Berenberg upgrades Hikma Pharmaceuticals to ‘buy’

It said that after almost two years with a ‘hold’ rating, it believes the time is now right to upgrade the stock to a ‘buy’.

"We have more confidence in the growth outlook across the business (including the US Generics business) for the next year and we also have more certainty on the business’s leadership, following a period of management change - this included the hiring of a new permanent CEO (an internal appointment who knows the business well), as well as a new head of Injectables and US Generics," the bank said.

Berenberg said Hikma continues to maintain a strong balance sheet, with leverage at 1.3x and $1.5bn of firepower available for further M&A (in addition to the recently announced Xellia Pharmaceuticals deal).

"We also think that the returns Hikma offers are excellent, with return on invested capital averaging 16% over the last three years.

"In this context, the valuation of 11.8x price-to-earnings does not look demanding, in our view."

At 0915 BST, the shares were up 1.8% at 2,010p.