What is reported to be a blip in Hikma Pharmaceuticals’ (HIK) profitability this year has proved strong enough to worry investors and wipe 13% off its value. Shares in the developer and distributor of branded and non-branded medicines have slumped to £23.08 on a warning that profits will be lower in its generics business this year.

Delays in product approvals and litigation costs have been blamed.

Analysts at Numis now expect earnings before interest, tax and amortisation (EBITA) for the generics business to be $36 million in 2016, 51% lower than originally anticipated.

In what is perhaps a lesson in that sometimes acquisitions need time to bed-in, these issues relate to Roxane, a generic drug business Hikma bought in February.

Management maintained sales forecasts of between $2 billion to $2.1 billion for the year in a trading update ahead of half-year results on 24 August.

Web - Hikma - 4 August 2016

The London-listed Jordanian lifted margins for its injectables business to 38% from 36%, and reaffirmed sales guidance for the branded division.

But Numis has slashed its EBITA for the group by 9% for this year to $382 million, while the earnings per share (EPS) forecast is now 10% lower than it was yesterday at 111 cents.

However, the broker describes Hikma’s outlook as ‘encouraging’, stating: ‘We ultimately see this as a temporary hiccup for the generics business, and potentially a more attractive entry point on the assumption shares will come under pressure today.’

Issue Date: 04 Aug 2016