HSP

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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