Hospira bids for global domination in generic injectables

By Gregory Roumeliotis

- Last updated on GMT

Related tags Pharmaceutical drug Pharmacology

To escape stagnating growth, hospital supplies firm Hospira has
agreed to buy Australia's Mayne Pharma for $2bn (€1.56bn), creating
the world's biggest manufacturer of generic injectable drugs.

The acquisition will significantly expand Hospira's presence outside the US, enrich its portfolio with oncology products and add five more production sites to its 14 manufacturing facilities.

Hospira, a subsidiary of Abbott Laboratories, is desperately looking for cost savings and a growth stimulus after its second quarter pre-tax profit plunged 25 per cent to $71.2m, with sales barely rising and selling, general and administrative expenses surging by 27 per cent.

Mayne Pharma, which was spun off from Mayne Group last year, is in better shape despite posting a pre-tax loss of $5.4m in 2006 from a pre-tax profit of $37.1m in 2005, since most of this loss was down to charges from the split from its parent company.

Teva reportedly backed out from acquiring Mayne Pharma five years ago after looking at its financial accounts, yet since then Mayne has become Europe's biggest producer of generic injectable medicines, so troubled Hospira did not hesitate to take on $1.9bn in debt to finance the acquisition.

Consolidation is the name of the game at present in the generics industry, with manufacturers looking for economies of scale around the world; Novartis last year bought Germany's Hexal and its US affiliate Eon Labs, Teva bough Ivax Corporation in January, Mylan bought India's Matrix Laboratories last month, while Barr is poised to take over Croatia's Pliva.

Illinois-based Hospira was happy to pay a 32 per cent premium over Mayne's share price prior to the deal because it believes the merger will lead to savings of $50m in 2008 and allow it to be successful outside the US, where it is already the top maker of generic injectables.

"This combination will create the leading generic injectable pharmaceuticals company in the world, delivering unparalleled value to the global healthcare system as well as our respective shareholders and employees,"​ said Hospira CEO Christopher Begley.

"The Mayne acquisition more than doubles Hospira's international presence and significantly accelerates the expansion of our generic injectables business."

Apart from gaining access to Mayne's global sales and distribution platform and contract manufacturing capacity, Hospira will benefit from the Australian company's comprehensive expertise in formulating and manufacturing potent and cytotoxic compounds.

One of these compounds is paclitaxel, Mayne's top oncology product, used in the treatment of breast, ovarian and some types of lung cancer.

Mayne's drugs are sold in 65 countries and manufactured at sites in Australia, the US, Puerto Rico and Germany, with a joint venture planned for India.

Although the acquisition doubles Hospira's international sales to nearly 30 per cent of its total sales, the US firm will have to quickly find savings in its enlarged manufacturing infrastructure to justify the huge amount of debt it has sustained to buy Mayne.

Mayne's board of directors has unanimously endorsed the deal and shareholders are expected to vote on it in December.

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