Hikma Pharmaceuticals PLC · LSE:HIK
Hikma Pharmaceuticals — FY2006 Earnings Presentation
42 slides from Hikma Pharmaceuticals's earnings presentation, Mar 22, 2007
Slide 1: 2006 Preliminary Results
HIKMA PHARMACEUTICALS PLC 2006 Preliminary Results 22 March 2007
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: Samih Darwazah, Chairman and Chief Executive
Samih Darwazah Chairman and Chief Executive
Slide 4: 2006 Highlights
2006 Highlights ■ Significant strategic progress ■ Continued strong growth in revenue and profit attributable to shareholders ■ Acquisition of outstanding 52.5% of JPI consolidates position in fast growing Saudi and GCC markets ■ Capacity expansion including our new plant in Algeria, the completion
Slide 5: Bassam Kanaan, Chief Financial Officer
Bassam Kanaan Chief Financial Officer
Slide 6: Financial summary
Financial summary ($ million) 2006 2005 Increase Revenue 317.0 262.2 20.9% Gross profit 158.5 135.8 16.7% R&D costs 18.3 16.5 10.8% Operating profit 75.2 69.2 8.7% Profit before tax 75.6 64.4 17.4% Profit attributable to shareholders 54.5 43.9 24.3% Diluted earnings per share (cents) 31.0 28.3 9.5%
Slide 7: Branded and Injectables represent greater share of sales
Branded and Injectables represent greater share of sales 2006 revenue by segment 2005 revenue by segment 41.0% 35.5% 21.3% 18.8% 43.9% 35.9% 1.8% 1.8% Generic Branded Injectable Other Generic Branded Injectable Other Page 6
Slide 8: Continuing a track record of strong growth
Continuing a track record of strong growth Branded revenues ■ Consistent revenue performance Year to 31 December - 39.9% growth in 2006 - 3-yr CAGR = 34.8% 39.9% (US$ million) ■ Strong growth across the MENA 120 130.1 region, especially in Saudi Arabia and Jordan 100 93.0 80 ■ JPI consolidated from
Slide 9: Stable performance in a competitive market
Stable performance in a competitive market Generic revenues ■ Price erosion partially offset by Year to 31 December volume increases (US$ million) ■ Delays of new product launches -1.3% 120 115.2 113.7 ■ Renewal of lisinopril contract 100 80 60 40 20 0 2005 2006 Page 8
Slide 10: Developing through strong growth
Developing through strong growth Injectables revenues ■ 37.1% growth in sales Year to 31 December ■ 3-year CAGR = 44.8% (US$ million) 37.1% 70 ■ Particularly strong growth in MENA 67.6 60 - Saudi Arabia and Sudan 50 - New customers and distribution 49.3 channels 40 30 ■ Strong growth in Europe 20 -
Slide 11: Gross profit
Gross profit (US$ million) +16.7% 160 158.5 140 135.8 120 100 80 60 40 20 0 2005 2006 Gross Margins 2004 2005 2006 Change vs. 2005 (percentage points) Branded 53.6% 57.8% 53.4% -4.4 Generic 54.1% 54.1% 52.6% -1.5 Injectables 33.7% 37.4% 41.9% +4.5 Group 51.1% 51.8% 50.0% -1.8 Page 10
Slide 12: Operating expenses
Operating expenses (US$million) Change 90 84.2 +23.8% 0.6 80 68.0 70 1.5 30.3 +34.1% 60 22.6 50 18.3 +10.9% 40 16.5 30 20 35.0 +27.9% 27.4 10 0 2005 2006 Operating expenses as a percentage of Group revenue 2005 2006 Change (percentage points) G&A 8.6% 9.6% +1.0 R&D 6.3% 5.8% -0.5 S&M 10.4% 11.0% +0.
Slide 13: Operating profit
Operating profit (US$ million) +8.7% 80 70 75.2 69.2 60 50 40 30 20 10 0 2005 2006 Operating Margins Change vs. 2005 2004 2005 2006 (percentage points) Branded 30.3% 30.9% 30.3% -0.6 Generic 38.6% 33.6% 31.7% -1.9 Injectables 14.1% 17.2% 19.8% +2.6 Group 29.5% 26.4% 23.7% -2.7 Page 12
Slide 14: Profits attributable to shareholders
Profits attributable to shareholders All figures US$m 2006 2005 PROFIT BEFORE TAX 75.6 64.4 Tax (19.6) (19.5) Effective tax rate 26.0% 30.2% Profit for the year 56.0 45.0 Attributable to: Minority interest 1.5 1.1 Equity holder of the parent 54.5 43.9 Diluted earnings per share (cents) 31.0 28.3 Pro
Slide 15: Cash flow
Cash flow All figures US$m 2006 2005 NET CASH FLOW FROM OPERATING ACTIVITIES Profit before tax and minority interest 75.6 64.4 Adjustments for non-cash items 13.8 13.8 CASH FOW BEFORE WORKING CAPITAL 89.4 78.2 Change in working capital (35.1) (24.1) Income tax paid (19.4) (17.8) Interest received 5.
