Hospira Inc. (HSP) primarily provided an insight regarding its way forward at its Investor Day on Dec 5, 2013 apart from providing an update on its current operations. Hospira stated that it is the market leader in the generic injectables market commanding a 34% share in the $9 billion market.
The company further stated that it is highly optimistic about its Specialty Injectable Pharmaceuticals (SIP) segment, the biggest contributor to the company’s top line. The SIP pipeline had 77 molecules, as of Sep 30, 2013, having significant commercial potential.
Management also said that Hospira is one of the leading players in the global Medication Management Systems (MMS) commanding a share of 25% in the $2 billion market. We remind investors that in May 2013, Hospira announced a global strategy regarding its devices portfolio. Through this strategy, Hospira aims to modernize and streamline its device portfolio in order to drive growth and serve customers in a better manner.
Under the program, the company intends to remove its relatively old pump technology from the market and bring in customer replacement programs over the next few years. Moreover, Hospira intends to focus on developing next-generation pump technology. The company will focus on strengthening its global device quality system to facilitate growth.
We believe that this strategy will enable Hospira to sustain long-term growth. Due to the increased investments aimed primarily at expansion and modernization, capital spending at Hospira in the 2014-2018 time period is expected in the range of $1.7-$2 billion.
Hospira also threw light on its efforts to grow in the lucrative biosimilars market. Hospira boasts of a strong biosimilars pipeline. Biosimilars, which are generic versions of biologic drugs, are expected to be a significant growth driver in the generics industry going forward. Hospira stated that currently the global biologics market is worth approximately $127 billion and more than $67 billion of it is expected to face competition from biosimilars by 2020. Hospira also stated that the value of a biologic going off patent in the U.S. or EU will rise with time.
In Sep 2013, the European Commission approved Inflectra, the biosimilar version of Johnson & Johnson (JNJ) and Merck & Co. Inc.’s (MRK) blockbuster drug Remicade. This is the third biosimilar marketed by Hospira in the EU. The biosimilar market in the U.S. is expected in the range of $6-$13 billion by 2020 resulting in massive cost savings.
Hospira stated that the compounded annual growth rate (CAGR) for its net sales over the 2013-2018 time period is expected in the mid to high single digit range. Biosimilars and generics are expected to account for more than half of the top-line growth at Hospira over the time period.
Geographically, the CAGR for net sales over the same time period are mid to high single digits for Americas, low teens for the Europe, Middle East and Africa (EMEA) region and high single digits for the Asia-Pacific region. The CAGR for adjusted earnings per share at Hospira over 2013-2018 is projected in the mid to high teens range. Hospira said that tax rates will rise with time driven by changes in the geographical earnings mix.
Hospira expects 2014 adjusted earnings in the range of $2.10-$2.25 per share. The Zacks Consensus Estimate for 2014 stands at $2.11 per share, towards the lower end of the management’s projected range.
Hospira carries a Zacks Rank #3 (Hold). Advaxis, Inc. (ADXS) is a better ranked stock in the sector. Advaxis carries a Zacks Rank #2 (Buy).
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