Covidien ticks toward pharma spinoff

Covidien ($COV) is just about ready to spin out its drug business, Mallinckrodt, filing with the SEC and planning to split into two publicly traded companies next quarter.

Mallinckrodt specializes in branded generics, active pharmaceutical ingredients and diagnostic imaging agents, netting $2.1 billion in sales last year, according to the Form 10. Once the split is complete, Mallinckrodt will operate in two segments: specialty pharmaceuticals, which will develop, manufacture and sell the company's drug portfolio; and global medical imaging, which will handle all of Mallinckrodt's agents.

Once the breakup is final, Covidien will retain all of its medical device products, and splitting the two will help the company double down on its core business, CEO José Almeida said in a letter to shareholders.

"As independent, publicly owned companies, Covidien and Mallinckrodt each will be able to pursue and focus on its own strategic and operational plans, including setting an optimal level of investment in research and development projects and in the operation and expansion of its businesses and creating a business-appropriate capital structure," Almeida wrote.

Covidien's shareholders have already approved the split, and the deal is now in the hands of the SEC and IRS, who must grant their approval. After that, Mallinckrodt will apply for a New York Stock Exchange listing under the symbol $MNK, the company said.

Covidien's mitosis comes amid something of a trend in the life sciences world. Abbott Laboratories ($ABT) completed its breakup at the start of the year, launching AbbVie ($ABBV) for drug development and retaining devices and diagnostics under the original moniker. Meanwhile, Pfizer ($PFE) CEO Ian Read said the drug giant is exploring a similar setup, but not any time soon.

- read the Form 10
- check out the letter to investors