Baxter to Spin Off Biotech Biz to Separate Company

International medtech giant Baxter International Inc. has announced that it intends to split itself into two individually operated companies in 2015. One is to concentrate on the pharmaceuticals and biotechnology business while the other will retain the firm's medical devices operations.

A company press release says that CEO Robert Parkinson will continue in his role on the medtech side, while Ludwig Hantson, currently president of Baxter's BioScience unit, will lead the as-yet unnamed biotech and pharmaceuticals company.

In a Thursday morning conference call covered by Reuters addressing the planned spinoff, Parkinson said it was the company's view that it had reached the point where separating the two businesses would "generate more value."

The biopharmaceuticals operations that will constitute the new company generated about $6 billion in revenues in 2013. They include Baxter's diverse 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.

The company believes shareholders will benefit from the division. The new company's stock will be a tax-free distribution, and Baxter says that the split will allow greater management focus on the distinct businesses of biopharmaceuticals and medical products. It is said that separately the two companies will be able to more effectively commercialize new and existing product offerings.

They will also have "the ability to drive innovation across the franchises and allocate necessary resources to the areas presenting the highest growth potential" and the "flexibility to pursue respective growth and investment strategies resulting in revenue acceleration, improved profitability and enhanced returns."

The Chicago Tribune reportsthat Baxter, which has about 61,000 employees worldwide including some 5700 in northern Illinois, has said that "the headquarters of both companies will remain in or near the Chicago north metro" area.

Also, according to Reuters, Baxter executives said during the conference call that the company was working on the divestiture of its vaccines business. The news service had reported earlier this weekthat the company was "working with Goldman Sachs Group to find a buyer for the unit and has reached out to potentially interested parties, including private equity firms."

Although Baxter expects to take a one-time charge for the biotechnology spinoff, its financial forecast for 2014 should not be affected, the company said. Analysts expect earnings of $5.13 per share and revenue of $16.59 billion this year, according to Thomson Reuters I/B/E

Stephen Levy is a contributor to Qmed and MPMN.