Hospira is a global specialty pharmaceutical and medication delivery company that
is focused on products that improve the productivity, safety and efficacy of patient
care in the acute care setting. Hospira is a leader in the development, manufacture
and marketing of specialty injectable pharmaceuticals and medication delivery
systems that deliver drugs and intravenous (I.V.) fluids. Hospira is also a leading
provider of contract manufacturing services to pharmaceutical and biotechnology
companies for formulation development, filling and finishing of injectable pharmaceuticals.
Hospira's broad portfolio of products is used by hospitals and alternate site
providers, such as clinics, home healthcare providers and long-term care facilities,
which are together referred to as the "continuum of care."
Hospira's business has an approximately 70-year history. Prior to its spin-off
from Abbott Laboratories on April 30, 2004, Hospira's business was conducted
by Abbott, and for all periods prior to the spin-off, references in this annual
report to Hospira's historical assets, liabilities, products, businesses or
activities are generally intended to refer to the historical assets, liabilities,
products, businesses or activities of Hospira's business as it was conducted
as a part of Abbott.
Hospira was incorporated in Delaware on September 16, 2003, as a wholly owned
subsidiary of Abbott. As part of a plan to separate its core hospital products
business from Abbott, Abbott transferred the assets and liabilities relating
to Hospira's business to Hospira and, on April 30, 2004, distributed Hospira's
common stock to Abbott's shareholders. On that date, Hospira began operating
as an independent company, and on May 3, 2004, Hospira's common stock began
trading on the New York Stock Exchange under the symbol "HSP." The
separation from Abbott and distribution of Hospira common stock as described
above are sometimes referred to in this document as the "spin-off"
and April 30, 2004 is sometimes referred to as the "spin-off date."
Hospira believes that the treatment of patients in hospitals or hospital-like
settings is a large and growing opportunity. Hospira's strategy is to develop,
manufacture and market products that improve the productivity, safety, efficacy
and overall cost of patient care by meeting the increasing needs of customers
for advanced medication management systems, innovative device technologies and
specialty injectable pharmaceutical products. There are two primary components
to Hospira's strategy:
Investing for growth. Hospira's growth strategy is focused on growing global
sales by increasing investment in product development and expanding sales outside
the United States.
Invest in new product development. Hospira is expanding its portfolio of products
to improve the effectiveness of patient care, including innovations in injectable
products, drug delivery and medication management. Hospira has been successful
in expanding its portfolio of generic injectable pharmaceuticals and plans to
continue that expansion by increasing investment in its product development
programs. Hospira intends to increase the number of first-to-market generic
injectable drugs in its portfolio and to develop innovative drug delivery and/or
packaging systems. Hospira may also expand its product offerings through strategic
alliances or acquisitions to gain access to innovative technologies or products
that are complementary to its existing products, and can be brought to market
through its existing sales channels.
Expand sales outside the United States. Hospira intends to increase its participation
in select markets outside the United States that have increasing demands for
acute care products and that represent an opportunity for growth. As Hospira
develops its independent international operations, it intends to establish direct
commercial infrastructure in markets that have the greatest potential and focus
its efforts in those markets. Hospira believes this approach will allow it to
maximize its use of resources.
Product Line
Description
Specialty Injectable Pharmaceuticals
More than 130 injectable generic drugs in more than 600 dosages and formulations
Major therapeutic areas: cardiovascular, anasthesia, anti-infectives, analgesics,
emergency and other
Precedex® (dexmedetomidine HCl), a proprietary drug for sedation
Medication Delivery Systems
Medication management systems that include electronic pumps and sets for I.V.
drug delivery, and patient-controlled analgesia for pain management (PCA)
Pre-mixed drug solutions and nutritionals for I.V. infusion
I.V. solutions and supplies
Injectable Pharmaceutical Contract Manufacturing
Formulation development, filling and finishing of injectable pharmaceuticals
on a contract basis for pharmaceutical and biotechnology companies
Other
Sales through alternate site providers, including clinics, home healthcare
providers and long-term care facilities
Hemodynamic monitoring systems used in intensive care and critical care units
to measure cardiac output and blood flow
International
Sales of Hospira's products outside the United States
Hospira's primary customers in the United States include hospitals, integrated
delivery networks, alternate site facilities, and medical product and drug wholesalers.
