Research Update: Hikma Pharmaceuticals Affirmed At 'BBB-' On Solid Metric Projections Amid Some Margin Pressure; Outlook Still Stable

We think Hikma Pharmaceuticals PLC has sufficient balance sheet strength and robust topline growth potential to accommodate upcoming margin erosion, mostly due to higher royalties in the generics division and favorable one-offs last year. We anticipate S&P Global Ratings-adjusted EBITDA margins of 25%-26% in the next two years, translating into positive free cash flow of about $200 million-$300 million, with leverage slightly below 1.5x over the same period. In our view, Hikma's recently announced acquisition of part of Danish specialty pharma company Xellia Pharmaceuticals should support top-line growth over the next two years and strengthen the product pipeline and manufacturing capabilities of its Injectable Business in the U.S. We also consider that, at the current rating level, Hikma's credit metrics

...- We think Hikma Pharmaceuticals PLC has sufficient balance sheet strength and robust topline growth potential to accommodate upcoming margin erosion, mostly due to higher royalties in the generics division and favorable one-offs last year. We anticipate S&P Global Ratings-adjusted EBITDA margins of 25%-26% in the next two years, translating into positive free cash flow of about $200 million-$300 million, with leverage slightly below 1.5x over the same period. - In our view, Hikma's recently announced acquisition of part of Danish specialty pharma company Xellia Pharmaceuticals should support top-line growth over the next two years and strengthen the product pipeline and manufacturing capabilities of its Injectable Business in the U.S. - We also consider that, at the current rating level, Hikma's credit metrics can manage possible continued inorganic investments and the recent increase in shareholder remuneration. - We therefore affirmed our '###-' long-term issuer credit rating on Hikma...

Research Update