London, 17 May 2012 – Hikma Pharmaceuticals PLC (LSE: HIK) (NASDAQ Dubai: HIK), the fast growing multinational pharmaceutical group, will hold its Annual General Meeting today where the following statement will be made regarding its current trading and financial position. This constitutes its Interim Management Statement relating to the period from 1 January 2012 to date, as required by the UK Listing Authority’s Disclosure and Transparency Rules.
17 May 2012
We are pleased to maintain our guidance for 2012 of around 20% Group revenue growth.
Our Branded business grew by 28% in the first four months of the year, with 12% organic revenue growth. Two of our largest markets, Algeria and Egypt, are delivering excellent growth, benefiting from increased local production and greater manufacturing capacity, respectively. We have also seen a good performance from our businesses in Saudi Arabia, Tunisia and Libya, as well as higher tender sales. These strong performances are partially offsetting the impact of a slower than expected start to the year in Sudan and the effect of the changes we have made in reorganising our operations in Iraq.
We reiterate our guidance of around 20% Branded revenue growth for the full year and expect around 45% of revenue to be delivered in the first half. We continue to expect gross margin and adjusted operating margin in 2012 to be broadly in line with 2011, reflecting the increases that we anticipated in wages and R&D expense and the impact of consolidating Promopharm, our recent acquisition in Morocco. The benefit of operating leverage will mean margins are stronger in the second half of the year.
Our global Injectables business continues to perform extremely well this year. This is being driven by strong demand for our products in the US and the benefit of significant operational improvements and increased capacity since we acquired the Multi-Source Injectables business last year. We are seeing double-digit revenue growth in MENA and single-digit revenue growth in Europe. Overall, we expect that the global Injectables business will achieve revenue growth of more than 35% in 2012, with an adjusted operating margin in the high teens.
Our strategic priority for the Injectables business and across the Group this year is to strengthen our product portfolio, with a particular focus on more differentiated products. In May, we purchased an ANDA for an injectable product, sodium ferrous gluconate, from GeneraMedix Pharmaceuticals for a cash consideration of $16 million. This is the only US approved generic of this product and is a product we had previously been producing for GeneraMedix under a contract manufacturing arrangement. Acquisitions of this nature will contribute to the continued growth of our Injectables business.
As highlighted in March, pricing pressure continues to impact our Generics business. Revenue has been further impacted by the actions we have been taking in response to the US FDA warning letter we received in February for our Eatontown facility. We are enhancing our processes to address the FDA’s observations. This has caused a slowdown in sales and we expect a stronger second half. For the full year, we expect sales of between $130 million and $135 million. The slower start in 2012 will impact profitability in the first half and we now expect the full year adjusted EBIT margin to be in the mid single-digits.
We continue to expect the effective tax rate for the Group to be around 20% in 2012. Due to the timing of sales, the rate is expected to be higher in the first half of the year.
Our financing position remains strong and will allow us to make further strategic investments during 2012.
Said Darwazah, Chief Executive Officer of Hikma said:
“We are making good progress towards delivering our targets for this year and surpassing the important milestone of $1 billion in revenue. In the MENA region, where the Arab Spring has created a challenging environment, we are delivering strong growth and continue to expand our share of these fast growing markets. We are seeing very strong growth in our Injectables business, where we are benefiting from our long track record of investing in quality, capacity and new products. This is compensating for the slowdown in the Generics business in 2012. Overall, the strength of our diversified business model will once again enable us to grow Group revenue by around 20% this year. ”
We will announce our interim results for the six months to 30 June 2012 on 16 August 2012.