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Baxter follows Abbvie playbook: Split to boost biopharma partnering or competition?

By Marie Powers, Staff Writer

Baxter International Inc. put weeks of rumors to rest by disclosing its plan to create separate, independent global health care companies, with one focused on the development and commercialization of biopharmaceuticals and the other on medical products.

The move came little more than a year after Abbvie Inc. launched as an independent biopharma, splitting from Abbott in a plan initially disclosed in October 2011. (See BioWorld Today, Jan. 3, 2013.)

Baxter, of Deerfield, Ill., is following the same playbook. The pharma said the spinoff will create well-capitalized, independent companies with strong balance sheets, investment-grade profiles and disciplined approaches to capital allocation. The company cited the desire for greater management focus on two distinct business lines, the ability to commercialize new and existing products more efficiently, the need to drive innovation across the franchises and allocate appropriate resources in high-growth opportunities and the flexibility to pursue respective growth and investment strategies for revenue acceleration, improved profitability and enhanced returns in both drugs and medical products.

The as-yet unnamed biopharma business, with 2013 annual revenues of approximately $6 billion, will consist of a 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 new company will aim to improve diagnosis, treatment and standards of care across a wide range of bleeding disorders and chronic diseases.

Baxter said it plans to expand its product pipeline through acquisitions as well as collaborations, though the company did not tip its hand about becoming more partner or rival in the biopharma industry.

The corporate headquarters of both companies will remain in northern Illinois. Robert L. Parkinson, Jr., will serve as chairman and CEO of the medical products company, which will retain the Baxter International name. Ludwig N. Hantson, who currently serves as president of Baxter’s Bioscience unit, will be named CEO of the biopharmaceuticals company. Hantson joined Baxter in 2010 from Novartis Pharmaceuticals Corp., where he served in a number of roles, culminating as CEO of the Pharma North America unit. Prior to Novartis, Hantson spent 13 years at Johnson & Johnson.

Wayne T. Hockmeyer, who joined Baxter’s board in 2007, will serve as nonexecutive chairman of the new biopharmaceuticals company. Hockmeyer founded Medimmune Inc., and served as its chairman and CEO until its sale in 2007 to Astrazeneca plc, of London. (See BioWorld Today, April 24, 2007.)

The transaction will take the form of a tax-free distribution to Baxter shareholders of publicly traded stock in the new biopharmaceuticals company. The transaction is expected to be completed by the middle of 2015, subject to market, regulatory and certain other conditions, including final approval by Baxter’s board of directors, receipt of a favorable opinion and/or rulings with respect to the tax-free nature of the transaction and the effectiveness of a Form 10 registration statement that will be filed with the SEC. Baxter expects to incur one-time charges related to the transaction during the reporting periods preceding the separation and does not otherwise expect the deal to affect its 2014 financial guidance.