The pharmaceutical Pfizer giant is purchasing the injectable drugmaker Hospira for a reported $15 billion. This represents a new area for Pfizer.
Major drugs company Pfizer has agreed to buy Illinois-based Hospira, which is a major manufacturer of injectable drugs, infusion technologies, and biosimilars, for $90 a share. This represents the first major acquisition for Pfizer after its attempt to buy AstraZeneca for more than $100 million was halted last year, amid concerns expressed by the U.K. government. With this aborted deal, the U.S. drugmaker had wanted to use acquisition of AstraZeneca to shift tax base to Britain, a move known as tax inversion.
The deal, which is expected to be completed in the second half of 2015, comes as some of Pfizer’s top-selling drugs are set to lose patent protection. Thus the movement into a new arena is seen as a strategic move by Pfizer. Hospira is the world’s largest producer of generic injectable pharmaceuticals,manufacturing generic acute-care and oncology injectables, as well as integrated infusion therapy and medication management systems.
“The proposed acquisition of Hospira demonstrates our commitment to prudently deploy capital to create shareholder value and deliver incremental revenue and EPS growth in the near-term,” said Ian Read, Chairman and Chief Executive Officer, Pfizer. “In addition, Hospira’s business aligns well with our new commercial structure and is an excellent strategic fit for our Global Established Pharmaceutical business, which will benefit from a significantly enhanced product portfolio in growing markets. Coupled with Pfizer’s global reach, Hospira is expected to drive greater sustainability for our Global Established Pharmaceutical business over the long term.”
This strategically complementary combination will add a growing revenue stream and a platform for growth for Pfizer’s GEP business. The expanded portfolio of sterile injectable pharmaceuticals, composed of Hospira’s broad generic sterile injectables product line, including acute care and oncology injectables, with a number of differentiated presentations, as well as its biosimilars portfolio, combined with GEP’s branded sterile injectables, including anti-infectives, anti-inflammatories and cytotoxics, will create a leading global sterile injectables business. The combination also reinforces GEP’s growth strategy to build a broad portfolio of biosimilars in Pfizer’s therapeutic areas of strength through the addition of Hospira’s portfolio that includes several marketed biosimilars. Pfizer will also use its existing commercial capabilities, global scale, scientific expertise and world class development capabilities to significantly expand the reach of Hospira’s products, which are currently distributed primarily in the United States, to Europe and key emerging markets, where GEP has a significant presence.
“The addition of Hospira has the potential to fundamentally improve the growth trajectory of the Global Established Pharmaceutical business, vault it into a leadership position in the large and growing off-patent sterile injectables marketplace by combining the specialized talent and capabilities of both companies, including enhanced manufacturing, and advance its goal to be among the world’s most preeminent biosimilars providers,” said John Young, group president, Pfizer Global Established Pharmaceutical business. “We’re excited to combine Hospira’s expertise and key talent with that of Pfizer to create a leading global business that will deliver an even broader portfolio of important and life-saving sterile injectable medicines to patients around the world.”
Both sterile injectables and biosimilars are large and growing categories. The global marketplace value for generic sterile injectables is estimated to be $70 billion in 2020. The global marketplace for biosimilars is estimated to be approximately $20 billion in 2020.
Pfizer expects to finance the transaction through a combination of existing cash and new debt, with approximately two-thirds of the value financed from cash and one-third from debt. In addition, Pfizer anticipates the transaction to deliver $800 million in annual cost savings by 2018.
The transaction is subject to customary closing conditions, including regulatory approvals in several jurisdictions and approval of Hospira’s shareholders, and is expected to close in the second half of 2015.