In an intriguing move, Becton Dickinson (BD) has announced that it will spin off or sell its life sciences and diagnostics businesses to instead focus more closely on medical technology.
BD’s future plans will play out over the rest of 2025, noted senior analyst Robbie Marcus, who monitors the company for investment bank J.P. Morgan. Marcus provided Lab Manager with a recent investor research report about BD.
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“[We] have a positive view on the proposed separation of the biosciences and diagnostic systems businesses, although details are set to remain limited until later this year,” Marcus wrote in his report.
BD is a familiar vendor to clinical and life sciences laboratories across the world, and keen lab leaders across all industries will note the reasons for the upcoming change.
What’s behind BD’s future plans to sell its life sciences business?
Poking through the hyperbole in BD’s press release about how the spinoff will lead to value creation and innovation, it’s reasonable to assume the following business factors are at play:
Strong opportunities in medical technology
Clearly, BD sees more promising growth in medtech than it does in life sciences or diagnostics going forward. The overall medtech market faces challenges, including Medicare and private insurance reimbursement concerns. Yet it also brings in more than half a trillion dollars in annual earnings, noted accounting and consulting firm Ernst & Young in its “Pulse of the MedTech Industry Report 2024.”
“While the industry chalked up another year of growth in 2023, with revenues rising to $587.6 billion, the 3.8 percent annual growth rate was the sector’s lowest since 2017,” the report stated.
AI may provide a turning point for medtech. The Food and Drug Administration approved 392 AI-enabled medical devices in just 2023 and 2024, compared to 600 such devices in the previous 10 years.
“AI can offer expanded data capture and functionality, potentially helping medtechs differentiate and enhance their product and service offerings and achieve and sustain stronger top-line growth,” Ernst and Young observed.
BD's emphasis on medtech means less attention on diagnostics, so a spinoff of the latter business makes sense, says Gareth Jones, senior market analyst at Signify Research.
“Benefits should accrue to both sides of a transaction,” Jones notes. “For the departing company, the freedom to chart its own course in the life sciences and research industries. For BD, opportunities to reduce debt, reward existing shareholders with dividends or share buybacks, or continue to broaden its core business areas through increased R&D spend and selective M&A.”
BD wants to spend money on high-growth deals in the medtech sector, said CEO Thomas Polen, during an investors call on February 6, 2025. Polen highlighted the company’s interventional division, which develops devices to treat chronic conditions such as urinary incontinence, peripheral vascular disease, cancer, and hernias.
“We think our interventional segment … has a number of tremendous market opportunities in it,” he said.
The remaining BD units after the spinoff—which will include interventional, medical delivery, specimen management, advanced patient monitoring, and biopharma systems—will have $17.8 billion in revenue, based on 2024 earnings.
Money needed to pursue growth
As BD pushes further into medtech, it will need cash to do so—whether to invest in new technologies or fund mergers and acquisitions (M&A). The company has spent tens of billions during the last decade in this pursuit.
“[BD] has deployed about $43 billion of capital towards M&A over the last 10 years,” Pollen told investors. Of that amount, “99.5 percent-plus of that has gone towards building our position on the medtech side.”
Shedding its diagnostics and life sciences divisions will bring in billions in new capital for BD, as its life sciences division earned $5.2 billion in 2024, according to company earnings reports.
As a comparison, diagnostics manufacturer Quidel acquired Ortho Clinical in 2021 for $6 billion. Ortho pulled in $2 billion in revenue that year prior to the purchase.
“Speculation seems to be that [BD] will sell the spin off its diagnostics and life science units and use that cash to boost the new BD medtech innovation company,” wrote market researcher Bruce Carlson, who publishes the Eye on IVD newsletter on LinkedIn.
Marcus, in his report to J.P. Morgan investors, mentioned $18 billion as a potential target price for any deal as part of BD’s future plans. The sale or spinoff is not expected to happen until 2026.
Weakened diagnostics market, especially COVID-19 tests
For many healthcare vendors, diagnostic revenue collapsed since the pandemic ended because COVID-19 testing demand dropped off quicker than expected. BD did not report COVID-19-only diagnostic testing revenue for 2024, but here are numbers from prior years:
- FY 2021—$1.95 billion
- FY 2022—$511 million
- FY 2023—$73 million
As the figures indicate, from 2021 to 2023, COVID-19-only testing revenue decreased 96 percent at BD. Other diagnostics manufacturers also experienced significant drops in that time frame.
Two valuable takeaways for laboratories
For lab leaders, there are two key takeaways regarding BD’s future plans:
- The company’s upcoming focus on medical technology should prompt laboratory managers to investigate how their own work might integrate with medtech. Doing so may uncover opportunities for collaboration with new partners and increased revenue. This suggestion does not only apply to medical labs.
- It will be important for labs to monitor whether other healthcare vendors divest of diagnostic and life science businesses. Any pattern in this regard would signify a long-term shift in the market and, depending on who steps in to buy these diagnostic and life sciences divisions, could foretell market consolidation.
Further details will likely come from BD in its Q2 2025 earnings report in May.
