Hikma Pharmaceuticals PLC
LSE:HIK
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 722.5
2 083
|
| Price Target |
|
We'll email you a reminder when the closing price reaches GBX.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Hikma Pharmaceuticals PLC
You don't have any saved screeners yet
Good morning everyone, and thank you for joining Hikma's results Q&A today. Hopefully, you have all been able to download our prerecorded presentation from hikma.com. I'm very pleased to have our Hikma management team here with us today. We're joined by our CEO, Said Darwazah; our CFO, Khalid Nabilsi; Vice Chairman of Hikma and Head of the Branded business, Mazen Darwazah; the President of Injectables, Riad Mishlawi; and the President of Generics, Brian Hoffmann.
With no further ado, I will pass the call over to Said.
Thank you, Susan, and good morning, everybody. I'm sure you've already – or I hope you've already read the releases. I'm extremely happy with the results this year. In a very relatively tough year, we have delivered resilient results. Our top line is almost the same as last year, and the core operating profit is down about 6%. And when you consider the extra interest rates that we paid the shipping, the fuel, the inflation and so on, it really shows that the company delivered very good and very resilient results.
The Injectables and Branded businesses, of course, have done extremely well. They were able to cover the downfall in the generics sales with very good growth and still hopefully much more growth to come. We have a very strong balance sheet, obviously. Net debt is around $1 million. So, we still have a lot of firepower. We have successfully integrated two companies, Custopharm and Teligent. We are entering into new markets, especially in Europe.
In the MENA, we are the third largest company there now. We saw that in Saudi Arabia, which is now becoming the largest market – is the largest market where we are Number 1. And finally, Generics delivered, in my opinion, reasonable results, where we had margins of about 15% and delivered about $100 million in [EBIT]. So, I'm very happy with all our results and look forward to having a great year ahead of us.
So with that, can we please start taking the questions.
[Operator Instructions] Our first question is from Peter Verdult at Citi. Peter, please unmute yourself and ask your question. Thank you.
Thanks operator. Good morning, everyone. Thanks for taking the call. Hi, Said and team. Peter Verdult, Citi. Three questions, please. Said, obvious one for you, CEO search. If you were to frame the, sort of innings we're in, are we in the late stage of naming your successor? And are internal and external candidates still in the running or is it an external hire we should be thinking about given the time it's taken?
Secondly, for Brian, could you talk a little bit about the CMO business within U.S. Generics, the current scale and dynamics and how you expect to grow that? Just a little bit more flavor and insight there? And then Riad just on the compounding business, I think we're expecting first sales this year, but can you remind us where we are in terms of generating meaningful sales time lines to profitability? And if I could push you on what you think a peak sales opportunity or when you speak to Said, what you think the long-term opportunity here is? Thank you.
Thank you, Peter, and thank you for getting that out of the way at the beginning. We are really at a very advanced stage, I have to say. We've had a very thorough search, and we are at a very advanced stage right now. We are – very few candidates still in the running. And we are still looking at both internal and external. I feel – I think that we would be able to announce relatively soon. Maybe – I don't want to give an exact time, but I think within the next six weeks, we should be able to announce our candidate. And hopefully, I'm sure I will be very happy with the candidate, and I hope the market would be happy with them. So, anything more on that. Peter?
Sorry, Said, can you hear me?
Yes, I can hear you now.
Yes. You'd think after three years I'd work this out, how to unmute myself, but I didn't know. I mean, look, I'm not going to push any further. I think that will be...
Like I said, we are at a very advanced stage, and we should be able to announce quite soon. And we're still looking at internal and external. So, we haven't – okay.
I suppose my only follow-up question would be, when Siggi arrived, I mean, obviously, the Hikma business was under pressure. You needed to make some changes to U.S. Generics. I mean it's not as if the strategy or the company is in – having problems at the moment. So, what are you – like what are you hoping for in terms of what do you want the new CEO to focus on or to sharpen up? Because you have a clear, coherent strategy across the divisions. So, I'm just wondering what you're hoping the new CEO brings to the table.
