00:02 So, good morning everybody. Welcome to the people here in the room. You made it through the weather to visit our office. So it's great to see people face-to-face and also welcome to the people on the line. We are very pleased to talk to you today, both from a personal point of view of seeing people face-to-face for the first time in two years. Secondly, to talk about the great results that we had in 2021. 00:33 I'm not going to go through the results. I think you saw the press release and we have the presentation this morning. A strong growth in all 3 businesses in 2021. A lot of new launches, many business development deals, challenging environment still in the US, but overall, I think the performance was really, really good in all 3 businesses and a strong guidance for 2022. 01:03 So with that, I was just going to open it up for question and answers. Maybe we start in the room here and then, of course, we go online a little bit later on, when we are running out of questions in the room. So who wants to start? A - Unidentified Speaker: 01:19

01:30 Emily Field from Barclays. Maybe just to start, the deflationary environment in Generics. I believe you're talking about low double-digit inflation for 2022. Sort of the factors driving that, if you expect that to persist. Or kind of what you think as a more normalized environment for generic price deflation?

01:50 Yes. So what we saw in 2021, we saw a gradual worsening of the pricing environment. And you see that on the slides we put up this morning, that 2020 was a particularly good year in a way. We have the price erosion of around 4% for the Generics business in 2020. We guided 6% to 8% or mid to high single digits last year pricing, and our pricing came out just about 8% for the full year in 2021, maybe 8.5%. So just about 8%. So -- but we saw that throughout the year, that there have been the focus of the customers have been the security of supply in 2020. So we had very few tenders or auctions happening in 2020. So I sometimes say there was like a pent-up demand from the customers of tendering out the portfolio. So we got so many tenders coming in in the first half that impacted then the second half in terms of pricing. 03:03 So that's how it started. I think also, maybe some of our peers have inventory issues because there were less volume in the market during COVID due to less diagnoses. We are back to normal volume in the market, as we showed in our slides. So we have the feeling that some of our peers have inventory issues and therefore pushed down the price a little bit in the market. 03:30 In terms of how long will this last, you never know. But I believe, and I've been doing this now for just over 20 years, the pricing in the US is cyclical. It really is cyclical. And I've been very close to the market in the U.S. since 2010, and you can see that you usually have maximum 2 challenging years and then you usually have 3 very -- 3 to 4 very decent years. We had '16 and '17 which was challenging years from pricing. We had '18, '19 and '20, quite good years. We had the chains of the store in '21. And we are forecasting low double-digit pricing for '22 based on the tenders that we see and the expectation in the market. 04:20, So I'm still optimistic on the market. This is cyclical, and I hope -- I'm hoping also like if there's any extra inventory of our competitors, that will flush through, hopefully in the first half of the year. So I'm optimistic about the market. But clearly, we are in a little different environment today than 24 months ago, for example.

04:49 Peter from Citi. 3 questions by myself. PANDAs, Teva talking about PANDAs, change in FDA regulations where drugs that are approved pre-'84 are now being converted to a sort of 505(b)(2). So that could have implications for generic company in terms of post-marketing, surveillance or potential litigations. So I think they're saying they might have to withdraw at least 30 products potentially from the market, and some of them are on the shortest list. And I think there are 2 that stand out for Hikma, dexamethasone and digoxin. So I just wondered if that is on your radar or not. 05:23 And then specifically to Hikma. On the Generics outlook, I mean, the margin is pretty impressive. You have always said 20% is good and you're guiding to 25% or, let's say, 24% to 25%. Is that all just product mix or something, let's just say, it's just because you're not spending as much. I just wanted to get a sense there because it does feel that you're finally conceding that the revenue outlook for things like Advair and might not be as big as people hoped? 05:49 And then lastly on the buyback. I mean in the past, you said, look, it's a bit like giving candy to a kid. It's a short-term impact. What is the signaling or thought behind doing the buyback now? Just to help prop up the earnings outlook? Or how should we interpret that buyback? Thank you.

6:05 Do you want to start on the buyback Khalid?

06:09 Yeah. I'll start on the buyback. I think in terms of our capital allocation priorities since Capital Market Day in 2018, we have 4 priorities, one on investing in organic growth, M&A, BD acquisition. And this has not changed. Today, our balance sheet is very strong. We have a very low leverage even within our industry. We have the flexibility. So a buyback of GBP300 million -- up to GBP300 million is not going to affect our ability to persue further acquisition. And you saw during this year, we had a couple of -- signed some licensing deal, acquired few products, we did . So it's not going to have an impact on our financial flexibility. 06:55 So it's in a way that the Board and the management, we believe that the market is not reflecting the intrinsic value of the company. And therefore, maybe a share buyback just shows that we believe in the prospects of the company and the future.

