Mar 27 2014, 10:18am CDT | by Forbes
As the global market for medical products and biopharmaceuticals has become more complex, Baxter International (BAX) said this morning it will split its businesses in two to more effectively compete in both fast-growing areas.
The drug and medical product giant, known for its intravenous solutions and medication delivery devices in one half of the company has also had some hits on the drug side such as the blockbuster hemophilia treatment Advate.
“Baxter has an established history of executing successful spinoffs, and we have continued to evaluate the separation of these two businesses in response to diverging business dynamics and the rapidly changing macro-environment,” said Robert L. Parkinson, Jr., chairman and chief executive officer.
Parkinson, who will lead the medical products business that will retain the Baxter name and its $9 billion in annual sales, told Wall Street analysts and investors on an 80-minute conference call this morning that the companies will be more nimble on their own, developing new products faster from quicker decision-making and more focus.
“The value of the spinoff will only increase over time,” Parkinson told analysts.
The biopharmaceutical business, which generates more than $6 billion in annual sales, will be led by current Baxter bioscience president Ludwig Hantson. The biopharmaceutical business will take on a new name that has yet to be decided but will remain in the northern Illinois suburbs near Deerfield-based Baxter.
“We are confident that this decision not only strengthens our outlook, it positions us well to execute on our future growth prospects,” Hanston said.
The Baxter move is somewhat similar to that of Abbott Laboratories (ABT), which spun off its drug business into AbbVie (ABBV) a couple of years ago. Abbott even earlier spun off its hospital products business, Hospira (HSP) into a separate company. The Abbott spinoffs have largely won over investors and shareholders with revenue growth.
In Baxter’s case, Parkinson acknowledged he spinoff could reduce the clout the current company has when leveraging its diverse mix of products in selling products to customers and governments around the world.
But he said the medical products and biopharmaceutical products have become more complex and therefore each business needed more attention. Baxter, he said, is more than just a drug business with Advate and plasma products but has grown in the areas of oncology and hematology as well as biosimilars, which are a quickly growing form of cheaper copies to some of today’s blockbuster biotech drugs.
On the medical product side, Parkinson said Baxter will be able to focus more research attention to outpatient dialysis devices which move patients out of dialysis centers where they sometimes have to go three times a week and wait several hours.
Baxter, for example, is working on developing “nocturnal dialysis,” which allows patients to have the therapy at home in the evenings. “That’s a long journey,” Parkinson said of the device’s development.
Source: Forbes Business
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