Hikma Pharmaceuticals PLC · LSE:HIK
Hikma Pharmaceuticals — FY2010 Earnings Presentation
60 slides from Hikma Pharmaceuticals's earnings presentation, Mar 16, 2011
Slide 1: 2010 Preliminary Results
HIKMA PHARMACEUTICALS PLC 2010 Preliminary Results 16 March 2011
Slide 2: ■ This document, which has been issued by Hikma Pharmaceuticals PLC (the “Company”), comprises
■ This document, which has been issued by Hikma Pharmaceuticals PLC (the “Company”), comprises the written materials/slides for a presentation. This document and its contents are confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or publis
Slide 3: Said Darwazah, Chief Executive Officer
Said Darwazah Chief Executive Officer
Slide 4: 2010 highlights
2010 highlights ■ Growth through diversification - Revenues up p 14.8% and operating p gpprofit up p 25.9% ■ Excellent working capital management p g cash flow increased by -Operating y 21.7% to $144.8 million through g ■ Strong balance sheet -Reduced net debt by y $15.8 million to $101.1 million ■
Slide 5: Khalid Nabilsi, Chief Financial Officer
Khalid Nabilsi Chief Financial Officer
Slide 6: Consolidated P&L
Consolidated P&L All figures in $ million 2010 2009 Change Net sales 730.9 636.9 +14.8% Gross profit 357.3 304.4 +17.4% Gross margin 48.9% 47.8% +1.1 Operating profit 135.1 107.3 +25.9% Operating margin 18.5% 16.8% +1.7 Profit before tax 121 0 121.0 94 8 94.8 +27 6% +27.6% Tax (21.5) (15.5) +38.7% E
Slide 7: Branded: Continuing to deliver double digit growth
Branded Continuing to deliver double digit growth Revenues ($ million) ■ Excellent E ll t second d half h lf performance f across the th 440 + 12.9% in constant MENA region 400 currency 398.0 394.2 360 ■ Strong rebound in Algeria 352.7 + 11.8% 320 280 ■ Good growth in the rollout of our key in-licen
Slide 8: Branded: Good profitability despite forex headwinds
Branded Good profitability despite continued forex headwinds Gross profit ($ million) Operating profit ($ million) 220 120 200 + 8.4% 203.4 100 + 7.9% 180 187.6 98.7 160 91.4 80 140 120 60 100 80 40 60 40 20 20 0 0 2009 2010 2009 2010 Gross margin Operating margin 2009 2010 Change 2009 2010 Change 5
Slide 9: Significant forex movements in MENA since 2008
Branded Significant g forex movements in MENA since 2008 Sudanese Pound against US Dollar (2008-2011 spot) Algerian Dinar against US Dollar (2008-2011 spot) 0 50 0.50 0 016 0.016 0.45 - 17.0% 0.015 0.40 - 11.1% - 13.4% 0.014 0.35 - 35.2% 0.013 0.30 0.25 0.012 2008 2009 2010 2011 Spot p 2008 2009 201
Slide 10: Injectables: Building scale in global injectables
Injectables Building u d g sca scale e in g global oba injectables jec ab es Revenues ($ million) ■ Excellent growth in the US driven by new product 200 launches, existing products and contract manufacturing + 12.1% 12 1% in constant 160 currency 161.5 ■ Strong pick up in sales in MENA in the second
Slide 11: Injectables: Excellent improvement in operating margin
Injectables Excellent ce e t improvement p o e e t in ope operating at g margin ag Gross profit ($ million) Operating profit ($ million) 80 26 24 70 + 12.9 % 71.0 22 23.7 60 20 + 54.7% 62.9 18 50 16 14 15.3 40 12 30 10 8 20 6 4 10 2 0 0 2009 2010 2009 2010 Gross margin Operating margin 2009 2010 Ch
Slide 12: Generics: Solid demand for our core product portfolio
Generics Solid demand for our core p product p portfolio Revenues ($ million) ■ Robust demand across the core product portfolio 200 180 174.5 ■ Substantial increase in sales coming from certain 160 + 29.2 % market opportunities 140 135.1 120 ■ Continued emphasis on quality and service levels 100 80
Slide 13: Generics: Exceptional growth in operating profit
