07.22.14
$4.00 Billion
KEY EXECUTIVES:
F. Michael Ball, CEO
Richard J. Davies, Sr. VP and Chief Commercial Officer
John B. Elliot, Sr. VP, International Pharmaceutical Operations
Thomas E. Werner, Sr. VP, Finance, and Chief Financial Officer
Richard J. Hoffman, Corporate VP, Controller and Chief Accounting Officer
Zena G. Kaufman, Sr. VP, Quality
Sumant Ramachandra, M.D., Ph.D., Sr. VP, Chief Scientific Officer
Matthew R. Stober, Sr. VP, Operations
NO. OF EMPLOYEES: 17,000
GLOBAL HEADQUARTERS: Lake Forest, Ill.
It pays to be an optimist. Literally. In his 1991 book “Learned Happiness,” psychologist/educator/author Martin E.P. Seligman, Ph.D., claims optimists are more successful than cynics due to the way they handle setbacks. “They perceive it as a challenge and try harder,” he noted in his book.
Michael F. Scheier, a psychology professor and head of Carnegie Mellon University’s Psychology Department, came to the same conclusion in 2010, contending that optimists’ “active coping techniques” make them less prone to failure.
“We know why optimists do better than pessimists,” Scheier told The Atlantic in a 2012 interview. “The answer lies in the differences between the coping strategies they use. Optimists are not simply being Pollyannas; they’re problem- solvers who try to improve the situation. And if it can’t be altered, they’re also more likely than pessimists to accept that reality and move on.”
F. Michael Ball easily fits that description. The Hospira Inc. CEO has been inspired—energized, really—by the company’s ensuing string of troubles, and he’s maintained a positive attitude in the face of mounting hardships.
Such sanguinity served Ball well last year as he confronted the company’s ongoing issues with product recalls and manufacturing deficiencies. U.S. Food and Drug Administration (FDA) inspectors found fault once again with the firm’s Rocky Mount, N.C., facility, citing the plant in March for nearly two dozen violations of Current Good Manufacturing Practices and poor quality control. The issues have hounded Hospira for the last three years and have led to drug shortages resulting in small batch releases. JPMorgan Chase & Co. estimates that 47 percent of the FDA’s Drug Shortage List was either fully or partly manufactured by the 10-year-old firm.
The Rocky Mount citation was just the start of Hospira’s regulatory woes in 2013: The company’s Costa Rica-made infusion pumps earned an import ban during the winter, and its GemStar system ran into FDA trouble twice—once in the spring for a faulty battery, and again in the fall for malfunctioning pressure sensors. Both problems resulted in Class I recalls.
In May, Hospira’s infusion pump manufacturing site at its Lake Forest, Ill., headquarters came under fire for alleged failures in design, corrective action, records maintenance, document controls and adverse event reporting. In a May 9 warning letter, FDA inspectors chided the firm for failing or refusing to report the results of adverse events, improperly handling customer complaints, and mislabeling the Plum A+ pump’s battery, among other problems.
Perhaps most troubling about the May 9 letter, however, was the FDA’s concerns with Hospira’s plan to streamline and modernize its infusion systems. The firm is spending up to $350 million to retire its Symbiq, GemStar and older Plum pumps—all of which have endured regulatory troubles—and replace them with the Plum A+, LifeCare PCA and Sapphire models (Hospira obtained the latter system through a licensing agreement with Q Core Medical in January 2013). Coupled with its “Global Device Strategy” was a promise from Hospira to amend its quality systems to avoid future problems with the FDA. The company has spent $375 million since the third quarter of 2011 in various remediation efforts for its pharmaceuticals and infusion pumps, both of which have been targeted by the FDA for quality and safety issues.
Hospira bigwigs are counting on the Global Device Strategy to reduce complexity, enhance pump performance and improve the company’s ability to meet customer expectations and regulatory standards. The FDA is not so hopeful, though.
“FDA acknowledges your firm’s Global Device Strategy,” the agency’s May 9 letter stated. “FDA has significant concerns, however, with the timeliness of your firm’s plan to replace Symbiq, GemStar and other legacy infusion pumps with remediated Plum A+ pumps.”
