In a major setback for Hospira Inc., (HSP) the company had to stop the shipment of its generic version of chemotherapy drug Eloxatin (oxaliplatin), within a few days of receiving regulatory approval. Apart from Hospira, Teva Pharmaceuticals (TEVA), the largest generic player also received the approval to sell its generic version of Eloxatin, which is manufactured by Sanofi-Aventis (SNY).

Eloxatin, meant for the treatment of advanced colorectal cancer and stage III colon cancer patients after surgery, recorded US sales of $1.4 billion in 2008. French giant, Sanofi-Aventis is suing both Hospira and Teva for patent infringement. Although in June 2009, a US District Court in New Jersey ruled in favor of Hospira and announced that the generic drug did not infringe the patent held by Sanofi-Aventis, the latter has appealed the decision. As a result, both Hospira and Teva had to stop the shipment of the drug.

This is not the only problem being faced by Hospira. In another development, the company had to recall several of its medication delivery devices due to defective power cords. We believe these issues should not have a major impact on the company. We hope the patent infringement will be resolved soon so that Hospira can resume sales of the drug.

Hospira derives about 50% of its total revenues from the Specialty Injectable Pharmaceuticals (SIP) segment, which includes generic injectables. This segment is the primary top-line growth driver at Hospira and we expect the segment to continue contributing significantly to the top-line going forward. The company plans to release around 25 generic drugs in different regions across the world in 2009 and 2010. Meanwhile, we believe Project Fuel (undertaken by the company to reduce 10% of its workforce) should help Hospira drive long-term growth and profitability for the company. 

We have a Neutral recommendation on the stock.

Read the full analyst report on “HSP”
Read the full analyst report on “TEVA”
Read the full analyst report on “SNY”
Zacks Investment Research