Hikma Wins $10 Million Libyan Order After Arab Spring

Hikma Pharmaceuticals Plc won two orders valued at as much as $10 million combined from the transitional government in Libya, Chief Executive Officer Said Darwazah said.

Governments emerging from the Arab Spring revolts, eager to earn goodwill with citizens, have increased spending on drugs, Darwazah said, helping the company withstand a temporary blow to sales from the turmoil. Hikma was one of the first companies to negotiate with Libya’s new leaders, he said.

“The government there is very excited to provide health care to the people,” Darwazah said in a Nov. 14 interview. “In Libya, the need is tremendous. There’s huge demand there for even basic health care. The new government is trying to catch up and get supplies in as fast as possible.”

The turmoil chipped away at Hikma’s Middle Eastern sales by about 3 percent to 5 percent, with Yemen and Libya being hit the hardest, Darwazah said. Darwazah said he hopes sales in Libya next year will be comparable to those in 2010 of about $20 million.

Still, the company, which is based in London with offices in Amman, Jordan, expects overall 2011 sales to rise 20 percent from last year, helped in part by the October purchase of a controlling stake in Moroccan drugmaker Societe de Promotion Pharmaceutique du Maghreb SA for $112.2 million. Hikma relies on the Middle East and North Africa for about 60 percent of revenue.

“In the short term it was obviously a slowdown, but medium to long term it will be a good thing,” he said, referring to the political uprisings in Tunisia that inspired a wave of revolts across the region.

‘Open’ Playing Field

“The movement has already loosened control of monopolies in some markets,” he said, allowing for a “much more open playing field” among drugmakers. There’s also a “concentrated effort to build a strong middle class,” in some countries, which will boost spending on remedies, he said.

Hikma fell 0.1 percent to 630.5 pence at 12:40 p.m. in London trading, giving the company a market value of 1.2 billion pounds ($1.95 billion). The stock has declined 21 percent this year including reinvested dividends, compared with a 14 percent return for the FTSE All-Share Pharmaceuticals & Biotechnology Index.

During the unrest, the company accelerated the expansion of facilities in Egypt and Tunisia while building a new facility in Algeria, Darwazah said. He said he is “actively” looking for acquisitions in Egypt.

“We took a decision we would move on with our plans full-steam ahead: Adding people to the organization, expanding manufacturing,” Darwazah said. “Because we moved faster we will benefit.”

Emerging Markets

Political turmoil in Middle Eastern and North African countries this year added to pressure on emerging market sales for drugmakers. Government price controls in countries such as China and rising food and fuel costs are crimping spending on out-of-pocket health expenses, Credit Suisse analysts including Luisa Hector wrote in a research report today.

IMS Health Inc., a Connecticut-based market research firm, cut its forecasts for emerging market revenue growth from a range of 13 percent to 15 percent to 10 percent to 12 percent, and that estimate “still may be too high,” Hector wrote.

Hikma is among the top five drug companies in Middle Eastern markets along with Sanofi, Pfizer Inc., Novartis AG and GlaxoSmithKline Plc, according to Hikma.

Darwazah, whose family owns about 29 percent of Hikma’s shares, said last year he wouldn’t consider selling the company until it reached a market value of 5 billion pounds and that he had fended off seven takeover approaches from bigger rivals. He repeated that goal this week, and said he gets no offers now.

“I think the message has reached everybody,” he said.

(Corrects value of order in headline, first paragraph.)
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