A substantial portion of Hospira's products is sold to group purchasing organization,
or GPO, member hospitals and through wholesalers and distributors. Hospira has
pricing agreements for specified products with the major GPOs in the United
States, including AmeriNet, Inc.; Broadlane Healthcare Corporation; Consorta,
Inc.; MedAssets Inc.; Novation, LLC; PACT, LLC; and Premier Purchasing Partners,
LP. The scope of products included in these agreements varies by GPO. Hospira
has configured its U.S. sales and marketing organizations to meet the needs
of customers across the continuum of care. Hospira's sales organization includes
sales professionals who sell its complete product line, as well as product specialists
who detail and promote its medication delivery systems, and sales personnel
who market and sell Precedex® (dexmedetomidine HCl). Hospira's business has
extensive experience contracting with, marketing to and servicing members of
the major group purchasing organizations.
In the United States, Hospira's products are primarily distributed through
a network of five distribution facilities as well as external distributors.
The distribution facilities in the United States Hospira operates are located
in Atlanta, Georgia; Dallas, Texas; King of Prussia, Pennsylvania; Los Angeles,
California; and Pleasant Prairie, Wisconsin.
Sales in markets outside the United States comprised approximately 16% of 2004
net sales. Hospira's primary customers in markets outside the United States
are hospitals and wholesalers that Hospira serves through a direct sales force
and a network of distributors. The majority of Hospira's business outside the
United States is contract or tender driven. Hospira expects to exit certain
countries as a result of its ongoing assessment of its international operations.
Pursuant to arrangements with Abbott made at the time of the spin-off, a significant
portion of Hospira's commercial operations outside the United States is being,
and will continue to be, performed for Hospira by Abbott under transitional
services arrangements. These transitional services generally will be provided
by Abbott for varying periods up to two years following the spin-off. While
some of Hospira's personnel outside the United States will be former employees
of Abbott, Hospira will need to hire additional people to conduct its business
outside the United States, and Hospira will need to establish business infrastructure
to support its operations. As Hospira establishes its business infrastructure
outside the United States, and marketing authorizations for Hospira's products
are transferred to Hospira by the applicable regulatory authorities, Abbott
will legally transfer the local net assets to Hospira and Hospira will conduct
those operations outside the United States. Hospira expects that the legal transfer
to it of operations outside the United States will happen on a country-by-country
basis, generally over the course of the two years following the spin-off.
Raw Materials
While Hospira produces some raw materials at its manufacturing sites, the majority
of raw materials that it uses are sourced externally on a global basis. Hospira
procures the active pharmaceutical ingredients in its products from third-party
suppliers. Although most of the raw materials Hospira uses are readily available
from multiple suppliers, Hospira relies on proprietary components that are available
exclusively from ICU Medical. ICU's LifeShield® CLAVE® and MicroCLAVE® connector
products are components of administration sets that represented over 10% of
Hospira's 2004 sales. In addition, Hospira purchases some of its materials from
single suppliers for reasons of quality assurance, sole-source availability,
cost effectiveness or constraints resulting from regulatory requirements.
Hospira uses resins and other petroleum-based materials as raw materials in
many of its products. Hospira may experience increased prices for these materials
if oil prices continue to rise.
Hospira works very closely with its suppliers to assure continuity of supply
while maintaining excellence in material quality and reliability. Hospira continually
evaluates alternate source suppliers, although it does not typically pursue
regulatory qualification of alternative sources due to the strength of its existing
supplier relationships, the reliability of its current supplier base, and the
time and expense associated with the regulatory process. Although a change in
suppliers could require significant effort or investment by Hospira in circumstances
where the items supplied are integral to the performance of its products or
incorporate unique technology, Hospira does not believe that the loss of any
existing supply arrangement (other than its supply arrangement with ICU Medical,
which continues through 2014) would have a material adverse effect on its business.
Competition
Hospira's industry is highly competitive. Hospira competes with many companies,
both public and private, that range from small, highly focused companies to
large diversified healthcare manufacturers. Hospira believes that the most effective
competitors in its industry are focused on product quality and performance,
breadth of product offering, manufacturing efficiency and the ability to develop
and deliver cost-effective products that help hospitals provide high quality
care in an environment that requires increasing levels of efficiency and productivity.
Hospira's competitors in medication delivery systems include Baxter International
Inc., Becton Dickinson and Company, B. Braun Melsungen AG, Cardinal Healthcare
Inc., Fresenius Medical Care AG and Terumo Medical Corporation. Competitors
in specialty injectable pharmaceuticals include American Pharmaceutical Partners,
Inc., Baxter and Teva Pharmaceuticals, as well as divisions of several multinational
pharmaceutical companies. Baxter, Cardinal and Patheon, Inc. are significant
competitors of Hospira's contract manufacturing business. Edwards Lifesciences
Corporation is a significant competitor in critical care monitoring devices.
Local manufacturers of specialty injectable pharmaceuticals also compete with
Hospira on a country-by-country basis.