By Bruce Japsen | Hospira Inc. said today profits dropped 14 percent in the first quarter
of this year thanks largely to an unusual gain the company had from a
tax settlement in the same period a year ago.

The Lake Forest-based maker of medication delivery devices and generic
injectable drugs reported profits of $141.7 million, or 84 cents,
compared to $165.5 million, or $1.03 in the quarter a year before. Sales
rose 17 percent to $1 billion on improved sales of injectables, such as
the intravenous sedation treatment Precedex.

Hospira said the earnings drop was primarily related to a 57-cent benefit “realized in the first quarter of 2009 from the settlement of a U.S. Internal Revenue Service audit.”

The price of Hospira shares fell nearly 2 percent, or $1.04, to $54.96 in afternoon trading on the New York Stock Exchange.

However, adjusted earnings per share jumped 57 percent to 94 cents, compared to 60 cents in the first quarter of 2009. That adjusted estimate beat Wall Street expectations by 22 cents, the company said.

Hospira raised its earnings guidance for 2010, citing improved sales of certain products, and what executives believe will be improved purchasing from hospitals as they ramp up capital spending on new devices and other products as the economy recovers.

Hospira now says full-year adjusted earnings per share will be in the range of $3.35 to $3.45, from $3.25 to $3.35.

Still, a wild card for Hospira will be the impact of the warning letter the company received last week from the U.S. Food and Drug Administration, saying the medical device maker violated federal “good manufacturing practice” guidelines at plants in the North Carolina cities of Rocky Mount and Clayton.

The letter was related to “certain emulsion products at the Clayton facility and the failure to adequately validate processes used to manufacture the company’s products at the Rocky Mount facility.”

Hospira executives said today the FDA inquiry has resulted in the company suspending sales of two products — nutritional supplement Liposyn, and the anesthesia drug Propofol. Both products generate a small amount of sales; the company would not disclose the exact number.

Unrelated to the FDA inquiry in North Carolina, Hospira also said it was “proactively” ceasing sales of its infusion pump Symbiq; customers complained the alarm failed “at the end of infusion in certain conditions.”

Unlike other drug and device makers that lowered their earnings guidance, citing the health care reform law, Hospira chief executive Christopher Begley said the bill signed into law last month by President Barack Obama “represents a positive opportunity for Hospira.” In the future, Hospira will be able to sell cheaper versions of brand biotech drugs thanks to health care reform legislation.

Hospira will benefit long-term because it makes generic versions of expensive drugs derived from biotechnology. Hospira already sells so-called “biogenerics” outside the U.S., but has been unable to do so here because the FDA does not have a regulatory pathway to do so.