Generic pharmaceuticals company Hikma (HIK) sold off strongly this morning after sales forecasts for its recent acquisition target were slashed.
Just last month the company issued the prospectus for its purchase of Roxanne Laboratories from German pharmaceutical giant Boehringer Ingelheim (BI) but has now announced a $535m (£368m) reduction in the upfront gross cash consideration based on new information from BI on the 2015 financial performance of Roxanne.
Hikma now expects Roxanne revenue in 2015 to be around $650m, lower than that achieved in the previous financial year. The group has stated this is largely due to higher than expected rebates on all of Roxanne’s products, which BI had not taken into consideration when the initial deal was agreed. Not only this, but the group said full-year revenues for 2016 and 2017 would be "negatively impacted". This strikes a different tone to the group's statement in June, which said it expected Roxanne would "be accretive in 2016 and very strongly accretive thereafter".
Although Hikma has suggested the higher levels of rebate are commonplace in the US generics market and "nothing to worry about in the long term", the 25 per cent reduction in the cash consideration for the business will raise questions about the rationale for the purchase.
Chief executive Said Darwazah, who hosted a speedily-arranged analyst and investor call hours after the announcement, said he remains confident the set back will only impact the business in the medium term and that the overall value of Roxanne has not been tarnished.
