Hikma Pharmaceuticals PLC · LSE:HIK
Hikma Pharmaceuticals — H1 2007 Earnings Presentation
44 slides from Hikma Pharmaceuticals's earnings presentation, Sep 5, 2007
Slide 1: 2007 Interim Results
HIKMA PHARMACEUTICALS PLC 2007 Interim Results Continuing to deliver strong growth 5 September 2007
Slide 2: Disclaimer
■ 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: Bassam Kanaan, Chief Financial Officer
Bassam Kanaan Chief Financial Officer
Slide 5: H1 2007 Highlights
H1 2007 Highlights ■ Revenue up 45% and net profit up 18% ■ Achieved gross margin for the Group of 50.7% ■ Interim dividend per share up 17% to 3.5 cents per share ■ 81 product approvals and 16 new product launches ■ Acquisition and integration of two oncology businesses ■ Entry into Egyptian market
Slide 6: Consolidated P&L
Consolidated P&L All figures in $ million H1 2007 H1 2006 % change Net sales 224.9 154.9 +45.2% Gross profit 113.9 80.0 +42.5% Gross profit margin 50.7% 51.6% -1.0 Operating profit 51.8 42.2 +22.7% Operating profit margin 23.0% 27.2% -4.2 Income before tax and minority interests 49.5 42.4 +16.7% Tax
Slide 7: Branded continues to generate an increasing percentage of group sales
Branded continues to generate an increasing percentage of group sales H1 2006 revenue by segment H1 2007 revenue by segment 46.1% 41.3% 21.9% 26.7% Branded Branded Injectables Injectables 2.0% Generics 1.1% Generics 34.8% Other Other 26.1% Page 6
Slide 8: MENA represents an increasing percentage of group sales
MENA represents an increasing percentage of group sales H1 2006 revenue by region H1 2007 revenue by region 8.8% 16.0% 50.5% 54.2% 29.8% MENA MENA US US 40.7% Europe & ROW Europe & ROW Page 7
Slide 9: Delivering strong organic growth across MENA
Branded Delivering strong organic growth across MENA Net sales ($ million) 140.0 ■ 33.2% organic growth (excluding JPI) 120.0 ■ Strong demand across all MENA markets + 62.0% 100.0 103.6 ■ Particularly strong growth in GCC following 80.0 successful integration of JPI 60.0 64.0 ■ Increased sales effor
Slide 10: Strong margins
Branded Strong margins Gross profit ($ million) Operating profit ($ million) 60.0 +58.9% 40.0 56.2 +55.7% 34.3 30.0 40.0 35.4 20.0 22.0 20.0 10.0 0.0 0.0 H1 2006 H1 2007 H1 2006 H1 2007 Gross margin Operating margin H1 H1 Change vs. H1 H1 Change vs. 2004 2005 2006 2006 2007 H1 06 2004 2005 2006 2006
Slide 11: Rapid growth through strong sales & marketing and acquisitions
Injectables Rapid growth through strong sales & marketing and acquisitions Net sales ($ million) + 76.7% 60.0 ■ 23% organic growth (excluding oncology 60.0 acquisitions) 50.0 ■ Strong growth in the MENA region 40.0 ■ Continued growth in Europe 34.0 30.0 ■ US business still developing as we grow own
Slide 12: Ribosepharm boosts gross margin
Injectables Ribosepharm boosts gross margin Gross profit ($ million) Operating profit ($ million) 30.0 +100.1% 15.0 29.6 +61.4% 12.3 20.0 10.0 7.6 14.8 10.0 5.0 0.0 0.0 H1 2006 H1 2007 H1 2006 H1 2007 Gross margin Operating margin H1 H1 Change vs. H1 H1 Change vs. 2004 2005 2006 2006 2007 H1 06 2004
Slide 13: Delivering revenue growth
Generics Delivering revenue growth Net sales ($ million) + 9.0% 60.0 ■ Sales of new products and volume increases 58.7 more than offset continued price erosion 50.0 53.8 ■ More competitive pricing for new products 40.0 30.0 20.0 10.0 0.0 H1 2006 H1 2007 Page 12
Slide 14: Lower margins reflect more competitive pricing
Generics Lower margins reflect more competitive pricing Gross profit ($ million) Operating profit ($ million) 20.0 30.0 -2.6% 28.9 28.2 17.5 -10.6% 15.0 15.7 20.0 10.0 10.0 5.0 0.0 0.0 H1 2006 H1 2007 H1 2006 H1 2007 Gross margin Operating margin H1 H1 Change vs. H1 H1 Change vs. 2004 2005 2006 2004
Slide 15: Group operating expenses
Group operating expenses Operating expenses Operating expenses as a percentage of Group revenue (US$ million) Change H1 2006 H1 2007 90 vs. H1 06 Sales & Marketing 10.2% 13.4% +3.2 80 Research & Development 5.8% 4.1% -1.7 70 G&A 8.5% 9.4% +0.9 62.2 Other 0.6% 0.7% +0.1 60 21.2 50 39.1 40 13.
