FDA warning hurts Hikma generics margins

Thu May 17, 2012 12:33pm IST

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(Reuters) - Hikma Pharmaceuticals Plc said it expects profitability in its generics business to be hurt by continuing price competition and steps it has taken to comply with a warning letter from U.S. regulators.

In February, the company received a warning letter from the U.S. Food and Drugs Administration (FDA) about operations at its Eatontown oral dosage facility in New Jersey. Hikma said it was enhancing its processes to address the regulator's observations but the actions would slow sales in the first half.

"The slower start in 2012 will impact profitability in the first half and we now expect the full year adjusted EBIT margin to be in the mid single-digits," the company said in the portion of an interim statement that referred to its generics business.

For the full year, the company expects to record generic drugs sales of between $130 million-$135 million, with sales strengthening in the second half.

This marks a 13 percent drop from the $154.8 million in sales the generics business reported last year.

However, the company, which also sells branded drugs, stood by its guidance for overall revenue growth of around 20 percent as it expects double-digit revenue growth in its branded and injectables segments to soften the impact of falling generics sales.

Branded drugs contributed the most to the company's revenue last year.

Shares in Hikma closed at 613.5 pence on Wednesday on the London Stock Exchange.

(Reporting by Abhishek Takle in Bangalore; Editing by Andrew Callus)

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