Sales growth in drug manufacturer Hikma Pharmaceuticals’ (HIK) injectables business has missed analysts’ expectations, causing the shares to fall 4.4% to £15.82.

The injectables division represents 40% of overall sales compared to approximately a third of revenues each from the generics and branded businesses.

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Continued shortages for injectable drugs in the US helped drive sales 7% higher to $832m in the year ending 31 December, but this fell short of consensus expectations of $843m.

Overall sales growth at Hikma also disappointed, up 7% at $2.07bn, missing forecasts of £2.1bn.

Hikma has been supporting growth in its injectables division with new drug launches and increased production during a shortage of opioid painkillers. Today's modest miss on expectations suggests analysts may have slightly overestimated the positive impact of these factors.

Jefferies analyst James Vane-Tempest says sales of injectable drugs were lower than expected in the second half of 2018, but margins were resilient amid intense competition for larger products.

Vane-Tempest argues there are ‘scope for upgrades’ in injectables if ongoing supply issues continue.

GENERICS GUIDANCE AHEAD OF EXPECTATIONS

Elsewhere at Hikma, 2019 guidance for the generics business is slightly ahead of analysts’ expectations. Sales are anticipated to hit $650m to $700m, while core operating margin is expected be in the mid-teens.

‘This reflects continued price erosions on our marketed portfolio, which we expect to be partially offset with market share gains and new product launches,’ comments Hikma.

Last year, Hikma’s strategy to boost sales paid off after a difficult 2017 when challenging conditions in the US forced the company to cut sales guidance several times.

In 2018, Hikma’s shares soared over 50% after strong product demand led to a hike in earnings guidance in the generics and injectables divisions.

This helped Hikma become one of the best performing UK-listed shares with a market cap of over £1bn last year.


Issue Date: 13 Mar 2019