CSL Drops Most in 16 Months as Baxter Cuts Profit Outlook on Health Reform

CSL Ltd., the world’s second- biggest maker of treatments made from blood, fell the most in 21 months in Australian trading after its larger rival, Baxter International Inc., cut its 2010 earnings forecast.

CSL dropped 7.3 percent to A$33.94, the sharpest decline since July 22, 2008. The stock was the biggest loser on the benchmark S&P/ASX 200 Index. Baxter fell the most in seven years in New York trading yesterday after saying the U.S. health-care overhaul will trim full-year profit to between $3.92 and $4 a share, from its previous projection of as much as $4.28.

Baxter said Medicaid rebates and a change in taxes for retiree prescription drug benefits under the health-care law enacted in March will reduce earnings. The Deerfield, Illinois- based company also said plasma-product market growth in the U.S. will be weaker than previously anticipated. Melbourne-based CSL said it doesn’t plan to change its full-year earnings forecast.

“We think the market’s soft, but it’s not as soft as the Baxter result suggests,” Andrew Goodsall, an analyst with UBS AG in Sydney, said today. CSL, which gets almost 40 percent of sales from the U.S., will see full-year profit reduced by about 1 percent because of the increased rebates, Goodsall said.

Baxter and CSL derive products from human blood plasma, the watery liquid in which blood cells are suspended, to treat immune deficiency disorders, hemophilia, wounds and burns.

Price Overreaction

CSL’s price drop is “an overreaction” to Baxter’s results, said Don Williams, who helps manage about A$2 billion ($1.8 billion), including the Australian company’s shares, at Platypus Asset Management Ltd. in Sydney. “In this particular industry, our assessment so far is that CSL is going to be able to perform a lot better than Baxter,” he said. Williams said he’s buying CSL shares.

CSL also said it completed a A$1.78 billion buyback of its stock that it undertook after U.S. regulators blocked its $3.1 billion bid for Talecris Biotherapeutics Holdings Corp. last year. About 25 million shares were traded today, 10 times the daily average for the past six months.

Separately, the company said it stopped distributing its seasonal flu vaccine for children in its home country after side effects were reported in some children in the state of Western Australia. CSL is working with the nation’s drug regulator to investigate the cases, it said in an e-mailed statement today.

To contact the reporter on this story: Simeon Bennett in Singapore at sbennett9@bloomberg.net

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