Good morning, everyone, and thank you for joining us on such short notice for Baxter's investor update. We are very excited to share with you the next phase of Baxter's transformation journey following a comprehensive strategic review we conducted over the last several months. Joining me today are José Almeida, Baxter's Chairman and Chief Executive Officer, and Jay Saccaro , Baxter's Chief Financial Officer. On today's call, we will be discussing Baxter's proposed spin-off of the Renal Care and Acute Therapies global business units, Baxter's planned organizational redesign, and further details surrounding actions to enhance our capital allocation profile, including the review of strategic alternatives involving our BioPharma Solutions or BPS business.
We are excited to share with you the strategic rationale behind our plan to create two independent leading healthcare companies and how we believe the spin will further enable strategic clarity and business simplification to accelerate each company's growth potential and deliver enhanced value to all stakeholders, including shareholders. We will open up the call for Q&A. A supplemental presentation to complement this morning's discussion can be accessed on our website in the Investor Relations section under Events and News.
Let me start our prepared remarks by reminding everyone that this presentation, including comments regarding the proposed spin-off of Baxter's Renal Care and Acute Therapies businesses into a standalone public company, KidneyCo, Baxter's planned organization redesign, and the review of strategic alternatives involving our BPS business, our standalone financial outlook, other business development activities, capital structure, new product development, and other regulatory matters contain forward-looking statements that involve risks and uncertainties. Of course, our actual results could differ materially from our current expectations. Please refer to today's press release and our SEC filings for more detail concerning factors that could cause actual results to differ materially. In addition, on today's call, non-GAAP financial measures will be used to help investors understand Baxter and KidneyCo's anticipated performance and standalone financial outlook, including certain pro forma measures.
A reconciliation of the non-GAAP financial measures being discussed today to the comparable GAAP financial measures, where practical, is included in our release issued this morning and available on our website. Before I turn the call over to Joe, I would like to point out that our prepared remarks will track with the announcement presentation available on our investor relations website. I'd like to turn the call over to Joe?
Thank you, Claire. Good morning, everyone. Today's announcement marks a pivotal moment in Baxter's ongoing transformation journey they started back in 2015 with the spin-off of Baxalta. Beginning on slide four, the strategic actions we have been evaluating over the past several months are aligned to the value creation pillars highlighted on this slide and previously discussed during our Investor Day last year. We believe the actions announced today are consistent with those strategic pillars and are expected to drive incremental value going forward for the patients and customers we serve. Turning to slide five, as described in our press release this morning, we undertook a comprehensive review of our portfolio last year. The proposed actions today reflect the outcome of that review. We believe these actions taken together will enhance operational effectiveness, accelerate innovation for patients, and drive value for shareholders.
I will start first by providing an overview of our proposed spin-off of the Renal Care and Acute Therapies global business units into a standalone independent public company and global innovator in kidney care. We'll shift our discussion to Baxter and share the actions we're taking to simplify our operating model to drive strategic clarity and improve end-to-end operational efficiencies. As part of this effort, we are pursuing strategic alternatives for our BioPharma Solutions business to further enhance focus and improve our capital structure. On slide eight, you can see an overview of Baxter's transformation journey. We've consistently looked for opportunities to optimize our performance, bolster our leading product portfolio, and further our innovation strategies to address evolving customer and patient needs. The strategy we discussed during our Investor Day in 2022 remain intact.
The connected care capabilities that Hillrom brings give us the ability to deliver incremental solutions across the continuum of care. Our combined portfolio of products allows us to help drive improved patient outcomes. Throughout 2022, we've discussed the importance of evaluating our current portfolio and undertaking actions to further optimize our company to deliver value over the long term for all stakeholders. Turning to slide seven, Baxter's multi-year transformation has made us stronger. In face of today's unprecedented pace of shifting macroeconomic factors, we recognize the need to adapt our business model and operations to proactively address these challenges and continue to deliver on our mission and create value for all the stakeholders we serve. As our product portfolio has grown over the years, it has become more challenging to effectively allocate capital to the highest potential opportunities without sacrificing some opportunities in the other businesses.
To address this, we've taken a rigorous approach toward reviewing our portfolio and evaluating potentially strategic moves. As part of this review, we believe spinning off our Renal Care and Acute Therapies businesses will drive enhanced strategic clarity for each of the company's distinct end market customers and allow for focused capital allocation strategies best suited for their respective businesses. Our current operating model, which has served us well previously, does create an element of operational complexity, which became more evident last year when working through the challenges created by the unprecedented volatility in the macro environment. It became clear that our broad geographic footprint impact our response times to these dynamic market conditions. While we've made changes to respond more adeptly, there is additional work to be done. Our current manufacturing supply chain network includes 65 manufacturing facilities around the world.