Generics Exceptional p g growth in operating p gpprofit Gross profit ($ million) Operating profit ($ million) 90 60 80 + 55.7% 81.8 70 50 + 104.2% 51.1 60 40 50 52.5 30 40 30 20 25.0 20 10 10 0 0 2009 2010 2009 2010 Gross margin Operating margin 2009 2010 Change 2009 2010 Change 38.9% 46.9% + 8.0 18
Slide 14: Decrease in Group operating expenses
Operating expenses Decrease in Group p operating p g expenses p Operating expenses as a % of Group revenue ■ S&M expenses decline as % of sales - Strong performance in Generics 2010 2009 Change - Economies of scale and reduced costs Sales & Marketing 14.6% 15.4% - 0.8 in global Injectables G&A 1
Slide 15: Continuous focus on working capital management
Cash Flow Continuous focus on working capital management Cash Flow from operating activities ($ million) 3-year CAGR: 40% Days $160 350 $145 $140 300 300 $119 $120 237 250 230 $99 $100 205 200 $75 $78 $80 $63 150 $53 $57 $60 100 $40 $20 50 $0 0 2007 2008 2009 2010 Net Income Operating Cash Flow Cash
Slide 16: Increased capex to support future growth
Capital expenditure Increased capex to support future growth Capital expenditure ($ million) 60 ■ Increased I d investment i t t in i new machinery hi and d expansion projects in MENA 50 49.1 + 32.9% 68 6.8 ■ Completion C l ti off our new llyophilisation hili ti ffacility ilit iin 40 Portugal 37.0 7
Slide 17: Very strong financing position
Balance sheet Very strong financing position Net debt position at 31 December 2010 ($ million) 100 ■ Significant increase in operating cash flow and reduction in net debt improves the Group 68.0 66.3 financing position 50 ■ Unutilised debt facilities of $264.8m Short-term Long-term borrowing borrowi
Slide 18: Outlook for 2011 (in constant currency)
Outlook for 2011 (in constant currency) ■ Group revenue growth of around 7% and gross margin of around 47%. ■ Branded revenue growth of around 7% - Reflects our best assessment of the current situation in five affected markets and assumes these markets k t return t to t normall by b the th middle id
Slide 19: Said Darwazah, Chief Executive Officer
Said Darwazah Chief Executive Officer
Slide 20: Another year of strong growth
Another year of strong growth Group revenues ($ million) Acquired Ibn Al Baytar/ Medicef In Tunisia Acquired Al Dar Al Arabia in Algeria 730.9 Acquired Ribosepharm and Thymoorgan (Germany) in H1 2007. 700 Acquired Alkan (Egypt) and APM (Jordan) in H2 2007. 637 Began manufacturing operations in Trust
Slide 21: Current turbulence offers potential long-term opportunities
Current turbulence offers potential long-term opportunities ■ Economic growth - Underdeveloped U d d l d economies i h have potential t ti l tto iimprove rapidly idl ■ Growth in per capita healthcare spend - New N governments t lik likely l to t prioritise i iti h healthcare lth - Newly employed bet
Slide 22: Underlying MENA growth drivers remain intact
Underlying MENA growth drivers remain intact ■ MENA population is large, growing and aging (326 million people in 2008, up 2.0%) ■ Increasingly affluent population (GDP growth of 6% forecasted for MENA in 2012) ■ “Catch up” growth from low pharmaceutical spending per capita relative to developed mar
Slide 23: Bassam Kanaan, President and COO, MENA and EU
Bassam Kanaan President and COO, MENA and EU
Slide 24: Focusing on returning to business-as-usual as quickly as possible
Focusing on returning to ‘business-as-usual as quickly as possible Short-term disruptions Case study: EGYPT ■ Countries affected 25 Jan – Mass protests across Egypt Protestors push for democratic reforms and end to rampant - Tunisia, Egypt, Libya, Yemen, Bahrain food inflation, unemployment and corr
Slide 25: Our diversified business model mitigates revenues at risk