Slide 16: Cash flow
Cash flow All figures US$m H1 2007 H1 2006 2006 Profit before tax and minority interest 49.5 42.4 75.6 Adjustments for non-cash items 13.4 5.0 13.8 Change in working capital (49.3) (29.4) (35.1) Income tax paid (9.8) (8.7) (19.4) Interest received 1.4 2.5 5.3 Interest paid (3.4) (2.2) (5.0) Net cash
Slide 17: Expanding production facilities for growth
Expanding production facilities for growth Capital expenditure ($ million) 30 ■ Expansion of our facilities in Jordan and Saudi 25.0 Arabia 19.1 4.6 ■ New production machines in Portugal and Italy 20 2.5 7.8 7.1 ■ Upgrade of liquid vial lines in Portugal in anticipation of US ANDA approvals 10 11.1
Slide 18: A strong balance sheet with flexibility to increase leverage
A strong balance sheet with flexibility to increase leverage Net debt position at 30 June 2007 ($ million) 140 69.1 100 60 117.1 20 50.9 -20 -26.8 -61.0 -21.2 -60 Long-Term borrowing -64.6 Short-Term borrowing -100 Investments in Cash Deposits, Cash and Cash Equivalents, and Collateralised cas
Slide 19: Outlook for 2007
Outlook for 2007 ■ Continue to expect organic revenue growth in the mid-20% range ■ Group revenue growth including acquisitions close to 40% ■ Gross margin of approximately 50% ■ General and administrative expenses to grow in line with revenues ■ Investment in R&D close to 5% Page 18
Slide 20: Said Darwazah, Chief Executive
Said Darwazah Chief Executive
Slide 21: Hikma's strong track record of delivering growth
Hikma’s strong track record of delivering growth Group revenues ($ million) 350 317 300 262 250 225 214 200 188 150 138 105 99 100 90 76 63 67 57 54 51 50 35 23 16 5 6 9 10 0 1 2 1 2 2 3 0 07 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 H1 06 20 19 19 19 19 19 19
Slide 22: Strong growth supported by diverse businesses
Strong growth supported by diverse businesses Group revenues ($ million) Acquired Ribosepharm and 350 Began manufacturing operations in Trust Pharma Algeria. Thymoorgan Acquisition of the 52.5% of JPI not previously owned by Hikma (Germany) 317 Acquired 300 Became public company listed on Alkan LSE.
Slide 23: Strategy for future growth
Strategy for future growth ■ Replicating our Branded business model in new markets ■ Developing our speciality Injectables business ■ Focusing the US business on more specialised products ■ Strategic investments in APIs will support growth across all businesses Targeting doubling of sales growth eve
Slide 24: Hikma's successful Branded business model
Hikma’s successful Branded business model ■ Strong brand recognition and reputation of quality products ■ Product portfolio tailored to the market needs ■ Experienced sales and marketing teams with local knowledge ■ Strong relationships with distributors / ownership of distribution channels ■ Excell
Slide 25: Establishing a leading position in a new market
Case study: Algeria Establishing a leading position in a new market Net sales in Algeria ($ million) Local manufacturing plant begins production for Algerian market 40 Total products registered in Algeria as of 31 December 2006 = 96 (including 20 for locally manufactured products) 35 30 Began constr
Slide 26: Replicating the Branded business model: Saudi Arabia
Future growth Replicating the Branded business model Net sales in Saudi Arabia ($ million) 2006: Acquisition of remaining 52.5% of JPI. 35 First US FDA approval (Cephalexin) 30 1983: Began Exporting Products to Saudi Arabia 25 1984: Signed distribution agreement with Kusaibi trading office 20 1999:
Slide 27: Acquisition of Alkan provides a foothold in the Egyptian market
Future growth Replicating the Branded business model Acquisition of Alkan provides a foothold in the Egyptian market ■ 2006 net revenue: $14.6 million ■ Significant product portfolio and pipeline of registered products, including licensed products ■ Over 200 sales representatives ■ Quality manufactu
Slide 28: Our strong position in injectables
Our strong position in injectables Hikma’s Injectable capabilities as of H1 2007 60 injectable products in 119 dosage strengths and forms Dedicated injectables sales and marketing teams Specialised sales and MENA, Europe & US marketing teams Ribosepharm (Germany) + Liquid injectables Cephalosporins
Slide 29: Developing a strong position in injectables
Future Growth Developing a strong position in injectables Potential for growth in speciality injectables Product development 60 injectable products in 119 dosage strengths and forms + and acquisition Dedicated injectable sales and marketing teams Specialised sales and Sales and marketing marketing t
