Hikma Pharmaceuticals Plc · LSE:HIK
Hikma Pharmaceuticals — Investor Day (2018)
78 slides from Hikma Pharmaceuticals's investor day presentation, 2018
Slide 1: Better health. Within reach. Every day. 2018 Investor Day
Better health. Within reach. Every day. Hikma Pharmaceuticals PLC 2018 Investor Day
Slide 2: Disclaimer
Disclaimer Save to the extent required by law, neither Hikma Pharmaceuticals PLC nor any of its affiliates ("Hikma"), nor any other party, is under any duty to update or inform you of any changes to such information. In particular, it should be noted that the financial information relating to Hikma
Slide 3: Agenda
Agenda 1:30 – 1:40pm Welcome Said Darwazah 1:40 – 2:10pm Delivering sustainable growth Siggi Olafsson Riad Mechlaoui 2:10 – 2:30pm Injectables Dan Motto Brian Hoffmann 2:30 – 2:50pm Generics Kristy Ronco BREAK Mazen Darwazah 3:05 – 3:25pm Branded Masoud Abdelmajid 3:25 – 3:40pm Financial overview Kh
Slide 4: Today's presenters
Today’s presenters Said Darwazah Siggi Olafsson Riad Mechlaoui Dan Motto Brian Hoffmann Kristy Ronco Executive CEO President of EVP, Commercial President of EVP, Sales and Chairman Injectables and BD, Injectables Generics Marketing, Generics Mazen Darwazah Masoud Abdelmajid Khalid Nabilsi Executive
Slide 5: Welcome
Welcome Said Darwazah, Executive Chairman
Slide 6: Hikma today
Hikma today 40 years ~$2bn 7 billion 8,500 in existence 2018 revenue doses made annually employees 29 Top 10 ~50 650+ manufacturing sites countries compounds generic pharma around the world company in the US Hikma Pharmaceuticals PLC 6
Slide 7: A legacy of strong growth
A legacy of strong growth 2007 2010 2011 2014 2015 2005 Expanded into Grew Became a top Grew Increased presence Listed on injectable footprint in 3 generic Injectables in US Generics $ 2,500 LSE oncology MENA with Injectables pipeline market by acquiring market in acquisitions manufacturer through C
Slide 8: Delivering sustainable growth
Delivering sustainable growth Siggi Olafsson, Chief Executive Officer
Slide 9: Benefiting from our well-diversified business model
Benefiting from our well-diversified business model Injectables Generics Branded 1H18 revenue contribution 42% 34% 23% 1H18 core operating profit contribution1 70% 12% 18% Generics Branded 1 Core operating profit is $214 million. Before Unallocated corporate costs of $33 million and operating loss f
Slide 10: Our unique strengths provide a platform for growth
Our unique strengths provide a platform for growth Reliable Broad product High-quality partner portfolio Commercial People Strong excellence and culture balance sheet Hikma Pharmaceuticals PLC 10
Slide 11: Delivering strong Group performance in 2018 and raising full year guidance
Delivering strong Group performance in 2018 and raising full year guidance 1H18 Group financial highlights ($ million) Revenue Core1 operating profit Core1 operating profit Core1 basic earnings margin per share $989m $214m 21.6% 61.4¢ +11% +22% +1.9pp +35% 1 Core results are presented to show the un
Slide 12: Delivering sustainable growth
Delivering sustainable growth Focus on the foundation Develop our pipeline Leverage partnerships and M&A Hikma Pharmaceuticals PLC 12
Slide 13: Focus on the foundation
Focus on the foundation Group core operating profit and margin Focus on the ($ million) foundation 500 $427 100% $413 $409 $419 $386 400 80% 300 60% 200 30% 29% 28% 40% 21% 20% 22% 100 20% - 0% 2013 2014 2015 2016 2017 1H18 Objectives Maximise our product portfolio Reduce costs Leverage our Improve
Slide 14: Develop our pipeline
Develop our pipeline Group R&D spend and contribution from new launches Develop our pipeline 6-7% R&D spend % of Group revenue ~10% New launches revenue 6% 6 - 7% % of Group revenue 3% 2017 5 year target Focus for business segments Injectables Generics Branded Increasing complexity of Increasing num
Slide 15: Leverage partnerships and M&A
Leverage partnerships and M&A Through partnerships and M&A, we will add more specialised products, new technologies and add scale in our core markets Business segment objectives Branded Generics Injectables Generics Branded • Add more complex • Fill gaps in our • Continue to form products pipeline p
Slide 16: Delivering sustainable growth
