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Baxter International Inc (NYSE:BAX)

38th Annual Deutsche Bank Health Care Conference

May 29, 2013 8:00 am ET

Executives

Robert J. Hombach - Chief Financial Officer and Corporate Vice President

Analysts

Kristen M. Stewart - Deutsche Bank AG, Research Division

Kristen M. Stewart - Deutsche Bank AG, Research Division

All right. So thank you, guys, for joining us for the 30th Annual Deutsche Bank Healthcare Conference. My name is Kristen Stewart. I am the medical device analyst at DB. Just want to thank you on behalf of all my colleagues, again, for coming.

It's my pleasure to kick off today with Baxter International. Baxter, as you know, is a company that has a bioscience business, as well as medical products business. With us today, we have Bob Hombach, he's the CFO, as well as Mary Kay Ladone, which you know from Investor Relations.

So we're going to keep the format mainly fireside chat. I would like the opportunity to offer you guys all questions. You can certainly feel free to raise your hands at any point in time, and we also do have a app that you can access on your iPad or on your mobile, and you just go to yorn, Y-O-R-N.com/db, and you can submit any questions anonymously online for me to read.

Question-and-Answer Session

Kristen M. Stewart - Deutsche Bank AG, Research Division

So I guess just with that, Bob, I guess, the first question that I have for you is last fall, you guys had an investor conference, and you outlined your updated long-term plans. And you talked about top line growth of about 5%, and then earnings growth of about -- or EPS growth, 7% to 9%. And then in December, you had the Gambro acquisition, and you had talked about how that's going to be accretive to both the top and bottom line growth. So can you first just provide us real quickly just what's kind of left to close the deal? What the timelines looks like? And then just spend some time trying to get us a little bit more comfortable on just the path forward in terms of where you see the sales accretion and from the cost synergies as well.

Robert J. Hombach

Certainly. As it relates to the timing of the deal, we continue to work through the regulatory process in various countries around the world. And given the timing of our most recent filings and the best information we have at the moment, I would say that we're looking at an early Q3 close, again, pending regulatory approvals in various jurisdictions. Again, we view the Gambro acquisition as a very strong strategic fit for Baxter and one that offers very attractive financial returns as well. And in terms of acceleration of top line growth, we feel there are a number of avenues to generate commercial synergies across the 2 businesses going forward, as our portfolios are very complementary. Baxter's historic focus in the renal business has been on our home Peritoneal Dialysis franchise. As you know, we're in the process of working through the regulatory approval for a home hemo device as well. Meanwhile, Gambro is very strong in, in-center hemodialysis, as well as Continuous Renal Replacement Therapy or CRRT, which is actually administered in an acute care hospital setting for acute kidney failure. And certainly, hospital setting is one where Baxter has very strong presence on a global basis. So given the complementary nature of the portfolios, the fact that we have strength in channel as it relates to the hospital setting, and we think we can further leverage their leadership position already in the CRRT business. And from a geographic footprint standpoint, I would characterize our PD business as being very strong in emerging and developing markets, particularly in Latin America and Asia Pacific. And that's an area, frankly, where I think Gambro has underperformed. And so as we look to bring that portfolio into Baxter, we think there's great leverage opportunities in emerging developing markets to improve variability to drive growth going forward. There are a few other specific issues that are being dealt with in terms of an earthquake and impacted sales in prior year for Gambro, as well as a dialyzer capacity that's coming online here, not only in 2013, but additional capacity in '14 and '15 that will help accelerate growth. And on the cost side, again, we believe there are significant synergies that we can generate. We've talked about approximately $300 million over the next 5 years, with 80% of that achieved by the end of 2015 or a little more than 2 years into the deal. And these synergies are primarily -- more than half of that will be generated in the operations, manufacturing, supply chain procurement and technical service areas of the business, where, again, a lot of what they do today in terms of manufacturing sterile solutions and electromechanical devices and various accessories that go along with it is very similar to things that Baxter does today as well. So we see great leverage in that aspect, and then the remaining synergies certainly in the back office and administrative functions. So we feel like we have a very good line of sight on both the cost synergies and the commercial opportunities. And again, we think, we can enhance value here pretty significantly as we bring them into the portfolio.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And then just going back to the dialyzer capacity, do you feel good about just kind of the timeline for when this comes back on? And then what would be kind of the underlying growth rate that you would expect coming out of this HD business?

