Baxter 3Q profit up 12%, raises outlook

By Bruce Japsen
Posted Oct. 21, 2010 at 10:08 a.m.

Baxter International Inc. reported third-quarter profits up 12 percent on improved sales of medication delivery devices.

The Deerfield-based medical product giant reported profits of $595 million, or $1.01 per share, compared to $530 million, or 87 cents a share in the third quarter of 2009. Revenues rose 3 percent to $3.2 billion.

“We effectively executed on our plans to drive operating margin expansion as a result of continued momentum in the medication delivery business, improvement in the plasma proteins business, and our disciplined focus on expense management,” said Baxter chief financial officer Robert Hombach.

The earnings report comes a week after Baxter chief executive officer Bob Parkinson shook up his management team and announced plans to combine the company’s renal and medication delivery businesses into a single global “medical products” business.

By combining the two businesses, Parkinson told analysts this morning that manufacturing and supply chain efficiencies will result in part from taking “cost out” where there is overlap and where both renal and medication delivery research and development can work together on potential new products.

A lot of the technologies in renal  are similar because workers are in effect packaging drugs into flexible, or plastic, containers. In addition, medication delivery, like renal, is a device business that sells pumps that deliver drugs to patients in hospital and outpatient settings.

He did not, however, offer a potential future product Baxter might create under the combined business in his explanation to analysts.

Wall Street appears to like what they heard. The price of Baxter shares was up 4 percent or $2 a share this morning following the earnings call to $51.39 in trading on the New York Stock Exchange.

Baxter did not combine renal and medication delivery under the new structure in its third-quarter earnings report as medication delivery sales, which include intraveneous drugs and devices.

Medication delivery sales rose 5 percent to $1.2 billion. Sales of renal drugs and products used to treat kidney diseases were up 3 percent to $594 million.

The company’s most profitable business, biosciences, continued to struggle in the U.S. Worldwide bioscience sales were flat at $1.38 billion. As part of last week’s management shakeup, Parkinson announced that Joy Amundson, head of the bioscience business, was leaving the company.

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