Hospira’s bureaucratic bungles were not limited to its infusion pump business, however. In May (a particularly cursed month), the company received an FDA warning letter for reported good manufacturing practice deficiencies at its pharmaceutical production facility in Irungattukottai, India. The letter cited the firm’s failure to establish and follow appropriate written procedures, including improper facility maintenance and validation of all aseptic and sterilization processes.
Not surprisingly, the FDA’s incessant nitpicking impacted 2013 revenues. Sales remained largely stuck in neutral, hovering at $4 billion for the third consecutive year (about the extent of the FDA’s warning letter continuum), and gross profit slid 3 percent to $1.08 billion.
The company’s full-year 2013 income from operations was obliterated by warning letter-related charges, corrective action costs, higher SG&A expenses and implementation of the Global Device Strategy. On a GAAP basis, income plunged 71 percent to $17 million, according to Hospira data.
Medication Management product revenue (earnings from drug delivery pumps, safety software and disposable administration sets) took a big hit in 2013 (year ended Dec. 31), plummeting 24.3 percent, but the decrease partially was offset by a 7.4 percent spike in specialty injectable pharmaceuticals (SIP).
Executives attributed the robust SIP sales to improved pricing and supply in the United States, though the increase partly was hampered by declines in both U.S. docetaxal proceeds and Medication Management revenue.
Nevertheless, Hospira’s SIP products out-performed its infusion pumps in every world region last year, besting the systems by 33 percent in the Americas; 23 percent in Europe, the Middle East and Africa; and 16.6 percent in Asia Pacific. Medication Management sales were worst in the Americas, where revenues sank 25.6 percent to $630 million.
Ball, naturally, was unfazed by the losses. He remained characteristically upbeat in his annual shareholder message, branding 2013 a “year of significant progress” that allowed Hospira to reinforce its foundation for growth. “The progress we’ve made is driving results—and advancing the many opportunities we’re pursuing for growth tomorrow,” Ball said in the opening pages of the 2013 annual report. “The initiatives... represent a ‘sea of opportunity’ for Hospira. They also address many of the pressing issues facing our customers and global healthcare today...we believe the progress we have made in both reinforcing our foundation and turbocharging growth position us well going forward. We are tapping into many of the opportunities available to Hospira today, towards our goal of delivering sustainable growth and shareholder value.”
Spoken like a true optimist.
KEY EXECUTIVES:
F. Michael Ball, CEO
Richard J. Davies, Sr. VP and Chief Commercial Officer
John B. Elliot, Sr. VP, International Pharmaceutical Operations
Thomas E. Werner, Sr. VP, Finance, and Chief Financial Officer
Richard J. Hoffman, Corporate VP, Controller and Chief Accounting Officer
Zena G. Kaufman, Sr. VP, Quality
Sumant Ramachandra, M.D., Ph.D., Sr. VP, Chief Scientific Officer
Matthew R. Stober, Sr. VP, Operations
NO. OF EMPLOYEES: 17,000
GLOBAL HEADQUARTERS: Lake Forest, Ill.
It pays to be an optimist. Literally. In his 1991 book “Learned Happiness,” psychologist/educator/author Martin E.P. Seligman, Ph.D., claims optimists are more successful than cynics due to the way they handle setbacks. “They perceive it as a challenge and try harder,” he noted in his book.
Michael F. Scheier, a psychology professor and head of Carnegie Mellon University’s Psychology Department, came to the same conclusion in 2010, contending that optimists’ “active coping techniques” make them less prone to failure.
“We know why optimists do better than pessimists,” Scheier told The Atlantic in a 2012 interview. “The answer lies in the differences between the coping strategies they use. Optimists are not simply being Pollyannas; they’re problem- solvers who try to improve the situation. And if it can’t be altered, they’re also more likely than pessimists to accept that reality and move on.”
F. Michael Ball easily fits that description. The Hospira Inc. CEO has been inspired—energized, really—by the company’s ensuing string of troubles, and he’s maintained a positive attitude in the face of mounting hardships.
Such sanguinity served Ball well last year as he confronted the company’s ongoing issues with product recalls and manufacturing deficiencies. U.S. Food and Drug Administration (FDA) inspectors found fault once again with the firm’s Rocky Mount, N.C., facility, citing the plant in March for nearly two dozen violations of Current Good Manufacturing Practices and poor quality control. The issues have hounded Hospira for the last three years and have led to drug shortages resulting in small batch releases. JPMorgan Chase & Co. estimates that 47 percent of the FDA’s Drug Shortage List was either fully or partly manufactured by the 10-year-old firm.
