Pfizer Acquires Hospira: Biosimilars Gain Full Pharma Acceptance
By Louis Garguilo, Chief Editor, Outsourced Pharma
Just days after Outsourced Pharma’s in-depth, two-part article on Hospira and the role of biosimilars in global healthcare, and in which I asked Hospira’s Sumant Ramachandra whether he foresaw a future where a Pfizer comes to Hospira to work together on biosimilars, we have a definitive answer.
Sumant, senior vice president and chief scientific officer at Hospira, shot me a heads-up email earlier this afternoon that said: “Your article was prescient.” He’s referring to the blockbuster announcement by Pfizer Inc. (NYSE: PFE) and Hospira, Inc. (NYSE: HSP) that they have entered into a definitive merger agreement under which Pfizer will acquire Hospira, the world’s leading provider of injectable drugs and infusion technologies and a global leader in biosimilars, for $90 a share in cash for a total enterprise value of approximately $17 billion. The Boards of Directors of both companies have unanimously approved the merger.
“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.”
According to the press release, this strategic combination adds a growing revenue stream and a platform via an expanded portfolio of sterile injectable pharmaceuticals, composed of Hospira’s broad generic product line as well as its biosimilars portfolio. According to Read, combined with GEP’s branded sterile injectables, this creates a leading global sterile-injectables business.
Moreover, the press release emphasizes that “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.”
In other words, we have the Big Pharma company throwing its full weight behind the expansion of biosimilars. As I started my second article two days ago: “Time to table the discussion on the science of replicating biologics. It’s all about dollars now.”
Hospira’s CEO, F. Michael Ball, said “The Pfizer-Hospira combination is an excellent strategic fit, presenting a unique opportunity to leverage the complementary strengths of our robust portfolios and rich pipelines.” He added: “I want to recognize and thank our 19,000 employees around the world for their tireless efforts to deliver more affordable healthcare solutions, increase patient access to high-quality care and drive sustained growth for our shareholders.”
Sterile injectables, Hospira’s core for all its business lines, including medical device, pharmaceuticals and generics/biosimilars, is a large and growing category. According to the press release, 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 deal is subject to all the customary closing conditions, including regulatory and stockholder approvals.
In the meantime, it would be a good idea to (re)read the two-parter at Outsourced Pharma.