Robert J. Hombach

Well, I think, if you're referring to the in-center monitor business, I think our assumptions around the in-center monitor business for this going forward are, I think, appropriate and modest, kind of low single-digit growth. I think it's really the acute-care CRRT business that I mentioned, as well as the dialyzer capacity coming online that's going to drive the majority of the acceleration of their underlying business going forward. The capacity comes online in stages over the next 3 years. And I think, given their somewhat under-representation, let's say, in emerging and developing markets and our strong position there, we think there'll be ample outlets to deploy that capacity and drive growth going forward in a meaningful way.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then just kind of thinking about just the M&A strategy. Gambro is one of the larger dealers that you guys have or will be consummating. How should we just think about the appetite for M&A for Baxter, overall, going forward?

Robert J. Hombach

Yes, I think, given our strong cash flow generation and the projections we have going forward, we expect to continue to be able to do bolt-on acquisitions of the kind that you've seen us do over the last 2 years. Baxa, SIGMA and Synovis are 3 examples of transactions in the $100 million to $300 million range in terms of acquisition price. Businesses that had strong presence in the U.S., but great growth opportunities outside the U.S. that the smaller companies have not been able to exploit. And those are exactly the kind of deals we're going to continue to look for in that kind of $100 million to $500 million range. And while Gambro is a significant transaction much bigger than we normally do, it very much has a lot of the same characteristics of a bolt-on, just a very big bolt-on to what you've seen us do before. But financially, we will definitely be in a position to continue to look at bolt-on acquisitions going forward here, even after financing the Gambro transaction. I think the key thing about the Gambro transaction is given that we're buying an asset outside the United States, we have 2/3 of our cash flow generation on an annual basis and about 2/3 of our cash on hand today outside of the U.S. So the ability to finance that in a very cost-efficient, tax-efficient manner does not do anything to hinder our financial flexibility due to the kind of things we'd otherwise would be doing anyway.

Kristen M. Stewart - Deutsche Bank AG, Research Division

All right. And then -- because I have them, I'm going to ask this. So spinoffs have always tended to create value more often than not, and certainly, we've seen what the spinoff for Abbvie has done for Abbott shareholders, and obviously, committing -- it's going to be [indiscernible]. I know you guys have had a history. And I think I actually asked you this last year as well, so I'll ask you again. In light of the success that you've seen, is the breakup something that Baxter would consider. You've had AdWords in the past allegiance or whatnot. So you guys seem to be pretty open to it. So if you say no, I want to know why it doesn't make sense.

Robert J. Hombach

Sure, sure. Well, as you know, the management team at Baxter has been very focused on driving strong operational performance and enhancing shareholder value over the long term going forward. As part of our disciplined approach to managing the business and, frankly, as part of good corporate governance, management and the board regularly evaluate the portfolio. And we believe that the mix of businesses and the diversification we have today is a powerful asset and a platform that we can leverage to drive accelerated growth, particularly in emerging and developing markets and the environment that we're in today. And frankly, that diversification does mitigate risk to some degree as well. So as we go forward here, as we outlined in our investor conference last October, we're really focused on 4 key metrics of growth that we think will drive the accelerated top and bottom line growth that you described at the beginning there, Kristen. And so driving the core portfolio into emerging and developing markets, leveraging our emerging R&D pipeline and new product launches, approximately 20 that we expect to have over the next 5 years, continuing to look at bolt-on acquisitions, while we integrate the Gambro acquisition, which again, we haven't even started that process yet and also public-private partnerships as demonstrated by our recent hemophilia collaboration with Brazil and PD collaboration in China. We think there are ample growth opportunities here that we're pursuing as a team that will drive enhanced shareholder value going forward. And that, we believe, in concert with the board, is the right strategic path for Baxter to follow going forward.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Just, I guess, on that last point of the pubic and private partnership. You mentioned the hemophilia and PD one. Maybe just for those who aren't familiar, though I suspect most are, can you just review for us exactly and how you entered into those, the kind of economics from a Baxter perspective? And what sort of opportunities you see down the road of doing additional agreements like this?

