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Morningstar | Hikma's Strong Position in Injectable Drugs Helps Offset Some Generic Pricing Challenges

Since going public in 2005, Hikma has grown rapidly thanks to emerging-market access, developed-country market share gains, and acquisitions. Manufacturing and operational improvements should continue to benefit the firm, but we have longer-term concerns about the stability of pricing and market share in the generics industry. Despite its small share in the global generics market, Hikma has a few traits that place it apart from its peers. First, it's one of the world’s largest generic injectable drug manufacturers by volume. Acquiring Baxter's injectables unit in 2010 and key assets from Bedford Labs in 2014 more than doubled Hikma's injectables business and its U.S. market exposure. Although Hikma participates in the more commodified segments of the injectables market, placing it well behind industry leaders like Hospira by value market share, we still view its growing presence in the injectables market as an attractive opportunity.Second, Hikma ranks as the top generic drug manufacturer in the Middle East and North Africa, where it possesses brand recognition. Its status in this region makes the firm the go-to partner for in-licensed drug launches in this region of the world. Rising disposable incomes combined with Hikma's established presence in its core markets should continue to support compelling growth opportunities.Lastly, Hikma's low-cost operations should create additional share gains in developed markets, primarily against less nimble competitors in the United States and Europe. The recent acquisition of Roxane Laboratories significantly boosts the scale and small-molecule manufacturing ability of Hikma's U.S. generic drug unit and provides an opportunity to leverage these strengths. Its low labor costs and tax base enable Hikma to competitively price its products and gain share in these more commodified generic drug markets. Even the ability to steal small amounts of share could lead to rapid sales growth for Hikma. However, Hikma lacks the capabilities of industry leaders, namely large-scale manufacturing, vertically integrated operations, and an adept legal department.