Hospira pulling the plug on troubled devices

Hospira hopes to reverse its fortunes by retiring troubled infusion devices like the GemStar.--Courtesy of Hospira

After a year of recalls, bans and technical failures, Hospira ($HSP) is changing the way it does business in medical devices, planning to discontinue some of its infusion pumps and focus on next-generation technology.

The Illinois company has been beset by regulatory problems with its pumps, and the resultant costs have marred Hospira's financials. Last quarter, the company posted a $76.6 million net loss, thanks to swelling expenses and an 8.5% decline in sales.

In response, Hospira is cutting some of its losses. First, the company will retire its Symbiq infusion device, which the FDA banned from importation in November, and its GemStar ambulatory pump, the subject of a Class I recall last month. In their place, Hospira will focus on the Plum A+ pump and the Sapphire ambulatory device, which the company licensed from Q Core Medical back in January.

The second prong of Hospira's plan involves investing in the development of new technologies and stronger quality systems, planning to roll out new interoperable pumps and buckle down to avoid further FDA scorn.

All told, the "device strategy," as Hospira termed it, cost the company about $181.5 million last quarter and will bring down full-year sales by between 2% and 4%, the company said.

"With a streamlined and modernized portfolio, we will reduce complexity, improve performance and be better positioned to meet the expectations of customers and regulatory agencies today, while developing tomorrow's next-generation technologies," Chief Commercial Officer Richard Davies said in a statement.

While Hospira's infusion woes began with device-by-device failures and recalls, the latest issues seemed to suggest systemic problems. In February, the FDA cited 10 objectionable conditions at Hospira's Illinois headquarters. The agency also extended its ban on infusion pumps made at Hospira's Costa Rica plant, and, if that stays in effect through 2013, it would cut between $50 million and $100 million from annual sales, the company said.

- read Hospira's announcement
- check out the company's financials

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