I think if you look at the businesses, it's very clear that all three businesses, but specifically the Injectables has an extremely bright future ahead of it. And I think one of the biggest issues – so we could probably sell twice what we are selling if we had capacity and so on. So, I think we need somebody that can deliver on making sure that we will be able to deliver, to have all these three divisions delivering on time and what's required from them. So, to push the existing strategy forward. And then give us the luxury to start again looking at, is there anything else we'd like to enter and how do we enter that – what we'll be always [calling] [ph] the fourth part of the business. But right now, I think executing on our strategy is very high, somebody that can deliver and execute the strategy where we are.
Said, would you like me to take the CMO question?
Yes, please.
Peter. Great to see you. Thanks for the question. So, CMO is an important part of our business, an important part of our strategy for the future. So, when we acquired Roxane Labs and the facility in Columbus, Ohio in 2016, we inherited a fairly sizable contract manufacturing business. And since we took over ownership of that business, we've tried to grow it. We're really grateful to have a fantastic state-of-the-art, high-quality facility in the United States. It's one that has over a million square feet of manufacturing space, over 80 acres with a really diversified set of technologies.
Within our existing footprint and within our existing infrastructure, we have the ability to increase our capacity. So, we're very interested in bringing in more volumes to that facility. We certainly have the ability to do so. And not only are we bringing in business that's accretive from a margin perspective, but as we bring in that additional volume and lowers the cost overall across our entire portfolio.
So, it really works well with the rest of our business. It's synergistic with it. And as we've now put really a focused initiative to advertise it to engage with primarily branded partners, we've been able to generate a lot of interest, due to the vast technologies we have, the high-quality track record we have and the U.S.-based manufacturing. So, we've been engaged with multiple potential CMO partners at various stages of development, from the early stages to partners who are already commercial and are looking for a commercial partner. So, it's an area that we want to continue to grow and improves the rest of the business and also improves our margins.
Okay. And the third part of the question was?
Compounding, I believe.
Okay. Okay.
And regarding compounding, I think we still believe that this is a fantastic business to get and to, very complementary with what we do. But also, this is a business that we started as more of a start-up. So, the disadvantage of starting a business if you have to really building and build it block by block, get state-by-state approvals, make sure that all your products are in line with the stability, with all the data that you have.
However, the advantage of building that, you do it right, you do it carefully. You do it in a very strong foundation. And this is exactly what we're trying to do. So, as you would know, you need to get 50 states. Right now, we're at 39%. We still have 11 states to go. We have – we are trying to make sure that we don't overpromise because in this business, continuity and reliability of suppliers as much as the quality is very, very important.
So, we really don't want to go in very aggressively and very prematurely and end up introducing products that we cannot continue or take on more than we can supply. So, we're doing this very carefully. We're doing this step by step. We're still looking to get another 11 states there before we cover the whole United States. But we're really progressing very nicely.
We're putting a nice crew in together. We are adding to our portfolio more and more products. We're going to the hospitals, having interviewed with the pharmacists in the hospitals to make sure what are their needs. So, we want to go in with the niche products, not like the any other compounding company that we have out there. We know that Nephron – we learned a lot from Nephron and their experience there and deployed that they had left in the market when they are mostly right now, they're not delivering a lot of the compounded products there.
We believe that this is still a great opportunity. I don't know what meaningful means. I think we'll do this year, of course, much better than last year, which we haven't done much. But I don't think we really see the meaningfulness of this business until maybe a year or two after – maybe in 2024, 2025. We're still building, I think we'll get to the 50 states by the middle of this year, I hope. And then we will be able to start aggressively growing the business.
Our next question comes from Thibault Boutherin at Morgan Stanley. If you’d like to unmute yourself and ask your question. Thank you.
Thank you very much for doing the call. If I can just push a little bit on the assumptions behind the guidance for Generics and Xyrem within that. So, I know you're not going to give us exactly what you expect from Xyrem, but just maybe the assumptions that you are using in, particular for the second half of the year of this product because what we know is in theory, you have three more generic makers who have signed agreements with Jazz to launch [anti-generic] [ph], but as far as we can see from the FDA website, it looks like only one of them actually has an approval.
So, when you think about the evolution of the Xyrem opportunity in the second half, can you tell us, kind of what expectations, what assumptions you have behind the evolution of the market? So, the first question and maybe just related to Xyrem again. And thinking ahead of 2023, when you think about the Generics business, obviously, the Xyrem business probably going to start eroding next year? And if you could just tell us conceptually if you think it's fairly stated to have this business, kind of being flattish or even potentially growing out of Xyrem or if we should reasonably assume that we have a step-down of generics in 2024? Thank you.
