Friday, January 3, 2014

Hikma on a high from drugs shortage

A dose of doxycycline, a widely used generic antibiotic, cost less than $5 a year ago. Today it costs more than $100.

Shortages of the drug have benefited Hikma Pharmaceuticals, one of three suppliers that control more than 90 per cent of the market. Hikma raised sales guidance three times last year after halting production of the medicine, then starting again once supply had been squeezed and prices had soared.

Hopes of another sales boost lifted Hikma shares to a record high yesterday, up 6.3 per cent to £12.77, with UBS analysts adding the stock to its “buy” list.

Hikma management has cautioned to expect another generic drugmaker to enter the market this year, UBS said. But a new entrant would not want to disrupt things too much, suggesting pricing will fall by a maximum of 40 per cent this year, the broker forecast.

At that price, doxycycline can still generate earnings of at least $50m for Hikma this year, which would put group profit to 12 per cent above the consensus, UBS said. It had a £13.50 price target on Hikma stock.

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