Layoffs to Begin as Hospira Sets Date for N.C. Plant Closure
May 7, 2015
By Alex Keown and Riley McDermid, BioSpace.com Breaking News Sr. Editor
RALEIGH, N.C. – Illinois-based Hospira, Inc. will terminate 100 employees beginning in July as it shutters its plant in Clayton, N.C., the company confirmed this morning.
The injectable-drugmaking company will spend about $15 million on severance and other employee assistance programs, the company said when it first announced the impending closing. In January the company announced it would shutter the Clayton site, which will impact about 250 employees. In its filing with the U.S. Securities and Exchange Commission, the company said the plant closing “results from extensive analysis of the plant, careful assessment of market needs for the products manufactured there, and available capacity within our operations network, and is part of the company’s ongoing optimization and modernization efforts.”
Hospira’s stock dipped slightly this morning at $87.60 from its open of $87.70.
Hospira manufactures specialty injectables, biosimilars, medication management systems, infusion therapy solutions and supplies and third-party contract manufacturing. Its brand products include the iSecure syringe, a pre-filled, ready-to-use, disposable syringe, biosimilars such as Inflectra (infliximab), Retacrit (epoetin zeta) and Nivestim (filgrastim). It also manufactures electronic infusion pumps such as Plum A+ and LifeCare PCA.
The company announced the terminations will occur over a two-week period in a Worker Adjustment and Retraining Notice filed Monday with the N.C. Department of Commerce. The terminated employees will be eligible to apply for other positions in the global company. Hospira operates another facility in Rocky Mount, N.C., about an hour east of Clayton. The company also operates facilities in Austin, Texas, Boulder, Colo., Buffalo, N.Y. and McPherson, Kan. Hospira also maintains facilities in several countries around the world. In its WARN letter the company said it is working to find jobs at other sites for some employees.
In 2010 the U.S. Food and Drug Administration (FDA) flagged Hospira’s N.C. sites noting 20 concerns that manufacturing practices at the plant violated the regulatory agency’s defined standard practices. In its 2010 letter to Hospira, the FDA said the company “failed to assure adequate process design and control of Liposyn, Propofol and Cleviprex emulsion products to prevent objectionable particulate contamination (primarily stainless steel),” at the Clayton site.
In 2012 the Rocky Mount site was operating at less than 70 percent capacity, Outsourcing Pharma said. Later that year Hospira pledged to invest $85 million and create 200 new positions at the plant. Hospira, which claims to be the leading provider of injectable drugs and infusion technologies, employs 15,000 people worldwide. The company, which was formerly the hospital products division of Abbott Laboratories , was spun off from Abbott in 2004.
On April 8, Hospira, Inc. was once again being reprimanded by the U.S. Food and Drug Administration (FDA), this time via a warning letter detailing violations in standard drug manufacturing practices at its facility in Liscate, Italy.
The letter, dated March 31, does not restrict the production or shipment of pharmaceutical products from the facility, but it does say that Hospira had not made “sufficient corrective actions" after the FDA visited the plant twice last May and found multiple violations.
Hospira Inc, which said in February it will be acquired by global drug giant Pfizer Inc. for $15 billion, has run afoul of the FDA’s manufacturing practices before, most recently in October 2014.
In October, Hospira announced that it received a similar warning letter from the FDA Australian manufacturing facility in Mulgrave, Victoria, chiding the firm for not sufficiently correcting manufacturing problems observed by the FDA during an inspection of the plant between February 24 and March 1 of 2014.
The letter, posted in an 8-K filing by Hospira, states that, “Until all corrections have been completed and FDA has confirmed corrections of the violations and your firm’s compliance with CGMP, FDA may withhold approval of any new applications or supplements listing your firm as a drug product manufacturer.”
In the 8-K filing, Hospira states, “The company takes this matter seriously, and intends to respond fully and in a timely manner to the FDA’s warning letter.”
Though the FDA warning letter does not restrict the production of or the shipment of products from the Mulgrave plant at this time, Hospira acknowledges in the filing that, “There can be no assurance that the FDA will be satisfied with the company’s response. Until the violations are corrected, the company may be subject to additional regulatory action by the FDA. Any such further action could, ultimately, be significant to our ongoing business and operations.”
The company indicates in the same document that it does not believe the warning will impact its 2014 financial guidance.
The FDA letter read, “During our inspection of your pharmaceutical manufacturing facility, Hospira Australia Pty, Limited located…[in] Mulgrave, Victoria, Australia, dated February 24 through March 1, 2014, investigators from the U.S. Food and Drug Administration (FDA) identified significant violations of current good manufacturing practice (CGMP) regulations for finished pharmaceuticals….These violations cause your drug product(s) to be adulterated.”
The FDA acknowledged that Hospira did respond to the infractions noted, however, the response was insufficient. In the most recent warning letter, the FDA states, “We have conducted a detailed review of your firm’s response dated March 21, 2014 and note that it lacks sufficient corrective actions.”
There has been some good news for the company, however, The chief executive of Hospira, Inc., Michael Ball, is expected to receive more than $80 million from the $15 billion acquisition deal the company just inked with Pfizer Inc. (PFE), based on a review conducted by Crain’s Chicago Business of Hospira filings.
The newspaper reported in early February that the filings detail Bell’s ownership of company stock, stock options, restricted shares and severance compensation tally up to a combined $81 million in payouts to the former CEO—though no new job with the merged company.
Hospira will see all stock options and share awards converted into cash automatically upon completion of the deal, at the $90-per-share buyout price.
“After deducting the exercise prices of his options. Ball would collect $60 million on options and restricted shares alone,” wrote columnist Joe Cahill. “Add $90 apiece for another 148,000 shares he owns outright, according to the company's most recent proxy statement, and his net from the deal rises to more than $73 million.”
“He also is entitled to severance pay equal to 2.99 times his annual salary and bonus if he leaves Hospira after the merger, as he is expected to do,” he said. “That comes to about $8 million, according to the proxy, bringing his grand total to about $81 million.”
In addition, while deal hungry Pfizer Inc. (PFE) may have seen $6 billion in market cap tacked on after it announced a $15 billion acquisition of Hospira, Inc. to bolster its hospital products business, but that’s no guarantee the firm will escape its perennially bad track record with M&A activity, market watchers have said, or that it’s done making buys.
Pfizer’s purchase of the injectable drugmaker last week looks like a good bet to analysts, who like the potential it has for a spin off and the more than $800 million in cost savings it could bring to the company.
“I don't think this deal is a game changer for Pfizer but helps them build out their sterile injectables business without wildly overpaying for assets, as the company has done in the past," portfolio manager Les Funtleyder of E Squared Asset Management, told Reuters.
Will Hungry Pfizer Make a Play for Struggling GlaxoSmithKline?
Almost a year after its $119 billion offer for AstraZeneca PLC fell apart in the face of massive opposition from regulators and internal dissent, global drugmaker Pfizer Inc. is once again being floated as a potential buyer of another marquee-name British pharmaceutical company: GlaxoSmithKline . We at BioSpace want to know your thoughts: With cash to burn, will Pfizer go hunting for Glaxo?