Over the last couple of years, we've experienced some network inefficiencies as well as absorbing significant inflationary impacts, both of which have meaningfully increased our total cost structure. To address this, we are continuing to accelerate our manufacturing plant footprint rationalization, making sure we lean into the make where you sell, buy where you make philosophy. Furthermore, we are continuing to double down on the digital transformation of operations to increase efficiencies, especially in automation, supply chain resiliency, and digital analytics. Finally, as we've discussed previously, macroeconomic factors have had and are expected to continue to have a profound impact on our business and how we operate. Today's proposed spin announcement will enable Baxter to simplify the way we conduct business. By spinning out Renal Care and Acute Therapies, we will simplify both organizations, allowing each to focus on opportunities to improve operational performance and drive value.
Going forward, we believe Baxter and KidneyCo will be more nimble organizations that are able to respond more effectively to market challenges and thus be better positioned to maximize shareholder value. On slide eight, you can see that the proposed spin-off will result in two leading healthcare companies with a shared heritage of saving and sustaining lives. KidneyCo will be a global innovator in kidney care, which generated approximately $5 billion of revenues in 2021. It will be comprised of our Renal Care business, inclusive of peritoneal dialysis or PD, hemodialysis or HD, and our Acute Therapies business. After giving effect to the proposed spin-off and inclusive of Hillrom as if it had been part of Baxter for the full year, Baxter generated approximately $11 billion of revenue in 2021.
The company's commitment to its mission of saving and sustaining lives and vision to transform healthcare, improving patient outcomes, enhancing workflow efficiency, and enabling cost-effective care remain unchanged. The proposed spin-off is expected to achieve the following objectives: establishing two leading healthcare companies with enhanced strategic clarity in their respective customer end segments. Providing optimized platforms for focused commercial and research and development investments across both companies to help accelerate growth. Creating a catalyst to drive a simplified, more nimble supply chain organization and expand margins. Finally, aligning the capital allocation philosophy to the respective businesses growth profile and strategies. Turning to slide nine. We believe spinning the Renal Care and Acute Therapies businesses successfully positions both companies to drive additional shareholder value.
For KidneyCo, it will create a publicly traded renal-focused healthcare company with a leading product portfolio, a history of innovation in the space, and a broad geographic footprint. The kidney care focus strategy will help unlock incremental growth potential without being encumbered by other competing Baxter priorities. KidneyCo will have a better aligned capital allocation strategy directed towards research and development investments to help bring innovative therapy technologies to market. Through focused investment in commercial execution, KidneyCo should be able to increase PD therapy penetration, drive utilization of Sharesource to help extend time on therapy, and increase expanded hemodialysis therapy penetration in target markets. Baxter is and remains an established healthcare leader with a broad portfolio of core therapy and connected care offerings across the care continuum.
Baxter expects to meaningfully improve margins through the proposed spin-off, which will be used to fund incremental investment in research and development and commercial infrastructure. Baxter will also continue focusing on portfolio optimization with inorganic investments in connected care in core growth vectors. Baxter will utilize the opportunity to simplify our operating model and portfolio to enable additional business transformation opportunities, such as streamlining our manufacturing and distribution network, as well as right-sizing business support functions. On slide 10, you can see KidneyCo already has a robust established portfolio within the durable renal market segments. We're excited to see these portions of the portfolio grow on their own and deliver targeted value to the patients who need the most.
As we discussed earlier, KidneyCo is composed of PD, which generated approximately $2.8 billion in revenue in 2021 across PD cyclers and solutions, as well as digital and technical services offered to customers. HD, which generated approximately $1.1 billion in revenue in 2021 across HD monitor systems, dialyzers, bloodlines, and other ancillaries, as well as sales generated from our renal care clinics outside the U.S. In Acute Therapies, which generated approximately $800 million in revenue in 2021 across continuous renal replacement therapies or CRRT monitor systems, hemofilters, bloodlines, and other organ support therapies and digital health solutions. These businesses currently operate in global dialysis market segments totaling approximately $15 billion and are estimated to collectively grow between 3%-4% on a compound annual basis over the next three years.
The market growth rate and acceleration should be driven by the recovery in underlying patient volumes and the ongoing shift to the home. We expect market growth in the near term to continue to be impacted by reduced end-stage kidney disease or ESKD patient volumes globally due to the excess mortality resulting from COVID-19. Given patient demographics and comorbidities continue to rise, we anticipate patient growth in ESKD and chronic kidney disease segments to return to pre-pandemic levels in the coming years. The Acute Therapies business experienced tremendous growth during the pandemic, and as such, growth for this market is expected to be tempered in the near term as volumes return to more normalized levels. Over time, growth is expected to accelerate back to mid to high single digits, driven by increased therapy adoption.
