Will Biosimilars Unlock This Company's Long-Term Potential?http://www.fool.com/investing/general/2013/11/09/will-biosimilars-unlock-this-companys-long-term-gr.aspx Leo Sun
November 9, 2013
When you think of generic drug manufacturers, you're probably thinking of major players such as Teva Pharmaceutical, Actavis, Mylan, and Novartis subsidiary Sandoz.
However, there is another up and comer that shouldn't be ignored -- Hospira (NYSE: HSP), a maker of specialty injectable drugs and medical devices. Hospira holds an impressive portfolio of biosimilars -- generic versions of top-selling biologic drugs -- which will help boost its top line.
Let's take a closer look at how Hospira has fared in the past, and how newer products might unlock the company's true potential.
Third-quarter earnings top analyst expectations
Hospira's revenue comes from three segments -- specialty injectable pharmaceuticals, medical management (medical devices and software), and other pharmaceuticals. 80% of its total revenue is generated in the America's, with the remainder split between the EMEA (Europe, Middle East, Africa) and APAC (Asia Pacific) regions.
Strength in specialty injectable pharmaceuticals
Sales of Precedex were strong in Japan and Korea, and were boosted in the U.S. by the introduction of new premix versions. During its conference call, Hospira noted that its conversion rate from the original to premix versions jumped from 20% to 40% sequentially.
Another top seller was the chemotherapy drug paclitaxel, which sold particularly well in China during the third quarter.
Weakness in medical equipment
After the FDA ban, Hospira signed a deal with Q Core Medical to distribute the Sapphire system, a new infusion pump intended to replace its older GemStar line, which was banned by the FDA. Hospira intends to launch Sapphire in the U.S. in late 2013.
Hospira's primary competitor in the medical equipment market is Baxter International (NYSE: BAX). Baxter's medical products segment, which consists of specialty pharmaceuticals and infusion pumps, closely resembles Hospira's core business. Last quarter, revenue at its medical products segment, which accounts for 57% of Baxter's top line, climbed 10% year over year.
Although Baxter hasn't been hit by a regulatory setback on par with Hospira's, it received an FDA warning letter in regards to its SIGMA Spectrum Infusion Pump in April, which adversely affected U.S. sales during the quarter.
The road to the future is paved with biosimilars
Retacrit and Nivestim, two specialty injectable drugs, were the top-performing SIP products in Hospira's EMEA region.
Retacrit is a biosimilar version of Johnson & Johnson's (NYSE: JNJ) Procrit/Eprex, a treatment for anemia. Last quarter, J&J reported that global sales of Procrit/Eprex fell 4.2% year over year to $342 million, with a 13% drop in international markets -- possibly attributed to Retacrit's strength.
Nivestim is a biosimilar version of Amgen's (NASDAQ: AMGN) Neupogen, a treatment for neutropenia, or the lack of white blood cells. In 2012, Neupogen generated $1.2 billion in revenue for Amgen, accounting for 7% of its top line. Although global sales of Neuopgen remained flat year over year, sales in international markets fell 16% -- which could be due to rising sales of Hospira's Nivestim and Teva's generic Neupogen, which was approved last August.
Generic Remicade could become Hospira's crown jewel