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Stock Strategist

Moats and Growth Drivers Look Solid for Post-Split Baxter

Focus remains on hemophilia competition, but Baxter's comprehensive product portfolios are unmatched.

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When  Baxter (BAX) spins off its biopharmaceutical business in mid-2015, the latter firm's flagship hemophilia product Advate will be battling  Biogen's (BIIB) Eloctate for market share, and two generic launches will be putting pressure on the new Baxter to make the most of the integration of dialysis firm Gambro. However, we think the new biopharmaceutical firm's hemophilia pipeline and differentiated immunoglobulin therapy HyQvia will serve as strong growth drivers, just as the new Baxter sees significant top-line synergies from Gambro and stronger hospital contracting power with the inclusion of biosurgery.

Baxter's strongest competitive advantages have traditionally been on the biopharmaceutical side of its business, thanks to intangible assets including pipeline productivity and a strong global salesforce in hemophilia as well as cost advantages in plasma fractionation. Our preliminary analysis points to a strong, stable moat for this side of the business, based on the global plasma market oligopoly and Baxter's ability to counter hemophilia competition with several (albeit smaller) new product launches.

Karen Andersen does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.