Hikma adjusts expectations amid injectables challenges

Hikma Pharmaceuticals reported solid global growth in its injectables business on Thursday, with strong customer demand for its product portfolio in North America, although some challenges meant it expected revenue and operating margin growth at the lower end of guidance.

It said growth in the region was slightly lower than expected due to short-term supply and capacity constraints.

The FTSE 100 company said the constraints were gradually alleviating as new high-speed manufacturing lines in the Cherry Hill and Portugal facilities became fully operational.

Hikma said it was confident in its ability to meet demand in 2024.

In the Middle East and North Africa (MENA) region, the injectables business was performing well, driven by successful product launches, offsetting sales losses in Sudan.

Meanwhile, in Europe, the company said it was achieving robust growth in Germany and Italy while steadily increasing its market share in Spain, France, and the UK.

Hikma said it was committed to expanding its injectables business through substantial investments.

Progress was being made on new facilities in Morocco and Algeria, and advancements were also occurring in the 503B sterile compounding business in the US.

As a result of those developments, the firm now expected its full-year revenue growth and core operating margin to align with the lower end of its previously stated guidance range of 7% to 9% and 36% to 37%, respectively.

The board said that considered the closure of the Sudan manufacturing facility, investments in the compounding business, and the short-term capacity constraints in the US.

In the branded sector, Hikma saw strong demand, particularly for medicines used to treat chronic illnesses in key MENA markets.

That demand offset challenges posed by the devaluation of the Egyptian pound and the closure of the Sudan facility.

Leveraging its local manufacturing presence and strong commercial teams, it introduced new products, including first-to-market generics and innovative in-licensed products.

Operational efficiencies at regional facilities, combined with a favourable product mix, contributed to improved profitability.

Hikma said it expected branded revenue to grow in the mid-to-high single digits in constant currency and, assuming no further adverse currency movements, to be in line with 2022 on a reported basis.

Thanks to its strong performance and focus on efficiencies, the company anticipated the core operating margin to expand to around 23% for the whole year.

Finally, in the generics business, Hikma said it was having a successful year due to favourable market dynamics in its base business and stronger-than-expected revenue from its authorised generic of sodium oxybate.

The company also used spare capacity at its Columbus plant for contract manufacturing and was progressing with its speciality products.

As a result, Hikma said it now expected 2023 revenue to fall within the range of $920m to $940m, with a core operating margin of around 20%.

That was an improvement from previous guidance, which predicted close to 30% growth and margins of 18% to 20%.

“The good momentum during the first half has continued, enabling us to upgrade full year guidance in two of our three businesses,” said chief executive officer Riad Mishlawi.

“Our branded business is performing exceptionally well on an underlying basis and our generics business has seen key products continuing to drive better-than-expected performance.”

Mishlawi added that the company saw solid growth in injectables, supported by a good performance in MENA and Europe, as it continued to invest across all its regions to expand manufacturing capacity and build its pipeline.

“Overall, the group is making excellent progress and we are on track to deliver very strong earnings growth for the full year.”

At 0805 GMT, shares in Hikma Pharmaceuticals were down 1.24% at 1,896.1p.

Reporting by Josh White for Sharecast.com.