Hospira Completes Orchid Facility Buy

Zacks

In a move to strengthen its presence in the highly sought after Indian market, Hospira (HSP) purchased the penem and penicillin active pharmaceutical ingredient (API) manufacturing unit and an associated research and development (R&D) facility from India-based Orchid Chemicals & Pharmaceuticals Ltd. for around $218 million (after the settlement of previous advances worth approximately $30 million).

As per the deal, announced in 2012, the purchase price was fixed at around $202.5 million. The value was increased to approximately $218 million in Mar 2013.

Following the completion of the deal, Hospira gained access to an FDA approved manufacturing facility in Aurangabad and a Chennai based R&D unit. The acquisition also gave Hospira access to the related assets and employees associated with those businesses. Orchid Chemicals, a supplier of APIs to Hospira, will continue to supply cephalosporin APIs. We remind investors that Hospira had acquired the generic injectable pharmaceuticals business of Orchid Chemicals in 2010.

Hospira stated in its press release that the completion of the acquisition of Orchid Chemicals’ API operations will support the continuous supply of key beta-lactam antibiotics. Moreover, by gaining access to the Indian company’s API business, Hospira will benefit on the cost front and will be able to deliver low-cost drugs to patients without compromising on quality.

Hospira’s state-of-art low cost facility at Vizag (plant not yet approved) is another example of its focus on India. The facility is expected to produce its first commercial product by Dec 31, 2014. Hospira is also focusing on another lucrative emerging market – Brazil. In Feb 2014, Hospira entered into an agreement to acquire Brazilian-based oncology distributor, Evolabis. The acquisition added 15 on-market oncology offerings to Hospira’s portfolio in Brazil.

Hospira carries a Zacks Rank #2 (Buy). Better-ranked medical stocks include Regeneron Pharmaceuticals (REGN), Wright Medical Group (WMGI) and Actelion (ALIOF). All three stocks sport a Zacks Rank #1 (Strong Buy).

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