Hikma Pharmaceuticals PLC · LSE:HIK
Hikma Pharmaceuticals — FY2008 Earnings Presentation
47 slides from Hikma Pharmaceuticals's earnings presentation, Mar 17, 2009
Slide 1: 2008 Preliminary Results
HIKMA PHARMACEUTICALS PLC 2008 Preliminary Results 17 March 2009
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: Said Darwazah, Chief Executive
Said Darwazah Chief Executive
Slide 4: Hikma's strong track record of delivering growth
Hikma’s strong track record of delivering growth Group revenues ($ million) 600 580.7 500 448.8 400 317 300 262 214 200 188 138 99 105 90 100 76 63 67 57 54 51 35 16 23 1 2 1 2 2 3 5 6 9 10 0 0 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 06 07 08 19 19 19 19 19 1
Slide 5: 2008 Highlights
2008 Highlights ■ Group revenues up +29% to $581 million - Since IPO in November 2005, 30% CAGR in reported annual revenues ■ Net income of $57 million ■ Branded: continuing premium revenue growth-rate +22% organic (+61% reported) - 2007 acquisitions successfully integrated - performance exceeded ex
Slide 6: 2008 Highlights
2008 Highlights ■ Focus on “Quality sales” - capitalise on strength of Hikma brand - focus on prompt payment - sales force incentives changed to include KPIs such as cash collection ■ Operating cashflow* +41% - Generated $75 million compared to $53 million in 2007 ■ Net debt reduced by 44% from 2007
Slide 7: Bassam Kanaan, Chief Financial Officer
Bassam Kanaan Chief Financial Officer
Slide 8: Consolidated P&L
Consolidated P&L All figures in $ million 2008 2007 % change Net sales 580.7 448.8 +29.4% Gross profit 256.5 221.5 +15.8% Gross profit margin 44.2% 49.4% -5.2 Operating profit 80.7 92.4 -12.7% Operating profit margin 13.9% 20.6% -6.7 Adjusted operating profit* 94.3 95.1 -1.0% Adjusted operating marg
Slide 9: Branded now represents over half of Group sales
Branded now represents over half of Group sales 2008 revenue by segment 2007 revenue by segment 55.3% 44.3% 27.0% 25.7% 0.8% 1.0% Branded Branded 18.2% Injectables 27.7% Injectables Generics Generics Other Other Page 8
Slide 10: Further increase in the contribution from the MENA region
Further increase in the contribution from the MENA region 2008 revenue by region 2007 revenue by region 14.5% 17.0% 51.0% 63.0% MENA 22.5% MENA US 32.0% US Europe Europe Page 9
Slide 11: Branded: Strong organic growth, enhanced by acquisitions
Branded Strong organic growth, enhanced by acquisitions Net sales ($ million) 350 320.8 ■ 22.4% organic growth excluding acquisitions of APM & Hikma Egypt (formerly Alkan) 300 + 61.3% 85.2 250 ■ 61.3% reported growth 198.9 200 6.5 +22.4% ■ Successful integration of APM and Hikma 150 Egypt 235.6 100
Slide 12: Branded: Margins reflect acquisitions and investment
Branded Margins reflect acquisitions and S&M and R&D investment Gross profit ($ million) Operating profit ($ million) 100 180 93.6 * 90 6.1 160 172.8 +50.6% * 80 + 60.0% 140 70 62.2 * 120 60 +41.8% 50 100 108.0 40 87.5 80 30 61.7 60 20 10 40 0 20 2007 2008 0 Reported Adjustment 2007 2008 Gross margi
Slide 13: Injectables: Good growth despite tough market in Germany
Injectables Good growth despite tough market in Germany Net sales ($ million) 160 ■ 14.2% organic growth (excluding APM and 149.3 Thymoorgan acquisitions) 140 + 23.2% 17.3 121.2 120 5.6 ■ Further strong growth in MENA (+43%) +14.2% - Strong product portfolio 100 -100 Injectable sales reps 80 - incre
Slide 14: Injectables: Margins impacted by consolidation of acquisitions
Injectables Margins impacted by consolidation of acquisitions Gross profit ($ million) Operating profit ($ million) 30 70 + 17.0% +8.8% 24.7 * 25 60 63.4 22.7 * 2.6 2.2 20 50 54.2 +7.8% 40 15 30 10 20.5 22.1 20 5 10 0 2007 2008 0 2007 2008 Reported Adjustment Gross margin Operating margin Change vs.
