Hospira faces lawsuits from disgruntled investors
pharmafile | January 9, 2012 | News story | Manufacturing and Production |Â Â Hospira, generics, manufacturingÂ
Angry investors in US generic drugmaker Hospira have filed a class action lawsuit against the company, alleging that it misled them over the extent of problems at one of its primary manufacturing facilities.
The company faces at least two lawsuits filed on behalf of groups of investors claiming that Hospira did not properly disclose the quality control problems it was facing, and that a reinvigoration programme called Project Fuel, announced by the firm in 2009, has been largely undermined by the compliance issues.
Towards the end of last year, Hospira announced that it would have to spend $375 million on upgrades to its manufacturing facilities designed to back them back into compliance with GMP, upping its earlier cost estimate by more than $100 million.
The greatest portion of the money will be spent on Hospira’s Rocky Mount facility in North Carolina, which makes injectable generics and was the subject of warning letter from the US FDA last year.
Hospira is facing continued manufacturing problems at the facility, which accounts for approximately 25% of the company’s overall net sales.
The compliance issues were instrumental in pegging back the drugmaker’s revenues and profits in the third quarter of 2011, with lost sales exacerbated by costs associated with remediation and quality control investments.
Rocky Mountain is currently operating at around 60%-70% of normal capacity, according to analysts at Zacks Equity Research.
Hospira’s share price was reliably in the $50-$60 range in the first six months of 2011, but fell rapidly after the extent of the manufacturing issues were revealed and is currently languishing around $30.
The weakness has led to speculation that the company could be vulnerable to a hostile takeover bid.
Meanwhile, Hospira is facing increasing pressure to prevent its muscle relaxant drug pancuronium being used for executions in the US, with a group of physicians demanding that it put in place a restricted distribution system for the drug. The company has already stopped making another drug used in executions – called thiopental – but has held back from restricting pancuronium supplies for fear of jeopardising access to the drug for other uses.
Phil Taylor
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