Forward-Looking Statements

This report contains forward-looking statements within the meaning of the federal securities laws. Hospira intends that these forward-looking statements be covered by the safe harbor provisions for forward-looking words such as "may," "will," "should," "anticipate," "estimate," "expect," "plan," "believe," "predict," "potential," "project," "intend," "could," or similar expressions. In particular, statements regarding Hospira's plans, strategies, prospects and expectations regarding its business and industry are forward-looking statements. Investors should be aware that these statements and any other forward-looking statements in this document only reflect Hospira's expectations and are not guarantees of performance. These statements involve risks, uncertainties and assumptions. Many of these risks, uncertainties and assumptions are beyond Hospira's control, and may cause actual results and performance to differ materially from expectations. Important factors that could cause Hospira's actual results to be materially different from its expectations include (i) the risks and uncertainties described in "Item 1A. Risk Factors" in Hospira's Annual Report on Form 10-K for the year ended December 31, 2007 (the "2007 Form 10-K"), and (ii) the factors described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2007 Form 10-K, and the factors described in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the report on Form 10-Q for the three month period ended March 31, 2008, as may be updated by this Item 2. Accordingly, one should not place undue reliance on the forward-looking statements contained in this report. These forward-looking statements speak only as of the date on which the statements were made. Hospira undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

Hospira is a global specialty pharmaceutical and medication delivery company that develops, manufactures and markets products that help improve the safety, cost and productivity of patient care. Hospira's portfolio includes one of the industry's broadest lines of generic acute-care and oncology injectables, as well as integrated infusion therapy and medication management solutions. 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. In February 2007, Hospira acquired Mayne Pharma Limited ("Mayne Pharma") to increase its global presence in specialty generic injectable pharmaceuticals.

In 2008, Hospira has re-aligned its segment presentation to better reflect how the business is currently managed. Hospira has three reportable segments:
Americas; Europe, Middle East and Africa ("EMEA"); and Asia Pacific ("APAC"). Prior year segment disclosure has been reclassified to conform to the current year presentation.

Mayne Pharma Acquisition

On February 2, 2007, Hospira completed its acquisition of Mayne Pharma for $2,055.0 million. The results of operations of Mayne Pharma are included in Hospira's results for periods on and after that date, which has affected comparability of the financial statements for the periods presented in this report and will affect comparability in future periods. Hospira financed the acquisition and related expenses through borrowing approximately $1,925.0 million, and the remainder was funded with cash on hand. Net sales of Mayne Pharma products, which are principally specialty injectable pharmaceutical products, are reported within each of Hospira's reportable segments.

In connection with the acquisition, Hospira recorded $137.9 million of charges relating to purchase accounting during the six months ended June 30, 2007, including $84.8 million of acquired in-process research and development, all of which was recorded in the first quarter, and $53.1 million of inventory step-up charges, of which $21.4 million was expensed in the first quarter and $31.7 million was expensed in the second quarter. Hospira also recorded $518.2 million of intangible assets in connection with the acquisition, which will be amortized over their estimated useful lives (which have a weighted average life of 10 years).

In connection with the integration of Mayne Pharma into its operations, Hospira reported that it expected to incur approximately $95 million to $110 million of cash expenditures for the two-year period after the closing, of which $60 million to $75 million will be recorded as expense with the remainder related to purchase accounting items and capital projects. These expenses relate to the closure of facilities, termination of lease agreements and employee-related benefit arrangements during the two-year period after the closing. Hospira expects to incur cash expenditures at the high end of the range due to the impact of foreign currency fluctuations and other considerations. To date, approximately $100.8 million of cash expenditures have been made, of which $61.8 million of expenses have been incurred. Approximately $7.8 million and $17.6 million of integration expenses were recorded during the three and six months ended June 30, 2008, respectively. Approximately $13.2 million and $23.7 million of integration expenses were recorded during the three and six months ended June 30, 2007. In addition to integration expenses, Hospira recorded other acquisition-related expenses of $7.9 million in the three months ended March 31, 2007.

Critical Accounting Policies

The preparation of financial statements in accordance with generally accepted accounting principles in the United States (GAAP) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of Hospira's significant accounting policies is included in Note 1 to the company's consolidated financial statements, which are included in Hospira's Annual Report on Form 10-K for the year ended December 31, 2007. Certain of Hospira's accounting policies are considered critical, as these policies require significant, difficult or complex judgments by management, often employing the use of estimates about the effects of matters that are inherently uncertain. Such policies are summarized in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2007 Form 10-K.

