Baxter is doubling down on diabetes, not a bad bet to make given the global proliferation of the disease and its own overwhelming demand for dialyzers. The company is investing almost $300 million and hiring 200 people to expand its hemodialysis manufacturing in Opelika, AL.
This could help lay the groundwork for the company’s future; it’s in the process of spinning out its therapeutics business into a separate company. Baxter expects to make executive appointments in the coming months. It also plans an investor meeting during the second quarter of 2015 to help outline the two companies. The spinoff is expected to complete by mid-2015.
Following a major acquisition last year, dialysis is the company’s largest and, by far, its fastest growing franchise. During the second quarter, Baxter had $1 billion in dialysis product revenues, an increase of 60% over the same quarter a year earlier. In September 2013, Baxter paid about $3.9 billion for Swedish dialysis company Gambro–which is now the core of its dialysis products business.
“On the legacy Gambro business, we continue to focus on ramping up capacity specifically in the dialyzer area, which is going to continue to be a challenge over the next year or two. Simply stated there’s more demand right now than our ability to deliver,” said Baxter chairman and CEO Robert Parkinson on the company’s recent earnings call in July.
He continued, “You know some of the historical issues that the previous owners of Gambro were dealing with in that regard and so on. But we are moving forward to expand capacity. Our two primary dialyzer facilities in Hessiga, Germany, and Opelika, Alabama, and it’s just a matter of time before we get that capacity ramped up, so that we can accelerate the growth of the dialyzer business.”
Baxter will add 230,000 square feet to the Opelika facility, including several production lines. It expects to start the planned hiring at the facility in 2016, when the first commercial production lines are slated to begin.
Almost two million patients globally with end-stage renal disease are on hemodialysis, according to the company. Diabetes is the most common cause of end-stage renal disease, which is when kidney function drops to about 10% to 15%. They peg the market as expanding 6% to 7% annually.