have rallied nicely over the past 12 months, handily
outperforming the broader market and closing in on all-time
Last quarter, the maker of specialty injectable
pharmaceuticals (SIP) and medical devices reported that its
revenue rose 11% year-over-year to $1.1 billion, while its
adjusted earnings per share rose 31% to $0.72 per share. 69% of
Hospira's top line comes from its SIP segment, 19% comes from
medication management devices, and the rest comes from other
pharmaceutical products. It topped off those robust earnings by
raising its top and bottom line guidance for the full year.
The key question now is whether or not Hospira's stock can
keep climbing, so let's study the three most bullish cases for
Hospira's continued growth. But before we get started, investors
should remember that although these points highlight Hospira's
greatest strengths, they do not guarantee that the stock will
soar to new highs.
1. A growing footprint in biosimilars
The global market for biosimilars, or generic versions of
biologic drugs, is expected to grow from $1.3 billion in 2013 to
$35 billion in 2020, according to Allied Market Research. The
reason is simple -- more than ten blockbuster biologic drugs with
combined annual sales of $60 billion will lose patent protection
in the U.S. and Europe over the next four years.
Hospira has a strong pipeline of 11 biosimilars, some shared
Hospira's Inflectra, which is a biosimilar version of
Johnson & Johnson
's rheumatoid arthritis drug Remicade, was approved in
Europe last year and launched in several countries in Eastern
Europe. Remicade's patents are protected throughout most of
Europe until February 2015 and in the U.S. until September 2018.
Remicade respectively generated $6.67 billion and $2.27 billion
in revenue for Johnson & Johnson and Merck in 2013.
Therefore, Hospira's portfolio of biosimilar versions of
blockbuster drugs is expected to fuel stronger top line growth as
additional patents expire in the U.S. over the next few
2. All clear in North Carolina
One of Hospira's biggest problems in the past was its plant in
Rocky Mount, North Carolina, which has been scrutinized by the
FDA since 2011. The company has reportedly spent $487.5 million
over the past three years on product and quality charges, mostly
related to upgrading the plant.
Besides being a weight on its bottom line, the plant was also
bad PR for the company, which has suffered similar manufacturing
issues in India and Costa Rica. The embargo of pumps made at its
Costa Rica plant, issued by federal regulators last February, has
further weighed on growth.
In late July, CEO F. Michael Ball announced that the FDA
finally cleared its Rocky Mount plant with no observations --
down from over 20 observations that the plant was originally
slapped with. That's a highly positive development which
indicates that Hospira's efforts are paying off, and hopefully
provides a roadmap for Hospira to solve similar issues in India
and Costa Rica.
3. A possible tax inversion
Many U.S. companies have recently lowered their corporate taxes
by buying smaller companies in lower-tax nations like Ireland,
then moving their headquarters overseas. Companies like
have all recently adopted that controversial strategy, known as
tax inversion. A move from the U.S. to Ireland, for example,
could theoretically drop a company's corporate tax rate from as
high as 40% to 12.5%.
The Wall Street Journal,
in late July, Hospira was in talks to purchase
's medical nutrition unit for $5 billion to move its
headquarters from Illinois to France, which has a 33% corporate
tax rate. If Hospira makes the move, it would not only boost its
bottom line in the long run, but also diversify its portfolio
away from injectables and pumps. Danone's medical nutrition unit
generated €1.3 billion in revenue ($1.7 billion) last year
-- which would make it a huge new division for Hospira, which
reported $4 billion in revenues in 2013.
The Foolish final word
In conclusion, Hospira could certainly climb higher in the
future. Its biosimilars portfolio has strong growth potential, it
has taken steps to help its plants meet regulatory standards, and
it could grow its bottom line and diversify its top line by
acquiring Danone's medical nutrition business.
Leaked: This coming blockbuster will make even Hospira
Let's face it -- the best investors consistently reap gigantic
profits by recognizing true potential earlier and more
accurately than anyone else. Let me cut right to the chase.
There is a product in development that will revolutionize not
just how we treat a common chronic illness, but potentially the
entire health industry. Analysts are already licking their
chops at the sales potential. In order to outsmart Wall Street
and realize multi-bagger returns you will need The Motley
Fool's new free report on the dream-team responsible for this
CLICK HERE NOW
3 Reasons Hospira, Inc. Stock Could Rise
originally appeared on Fool.com.
has no position in any stocks mentioned. The Motley Fool
recommends Johnson & Johnson. The Motley Fool owns shares of
Johnson & Johnson. Try any of our Foolish newsletter services
free for 30 days
. We Fools may not all hold the same opinions, but we all believe
considering a diverse range of insights
makes us better investors. The Motley Fool has a
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights
reserved. The Motley Fool has a