Our diversified business model mitigates revenues at risk 2010 revenue by region 5 affected MENA markets represented t d 14.0% 14 0% off G Group sales l in 2010 MENA US Europe & ROW Page 24
Slide 26: Our growth in Iraq demonstrates ability to succeed in difficult markets
Our growth in Iraq demonstrates our ability to succeed in difficult markets Iraqi market characteristics Hikma’s coverage of Iraqi market 2008 2 provinces S&M team 2 ■ Population: 32 million 2009 7 provinces S&M team 45 ■ 18 territorial provinces 2010 13 provinces S&M team 54 ■ Fast growing market 2
Slide 27: Strengthening our presence in MENA through acquisitions
Strengthening our presence in MENA through acquisitions Tunisia Algeria ■ 2010 Tunisian market size: ■ 190 medical/sales reps to cover one $680 million of the biggest market in MENA ■ Re-organised sales force to reflect change in product mix ■ Hikma’s rank #9 in 2010 ■ Increased local capacity utili
Slide 28: Delivering strong growth in cardiovascular sales
Delivering strong growth in cardiovascular sales Hikma’s cardiovascular sales g growth* (($000)) 70000 60000 Overall MENA MENA¹ market potential: 50000 $866 million 40000 ■ 8 products were launched in 2010 30000 ■ 5th largest supplier of cardiovascular and diabetes 20000 products by value1 10000 ■ 6
Slide 29: Building our franchise in the CNS market
Building our franchise in the CNS market Hikma Therapeutic Originator Hikma Overall CNS¹ market Originator brand class brand growth potential: t ti l Anti- Solotik depressant Zoloft Pfizer +19.9% $ 733 million Atypical anti- Respirox Risperidal Janssen +105 6% +105.6% psychotic ■ Since 2007, we have
Slide 30: Hikma remains the licensing partner of choice in MENA
Hikma remains the licensing partner of choice in MENA Improving our market share of key in-licensed products d t Partneringg with Celltrion for the MENA region g - Differentiates Hikma as a biotechnology company - Access to rich pipeline of nine biosimilars - Ability to learn biotechnology -Oppo
Slide 31: Michael Raya, CEO for the USA
Michael Raya CEO for the USA
Slide 32: Delivering on our strategy for growth in the US market
Delivering on our strategy for growth in the US market ■ Continue to focus on driving down costs Cost Reduction ■ Increase global coordination and leverage global capabilities API ■ Own destiny through utilizing alternate API manufacturers ■ Continue diligence and focus on maintaining FDA standards
Slide 33: Gaining market share: orals
Gaining market share through continuous focus on quality and service Orals 2008 (‘000s) 2009 (‘000s) 2010 (‘000s) US generic oral market Total prescriptions written 2,247,088 2,409,483 2,576,204 Market growth +7 2% +7.2% +6 9% +6.9% Hikma (West-Ward) Total prescriptions written 24,531 33,770 44,203
Slide 34: Gaining market share: injectables
Gaining market share through continuous focus on quality and service Injectables 2008 (‘000s) ( 000s) 2009 (‘000s) ( 000s) 2010 (‘000s) ( 000s) US generic injectables market Total eaches (vials) 1,181,456 1,241,791 1,249,198 Market growth +5.1% +0.6% Hik Hikma (W (West-Ward) t W d) Total eaches (via
Slide 35: 13th largest generic manufacturer and 5th fastest growing in the US
13th largest generic manufacturer and 5th fastest growing in the US* Manufacturer 2008 2009 2010 CAGR 1 TEVA PHARMACEUTICA 589 523 081 589,523,081 597 795 573 597,795,573 610 038 486 610,038,486 1 7% 1.7% 2 MYLAN 295,176,944 330,142,713 367,193,087 11.5% 3 WATSON LABS 245,463,527 237,603,052 235,674
Slide 36: Delivering quality sales through focus on customer channels
Delivering ‘quality' sales through a focus on customer channels 2010 Net Sales Growth Class of Trade 2010 Net Sales Growth (excl. colchicine) Wholesaler 33% 15% National chains 40% 22% Small distributor 37% 36% Large distributor -3% -8% M il order Mail d 29% 37% All other 62% 19% Page 35
