) third quarter 2013 adjusted earnings of 51 cents per share
surpassed the Zacks Consensus Estimate by 6 cents and the
year-ago earnings by 4 cents. Results during the quarter were
aided by lower costs. Including one-time items, the company
posted earnings of 1 cent per share in the third quarter of 2013
flat year over year.
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Third quarter revenues improved 1.4% to $1 billion in the third
quarter of 2013, edging past the Zacks Consensus Estimate of $994
million. Revenues were aided by the strong sales of drugs like
Precedex (sedative) in the Specialty Injectable Pharmaceuticals
(SIP) segment. Impressive sales of these drugs outweighed the
price erosion of some of the new products in the SIP division.
Sales of devices were also disappointing during the third quarter
Quarter in Detail
Sales from the SIP segment, the biggest contributor to Hospira's
revenues, climbed 6.5% (up 7.4% at constant currency) to $685
million despite the price erosion mentioned above.
The Medication Management segment performed disappointingly
during the third quarter of 2013. Sales in the segment declined
11.3% (down 10.8% at constant currency) to $209.8 million. The
segment has been going through a rough patch. In Feb 2013, the
U.S. Food and Drug Administration (FDA) expanded the import ban
on certain Hospira products issued last year.
In Nov 2012, the FDA had issued a directive prohibiting Hospira
from importing Symbiq medication infusion pumps, manufactured at
its Costa Rica facility, into the U.S. The U.S. regulatory body
issued a fresh directive in Feb 2013, preventing Hospira from
importing Plum, GemStar and LifeCare PCA infusion pumps,
manufactured in Costa Rica, to the U.S. Sales in the Other Pharma
division declined 0.7% to $113.4 million.
Geographically, the Americas, Europe, Middle East and Africa and
the Asia-Pacific markets contributed $804.2 million (up 2.6% at
constant currency), $123.5 million (down 3.2% at constant
currency) and $80.5 million (up 6.5% at constant currency),
respectively, to total revenue in the third quarter of 2013.
Hospira still expects top-line growth in the range of negative 1%
to positive 1%. The company still expects 2013 adjusted earnings
in the range of $2.00 to $2.10 per share, representing flat to 5%
growth. The pre-earnings Zacks Consensus Estimate of $2.06 per
share is towards the higher end of management's guidance.
The company still expects cash flow from operations for 2013 in
the range of $200 million - $250 million. Depreciation and
amortization is projected in the range of $255 million- $275
million. Hospira still forecasts 2013 capital expenditures in the
range of $350 million - $400 million.
At first glance, Hospira's third quarter results look impressive
with the company surpassing earnings and revenue estimates.
However, the top line beat was only marginal. We believe revenues
will remain under pressure until the manufacturing issues
confronting the company are resolved.
A positive development for Hospira in the third quarter of 2013
was the European approval of the company's Inflectra (infliximab)
for the treatment of inflammatory conditions such as rheumatoid
arthritis, ankylosing spondylitis, Crohn's disease, ulcerative
colitis, psoriatic arthritis and psoriasis.
We note that Inflectra is the biosimilar version of
Johnson & Johnson
Merck & Co. Inc.
) blockbuster drug Remicade. Hospira noted that Inflectra is the
first monoclonal antibody therapy to be cleared in Europe through
the European Medicines Agency biosimilars regulatory process.
Biosimilars, which are generic versions of biologic drugs, are
expected to be a significant growth driver in the generics
industry in the coming years. The biosimilars market represents
huge commercial opportunity with a significant amount of biologic
sales slated to lose patent protection in the coming years.
Hospira carries a Zacks Rank #3 (Hold).
) appears to be well placed with a Zacks Rank #1 (Strong