Hikma Pharmaceuticals' share price plunges on lower offer for US drugs business

 
Suzie Neuwirth
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Hikma is buying Roxane, a US generic drugs business (Source: Getty)

Hikma Pharmaceuticals’ share price plummeted 20 per cent this morning, after the drugmaker slashed its offer price for Boehringer Ingelheim (BI)’s US generic drugs division.

It almost halved the cash part of its offer for Roxane Laboratories from $1.18bn (£813m) to $647m, after due diligence into the company revealed that Roxane’s 2015 revenue was likely to be lower than previously expected.

Hikma, which is the largest pharmaceuticals company in the Middle East, agreed to buy Roxane for around $2.65bn in cash and stock back in July. The stock component of the deal remains unchanged.

The firm was the biggest loser on the FTSE 100 in early trading, although shares rebounded slightly to 14.3 per cent lower at 1,710p by late morning.

“On the basis of the new information provided by BI, Hikma now anticipates that Roxane's full year revenue for 2016 will also be negatively impacted compared to Hikma's previous expectation and, as a consequence, will be lower than revenue in 2015,” said the Jordan-founded company.

Higher-than-expected rebates due to a shift in the business model had lowered selling prices, while higher volumes and change in the product mix resulted in a higher cost of raw materials, Hikma said.

Roxane’s 2017 revenue is also forecast to be lower. Hikma now anticipates that Roxane’s total revenue for 2017 will be between US$700m and US$750m, rather than the previous expectation that revenues in 2017 would be between US$725m and US$775m.

“We remain very excited about the strategic and financial value of this acquisition, which will transform our position and scale in the US generics market,” said Said Darwazah, chief executive of Hikma.

“Whilst there will be a short term impact related primarily to higher than expected product rebates, we have agreed a reduced purchase price to reflect this, and we remain confident in our outlook for the business.

“Roxane's impressive, differentiated product portfolio and pipeline, along with its manufacturing capacity and technological capabilities will create a strong platform for sustainable long-term growth and substantial value for shareholders.”

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