HSP

Hospira Inc.’s (HSP) shares fell significantly following the import ban imposed by the US Food and Drug Administration (FDA) on some of the company’s offerings. Hospira withdrew its guidance for 2013 following the FDA decision.

We remind investors that in Nov 2012, the FDA had issued a directive prohibiting the Hospira from importing Symbiq medication infusion pumps, manufactured at its Costa Rica facility, into the US. However, a few days back the FDA dealt a more damaging blow to Hospira when it expanded the import ban. Following the fresh directive, Hospira is also prohibited from importing Plum, GemStar and LifeCare PCA infusion pumps, manufactured in Costa Rica, into the US. Hospira stated that it intends to support the repair and service of the affected pumps to existing customers.

Hospira expects the expansion of the import ban to adversely impact its 2013 net sales by $50–$100 million. The expectation is based on the assumption that the ban will stay throughout 2013. The company also expects the FDA’s action to hurt its adjusted per share earnings guidance of $2.05 to $2.20 (issued while releasing its  fourth quarter and full year 2012 earnings results )  by 5–15 cents per share. Hospira intends to issue a new guidance for 2013 while releasing its earnings results for the first quarter of 2013 later this year.

Apart from the issue related to the infusion pumps, Hospira is facing many other challenges. The ongoing manufacturing issues at its Rocky Mountain facility have hurt the company’s earnings over the last few quarters. The issue, until resolved, will remain a major overhang on the stock. Manufacturing issues at Hospira’s other facilities, such as at Lake Forest, McPherson, Austin and IKKT are further challenges for this global specialty pharmaceutical and medication delivery company.

Hospira carries a Zacks Rank #3 (Hold). Favorably placed stocks in the medical sector include Covidien plc (COV), Medtronic, Inc. (MDT) and Edwards Lifesciences Corporation (EW). All these stocks carry a Zacks Rank #2 (Buy).
 

 
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