Pfizer buys injectable medicine company Hospira: Is a bigger buy on the way?
Pfizer - the biggest drug company in North America - has bought injectable-medicine maker Hospira for about $17bn, or $90 a share, "a price that Hospira’s stock has never come close to on its own," says Bloomberg.
Pfizer makes $17 billion move
The drugs giant has been courting an acquisition for some time. Last year the company was snubbed by AstraZeneca for which it offered to pay about $117bn. Teva Pharmaceutical Industries - a $49 billion company - also rejected Pfizer.
Hospira is a small purchase in comparison, which may leave investors wondering whether Pfizer is still planning something bigger, according to Bloomberg.
One benefit of the Hospira buy: Pfizer gains a steadily growing business to tack onto its established drugs unit that it has discussed spinning off.
The purchase represents a multiple of 23 times Hospira’s earnings before interest, taxes, depreciation and amortization (EBITDA), according to data compiled by Bloomberg.
Hospira is the biggest provider of injectable drugs and buying the company will add to Pfizer’s offerings of biosimilars, which are imitations of biologic drugs.
They’re akin to generic treatments but have a different name because living organisms can’t be precisely copied. Pfizer says the global market for biosimilars may reach $20 bn by 2020, while generic sterile injectables may reach $70 bn.
With Pfizer estimating it can cut $800m of costs annually by 2018, the transaction starts to look cheaper - more like 10 times EBITDA, Kevin Kedra, an analyst for Gabelli & Co. in Rye, New York told Bloomberg.
“It’s certainly a high price, but Pfizer is paying a premium for the biosimilar assets which are still a small portion of Hospira’s current business but are expected to grow significantly over the next three to five years,” Kedra said.