Baxter is saying bye-bye, biopharma.
In a deal announced Monday, the medtech giant is set to separate out its biopharma solutions business, which offers drugmakers support in the form of products like injectable delivery systems and services that include regulatory resources, help with drug formulation and development, and packaging capabilities.
Private equity firms Warburg Pincus and Advent International are snapping up the segment. They’ll pay Baxter $4.25 billion in cash, which the devicemaker said will translate into net proceeds of about $3.4 billion after taxes. The deal is set to close sometime in the second half of this year.
The biopharma solutions business is among Baxter’s smallest. In 2022, it brought in $644 million in sales—a decline of 4% year over year—representing just 4% of the company’s $15.1 billion in total sales for the year.
Baxter CEO José Almeida called the divestment “an important step in Baxter’s ongoing transformation journey” in the announcement.
“Advent International and Warburg Pincus have extensive experience helping innovative healthcare companies advance their mission and strategic priorities,” he said. “I am confident that under their stewardship, BPS will continue to build on its leadership position, foster world-class talent, invest in new capabilities and capacity, and provide leading-edge, high-quality solutions for its clients.”
Baxter said it will use the proceeds from the sell-off to help reduce its debt, which spiked thanks to the $10.5 billion acquisition of Hillrom that closed at the end of 2021.
The company is also in the process of making other cost-cutting moves. Alongside a restructuring plan that it’s hoping will reduce superfluous costs by streamlining its corporate layout, Baxter also announced in February that it would lay off a chunk of its workforce. Though the reduction was set to affect “less than 5%” of employees, because Baxter’s global workforce numbered around 60,000 as of the end of 2022, as many as 3,000 jobs were on the chopping block.
In total, the job cuts and restructuring were expected to save Baxter more than $300 million for the year.
The restructuring plan groups Baxter’s many businesses under four main umbrellas. The biopharma solutions segment was set to move under the pharmaceuticals umbrella; with its sale, that group will be left only with the company’s injectable and premix drug portfolios.
Though Baxter said in Monday’s announcement that separating out the biopharma solutions business would dilute its earnings by about 10 cents per share in the fourth quarter of this year, it's aiming to offset those losses with the reduced interest payments that will result from the debt repayments it’s hoping to make with the deal proceeds.
Baxter suggested that the biopharma solutions division’s divestment could be on the horizon at the start of this year, as it laid out plans to spin out another two of its businesses, the renal care and acute therapies divisions, into a standalone kidney care company.
In the January announcement, Baxter said that plan would take effect within the next 12 to 18 months, meaning the kidney business may not leave the nest until as late as July 2024.
In the meantime, however, it’s already making plans for the new independent company. Last week, the company tapped former Varian CEO Chris Toth to take on the lead role at the kidney-focused venture, whenever it may come to fruition. Until then, starting June 1, he’ll serve as an executive VP of Baxter and group president of its kidney care segment.