Baxter International Hiding in Plain Sight

Credit Suisse analyst Kristen Stewart tells clients that the Colleague infusion pump has been plagued with problems for several years -- two recalls in 2005 and an FDA seizure of pumps in 2005. Baxter signed a consent decree in 2006 but had another recall last year, Stewart adds. It continues to talk to the FDA, and it continues to try fixing software problems with the pump.

"Baxter no longer expects the re-commercialization of Colleague in the second half of 2008," she told clients in mid-April research report. "While the delay is disappointing ... we are not that surprised given the history of delays."

Some pumps have been upgraded and remain on the market, says Stewart, adding that the product has lost only 3% to 4% of its market share in the past two years. Stewart, who doesn't own shares, is neutral on the stock. Her firm has had a recent investment banking relationship.

"They need to fix this [pump] problem now," says Morningstar's Stralow. Although the pump and heparin don't have a large revenue impacts relative to Baxter's total size, they are "hurting their image," she adds. "It's causing a problem with trust."

So far, however, heparin and the pump aren't causing Baxter much grief among sell-side analysts. Eight have buy ratings and two are neutral, says Thomson Reuters.

Despite its size -- revenue of $11.3 billion last year and a market capitalization of $38.4 billion -- Baxter seems to hide in plain sight when it comes to analysts' attention.

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