Baxter Shares Hit Amid Confusion About FTC Plasma-Market Review

Shares of Baxter International Inc. (BAX) have come under pressure amid signs the U.S. Federal Trade Commission is concerned about what the agency calls "coordinated behavior" in the market for medical plasma products, where Baxter is a big player.

A Wall Street research note Thursday sparked confusion as to whether the FTC is really digging into the plasma market, although the agency has made clear it has some concerns.

Baxter spokeswoman Deb Spak confirmed the company received a request for information from the FTC during the agency's review of CSL Ltd.'s (CSL.AU) plan to buy Talecris Biotherapeutics Holdings Corp. for $3.1 billion. This kind of request is typical, she said, and Baxter cooperated with the government.

"Baxter has not engaged in any improper conduct and does not comment on matters involving other companies," Spak said.

Nonetheless Baxter shares fell $1.90 Thursday, or 3.9%, to $47.38.

An FTC spokesman declined comment on the matter.

The agency announced last Wednesday that it seeks to block the CSL/Talecris deal because it would shrink an already shrunken roster of plasma competitors to four from five. A complaint the agency filed in court noted the transaction would leave only Baxter as a major rival to the proposed combined company.

CSL said it will "vigorously oppose" the FTC's move to block the deal.

Confusion about the FTC's continued interest in the plasma market was tied to comments from a Citigroup analyst. An early Thursday note said the agency was looking into "collusion efforts," but the research firm issued a later clarification saying it doesn't appear the FTC increased its scrutiny beyond a review of the proposed deal. Nonetheless, Baxter shares remained under pressure.

Donated plasma, the liquid component of blood, is refined to make products that treat problems such as immune-system disorders. Because people collect a small fee for making donations, investors have been worried a recession-induced surge in supply would hurt prices for plasma products.

Memories of a supply glut early this decade fanned the flames, but some analysts have stressed that industry consolidation since then puts the means of collection under better control.

The FTC voiced concern with the sector's structure. "The industry already operates as a tight oligopoly, with a high level of information sharing and interdependence among firms," the agency said in last week's complaint, in which many passages were blacked out.

"Without the aggressively expanding Talecris, CSL and Baxter, the only two remaining significant firms in the plasma industry, could more successfully and completely suppress industry output relative to demand," the agency added.

Citigroup analyst Matthew Dodds, in his note, said antitrust risk had materialized and that all plasma processors had received subpoenas. While he also said the nature of the industry allows companies to gain information without collaborating and that an anti-competitive investigation looked unlikely, Baxter shares still headed south.

Dodds' later clarifying note said the FTC's comments don't point to a new probe and that Baxter wasn't getting unique treatment.

JPMorgan analyst Michael Weinstein, meantime, said the FTC requested information from companies as part of its normal due diligence review of the proposed merger.

"Our understanding is that this exchange took place a few months ago, but that there has been no new information request, or subpoenas, in recent weeks within the plasma protein industry," Weinstein said.

Baxter had a similar take. "In the ordinary course of review of a merger/acquisition, the FTC typically asks for information from other companies and parties within the industry," spokeswoman Spak said.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; [e-mail]