Hikma Pharmaceuticals, a drug maker based in Jordan and the largest manufacturer in the region, is projecting lower revenue margins in its generics business.
The company made the disclosure yesterday after a warning letter that it received from the US Food and Drug Administration (FDA).
In February, the company received a warning over its operations in the oral-dosage facility that it runs in Eatontown, New Jersey. Hikma acquired the facility in 1991 as it prepared to enter the American market.
The company, in a statement, said it expected a 20 per cent group revenue growth, but added that pricing pressure had contributed to lower generics sales.
Hikma is "implementing some control procedures to enhance important quality processes and as a result, our generics segment has had a weaker start than expected to 2012", said Zeena Murad, Hikma's investor relations manager. "This will not affect our expansion plans in the US [and] we had already begun expanding our injectables facility."
Shares of the FTSE 250 generic drug and injectables specialist were trading at 611 pence on the London Stock Exchange in midday trading yesterday after closing at 613.50 pence on Wednesday.
Analysts said they did not think the FDA warning would have any major impact on Hikma in the long run.
"As you can see from the share price reaction, most people are mostly interested in the return to growth in Mena [Middle East and North Africa]," said Savvas Neophytou, a Panmure Gordon executive. "There are not that many pharmaceutical companies these days providing such strong growth."
Algeria and Egypt, the company's largest markets in branded medicine, cushioned the margins drop in generics. These markets were followed by Saudi Arabia, Tunisia and Libya. The US market accounts for 35 per cent of Hikma's total revenue, including generics, whereas 55 per cent comes from the Mena region, according to Ms Murad.
The major unknown is any future consent decree which may be levied by the FDA, Mr Neophytou said. "This could be anything between US$20 million [Dh73.4m] and $150m depending on the severity of the situation and mediation between the agency and Hikma."
But that will be seen as a one-off cost, and assuming it is not so big that it provides a liquidity problem, the shares should be able to take the situation in their stride, he said.
The Eatontown warning is not expected to impact Hikma's overseas markets.
"For the full year, we expect sales of between $130m and $135m," the company statement said.
Generics sales were reported at $154.8m last year, 13 per cent higher than this year's outlook.
The region's largest drug maker maintained its guidance of 20 per cent revenue growth in branded medicines.
Hikma still expects to surpass $1 billion in turnover for this year, Ms Murad said.
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