Stock of the day 14/03/2016 – Hikma Pharmaceuticals PLC

An acquisition headache has exacerbated Hikma Pharmaceuticals fall since 2016 began; can the Jordan-based company recover with its full year figures on Thursday?

Even before the New Year got underway things were looking rocky for Hikma. Its last update at the start of November caused the stock to fall 5% to £20.56, the company revealing that sales of its colchichine drug (named Mitigare and aimed at fighting gout flares in adults) had suffered in light of ‘greater competition in the market’, forcing Hikma to downgrade its revenue forecasts for tis generics division as a whole.

Things did pick up, however, as November continued, the stock lifting away from its 4 month low of £18.66 as the FDA gave Hikma’s Portuguese injectable drugs factory the all clear after having sent a warning letter in regards to certain practices at the plant back in October. This helped put some spring back in Hikma’s step, and despite a start of December wobble (felt by the market as a whole), the stock could continue to climb, closing out 2015 at a 3-ish month high of £22.98.


(Source: IT-Finance.com 14/03/2016)

Yet Hikma couldn’t escape the market-wide slide that rang in the New Year, the pharma-stock falling to £18.81 (a low not seen since its post-November update performance) by January 21st. A rebound back to £21.57 at the start of February was then swiftly lost as Hikma revealed that it was buying Roxane Laboratories from Boehringer Ingelheim GmbH (a deal announced at the end of last July) for the reduced cash price of $627 million (alongside 40 million new shares issued to Boehringer), compared to the previously agreed $1.18 billion, following a lower than expected full-year revenue for the soon-to-be bought business.

The news wreaked havoc on Hikma’s stock price, the company at one point hitting an intraday low of £15.96, its worst price in nearly a year and a half. Things did calm down, however, as investors processed the fact that Hikma was getting Roxane at a huge discount, leaving the stock to stabilise just below the £19 mark for much of February. Yet Hikma then took another hit as March began, relegation from the FTSE 100 putting the company on track to hit a current trading price of £17.27 (IT-Finance.com, 14/03/2016).

In terms of Hikma Pharmaceuticals full year figures analysts expecting a 2.7% fall in revenue to $1.5 billion with a near 9% drop in EBITDA to $433.5 million. Investors will also be keen for reassurance over the aforementioned Roxane purchase is good business for Hikma despite the hefty reduction in price perhaps suggesting otherwise.

Hikma Pharmaceuticals PLC has a consensus rating of ‘Buy’ with an average target price of £24.95.