The roller coaster highs and lows of the blood products market continued to plague Baxter International as the multifaceted company announced another round of job cuts and a reduction in plasma production last week in its continuing effort to right its financial performance.
Earlier in the week, the blood therapy, vaccine and IV delivery systems manufacturer elected Robert Parkinson Jr., formerly president and chief operating officer of its rival and Chicago-area neighbor Abbott Laboratories, as its chairman and chief executive officer. Parkinson, 53, succeeded Harry Kraemer Jr., who announced his resignation in January amidst an underwhelming Wall Street performance (Feb. 2, p. 12).
Since 2002, Parkinson has served as dean of Loyola University Chicago's School of Business Administration and Graduate School of Business. Before that he held a variety of management positions during a 25-year tenure at Abbott, and was named its COO and president in 1999. The baton officially passes April 26.
Following through on plans to further reduce costs that were announced in January, Baxter said last week that it would eliminate as many as 4,000 jobs-8% of its global workforce-with about half of those jobs in the U.S. In addition, for the second time in a year, the company will close more plasma collection centers and reduce plasma production, this time by 13%, or 400,000 liters. The company expects to take as much as a $400 million charge in the second quarter to cover severance and facility-closing costs.
Baxter has been reeling from sluggish sales, particularly in its biosciences division. Last summer, the company significantly reduced its plasma business and announced plans to cut nearly 6% of its workforce.
In 2003, Baxter suffered an 11% decline in income, reporting net income of $881 million on $8.9 billion in net revenue. Revenue increased in the first quarter ended March 31, but income fell. Baxter reported profits of $189 million, or 31 cents per share, on revenue of $2.21 billion for the quarter, down from income of $217 million, or 36 cents a share, on revenue of $2 billion in the year-ago period.
Baxter's plasma troubles won't have much impact on the country's independent, not-for-profit blood suppliers, which sell their excess plasma to European companies that compete with Baxter, said James MacPherson, CEO of America's Blood Centers, the umbrella group for the independents. But it does point to a glut of plasma on the world market. Some of the glut is caused by cost-cutting efforts on the part of payers, and some by concern about the use of certain blood products. Just a few years ago there was a shortage, which spurred plasma suppliers to crank up production, he said.
"Compounding everything is a market cycle of boom and bust, so the fact that Baxter is cutting back is more recognition that the glut of product on the market isn't going to go away soon," MacPherson said.
Plasma product prices are holding steady for hospitals that purchase under contract with Novation, the joint group purchasing organization of VHA and University HealthSystems Consortium, said Kristin Lucido, a Novation spokeswoman. Novation does not have a contract for plasma products with Baxter but does with seven other suppliers.
"Novation prices available to member healthcare organizations have not been affected by market changes, and we have taken measures to minimize the effect of future price increases on members," she said.
