Full Press Release Details
Safe Harbor Statement This presentation includes forward-looking
statements concerning the company's financial results, business development and regulatory activities (including the December 2021 acquisition of Hillrom), the anticipated impact of Value Improvement Processes (VIP) and the 2030
company's corporate responsibility goals. These forward-looking 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 (including challenges with the company's ability to accurately predict changing customer preferences (which has led to and may continue to lead to increased
inventory levels)); continuity, availability and pricing of acceptable raw materials and component parts (and the company's ability to pass some or all of these costs on to its customers); inability to create additional production capacity in
a timely manner or the occurrence of other manufacturing or supply difficulties (including as a result of a natural disaster, public health crises and epidemics/pandemics, geopolitical crises, regulatory actions or otherwise); product development
risks (including any delays in obtaining required regulatory approvals or failures to obtain such approvals); the impact of global economic conditions (including the ongoing war in Ukraine, the related economic sanctions being imposed globally in
response to the conflict and potential trade wars and global inflationary pressures) and public health crises and epidemics, such as the ongoing coronavirus (COVID-19) pandemic, on the company and its employees, customers and suppliers, including
foreign governments in countries in which the company operates; accurate identification of and execution on business development and R&D opportunities and realization of anticipated benefits (including the acquisitions of Cheetah Medical,
Seprafilm Adhesion Barrier, specified OUS rights to Caelyx/Doxil, full U.S. and specific OUS rights to Transderm Scop, PerClot, Hillrom and certain rights to Zosyn in the U.S. and Canada); product quality or patient safety concerns; breaches or
failures of the company's information technology systems or products, including by cyberattack, unauthorized access or theft; the adequacy of the company's cash flows from operations and other sources of liquidity to meet its ongoing
cash obligations and fund its investment program; loss of key employees or inability to identify and recruit new employees; future actions of regulatory bodies and other governmental authorities, including FDA, the Department of Justice, the SEC,
the New York Attorney General and foreign regulatory agencies, including the continued delay in lifting the warning letter at the company's Ahmedabad facility; the outcome of pending or future litigation, including the opioid litigation and
ethylene oxide litigation or other claims; proposed regulatory changes of the U.S. Department of Health and Human Services in kidney health policy and reimbursement, which may substantially change the U.S. end-stage renal disease market and demand
for the company's peritoneal dialysis products, necessitating significant multiyear capital expenditures, which are difficult to estimate in advance; 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; fluctuations in foreign exchange and interest rates; the ability to enforce owned or in-licensed patents or the prevention or restriction of the manufacture, sale or use of products or technology affected
by patents of third parties; global, trade and tax policies; any change in laws 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 or the Build Back Better framework; actions taken by tax authorities in connection with ongoing tax audits; and other risks identified in Baxter's most recent filings on Form 10-K and Form 10-Q and other SEC
filings, all of which are available on Baxter's website. Baxter does not undertake to update its forward-looking statements unless otherwise required by the federal securities laws. 2
Executive Summary Leading global medical technology company
focused on transformative innovation to improve patient outcomes, enhance workflow efficiency, and enable cost-effective care Business Addressing healthcare needs across the care continuum including hospitals, homes, physician offices and
alternate sites of care Overview Accelerating Baxter's expansion into connected care with the acquisition of Hillrom, a global medical technology leader Executing on several integrated supply chain initiatives to mitigate
disruptions from a challenging macroenvironment Supply Chain Focusing resources on ensuring critical products reach customers and patients at the right time Management 1 Highly qualified, independent and engaged Board, with 58% diverse
directors and complementary skillset Board of Continued focus on refreshment and diversity led to the appointment of four new directors in 2021-22: David Wilkes, Nancy Schlichting, Brent Directors Shafer and Peter Wilver, all of whom enhance
Baxter's Board and further align skills with Company's long-term strategy Stockholder engagement remains a key focus and an important part of the Board's commitment to governance and accountability Stockholder In
