Hospira says ‘quality actions’ taken to fix problems at key injectable drug manufacturing plant in US reduced its third quarter earnings.
The facility in Rocky Mount, North Carolina was issued with a warning letter in August last year by the US Food and Drug Administration (FDA) after inspectors identified a number of deviations from good manufacturing practice (GMP) and quality monitoring deficiencies.
Since then Hospira has taken various steps to try and resolve the issues identified by the FDA and increase production output at the plant – which contributes around 25 per cent of its revenues.
However these steps, which are ongoing and include the replacement of the site’s quality team by senior corporate staff and calling in third party observers from IHL and Quintiles, have cost money and offset gains made elsewhere.
Net revenue for the three months ended September 30 increase 2.9 per cent to $977m (€m) on US sales of docetaxel, a generic version of Sanofi’s cancer drug Taxotere which Hospira launched in March.
But, despite this extra revenue, operating income for the period was down $47m to $142m due, according to Hospira, “due to charges and costs associated with the quality actions [at Rocky Mount] and related inventory losses.”
CEO Michael Ball said: “While recently launched product sales continue to drive top-line growth, we were extremely disappointed in the third quarter by developments related to our quality-improvement initiatives that resulted in a significant slowdown of production and an associated impact on our operating performance.”
“Addressing these issues [at Rocky Mount] is Hospira's top priority, and our organization is committed to full resolution. I remain confident that Hospira will emerge from this process a stronger, more competitive global company that is optimally positioned to serve the needs of our customers and patients, and deliver strong value to our shareholders.
"We have revised our 2011 full-year adjusted earnings per share guidance to the range of $2.95 to $3.05. This reflects the fact that we will remain at reduced production capacity at Rocky Mount at least through the end of the year."