Several months ago, Citi released research saying that given Hospira's ($HSP) ongoing manufacturing problems and stepped FDA enforcement, other companies stood to benefit from shortages in a growing sterile injectables market. It said German drug and healthcare company Fresenius and Jordan-based Hikma were its two best bets to jump on the opportunity. Both have.
"We believe that Fresenius SE and Hikma will continue to be beneficiaries of injectables competitors' manufacturing issues in the U.S.," says the Citi investment report provided to FiercePharmaManufacturing. Citi was right but also warned that more supply is expected to materialize, making the opportunities short-lived.
On Wednesday, Fresenius for the third time this year upped its earnings forecast, saying Fresenius Kabi, its generic infusion drug unit, keeps picking up additional business from companies that are coming up short. It now forecasts growth in sales and margins to hit the top end of its earlier projection, 9% and 20.5%, respectively. The company said, "Demand in the United States is expected to remain high supported by ongoing IV drug shortages, particularly of propofol. Supply constraints of a competitor for this anesthetic are now expected to last well into the fourth quarter."
The unnamed competitor is Hospira. In March, it halted production of propofol after uncovering a problem at its Rocky Mount, NC, plant and later had to recall propofol vials because they had glass particles in them. In an August earnings call, CEO F. Michael Ball said work at the plant is making headway toward the improvements the FDA says are needed but that production at the plant will remain below normal throughout this year.
Just as Citi predicted, Hikma also has benefited. In August, it reported that revenue from its sterile injectables business nearly doubled in the last quarter. It earlier said it intended to target products on the shortage list.
But the market looks to get more competitive. Claris Lifesciences last month got a closeout letter from the FDA withdrawing a ban on its injectable drugs made at plants in India and New Jersey. Claris announced that it would begin selling product itself in the U.S., no longer passing it through partners. The move promises to heat up the market and potentially shave margins off some drugs. In its report, Citi projected that the generic sterile injectables market would grow to about $17 billion in 2020 from $12 billion last year as more products come off patent, but also said there is little opportunity for margin growth in the industry, "given the increased supply anticipated in coming years placing pressure on price."
- read the Fresenius release
- here's more from FiercePharma
Fresenius' Kabi unit prospers on competitors' mistakes
West-Ward plant problems undermine Hikma earnings
Hospira says temporary production glitch affecting propofol supplies
Another pain drug recall for Hospira
Claris squares off against former partners in U.S. injectables market