In a deal that could reshape the landscape for the emerging biosimilars drug class, New York-based Pfizer Inc. agreed to acquire Hospira Inc. for $90 per share in cash, or a deal valued at approximately $17 billion. The boards of both companies unanimously approved the transaction, which is expected to be accretive immediately upon closing and accretive by 10 cents to 12 cents per share for the first full year following the close.

The purchase price represented a 39 percent premium to the closing price of $64.80 for Hospira's shares (NYSE:HSP) on Wednesday. Predictably, the company's shares soared nearly to the strike price Thursday, closing at $87.64 for a gain of $22.84, or 35.3 percent. Pfizer's shares (NYSE:PFE) gained 92 cents to close at $32.99.

Although Hospira has a considerable business in injectable drugs and infusion technologies, the company clearly has focused in recent years on its biosimilars portfolio. In 2013, the Lake Forest, Ill.-based firm achieved a major milestone in the development of biosimilars by gaining formal EC approval for Europe's first biosimilar monoclonal antibody, Inflectra (infliximab), based on the blockbuster TNF-alpha inhibitor Remicade (infliximab, Janssen Biotech Inc.), developed in partnership with Celltrion Inc., of Incheon, South Korea. That event represented the first major dent in the armor of the biotechnology industry's most valuable franchise. (See BioWorld Today, Sept. 11, 2013.)

At the 33rd Annual J.P. Morgan Healthcare Conference in San Francisco last month, Hospira CEO Michael Ball devoted most of his presentation to global prospects for biosimilars, predicting that 2015 could be a bellwether year in the U.S. Hospira already has a hand in two of the four biosimilar applications pending at the FDA. Partner Celltrion filed for Remsima, a biosimilar based on Remicade, and Hospira submitted an application in December for Retacrit, an epoetin alfa biosimilar to Thousand Oaks, Calif.-based Amgen Inc.'s Epogen. Given the positive FDA advisory committee meeting in early January for Sandoz Inc.'s biosimilar to Amgen's Neupogen (filgrastim), Hospira was looking for biosimilars to "turbo charge" growth, Ball said. (See BioWorld Today, Jan. 8, 2015, and Jan. 15, 2015.)

Bringing Hospira into its fold adds an expanding revenue stream and a growth platform for Pfizer's Global Established Pharmaceutical, or GEP, business, according to Pfizer officials. The GEP unit includes four portfolio segments: products facing the loss of patent protection in developed markets, including major brands such as Celebrex (celecoxib) and Zyvox (linezolid); legacy products consisting of mature, off-patent medicines in developed markets; legacy emerging markets; and growth opportunities, including biosimilars and sterile injectables, partnerships in emerging markets and targeted opportunities in developed markets.

On a conference call early Thursday morning, Ian Read, Pfizer's chairman and CEO, pointed to the synergies of combining Hospira's portfolios of generic sterile injectables with GEP's branded sterile injectables, which include anti-infectives, anti-inflammatories and cytotoxics. Similarly, he said, Hospira's biosimilars candidates will allow the GEP to expand its portfolio of biosimilars in key therapeutic areas of strength for the pharma.

Pressed on last week's fourth quarter earnings call about the need to create "growth drivers" in its GEP business, Read observed that Pfizer's strategy was "to deploy our capital in a way that is shareholder friendly. We've been doing that through dividends and buybacks."

And, Read insisted, Pfizer did not feel compelled to undertake another big deal in the wake of its snub last year by Astrazeneca plc, of London. The transatlantic wrangling, which played out over a four-week period in May 2014, saw four bids, including a final offer of $119 billion, summarily rejected. (See BioWorld Today, April 29, 2014, May 5, 2014, May 20, 2014, and May 28, 2014.)

Although some analysts and investors expected Pfizer to make another run at Astrazeneca after expiration of the six-month waiting period under UK takeover rules, both pharmas appear to have moved on. Last July, Astrazeneca paid $875 million to acquire the respiratory disease portfolio of Almirall SA, of Barcelona, Spain. The pharma also partnered with Eli Lilly and Co., of Indianapolis, in a $500 million deal to develop to develop and commercialize its oral beta secretase cleaving enzyme, or BACE, inhibitor, AZD3293, in Alzheimer's disease. (See BioWorld Today, July 31, 2014, and Sep. 17, 2014.)

Pfizer, meanwhile, inked a string of deals, including a $2.775 billion collaboration that included a 10 percent equity stake with Cellectis SA, of Paris, based on the firm's allogeneic chimeric antigen receptor T-cell platform and a potential $2.85 billion deal with Merck KGaA, of Darmstadt, Germany, for programmed death ligand 1 (PD-L1) inhibitor, MSB0010718C, in which the pharmas will pool their resources in PD-L1 and PD-1 inhibition. (See BioWorld Today, June 19, 2014, and Nov. 18, 2014.)

Just this week, Pfizer had a win with the FDA, gaining accelerated approval of its cyclin-dependent kinase inhibitor, palbociclib, in advanced or metastatic breast cancer. The drug, branded Ibrance, made a splash at last year's American Association for Cancer Research meeting in San Diego, with data from the phase II PALOMA-1 trial showing that palbociclib doubled progression-free survival in women with metastatic estrogen receptor-positive, or ER-positive, breast cancer when added to standard treatment with estrogen synthesis inhibitor letrozole. (See BioWorld Today, April 8, 2014, and Feb. 4, 2015.)

