A drug-free Covidien is now all about devices

Covidien ($COV) has completed  the spinout of its drug business and, as of July 1, is pretty much all about  medical devices.

Moving forward, the old Covidien pharmaceuticals operation, dubbed  Mallinckrodt ($MNK), focuses  on pain management drugs and medical imaging diagnostics. The companies finished  their separation at the end of June, capping a plan that Covidien first  announced in December 2011 in an effort to give each operation’s distinct  business model a chance for more focused on robust growth. Abbott Laboratories  ($ABT) did the  same thing for similar reasons at the end of 2012, separating its drug business  into separate company called AbbVie ($ABBV).  Abbott today relies on medical devices, diagnostics and generic drugs, among  other businesses.

The new Covidien is still pretty formidable. Execs tout that fact in their  separation announcement that the company’s business, excluding pharmaceuticals,  produced nearly $10 billion in sales during fiscal 2012. Also, 38,000 employees  in 70 countries remain a part of Covidien. But 80% of the company’s sales are  now dependent on medical devices, with the difference coming from medical  supplies. Covidien said it has either the leading or second highest market  position in most of its sales categories, but a weak device or medical supply  market will be felt more acutely, without pharmaceuticals to spread out the  revenue burdens.

Covidien chairman, president and CEO José E. Almeida said in a statement that  the spinout will allow Covidien to expand its focus on developing new products  as well as growth in emerging markets, without backing away from aggressive  financial targets. That translates into a goal of mid-single digit sales growth  and double-digit adjusted earnings per share growth over time, with a plan to  give back at least 50% of free cash flow to shareholders each year via dividends  and share repurchases.

“We are maintaining our long-term financial goals and continue to target  top-line growth at or above the markets in which we compete,” Almeida said.

– read the release


Link to original article: A drug-free Covidien is now all about devices – FierceMedicalDevices