BD's Strategic Separation of Biosciences and Diagnostics Business
BD announced a definitive agreement to separate its Biosciences and Diagnostics business via a tax-efficient Reverse Morris Trust with Waters, expected to close around the end of Q1 2026.
The separation aims to unlock shareholder value and establish New BD as a pure-play medical technology company with over 90% consumable revenue, a strong innovation pipeline, and margin expansion.
Brooke Story has been appointed to lead the integration and separation management office, leveraging her experience as President of Diagnostics and her role in Edwards Critical Care integration.
The post-separation company is expected to benefit from enhanced capital allocation, including using at least half of the $4 billion cash from Waters for share buybacks, and will maintain a focus on margin expansion and innovation.
The transaction is progressing well, with the expected timeline and strategic benefits clearly articulated, positioning BD for long-term success.
Adjusted diluted net earnings per share were $1.80, up approximately 5% year-over-year.
Adjusted operating profit margin was 27.3%, flat year-over-year, driven by volume leverage, product mix, and cost management.
Biotechnology segment core revenue increased 6%, led by high single-digit growth in bioprocessing and a slight decline in discovery and medical.
Cepheid's non-respiratory molecular diagnostics grew double digits, driven by sexual health, virology, and hospital-acquired infections assays.
Diagnostics segment core revenue increased 2%, with strong growth outside China, especially in clinical diagnostics and molecular diagnostics non-respiratory revenue.
Free cash flow was $1.1 billion in the quarter and $2.2 billion in the first half, with a 143% free cash flow to net income conversion ratio year-to-date.
Life sciences segment core revenue declined 2.5%, impacted by weak academic and government demand and lower genomics consumables sales.
Second quarter sales were $5.9 billion with 1.5% core revenue growth year-over-year.
Strategic Review Concludes with Focus on Portfolio Optimization and Asset Divestitures
The company completed an extended strategic review in June, reaffirming its position as a leading independent short-stay surgical provider.
Management plans to selectively partner or sell facilities to reduce leverage, accelerate cash flow, and focus on core ASC service lines.
Potential divestitures include surgical hospitals and non-core assets, with a focus on markets that can expedite leverage reduction and cash flow growth.
The company is considering partnerships with health systems, including selling stakes in assets to accelerate strategic goals.
Commercial Transformation and Sales Process Overhaul
The commercial transformation aims to capitalize on large enterprise and IDN opportunities, with a focus on moving from early-stage to later-stage deals.
The company has retooled its sales team to target hospital CNOs and other key decision-makers, emphasizing change management and clinical benefits.
Progress includes a more disciplined approach to sales forecasting, pipeline management, and deal closure, setting the stage for sustained growth.
Dafinchi