UPDATE: Hospira 1Q Helped Generic Drug, But Weaker 2Q Expected
26 Abril 2011 - 2:43PM
Dow Jones News
Hospira Inc.'s (HSP) first-quarter earnings rose 5.8% following
higher costs a year ago and a strong start for a generic cancer
drug recently launched in the U.S., although the company cautioned
that benefit could be temporary.
The recent quarter's better-than-expected sales were fueled by
the Food and Drug Administration approval in March for docetaxel, a
generic version of the Sanofi-Aventis SA (SNY, SAN.FR) cancer drug
Taxotere. That only affected a small part of the quarter, but the
company benefited as customers quickly built up inventory.
This activity essentially pulled forward sales that otherwise
would have come in the second quarter, and Hospira maintained its
full-year guidance while saying it now expects its lightest
earnings of the year in the current period.
The year's first two quarters "sort of changed places," Thomas
Werner, Hospira's chief financial officer, said on an earnings call
with analysts.
Shares of the Lake Forest, Ill., company recently traded down
2.8% to $56.50.
Hospira reported a first-quarter profit of $149.9 million, or 88
cents a share, up from $141.7 million, or 84 cents a share, a year
earlier. Excluding items including restructuring charges and a tax
benefit in the recent quarter, adjusted earnings fell to 93 cents
from 94 cents.
Analysts surveyed by Thomson Reuters had expected, on average,
earnings of 78 cents a share in the recent quarter.
Sales of $1 billion easily topped Wall Street's view but were
still down slightly from a year ago. Hospira faced a tough
comparison because last year's first quarter got a lift from a
generic version of another Sanofi-Aventis cancer drug that Hospira
has since stopped selling in the U.S.--until 2012--due to a legal
settlement.
Sales in the company's biggest business, for specialty
injectable pharmaceuticals, rose 4.4% in the quarter to $638.6
million. Hospira's generic drug efforts have also been helped
lately by the U.S. launch late last year of gemcitabine, a generic
version of the Eli Lilly & Co. (LLY) chemotherapy drug Gemzar.
But this business has also dealt with challenges in meeting
customer demand.
The company said it has made faster-than-expected improvement by
reducing backorders 30% from where they were at the end of 2010.
The company aims to further reduce backorders over the next several
months, Christopher B. Begley, Hospira's executive chairman and
recently retired CEO, said during the call.
Hospira's medication management business posted a 4% sales
decline to $240.2 million. This business includes infusion pumps,
which is an area where the company has struggled with
product-quality issues. Hospira in late March submitted an
application to the FDA covering modifications for its "Symbiq"
brand pumps; the company stopped shipping new Symbiq pumps a year
ago due to alarm-failure issues, and it won't resume shipping until
it gets regulatory clearance.
Hospira is also addressing issues with its "Plum" pumps, but it
continues to sell these devices while it fixes pumps in the field
and in company inventory.
Elsewhere at Hospira, sales in the company's "other
pharmaceuticals" business, which includes intravenous solutions and
contract-manufacturing operations, declined 16%. Sales there were
hurt by the divestiture of a facility last year and the timing of
certain customer orders this quarter, Werner said.
The company backed its full-year targets for sales growth of 5%
to 7%, excluding the impact of currency rates, and adjusted
earnings of $3.90 to $4.00 per share.
The company noted, however, that it's boosting its capital
spending this year and over the next several years to boost
capacity in India for making generic drugs. The company had few
details on this front, but expects to provide more during an
"investor day" in August, where new CEO F. Michael Ball will talk
more about this outlook.
"I see significant opportunity for further growth, both in the
United States and around the globe," he said on Tuesday's call.
-By Jon Kamp, Dow Jones Newswires; 617-654-6728;
jon.kamp@dowjones.com
--Tess Stynes and John Kell contributed to this article.
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