Okay. Great question. So, first off, our generics guidance of low-single-digit revenue growth does include sodium oxybate. So, that's included in that number. I can't give you specific guidance on sodium oxybate, but we're excited to have launched the product in January. We view the product as making a contribution across the entire year. We expect the other filers to launch on day 181 in the second half of the year.
So, we expect that to have an impact in the second half of the year. And then we also, as we've disclosed, the second half of the year, our royalty payments for the authorized generic to Jazz due to increase. So, we expect sodium oxybate to be a significant contributor in 2023. And then as you mentioned, in 2024, we do expect following the exclusivity period that that will be a smaller contributor in 2024. But what we're really focused on strategically is to continue to grow the business.
We're working very hard on growing our base business, our complex generics business. We're continuing to grow our contract manufacturing business, as well as our specialty business. So, our aim is to continue to grow this business beyond 2024, but of course, sodium oxybate will be a lower contributor then.
Our next question comes from Paul Cuddon at Numis. If you could please unmute yourself and ask your question. Thank you.
Hello. Thank you very much. I've got a few questions, please. I mean, firstly, on the success of Custopharm and particularly [indiscernible] kind of far beyond the kind of six-month exclusivity. If you could elaborate on the expectations for that particular product and maybe how you think about the broader, kind of injectables pipeline? Secondly, we've been kind of discussing antibiotic shortages around the world and to what extent that might be benefiting Hikma? And thirdly, just on the kind of strong recent prescription trends for things like Vascepa and at Advair what your expectations are for those for the rest of the year, please?
Riad, can you take the first two parts, and then, Brian, the last?
Sure. As far as Custopharm and [indiscernible] we will have the benefit of a full-year this year. We had integrated the company very well. I think we benefited a lot. The good thing about it is when we acquired this business, we dialed-in in our assumptions that the new competitor will begin in the market, and there it was as you know, [indiscernible] had entered into the market. So that has been assumed when we did the acquisitions.
It has contributed very well to the overall growth of the Injectables and with very high gross margins. So, we're happy where we are today. We're benefiting both in the pipeline from the commercialized product, as well as from the team that we have in the R&D and in development. As you know, Bill Larkins, one of the CEO of this business has joined us now, and he is heading the Injectables R&D and we're benefiting a lot from his experience and from his knowledge in this business. So, we're happy so far. Things have been going exactly as expected and in line with what our expectations were when we acquired it.
As far as the shortages, it's been – we're learning more and more that the shortages are not only in the U.S., but it is worldwide. So, now that we're expanding in Europe, we're learning that countries do have shortages as much as the U.S. does. And we were able to work with those countries to take it from one country and feed it to another country. So, we're working with the agencies. Canada is a great example.
For example, they had contact with us for some products that we have already approved in the U.S. but not in Canada. And we've had some shipments go there because of that. Same thing with France, same thing in Spain. So, we think that this is something with – that we can really capitalize on with the large portfolio that we have and being so global and having products a little over the countries, we can definitely be watching this very, very closely and try to capitalize on that whenever it's possible.
One is to make sure that the patients are benefiting from having a product on the market where they really need it and from us creating a really good relationship with the regulatory agencies. So, this has been happening and has been doing – we're doing good at it.
Brian, could you take the last one?
Yes, happy to do so. So, I think I'll address the antibiotic shortage first. So, in taking a step back in 2021 and 2020, we really saw limited – much more limited antibiotic use in the United States and due to COVID and social distancing and people not traveling as much. We saw much lower demand. So, the shortage situation that we experienced as an industry in the fourth quarter of last year, really caught a lot of us by surprise.
It maybe, caught our customers by surprise, caught us by surprise and certainly put a significant stress on our operation. I'm really pleased with the way that our teams responded. So, we quickly ramped up our production. We went through a 24/7 scheduling of production. We went above and beyond that and even air shipped products to get the product into our customers' hands, as quickly as possible, to do everything that we could to resolve that shortage.
So, it was a revenue growth opportunity from 2022 over 2021, but it is a lower margin product for us. So, not as material to the bottom line, but of course, very important to our customers and very important to our patients. So, I'm really pleased with the way that our operations and supply chain teams responded.
