FT Lex : Hikma Pharmaceuticals: Amman with a plan Premium

Hikma Pharmaceuticals: Amman with a plan Premium
Middle Eastern group’s prospects rest on generic asthma drug in US

Asked to name a large Middle Eastern company whose share price has risen eightfold since its London debut, the average punter might respond that it had something to do with oil. Hikma Pharmaceuticals hopes to bust such stereotyping — but its future growth depends on a key drug in the US.

Hikma, which on Tuesday raised its dividend for the fifth consecutive year, tells a compelling story. The Jordanian-managed group has grown from a regional generics distributor to deriving nearly two-thirds of sales from the US. It has responded to the rise of low-cost Indian manufacturers by specialising in more sophisticated injectables, which account for two-fifths of sales, rather than lower-margin pills. Sales grew 18 per cent annually from 2005 to 2015. The shares peaked at 750 per cent over their offer price.

For the past two years, however, the company has confronted the familiar low-growth conundrum faced by maturing pharma companies. A $2.6bn cash and stock takeover of Roxane (since renamed West-Ward Columbus) the US generic drugs unit of Germany’s Boehringer Ingelheim, was meant to change that. Initially, it did the opposite. Lower than expected sales growth at Roxane saw the company dumped from the FTSE 100.

Since then, Hikma has benefited from encouraging signals by the Trump administration about expediting generic approvals. WWC has a pipeline of potentially higher value products with greater barriers to competition. These include a generic version of GlaxoSmithKline’s best-selling Advair asthma drug. A decision indicating approval is expected in May — although rival Mylan is also seeking approval for its own version.

The WWC pipeline is important because some other parts of the group are struggling. Strip out the injectibles division and operating profits fell last year. But Hikma’s investors remain faithful. If Advair is approved, they stand to be rewarded.

>>> Oracle beats by $0.07, reports revs in-line; raises dividend 27% (43.05 +0.

--> ORCL +3% in after hours...

Oracle beats by $0.07, reports revs in-line; raises dividend 27%
  • Reports Q3 (Feb) earnings of $0.69 per share, excluding non-recurring items, $0.07 better than the Capital IQ Consensus of $0.62; revenues rose 2.9% year/year to $9.27 bln vs the $9.25 bln Capital IQ Consensus.
  • Cloud software as a service (SaaS) and platform as a service (PaaS) revenues were $1.0 billion, up 73% in U.S. dollars and up 74% in constant currency.
  • Non-GAAP SaaS and PaaS revenues were $1.1 billion, up 85% in U.S. dollars and up 86% in constant currency. Total Cloud Revenues, including infrastructure as a service (IaaS), were $1.2 billion, up 62% in U.S. dollars and up 63% in constant currency. Total Cloud and On-Premise Software Revenues were $7.4 billion, up 4% in U.S. dollars and up 5% in constant currency.
  • "Our new, large, fast growing, high-margin cloud businesses are driving Oracle's total revenue and earnings up and improving nearly every important non-GAAP business metric you care to inspect; total revenue is up, margins are up, operating income is up, net income is up, EPS is up. Take a look. Q3 was a very strong quarter."
  • "Over the last year, we sold more new SaaS and PaaS than Salesforce.com [CRM], and we're growing more than 3 times faster," said Oracle CEO, Mark Hurd. "If these trends continue, where we are selling more SaaS and PaaS in absolute dollars AND growing dramatically faster, it's just a matter of when we catch and pass Salesforce.com in total cloud revenue."
  • "Both our SaaS and PaaS businesses are doing great, but I'm even more excited about our second generation IaaS business," said Oracle Chairman and CTO, Larry Ellison. "Our new Gen2 IaaS is both faster and lower cost than Amazon Web Services. And now our biggest customers can run their largest and most demanding Oracle database workloads in the Oracle Cloud -- something that is absolutely impossible to do in the Amazon Cloud."
  • Oracle announced that its Board of Directors declared a quarterly cash dividend of $0.19 per share of outstanding common stock, reflecting a 27% increase over the current quarterly dividend of $0.15.