The Rocky Mount citation was just the start of Hospira’s regulatory woes in 2013: The company’s Costa Rica-made infusion pumps earned an import ban during the winter, and its GemStar system ran into FDA trouble twice—once in the spring for a faulty battery, and again in the fall for malfunctioning pressure sensors. Both problems resulted in Class I recalls.
In May, Hospira’s infusion pump manufacturing site at its Lake Forest, Ill., headquarters came under fire for alleged failures in design, corrective action, records maintenance, document controls and adverse event reporting. In a May 9 warning letter, FDA inspectors chided the firm for failing or refusing to report the results of adverse events, improperly handling customer complaints, and mislabeling the Plum A+ pump’s battery, among other problems.
Perhaps most troubling about the May 9 letter, however, was the FDA’s concerns with Hospira’s plan to streamline and modernize its infusion systems. The firm is spending up to $350 million to retire its Symbiq, GemStar and older Plum pumps—all of which have endured regulatory troubles—and replace them with the Plum A+, LifeCare PCA and Sapphire models (Hospira obtained the latter system through a licensing agreement with Q Core Medical in January 2013). Coupled with its “Global Device Strategy” was a promise from Hospira to amend its quality systems to avoid future problems with the FDA. The company has spent $375 million since the third quarter of 2011 in various remediation efforts for its pharmaceuticals and infusion pumps, both of which have been targeted by the FDA for quality and safety issues.
Hospira bigwigs are counting on the Global Device Strategy to reduce complexity, enhance pump performance and improve the company’s ability to meet customer expectations and regulatory standards. The FDA is not so hopeful, though.
“FDA acknowledges your firm’s Global Device Strategy,” the agency’s May 9 letter stated. “FDA has significant concerns, however, with the timeliness of your firm’s plan to replace Symbiq, GemStar and other legacy infusion pumps with remediated Plum A+ pumps.”
Hospira’s bureaucratic bungles were not limited to its infusion pump business, however. In May (a particularly cursed month), the company received an FDA warning letter for reported good manufacturing practice deficiencies at its pharmaceutical production facility in Irungattukottai, India. The letter cited the firm’s failure to establish and follow appropriate written procedures, including improper facility maintenance and validation of all aseptic and sterilization processes.
Not surprisingly, the FDA’s incessant nitpicking impacted 2013 revenues. Sales remained largely stuck in neutral, hovering at $4 billion for the third consecutive year (about the extent of the FDA’s warning letter continuum), and gross profit slid 3 percent to $1.08 billion.
The company’s full-year 2013 income from operations was obliterated by warning letter-related charges, corrective action costs, higher SG&A expenses and implementation of the Global Device Strategy. On a GAAP basis, income plunged 71 percent to $17 million, according to Hospira data.
Medication Management product revenue (earnings from drug delivery pumps, safety software and disposable administration sets) took a big hit in 2013 (year ended Dec. 31), plummeting 24.3 percent, but the decrease partially was offset by a 7.4 percent spike in specialty injectable pharmaceuticals (SIP).
Executives attributed the robust SIP sales to improved pricing and supply in the United States, though the increase partly was hampered by declines in both U.S. docetaxal proceeds and Medication Management revenue.
Nevertheless, Hospira’s SIP products out-performed its infusion pumps in every world region last year, besting the systems by 33 percent in the Americas; 23 percent in Europe, the Middle East and Africa; and 16.6 percent in Asia Pacific. Medication Management sales were worst in the Americas, where revenues sank 25.6 percent to $630 million.
Ball, naturally, was unfazed by the losses. He remained characteristically upbeat in his annual shareholder message, branding 2013 a “year of significant progress” that allowed Hospira to reinforce its foundation for growth. “The progress we’ve made is driving results—and advancing the many opportunities we’re pursuing for growth tomorrow,” Ball said in the opening pages of the 2013 annual report. “The initiatives... represent a ‘sea of opportunity’ for Hospira. They also address many of the pressing issues facing our customers and global healthcare today...we believe the progress we have made in both reinforcing our foundation and turbocharging growth position us well going forward. We are tapping into many of the opportunities available to Hospira today, towards our goal of delivering sustainable growth and shareholder value.”
Spoken like a true optimist.