07:14 how quickly it will start?

07:17 It's going to -- we are going to do it over the -- before the end of this year. So it's going to spread over the -- during this year. And on the older ANDAs approved prior to 1984. As you said, Pete, in your question, it's only affecting 2 products for us which are relatively small. I think also to keep in mind is, I don't think the FDA wants us to take these products off the market, because there will be a shortage on the market, especially on these 2 products that we have. Digoxin is a lifesaving drug, but I think most of the applications are very old in the market and it would be very bad for the market. 07:57 And the second thing on Dexamethasone, it's very important, especially now during COVID, but it's a relatively small product outside of COVID season. So I -- we keep an eye on it. I'm not sure it will be as drastic as Teva is painting it, but out of the 85, 86 products we have in Generics, it's only 2 of them that we are monitoring at the moment. And for Digoxin, I doubt if it will come through, we are ready for it --

08:36 So the question is basically, if the biostudy is older, that we need to check, but I don't think Digoxin is at risk. Dexamethasone might be at risk, but we need to look into that. In terms of the -- in terms of generic margin, so remember when I joined 4 years and 4 days ago the company, I basically set out my ultimate goal in five years’ time would be to have a gross margin in the mid '40s and the net operating profit in the '20s. And we have achieved that. Even in a year where we are guiding to top rated price emersion. Similar to what we saw in 2017, we are guiding to net operating profit 24% to 25%. That highlights to you what we have done to this business. This is not the same business. If I remind you of the numbers in 2017, our net operating profit was 3.6% and our gross margin was 36%. So now we are guiding 23% to -- 24% to 25% net operating profit in that similar pricing environment as we are focusing, so totally different business. 09:56 In terms of investment, we are continuing to see investment. So it's not we are getting to this level by cutting the R&D or cutting the sales, we are launching big specialty product. We hope we will bring Ryaltris to the market sometime around the middle of this year. We have the approval in hand, but the supply is not available yet from Glenmark. Glenmark is responsible for the supply for us. So our best estimation is probably soon in third quarter that will be ready. So we will miss the main holiday season. So -- but we need to start to build up sales force. We are expanding our promotion of Kloxxado. So really it's not high costing, its control of the cost, of course. I think you saw that the gross margin for the Generics in 2021 has never been higher. We showed 47 plus gross margin. And show me any peers that don't have injectables with like-to-like comparison. This is really amazing result. And it's about the work the team has done over the last four years. 11:03 So I feel I have maintained -- I have never committed to say it's going to be in the mid-20s, but I think this business even in tough years like these, this business should continue to deliver a net operating profit in the 20s. I'm very confident about that.

11:29 Thibault from Morgan Stanley. So my first question on the Generic Xyrem. So I think it's included in the guidance, there is a launch in the end of the year. Just if you could give us a little bit color on what you're expecting in terms of market share uptake, timing of competition launch. And I guess is a kind of mid to long-term outlook for Generic in terms of -- does it have longer tail values than new version X on that? 12:01 And just also on Kloxxado, if you could maybe give us a little bit of color on the early trends in the launch. What's different compared to what you're expecting. Before launching the strategy you explained to us in the past months and quarters. And maybe just to finish on the biosimilars. So some of the biosimilar agreements you've made have any trials ongoing in China? And just if you could tell us more about your confidence of opening FDA approval with these trials. When we saw that's recently happened with Eli Lilly and (ph) drug recently was, FDA obviously was not -- doesn't seem to be ready to approve actually branded biologics based on synergy connected excluding China.

12:50 Yeah. So let me start on your last question around the biosimilar. So last year we signed 2 biosimilars deal with Bio-Thera on ustekinumab and Gedeon Richter on denosumab, both really good companies, very impressive development. In terms of Gedeon Richter, they are doing a global trial. I'm not even sure they have a site in China. In terms of Bio-Thera, they have patients in China, but they are running their trial in 6 different countries. So it will not be solely based on Chinese population in the Phase III study for sure. 13:29 Overall we read the guidance from the FDA and this issue came up around the Eli Lilly analysis of their innovative product. I don't think it affects the biosimilars per se, but no matter what we are running a global trial for both products. So we don't think that will be an issue for neither development, but you keep an eye on it. But I think it's a specialty product issue, but I'm more confident, of course, by having a global trial behind the development work for these. Your first question, if you could just repeat it?

14:23 Let me take the Kloxxado, while you're looking the other one up.

