Hospira upgraded to 'Neutral' on lower share price

Hospira upgraded as analyst says lower price already reflects plant problems, slower growth

Associated Press

NEW YORK (AP) -- A UBS analyst upgraded shares of Hospira Inc. Friday, saying the drug and medical device maker's stock has fallen to a more reasonable price.

THE OPINION: Analyst Ami Fadia raised her rating to "Neutral" from "Sell" and increased her price target to $30 per share from $28. Fadia said Hospira still needs more time to address manufacturing problems and its earnings growth will probably be slow over the next few years, but those concerns are reflected in the stock price, which is trading at annual lows.

The analyst said problems at Hospira's manufacturing plants probably won't have a big impact on its income unless the Food and Drug Administration fines Hospira. She said the Lake Forest, Ill., company will spend more money on research and development in the coming years and its sedative Precedex will face generic competition starting in 2014, which will reduce earnings growth.

THE BACKGROUND: In 2010 the FDA said manufacturing processes at Hospira's facilities in Rocky Mount and Clayton, N.C., didn't meet regulatory standards. Hospira has been trying to fix the problems since then. The FDA also sent Hospira a warning letter in August 2012 after an inspection of a medical device facility in Costa Rica.

The Rocky Mount and Costa Rica facilities are two of the company's biggest manufacturing plants, as the Costa Rica makes most of its infusion devices and sets.

Hospira said it has recorded about $375 million in charges related to those problems and expects those costs to decrease in 2013. However the company has said is still has to do a lot of work to improve its medical device operations.

THE STOCK: Hospira shares rose 11 cents to $29.77 in midday trading. The stock has lost 15 percent of its value since Feb. 12, just before Hospira reported its fourth-quarter results.

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