Expected CareFusion synergies
Becton Dickinson (or BD) (BDX) completed its acquisition of CareFusion in March 2017. It expects the deal to result in cost synergies of $325.0 million to $350.0 million by 2018. Due to the two companies’ complementary technologies and product portfolios, the deal was considered a strategic fit for BD and an opportunity for the company to expand its customer base across geographies and markets. BD established itself as the leader in the medication management space following the merger. For details of the deal, read Becton, Dickinson and Company’s Acquisition of CareFusion.
Allscripts Healthcare Solutions (MDRX), McKesson (MCK), and Cerner (CERN) are some of the other major players in the medication management market. Investors interested in gaining exposure to BD can invest in the iShares Russell 1000 Growth (IWF), which has ~0.39% of its total holdings in BD.
Integration progress and cost synergies
BD has been involved in the CareFusion integration since the merger in 2015. The successful implementation of integration initiatives has resulted in consistent margin growth and has expanded its comprehensive product portfolio. The company realized cost synergies of around $170.0 million throughout 2016. It’s on track to achieve around $80.0 million of cost synergies in 2017. BD expects to drive operating margin improvement of approximately 200 basis points to 225 basis points in 2017. Thus, the company is expected to have delivered approximately 500 basis points of operating margin improvement through the last three years ending in 2017.
BD had a target of achieving approximately 250 product registrations outside the United States after the acquisition of CareFusion. BD has around 150 products registered, which it has started selling. About 75 more product approvals are pending with regulatory agencies. BD is on track to submit the rest of the applications. These product registrations are expected to drive significant revenue synergies going forward for the medical segment as well as the entire company. BD stated that its 2017 revenue synergies were driven by international product registrations in its MPS (Medication and Procedural Solutions) business vertical and Dispensing business under its MMS (Medication Management Solutions) business vertical. MPS and MMS have registered revenue growth of about 7.0% year-to-date.
Next, let’s look at BD’s innovation strategy and recent product launches.