Boston, MA 09/12/2014 (wallstreetpr) – Investment advisor Goldman Sachs Group Inc (NYSE:GS) expects the injectable drug and infusion technologies provider Hospira, Inc. (NYSE:HSP) to lose 26 – 52 cents a share from Precedex in the next year after the court ruled in favor of generic competition recently.
Major Factors
In a research note to clients, the brokerage has arrived at this conclusion based on a number of scenarios clouding over the loss of volume, as well as, price. Its analyst David Roman said that its model still reflected a meaningful contribution in the current year estimation due to its robust performance for the year-to-date and the build up of likely inventory before the generic competition.
The investment advisor has listed three major factors to influence Hospira, Inc. (NYSE:HSP)’s financial results after the September 5 court order allowing generic competition to the company’s Precedex drug, a key brand, which was estimated to contribute 8% of sales in the current year.
Analyst David Roman believes that the company’s future earnings would be influenced by loss of profits in relation to Precedex competition, contributions from its final phase of pipeline drug, both small molecule, as well as, biosimilars, and the rate at which the company could recapture its market share in post-FDA warning letters.
Implications
Goldman Sachs Group Inc (NYSE:GS) said that Hospira, Inc. (NYSE:HSP) can continue to see opportunities to expand its EBIT margins. However, it doubts whether the company would be in a position to achieve its mid-40s gross margin goal by the year 2018 in the absence of any meaningful contribution from its new products apart from a continued favorable pricing trends.
The brokerage said that the product pipeline was one of the biggest swing factors in view of the lack of visibility on timeliness besides approval tracks. It has, however, lifted its pipeline contribution to 13.7% of estimated sales in 2018 from an estimated 7.4% of sales in 2015.
Maintains Rating
Analyst David Roman has maintained his rating of Sell on the shares of Hospira, Inc. (NYSE:HSP) and kept a one-year price objective of $46, which was derived through P/E, DCF, and M&A. He also cited weak earnings power to sustain recent momentum.