14:27 Xyrem. Yeah. Let me do Xyrem. So, Xyrem -- so, we, obviously -- we have no guarantee when it's launched. We are saying mid -- around mid-year, it could be lifted into the second half of the year, of course, but our best estimation is around mid-year. So it's difficult to give the exact timing. Kloxxado -- Xyrem or sodium oxybate is a specialty product in a closed system. So we have seen that the branded companies tend to retain a significant market share when you come into the market and the best example is Advair today. I think GSK in fourth quarter was 52% market share. So our expectation is that the brand will maintain some market share due to the closed system and so few payers around this product, because if only one payer decides to stay with us that could be in 60% of the patients. So this is a very different situation. When you're modeling it, you need to think about that. We obviously don't know and we will know it when we launch the product, but that is what we have seen as an action. We are keeping an eye on it. 15:45 But remember that we included in the guidance that the timing of the launch is difficult to say because that is based on the decline of Xyrem. So I'm not going to help you to model this in too much details, but you have to recognize that if an acceleration takes place, the volume has declined quite significantly on top of that that the brand might keep some of the markets. But we are ready to go. The good thing is, this is an authorized generics. So we will get the supply from just whenever this is reached, this level and we also have access to the REMS program. So we are ready to move whenever the calculation tells us that we can have an accelerated approval. 16:34 We feel it's going to be, as I said, around mid-year, but let's -- we haven't even seen the sales numbers in January yet. So it's monitoring how the sale is going, because it's not like you can pick up Xyrem in IQVIA. I'm sure you not. 16:53 In terms of Kloxxado, we are very pleased with the feedback on Kloxxado. So we are working now in 2-fold with the communities where we are going to different states in the US and buying into their police departments and get it on the register. We have had a good feedback because the feedback, especially from the emergency workers and police departments, they like to have a higher dose instead of having to give 2 doses of 4 milligram, because that is 2 things they have to have on their belt. We -- but there is a plenty of cycles in the states. So it takes a little bit of time. Remember, we only launched this at the end of August of last year, but we are really pleased with that. 17:39 On the prescription thing, they have started to come. You can see that, slowly every week there is more and more, there is a growth in the prescription, still relatively low. But we also got one of the major pharmacy chains in the US to keep it in stock as an emergency medicines in their pharmacies. So that is a big win for us. So it takes time, but it's -- as per expectation or little better. It is a good thing. Maybe the follow-up question, has the generic version of Narcan impacted our sales. It really hasn't, because the Generics solely focused on the prescription market. Generics wouldn't go into the communities. You need a totally different sales force and it's costly. So the impact of the Generic 4 milligram which Teva has introduced to the market in the 80s really hasn't impacted our sales as we expected.

18:42 Hi. Christian Glennie from Stifel. Just to follow-up and I guess on a couple of products. We expected to step up last year or at some point generic Advair, generic Vascepa usage. Generic Advair around 8%, Vascepa at 12% to 14%. I think what is the expectation then? I mean have you got supply sort of along Vascepa. What's your expectation with both products as it relates obviously to your guidance for the Generics overall?

19:11 Yeah. So if I take both products, so in terms of Icosapent, the challenge here is, we got the third player in the market, that's now actively marketing at the moment. So Apotex introduced by the end of last year as a new entrant to the market. We don't know if Teva is coming or not. They have approval in hand, but they haven't launched their product. So at the same time there is still a shortage in off supply in the market. If you look at IQVIA for fourth quarter, you still see that Amarin remains about 80%. Apotex is still at 0, because they are just launched by the end of December. So they don't register yet, but they are active in the market in early this year. 19:59 I think we came up 14% and Dr. Reddy's at 6%. So you can still see that there is a shortage everywhere in the market. We are working everywhere to increase our supply. I think for the time being we expect to increase a little through the year. But the fact that an increase would mean to our expectation would be a big setup would mean that the FDA has to inspect some sites for us and maybe for the others. So that's the reason because the queue of the FDA to get the quality inspection for foreign plants is very long at the moment and this is not the priority. 20:41 So there could be some time until you see a big step up in the Generics with a significant API supply in the market. So 3 player market, it's quite competitive, but only at around 20% of last year, probably a little bit more now in terms of business. 21:03 In terms of Generic Advair, the Teva got approval in December. They haven't launched yet. But I read the analyst notes as you did about them, so they are expecting to launch soon -- whatever soon means. In the market, obviously Mylan and Prasco. In terms of others that could come in to keep an eye on. I think (ph) in their press release, on their second quarter earnings, they said they are expecting a letter from the FDA in February and there is not many days left for February. So let's see what the letter says. And then Cipla has indicated that they are waiting for a feedback on the deficiency responses from the FDA. So it is -- there are more companies thinking around it. 21:59 In terms of our markets here, so, we, I think in fourth quarter on average, we had about 20% of the generic market. So 10% of the total market if you counted like that roughly. We -- I think we -- you will see still an increase, because it’s been a gradual increase for that. We have plenty of supply. We don't have any shortage of supply. We have manufacturing lines. We probably could supply nearly the whole market if it would be needed. But overall, it is going to be more significant and more competitive product in 2022 than it was in 2021.