Slide 37: Leveraging our MENA capacity for the US market
Continuing to leverage our MENA capacity for the US market Percentage of Generics sales produced in MENA* MENA 30.0% 26.2% 25.0% 22.2% 20.0% 15.0% 10.0% 9.3% 7.2% 5.0% 0.0% 2007 2008 2009 2010 Page 36 * Oral generic products produced at our FDA approved facilities in Jordan and Saudi Arabia and sold
Slide 38: Transforming our global injectables platform
Transforming our global injectables platform ■ MSI MSI’ss significant portfolio of commodity and differentiated products will make Hikma the #2 player in the US injectables market ■ Doubles Hikma’s US revenue and global injectables sales ■ Adds a comprehensive controlled substances product portfolio
Slide 39: Positioning Hikma as the #2 generic injectables supplier in the US
Positioning Hikma as the #2 generic injectables supplier in the US Top US generic injectables suppliers (million eaches) Generic narcotics market share (units) 600 100% 39.8% 90% 500 #2 #9 80% 400 70% 300 60% 17.9% 16.5% 50% 200 13.9% 40% 100 5.1% 4.2% 3.9% 3.6% 30% 2.4% 1.5% 1.4% 1.3% 0 20% 10% 0%
Slide 40: Adding a high quality and complementary injectables portfolio
Adding a high quality and complementary injectables portfolio Top therapeutic areas Hikma Multisource Injectables Combined Antibiotics 9 9 9 Anti-cholinergics 9 9 9 Anti-convulsants 9 9 9 Anti-emetics 9 9 9 Anti-hypertensive 9 9 Anti-psychotics 9 9 Cardiac Agents 9 9 CAN Agent 9 9 Diuretics 9 9 Hema
Slide 41: Riad Mechlaoui, Global Head of Injectables
Riad Mechlaoui Global Head of Injectables
Slide 42: MSI brings key capabilities to our global injectables business
MSI brings key capabilities to our global injectables business ■ Adds large capacity for the production of small vials ■ Gives flexibility to participate to US government contracts ■ Increase contract manufacturing opportunities ■ Strengthens the potential of selling injectables in the MENA and Euro
Slide 43: Creating centres of excellence for injectables manufacturing
Creating centres of excellence for injectables manufacturing ■ MSI West-Ward - Large L quantity tit volumes, l liliquid id smallll volume l parenterals t l (vials ( i l lless th than 10 10ml) l) - Servicing worldwide market ■ Hikma Portugal - Medium/small quantity niche liquid parenterals including
Slide 44: Integrating MSI into Hikma's global Injectables platform
Integrating MSI into Hikma’s global Injectables platform ■ Remediation ■ Construction ■ Technical transfers ■ World wide registration Page 43
Slide 45: Hikma is now the 9th largest generic injectables supplier in the US
Hikma is now the 9th largest generic injectables supplier by volume in the US* US 2010 MFG COMPANY / 2010 HIKMA 2010 INJECTABLES PRODUCT EACHES INJECTABLES USD LAUNCHES (000s) 1 HOSPIRA 1,118,167 497,585 1 Enalaprilat injection 2 BAXTER PHARM DIV 253 810 253,810 205 558 205,558 2 Fosphenytoin sodium
Slide 46: Opportunities for growth in Europe
Opportunities for growth in Europe ■ Retail Germany -Germany -Oncology products -Leveraging our specialised sales force ■ European tenders -Germany, Portugal, Italy, Netherlands, Austria -Price sensitive -Leverage efficient manufacturing and competitive API costs ■ Contract manufacturing -Significan
Slide 47: Significant potential for Injectables in MENA
Significant potential for Injectables in MENA ■ Considerable scope to continue to roll out portfolio in larger markets - Egypt, Algeria and KSA 12 Syria - 19 new products pending Tunisia Lebanon 8 approval 12 Jordan 55 Iraq 20 11 - 223 registrations pending across Algeria Kuwait all markets 10 Bahra
Slide 48: Conclusion
