Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 10% in H1, with strong performance across all business segments.
- Launched 59 new products and strengthened the pipeline with over 300 products.
- Strategic acquisitions, including Xellia, are expected to bolster medium and long-term growth.
- Expanded presence in Europe, particularly in the UK and Spain, showing strong demand.
- Upgraded revenue guidance for the year, with expected growth in the range of 6% to 8%.
Negative Points
- Low CMO revenue in the first half due to timing issues.
- Increased competition in the generics market expected in the second half.
- Higher R&D costs anticipated in the second half, impacting margins.
- Revenue and operating profit are heavily weighted towards the first half, creating potential volatility.
- Challenges in the US compounding business, requiring a slow and cautious growth approach.
Q & A Highlights
Highlights of Hikma Pharmaceuticals PLC (HKMPF, Financial) Earnings Call Transcript
Q: Emily Field from Barclays. Maybe just a question on your R&D in the generic segment. Is there any fundamental changes to the R&D strategy in generics or changing any prioritization of any products as a result?
A: Riad Mishlawi, CEO. Yes, Hafrun has evaluated our R&D strategy, pipeline, and team, leading to changes in all three. We have a different pipeline now, with some products discontinued and others continued. We've also shuffled teams and added key members to make R&D more efficient.
Q: Peter Verdult of Citi. Just a few topics, Riad. Firstly, the balance sheet gets stronger. Is the environment to do deals improving versus three to six months ago? Also, any updates on the US compounding business and the pricing environment in US generics and injectables?
A: Riad Mishlawi, CEO. We've been very active in M&A, looking at potential prospects and partnerships. For US compounding, we're learning more as we go and are purposely growing slowly to avoid mistakes. Regarding the pricing environment, there's no dramatic change; we see some increased competition for key products in the second half.
Q: Paul Cuddon from Deutsche Numis. Can you provide visibility on CMO recovery in injectables into the second half of the year, particularly within Europe, and explain the margin dynamics?
A: Riad Mishlawi, CEO. Demand remains healthy, and CMO is heavily weighted on the second half. CMO usually has higher margins than our products, but we have to balance capacity between CMO and our products. We're expanding capacities in injectables in Europe and the US, which will drive future growth.
Q: Victoria Lambert from Berenberg. Can you update us on your biosimilar strategy in the US and the Middle East?
A: Riad Mishlawi, CEO. In the US, our strategy will depend on costs and prices. We will file soon and decide on the commercial strategy later. In the Middle East, we have a strong partnership with Celltrion, planning to introduce their portfolio to MENA, growing the market and taking a significant market share.
Q: Christian Glennie from Stifel. What should be the mid-term expectations for branded business margins?
A: Khalid Nabilsi, CFO. We see very good momentum in the branded business, driven by new launches and growth in different markets. We are becoming the partner of choice, and this trend will continue. Riad Mishlawi, CEO, added that increasing local presence and investments in oncology and new plants are key factors.
Q: James Gordon from JPMorgan. The guidance implies a sequential contraction in generics margin in the second half. How much is due to higher R&D versus other factors?
A: Khalid Nabilsi, CFO. The second half will be more weighted for R&D. Some R&D projects were put on hold until Hafrun evaluated them. We expect more R&D spending in the second half, around 6% to 7% of sales for the generic business.
Q: Sebastien Jantet from Panmure Liberum. Where did the outperformance in generics revenue come from? Was it solely from sodium oxybate?
A: Khalid Nabilsi, CFO. The outperformance came from multiple products, including sodium oxybate and Advair. It's not just one product; it's a combination of several contributing to the strong performance.
Q: Peter Verdult from Citi. Can you clarify the US generics strategy, especially regarding the CMO business and specialty business?
A: Riad Mishlawi, CEO. The strategy remains the same but faster and bigger. We are focusing on increasing R&D, contract manufacturing, and new technologies. We have many big customers knocking on our doors, and we are being selective. The strategy is to grow the CMO business while maintaining focus on core business.
Q: Emily Field from Barclays. Any updated thoughts on generic GLP-1 strategy now that we've seen Victoza generic launch in the US?
A: Riad Mishlawi, CEO. The generic launch is an authorized generic by Teva. We are excited about the opportunity for 2025. We will be part of the GLP-1 market, either through our own development, partnerships, or contract manufacturing.
Q: Peter Verdult from Citi. What's going on in the Egypt market on an underlying basis, excluding currency impacts?
A: Khalid Nabilsi, CFO. Egypt remains a very strong market despite currency impacts. We are one of the largest players, and the government helps with pricing to sustain good profit. We continue to launch products and are committed to the Egyptian market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