As you can see on slide 11, the proposed spin-off is expected to enable KidneyCo to accelerate patient-focused research and development innovation pipeline. In the near term, the PD business will continue to launch patient and clinician-focused innovations to build upon the leading Sharesource remote patient management platform. Creating an ecosystem of digital solutions to support both patients and providers is integral to the PD business's long-term strategy to keep patients on therapy longer in the interest of improving patient outcomes. Further launches, such as the next-generation global APD cycler, are designed to help lower total cost of therapy, thus expanding access to automated PD in developed and emerging markets. As a global leader in kidney care, KidneyCo will be well-positioned to maintain an eye toward the evolution of technologies within the artificial kidney space.
Within acute therapies, KidneyCo will be focused on near-term launches such as NEPHROCLEAR, acute kidney injury diagnostics, bringing CRRT fluids to China, sepsis diagnostic and risk assessment technology, and the PMX sepsis filter, to name a few. Key future launches to highlight is PrisMax 3, a new and improved citrate-based ecosystem for optimal delivery of CRRT therapy. KidneyCo's future portfolio decisions will track in lockstep to help ensure it stays at the forefront of healthcare innovation, focusing on device connectivity and optimal therapy delivery for kidney patients across modalities. Turning to slide 12. Through the proposed spin-off, the new kidney care company will be able to fully focus on executing against its well-defined strategic priorities. Within PD, the strategy is centered on increasing PD penetration globally, as well as extending time on therapy for patients.
We believe these two goals can be achieved through accelerating commercial investments to drive PD therapy adoption in the US and abroad. Further, the PD business is focused on delivering additional connected care solutions to grow the Sharesource ecosystem in support of patients and clinicians. Through delivering stronger analytics, enhanced remote management capabilities, and improved workflow efficiencies, Baxter's PD cyclers, powered by Sharesource Remote Patient Management, should continue to lead the way in home-based dialysis treatment. Lastly, within PD, the focus will be on innovating new technologies to simplify therapy and drive greater adoption. This will be advanced through both increased research and development investment in support of internal projects such as the next-gen APD cycler and Home PD Solutions generation system, as well as continued focus on venture opportunities in support of breakthrough technologies.
Within HD, the key strategic objectives are focused on increasing therapy penetration for extended hemodialysis enabled by Theranova and optimizing dialyzer manufacturing capacity to improve the overall margin profile of this business. We also anticipate evaluating strategic X in select geographies as another lever toward improving profitability. Lastly, with Acute Therapies, the emphasis is on introducing additional connected care in core therapy offerings with real-time clinical insights as well as new diagnostic capabilities. CRRT remains an under-penetrated therapy globally, and the COVID-19 pandemic has demonstrated the clinical benefits of blood filtration technology. With increased commercial investments in therapy awareness and evidence generation, we expect to continue to drive therapy adoption in the years to come. KidneyCo will also build upon CRRT by expanding into next-gen blood purification technologies for multi-organ support. Turning to slide 13. We are very optimistic for the future of the proposed standalone kidney care company.
As a global leader in this space, we believe KidneyCo will be set up for success. As an independent, publicly traded company will be able to accelerate value for shareholders and all stakeholders. For KidneyCo's global customers and patients served, the transaction should accelerate investments to increase PD and HDx therapy penetration in existing geographies to reach additional patients. Further, this will provide an opportunity to renew execution of commercial development of target markets to expand the Acute Therapies footprint. Within innovation, this will create a more tailored reinvestment strategy to enable sufficient funding of KidneyCo's R&D priorities and accelerate investments in the next-gen renal R&D projects and enhance focus on delivering more cost-effective solutions. KidneyCo's R&D mindset will evolve from one of investing in sustaining on-market products to one of new product development.
This includes new renal product offerings that will drive differentiation in features to be an innovative leader. Synergies, especially in fluid, electromechanical, and consumables technical capabilities between renal segments can be leveraged to accelerate R&D efforts. Within operations, the proposed spin-off will enable KidneyCo to transform with dedicated renal sites. While the operations disentanglement is expected to be complex, we have a detailed execution plan in place and see great opportunity for both companies in creating dedicated sites over time. With a simplified business focus, the business support functions can also be streamlined. While in the near term, we will see some increases in operating expenses from these synergies, we believe that over time we can recoup those costs with further optimization. We're confident these actions will position the standalone KidneyCo to accelerate revenue growth, improve operating margins, and deliver enhanced value creation over time.
Now I would like to pass it over to Jay to speak to some of the details surrounding the proposed transaction, as well as provide some commentary regarding Baxter's plans to simplify its operating model that we'll begin to implement in parallel with our planning for the proposed spin-off of the Renal Care and Acute Therapies business. Jay?