Slide 15: Generics: Lower sales in a difficult US trading environment
Generics Lower sales in a difficult US trading environment Net sales ($ million) ■ Lower prices and lower than expected volumes for 140 lisinopril following the expiry of the VA contract in -11.0% December 2007 120 4.8 100 -14.9% ■ Lower than expected demand for new products 80 ■ Price erosion acros
Slide 16: Generics: Loss for the year, restored to profit in Q4
Generics Loss for the year - but restored to profit in fourth quarter Gross profit ($ million) Operating profit/loss ($ million) 35 70 31.6 30 60 25 58.6 50 20 -118.3% 40 -67.0% 15 10 30 5 20 0 19.3 2007 2008 10 -5 -10 -5.8 0 2007 2008 Gross margin Operating margin Change Change vs. vs. 2005 2006 20
Slide 17: Group operating expenses
Group operating expenses Operating expenses ($ million) Operating expenses as % of Group revenue Change 200 2008 2007 vs. 07 180 175.8 Sales & Marketing 15.6% 13.6% +2.0 6.2 G&A 9.8% 10.3% -0.5 160 +36.1% 22.2 Research & Development 3.8% 4.3% -0.5 140 129.1 Other 1.1% 0.6% +0.7 120 56.9 19.3
Slide 18: Expanding and upgrading production facilities for growth
Capital expenditure Expanding and upgrading production facilities for growth Capital expenditure ($ million) 60 56.7 ■ Investment in a new lyophilisation plant in +14.8% 1.4 Portugal 49.4 8.0 50 1.0 4.2 ■ Upgrading machinery, buildings and equipment at 40 13.0 APM, Hikma Egypt and JPI 15.8 30 ■ Ongo
Slide 19: Cash flow: Benefit from focus on working capital
Cash flow Benefit from focus on working capital Operating cashflow * ($ million) ■ Operating cashflow increased by 41%, funding all 80 capex and financing costs +41% 60 ■ Despite the decline in Generics profitability (historical main source of Group cashflow), cash conversion improved to 13% of net
Slide 20: Net debt cut by $136m
Net debt Cut by $136 m from equity issue and improved operational cash flow Net debt at 31 December ($ million) ■ Placed 9.9% of issued share capital on 17 January 2008 raising gross proceeds of £81.6 m 100 (approximately $160 m) -170.9 50 -306.8* 63.5 0 34.5 ■ Year-end cash balance of $63.5 m (2.5
Slide 21: Slight benefit of the weaker dollar during 2008
Foreign exchange Slight benefit of the weaker dollar during 2008 ■ Exposure to Algerian Dinar 2008 -8% appreciation of the Algerian Dinar % 2008 against the dollar during 2008 All figures in $ million 2007 Constant FX change Reported Currency -Impact was favourable on both revenues and operating pro
Slide 22: Outlook for 2009
Outlook for 2009 ■ Group revenues: growth of 10-15% ■ Gross margin: improvement of 1-2% ■ Currency impact: - at constant exchange rates, higher end of ranges above - If current rates are maintained throughout 2009, lower end of ranges above ■ Tax rate: higher by 2-3 percentage points Page 21
Slide 23: Said Darwazah, Chief Executive
Said Darwazah Chief Executive
Slide 24: MENA: Sustained strong market growth
MENA Sustained strong market growth – Hikma still gaining market share AVGE YoY MARKET UNITS VALUE Rx RANK GROWTH SHARE MENA growth drivers m $m VALUE % % $ ■ Growing populations Top 9 MENA 2,697 7,322 2.71 18.5 100.0 markets ■ Increasing affluence SANOFI-AVENTIS 1 231 810 3.51 20.9 11.1 ■ Changing
Slide 25: Increasing penetration of our core markets
MENA Increasing penetration of our core markets JORDAN – HIKMA #1 ALGERIA – HIKMA #4 (from #5) SAUDI ARABIA – HIKMA #5 COMPANY Market YoY Market COMPANY Market YoY Market COMPANY Market YoY Market value share value share value share Growth Growth Growth ($m) (%) ($m) (%) ($m) (%) (%) (%) (%) JORDAN
