Hospira Falls After Cutting Annual Forecast on Plant Costs

Hospira Inc. (HSP), a maker of generic injectable drugs, declined the most ever after the company reduced its annual earnings forecast to reflect costs to improve manufacturing at a North Carolina factory.

Hospira slid 21 percent to $29.51 at 4 p.m. New York time, the biggest drop since the company spun off from Abbott Laboratories (ABT) and shares began trading May 3, 2004. The Lake Forest, Illinois-based company expects adjusted earnings for the year of $2.95 to $3.05 a share, less than the analysts’ consensus estimate of $3.91.

“We were extremely disappointed in the third quarter by developments related to our quality-improvement initiatives that resulted in a significant slowdown of production and an associated impact on our operating performance,” said Hospira Chief Executive Officer Michael Ball in a statement.

The reduction in projected earnings resulted from costs to improve quality at the plants. The U.S. Food and Drug Administration in April 2010 identified manufacturing issues at two North Carolina plants. The concerns at one plant have been resolved with the FDA and those at another in Rocky Mount, North Carolina, are still getting addressed, Ball said.

Analyst Downgrade

The Rocky Mount plant makes products comprising about a quarter of Hospira’s revenue, Rick Wise, an analyst Leerink Swann, said in a note to clients. He downgraded the stock today to a “market perform” rating from “outperform.”

“It now appears that the manufacturing disruption, time to resolution and cost to fix all these issues clearly is greater than expected,” Wise said in his note. He predicted the company may be dealing with costs from the manufacturing problems until early 2013.

Hospira recalled two drugs in April 2010 for a second time in six months because of manufacturing defects, the company said at the time. The recalled drugs -- Propofol, an anesthetic agent, and Liposyn, an intravenous nutritional product -- had been contaminated by particulates during the manufacturing process, the company said it told the FDA.

To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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