Hikma Pharmaceuticals Plc · LSE:HIK
Hikma Pharmaceuticals — H1 2011 Earnings Presentation
51 slides from Hikma Pharmaceuticals's earnings presentation, Aug 25, 2011
Slide 1: 2011 Interim Results
HIKMA PHARMACEUTICALS PLC 2011 Interim Results 25 August 2011
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: H1 2011 highlights
H1 2011 highlights g g ■ Group revenue growth up 10.4%, 3.2 % organic growth ■ Branded revenue up 3.0%, despite disruptions in certain MENA markets, with double-digit growth in most other markets - Strengthening MENA operations through investment in our people, our facilities and sales and marketing
Slide 4: Resilient H1 performance
Resilient es e H1 pe performance o a ce All figures in $ million H1 2011 H1 2010 Change Net sales 394.8 357.7 +10.4% Gross profit 172.6 178.5 -3.3% Gross margin 43.7% 49.9% -6.2 Operating profit 49.0 74.3 -34.0% Operating margin 12.4% 20.8% -8.4 j Adjusted 1 operating p g profit p 60.3 73.2 -17.5% A
Slide 5: Currency movements impact reported results
Currency movements impact reported results Euro/USD Jan 2010 - June 2011 USD/SDG Jan 2010 - June 2011 USD/JPY Jan 2010 - June 2011 H1 2011 Avg 2011 Spot H1 2010 H1 2011 vs 2011 vs Avg Avg H1 2010 Avg Spot(3) H1 2010 Avg Yen (1) 91.47 81.94 11.6% 76.62 19.4% SDG (2) 2.39 3.07 -28.4% 2.90 -21.5% Euro
Slide 6: Branded: Resilient performance despite MENA disruption
Branded Resilient performance despite MENA disruption Revenues ($ million) 240 ■ Sales growth of 3% despite impact of Arab Spring + 4.9% 203.3 200 ■ Double-digit growth across many MENA markets 199.6 193.8 + 3.0% 160 ■ Stronger growth expected in the second half of 2011 120 80 40 0 H1 2010 H1 2011 R
Slide 7: Branded: Quick response to market events limits impact on profitability
Branded Quick response to market events limits impact on profitability Gross profit ($ million) Operating profit ($ million) 120 60 116.1 - 2.9% -16.8% 54.3 Revaluation 100 gain impact 102.2 99.2 47.1 of $7.2 - 4.1% 45.2 million 80 40 60 40 20 20 0 0 H1 2010 H1 2011 H1 2010 H1 2011 Gross margin Oper
Slide 8: Injectables: Excellent performance across global business
Injectables Excellent ce e peperformance o a ce ac across oss g global oba Injectables jec ab es bus business ess Revenues ($ million) ■ Excellent organic sales growth of 21.6% - driven 120 by increased revenue across US, MENA and Europe H1 2011 S l Sales G Growth th + 55.9% 116.1 US $18.1m 39.7% 90
Slide 9: Injectables: MSI expected to break even for second half of 2011
Injectables MSI S eexpected pec ed to o break b ea even e e for o the e second seco d half a o of 2011 0 Summary P&L H1 2011 ■ MSI contributed $25.5 $ million $ million Group MSI Inventory & Exceptional Group of incremental sales ex MSI amortisation items Consolidated adjustments Revenue 369.2 25.5
Slide 10: Injectables: Increasing scale drives continued margin expansion
Injectables Increasing c eas g scale sca e d drives es co continued t ued margin ag e expansion pa s o Gross profit ($ million) Operating profit ($ million) 50 20 + 27.0 % 18 40 43.6 16 37.9 14 + 41.0% 14.9 + 10.6% 10 6% 30 34.3 12 13.3 Group 10 + 26.5% Group incl. MSI 10.6 ex MSI 20 8 Group Group e
Slide 11: Generics: Double-digit revenue growth, excluding colchicine
Generics Double-digit g revenue g growth,, excluding g colchicine Revenues ($ million) ■ Reported sales declined by 12 12.4% 4% 100 - 12.4 % ■ Excluding colchicine sales in H1 2010, Generics 87.2 80 achieved double-digit growth in H1 2011 76.4 60 ■ Volume growth more than offset the slight increases
Slide 12: Generics: Return to sustainable margins