Slide 26: Strengthening our position as MENA's preferred licensing partner
Branded Strengthening our position as MENA’s preferred licensing partner ■ 33% or $107 million of 2008 Branded sales from in-licensed products - aspirational target is ~50% - ongoing discussions with multiple potential partners ■ 63% growth in sales of all in-licensed products in 2008 ■ 64% growth i
Slide 27: Investment in sales and marketing to drive future growth
Branded Investment in sales and marketing to drive future growth Sales and marketing staff Country 31 Dec 2008 Syria Tunisia Lebanon Algeria 164 Morocco Jordan Iraq Tunisia 32 Kuwait Libya 30 Algeria Bahrain & Qatar Egypt 296 Libya Egypt Sudan 39 Saudi Arabia UAE Jordan 149 Lebanon 40 Oman Iraq 8 Su
Slide 28: Branded: Strategic priorities
Branded Strategic priorities ■ Organic growth - Expanding product portfolio - Enhanced sales and marketing structure - Increase proportion of in-licensed products ■ Synergies from recent acquisitions - Product launches in new markets - Streamlining distribution channels - Roll-out of Hikma payment t
Slide 29: Our competitive injectables platform and global market presence
Injectables Our competitive injectables platform and global market presence Our competitive injectables platform 2008 Injectables sales by region ■ A “one-stop-shop” for injectables (development, Europe - manufacturing, sales & marketing Injectable 24% ■ A reputation for operational excellence and c
Slide 30: Injectables: Growth strategy
Injectables Growth strategy ■ Expand the current product portfolio - more in-licensed products, more oncology products - aim to differentiate Hikma’s portfolio from competitive offerings - continue to raise the number of submissions ■ Strengthen Hikma’s presence in existing markets - Libya, Yemen, U
Slide 31: Generics: Turnaround strategy
Generics Turnaround strategy ■ Objective: Improve the financial performance as quickly as possible ■ Changes to the management team - Appointed new General Manager and VP, Sales & Marketing - Overhauled the Sales and Marketing team ■ Actions - Abandoned low margin products - Improved costing procedu
Slide 32: Generics: Outlook for 2009 and beyond
Generics Outlook for 2009 and beyond ■ 2009 - Revenues likely to be flat from changes to the product portfolio - Expect business to return to full year profitability - FDA-enforced withdrawal of some suppliers from the US market is having a positive effect in some product areas ■ 2010 and beyond - G
Slide 33: Positioning Hikma's management for future growth
Positioning Hikma’s management for future growth ■ Hikma no longer a small company - sales already over $500 m and further strong growth expected - complexity from recent acquisitions ■ Need to adapt and simplify management structure to drive future growth ■ Improve focus on revenue generation and o
Slide 34: Management evolution for future growth
Management evolution for future growth ■ Hikma no longer a small company - sales already over $500 m and further strong growth expected - complexity from recent acquisitions ■ Need to adapt and simplify management structure to drive future growth ■ Improve focus on revenue generation and operational
Slide 35: Strategy for future growth
Strategy for future growth ■ Replicating our Branded business model in new emerging markets ■ Building on our leading position in our core MENA markets ■ Pursuing further acquisitions to accelerate organic growth ■ Developing our global specialty Injectables business ■ Leveraging our expertise and c
Slide 36: Q&A
Q&A
Slide 37: Appendix
Appendix
Slide 38: Analysis of adjusted consolidated P&L
Analysis of adjusted consolidated P&L 2008 2007 Exceptional items (1) 08 vs. 07 All figures Amortization of Adjusted & Amortization of As Reported Adjusted As Reported Adjusted in $ million Intangibles (2) Intangibles (2) change Net sales 585.5 (4.8) 580.7 448.8 448.8 136.7 Operating Income 94.3 (13
Slide 39: Balance sheet
Balance sheet $ million 2008 2007* 2008 2007* ASSETS LIABILITES Cash and cash equivalent 62.7 28.9 Short-term debt 118.5 278.0 Trade and other receivables 195.8 188.3 Trade and other payables 82.0 84.3 Inventories 154.8 140.4 Other current liabilities 27.9 31.7 Other current assets 1.9 8.6 Total Cur
Slide 40: Controlling working capital
Controlling working capital 200 Typical 150 payment days US: 60-90 100 MENA: 120-360 Europe: 60-120 50 2005 2006 2007 2008 * Debtor days Stock days Creditor days Debtor days(1) 101 126 120* 111* Stock Days(2) 168 194 200* 179* Creditor 77 74 75* 53* Days(3) (1) Debtor Days: Receivables (net) as % of
Slide 41: Operating cash flow benefit from focus on working capital
Cash flow Operating cash flow benefit from focus on working capital $ million 2008 2007* Profit before tax and minority interest 64.0 83.8 Adjustments for non-cash items 53.7 34.4 Change in working capital (35.0) (46.9) Income tax paid (7.7) (18.0) Net cash generated from operating activities 75.0 5
Slide 42: Branded: Launching new products and developing new markets
Branded Launching new products and developing new markets Product approvals in 2008 Product launches in 2008 90 100 84 90 87 80 80 70 70 60 60 50 50 67 50 40 40 30 30 20 20 37 13 10 7 10 17 7 5 6 0 2 0 MENA Europe and ROW MENA New MENA-Other New products New products Line extensions and new countrie
Slide 43: Branded: Pipeline for future growth
Branded Pipeline for future growth Submissions in 2008 Pending approvals at 31 Dec 2008 345 160 320 140 137 280 120 240 100 200 345 80 160 137 60 120 40 32 80 16 41 37 20 16 40 18 23 16 10 14 6 23 0 0 MENA New Other MENA Europe & RoW MENA New Other MENA Europe & RoW New products Line extensions Page
Slide 44: Injectables: Launching new products and developing new markets
Injectables Launching new products and developing new markets Product approvals in 2008 Product launches in 2008 40 35 37 35 30 30 30 25 25 20 20 31 20 27 16 15 15 11 7 10 19 10 7 6 1 5 5 9 6 6 5 3 0 0 1 US MENA Europe & RoW US MENA Europe New products Line extensions Page 43
Slide 45: Injectables: Pipeline for future growth
Injectables Pipeline for future growth Submissions in 2008 Pending approvals at 31 Dec 2008 16 140 128 14 14 120 12 12 100 10 10 1 5 80 8 8 128 2 14 60 6 9 40 32 4 7 6 11 17 20 14 2 1 6 21 13 11 0 0 US Europe & RoW MENA New Other MENA US Europe & RoW MENA New Other MENA New products Line extensions
Slide 46: Generics: Launching new products
Generics Launching new products Product approvals and launches in 2008 8 7 7 6 5 5 4 3 3 1 2 1 2 2 0 Approvals Product launches New products Line extensions Page 45
Slide 47: Generics: Pipeline for future growth
Generics Pipeline for future growth Submissions in 2008 and pending approvals at 31 Dec 2008 35 33 30 8 25 20 15 25 10 5 4 2 2 0 Submissions Pending approvals New products Line extensions Page 46