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") as updated by Part II. Item 1A. in this Form 10-Q, 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 each report on Form 10-Q for the three month periods ended March 31, 2008 and June 30, 2008, as 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 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 as of 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, during the nine months ended September 30, 2007, Hospira recorded $137.9 million of charges relating to purchase accounting, 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 to 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. Approximately $4.8 million and $22.4 million of integration expenses were recorded during the three and nine months ended September 30, 2008, respectively. Approximately $7.9 million and $31.6 million of integration expenses were recorded during the three and nine months ended September 30, 2007, respectively. To date, approximately $108.7 million of cash expenditures have been made, of which $66.6 million of expenses have been incurred. Although the remaining expenditures are expected to be completed by the end of 2008, Hospira now expects to incur cash expenditures slightly above the high end of the range due to the impact of changes in foreign exchange rates and additional capital expenditures. 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 April 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position No. FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("FSP 142-3"). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, "Goodwill and Other Intangible Assets." This provision of FSP 142-3 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. Since this guidance will be applied prospectively, on adoption, there will be no impact to Hospira's consolidated financial position, results of operations or cash flows.

In March 2008, the 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. SFAS No. 161 only requires additional disclosures, hence the adoption will not impact Hospira's consolidated financial position, results of operations or cash flows.

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 the consolidated financial position, results of operations or cash flows.

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 the 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. Since this guidance will be applied prospectively, on adoption, there will be no impact to Hospira's consolidated financial position, results of operations or cash flows.

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. Therefore, the actuarial valuation measurement date will be changed from November 30 to December 31, 2008, so all plans will have a year end measurement date. This provision of SFAS No. 158 is effective for fiscal years ending after December 15, 2008. The adoption of this provision of SFAS No. 158 will not be significant to the 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 from the adoption of SFAS No. 157.

SFAS No. 157 establishes a fair value hierarchy for disclosure of the inputs used to measure fair values. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for similar assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs which reflect assumptions developed by management to measure assets and liabilities at fair value. A financial asset or liability's classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The fair value of the Level 1 financial assets is based on quoted market prices of the identical underlying security in an active market. The fair value of the Level 2 financial assets is based on market observable inputs to quoted market prices, benchmark yields and broker/dealer quotes.

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. At adoption, Hospira had not elected to apply SFAS No. 159 to measure selected financial instruments and certain other items at fair value, therefore, there was no impact to the condensed consolidated financial statements from 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 nine months ended September 30, 2008.

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

Net Sales

Net sales increased 10.4% or 8.8%, excluding the impact of changes in foreign exchange rates, in the three months ended September 30, 2008 compared to the three months ended September 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 September 30,
                                                             Percent
                                                            Change vs.
                                   2008          2007       Prior Year
Americas-
Pharmaceuticals
Specialty Injectables           $    341.1    $    299.9          13.7 %
Other Pharma                         129.8         131.3          (1.1 )%
                                     470.9         431.2           9.2 %
Devices
Medication Management Systems        138.5         123.0          12.6 %
Other Devices                         96.3          90.5           6.4 %
                                     234.8         213.5          10.0 %
Total Americas                       705.7         644.7           9.5 %

EMEA-
Pharmaceuticals
Specialty Injectables                 67.5          65.0           3.8 %
Other Pharma                          41.3          37.8           9.3 %
                                     108.8         102.8           5.8 %
Devices
Medication Management Systems         19.6          16.1          21.7 %
Other Devices                         18.2          14.9          22.1 %
                                      37.8          31.0          21.9 %
Total EMEA                           146.6         133.8           9.6 %

APAC-
Pharmaceuticals
Specialty Injectables                 57.3          45.7          25.4 %
Other Pharma                           4.5           4.2           7.1 %
                                      61.8          49.9          23.8 %
Devices
Medication Management Systems          4.8           4.0          20.0 %
Other Devices                          6.6           5.6          17.9 %
                                      11.4           9.6          18.8 %
Total APAC                            73.2          59.5          23.0 %

Net Sales                       $    925.5    $    838.0          10.4 %

Specialty Injectables include generic injectables and proprietary specialty injectables. Other Pharmaceuticals include large volume IV solutions, nutritionals and contract manufacturing services (including former "Sales to Abbott"). Medication Management Systems include infusion pumps, related software, services and administration sets. Other Devices include gravity administration sets, critical care products and other device products.

Americas

Net sales in the Americas segment increased 9.5%, or 9.2% excluding the impact of changes in foreign exchange rates. The growth in net sales of Specialty Injectable Pharmaceuticals was due to increased volumes from Group Purchasing Organization ("GPO") pharmacy contract awards, new product introductions, and the impact of competitor supply issues. 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, particularly for Symbiq®, Hospira's newest general infusion system. Other Device net sales increased due to volume growth in gravity administration sets.

EMEA

Net sales in the EMEA segment increased 9.6%, or 3.4% excluding the impact of changes in foreign exchange rates. Excluding the changes in foreign exchange rates, Specialty Injectable Pharmaceuticals sales declined, primarily due to expected oncology price decreases, partially offset by higher anesthesia product volume, and sales of newly launched biogenerics. Net sales in Medication Management Systems increased due to higher sales volume of ambulatory infusion systems.

