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Hospira slowly ramps up production

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Hospira is slowly ramping up production at the manufacturing plants it has been upgrading to get critical drugs back to the market, CEO Michael Ball told analysts Wednesday. It, however, will not hesitate to cut that off if there is any sign that higher production is putting its extensive remediation efforts in jeopardy.

Hospira ($HSP) has undertaken improvements throughout its manufacturing system after the FDA last year found extensive problems, steps that have led to shortages of a number of commonly prescribed generic sterile injectable drugs. Ball said the work is taking longer and costing more than he has twice projected and will now top out at more than $375 million.

The company anticipates an FDA inspection in the first or second quarter of 2013 at its Rocky Mount, NC, plant, which could provide it with a clean bill of health and the confidence to crank up production to preremediation levels. He called that inspection a "seminal event" but acknowledged that production levels are in its own hands. "We can ramp the plant up as we believe we should and are able to, but that FDA inspection will be critical in terms of telling us the path forward," Ball said.

The executive ticked through the list of other plants, updating analysts on improvements at each, according to a transcript of the call on Seeking Alpha. While more costly than expected, Ball said having top-notch facilities will give Hospira a competitive advantage. Among the improvements are upgrades to its IT systems, from computer systems "to manage batch documentation release, to systems that track the training and qualifications of our employees." He said those upgrades should make Hospira's manufacturing more "robust" and result in "better first-pass quality, more stable production and eventually, lower waste and overall cost."

The call came after the company released its earnings, which showed it had swung to a small profit for the quarter, $1.2 million, or 1 cent a share, compared with the $88.9 million loss a year earlier. Revenue was up 1.8% to $994 million.

Ball also talked about growth, pointing out that the $200 million acquisition of the Orchid Chemicals & Pharmaceuticals API plant in India will allow Hospira to vertically integrate APIs into certain beta-lactam antibiotics and improve costs. "With all of the remediation activity, it's easy to lose sight of our powerful fundamentals and exciting prospects," Ball said. "Let me remind you, we currently supply more than 200 generic injectable drugs to the market. We have 1/3 of the market share in the U.S., giving us the leading market share position."

- here's the earnings report
- Seeking Alpha earnings call transcript

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