Hikma slashes $535M from offer price for Boehringer's U.S. generics biz

Hikma Pharmaceuticals said last year that it would shell out more than $1 billion for Boehringer Ingelheim's U.S.-based generics business, Roxane Labs, to gain ground in noninjectable generics. But now, Hikma is slashing its offer price for the deal after catching wind of Roxane's disappointing 2015 sales.

Hikma CEO Said Darwazah

The Amman, Jordan-based company will pay $647 million in cash and issue 40 million new shares to Boehringer, about $535 million less than it said it would pay last July when it announced the deal. Hikma said that Roxane's 2015 revenue was lower than it anticipated, primarily due to higher rebates paid to wholesalers.

The rebates "resulted in lower net selling prices on marketed products than had previously been expected," the company said in a statement. Some "specific products rebates have been offered on a case by case basis," the company added.

Slumping sales will continue to impact business, Hikma said. The company expects Roxane's 2015 unaudited revenue to total $650 million--much lower than in 2014--and full-year 2016 will be even lower than that. Hikma is projecting full-year revenue for Roxane in 2017 of between $700 million and $750 million, lower than its previously expected $725 million to $775 million range.

Still, Hikma is not throwing in the towel. The company is "very excited about the strategic and financial value of this acquisition, which will transform our position and scale in the U.S. generics market," Hikma CEO Said Darwazah said in a statement, adding that the company remains "confident in our outlook for the business."

In July, Hikma said it would snatch up Roxane to become the sixth largest supplier of generic drugs in the U.S. The company would inherit 88 Roxane products through the deal, as well as a Columbus, OH-based manufacturing plant that would help Hikma build up its noninjectables business.

Analysts initially seemed optimistic about the deal. Hikma's acquisition of Roxane "represents good value" compared with the median purchase price for similar transactions, Stifel Nicolaus analyst Max Hermann and colleagues wrote in a note to investors at the time of the agreement. "We continue to believe the company has superior long-term growth prospects," Hermann said.

Hikma will have a long road to travel, though, as it struggles to gain momentum with Roxane's generics business. The company "is not in the race to be No. 3," Darwazah said last year, but it is still aiming high in generics. "We won't be the size of Teva and other big companies, but we will be bigger than many other companies that were ahead of us over the last 5 years," Darwazah said.

This is not the first time Hikma has struck a deal with Boehringer. The company last year said it would shell out $300 million in cash and performance-related milestones to get assets and injectable products from Boehringer's Ben Venue Laboratories unit. Hikma also bought a troubled Ben Venue plant in a separate deal, and has since gutted the facility and used equipment in other plants.

- read Hikma's statement

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