Since then, we've seen that demand taper off a little bit, but we're expecting a little bit more of a spike now going into the spring season. So, we're preparing for that and working very closely with our customers. My hope is that given the situation that we can begin to think longer-term with our customers and how can we prevent these shortages in the future. And I think it requires a really good partnership from both the manufacturers and our customers about let's plan for demand better and maybe excess demand so we can avoid this situational future. So, that's my hope for antibiotics. I think if we partner well, we can do a better job moving forward.
Regarding Vascepa and generic Advair, I kind of put them in a similar bucket. Our expectations for this year is that we will see on both those products some more competition, which could result in price erosion. So, our guidance anticipates that. The opportunity, I think, both for Vascepa and generic Advair is that we see greater brand to generic conversion. So, in the case of Vascepa, the brand still controls over 60% of the market share and with generic – with Advair, the brand still controls over 50 – just over 50% market share.
So, where I think the opportunity is for generics, even if we do see more competition, if that equation starts to shift more towards generics, I think that will create more volume opportunities and give us a chance to grow those products. So, that's our hope, but our guidance does anticipate some price erosion on both.
Our next question is from Emily Field at Barclays. Emily, if you would like to unmute your line and ask your question. Thank you.
Hi, thanks for taking my questions. Just a couple on generics. One, just – I think that you've been talking about expectation in the guidance for 2023 of double-digit price erosion, if I'm correct. Given the – I know IQVIA data can be helpful or not directionally, but it does look like that's been trending much better lately. So, in your view, is that a conservative assumption or just any thoughts on sort of base business generic pricing. And then maybe also if you could give just a little bit more color or figures around this rationalization of the R&D pipeline that resulted in the impairment charge and just – more details on how you realigned the portfolio there?
And then a question on Branded. The guidance now with a range between mid-single and high single, not that, that's a significantly wide range, but just if you could give any details on the drivers that will result in the lower-end versus the higher-end? And as that is constant currency, if you are expecting significant currency – a currency impact at this time for the year? Thanks.
Thank you. Brian, then Mazen.
Great. Thanks Said. So, I'll start off with the generics question, the first around price erosion. So, in 2022, we certainly saw low-digit price erosion – a low double-digit price erosion, I'm sorry, and that was pretty consistent throughout the year. And so given that we saw that in the fourth quarter, our expectation and certainly in our guidance, we're expecting to continue to see that trend.
I think there are some signs that it could be improved next year, and that's always our hope that things get better rather than worse. I think we're seeing the FDA be significantly more active in inspections. Could that create disruptions? Could competitors have supply chain disruptions, et cetera? All those things could help improve the overall environment. But our guidance does contemplate that, that low double-digit price erosion will continue into 2023.
In terms of the rationalization of the pipeline, as what we do as part of the ordinary course is we're always constantly reassessing our pipeline. And in any given year, we're also constantly looking at what can our P&L support in terms of an investment, and we'll make prioritization decisions along the way. So, that's really part of the ordinary course. We manage that very closely as a division and as a group overall.
And then in terms of your specific question around the impairment, we did take an impairment as you saw. That was due to really 2 things. The first, due to the intangible assets around generic Advair for our reduced expectations. We reassess that every year. So, this was – we've taken impairment before. This was another one that we took on the intangible assets. And that we also took an impairment around the property, plant and equipment due to some excess capacity for generic Advair, as well as some of our other respiratory assets in the pipeline.
Good evening. For the MENA, actually, this is the first time that we guide mid- to high range single digit in the MENA. The reason is that we're growing in the MENA of new therapeutic classes, and we're getting more in-licensed products in the MENA in the pipeline. Now, what really depends is the Egyptian market. Egypt today is our third largest market in terms of volume, and the currency in Egypt has been quite – I would say, during last year and the beginning of this year, it has been very volatile.
So that depends on how the market will end up in Egypt, what the currency will be like, but we will update the market hopefully within half – the year half, but we still do see a growth in the MENA region and other markets. We're doing quite well in Saudi Arabia and North Africa like Algeria, and in other markets where we have presence for a very – we've been here 45 years. So, we've witnessed this before and we can maneuver through the different cycles that we have in this market. So, we're confident that we'll be able to achieve the guidance that we've had on a constant currency basis.
[Operator Instructions] Our next question is from James Gordon at JPMorgan. James, if you could unmute and ask your question. Thank you.
