Daughters often better than the mothers, The Edge finds future value Healthcare Spinoffs

By Richard Haimann, Writer, ArzteZeitung:

In the fall it will be ready. Then the pharmaceutical and chemical company Bayer wants to focus only on the areas of health and plant protection. The plastics division is to be split off and floated as an independent company. The name is already certain: Covestro. And investors may be well advised to draw the new shares. Because the stock market newcomer will be the fourth-largest producer in Europe not only plastic behind BASF, LyondellBasell and Evonik. In the past, the share prices of split-off group subsidiaries have – known in financial market jargon spinoff – usually better developed than that of the parent companies.

Share prices of breakaway daughters of the summer of 2012 have increased by 118 per cent by the end of June this year, vs. the parent companies, however, only 61 percent.

For Brian Gillott, strategist at New York-based investment company Jennison Associates: In large corporations division daughters would often be “just dragged along” not performing optimally. “They are the unloved stepchildren,” says Gillott. Were they released into the wild, their businesses could flourish successfully.

“They are now very much crowding the narrow passage to the trading floor,” says Jim Osman, CEO of New York management consulting firm The Edge.

Promising IPO: For Osman favorites among the youngest among spin-offs is Baxalta. “In the coming years their price is likely to double, because Baxalta is one of the leading suppliers of therapeutics for hemophilia and immune diseases,” Osman is convinced. Alone in the hemophilia medication, Baxalta sales last year may increase by eight percent to three billion US dollars.

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