Recent positive news about a COVID-19 vaccine has drawn attention to healthcare and pharmaceutical companies, particularly BioNTtech (NASDAQ :), Moderna (NASDAQ 🙂 and Pfizer (NYSE :).
Today we are expanding the discussion to the generic drug market and a UK-based company, Hikma Pharmaceuticals (LON :), (OTC :), which recently started manufacturing Remdesivir – Gilead Sciences & # 39 (NASDAQ 🙂 antiviral drug – under contract in Portugal. In October, the United States Food and Drug Administration (FDA) approved Remdesivir for coronavirus treatment of hospitalized patients.
Generic Market Grows
The FDA describes a generic drug this way:
"A drug made to be the same as an existing approved brand name drug in dosage form, safety, strength, route of administration, quality, and performance characteristics."
Manufacturers can start producing generic drugs when exclusive patents on drugs expire. Research led by Olivier J. Wouters of the London School of Economics and Political Science cites:
"Generic drugs can theoretically be sold for a fraction of the price of brand name drugs."
According to IMARC, the "global generic drug market will reach $ 497 billion by 2025". In 2019 it was $ 367 billion.
IBISWorld metrics also show that in the US, "The generic pharmaceutical industry's market size as measured by revenue is $ 49.3 billion in 2020." In fact, more than 90% of all US prescriptions filled in 2019 were generics. In the UK, this number reached 75% in 2017, compared to the Organization for Economic Co-operation and Development (OECD) average of 52%.
In addition to current figures, changing demographics are likely to help generic companies increase sales. The world population is aging.
The states of the United Nations say:
“By 2020, there will be an estimated 727 million people aged 65 or older worldwide. This number will more than double to more than 1.5 billion people by 2050. The proportion of elderly people in the world population is expected to increase from 9, 3 percent in 2020 to 16 percent in 2050. "
As a result, we can expect more chronic diseases in the coming decades, translating into more generic drug production. The generic pharmaceutical market is an important market not only for health professionals, drug manufacturers and policymakers, but also for investors.
With that said, here's a closer look at HIK's stock.
Hikma Pharmaceuticals
London-based member Hikma Pharmaceuticals is a multinational manufacturer of generic drugs. The company was founded in 1978. Since then it has grown both organically and through acquisitions worldwide.
Hikma Pharmaceuticals 1-Year Chart.
His portfolio is sold both in hospitals and retail. Analysts mention the breadth of its portfolio, the robustness of its production capabilities and the reliability of its distribution channels.
In August, management published semi-annual trading results. Sales were $ 1,132 million, an 8% year-over-year increase (yoy). Cash flow of $ 292 million was a 52% year-over-year increase. Earnings per share (EPS) was 87.6 cents, an increase of 15%.
Three segments contributed to revenue:
Injectables: saw double digit sales growth;
Generic: maintaining the operational core margin
Branded: Realized 6% growth in core operating profit.
Even before obtaining the non-exclusive supply agreement with Gilead, Hikma manufactured a wide variety of injectable therapies for ventilator patients in the US
On November 5, the group released a positive trading update with improved outlook for the full year. CEO Siggi Olafsson emphasized the company's ability to "provide the drugs most needed for … customers, including those used in the treatment of COVID-19."
So far in the year, shares are up about 32%. On November 17, HIK closed at 2,547p ($ 69.5 for US stocks). With a market capitalization of 5.87 billion, the company could still grow significantly. The forward P / E and P / S ratios stand at 18.98 and 3.71, respectively. We would like to buy the dips in stock. Long-term shareholders would also be entitled to a dividend yield of approximately 1.4%.
Finally, investors interested in Hikma shares who do not want to allocate capital to one company can research two ETFs that contain HIK shares as an investee: iShares Core MSCI EAFE ETF (NYSE 🙂 and the iShares MSCI EAFE ETF (NYSE :).
Bottom Line
In addition to the biopharmaceutical companies that investors have looked to in 2020, other US-listed generics manufacturers that may be suitable for long-term portfolios include Bridgewater, Amneal Pharmaceuticals (NYSE :), based in New Jersey, India. . Dr Reddys Laboratories (NYSE :), Irish headquarters Endo International (NASDAQ 🙂 and Perrigo (NYSE :), German Fresenius Medical Care (NYSE :), Philadelphia-based Lannett Company (NYSE 🙂 and Israeli headquarters Taro Pharmaceutical Industries (NYSE 🙂 and Teva Pharma Industries (NYSE :).
Since nine of the ten American recipes that are filled out are generic, Hikma, like the above companies, deserve further care.
