Dive Brief:
- Baxter International plans to spin off its renal care and acute therapies businesses into a publicly traded company in the next 12 to 18 months.
- The company also is exploring strategic alternatives for its Biopharma Solutions business, it said in a statement on Friday.
- The changes are intended to simplify Baxter’s operating model and manufacturing footprint.
Dive Insight:
By selling or spinning off three of its businesses, Deerfield, Ill.-based Baxter plans to narrow its focus as a hospital solutions and connected care company. The firm said the changes would allow it to increase research and development investments into higher-growth and more strategic opportunities.
“Our learnings over the past year and beyond require a fundamental rethinking of our profile and operating model,” CEO José Almeida said in the statement. “These decisive actions are necessary to help deliver future performance and innovation.”
Baxter had hinted at plans to review its portfolio in October, when it lowered its earnings forecast for 2022. It plans to spin out its renal care and acute therapies businesses into a combined kidney care company.
The move would involve divesting Baxter’s largest segment. Its renal care business brought in $3.9 billion in revenue in 2021. Baxter’s shares fell 5.4% to $49.72 in mid-morning trading.
“A negative investor reaction is understandable as it's much larger, more complex, and reduces visibility over a longer timeframe (12-18 months),” KeyBanc analyst Matthew Mishan wrote in a note on Friday, adding that “this is likely the most logical outcome to the strategic alternative process.”
Almeida said the changes will allow each of the entities to set their own growth and investment priorities.
According to Baxter, the spinoff would operate in market segments totaling $15 billion, which are estimated to grow between 3% and 4% over the next three years. It plans to share details about the proposed leadership, structure and other details about the new kidney care company later.
Separately, Baxter said it’s considering a possible sale of its BioPharma Solutions business, which provides contract manufacturing services to the pharmaceutical and biotechnology industries. The segment brought in $669 million in revenue in 2021 and was Baxter’s fastest-growing business.
Biopharma solutions “has continued opportunities for growth, but its business model and client focus have limited strategic alignment with the rest of Baxter's portfolio,” the company said.
A potential sale would allow Baxter to streamline its focus while letting the company deploy capital with its stated priorities, including repaying debt.
Mishan wrote that a possible sale “makes sense from a deleveraging perspective and is likely one of its most attractive assets that could also be considered non-core.”
