Hikma confident for full year as injectables and generics start well

14th May 2015 09:12

Hikma Pharmaceuticals said it had enjoyed a good start to the year and said revenues at its Injectables division would remain at a similar level to last year's but with a slight decline in operating profit margins.Ahead of its annual shareholder meeting on Thursday, the FTSE 100 group reiterated its overall full year guidance of 6% revenue growth in constant currency, with currency fluctuations would flatten turnover growth to just 2% at the reported levels.Currently the consensus forecast for full year adjusted profit before tax stands at around $374m.Hikma said first half revenues were likely to be flat against the extremely strong performance last year, with the second half providing the expected bulk of revenue growth for the full year.Growth in the injectables business from strong sales of some products was being balanced by increased competition on other products.Despite good progress in transferring the injectables products acquired from Bedford Laboratories in 2014, its additional research and development costs will reduce operating margin slightly to around 35%.The branded drugs business continues to be expected to grow revenues in the low teens at constant currencies and an improvement in adjusted operating margin of around 200 basis points, driven by a recovery in Algeria and good demand in Saudi Arabia and the other Gulf markets.For the generic drugs arm, full year guidance for revenues of $200m was maintained.Broker Peel Hunt noted that although generics revenue targets were maintained, "there is little to suggest that the launch of Mitigare for gout is generating the margins that consensus forecasts currently imply".It added that the issue of a $500m bond will mean interest costs should rise 35%, which will takes around 4% off its $350m adjusted pre-tax profit forecast for the year."The shares trade on 25 times full year 2015 earnings and offer great upside through the launch of Bedford Laboratories range of injectable products next year," it concluded.Analysts at Shore Capital said Hikma's diversified business model was providing it with a buffer from some of the challenges faced by its individual divisions from time to time, and also looked forward to the re-introduction of the acquired Bedford products to rejuvenate growth from 2016."However, given the lack of visibility on the outlook for non-injectables, our forecasts are modestly more conservative than management guidance."Shares in Hikma were up 1.7% to 2,065p by 09:30 on Thursday.