Conclusion ■ Strong set of results for 2010 ■ Confidence in continuing momentum for the Group ■ MENA continues to offer long-term growth potential ■ US generics well-placed for growth ■ MSI acquisition brings scale and opportunities to global Injectables ■ Acquisitions remain a priority for growth P
Slide 49: Appendix
Appendix
Slide 50: Revenue by segment and region
Revenue by segment and region 2010 revenue by segment 2010 revenue by region 53.9% 61.1% 10.8% 23 9% 23.9% 0.7% 28 1% 28.1% 21.5% Branded Generics Injectables Other MENA US Europe & ROW Page 49
Slide 51: Injectables sales by region
Injectables sales by region 2010 Injectables revenue by region 19.0% 41.2% 39 8% 39.8% MENA US Europe & ROW Page 50
Slide 52: Significant improvements in cash generation
Cash flow Significant g improvements p in cash g generation All figures US$m 2010 2009 Profit before tax and minority interest 121.0 94.8 Adjustments for non-cash items 51.8 51.0 Change in working capital 4.7 (11.0) Income tax paid (32.7) (32 7) (15.8) (15 8) Net cash generated from operating activi
Slide 53: Balance sheet
Balance sheet $ million 2010 2009 Growth $ Growth % Cash 66.3 68.0 -1.7 -2.5% Trade and other receivables 228.7 226.8 1.9 0.8% Other current assets 0.9 1.3 -0.3 -25.7% Inventories 182.2 160.5 21.7 13.5% Total current assets 478.1 456.6 21.5 4.7% Intangible assets 269.1 269 1 255.7 255 7 13 4 13.4 5
Slide 54: 2010 MENA market growth
2010 MENA market growth Market Unit Avg Rx share sales Value Value Growth Rank (million) $m $ % % MENA PRIVATE MARKET 3,071 8,356 2.72 +8.4 SANOFI-AVENTIS 1 228 773 3.39 +4.2 9.3 GLAXOSMITHKLINE 2 238 677 2.85 +5.4 8.1 NOVARTIS 3 152 547 3.61 +10.8 6.6 PFIZER 4 86 462 5.36 +5.5 5.5 HIKMA PHARMA 5 87
Slide 55: Branded: Launching new products and developing new markets
Branded Launching g new p products and developing p g new markets Product launches in 2010 Product approvals in 2010 70 100 95 61 90 87 60 85 80 75 50 70 65 60 40 55 50 45 30 40 35 29 30 20 25 14 20 15 10 8 15 10 8 5 1 1 0 0 MENA & ROW Europe MENA & ROW Europe New compounds New compounds New dosage
Slide 56: Branded: Pipeline for future growth
Branded Pipeline p for future g growth Product submissions in 2010 Pending approvals in 2010 180 500 170 159 450 160 150 400 140 130 350 120 299 110 300 100 90 250 80 200 70 60 150 50 45 40 100 91 30 20 44 20 50 21 14 10 0 0 0 7 0 0 MENA & ROW Europe MENA & ROW Europe New compounds New compounds New
Slide 57: Injectables: Launching new products and developing new markets
Injectables Launchingg new p products and developing p g new markets Product launches in 2010 Product approvals in 2010 20 90 18 80 77 16 70 14 13 60 12 12 11 11 50 10 44 10 40 8 6 6 30 6 20 4 10 10 2 10 6 5 4 2 3 0 0 0 0 US MENA & ROW Europe US MENA & ROW Europe New compounds New compounds New dosa
Slide 58: Injectables: Pipeline for future growth
Injectables Pipeline p for future g growth Product submissions in 2010 Pending approvals in 2010 100 240 223 220 90 200 80 180 70 160 60 58 140 50 120 100 40 34 80 30 60 20 40 29 29 34 9 9 18 19 21 10 5 3 20 1 1 2 6 5 0 0 US MENA & ROW Europe US MENA & ROW Europe New compounds New compounds New dosa
Slide 59: Generics: Launching new products
Generics Launching g new p products Product launches in 2010 Product approvals in 2010 10 10 8 8 6 6 4 4 4 4 4 3 3 2 2 2 0 0 US US New compounds New compounds New dosage forms and strengths New dosage forms and strength T t l product Total d t launches l h Total product approvals Page 58
Slide 60: Generics: Pipeline for future growth
Generics Pipeline p for future g growth Product submissions in 2010 Pending approvals in 2010 10 40 35 34 34 8 30 7 7 25 25 6 5 20 4 15 10 2 5 0 0 US US New compounds New compounds New dosage forms and strengths New dosage forms and strengths T t l submissions Total b i i T l pending Total di approv