Baxter restructures renal unit into independent company amid new strategy to increase innovation

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Baxter International has announced a comprehensive strategic roadmap to meaningfully enhance its operational effectiveness, drive towards improved long-term performance, accelerate innovation and create additional value for all stakeholders. These changes include the plan to spin off the company’s Renal Care and Acute Therapies global business units into an independent, publicly traded company; a simplified commercial and manufacturing footprint to enhance underlying business performance; and further portfolio actions to improve Baxter’s capital structure, including a review of strategic alternatives for the BioPharma Solutions business. 

“We are at a major inflection point in Baxter’s ongoing transformation journey,” said José (Joe) E. Almeida, chairman, president and chief executive officer. “The healthcare landscape has never been more dynamic. Our learnings over the past year and beyond require a fundamental rethinking of our profile and operating model. These decisive actions are necessary to help deliver future performance and innovation at the levels we demand of ourselves in pursuit of our mission to save and sustain lives.” 

Almeida continued, “We are confident that the strategic actions we are announcing today will help ensure that each of these entities, and the incredibly strong and dedicated group of colleagues that comprise them, are on the best possible trajectory moving forward. Realising the full impact of these decisions will take time, but we believe they are essential to enhance our focus, fuel our innovative spirit, and, most crucially, deliver optimal results for the patients, clinicians, shareholders, and other stakeholder communities that depend on us.” 

Baxter’s Renal Care and Acute Therapies businesses are leaders in the global kidney care industry. As an independent, publicly traded company, the new kidney care business would carry forward Baxter’s nearly 70-year legacy as a pioneer and leader in kidney disease therapies. The new business would continue to serve as a trusted partner to providers and clinicians around the world, focusing on improving outcomes for the more than one million patients it serves annually in more than 70 countries. 

The new kidney care company will benefit from its existing leading product portfolio, geographically diverse footprint, and extensive commercial operations, as well as from robust service capabilities that support its therapies delivered in the home, clinics, and intensive care unit (ICU). As a standalone entity with its own investment priorities and enhanced management focus, the new kidney care company will be better positioned to pursue growth opportunities and invest in innovation. 

The business will operate in market segments totalling approximately US$15 billion that collectively are estimated to grow 3–4% on a compound annual basis over the next three years. The company will have leading positions in the businesses in which it operates, meaningful financial scale, and opportunities to expand margins in the near term and beyond. In 2021, sales for these businesses totalled approximately US$5 billion globally. 

Over the past several years, Baxter has executed many initiatives to strengthen its ability to deliver on its vision to transform healthcare. To better achieve these goals, the company is working to finalise a new operating model that it will begin to implement in parallel with its planning for the proposed spinoff of the Renal Care and Acute Therapies businesses. 

Once the simplified model is finalised and implemented, Baxter is expected to be a more integrated and nimble organisation that can respond to changes in the environment faster and more effectively, while enhancing its ability to advance innovation for its patients. This simplified structure should create a more resilient supply chain and greater alignment with the company’s manufacturing footprint, better positioning the organisation to deliver against the operational and investment priorities of Baxter’s businesses. As part of this organisational redesign, the company expects to initiate a restructuring plan, including optimisation of its manufacturing footprint. Baxter plans to provide additional detail on these efforts in the company’s fourth-quarter earnings conference call on 9 February 2023. 

After the completion of the reorganisation and the proposed spinoff of the new kidney care company, Baxter’s market-leading businesses will continue to compete in large and growing segments, which total more than US$100 billion in size and taken together are expected to grow approximately 3% on a compound annual basis over the next three years. On a pro forma basis, including Hillrom as if it were owned for the entire year, 2021 annual sales across these businesses (excluding Renal Care and Acute Therapies) were approximately US$11 billion. Baxter will continue to be led by CEO Joe Almeida. 

Baxter is pursuing strategic alternatives for the BPS business, including a potential sale or other separation options. BPS is a provider of contract manufacturing services to the pharma and biotech industries with an established track record and strong reputation for quality. The business has continued opportunities for growth, but its business model and client focus have limited strategic alignment with the rest of Baxter’s portfolio. A potential sale of, or other strategic transaction involving, this business would help Baxter further streamline its focus while providing an opportunity for capital redeployment in accordance with its stated capital allocation priorities, including debt repayment. 

Following the proposed operating model redesign and spinoff, Baxter should emerge as a stronger hospital solutions and connected care company. As a more focused business, Baxter will be better positioned to make strategic investments to accelerate its vision, delivering differentiated value to all stakeholders with its unique combination of products, therapies and connected care platforms. 

By increasing R&D investments in higher-growth and more strategic opportunities, Baxter will drive innovation to help accelerate sales growth, better serve patients and customers, and provide new opportunities for employees. The company will also have the opportunity to expand investments in marketing, sales, and business development, while optimising its manufacturing network and systems to improve its margin profile and create value.

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