In a filing with the US Securities and Exchange Commission (SEC), Hospira Inc. (HSP) recently announced changes to its guidance for first quarter 2011.
Hospira had issued 2011 revenue guidance, in February 2011, at its fourth quarter conference call. The guidance called for top-line growth in the range of 5%–7% on a constant currency basis. Hospira also mentioned that revenue is expected to decline by 10% sequentially in the first quarter and then improve in the remaining three quarters. The guidance assumed the US launch of the generic version of Sanofi Aventis’ (SNY) Taxotere (oncolytic drug) late in the first quarter of 2011. Two generic competitors were expected to launch their versions at the same time as Hospira, one of them being an authorized generic. The guidance also assumed consistent buying patterns from wholesalers and distributors.
In March 2011, Hospira received clearance from US Food and Drug Administration (FDA) for its generic version of Taxotere. Following approval and subsequent communication with wholesalers, Hospira now believes its generic version of Taxotere will generate greater sales in the first quarter than predicted earlier due to high wholesale demand for the product and the presence of only one generic competitor in the market. Accordingly, revenue is expected to decline 5%–6% sequentially in the first quarter versus previous expectations of a 10% sequential decline. Adjusted earnings are also expected to be in the range of 19% to 21% of its annual adjusted EPS versus the previously anticipated range of 16% to 18% in the first quarter. The full year revenue and earnings guidance remain unchanged.
Our Recommendation
Currently, we have a Neutral recommendation on Hospira, which is supported by a Zacks #3 Rank (short “Hold” rating). We find the company’s acquisition of Javelin Pharmaceuticals and the deal with Durect Corp encouraging. Further, Hospira’s efforts to expand its biosimilar portfolio should bring in additional revenues. We believe that the ongoing issues in Specialty Injectables (SIP) business and pumps are near-term problems, which will be countered by potential new product launches like the generic version of Taxotere, strong SIP portfolio and pipeline products.
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