response to stockholder feedback, Baxter's Board put forth two management proposals for stockholder approval at the 2022 Annual Meeting - to provide stockholders with the right to act by written consent (25% threshold), and to lower the
company's special meeting Outreach threshold from 25% to 15%, both of which were subsequently approved by stockholders and promptly implemented Pay-for-performance philosophy effectively aligns the interests of management and Baxter
stockholders Executive Say-on-Pay vote was supported by 91% of stockholders at Baxter's 2022 Annual Meeting Planned enhancements to the company's compensation program for 2022 will further motivate and incentivize senior
leadership to help meet Compensation key 2022 priorities focused on strategic areas, including ESG opportunities, while continuing to focus on the delivery of strong financial results 2030 Corporate Responsibility Goals support Baxter's
3 overarching pillars, which are to empower our patients, protect our planet, and champion our people and communities Continue to demonstrate leadership in Corporate Responsibility and deliver meaningful progress towards 2030 milestones,
which include Corporate progress on reducing absolute scope 1 and 2 greenhouse gas emissions and increasing diverse representation in leadership roles Responsibility Undertaking a materiality assessment to help ensure that Baxter's
Corporate Responsibility focus continues to align with the interests of the Company and its stakeholders, following the Hillrom acquisition Evaluating Baxter's ability to report against the Task Force on Climate-related Financial
Disclosures (TCFD) framework 1 Reflects both Board ethnic/racial diversity (25%) and gender diversity (33%). See slide 6 for full breakdown. 3
Embarking On Next Phase Of Transformation Journey Mission Save and
Sustain Lives Vision Transform healthcare with customer focus: improve patient outcomes, enhance workflow efficiency, enable cost-effective care 4
Baxter Profile: A Leading Medical Technology Company Global Opportunity
Leadership Innovation Executing Market Expansion Through Advancing Category Leadership in Large Innovating With Connected Care And Core Focused Initiatives Durable End Markets Therapies Sales by Segment Sales by Global Business Unit Innovation Focus
Devices or software that can connect, 2021 Pro Forma Global Business Unit communicate, and/or analyze data to help 3 Net Sales transform healthcare $15.6B Renal Care $3.9B 2021 Pro Forma 1 Pharmaceuticals & BPS $3.0B Net Sales
"Smart" Communi- Analytics Devices cations Medication Delivery $2.9B PSS & GSS $1.9B Americas 43% EMEA 20% Core therapies and essential products 2 Hillrom 19% Asia Pacific 18% designed to address patient Front Line Care $1.1B and
provider needs 350+ Million Advanced Surgery $1.0B Patients' lives touched annually Clinical Nutrition $1.0B 100+ Acute Therapies $0.8B Countries served by Baxter products 1 Pro forma amounts as presented on this slide represent the combined
results of Baxter for its fiscal year ended 12/31/2021 and Hillrom calendarized for fiscal year ended 12/31/2021. 2 Hillrom acquisition accelerated Baxter's expansion into digital and connected care; expect that Hillrom integration will result
in $200 million of sales synergies by 2025. 5 3 Total sales includes $0.1B of other revenue not presented above. Core Therapies Connected Care
Driving A Robust Value Improvement Process Value Driver Key Initi atives
Dual/Secondary Sources Materials Insourcing of Molded Components 30% Of VIP Strategic Partnerships Direct & Indirect Labor Efficiencies Productivity Overall Equipment Effectiveness 22% Of VIP Waste
Reduction Architecture In Region/For Region Manufacturing & Fulfillment Manufacturing & Distribution Network Rationalization 16% Of VIP Automated Filling, Pouching & Inspection Automation & Digitization
Automated Set Assembly 16% Of VIP Integrated Vision Systems Advanced Planning Tools Analytics Control Tower 16% Of VIP Predictive Analytics 30% Targeting the Delivery ~$650M Of Anticipated Gross Savings By
Integrated Supply Chain Becoming A Competitive Advantage
Accelerating the cultural and operational transformation Building an end-to-end, resilient, cost-effective Integrated Supply Chain Simplifying processes to enable speed and agility through Lean principles Driving network
optimization while implementing "make where you sell; buy where you make" mindset Mitigating near term headwinds through VIPs, labor optimization, and increased governance and visibility to be well positioned to deliver margin
accretion post-inflationary cycle Compliance People Resilience 7
Highly Experienced and Qualified Board Baxter is committed to Board
diversity and ongoing director refreshment to ensure its Board has the right skills and background to effectively oversee its strategy and create long term value for stockholders Since 2021, four new world-class independent directors have
