February 9, 2015
By Mark Terry, BioSpace.com Breaking News Staff
The news on Feb. 5, 2015 that New York-based Pfizer Inc. will be acquiring Lake Forest, Ill.-based Hospira, Inc. is also bringing speculation on potential layoffs.
Pfizer will be acquiring Hospira for approximately $17 billion. As part of the deal, Pfizer has projected annual cost savings of about $800 million by 2018. Analysts, however, suspect that figure can only be reached by layoffs.
“I don’t see how they do that without firing (employees),” said Ronny Gal, a senior research analyst at Sanford Bernstein in a statement. “Some of it will come from their business presumably, but I don’t see how they would do that without taking out a lot of the cost structure of Hospira.”
Hospira develops and markets injectable drugs and infusion technologies. It employs 19,000 people worldwide. The company reported nine-month earnings in October 2014 of $3.3 billion, up 14.4 percent for the same period the previous year. In 2013 the company reported net product sales of $4.0 billion.
It has been noted that the Pfizer-Hospira deal looks small at $17 billion compared to its failed $119 billion bid for British drugmaker AstraZeneca PLC in May 2014. However, analysts noted that Pfizer is spending 39 percent more on Hospira stock that it traded the previous day, making it one of the highest premiums ever paid for a U.S. healthcare company.
The fact the deal largely came as a surprise to investors and the market may account for that. Once news broke of the acquisition, Hospira stock closed 35 percent higher. This brought Hospira’s market value up closer to the amount of what Pfizer is paying for the company.
On Feb. 5, 2015, Hospira stock sold for $64.80 per share. Today’s price is currently $87.48 in morning trading, the jump primarily occurring after announcement of the sale.
It remains to be seen how many Hospira employees will lose their jobs. “We are very well aware that Hospira has a lot of talented individuals and have been very successful,” said Pfizer chief executive and chairman Ian Read in a statement, “as our organization has been successful, so we look to create a combined organization that has the best talent from both organizations.”
“But given the cost savings that Pfizer expects,” said Kevin Kedra, analyst at Gabelli & Co., in a statement, “there will obviously be some degree of layoffs.”
BioSpace Temperature Poll
Who Do You Think Will Be Sanofi’s New CEO? French drugmaker Sanofi said Thursday that it will name a new chief executive in mere weeks, as it attempted to put to rest rumors that the company could not find any executives willing to take the reins after it unceremoniously ousted its previous CEO last fall. Who do you think will soon be crowned king? BioSpace wants your opinion!