Generics Return to sustainable margins g Gross profit ($ million) Operating profit ($ million) 45 30 40 41.8 35 - 30.1% 25 26.1 30 - 61.1% 20 29.2 25 15 20 15 10 10.2 10 5 5 0 0 H1 2010 H1 2011 H1 2010 H1 2011 Gross margin Operating margin H1 2010 H1 2011 Change H1 2010 H1 2011 Change 47.9% 38.3% -
Slide 13: Operating expenses: Strengthening the business to support future growth
Operating expenses Strengthening g g the business to support pp future g growth Operating expenses as a % of Group revenue ■ S&M expenses stables as % of sales - Investment in S&M team in MENA H1 2011 H1 2010 Change - Economies of scale in global Sales & Marketing 14.4% 14.7% - 0.3 Injectables G
Slide 14: Cash Flow: MSI transaction increases working capital requirement
Cash Flow MSI transaction increases working capital requirement Operating Cash Flow ($ million) ■ Operating cash flow reduced, funding the working 70 Group capital requirement of the MSI business and ex MSI increased Group inventory levels 65.3 Group 60 incl. MSI ■ Working capital days increased to
Slide 15: Capital expenditure: MENA investment reflects optimism for growth
Capital expenditure MENA investment reflects optimism p for g growth and commitment to region g Capital expenditure ($ million) 40 ■ Expansion E i iin MENA manufacturing f t i capabilities 35 33.2 - Algeria, Egypt and Tunisia 30 + 41.2% 41 2% 43 4.3 3.1 ■ Machinery and equipment for new 25 23.4 25.8
Slide 16: Balance sheet: Leverage ratios remain comfortable
Balance sheet Leverage g ratios remain comfortable Net debt position ($ million) 150 ■ Increase in net debt reflects three acquisitions completed in the first half 92.0 100 ■ Leverage ratios remain comfortable 68.0 50 Short-term Long-term H1 2010 H1 2011 borrowing borrowing 0 Net debt 123.6 322.7 Ca
Slide 17: Outlook for 2011
Outlook for 2011 ■ Reiterate guidance of around 7% Group revenue growth and around 47% gross margin ■ Branded revenue growth of around 7% and operating margin of around 23% ■ Generics revenue of $160 million for 2011, with operating margin in the ‘low-teens’ ■ Continued strong performance of our glo
Slide 18: A strong track record of revenue growth
A strong g track record of revenue g growth Acquired Baxter’s Multi Source Injectables (US) in April 2011 Acquired minority stake in India’s Unimark and China’s Group revenues ($ million) Haosun Acquired Ibn Al 731 Baytar/ Medicef Acquired Ribosepharm and In Tunisia Thymoorgan (Germany) in H1 2007.
Slide 19: Our diversified business model mitigates revenues at risk
Our diversified business model mitigates g revenues at risk 2010 revenue by region 5 affected MENA markets* represented 14.0% of Group sales in 2010 *Tunisia, Egypt, Libya, Yemen and Bahrain were impacted by significant political unrest in the first half of 2011 Page 18
Slide 20: Recovery in Egypt and Tunisia reflects resilience of MENA operations
Recovery y in Egypt gyp and Tunisia reflects resilience of our MENA operations p Egypt Tunisia ■ Excellent growth despite disruptions ■ Good recovery in shipping sales ■ Expansion of new facility ■ Upgrade and expansion of manufacturing f iliti facilities ■ Strengthened our sales and marketing team
Slide 21: Strong growth in the MENA pharmaceuticals market despite disruptions
Strong gggrowth in the MENA p pharmaceuticals market despite p disruptions p Hikma’s leading position in the MENA market Unit sales Value Avg Rx $ Growth Market share Rank (M) $M Price % % MENA PRIVATE MARKET 0 1 496 1,496 4 381 4,381 1 93 1.93 11 7 11.7 100 0 100.0 GLAXOSMITHKLINE 1 113 323 1.86 7.
