HIKMA PHARMACEUTICALS PLC. Merrill Lynch Middle East & North Africa (MENA) Conference 13 December r 2005

Transcription

1 HIKMA PHARMACEUTICALS PLC Merrill Lynch Middle East & North Africa (MENA) Conference 13 December r 2005

2 Important notice This document and its contents are confidential and may not be redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose and it is intended for distribution in the United Kingdom only to persons who have i) professional experience in matters relating to investments falling within Article 19(5); or ii) high net worth companies or unincorporated associations falling within Article 49, in each case of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or to those persons to whom it can otherwise lawfully be distributed. The contents of this presentation are only available to such persons and any persons of any other description should not act upon the contents of this document or any other information supplied with it. This document, which has been issued by Hikma Pharmaceuticals plc (the Company ), comprises the written materials/slides for a presentation. This document does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, any shares in the Company to any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision in relation thereto. Some of the information is in draft form and has not been legally verified. Neither the company nor any 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 the Company contained in this document may not have been audited and in some cases is based on management information and estimates. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Company or any of such persons affiliates, directors, officers or employees, advisors or any other person as to the accuracy or completeness of the information or opinions contained in this document and no liability whatsoever is accepted for any such information or opinions or any use which may be made of them. Neither this document nor any copy of it may be taken or transmitted in or into the United States, its territories or possessions, or to any US person (as defined by Regulation S of the US Securities Act of 1933 (the Securities Act )) or distributed, directly or indirectly, in the United States, its territories or possessions or to any US person. Neither this document nor any copy of it may be taken or transmitted in or into Australia, Canada or Japan or to Canadian persons. Certain statements in this presentation, are forward-looking statements under the US federal securities laws, including the Private Securities Litigation Reform Act of By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak as only of the date of this presentation. By participating in this presentation or by accepting any copy of this document, you agree to be bound by the foregoing limitations. 1

3 Bassam Kanaan Chief Financial Officer 2

4 Group overview Multinational pharmaceutical group operating across the Middle East and North Africa (MENA), Europe and the US Broad product portfolio covering generics, branded generics and licensed patented products in both solid and injectable forms Attractive therapeutic categories with particular strength in anitinfectives, alimentary and central nervous system 3

5 Diversified and successful business model Generics Focus on US market 2004 sales: $108 million Branded Focus on Middle East and N. Africa (MENA) 2004 sales: $74 million Injectables Sales in US, Europe & MENA 2004 sales: $29 million 4

6 Segmental sales breakdown 2004 Sales Breakdown by Business Segment 2004 Sales Breakdown by Geographical Segment Injectable Pharmaceuticals Others 1.5% 13.5% Europe RoW 5.8% 0.5% Branded Pharmaceuticals 34.6% 50.4% Generic Pharmaceuticals United States 53.6% 40.1% MENA Region 5

7 Broad geographic coverage Multinational operations - - Manufactures in six countries(1) Sells in 34 countries Cost-effective R&D and manufacturing - Including countries with lower labour and infrastructure costs Reduced risk profile Manufacturing Plants (including JPI, 47.5% owned associate) (1) R&D Centres Includes manufacturing plant in Algeria which is under construction and JPI 6

8 API sourcing strength Raw material costs, including direct API costs, represented ~ 31.4% of Hikma s 2004 net sales Relationships with ~70 suppliers APIs sourced from Europe, Japan, US, India, China, Taiwan, Korea At least 2 qualified suppliers of API for all key products (except for in-licensed products, which are sourced from the licensors) 10 employees in API sourcing teams located in Jordan, US, China and India, API Sourcing Team FDA-approved API manufacturing plant in Jordan Hikma s groupwide API sourcing function allows it to minimise raw materials costs and enhance margins 7

9 Efficient, experienced and successful R&D team Strong R&D Team 135 professionals and scientists - 23 based in US, 9 in Italy and Portugal and 103 in Jordan where costs are lower 14 scientists at IPRC specialising in bioequivalency testing Expertise in pharmaceutical formulation, bioequivalency testing, analytical chemistry and drug delivery Historical Success Strong Pipeline of Products Since 1995, Hikma has been granted over 950 product approvals for all regions 42 new products pending approval including 36 in the United States 90 new products under development Targeting submission of 10 new products annually for each business segment for the next two years Particular expertise in technically challenging products and manufacturing processes such as injectables, complex formulations, challenging compounds and sustained release tablets and capsules API Development Capability Filed five drug master files since

