Baxter Plans Split Into Two Separate Firms

Baxter International Inc. is splitting. No, the company’s not going anywhere, it’s separating into two distinct firms.

The Deerfield, Ill.-based healthcare company unveiled plans to create two separate, independent life-science firms—one focused on biopharmaceuticals and the other on medical products.

”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 CEO. ”This decision underscores Baxter’s commitment to ensuring its long-term strategic priorities remain aligned with shareholders’ best interests, while improving our competitive position and performance, enhancing operational, commercial and scientific effectiveness and creating value for patients, healthcare providers, and other key stakeholders.”

According to company officials, the spinoff will create two, “well-capitalized independent companies with strong balance sheets, investment grade profiles, and disciplined approaches to capital allocation.” Baxter’s brass also believes that the separation will result in other benefits, including:

• Greater management focus on the distinct businesses of biopharmaceuticals and medical products;
• Ability to more effectively commercialize new and existing product offerings;
• Ability to drive innovation across the franchises and allocate necessary resources to the areas presenting the highest growth potential; and
• Flexibility to pursue respective growth and investment strategies resulting in revenue acceleration, improved profitability and enhanced returns.

The biopharmaceuticals business, with 2013 annual revenues of approximately $6 billion, consists of a portfolio of recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders, and plasma-based therapies to treat immune deficiencies, alpha-1 antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions.

”Today’s news represents a significant milestone that will result in material benefits for key stakeholders,” said Ludwig N. Hantson, Ph.D., president of Baxter’s existing BioScience division. ”We are confident that this decision not only strengthens our outlook, it positions us well to execute on our future growth prospects, new product pipeline and other opportunities as we enter a new era in the journey to achieve our aspiration as a premier biopharmaceuticals company.”

The medical products business, with 2013 annual sales of more than $9 billion, has a portfolio of intravenous (IV) solutions and nutritional therapies, drug delivery systems and administration sets, premixed and other injectable drugs, as well as inhalation anesthetics and hospital-based biosurgery products. This business is also integrating the Swedish firm Gambro AB, which Baxter purchased in 2012 for $12 billion (the largest acquisition in Baxter’s more-than-80-year history) and complements the company’s existing renal therapies franchise.

The corporate headquarters of both companies will be located in northern Illinois.

Parkinson will serve as chairman and CEO of the medical products company, which will retain the Baxter International name. Hantson will be named CEO of the new biopharmaceuticals company, which will be named at a later date. Hantson joined Baxter in 2010 from Novartis Pharmaceuticals Corporation where he served in a number of roles of increasing responsibility, the most recent of which was CEO, Pharma North America. Prior to Novartis, Hantson spent 13 years at Johnson & Johnson. Wayne T. Hockmeyer, Ph.D., who joined Baxter’s board in 2007, has agreed to serve as non-executive chairman of the board of the new biopharmaceuticals company. Hockmeyer founded MedImmune, Inc., and served as its chairman and chief executive officer.

The split will come via a tax-free distribution to Baxter shareholders of a new publicly traded stock in the new biopharmaceuticals company. The transaction is expected to be completed by mid-year 2015, subject to market, regulatory and certain other conditions, including final approval by Baxter’s board of directors.

This isn’t the first time Baxter has spun off parts of itself. Other companies that Baxter has spun off in the past three decades include Edwards Lifesciences Corp, Caremark Corp, and Allegiance Healthcare Corp.

It’s also part of a larger industry trend of refocusing on core businesses. Baxter’s Illinois neighbor, Abbott Laboratories, spun off it’s pharmaceutical arm to create a new firm—AbbVie Inc.—at the beginning of 2013. Covidien plc also completed the spinoff of its pharmaceutical business in 2013 to concentrate on medical devices.