Hikma Pharmaceuticals PLC

Ladies and gentlemen, welcome to HECMA FY24 results. My name is Ada, and I will be the operator for today's call. If you would like to ask a question during the presentation, you may do so by pressing star followed by 1 on your telephone keypad. I will now hand you over to CEO, Riyadh Mishlawi. Riyadh, please go ahead.

Okay, well, good morning, everyone. Thank you very much for coming. Thank you very much for being online to listen to this. I have to introduce my – I should introduce my colleagues. I'm usually here with Khaled, but this time we're all together, so you'll have a chance to ask directly to the presidents and the responsibles of each of our divisions. So starting with Susan, head of the investor relations. Bill Larkin, he's head of the injectables division. Khaled Nebulsi, as you all know, he's the CFO. Madem Darwaza, he's president and vice chair of MENA. And we have also Hafron. She is the president of the generics division. I have to start to say that we had a fantastic year this year. It's been a year since I've taken over the CEO position, and not only that, but also Three of the people that we have in front of you here had their first year in the positions that they are in. Halfron had joined us in April, and Bill took this position, replacing me when I took the CEO. So despite new management, we also had added new management into the EC. We managed to work very well together. We managed to really do a lot of things that is part of the execution of the strategy that we had. And I believe we had really a stellar year. A lot of things we had done in preparing for the medium term and the long term for the company. So let me start with the year. So I think we had a great momentum here. We had excellent results. We were well ahead of our original guidance in February last year. We are about $140 million ahead of revenue and $40 million ahead of the EBIT. Injectables, 10%, growth of 10% in revenue, $1.3 billion for the first time, with $468 million up from $444 last year of core operating profits. The margins were at 35.3%. And really the most impressive part about it is in all three geographies, as you know, the injectables is the only global division that we have that services MENA, Europe, and the United States. And in this case, in last year, all three of those geographies had significant growth, especially in both MENA and Europe. Branded divisions were up by 9% in constant currency. to $769 million with a core operating profit of about 25, exactly 24.6, $182 million of core EBIT. Very good performance and really a lot of things that has happened in that division also to prepare for the medium term and the future. A lot of construction, expansion of capacity, and putting and installing new technologies there. In generic, very impressive 11%. As you know, with sodium oxibate coming in the year before, you know, coming in into this year, we're doing very low margins since our royalties have increased significantly. Still, we managed to do 11% over $1 billion in revenue with a core operating profit of $170 million. Two years ago, we came in to all of you and we're talking about this division saying, 100 to 120. And since then, we're really doing much, much better than this. And even in tough years when we had headwinds, we still have managed to do very well. 16.4% of the margins that for a year that we had some headwinds is very, very impressive. And I think we will talk a little bit about the future of this division and tell you a lot that is happening there. We had some really excellent strategic progress. As I said, we really put a lot of iron in the fire in the last year, not only externally and not only with the investors trying to communicate our strategy correctly, but also within the company. We've done a lot in the management or structure. We've done a lot in looking at expansion of markets. Europe had expanded. We did a lot in R&D, and we'll talk about this in the at the next session when we talk about next year. But what we did last year, of course, Zelia was a big thing for us. I think it was a great acquisition. It's really giving us exactly what we needed. R&D was our focus. We really needed to increase R&D. We needed to increase capacity. We needed to get some infusion to our pipeline. And really, Zelia has given us all of this. So some very good products. and with a good future, with good pipelines that we are finishing right now, and I think also coming in the United States with a huge facility and very unique technologies in aseptic backfillings and liquefaction. At this time, with the geopolitical situation, I think it made it even sweeter. So we have a lot that is going on with Delia, and we are progressing very well against it. We launched Lear Glutide. We're still the only ones in the market. We were the first in the market after Teva had gotten the authorized generic. We're still the only one approved besides them. It just shows that our BD had chosen the right partner, very active in doing more business with them. I think this is really a testament of how we're going about expanding our pipeline, not only through our organic R&D, but also through partnerships. We find a significant CMO for generics, and this is also something that we have talked about when we talked about the generics and what we need to do in the generics. We talked about we have capacity that we can use some contract manufacturing for that capacity, and we did. We went after big companies. branded companies, and we have a very impressive facility, very impressive quality record in the U.S. So that all gave us a huge advantage, and we found a lot of people that were very, very interested. We finally chose one that has a great potential, and we found a significant contract there. So that is very much of how our progress against the strategy that we have put forward. We partnered with Emergent on Klaxado. We can talk a little bit more. I'll leave it to Hafran if you have any questions about that, but I think this is very good. I think we can do better that way, much more effective marketing and much more cost management there. So I think it's a great deal, and I think Hafran can expand on that one. And the branded business, for a long, long time, it was very much stagnant at 20%. In the last three years, you see the growth. This year is not an exception, and the future will not be an exception. We feel that the momentum is there. We feel our size has been grown. We are still growing and investing significantly in MENA, and you can see the results. So this is something that will not stop, and the momentum will continue. Injectables, we're keeping the margins in the mid-30s. We're looking at absolute increase in profits. So we need to invest in the business, and we are investing in the business. We are investing in R&D. We are investing in capacity. All that costs money. So to be able to maintain the margins at a very high level, highest in the industry, and still, you know, would from absolute value increase the profitability, I think it's a great achievement. We're really prioritizing this absolute profit growth. I know a lot of people are stuck up on the margins, whether it's half a percent more, half a percent less, but we had some impressive ratios. But as you grow, we need to also look at other geographies that we can expand and not as high, but still give us an absolute growth in our profits. So we have to really give a balance to how much are we growing versus how much is our ratios being affected. For 2025, strong guidance also, good EBIT growth. Even when you include, and this is something that is very important, we have committed that we want to spend money on R&D. And this is why we recruited the people that you see in front of you, the R&D experts. They've all been in R&D. They have PhDs, done this, done that. And you can't recruit those people and tell them, no, we cannot expand the budget. That's the reason why we recruited them, and that's the reason why we're expecting them to do. R&D is our future. We really need to. We are now a very significant company, and we can't get away with just simple R&D. We have to go into the complex ones. and we have to go into very sophisticated R&D, and that requires some spend. So we are increasing our spend by 20% and still coming in with good forecast for next year and good guidance for 2025. So I'll leave it at that, and if you have any questions, the team is here, and we can just go as deep and detailed as you want.

Thank you. Thanks, James Gordon and Jason Morgan. Two questions on injectables, as that's why I've had some questions from people this morning. The first one was on the top line. So I think in H2, you did something like 8% organic local currency, but then the guidance implies for this year, for 25, more like 3% to 5% organic local currency. So if the first question is, why would there be that slowdown? And does your previous guide that you gave in 2023 that injectables should be something like a high single-digit business, Does that still apply? Is 25 a little bit exceptional, or have things actually slowed both for 25 and for the medium term?