Hikma Rises to Record Price on Doxycycline Boost: London MoverAlex Pashley
Hikma Pharmaceuticals Plc advanced to the highest price on record after the U.K. drugmaker raised its 2013 sales forecast, citing “excellent performance” of its doxycycline antibiotic.
Full-year revenue will gain about 17 percent, up from a previous prediction of 13 percent, on better than expected sales of generic medicines, the London-based company said today in a statement. Total revenue was $1.1 billion last year.
The stock rose 5.6 percent to 1,050 pence, the highest closing price since Hikma sold shares in 2005. The volume of trading was more than three times the three-month daily average.
“Although today’s upgrade is driven by windfall, the cash flow is real, which should boost the balance sheet,” Savvas Neophytou, an analyst at Panmure Gordon & Co., said in a note to investors. Doxycycline will add at least $100 million of incremental revenue, said Neophytou, who raised his price prediction for the stock to 1,100 pence from 1,000 pence and maintained a buy recommendation.
While doxycycline success will boost the generics division’s operating margin, a potential $60 million gain in incremental profit is less than the $100 million Neophytou had estimated. Even so, the analyst predicts $220 million in generics revenue versus a company forecast of $200 million, and an operating profit margin of 33.8 percent versus Hikma’s 30 percent guidance.
Hikma’s injectables business also may do better than the company predicts, Neophytou wrote. The length and quality of contracts has “improved significantly in recent years due to the company’s perceived reliability of supply.”
The drugmaker said today that the injectables unit is doing well in the U.S. and Europe and will benefit from new contracts in the Middle East in the second half. The branded drugs division is on track for revenue growth of about 9 percent, Hikma said.
The company has as much as $600 million to fund acquisitions in the Middle East and Africa and hopes to close a second deal this year after buying Egyptian Company for Pharmaceuticals & Chemical Industries, Mazen Darwazah, chief executive officer for the Middle East and North Africa, said in May.
Hikma, founded in Jordan in 1978 by current Chairman Samih Darwazah, established a foothold in the U.S. in 1991 and now is the second-biggest injectable-drug business by volume in that country. The drugmaker has more than 6,500 employees worldwide.