Delivering sustainable growth Focus on the foundation Develop our pipeline • Maximise value from our • Increase R&D productivity portfolio and operations • Target 10% of Group revenue from • Drive efficiencies and cost new launches reductions • Add differentiation and complexity • Leverage our uniqu
Slide 17: Injectables
Injectables Riad Mechlaoui, President of Injectables Dan Motto, EVP, Commercial and BD, Injectables
Slide 18: Strong performing Injectables business with a broad portfolio
Strong performing Injectables business with a broad portfolio and high-quality manufacturing Injectables financial performance ($ million) Top 3 3 core $900 100% generic injectables geographies $800 manufacturer in 80% $700 the US $600 60% $500 $400 5 1 billion units $300 40% manufacturing of annual
Slide 19: History of our Injectables business
History of our Injectables business Cherry Hill Portugal • Pre-filled syringes • High-containment Portugal facility Acquired Bedford Labs • Lyophilization $900 • >100 ANDAs expansion • Expansive R&D centre • IV bags $800 • Manufacturing assets $700 Cherry Hill • Significant expansion Acquired Baxter
Slide 20: Delivering sustainable growth: Injectables
Delivering sustainable growth Focus on the foundation Develop our pipeline • Maximise value of broad • Optimise investment in R&D portfolio and market position • Increase focus on complex • Execute on launches and technically challenging • Maintain high-quality, flexible products manufacturing • Lev
Slide 21: Commercial presence in three core geographies
Commercial presence in three core geographies MENA 5 year CAGR +6% 1H18 +46% United States 1H18 5 year CAGR +11% revenue Europe 1H18 +10% 5 year CAGR +6% 1H18 +16% Hikma Pharmaceuticals PLC 21
Slide 22: Leading supplier of generic injectables in the US
Leading supplier of generic injectables in the US US generic injectables market share1 September 2018 (eaches) 500 450 400 >57% of all US generic injectables 350 are manufactured by 300 three companies 250 200 150 100 50 0 Pfizer Fresenius Hikma Sagent Auromedics Teva Baxter (Claris) Mylan Heritage
Slide 23: Resilient and growing portfolio is driving top line growth in the US
Resilient and growing portfolio is driving top line growth in the US Hikma’s US injectables quarterly revenue by product type ($ millions) $160 Total product sales Other products’ contribution increased reflecting breadth of portfolio and $120 ability to supply $80 Sales of glycopyrrolate, neostigmi
Slide 24: Consolidated US customer base but market dissatisfaction driven by supply disruptions
Consolidated US customer base but market dissatisfaction driven by supply disruptions Key US injectable customer segments1 External initiatives may shift the market2 3 group purchasing organisations (GPOs) Integrated Increasing size of hospital networks: Delivery Top 10 now covering >1,500 hospitals
Slide 25: US injectables competition is increasing with ANDA approvals and new entrants
US injectables competition is increasing with ANDA approvals and new entrants Number of injectable ANDA approvals in 20181 >60 active US injectable suppliers2 (October 2018) 31 Other approvals Against Hikma portfolio 24 18 17 17 17 16 15 4 3 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Se
Slide 26: Continuing to expand our portfolio with high number of new launches in the US
Continuing to expand our portfolio with high number of new launches in the US launches launches launches YTD expected 11 17 15 15-20 Contribution of new launches expect 2 new launches additional Products launched over last 3 years will contribute ~20% of 2018 Injectables 2016 2017 2018E 2019E revenu
Slide 27: Strong foothold in Europe supported by local manufacturing
Strong foothold in Europe supported by local manufacturing Europe highlights Hikma’s European Injectables markets • Steady revenue growth, generating profitable Germany results from tender wins Italy 22% Portugal 37% • Broad portfolio with 82 unique molecules Others distributed across eight EU count
Slide 28: Higher-value products driving growth in MENA
Higher-value products driving growth in MENA MENA highlights Hikma’s MENA Injectables markets • Significant sales force targeting the Saudi Arabia hospital segment Egypt Jordan • Investing in local manufacturing – Algeria Lebanon and Egypt Morocco Sudan • Opportunity to take market share and Others
