Covidien to spin off pharmaceuticals business

US medical products and generic drugmaker Covidien (NYSE: COV) says that it plans to spin off its pharmaceuticals business - which generates around $2 billion in annual sales - into a stand-alone public company. The decision comes after several years of evaluating options which, according to observers, included talks to sell the drugs business for $3-$4 billion that failed to materialize. The news saw Covidien’s shares rise 3.3% to $43.55 by close yesterday.

Covidien, which is headquartered in Mansfield, Massachusetts, and has a European base in Ireland, says its pharmaceuticals business is one of the world’s largest producers of bulk acetaminophen, is the biggest US supplier of opioid pain medications and is among the top 10 generic pharmaceuticals manufacturers in the USA, based on prescriptions. Since 2008, this business has received US Food and Drug Administration approval for eight new products, including two branded pain products launched in 2010. In addition, Covidien’s pharmaceuticals business is one of the world’s leading suppliers of generators used to produce technetium-99m, a critical diagnostic medical isotope. It is also the only manufacturer that offers a fully integrated system of diagnostic contrast media in prefilled syringes and injectors.

“We’ve evaluated whether to separate these businesses for several years, due to the major differences between the medical products and pharmaceutical industries. We believe that now is the right time to do so because we have significantly improved the operations, performance and pipeline of our pharmaceuticals business,” said Jose Almeida, president and chief executive.