Slide 16: Expanding production facilities to meet growth plans
Expanding production facilities to meet growth plans ■ 7,500 m2 cephalosporin plant in Portugal completed -Expected to be operational early 2007 Capital expenditure (US$ million) - All cephalosporin lines plus dedicated 60.0 laboratory, packing and warehousing facilities 53.2 2.5 ■ New production an
Slide 17: Confidence in our ability to deliver further strong growth
Confidence in our ability to deliver further strong growth Outlook for 2007 ■ Updating guidance to include Ribosepharm ■ Now expect sales growth in excess of 30% ■ Gross margin in line with 50.0% achieved in 2006 - Ribosepharm should impact positively on gross margin ■ Ribosepharm’s sales and market
Slide 18: Samih Darwazah, Chairman and Chief Executive
Samih Darwazah Chairman and Chief Executive
Slide 19: Achieving significant strategic progress
Achieving significant strategic progress ■ Acquisitions -Acquired JPI, consolidating our position in the GCC region -Acquired Ribosepharm in 2007, entering the injectable oncology market and expanding our product portfolio and sales and marketing capabilities ■ Expanding capacity - Began production
Slide 20: Consistent strategy for growth
Consistent strategy for growth ■ Consolidate our strong Branded market position in the MENA region by launching new products, increasing our under-licensed products, expanding our geographic reach and taking market share ■ Grow our Injectables business by expanding our product portfolio, developing
Slide 21: Strong industry dynamics in MENA driving Branded growth
Strong industry dynamics in MENA driving Branded growth Per capita drug spending(1) (US $) 900 841 800 700 600 500 400 370 299 300 216 208 200 133 118 94 100 78 33 32 45 21 20 14 0 a ic ia ia ia y ce a nd an ry t t SA AE ai yp bi an si er ak bl an ga an uw rd la ra us U U Eg m pu lg ov om Po un Jo i
Slide 22: Developing our portfolio of products under license
Developing our portfolio of products under license ■ Attractive partner for licensors -Broad geographic coverage spanning 17 countries Products under license -More than 300 Branded sales reps as a % of 2006 Branded sales (plus 58 in Injectables ) 65.9% ■ Opportunity to benefit from data exclusivity
Slide 23: Strong product position and sales and marketing capacity
Strong product position and sales and marketing capacity MENA sales and marketing staff (including JPI) Product Therapeutic category Market rank Saudi Arabia 153 Jordan Algeria 96 Amoclan Broad spectrum penicillin 1 Jordan 80 Penamox Broad spectrum penicillin 3 Sudan 20 Suprax Oral cephalosporins 1
Slide 24: Leveraging the Branded portfolio across MENA
Leveraging the Branded portfolio across MENA Product approvals in 2006 Pending approvals across the MENA region UAE UAE Iraq Iraq Yemen Yemen Egypt Egypt Tunisia Tunisia GCC GCC Syria Syria Bahrain Bahrain Oman Oman Qatar Qatar Kuwait Kuwait Lebanon Lebanon Sudan Sudan Saudi Arabia Saudi Arabia Alge
Slide 25: Strong Injectables growth in the MENA region
Strong Injectables growth in the MENA region ■ Continued roll-out of new products 120 -6 new products launched in Jordan ■ Leveraging investment made in sales and 100 marketing in 2005 -58 sales reps in the MENA region ■ Extensive geographic reach maximises potential 80 of product portfolio -32 appr
Slide 26: Expanding our European Injectables operations
Expanding our European Injectables operations ■ Continued roll out of new products 35 -5 products launched in 2006 -29 products for sale in Germany 30 ■ Enhanced sales and marketing capabilities delivering growth 25 -14 sales reps across region ■ Accelerating regulatory approvals 20 -28 approvals in
Slide 27: Developing our Injectables presence in the US
Developing our Injectables presence in the US ■ Newly established sales organisation 25 -Shifting away from contract manufacturing -Own products account for 44% of sales, compared to 21% in 2005 20 -5 new sales reps ■ Limited product portfolio -9 products marketed 15 ■ Strong pipeline -25 pending ap
Slide 28: Entering the injectable oncology market