Recently Issued Accounting Standards

In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 161, "Disclosures About Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133" ("SFAS No. 161"). SFAS No. 161 expands the disclosure requirements for derivative instruments and hedging activities. The provisions will be effective for financial statements issued for fiscal years beginning after November 15, 2008. Hospira is currently evaluating the potential impact of SFAS No. 161 on its financial statements.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("SFAS No. 160"). SFAS No. 160 states that accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Hospira does not anticipate that the impact from the adoption of SFAS No. 160 will be significant to its financial statements.

In December 2007, the FASB ratified Emerging Issues Task Force ("EITF") Issue No. 07-1, "Accounting for Collaborative Arrangements" ("EITF 07-1"). EITF 07-1 provides guidance on how to determine whether an arrangement constitutes a collaborative arrangement, how costs incurred and revenue generated on sales to third parties should be reported by the participants in a collaborative arrangement, how payments made between participants in a collaborative arrangement should be characterized, and what participants should disclose in the notes to the financial statements about a collaborative arrangement. EITF 07-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Hospira is currently evaluating the potential impact of EITF 07-1 on its financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. This statement also establishes disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for business combinations that close in years beginning on or after December 15, 2008. Hospira is currently evaluating the potential impact of SFAS No. 141R on its financial statements.

In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)" ("SFAS No. 158"). One provision of SFAS No. 158 requires the measurement of Hospira's defined benefit plan's assets and its obligations to determine the funded status be made as of the end of the fiscal year. This provision of SFAS No. 158 is effective for fiscal years ending after December 15, 2008. Hospira does not anticipate that the impact from the adoption of this provision of SFAS No. 158 will be significant to its financial statements.

Adoption of New Accounting Standards

Hospira adopted the required provisions of SFAS No. 157, "Fair Value Measurements" ("SFAS No. 157") on January 1, 2008. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. There was no impact to the condensed consolidated financial statements upon the adoption of SFAS No. 157.

FASB Staff Position No. FAS 157-2, "Effective Date of FASB Statement No. 157" ("FSP 157-2") delays the effective date of the application of SFAS No. 157 to fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis. Hospira adopted SFAS No. 157 with the exception of the application of the statement to non-recurring nonfinancial assets and liabilities. Non-recurring nonfinancial assets and nonfinancial liabilities for which Hospira has not applied the provisions of SFAS No. 157 primarily include

those measured at fair value in goodwill and long-lived asset impairment testing, those initially measured at fair value in a business combination, and nonfinancial liabilities for exit or disposal activities.

Hospira adopted the provisions of SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS No. 159") on January 1, 2008. SFAS No. 159 provides a company with the option to measure selected financial instruments and certain other items at fair value at specified election dates. Upon adoption, Hospira has not elected to apply SFAS No. 159 to measure selected financial instruments and certain other items, therefore, there was no impact to the condensed consolidated financial statements upon adoption of SFAS No. 159. Subsequent to the initial adoption of SFAS No. 159 on January 1, 2008, Hospira has not made any elections to apply SFAS No. 159 during the six months ended June 30, 2008.

Results of operations for the three months ended June 30, 2008 compared to June 30, 2007

Net Sales

Net sales increased 3.7% or 0.2% excluding the impact of foreign exchange in the three months ended June 30, 2008 compared to the three months ended June 30, 2007.

A comparison of product line net sales is as follows:

                                 Hospira, Inc.

                           Net Sales by Product Line

                                  (Unaudited)

                             (dollars in millions)



                                   Three Months Ended June 30,
                                                         Percent
                                                         Change
                                                        vs. Prior
                                  2008         2007       Year
Americas-
Pharmaceuticals
Specialty Injectables           $   299.9    $  300.5        (0.2 )%
Other Pharma                        122.7       136.1        (9.8 )%
                                    422.6       436.6        (3.2 )%
Devices
Medication Management Systems       161.7       132.8        21.8 %
Other Devices                        92.9        91.8         1.2 %
                                    254.6       224.6        13.4 %
Total Americas                      677.2       661.2         2.4 %