-->Oracle: Guides Q4 revenue in line, EPS above
  • Expects more currency headwinds;expect to see currency headwinds of 2% on revenue and two cents negative impact on EPS.
  • Q3 bookings were strong.
  • EPS expected in the range of $0.78-0.82; Q4 Capital IQ EPS consensus $0.78;
  • Revenue is expected to fall in the range of -1% to +2% (Approx $10.48-10.82 bln); Q4 Capital IQ Revenue consensus $10.61 bln.
  • SaaS and PaaS revenue, including last week, is expected to grow 69% to 73%, effectively raising full-year guidance from 80% to 81% for the year.
  • IAS is expected to grow 25% to 29%.
  • Software and cloud revenue including SaaS, PaaS, and IAS, new software license, and software support is expected to grow 1% to 3%.

FT : Tesla taps Wall Street for $1bn cash injection

Tesla taps Wall Street for $1bn cash injection
Pressure on shares eases as capital-raising less severe than expected

Tesla turned to Wall Street for another $1bn cash injection on Wednesday as it sought a bigger financial cushion for the planned launch of its mass-market Model 3 this summer.

Elon Musk, chief executive of the US electric car maker, signalled last month that the company’s ambitious launch plans would push its finances “close to the edge”, and indicated he was thinking of raising more money.

His comments at the time wiped 10 per cent from Tesla’s stock price, as investors anticipated another round of dilution to their holdings after a steady flow of capital raising in recent years. Tesla has raised around $9bn in the past five years, after netting out its repayments of convertible debt and a US government loan.

But news of the latest capital raising was less severe than Wall Street had been expecting, helping to ease pressure on its shares. The amount was below what many analysts had forecast, and Tesla said it would put hedges in place to limit eventual dilution from the convertible bonds. Its shares edged up more than 2 per cent in after-market trading.

Demand for Tesla’s shares has been one of Mr Musk’s main weapons in recent years, enabling him to race faster up an expensive production curve designed to take the company from small-scale maker of electric roadsters to a mass-market producer.

A strong share price rally that set in during December opened the way to the latest fundraising. It added 55 per cent to the company’s stock and pushed its value to $47bn by late February, when Mr Musk revealed he was thinking of raising more cash.

In a regulatory filing on Wednesday, Tesla said it was planning to issue around $250m of stock and $750m of convertible debt. An overallotment provision will allow the underwriters, led by Goldman Sachs, to sell an extra 15 per cent of the securities if demand is strong.

>>> US Close Dow +0.54% S&P +0.84% Nasdaq +0.74% Russell +1,50%


Closing Market Summary: Fed Hikes Rates, Stocks Move Higher

As expected, the Federal Open Market Committee voted to raise the fed funds target range by 25 basis points to 0.75%-1.00% on Wednesday. More notably, the Fed still believes that three rate hikes are appropriate for 2017, relieving investors' fears that the central bank could begin setting the groundwork for a fourth hike. The major averages started the day in the green thanks to a bullish sentiment in the crude oil market and climbed to new session highs in the afternoon following the FOMC decision. The S&P 500 and the Nasdaq finished higher by 0.8% and 0.7%, respectively, while the Dow (+0.5%) struggled to keep pace with its peers. Also of note, small-caps surged on Wednesday with the Russell 2000 jumping 1.6%.

U.S. Treasuries spiked across the board in the wake of the FOMC's decision to tighten monetary policy. The benchmark 10-yr yield, which moves inversely to the price of the 10-yr Treasury note, finished ten basis points lower at 2.51%. Meanwhile, the 2-yr yield, which is more vulnerable to short-term interest rate hikes, lost seven basis points to finish at 1.31%.

In the same breath, the U.S. Dollar Index (100.69, -0.93) plunged 0.9% lower, ultimately aiding crude oil in its already solid performance.

