Hikma Pharma sees growth after Middle East upheaval

Hikma Pharmaceuticals believes the health sector in the Middle East and North Africa (MENA) has a bright future as political upheaval in the region subsides. The group gave a positive growth outlook for 2012 after reporting a dip in profit for 2011, reflecting a weaker performance from its generics drugs units and costs from higher wages and currency fluctuations in the MENA region. London-listed Hikma, which sells branded drugs and also has an injectable drugs business in the United States, said on Wednesday it made an adjusted profit attributable to shareholders of $100.9 million last year, down 2.2 percent, on revenue 25.6 percent higher at $918 million. Adjusted earnings per share fell 2.6 percent to 51 cents, it said, broadly in line with analysts’ forecasts. Hikma’s generics business was a drag on profit, with a 36 percent fall in gross profit reflecting lost sales of colchicine after U.S. regulators restricted the sale of the gout medicine to a single supplier, and stronger price competition for generic drugs in the second half. Chief Executive Said Darwazah told Reuters, however, that the impact of the Arab Spring uprisings had been less severe and shorter in duration than the group had forecast. “Egypt is still showing growth, both for us and the (MENA) market itself is still growing,” he said in an interview. “We guided 7 percent growth for the whole MENA, while our actual growth was 9.6 percent driven by strong growth in the second half of the year.” He said that despite the upheaval and the rise in labor costs the political changes would create opportunities. “ (The new governments) will be spending a lot more money on social issues such as healthcare,” he said. “Healthcare will definitely benefit, so we are very optimistic about the region.” Hikma moved into Morocco, a market it had long targeted, with a $111 million acquisition in October that will also provide a springboard to extend into West Africa. The group is now aiming for expansion further north, and Darwazah said Turkey was an interesting longer term opportunity. “Turkey is strategic for us in the future because it is a market of the size of MENA,” he said. “But we really haven't honed in on anything right now.” Darwazah said he was expecting a strong performance in 2012, with revenue growth expected to be about 20 percent, driven by opportunities in MENA and in the global injectable drugs market. Shares in Hikma reversed early losses to touch an eight-month high of 780 pence in morning trade. They were 0.7 percent higher at 777.5 pence at 1210 GMT, valuing the group at about 1.5 billion pounds. Peel Hunt analyst Paul Cuddon said the strong second half performance in MENA was likely to reassure the market and help the company retain its premium rating relative to global peers. Citi, meanwhile, said the group’s injectable drugs division had driven a strong 2011 performance and the unit should continue to drive growth in 2012. “A decline in the generics division operating income will be more than offset by improved injectable division profitability,” the bank’s analysts said. Hikma maintained its dividend at 13 cents a share.