The City panicked at some bad-sounding news, but Hikma's long-term outlook makes it a good bet.
Jordanian pharmaceuticals company Hikma is an oddity - a FTSE 100-listed giant that is still managed by a member of its founding family. The company’s CEO is Said Darwazah, the son of Samih Darwazah, the visionary who founded the company in 1978.
Because of this, Hikma is an oddity in another way, too. Despite the rigours of quarterly reporting and the constant spotlight on its every movement, it still retains the long-termist outlook so typical of family firms.
Last year Hikma bought Roxane last year, a maker of generic drugs, for $2.65bn. This week Roxane revealed that its sales would be about 10% lower than expected, and that sales in 2016 and 2017 would also fall below its previous predictions.
Cue panic in the markets. Hikma’s share-price dropped by 18%. Once the traders had calmed down and read the details of the announcement, though, they realised that it was not, in fact, the end of the world. Because of the reduced income from Roxane, Hikma had in fact negotiated a reduction in the purchase price, down to about £2bn.
So, a small reduction in profits - about 10% - led to a £600,000 saving. As the City’s over-caffeinated traders calmed down and read the details, the share price bounced back.
When it bought Roxane, Hikma made it clear that they were interested in its pipeline of drugs - it had 89 drugs in R&D including 57 Paragraph IV opportunities, drugs that are identical or nearly identical to existing patented ones and have a good chance of being approved for use in the US, where they can be a cash-cow.
Over time, these ought to mean that Hikma’s share-price continues on the long upward trajectory that the Darwazah family has put it on.
Sometimes it is good to be odd.
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