22:50 I don't guide on revenue on individual products. It depends also on when Teva comes and if Cipla comes or anyone else. But -- so there is so many things outside of our control that can affect it.

23:08 Hi, Siggi. It's Paul Cuddon from Numis. Just pivoting to the Injectables business. I'm just wondering if you could provide a bit of an overview of the pricing environment kind of around the world within injectables? The margins taking a bit of a step down next year to what extent is that sort of a cautious assumption reflecting delay with contract manufacturing and where might that leads in the next few years? 23:33 And then just generally on your customer service proposition, closeness to the hospitals. I mean, is anybody starting to kind of match that to your levels?

23:45 Yeah. So good question. So overall, the injectables business did extremely well in '21. And the reason I say that is that, the comparator in 2020 is very tough, because we were selling, especially in the first half of 2020 so much of the COVID-related treatments. So the comparison, remember midyear, we were not growing in the US and on full year basis our US business grew 4%, which is very significant, because we have a strong comparator in 2020. 24:18 In terms of our US business, we're doing very well. We launched 15 products in 2021. We continue to gain market share, so we became number 2 in the market, we over to pressing news in terms of volume in the US market. So Pfizer is still the biggest, but we became number 2. In terms of our service level there, really second to none, we have been really, really good in dealing with that. 24:49 In terms of the margin, so I think '21 we did 37.6% or -- 37 -- yeah, 37.6% net operating profit, which is really strong profit. You have to always keep in mind that US has the highest profit and MENA and Europe have the lower profit. On both MENA and Europe are growing faster than the US. So there will be a little bit dilution always on the net operating profit. There is more dollars at the end of the day, but the faster I grow in Europe and MENA versus the US market there will be a little bit of dilution in the business. 25:28 In terms of '22, we are excited about that. In terms of the new launches, we expect to be in the similar numbers as previously, 10 to 15 new launches for the US injectables. The growth in Europe will continue, we expect to have our first revenues in France. And with the small acquisition we did in Canada of Teligent Canada bankruptcy of the assets of Teligent Canada gave us a little bit of platform to launch our own products. We have registered 9 products already in Canada but we have not launched it, because if you launch only with 9 products, you are loss making. So we wanted to sit on our hands until we have big enough portfolio to offer. 26:20 In MENA, we will continue on the biosimilars getting more approval. And that will really drive the growth of the injectables in MENA in '22, especially on Herzuma and the rituximab. We are getting the approvals through in more and more countries every year until Remsima is performing very well. So in terms of the profit, I've always maintained that you should think about the injectables, 35 is the base. We always hope to do a little better than that. Shortages in the market usually mean you do a little bit better. You can't build in shortages into your forecast. I think you know that, that would be -- because, for example, Fresenius, even though they have challenges at their Melrose Park plant, it really hasn't benefited anyone because they have done a good job in managing that quite well. 27:19 So, overall, very excited about the injectables. We will -- we have the first sale of our compounding, so compounding, we kick that off. We have now our manufacturing plant that is fully running with validated processes. The challenges are that you need to license in every state in the US. So we are just starting. So we are between 5 and 10 states at the moment. So we expect that that will come through the year. Some of the states require us to have the FDA to visit before. So then we need to wait for the FDA to visit. 27:58 So this is why in '22 we don't expect a big contribution from this. This will be the start year. And hopefully, midyear -- the -- my thinking is, I can give you more of a forecast of long term, what this business can do. We will see more of the market, we will have better information from the hospitals. But this is the kick-off that we see in '22.

28:20 Just adding to the back to the margin, in 2021, there were some impact in the injectable margin coming from FX. So if you exclude that, and there is an appendix, some explanation about the hyperinflationary impact, which affected the injectable more. The margin would be higher like 38.9% in constant currency. So slightly higher than 2020 as well.

.

28:53 Yeah. Price -- we focus a lot on generic price deflation and things like that. So, and a lot of investors will ask me what is the life injectables .

29:01 So we are still remaining that, it's low to mid-single-digit. We are not seeing the pricing impact there because I've always said and maintain that the service level that we have and the relationship and how we have been able to step into when others have not been able to deliver, has little bit helped us to maintain pricing better on the injectable side than on the non-injectable side on the US generics. So I'm much more positive on the injectables pricing environment in the US land -- maybe on the non-injectables.

29:41 Thank you.

29:44

29:51 Yeah. So, operator, if you open the line for questions online.