Thanks a lot. I think I unmuted. Thanks. James Gordon, JPMorgan. Couple of questions. One was also about the generics, and there was territory impairment [indiscernible] on that. Are you generally investing a bit less in generics and now redirecting that investment into Injectables and Branded and they're more focused or are there other areas of generics where you're going to invest a bit more. So, how should we think about it? Is this an investment division or more like a one-off for cash division?
Second question would be on Branded. So, the faster growth you guided for this year in mid- to high single-digit level currency. Is that the growth rate, which we've announced sustainably plug into our model and then it used to be a mid-single-digit business? This is now mid-to-high and it could even be high-single-digit over the next few years? How should we think about that? And then the last question was, I think Said mentioned the fourth arm of the business or what could be a future fourth arm. So, what areas are you considering investing in, that's the fourth arm, and where would you not invest, with which bits could be up for going for there?
Thank you. The company is growing and our capacity to invest, obviously, is growing. And I would say, we are not cutting down on investment in generics, but with the extra capacity that we have, we're dedicating that more to the Branded and to the Injectables. We have been talking about expanding capacity significantly both in MENA and in U.S. and in Europe in the Injectables.
We are building new facilities for the Injectables in the MENA, expanding Italy, Germany, Portugal, and in the U.S.A. So, a lot of emphasis has been going on there, but we are still going to be investing in generics. As I said, we're not reducing, but maybe not increasing. Brian, would you like to put a little color on that.
Yes. Happy to do so. I think as Said mentioned, we continue to invest as a group. I think overall, we're contributing about 6% of our revenues to R&D, and Generics is also in-line with that. I think in any given year, we need to make adjustments to reflect the performance of the business, what the P&L can support. And I also think in any given year, you could have particular products that are in your pipeline that may be more expensive than others.
So, we could go up from that 6% in a given year as P&L supports, as well as with which specific projects that we're working on, but we continue to reinvest for the growth of the business.
Thank you, Brian. So, the idea of the new businesses, we started some time ago, a VC fund with $30 million to invest in digital health. This was like 6, 7 years ago. Recently, we've really expanded that fund. We've increased the value of the money that they can invest. We've asked more of our new board members to become involved and they are more savvy about the business in the States and so on.
So, we'll be looking at getting, not just into digital and so on, but maybe start investing in Stage 3, things like that. Products that initially we can bring to the MENA because the MENA has the infrastructure to support originator products because we have a lot of in-licensing and then see how – where that trip takes us.
I think, again, we need to – we have been adding expertise in biosimilars. We have been adding expertise in biologics. We'll probably keep adding that kind of expertise looking at different opportunities. Before I hand back to Mazen, Riad, do you have anything else to add to what I just said. You are on mute, Riad.
Sorry. No, I just wanted to emphasize what you have said. We're putting a lot of money in expanding our capacities and getting into new technology. So, as Said had said, we are expanding Portugal today as we speak, same thing with the U.S. in Cherry Hill. We're doubling the capacity in Cherry – sorry, in Italy, expanding in Germany, and we're building new facilities in both Algeria and Morocco, and we have big plans for Saudi Arabia. So, we're putting a lot of money in investing in new technologies, in capacities, also NPDs and increasing our R&D to increase our portfolio.
Okay. Thank you. Obviously, in the portfolios that we have, we're looking more and more at complex generics, both for the Injectables and the [orders]. So – and as Mazen said, for the MENA, more and more in-licensed products, oncology products, biosimilars and things like that. Mazen, you want to take the Branded question?
Yes, sure. For the Branded – with regard to the Branded, it's one of our major issues in MENA is not selling. The MENA is a very volatile market. So, it's very important for us to collect our money. So, we are very prudent on how much we want to expand in the markets and keep our healthy cash cycle. And this is why we're witnessing many companies now leaving the MENA for the factor of the currency fluctuations. But because we are very entrenched in the MENA for the last 45 years, we know how the system grows.
Now, we will continue growing on a single to – mid-to-high as we go forward, but what's more important than that, which we stated five years ago that we want to sustain our profitability and increase it by 40 basis points as we go forward. So, it's not how much we sell in the MENA, it's how much profitable the MENA business will go – will stay as we go forward.
So, in a nutshell, all that will depend on the fluctuation of the currency, and that will depend on the political situation in these markets. A lot will depend on how we have managed our own cash cycle as we go forward and continue improving our margins going forward.