Robert J. Hombach

We do think there are opportunities going forward beyond those 2. And we're looking for the unique combination of Baxter capabilities meeting the needs of government in a significant way. And so I think being a market leader in some key product areas position us well to start those dialogues. As it relates to the 2 I mentioned, in Brazil, we have a 20-year exclusive agreement with the Ministry of Health to provide recombinant Factor VIII for hemophilia A in the country. Today, Brazil is the third largest market for Factor VIII utilization in the world, but it's almost entirely plasma-derived. The government is looking to improve access to care, and frankly, patient outcomes as well. So in addition to converting to the state-of-the-art recombinant platform, they're also focused on improving access to prophylaxis treatment, which, again, will prevent bleeds and joint damage and so on going forward. So it's really a opportunity increase access and provide better outcomes. And given the scale of the opportunity here and the exclusive nature of it, the financial returns to Baxter are very attractive and accretive both at the gross and operating margin aligned for Baxter relative to our current company averages. In China, Baxter has had a PD presence for home Peritoneal Dialysis for some time. And in fact, we now have more patients in China than any other country in the world, despite the fact that we've been in other countries for more than 30 years. And -- but we really just scratched the surface of the opportunity. And again, the Chinese government is looking to expand access to care in the most cost-effective manner possible. As we've talked about many times, we think PD is significantly more cost effective than in-center HD on an annual cost basis. And so this allows the Chinese government to expand access in a cost-effective way. And so we have some pilot programs in a number of provinces to expand PD access even further. So there's just a couple of examples across a couple of our key product areas, but there's other areas in certainly other countries that we're looking at that are, again, looking to combine the power of scale and global expertise.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Perfect. Then one of the other vectors that you had talked about and just mentioned was just kind of R&D. So just kind of want to walk through a couple of the newer products that you have. You recently, I guess, just last week, received European approval for HyQvia. You had mentioned that you're going to be launching in select countries this year and then doing a broader roll out in 2014. So can you just maybe walk us through why that is? Is it just simply a function of capacity issues? And then just kind of the strategy of kind of launch, kind of the economics perhaps with it and then where you expect to see the greatest use?

Robert J. Hombach

Okay. Yes, may be I'll address capacity first, and then we'll talk a little bit about the strategy around deploying HyQ. So as it relates to capacity, as you know, we took down one of our older facilities to do some, I would call, modest refurbishments to extend the useful life of the asset. And we're in the process now of -- we've restarted production in the older L.A. facility and expect to have product available to the market in the third quarter of this year. Over the last 2 years, we have been able to support some level of volume growth, low-single digits in 2012. And then in 2013, we've talked about mid-single-digit volume growth. As you know, the market growth rate particularly for immunoglobulins has been faster than that. We expect over the long term that immunoglobulins, in particular, could grow 6% to 8% on a volume basis going forward. And with bringing the older facility back online and some of the other modest capacity expansions we've been implementing over the last year, so we're definitely going to be in a position, starting in 2014 and forward to support that 6% to 8% growth rate that we expect to see in the marketplace, with some additional flexibility, given the contract manufacturing agreement we set up with Sanguin that will kick in, in the back half of 2014. So I think our capacity situation is somewhat of a consideration here at the moment, but I think, more importantly, as we look to launch in the back half of 2013 here in Europe with HyQvia, we do have to first go through a process over the next 30 to 120 days to get reimbursement approval in a number of countries. We will do a targeted launch here. Initially, this is a very significant change in approach in terms of the treatment itself in the therapy, and we want to make sure treaters and patients are very well-educated and that the launch is executed in an outstanding manner, because we're really looking to optimize this opportunity for the next 10 years, not maximize sales in the next 6 months. And so the controlled launch, we think, is the right way to do that, because I think once we establish this as an effective and safe and cost-efficient approach through subcutaneous administration of ITs, we'll be able to drive growth in an accelerated basis in 2014 and beyond. And as you know, we continue to work through getting approval in the United States as well, which is another big market that we want to consider volume allocations and so on, as we go forward.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Since you open the door for that one, can you provide us just an update on what's kind of going on in the U.S.? You had initially anticipated meeting with the FDA, and, I guess, in some of the more recent calls you've said that, that was not happening because you already had an active dialogue. So kind of what, I guess, should we think about the, I guess, preclinical data that you're giving and kind of best case opportunity for when that products can actually reach the market?

