Hospira (HSP) has been making certain strategic moves in the recent past; the latest deal will establish its presence in one of the most sought after emerging market ? India. Hospira decided to acquire India-based Orchid Chemicals’ generic injectable finished-dosage form pharmaceuticals business for approximately $400 million. The transaction, expected to be completed by the first quarter of 2010, will be EPS neutral for Hospira in 2010, excluding the associated costs.

The acquisition involves Orchid’s beta-lactam antibiotics (a class of drugs with a wide spectrum of antibacterial activity) manufacturing complex (comprising cephalosporin, penicillin and carbapenem facilities) and pharmaceutical research and development (R&D) facility at Irungattukottai, Chennai, as well as its generic injectable product portfolio and pipeline.

The manufacturing site has necessary approvals from international regulatory authorities Incorporatedluding the US Food and Drug Administration (FDA). Additionally, both the companies have signed a long term agreement under which Orchid will supply active pharmaceutical ingredients (APIs) for the acquired generic injectable pharmaceuticals business.

The relationship between Hospira and Orchid dates back to 2005 with a commercialization and development agreement between Mayne Pharma (now a part of Hospira) and Orchid. Thereafter, many such deals have strengthened the ties between the two companies.

Earlier this month, Hospira entered into an agreement with Australia-based ChemGenex Pharmaceuticals to license, develop and commercialize ChemGenex’s product candidate omacetaxine mepesuccinate in Europe, the Middle East and parts of Africa. The drug is meant to treat patients with chronic myeloid leukemia (CML) who are not responding to the current available treatment with imatinib mesyl. The marketing approval application of the drug is pending in both the US and Europe.

Apart from an initial payment of €11.1 million, Hospira might have to pay another €74.1 million as milestone payments based on a successful development and commercialization of the drug. In addition, ChemGenex will also receive a royalty on product sales in the specified areas of the agreement.

Hospira has been eyeing small deals to expand its generic injectables business as well as its geographic presence. The company has a leading position in this market – it owns about 23% of the roughly $11 billion global generic injectables market. We believe these deals will further strengthen its top line in due course.

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