NEW YORK – Following rampant speculation this week of changes to the organizational structure of the company, Becton Dickinson announced after the close of the market on Wednesday that it plans to separate its Biosciences and Diagnostics Solutions business by the end of 2026.
Specifically, the firm said in a statement that its board of directors has authorized BD to pursue a plan to separate the business to maximize shareholder value. The separation may take the form of a sale, spinoff, or other transaction, including a strategy dubbed a Reverse Morris Trust in which a company sells its assets tax-free to another company.
Separately, BD also announced its fiscal first quarter 2025 revenues rose 10 percent year over year due mainly to growth in its medical and interventional businesses.
The separation of Biosciences and Diagnostics Solutions — which, along with Specimen Management, currently make up BD Life Sciences — is the result of a business portfolio review that began in early 2024. The move is expected to create a separate company with approximately $3.4 billion in annual revenue and an addressable market of more than $22 billion growing at mid- to high single digits and more than 80 percent recurring revenue, BD said. By comparison, the market cap for BD's total business is $71.07 billion.
If the separation occurs, a "New BD" will emerge as a pure play medical technology firm with four new operating segments, including Medical Essentials, which incorporates BD's Medication Delivery Solutions and its Specimen Management businesses that manufacture tens of billions of devices each year. It also will include Connected Care, a segment that will house BD's Medication Management Solutions and Advanced Patient Monitoring businesses, and the BioPharma Systems segment.
Lastly, the New BD will include the Interventional segment consisting of BD's Urology and Critical Care, Peripheral Intervention, and Surgery businesses.
The New BD is expected to have revenue of about $17.8 billion and an addressable market of more than $70 billion growing at about 5 percent. It would have a recurring revenue model of greater than 90 percent, BD said.
The announcement of the potential separation follows a similar move in 2022 when BD spun off its diabetes care business into a standalone company called Embecta, in line with the firm's BD 2025 growth strategy initiated by Tom Polen when he took the reins as CEO in January 2020. Polen had previously served as BD's chief operating officer and in 2017 led the $24 billion acquisition of medical technology firm CR Bard.
On a call with investors on Thursday morning, Polen specified that under the BD 2025 plan the firm has deployed approximately $7 billion in capital to complete 20 transactions.
"Our BD 2025 strategy has transformed the company into a faster-growing, more profitable organization positioned at the forefront of long-term growth trends in healthcare, and we believe today's announcement is an exciting next step in unlocking significant potential value for all our stakeholders," Polen said in a statement.
"BD 2025 has really transformed BD into a faster-growing, more profitable organization positioned at the forefront of multiple long-term growth trends," he said on the call, adding that the planned separation is "the next natural step" in BD's evolution.
Separation will allow the combined Biosciences and Diagnostic Solutions business to "realize its full market potential as a pure-play leader in life sciences tools and diagnostics, continuing to accelerate growth through its strong innovation pipeline and industry-leading solutions," Polen said.
Including the Bard and CareFusion transactions, more than $43 billion of BD's capital went to M&A in the past 10 years, Polen also said but more than 99 percent of that investment supported building the medtech side of the business while the life sciences business has mainly been growing organically through R&D. BD bought Carefusion for $12.2 billion in 2015.
By separating the Biosciences and Diagnostic Solutions business, "There's certainly opportunities for that business as a focused entity to accelerate capital deployment in a way to create value in extremely attractive markets, on extremely attractive core businesses," Polen added.
Polen called BD Biosciences "the undisputed pioneer that created the modern field of flow cytometry," highlighting the FACSDiscover S8 platform BD launched three years ago and the Rhapsody multiomics system.
Overall, "Biosciences has a very strong innovation pipeline of future FACSDiscover instruments, new antibodies, dyes, and assays," Polen said, adding that a significant increase in commercial headcount is also supporting strong double-digit growth.
The Diagnostic Solutions business, meanwhile, is primarily comprised of BD's microbiology and molecular diagnostics platforms, and, "Both have strong innovation pipelines," Polen said.
In microbiology, BD markets the Phoenix ID/AST and Kiestra total lab automation systems, while BD's molecular portfolio is anchored by the BD MAX medium-throughput systems and BD Cor high-throughput systems. Among its regulated assays, the Onclarity HPV assay on the BD Cor, in particular, "offers a complete paradigm shift in cervical cancer screening starting with the ease of self-collection," Polen said. The firm also has a point-of-care molecular diagnostic system, called Elience in development.
The company expects to announce details on the separation plans by the end of fiscal 2025 and is targeting completion of the transaction in fiscal 2026.
