Hospira moves forward with two plants in India

CEO says Rocky Mount inspection key but other projects important
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CEO F. Michael Ball

Hospira officials are walking on pins and needles as FDA inspectors slowly and deliberately reinspect the Rocky Mount, NC, plant that has been at the heart of its manufacturing woes. But that process will be lengthy, CEO F. Michael Ball predicts, and in the meantime, Hospira has a lot more that it is doing on its manufacturing network.

Hospira ($HSP) has two large projects under way in India, the construction of one plant and a $200 million deal to buy a plant from Orchid Chemicals & Pharmaceuticals. During an earnings call with analysts Wednesday, CFO Thomas Werner said Hospira has expanded the scope of work on a new manufacturing plant in Vizag, India, to include visual inspection equipment. It has already spent $150 million on the plant and now expects the total investment to run from $375 million to $450 million. The facility, which will produce specialty injectable drugs, is forecast to begin commercial production in the second half of 2014 and ramp up over the following 24 months.

He said a deal announced last year for Hospira to buy Orchid's FDA-approved API plant in Aurangabad, India, should close in the first half of this year. That will secure Hospira's place in penems and penicillins. The 538,196-square-foot plant was built in 2000 and employs 640 workers.

Still, in discussing its earnings picture, executives did not ignore the price of the massive upgrade of its Rocky Mount plant as well as improvement to others. Werner says the outlay on Rocky Mount will cost more than the $375 million last projected. Some of the cost was for tens of thousands of hours in consultant time.

Ball explained that the company's forecast for 1% to 3% growth in sales in 2013 is predicated on a successful inspection of its Rocky Mount facility. "To us [that] would entail the FDA saying, 'Yes, you made progress. Yes, you have met your commitments and that the cadence of remediation seems appropriate.' And if we get those types of responses, then the net-net from that will be that we will be able to continue to increase the release of supply out of Rocky Mount, in my view. So that's what success would look like."

- here's a transcript of the call from Seeking Alpha

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