Crude oil set today's bullish tone in pre-market action after the API reported encouraging inventory data on Tuesday evening. The EIA validated those positive numbers this morning, showing a draw of 200,000 barrels (+3.7 million barrels consensus). The reading prompted WTI crude to finish the day 2.1% higher at $48.71/bbl.

As one might expect, the energy sector (+2.1%) rode the commodity's performance to the top spot on today's leaderboard. The rate-sensitive utilities (+1.6%) and real estate (+1.9%) spaces closed in the same neighborhood as the energy sector, profiting from the slip in interest rates within the Treasury market, while the financial group (-0.1%) reacted in opposite fashion as the decline in yields weighed.

Meanwhile, the top-weighted technology sector (+0.6%) underperformed as semiconductor giant Intel (INTC 35.10, -0.08) continued to see weakness in the wake of its acquisition of Mobileye (MBLY 60.77, -0.19), which was announced on Monday. The two names lost 0.2% and 0.3% on the day, respectively.

Like technology, the consumer discretionary group (+0.5%) also struggled as large-cap names like Amazon (AMZN 852.97, +0.44), Walt Disney (DIS 111.87, -0.44), McDonald's (MCD 127.88, +0.08), and Target (TGT 54.57, -0.18) underperformed, among others.

Wednesday saw a slew of economic data, including February CPI, February Retail Sales, March Empire Manufacturing, March NAHB Housing Market Index, January Business Inventories, and the weekly MBA Mortgage Applications Index, but it was largely overshadowed by the Fed's rate decision:

  • Total CPI rose 0.1% (consensus +0.1%) in February while core CPI, which excludes food and energy, increased 0.2% (consensus +0.2%). On a year-over-year basis, total CPI is up 2.7% and core CPI has increased 2.2%.
    • The key takeaway from the report is that consumer inflation is certainly firming and offering a data-based rationale for the Fed to move on rates.
  • February retail sales increased 0.1%, which is in line with the consensus. The prior month's reading was revised higher to 0.6% from 0.4%. Excluding autos, retail sales rose 0.2% while the consensus expected an uptick of 0.1%. The prior month's reading was revised higher to 1.2% from 0.8%.
    • The key takeaway from the February report is that retail sales activity didn't necessarily corroborate the high readings seen for consumer confidence, exposing some of the disconnect between "soft" survey data and the "hard" data.
  • The Empire Manufacturing Survey for March rose to 16.4 from the prior month's reading of 18.7. The consensus estimate was pegged at 14.5.
  • The NAHB Housing Market Index for March rose to 71 (consensus 65) from an unrevised reading of 65 in February.
  • Business Inventories rose 0.3% in January, which is in line with the consensus. The prior month's reading was left unrevised at 0.4%.
    • The key takeaway from the report is that the inventory-to-sales ratio is at its lowest point since December 2014. That's elevated from pre-financial crisis levels, when it was below 1.30, yet a further downtrend could restore some much needed pricing power.
  • The weekly MBA Mortgage Applications Index increased 3.1% to follow last week's 3.3% uptick.

Tomorrow's economic data will include February Housing Starts (consensus 1.260 million), Initial Claims (consensus 242,000), and March Philadelphia Fed (consensus 25.0) at 8:30 ET, while January JOLTS will cross the wires at 10:00 ET.

  • Nasdaq Composite +9.6% YTD
  • S&P 500 +6.5% YTD
  • Dow Jones Industrial Average +6.0% YTD
  • Russell 2000 +2.0% YTD

>>> Renault Management Including CEO Involved in Emission Fraud: AFP

Renault Management Including CEO Involved in Emission Fraud: AFP
Renault may have implemented fraudulent strategies for over 25 years regarding emissions and the company’s management including CEO Carlos Ghosn is responsible, Agence France-Presse reports, citing a report by the French Economy Ministry’s fraud office.
  • Renault wasn’t immediately available for comment
  • French Economy Ministry spokeswoman declined to comment