29:56 Sure. Thank you We now have our first question from Max Herrmann from Stifel. Please go ahead

30:43 Great. Thanks very much for taking my question. It was just really a follow-up on the injectables, again on the pricing. Just because we've seen this week from Fresenius commentary about tougher pricing environment in their injectables business. I know you said your customer relationships mean you don't expect to change from your previous guidance. So I just want to try and understand their relationship is not as strong or what is the differences they're seeing that change in the market? So just wanted to understand why you're not seeing that change?

31:17 Yes. So the issue is between Fresenius and Hikma. The key difference is the portfolio that we have. So our portfolio, we have over 120 products, but all of our products are relatively small. So when we get a competition on a single molecule, that doesn't affect us nearly as much as when Fresenius. Fresenius has at least 5 very, very big products in the hundreds of millions in revenue. So when they get a competition or new entrants on these bigger molecules, they obviously have reflected in more price erosion that you see in the market. 32:00 So the buildup of the portfolio I think Fresenius has a really good relationship with the customers. I don't think there's a big difference there. But it's really the buildup of the portfolio why we are reporting a lipid different numbers of how we see the pricing in the market. Therefore us, having a much -- a very large portfolio, but really no blockbusters to talk about. I would love to have their blockbusters, but also at the same time, in a tough pricing environment it is better to have smaller products and a lot of them.

32:37 Okay. And then just a final -- the last question was just on Custopharm. Can you -- I may have missed this, but can you update us in terms of the completion and what the process is at the moment in terms of the regulatory review. Where do you think –

32:54 Yes. So by the way, Custopharm is not included in the injectables guidance. Obviously, we don't know the exact numbers today, so -- and we don't know exactly when we close. So it wouldn't be right to try to guide for those numbers. In terms of when this transaction close, it’s -- at the same time, as we've said, when we announce. So we expect it by midyear, hopefully in the second quarter of this year. We're working closely with the FTC. Nothing is quick in this process, but really there's no outstanding issues, we are very comfortable on the transaction itself, and we expect that to happen in second quarter.

33:42 All right. Thanks guys.

33:49 Thank you. We now have our next question from James Vane-Tempest from Jefferies. James Vane-Tempest: 33:57 Hi. Thanks for taking my questions. Just starting with injectables. And apologies if I missed it, but can you give us a little bit of clarity around the 35% to 37% margin? Is this based on regional mix or is it more based on new launches? Just to give us a flavor of that. I'm just looking at '21, I guess despite Europe and MENA growing really, really well, which we know are low margin, you're still in the middle of your guidance. So I mean, if your underlying US margin is going up just given the growth that it delivers and where you came in at the full year. 34:31 And then the second question is just on Custopharm. I appreciate, it's still to close and you're not guiding specifically. But just as a scenario to help us, if it was to close, say, in the middle of the year, can you give us a sense in terms of what the contribution would be to the business? Thank you.

34:47 So on the margin itself, it is overall, it's still a strong margin in terms of the 35% to 37%. It has to do with the regional mix, a lipid differentiation. There is an increase in the cost of transportation, there's a lipid of increase in cost of manufacturing that we're dealing within this business, because you have to remember for the US half the volume that we sell in the US is coming from Portugal. So there is a tiny bit of increase in that cost. But you really cannot push that to the customers. It's nowhere near that some of our peers are seeing, because we have a good control, but that's part of it. Part of it is that the biosimilars in MENA are growing the fastest than biosimilars, because we are sharing the profits with Celltrion, naturally it has a lower profitability. And then part of that is also how the contract manufacturing comes in overall. 35:52 But overall, there's no big change in the business. That means that the profitability is going way down. It's small things here and there. The regional, a lipid of increase in transportation costs, and then more sale of the partnership drugs, which means naturally impacting our operating profit. Second question, if you'll remind --

36:20 It's about Custopharm.

36:22 Custopharm, yes. So Custopharm -- so the FTC doesn't allow me even to visit them. So I really don't know what their budget is for 2022. So that's why I'm very blindsided. Remember, when we announced the transaction, we said that a rough estimate of the revenue for full year 2021 was $80 million, and that's really all I have. I have no update on that per se, because we need to treat it -- them as competitor until the transaction closes. But that the -- that’s in a way, James, the only indication I can give you is what we announced when the transaction was announced in September. James Vane-Tempest: 37:12 Thank you.

37:15 One more online.

37:18 Thank you. We now have our next question from Nicholas Vore from Barclays. Please proceed with you question.

37:25 Hi, there. Thanks very much for taking my question. Just I had a quick question on the R&D. I know that it's difficult for you to guide towards revenue specifically on the individual products and business lines. But just thinking about what guidance looks like for 2022, some of the brokers have been explaining that they expect R&D overall to increase. How do you kind of see R&D and also the allocation across the regions as well? So we should expect to see probably MENA and Europe with the greatest allocation to R&D?

