Press Release

Baxter International Inc. (NYSE:BAX) today reported strong performance for the fourth quarter of 2009, and provided its financial outlook for the first quarter and full-year 2010.

Baxter reported net income of $572 million, an increase of 1 percent from $569 million reported in the fourth quarter of 2008. Earnings per diluted share of $0.94 advanced 3 percent from $0.91 per diluted share reported in the prior-year period. Baxter’s fourth quarter 2009 financial results included an after-tax special charge of $56 million (or $0.09 per diluted share) for costs and asset impairments associated with the company’s optimization of its manufacturing and business operations. The company recorded an after-tax special charge in the fourth quarter of 2008 of $5 million.

On an adjusted basis, excluding special items in both years, Baxter’s net income of $628 million increased 9 percent in the fourth quarter from $574 million reported in the fourth quarter of 2008. Adjusted earnings per diluted share of $1.03 increased 13 percent from $0.91 per diluted share reported in the prior-year period. These results are in line with the guidance the company previously provided of $1.02 to $1.04 per diluted share, and reflect strong growth in sales, continued margin expansion, solid operational performance across the business, and benefits derived from the company’s ongoing share repurchase program.

Baxter’s global sales of $3.5 billion advanced 11 percent from the $3.1 billion reported in the same period last year. Excluding the impact of foreign currency, Baxter’s worldwide sales increased 6 percent. Sales within the United States increased 5 percent to $1.4 billion in the fourth quarter, while international sales grew 15 percent to $2.1 billion. Excluding the impact of foreign currency, Baxter’s international sales grew 7 percent.

BioScience revenues increased 12 percent to $1.5 billion in the fourth quarter as a result of double-digit growth across multiple product categories. Excluding foreign currency, BioScience sales advanced 7 percent. Key drivers of sales performance include continued growth of recombinant therapies, such as ADVATE [Antihemophilic Factor (Recombinant), Plasma/Albumin-Free Method] for the treatment of hemophilia, antibody therapies and several specialty plasma therapeutics, as well as biosurgery products.

Medication Delivery sales of $1.3 billion increased 12 percent (and excluding foreign currency increased 7 percent), reflecting solid growth across its global portfolio that includes intravenous and nutritional therapies, infusion systems, injectable drugs and anesthesia products. Renal sales also grew 12 percent (or 6 percent excluding foreign currency) to $625 million due to the expanded use of peritoneal dialysis in many developed and emerging markets around the world, and the contribution of sales associated with the acquisition of the hemofiltration business, also known as Continuous Renal Replacement Therapy (CRRT), from Edwards Lifesciences Corporation.

“In 2009, Baxter achieved record financial results and enhanced shareholder returns,” said Robert L. Parkinson, Jr., chairman and chief executive officer. “Each of our businesses and regions contributed to our strong financial performance in the fourth quarter and for the full year, which reinforces the value of the diversified business model, the medically-necessary nature of the portfolio, and our strong global presence.”

Full-Year 2009 Results

For the full year, Baxter’s net income totaled $2.2 billion, an increase of 9 percent over the $2.0 billion reported in 2008. Earnings per diluted share of $3.59 advanced 14 percent over the $3.16 per diluted share reported in the prior year. On an adjusted basis, excluding special items from both years, Baxter’s net income of $2.3 billion increased 8 percent over the $2.2 billion last year. Adjusted earnings per diluted share for full-year 2009 increased 12 percent to $3.80 per diluted share, from $3.38 per diluted share reported in 2008.

Baxter’s global sales totaled $12.6 billion for the full year, growing 2 percent from $12.3 billion reported in the prior year. Excluding the impact of foreign currency, sales growth for full-year 2009 was 7 percent. Sales within the United States totaled $5.3 billion, an increase of 5 percent over the same period last year, while international sales declined 1 percent to $7.2 billion. Excluding the impact of foreign currency, Baxter’s international sales grew 7 percent in 2009.