Slide 29: Expanding our portfolio with dosage forms that bring value to our customers
Expanding our portfolio with dosage forms that bring value to our customers Liquid in vials Lyophilised Ampules Pre-filled IV bags Pens powder in vial syringes Broad portfolio of products today Ready-to-administer (RTA) formulations • Third largest injectable portfolio in the US market • Improves ef
Slide 30: Growing pipeline with a diverse mix of product opportunities
Growing pipeline with a diverse mix of product opportunities A total pipeline of 119 products1 Pipeline by dosage form and container closure1 Projects 28% 4% 72 Development 17 55 14% Submissions Filed 4 31 47 IV bags PFS 14% Liquid vial Approved/tentatively Lyophilised vial 1 11 approved 40% Pens Hi
Slide 31: Increasing number of complex products
Increasing number of complex products R&D objective Target Increasing complexity 10 to 15 of products launches per year Progress 119 products Targeting in the pipeline 10% of revenue from new launches by 2023 Hikma Pharmaceuticals PLC 31
Slide 32: Benefiting from our facility investments over the last decade
Benefiting from our facility investments over the last decade Extensive capacity provides flexibility Significant investments in technology and automation USA • 300 million vials • 100 million PFS • 100 million ampules Portugal • 250 million vials • 70 million lyophilised units • 75 million cephalos
Slide 33: Quality track record supports our market position
Quality track record supports our market position 2016 2017 2018 April December April September December March September Just “three” manufacturing facilities. Shall we show a full 2 yr history? I believe all three site were inspected in Sintra Cherry Hill 2017 as well – this will highlight the Sint
Slide 34: Growth drivers for the Injectables business going forward
Growth drivers for the Injectables business going forward Large pool of new generic injectable Leverage portfolio across geographies Adjacent businesses opportunities Build on our presence in generic injectables Expand our product offerings by leveraging our Evaluate and pursue adjacent opportunitie
Slide 35: Delivering sustainable growth
Delivering sustainable growth Maintain Expand pipeline with Leverage position to strong focus on higher-value expand into adjacent foundation products segments and complementary markets Hikma Pharmaceuticals PLC 35
Slide 36: Generics
Generics Brian Hoffmann, President of Generics Kristy Ronco, EVP, Sales and Marketing, Generics
Slide 37: Diversified portfolio and state of the art manufacturing facility
Diversified portfolio and state of the art manufacturing facility Generics financial performance ($ million) State of Capabilities $800 100% the art in orals, liquids, nasal $700 sprays, respiratory, manufacturing 80% high-containment facility in and controlled $600 Columbus, Ohio substances $500 60
Slide 38: US retail generics has been a challenging market over the last two years
US retail generics has been a challenging market over the last two years Customer consolidation Price erosion appears to be stabilising (price per unit) 20% 15% 90% 10% of all retail generic products are bought by 5% 0% 3 customer groups -5% 2014 2015 2016 2017 2018 -10% -15% Source: IQVIA US 2018 -
Slide 39: Attractive opportunities remain in the US market
Attractive opportunities remain in the US market Generic share of US prescription market1 US retail generic sales by manufacturer1 (millions) (YTD September 2018) Rank Company Sales ($ million) YOY growth (%) 3,500 100% 1 Teva 4,087 (23%) 2 Mylan 3,180 (22%) 3,000 80% 3 Sandoz 2,383 (21%) 2,500 4 Am
Slide 40: Delivering sustainable growth: Generics
Delivering sustainable growth Focus on the foundation Develop our pipeline Reduce the cost base Increase R&D productivity and output Drive value from broad and Focus on areas of expertise differentiated in-market portfolio Leverage commercial capabilities Leverage partnerships and M&A En
Slide 41: Optimising our well-diversified product portfolio
Optimising our well-diversified product portfolio Generics revenue by product, 2015 Generics revenue by product, 1H18 7% 46% Top 10 products Other products 54% 93% Top 10 products Top 10 products contributed 93% of revenue contributed 54% of revenue Hikma Pharmaceuticals PLC 41
Slide 42: Focusing on differentiated in-market products with limited competition
Focusing on differentiated in-market products with limited competition Generics portfolio by number of generic competitors1 12% 29% ≤2 3-5 24% 6-8 ≥9 35% 1 IQVIA US 2018 Hikma Pharmaceuticals PLC 42
Slide 43: Cost reductions are building a sustainable foundation
Cost reductions are building a sustainable foundation Actions taken to-date Near-to-medium term priorities Long term priorities ▲ Closure of Eatontown ▲ Sale of Eatontown ▲ Operational efficiencies manufacturing facility manufacturing facility ▲ Align headcount with ▲ Transfer of products to ▲ Addit
Slide 44: Developing a pipeline of differentiated products
Developing a pipeline of differentiated products to drive increased return on investment Pipeline of 66 products1 Pipeline by area of focus1 Projects 1% Development 12 26 Liquids 6% High containment operations 20% 11% Dry powder inhalers (DPI) Submissions REMs 12% Filed 10 8 CGT & first to market Co
Slide 45: Focus on increasing the number of projects
Focus is on increasing the number of products in our pipeline R&D objective Target Focus on increasing 8 to 10 launches the number of per year projects Progress 66 products Targeting in the pipeline 10% of revenue from new launches by 2023 Hikma Pharmaceuticals PLC 45
Slide 46: Strengthening our PIV capabilities and taking a more targeted approach
Strengthening our PIV capabilities and taking a more targeted approach Our disclosed Generics Paragraph IV pipeline Ritonavir sales by month1 ($millions) Current US Current Product PIV status market Product PIV status US market size ($m)1 size ($m) 1 $20 Ampyra® Won Afinitor® Lost 274 760 Acorda tri
Slide 47: Strategically investing in higher-value branded product opportunities
Strategically investing in higher-value branded product opportunities to drive sustainable growth Mitigare®/colchicine US prescriptions (thousands) 140 20% 120 15% 100 80 10% 60 40 5% 20 0 0% Hikma colchicine market share Hikma colchicine total prescriptions Source: IQVIA US 2018 Hikma Pharmaceutica
Slide 48: Leveraging our experience to become a leader in the generic respiratory market
Leveraging our experience to become a leader in the generic respiratory market Capabilities Powder filler • Significant investment in dry powder inhaler (DPI) development and commercial manufacturing capacity • Extensive in-house respiratory formulation, analytical, and clinical expertise • Invaluab
Slide 49: Partnering with Vectura to develop generic versions of GSK's Ellipta portfolio
Partnering with Vectura to develop generic versions of GSK’s Ellipta® portfolio Global DPI sales, 20171 • DPIs account for roughly half of the $19 billion global branded respiratory market1 • GSK products accounted for around 60% of global DPI sales in 20172 GSK – Diskus — Diskus® family: $3.7 billi
Slide 50: Delivering sustainable growth: Generics
Delivering sustainable growth Successfully Focusing on more Making good Rebuilding the Filling pipeline turning the differentiated, progress with pipeline to gaps and business around in-market cost reductions improve return on enhancing products and identified investment capabilities areas to delive
Slide 51: Branded
Branded Mazen Darwazah, Executive Vice Chairman & President of MENA Masoud Abdelmajid, Territory VP, Egypt
Slide 52: Excellent commercial capabilities, large product portfolio and high-quality manufacturing
Excellent commercial capabilities, a large product portfolio and high-quality manufacturing facilities Branded financial performance in constant currency1 ($ millions) 5th largest Manufacturing $800 100% pharma facilities in company in 7 countries 80% MENA $600 60% $400 ~2,000 sales Presence in over
Slide 53: Fifth largest pharmaceutical company in MENA
Fifth largest pharmaceutical company in MENA MENA top 10 pharmaceutical companies by sales1 1H18 Branded revenue contribution ($ millions) 92% of all Branded revenue comes from 10 markets 8% Top 10 Branded markets Others 1 IQVIA local Pharma Index Q3 MAT 2018. Data is only retail pharmacy purchases.
Slide 54: Delivering sustainable growth: Branded
Delivering sustainable growth Focus on the foundation Develop our pipeline Leverage commercial and Focus on key opportunities manufacturing capabilities Prioritise key markets and Drive efficiencies and operational therapeutic areas excellence Focus on key markets Leverage partnerships and
Slide 55: Leveraging our new brand to deliver a unified message across MENA
Leveraging our new brand to deliver a unified message across MENA Before 2018 2018 and going forward Hikma Pharmaceuticals PLC 55
Slide 56: Developing a unique offering to increase engagement with stakeholders across MENA
Developing a unique offering to increase engagement with stakeholders across MENA Developing a tailored approach Commitment to education • To advance scientific awareness in MENA, Hikma hosted a forum in partnership with the Department of Leukemia at the University of Texas MD Anderson Cancer Centre
Slide 57: Launching differentiated products to deliver affordable solutions for patients
Launching differentiated products to deliver affordable solutions for patients Major challenges for multiple sclerosis care in MENA • Rising prevalence • Lack of education and resources for medical community • Limited public awareness and patient support Hikma’s launch of Sclera • Hikma launched Scl
Slide 58: Adopting a focused approach to markets, aligning resources with opportunity
Adopting a focused approach to markets, aligning resources with size of opportunity Market prioritisation Criteria for selecting markets • Market size Tier 1 Tier 2 • Demographics Large markets with significant Large markets with the potential to • Growth potential Hikma presence become Tier 1 marke
Slide 59: Maintaining our MENA-wide coverage while prioritising largest opportunities
Maintaining our MENA-wide coverage while prioritising largest opportunities Market prioritisation Tier 1 SYRIA TUNISIA IRAQ LEBANON Tier 2 JORDAN Tier 3 MOROCCO KUWAIT Tier 4 ALGERIA BAHRAIN LIBYA EGYPT QATAR UAE SAUDI ARABIA Atlantic Ocean OMAN SUDAN Arabian Sea YEMEN Hikma Pharmaceuticals PLC 59
Slide 60: Building upon strong foundation to become a market leader in Egypt
Building upon strong foundation to become a market leader in Egypt Tier 1 Market – Egypt1 Hikma’s growth strategy • Drive demand for existing Total market size of broad product portfolio $3.0 billion 7.8% 6.7% • Launch new products from pipeline and through partnerships Hikma is 9th largest 2.4% 5.4
Slide 61: Well positioned in Saudi Arabia to capture larger share of market
Well positioned in Saudi Arabia to capture larger share of market Tier 1 Market – Kingdom of Saudi Arabia1 Hikma’s growth strategy • Align business with Total market size of government’s new $3.6 billion 1.9% reimbursement program 2.0% 5.1% • Greater control of supply chain 2.2% Hikma is 7th largest
Slide 62: Leveraging partnership with local manufacturer to grow our position in UAE
Leveraging partnership with local manufacturer to grow our position in UAE Tier 2 Market – United Arab Emirates1 Hikma’s growth strategy • Leverage local manufacturing Total market size of $2.2 billion • Focus on successful launch of 2.6% 3.0% 7.6% Takeda products 3.3% • Invest in consumer healthcar
Slide 63: Focusing R&D efforts on key markets and therapeutic areas
Focusing R&D efforts on key markets and therapeutic areas Top 5 markets pipeline of 248 products1,2 Pipeline by market2 Algeria Projects 16% 25% Morocco Development 74 KSA 21% Jordan 18% Egypt 20% Submissions Filed 121 Pipeline by key therapeutic area2 2% Anti-infectives 9% Autoimmune 20% Cardiovasc
Slide 64: Prioritising key opportunities to deliver growth
Prioritising key opportunities to deliver growth R&D objective Target Prioritising products to maximise 6 to 8 launches launch potential per Tier 1 and Tier 2 markets per year Progress 248 products in the pipeline Hikma Pharmaceuticals PLC 64