37:55 Yes. So R&D is roughly -- we don't guide on R&D, by the way. But what we have been delivering through the -- since I joined the company at least is approximately 6% of revenue on R&D, it could be a lipid less, a lipid more, but that's really the -- what has come out over the last few years. I can't guide you on 2022. In terms of where the most money is being spent, we spent when you look at the numbers, we spent a lipid more, we spent more on Generics and injectables than we do in MENA. And the simple reason for that is so big portion of our pipeline in MENA is also business development. So we do our own development, but also we compensate or basically mix the two together where we have specialty products in the pipeline which is done by our partners. So around -- we have delivered around 6% of global revenue, more on Generics and injectables versus MENA. So that's really how far I can take you in terms of the allocation of the R&D. James Vane-Tempest: 39:05 Okay. Thank you.

39:06 Okay, Pete.

39:08 Peter Verdult, Citi. Just two questions. Maybe first for Khalid, on cash flow, pretty strong. Just --

39:14 Crazy.

39:16

39:17 Very strong.

39:19 Quite strong. On a serious note, you've -- during the crisis, you made it clear that you had high inventories and that was putting you in good stead. But of course, there's been profit growth. But is there anything meaningful change in the inventory levels that you're holding receivables/payables that is helping? And then secondly, for both of you may be on the MENA region. Just any -- can we -- I know there's hyperinflationary effects. But if we put that to one side, anything you want to highlight in terms of country performance? And then more broadly, you've had this long-standing strategy of holding the cost base, delivering a better portfolio. I mean it feels to me like it was years ago that you did for Brasilia deal. When might we dream that should start -- that starts to sort of translate into a better top line performance and margins maybe just finally getting off that bottom of around 20%?

40:08 Do you want to take that?

40:10 Yes, I'll start. In terms of cash flow, there was a focus from the beginning of the year, all the management team on how we want to manage inventory levels, because if you look into 2020 versus 2019, it went up. And we had actually a project that we've done with all the segments and involved many of the supply chain, purchasing team, finance to look into how we are going to optimize our inventory level. And you can see, this drove our inventory down and really drives the increase in our operating cash flow. It's one side, it's not just the cash flow as well receivables. Now we have much more control over our receivables. We put in place certain controls that -- when countries can sell at different level of authorization and control mechanics to their credit limits which helps as well controlling the receivable balances in a way. 41:07 So all of these helped with the targets that we are setting to the regions as well, and how they are going to achieve their cash flow targets helped improve our cash flow. And we've been working on this since some time, not just in this year, and we've been delivering year-on-year on our cash flow. So it's nothing, I would say, specific other than the inventory, but it's much more controlled and bringing the inventory into a more normalized level.

41:37 Yes. And also, I think on inventory, we are very selective what we keep more inventory off because of delay in transportation and things like that, there came a shortage of rubber stoppers for our injectables business. And then we get more rubber stoppers. So it's not like finance takes everything down. You can see that our inventory in '21 is lipid more than 2019, but lower than 2020. Is that right?

42:06 Yes, 2020 is --

42:07 2020 was very high because the pandemic was going on and we let a lipid loose. It was better to have more inventory than less. So there was an opportunity to fix that a lipid in '21. In terms of MENA, the country I'd call out which did amazingly in '21. but also in '20 was Algeria. Algeria now is our star market in MENA. So well executed on all fronts, they introduced a new oncology plant. They've got 8 products from a brand-new plant to the market. And the beauty in Algeria is you are alone. If you manufacture locally then others cannot import it. So I think we grew Algeria 42%, if I remember correctly. So very strong growth, but we also grew in Egypt. Not at the same level. And these are at Tier 1 markets. 43:06 In Saudi Arabia, Saudi Arabia is still a very strong market. But what happened in 2021 was that the government restructured the governmental tenders. So there was a delay in the tender. So the tender part of the business didn't perform maybe as well, but I'm saying that's a timing for me. When --