Slide 30: Our developing Injectables business
Our developing Injectables business Injectable revenues ($ million) and products sold 80 70 70 67.6 60 60.0 60 50 49.3 50 40 40 30 28.9 30 22.2 19.2 20 20 10 10 0 0 2002 2003 2004 2005 2006 H1 2007 Injectable revenue Products Page 29
Slide 31: Building a strong oncology platform
Future growth Building a strong oncology platform ■ Ribosepharm provides excellent platform for oncology -11 injectable oncology products in product Forecast sales of oncology products losing portfolio patent protection 16000 ■ Strengthens injectable sales and marketing capabilities 14000 - Experien
Slide 32: Our strong platform in the US market
Our strong platform in the US market Hikma’s oral generic business in the US as of H1 2007 43 products in 97 dosage strengths and forms Strong track Excellent Experienced Cash record with customer sales and generation FDA relationships marketing team Big 3 wholesalers Distributors Chains Hospitals L
Slide 33: Focusing the US business on more specialised products
Future growth Focusing the US business on more specialised products Potential to develop Hikma’s US Generics business 43 products in 97 dosage strengths and forms 56 ANDAs pending for oral and injectable products Strong track Excellent Experienced Cash record with customer sales and generation FDA r
Slide 34: Hikma's strong investment proposition
Hikma’s strong investment proposition ■ Diversified model ■ Leading position in MENA ■ Unique strengths ■ Strong pipeline of new products ■ Excellent marketing and distribution infrastructure ■ Preferred partner for licensing ■ Strong financial track record Page 33
Slide 35: Q&A
Q&A
Slide 36: Appendix
Appendix
Slide 37: Launching new products and developing new markets (Branded)
Branded Launching new products and developing new markets Product approvals in H1 2007 Product launches in H1 2007 35 35 30 30 13 25 25 23 20 20 15 15 6 10 10 7 20* 4 5 10 5 9 7 4 0 0 1 Jordan Other MENA Europe and ROW Jordan Other MENA Europe and ROW New products Line extensions * Includes one new
Slide 38: Pipeline for future growth (Branded)
Branded Pipeline for future growth Branded submissions in H1 2007 Branded pending approvals at 30 June 2007 100 400 90 350 80 300 70 217 57 250 60 50 200 40 150 30 100 20 37 163 50 14 10 10 7 5 4 4 14 0 0 8 Jordan Other MENA Europe and RoW Jordan Other MENA Europe and RoW New products Line extension
Slide 39: Launching new products and developing new markets (Injectables)
Injectables Launching new products and developing new markets Product approvals in H1 2007 Product launches in H1 2007 12 10 9 10 8 2 7 8 5 6 6 5 3 4 3 4 2 7 3 5 2 2 3 3 3 1 1 1 1 0 0 US Jordan Other MENA Europe US Jordan Other MENA Europe New products Line extensions Page 38
Slide 40: Pipeline for future growth (Injectables)
Injectables Pipeline for future growth Injectable submissions in H1 2007 Injectable pending approvals at 30 June 2007 25 140 120 20 100 49 15 80 20 60 10 40 73 5 1 20 5 5 8 19 4 2 6 11 0 1 0 US Europe Jordan Other MENA US Europe Jordan Other MENA Page 39
Slide 41: Improving time to launch and sustaining a strong product pipeline
Generics Improving time to launch and sustaining a strong product pipeline Product approvals and launches in H1 2007 7 6 5 4 5 3 2 2 1 1 1 0 Approvals Product launches New products Line extensions Page 40
Slide 42: Pipeline for future growth (Generics)
Generics Pipeline for future growth Submissions and pending approvals in H1 2007 35 30 6 25 20 15 26 10 5 2 3 0 Submissions Pending approvals New products Line extensions Page 41
Slide 43: Market share in core Branded markets
Market share in core Branded markets JORDAN SAUDI ARABIA Market Position Market Share Market Position Market Share Company 2006 H1 2007 2006 H1 2007 Company 2006 2006 H1 2007 HIKMA 1 1 7.3% 7.1% GLAXOSMITHKLINE 1 1 10.8% 10.4% DAR AL DAWA 2 2 7.0% 5.3% SPIMACO 2 2 7.4% 9.5% APM 4 3 5.2% 4.9% PFIZER
Slide 44: Net working capital
Net working capital 220 170 Terms of payment (days) 120 US: 60-90 MENA: 120-360 70 Europe: 60-120 20 (30) H1 2005 Jun-05 H1 2006 2006 H1 2007 Debtor days Stock days Creditor days Debtor days(1) 122 101 107 126 122 Stock Days(2) 163 168 163 194 176 Creditor Days(3) 70 77 66 74 70 (1) Debtor Days, net
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