11th Mar 2015 11:38
LONDON (Alliance News) - Hikma Pharmaceuticals PLC is one of the biggest fallers in the FTSE 250 index Wednesday morning, despite posting a rise in pretax profit for 2014 due to strong growth in its injectibles business helping offset declines in its branded and generics businesses, as the strength of the dollar loomed over its revenue forecast for 2015.
Shares in Hikma are trading down 4.1% at 2,221.00 pence late Wednesday morning.
The pharmaceutical company is forecasting revenue growth of 6% at constant currency for 2015. However, it warned that the strength of the dollar since the beginning of 2015 could reduce revenue by around 3% for the year, or USD45 million, if current exchange rates persist.
Hikma posted a pretax profit of USD362 million, up from USD298 million a year before, on a rise in revenue to USD1.49 billion from USD1.37 billion.
Revenue declined in its branded business by 1%, as new products and strong growth in most markets were offset by lower sales in Algeria due to restructuring, and by political disruptions in Iraq and Libya. Generics revenue fell to USD216 million from USD268 million in 2013, as increased competition hit some products, Hikma said, although this was partly offset by the re-launch of legacy products.
These declines were offset by a 33% rise in revenue in its injectibles business to USD713 million, driven by a strong performance in the US, which offset declines in Europe, and the Middle East and North Africa. The company received a warning letter from the US Food and Drug Administration over an inspection of its Portuguese facility last March.
Hikma said it does not believe this warning will impact the manufacture or distribution of products at the facility, and it does not expect re-mediation costs to be "material".
Last July the company acquired Ben Venue Laboratories Inc's generic injectibles manufacturing site in Bedford, Ohio, for up to USD300 million, along with the businesses assets. Ben Venue Laboratories is a member of the Boehringer Ingelheim Group of Companies and its US generic injectibles business is named Bedford Laboratories.
Hikma has begun transferring an initial tranche of around 20 Bedford products to Hikma's manufacturing facilities in the US, Germany and Portugal. It will begin relaunching these products towards the end of 2015, and expects to have all 20 products back on the market in 2017. It will use the Bedford site's quality and development centre and research and development team to expedite the transfer and reactivation of Bedford's products.
The Bedford sites were voluntarily shut down in 2011 after the US Food and Drug administration raised significant manufacturing and quality concerns about the site, although Ben Venue poured funds into upgrading the facility and resumed limited production towards the end of 2012, it decided to cease production at the end of 2013, as it was unable to return to "sustainable production".
Hikma said that four of the sites remain dormant, but it has begun the process of transferring equipment to its other global manufacturing facilities.
Hikma proposed a final dividend of 15.0 cents per share, and a special dividend of 6.0 cents, taking its total dividend for 2014 to 32.0 cents, up 19% from 27.0 cents in 2013.
It expects its branded business to deliver revenue growth in the low-teens on a constant currency basis, citing growth in underlying markets, improved sales in Algeria and a stronger sales and marketing teams. At actual exchange rates, it expects the business to report revenue growth in the high-single digits, and a slight improvement in adjusted operating margin.
Hikma expects its injectibles business to achieve revenue at a similar level to 2014 in 2015, and it expects its generics business to deliver around USD200 million in revenue in 2015, as new product launches partly offset the continue decline of some market opportunities.
Hikma said it is continuing to develop its generic portfolio through reintroducing products, investing in its pipeline, and executing targeted mergers and acquisitions.
Hikma is currently part of the FTSE 250 index, but will be promoted to the FTSE 100 from March 23, replacing Tullow Oil PLC.
Accendo Markets research analyst Augustin Eden said the stock was likely trading down due to the "storming US dollar". Eden noted that Hikma's incorporation into the FTSE 100 could "signal the start of a weighting change in the UK benchmark index given the regulatory pressures and low commodity prices weighing on energy sector minnows like Tullow."
Hikma's strong balance sheet and intention to look at acquisitions will make it a "closely watched stock in 2015".
Shore Capital reiterated its Hold recommendation for Hikma, saying that the company's stronger than expected performance in 2014 will make for a tougher comparator in 2015. Shore analyst Brian White said that upgrades will be harder to find in the injectables business, while the generics business lacks visibility on windfall opportunities, adding although he still likes the branded business.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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