APAC

Net sales in the APAC segment increased 23.0%, or 17.3% excluding the impact of changes in foreign exchange rates. The majority of the increase was attributed to growth in Specialty Injectables due to volume growth in anti-infectives and oncology products. The remaining increase was due to volume growth in Medication Management Systems, Other Pharma and Devices.

Gross Profit



                                                                            Percent
Three months ended September 30 (dollars in millions)    2008      2007     change
Gross profit                                            $ 330.0   $ 294.5      12.1 %
As a percent of net sales                                  35.7 %    35.1 %

Gross profit increased $35.5 million, or 12.1%, for the three months ended September 30, 2008, compared with the same period in 2007.

The gross profit increase is primarily the result of higher sales volume, favorable product mix and improved manufacturing performance, partially offset by higher freight and distribution expenses. Gross margin increased to 35.7% for the three months ended September 30, 2008, from 35.1% for the three months ended September 30, 2007.

Research and Development



                                                                          Percent
Three months ended September 30 (dollars in millions)    2008     2007    change
Research and development expense                        $ 51.7   $ 51.4       0.6 %
As a percent of net sales                                  5.6 %    6.1 %

Research and development ("R&D") expenses increased $0.3 million, or 0.6%, for the three months ended September 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 medication management systems projects, partially offset by lower clinical trial spending.

Selling, General and Administrative



                                                                            Percent
Three months ended September 30 (dollars in millions)    2008      2007     change
Selling, general and administrative expense             $ 145.6   $ 136.5       6.7 %
As a percent of net sales                                  15.7 %    16.3 %

Selling, general and administrative ("SG&A") expenses increased $9.1 million, or 6.7%, for the three months ended September 30, 2008, compared with the same period in 2007. The expense increase was primarily due to sales and marketing support within the Americas and support costs for new product launches outside the Americas.

Interest Expense and Other Income, Net

Interest expense was $27.6 million for the three months ended September 30, 2008, compared to $34.7 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 $(2.4) million for the three months ended September 30, 2008 compared to $(6.2) million for the three months ended September 30, 2007. The decrease reflects lower levels of interest income, foreign exchange transaction gains, and net gains on investments.

Income Tax Expense

The effective tax rate was 23.9% for the three months ended September 30, 2008, compared to 24.0% for the same period in 2007.

Results of operations for the nine months ended September 30, 2008 compared to September 30, 2007

Net Sales

Net sales increased 9.1%, or 6.1% excluding the impact of changes in foreign exchange rates, in the nine months ended September 30, 2008 compared to the nine months ended September 30, 2007.

A comparison of product line net sales is as follows:

                                 Hospira, Inc.

                           Net Sales by Product Line

                                  (Unaudited)

                             (dollars in millions)



                                   Nine Months Ended September 30,
                                                            Percent
                                                           Change vs.
                                   2008          2007      Prior Year
Americas-
Pharmaceuticals
Specialty Injectables           $     981.7    $   891.2         10.2 %
Other Pharma                          374.4        393.6         (4.9 )%
                                    1,356.1      1,284.8          5.5 %
Devices
Medication Management Systems         418.3        372.2         12.4 %
Other Devices                         282.7        273.4          3.4 %
                                      701.0        645.6          8.6 %
Total Americas                      2,057.1      1,930.4          6.6 %

EMEA-
Pharmaceuticals
Specialty Injectables                 224.2        184.3         21.6 %
Other Pharma                          120.3        111.3          8.1 %
                                      344.5        295.6         16.5 %
Devices
Medication Management Systems          59.3         49.8         19.1 %
Other Devices                          52.2         51.1          2.2 %
                                      111.5        100.9         10.5 %
Total EMEA                            456.0        396.5         15.0 %

APAC-
Pharmaceuticals
Specialty Injectables                 155.3        121.6         27.7 %
Other Pharma                           12.1         10.8         12.0 %
                                      167.4        132.4         26.4 %
Devices
Medication Management Systems          15.5         12.3         26.0 %
Other Devices                          19.8         18.5          7.0 %
                                       35.3         30.8         14.6 %
Total APAC                            202.7        163.2         24.2 %

Net Sales                       $   2,715.8    $ 2,490.1          9.1 %

Specialty Injectables include generic injectables and proprietary specialty injectables. Other Pharmaceuticals include large volume IV solutions, nutritionals and contract manufacturing services (including former "Sales to Abbott"). Medication Management Systems include infusion pumps, related software, services and administration sets. Other Devices include gravity administration sets, critical care products and other device products.

Net sales for the nine months ended September 30, 2008 and 2007 include nine and eight months, respectively, of Mayne Pharma net sales.

Americas

Net sales in the Americas segment increased 6.6%, or 5.7% excluding the impact of changes in foreign exchange rates. Net sales of Specialty Injectable Pharmaceuticals increased due to higher volumes from GPO pharmacy contract awards, new product introductions and the impact of various competitor supply issues. 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, particularly for Symbiq®, Hospira's newest general infusion system, as well as improvements in our implementation processes. Other Devices net sales increased due to volume growth in gravity administration sets.

EMEA

Net sales in the EMEA segment increased 15.0%, or 4.9% excluding the impact of . . .