Baxter 1Q profit rises 20 percent, but sales fall

Specialty drug and medical device maker Baxter International Inc. said Thursday its profit climbed 20 percent in the first quarter, but like several rivals, its sales fell short of expectations due to new strength in the dollar.

The Deerfield-based company said it earned $518 million, or 83 cents per share, compared with $432 million, or 67 cents per share, during the same period last year. Its revenue slipped 2 percent to $2.82 billion from $2.88 billion despite better sales from its BioScience business.

Analysts expected a more modest profit of 81 cents per share and $2.87 billion in revenue, according to a Thomson Reuters survey.

Wall Street appeared to focus on the better-than-expected profits, sending company shares higher in morning trading.

Chief Executive Robert Parkinson said the company's performance has not been hurt by the ongoing recession.

"To date we have not experienced any meaningful impact," Parkinson told analysts. "We continue to believe that we are well-positioned given our geographic reach and the medically necessary nature of our portfolio."

Baxter said revenue from the BioScience unit grew 3 percent, to $1.3 billion. Baxter credited better sales of antibody therapies and plasma-protein products, greater demand for a hemophilia treatment and strong biosurgery product sales. Excluding the impact of the stronger dollar, bioscience sales would have risen 11 percent.

Companies with global operations translate sales that are in foreign currencies into dollars. That helped boost revenue for Baxter and other drugmakers last year when the dollar was weak. But the tide has turned now that the dollar has strengthened, making foreign sales worth less here in the U.S.

Revenue from its medication delivery business fell 3 percent to $1 billion. Sales of the company's renal business -- which sells therapies and equipment for patients with kidney failure -- dropped 8 percent to $515 million. Company executives said they expect renal sales to grow 4 to 6 percent for the year. Government reforms aimed at covering more patients with kidney failure could also help the business going forward, they added.

Excluding the impact of currency exchanges, Baxter said BioScience revenue rose 11 percent, medication delivery sales grew 6 percent, and kidney product sales edged up 1 percent.

Earlier this week, Johnson & Johnson and Abbott Laboratories both reported disappointing first-quarter revenue because of unfavorable currency exchange rates. Abbott said Wednesday that foreign currency exchange rates were less favorable than it had anticipated.

Baxter continued its investment in research and development, raising spending 12 percent to $212 million for the quarter.

Baxter also modestly raised the low end of its full-year profit forecast range. The company now expects an adjusted profit of $3.72 to $3.78 per share, compared with an earlier forecast of $3.70 to $3.78 per share. Analysts expect profit of $3.74 per share.

In the second quarter, Baxter said it expects an adjusted profit of 93 cents to 95 cents per share, but predicted sales would be weaker than a year ago because of currency exchange rates. Baxter reported $3.19 billion in sales in the second quarter of 2008, and expects a decrease by a percentage in the low single digits.

Analysts expect a profit of 95 cents per share and $3.13 billion in revenue.

Shares of Baxter International Inc. gained $2.07, or 4.2 percent, to $51.31.