Hikma Pharmaceuticals PLC · LSE:HIK
Hikma Pharmaceuticals — FY2007 Earnings Presentation
43 slides from Hikma Pharmaceuticals's earnings presentation, Mar 18, 2008
Slide 1: 2007 Preliminary Results
HIKMA PHARMACEUTICALS PLC 2007 Preliminary Results 18 March 2008
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: Said Darwazah, Chief Executive
Said Darwazah Chief Executive
Slide 4: 2007 Highlights
2007 Highlights ■ Group revenues up 41.6% ■ Profit attributable to shareholders up 14.8% ■ Achieved gross margin for the Group of 49.4% ■ 129 product approvals and 28 new product launches ■ Acquisition and integration of two oncology businesses ■ Entry into Egyptian market through acquisition of Alk
Slide 5: Bassam Kanaan, Chief Financial Officer
Bassam Kanaan Chief Financial Officer
Slide 6: Consolidated P&L
Consolidated P&L All figures in $ million 2007 2006 % change Net sales 448.8 317.0 +41.6% Gross profit 221.5 158.5 +39.7% Gross profit margin 49.4% 50.0% -0.6% Operating profit 92.4 75.2 +22.8% Operating profit margin 20.6% 23.7% -3.1% Income before tax and minority interests 83.8 75.6 +10.8% Tax (1
Slide 7: Branded and Injectables continue to generate an increasing percentage of group sales
Branded and Injectables continue to generate an increasing percentage of group sales 2007 revenue by segment 2006 revenue by segment 44.3% 41.0% 21.3% 27.0% Branded Branded Injectables Injectables 1.0% Generics 1.8% Generics Other 35.9% Other 27.7% Page 6
Slide 8: MENA represents an increasing percentage of group sales
MENA represents an increasing percentage of group sales 2007 revenue by region 2006 revenue by region 9.3% 17.0% 51.0% 49.8% 40.9% 32.0% MENA MENA US US Europe & ROW Europe & ROW Page 7
Slide 9: Excellent performance driven by organic growth and acquisitions
Branded Excellent performance driven by organic growth and acquisitions Net sales ($ million) 220.0 ■ 32.0% organic growth (excluding JPI & Alkan) + 52.9% 200.0 198.9 180.0 ■ Strong demand across all MENA markets 160.0 140.0 ■ Particularly strong growth in GCC following successful integration of JPI
Slide 10: Strong margins
Branded Strong margins Gross profit ($ million) Operating profit ($ million) 120.0 + 55.5% 80.0 +56.7% 70.0 108.0 100.0 60.0 61.7 80.0 50.0 69.5 60.0 40.0 39.4 30.0 40.0 20.0 20.0 10.0 0.0 0.0 2006 2007 2006 2007 Gross margin Operating margin Change vs. Change vs. 2004 2005 2006 2007 2006 2004 2005
Slide 11: Rapid growth through strong sales & marketing and acquisitions
Injectables Rapid growth through strong sales & marketing and acquisitions Net sales ($ million) 140.0 + 79.3% ■ 25.2% organic growth (excluding oncology acquisitions) 120.0 121.2 ■ Strong growth in the MENA region 100.0 80.0 ■ Continued growth in Europe 60.0 67.6 ■ US business still developing as w
Slide 12: Continued investment impact margins
Injectables Continued investment impact margins Gross profit ($ million) Operating profit ($ million) 60.0 + 91.1% 25.0 +53.1% 50.0 54.2 20.0 20.5 40.0 15.0 30.0 13.4 28.3 10.0 20.0 5.0 10.0 0.0 0.0 2006 2007 2006 2007 Gross margin Operating margin Change vs. Change vs. 2004 2005 2006 2007 2006 2004
Slide 13: Delivering revenue growth
Generics Delivering revenue growth Net sales ($ million) 140.0 +9.3% ■ Sales of new products and volume increases more than offset continued price erosion 120.0 124.2 113.7 ■ More competitive pricing for new products 100.0 80.0 60.0 40.0 20.0 0.0 2006 2007 Page 12
Slide 14: Lower margins reflect more competitive pricing
Generics Lower margins reflect more competitive pricing Gross profit ($ million) Operating profit ($ million) 40.0 70.0 -2.0% 35.0 36.0 -12.1% 60.0 59.8 58.6 30.0 31.6 50.0 25.0 40.0 20.0 30.0 15.0 20.0 10.0 5.0 10.0 0.0 0.0 2006 2007 2006 2007 Gross margin Operating margin Change vs. Change vs. 200
Slide 15: Group operating expenses
Group operating expenses Operating expenses Operating expenses as a percentage of Group revenue (US$ million) Change 2006 2007 140 vs. 06 129.1 Sales & Marketing 11% 13.6% 2.6% 2.8 120 46 Research & Development 5.8% 4.3% -1.5% G&A 9.6% 10.3% 0.7% 100 Other 0.2% 0.6% 0.4% 84.2 80 0.6 30.3 19.
