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Share Centre stock of the week: Hikma Pharmaceuticals

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04/01/2016
Helal Miah, investment research analyst at The Share Centre, explains why Hikma Pharmaceuticals is stock of the week.

Hikma is a pharmaceuticals company with Middle Eastern origins and is a recent entrant to the FTSE 100. Investors should appreciate that it is very distinct from its larger rivals in that its focus is on both branded and unbranded generic drugs and its sales exposure is geared towards the Middle East, North African and US markets. The group was founded in Jordan in the late seventies and grew as a result of demand for affordable drugs and the needs of a growing population in the region.

The company has performed well over the last two years with group revenue being driven by strong growth in the injectables business. Investors should be aware that there was some disappointment in the group’s October trading update, where sales of colchicine have been slower than expected, mainly due to competition. Despite this, as patented drugs expire, more manufacturing opportunities are arising and so it is likely that generic drugs will continue to take an increasing share of the market and the likes of Hikma Pharmaceuticals should benefit.

The acquisition of Bedford/Ben Venue and Roxane gives the group a further foothold in the US drugs market and integration continues to progress well. We believe there is much more growth to come from the group and as a result we continue to recommend the shares as a ‘buy’ for investors seeking capital growth and willing to accept a medium level of risk.

 

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