Hikma 'fairly valued' after recent run, UBS downgrades

8th Apr 2014 09:28

UBS has lowered its recommendation for pharmaceuticals group Hikma from 'buy' to 'neutral' on valuation grounds, saying that it is 'time to take a pause and breathe' after the stock's recent performance."As the stock trades near our price target [1,700p] and as we see no reason in the short-term to increase our expectations, we feel the stock could be range bound and therefore downgrade to 'neutral'," the bank said."We continue to believe that Hikma is a well-managed growth company but see the stock as fairly valued at the current level."UBS said the next catalyst for the stock could come from an acquisition of a small manufacturing presence in Russia - which the company had signalled its interest in - as it continues to spend to diversify its revenues source. Nevertheless, the bank raised concerns with Hikma's doxycycline antibacterial medicine, saying that visibility over the product remains limited. "Although Hikma Doxycycline has managed to keep circa 18% of the overall volume in the US, management expect more competition to come in the second half of 2014. We already assume 40% price drop and 75% loss in market shares by the end of 2014, but should competition significantly intensify, a price drop of 90%+ is not impossible and could prove our expectations for Doxycycline are overly optimistic."The stock was down 3.9% at 1,600p by 09:36. By Monday's close, the stock had gained nearly 40% since the start of the year.BC