LONDON (ShareCast) - (ShareCast News) - Analysts at HSBC slashed their target price for Hikma Pharmaceuticals, telling clients its first half numbers contained lower guidance for generics and a tougher outlook for injectables and branded drugs.
What was missing from the update, for some investors, was any substantive update on generic Advair in the US, they added.

In particular, they took issue with management's assertion that the downwards pressure on margins they were now forecasting for the rest of the year and into 2018 was "cylical" and that the industry had been there before.

"We disagree," they replied.

The target price was thus knocked down from 1,410p to 1,060p and the recommendation on the shares kept at 'reduce'.

They went on to explain that while increased competition and faster generic approvals by the FDA were cyclical, pressure on drug prices from the consolidation of pharmacy benefit managers and the alignment of PBMs, drug distributors and pharmacies were structural.

Compounding matters, the confluence of all those factors had not been seen before and their alignment after agreements between McKesson and Walgreens and Express Scripts and Wal Mart were only signed in May, so the impact had yet to be felt.

HSBC also pointed out how the acquisition of Roxane would lower the company's return on invested capital from 24% in 2015 to an estimated 11% in 2017.

Their recommendation on the shares was kept at 'reduce'.

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE