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02 Apr 2020 | 12:11

JP Morgan ups rating on Hikma after key patent win

(Sharecast News) - JP Morgan has upped its rating on Hikma Pharmaceuticals after the generics specialist won a key patent challenge. On Tuesday, the US District Court for the District of Nevada ruled that Hikma's generic version of rival Amarin's drug Vascepa did not infringe six patents, as Amarin had claimed, and JP Morgan argued that the ruling offered "significant upside".

It has upped its rating to 'overweight' from 'underweight', and raised its price target around 20% to ?24.

The bank argued: "We now see a potential Hikma generic Vascepa approval in the second half of 2020, which could position the company as one of a handful of players targeting a $2.5bn+ peak sales opportunity.

"We believe this significant optionality is yet to reflected in Hikma's shares, with less than $0.3bn of market cap gained since the update versus the around $3.4bn hit to Amarin's market cap."

JP Morgan said it believed the significance of the patent win had been overlooked by the market, in part because of Covid-19 but also because some investors did not believe Hikma would receive approval from US Food and Drug Administration "any time soon".

In addition, JPM Morgan noted: "Hikma also offers a robust base business and a clean balance sheet, positive attributes in the current environment. We see little Covid-19 impact, with potential for some increase US general utilisation during the epidemic.

"Though deal making may be on hold, with a clean balance sheet we believe Hikma is well position for future M&A."
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