Karen Andersen: Baxter is a diversified health-care operation. They really operate in several different types of businesses. First, there is the bioscience business, which is largely based on hemophilia and plasma products. There are also dialysis products as well as kind of a diverse array of medical products that are targeted at hospitals.
We assigned the company a wide moat rating and this is tied to a combination of intangible assets as well as cost advantages. The intangible assets are really linked to more the bioscience side of the story and their innovative hemophilia pipeline. Cost advantages come from their plasma business, which is really a business that's very difficult for companies to compete in globally just because of the expenses and the difficulty of manufacturing. [There are also] cost advantages from the medical products that are more hospital-focused. Generally speaking, Baxter is a global leader in a lot of the businesses that it operates in. So they have a lot of scale advantages.
In terms of valuation, [we assign Baxter a fair value estimate of] $84. It currently looks slightly undervalued. The company also recently announced a spin-off--that's going to be taking place in 2015--of its bioscience business. We have a very positive view on this.
Baxter is really, as I've said, a diversified company, but it really operates in two very different business segments. The bioscience business is going to be spun off, and I think that's really going to boost growth and their ability to invest in innovation. And on the medical products side, Baxter is really going to turn into more of a hospital-focused company that will have greater negotiating leverage and just greater focus.