Hospira expects to start first commercial production from Vizag facility this year

US-based generic injectables manufacturer Hospira Inc is planning first commercial production in its pharmaceutical manufacturing facility at Vizag, in Andhra Pradesh, to start by the end of 2014. The company is expecting a capital expenditure of $90 million in India this year, in the backdrop of the setting up of the facility.

The company estimates a capital expenditure of $375-450 million for the Vizag capacity expansion, in total. Elaborating on the plans, a Hospira spokesman said, "We expect to begin initial commercial operations at Vizag by the end of this year."

He added that there are two facilities at Vizag, a terminal sterilisation  facility and an aseptic sterilization facility. "The company is not bringing both the buildings or all production lines up at once, but are planning to ramp up production in 2015 and continue thereafter. Once fully up and running, Vizag will have a total capacity of 500 million vials a year," said the spokesman.

The production in the specialty injectable manufacturing facility, which is utilising long-term land leases acquired in 2010, would increase over the course of next several years, starting the commercial production by the end of the year.

According to information available, the company has been engaged in construction of the facility from 2011. Of the aggregate estimate of $375 million to $450 million capital expenditures for Vizag capacity expansion, it has already incurred total capital expenditures of $227.2 million through December 31, 2013. It has made capital expenditures of $74.1 million, $73.4 million and $79.7 million in the years 2013, 2012 and 2011, respectively.

"Capital expenditures in 2014 are expected to be approximately $90 million with the remaining amounts to be capitalized in subsequent years," said a company document.

The facility is part of the company's effort to ensure aligning its manufacturing capacity with expected future commercial growth and demand. Further, the company expects continued higher levels of capital expenditures related to modernization and streamlining at its existing facilities over the next few years, it added.

It may be noted that the company, in 2012, has announced that it is acquiring the penicillin and penem active pharmaceutical ingredience (API) business and the API facility at Aurangabad, in Maharashtra, along with an associated process R&D infrastructure in Chennai, through its Indian subsidiary, for a total cash consideration of around $ 200 million. Earlier, in December 2009, It has acquired the generic injectables business of Orchid Chemicals and Pharmaceuticals Ltd through its subsidiary, Hospira Healthcare India Pvt Ltd, for a consideration of around $400 million.

The company also has a joint venture with Gujarat-based Cadila Healthcare Ltd, Zydus Hospira Oncology Pvt Ltd (ZHOPL). The JV began commercial manufacturing of injectable cytotoxic drugs in the first half of 2009 and manufactures docetaxel which Hospira launched in the US and Australia in 2011. During the years ended December 31, 2013 and 2011 distributions received by Hospira from ZHOPL were $37.5 million and $40 million, respectively, says the company.

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