Thank you, Joe. Good morning, everyone. On slide 14, we want to provide additional details surrounding the structure and timing of the transaction. We expect the spin-off of our Renal Care and Acute Therapies business units into a new independent, publicly traded company to be completed within 12-18 months via a tax-free distribution, at which time newly issued shares of KidneyCo will be issued to Baxter shareholders. At Baxter, we remain committed to maintaining an investment-grade credit profile and capital allocation strategy, and we expect KidneyCo will be appropriately capitalized to provide the business with the liquidity it needs to drive its investment and growth opportunities.
The proposed spin-off is subject to satisfaction of customary conditions, which include consultations with work councils and other employee representative bodies, final approval from Baxter's board of directors, receipt of an IRS ruling or related tax opinion from council, filing and effectiveness of a Form 10 with the SEC, factory completion of related financing arrangements, and receipt of any necessary regulatory approvals. At this point, we're determining KidneyCo's leadership team and expect to make announcements in the coming quarters. We'll provide additional updates on the proposed spin-off in due course. On slide 15, through the actions we've announced today, we believe Baxter will be set up to maximize shareholder value. From a customer perspective, Baxter's streamlined portfolio and commercial organization will better position us to advance our vision to transform healthcare.
From an innovation perspective, Baxter is committed to bringing innovation across the care continuum and across sites of care to help improve patient outcomes, enhance workflow efficiency, and deliver more cost-effective care regardless of where the patient's treated. When it comes to executing on our vision, connected care is at the center of how Baxter plus Hillrom can be greater than the sum of the parts. A simplified business model and expanded operating margin allows for increased R&D investment into high-growth segments, especially in Patient Support Systems, Frontline Care, and Medication Delivery to drive next-generation connected products to improve workflow efficiencies and patient outcomes. Within operations, we'll transform our total cost structure through manufacturing plant disentanglements to create Baxter-specific plans and optimize our distribution network strategy. Coupled with our redesigned structure, we expect to drive improved accountability, simplified reporting, and a more resilient supply chain.
We've spent the last several months assessing our operations across our entire network down to the line level, and we feel confident in our detailed execution plan to deliver a leaner, more efficient, more responsive, and more cost-effective manufacturing footprint for both organizations. Today's announcement will enable us to progress to the implementation phase of this comprehensive plan. This proposed spin-off should lead to accelerated growth from additional investments in sales and marketing and R&D in the near and long term. We expect it will create a path toward improved margins that will position Baxter to create additional shareholder value over time. Turning to slide 16. After the proposed spin-off, Baxter will maintain a leadership presence across its portfolio, starting with pharmaceuticals and BioPharma Solutions, which comprise approximately $3 billion of revenue in 2021.
This is inclusive of our generic injectable pharmaceutical drugs, inhaled anesthetics, and drug compounding in select markets. Our Medication Delivery portfolio generated approximately $2.9 billion in revenue in 2021. This business consists of IV therapies, infusion pumps, administration sets, and drug reconstitution devices to safely deliver medication to patients. Moving on to our legacy Hillrom businesses, Patient Support Systems and Global Surgical Solutions in Frontline Care, which on a pro forma basis generated approximately $3 billion in revenue in 2021. These businesses consisted of connected devices, software, care communication solutions to support patients and clinicians across the care journey. Patient Support Systems and Global Surgical Solutions also include our portfolio of smart beds, surgical tables, and other technologies to support care from the OR to the ICU and to med surg.
Lastly, the Frontline Care business includes integrated patient monitoring and diagnostic technologies to help diagnose, treat, and manage a wide variety of illnesses and diseases, including respiratory therapy, cardiology, vision screening, and physical assessment. We have our Advanced Surgery portfolio of products and devices used in surgical procedures for hemostasis, tissue sealing, and adhesion prevention, and our Clinical Nutrition business, which delivers life-saving parenteral nutrition to critically ill patients. Both businesses generated approximately $1 billion of revenue each during 2021. After giving effect to the proposed spin-off, Baxter will operate in markets totaling more than $100 billion and taken together, estimated to grow approximately 3% on a compound annual basis over the next three years.
These durable end markets are driven by an increased number of patients with complex chronic disorders as well as continued emphasis on digital transformation in a post-pandemic world, leveraging digital solutions to optimize workflow efficiencies in lower cost care settings. Outcome space reimbursement is becoming more prevalent, and as such, we'll continue to focus on ways to differentiate our product portfolio and address customers' evolving needs. The pandemic has brought to light that our integrated supply chain needs to be more robust and further aligned to our specific businesses rather than centralized, which will help improve our overall operational efficiency and effectiveness going forward. Turning to slide 17. Baxter continues to be a pioneer in hospital care and connected devices. The proposed spin-off is expected to accelerate future launches mentioned previously through more focused R&D capital allocation.
