ii view: Hikma drug sales climb but shares fall

Full-year results to 31 December

• Adjusted revenue up 10% to $3.2 billion
• Core operating profit up 2% to $719 million
• Net debt up 15% to $1.12 billion
• Final dividend of 48 US cents per share
• Total dividend for the year up 11% to 80 US cents per share

Guidance:

• Expects full-year 2025 revenue growth of between 4% to 6%
• Expects full-year 2025 core operating profit of between $730 million to $770 million

Chief executive Riad Mishlawi said:“It’s been another strong year for Hikma with double-digit revenue growth, increased profits and a resilient margin. We continued to invest in the business to support our future progress, with a strategic acquisition alongside new partnerships and agreements. 

“This momentum combined with our diversified portfolio, leading market positions and increasing investment in R&D, underpins our positive outlook for 2025 and confidence in the future.”

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ii round-up:

Hikma Pharmaceuticals (LSE:HIK) today detailed full-year sales marginally exceeding City hopes but with profits broadly in line with estimates. 

Annual 2024 revenues climbed 10% to $3.2 billion, pushing a 2% gain in core operating profit to $719 million. The supplier of generic and branded drugs expects sales for the 2025 year ahead to grow by between 4% and 6%, potentially taking core operating profit to between $730 million and $770 million. 

Shares for the FTSE 100 company fell 7% in UK trading having come into these latest results up 15% over the last year. That’s similar to cancer drug maker AstraZeneca (LSE:AZN) and broadly in line with the FTSE 100 index over that time. 

Hikma operates across the three divisions of Injectables, Generics and Branded drugs, making and supplying medicines to hospitals across North America, the Middle East and North Africa (MENA), and Europe. 

Sales growth for 2024 was achieved across all regions, led by North America, with Injectable drug sales climbing 10%, Generic drug demand up 11% and Branded drug sales rising 8%. 

Hikma’s therapeutic categories include anti-infectives, pain management and oncology. Last year it expanded its injectables business, buying parts of Xellia Pharmaceuticals, a Danish-based company focused on anti-infective treatments for up to $185 million.

Group net debt of $1.1 billion, as of 31 December, was up 15% from 2023. A final dividend of 48 US cents per share, payable to eligible shareholders on 1 May, leaves the total payment for 2024 up 11% at 80 cents per share. 

A first-quarter trading update is likely in late April. 

ii view:

Established in Jordan in 1978, Hikma today supplies a portfolio of more than 760 injectable, oral, nasal and inhalable generic and branded treatments. Injectables generated its biggest slug of sales during 2024 at 42%. Hikma is a top three US supplier of sterile-injectable medicines. That was followed by Generic drugs at 33% and Branded drugs most of the 25% balance. Geographically, North American sales dominate at 62%, followed by MENA at 31%, and Europe and the Rest of the World 7%.

For investors, higher royalty payments for its generic sodium oxybate, used to treat narcolepsy, pushed profits for Generics 11% lower. Competition for Generic drug supply in North America is intense. Sales exposure to the MENA leaves Hikma vulnerable to political unrest and change, while Hikma’s estimated future dividend yield of around 2.6% sits below that of other pharma companies such as GSK (LSE:GSK) at over 4%. 

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More favourably, Hikma offers both geographical and product diversity. Acquisitions, such as the 2024 purchase of parts of Xellia Pharmaceuticals, continue to expand operations and potential future earnings. Investment in Research and Development (R&D) is ongoing, while the dividend has grown for more than five years running. 

In all, and despite ongoing risks, this UK-headquartered pharmaceutical company continues to justify its place in diversified investor portfolios. 

Positives: 

• Diversity in both product and geographical location
• Relative defensiveness given exposure to healthcare

Negatives:

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

The average rating of stock market analysts:

Buy