Shares of

Baxter International

(BAX) - Get Report

plummeted 23% Thursday after the maker of medical products reported lower second-quarter earnings and sales that failed to meet expectations.

The Deerfield, Ill.-based company said second-quarter net income totaled $200 million, or 32 cents per share, compared to $253 million, or 42 cents per share, in the year-ago quarter.

Second-quarter results included two charges that depressed earnings by 16 cents per share -- a $51 million charge for in-process research and development related to the acquisition of Fusion Medical Technologies, and a $70 million writedown of investments in two public companies.

Excluding the charges, Baxter matched Wall Street estimates of 48 cents per share, according to Thomson Financial/First Call.

Sales during the quarter rose 8% to $2.02 billion, but that fell below Wall Street's expectations of about $2.1 billion. Baxter's Recombinate business, used to treat hemophiliacs, was strong, but its renal and plasma businesses were weaker than forecast.

Baxter shares were off $10.16, or 23%, to $33.25 in recent trading. Merrill Lynch analyst Dan Lemaitre downgraded Baxter to buy from strong buy, based on the lower-than-expected sales. UBS Warburg analyst David Lothson upgraded the company to strong buy from hold, believing the selloff is an overreaction. Merrill Lynch is seeking investment banking fees from Baxter, while UBS has done banking for the company in the past 12 months.

Despite the second-quarter shortfall, Baxter reiterated full-year 2002 sales growth in the low teens, earnings per share growth in the midteens and operational cash flow of $500 million.