Hikma Pharmaceuticals PLC · LSE:HIK
Hikma Pharmaceuticals — FY2009 Earnings Presentation
50 slides from Hikma Pharmaceuticals's earnings presentation, Mar 17, 2010
Slide 1: Hikma Pharmaceuticals PLC 2009 Results
HIKMA PHARMACEUTICALS PLC 2009 Results 17 March 2010
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
Said Darwazah Chief Executive
Slide 4: 2009 highlights
2009 highlights ■ Focus on high quality sales - Revenues up p 12.5% at constant exchange g rates ■ Record results with 36% growth in earnings ■ Successful control of costs across the Group despite continued investment for growth -Operating margin increased three percentage points to 16.8% ■ Excellen
Slide 5: Bassam Kanaan, Chief Financial Officer
Bassam Kanaan Chief Financial Officer
Slide 6: Consolidated P&L
Consolidated P&L All figures in $ million 2009 2008 Change Net sales 636.9 580.7 + 9.7% % Gross profit 304.4 256.5 + 18.7% Gross profit margin 47.8% 44.2% + 3.6 Operating profit 107.3 80.7 + 33.0% Operating profit margin 16.8% 13.9% + 2.9 Profit before tax 94.8 64.0 + 48.0% T Tax (15 5) (15.5) (6 9)
Slide 7: Impact of exchange rate fluctuations
Impact of exchange rate fluctuations ■ Negative impact on sales and operating profit in the Branded and Injectables business ■ Euro, Algerian Dinar, Egyptian Pound and Sudanese Pound continued to depreciate against the dollar Impact of Exchange Rate Fluctuations 2009 2008 Change Change at FX Impact
Slide 8: The MENA region represents nearly 65% of Group sales
The MENA region represents nearly 65% of Group sales 2009 revenue by segment 2009 revenue by region 63.5% 55.4% 21 2% 21.2% 24.0% 0.8% 12.5% 22.6% Branded Generics Injectables Other MENA US Europe & ROW Page 7
Slide 9: Branded: new launches and focused sales and marketing drive sales
Branded New launches and focused sales and marketing g drive sales Net sales ($ million) ■ Branded sales grew by 9.9% 400 - 13.1% 13 1% growth th in i constant t t currency +13.1% in constant 362.9 currency 10.2 350 + 9.9% ■ More focused sales and marketing efforts with 300 focus on promotion of new
Slide 10: Branded: margins impacted by exchange rates
Branded Margins g impacted p by y exchange g rates Gross profit ($ million) Operating profit ($ million) 200 100 +4.5% 180 + 8.6% 187.6 91.4 160 172.8 80 87.5 140 120 60 100 80 40 60 20 40 20 0 0 2008 2009 2008 2009 Gross margin Operating margin Change vs. Change vs. 2006 2007 2008 2009 2006 2007 20
Slide 11: Injectables: forex and strategy shift impact 2009 sales
Injectables Forex and strategy gy shift impact p 2009 sales Net revenue ($ million) ■ Injectables sales down 3.5% 160 + 0.6% 0 6% in constant currency 150 1 150.1 -Up 0.6% in constant currency 6.0 140 - 3.5% -Delivered strong growth in H2 2009 120 ■ MENA sales now represent 43.2% of Injectables 100
Slide 12: Injectables: higher gross margin reflects shift in sales mix towards MENA
Injectables Higher g g gross margin g reflects shift in sales mix towards MENA Gross profit ($ million) Operating profit ($ million) 70 25 -0.7 0.7 % -30.6% 60 63.4 62.9 22.1 20 50 15 40 15.3 30 10 20 5 10 0 0 2008 2009 2008 2009 Gross margin Operating margin Change vs. Change vs. 2006 2007 2008 200
Slide 13: Generics: strong management team and successful implementation of strategy
Generics Strong management team and successful implementation of strategy Net sales ($ million) ■ Sales up 27.8% reflecting strengthened management team 160 140 ■ Strong demand for anti-infective products + 27.8 27 8 % 135.1 120 ■ Successful supply of anti-infectives from FDA- 100 105.7 approved fac
Slide 14: Generics: excellent improvement in profitability
Generics Excellent improvement p in p profitability y Gross profit ($ million) Operating profit ($ million) 60 30 + 532.1% 50 + 172.1 % 25 52.5 25.0 20 40 15 30 10 20 5 19.3 0 10 2008 2009 -5 -5.8 0 -10 2008 2009 Gross margin Operating margin Change vs. Change vs. 2006 2007 2008 2009 2006 2007 2008
