Hikma Pharmaceuticals profits rise 21% higher

The London-listed Hikma Pharmaceuticals yesterday reported a 21 per cent rise in pretax profits to US$362 million for last year even as sales from its generics division plummeted.

Gross profit from the generics division, whose predominant market is the United States, touched $150m, down from $206m in 2013. One of the contributing factors was the declining US sales of doxycycline, used to treat sexually transmitted diseases, as more manufacturers entered the market. The revenues from the division are expected to decline further to $200m this year from $216m last year.

The Jordanian company said generics sales will continue to drop this year, but group revenues are expected to rise 6 per cent on the back of sales from its profitable injectables business.

Overall revenue grew 9 per cent to $1.48 billion. Revenues from its injectables division rose to $713m, up 33 per cent, with the US contributing 77 per cent of the amount.

The injectable drugs business accounted for 48 per cent of total group revenues last year, up from 39 per cent, while the generics division accounted for 15 per cent of the revenues, down from 20 per cent. The rest was held by branded medicines.

The US is increasingly contributing more of group revenues at 51 per cent last year, up from 46 per cent a year earlier. The Middle East and North Africa market contributed 43 per cent of revenues, down from 47 per cent in 2013.

“We are continuing to develop our generics product portfolio through the reintroduction of products, investing in our research and development pipeline and targeted mergers and acquisitions,” the company said in a filing to London Stock Exchange yesterday.

Within the Arabian Gulf region, where Hikma has a manufacturing plant in Saudi Arabia, sales of generics are low compared to branded medicines.

Generics sales, which had a market share of about 6 per cent within the $8.5 billion Gulf pharmaceuticals market in 2012, are expected to grow, according to Alpen Capital in a 2013 report. The total Gulf pharma market is expected to grow at an annual rate around 7 per cent between 2010 and 2020.

The drop in generics sales will not affect Hikma’s forecast, as it was expected with competition in sales of the generic drug doxycycline in the second half of the year, according to Savvas Neophytou, an analyst with the London-based Panmure Gordon. He has a “hold” recommendation on the stock.

This year, Hikma expects to build its manufacturing capabilities, and expand its geographic footprint. The group’s net debt position was $274m at the end of the year. It acquired the assets of Bedford Laboratories, an Ohio-based maker of injectable drugs, last year for $300m from Germany’s Boehringer Ingelheim.

Hikma shares were trading at 2,221 pence yesterday afternoon, down 4.10 per cent from Tuesday’s close. That is up from 1,979 pence on the end of last year. It will join the FTSE-100 index this month.


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