January 27, 2011 / 12:21 PM / 9 years ago

UPDATE 4-Baxter net falls; discloses new FDA warning letter

* FDA warning concerns plants in Puerto Rico

* Q4 EPS 72 cents vs 94 cents a year earlier

* Adjusted EPS $1.11 vs Street view $1.10

* 2010 sales up 2 pct; sees 2011 sales up 2-3 pct

* Shares down 3 pct (Rewrites first paragraph; adds more analyst comment; updates stock price)

By Debra Sherman

CHICAGO, Jan 27 (Reuters) - Baxter International Inc (BAX.N), beset by quality-control problems over the last several years, disclosed a new warning letter from U.S. health regulators when it reported quarterly earnings on Thursday.

The company, which makes therapies used to treat blood disorders, medication-delivery devices and products used for kidney dialysis, said the warning from the U.S. Food and Drug Administration concerned manufacturing plants in Puerto Rico.

The warning pertains to several amino acid products, critical care products and the drug Suprane, it said.

Chief Executive Robert Parkinson said on a conference call with analysts the warning primarily concerns how the company investigates issues and reports them to the FDA. No adverse patient events have been reported, he added.

Parkinson said the company is evaluating the FDA letter.

“Clearly, I’m not happy to have to communicate that we got a warning letter,” he told analysts. “Our aspiration is zero defect here. We are better than we were, but we have to get better.”

Baxter shares were down $1.55, or 3 percent, to $49.35 in afternoon trading on the New York Stock Exchange.

“History makes us see this (FDA) letter as a new blow. This looks and feels worse than it probably is because of its long and complicated history resolving the Colleague issues,” said Leerink Swann analyst Rick Wise, referring to Baxter’s recall and protracted remediation of its Colleague infusion pumps.


The company expects 2011 sales growth of 2 percent to 3 percent, excluding the impact of foreign exchange.

Baxter forecast 2011 earnings of $4.15 to $4.25 per share before one-time items. Analysts’ average forecast is $4.23.

Fourth-quarter net earnings were $423 million, or 72 cents per share, down from $572 million, or 94 cents per share, a year earlier.

Excluding special charges and other one-time items, adjusted earnings were $1.11. On that basis, analysts expected $1.10, according to Thomson Reuters I/B/E/S.

Fourth-quarter sales rose to $3.50 billion from $3.47 billion a year earlier.

For the first quarter, Baxter expects earnings per share of 92 cents to 94 cents, excluding special items, on sales growth of 2 percent to 3 percent.

Goldman analyst David Roman said he was maintaining his “buy” rating on Baxter shares.

“The initial market reaction to the guidance and another announced Warning Letter provides an attractive entry point, in our view,” Roman wrote in a note to clients. “Revenue growth and operating profitability should accelerate throughout 2011 and we view 2012 as a potential inflection point.” (Reporting by Debra Sherman; editing by Lisa Von Ahn, John Wallace, Phil Berlowitz)

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