Drug manufacturer Hikma Pharmaceuticals’ (HIK) decision to keep its global injectables business has not been positively received by the market which had been expecting a large cash sale. The London-based generic and in-licensed pharmaceuticals maker fell 5.6% to 930.5p on the news.


Management had been conducting a strategic review of its business after receiving a number of unsolicited enquiries for its injectable medicine operations last month (1 March).


Hikma is the second largest player in the US’ injectables market and has benefited from the manufacturing constraints placed on its main competitor Hospira (HSP: NYSE). In April 2010 the Food & Drug Administration (FDA), the US regulator, closed the company’s Rocky Mount site in North Carolina. The regulator believes the manufacturing practices at the site have not met its defined standard practices.


A sale would have generated between $1.9 billion and $2.2 billion for the £1.9 billion cap, according to analysts at Jefferies. This estimate was based on their $150 million earnings before interest, tax, depreciation and amortisation (EBITDA) estimate for 2013.


The board believes they can create significant further value by retaining the business and leveraging its manufacturing sites, product portfolio, R&D pipeline and global distribution platform.


A review of Hospira’s site continues but a decision to re-open the factory could end Hikma’s run in the injectables market, which accounted for 42.4% of the group’s revenues in 2012.


This helped Hikma to make £81.2 million pre-tax profit, up from £60 million 12 months earlier. This saw its earnings per share rise to 31.4p up from 26.5p in 2011, while its dividend increased 23% to 16 cents per share.


Said Darwazah, Hikma’s chief executive, says retaining and investing in this business is the best option for shareholders. He adds: 'Injectables offer excellent long-term growth prospects and will remain an integral part of our overall growth strategy.'


Hikma was established in 1978 in Jordan and listed on the London Stock Exchange in 2005. It has a presence in Europe, the Middle East, North Africa and the US.

Issue Date: 17 Apr 2013