43:28

43:29 So there were 6 or 7 different tenders in Saudi Arabia for different parts, different hospitals, different regions. So they now have one central tender for the whole country. And by doing that, there is a delay in the tendering business that's happening. So it will benefit us going forward. But the retail side of the business in Saudi did very, very well. It was encouraging. Jordan did well, probably the best performance in Jordan that we have seen at least since I joined the company. So we feel really good about the MENA in terms of profitability. So if you take out the hyperinflation, they delivered a low 20s as a profitability. The hyperinflation, I'm sure you saw it, it took me forever to -- I still don't understand why it's done like this, but the hyperinflation obviously increased our revenue, but decreased the profitability. So the branded business delivered in constant currency a low 20s profitability, which is where it has been, to your question. In terms of when we can raise that into the 23%, 24%, we don't know. 44:44 But as you can see, it is no matter how we deliver on the business, it seems to be eaten up by FX and our hyperinflation accounting and things like that. So that's my biggest thing. We launched the Gedeon Richter the Rylan in the first country end of last year. It takes a long time to register products in MENA, up to 3 years approval time in many of the markets, especially for specialty drugs, they don't recognize. So we're hopeful. The ultimate goal is we want to be just over 50% branded generics, just under 50% specialty drugs. But also, you have to keep in mind that when I introduce specialty drugs, I'm sharing the profit with the partner at the same time. 45:31 So hopefully, there is a step-up. And the step-up is more better utilization of my OpEx, better utilization of my sales force, because we have a big sales force, we have 2,000 sales reps and sales support. And I need to grow and better utilize. It's like an overhead in a plant. The more they manufacture, the less the overhead is impacting. It's the same I'm thinking about for the MENA region. But it just takes a little bit -- it takes time.

46:01 So what

46:04 Even better. You should see the inventory of rubber stoppers we have. It's beautiful.

46:12 But the volumes in MENA as well is increasing. So the business itself is doing very well. And as Siggi mentioned, now you get bits and pieces from FX from different countries. So it's like 18 countries, each country has its own currency. So -- but it's in a way, we are managing that. And I think this year we are targeting to improve as well.

46:37 This is the last point on MENA, is that -- so I think 5, 6, 7 years ago, between 60% and 70% of our sales there was antibiotics. Now over 50% is chronic medications and antibiotics is down to 20% to 30% of our sales, which tells you that this strategy of bringing in more chronic medication, relying less on the old -- the old brands are still good, they're still very valid, but the growth is more in the chronic medication because the movement is less. So I'm really pleased with that. We showed that on the slides that over 50% of our portfolio being chronic medication. It's a huge improvement of the portfolio markup that we have for the business. Any more questions online? Nothing? Any more questions in the room? Yes?

47:36 Thank you. Thibault Boutherin, Morgan Stanley. Just two more questions.

47:39 Yes.

47:40 So the first one just on the operating margin for the branded business. When you think about the kind of normalized base of low 20s for 2022, will we see some sort of negative base effect in the first half, which means that we'll probably be below this kind of normalized margin because of the penetration hanging on in the first half? That's my first question. 48:03 And the second question, just on the compounding business. If you could tell us a little bit more about is this a kind of new industry? So who are the competitors? Kind of which are the markets? And just kind of give us a little bit more details on what you're doing here? Thank you.

48:19 Do you want to start?

48:21 On the first question, I think if you look into the H1 and H2 in a way how much we have achieved, there's a lot of, I would say, controlled costs in the second half in order to manage our -- and this is like we put a plan into how to reduce our costs and control our costs, which helped as well the margins. But a big chunk of the inflationary impact took place at year-end, because it took us by surprise, to be honest with you, because the currency in Sudan was stabilizing and then suddenly the CPI index showed a different result to the stabilization of the currency. So a big chunk of the FX took place in the second half and therefore affected the margin. If we exclude that, you would see more of a normalized level on margin for the second half and margin would be stronger than the first half for the branded business.

49:14 So in terms of the business, it is a big and growing business. So it's estimated -- there was a FDA conference, virtual conference last year about this business. It's estimated that the total market is between $2.3 billion and $4.6 billion. So the reason nobody knows it's a direct sale to the hospital, this doesn't hit any wholesalers. So how it happened is that, you have a courier from your plant straight to the hospitals because it's made for each patient in a way. In terms of the environment, so in the US today, there are 67 companies that say they're into 503B, and they have approximately 75 manufacturing plants for this business. The biggest company is QuVa, Nephron, C-A-P-S, CAPS. Those are the top 3 I think, in terms of the business.

50:24 Revenue they generate.

50:25 They are not public. I honestly don't know. I think QuVa -- no, I don't know. I think it's in the -- probably in the hundreds of millions, the biggest ones, maybe 100-something millions. But I -- it's a pure guess from my point of view. In terms of the portfolio opportunity, it's pretty big. There are different opportunities. And also, when there is a shortage in the market, what the FDA allows the compounders to do is to compound this product for the hospitals, if there's a shortage on the lifted front. But the first focus is sterile-to-sterile compounding where you take a drug and you make it into a bag when it's not in bag then you mix it. What we heard and the reason why we stepped into it is, when we met at the hospitals, the hospital pharmacists, the doctors and the nurses, there's been -- this industry has been inundated with quality issues. And if you go online and go on the FDA website and you look the 483s and warning letter that this industry has had, it's a long reading. This is like all volumes of Harry Potter. So there is a long reading. 51:48 And they came to us and said, this is not a reliable industry, it's a way of utilizing the quality system you have for the pharmaceutical companies on the SOPs, the validations, the stability testing to change this industry into something different and really revamp it in a way that will step up, of course, the quality, but also will give the hospitals more trust in the products that's coming in. So that's really where we came to this. It is that there is a need in this growing market for a high-quality supply. We have a big and beautiful plant. I'm really hoping, if this dam pandemic goes away, that I could invite you to see the plant, maybe this year or early next year because we are ready, it's running. Estimating we will have 100 people there. 52:52 In the video that went on social media, you can see a little bit of video from the plant itself, where it is. But the idea behind it, it's a big market, we have to obviously start from 0. We have this idea. We thought about doing an M&A because it takes a long time to start from 0. But we went against that, because what you take is the quality records of the companies that you're buying and instead of starting fresh and taking maybe an extra 1 or 2 years to build the drugs. That was how we thought about it. But the thinking is, it's the quality of the pharmaceutical industry we are introducing into the 503B business.

