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.