Hikma Pharmaceuticals is no stranger to buyout rumors. The Jordan-based drugmaker pops up often in deal talk, partly because of its sales and infrastructure in emerging markets. Now, there’s another reason or two–its recent win on the gout drug Mitigare and its impending entry onto London’s Financial Times Stock Exchange. New rumors, too.
Hikma shares were up in London today on talk of a potential sale to Mylan, the U.S.-based generics maker, according to a brief in The Independent. Meanwhile, This is Money put up Big Biotech leader Amgen as a possibility.
The price would be richer than it would have been several weeks ago, because Hikma shares hit an all-time high of £25 earlier this month. The company’s market cap is now about £4.7 billion, This is Money figures–almost at the £5 billion threshold founding family member Samih Darwazah has pegged as a potential sale point for the company.
The Independent’s rumors put a Mylan bid at £35 per share–and the talk was sufficiently hot to persuade Evercore ISI analyst Umer Raffat to issue a note about potential cost synergies and earnings growth associated with a Mylan-Hikma combo. Raffat figures the 25% to 35% in SG&A and R&D costs could be squeezed out after a takeover, with earnings accretion of $0.12 this year and $0.25 next, or a 3% to 5% bump.
Of course, the Mylan buyout idea has surfaced before, including last year, when investors started to worry that Mylan hadn’t been doing enough deals.
Here’s why now might be the time for a Hikma buy: The company prevailed in its long quest to launch Mitigare, a gout drug whose active ingredient is the ancient remedy colchicine.
Japan’s Takeda Pharmaceutical had been marketing its own version of colchicine, Colcrys, under an exclusivity granted by FDA in return for putting the widely used–but not FDA-approved–drug through clinical trials.
Hikma’s colchicine drug was one of those forced off the U.S. market when the FDA gave Colcrys its blessing. But Hikma persisted with the agency, and last September, the agency blessed Mitigare for launch. Takeda sued the FDA and a U.S. judge put a hold on Mitigare’s launch at first, but then denied the company’s request for an injunction. By early January, Hikma was preparing to roll out Mitigare.
Colchicine sales amounted to $688 million in the U.S. for the 12 months ended August 2014, Hikma says. That’s a solid market opportunity for a bigger drugmaker looking for new products to beef up a portfolio.
By Tracy Staton