(Adds Breakingviews link, updates stock price)
March 27 Baxter International Inc said
on Thursday it would spin off its biotechnology operations into
a publicly traded company by the middle of next year and focus
on its core medical technology business, sending its shares up
more than 4 percent.
The move, which is similar to Abbott Laboratories'
spinoff of AbbVie Inc at the beginning of 2013, is part
of a trend among healthcare companies to divest businesses that
are not part of their primary operations.
Baxter said its biotech business, which includes
plasma-based proteins to treat hemophilia and other bleeding
disorders, had 2013 revenue of $6 billion, while medical
products and equipment sales were $9 billion.
That remaining products business includes intravenous fluid
systems, dialysis, biosurgery and some specialty pharmaceuticals
such as anesthesia and nutrition.
Chief Executive Officer Robert Parkinson will continue in
his role, while Ludwig Hantson, president of its BioScience
group, will lead the new, as-of-yet unnamed biopharmaceutical
During a conference call, analysts asked Parkinson what had
changed his view about a company split, which had been
speculated about in the past.
Baxter's board had been evaluating the strategy for a while,
"I have been a strong advocate of the diversified healthcare
model," Parkinson said, "and I will tell you there remain
distinctive advantages and value drivers of that model.
"The question is when did the merits of a spinoff begin to
generate more value, and it is our view today, we are at that
Baxter has spun off other companies in the past three
decades, including Edwards Lifesciences Corp, Caremark
Corp and Allegiance Healthcare Corp.
Baxter executives also said during the conference call that
the company was working on the divestiture of its vaccines
business. Earlier this week, Reuters reported that Baxter had
hired an investment bank to explore the sale of the business,
which has $300 million in sales in 2013 and had been undergoing
a strategic review.
Baxter said it expected to take a one-time charge for the
biotechnology spinoff but that it should not affect its
financial forecast for 2014. Analysts expect earnings of $5.13
per share and revenue of $16.59 billion this year, according to
Thomson Reuters I/B/E/S.
Shares of Baxter rose 4.2 percent to $74.32 shortly after
midday, but ISI Group analyst Mike Craig said the gains might
"We have seen several announcements recently where an
announcement of the split drives the stocks up 10 percent and
quickly fades as timing sets in and market risk still exists,"
Craig said in a research note.
Elsewhere in the healthcare industry, Novartis AG
is considering divesting some smaller businesses, which include
animal health, vaccines and over-the-counter medicines, while
Merck & Co Inc is selling its consumer healthcare
(Reporting by Caroline Humer; Editing by Jeffrey Benkoe and
Lisa Von Ahn)