Pfizer to buy Hospira for $15 bn to boost copycat drug business

Drugmaker Pfizer Inc said it would buy Hospira Inc for about $15 billion to boost its portfolio of generic injectible drugs and biosimilars, or copies of biotech drugs.

Pfizer offered $90 per share in cash, a 39 per cent premium to Hospira's closing stock price on Wednesday. Hospira soared 35 per cent to near $88 before the bell Thursday, while Pfizer was up 3.6 per cent.

For Pfizer, the deal is the largest since its failed takeover attempt of AstraZeneca Plc, which rebuffed its $118 billion approach last year but has remained a subject of takeover speculation.

Pfizer said the latest move showed its commitment to deploy capital and deliver revenue and earnings per share growth in the near term. The deal is expected to add 10 cents to 12 cents per share to Pfizer's earnings in the first full year after the deal closes, it said.

The move will increase Pfizer's business in established drugs, or those no longer covered by patents. Hospira makes generic versions of injectible drugs that are widely used in hospitals and sells several biosimilars overseas. It has other biosimilars in development.

Drugmakers are racing to develop biosimilars, which typically cost 20 per cent to 30 per cent less than the original, as big-ticket patents on biotech drugs expire and cash-strapped healthcare systems cut costs.

There are no approved biosimilars in the United States yet. A US regulatory panel endorsed the first one in January from Novartis AG, a copy of Amgen Inc's blockbuster cancer drug Neuopogen, but it has not yet been approved.

Biosimilars are expected to account for about one-quarter of the $100 billion in sales from off-patent biological drugs by the end of the decade, according to a study compiled by Thomson Reuters BioWorld.

Hospira is seeking approval from the US Food and Drug Administration to market a copy of Johnson & Johnson's blockbuster arthritis treatment Remicade.

The total enterprise value of the deal with Pfizer is about $17 billion, including debt, the companies said.

Hospira had $1.75 billion in outstanding long-term debt as of September 30, according to a regulatory filing.

Pfizer's financial advisors are Guggenheim Securities, JP Morgan and Lazard, with Ropes & Gray LLP serving as legal advisor and Clifford Chance LLP advising on international regulatory matters.

Morgan Stanley is Hospira's financial advisor, while Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates served as its legal adviser.

The deal requires regulatory and shareholder approvals.

HOTTEST PHARMA DEALS
Here is a look at some of the major pharma deals of 2014 and 2015 so far

2014
Feb: Generic drugmaker Actavis Plc says it would buy Forest Laboratories Inc for about $25 bn in cash and stock
April:

• Sun Pharmaceutical Industries Ltd agrees to buy generic drugmaker Ranbaxy Laboratories Ltd for $3.2 bn
• Eli Lilly announces $5.4-bn takeover of Swiss peer Novartis’s animal health business  
• Novartis agrees to buy GlaxoSmithKline’s oncology products for $14.5 bn and sell its vaccine business to the British drugmaker for $7.1 bn

May:

• Bayer AG agrees to buy Merck & Co’s consumer unit for $14.2 bn

July:

• Roche Holding says it would pay up to $1.72 bn to buy Seragon Pharmaceuticals
• Mylan Inc agrees to buy Abbott’s branded speciality and generics business in developed markets outside the United States in a $5.3-bn deal

Aug:

• Roche Holding AG agrees to buy US biotech company InterMune Inc for $8.3 bn in cash

Nov:

• Botox maker Allergan Inc accepts a $66-bn takeover bid from Actavis Plc

2015
Jan:

• Shire Plc agrees to buy US group NPS Pharmaceuticals Inc for $5.2 bn

Feb:

• Drugmaker Pfizer Inc says it would buy Hospira Inc for about $15 bn

THE ONES THAT FAILED TO MATERIALISE
2014
April:

• AstraZeneca Plc turns down a $101-bn bid from Pfizer Inc

Oct:

• US drugmaker AbbVie pulls the plug on its plan to buy Dublin-based Shire, recommending shareholders vote against the proposed $55-bn takeover following new US tax rules

Sources: Reuters & Bloomberg