Slide 16: Cash flow
Cash flow All figures US$m 2007 2006 Profit before tax and minority interest 83.8 75.6 Adjustments for non-cash items 34.4 13.8 Change in working capital (46.9) (35.1) Income tax paid (18) (19.4) Interest received 2.0 5.3 Interest paid (10.2) (5.0) Net cash generated from operating activities 45.1 3
Slide 17: Expanding production facilities for growth
Expanding production facilities for growth Capital expenditure ($ million) 60 ■ Expansion of our facilities in Jordan 53.2 49.4 ■ New cephalosporin plant in Portugal. 50 7.6 ■ Upgrading production lines, reconstruction of 4.2 labs and new lyophilisation machine & FDA 21.2 15.8 40 approval investment
Slide 18: Increasing balance sheet leverage to support acquisitions
Increasing balance sheet leverage to support acquisitions Net debt position at 31 December 2007 ($ million) 29.5 ■ Placed 9.9% of issued share capital on 17 95 January 2008 -301.1 45 91.6 34.5 ■ Raised gross proceeds of £81.6 million -5 -25.3 (approximately $160 million) -57.6 -36.8 -55 -105 -155 -2
Slide 19: Outlook for 2008
Outlook for 2008 ■ Group revenue growth between 35% and 40% ■ Gross margin of approximately 47% ■ Strong organic growth in the Branded and Injectable businesses ■ Stable revenue growth in Generics, but significant margin erosion ■ Excellent performance from acquisitions Page 18
Slide 20: Said Darwazah, Chief Executive
Said Darwazah Chief Executive
Slide 21: Hikma's strong track record of delivering growth
Hikma’s strong track record of delivering growth Group revenues ($ million) 500 448.8 450 400 350 317 300 262 250 214 200 188 150 138 99 105 100 90 76 63 67 57 54 51 50 35 23 9 10 16 0 1 2 1 2 2 3 5 6 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 19 19 19 1
Slide 22: Opportunities in the MENA Region
MENA Opportunities in the MENA Region ■ Growing populations ■ Increasing affluence ■ Developing health insurance industry ■ Increasing government health expenditure ■ Stable pricing environment ■ Lower manufacturing costs ■ Fragmented competitive landscape Page 21
Slide 23: Significant scope to increase pharmaceutical spending
MENA Significant scope to increase pharmaceutical spending Per capita drug spending(1) 900 800 700 600 500 400 300 200 100 0 an na y ia n a y ia ic ce nd ia a ria ca E US it an pa ar di bi wa ak bl an UA ss an i rd la ge ri In ra Ch ng pu m Ja Af ov m Po Ru Ku Jo Fr Al iA er Hu Re Ro Sl h G ud ut h
Slide 24: Barriers to entry create opportunities for Hikma
MENA Barriers to entry create opportunities for Hikma Barriers to entry Opportunities for Hikma Brand promotion Strong brand recognition and 1,100-strong sales promotion team Preferential treatment for local Local manufacturing facilities and investments in producers local markets Local relationship
Slide 25: The preferred licensing partner for the MENA region
MENA The preferred licensing partner for the MENA region ■ 32.3% or $64 million of Branded sales from in- licensed products ■ Strong product promotion team of nearly 1,100 ■ 40 in-licensed products marketed and further five pending approval ■ 3 new in-licensing agreements in 2007 ■ Appointed new hea
Slide 26: Our position in MENA markets is stronger than ever
MENA Our position in MENA markets is stronger than ever ■ Organic growth -78 product approvals and 77 product launches across region in 2007 -Focusing our sales efforts -Developing new customer relationships ■ Alkan Pharma (now Hikma Egypt) -Expanding our geographic footprint into Egypt ■ APM -Stren
Slide 27: Entering the fast-growing Egyptian market
MENA Entering the fast-growing Egyptian market ■ Integrating Alkan Pharma – now Hikma Egypt ■ Management -Senior management appointments -Productivity and process improvements -Integration of key functions – Finance, R&D, Marketing ■ Product and product promotion -Promotion of new Hikma Egypt brand
Slide 28: Strengthening our core MENA markets
MENA Strengthening our core MENA markets ■ Integrating Arab Pharmaceutical Manufacturing (“APM”) ■ Management -Appointed strong GM and management team from Hikma -Establishing important functions, clear communication channels and reporting lines -Logistics, supply chain, quality department, sales op
Slide 29: Key markets
