Covidien may base spin-off drugs company in Ireland

COVIDIEN Plc, a maker of surgical products and drugs, plans to spin-off its pharmaceuticals division into a separate company that could be based in Ireland.

The drugs unit generates about €1.5 billion in annual sales, with about two-thirds coming from the US market, the company said in a statement yesterday.

Among its products are Exalgo, a 24-hour extended release opioid, and Pennsaid, a topical anti-inflammatory medication.

Covidien, whose principal executive office is on Dublin’s Hatch Street, had been seeking to sell the unit when talks broke down earlier this year, people familiar with the matter said in June. The company’s medical products business has annual sales of about $9.6bn (€7.37bn).

“The pharma division has been a drag on the company’s top-line growth rate,” said Joanne Wuensch, an analyst with BMO Capital Markets in New York. The spin-off “should provide a relief to the overhang and questions that have dogged this division.”

Shedding the drugs division is expected to take up to 18 months. The spin-off won’t affect the company’s ability to make acquisitions, chief financial officer Charles Dockendorff said on a conference call.

The medical products division makes trays, hypodermic needles, retractors, pumps for patient feeding and pain management, and other hospital equipment.

“This transaction, if completed, would give both businesses greater flexibility to focus on and pursue their respective growth strategies, while potentially providing shareholders with greater value over the longer term,” Almeida said.

The pharmaceutical firm will likely be based in Ireland, partly for tax purposes, Dockendorff said. The main operations of the firm are now in St Louis, Missouri.