Strong sales of biotech drugs and vaccines drove second-quarter profit up 26 percent for drugs and medical device maker Baxter International Inc., beating Wall Street estimates.
Higher international sales helped the manufacturer weather lower U.S. sales of several injectable drugs, including the blood thinner heparin, which was recalled for safety reasons earlier this year.
The company also raised its full-year outlook.
For the quarter ended June 30, Deerfield-Ill.-based Baxter reported net income of $544 million, or 85 cents per share, up from $431 million, or 65 cents per share, in the same period last year. Last year's second-quarter earnings included $70 million in restructuring costs.
Sales increased 13 percent to $3.2 billion. However, more than half of that increase came from favorable currency exchange rates. Excluding foreign currency adjustments, sales would have increased only 5 percent.
Analysts polled by Thomson Financial expected second-quarter earnings of 82 cents per share on revenue of $3.05 billion.
Based on its performance, Baxter raised its expectations for 2008 adjusted earnings to between $3.28 and $3.32 per share, up from prior estimates of $3.18 to $3.24 per share. Analysts predicted $3.24 per share.
"The increase in guidance is a tangible manifestation of the confidence we have that our margin improvement story has a long way to run," said Chief Executive Bob Parkinson.
Baxter said profit margins benefited from product and geographic mix and favorable pricing.
Much of the profit boost came from increased international business, as foreign sales of biotech products rose 21 percent to $795 million. International sales for Baxter's medication delivery unit, which markets drug pumps and syringes, rose 27 percent to $639 million.
Overall sales for the company's bioscience unit rose 16 percent to $1.4 billion on increased demand for biotech drugs to treat hemophilia and other immune disorders.
One weak spot in Baxter's performance was in U.S. injectable medicines, where sales declined 16 percent on low demand for the sedative propofol and heparin.
Lower domestic sales due to generic competition, among other reasons, were offset by higher international revenue from injectable therapies, which grew 35 percent.
Earlier in the year Baxter recalled its entire stock of heparin after it was associated with hundreds of allergic reactions and dozens of deaths.
The drug was made with an with active ingredient from a Chinese facility, prompting inspections by the Food and Drug Administration. Government inspectors found the heparin was contaminated with a nutritional supplement that costs less, but mimics the real drug. The FDA has stated deliberate contamination is a possibility, but has not reached a formal conclusion.
For the third quarter, Baxter said it expects earnings between 81 and 83 cents per share.
Wall Street expects earnings of 81 cents per share.
Goldman Sachs analyst Larry Keusch said Baxter should be able to post even higher year-over-year earnings in the second half of the year.
"We believe there is good visibility to achieve the company's revenue and 'earnings per share' growth targets," Keusch wrote in a note to investors.
Shares of Baxter rose $2.08, or 3.2 percent, to $67.96 Thursday after hitting an all-time high of $69.66 earlier in the session.
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