Hikma PLC currently holds a stable outlook according to financial analysts. Despite the fact that it has faced two major setbacks 2010 onwards such as stringent pricing on its generic medicines, with a major impact in its US market where FDC regulations will continue to force prices down. Second being its controversial stake in
Unimark and onboarding of the US-based Roxane that would have increased its market share to a dominant one. However, the US FTC prohibits unethical market control that allows singular entities to control commodity market prices. Nonetheless, the strategies adopted by Hikma to diversify its product portfolio by means of acquisition has worked well so far.
According to Moody’s, the situation right after the Roxane acquisition has put Hikma under the radar for the next 2-3 years to determine how its debt financing is managed, in order to retain its stable position (Moody’s, 2015). With this acquisition, Hikma has strengthened its market position in the US, which is its major market.
3.1 Market Capitalisation (focus of FTSE ranking)
Market capitalisation (in Billion – UK pound) Year 2016
Hikma PLC
2.585
Indivior PLC (within FTSE 250)
2.83
AstraZeneca (within FTSE 100)
61.793
Paddy Power PLC (company with the least Market Cap in FTSE 100)
7.250
Hikma PLC cited in (GuruFocus, 2017 B), Indivior PLC cited in (GuruFocus, 2017 C), AstraZeneca cited in (GuruFocus, 2017 D)
What could be noted is that Hikma’s inclusion in FTSE 100 during the 2015 coincided with two major events. First, the crises revolving around oil prices witnesses tumbling share prices for industry related companies, second the dropout by inmarsat (Anon., 2016). However, the stay in the top FTSE was brief as Hikma was reverted to FTSE250 due to falling share prices at the time around Roxane’s acquisition.
3.2 Corporate Governance
Hikma’s annual reports consist of a detailed corporate structure that detail their compliance with the UK governance code (UKGC). The remunerations of board members, meeting times, agendas and annual targets are formally released on Hikma’s website and on the annual financial reports. Any departures from the set parameters in the code are detailed, and safeguards/contingencies are placed as needed.
Said Darwazah is the current chairman (from year 2007) and chief executive (from year 2014), and is a departure from the code, however he the board unanimously agrees to his leadership due to the extensive knowledge of pharmaceuticals, the legacy that he carries forward from the moment his father, Samih Darwazah. The family has deep ties within the MENA region due to similar culture/language. The independent directors meet twice yearly ensure necessary controls are placed over governance structure (Hikma, 2017 C).
The board consists of 6 independent non-executives, 2 non-executives, and 2 executives. The total directors are 5 out of which 3 are independent, in line with the UKGC recommendations of a min of 50% (FRC, 2016). This ensures that decisions are not taken under duress or influence, and maintains rationale over objectives.
2 females represent 18% of the board, below then the recommended according to Davies review report (DaviesReview, 2015). This report recommends that the minimum criteria for an FTSE100 company be set at 25%. Hikma may need to consider as they head towards their FTSE100 index mark.
3.3 Recommendations
Hikma’s market cap in 2016 has been around 5,303, within the FTSE 250 index, whereas, as a benchmark Paddy Power PLC heads the lowest market cap in the FTSE100 at 7.25 Billion. Hikma would need to float appropriately prices shares in the market to beat the benchmark. However, investors would expect suitable returns (i.e. benchmarking AstraZeneca’s earnings per share) while seeking assurance that their investments are safe due to ample liquidity ratios.
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