News Release

BAXTER REPORTS THIRD QUARTER SALES GROWTH OF NINE PERCENT

Company Generates Year-to-Date Cash Flow of $668 Million
Baxter Reiterates Full Year 2003 Guidance

DEERFIELD, Ill., October 16, 2003 -- Baxter International Inc. (NYSE: BAX) today reported its third quarter results, with sales growth of nine percent and earnings per diluted share from continuing operations of $0.47.

Sales in the third quarter totaled $2.22 billion, with foreign exchange favorably impacting sales by three percent. Baxter's sales within the United States increased 10 percent to $1.07 billion, while sales outside the United States grew nine percent (including a seven percent benefit from foreign exchange) to $1.15 billion. In the third quarter, Medication Delivery sales grew 16 percent to $948 million, BioScience sales grew 6 percent to $820 million and Renal sales grew 4 percent to $451 million. Contributing to the growth in the quarter were strong sales of anesthesia, biosurgery, drug delivery and IV therapy products and record sales of recombinant clotting factor, which rose 14 percent in the quarter.

Income from continuing operations totaled $278 million or $0.47 per diluted share in the third quarter. The third quarter results compare to income from continuing operations of $317 million, or $0.51 per diluted share, in the same period last year.

"The third quarter financial results were in line with our expectations," said Harry M. Jansen Kraemer, Jr., chairman and chief executive officer. "The actions we have taken to improve our operational efficiency and simplify our capital structure, together with the launch of new products, position us well to achieve our goals for the year."

Recent Highlights
During the third quarter, Baxter received FDA approval for the company's innovative hemophilia therapy ADVATE Antihemophilic Factor (Recombinant) Plasma/Albumin-Free Method (rAHF-PFM), which offers patients the first and only factor VIII made without any added human or animal plasma proteins or albumin in the cell culture process, purification and final formulation, thereby eliminating the risk of infections caused by viruses that may be carried in these proteins.

Also during the third quarter, Baxter's vaccines business was awarded a $10 million contract from the National Institutes of Health for the development of a vaccine against Severe Acute Respiratory Syndrome (SARS). Separately, Baxter announced it will collaborate with Avecia, one of Europe's largest privately owned specialty chemical companies and a leader in biotechnology-derived medicines and vaccines, to provide regulatory expertise, commercial services and support and finishing and final packaging of a recombinant anthrax vaccine being developed under a $71 million contract award to Avecia from the U.S. government's National Institute of Allergy and Infectious Disease.

Within its Medication Delivery business, Baxter was awarded contracts in the third quarter from Premier, Inc., the largest alliance of hospitals and health systems in the United States, for Baxter's intravenous solutions, medications and nutrition products, infusion pumps, intravenous tubing and devices, and patient-controlled analgesia products, as well as for anesthesia and critical care products, including generic injectables and inhaled anesthetics.

Financial Results Year-to-Date
Year-to-date, Baxter's sales grew nine percent to $6.38 billion, up from the $5.85 billion reported last year. Foreign exchange favorably impacted sales growth by five percent. Medication Delivery sales advanced 16 percent to $2.74 billion, BioScience sales rose four percent to $2.33 billion, and Renal sales grew five percent to $1.31 billion. Sales within the United States totaled $3.02 billion in the first nine months of this year, up six percent. Sales outside the United States increased 12 percent (including a nine percent benefit from foreign exchange), to $3.36 billion. Income from continuing operations for the first nine months of this year declined to $544 million from $774 million last year, or to $0.90 per diluted share. Year-to-date, Baxter generated $668 million in cash flow from continuing operations, which compares with $458 million for the same period last year.

2003 Outlook
For the full-year 2003, the company expects to achieve sales growth in the eight to 10 percent range, earnings per diluted share from continuing operations of $1.65 to $1.75 and cash flow from continuing operations of approximately $1.2 billion.

A webcast of Baxter's third quarter conference call for investors can be accessed live from a link on Baxter's website at www.baxter.com beginning at 7:30 a.m. CDT on October 16, 2003.

Baxter International Inc., through its subsidiaries, assists health-care professionals and their patients with treatment of complex medical conditions, including cancer, hemophilia, immune disorders, kidney disease and trauma. The company applies its expertise in medical devices, pharmaceuticals and biotechnology to make a meaningful difference in patients' lives.

Questions and Answers

What impact does the lawsuit filed this week have on Baxter's relationship with Cerus Corporation?
This lawsuit does not affect our current development and commercialization agreements with Cerus. Baxter Capital Corporation filed a lawsuit against Cerus Corporation seeking repayment of Cerus' loan because they are in default. The collateral for the loan was based on revenue projections for Cerus that have not been met.

What is the status of your ADVATE launch?
Since the late August U.S. launch of ADVATE, sales in the third quarter totaled approximately $11 million. In Europe, we anticipate a positive opinion for marketing authorization from the Committee for Proprietary Medicinal Products (CPMP) of the European Medicines Evaluation Agency (EMEA), before the end of the year. Typically, final approval notification is received 90 days following CPMP positive opinion.

What is the status of your equity forward agreements?
During the third quarter, all of the remaining equity forward agreements were settled. This was accomplished with the completion of an equity offering of 22 million shares of common stock, from which Baxter used a portion of the proceeds to settle all remaining equity forward agreements.

What were the accounting changes in the third quarter?
Baxter adopted two new accounting standards on July 1, 2003. The non-cash cumulative effect of these accounting changes, as of July 1, 2003, reduced Q3 net income by $17 million, or $0.03 per diluted share.

FASB Interpretation No. 46 (FIN 46) requires the consolidation of certain entities by companies that do not control those entities, and FASB 150 changes the classification of certain financial instruments from stockholders' equity to liabilities. With the adoption of FIN 46, approximately $165 million of our synthetic leases, which principally relate to certain office space and plasma centers, are now on the balance sheet. With the adoption of FASB 150, the equity forward agreements relating to Baxter common stock were also included on the balance sheet. The company settled the remaining equity forward agreements during the third quarter.

(ADVATE and Baxter are registered trademarks of Baxter International Inc. and its affiliates.)

This news release contains forward-looking statements that involve risks and uncertainties, including the effect of economic conditions, actions of regulatory bodies, product development risks, product demand and market acceptance, the impact of competitive products and pricing, foreign currency exchange rates and other risks detailed in the company's filings with the Securities and Exchange Commission. These forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results or experience could differ materially from the forward-looking statements.

Attachments (Adobe Acrobat PDF format)

• Consolidated Statements of Income
• Cash Flows from Continuing Operations and Changes in Net Debt
• Net Sales from Continuing Operations
• Key Product Line Sales

FOR ADDITIONAL INFORMATION: