Hikma Pharmaceuticals Plc · LSE:HIK
Hikma Pharmaceuticals — H1 2017 Earnings Presentation
33 slides from Hikma Pharmaceuticals's earnings presentation, Aug 17, 2017
Slide 1: 2017 Interim results
Hikma Pharmaceuticals PLC 2017 Interim results 17 August 2017 HIKMA PHARMACEUTICALS 2017 INTERIM RESULTS
Slide 2: Disclaimer
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 perso
Slide 3: Strategic highlights
Strategic highlights HIKMA PHARMACEUTICALS 2017 INTERIM RESULTS
Slide 4: Delivering stable profitability and strong cash generation and maintaining a solid balance sheet
Delivering stable profitability and strong cash generation and maintaining a solid balance sheet H1 2017 highlights ▲ Stable revenue and profitability in H1 2017 REVENUE CORE EPS ▲ Generated good cash flow, supporting a strong and flexible balance sheet ▲ Continued focus on operational efficiency an
Slide 5: Focusing on five key priorities to achieve our strategic objectives
Focusing on five key priorities to achieve our strategic objectives Maximise Optimise Develop a Attract and Use M&A portfolio operations and differentiated develop talent and capital potential drive product across the investment across our efficiencies portfolio by Group to accelerate markets buildi
Slide 6: Significant challenges are impacting the US generics market
Significant challenges are impacting the US generics market US generics market volume and price change1 ▲ Increased consolidation among chains and 25% 25% independent pharmacies 20% 20% − In 2017, the three largest purchasing groups will represent 80% of all 15% 15% generics purchases in the US2 10%
Slide 7: Ensuring the Generics business is well positioned for future growth
Ensuring the Generics business is well positioned for future growth Commercial focus Cost reductions ▲ Expanding customer channels for certain products ▲ $35 million cost savings in 2016 ▲ Continuing portfolio optimisation ▲ Further reduction in overhead costs in 2017 are offsetting incremental cost
Slide 8: Strengthening the Generics management team through internal promotion and external recruitment
Strengthening the Generics management team through internal promotion and external recruitment Frank Savastano Jerald Andry Craig Heneghan Supply Chain and Regulatory and Medical Commercial Development Operations Affairs Strategy Previously with Schering-Plough/ Merck Previously with Boehringer Inge
Slide 9: Focusing on weathering near-term headwinds while positioning for long-term growth
Focusing on weathering near-term headwinds while positioning for long-term growth 2017 2018 2019 and beyond • Challenging market • Industry headwinds expected • Market conditions expected conditions, leading to price to continue to improve erosion and volume decline • Full-year benefit of cost • Str
Slide 10: Developing generic Advair for the US market
Developing generic Advair for the US market DEVELOPMENT SUBMISSION REVIEW APPROVAL FDA review of file • Received a ‘major’ Complete Response Letter (CRL) in May 2017 • Have had constructive dialogue with the FDA to address the points raised - able to clarify and resolve a number of issues • Ongoing
Slide 11: Maintaining our position in the US generic injectables market despite increasing competition
Maintaining our position in the US generic injectables market despite increasing competition US generic injectables market share1 US generic injectables market share1 June 2017 (eaches) June 2017 (sales) 600 $2,000 USD millions $1,800 500 $1,600 $1,400 400 $1,200 300 $1,000 $800 200 $600 $400 100 $2
Slide 12: Building best-in-class R&D capabilities to deliver global Injectables growth
Building best-in-class R&D capabilities to deliver global Injectables growth ▲ Significant investment in Injectables R&D over the last five years ▲ Dedicated R&D facility with pilot plant >160 ▲ Consolidated function preparing global files to efficiently products1 launched access our markets in the
Slide 13: Investing in our Injectables facilities and capabilities
Investing in our Injectables facilities and capabilities Injectable products – building additional capacity in Cherry Hill and Portugal Liquid and vials 480m units 550 million units Lyophilised products 56 metres2 120 metres2 176 metres2 Cephalosporins 46m units 70 million units Pre-filled syringes
Slide 14: Expanding existing partnership with Takeda reinforcing our position as a partner of choice in MENA
Expanding existing partnership with Takeda reinforcing our position as a partner of choice in MENA ▲ Builds upon a long-standing partnership – successfully commercialised eight of Takeda’s products in MENA ▲ Adds attractive branded products to our portfolio – Vipedia® (alogliptin), Edarbi® (azilsart
Slide 15: Successfully launching high-value products in our largest MENA market
Successfully launching high-value products in our largest MENA market 6 new products launched in Saudi Arabia 3 2 1 first- second- in-licensed to-market to-market branded generics generics product Products cover key therapeutic areas – 4 central nervous system, 1 anti-infective and 1 diabetes HIKMA
Slide 16: Strategic outlook for the Group
Strategic outlook for the Group Clear and Experienced Strong balance consistent strategy management sheet to support across all our teams focused on growth segments execution HIKMA PHARMACEUTICALS 2017 INTERIM RESULTS 15
Slide 17: Financial performance
Financial performance HIKMA PHARMACEUTICALS 2017 INTERIM RESULTS
Slide 18: Stable profitability and strong cash generation
Stable profitability and strong cash generation H1 2017 Group financial highlights ($ million) 1,000 (cents) 928 46.7 900 40 882 29.6 800 48.2 45.4 20 700 25.7 28.8 11 11 600 0 Basic0 EPS 0 EPS Core basic Dividend 0per share 500 470 H1 2016 H1 2017 Constant currency 895 400 425 300 218 454 182 200 1
Slide 19: Maintaining strong profitability in Injectables
Maintaining strong profitability in Injectables Injectables revenue ($ million) Injectables core1 operating profit ($ million) 400 175 ▪ CONSTANT CURRENCY +3% 369 357 150 -% 146 350 42 +1% 44 146 -3% 144 125 300 43 35 100 283 250 272 75 200 362 50 150 25 100 0 H1 2016 H1 2017 50 Operating margin - 2
Slide 20: Growth reflects an additional two months of West-Ward Columbus in H1 2017
Growth reflects an additional two months of West-Ward Columbus in H1 2017 Growth revenue ($ million) Growth core1 operating profit ($ million) 275 +19% 40 250 305 35 257 225 30 200 25 175 20 150 163% 15 125 21 10 100 5 8 75 0 50 H1 2016 H1 2017 25 - Operating margin H1 2016 H1 2017 H1 2016 H1 2017 C
Slide 21: Branded results impacted by currency headwinds and seasonality
Branded results impacted by currency headwinds and seasonality Branded revenue ($ million) Branded core1 operating profit ($ million) ▪ CONSTANT CURRENCY ▪ CONSTANT CURRENCY -6% 250 264 249 149 60 26 -16% -16% 223 55 46 200 40 -25% 46 41 150 20 100 0 H1 2016 H1 2017 50 Operating margin 0 2017 H1 H1
Slide 22: Strong cash generation
Strong cash generation Group operating cash flow ($ million) 250 ► Operating cash flow was $225 million, up from $134 million excluding WWC acquisition and 225 integration costs 200 ► Increase reflects the working capital investment made 168% in the West-Ward Columbus business in H1 2016 following t
Slide 23: Solid balance sheet providing financial flexibility
Solid balance sheet providing financial flexibility Group net debt position at 30 June 2017 ($ million) 400 247 ► Net debt of $633 million, down from $697 million 200 162 ► Reflects paydown of debt in the period Short-term Long-term borrowing borrowing 0 ► Financing position remains strong – Net deb
Slide 24: Continued investment in capacity and capabilities to support future growth
Continued investment in capacity and capabilities to support future growth Group capital expenditure ($ million) 60 55 ► Expanding Injectables capacity and capabilities 50 6 in the US 47 8 ► Investing in the West-Ward Columbus facility 40 17 ► Expansion of Injectables manufacturing capacity 11 30 in
Slide 25: Expanding and enhancing our portfolio through R&D and product-related investments
Expanding and enhancing our portfolio through R&D and product-related investments Group product-related investments1 ($ million) 90 R&D and product-related investments were 7% of Group revenue in H1 2017 ► Continuing to invest in pipeline development 80 across the Group 70 69 65 ► Supplementing inte
Slide 26: Outlook for full year 2017
Outlook for full year 2017 Group revenue • Group revenue of around $2.0 billion in constant currency • Revenue of around $775 million Injectables • Core operating margin of around 39% • Revenue of around $620 million Generics • Core operating profit of around $30 million • Revenue growth in the mid-
Slide 27: Appendix
Appendix HIKMA PHARMACEUTICALS 2017 INTERIM RESULTS
Slide 28: Bridge between core and reported operating profit and net income for the full year in 2017
Bridge between core and reported operating profit and net income for the full year in 2017 $88 million $74 million 49 88 35 15 1 4 Core operating Intangibles Impairment of Severance costs Reported Core net income Amortisation and Remeasurement Tax impact on Reported net profit amortisation product-r
Slide 29: Revenue by segment and region
Revenue by segment and region H1 2017 revenue by segment H1 2017 revenue by region 40% 65% 25% 29% 1% 34% 6% Branded Injectables Generics Other MENA US Europe & ROW HIKMA PHARMACEUTICALS 2017 INTERIM RESULTS 28
Slide 30: Consolidated P&L
Consolidated P&L Constant $ million H1 2017 H1 2016 Change currency change Revenue 895 882 +1% +5% Gross profit 454 425 +7% +11% Gross margin 50.7% 48.2% +2.5pp +2.5pp Operating profit 113 121 -7% -2% Core operating profit1 176 176 -- +3% Core operating margin 19.7% 20.0% -0.3pp -0.4pp EBITDA2 210 1
Slide 31: Cash flow statement
Cash flow statement $ million H1 2017 H1 2016 Profit before tax 100 83 Adjustments for non-cash items 125 84 Change in working capital 63 (38) Income tax paid (63) (30) Net cash generated from operating activities 225 99 Purchases of property, plant and equipment (47) (55) Purchase of intangible ass
Slide 32: Balance sheet
Balance sheet $ million Jun-17 Dec-16 Growth $ Growth % Inventories 507 459 48 10% Trade and other receivables 669 759 (90) (12)% Cash 247 162 85 52% Other current assets 43 68 -- -- Total current assets 1,466 1,448 43 3% Goodwill and intangible assets 1,686 1,719 (33) (2)% Property, plant and equip
Slide 33: Exchange rate movements impacting 2017 revenue and profit
Exchange rate movements impacting 2017 revenue and profit Currency H1 2017 H1 2016 Change% Average Average USD/Algerian Dinar 109.5352 108.0838 1% USD/British Pound 0.7935 0.6976 14% USD/Egyptian Pound 17.9856 8.4602 113% USD/EUR 0.9228 0.8955 3% USD/Japanese Yen 112.4076 111.4201 1% USD/Jordanian D
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