UPDATE: Baxter 1Q Net Climbs 20%; Co. Sees Plasma Stability

Baxter International Inc. (BAX) posted a 20% jump in first-quarter net income with help from a business for blood plasma-based products, easing concerns about too much supply and falling prices.

A charge last year linked to a problem device also helped earnings, which rose more than Wall Street analysts expected despite slightly weaker-than-anticipated sales. Solid performance in Baxter's high-margin BioScience unit, which includes plasma products, helped.

Donated plasma, the liquid component of blood, is refined to make products that treat problems such as immune-system disorders. While Baxter is shielded from major economic strains by the severity of the diseases its products treat, the company has recently faced another more unique recession-related worry: that people will donate more plasma to collect the typical $25 to $35 payment, boosting supplies and putting downward pressure on plasma prices.

Baxter executives sought to assuage such concerns on Thursday, however, by saying it's been business as usual in a market where supply constraints and growing demand can be bigger concerns. Collections were actually down slightly from the fourth quarter.

"We continue to grow our collections in line with market growth," said Robert L. Parkinson, Jr., Baxter's chief executive, on a conference call with analysts. He added that Baxter still sees an opportunity for price increases in coming years.

Thursday's report helped Baxter's shares, which recently traded up 4.3% to $51.35. Still, the company's stock price remains down more than 12% over the last two months due to plasma concerns and a general drop in health stocks triggered by health-care reform worries.

Analysts thought Baxter's results looked good in light of recent concerns. "The fact that they're getting price increases in that market shows that clearly there's not an oversupply," said Edward Jones analyst Aaron Vaughn, referring to the plasma market.

Leerink Swann's Rick Wise said Bioscience sales, which rose 3%, or 11% excluding the impact of unfavorable currency rates, were "in-line" and "seem to confirm no major near-term shift in market dynamics."

Baxter's first-quarter net income rose to $518 million, or 83 cents a share, from $432 million, or 67 cents a share, a year earlier. The year-ago period included a 7-cent charge for long-running problems related to infusion pumps.

Earnings topped the company's projected range, given in January, and the average 81-cent target among analysts surveyed by Thomson Reuters.

Following a pattern set by other big medical companies that have reported this week, Baxter turned in solid earnings despite sales, which slipped 2% to $2.82 billion, that fell short of Wall Street forecasts. Foreign currency rates played a big role, as Baxter said sales were up 6% excluding this impact, slightly below its forecast for a 7% gain.

Gross margin rose to 52.7% from 48%, helping the earnings performance.

Within the BioScience business, which also includes products to treat hemophilia and trauma victims, domestic sales were up 14%. Plasma-protein sales grew by 5%, or 17% excluding currency.

Sales in the Medication Delivery business, which makes anesthesia, intravenous therapies and other products, sank 3%, while sales in the Renal business, which provides dialysis treatments for kidney failure, fell 8%. Sales were up in both cases, though, when the currency effect is taken out.

Looking ahead, Baxter raised the low end of its 2009 earnings outlook by 2 cents, putting the range at $3.72 to $3.78 a share. It also reiterated its sales outlook.

For the second quarter, the company forecast earnings of 93 cents to 95 cents on sales that are expected to be dragged lower by currency, but rise 7% excluding that factor.

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

(Mike Barris contributed to this report.)