Hospira, Inc. (HSP), Mylan Inc. (MYL), Actavis Inc (ACT): Is This Hurting Healthcare Company Priced for a Recovery?

Mylan Inc. (NASDAQ:MYL) has been pretty assertive with some recent deals. In August 2012, the company and drug major Pfizer established an exclusive long-term strategic partnership to manufacture and market generic drugs in Japan. The company has also cut into Hospira’s turf with a recent $1.6 billion acquisition of Agila Specialties, a developer, manufacturer and marketer of high-quality generic injectable products.

Rarely a market favorite, the company’s shares look moderately priced. Based on yearly revenues of $7.1 billion and earnings of $994 million, they currently trade at a relatively sedate multiple of 12.

Actavis Inc (NYSE:ACT) is the world’s third-largest manufacturer of generic prescription drugs. It also has a branded specialty pharmaceutical business that develops and markets a portfolio of approximately 40 products.

The company was recently in the news with a $5 billion offer to acquire Ireland-based Warner Chilcott Plc (NASDAQ:WCRX). The combined company will have around $11 billion in annual revenue as Actavis Inc (NYSE:ACT) adds gastroenterology and dermatology products to its portfolio. This is the company’s second deal that combines product expansion with a major tax advantage. Previously called Watson Pharmaceuticals, Actavis Inc (NYSE:ACT) took the name of a Switzerland-based generics maker it acquired last year for $5.5 billion. The Watson-Actavis deal cut the company’s tax rate to about 28 percent from 37 percent. The Warner Chilcott Plc (NASDAQ:WCRX) purchase could drop the rate another 10 percent.

Through its shrewd and aggressive acquisition strategy, Actavis Inc (NYSE:ACT) has finally caught the attention of Wall Street. After a history of under valuation, the company’s shares currently trade at a more optimistic 14 multiple. The value being based on a pre-Warner Chilcott close with estimated sales around $8.1 billion and cash earnings of $1.15 billion.

Conclusion

Hospira has been hit with a string of bad news over the last couple of years, though the shares are showing little signs of distress. It’s unclear whether the market is simply pricing in an anticipated recovery or if it’s expecting great things in the company’s future. Either way, it seems probable that Hospira will make news again.

Bob Chandler has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Is This Hurting Healthcare Company Priced for a Recovery? originally appeared on Fool.com and is written by Bob Chandler.

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