Baxter's New Look

Executive Summary

Following its 1985 acquisition of American Hospital Supply, Baxter International reigned as one of the leading hospital suppliers, with a strong distribution component and an extremely broad product line. But though the strategy seemed right to appeal to a new kind of hospital customer, it did little to help Baxter grow as a corporation, and the company's stock hit a fallow period in the late 1980s and early 1990s. Beginning in the mid 1990s, Baxter embarked on a program to bring focus and discipline, in the process turning itself into a very different kind of business. By the end of the decade, it had shed virtually all of the businesses it acquired in the AHSC deal, re-focused on long-time efforts in dialysis and IV/medication delivery, and quietly built a huge biopharmaceutical business. Some questions linger for Baxter as it pursues a strategy with one foot in the medical device industry and one in biotech, most notably whether Baxter's R&D team can expertly maneuver in biopharmaceuticals. Still, the strategy seems to be working: Baxter is a leader in dialysis and IV solutions, has built a $2.5 billion biotech business, and has seen its market cap soar.