EMEA-
Pharmaceuticals
Specialty Injectables                78.4        70.4        11.4 %
Other Pharma                         42.4        40.5         4.7 %
                                    120.8       110.9         8.9 %
Devices
Medication Management Systems        19.3        17.2        12.2 %
Other Devices                        16.5        18.6       (11.3 )%
                                     35.8        35.8         0.0 %
Total EMEA                          156.6       146.7         6.7 %

APAC-
Pharmaceuticals
Specialty Injectables                52.4        46.5        12.7 %
Other Pharma                          3.5         4.5       (22.2 )%
                                     55.9        51.0         9.6 %
Devices
Medication Management Systems         5.0         4.0        25.0 %
Other Devices                         6.9         6.4         7.8 %
                                     11.9        10.4        14.4 %
Total APAC                           67.8        61.4        10.4 %

Net Sales                       $   901.6    $  869.3         3.7 %

Americas

Net sales in the Americas segment increased 2.4% including 1.0% of favorable foreign exchange impact. Net sales of Specialty Injectable Pharmaceuticals were essentially even with sales in the second quarter of 2007 as increased volumes from additional Group Purchasing Organization ("GPO") pharmacy contract awards, benefits from competitor supply issues and new product introductions were offset by decreases related to wholesaler buying patterns and some expected oncology price. Other Pharma net sales decreased due to lower demand from certain contract manufacturing customers, partially offset by increased large volume IV solutions sales. Net sales in Medication Management Systems increased due to strong demand and penetration for Symbiq® as well as improvements in our implementation processes. Other Device net sales increased 1.2% over the second quarter of 2007.

EMEA

Net sales in the EMEA segment increased 6.7%. Foreign exchange impact of 10.5%, combined with strong growth in compounding, and sales of newly launched biogenerics more than offset declines in Other Pharma and Devices.

APAC

Net sales in the APAC segment increased 10.4%, which included 12.0% impact of foreign exchange. Decreases in Other Pharma and Devices accounted for the majority of the remaining change compared to 2007.

Gross Profit



                                                                       Percent
Three months ended June 30 (dollars in millions)    2008      2007     change
Gross profit                                       $ 329.4   $ 266.2      23.7 %
As a percent of net sales                             36.5 %    30.6 %

Gross profit increased $63.2 million, or 23.7%, for the three months ended June 30, 2008, compared with the same period in 2007.

The gross profit increase is primarily the result of the impact of foreign exchange and lower costs related to the absence of purchase accounting charges for Mayne Pharma which in the prior year included inventory step-up charges of $31.7 million. In addition, favorable product mix, including Medication Management Systems, improved manufacturing utilization, and adjustments relating to intercompany profit which should have been recorded in prior periods was partially offset by higher freight and distribution expenses. Gross margin increased by 5.9 points to 36.5% for the three months ended June 30, 2008, from 30.6% for the three months ended June 30, 2007.

Research and Development



                                                                     Percent
Three months ended June 30 (dollars in millions)    2008     2007    change
Research and development expense                   $ 58.5   $ 52.6      11.2 %
As a percent of net sales                             6.5 %    6.0 %

Research and development ("R&D") expenses increased $5.9 million, or 11.2%, for the three months ended June 30, 2008, compared with the same period in 2007. The expense increase was primarily related to higher spending on product development related to new compounds in Hospira's generic injectable drug pipeline and the impact of foreign exchange.

Acquired In-Process Research and Development

In the three months ended June 30, 2008, as part of the acquisition purchase price allocation further described in Note 2, Hospira expensed $0.5 million to acquired in-process research and development related to pipeline products.

Selling, General and Administrative



                                                                       Percent
Three months ended June 30 (dollars in millions)    2008      2007     change
Selling, general and administrative expense        $ 152.7   $ 146.0       4.6 %
As a percent of net sales                             16.9 %    16.8 %

Selling, general and administrative ("SG&A") expenses increased $6.7 million, or 4.6%, for the three months ended June 30, 2008, compared with the same period in 2007. The expense increase was primarily due to sales and marketing support for new products primarily outside the United States and the impact of foreign exchange. This increase was partially offset by a decrease in stock-based compensation since the annual stock options grant was awarded in the first quarter of 2008 as compared to the second quarter of 2007.

Interest Expense and Other Income, Net

Interest expense was $28.2 million for the three months ended June 30, 2008, compared to $37.3 million in the same period in 2007. The decrease was primarily due to lower debt outstanding in the 2008 period, and lower interest rates on floating rate notes. Other income, net was zero for the three months ended June 30, 2008 compared to $(5.2) million for the three months ended June 30, 2007. The decrease reflects lower interest income and foreign exchange transaction gains.