Okay. Next question please.
Our next question comes from Harry Sephton at Credit Suisse. [Operator Instructions] Thank you.
That should be unmuted now. Thanks for taking my question. So, we've seen some 483 and [indiscernible] at some of the Indian Generic companies. I'd like to get your sense on whether you're seeing any significant benefit to yourselves from any of those, and how do you view your ability to gain market share in Injectables in the current environment? My second question is, you partnered on a peptide formulation partner a couple of years ago. And I wanted to get your take on the peptide injectable market more broadly. Clearly, it's one of the largest spaces in branded medicines currently? And is this partnership a sign that you're looking to be a meaningful player in this market longer-term, including in the GLP-1?
Maybe a third question just on financial fees. How are you seeing the impact of inflationary pressures on margins in 2022? Can you quantify how much that has been a drag in 2022? And we tended to see an inventory lag effect from inflation impacts to cost of goods sold. Is this something that you're expecting in your guidance for 2023 as well? Thank you.
Thank you. I've always been saying that during COVID, the FDA was not really doing major foreign inspections. Most of the inspections were being done online. Although in the U.S., they were still being very active for the U.S. companies. And I've always thought that once they go out there and start doing the foreign inspections, they will be issuing a lot of 483s and warning letters and so on, which we have seen.
We have seen a major ramp up. We've seen this before. I don't know if you remember 6, 7 years ago, that was really what caused the major growth in those years and then caused the shortages and caused all these things to happen. Obviously, there are benefits for a quality company that can deliver, that is ready to pick up the – this slack. Maybe, Riad, would you like to talk a little bit more about that and then answer the other question? And then we can ask Khalid to answer the financial question.
Sure. Yes, of course, between, I think, the major ones that were lately hit by the FDA as Sun and Intas both, we have some overlap products. We're watching the market to see how we benefit and capitalize on this. With Sun in particular, we have few important products that we overlap with. Intas more in Europe. But yes, I think as this happens, how ready and how flexible we are to capitalize and benefit from that is important to us. And we are agile, we are flexible and we think that this will – we'll be able to capitalize.
How much, it's still not clear. We don't know. We know that there's an import alert on Sun, but we don't know what they can – they can send to the U.S. and what they can't. This wasn't clear for us. But I think the market can tell and shortages can tell and we'll be ready to – we're watching the market very closely and we'll be ready to capitalize whenever the opportunity arises.
As far as – and as Said, said, this is the course of business. This happens all the time. It hasn't happened in the last 2, 3 years because of the pandemic. I think the FDA did not make it to a lot of inspections, but we will see it more and more right now. I think they're getting more active. As far as in our R&D, yes, peptides is a very important area where we are developing. We're looking at it, and we're hiring a lot of expertise in our development centers.
We're also looking at partnering with a lot of other companies to some, kind of BD licensing or co-development. We understand that this is a very complex, but also it's very key to our differentiated product ambitions that we have. And we are trying to find a few partners that we can codevelop with and create together some, kind of a partnership and get into the market with those important products, but this is amongst our strategy of bringing in differentiated products to the U.S.
Thank you, Riad. Brian, is the generic business going to benefit from all these 483s and warning letters?
We are starting to see some disruption on the market. Similar to injectables. There are a number of companies who have gotten significant 483s and/or warning letters. So, we're always monitoring to see if there's opportunities, and we're hopeful there will be some.
Okay. Thank you. Khalid, do you want to take the financial?
Yes. Thank you, Said. So, in terms of cost of inflation, as you know, this is a global issue now. And we are seeing it more in utilities, consumables, freight, labor, but we continuously look into our cost supply chain, procurement, using our scalable relationship to drive efficiencies. In 2022, we've seen around like 20 million plus in cost inflation and we will see some as well more in 2023, but all anticipated into our guidance.
In terms of inventory, I would say, as you've noticed in our financials, there is big jump in inventory of around 100 million. So, we had like the of course, more of stocking than inventory and for the reason to make sure that we have continuity of supply. So, we don't anticipate significant, I would say, increase in API, but mostly in the consumable side, but it's all reflected in our margin and guidance for the group.
