Becton, Dickinson and Company BDX, popularly known as BD, recently announced the sale of its BD Rx business to Fresenius Kabi USA. However, the financial terms of the transaction were kept under wraps.
Moreover, BD and Fresenius Kabi USA signed a distribution deal, under which the latter will supply a series of intravenous (IV) solutions to the former for the next 10 years. Both the companies plan to launch a range of IV solutions in the U.S. in the near term.
The BD Rx business comprised a pharmaceutical manufacturing plant in Wilson, NC, and the BD Simplist line of seven drugs in ready-to-administer prefilled glass syringes. BD will record an asset write-off due to the divestiture, which is expected to be immaterial to the company’s fiscal 2016 results.
However, the deal is expected to be modestly positive for BD’s adjusted diluted earnings per share (EPS). Meanwhile, BD expects EPS in the range of $8.73 to $8.80 for fiscal 2016, which reflects year-over-year growth of 22% to 23%, at cc.
The transaction is in accordance with BD’s strategy of selling low-margin assets that will help it to focus on its high-margin core business. This will not only drive top-line growth but will also expand margins.
Meanwhile, the distribution deal will boost BD’s expanding IV solutions business. The company recently unveiled an IV medication management solution that is aimed at reducing the possibility of harmful and costly IV medication programming errors in hospitals. The new solution will also help bring down unnecessary expenditures on infusions, which are never utilized. The solution incorporates technologies from BD and CareFusion (acquired by BD in Mar 2015).
We believe the new medication management solution will help BD gain better market traction, which will improve the top line. According to a report by MarketsandMarkets, the global medication management market will be worth an astounding $1.62 billion by 2019, which will open up significant prospects for BD.
Further, we note that the CareFusion takeover has opened up significant opportunities for BD. The combined company has already delivered strong top-line results over the past two quarters. The momentum is expected to continue on combined synergies and expanding product portfolio. We believe a wider range of product offerings will help drive the top line of the company over the long haul.
Zacks Rank & Key Picks
Currently, BD has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Oculus Innovative OCLS, AmerisourceBergen ABC and Henry Schein HSIC. Oculus sports a Zacks Rank #1 (Strong Buy), while both AmerisourceBergen and Henry Schein carry a Zacks Rank #2 (Buy).
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