HOSPIRA BUY 'ALIGNS WELL WITH OUR CORE PRIORITIES'

Pfizer took its first big step into biosimilars in 2010 when it picked up rights to biosimilar versions of insulin in a potential $350 million-plus partnership with Indian biotech Biocon Ltd. Although Biocon's recombinant human insulin formulations were approved in 27 countries in developing markets and commercialized in 23, Pfizer was looking more at the impact as biosimilar insulin products began to hit the market following patent expirations that begin this year for leading insulin products Novolin (human insulin) and Novolog (aspart) from Novo Nordisk A/S, Humulin (human insulin) and Humulog (lispro) from Lilly and Lantus (glargine) from Sanofi-Aventis SA. (See BioWorld Today, Oct. 19, 2010.)

But as recounted in Biosimilars: A Global Perspective of a New Market, from BioWorld and Thomson Reuters, the partners went their separate ways less than two years later, citing differing priorities for their biosimilar development. Pfizer has moved five oncology biosimilars into development within its GEP unit. Launches are expected to begin in the 2017-2018 time frame, with a global strategy tailored to each market model.

Hospira's assets and knowhow will expand the pharma's biosimilars footprint rapidly. Historically known for contract manufacturing and generics, Hospira embraced biosimilars nearly a decade ago as an additional pillar of its business model. Retacrit, the company's EPO biosimilar, was launched in the EU in 2007, followed by Nivestim, a filgrastim biosimilar approved in 2010 in both Australia and the EU.

Hospira capitalized on education and physician engagement to build market share for its biosimilars, recognizing that a discount of 20 percent to 30 percent to the reference drug wouldn't suffice. Thanks to its aggressive stance, the company has emerged as one of the biggest success stories in biosimilars, together with Sandoz, a unit of Novartis AG, of Basel, Switzerland, and Teva Pharmaceutical Industries Ltd., of Jerusalem. As an early adopter in the space, Hospira has manufacturing expertise and considerable savvy on issues that have bedeviled biosimilars development in the U.S., including the regulatory framework created by the Biologics Price Competition and Innovation Act of 2009, interchangeability, naming and labeling. (See BioWorld Today, Aug. 1, 2014, Aug. 5, 2014, and Jan. 7, 2015.)

Pfizer said it will use its existing commercial capabilities, global scale, scientific expertise and development capabilities to expand the reach of Hospira's products, which are currently distributed primarily in the U.S., to Europe and key emerging markets. Long term, the opportunity is enormous, with sales of biosimilars predicted to hit $25 billion by 2020. Already, some 245 biotech, big pharma and generics firms have moved into the space, with more than 700 follow-on biologics approved or in development.

Hospira's business "aligns well with our core priorities," Read said during the conference call, ticking off efficient use of Pfizer's capital, the potential to create near-term revenues and the enhancement of the company's leadership in key therapeutic areas. "The acquisition of Hospira meets all these objectives," he maintained.

'WE LIKE THE IMMEDIATE ACCRETION AND STRATEGIC FIT'

Some analysts voiced qualms about the extent of Hospira's relationship with Celltrion, which began in 2009 with a business cooperation agreement covering the distribution in the U.S., Europe, Australia, New Zealand and Canada of eight biosimilars candidates then under development at the South Korean firm. With increased co-development, the two firms have grown cozier and Celltrion is due royalties on certain products – some of which replicate Pfizer's internal biosimilars pipeline.

"We haven't sat down with Celltrion yet," Read acknowledged. "We've looked at the contractual relationship between Hospira and Celltrion, and we're satisfied that it will allow us to continue to maximize value and continue to have a good relationship with Celltrion and will enable us to have the appropriate discussions with regulators." With those considerations all factored into the value of the deal, "you can feel satisfied that we don't think this is a major issue for the transaction," he added.

All in all, analysts liked the deal. Jefferies LLC analyst Jeffrey Holford wrote in a flash note that "we wanted PFE to augment GEP through a cash deal. We like the immediate accretion and strategic fit with GEP's move towards longer duration growth assets, but even more important is the potential multiple uplift it likely gives GEP if it is separated from PFE in 2017. We think this deal signals a firm intent to separate GEP in 2017 and leaves more firepower for further deals."

Evercore ISI analyst Mark Schoenebaum added in an email that the deal seems consistent with Read's comment during Pfizer's fourth quarter earnings call that, "given the strength of our late- and mid-stage pipeline, we will evaluate business development opportunities biased towards deals with the potential for creating value in the near-term."

Pfizer plans to finance the transaction through a combination of existing cash and new debt, with approximately two-thirds financed from cash – an undisclosed amount repatriated from overseas operations – and one-third from debt. The pharma said the transaction is expected to deliver $800 million in annual cost savings by 2018, with incremental savings in the interim.

The deal, which includes a $500 million break-up fee, is expected to close in the second half of the year, subject to customary conditions, including regulatory approvals in several jurisdictions and approval of Hospira's shareholders.

Editor's note: More than 700 biosimilars and 245 biopharmaceutical, big pharmaceutical and generics companies developing or already marketing biosimilars are detailed in a new report by BioWorld, titled Biosimilars: A Global Perspective of a New Market Opportunities, Threats and Critical Strategies 2014.