Hikma Pharmaceuticals Plc said it’s considering a possible sale of its injectable-medicines business, the second-biggest by volume in the U.S., after receiving unsolicited expressions of interest.
Hikma “will consider the best option for shareholders,” Chief Executive Officer Said Darwazah said today in a statement. The London-based company said it will make a further announcement “if appropriate.” The stock rose 8.1 percent, the biggest gain since March 18, 2009.
The business, which Hikma expanded in 2010 with a $112 million purchase from Baxter International Inc., could be sold for as much as $1.5 billion, said Savvas Neophytou, an analyst at Panmure Gordon & Co., while Jefferies International Ltd. analyst James Vane-Tempest said the unit could fetch as much as $2.2 billion. Mylan Inc. agreed this week to buy Strides Arcolab Ltd.’s injectable-medicine unit for $1.6 billion.
“We are making a positive read-across from M&A activity, which demonstrates attractiveness of the company’s injectables business,” Neophytou said in a note to investors.
The shares closed at 936.50 pence in London, giving the company a market value of 1.85 billion pounds ($2.8 billion). It’s the stock’s highest price since the company’s initial public offering in 2005. Trading volume was almost eight times the three-month daily average.
Hikma in November said the unit has been performing ahead of expectations and that full-year sales could reach about $460 million, exceeding an earlier estimate. Bank of America Corp. and Centerview Partners are advising Hikma, which reports full-year earnings March 13.
A sale price may be bumped higher if Hospira Inc., the biggest U.S. injectable-drug maker, is unable to clear inspection of a North Carolina plant by the Food and Drug Administration, Neophytou said. Potential bidders could include generic-drug makers Teva Pharmaceutical Industries Ltd., Novartis AG’s Sandoz unit and Actavis Inc., formerly known as Watson Pharmaceuticals Inc., he said.
Novartis spokesman Eric Althoff, Actavis spokesman Charlie Mayr and Teva spokeswoman Denise Bradley declined to comment.
Mylan had looked at other injectable-drug companies and assets before buying the Strides unit and was disappointed because “a lot of the facilities out there are really old,” CEO Heather Bresch said in an interview yesterday.
It’s unclear whether the approaches have been for Hikma’s global or U.S. injectable-drug business, Jefferies’ Vane-Tempest said. Some investors have been concerned about the pricing of injectables, especially in the U.S., he said.
“If Hikma was to sell its injectables business, given Hikma’s acquisitive past, we would expect the company to reinvest potential proceeds in its legacy Middle East North Africa business and continue its acquisition strategy across sub-Saharan Africa and Turkey, markets previously cited that are of interest,” Vane-Tempest wrote in a note to clients.
Separately, Hikma is considering options for its U.S. oral generic-drug business.