Hikma Pharmaceuticals’ Price Target Cut, Analyst Remains Bullish

Hikma Pharmaceuticals shares (LON:HIK) have taken a hit over the past month, declining 9.27% to sit near the bottom of it's 12 month range. The news of a cut price target would not normally be seen as a positive, although the level, and the messaging indicate this could be more bullish than first seemed.

Deutsche Bank lowered its target to 2,850p from 3,100p, though maintaining a “Buy” rating on the pharmaceutical company. This adjustment reflects concerns over lower margin guidance for Hikma's injectables business, a key segment for the group, yet continues to offer a very healthy upside from current price action at 1,792p.

The downward revision by Deutsche Bank comes despite a partially offsetting small increase in revenue and margin expectations for Hikma's Branded division. The net effect, according to Deutsche Bank's analysis, is a very low-single-digit reduction to fiscal year 2025 core EBIT (Earnings Before Interest and Taxes) forecasts.

This marginal adjustment to overall profit expectations, however, appears to have triggered a more significant market reaction, as evidenced by the sharp decline in Hikma's share price.

The primary driver of the investor unease stems from the revised expectations surrounding the injectables business. While Hikma's Branded segment is demonstrating signs of improvement, the injectables margin pressure has become a focal point for analysts and investors alike. The injectables business is a significant contributor to Hikma's overall revenue and profitability, making any dip in its expected performance particularly impactful.

Hikma's strategic moves, such as the acquisition of the trametinib ANDA from Novartis Pharma AG, which grants Hikma 180 days of U.S. generic market exclusivity for trametinib (used in cancer treatment), are intended to bolster its portfolio and offset challenges in other areas.

Also, Hikma's plans to introduce generic versions of Novo Nordisk’s diabetes and weight loss drugs, Ozempic and Wegovy, as their patents begin to expire, also offer potential for future revenue growth, given the rapidly expanding market for weight loss medications.

However, these positive developments have so far been overshadowed by the immediate concerns surrounding injectables margins and the resulting impact on near-term profitability. The company's medium-term growth targets, unveiled in May 2025, which project a compound annual growth rate (CAGR) of 6% to 8% in revenue and 7% to 9% in core operating profit from 2024 to 2027, and an ambitious goal of achieving $5 billion in group revenue by 2030, now face increased scrutiny in light of these recent headwinds.

The next few quarters could prove pivotal in shaping sentiment surrounding Hikma, as the firm seeks to reassure markets and its ability to deliver to its long-term goals.