Covidien updates on pharma spinout

November 27, 2012 by MassDevice staff

Covidien updates investors on the planned spinout of its pharmaceuticals business, expected by mid-2013.

Covidien

With strong fiscal 2012 numbers under its belt, Covidien (NYSE:COV) updated investors today on its expected financials after it spins out its pharmaceuticals business next year.

The Mansfield, Mass.-based medical device company said late last year that it planned to ditch the no-or-low-growth pharma unit, which will become a stand-alone operation.

When it announced the deal in December 2011, Covidien forecast adjusted growth margins of 60.0% for the "New Covidien." That figure is now expected to be 60.4%, according to a regulatory filing, up 40 basis points.

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At the time of the announcement, CEO José Almeida said Covidien has been considering a separation for years and decided to pull the trigger now that the pharma unit has been fine-tuned.

"We've evaluated whether to separate these businesses for several years, due to the major differences between the medical products and pharmaceutical industries. 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," Almeida said. "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."

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