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|15 August, 2018

Hikma boosts full-year revenue forecast at its top two divisions

Hikma Pharmaceuticals' operating profit rose 54% in the six months ended June 30, while revenue rose 11%

Image used for illustrative purpose. An employee works at the EIPICO medicine factory at the industrial area at Al-Asher Min Ramdan city at the outskirts of Cairo, Egypt, January 27, 2016.

Image used for illustrative purpose. An employee works at the EIPICO medicine factory at the industrial area at Al-Asher Min Ramdan city at the outskirts of Cairo, Egypt, January 27, 2016.

REUTERS/Mohamed Abd El Ghany

London-listed Hikma Pharmaceuticals HIK.L expects higher full-year revenue after raising forecasts at its top injectables and generics businesses, sending its shares up 10 percent.

The Jordanian drugmaker said it sold more injectable opioids in the United States due to a supply shortage, and had a better-than-forecast performance in generics for the first half of the year as its prices proved more resilient than expected.

The higher forecast in generics comes as global generic drugmakers with operations in the U.S. cut profit forecasts because of pricing pressure.

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Novartis said last month that 2018 sales at its generics unit, Sandoz, would fall in the low single-digit percentages, after previously holding out hopes for them to remain steady. 

Earlier this month, Mylan reported a much smaller-than-expected second-quarter profit and lowered its 2018 earnings forecast. 

U.S. President Donald Trump has called for drug companies to lower prices and has set an agenda to do so.

Hikma, which makes and markets branded and non-branded generic and injectable drugs in more than 50 countries, reported 54 percent higher first-half operating profit, while revenue rose 11 percent. urn:newsml:reuters.com:*:nRSO8175Xa

Hikma's U.S. injectables division - its largest unit - has been prioritizing the manufacture of opioid products affected by shortages including fentanyl, meperidine, morphine and hydromorphone.

Injectable opioid painkillers, which hospitals use to manage pain after operations and in terminal illness, have been in short supply for more than a year largely due to production problems at Pfizer, the biggest supplier of the drugs.

Chief Executive Sigurdur Olafsson, who replaced Said Darwazah in February, said in a call with Reuters that Hikma's reputation among hospitals has improved as it increased production of opioids to relieve shortages.

However, the company said it will not see the same demand for some injectables next year as Pfizer said it was confident that it would resolve issues at its plant.

Shares of Hikma rose as much as 10 percent to 1,812.5 pence in early trading, their highest in more than a year. The company was the biggest gainer on the mid-cap FTSE 250 index .

Hikma expects full-year revenue at its injectables business to be $775 million to $825 million, higher than its prior forecast of $750 million to $800 million, while margins are seen in the mid to high 30s percent, up from low-to-mid 30s percent.

In generics, it expects revenue to be $600 million to $650 million, up from $550 million to $600 million, and margins to be mid-to-high single digits, up from low single digits.

Hikma, which was forced to cut revenue guidance for its generics business three times in 2017 due to pricing pressures, has seen some relief in the market.

"I think it's a little better (now)", said Olafsson, noting that Hikma saw high-single-digit price erosion in the first half of the year compared to a double-digit last year.

(Editing by Bernard Orr and Jan Harvey) ((justin.varghese@thomsonreuters.com; Tel: +91 80 6749 3486; Reuters Messaging: justin.varghese.thomsonreuters.com@reuters.net))