During our 2022 investor conference, our various business unit leaders had the opportunity to present our anticipated near-term and future launches, some of which are highlighted on this slide. We won't go into them in detail now. The innovations we're in the process of bringing forward are focused on two main pillars: connected care and core therapies. Within connected care, our efforts are focused on developing devices or software that can connect, communicate, and/or analyze data to help transform healthcare. Within core therapies, we're leveraging our deep history and experience in the space to design products and therapies that can address patient and provider needs. The future is bright. We're on track to deliver numerous differentiated product innovations across our business units. As you can see on slide 18, our business structure allows for a presence across the care continuum.
Baxter has historically been very strong in the hospital setting. We have a broad portfolio offering and strong relationships with our customers who we can continue to learn from and integrate their needs into our product development process. With our portfolio of parenteral nutrition, pharmacy injectables, and respiratory health therapies, we will maintain a presence in the home even after the proposed spin-off of the new kidney care company. The majority of our businesses have a presence today in alternate sites of care, such as primary care and ambulatory surgery centers. With our newly focused portfolio and incremental commercial investment, we see great opportunity to further expand our portfolio across the care continuum. On slide 19, in support of expanding our impact across the care continuum, we will be optimizing our manufacturing and supply chain network to drive efficiencies enterprise-wide.
As we focus on optimization, we're going to implement in-region, for-region manufacturing and fulfillment where our plants are dedicated to our business units. We're also preparing to rationalize our manufacturing and distribution network across the globe to create a nimbler supply chain and to drive cost efficiencies. Second, we'll be focused on streamlining our operations through automation, vertical integration of specific manufacturing capabilities, inventory optimization, and advanced analytics across the integrated supply chain organization. These moves in total will reduce our overall cost structure, will increase operational efficiencies, and will create a more resilient and more robust supply chain organization that can better absorb macroeconomic shocks and respond more quickly. All of this will free up capital to invest in future growth vectors. Moving to slide 20.
As we've discussed, post the announcement of the acquisition of Hillrom, our capital allocation priorities reflect the focus on balancing business investments to accelerate growth and the return of capital to shareholders. Our capital allocation strategy includes first and foremost, repaying our outstanding debt undertaken with the acquisition of Hillrom. As we mentioned, we're exploring strategic alternatives for our BioPharma Solutions business, including a potential sale, which would help accelerate our capital allocation priorities inclusive of debt repayment. Next, we look at M&A and our commitment to successfully integrating Hillrom. A year into the integration, we've reflected on the progress made and the supply challenges we've tackled as a combined organization. While there is more work to be done, we are achieving even greater value capture through cost synergies than initially anticipated.
We're seeing the benefits of bringing together two leading portfolios. There's still significant opportunity to realize revenue synergies through channel expansion of both portfolios, geographic expansion of the legacy Hillrom portfolio, and cross-business R&D initiatives to expand connected care and tech service offerings to our customers. While we remain focused on first achieving our deleveraging commitment, our longer-term M&A strategy includes investments into higher growth end markets. This includes both internal R&D investments, capital expenditures to fund further capacity needs, and strategic inorganic growth opportunities. We believe the proposed spin-off will allow further focus on the investments required to fuel our aspirations. Lastly, we'll continue to return value directly to shareholders through dividends and share repurchases. We plan to reinstate share repurchases over time. Now, I'd like to turn the call back over to Joe for some closing comments. Joe?
Lastly, on slide 21, I will end where I began. Today's announcement is a critical moment in Baxter's transformation journey. We are aware of the challenges we have faced since the start of the pandemic, and today we are announcing strategic actions designed to meaningfully enhance operational effectiveness, drive towards improved performance, accelerate innovation, and create additional value for all stakeholders. The proposed spin-off of our Renal Care and Acute Therapies businesses will create two leading healthcare companies with robust product portfolios, strong research and development pipelines, and well-defined strategic objectives to execute upon going forward. It is expected to accelerate value creation potential for both companies, and we believe the related benefits for all stakeholders are multifold. Our plans to simplify Baxter's operating model will enable greater strategic clarity and faster decision-making. We believe they will drive improved global accountability, reporting simplicity, and a more resilient supply chain organization.
Through greater alignment of our manufacturing footprint with each business, we believe we'll be able to deliver better performance and drive margin improvement over time. We plan to provide additional detail on these efforts and associated benefits in the coming quarters. Taken together, these actions are expected to better position Baxter to make strategic investments to accelerate our vision and deliver differentiated value to all stakeholders with our unique combination of products, therapies, and connected care platforms. Finally, given a number of factors, including today's announcement, we plan to provide additional 2023 commentary as part of our fourth quarter 2022 earnings conference call next month. We can now open up the call for your questions.
Thank you. We will now begin the question and answer session. If you have a question, please press star, then the number one on your touch tone phone. If you're using a speakerphone, please lift the handset to ask your question. That we may be respectful of everyone's time, please limit your comments to one question with one follow-up question if necessary. We appreciate everyone's patience and would like to provide as many of you as possible the opportunity to ask a question. We will pause for a moment while the list is being compiled. Your first question comes from the line of Vijay Kumar from Evercore ISI. Your line is open.
Hey, guys. Thanks for taking my question, happy New Year to Joe and Jay, both of you. A lot of details this morning, but maybe if you could just take a step back, Joe. You know, when I go back to the 2022 analyst day, the WAMGR was 2%-4%. Looks like renal WAMGR was north of 4%. If I try to do the new Baxter, it was somewhere in the 2%-4% range. It looks like those WAMGRs have come down. What is the implication for the prior Baxter outlook, right, when you had 4%-5% for the combined company? Has that changed because now it looks like WAMGRs have gone down, and any reason why that should change?
Given these announcements, how can revenues accelerate?
Vijay, Happy New Year to you, and thank you for the question. There are a few things that have changed. We had expected a fast recovery in the Renal Care. Overall, the PD and the HD as well were affected by the mortality and the rebound of the dialysis business is lower. It doesn't mean that we will not rebound to the levels that we had predicted. It's just a time delay of probably 1 or 2, 18 months when we see that curve coming back to accelerate. If you look at the end period of the CAGR, you'll see an acceleration of that uptake in demand to go to what we had predicted.
I wanna underscore that the acute Renal Care has significantly changed in the short term because the usage of our equipment in ICUs to treat COVID patients had been exacerbated in the years of 2021 and came down in 2022. We're gonna see that number coming down probably even further, bit and coming back towards the end of the period. One of the things that we highlight now when we look at CRRT or acute Renal therapies is that that business has increased penetration. We have sold extremely well equipment in the marketplace, and the use of that technology continues to be underutilized. We see that as a great business for the Renal portfolio. It is just a timing phase in the Renal business.
Understood. Then maybe, Jay, one for you on the numbers here. What is the margin profile for these two, you know, Kidney Care versus Baxter? I think in the past, assuming these strategic actions hadn't happened, I think we were looking at 4% organic and 75 basis points of margin expansion. Are those still valid, Jay, or has that changed?
Sure. Well, let's talk a little bit first about the overall margin profile of the two businesses over time, and then we can talk about 2023 guidance and things of that nature, which we're gonna be very limited in terms of our commentary today. From a margin perspective, the KidneyCo's operating margin is well below the overall company average, and the residual Baxter or the NewCo, Baxter operating margin is above the whole co company average. It's interesting. If you look at the KidneyCo, one of the big drags is HD. We have a nice margin in the Acute business. And then the PD business, because of fairly substantial logistics costs, has a lower margin profile.
Taken together, that is a drag on the company's margin today. As we think about KidneyCo, one of the very interesting opportunities for that business will be to accelerate margin improvements through optimization of logistics, optimization of the manufacturing network. We started to put all of these plans together, which becomes a very exciting story for this new kidney company. It really becomes a continued execution on the top line, with some innovation coupled with a margin transformation. Now, on the residual Baxter portion, what happens is the margin is above today's corporate average. What gets very interesting is you have opportunity to invest further in areas like connected care investments and other digital and other R&D investments to accelerate growth.
So it really is, allows both companies to strategically focus on some critical priorities. Now, as it relates to 2023 guidance, 'cause Vijay, the numbers that you were quoting relate to 2023. Look, given a number of factors, you know, we're gonna give guidance on the earnings call in February. We will also report our financials for the first time in the earnings call in February. I think, you know, for us, we've learned a lot over the last year, to be clear. Given the rapidly changing market, we feel that it's prudent to wait as long as possible to watch how the markets evolve over time before providing the refreshed outlook for 2023. As we've discussed previously, 2022 was extremely challenging.
From a macro environment standpoint, we've seen challenges over the last couple of years. Even on the customer demand side, we've seen a lot of volatility. Our expectation is that these factors mitigate, but they don't go away immediately in 2023. We're gonna watch this very carefully in the coming weeks before we finalize guidance. I think, you know, like I said, we wanna take all of the learnings from 2022. I think it's important to underscore, you know, some of the commentary from the presentation. At the end of the day, I think the measures that we've described here, and the measures that we're putting in place to improve near-term performance really set the company up for success long term.
