The Zacks Analyst Blog Highlights: Hospira, Johnson & Johnson, Merck, Advaxis and ACE

Zacks

For Immediate Release

Chicago, IL – December 9, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Hospira Inc. (HSP-Free Report), Johnson & Johnson (JNJ-Free Report), Merck & Co. Inc. (MRK-Free Report), Advaxis, Inc. (ADXS-Free Report) and ACE Limited (ACE-Free Report).

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Here are highlights from Friday’s Analyst Blog:

Update on Hospira’s Investor Day

Hospira Inc. (HSP-Free Report) primarily provided an insight regarding its way forward at its Investor Day on Dec 5, 2013 apart from providing an update on its current operations. Hospira stated that it is the market leader in the generic injectables market commanding a 34% share in the $9 billion market.
The company further stated that it is highly optimistic about its Specialty Injectable Pharmaceuticals (:SIP) segment, the biggest contributor to the company’s top line. The SIP pipeline had 77 molecules, as of Sep 30, 2013, having significant commercial potential.

Management also said that Hospira is one of the leading players in the global Medication Management Systems (MMS) commanding a share of 25% in the $2 billion market. We remind investors that in May 2013, Hospira announced a global strategy regarding its devices portfolio. Through this strategy, Hospira aims to modernize and streamline its device portfolio in order to drive growth and serve customers in a better manner.

Under the program, the company intends to remove its relatively old pump technology from the market and bring in customer replacement programs over the next few years. Moreover, Hospira intends to focus on developing next-generation pump technology. The company will focus on strengthening its global device quality system to facilitate growth.

We believe that this strategy will enable Hospira to sustain long-term growth. Due to the increased investments aimed primarily at expansion and modernization, capital spending at Hospira in the 2014-2018 time period is expected in the range of $1.7-$2 billion.

Hospira also threw light on its efforts to grow in the lucrative biosimilars market. Hospira boasts of a strong biosimilars pipeline. Biosimilars, which are generic versions of biologic drugs, are expected to be a significant growth driver in the generics industry going forward. Hospira stated that currently the global biologics market is worth approximately $127 billion and more than $67 billion of it is expected to face competition from biosimilars by 2020. Hospira also stated that the value of a biologic going off patent in the U.S. or EU will rise with time.

In Sep 2013, the European Commission approved Inflectra, the biosimilar version of Johnson & Johnson (JNJ-Free Report) and Merck & Co. Inc.’s (MRK-Free Report) blockbuster drug Remicade. This is the third biosimilar marketed by Hospira in the EU. The biosimilar market in the U.S. is expected in the range of $6-$13 billion by 2020 resulting in massive cost savings.

Hospira stated that the compounded annual growth rate (CAGR) for its net sales over the 2013-2018 time period is expected in the mid to high single digit range. Biosimilars and generics are expected to account for more than half of the top-line growth at Hospira over the time period.

Geographically, the CAGR for net sales over the same time period are mid to high single digits for Americas, low teens for the Europe, Middle East and Africa (:EMEA) region and high single digits for the Asia-Pacific region. The CAGR for adjusted earnings per share at Hospira over 2013-2018 is projected in the mid to high teens range. Hospira said that tax rates will rise with time driven by changes in the geographical earnings mix.

Hospira expects 2014 adjusted earnings in the range of $2.10-$2.25 per share. The Zacks Consensus Estimate for 2014 stands at $2.11 per share, towards the lower end of the management’s projected range.

Hospira carries a Zacks Rank #3 (Hold). Advaxis, Inc. (ADXS-Free Report) is a better ranked stock in the sector. Advaxis carries a Zacks Rank #2 (Buy).

ACE Ltd Kept at Outperform

We retain our Outperform recommendation on ACE Limited (ACE-Free Report) following the company’s outperformance in the third-quarter 2013 earnings results as well as its efforts to boost shareholders’ value and strengthen its product suite. The property and casualty insurer carries a Zacks Rank #2 (Buy).

Why the Reiteration?

ACE Limited has witnessed rising estimates following its solid third-quarter results and efforts to enhance shareholders’ value. The Zacks Consensus Estimate for 2013 rose 3.8% over the last 60 days to $8.90 while the same for 2014 increased 1.7% to $8.34 over the same time frame.

Third-quarter operating net income of $2.49 per share surpassed the Zacks Consensus Estimate by 12.7% and the year-ago number by 23.9%.

Solid underwriting performances aided the better-than-expected results. Absence of any significant cat activities aided the upside. ACE Limited also gained on account of improved commercial property & casualty (P&C) pricing environment.

ACE Limited has, over the past several quarters, delivered positive earnings surprises. The expected long-term earnings growth rate for this stock is 7.8%.

In November, the board of directors also announced its intention to propose a 24% increase in quarterly dividend to 63 cents per share. With respect to share buyback, the board also approved a $2 billion share repurchase program. Given its strong capital, which exceeds $34 billion, and a solid liquidity position, we expect to see more such initiatives going forward.

ACE Limited, with its considerable balance sheet strength, remains focused to grow both organically and inorganically. The company expects its acquisitions to meet or exceed its long term return on investment (:ROE) goal of 15% within 2-3 years.

Also, ACE Limited announced the launch of ACE Global Export Protection in Continental Europe. This new product is likely to support the casualty needs of middle-market businesses. The timing for the launch seems perfect given that several European mid-sized companies are now expanding in emerging economies.

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