Thank you, Khalid. I'd like to add, there two things that are different now than they were, let's say, 6, 7 years ago regarding the 483s and the warning letters. In the past, when a company got a warning letter or a major 483, we used to see the FDA not approve new products for them. Right now, that's not happening. They are still – they get the warning letters, and they still get some products being approved. So, we're trying to figure out where the FDA still stands on that.
The other thing was prices used to rise significantly when there were shortages. Right now, it's more difficult. Obviously somebody that's not on a contract, we have to pay more than those that are on contract. But relatively to where we were 7, 8 years ago, we could – where the industry stood its prices significantly, that has moderated. So, the price increases, there will be benefits, but not as big as they used to be.
That's helpful. If I could just quickly ask another one on the U.S. Generics. I understand that your U.S. pricing assumption for 2023 is for the erosion of price to continue to be low-double-digits. It seems that commentary from some of the Indian generic companies that is more stabilized pricing. So, I'd like to understand a bit more whether the pricing you're seeing as being largely driven by specific products on your product mix. So, is it generic Advair and icosapent are the larger products, which are seeing a more meaningful price erosion or are you seeing the low double-digit price erosion more broadly across your portfolio?
Yes, great question. So, as I mentioned in the fourth quarter last year, and pretty consistently throughout the course of the year, we saw a double-digit price erosion. So, we're expecting that trend to continue. But as you highlight, price erosion is always a function of your portfolio. So, in some of our larger products like icosapent and generic Advair, we do anticipate that some new entrants could come into those markets, which would result in price erosion, which given the size of those products would be more significant for us. But we are seeing – we're still seeing competitive intensity in some of our other products. And so, overall, for the business that's why our guidance reflects low-double-digit price erosion.
Our next question is from Christian Glennie at Stifel. Christian, if you could please unmute your line and ask your question. Thank you.
Hi, good afternoon guys. Just following up on the generics and the guidance for this year 2023. On the margin side, the 16% to 18%, just to understand what some of the swing factors might be there to go to a lower or higher end of that range? Is it really just your success with generic Xyrem or is there anything else to be aware of there in terms of fluctuation there? And then which may be a related point, any comments to make at this point in terms of expectations around some of the specialty products, Ryaltris, obviously, launched last year, but this would be the first proper, sort of allergy season this year. Then Kloxxado, any impact you're seeing or expectations around the change in Narcan to OTC and the like? Any comments on that one? Thank you.
Okay. A couple of questions there. First, on the guidance range. So, there's a number of factors that could push us to the higher end of that range, generic Xyrem just being one of them. Others, we were just talking about price erosion. If that's lower than what we're anticipating, that could improve. Some of our other products that we don't see new entrants on and/or if we see them lighter than we're projecting, that could push us to the higher end of that range.
We have some new product launches, and we have some products that we launched late last year, which we're ramping this year if they do better than expected, that could push us to the higher-end of that range. We're also seeing volume growth this year, whereas we saw volume erosion last year. So, to the extent that, that volume growth is greater than we've anticipated for this year, that will also push us to the higher-end of the range. So, it's a number of factors that we've reviewed as part of our guidance. And I'm sorry, your next question on generics was?
Yes. Any comments on the specialty products, Kloxxado, Ryaltris in terms of expectations this year?
Right. So, we're continuing to focus on our Kloxxado product in both the Rx pharmacy market, as well as the state government market. So we're looking to continue to grow that product over the course of the year. We also got approval and launched our Ryaltris allergy nasal spray product. We're now going into the peak allergy season right now. So, we're seeing some good prescription growth on that, and we're working closely with our retailer partners to get that stocked and get the pull through at the pharmacy level. So both of those products, we expect to be contributors to our growth this year.
Our next question comes from Victoria Lambert at Berenberg. Victoria, if you would like to unmute your line and ask your question. Thank you.
All right. I've got a couple of questions, please. The first one is, just on the Branded business. You guys mentioned at the JPMorgan Healthcare Conference that you guys are now number 3 in MENA. So, who did you overtake? What are the things you're doing right? What is the goal in that region? And then just on your biosimilar strategy, is the strategy there just still to go into partnerships? Is there an update from Bio-Thera and Richter with time lines for those products? And then I just noticed for your Generics business, your target, I think it was to reach 30% of sales from specialty, that's been moved to 2026 from 2025. Just wondering what informed that change? Thank you.
