HSP

We recently upgraded Hospira Inc. (HSP) to Neutral from Underperform following better-than-expected first quarter 2011 results.

Hospira’s first quarter earnings of 93 cents per share were well above the Zacks Consensus Estimate of 79 cents. Earnings benefited from strong US sales of the generic version Sanofi Aventis’ (SNY) Taxotere, which was launched in March 2011, reversing the disappointing performance of the prior quarter. It captured 30-35% market share within a few weeks of launch due to limited competition with only one authorized generic version of the drug present in the market at that time. Hospira hopes to maintain a market share of 25-30% going forward. Besides launching generic Taxotere in the US, Hospira has launched the product in 15 EU countries and Australia and has received approval for a Canadian launch. Hospira’s generic version of Eli Lilly’s (LLY) Gemzar did well in the quarter, thereby boosting the performance of the Specialty Injectable Pharmaceuticals (SIP) segment.

Moreover, the fourth quarter 2010 results were adversely affected by very high backorders in the SIP segment, which resulted in supply shortages. A 30% decline in backorders from 2010 levels benefited first quarter performance, a trend that is expected to continue further.

To top favorable trends, Hospira boasts of a strong pipeline. The company expects to launch more than 17 generic drugs by 2012, a little more than 50% of them in 2011. Hospira has already launched a generic version of Taxotere in the US in March 2011 and hopes to launch a solution presentation of its generic version of Gemzar in the fourth quarter of 2011. Hospira also has a strong biosimilars pipeline with 11 compounds, which have total branded value of $28 billion. The strong pipeline should boost Hospira’s top-line growth in the long term.

 
HOSPIRA INC (HSP): Free Stock Analysis Report
 
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