Robert J. Hombach

Yes, just taking it back a little bit, the fall of last year, we received a complete response letter and we're out to do some preclinical animal studies to address some concerns that the FDA had highlighted. And we initiated those studies in the fourth quarter of last year. And those studies will take about a year to complete. The meeting that we have previously scheduled in the second quarter was really meant to provide interim data to the FDA to ensure that the path we are on was going to address their concerns, and that as we wrapped up the studies at the end of this year, we'll be in a position to file an amendment to our BLA. So as you mentioned, we did share their preclinical interim data with them prior to the meeting, and that started an active dialogue immediately, which made the meeting a little bit less relevant as a driver here. And the goal, again, really, is to get clarity around are we on the right path. And if assuming we are, as the preclinical trials -- studies, excuse me, wrap up at end of this year, we'd be in a position then to file the amendment, which would be a 6-month review. So we're talking back half of 2014, best case, on U.S. approval.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And, I guess, will you be having any other formal meetings with the FDA? Or is this kind of an ongoing dialogue, so we won't necessarily have any milestones to kind of look for to be determined?

Robert J. Hombach

Yes, it's really to be determined as the dialogue evolves here.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay, perfect. And just in terms of how you're planning on kind of pricing the product? How do you the think the best access? As I understand, just kind of what subcutaneous, you have to administer it more often and then this, obviously, would be less of a dose, is that correct? So maybe just walk through that.

Robert J. Hombach

Yes, well, again, we think HyQ represents meaningful innovation in IG subcutaneous administration, because it really mimics the bioavailability pretty closely to IV administration. It's once a month, one injection site versus the -- as you mentioned, the current subcu approach, which is once a week, multiple injection sites. And in many cases, a fair amount of injection site reaction rate among some competitive products and so on. So I think from a cost and convenience standpoint that this is meaningful innovation, and that, that should be reflected in the price in the marketplace. So I'm not going to get into specifics around our pricing strategy here, other than to say, we do think this warrants a premium price, given that, again, the innovation is there, as well as the fact that this will be a accretive [ph] product with the GAMMAGARD LIQUID, along with the hyaluronidase that needs to be infused in advance of the IGs.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And where would you say you would estimate the subcutaneous market to be today in terms of percentages? And where could that go, if you have a product like this? And what indications would you anticipate, seeing the greatest use?

Robert J. Hombach

Despite the fact that some of the pitfalls I mentioned around the current subcu treatments, that has been the fastest growing part of the market for primary immune deficiency, which is the on-label indication we're seeking for HyQ. And so we estimate, and it's difficult in this market to get very precise. We estimate that, today, subcu represents a little bit more than 30% of the IG utilization for PID. And, really, there's no reason why there should be an upper limit to how much conversion could occur towards subcu from IV in the PID space. Many of these patients today are treated at home already and infusionists will come in and assist them with the IV administration. And if we're successful with HyQ, that should be something that could be self-administered at home, as well. And so really there's a second significant opportunity here to increase that conversion from, again, approximately 30% of utilization today up to a much higher percentage.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then, I guess, just kind of moving on to Alzheimer's, which data you guys had released. It was a little bit disappointing. Just to understand the timeline of what's coming up there, so you guys will be presenting the subgroup analysis, should I think you're in Boston in July. And then how do you guys just think about the decision to move forward, and may be just give us a little bit of perspective on how much these trials were costing you? And if you'll just let -- and if you decide to cut it short, will you just let this flow through? Or do you look to reinvest in some other areas?