10 Product pipeline for future growth Pending Approvals (1) New Products Under Development (1) Generic Pharmaceutical Branded Pharmaceutical Injectable Pharmaceutical Generic Pharmaceutical Branded Pharmaceutical Injectable Pharmaceutical (2) (3) (2) Line Extensions New Products (1) As of 30 September To avoid duplication, the data presented does not double count when the same product is filed or is pending approval in multiple countries (2) Expected to be launched between (3) Expected to be launched between

11 Generic pharmaceuticals Description Develops, manufactures, markets and sells 36 solid nonbranded pharmaceutical generic products in 79 dosage strengths and forms Nearly all sales made in the US Sales made under - West-ward label - Contract manufacturing (focused on technically challenging products) and private label arrangements Increasingly markets products from other Group business segments Primary focus on the CNS, cardiovascular, anti-infectives and musculoskeletal therapeutic categories 10

12 Branded pharmaceuticals Description 2004 Sales by Geography Develops, manufactures and/or sells - 47 solid, semi solid and liquid branded generic pharmaceutical products in 112 dosage strengths and forms Other 30.5% 38.7% Algeria 5 OTC products - 18 originator products licensed to Hikma for distribution in the MENA region Jordan 12.5% 18.3% 3 OTC products Saudi Arabia Received over 515 marketing approvals across the MENA region and Europe since 1995 Primary focus on anti-infectives, immunomodulating agents, musculoskeletal and, increasingly, cardiovascular therapeutic categories OTC products represented approximately 6.5% of the Branded Pharmaceuticals business s net sales in

13 Injectable pharmaceuticals Description 2004 Sales by Geography Develops, manufactures and sells - 30 branded and non-branded finished dose injectable pharmaceutical products in 60 dosage strengths and forms US 23.4% 46.6% MENA region - 7 in-licensed products in 16 dosage strengths and forms 30.0% Historically focused on contract manufacturing and outlicensing (38.4% of segment net sales in 2004) - expected to decline as Hikma owned and marketed products increase Europe Received 329 regulatory approvals since 1995 in the US, the MENA region and Europe Primary focus on anti-infectives (especially cephalosporins) and, increasingly, musculoskeletal and cardiovascular therapeutic categories 12

14 Group strategy Consolidate market position in MENA region Grow injectable pharmaceutical business Pursue growth in US market 13

15 Key MENA Market Characteristics Branded Generic Markets Branded products dominate the pharmaceutical market Strong brands can gain significant market share - Physicians value brand reputation and company quality less price sensitivity in markets First company to launch a generic is often well placed to take and maintain a significant market share Generic pharmaceutical companies in the MENA region spend considerable resources on building brands and strengthening relationships with doctors and pharmacists Growing per Capita Income and Medical Expenditure Per capita income and average drug expenditure are growing rapidly, further driving growth 2004 per Capita Income ($) (1) 2004 Per Capita Average Health Expenditure ($) (2) Jordan 1, Saudi Arabia 10, Algeria 2, Government Price Controls The price for the first generic drug to be approved is typically set at a discount of 25%-30% to the originator price Subsequent generics are often priced at a small discount to this Expanding Healthcare Infrastructure Many people in the MENA region do not have access to modern medical treatment and pharmaceutical products due to limited healthcare infrastructure Hikma believes that improved access to medical services will strengthen demand for pharmaceutical products In MENA, growth of 8-10% (3) p.a. over the next 3 years is expected to be driven by strong economic growth, favourable demographics, and a consequent increase in awareness, diagnosis and treatment of illness (1) Source: Calculated based on population and GDP figures from Economist Intelligence Unit, August 2005 (2) Source: Euromonitor Plc, 2005 (3) Source: Management estimates 14

