UPDATE: Hikma 3Q Sales Slow; Western JV Within Months
November 12 2009 - 8:18AM
Dow Jones News
Middle Eastern drug company Hikma Pharmaceuticals PLC (HIK.LN)
Thursday said protectionism in Algeria and a September Ramadan and
Eid held back third-quarter sales, and added it expects to enter a
joint venture with a Western peer within months.
Chief Executive Said Darwazah told Dow Jones Newswires Hikma
anticipates formalizing a joint venture with a Western partner in
the next six months.
The company already sells Western and Japanese drug makers'
medicines in the Middle East and North Africa under license, but
Darwazah said Jordan-based Hikma is in talks about broader
alliances.
A rising prevalence of Western-style illnesses like diabetes
offers rich pickings for multinational pharmaceutical companies
struggling with patent expiries and bare pipelines in their home
markets. Generic versions of off-patent medicines also offer big
sales prospects.
Emerging markets play a key role in several Western drug makers'
strategies. France's Sanofi-Aventis SA bought drug businesses in
Brazil, Mexico and Eastern Europe, while the U.K.'s GlaxoSmithKline
PLC bought units of Bristol-Myers Squibb Co. in Pakistan and Egypt,
and a stake in South Africa's Aspen Pharmacare Holdings Ltd.
Darwazah didn't say which companies Hikma is talking to.
Hikma said Thursday it expects full-year sales to be 10% higher
on year, or about 13% ahead stripping out the effect of exchange
rates. It previously said it expected constant currency sales
growth of 15%.
Darwazah said drug sales in the third quarter slowed in its key
Middle Eastern and North African markets, hurt by Ramadan and Eid
holidays in September and lower sales in Algeria, where the
government slapped restrictions on imports.
That didn't affect Hikma as badly as some competitors since it
has some production in Algeria, said Darwazah. Hikma's drug sales
in the Middle East and North Africa grew 12.3% during the nine
months to Sep. 30, outpacing a market growth rate of 6.8%.
Hikma said it agreed a licensing deal with Japan's Astellas
Pharma Inc. (4503.TO) to sell its immunosuppressant Advagraf in the
region. Advagraf is a newer version of a drug called Prograf. Noble
analyst Stefan Hamill said in a research note the licensing deal is
significant because he estimates Prograf sales account for about 5%
of Hikma's branded drug unit's revenue.
"This agreement removes any uncertainty related to the expiry of
the Prograf licensing agreement," Hamill said. He has a "positive"
rating on the stock.
Hikma said sales at its U.S. unit, which sells cheaper generic
versions of off-patent drugs, improved during the second half of
the year, continuing a first-half trend, although it didn't give
figures.
Sales there suffered last year because of cutthroat competition,
but cost cuts and a Food and Drug Administration crackdown on
shoddy manufacturing by overseas suppliers helped turn the unit
around. Some of Hikma's competitors were barred from selling drugs
in the U.S. but Hikma wasn't. "We capitalized on our exemplary
manufacturing track record," said Darwazah.
He told Dow Jones Newswires Hikma is eyeing expansion in its
core markets in the Middle East and North Africa. It wants to
expand its manufacturing capacity by buying smaller competitors in
Algeria, Morocco, Tunisia and Syria, said Darwazah. The company has
cut its debts and boosted cashflow, which will help it pay for any
deal.
Hikma is also eyeing a return to Iraq, where it operated decades
ago, he said. Hikma is considering spending about $50 million over
three years to set up a small operation there, said Darwazah.
At 1239 GMT, shares in Hikma were up 0.4 pence, or 0.1%, at 482
pence, underperforming a 0.4% higher FTSE 250 index.
Company Web site: www.hikma.com
-By Rachael Gormley, Dow Jones Newswires; 44-20-7842-9308;
rachael.gormley@dowjones.com
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