Hikma Pharma profits jab higher

Hikma Pharmaceuticals grew 2018 sales and profits much more than it had expected at the start of last year, but final numbers and guidance for 2019 from the speciality and generic drug maker were both a little short of upgraded market forecasts.

For the calendar year, core revenue increased 7% to $2.08bn and core operating profit came in 19% higher at $460m. Revenue was 1% below the average analyst forecast, while profit was 2% light.

Core basic earnings per share, however, increased 31% to 137.8 cents, beating the consensus by 2% due to lower finance charges, while cashflow from operating activities of $430m down from $443m.

A full year dividend of 38 cents per share was proposed, up from 34 cents a year ago.

Looking at the results by division, the injectables division grew sales 6% at constant currencies to $826m at 40.3% operating margins with a continued strong performance in the Middle East and North Africa and EU. There was 13% growth from the generics arm at 13% operating margins, and 5% CER growth in branded with a slight improvement in operating margins to 21.6%.

Central costs increased significantly to stand at 4% of sales, after an overhaul of senior management during the year, including the move by founder Said Darwazah up to executive chairman with Siggi Olafsson brought in as chief executive.

Darwazah said: "In 2018, we have made transformational changes across our businesses that will enable us to be more competitive and achieve our strategic goals."

"Looking ahead to 2019 and beyond, I am very optimistic for the future of Hikma. I believe we have set ourselves the right strategic objectives and have a strong leadership team in place to deliver sustainable growth over the long term."

For 2019 guidance was given for injectables revenue of $850-900m at a core margin of 35-38%; generics revenue $650m-700m at a core margin in the “mid teens”; and branded revenue to grow mid single digit rates.

Group finance expense guidance is $50m, with a core tax rate of 21% and capex of $120-140m.

Broker Numis said the injectables guidance is more bullish than expected, benefiting from stronger than expected performance in MENA and Europe, while generics "reflects the uncertain outlook in the US and continued focus on efficiency" and branded "as expected".

Overall, the 2019 guidance "infers a decline in core operating profit in FY19, despite a more bullish outlook for injectables than we had inferred from US prescription trends. However, consensus expectations for FY19 offer little scope for error, and may see modest downgrades today."