As further illustration of the importance of biologics and the rise of generics, Pfizer has invested 17 billion US dollars for Illinois-based pharmaceutical and medical device company, Hospira. Hospira is pretty well-established with about 15, 000 employees (probably about to be reduced in the near future judging from Pfizer’s previous acquisitions), being the largest producer of generic injectable pharaceuticals in hospitals. It also develops biosimilars, which are generic versions of biologics. Though biosimilars can never achieve the exact composition to the reference biologic due to complex synthesis procedures, they nevertheless achieve biosimilar status on passing regulatory standards of quality, efficacy and safety. Interestingly, biosimilars have so far only been approved in Europe and Australia.
The deal is said to make investors happy as it would increase earnings and is a great counter-measure for the patent cliff Pfizer is currently facing. Additionally, it also spurs the expectation that Pfizer will eventually break up into two or more separate companies, which would increase shareholder value. CEO Ian Read has already done this with Pfizer’s animal health unit in the form of Zoetis Inc. This also appeases investor sentiment after Pfizer’s previously failed bid for Astrazeneca.
One wonders whether this deal would be enough though to sustain Pfizer in the long run. Many other companies also produce generics and do so at a larger scale than the previous Hospira ever could. These include Teva Pharmaceuticals based in Israel, Sandoz – the generic division of Novartis, and Actavis (previously known as Watsons Pharmaceuticals *very popular in Singapore) which is headquartered in Dublin, Ireland though initially founded in Illinois (yes, the move was for the tax breaks). Not to mention the rising stars of India, Ranbaxy Pharmaceuticals, Glenmark and Sun Pharmaceuticals, reporting chart-topping revenue growths over recent years.
Pfizer has built a reputation of being able to take care of herself though, so we will just have to wait and see what other moves she has up her sleeves.