LAKE FOREST, Ill., April 28, 2015 /PRNewswire/ -- Hospira, Inc. (NYSE: HSP), the world’s leading provider of injectable drugs and infusion technologies, and a global leader in biosimilars, today reported results for the first quarter ended March 31, 2015. For the first quarter of 2015, net sales were $1.2 billion, and adjusted* diluted earnings per share were $0.97. (Adjusted* measures exclude certain specified items as described later in this press release and the attached schedules.) On a U.S. Generally Accepted Accounting Principles (GAAP) basis, first-quarter 2015 diluted earnings per share were $0.43.
“Hospira started out the year with very strong sales and profitability, driven primarily by continued momentum in our Specialty Injectable Pharmaceuticals business,” said F. Michael Ball, chief executive officer. “In addition to our strong financial performance, we made significant progress on many fronts, including enhancing our biosimilars pipeline, launching new generic injectable products and advancing our device strategy. Going forward, we remain keenly focused on our key growth areas of biosimilars, generic injectables and devices, as well as on meeting the needs of our customers and healthcare systems around the world.”
In the first quarter, Hospira and Pfizer Inc. [NYSE: PFE] announced that the two companies had entered into a merger agreement under which Pfizer will acquire Hospira for $90 a share in cash for a total enterprise value of approximately $17 billion. The merger, which is subject to customary closing conditions, including regulatory approvals in several jurisdictions and approval of the merger by Hospira’s shareholders, is expected to close in the second half of 2015.
First-Quarter 2015 Results
The following table highlights selected financial results for the first quarter of 2015 compared to the same period in 2014:
In $ millions, except per share amounts | GAAP Three Months Ended March 31, | % Change | Adjusted* Three Months Ended March 31, | % Change | ||
2015 | 2014 | 2015 | 2014 | |||
Net Sales | $1,174.9 | $1,050.8 | 11.8% | $1,174.9 | $1,050.8 | 11.8% |
Gross Profit (Net Sales less Cost of Products Sold) | $523.5 | $369.6 | 41.6% | $538.5 | $419.9 | 28.2% |
Income from Operations | $133.4 | $99.6 | 33.9% | $247.2 | $151.5 | 63.2% |
Diluted Earnings per Share | $0.43 | $0.40 | 7.5% | $0.97 | $0.60 | 61.7% |
Statistics (as a % of Net Sales, except for Income Tax Rate) | ||||||
Gross Profit (Net Sales less Cost of Products Sold) | 44.6% | 35.2% | 45.8% | 40.0% | ||
Income from Operations | 11.4% | 9.5% | 21.0% | 14.4% | ||
Income Tax Rate | 39.3% | 20.3% | 28.5% | 24.5% | ||
Results under GAAP include items as detailed in the schedules attached to this press release.
Net sales increased 11.8 percent to $1.2 billion in the first quarter of 2015. Excluding the impact of foreign currency fluctuations, net sales increased 15.7 percent. The majority of the increase was due to continued strong net sales of Specialty Injectable Pharmaceuticals (SIP) in the United States. Also contributing to the quarter’s net sales performance were sales of biosimilars in the Europe, Middle East and Africa (EMEA) segment and device sales globally. The strong net sales growth more than offset the expected decline of Precedex, Hospira’s proprietary sedation drug, which lost market exclusivity in the second half of 2014.
Adjusted* income from operations increased 63.2 percent to $247 million in the first quarter of 2015, compared to $152 million in the first quarter of 2014. Improved adjusted* gross margin performance reflected the impact of the strong growth in net sales. Selling, general and administration (SG&A) increased 20.2 percent to $224 million due to employee-related compensation expenses and biosimilars promotional spending. On a GAAP basis, income from operations was $133 million compared to $100 million in the first quarter of 2014. In addition to the impact of the strong net sales, the first-quarter 2015 GAAP income from operations included an upfront research and development (R&D) milestone charge of $51 million associated with a biosimilar collaborative arrangement with Pfenex, announced earlier in the first quarter, as well as costs associated with the proposed merger with Pfizer.
The effective tax rate on an adjusted* basis in the quarter was 28.5 percent compared to 24.5 percent in the first-quarter 2014, with the increase mainly reflecting stronger earnings in higher tax-rate jurisdictions. On a GAAP basis, the first-quarter 2015 effective tax rate was 39.3 percent, compared to 20.3 percent in the first quarter of 2014, reflecting the non-deductibility of the upfront R&D milestone payment to Pfenex.
Cash Flow
Cash flow from operations for the first three months of 2015 was an outflow of $100 million, compared to an inflow of $18 million in the first three months of 2014. The decrease is primarily due to the upfront R&D milestone payment to Pfenex, higher employee incentive payments and higher investments in working capital.
Capital expenditures were $103 million for the first three months of 2015, compared to $95 million for the same period in 2014.
2015 Projections
Given the announcement early in the first quarter that Hospira and Pfizer had entered into a merger agreement, the company has not provided annual projections for 2015.
*Use of Non-GAAP Financial Measures
Adjusted measures used in this press release are reconciled to the most comparable measures calculated in accordance with GAAP in the schedules attached to this release. For more information regarding these non-GAAP financial measures, please see Hospira’s Current Report on Form 8-K furnished to the Securities and Exchange Commission on the date of this press release.
Webcast / Complementary Information
Given the proposed merger, Hospira will not hold a conference call for its quarterly results. Complementary information to this press release on the first-quarter 2015 results is available on the Presentations page of the Investor Relations website.
About Hospira
Hospira, Inc. is the world’s leading provider of injectable drugs and infusion technologies, and a global leader in biosimilars. Through its broad, integrated portfolio, Hospira is uniquely positioned to Advance Wellness by improving patient and caregiver safety while reducing healthcare costs. The company is headquartered in Lake Forest, Ill. Learn more at www.hospira.com.
Private Securities Litigation Reform Act of 1995 --
A Caution Concerning Forward-Looking Statements
Information provided and statements contained in this release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements only speak as of the date of this report and the company assumes no obligation to update the information included in this report. Such forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy and statements regarding the proposed merger with Pfizer Inc. These statements often include words such as “will,” believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or similar expressions. These statements are not guarantees of performance or results and they involve risks, uncertainties, and assumptions. For a further description of these factors, see the risk factors set forth in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and subsequent Forms 10-Q. Additional factors may include the effect of the announcement of the merger and related transactions on Hospira’s business relationships, operating results and business generally; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Pfizer Inc., and the risk that the merger agreement with Pfizer Inc. may be terminated in circumstances that require Hospira to pay a termination fee to Pfizer Inc.; the outcome of any legal proceedings that may be instituted against Hospira related to the merger agreement with Pfizer Inc.; and the failure to satisfy conditions to completion of the merger with Pfizer Inc., including the receipt of all required regulatory approvals related to the merger with Pfizer Inc. Although we believe that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. All future written and oral forward-looking statements by us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above.
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