Hikma shrugs off drug ban threat

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Hikma shrugs off drug ban threat

Fri, 01 October 2010
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Hikma shrugs off drug ban threat

Drugs group Hikma Pharmaceuticals has moved to calm fears about the impact of a plan by US regulators to ban unapproved oral colchicine products to treat gout.

Its shares tumbled yesterday on the news. Investors also worried about comments from Numis analyst Jonathan Kwok that August’s impressive interims were fuelled by colchicine.

“Hikma Pharmaceuticals notes recent press speculation that the United States Food and Drug Administration intends to take enforcement action against unapproved single-ingredient oral colchicine products and those companies that manufacture and sell them,” it wrote in a statement Friday.

The company said it will comply with any FDA regulatory requirements related to the sale of colchicine “if such a notice is served”, but still predicts 20% revenue growth for its US generics business for the full year 2010 “irrespective of the timing of such notification”.

It also expects its core US generics business will continue to perform well in 2011.

The reaction from brokers has been reasonably good.

“We see no reason to alter our forecasts or thesis which remain intact, preferring instead to use any weakness as a buying opportunity for a stock that is a main player of one of the most lucrative pharmaceutical markets globally,” said Panmure Gordon.

KBC Peel Hunt is less bullish, believing the shares overreacted to exceptional revenue -driven upgrades and “are now moving toward a more realistic level”. It rates the stock a “hold”.