The Motley Fool: Will Baxter International Inc's Split Unlock Shareholder Value?

If a strategy has worked before, try it again. Baxter (NYSE: BAX  ) has never been shy about identifying businesses that lie outside its core operating focus and being willing to set them free. Edwards Lifesciences, Caremark, and Allegiance Healthcare (now part of Cardinal Health) were all once under the Baxter umbrella, and arguably did better on their own than they would have as parts of Baxter.

Now the company is doing it again, choosing to spin off its biopharmaceuticals business as an independent publicly traded company. Investors cheered the move, as it does remove some issues that were clouding the value of the company's other operations.

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Will Baxter International Inc's Split Unlock Shareholder Value?

The Motley Fool: Is This Overlooked Stock Primed for More Growth?

Blood products really don't get that much attention in the health care space, but it's a market worth more than $10 billion a year excluding hemophilia products and growing around 6% to 8% a year as indications and patient identification expand. Baxter (NYSE: BAX  ) , one of the largest players in the market, is reasonably well-known to investors, but Grifols (NASDAQ: GRFS  ) is more obscure despite being one of the three largest players in the world and the largest in the U.S. As Grifols looks to leverage good underlying market growth through more efficient operations, the growth potential looks impressive.

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Is This Overlooked Stock Primed for More Growth?

Seeking Alpha: Baxter Still Defensive, But Is Now The Time For Offense?

The best thing about Baxter (BAX) is that so much of its business comes from oligopolistic markets with pretty steady demand and reimbursement. The worst thing about Baxter is that so much of its business comes from oligopolistic markets with pretty steady demand and reimbursement.

In theory, Baxter is a good stock to own during slow patches in the med-tech world because the demand for profitable businesses like infusion, recombinants, plasma-derived therapies, and other bioscience products doesn't drop much with the economy, and Baxter reports growth while others contract . On the flip side, the company has historically not looked to target new growth markets, and the company's growth looks pretty pokey when the sector revives.

With a few signs of life here and there in med-tech, as well as oncoming competition in biosciences, it is worth asking whether Baxter is still a name that investors want to hold today.

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Baxter Still Defensive, But Is Now The Time For Offense?

Investopedia: Novavax Gets A Booster Shot From The Government

While the FDA seems to be relishing its role as Little Bunny Foo Foo these days, other arms of the U.S. government are actually trying to be helpful when it comes to getting new drugs and vaccines to market. The government may have actually learned a thing or two when the H1N1 flu outbreak in 2009 took health officials by surprise, and Tuesday's contract announcement with Novavax (Nasdaq:NVAX) suggests that the U.S. healthcare system would rather not be caught unaware next time. (For background reading, see Measuring The Medicine Makers.)

The Terms of the Novavax Deal  
Novavax announced that the Biomedical Advanced Research and Development Authority (BARDA), part of the Department of Health and Human Services, decided to award a contract worth as much as $179 million to Novavax to help the company develop and manufacture vaccines for seasonal and pandemic influenza. Although Novavax had been working with BARDA for some time and was generally seen as very likely to get something, the final details were always up in the air. (For more, see Trading The Swine Flu Index.)

Now, though, the company knows that it will get a three-year contract worth almost $100 million ($97 million), with the potential of a two-year extension worth another $82 million. Generally speaking, these contracts are solid and dependable, so Novavax will not have to worry about whether year-to-year budget wrangling will leave them high and dry; so long as the company holds up its end of the bargain, the money should be there. 


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