Entering the injectable oncology market ■ Oncology expected to become 2nd largest pharmaceutical market by 2010 ■ 2009 is key year for patent expiries ■ Acquisition of Ribosepharm provides excellent platform to develop a presence in oncology -12 injectable oncology products currently in product port
Slide 29: Future Generic growth dependent on new products
Future Generic growth dependent on new products ■ Growth will be driven by new products 35 -Strong pipeline -FDA approval times increasing 30 -Time from approval to launch – 3 to 6 months 25 ■ More competitive pricing for new products -Accept lower margins to gain market share 20 ■ Continued focus o
Slide 30: Acquisitions
Acquisitions ■ MENA -JPI -Continue to evaluate opportunities in Egypt, Morocco and Turkey ■ Injectables -Ribosepharm ■ Looking forward to the future with confidence that we can achieve growth both organically and through acquisitions Page 29
Slide 31: Q&A
Q&A
Slide 32: Branded revenues
Branded revenues (US$ million) 3-yr CAGR: + 34.8 % 130.1 120 100 93.0 80 74.0 60 53.1 40 20 0 2003 2004 2005 2006 Annual Growth 39.3% 25.7% 39.9% Page 31
Slide 33: Generic revenues
Generic revenues (US$ million) 3-yr CAGR: +1.3% 120 115.2 113.7 109.4 100 106.2 80 60 40 20 0 2003 2004 2005 2006 Annual Growth -2.8% 8.5% -1.3% Page 32
Slide 34: Injectable revenues
Injectable revenues (US$ million) 70 67.6 60 3-yr CAGR: +44.8% 50 49.3 40 30 28.9 20 22.2 10 0 2003 2004 2005 2006 Annual Growth 29.8% 70.8% 37.1% Page 33
Slide 35: Gross profit
Gross profit (US$ million) 160 158.5 140 120 135.8 100 108.4 80 94.2 60 40 20 0 2003 2004 2005 2006 Gross Margins Change vs. 2003 2004 2005 2006 2005 Branded 48.6% 53.6% 57.8% 53.4% -4.4% Generic 53.7% 54.1% 54.1% 52.6% -1.5% Injectables 39.8% 33.7% 37.4% 41.9% +4.5% Group 50.6% 51.1% 51.8% 50.0% -1
Slide 36: Operating profit
Operating profit (US$ million) 80 70 75.2 69.2 60 62.7 50 55.6 40 30 20 10 0 2003 2004 2005 2006 Operating Margins Change vs. 2003 2004 2005 2006 2005 Branded 21.2% 30.3% 30.9% 30.3% -0.6 Generic 40.0% 38.6% 33.6% 31.7% -1.9 Injectables 18.5% 14.1% 17.2% 19.8% +2.6 Group 29.9% 29.5% 26.4% 23.7% -2.7
Slide 37: Net working capital
Net working capital Twelve months ending 31 December 200 Stock days Stock days (excl JPI) 160 Excluding JPI, using the count back method to calculate Debtor days 120 debtor days, debtor Debtor days (excl JPI) days were stable at 102 days and 103 days as at Dec 31st 80 Creditor Days 2005 and Dec 31st
Slide 38: Net cash
Net cash Twelve months ending 31 December 2006 (US$ million) 86.9 150 25.0 141.1 91.6 25 (32.2) (28.9) (21.9) (36.8) (100) 2005 2005 2006 2006 Long-Term Borrowing 2005 2006 Short-Term Borrowing Debt / Equity 18.8 % 19.0 % Investments in Cash Deposits, Cash and Net Debt / Equity -30.2 % -7.1 % Cash E
Slide 39: Balance sheet
Balance sheet All figures US$m 2006 2005 Cash, cash equivalent and collateralised cash 91.6 141.1 Trade and other receivables* 121.8 82.6 Other current assets 2.7 3.2 Inventories 83.7 58.0 TOTAL CURRENT ASSETS 299.8 284.9 Intangibles assets 23.9 7.7 Property. Plant and equipment 156.8 91.2 Other lon
Slide 40: Increasing market share in core Branded markets
Increasing market share in core Branded markets JORDAN SAUDI ARABIA Market Position Market Share Market Position Market Share Company 2005 2006 2005 2006 Company 2005 2006 2005 2006 HIKMA AND JPI 1 1 6.8% 7.3% GLAXOSMITHKLINE 1 1 10.5% 10.8% DAR AL DAWA 1 2 7.0% 7.0% SPIMACO 2 2 7.2% 7.4% NOVARTIS 3
Slide 41: Dividends
Dividends ■ Final dividend of $11.7 million (4.0 cents per share) ■ Total dividend paid for 2006 was 7.0 cents per share ■ 21.5% payout, in line with our stated dividend policy ■ Final dividend ex-dividend date – 16 May 2007 ■ Final dividend record date – 18 May 2007 ■ Final dividend paid to shareho
Slide 42: Global investor base
Global investor base Institutional investors by region 35% 1% 28% 18% 18% UK Middle East Cont Europe US Far East & Aus Source: Investor Insight, Company data. Institutional investors made up 69.56% of the free float as of 29 December 2006. Page 41