I'm incredibly excited about the strategic focus that each of these two businesses will have. One on kidney disease, another on hospital and med tech innovation. I mean, it's incredibly exciting, and I think we set them both up for success on a sustained basis with the actions that we've outlined. That's, we'll talk more about that next week at JP Morgan in terms of our excitement around these two businesses. As I said, in February, we'll talk about earnings guidance.
Understood. Thanks, guys. I'll let others jump in.
Your next question comes from the line of Matt Miksic from Barclays. Your line is open.
Thanks so much for taking the question and congrats on all the work that must have went into this. Just I have one question on, if you could speak to perhaps the decision to include some of the sort of faster growing, more connected care assets of renal with the business, PD in particular and its ties to Sharesource. Then I have one follow-up.
Yeah, Matt, both Baxter and KidneyCo will have a strong position connected care. The Sharesource and PD business do not necessarily represent Baxter's connected care strategy. That is one of the prongs that we have in this wide range strategy that cuts across most of our businesses. We also are expected in both business to make investments in the connected care technologies and as a key differentiator for us. Also, when we think about the renal business in general, those assets are interconnected in many different levels, starting from the commercial point of view. The nephrologist is your call point across the globe, is a therapy that's performed in clinics and in the home.
In the home is specific to peritoneal dialysis and hemodialysis for the home, that we do not have specific technology addressing that. We believe PD is a good entry-level technology for the home treatment of the patients, and we have demonstrated that. These assets together make sense from the call point on the, on the commercial side. On the manufacturing side, we're gonna work very hard to disentangle. We have a very comprehensive plan. We spent a significant amount of time doing this, is to disentangle the assets from the infusion systems that are sometimes made in the same facilities. We have a pretty solid plan. We'll be able to do this in a period of 2-4 years, max, to be able to separate mostly these assets. That is the part that once you do it, makes much more sense.
For Renal to have its own future, we don't wanna have an entangled assets at the manufacturing side. Putting them together as a business, if we separated and picked technologies not to include in this, would not make the business complete, would not make a business that could compete with current four players for our renal technology players on the market. We've got to put together a company that must win, that can win, and all these assets together will get us there in the renal space.
That's super helpful. Just one follow-up on You've mentioned a couple of times, the, you know, the pursuit of strategic alternatives for pharma and BioPharma Solutions. Obviously, that's been a big part of Baxter for a long time, particularly in the solutions business. You know, and you're not, you're not really to give details now, but just in this context of thinking about growth and what that does to WAMGR and sort of the core Baxter growth over the longer term, assuming that you do follow through on a, on a decision there to sell it or spin it. Can you talk a little bit about how growth comes together without that asset? You know, what the profile might look like, you know, the puts and takes.
Yes. The BPS business is a very particular business that is very different than everything that Baxter does, including our pharmaceutical business. That business, we use as in some cases, prefilled syringes, mostly vials. In 2 different facilities, we have tremendous technology for oncology, for oncolytics in our plant in Germany. We were a part of the vaccine, the COVID vaccine fill and finish in the U.S., that, hence, is what depressed our growth in 2022. It probably going into 2023 because that volume will eventually disappear.
That is a business that has growth between 3% and 6%. The reason is 3%-6% because it varies depending upon the year and how many molecules were contracted to fill finish. It is a very, very good business that we believe in the right strategic hands can actually thrive even further than it's thriving in Baxter. Requires different level of investment, and I believe that, we look at the strategic options, is a tremendous valuable business for the right strategic partner. Having that in mind, we believe that is a great position for Baxter to be in, to be able to bring some capital in-house and allocate the capital towards the payment, the repayment of our debt and reduction of interest expenses and other things that go along with that.
It's a specific play on capital structure for the company. Very different than the Renal spin-off and the KidneyCo spin-off that is much more focused on the strategy and future allocation of capital for businesses that are spectacularly positioned to perform and thrive independently.
Understood. Thanks so much.
Your next question comes from the line of Lawrence Biegelsen from Wells Fargo. Your line is open.
Good morning. Thanks for taking the questions. Happy New Year, and congratulations on the news today. Jay, just one for you, Jay, one for you, Joe. Just starting with you, Jay, can you talk a little bit about the earnings dilution from the spin, you know, stand-up costs? Should we just look at, you know, historical spins? There's obviously been a lot. The disintegration that you talked about with PD and IV solutions, and I had one follow-up.
Yeah, Larry, great question. We think over time both companies have a real pathway to create value for shareholders, but there are gonna be some short-term one-time costs and some dyssynergies associated with the project. As part of the detailed assessment that we went through, we outlined and identified some of what those costs look like. We have a fairly good sense of what it's going to take to stand up these companies for success. In the process, we've looked at precedent transactions. We also looked at our own experience in terms of what it took to set up BioScience for success, along with the residual Baxter at that time. I think we have a pretty good handle on it.
