Baxter International has announced plans to spin off its renal care and acute therapies businesses into an independent, publicly traded company. The separation of its kidney units means the company is joining the ever-growing number of medtech companies deciding to spin off particular business units to streamline manufacturing during supply chain challenges. One such company utilizing this strategy is company rival, Medtronic, which announced the spinoff of its renal business in May 2022 and the spinoff of its patient monitoring and respiratory interventions businesses in October 2022.

The Baxter spinoff should be complete in 12 to 18 months, according to Baxter, and will continue with its existing product portfolio. As a standalone company, it will have its own investment priorities and management focus, putting the company in a better position to pursue growth opportunities and investments.

In 2021, the kidney units saw sales totaling approximately $5 billion globally. Additionally, for the nine months ending Sept. 20, 2022, the renal care and acute therapies units reported sales of $2.77 billion and $519 million, respectively. Going forward as a spinoff, “the business will operate in market segments totaling approximately $15 billion that collectively are estimated to grow between 3% to 4% on a compound annual basis over the next three years,” according to Baxter.

Along with the spinoff news, the company reported it is finalizing a new operating model to be implemented in parallel with the business separation. The model includes the initiation of a restructuring plan which will optimize its manufacturing footprint. Baxter plans to provide more information about these efforts in the company’s fourth quarter earning conference call on Feb. 9.

Baxter’s biopharma solutions business could soon see major change as well. The company reported it is pursuing strategic alternatives for the business, including potential sale or other separation options, according to a press release, because its business model and client focus have limited strategic alignment with the rest of Baxter’s portfolio. “A potential sale of, or other strategic transaction involving, this business would help Baxter further streamline its focus while providing an opportunity for capital redeployment in accordance with its stated capital allocation priorities, including debt repayment,” according to the company.

“We are at a major inflection point in Baxter’s ongoing transformation journey,” said José E. Almeida, Baxter chairman, president, and CEO. “The healthcare landscape has never been more dynamic. Our learnings over the past year and beyond require a fundamental rethinking of our profile and operating model. These decisive actions are necessary to help deliver future performance and innovation at the levels we demand of ourselves in pursuit of our mission to save and sustain lives.”