Production problems continue to be a drag on Hospira ($HSP), despite last week's announcement of a planned $375 million investment in operations upgrades. The drugmaker's current troubles provide another example of the overarching and devastating effects manufacturing missteps can have on a pharmaceutical company.
RBC Capital Markets analyst Shibani Malhotra penned an investor note saying Hospira's production problems are possibly "systemic," Bloomberg reports. Long-term effort--perhaps as much as three years--may be required for the drugmaker to get its manufacturing house back in order, according to Malhotra, in the Bloomberg report. The problems are "far greater than investors realize" and may be global in scope.
Hospira's situation bears some resemblance to that of Boston-area biotech Genzyme in the months prior to its acquisition by Sanofi($SNY). Genzyme's GMP violations earned it a warning letter in early 2009; subsequent manufacturing issues, including a virus contamination that led to the temporary shutdown of its Allston Landing plant several months later, were followed by a May 2010 consent decree. That decree is still in place, and payments for meeting remediation milestones became part of Sanofi's acquisition terms.
Like Genzyme, Hospira may be weakened by the current production problems and the costly, disruptive remediation effort to the point that it becomes a takeover target. Bloomberg notes Hospira stock is now trading at its lowest level since March 2009. Malhotra says in the report the slide makes the drugmaker vulnerable to a takeover.
- here's the Bloomberg report
Hospira to spend $375M in manufacturing upgrades
Hospira plant remediation stings company financials
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Genzyme manufacturing woes yield patent threat
Genzyme ready for FDA consent decree drill