Slide 22: Leveraging local production in the Algerian market
Leveraging g g local p production in the Algerian g market Locally produced goods % of total sales Algeria ■ Sales growth of 22.4% in H1 2011 ■ Investments delivering despite strong 46% competition 58% 74% ■ Ranked 3rd with 6% market share 81% ■ Strong growth in a competitive market ■ Growth in loca
Slide 23: Continued development of our franchise in growing therapeutic areas
Continued development p of our franchise in g growing g therapeutic p areas Overall CNS¹ market: Overall CVD1 market: $ 765 million $1.4 billion ■ Hikma CNS sales up 62.4%, compared to ■ Hikma CVD sales up 20.5%, compared to market growth of 10.9% market growth of 11.7% ■ Since 2007, we have launche
Slide 24: Hikma remains the partner of choice for MENA
Hikma remains the p partner of choice for MENA Currently marketing 50 in-licensed products Local manufacturing in largest markets reinforces attractiveness to partners - Multiple facilities audited and approved by Takeda Latest agreement with Vifor Pharma - Ferinject® for iron deficiency ■ Cel
Slide 25: Strong organic revenue growth across all Injectables markets
Strong g organic g revenue g growth across all our Injectables j markets Injectables revenue by region H1 2010 H1 2011 +14.6% +21.3% 25.5 MSI 36.4 36.1 31.8 29.8 +39.7% 18.1 13.0 US E Europe MENA Page 24
Slide 26: Excellent performance in MENA Injectables
Excellent p performance in MENA Injectables j ■ Strong performance in private Marketed Injectables products by country* market - Private market sales +15% - Strongest performance in Saudi Arabia, Sudan, Iraq and Al i Algeria 12 Syria Tunisia Lebanon 8 - 20 product approvals across 12 Jordan Iraq 55
Slide 27: Continuously building our oncology platform in MENA
Continuously y building g our oncology gy p platform in MENA MENA oncology market, by value *** Hikma marketed oncology products in MENA* ■ Zoledronic Acid ■ Epirubicin (Zometa) (Pharmorubicine) Glivec Others & generics ■ Letrozole (Femara) ■ Gemcitabine (Gemzar) ■ Imatinib I ti ib (Glivec) (Gli ) ■
Slide 28: Contract manufacturing in US and Europe offers new growth opportunities
Contract manufacturing g in US and Europe p offers new g growth opportunities pp Generic value chain Case study: Partnering higher up the value chain API Sourcing ■ Manufacture of iron gluconate for US generic company Formula/Product Development ■ Collaborated on formulation - enhancing R&D capabili
Slide 29: MSI acquisition brings significant increase in market share
MSI acquisition q brings g significant g increase in market share MAT 6/11 Injectables 2009 (000s) 2010 (000s) (000s) US generic injectables market Total eaches (vials) 1 241 791 1,241,791 1 249 198 1,249,198 1 287 392 1,287,392 Market growth +5.1% +0.6% +3.2% Hikma (West-Ward) Total eaches (vials)
Slide 30: MSI offers multiple levers for growth: dormant ANDAs
MSI offers multiple p levers for g growth New product opportunities from dormant ANDAs Current Market size Number of Product name Therapeutic Area ($M) Manufacturers Product A Anti-infective 182 5 Product B Analgesic/anesthetic 66 5 Product C Anti-infective 38 5 Product D Cardiovascular 36 4 Prod ct
Slide 31: MSI offers multiple levers for growth: Heparin
MSI offers multiple p levers for g growth Share of the US Heparin market ($M) ■ Heparin market size as of June 2011 was $288 million APP ■ Market shared by APP, Hospira, and Sagent Sagent g ▬ Pfizer and Sandoz expected to launch soon Hospira 57% ■ Hikma to launch early September 77% ■ Differentiated
Slide 32: Security of our supply chain minimises risk in the US market
The security y of our supply pp y chain minimises risk in the US market ■ Potential legislation for a Generic Drug User Fee Act (GDUFA) would require generic manufacturers to pay a user fee anticipated to raise up to $299 million in annual fees for the FDA. This is anticipated to: - Speed up process
Slide 33: Gaining market share through ongoing focus on quality and service
Gaining g market share through g on g going g focus on q quality y and service MAT 6/09 MAT 6/10 MAT 6/11 1H 2011 Orals ((000s)) ((000s)) ((000s)) ((000s)) US generic oral market Total prescriptions written 2,341,692 2,506,333 2,675,385 1,354,986 Market growth +7.0% +6.7% +4.0% Hikma (West (West-War
Slide 34: Continuing to leverage our MENA capacity for US market
Continuing g to leverage g our MENA capacity p y for US market Percentage of Generics sales produced in MENA* +25.1% +24.8% +24.8% +21.2% +20.9% +9.4% 9.4% +7.2% 2007 2008 2009 2010 2011 H1 2010 H1 2011 Oral generic products produced at our FDA approved facilities in Jordan and Saudi Arabia and sold
Slide 35: Enhancing the US management team
