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Baxter-Dorizoe Ink Deal to Expand Generic Injectables Line


Deerfield, IL-based Baxter International Inc. BAX, a global medical technology company, recently signed an agreement with India-based Dorizoe Lifesciences for expansion of its generic injectables pipeline. The duo is expected to develop more than 20 generic injectable products that include anti-infectives, oncolytics and cardiovascular medicines. However, the financial terms of the deal have been kept under wraps.

Dorizoe is a global contract research and development (R&D) organization that provides services formulation development, analytical development, tech transfer and regulatory filing support services to pharmaceutical companies.

Post the deal closure, Baxter will leverage on Dorizoe’s R&D expertise to accelerate the launch of generic molecules. The deal will combine Baxter’s manufacturing leadership and hospital channel strength with Dorizoe’s technical expertise, thereby boosting Baxter’s foothold in the niche space. Per management, Baxter can tap into the bountiful opportunities of the global sterile generic injectables market, which has a current worth of $40 billion.

The takeover will provide Baxter with a robust portfolio of generic injectables which are approved in the U.S. Meanwhile, Baxter also announced plans to close the acquisition of Claris Injectables by the second half of 2017. The transaction is subject to regulatory approvals and certain customary closing conditions.

A research report by the CPhl Pharma Insights reveals that cutthroat competition from low-cost manufacturing zones like India and China in the generic space has led to the shutdown of certain sterile manufacturing bigwigs in the U.S. We believe the latest initiative by Baxter to expand its footprint in India is a prudent and sustainable move. We are also upbeat about the company’s impressive third-quarter results and an encouraging guidance for the rest of the year.

Unfavorable Stock Performance

Meanwhile, the stock represents a dismal return of just 0.7%, comparing unfavorably with the Zacks categorized Medical Products sub-industry’s solid gain of almost 4.4% over the last one month. Shares of Baxter followed the unfavorable market trend and inched 0.2% down to close at $57.98 following the news.

However, Baxter promises a long-term expected earnings growth rate of almost 12% and an earnings yield of 3.97%, compared to the industry’s 1.29%. This indicates chances of recovery in the near term.

We note that Baxter sports a Zacks Rank #1 (Strong Buy), courtesy of a solid estimate revision trend with nine estimates moving north in the last two months for the full year. Notably, current year estimates for the stock rose 5% to $2.27 per share over the same time frame.

Key Picks

Some better-ranked stocks in the broader medical sector include Inogen Inc. INGN, Luminex Corporation LMNX and IDEXX Laboratories, Inc. IDXX. Notably, Inogen and Luminex Laboratories sport a Zacks Rank #1, while IDEXX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen has a long-term expected earnings growth rate of 17.50%. Notably, the stock represents an impressive one-year return of 90.2%.

Luminex has a long-term expected earnings growth rate of 16.3%. The stock posted a positive earnings surprise of 237.5% in the last reported quarter.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.37%. Additionally, the stock represents an impressive one-year return of 80.5%.

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