Robert J. Hombach

Yes, as you mentioned, we're disappointed across a number of factors related to how the Alzheimer's trial turned out. This is a risky area to begin with. It's something we always highlighted as a wild card, and we did not include any contribution from Alzheimer's in our long-range plan. And it's unfortunate for patients, treaters, families and certainly for the company that we weren't as successful as we hoped to be. There were some interesting data points there around a few subgroups. We will do additional analysis on that, as well as biomarker data, which wasn't available at the time that we initially announced. That all will be presented in July here in Boston at AAIC. And that full analysis then really will drive whether there's going to be a next step for Baxter in this area. As you mentioned, given the nature of the studies we were doing, and the fact we're using a low-established product like GAMMAGARD LIQUID, they were relatively small studies. The Phase III for -- we have completed one Phase III, and we're in the process of initiating a second Phase III were costing us approximately $40 million a year on a run rate basis for R&D expense. We have stopped those current trials, and as we evaluate this, and so we've got about half a year left here in 2013. And we are going to look at potentially redeploying some of that in the other R&D programs and, potentially, some of it would drop through. But that's to be determined based on, again, how the biomarker data is reviewed to small subgroups, because we may initiate additional trials.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And I know it's always hard to see if there's been, any -- well, which many has been in been in Alzheimer's. But are you guys concerned that given these results that there could be a little bit of an impact on the market growth rate?

Robert J. Hombach

We really didn't have visibility to any meaningful amount of utilization related to Alzheimer's. And so we don't suspect there's going to be a meaningful impact, but that does remain to be seen. We think demand for IGs is just going to continue to grow. And that 6% to 8% that I mentioned for a whole lot of reasons, including the fact that there remain significant under diagnosis and under-treatment in the U.S., even but certainly in Europe. And even to a greater degree in emerging and developing markets related to uses for IG. So I think over the long term, we continue to be very positive on the long-term outlook for IGs.

Kristen M. Stewart - Deutsche Bank AG, Research Division

All right. And then just kind of circling back, I know, you mentioned this a little bit earlier, but just with the expansion of capacity, you guys certainly are expanding capacity. It seems like it's more in line with the growth rates that you're mentioning on 6% to 8% volume. How do you just -- are you concerned at all at the some of the capacity additions that your competitors are putting out? It kind of seems like everyone's being very rational in their approach but...

Robert J. Hombach

Again, I can only speak to Baxter. But the way we've gone about providing additional capacity in the near-term -- as you know, we announced a large investment in Georgia to build out up to 3 million liters of capacity. That doesn't come online until 2018. And in the meantime, again, with a robust underlying growth rate of 6% to 8% in over a 5-year period, that's a pretty meaningful increase in demand. And so we really geared our capacity to be able to support that. And the way we've done it here, both with the extension of the older L.A. facility, which was a very, very small investment that -- incremental investment we had to make in order to do that as well as the contract manufacturing agreement that we have with Sanguin today, which offers us a lot of flexibility but that is not a take-or-pay agreement. So to the extent we don't utilize that to the extent we had originally planned, the financial penalties are de minimis. And so, we have flexibility, but we don't have a lot of fixed cost to concern ourselves with in either case. So that really was our approach, and I think the right one in this environment, because we're -- we are excited about the prospects for products like HyQ. And again, hope to get approval in 2014 in the U.S., and we'll see how that plays out going forward.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And there also just seems on Sanquin that the economics are pretty favorable for you guys. Is that...

Robert J. Hombach

Yes. Yes, I mean, the one aspect of the fractionation process that they're going to do for us is certainly a bottleneck. But in terms of the total cost of producing IGs, as an example, it's a fraction of that cost. And the cost that they're going to charge us is very much in line with what our own internal cost base is. So again, the marginal cost of that agreement is very, very minimal to what we would otherwise do internally, and we avoid significant time and CapEx investments in order to get it.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. Before I keep on going, I just want to check in and see if anybody in the audience has any questions. Okay, because it's just early. So I'll keep going then. Just moving on to the recombinants business that you guys have. It seems like the market could potentially become a lot more clouded, not only with potential entries of the long-acting products but also some me-toos that are coming on that seems to be a threat, I guess, for the current Baxter business. But on the other hand, I know you guys have a number of recombinant products in the pipeline. So maybe you can just help us get a better understanding about how you guys are thinking about the kind of relative risks with these new entrants relative to the opportunity that you see for your products?

