Are the clouds parting for Hikma?

The outlook for the division is also slightly better than investors and analysts had feared. In 2018, generics revenues are expected to be between $550m and $600m, with a core operating margin in the low single digits. This and the potential for better tax and interest charges means broker Numis is expecting to upgrade its core EPS forecasts by around 10 per cent to 94ȼ against the current consensus estimate of 88ȼ.

But that is not to say Hikma had a good 2017. Its generics business has had to contend with a big increase in competition in the US, as drugs regulators speed through unbranded approvals in a bid to bring down the price of medicine. But the group’s unbranded version of GlaxoSmithKline’s (GSK) top-selling asthma drug, Advair, failed to gain approval, meaning Hikma has been forced to complete another trial,  probably in a larger clinical population. Launch of the group’s generic Advair is now not expected until 2020 at the earliest.

So, with performance and prospects so poor at the generics business, the group has been forced to take a $1.1bn impairment on the goodwill, intangible assets and property of West Ward Columbus, the generics business Hikma bought from Boehringer Ingelheim in 2016. This payment left the group with a $747m operating loss in 2017, compared with a $302m operating profit in the previous year. But even after extracting the impairment, core operating profits fell 4 per cent to $386m as operating margins were dented in Hikma’s two largest subsidiaries – injectables and generics. Both divisions have faced rising competition in the US.