Slide 15: Good control of costs keeps operating expenses in line
Operating expenses Good control of costs keeps p operating p g expenses p in line ■ Decrease in Sales & Marketing expenses as % of Operating expenses as a % of Group revenue revenue Change - Better control of Sales & Marketing 2009 2008 vs. expenses in Branded business 2008 - Improving Generics sale
Slide 16: Cash flow: benefit from focus on working capital
Cash flow Benefit from focus on working g capital p Operating cash flow ($ million) ■ Operating cash flow increased by 58.7%, 140 ■ Cash conversion improved to 18.7% of net sales reflecting working capital improvement and 120 improved profitability 119.0 100 + 58.7% 2008 2009 Change 80 Receivable da
Slide 17: Capital expenditure: continuing to invest for future growth
Capital expenditure Continuing g to invest for future g growth Capital expenditure ($ million) ■ Completion of our new Lyophilisation plant in 60 Portugal 56.7 1.4 50 - 34.8 % ■ Expansion of manufacturing capacity in Algeria 13.0 and Egypt 40 37.0 8.0 0.6 ■ Maintenance capex in other regions 30 9.6
Slide 18: Balance sheet: strong financing position will support future growth
Balance sheet Strong g financing gpposition will support pp future g growth Net debt position at 31 December 2009 ($ million) ■ Further reductions in net debt keep the Group in a comfortable financing position -116.9 ■ Unutilised debt facilities of $193.1 m as at 31 December 2009 Dec 09 Dec 08 Net d
Slide 19: Outlook for 2010
Outlook for 2010 ■ Group revenue growth in the low teens ■ Gross margin broadly in line with 2009 ■ Continued growth in Branded, with revenues in the low double digits ■ Strong growth in Injectables revenues ■ Continuing success in Generics, with high-single digit revenue growth Page 18
Slide 20: Said Darwazah, Chief Executive
Said Darwazah Chief Executive Page 19
Slide 21: Measuring our progress against our strategic priorities
Measuring our progress against our strategic priorities Our strategy has six core priorities: ■ Strengthening our leading position in the MENA region ■ Developing our global product range across all our businesses in growing therapeutic areas ■ Extending our reach and diversity through new partnersh
Slide 22: Hikma continues to grow faster than the underlying MENA market
Hikma continues to grow faster than the underlying MENA market Market Unit Avg Rx share sales Value Value Growth Rank (million) $m $ % % MENA PRIVATE MARKET 2,967 8,028.0 2.70 +10.0 100.0 SANOFI-AVENTIS 1 235 769 3.27 -2.6 9.6 GLAXOSMITHKLINE 2 219 619 2.82 +13.0 7.7 PFIZER 3 88 465 3.26 +4.5 5.8 NO
Slide 23: Growth remains extremely strong across most MENA markets
Growth remains extremely strong across most MENA markets 2009 vs 2008 2009 vs 2008 Unit Growth Value Growth Egypt 10.5% 16.4% Hikma in Egypt 14.3% 17.0% Saudi Arabia 10.2% 12.8% Hikma in Saudi Arabia 14.9% 18.5% Algeria 9.1% -1.4% Hikma in Algeria 9.2% 3.3% Lebanon 16.4% 13.4% Hikma in Lebanon 60.3%
Slide 24: Our strong pipeline will drive future growth
Our strong pipeline will drive future growth 110 105 100 90 83 80 70 60 48 49 50 40 30 20 15 8 10 10 5 7 5 1 1 3 1 2 0 Anti-infectives Cardiovascular Alimentary CNS Respiratory New compounds pending New dosage forms and strengths pending Total pending across MENA Page 23
Slide 25: Strengthening our position in the cardiovascular and diabetes market
Strengthening our position in the cardiovascular and diabetes market 2009 2008 Yr on YR Market Yr on YR Market Value Value Growth share Growth share Rank $m Rank $m % % % % MENA Cardiovascular and Diabetes Market* 774.1 6.0 730.4 +24.4 SANOFI-AVENTIS 1 165.3 -12.5 21.4 1 189.1 +24.2 25.9 NOVARTIS 2
Slide 26: Improving our share of the oral diabetes market
Improving our share of the oral diabetes market 2009 2008 Yr on YR Market Yr on YR Market Value Value Growth share Growth share Rank $m Rank $m % % % % MENA Oral Diabetes Market* 171.5 +7.2 160.0 +21.3 GLUCOPHAGE 1 29.7 +11.0 17.3 2 26.7 +29.6 16.7 AMARYL/AMAREL(glimepiride 2 27.5 -32.9 16.0 1 41.0
