Interactive Investor

ii view: Hikma Pharmaceuticals ups the dividend again

6th August 2021 16:06

Keith Bowman from interactive investor

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A diverse product offering and ongoing new launches. We review these latest results. 

First-half results to 30 June

Revenue up 7% to $1.22 billion (£888 million)

Operating profit up 10% to $326 million (£235 million)

Interim dividend up 13% to 18 US cents per share

Guidance:

  • Expects full-year generics revenue to between $810 million to $830 million, up from $770 million to $810 million

Chief executive Siggi Olafsson said:

"Once again, we have benefited from the resilience of our portfolio and our flexible manufacturing footprint. Our strong performance included solid year-over-year increases in revenue and operating profit, underscoring our ability to generate positive results in challenging market conditions.”

ii round-up:

Pharmaceutical company Hikma (LSE:HIK) today raised its revenue estimate for its generics business leaving expectations for its other injectables and branded businesses unchanged. 

The increase brought its in line with already raised analyst forecasts according to broker Morgan Stanley. Overall revenue rose by 7% to $1.22 billion, with operating profit up 10% to $326 million.

Hikma shares fell by more than 4% in UK trading, having gained by over 40% since pandemic induced market lows back in March 2020. Shares for Covid vaccine maker AstraZeneca (LSE:AZN) are up by a fifth in that time. Shares for GlaxoSmithKline (LSE:GSK) are up by less than 5%.

Injectables generated Hikma’s biggest slug of sales over 2020 at just over two-fifths; followed by generics at just under a third and branded drugs the difference. Revenue growth was achieved across all three divisions.

Having grown by 42% over the pandemic year of 2020, revenue for its injectables business is expected to rise by a far more sedate mid-single digit over 2021. 

A dividend increase of 13% for the interim adds to the 14% improvement paid at the 2020 final payment. 

Hikma relaunched its generic Advair Diskus version of GlaxoSmithKline drug used for the treatment of asthma back in April, having previously paused the launch. 

ii view:

Founded in Jordan, Hikma today develops, makes and markets a range of branded and non-branded generic medicines. It provides over 780 products to patients globally. Its therapeutic categories include anti-infectives, cardiovascular, central nervous system, diabetes, oncology, pain management and respiratory.

Employing over 8,000 people, it operates across more than 30 manufacturing plants. In 2020, the US generated its biggest slug of sales at 60%, with the Middle East and North Africa accounting for a further third and Europe and the rest of the world the balance. 

For investors, a high sales exposure to the Middle East and North Africa could leave if vulnerable to political unrest and change. A historic dividend yield of under 2% is below that of both AstraZeneca and GlaxoSmithKline. 

But Hikma offers significant product diversity, with a range of treatments which continue to grow. Increases in the dividend contrast with recent payments at rivals AstraZeneca and GlaxoSmithKline. In all, and with forecast price earnings (PE) ratio trading above the 10-year average, the shares look to be up with events for now. 

Positives: 

  • Diversity in both product and geographical location
  • Launched 154 new products during 2020

Negatives:

  • Currency translation can hinder performance
  • Key Middle Eastern markets can suffer political instability

The average rating of stock market analysts:

‘Buy’

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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