US pharmaceutical company Hospira to cut 10 per cent of workforce
25 Mar 2009
Hospira Inc, a leading US global specialty pharmaceutical and medication delivery company, yesterday it expects to cut about 10 per cent of its workforce, or 1,400 jobs, as part of a plan to reduce costs and become more efficient. The majority of the job cuts will take place over the next 12 months, it said.
The company, whose shares rose almost 8 per cent, said most of its job cuts are expected within the next 12 months and that its new "Project Fuel" restructuring initiatives this year could create $8 million to $10 million in annualised pretax cost savings.
Hospira also said it would consider exiting or divesting non-strategic assets aside from its main growth businesses of generic injectable medicines and medication management systems, including drug infusion pumps. Price increases or cost cutting might improve profitability of its injectable products, Hospira officials said.
"We understand the impact these decisions have on our employees and their families, especially during tough economic times," said Chairman and CEO Christopher B Begley, in a statement. "Our actions, while difficult, are designed to benefit all of our stakeholders by ensuring a strong foundation for our future."
"To maximize our opportunities for growth and sustainable shareholder value, Hospira is taking a number of important steps to simplify our business, strengthen our financial position and establish a strong foundation for our future. By reducing costs and improving efficiencies, we can free up more dollars to invest for profitable growth and shareholder returns. And with a streamlined, focused organization, we will reduce complexity, improve performance and be better positioned to advance our significant opportunities," Begley added.
In connection with these actions, Hospira estimates it will incur total pre-tax charges in the range of $140 million to $160 million, of which approximately $90 million to $100 million will be incurred during 2009. The total charges for the project include cash costs of approximately $120 million, primarily related to restructuring costs, including employee-separation and other costs, as well as process optimization implementation costs.
Approximately $30 million of non-cash costs is related to various potential asset write-downs. Hospira expects these actions will deliver annualized pre-tax savings of approximately $8 million to $10 million in 2009 and approximately $110 million to $140 million on an annualized run-rate basis, which it expects to reach by the second quarter of 2011.
Hospira shares were up $2.04 or 7.8 per cent at $28.37 on the New York Stock Exchange on Tuesday afternoon.
