Hospira

$3.4 Billion

KEY EXECUTIVES:

Christopher B. Begley, Chairman and CEO
Terrence C. Kearney, COO
Thomas E. Werner, Sr. VP, Finance, and CFO
Brian J. Smith, Sr. VP, General Counsel and Secretary
Richard J. Hoffman, VP, Corp. Controller and Chief Accounting
   Officer

NO. OF EMPLOYEES:

14,000
   

GLOBAL HEADQUARTERS:

Lake Forest, IL

What a difference a year and a large investment can make. After an encouraging, yet somewhat flat 2006, with annual net sales growth of only 2.6% as the company continued its transition after spinning off from Abbott Laboratories in 2004, Hospira rebounded in a big way and was right on target with the executive team’s stated goal in early 2007. Net sales for the year grew 28% to $3.4 billion, compared with $2.7 billion in 2006. Gross profit increased from $939 million in 2006 to $1.17 billion in 2007, while net income was nearly $137 million, compared with nearly $238 million in 2006.

“Our 2007 results point to the success of our strategies of investing for growth and improving operating margins and cash flow. It’s through our disciplined focus on executing these strategies that Hospira has become the growing, profitable company it is today and is positioned for continued success going forward,” said Chairman and CEO Christopher Begley at Hospira’s 2008 annual shareholders meeting in May.

Although the company steadily has increased its international presence, 69% of net sales came from the United States, where totals reached  $2.37 billion—a 6.9% increase from $2.22 billion in 2006. International sales, however, exploded for the company as they grew 127% to nearly $1.1 billion in 2007, compared with $468 million in 2006.

The bulk of the marked increase in global sales was attributed to Hospira’s $2 billion acquisition of Australia-based Mayne Pharma Ltd. early in 2007; excluding Mayne Pharma’s contributions, the overall net sales increase was 4%. Along with expanding the company’s global presence, Mayne Pharma significantly enhanced Hospira’s specialty injectable pharmaceuticals portfolio, particularly oncology products.

The company’s $551 million in cash flow from operations also was “instrumental,” Begley said, in enabling the company to pay down some of its debt and invest in new ventures. One such initiative was the establishment of a new operational structure that included the appointment of three new regional presidents and division of the overall business into two product areas: Global Pharmaceuticals and Global Devices. Specialty Injectable Pharmacueticals and Medication Management Systems (MMS) were the primary growth drivers.

As the global market leader for generic injectable pharmaceuticals, Hospira’s Specialty Injectable Pharmaceuticals branch includes more than 190 generics in excess of 900 dosages and formulations in areas such as analgesia, anesthesia, anti-infective, cardiovascular and oncology. With many injectables coming off patent in the next five to seven years, Hospira believes this division will be a profitable growth driver in years to come. Total US sales for 2007 were $876 million, an 8.4% increase from $808 million reported in 2006. (Editor’s note: International breakdowns for each business unit were not provided in Hospira’s annual report.)

The primary focus of the Global Device branch, known as Medication Delivery Systems, was MMS, which includes more than 400,000 installed infusion devices. US-based net sales for Medication Delivery Systems increased 4% in 2007 to $890 million, compared with $855 million in the prior year. Growth in infusion therapy and MMS sales were the primary drivers.

Last year, the company notably began a full-scale rollout of Symbiq, an advanced general infusion device, and introduced enhanced security features for the wireless version of Hospira MedNet drug safety software. Language translations were another initiative undertaken for key markets.

Hospira also has an Injectable Pharmaceutical Contract Manufacturing division, which reported US net sales of $149 million in 2007, an 18.7% decrease from $183 million reported for 2006.

Efforts to optimize manufacturing operations as a partial means of improving margins and cash flow also saved the company $15 million in 2007.

At the close of the year, 16 manufacturing facilities were in operation globally. Hospira had closed its Donegal, Ireland facility in 2006 and completed its planned closure of an Ashland, OH facility in late 2007. The company’s Montreal, Canada facility was expected to close by the end of the first half of 2008. In addition, the company is still on track to phase out production at its North Chicago, IL facility (leased from Abbott) by early 2010. By the end of 2007, Hospira had nearly completed its $60 million expansion of manufacturing capacity at its McPherson, KS facility.

Looking at the first quarter of 2008, net sales increased 13.5% to $888.7 million, compared with $782.8 million in the first quarter of 2007.

“By focusing on our business strategy, Hospira continues to gain momentum,” said Begley. "The first quarter was a good start to 2008, with particular strength in our specialty injectables business. Company-wide, we are delivering the right products to our customers that help reduce their costs and improve patient safety. Our focus will translate into another year of solid growth for Hospira.”

There doesn’t appear to be any undertakings as large as the 2007 Mayne Pharma acquisition on tap for 2008, but Hospira already snapped up another company at the end of April. Hospira bought Sculptor Developmental Technologies, a subsidiary of St. Clair Hospital, for an undisclosed sum of money. Sculptor is a software engineering company that will provide Hospira with barcode point-of-care technology for patient safety and clinician workflow capabilities. The company’s VeriScan Rx is a software application that supports barcode medication administration.