joined the Board Diverse Board with Strong Independence and Thoughtful Refreshment Diversity Tenure Jos (Joe) E. Almeida Thomas F. Chen* Chairman, President and Chief Executive Former SVP and President, International Officer Nutrition, Abbott
Laboratories <5 years 10+ years Former Chairman, President & CEO, Covidien Committees: NCGPP**, QCT 3 1 6 5 5.2 58% Patricia B. Morrison* Michael F. Mahoney* YEARS Fo rmer Executive VP, Customer Support DIVERSE Chairman, President and CEO,
Boston 1 AVERAGE Services & CIO, Cardinal Health Scientific Corporation 5 Committees: AC, QCT 4 Committees: CC, NCGPP Ethnically/Racially Diverse 5-10 years Joined in 2021 Nancy M. Schlichting* Stephen N. Oesterle, M.D.* Gender Diversity Other
Former President and CEO, Henry Ford Healthcare industry consultant, Former SVP, Health System Medicine & Technology, Medtronic 2 Directors Have Diverse Background and Expertise Committees: CC**, NCGPP Committees: NCGPP, QCT** Cyber / IT 5
Joined in 2022 Cathy R. Smith* Brent Shafer* Chie f Financial and Administrative Officer, Fo rmer Chairman and CEO, Cerner 6 Financial Expertise / Risk Management Bright Health Corporation Committees: AC** Committees: AC, CC Healthcare Marketing /
Delivery 8 Human Capital Management 7 Amy A. Wendell* Albert P.L. Stroucken* Former SVP, Strategy and Business Lead Independ ent Director International 7 Development and Licensing, Covidien Former Exec. Chairman and CEO, Owens-Illinois Committees:
CC, QCT Committees: AC, NCGPP M&A / Transactional 7 5 Manufacturing and R&D Joined in 2021 Joined in 2022 Peter M. Wilver* David S. Wilkes, M.D.* Fo rmer Executive VP and Chief Administrative Dean Emeritus of the University of Virginia 6
Other Sector Leadership Officer, Thermo Fisher Scientific School of Medicine Committees: CC Quality, Regulatory and Compliance Committees: QCT 6 CC = Compensation Committee; AC = Audit Committee; NCGPP = Nominating, Corporate Governance & Public
Policy Committee; QCT = Quality, Compliance & Technology Committee * denotes independent director; ** denotes committee chair 8 1 2 As of September 30, 2022 Excludes B. Shafer and P. Wilver
Extensive Stockholder Engagement Program Engagement with stockholders
remains a key focus for Baxter and an important part of the Board's commitment to governance and accountability Baxter's Board, along with its Investor Relations team and other Robust Engagement Year-Round select members of management,
is committed to engaging in 1 2021 Outreach Statistics constructive dialogue with stockholders on corporate governance, executive compensation, corporate responsibility, and other matters Proactively reached out to: of importance Stockholder views
and feedback are carefully reviewed and ~60% incorporated by the Board when overseeing Baxter's strategy, of outstanding shares formulating governance practices and designing or evaluating compensation programs Directors Thomas Chen and Albert
Stroucken and Held extensive discussions with stockholders to better understand select members of management met with: their perspectives on a variety of relevant issues, including: Company strategy and Succession planning
performance Executive compensation COVID-19 response Corporate responsibility ~30% of outstanding Hillrom acquisition matters shares Board composition and Proposed changes to lower structure special meeting
threshold Board refreshment and adopt written consent 1 Calculated based on shares outstanding as of December 31, 2021. 9
Responsiveness to Stockholders Baxter is committed to being responsive
to the views of stockholders and has continued to make significant governance enhancements in 2021 2022 Took Action to Permit Stockholders to Enhanced Stockholder Rights by Act by Written Consent Lowering the Special Meeting Ownership
Threshold In response to support for a stockholder proposal at 2021 Annual In response to the Company's receipt of a stockholder proposal on Meeting, the Board took responsive actions in 2022 and put forth this topic, the Board
decided to put forth a management proposal a management proposal to permit stockholders to act by written at 2022 Annual Meeting to lower the Company's special meeting consent (25% ownership threshold) threshold from 25% to 15%
Proposed management proposal was approved by stockholders at Proposed management proposal was approved by stockholders at 2022 Annual Meeting, receiving 99% support, and the amendment 2022 Annual Meeting, receiving 98% support, and the
amendment was promptly implemented was promptly implemented Highlighted Procedural Safeguards Aligned With Long-Term Stockholder Interests 1 Ownership thresholds based on "net long " ownership - ensures that a stockholder
has an economic interest in the Company - promotes stockholder rights of true long-term stockholders One-year continuous ownership holding requirement 1 A stockholder's "net long" shares exclude shares as to which the
stockholder does not have the right to vote or direct the vote or as to which the stockholder 10 has entered into any derivative or similar arrangement that hedges or transfers the economic consequences of ownership of such shares.