Slide 27: Extending our reach and diversity through partnerships
Extending our reach and diversity through partnerships ■ Moving closer to target of 50% of sales from in- licensed products - 37.9% or $133.6 million of 2009 Branded sales from in-licensed products ■ +24.9% g growth in Branded in-licensed sales ■ Actos® sales up 43.1% in top MENA markets* ■ Blopress
Slide 28: Increasing the scale of our speciality Injectables business
Increasing the scale of our speciality Injectables business 2009 Injectables revenue by region 11.8% 43.2% 45.0% MENA US Europe & ROW Page 27
Slide 29: Launching our first oncology generics in MENA
Launching our first oncology generics in MENA Entering the oncology market in 2009 Oncology submissions pending at 31 Dec 09 – MENA 4 Approved in Launched in 4 2009 2009* 3 3 3 3 3 3 Epirubicin 2 2 2 Gemcitabine 2 Vinorelbine 1 1 1 1 Irinotecan 0 * These products were launched in Jordan and Yemen in
Slide 30: Generic penetration is still low in the MENA oncology market
Generic penetration is still low in the MENA oncology market Others & Generics, $100m Novartis, $160m Eli Lilly, $20m AstraZeneca, $12 m MENA oncology market in 2009 Sanofi- $597 million Aventis, $85m Roche, $220m Source: Company estimates Page 29
Slide 31: Developing our oncology investments in Europe
Developing our oncology investments in Europe ■ Underlying Injectables business in Europe Top five oncology New oncology remains stable products in 2009 launches in 2009 Folinic acid Bicalutamide ■ Continued expansion of product portfolio -21 products launched across all Hikma Paclitaxel Gemcitabine
Slide 32: Building momentum in US Injectables sales
Building momentum in US Injectables sales US Injectables sales ($ million) ■ Strategic decision to terminate private label sales sales* 18 17 -Reduced private label sales by 16 approximately $11 million in 2009 14 ■ Nearly doubled own product sales in H2 12 ■ Hospital field force now in place 10 -6
Slide 33: Our US Generics business is gaining Rx market share
Our US Generics business is gaining Rx market share YTD 01/2008 YTD 01/2009 YTD 01/2010 (‘000) (‘000) (‘000) US generic market T t l prescriptions Total i ti written itt 2 059 271 2,059,271 2 254 210 2,254,210 2 418 221 2,418,221 Market growth +9.5% +7.2% Hikma (West-ward) Total prescriptions writte
Slide 34: Differentiating our US Generics business through improved service levels
Differentiating our US Generics business through improved service levels Service level improvements (number of days) Customer perception of US Generics business 10 Pricing Price competitive on core 8.7 products 8 Reliability Improved service levels Consistent supply on core 6 products 4.0 4 Qu
Slide 35: Delivering quality sales through a focus on key customers
Delivering quality sales through a focus on key customers Generics sales by customer, 2008 and 2009 45 0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0 0% 0.0% Wholesalers Chains Core Mail Order & Second Tier Specialized Private Label Other Distributors Managed Distributors Distributor Care
Slide 36: Leveraging our global expertise and capacity for the US market
Leveraging our global expertise and capacity for the US market Percentage of US Generics sales produced in MENA 30.0% 24.7% 25.0% 20.0% 15.0% 9.5% 10.0% 7.9% 5.0% 0.0% 2007 2008 2009 * Products produced at our FDA approved facilities in Jordan and Saudi Arabia Page 35
Slide 37: Our track record of regulatory compliance
Our track record of regulatory compliance Certification Location # of Oral/semi- Injectable API FDA EU Local Other facilities solid/liquid cGMP Eatontown, NJ USA 1 9 9 9 OSHA, DEA, EPA Amman, Jordan 5 9 9 9 9 9(2) 9 Sintra, Portugal 1 9 9 9(3) 9 Pavia, Italy 1 9 9 (4) 9 Vienenburg, Germany 1 9 9 (5)
Slide 38: Maintaining our world-class manufacturing and API sourcing capabilities