53:40 Oh, yes.

53:40 If you take a microphone --

53:46 Yes, just a very quick one, and I expect the answer is no given the mix of your business. But is there any potential impact, direct or indirect, from Russia-Ukraine conflict?

53:55 No. That's the quick answer, other than the impact on the share price today.

54:01 Yes, we knew that.

54:02 Yes, it's all Ukraine today.

54:06 It's Keyur Parekh from Goldman. Couple of kind of questions for you. One is kind of you've announced a $300 million buyback, which is kind of reflective of this great cash flow you've had last year. But what level is it also reflective of in your view, lack of inorganic growth opportunities kind of across the industry? One of the things kind of people want you to do is grow faster. So is this $300 million in buyback kind of because you're not seeing enough growth opportunities? You think you can do $300 million plus everything else kind of you want to do? That's question number one. 54:46 The second is, if press reports are to be believed, kind of there could be a different owner to one of the large generic players by the end of the year. It could be in private equity hands. How do you -- if that was to happen, how do you think that kind of changes the competitive environment kind of for the broader industry? And what does that mean for Hikma? 55:11 And then lastly, as you kind of enter this new market on 503B, how should we think about the margin profile for that business kind of over the next few years as you've kind of said you'll evaluate it inorganically entering that market versus doing it organically off a very low base. But I'm presuming it's going to be margin dilutive for you kind of in the next couple of years. But any kind of help there would be helpful? Thank you.

55:39 Yes. So let me start on the last first. So in terms of the margin, so clearly when you're starting and kicking off a business and you hire 100 people to have a very little sale, there will be a little dilution to the margin this year. But overall, when we are up and running and then this business is growing and when we have the licenses, we wouldn't expect this to be dilutive. It's basically only the start-up cost that is impacting the margin. You want to take the ?

56:15 Yes. In terms of the share buyback, if you look into this year, we've done 2021, we've done several like Custopharms. And we've done 2 deals on the biosimilars. So we have a couple of, I would say, business and BD activities, and the team is still looking into several opportunities, of course. So a buyback of $300 million is not going to impact us in terms of doing any organic or inorganic growth because the firepower that we would have is still above $1 billion or something. Even our net debt today is 0.6 times. The share buyback is going to increase at a minimum level, and it's not going to affect our ability to do bigger acquisitions. So it's just how the management believe that the market is not really seeing the intrinsic value of the business and the value of the business and the multiples that we are creating here.

57:18 So -- and on Sandoz, I -- so if you look at the profile of Sandoz versus our profile, you really are only overlapping in US. They are 55% European company, and then they're all around the world. They don't have a big business in MENA. So the US business, yes, we are competing with them on the injectables and on solid oral in the US. I don't think it's changed so much. They have been declining double digits in the US over the last few years versus where we have been growing double digits. So they have a very different portfolio of products they are dealing with. They sold their solid oral business. They got it back. So there have been many challenges that they have been facing. So I don't see a new owner of Sandoz will fundamentally affect us. I think it will be a lot of integration, I think, to take place to make this into a stand-alone company. So I'm not sure it will be operational by year-end. But overall, I think the impact on us is very little to nil overall.

58:37 Just following up. So that 505(b) 3, you said when you get to --

58:41 503B, yes.

58:42 When you get to that kind of steady state, it'll it won't be margin dilutive. How long before you get to that steady state?

58:49 So I'm hoping that -- so it will be a -- so it's so small this year. It's just a tiny bit market dilutive this year. Next year, I'm hoping that we will already not be dilutive. It might not be accretive next year but maybe in the third year it could be a tiny bit accretive if the plan goes ahead as we expect. 59:14 Any last questions? Very good. So I just want to thank you all. Great to see you face-to-face. And thanks to the people on the phone. Hope we can see you all soon face-to-face again. Thank you.

59:28 Thank you.

59:32 Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.