Covidien, a global supplier of healthcare products based in Ireland, plans to spin off its pharmaceuticals business into a standalone US company.
The spin-off is expected to give the new company better opportunities to commercialise its pipeline and pursue its global growth plans.
Covidien’s medical devices and products business will remain within the existing company.
The company’s pharmaceutical business is a leading supplier of generics, opioid pain medications and bulk paracetamol, as well as such diagnostic products as medical isotopes and contrast media.
The growing pain management drug market is expected to be a major focus for the new company.
“We’ve evaluated whether to separate these businesses for several years, due to the major differences between the medical products and pharmaceutical industries,” said José E. Almeida, President and CEO of Covidien. “We believe that now is the right time to do so because we have significantly improved the operations, performance and pipeline of our pharmaceuticals business.
“While both businesses hold industry-leading positions, they have distinctly different business models, sales channels, customers, capital requirements and talent bases. In addition, their respective innovation pipelines differ substantially in length, regulatory approval requirements, possible risks and potential returns.
“This transaction would give both businesses greater flexibility to focus on and pursue their respective growth strategies, while potentially providing shareholders with greater value over the longer term.”
Covidien plans to distribute shares in the new pharmaceutical company to its US shareholders. The transaction is expected to be completed within 18 months.