Branded Key markets ■ Algeria ■ Jordan -Now 4th largest pharma company in Algeria -Largest pharma company in Jordan -Increase in marketed products -9 new product launches -Enhanced sales and marketing efforts and -More focused sales efforts for key better geographical coverage products -Strengthenin
Slide 30: Building our global oncology business
Injectables Building our global oncology business ■ Acquisitions of Ribosepharm and Thymoorgan establish a strong platform for oncology -Experienced salesforce -High quality manufacturing facilities -12 generic injectable oncology products marketed in Germany -In-house oncology development expertise
Slide 31: Developing our global Injectables business
Injectables Developing our global Injectables business ■ MENA -20 new product approvals and 18 new product launches across the region -Strong product positioning (sole generic for 6 products) -More focus on institutions / government tenders -Increase in bundling for hospitals ■ Europe -4 new product
Slide 32: Reinforcing our US generic business
Generics Reinforcing our US generic business ■ Strengthening management team -Appointed new Finance Director and Head of Sales and Marketing ■ Expanding production capacity and lowering our cost base -MENA facility dedicated for exports to the US -Enhancing US-based capabilities -Sourcing lower cost
Slide 33: Strategy for future growth
Strategy for future growth ■ Replicating our Branded business model in new emerging markets ■ Building our leading position in our core MENA markets ■ Integrating acquisitions and pursuing further acquisitions ■ Developing our global specialty Injectables business ■ Developing our US Generic busines
Slide 34: Q&A
Q&A
Slide 35: Appendix
Appendix
Slide 36: Net working capital
Net working capital 220 170 Terms of payment (days) 120 US: 60-90 MENA: 120-360 70 Europe: 60-120 20 (30) '2005 '2006 '2007 Debtor days Stock days Creditor days Debtor days(1) 101 126 125* Stock Days(2) 168 194 207* Creditor Days(3) 77 74 81* (1) Debtor Days, net as % of revenue x 365 . * Excluding
Slide 37: Launching new products and developing new markets
Branded Launching new products and developing new markets Product approvals in 2007 Product launches in 2007 50 70 45 60 40 50 35 30 40 35 25 46 30 20 15 20 * 7 10 3 10 10 23 5 15 8 7 0 0 1 Jordan Other MENA Europe and ROW Jordan Other MENA Europe and ROW New products Line extensions * Includes one
Slide 38: Pipeline for future growth
Branded Pipeline for future growth Branded submissions in 2007 Branded pending approvals at 31 Dec 2007 160 300 140 250 120 200 100 68 130 80 150 60 100 40 66 128 50 20 14 18 12 27 12 7 9 4 0 0 Jordan Other MENA Europe and RoW Jordan Other MENA Europe and RoW New products Line extensions Page 37
Slide 39: Launching new products and developing new markets
Injectables Launching new products and developing new markets Product approvals in 2007 Product launches in 2007 20 20 18 18 16 16 5 7 14 14 12 12 10 10 12 5 5 8 8 7 13 6 6 12 4 4 7 2 6 2 4 2 4 2 0 1 0 US Jordan Other MENA Europe US Jordan Other MENA Europe New products Line extensions Page 38
Slide 40: Pipeline for future growth
Injectables Pipeline for future growth Injectable submissions in 2007 Injectable pending approvals at 31 Dec 2007 60 140 120 50 13 100 49 40 80 30 60 20 39 40 77 10 2 10 2 20 3 4 5 7 9 21 11 13 0 2 0 US Europe Jordan Other MENA US Europe Jordan Other MENA New products Line extensions Page 39
Slide 41: Improving time to launch and sustaining a strong product pipeline
Generics Improving time to launch and sustaining a strong product pipeline Product approvals and launches in 2007 10 9 8 7 5 6 5 4 5 3 2 4 1 1 0 Approvals Product launches New products Line extensions Page 40
Slide 42: Pipeline for future growth
Generics Pipeline for future growth Submissions and pending approvals in 2007 35 30 7 25 20 15 25 10 8 5 6 0 Submissions Pending approvals New products Line extensions Page 41
Slide 43: Market share in core Branded markets
Market share in core Branded markets JORDAN SAUDI ARABIA Market Position Market Share Market Position Market Share Company 2006 2007 2006 2007 Company 2006 2007 2006 2007 HIKMA 1 1 7.3% 7.3% GLAXOSMITHKLINE 1 1 10.8% 10.5% DAR AL DAWA 2 2 7.0% 4.9% SPIMACO 2 2 7.4% 9.5% SANOFI-AVENTIS 5 3 4.5% 4.4%