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Strong Pipeline Helps Protect Baxter's Wide Moat From Competition

The diversified health-care firm remains remarkably profitable in tough industries.

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While competition is around the corner for Advate,  Baxter's (BAX) highly profitable hemophilia A product, we think this diversified health-care firm's competitive advantages remain strong.

Baxter's BioScience division represents slightly less than half of the firm's sales, but a higher proportion of profits. Recombinant factor VIII therapy Advate dominates the U.S. market (Bayer's (BAYRY) Kogenate leads in Europe), and the drug's prophylaxis label and conversion of patients previously on plasma-derived products is allowing it to achieve strong growth, particularly among the underpenetrated adult segment. Competition is growing in this market, as Biogen Idec (BIIB) plans to launch a long-acting product in 2014 that could support once-weekly dosing schedule (Advate can be given every three days), and Novo Nordisk (NVO) has filed for approval of a recombinant Factor VIII and has a long-acting version in late-stage development. However, Baxter's pipeline investments will help shield it from these challenges. Baxter has accelerated development of long-acting factor VIII protein BAX855, aiming for a 2015 launch. In addition, HyQvia, a long-acting version of Baxter's immunoglobulin product Gammagard, recently received regulatory approval in Europe and should launch in the United States in 2014. HyQvia's improved convenience should translate into market share gains and better pricing power.

Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.