Baxter International Inc. (BAX) and Halozyme Therapeutics Inc. (HALO) said Monday that they are recalling a product called Hylenex that is used for pediatric rehydration because there could be glass particles in vials.

There are about 3,500 vials on the market, the companies said in releases Monday. There haven't been any medical events or customer complaints, but post-production testing revealed "a limited number of vials" with flakes of glass in them, Baxter said. The injectable product is made at a Baxter facility.

Shares of Halozyme, a San Diego-based biopharmaceutical company, recently traded down 3.9% to $7.18. Shares of Baxter, a much larger drug and device maker headquartered in Deerfield, Ill., slipped 2.9% to $42.27.

The recall adds to a recent spate of challenges for Baxter, including a slowdown in the market for plasma-based drugs and the recall of about 200,000 drug-infusion pumps, but analysts noted Hylenex represents a tiny fraction of Baxter's sales. Sales are expected to be just $5 million this year.

Baxter makes Hylenex based on technology Halozyme discovered, and the two companies announced Food and Drug Administration approval in October to launch the product for pediatric rehydration. It allows for fluid to be administered under the skin, rather than through intravenous injections.

Baxter and Halozyme also have an agreement surrounding development of a subcutaneous version of a drug Baxter makes for immune system disorders. Analysts noted that the recall at issue Monday appears isolated to the pediatric hydration product, however.

In connection to the recall announcement, Halozyme said Sunday that it delivered "notice of breach" to Baxter over Baxter's "failure" to provide Hylenex in accordance with the terms of their existing development and supply contracts. If Baxter can't remedy all breaches in 120 days, Halozyme said it can terminate the Hylenex relationship.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com
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