Hospira, Inc. (HSP)
Q2 2010 Earnings Call Transcript
July 28, 2010 9:00 am ET
Karen King – IR
Chris Begley – Chairman and CEO
Tom Werner – SVP, Finance and CFO
Gregg Gilbert – Bank of America
David Roman – Goldman Sachs
Chris Schott – J.P. Morgan
Gregory Hertz – Citi
David Buck – Buckingham Research
Ronny Gal – Sanford C. Bernstein
Rick Wise – Leerink Swann
Marshall Urist – Morgan Stanley
Jayson Bedford – Raymond James
Junaid Husain – Soleil Securities
Welcome to Hospira's 2010 second quarter conference call. All lines have been placed on a listen-only-mode to prevent any background noise. Following the speakers’ remarks, there will be a question-and-answer period. I will now turn the call over to Karen King, Vice President of Investor Relations. Karen, you may begin your conference.
Thank you. Good morning, everyone, and welcome to our conference call and webcast regarding Hospira’s financial results for the second quarter of 2010. Participating in today's call are Chris Begley, Chairman and Chief Executive Officer of Hospira, and Tom Werner, Senior Vice President, Finance and Chief Financial officer.
We will be making some forward-looking statements today, which are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those indicated. A discussion of these factors is included in the Risk Factors and MD&A sections in Hospira's latest annual report on Form 10-K and subsequent Form 10-Qs on file with the SEC. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments.
In today's conference call, non-GAAP financial measures will be used to help investors understand Hospira's base business performance. These non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release and Form 8-K issued this morning, and are also available on the presentation page in the Investor Relations section of our website.
Also posted on our website is a presentation of complementary materials that summarize the points of today's call. We will not be speaking directly to the material, which is posted on the presentation page at www.hospirainvestor.com. The material is for your reference as an enhanced communication tool.
With that, I'll now turn the call over to Chris.
Thank you, Karen. And good morning, everyone. We had another solid quarter, driven mainly by continued strength in Specialty Injectable Pharmaceuticals. The majority of the positive performance came from oxaliplatin, an oncology drug used in the treatment of colon cancer, and Precedex, our proprietary sedation agent.
Net sales were $968 million this quarter, increasing 1% year-over-year or relatively flat excluding the impact of foreign currency. If we look at the results, excluding the impact of the divestitures we have made as part of Project Fuel, net sales grew 5% compared to the second quarter of 2009 on a constant currency basis. Adjusted earnings per share of $0.86 represented growth of 18% over the second quarter 2009 EPS of $0.73.
We had several significant achievements during the quarter and in more recent weeks. We received approval for injectable meropenem, launching the generic anti-infective at the end of the quarter. Meropenem is the first generic carbapenem drug approved in the US and the first drug to launch from our recent acquisition of the generic injectable business of Orchid Pharmaceuticals, which we now reference as Hospira India.
So far, we are the only company to have launched a generic version of the drug, which has branded sales of $200 million in US last year. We completed two transactions, which provide Hospira with a couple of new pain management products that will bolster our leadership position in acute care proprietary pharmaceuticals.
The first is a signed agreement with DURECT to develop and commercialize POSIDUR, a long-acting version of the anesthetic bupivicaine in the US and Canada. POSIDUR is designed to provide up to 72 hours of anesthetic directly at the site of a surgical wound, with the potential to reduce post-surgical pain and allow earlier patient mobility and hospital discharge.
The second was the acquisition of Javelin Pharmaceuticals, which we successfully completed in early July. As with DURECT, Javelin will allow us to capitalize on the synergies between Javelin’s main product candidate Dyloject, a post-operative pain management drug, and Precedex. Both Dyloject and POSIDUR will be marketed to anesthesiologists and sold to our Precedex sales force.
During the quarter, we were also awarded five-year contracts by Novation, the largest group purchasing organization in the US. The contracts, which take effect in October, provide us additional access to Novation’s University HealthSystem Consortium member hospitals. We are already meeting with prospective customers regarding future MMS opportunities.
On the biosimilar front, we were very pleased to receive approval from the European Commission for Nivestim, our second commercially available biogeneric. Nivestim is our brand name for generic filgrastim, a drug used to boost white blood cells. We will be leveraging the strong Retacrit sales force we’ve developed across the European region to market Nivestim as well.
Finally, we announced earlier this week the start of our US Phase I clinical trial for biosimilar erythropoietin or EPO in renal patients. The goal of the Phase I trial is to test the safety in pharmacokinetics of our biosimilar EPO compared with the reference product. Pending the successful completion of the Phase I trial, we would then launch an expanded Phase III trial in 2011.
I would like to update you at this point on the progress we have made towards resolving some of the situations we discussed with you last quarter. First, the warning letter we received from the US FDA related to inspections of our manufacturing facilities in Clayton and Rocky Mountain, North Carolina.
We submitted our response to the FDA in May and have subsequently met with the agency to discuss our plans and objectives. We believe the FDA has accepted the remediation plan we laid out. We are now dedicated to fulfilling the planned commitments, the bulk of which we expect to complete by year-end. As part of our commitment to transparency and proactive communication, we are providing bimonthly updates to the FDA and are pleased with the progress so far.