Hospira makes progress on plant problems, reports improved financials

In the past, Hospira ($HSP) competitors have been able to take advantage of the drugmaker's absence from a market because of its plant problems, filling the void and their pockets as well, at Hospira's expense. More recently it has been Hospira's chance to live large off of the quality issues of others. The company's improved Q1 earnings were, in part, due to "off contract" prices.

Hospira CEO F. Michael Ball

That is not to say the FDA no longer has issues with Hospira operations. While steady progress and product releases continue at its massive plant in Rocky Mount, NC, the FDA is still finding issues at two plants in India. CEO F. Michael Ball acknowledged the concerns during an earnings call Wednesday, according to a transcript from Seeking Alpha. He said the FDA did a pre-approval inspection of its plant in Vizag, India, in March and left the plant a Form 483 with 10 observations. Ball said the company had "self-identified" half of those and was working to fix them all. The issues, he believes, are easily resolved, "such as training and supplier quality." Hospira expects the FDA approval for the plant sometime in 2014.

A plant in Irungattukottai that was tagged with a warning letter in May 2013 came up short of expectations during a recent follow-up inspection. In April, Ball said the plant got an untitled letter from the FDA. That followed an inspection in December which had resulted in nearly two dozen observations. But Ball is upbeat about efforts to resolve those issues as well. He said the company continues to work with the FDA and he does not expect them to affect "financial or operational performance" there.

The warning letter laid out a variety of shortcomings with sterility, including unsanitary surfaces, airflow questions and problems with the sterility of gloves worn by workers. In the letter, the agency ordered Hospira to create a corrective action plan for both its foreign and U.S. plants, including how it intends to train employees involved in aseptic processes.

While recalls of products continue for the sterile injectable drug expert, the company seems to have gotten many of its quality issues behind it. In March, it also settled an investor suit for $60 million that had accused it of earlier downplaying regulatory issues at its plants. The drugmaker Wednesday reported sales of $1.1 billion, up 6.3% on an adjusted basis. Earnings were up 187% to 40 cents a share.

- read the release
- here's the call transcript from Seeking Alpha