Drugmaker Hikma on lookout for acquisitions
Hikma is on the lookout for more acquisitions as the UK-listed drugmaker pushes for membership of the FTSE 100 index.
Said Darwazah, chief executive, said Hikma had the financial firepower for more dealmaking if good targets could be found at a reasonable price.
“Money is readily available and interest rates are very low. It is a good time to do an acquisition,” Mr Darwazah told the Financial Times.
Hikma has built itself into one of world’s biggest makers of generic injectable medicines with the help of deals such as last July’s $300m acquisition of US-based Bedford Laboratories from Boehringer Ingelheim of Germany.
Analysts have estimated that Hikma has a war-chest of up to $1bn available for deals and Mr Darwazah confirmed that Hikma was open to buying companies or individual products to boost growth.
His comments suggest that the mergers and acquisitions spree that convulsed the pharmaceuticals sector this year could spill into 2015 as drugmakers tap plentiful cash and cheap credit to strike deals.
But Mr Darwazah added: “Hikma has always been very disciplined and we will not make acquisitions for the sake of it.”
Hikma’s share price has risen by two-thirds in the past year, taking its market capitalisation above £4bn to the cusp of the FTSE 100 index of Britain’s biggest companies.
The company has increased revenues by a compound annual rate of 19 per cent over the past five years to $1.37bn and Mr Darwazah said he was looking for ways to sustain the momentum through deals and organic growth.
Hikma’s London listing makes it the fourth-biggest UK-listed drugmaker after GlaxoSmithKline, AstraZeneca and Shire, but most of its business is concentrated in the US, the Middle East and North Africa.
The company was founded by Mr Darwazah’s father, Samih, in their native Jordan in 1978. The former took over as chief executive in 2007.
It has not all been smooth sailing. Hikma has received warning letters from the Food and Drug Administration, the US regulator, over quality problems at plants in the US and Portugal over the past two years. The US facility has since been given the all-clear and Mr Darwazah says the Portuguese issues are being addressed.
The Middle East and North Africa, which still account for 40 per cent of sales, have also been a drag on growth recently, in part because of political disruption in Libya and Iraq. “This year has seen more volatility than usual but volatility is part of doing business in this region and we have got used to it,” said Mr Darwazah.
James Vane-Tempest, analyst at Jefferies, said strong US growth was “offsetting a disappointing performance in the Middle East and North Africa”.
The company chose London over New York for its stock market listing in 2005. This has allowed it to benefit from the more favourable UK corporate tax regime compared with the US. Several US drugmakers have used foreign acquisitions to move their tax domicile offshore through so-called inversion deals in the past two years.
Ramaswamy Narayanan, analyst at Citigroup, said Hikma had strong momentum with M&A activity holding the potential for further upside.