Thank you. For the biosimilars, right now, our main strategy is to work with partners, and we have been adding quite significant amount of products, both for the MENA and for the U.S. I'll let Mazen and Riad explain a little bit more regarding those. Mazen also you have a question of who did you overtake to become number 3.
In the MENA, the market has always been dominant by multinationals. So, we have Sanofi, we have GSK, we have Pfizers and these companies. Now, we took over the market share of becoming number 3. Now we are one of the top 5 players in the MENA in terms of multinational. So, we took another multinational and we succeeded them. That was GSK, if I remember properly. And the reason is that we increased our market share in Saudi Arabia and in Egypt and in Morocco.
So, we have advanced in these markets and therefore, we were able to beat those companies. And now, like we said, we're number 3 in terms of volume. But also, you have to look at the other thing in the MENA, that is a [tender] [ph] business. And many times, this tender business is not being calculated in the IMS or IQVIA data. So, now we're talking about the pure private market in terms of statistics. Riad?
Sorry. As far as the biosimilars, as Said has said, our biosimilars continue to be a very important part of our business, and we would like to grow it and would like to keep it continuously filled with the pipelines and products in MENA today. We have three products that are commercialized. We have six products that we had agreed with Celltrion and three to be launched soon.
We think that this business has been a good business for us, a good partnership with Celltrion. I think we're trying to expand that one to see if we can do a fill and finish as well with the new facilities that we're building in North Africa. We can get the advantage of being local manufacturers of those. So, there's a lot of focus in MENA on biosimilars. And it's a big driver for the growth that we have.
As far as the U.S. with Bio-Thera and Gedeon Richter, we're happy with the partnership so far. We feel that we are on time. We're anticipating launching those two products in 2025. We are looking and talking to a lot of different partners also to expand our portfolio in biosimilars.
I think very soon we'll start building the commercial arm for that and we have already started hiring expertise in this field. And we think that this is something that we'll be focusing on as we grow the biosimilars. So, it is an important part, and I hope this will grow and have better views or more news about partnering with other companies with [indiscernible].
Thanks. And just on the Generics business, the specialty target being pushed out by you. Just any comment on that?
Yes. So every year, as we do as a group, we refresh our five-year business plan, and we reassessed how all components of the business are growing. So, we're still very optimistic about our specialty business. We have three branded products on the market today. We have two more in the pipeline, and we're still looking at other opportunities for that business. So, we – our expectation is that business is going to continue to grow, but we're also making some very good progress on some of our other strategic growth areas.
So, our contract manufacturing business, our complex generics business and growing our base business and looking at where we can selectively look at international market opportunities. So, like I said, as a function of putting that all together, the percentages and timing may have changed, but we're still optimistic on all those strategic growth areas for the business unit.
I will now hand over to Guy Featherstone for some questions. Thank you.
Just one in for Brian. Brian, how do you see Amazon's new generics prescription business affecting you? And could you be a supplier?
So today, we haven't really seen much of an impact on our business with Amazon. We are on – we are speaking with Amazon, and we are finding opportunities to collaborate with them. We do supply them some products today. So, we do see that there's a potential opportunity for us to do more business with them. Their focus so far has been more on cash paying customers. So, it's been a smaller portion of the market, but we'll stay close to that new channel and see how that evolves over time.
Thanks Brian. And one more question, a two-parter. Firstly, for Khalid. On the balance sheet, could you explain the shareholder equity fall from 2.4 billion to 2.1 billion at end of 2022 and did the acquisition of Custopharm affect this? And then secondly, to Brian on chargebacks in the U.S., is there anything to update here about chargebacks and changes in policies for 2022 or 2023?
Sorry, Guy. What's the first question?
Just on the balance sheet reduction in shareholder equity, I think, probably related to...
Yes, it's mainly related to impairment and dividends. So, it's nothing, I would say, impacting the business itself.
Thank you. Brian, did you get that question?
There's a question about chargebacks [Technical Difficulty] continuous improvement company. So our internal operations, we're always looking at ways, whether it's chargebacks, whether it's other support areas. We're always looking to see how we can do things more efficiently and so chargebacks being one of those areas, but I don't see anything noteworthy for me to highlight there.
Thanks, Brian. And I think with that, assuming there are no other questions on the line, which I can see aren't, I will hand over to Said for some closing remarks and to wrap up the call.
Thank you, Guy. Thank you to all of those that participated. Thank you, team. We'll see you soon. Take care. Bye.