What I can tell you at this point is that our expectations of one-time and stranded costs are, largely speaking, in line with other precedent spins. The one-time costs are a little bit on the higher end of precedents, in part because of what you mentioned, the co-mingling of the IV and PD, from a manufacturing and from a supply chain standpoint. That's something that we've had to address. There's a little bit of incremental one-time costs that you might not otherwise see in spins. Generally speaking, we're in line with precedent transactions. What I will tell you is previously I thought that the IV and PD shared nature of manufacturing and supply chain would be a bigger barrier.
With the work that we've been doing in terms of automation and the regionalization of our manufacturing approach, those were real enablers in terms of our ability to split up the manufacturing in a very effective way. We talked about months of work. I think probably the largest piece of work is how do we design a supply chain that allows both companies to win and respond to a highly dynamic macro environment in a cost-effective manner. I'm really proud of the work that the team did there. That's something that, you know, I think has been crucial.
That's super helpful. Joe, we've gotten a lot of questions from investors on your plans. You know, can you talk about your plans a little bit, Joe, and any color on Giuseppe's resignation, which was, you know, a bit of a surprise for me to see this morning. Thank you.
Larry, our restructuring plans are pretty comprehensive in many areas. They include simplification of how our company is gonna structure itself in the future and then also our plans rationalization. I think... Oh, you're talking about my plans of retirement.
Yeah, yeah.
Sorry, Larry. Usually I'm not dealing with this question often. I have no plans for retirement. This is a big moment for Baxter. Actually, the way I start answering the question was quite appropriate because there's significant restructuring we're doing in the company. We have significant changes in our potentially footprint of our manufacturing with separation of the Renal business, the spin of the Renal business. All of this requires significant amount of energy. I absolutely have tremendous energy behind this. I was the person who started this process six months ago. I was the genesis of this, not consultants or anybody else. It was me and the board.
We sat down and how we think about Baxter in the future, how we bring Baxter to the next level, how do we disentangle some of the complexities, how we make Baxter a more connected care company, how we take advantage of the assets that we have and how we maximize shareholder value. This whole thing is a big driver of my enthusiasm to stay at Baxter and get the job done here. In terms of Giuseppe's resignation, Giuseppe decided to move to a different opportunity. You know, the fact that we regret that Giuseppe is leaving, is important note.
He did work 15 years for Baxter, did a great job here. We were sorry to see him go. We have a very strong bench in the company. Our restructuring will provide us with the ability actually to move even further into this bench and bring the right talent to the surface. I'm confident in the talent of Baxter is that it's not made by one or two people, but it's made of a group of people highly committed to the success of the company.
All right. Thank you, Joe.
Your final question comes from the line of Matt Taylor from Jefferies. Your line is open.
Hi, guys. Thanks for taking the question. Can you hear me okay?
Yeah, we can.
Yes, we can.
Great. Great. I had kind of two follow-ups. One is I just wanted to clarify on BJ's question about WAMGR. You know, for RemainCo, I think the calculated WAMGR from the 22 analysts, they would have been 3%-4%. You know, now you're talking more about 3%. I know you addressed the renal side of things, has anything changed with the RemainCo businesses that would change the WAMGR more towards 3% versus 3%-4% over the next 3 years?
Matt, in general, I would say not much has changed. I'd say the one business that we are likely going to see kinda come down slightly in the near term is what we call our Patient Support Systems business because as we look at just the overall capital environment. In general, the rest of the businesses for on the Baxter side relative to what we had presented at our Investor Day earlier last year in May, have stayed relatively the same.
Okay. Okay. Then Jay, you know, you talked about significant margin opportunities at KidneyCo and at RemainCo. I guess I'm curious if you could frame for us just the rate of change of those margin improvements going forward. Is it gonna be meaningfully different at one or the other? Maybe, you know, has one or the other been hit harder by some of the inflation issues, et cetera, that could unwind and actually help their margins grow faster in the future?
Sure. What I will say about yeah, and I don't wanna get into too much detail at this stage because there's a lot of work that we're gonna undertake before we introduce you to the two new companies in detail. What I will tell you is the margin at KidneyCo is well below the NewCo, New Baxter Co. As such, it's been heavily impacted by logistics costs, by resin costs, by freight costs, and all of those factors have contributed to the low margin of KidneyCo. I do believe that relatively speaking, there is more opportunity on the KidneyCo side, whereas on the NewCo side, it is more about investments to accelerate growth, which become really exciting.
I think it's gonna be a little bit of a different profile in terms of what the two are trying to achieve. Clearly, there's gonna be more opportunity in terms of margin expansion on KidneyCo over time.
Great. Thank you. Thank you very much.
Ladies and gentlemen, this concludes today's conference call with Baxter International. Thank you for your participation. You may now disconnect.