Hospira Back to Neutral - Analyst Blog
28 Fevereiro 2012 - 1:10PM
Zacks
We
recently upgraded our rating on Hospira, Inc.
(HSP) to Neutral from
Underperform with a target price of $38.00 following appraisal of
the fourth quarter and full year 2011 results.
Hospira’s fourth quarter 2011 adjusted earnings of 51 cents per
share fell short of the year-ago adjusted earnings by 26 cents.
Earnings were hurt by the slowdown in production at the company’s
facility in Rocky Mountain, North Carolina, which accounts for
approximately 25% of the overall net sales.
Earnings, however, got the better of the Zacks Consensus
Estimate of 45 cents due to higher-than-forecast top-line results.
The company came up with revenues of $1.0 billion, up 2.2% over the
prior-year quarter and also ahead of the Zacks Consensus Estimate
of $954 million. The year-over-year improvement was driven by
strong performance of the Specialty Injectable Pharmaceuticals
(SIP) segment despite production slowdown at the Rocky Mountain
facility.
(Read
our full coverage of the earnings report at: Hospira Tops; Quality Issues
Linger).
Hospira
is facing continued manufacturing problems at its Rocky Mountain
facility for which it received a warning letter from the US Food
& Drug Administration in April 2010. The remediation efforts
undertaken in response to the FDA warning letter have resulted in
additional costs for quality control, lost sales, inventory loss
and lower service levels.
Rocky Mountain is currently
operating at 60%–70% of
normalized levels. Moreover, the Symbiq and Plum pump issues are matters of
concern. The company is aggressively
working to address the problem areas. However, at the fourth
quarter conference call, management announced that it is
progressing well with its remediation efforts. Management has also
ruled out a consent decree for the Rocky Mountain
facility.
Overall,
we like the long-term prospects of Hospira as a leader in the
attractive generic injectables space. The top line at the company
is gaining steadily, especially by the SIP segment.
Growth prospects at the
segment appear promising due to increased demand for core generic
injectable drugs. The segment was bolstered by new drug launches,
particularly the generic versions of oncology drugs like Sanofi Aventis’ (SNY) Taxotere and Eli Lilly’s
(LLY) Gemzar. These
products, particularly Taxotere, are driving solid top-line
performance at the SIP segment.
Moreover, Hospira
is fast working on expanding its biosimilar portfolio. It already
markets two biosimilars in Europe and Australia --
Nivestim, a
biosimilar of Amgen’s (AMGN) Neupogen and Retacrit, a
biosimilar of Johnson and Johnson’s
(JNJ) Eprex.
Moreover, the entry of biosimilars in the US, widely anticipated in
2014, would open a new and significant avenue of growth for
pharmaceutical companies.
The FDA
has already issued biosimilars draft guidance. Hospira is thus fast
working on expanding its biosimilar portfolio. Hospira began a
phase III trial in the US for Retacrit in February
2012, results from which are expected in
2013.
Further, Hospira has a strong pipeline,
which could drive its
top-line growth in the long term. As of December 31, 2011, Hospira's
generic pharmaceutical pipeline consisted of 73 products with a
combined $17 billion in local market value. Moreover, Hospira boasts of a strong
biosimilars pipeline with 11 compounds in development with a global
market value of $40 billion. The strong pipeline should boost
Hospira’s top-line growth in the long term.
We
believe the company’s top and bottom line will rebound once the
ongoing manufacturing issues get resolved. We thus revert back to a
Neutral rating on Hospira.
AMGEN INC (AMGN): Free Stock Analysis Report
HOSPIRA INC (HSP): Free Stock Analysis Report
JOHNSON & JOHNS (JNJ): Free Stock Analysis Report
LILLY ELI & CO (LLY): Free Stock Analysis Report
SANOFI-AVENTIS (SNY): Free Stock Analysis Report
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