Robert J. Hombach

Yes, we're certainly well aware of the competitive threats that are out there in terms of near-term and longer-term entrants into the recombinant Factor VIII market. We try to reflect that in our long-range plan issue. As you know, we did have pretty meaningful negative headwind built in related not only to recombinant Factor VIII but SUPRANE and in cyclophosphamide to products in our mid-product side as well. We expect some generic entrance here starting in 2014. And so to offset that, we do have a robust new product pipeline, and as you mentioned, a number of recombinant proteins that we expect to come into play here as well to help drive growth. And meanwhile, we've done a number of things on the ADVATE front to continue to bolster that franchise and give us a bit of a head start on moving towards less frequent dosing with our PK-dosing label that we've got at the end of 2011, as well as the ability to market prophylaxis for both adults and children in the U.S. And so there are number of things there that I think are going to help mitigate some of that risk, but again, we have built in, I think, an appropriate amount of expectation of impact into our long-range outlook. And just to give you a sense of it, we talked about the overall hemophilia market growing in the 4% to 6% range over the next 5 years in our long-range plan, and our expectation is that our franchise grows 2% to 3%. So we did build in some below-market growth expectation there as a result of the effects that I just mentioned.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And the hemo, the 4% to 6%, is that thinking about it in terms of volume, or just kind of sales dollar? Is it sales dollar?

Robert J. Hombach

That's sales.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And just in terms of, I guess, your expectation, you guys have filed the BLA for the recombinant Factor IX, which is more of a, I guess, me-too product. How would you think about -- you guys did sell or had distribution benefits years ago, internationally. So how do you just think about the opportunity with that product?

Robert J. Hombach

Well, we're pleased to be in a position to hopefully get approval here in the back half of 2013 and launch that product here, starting in the U.S., but we'll file in Europe and other countries around the world. I would say that we don't view our version of recombinant Factor VIII as a me-too benefits. We think there are some benefits relative to that, but we'll save that for the product launch. Clearly, there are other entrants coming into the market, longer acting, as an example. But given our global presence in hemophilia, particularly hemophilia A and our focus on emerging and developing markets, we think there's going to be ample opportunity for that to be meaningful piece of our business here on a global basis going forward, given that, from the longer-acting standpoint, similar to what we've talked about on the hemophilia A space, Factor IX is for hemophilia B, we think there will be a portion of the market that will be interested and will be appropriate to think about a longer acting, but that portion is less than 25% of the market. And so we think there's still plenty of opportunity for a very strong recombinant Factor IX offering to do well on a global basis.

Kristen M. Stewart - Deutsche Bank AG, Research Division

So just to make sure I understood, for your less than 25% of the market, is that the -- what you guys view as long-acting for Factor IX? What does it look like? Or just long-acting in general?

Robert J. Hombach

Well, I think even for longer-acting Factor VIII, there will be a portion of the market that is interested in and willing to switch to potentially extend. I think the extension of half-life that's been demonstrated on the Factor IX has been suddenly more than what's been shown on Factor VIII. As you know with our PK dosing, we're already with the existing ADVATE product able to offer patients every 3-day dosing. And the majority of what has been demonstrated by one of our competitors was 3.5 days. So it's not a meaningful extension, given there are other factors that have to come into play in terms of the nature of the molecule and other things that we'll market against. Factor IX, I think, is more of an extension of half life, but again, I think, that's most relevant for those who are on a regular prophylaxis treatment, which for hemophilia B today is an even a lower percentage than A. That's kind of midteens right now.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then just in terms of your long-acting program using more, I guess, speculation. I guess, there's been perhaps, I guess, concerns just kind of raised with some of the conference I've been just with PEGylated versions and chronic use. How do you guys get comfortable with that? And what, I guess, gives you confidence that, that product will be able to come as market it, I think you guys have talked about in 2015 timeframe?

