Resilient generics spur growth at Hikma

Top line growth at Hikma Pharmaceuticals (HIK), best known as a manufacturer of generic drugs, has largely been driven by its fast-growing Injectables division. In the first half, the business saw sales growth of 9 per cent year on year despite a number of headwinds in Middle Eastern and North African (MENA) markets. 

While Hikma makes some 57 per cent of its sales in the United States, it also has a significant presence in a number of emerging markets, including Saudi Arabia, Algeria and Egypt. The continued devaluation of the latter’s currency has proved to be an obstacle for the group in 2023, as has the conflict in Sudan, where it has been forced to halt operations.

The company has consequently taken impairment and cost charges of $92mn – 16 per cent of which is related to the Injectables business. However, the vast majority of the total is connected to the Branded (or patented-protected) drugs division. Elsewhere in the MENA region, the company said oral oncology products and cardiovascular drugs performed particularly well. 

At the April AGM, Hikma’s management noted that its Generics business (responsible for around a third of first-half revenue) had a stronger-than-forecast start to the year thanks to new business wins and an improving pricing environment. At that time it said it was expecting full-year revenue growth of 20 per cent. 

But with a 39 per cent sales uptick in the first six months of the year, it has now lifted its full-year revenue growth forecast to 30 per cent for the Generics business. Though the group’s shares are up more than 27 per cent in the year to date, it still trades on a undemanding forward price-to-earnings multiple of 13.3 times. Buy.

Last IC View: Hold, 1,821p, 23 February 2023