Slide 65: Maintaining our position as 'partner of choice' in MENA
Maintaining our position as ‘partner of choice’ in MENA Partnerships with > 50 companies, licensing >85 products Revenue from in-licensed products represents ~ 40% of Branded revenue Hikma Pharmaceuticals PLC 65
Slide 66: Delivering sustainable growth: Branded
Delivering sustainable growth Leverage Hikma’s Focus on key opportunities Continue to build upon differentiated position in – markets, products and history of successful the region acquisitions partnerships Hikma Pharmaceuticals PLC 66
Slide 67: Finance
Finance Khalid Nabilsi, Chief Financial Officer
Slide 68: Delivered strong Group performance in 1H18 and positive outlook for the full year
Delivered strong Group performance in 1H18 and positive outlook for the full year Injectables Generics Branded • Revenue: • Revenue: • Revenue growth in $825 - $850 million, $675 - $700 million, constant currency: from $775 - $825 million from $600 - $650 million mid-single digits • Core operating m
Slide 69: Key moving parts that could influence Group performance in 2019
Key moving parts that could influence Group performance in 2019 Potential 2019 performance variables Potential Potential Base case positive factors negative factors • Mid-single digit price erosion • Continued supply disruptions in • Increased competition on in- Injectables the US injectables market
Slide 70: Continuing to invest in the maintenance, upgrade and expansion of our facilities
Continuing to invest in the maintenance, upgrade and expansion of our facilities across the Group Capex by region ($ million) $140 100% Guiding to $122m $110-120m $120 $107m 80% $100 $91m $82m 60% US $80 MENA Europe $60 40% Capex/revenue (%) $40 20% $20 $0 0% 2014 2015 2016 2017 2018E Hikma Pharmace
Slide 71: Long track record of strong cash flow generation
Long track record of strong cash flow generation Free cash flow1 Free cash flow ($ million) FCF/ core operating profit (%) $500 100% Roxane acquisition 87% $400 78% 80% 67% 69% $300 62% 60% 41% $200 40% $100 20% $0 0% 2013 2014 2015 2016 2017 1H18 1 Free cash flow is defined as operating cash flow l
Slide 72: Our capital allocation priorities
Our capital allocation priorities 1 2 3 4 Reinvest for Long-term Acquisitions Consistent growth partnerships in line with dividend strategy pay out Hikma Pharmaceuticals PLC 72
Slide 73: Strong balance sheet and low leverage will support future growth
Strong balance sheet and low leverage will support future growth Net debt/ EBITDA leverage ratio Acquisitions in Germany, Egypt and Jordan: Acquisitions in US (MSI) and Morocco (Promopharm): $300m $230m 3.5 3 2.7x 2.6x 2.5 Equity raise: Acquisition in US Acquisition in US (Roxane): $160m (Bedford):
Slide 74: Strategic outlook
Strategic outlook Siggi Olafsson, Chief Executive Officer Hikma Pharmaceuticals PLC
Slide 75: Growth targets over the medium term
Growth targets over the medium term Injectables Generics Branded Mid to high single Focusing on Targeting to digit top line growth profitability accelerate revenue growth Expect margins to Targeting to achieve Focusing on improving normalise in the gross margin above profitability low to
Slide 76: Executing our pipeline strategy is critical for our success
Executing our pipeline strategy is critical for our success Products in our pipeline and expected launches R&D spend and target ROI Revenue from R&D spend new launches Injectables Generics Branded Total pipeline 119 66 2481 6-7% ~10% of Group revenue of Group revenue 2019 launches 15-20 8-10 6-82 Me
Slide 77: Delivering sustainable growth
Delivering sustainable growth Focus on the foundation Develop our pipeline Leverage partnerships and M&A Hikma Pharmaceuticals PLC 77
Slide 78: Better health. Within Reach. Everyday.
Better health. Within Reach. Everyday. Hikma Pharmaceuticals PLC