Executive Compensation Aligned With Strategic Priorities A significant
majority of executive pay is "at risk" and only delivered if specific annual and long term performance requirements are met Objectives CEO Pay Mix (2021) Pay Element Provides a base level of competitive compensation Salary
Used to attract and retain executive talent Motivates and rewards executives for company and individual 9% performance against annually established financial targets and individual objectives, which include ESG measures Annual
Incentive 15% For 2021, financial targets included adjusted net sales (50%), further adjusted earnings per share (25%) and adjusted free cash flow (25%) 38% Motivates and rewards an executive's contributions to help to achieve
the Company's long-term objectives and create stockholder value Stock options recognize that it is in the best interests of the Company to Stock Options 38% provide equity that will vest as long as the executive continues to serve at
Baxter and are valued, in part, on the Company's performance during 91% that period Variable/ Motivates and rewards executive for company performance against "At-Risk" financial targets and incorporates an assessment of the
executive's Salary past performance and future potential Performance Share PSUs recognize that a portion of an executive's equity awards should be Target Cash Bonus Units (PSUs) completely "at-risk," measured over the
three-year performance period Target Stock Options 1 For 2021, financial objectives included relative TSR , adjusted ROIC, Target PSUs and adjusted net sales CAGR (equally weighted at 33-1/3%) 1 Relative TSR against the TSR performance of the
companies in the Dow Jones Medical Equipment Index. 11
Executive Compensation Program Changes and Practices Baxter continues
to evolve its executive compensation program to align the interests of management with stockholders, reflect best practices and drive sustained and superior performance relative to peers 2022 Executive Compensation Program Changes Compensation
Practices For the 2022 annual incentive, certain executives' individual Incorporation of ESG metrics into annual incentive plan through performance assessment will be determined in connection with an application of individual
performance assessment assessment of the Company's performance against pre-established measures for strategic 2022 priorities, inclusive of ESG issues: Pay-for-performance alignment 40% - Patient Safety and Quality (including
product safety and quality systems) Clawback policy 30% - Best Place to Work (including diversity in the workforce, Stock ownership guidelines for executives and directors culture, talent, the ACT racial justice initiative and
environmental, health and safety measures) 2 Double-trigger change-in-control provisions 30% - Growth Through Innovation (including the Company's ongoing digital transformation and its innovative ecosystem No excise tax
gross-ups on change-in-control payments platform) Beginning with the 2022 annual LTI grant, the equity mix for all NEOs No hedging, pledging, short sales, or derivative transactions will be revised to reflect the annual equity grant
value in: 25% stock options No re-pricing or exchanging of underwater stock options 25% RSUs 1 50% PSUs (reflective of a new peer group benchmark) No excessive perquisites for executives 1 For PSUs made under the
2022 annual LTI grant with a 2022-2024 performance cycle, the peer group used to measure relative TSR performance will change from the Dow Jones Medical Equipment Index to the S&P 500 Healthcare Equipment and Services Index. 12 2 In the context
of outstanding equity awards, a double-trigger change-in-control provision doesn't apply if it results in the company no longer being a public company or the outstanding awards are not assumed by the successor entity.
2030 Corporate Responsibility Goals and Progress Focused on delivering
business value by addressing the ESG issues that matter most to the company and stakeholders, while also addressing key risk factors that may impact Baxter's long term sustainability 1 Goals 2021 Performance Pillars Achieve
carbon neutrality for direct Reduced absolute Scope 1 and 2 GHG emissions by 0.4% through 2021 compared with 2020, after operations by 2040 exceeding Baxter's 2020 goal, and reducing absolute GHG emissions from operations by 13.6%
through 2021 relative to 2015 Reduce greenhouse gas emissions 25% by 2030 Collected data from Baxter's manufacturing sites to identify prioritized locations for water management, and continued upgrading Baxter's