Pharmaceutical giant Pfizer Inc. announced on Thursday it is to acquire Hospira Inc. for $90 per share in an approx. $17 billion cash deal. The two companies have entered into a definitive merger agreement.
The $90 per share represents a 39% premium over Hospira’s stock price on Wednesday.
According to a regulatory filing, Hospira had a $1.75 billion of outstanding long-term debt (Sept. 30th, 2014).
Hospira, which is based in Lake Forest, Illinois, is the leading provider of infusion technologies and injectable drugs globally, as well as a world leader in biosimilars. A biosimilar is a biological medication that is similar to another biological medicine that has already been authorized for use.
Pfizer says it wants to gain access to biosimilars, hence it is acquiring Hospira.
Biosimilars can only be authorized when the original medication’s patent life has expired. Biological medications (biologics) are manufactured in a living system, such as a microorganism, animal or plant cell. Most of them are very large, complex molecules or combinations of molecules. Many biologics are made using recombinant DNA technology.
The Boards of Directors of both Pfizer and Hospira unanimously approved the acquisition, which is expected to be immediately accretive when completed – accretive by $0.10 – $0.12 per share for the 1st full year following the close of the transaction “with additional accretion anticipated thereafter.”
Pfizer’s Chairman and CEO Ian Read said:
“The proposed acquisition of Hospira demonstrates our commitment to prudently deploy capital to create shareholder value and deliver incremental revenue and EPS growth in the near-term. In addition, Hospira’s business aligns well with our new commercial structure and is an excellent strategic fit for our Global Established Pharmaceutical business, which will benefit from a significantly enhanced product portfolio in growing markets.”
“Coupled with Pfizer’s global reach, Hospira is expected to drive greater sustainability for our Global Established Pharmaceutical business over the long term.”
Pharmaceutical industry moving to biosimilars
There is fierce competition among pharmaceutical companies to develop biosimilars, which generally cost up to 30% less than the original brand named product.
According to Thomson Reuters BioWorld, biosimilars are forecast to represent about one quarter of all off-patent biological drug sales by 2020.
Hospira has applied to the US Food and Drug Administration to market a copy of Remicade (infliximab), Johnson & Johnson’s blockbusting medication for the treatment of arthritis.
Hospira’s CEO, F. Michael Ball, said:
“The Pfizer-Hospira combination is an excellent strategic fit, presenting a unique opportunity to leverage the complementary strengths of our robust portfolios and rich pipelines.”
“I want to recognize and thank our 19,000 employees around the world for their tireless efforts to deliver more affordable healthcare solutions, increase patient access to high-quality care and drive sustained growth for our shareholders.”