Baxter International Inc. (NYSE:BAX) released a statement today, March 27th, that the company was planning to divide into two companies. One company would be focused on developing biotechnology and traditional pharmaceuticals and the other company would be focused on medical products. The split is anticipated to be finalized by the third quarter of 2015.
Baxter International Inc. (NYSE:BAX)’s move follows a two-year trend in the industry in which several major pharmaceutical concerns have sold, spun off or split apart their businesses. In the statement, Baxter said their drug division brought in $6 billion in revenues and the medical-products division had revenues of more than $9 billion last year.
Parkinson will remain the chief executive and chairman of the BoD at Baxter International Inc. (NYSE:BAX). Ludwig Hantson will be CEO of the not-yet-named new biotechnology/pharmaceutical company.
According to Joanne Wuensch, an analyst at BMO Capital Markets, “It’s a very good move. They’ll be able to focus on businesses they do best, and unleash opportunities for franchises which could have been hidden inside a larger organization.”
Until now, Wuensch said, Baxter International Inc. (NYSE:BAX) was trading “at a steep discount” to its peers because of worries over increasing competition in the hemophilia market.
Baxter International Inc. (NYSE:BAX) Chief Executive Officer Robert Parkinson, Jr. also said in a conference call this morning that the split will “enhance prospects for growth in both mature and emerging markets.”
The conference call also highlighted that the transaction could result in a market potential of around $50 billion in 2017 for the medical-products division, and up to $65 billion for the new biopharmaceuticals division.
Baxter developing new therapies
In the conference call, CEO Ludwig Hansen said that while the new biotechnology-pharmaceutical company will remain focused on hemophilia and new therapies for bleeding disorders, company goals also include “driving scientific innovation and leveraging expertise into new therapeutic areas through acquisitions and collaborations.”
The company statement noted recent acquisition Gambro will remain a part of Baxter International Inc. (NYSE:BAX).
Baxter International Inc. (NYSE:BAX) shares are trading up $3.67 at $73.75 as 12:03 PM ET today.