Crackdown in US proves to be boon for drug maker Hikma shares

Hikma raises revenue forcast for the second time this year.

Hikma Pharmaceuticals shares hit an all-time high yesterday after the drug maker raised its 2013 revenue forecast for a second time this year.

The Jordanian company, which lists its shares on Nasdaq Dubai, now expects to increase full-year revenue by 17 per cent as its generics business benefits from a drugs shortage in the United States.

It had already raised its yearly forecast from 10 to 13 per cent in May.

The company's share price rose to a record £10.80 on the news, an increase on the day of 8.6 per cent.

Sales of the antibiotic doxycycline are supported by the strict application of production standards in the US, which is forcing manufacturers of generic medicines to refit their factories, causing output to slump.

The shortage is boosting Hikma's revenues even though it had to stop production at its plant in Eatonville, New Jersey. Remediation costs and write-downs could amount to a total of US$30 million.

"Given the excellent performance of doxycycline, we are raising our full-year guidance for this business to revenue of around $200m with a reported operating margin of above 30 per cent," said the company, which is also listed in London.

The generics division contributed $103.7m to revenues in 2012.

Production at the Eatonville plant is slowly beingstepped up, said the company.

Hikma continues to expect double-digit growth at its injectables division this year. The unit has been subject to a number of unsolicited bids, and the company in April announced it would hold on to the division, the second-largest injectables business in the US by volume.

Sales of injectables in the Middle East would be boosted by a series of tenders won in the first half of the year, the company said. It added that its branded medicine division was on track to meet full-year expectations of 9 per cent.

"Our diversified business model is positioning the group to deliver another strong year in 2013," said Said Darwazah, Hikma's chief executive.

The company reported earnings before interest, taxes, depreciation and amortization (Ebitda) of $225.2m last year, an increase of 35.9 per cent on 2011. Revenues rose by 20.8 per cent to $1.1 billion.

Hikma had to stop production at its Eatonville plant in November to ensure compliance with US food and drugs administration guidelines. It has since started to retool the oral dosage facility at the plant.

"The significant contribution from doxycycline in the first half of 2013 is enabling us to cover the increased cost of remediation in our generics business," said Mr Darwazah in May.

Hikma in January finalised the $22m acquisition of the Egyptian Company for Pharmaceuticals & Chemical Industries.