Income Tax Expense

The effective tax rate was 22.8% for the three months ended June 30, 2008, compared to 13.5% for the same period in 2007. The increase in the effective tax rate for the three months ended June 30, 2008 compared to 2007, was due primarily to decreased expenses in higher tax rate jurisdictions in connection with the Mayne Pharma acquisition purchase accounting charges in the 2007 period. The effective tax rates are less than the statutory U.S. federal income tax rate principally due to the benefit of tax exemptions, of varying durations, in certain jurisdictions outside the United States.

Results of operations for the six months ended June 30, 2008 compared to June 30, 2007

Net Sales

Net sales increased 8.4%, or 4.6% excluding the impact of foreign exchange and the impact of an additional month of Mayne Pharma net sales in 2008 in the six months ended June 30, 2008 compared to the six months ended June 30, 2007.

A comparison of product line net sales is as follows:

                                 Hospira, Inc.

                           Net Sales by Product Line

                                  (Unaudited)

                             (dollars in millions)



                                    Six Months Ended June 30,
                                                         Percent
                                                         Change
                                                        vs. Prior
                                  2008        2007        Year
Americas-
Pharmaceuticals
Specialty Injectables           $   640.6   $   591.3         8.3 %
Other Pharma                        244.6       262.3        (6.7 )%
                                    885.2       853.6         3.7 %
Devices
Medication Management Systems       279.8       249.2        12.3 %
Other Devices                       186.4       182.9         1.9 %
                                    466.2       432.1         7.9 %
Total Americas                    1,351.4     1,285.7         5.1 %

EMEA-
Pharmaceuticals
Specialty Injectables               156.7       119.3        31.3 %
Other Pharma                         79.0        73.5         7.5 %
                                    235.7       192.8        22.3 %
Devices
Medication Management Systems        39.7        33.7        17.8 %
Other Devices                        34.0        36.2        (6.1 )%
                                     73.7        69.9         5.4 %
Total EMEA                          309.4       262.7        17.8 %

APAC-
Pharmaceuticals
Specialty Injectables                98.0        75.9        29.1 %
Other Pharma                          7.6         6.6        15.2 %
                                    105.6        82.5        28.0 %
Devices
Medication Management Systems        10.7         8.3        28.9 %
Other Devices                        13.2        12.9         2.3 %
                                     23.9        21.2        12.7 %
Total APAC                          129.5       103.7        24.9 %

Net Sales                       $ 1,790.3   $ 1,652.1         8.4 %

Net sales for the six months ended June 30, 2008 and 2007 include six and five months, respectively, of Mayne Pharma net sales.

Americas

Net sales in the Americas segment increased 5.1% including 1.2% of foreign exchange impact. Net sales of Specialty Injectable Pharmaceuticals increased due to higher volumes from additional Group Purchasing Organization ("GPO") pharmacy contract awards, benefits from competitor supply issues and new product introductions. Other Pharma net sales decreased due to lower demand from certain contract manufacturing customers, partially offset by increased large volume IV solutions sales. Net sales in Medication Management Systems increased due to strong demand and penetration for Symbiq® as well as improvements in our implementation processes. Other Device net sales increased 1.9% over the second quarter of 2007.

EMEA

Net sales in the EMEA segment increased 17.8%. Foreign exchange impact of 12.1%, combined with an additional month of Mayne Pharma net sales in 2008, strong growth in compounding, higher ambulatory systems volume, and sales of newly launched biogenerics more than offset declines in demand from existing contract manufacturing customers, and Other Pharma and Devices.

APAC

Net sales in the APAC segment increased 24.9%. Foreign exchange impact of 14.0%, combined with an additional month of Mayne Pharma net sales in 2008, were offset by decreases in Other Pharma and Devices.

Gross Profit



                                                                     Percent
Six months ended June 30 (dollars in millions)    2008      2007     change
Gross profit                                     $ 643.4   $ 540.8      19.0 %
As a percent of net sales                           35.9 %    32.7 %

Gross profit increased $102.6 million, or 19.0%, for the six months ended June 30, 2008, compared with the same period in 2007.

The gross profit increase is primarily the result of higher volume, inclusive of an additional month of Mayne Pharma gross profit in 2008 and the impact of foreign exchange. In addition, lower costs related to the absence of purchase . . .