Hikma profits soften as shortages of doxycycline are resolved

Chasing drug shortages in the U.S. caused by plant interruptions or discontinuations can be a lucrative business for those manufacturers who have the right ANDAs and the capacity to ramp up to meet unmet needs. But those profits can suddenly evaporate when a producer gets production back online. Hikma Pharmaceuticals has ridden that roller coaster with the antibiotic doxycycline and now finds itself at the low end of the curve.

The drugmaker reported this week that sales in its generic division were off nearly 20% for the year to $216 million and expects that for 2015 they will fall another 7% to about $200 million. But the impact on its profits in that division was even greater with its adjusted operating profit falling to $113 million, down from $166 million the year before and the margin slipping nearly 10% to 52.3% from 61.9%.

The reason? The market prices and demand for its doxycycline softened as other producers returned production to the market. The drugmaker has warned investors that it expected its sales would be hurt in 2014 as that shortage tapered off.

Hikma CEO Said Darwazah

The Jordan-based company still reported a 9% rise in sales for the year, hitting $1.5 billion, driven by growth in sales of sterile injectables, a business it once considered selling. CEO Said Darwazah it expects further growth for fiscal 2015, since it last year bought the generic injectable drugs from Boehringer Ingelheim that Boehringer sold under its Bedford Laboratories brand. It agreed to pay $225 million in cash upfront and up to $75 million in performance-related milestones for the products.

"With the acquisition of the Bedford and Ben Venue assets, continued new product launches and our strong market positions in the US, MENA and Europe, Hikma remains well placed for future growth," Darwazah said in an earning release.

It also got in the deal with the German drugmaker the massive sterile injectable plant in Bedford, OH, that Boehringer closed at the end of 2013 after dealing for years with FDA quality concerns. Hikma agreed it was too costly to reopen and instead stripped out the useful equipment for use in its other plants.

- here's the release
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