TIDMHIK
RNS Number : 5826S
Hikma Pharmaceuticals Plc
17 March 2021
Hikma Pharmaceuticals PLC
(the 'Company')
Publication of 2020 Annual Report and Notice of AGM
LEI: 549300BNS685UXH4JI75
The Company will today publish on its website, www.hikma.com ,
the Annual Report for the year ended
31 December 2020 (the '2020 Annual Report').
Hard copy versions of the following documents will be sent to
those shareholders who have elected to receive paper
communication:
-- 2020 Annual Report
-- 2021 Notice of Annual General Meeting
Shareholders who have not elected to receive paper communication
will be sent communications notifying them of the availability of
these documents on the Company's website.
Shareholders are encouraged to vote electronically at
www.hikmashares.com . Accordingly, the Company has not produced a
paper form of proxy. Should shareholders wish to use a paper proxy,
the registrars will provide one upon request (Link Market Services,
10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL,
United Kingdom, Tel: 0871 664 0300 (from within the UK) or +44 371
664 0300 (from outside the UK), E-mail:
enquiries@linkgroup.co.uk)
In compliance with Listing Rule 9.6.1 of the UK Financial
Conduct Authority ('FCA'), the aforementioned documents will be
submitted to the FCA's Electronic Submission System and will be
available from the National Storage Mechanism.
The information included in the unaudited preliminary results
announcement released on 25 February 2021, together with the
information in the Appendices to this announcement which is
extracted from the 2020 Annual Report, constitute the materials
required by the FCA's Disclosure Guidance and Transparency Rule
6.3.5R. This announcement is not a substitute for reading the 2020
Annual Report in full. Page and note references in the Appendices
below refer to page and note references in the 2020 Annual
Report.
The Company's Annual General Meeting ('AGM') will be held at
1:00 pm on Friday 23 April 2021 at Hikma Offices, 5th Floor, 1 New
Burlington Place, London W1S 2HR and virtually. Shareholders may
listen to the meeting remotely using the details below. Please be
aware that such remote listening is at the discretion of the AGM
Chairman and connectivity cannot be guaranteed. Shareholders
listening remotely will not be counted as being present at the
meeting and, therefore, will not be able to vote at the meeting and
will not have the ability to speak or ask questions. Shareholders
listening remotely are encouraged to do the following in advance of
the meeting:
1. Lodge your proxy votes with the registrar (
www.hikmashares.com ) in accordance with the instructions contained
in the Notice of AGM which has separately been made available to
shareholders - these will be counted in the votes for the
meeting.
2. Submit any questions to the Company Secretary (
cosec@hikma.com ) - these questions will be answered at the meeting
in the normal way.
Telephone
Dial the appropriate toll free telephone number from the list
below
-- Jordan: 800 222 03
-- UK: 0 800 031 5717
-- US: 877 853 5247
-- Other international numbers available: https://hikma.zoom.us/u/aHkK3dGm4
2. Enter the Webinar ID 969 2744 8970
3. You will automatically be placed on mute and will not be able
to speak
Web Access
1. Open a web browser, ideally Chrome
2. Enter the web address https://hikma.zoom.us/j/96927448970
3. You will automatically be placed on mute and will not be able
to speak
The Board encourages shareholders to monitor the Company's
website and regulatory news services for any updates in relation to
the AGM that may need to be provided and encourages shareholders to
submit their proxies as early as possible, as the situation may
change. Should shareholders have any questions, please visit the
www.hikmashares.com website or contact the Company Secretary at
cosec@hikma.com
Peter Speirs
Company Secretary
17 March 2021
Appendix 1 - Principal Risks and Uncertainties
The Group faces risks from a range of sources that could have a
material impact on our financial commitments and ability to trade
in the future. The Board of Directors has performed a robust
assessment to determine the principal risks for the Group
considering our risk context and with input from executive
management. Effectively managing these risks is directly linked to
the performance of our strategic KPIs and the delivery of the
strategic priorities outlined on pages 16-19 of the 2020 Annual
Report. Our principal risks are set out below with examples of
management actions that help to control the risk. The Board
recognises that certain risk factors that influence these risks are
outside the control of management. The Board is satisfied that the
principal risks are being managed appropriately and consistently
with the target risk appetite. The set of principal risks should
not be considered as an exhaustive list of all the risks the Group
faces.
Risk and description Mitigating actions
Industry dynamics
The commercial viability
of the industry and business * Continuous improvement in annual strategic reviews,
model we operate may change business planning, budgeting and forecasting
significantly as a result processes to enable and drive efficient and effective
of political action, economic execution of strategy
factors, societal pressures,
regulatory interventions
or changes to participants * Growth and expansion in existing markets with new
in the value chain of products and in new therapeutic areas
the industry.