Baxter generated strong cash flows in 2009, with cash flow from operations improving by approximately $400 million to a record level of $2.9 billion. This exceeded the company’s expectation of generating cash flow from operations of approximately $2.6 billion for the year. In addition, during 2009, Baxter repurchased approximately 23 million shares of common stock for $1.2 billion, and paid dividends totaling $632 million, an increase of 16 percent compared to dividends paid in 2008.

The company increased its investments in R&D by 6 percent (or 11 percent excluding special items and foreign currency) in 2009, to $917 million. During the year, Baxter advanced 14 Phase III clinical trials and numerous early-stage programs that have the potential to profoundly impact the treatment and delivery of care for chronic diseases like Alzheimer’s disease, hemophilia, end-stage renal disease, immune deficiencies, as well as public health threats like pandemic and seasonal influenza.

“Through continuing innovation, investment and collaboration, we’re advancing new therapies, improving the safety and cost-effectiveness of treatments, and expanding access to care,” Parkinson said. “The products in our pipeline are designed to extend Baxter’s great legacy of innovation in healthcare, and most importantly, provide life-saving and life-sustaining therapies to patients around the world that need them.”

First Quarter and Full-Year 2010 Outlook

Baxter also announced today its guidance for the full year and first quarter of 2010. For full-year 2010, Baxter expects sales, excluding the impact of foreign exchange, to grow 5 to 7 percent. Including the benefit of foreign exchange, Baxter expects reported sales growth to increase 7 to 9 percent compared to 2009, based on current exchange rates. The company also expects earnings per diluted share of $4.20 to $4.28, before any special items, and expects to generate cash flow from operations of approximately $2.9 billion.

For the first quarter of 2010, Baxter expects sales growth, excluding the impact of foreign exchange, of approximately 5 to 7 percent. Including the benefit of foreign exchange, the company expects reported sales growth of approximately 10 to 12 percent compared to the first quarter of 2009, based on current exchange rates. The company also expects earnings per diluted share of $0.92 to $0.94, before any special items.

“Our 2010 guidance reflects balance across the businesses, continued global expansion, and our ability to deliver sustainable growth,” said Robert M. Davis, corporate vice president and chief financial officer. “It is aligned with our long-range strategic and financial objectives, as we remain focused on delivering growth while making appropriate investments for the future.”

A webcast of Baxter's fourth quarter conference call for investors can be accessed live from a link on the company's website at www.baxter.com beginning at 7:30 a.m. CST on January 28, 2010. Please visit Baxter's website for more information regarding this and future investor events and webcasts.

Baxter International Inc., through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions. As a global, diversified healthcare company, Baxter applies a unique combination of expertise in medical devices, pharmaceuticals and biotechnology to create products that advance patient care worldwide.

This release includes forward-looking statements concerning the company’s financial results and outlook for 2010. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: demand for and market acceptance risks for new and existing products, such as ADVATE, and other technologies; future actions of regulatory bodies and other governmental authorities, including the FDA and foreign counterparts, that could delay, limit or suspend product development, manufacturing or sales or result in sanctions; product quality or patientsafety concerns leading to product recalls, withdrawals, launch delays, litigation, or declining sales; additional legislation or regulation which may affect pricing, reimbursement and rebate policies of government agencies and private payers or other elements of the company’s business; production yields, regulatory clearances and customers’ final purchase commitments with respect to the company’s pandemic vaccine; product development risks; inventory reductions or fluctuations in buying patterns by wholesalers or distributors; the impact of geographic and product mix on the company's sales; the impact of competitive products and pricing, including generic competition, drug reimportation and disruptive technologies; the availability of acceptable raw materials and component supply; the ability to enforce company patents; patents of third parties preventing or restricting the company’s manufacture, sale or use of affected products or technology; any impact of the commercial and credit environment on Baxter and its customers; foreign currency fluctuations and other risks identified in the company’s most recent filing on Form 10-K and other Securities and Exchange Commission filings, all of which are available on the company's website. The company does not undertake to update its forward-looking statements.Financial schedules are attached to this release and available on the company’s website.