20. Hospira
$3.9 Billion
KEY EXECUTIVES:
F. Michael Ball, CEO
Thomas E. Werner, Sr. VP, Finance & Chief Financial Officer
Sumant Ramachandra, M.D., Ph.D.,Sr. VP & Chief Scientific Officer
Francois (Frans) L. Dubois, Sr. VP, Quality
James H. Hardy Jr., Sr. VP, Operations
NO. OF EMPLOYEES: 14,000
GLOBAL HEADQUARTERS:Lake Forest, Ill.
“If you can find a path with no obstacles, it probably doesn’t lead anywhere.”
—Frank A. Clark
Like most racing cyclists, Christopher B. Begley has become a master at dodging obstacles. He rarely embarks upon a clear path, one that is free of the various roadblocks that can sidetrack him or prevent him from crossing the finish line. Naturally, such paths are more difficult to maneuver, but Begley is always up for the challenge—in fact, he thrives on the adrenaline created by competition and the self-satisfaction of knowing he can overcome most any obstructions in his way.
“…with experience, training and a keen focus on staying the course, any obstacles can not only be overcome, they can be transformed into opportunities,” Begley writes in the company’s 2010 annual report, explaining to shareholders the lessons he’s learned from the bike racing circuit.
Such perseverance and razor-sharp focus has served Begley well in his day job as chairman and CEO of Hospira Inc., a specialty pharmaceutical and medication delivery company based in Lake Forest, Ill. Begley, who handed over the reigns of the company in March to F. Michael Ball, president of Botox maker Allergan Inc.,held the top spot at Hospira since the company’s 2004 spin-off from Abbott Laboratories. Over the last seven years, the firm’s market value more than doubled to $9 billion and its drug development pipeline has ballooned to include about 200 injectable generic drugs (among them: Precedex, Retacrit and Nivestim). The company also has grown into a global player from a largely U.S.-based operation, and executives are hoping to ensure future growth by launching a business to develop cheaper generic biotech drugs under the nation’s new healthcare reform law.
Like any bike race, though, Begley’s tenure hasn’t been obstacle-free. The economy’s self-implosion in 2008 and 2009 dampened demand for many of Hospira’s medication management products, leading to a 1.2 percent decrease in device-centric sales in 2009 and a 9.6 percent dive last year, though the 2010 drop-off partially was due to a recall of two models of the company’s infusion sets, according to the company’s 2010 annual report. Medication management devices—which include infusion pumps and administration sets, gravity administration sets, software applications and devices that support point-of-care medication administration, and Hospira MedNet safety software and related services—garnered $999.1 million for the company in 2010, year ended Dec. 31. Since the start of the recession in 2008, medication management device sales have fallen 10.7 percent.
Specialty injectable pharmaceutical revenue, on the other hand, climbed 13.3 percent last year to $2.3 billion. Sales of those products have skyrocketed 29 percent since the recession began, helping to bolster the company’s overall sales by 1 percent last year to $3.9 billion and 7 percent in 2009 to $3.8 billion. Adjusted gross margin and adjusted operating margin both improved in 2010, reaching 42.5 percent and 20 percent, respectively, up from 40 percent and 19 percent, respectively, in 2009.
Adjusted diluted earnings per share grew 6 percent to $3.31 per share.
“Like a road race, 2010 was a year marked with milestone achievements,” Begley noted, “as well as challenges scattered throughout the course.”
Those challenges included an April 2010 warning letter from the U.S. Food and Drug Administration (FDA) about manufacturing problems at its facilities in Rocky Mount and Clayton, N.C. The agency found that Hospira’s emulsion products at the Clayton facility did not meet manufacturing standards, and the manufacturing processes at Rocky Mount were not properly validated. Some of the problems were repeat violations that were first discovered in an FDA inspection in April 2009.
Other inadequacies cited by the FDA included procedures related to quality control, investigations and medical device reporting obligations. The FDA inspected the company’s Clayton facility in January and did not observe any violations; the agency was scheduled to examine the Rocky Mount plant during the second quarter of 2011.
Around the same time Hospira received the FDA’s warning letters, the company also was experiencing problems with its Symbiq and Plum A+ drug infusion pumps. The devices are designed to help healthcare professionals deliver specific amounts of drugs, blood products and other solutions intravenously into patients. They also are designed to detect air bubbles in intravenous lines, a potentially dangerous condition that could lead to a severe injury or death.
The company in April put a voluntary hold on shipping its Symbiq pumps to new customers after it received complaints about an alarm failure. It followed up the hold on shipments with a Class 1 recall in August, though the recall did not involve pulling pumps from hospitals that already use them. In October, Hospira decided to upgrade software on the Symbiq pumps; Begley said the company would not resume shipping the device until that upgrade is cleared by the FDA.
Hospira experienced the same alarm failure problem with its Plum A+ infusion pump, but the company is correcting the issue through a field recall.
Executives correlate the problems with both the Symbiq and Plum A+ pumps to the disappointing performance of its medication management business in 2010. Sales in that division were further impacted by an ongoing recall at Baxter International Inc., which is pulling 200,000 Colleague-brand infusion pumps from U.S. hospitals following years of problems. Baxter has two years to complete the recall while offering replacement devices or customer refunds, and Hospira officials have said the market has stalled while hospitals work through their options.
As if the problems with its infusion pumps were not enough, Hospira also experienced an increase in backorders in the middle of 2010, which hampered pharmaceutical sales. By the end of last year, the company had cut backorders in half and had drafted a plan to restore service levels to customers.
Overall profit at Hospira was further impacted last year by higher sales and promotional expenses as well as a 25 percent hike in research and development costs (the firm spent $300.5 million on R&D), including a payment related to a partner company developing a bone-marrow transplant product.