When Mylan agreed to pay $1.6 billion to nab Strides Arcolab's sterile injectables drug business, the competitors it bested were thought to be sniffing around elsewhere for a similar deal. Within days of the announcement, Jordan-based Hikma said it had been approached to see if it might be willing to unload its injectable operation for the right price.
But the Jordan-based drug company has done the math and decided it has a prize. The math is pretty compelling. It started about two years ago by buying the injectables business of Baxter International ($BAX) for about $112 million and now has a business some analysts believe is worth $2 billion. Last year the operation had sales of $470 million and grew by more than 80% in the U.S.
In an announcement today, the company said, "Hikma is uniquely positioned to create significant further value by retaining this business and leveraging its high quality manufacturing facilities," CEO Said Darwazah said. "After a thorough review of strategic options for the Injectables business, we are confident that retaining and continuing to invest in this business is the best option for shareholders."
Hikma's decision to hold onto the business "validates that there is more value in that business and that they think they can grow it," Panmure Gordon London analyst Savvas Neophytou told Bloomberg.
Hikma in late February said it has gotten unsolicited interest in the injectable drug business and needed to thoroughly evaluate the company against growth potential in fairness to shareholders. That announcement came on the heels of Mylan's ($MYLN) $1.6 billion deal for Agila Specialities. Sources told Bloomberg that both Amgen ($AMGN) and Novartis ($NVS) were sizing up Hikma's business.
The Middle East company continues to benefit in the U.S. from the manufacturing problems of competitors like Hospira, which has been trying for several years to show the FDA that it's on top of its manufacturing and quality problems. But in March, Hospira ($HSP) received another setback following an FDA re-inspection of its Rocky Mount, NC, plant. Instead of getting the positive feedback it expected, it was handed a 21-page Form 483 with more to-dos on it. At about the same time, Hikma reported results of finances for 2012, showing its injectables sales in the U.S. grew 83%, up $134 million, or 82.6% to hit $296.2 million. That is 63% of its total injectables revenue of $470 million.
- here's the release
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