BD said that Citi is acting as lead financial adviser, with Evercore also serving as a financial adviser. Additional advisers include Wachtell, Lipton, Rosen & Katz, PricewaterhouseCoopers, Skadden, Arps, Slate Meagher & Flom, and FGS Global.
In a note to investors on Wednesday, Dan Brennan at TD Cowen said that a divestiture of the Biosciences and Diagnostic Solutions business "would create an earnings hole" for BD, but proceeds from a sale "could be used to fill the EPS void through debt pay down, share repurchases, and accretive M&A." If BD were to sell that business, which had been speculated upon during the week, Brennan noted Danaher and Thermo Fisher Scientific as two tools firms with the capacity for such an acquisition.
Vijay Kumar at Evercore ISI, meanwhile, wrote in a note to investors on Monday that BD's life sciences segment accounted for about a quarter of the firm's fiscal 2025 revenues, including $3.7 billion from diagnostics and $1.5 billion from biosciences. The diagnostics business includes microbiology, specimen management, molecular and women's health, and professional point-of-care testing, Kumar wrote, while biosciences includes flow cytometry and single-cell multiomics.
For the foreseeable future, BD said it will continue to operate the Biosciences and Diagnostics Solutions business in alignment with its BD 2025 strategy but will postpone its previously announced investor day scheduled for Feb. 26, 2025, to focus on the transaction.
BD also said it expects to announce specifics on its separation plans by the end of fiscal 2025, targeting completion of the transaction in fiscal 2026.
Q1 results
On Wednesday, the company also said that in the three months ended Dec. 31, 2024, it recorded revenues of $5.17 billion, a 10 percent increase over $4.71 billion in the year-ago quarter and exceeding Wall Street analysts' average estimate of $5.11 billion.
The company's life sciences segment revenues increased a fraction of 1 percent to $1.30 billion from $1.29 billion.
Within life sciences, specimen management revenues increased 3 percent year over year to $462 million from $447 million, while diagnostic solutions revenues increased 2 percent to $474 million from $467 million, and biosciences revenues declined approximately 4 percent to $361 million from $375 million.
Chris DelOrefice, CFO at BD, said on the call that the diagnostic solutions business grew modestly, "As strength in lab automation and momentum in BD MAX molecular platform IVD assays was partially offset by respiratory season timing." The performance in life sciences also reflected expected declines in biosciences related to market dynamics and reduced research funding in China and the US, he said.
On the call, Polen said BD remains on track to launch the BD FACSDiscover A8 Analyzer in the second half of the fiscal year.
"In our molecular diagnostics portfolio, we're continuing to advance our position in the $2 billion high-volume molecular testing market," Polen said, highlighting that BD Onclarity HPV is the only test with extended genotyping to be FDA approved for self-collection.
"We're seeing accelerating sales funnel momentum as a result of recent changes in US cervical cancer screening guidelines and increased US reimbursement," he added.
On the call, Mike Feld, president of life sciences at BD, noted that the FACSDiscover platform was impacted by a US government ban on certain exports to China, "As it directly targets spectral analyzers and analyzers with 26-plus colors."
The ban does not impact BD's clinical and research reagent portfolio or its clinical instrumentation offering that is anchored by the FACSLyric platform, Feld said, adding that BD is engaging with policymakers as it believes the previous administration may have erred in its risk assessment in this case.
BD medical segment revenues, meanwhile, jumped 17 percent to $2.62 billion in Q1 2025 from $2.23 billion a year ago, while BD interventional segment revenues rose 6 percent to $1.26 billion from $1.89 billion.
Revenues from the company's US business increased 12 percent to $3.08 billion from $2.75 billion a year ago. Revenues from international markets increased 7 percent to $2.01 billion from $1.96 billion.
BD recorded net income for Q1 2025 of $303 million, or $1.04 per share, compared to a net income of $281 million, or $.96 per share, a year ago. On an adjusted basis, the company reported Q1 EPS of $3.43, beating the consensus Wall Street estimate of $2.99 per share.
BD updated its fiscal 2025 guidance and adjusted its revenue guidance to a new range of about $21.7 billion to $21.9 billion from a previous range of $21.9 billion to $22.1 billion. The new range would reflect year-over-year growth of between 7.9 percent to 8.4 percent, compared to prior guidance for growth of 8.9 percent to 9.4 percent.
It also changed its adjusted diluted EPS guidance to a range of $14.30 to $14.60, which it said reflects growth of 10 percent at the midpoint, from a previous guidance of $14.25 to $14.60.
After the completion of the quarter, BD's board authorized repurchase of up to 10 million shares of BD common stock, over and above the shares that remain under a 2021 share repurchase authorization. The firm said it has completed $750 million in share repurchases to date in fiscal 2025.