

  • ngoing cash obligations and fund its investment program; and other risks identified in Baxter’s most recent filing on Form 10-K and other

Securities and Exchange Commission filings, all of which are available on Baxter’s website. Baxter does not undertake to update its forward- looking statements.

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Baxter Profile: A Diversified And Global Portfolio1

Acute Therapies

~$0 $0.5B .5B

Advanced Surgery

~$0 $0.8B .8B

Clinical Nutrition

~$0 $0.9B .9B ~$2 $2.7B .7B

Medication Delivery

~$ ~$2. 2.1B ~$3 $3.7B .7B

Renal Care Pharmaceuticals

$11.1B 11.1B

2018 Global Revenue

1Sales and related figures represent FY 2018; Other sales represent ~$0.5B. Totals may not foot due to rounding.

Americas 54% EMEA 27% APAC 20%

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Strengthen our portfolio and extend our impact through transformative innovation that spans prevention to recovery

Ou Our St Strat rategy egy

Industry leading performance Best place to work Product safety and Quality Growth through innovation

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Delivering On Our Strategy

2018 Business Highlights

Executing Disciplined Focus On Business Transformation Building Momentum With Strong Focus on Operational Performance

► Implementing optimized organizational structure, transforming cost

structure, and simplifying processes

► Establishing global centers of excellence to drive efficiencies in

functional areas

► Simplifying portfolio and optimizing manufacturing footprint ► Delivered solid fourth-quarter 2018 earnings growth, largely driven

by operational performance and business transformation initiatives

► Continuing momentum with new product launches, geographic

expansion, and evidence generation

► Focused on meeting long-term financial goals through strategic

execution and rigorous financial management

Capitalizing On New Product Launches And Geographic Expansion Significantly Enhancing Balance Sheet Flexibility To Deliver Value

► Focusing on operational improvement and effective working capital

management to improve cash flow

► Returned value directly to shareholders via 19% dividend increase

and over $2.4 billion of share repurchases in 2018

► Maintaining financial optionality while thoroughly assessing

capital investment opportunities

► Reallocating investment to higher-margin, faster-growing

businesses

► Executing on a robust pipeline to provide meaningful innovations

for patients and providers

► Enhanced capabilities along with increasing R&D efficiency enable

accelerating launch cadence

$

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Market Development Enter Adjacencies Portfolio Innovation

Executing on pipeline

  • pportunities and geographic

expansion Driving growth through evidence generation, physician education, and targeted market investments Expanding beyond the core to unlock new therapies and markets

Strategic Execution Allows Long-Term Acceleration

Strengthening And Extending Our Impact

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Executing On Near-Term Launches To Fuel Growth1

New Product Highlights

2019 2018

Prismax Spectrum IQ Infusion System Point of Care New Pump Platform Floseal Fast Prep

2020

Olimel N12

1All references to “new products” and “launches” in this presentation include new product launches, line extensions and geographic

expansions, unless otherwise noted.

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2016 2018 2020 2023

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Driving Operational Excellence Through Business Transformation

Zero-Based Organization

Rightsizing organization with reduced spans and layers

Zero-Based Spending

Employing disciplined cost assessment to eliminate waste

Portfolio Management

Optimizing manufacturing footprint, R&D operations and supply chain network

Global Business Services

Centralizing and streamlining support functions

Cumulative Savings vs. 2015

~$ ~$0.4B ~$1.0B ~$1.1B ~$1.2B Focused on sustainability

  • f business

transformation initiatives1 2024+

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Creating Incremental Value Through Capital Deployment Strategic M&A

BAX

Share Repurchases Reinvestment in Business Dividends

Increased annual dividend rate by 19% in 2018; currently targeting ~35% dividend payout ratio

  • ver time

Repurchased ~36 million Baxter shares in 2018 Continuing rigorous assessment of business development and licensing opportunities Strategically investing in higher-margin

  • pportunities to drive innovation
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Thoroughly Assessing Business Development Opportunities

Drive Category Leadership Rigorous Financial Criteria Preserve Investment Grade Credit Rating Capitalize On Core Capabilities

M& M&A Ob Objecti jectives ves

Disciplined Assessment Of Opportunities Considering Both Strategic Fit And Financial Criteria

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2018 Actual 2019 Guidance 2020 Outlook

Adjusted Operating Margin

~300bps

18.0% - 18.4% 20% - 21% 17.4%

2018 Actual 2019 Guidance 2020 Outlook

Adjusted Diluted EPS

~20%

$3.22 – $3.30 $3.60 – $3.75 $3.05

2018 Actual 2019 Guidance 2020 Outlook

Free Cash Flow3

~$1.6B ~$2.1B $1.4B

~1.5x

Constant Revenue Growth

2% 2% - 3% 3%

2019 Guidance

4% 4% - 5% 5%

2018 – 2020 CAGR Outlook

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Delivering A Solid Financial Outlook1,2

1See www.baxter.com for information regarding non-GAAP financial metrics used in this presentation, including constant currency sales,

adjusted operating margin, adjusted diluted EPS, and free cash flow. 22019 figures reflect guidance provided in Q4 2018 Earnings Call (1/31/19); 2020 figures reflect guidance provided in 2018 Investor Conference (5/21/18). 3Operating cash flow less capital expenditures.

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  • Increasing innovation to drive accelerated

revenue growth

  • Maintaining strong cadence of product launches

and geographic expansions

  • Realizing ongoing benefits of business

transformation initiatives

  • Strategically deploying capital to enhance value

and improve profitability

Continuing Momentum In 2019 And Beyond

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Unique opportunity to create

shareholder value

85+ year heritage of

saving and sustaining lives

Strong

global business

with great people One of the most

trusted brands

in medical products Established

market leadership

across portfolio