Pfizer's $17bn Hospira acquisition paves way for break up

Pfizer has announced a $17billion deal to acquire Hospira, a company specialising in injectable drugs and biosimilars.

The move has surprised many industry observers, as Pfizer had been linked with acquiring AstraZeneca, and generics giant Actavis in 2014, but lost out on both occasions.

Although big by most standards, the Hospira deal is small to the previously mooted acquisitions, and looks likely to be a precursor to a break up of Pfizer within the next few years.

Pfizer's chief executive Ian Read has long been discussing a potential break up of the company's different divisions. The company's management split it up into distinct units in 2013: the R&D based Global Innovative Products, its Vaccines business, Oncology, its Consumer Medicines division and Global Established Products, for off-patent medicines.

Hospira will be absorbed into the company's Global Established Pharmaceutical business, and its leading position in biosimilars makes it a particularly attractive acquisition.

Analysts forecast that biosimilars could account for around 25 per cent a $100 billion market for off-patent biological drugs by the end of the decade, although how quickly they will be adopted in the US is not yet clear.

The FDA has not yet approved any biosimilars, but the first are expected later this year.

"The proposed acquisition of Hospira demonstrates our commitment to prudently deploy capital to create shareholder value and deliver incremental revenue and EPS growth in the near-term," said Ian Read,

"In addition, Hospira's business aligns well with our new commercial structure and is an excellent strategic fit for our Global Established Pharmaceutical business, which will benefit from a significantly enhanced product portfolio in growing markets. Coupled with Pfizer's global reach, Hospira is expected to drive greater sustainability for our Global Established Pharmaceutical business over the long term."

Ian Read said the Hospira deal would not delay any breakup of Pfizer, which the company says could take place in 2017 if the numbers stack up, and it creates shareholder value.