Hikma Pharmaceuticals Plc (HKMPY) shares were active in London trading Monday after the drugmaker unveiled a reorganization of its U.S. business that includes a change in leadership.
The shakeup of its U.S. business, West Ward Pharmaceuticals, follows a 'complete response letter' issued by the U.S. Food & Drug Administration in May in relation to its crucial Advair Diskus generic application, which the company now says has a low likelihood of it receiving approval in the current year. Hikma indicated the changes are expected to position the drugmaker for further expansion.
"The leadership and organisational changes we have announced today will bring greater organisational focus and alignment, establish a scalable structure to enable continued growth, and strengthen the US leadership team," said chairman and CEO Said Darwazah.
Darwazah will take the helm of the restructured U.S. operation in addition to his ordinary duties after Michael Raya retires at the end of the year. The mission-critical U.S. half of the company will be split into two separate business units: a generic drug-making operation and an injectables business.
Hikma shares rose 0.8% in the opening minutes of London trading before paring gains and slipping 0.4% into the red by 09:00 London time , changing hands at 1,580 pence each and trimming the year to date loss to around 14%.
Gains for Hikma shares during the year to May had been built on expectations of an approval in 2017 for Advair Diskus and optimism over the generic's possible performance that had led management to forecast revenue growth of as much as 15% in the current year.
Advair is a blockbuster asthma treatment pioneered by GlaxoSmithKline plc (GSK) - Get GlaxoSmithKline plc Sponsored ADR Report although it lost the patent in 2010 and has since been bracing for a flood of generics to hit the market.
The drugmaker was dropped from London's blue chip FTSE 100 in May after a period of poor performance from the shares and since this time, analysts have warned that the Advair failure might make Hikma the subject of multiple downgrades during the months to come.
"The delay in our view also limits the commercial potential before other entrants potentially enter the market ... we expect a sizeable cons downgrade with any updated guidance," said James Vane-Tempest, an analyst at Jefferies, in a May research note.
Vane-Tempest has already hit Hikma with a double downgrade, reducing its rating from buy to underperform and slashing its price target by more than 25% to 1,450.0 pence.