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Securities Regulation Keyed to Cox
Asher v. Baxter International Inc.
Citation:
377 F.3d 727 (2004)Facts
Baxter International released optimistic financial projections on November 5, 2001, forecasting revenue growth in the low teens, earnings-per-share growth in the mid teens, and operational cash flow of at least $500 million for 2002. Baxter repeatedly characterized these forecasts as “commitments” and reiterated them until July 18, 2002, when it announced second-quarter results that fell significantly short of analysts’ expectations. The stock price plummeted from $43 to $32. Plaintiffs alleged that Baxter knew these projections were materially false because its Renal Division had not met internal budgets in years, economic instability in Latin America adversely affected sales, plant closures eliminated low-cost production sources, the albumin market was oversaturated, IGIV product sales fell short of predictions, and a March 2002 sterility failure resulted in destruction of multiple product lots and losses exceeding $10 million. Baxter had included cautionary statements in its Form 10-K filing identifying various risk factors, but plaintiffs contended these warnings were inadequate because they did not specifically address the known problems that ultimately caused the projections to fail.
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