Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Why Remdesivir Contract Manufacturer Hikma Deserves Attention Now

By (Tezcan Gecgil/ )Stock MarketsNov 18, 2020 08:22
Why Remdesivir Contract Manufacturer Hikma Deserves Attention Now
By (Tezcan Gecgil/ )   |  Nov 18, 2020 08:22
Saved. See Saved Items.
This article has already been saved in your Saved Items

Recent positive news about a COVID-19 vaccine has put the limelight on health-care and pharmaceutical companies, especially BioNTtech (NASDAQ:BNTX), Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE).

Today, we extend the discussion to the generic drugs market and a UK-based firm, Hikma Pharmaceuticals (LON:HIK), (OTC:HKMPY), which has recently started manufacturing Remdesivir—Gilead Sciences' (NASDAQ:GILD) antiviral drug—under contract in Portugal. In October, the U.S. Food and Drug Administration (FDA) approved Remdesivir for coronavirus treatment of hospitalized patients.

Generic Market Is Growing

The FDA describes a generic drug this way:

"A medication created to be the same as an existing approved brand-name drug in dosage form, safety, strength, route of administration, quality and performance characteristics.”

Manufacturers can start producing generics when the exclusive patents on drugs expire. Research led by Olivier J. Wouters of the London School of Economics and Political Science cites:

"Generics can, in theory, be sold for a fraction of the price of brand name drugs."

According to IMARC, the "Global Generic Drugs Market (will) Reach US$497 billion by 2025." In 2019 it was $367 billion.

Metrics from IBISWorld also show that in the U.S., "The market size, measured by revenue, of the Generic Pharmaceutical Manufacturing industry is $49.3 billion in 2020." In fact, more than 90% of all U.S. prescriptions filled in 2019 were generic drugs. In the UK, the number reached 75% in 2017, compared with the Organisation for Economic Co-operation and Development (OECD) average of 52%.

In addition to the current figures, changing demographics will likely help generic businesses grow their top lines. The global population is aging.

The United Nations states says:

"In 2020, there are an estimated 727 million persons aged 65 years or over worldwide. This number is projected to more than double by 2050, reaching over 1.5 billion persons. The share of older persons in the global population is expected to increase from 9.3 per cent in 2020 to 16 per cent in 2050."

As a result, we can expect more chronic illnesses in the coming decades, translating into more generic drug production. The generic pharmaceutical market is an important one not only for health professionals, drug manufacturers and policy-makers, but for investors.

With that said, here is a closer look at HIK stock.

Hikma Pharmaceuticals

London-headquartered FTSE 100 member Hikma Pharmaceuticals is a multinational generics manufacturer. The company was founded in 1978. Since then, it has grown both organically and through acquisitions worldwide.

Hikma Pharmaceuticals 1-Year Chart.
Hikma Pharmaceuticals 1-Year Chart.

Its portfolio is sold in both hospitals and retail markets. Analysts cite the breadth of its portfolio, the robustness of its manufacturing capabilities, and the reliability of its distribution channels.

In August, management released half-year trading results. Revenue came in at $1,132 million, up 8% year-on-year (YoY). Cash flow of $292 million meant an increase of 52% YoY. Earnings per shares (EPS) were 87.6 cents, up 15%.

Three segments contributed to revenues:

  • Injectables: saw double-digit revenue growth;
  • Generics: maintained core operating margin
  • Branded: achieved 6% growth in core operating profit.

Even before gaining the non-exclusive supply deal with Gilead, Hikma manufactured a wide range of injectable therapeutics for patients on ventilators in the U.S.

On Nov. 5, the group provided a positive trading update with improved full-year guidance. CEO Siggi Olafsson highlighted the company's ability to "supply the medicines most needed by ... customers, including those used in the treatment of COVID-19."

So far in the year, the shares are up around 32%. On Nov. 17, HIK closed at 2,547p ($69.5 for U.S.-based shares). With a market capitalization of 5.87 billion, the company could still grow significantly. Its forward P/E and P/S ratios stand at 18.98 and 3.71, respectively. We'd look to buy the dips in the stock. Long-term shareholders would also be entitled to a dividend yield of around 1.4%.

Finally, those investors interested in Hikma shares who do not want to commit capital to a single company may want to research two ETFs that include HIK stock as a holding: iShares Core MSCI EAFE ETF (NYSE:IEFA) and the iShares MSCI EAFE ETF (NYSE:EFA).

Bottom Line

In addition to the bio-pharma companies investors have been watching in 2020, other U.S.-listed generics manufacturers that may be appropriate for long-term portfolios include Bridgewater, New Jersey-headquartered Amneal Pharmaceuticals (NYSE:AMRX), India-based Dr Reddys Laboratories (NYSE:RDY), Irish-headquartered Endo International (NASDAQ:ENDP) and Perrigo (NYSE:PRGO), German-based Fresenius Medical Care (NYSE:FMS), Philadelphia-based Lannett Company (NYSE:LCI) and Israeli-headquartered Taro Pharmaceutical Industries (NYSE:TARO) and Teva Pharma Industries (NYSE:TEVA).

Considering that nine out of every 10 U.S. prescriptions filled are generic, Hikma, as well as the companies mentioned above, deserve further due diligence.

Why Remdesivir Contract Manufacturer Hikma Deserves Attention Now

Related Articles

Why Remdesivir Contract Manufacturer Hikma Deserves Attention Now

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email