Robert J. Hombach

Correct. Yes, we're in the process of working through a Phase III trial on our longer-acting Factor VIII BAX 855, and we do -- we're targeting a 2015 launch. And I think we laid this out in our investor conference, but just to reiterate, while there is PEGylation technology employed in our longer-acting Factor VIII, at its core, it is the ADVATE molecule that's been modesty tweaked with PEGylation. And so the amount of PEGylation utilized is very, very small relative to other products that are already on the marketplace. And so this is one, I think, where we'll spend a lot of time educating patients and treaters on the benefits, as well as making sure that we address any concerns they might have related to PEGylation.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. And then 2 other opportunities, I guess, quickly as we're down on time. The deal with Momenta, just around biosimilars and then Onconova. Can you just remind me what is in or out of your long-range plan? And how should we think about this as potential upside opportunity?

Robert J. Hombach

Well, that's pretty straightforward. Momenta is actually, given the timelines, no meaningful contribution by 2017, so it's not in our long-range plan. And, of course, we're focused with them on trying to accelerate the approval process, given their capabilities around molecule characterization and so on. So that deal is structured to pay significant milestones if we're able to accelerate time-to-market, but no contribution built in our long-range plan. Same thing with Onconova, nothing built in for that. Now that is much nearer term. We -- I think, they're presenting Phase II data on the oral version of their treatment for MDS, for rigosertib, here just later this week. And Phase III data for the IV version of MDS will be available at end of this year or early next year. And so I think we'll have very good line of sight later this year around possibilities for that product now. Now the timeline would be finalizing the trial later this year, early next year and filing in Europe and potentially launching in 2015 whether it's -- if you look across the 3 indications, IV, oral and a Phase II pancreatic study, they're joined, which will also see data early next year across those 3 indications in the European region, where we have licensed rights. It could be more than $1 billion of topline opportunity at very attractive margins for Baxter.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Would it be new margins greater than corporate average?

Robert J. Hombach

Yes.

Kristen M. Stewart - Deutsche Bank AG, Research Division

Okay. All right. I guess, with a little bit of time left, I'll throw one quick one and just on the infusion pump side, sorry.

Robert J. Hombach

Sure.

Kristen M. Stewart - Deutsche Bank AG, Research Division

It's always been kind of a one of, I guess, the areas where you've had some challenges, to say the least, I guess, over the last few years. Can you just give us an update on the warning letter and kind of the opportunity to just get that resolved. And then perhaps even broader ones that is squared away a with Hospira, having a lot of challenges. Do you see actually opportunities once you resolve the warning letter to perhaps capture some additional share back?

Robert J. Hombach

Definitely. The spectrum pump, which we acquired from SIGMA, has done very well in the marketplace over the last several years and won several awards and so on. As we were acquiring SIGMA fully last year, they filed an updated -- an update to their 510(k) filing. And as a result of that, the FDA has asked for a couple of additional data points that we need to provide, in order to finalize their review of that updated 510(k). And so we're in the process of providing that and expect to have that available in the fall and would look to provide -- file the -- update the filing then and, hopefully, have this reviewed and approved shortly thereafter. From a broader sense, pumps and accessories that go along with pumps are an important part of really any hospital operation. It's been an important part of our offering, and even in the issues that we've had with COLLEAGUE in the past, we've been able to maintain share pretty well because of the strength of our overall portfolio, as well as the importance of the pump. And we think spectrum, again, is a very good product and one that we think can drive good growth going forward here, and that this issue is one that we think we can address in fairly short order. Just as a remainder, we can't continue to shift pumps to existing customers. At this point though, we are prevented from pursuing new accounts until the 510(k) is fully updated.

Kristen M. Stewart - Deutsche Bank AG, Research Division

And again, you said that, that could be resolved in the fall towards the end of the year?

Robert J. Hombach

Yes, I would say, towards the end of the year, early next year.

Kristen M. Stewart - Deutsche Bank AG, Research Division

All right. And with that, I think we are out of time. So thank you, guys, again for your participation. Thank you, all, for joining us.

Robert J. Hombach

Great.

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