Enhancing g the US management g team Title Background CFO 20 years of experience in finance, including 16 years in the pharmaceutical industry COO Over 20 years experience in both Big Pharma and generics with such companies i as Pfi Pfizer, Ph Pharmacia i anddSSchein h i VP HR 19 years of HR experie
Slide 36: Strategic investments enhance API sourcing and R&D capabilities
Strategic g investments enhance API sourcing g and R&D capabilities p Unimark Haosun ■ One of India’s leading manufacturers of API ■ Chinese pharmaceutical company that and API intermediates. manufactures and supplies the domestic Chinese and international markets ■ Three Th API facilities, f iliti
Slide 37: Conclusion
Conclusion ■ Resilient set of results ■ MENA continues to offer long term growth potential ■ US Generics performing well ■ Global Injectables business gaining scale through strong organic growth and the MSI acquisition ■ Further acquisitions remain a priority for growth ■ On track to deliver full ye
Slide 38: Appendix
Appendix
Slide 39: Cash flow
Cash flow All figures in $ million H1 2011 H1 2010 Profit before tax and minority interest 39 9 39.9 67 5 67.5 Adjustments for non-cash items 38.8 23.1 Change in working capital (54.6) (7.3) Income tax paid (4.8) (18.0) Net cash generated from operating activities 19.2 65.3 Investment in property, p
Slide 40: Balance sheet
Balance sheet All figures in $ million H1 2011 H1 2010 Change $ Change % Cash 92.0 68.0 24.0 35.3% Trade and other receivables 273.2 238.9 34.3 14.4% Other current assets 2.9 1.0 1.9 181.3% Inventories 269.5 171.4 98.0 57.2% Total current assets 637.7 479.5 158.2 33.0% IIntangible t ibl assets t 294
Slide 41: Revenue by segment
Revenue by segment H1 2010 revenue by segment H1 2011 revenue by segment 54.2% 50.6% 19.3% 24 4% 24.4% 0.6% 0.7% 20.8% 29.4% Branded Generics Injectables Other Branded Generics Injectables Other Page 40
Slide 42: Revenue by region
Revenue by region H1 2010 revenue by Region H1 2011 revenue by region 61 0% 61.0% 58 2% 58.2% 11.4% 11 0% 11.0% 28.0% 30.4% MENA EU & ROW US MENA EU & ROW US Page 41
Slide 43: Injectables sales by region – excluding MSI
Injectables sales by region – excluding MSI H1 2010 Injectables revenue by region H1 2011 Injectables revenue by region 17.4% 20 0% 20.0% 39.9% 40% 42.6% 40.1% MENA US Europe & ROW MENA US Europe & ROW Page 42
Slide 44: Injectables sales by region – including MSI
Injectables sales by region – including MSI H1 2010 Injectables revenue by region H1 2011 Injectables revenue by region 17.4% 37 6% 37.6% 40.0% 31.1% 42.6% 31.3% MENA US Europe & ROW MENA US Europe & ROW Page 43
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 H1 2011 Product approvals in H1 2011 16 100 95 14 90 14 85 80 12 75 70 65 10 60 55 8 50 45 40 6 35 30 25 4 25 3 20 2 2 15 2 10 10 4 2 5 0 0 0 0 MENA & ROW Europe MENA & ROW Europe New compounds New compounds New do
Slide 46: Branded: Pipeline for future growth
Branded Pipeline p for future g growth Product submissions in H1 2011 Pending approvals in H1 2011 180 500 170 450 160 150 400 140 130 350 120 110 300 100 90 250 80 193 200 70 60 144 150 50 38 40 100 74 30 20 50 10 4 5 2 2 3 0 0 0 0 0 MENA & ROW Europe MENA & ROW Europe New compounds New compounds N
Slide 47: Injectables: Launching new products and developing new markets
Injectables Launchingg new p products and developing p g new markets Product launches in H1 2011 Product approvals in H1 2011 20 90 18 80 16 70 14 60 12 12 50 10 40 8 7 6 6 30 6 20 20 4 2 10 2 10 1 1 1 1 1 2 2 0 0 0 0 0 0 US MENA & ROW Europe US MENA & ROW Europe New compounds New compounds New dosa
Slide 48: Injectables: Pipeline for future growth
Injectables Pipeline p for future g growth Product submissions in H1 2011 Pending approvals in H1 2011 100 240 90 220 80 200 180 70 157 160 60 140 50 120 40 100 30 80 67 19 60 20 13 36 36 41 38 40 10 7 7 8 5 19 3 0 1 20 8 12 0 0 US MENA & ROW Europe US MENA & ROW Europe New compounds New compounds N
Slide 49: Generics: Launching new products
Generics Launching g new p products Product launches in H1 2011 Product approvals in H1 2011 10 18 16 8 14 12 12 12 6 10 8 4 3 3 6 2 4 3 1 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 T t l product Total d t
Slide 50: Generics: Pipeline for future growth
Generics Pipeline p for future g growth Product submissions in H1 2011 Pending approvals in H1 2011 10 40 35 8 30 7 7 25 23 23 23 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
Slide 51: Strengthening our leading position in MENA
Strengthening our leading position in MENA YTD/6/11 YTD/6/11 Unit Growth Value Growth Top 9 MENA markets 7.6% 11.7% Hikma in MENA 12.2% 13.4% Egypt 5.4% 4.4% Hikma in Egypt 18.3% 14.1% S di A Saudi Arabia bi 10.5% 15.4% Hikma in Saudi Arabia 5.5% 9.5% Algeria g 12 5% 12.5% 17 0% 17.0% Hikma in Alger
Hikma Pharmaceuticals — H1 2011 Earnings Presentation on 6ix