Baxter International Inc. has announced plans to create two separate, independent global healthcare companies:one focused on developing and marketing 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 chief executive officer, in a company statement. “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.”

The two businesses operate in distinct markets with corresponding underlying fundamentals, and each possesses different growth prospects, investment requirements and risk profiles. Baxter also cites the following as benefits:

• 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
• 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. This business’s strategy is aimed at improving diagnosis, treatment and standards of care across a wide range of bleeding disorders and chronic diseases, enhancing capacity to meet growing demand for biotherapeutics, leveraging expertise into new emerging therapeutics through acquisitions and collaborations, and developing a robust new product pipeline focused on new and effective treatments that address unmet medical needs.

The medical products business, with 2013 annual sales of more than $9 billion, offers a broad 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 Gambro AB acquisition, which complements Baxter’s existing renal therapies franchise and which provides products and services to treat end-stage renal disease across the full continuum of care. The medical products company will focus on strengthening its market leadership through geographic expansion and increased penetration, leveraging its extensive hospital presence and global footprint, developing comprehensive solutions to improve patient outcomes and safety, and enhancing profitability through a more streamlined and flexible cost structure.

The corporate headquarters of both companies will be located in northern Illinois. Robert L. Parkinson, Jr., will serve as chairman and chief executive officer of the medical products company, which will retain the Baxter International name. Ludwig N. Hantson, PhD., who currently serves as president, BioScience, will be named chief executive officer 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 chief executive officer, 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. Dr. Hockmeyer founded MedImmune, Inc., and served as its chairman and chief executive officer.

The transaction is intended to take the form of 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 the Baxter Board of Directors, receipt of a favorable opinion and/or rulings with respect to the tax-free nature of the transaction, and the effectiveness of a Form 10 registration statement that will be filed with the Securities and Exchange Commission.

Baxter expects to incur one-time charges related to the transaction during the reporting periods preceding the separation and does not otherwise expect this to impact the company’s financial guidance for 2014.

Source: Baxter International