Stock of the day 18/08/2015 – Hikma Pharmaceuticals PLC

It’s been a year of all-time highs and 8 month lows for Hikma Pharmaceuticals; can the stock continue its recent recovery following its interim results on Tuesday?

A stellar 12 months saw Hikma go from £12.14 at the start of 2014 to £19.67 at the start of 2015, just below its all-time high of £20.72. It hit the ground running in the New Year, jumping 24% across the first two weeks of January to reach £24.24. Whilst its growth slowed down in the second half of the month, it had still reached £24.73 in the first week of February. The reason for this early 2015 surge was the news that Takeda Pharmaceuticals had failed in its attempt to block Hikma from producing Mitigare, its version of Takeda’s gout drug Colchicine. Add onto this the news that Hikma was preparing to join the FTSE 100, meaning it had gone from IPO to UK index top flight in 10 years, and it was an early 2015 favourite for investors.


(Source: IT-Finance.com 18/08/2015)

This eventually led Hikma to hit a fresh peak of £26.15 by the end of February, aided by the news that it had signed an exclusive license agreement with Azanta for Nimoral. However, investors weren’t willing to keep the stock at these highs, and on the eve of its preliminary full year 2014 results in the middle of March Hikma had fallen back to £23.15, even with it officially joining the FTSE 100 at the start of the month. Those results didn’t help matters; despite a 21% increase in pre-tax profits to £242 million off of a 9% increase in revenue to £1 billion, the company’s warning that revenues would more likely be 6% after the impact of foreign exchange rates, something that it highlighted as a worry going into its fiscal 2015, weighed on investors’ minds.

By the end of March Hikma had slipped to £21.32, and after a limp April and a dismal start to May the stock was at £19.68 ahead of the UK election. The Tory win gave the company a bit of a bump, but not one that could be sustained, and by the end of June it had fallen to that aforementioned 8 month low of £18.52. Yet from this nadir things started to pick up for Hikma; across the start of July the stock rose back above £21 per share, before a big acquisition gave the company a burst of life.

The news at the end of July that Hikma was purchasing generic drug maker Roxane Laboratories and Boehringer Ingelheim Roxane from Germany’s Boehringer Ingelheim GmbH for $2.65 billion caused the stock to surge by 15% across 2 days, lifting it all the way back to £24.05. Hikma claims the deal will ‘significantly expand’ is manufacturing capacities and technological abilities as well as ‘transforming’ its position in the US generics market. Despite a tumble across the start of August, pushing it back below £23, the stock soon recovered in anticipation of its interim results, and currently sits at a trading price of £24.13 (IT-Finance.com, 18/08/2015).

Hikma Pharmaceuticals has a consensus rating of ‘Buy’ with an average target price of £23.03.