Baxter Recovers After Life2000 Ventilation Systems Recall

Shares of Baxter International BAX have gained 2.8% since Jun 26, after the company announced the recall of its Life2000 Ventilation System. Though the share price had declined following the news, it recovered following reports of potential discussion on divestment of BAX's kidney care segment.

The device, a portable ventilator for patients suffering from chronic respiratory failure or other breathing issues, has been recalled by Baxter. The recall follows the detection of damaged battery charger dongles, which can prevent the ventilator's internal battery from charging. Baxter had acquired Life2000 through its $10.5 billion purchase of Hillrom in 2021.

Significance of Life2000

Per Baxter, Life2000's recall is critical as it directly impacts the reliability of the Life2000 ventilators, potentially leaving patients without necessary respiratory support. Damaged dongles prevent battery charging, which could lead to ventilator failure and severe health consequences. Per the FDA's Database entry, Baxter has strictly advised customers to check for damage, maintain backup devices and replace faulty chargers promptly. This is the latest in a series of recalls since Baxter acquired Hillrom, underscoring the ongoing challenges in ensuring the safety and efficacy of these medical devices.

More on the News

According to a Jun 26 entry in the FDA‘s recall database, the recall affected more than 2,500 units distributed in the United States. The FDA has labeled the recall as a Class I event, its severest classification.

In 2023, the company also recalled thousands of Life2000 systems due to the risk of patient oxygen desaturation when the devices were connected to third-party oxygen concentrators. At the time, Baxter reported that it received no reports of death related to the safety problem, though there were reports of hospitalizations.

Life2000 is not the only device of Hillrom that Baxter was forced to recall since the acquisition. In 2022, Baxter felt the urgent need to recall the Volara ventilator system after an injury and two deaths were tied to a device malfunction.

Industry Prospects

Per a report by MARKETSANDMARKETS, the global ventilator market size was valued at $4.2 billion in 2023. It is anticipated to reach $5.7 billion in 2028 at a CAGR of 6.4%

The robust growth will be driven by unhealthy diet, obesity and physical inactivity, which are some of the leading risk factors contributing to the burden of respiratory diseases.

Recent Developments

In May, Baxter announced the FDA approval of an expanded indication for Clinolipid (Lipid Injectable Emulsion) to include pediatric patients, including preterm and term neonates. Clinolipid is a proprietary mixed oil lipid emulsion designed to provide essential fatty acids and calories in parenteral nutrition for patients who cannot receive adequate oral or enteral nutrition.

In the same month,Baxter announced new data demonstrating that expanded hemodialysis (HDx therapy), enabled by the Theranova dialyzer, is associated with approximately a 25% lower all-cause mortality risk over up to four years compared to high-flux hemodialysis (HF HD). This finding highlights the potential of HDx therapy to significantly improve patient outcomes in long-term dialysis treatment.

Price Performance

Shares of Baxter have declined 9.7% so far this year against the industry's 1.8% rise. The S&P 500 has witnessed a 17.5% rise in the same time frame.

Image Source: Zacks Investment Research

Zacks Rank & Other Key Picks

Currently, Baxter carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader medical space are DaVita Inc. DVA, Universal Health Services UHS and Ecolab Inc. ECL.

DaVita, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 13.6%. DVA's earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 29.4%.

DaVita's shares have gained 43.4% compared with the industry's 15.2% rise in the past year.

Universal Health Services, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.80%. UHS's earnings surpassed estimates in each of the trailing four quarters, with the average being 8.12%.

Universal Health Services has gained 21.3% against the industry's 20.4% decline in the past year.

Ecolab, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 14.3%. ECL's earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 1.3%.

Ecolab's shares have rallied 31.3% against the industry's 12.9% decline in the past year.

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