Yesterday, Hospira (HSP) made a declaration regarding selling its critical care product line to ICU Medical (ICUI) in an all-cash deal worth $35 million. The transaction is expected to be completed during the third quarter of 2009. Hospira has also entered into a transitional service agreement with ICU Medical for up to 18 months to facilitate the transition process.

Hospira went ahead with divesting its critical care product line following the non-strategic assets rationalizing plan that the company had announced this May under “Project Fuel.” “Project Fuel” aims to improve Hospira’s operational efficiency by optimizing product offerings, rationalizing non-strategic assets and streamlining organizational structure of the company.

The company expects to incur a pre-tax charge of $140-$160 million for this purpose, of which almost $90-$100 million will be incurred this year. Hospira also sees annualized pre-tax savings of nearly $8-$10 million in 2009. Moreover, it expects to achieve a pre-tax savings of $110-$140 million on an annualized run-rate basis by the second quarter of 2011.

Hospira focuses on Specialty Injectable Pharmaceuticals (SIP) and Medication Management Systems (MMS) product lines as its key growth drivers going forward. SIP and MMS contributed 50% and 18%, respectively, to the total revenues of the company in 2008.

Hospira closed at $36.12 on Thursday, trading at 13.83X ttm EPS. We continue to maintain our Hold recommendation for the company.

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