1274057--2/28/2007--HOSPIRA

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{capital, credit, financial}

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The integration of Mayne Pharma into Hospira s operations will present significant challenges. Hospira has incurred significant indebtedness in order to finance the Mayne Pharma acquisition, which may limit its operating flexibility. Hospira s credit rating has been downgraded by Standard and Poor s and future downgrades are possible. A further downgrade will increase Hospira s cost of borrowing. Hospira may not be able to refinance amounts borrowed under its bridge loan facility on favorable terms or at all. Hospira will incur substantial charges relating to the Mayne Pharma acquisition. Hospira faces significant competition and may not be able to compete effectively. If Hospira does not introduce new products in a timely manner, its products may become obsolete over time, customers may not buy its products, and its sales and profitability may decline. Failure to effectively manage efforts under product collaboration agreements may harm Hospira s business and profitability. Hospira is subject to the cost-containment efforts of hospital buying groups, wholesalers, distributors, third-party payors and government organizations. If Hospira is unable to maintain its GPO pricing agreements, sales of its products could decline. Hospira and its suppliers and customers are subject to various governmental regulations, and it could be costly to comply with these regulations and to develop compliant products and processes. The manufacture of Hospira s products is highly exacting and complex, and if Hospira or its suppliers encounter problems manufacturing, storing or distributing products, Hospira s business could suffer. Hospira is experiencing higher costs to produce its products as a result of rising oil and gas prices. Hospira depends on third parties to supply raw materials and other components and may not be able to obtain sufficient quantities of these materials, which could limit Hospira s ability to manufacture products on a timely basis and could harm its profitability. Hospira s cost-reduction activities have resulted in significant charges and cash expenditures. These activities may disrupt Hospira s business and may not result in the intended cost savings. Hospira s manufacturing capacity could limit its ability to expand its business without significant capital investment. Hospira relies on the performance of its information technology systems, the failure of which could have an adverse effect on Hospira s business and performance. Hospira may continue to acquire other businesses, license rights to technologies or products from third parties, or form alliances, which may not be successful. Hospira conducts sales activity outside of the United States and is subject to additional business risks that may cause its sales and profitability to decline. Hospira is subject to healthcare fraud and abuse regulations that could result in significant liability and require Hospira to change its business practices and restrict its operations in the future. State and federal investigations and existing and future lawsuits relating to the alleged reporting of false or misleading pricing information in connection with Medicare and Medicaid programs could have a material adverse effect on Hospira s business, profitability and financial condition. Income taxes can have an unpredictable effect on Hospira s results of operations and result in greater- than-anticipated liabilities. Hospira may incur product liability losses and insurance coverage could be inadequate or unavailable to cover these losses. If Hospira is unable to protect its intellectual property rights, its business and prospects could be harmed. If Hospira infringes the intellectual property rights of third parties, Hospira may face legal action, increased costs and delays in marketing new products. Hospira has outstanding stock options, which may dilute the ownership of its existing shareholders.

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1274057--2/28/2007--HOSPIRA_INC