UPDATE: Feb. 18, 2020: Baxter announced it completed a $350 million acquisition first announced in December of Sanofi-owned Seprafilm, a product meant to reduce adhesion barriers in patients having abdominal or pelvic laparotomy procedures. Baxter said it will immediately begin integrating Seprafilm, now part of its advanced surgery business.

Separately on Tuesday, Baxter announced a quarterly cash dividend of $0.22 per share of common stock.

Dive Brief:

• Baxter International said Monday it plans to acquire Sanofi's surgical products unit Seprafilm and related assets for $350 million in cash, confirming October speculation the Deerfield, Illinois-based healthcare products company and French pharma were weighing a deal.
• The deal gives Baxter's surgery division an adhesion barrier product meant to reduce incidence and severity of postoperative scarring in patients undergoing abdominal or pelvic laparotomy procedures.
• Baxter said it expects the deal to close no later than the first quarter of 2020 and anticipates the acquired products to generate $100 million in sales in the year following close.

Dive Insight:

FDA awarded premarket approval to Genzyme for Seprafilm in 1996, with 50 PMA supplements filed since. The product is a clear film meant to form a bioresorbable barrier between abdominal tissue and organs to reduce adhesions, or scarring, after surgery. Bloomberg reported in October that Seprafilm drew interest from other healthcare companies and private equity firms, citing people with knowledge of the matter.

Sanofi gained Seprafilm in its $20 billion-plus buyout of Genzyme in 2011. The product has faced scrutiny from the Department of Justice and medical device safety watchdogs alike.

The DOJ in 2013 ordered Genzyme to pay approximately $22.3 million, and in 2015, to pay $32.5 million, after regulators found it unlawfully distributed the product for non-approved indications.

Consumer group Public Citizen petitioned the FDA in 2015 to initiate a mandatory recall, citing 21 reports of death in patients who received Seprafilm and hundreds of related adverse event reports submitted to FDA. 

Michael Carome, director of Public Citizen's Health Research Group, told MedTech Dive the FDA has not yet issued a decision regarding the petition. But he said Public Citizen continues to believe "the device is unsafe and shouldn't be used" and "if patients understood the risks they wouldn't want it used in their surgeries."

Baxter intends to slot the product into its advanced surgery unit, one of its smallest behind its leading medtech divisions renal care and medication delivery. The surgery business generated $216 million last quarter, which CFO Jay Saccaro told investors in October credited to strong sales of hemostats and sealants.

The unit benefited this year from supply constraint issues related to hemostats in competitor Johnson & Johnson's biosurgery business. Baxter is also set to compete with J&J in the adhesion barrier space, where it sells absorbable adhesion barrier Gynecare Interceed. Baxter already markets an adhesion reduction solution called Adept.

RBC Capital Markets analysts wrote to investors Monday the deal "makes sense" for Baxter given the existing intraoperative wound and tissue management focus of its surgery unit.

With the exception of Baxter's $230 million acquisition of noninvasive fluid management monitoring system developer Cheetah Medical, announced in September, the RBC team noted Baxter has focused more on share buybacks the last three quarters, where it allocated roughly $2.1 billion in cash. The analysts estimate Baxter has about $4 billion available for further share buyback or M&A.

Baxter is currently in the midst of an internal accounting investigation after it discovered​ certain financial misstatements dating back to 2014 due to a historically applied foreign exchange rate convention not in accordance with GAAP.

Reuters reported last month Sanofi is considering a joint venture or sale of its consumer healthcare unit, which it said brought in around $5.2 billion in revenue last year. Sanofi, under new leadership of CEO Paul Hudson since September, is set to host an investor day Dec. 10.