Maintaining our world-class manufacturing and API sourcing capabilities p Key activities Key objectives Manufacturing Measuring productivity and asset utilisation, Creating flexible, efficient, quality manufacturing optimising p g the network with centres of excellence Supply planning Integrating su
Slide 39: Strong growth, delivered through a commitment to quality
Strong growth, delivered through a commitment to quality Group revenues ($ million) 637 Acquired Ribosepharm and Thymoorgan (Germany) in H1 2007. Acquired Alkan (Egypt) and APM (Jordan) in H2 2007. 581 600 Began manufacturing operations in Trust Pharma Algeria. A Acquisition i iti off the th 52.5% 5
Slide 40: Conclusion
Conclusion ■ Strong set of results for 2009 ■ Confidence in continued momentum for the Group ■ Aggressively targeting new in-licensing opportunities ■ Leveraging our infrastructure for global products ■ Focusing on driving efficiencies ■ Seeking strategic acquisition opportunities Page 39
Slide 41: Appendix
Appendix
Slide 42: Balance sheet
Balance sheet All figures US$m Actual 09 Actual 08 Variance $ Variance % Cash and cash equivalent 68.0 63.5 4.4 7.0% Net receivables 203.3 174.0 29.3 16.8% Other current assets 24.8 22.9 1.9 8.3% Inventories 160.5 154.8 5.8 3.7% Total current assets 456.6 415.2 41.4 10.0% Intangible assets 255 7 255
Slide 43: Cash flow
Cash flow All figures US$m 2009 2008 Profit before tax and minority interest 94.8 64.0 Adjustments for non-cash items 51.1 53.7 Change in working capital (11.0) (35.1) Income tax p paid ((15.8)) ((7.7)) Net cash generated from operating activities 119.0 75.0 Investment in property, plant and equipme
Slide 44: Working capital days
Working capital days Terms of payment (days) US: 60-90 60 90 MENA: 120-360 Europe: 60-120 Debtor days(1)* 120 110 116 St k Days Stock D (2)* 200 179 177 Creditor Days(3)* 75 53 63 (1) Debtor Days, annualized revenue x 365. (2) Stock Days , annualized COGS x 365. * Excluding Acquisitions (3) C Credit
Slide 45: Branded: launching new products and developing new markets
Branded Launching g new p products and developing p g new markets Product launches in 2009 Product approvals in 2009 80 75 69 71 70 70 65 60 60 55 50 50 45 40 40 35 30 30 25 20 18 20 15 10 10 10 10 6 5 0 0 MENA Europe & ROW MENA Europe & ROW New compounds New compounds New dosage forms and strengths
Slide 46: Branded: pipeline for future growth
Branded Pipeline p for future g growth Product submissions in 2009 Pending approvals in 2009 80 500 450 70 400 60 53 350 50 300 40 250 200 190 30 28 28 21 150 20 13 13 100 59 59 10 38 50 25 22 0 0 MENA Europe & ROW MENA Europe & ROW New compounds New compounds New dosage forms and strengths New dosa
Slide 47: Injectables: launching new products and developing new markets
Injectables Launchingg new p products and developing p g new markets Product launches in 2009 Product approvals in 2009 35 30 28 30 29 26 24 24 22 25 20 21 18 20 16 14 13 15 13 12 10 9 10 8 8 8 8 7 7 6 6 5 5 5 4 4 4 2 1 0 0 0 US MENA Europe & ROW US MENA Europe & ROW New compounds New compounds New
Slide 48: Injectables: pipeline for future growth
Injectables Pipeline p for future g growth Product submissions in 2009 Pending approvals in 2009 100 200 195 90 90 180 80 160 70 140 60 120 50 100 40 80 30 60 20 40 13 30 30 9 11 18 19 22 22 10 6 6 6 20 3 2 8 10 0 0 US MENA Europe & ROW US MENA Europe & ROW New compounds New compounds New dosage for
Slide 49: Generics: launching new products
Generics Launching g new p products Product launches in 2009 Product approvals in 2009 10 30 28 26 8 24 22 20 6 18 16 14 4 12 3 3 10 8 2 2 6 4 4 4 3 2 0 0 US US New compounds New compounds New dosage forms and strengths New dosage forms and strengths T t l product Total d t launches l h T l product
Slide 50: Generics: pipeline for future growth
Generics Pipeline p for future g growth Product submissions in 2009 Pending approvals in 2009 10 40 35 8 31 31 30 25 24 6 20 4 15 2 2 2 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