Hikma lowers full-year sales outlook amid "challenging environment"

Shares in Hikma Pharmaceuticals declined as much as 17 percent on Thursday after the company warned that full-year revenues would be around $2 billion in constant currencies, coming in at the bottom end of its already lowered previous forecast of between $2 billion and $2.1 billion. The update stems from lower sales expectations for its generics unit, which is now predicted to generate $620 million in 2017 amid what CEO Said Darwazah described as an "increasingly challenging environment." The division's outlook is down from a May forecast of $670 million, which had already been cut from earlier guidance of $800 million. 

In May, the FDA declined to approve Hikma's filing to market VR315, its generic version of GlaxoSmithKline's asthma and chronic obstructive pulmonary disease therapy Advair Diskus (fluticasone/salmeterol). At the time, Hikma indicated that "given the nature of the [FDA's] feedback…there is a low likelihood of approval this year" for VR315. Hikma noted that since receiving the complete response letter, it was "making progress on answering [the FDA's] questions." However, Brian Hoffmann, president of Hikma's US generics business, said "we still have a number of questions outstanding that we continue to work with them on," adding the company did not have a timetable for approval. 

Regarding other segments, Hikma anticipates approximately $775 million in sales for its injectables business, versus a prior estimate of $800 million to $825 million. Darwazah noted that "competition is increasing and pricing pressure is intensifying" in the US market, and while branded revenue declined in the first half, "we remain confident that we will deliver a much stronger performance" for the remainder of the year. Finance director Khalid Nabilsi suggested branded drugs were on track to offset falling sales in the generics business in the second half.

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Commenting on the news, Morgan Stanley analysts stated "while we believe that a guidance downgrade was somewhat anticipated given previous commentary this quarter from generics companies, downgrades across all the divisions highlights the headwinds the company is facing." Meanwhile, analysts at broker Numis Securities described the financial update as "less bad than feared." 

In addition, Brian White of Cantor Fitzgerald Europe remarked that there was "no let-up in the harsh pricing environment in the US," and while Hikma's half-year results did not shed light on when generic Advair might receive approval, "2018 [is] looking like the most likely timing for an introduction." White also suggested the downgraded outlook for the injectables business is "particularly disappointing" given the underperformance of the generics unit.

Separately, Hikma announced that it also expanded its licensing and distribution agreement with Takeda, adding new products to its portfolio in the Middle East and North Africa. Under the agreed terms, Hikma will have exclusive rights to manufacture and commercialise four of Takeda's primary care product families, including alogliptin, azilsartan, lornoxicam and dexlansoprozole, in 17 markets in the region, with certain exceptions. "Our large sales and marketing teams, with particular expertise in promoting cardiovascular and diabetes treatments, are well positioned to drive strong demand for Takeda's products," stated Darwazah.

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