16 Leading position in key MENA region markets Algeria Saudi Arabia Jordan Market Characteristics (1) Population of ~33.4m in 2004 Population of ~24.0m in 2004 Population of ~5.6m in 2004 Pharmaceutical market of $674m in 2004 and expected to reach $1,052m in 2010 Pharmaceutical market of $1,077m in 2004 and expected to reach $1,719m in 2010 Pharmaceutical market of $120m in 2004 and expected to reach $206m in 2010 #4 pharmaceutical company #2 generics company #9 pharmaceutical company (#15, ex-jpi) #4 generics company (#4, Market Position (Rx plus OTC) (2) ex-jpi) Market share of ~5.9% Market share of ~3.1% (1.7%, ex-jpi) #2 pharmaceutical company #2 generics company Market share of ~6.1% Manufacturing Manufacturing facility certified by the Algerian Ministry of Health 1 manufacturing facility owned by associate. Facility certified by the Saudi Ministry of Health and EU GMP 3 U.S. FDA, MHRA (3) and Jordanian Ministry of Health certified manufacturing facilities in Amman, Jordan (1) Population: Economist Intelligence Unit 2005; Size of pharmaceutical market: IMS data year 2004; Projected size: management estimates (2) IMS MAT Q sales data. Includes OTC sales. Data is for the Branded Pharmaceuticals business only (3) MHRA certification excludes API Facility 15

17 Strong marketing capabilities and brand recognition in the MENA region 76 sales representatives 1 sales manager 107 sales representatives Includes 4 specialised product marketing executives 15 contract sales representatives 17 sales representatives Includes 23 specialised product marketing executives One of the largest sales forces in the MENA region Attractive partner for in-licensing 25 (2) in-licensed products from 13 (3) multinational pharmaceutical companies 21 sales representatives 80 sales representatives Includes 3 specialised product marketing executives 5 sales representatives 25 sales representatives 1 sales representative (1) Includes 45 Injectables employees in MENA and excludes 15 contract sales representatives in Tunisia and JPI (2) Includes only those products marketed/sold as of 30 September 2005 (3) Includes active licenses only 16

18 Developing the injectable pharmaceutical business Injectable pharmaceuticals (1) Strategy Focus on developing a broad portfolio of products Targeting 10 new product filings annually for approval Developing sales force and distribution infrastructure in order to expand the customer base in the US and Europe 0 Pending approvals New products under development (2) Line Extensions New Products (1) As of 30 September To avoid duplication, the data presented does not double count when the same product is filed or is pending approval in multiple countries (2) Expected to be launched between

19 Pursuing profitable growth in the US market Positive Factors Negative Factors Strategy Loss of patent protection Demographics Medicare Act 2003 Cost Containment Measures Very Competitive Entry of low cost producers Price Erosion Targeting 10 ANDA filings for new products annually with the FDA for the next 2 years Active monitoring and quick response to customers preferences Expand sales & marketing infrastructure Competitive product pricing Consider acquisitions Positive industry dynamics resulting in forecast growth of 16.1% (1) p.a. for next 3 years (1) Source: IMS Generics Focus,

20 Consistent and profitable long-term growth Sales Gross Profit ($m) CAGR (02-04): 24.7% H H1 05 vs H1 04:+24.2% H ($m) Generics Branded Injectables Others % 51.0% 51.5% 51.0% CAGR (02-04): 23.5% H % Gross Profit Margin 55.4% 73 H1 05 vs H1 04:+34.8% H % 50% 40% 30% 20% 10% 0% 19

21 Consistent and profitable long-term growth Operating Profit Net Income ($m) % 28.6% 26.3% CAGR (02-04): 30.1% 31.1% 33 % Operating Profit Margin 29.4% 39 H1 05 vs H1 04:+17.6% 35% 30% 25% 20% 15% ($m) % CAGR (02-04): 48.9% 17.5% 16.7% % % 25 H1 05 vs H1 04:+21.3% % Net Margin 20% 15% 10% 20 10% 5% 10 5% H H % H H % 20

22 Investment highlights Diversified and Successful Business Model Broad product portfolio Broad geographic coverage Regional Strengths Well-established and successful position in the US Leading position in the Algerian, Saudi Arabian and Jordanian markets Strong marketing capabilities and brand recognition in the MENA region Strong relations with licensors Multinational Infrastructure Efficient, experienced and successful R&D team Continuous emphasis on quality API sourcing strength Financial Track Record Consistent & profitable long-term growth 21