* Portfolio management programmes to focus on strategic
products that support revenue, profit and margin
targets
* Development of capacity and diversification of
capability through differentiated technology
* Capital investment in the countries in which we
operate to ensure continued market access
* Active product life cycle and pricing management
* Continuous alignment of commercial and R&D
organisations to identify market opportunities and
meet demand through internal portfolio
* Collaboration with external partners for development
and in-licensing partnerships
* Leveraging the quality, reliability and flexibility
of our manufacturing facilities for partnerships
(such as contract manufacturing)
* Working with a broad range of customers and expanding
our relationships to cover new customers and
purchasing models, eg Civica Rx in the US
-------------------------------------------------------------
Product Pipeline
Selecting, developing
and registering new products * Selection process for new pipeline products with
that meet market needs commercial teams established and operating
and are aligned with Hikma's effectively
strategy to provide a
continuous source of future
growth * Optimised and standardised management of pipeline
development cycle
* Continuous improvement of strategic oversight of
pipeline delivery through dedicated global project
management office
* Bolstered pipeline through business development deals
* Developed strategic planning tool to manage the
pipeline projects aligning commercial, finance,
regulatory, legal, and R&D
* Established strategic partnerships to introduce new
technologies in our regions to expand the pipeline
* Recruited new talent and developed internal
capabilities
* Developed programme to improve utilisation of R&D
sites to optimise internal network capabilities
* Established R&D procurement function to improve
management of sourcing, quality and reliability for
R&D projects
-------------------------------------------------------------
Organisational development
Developing, maintaining
and adapting organisational * Strengthened teams with key talent appointed to fill
structures, management strategic regional and global positions
processes and controls,
and talent pipeline to
enable effective delivery * Implemented a new grading structure and initiated
by the business in the standardisation of job descriptions across the
face of rapid and constant organisation
internal and external
change.
* Drove standardisation of HR processes through
Group-wide human capital management system and
establishment of shared services hubs
* Established flexible working approaches to support
and enable employees as a result of disruption from
the COVID-19 pandemic
* Deployed variety of enhanced learning materials to
support employees through the organisation-wide
learning management system
-------------------------------------------------------------
Reputation
Building and maintaining
trusted and successful * Coordinated COVID-19 pandemic communication programme
partnerships with our to enable delivery of key messages to employees and
stakeholders relies on external stakeholders using different channels and
developing and sustaining platforms
our reputation as one
of our most valuable assets.
* Internal and external monitoring and management of
issues that may impact reputation (including complex
business and stakeholder environment related to drug
pricing, and the manufacture, sale and distribution
of opioid products)
* Established and developed strategic industry and
community partnerships
* Deployed internal communication programmes to support
employee engagement
-------------------------------------------------------------
Ethics and compliance
Maintaining a culture
underpinned by ethical * Board-level oversight from the Compliance,
decision making, with Responsibility and Ethics Committee
appropriate internal controls
to ensure staff and third
parties comply with our * Code of Conduct approved by the Board and delivered
Code of Conduct, associated to all employees
policies and procedures,
as well as all applicable
legislation. * Automated third-party due diligence and oversight
programme implemented
* Policies and procedures developed to ensure
compliance with new laws and regulations, including
US pharmaceutical pricing transparency, California
Consumer Privacy Act
* Active participation in international anti-corruption
initiatives
* Updated compliance programmes eg to adapt to COVID-19
pandemic related restrictions on salesforce access to
healthcare professionals, data privacy, and other
areas
-------------------------------------------------------------
Information and cyber security, technology and infrastructure
Ensuring the integrity,
confidentiality, availability * Industry-standard information security solutions and
and resilience of data, best practice processes adopted and adapted for local
securing information stored and Group requirements
and/or processed internally
or externally from cyber
and non-cyber threats, * Tailored Group-wide information security framework
maintaining and developing continuously enhanced to account for increase and
technology systems that changes in cyber risk
enable business processes,
and ensuring infrastructure
supports the organisation * Cyber security metrics defined to monitor the
effectively. evolving threats and update controls
* Employee communication initiatives increased with
greater emphasis on general and targeted risk areas
(eg phishing awareness)
* Group-wide programme established to coordinate
strategic remediation of cyber audit findings
* Board conducted a deep dive review of the information
security programme (see page 75)
* New Chief Information Officer appointed
* Continued roll-out of enterprise-wide standardisation
initiative incorporating data management and access
control
-------------------------------------------------------------
Legal, regulatory and intellectual property
Complying with laws and
regulations, and their * Continuous assessment of developments in legal and
application. Managing regulatory frameworks and impact on the organisation
litigation, governmental
investigations, sanctions,
contractual terms and * Developed and updated policies and procedures in
conditions and adapting response to changes in the risks facing the Group
to their changes while
preserving shareholder
value, business integrity * Internal communication and training to raise
and reputation. awareness, ensure understanding and build a
compliance culture across the organisation
* Delivered new training programmes covering antitrust,
international sanctions and the failure to prevent
the facilitation of tax evasion
* Managing complex litigation activity related to the
manufacture, sale and distribution of opioid products
* Provided oversight on pricing committees assessing
price increase to ensure thorough assessment of
business needs
* Ongoing assessment and monitoring of general
litigation activity in US pharmaceutical environment
* External counsel engaged for the provision of
independent specialist advice
* Controls and procedures implemented to address risk
of potential IP litigation in jurisdictions where
Hikma markets its products
-------------------------------------------------------------
Inorganic growth
Identifying, accurately
pricing and realising * Continuous improvement of procedures for target
expected benefits from identification, valuation, due diligence, transaction
acquisitions or divestments, execution and integration
licensing, or other business
development activities.
* Aligned business development practices across the
businesses
* Extensive due diligence of each acquisition in
partnership with external support in order to
strategically identify, value, and execute
transactions
* The Board spends a significant amount of time
reviewing major acquisitions proposed by the
Executive Committee to ensure strategic alignment
* Post-acquisition performance (financial and
non-financial) monitored closely to ensure
integration and delivery on business plan
* Post-transaction reviews highlight opportunities to
improve effectiveness of processes
-------------------------------------------------------------
Active pharmaceutical ingredient (API) and third-party risk management
Maintaining availability
of supply, quality and * Applied rigorous selection process for API suppliers
competitiveness of API and focus on building long-term supply contracts and
purchases and ensuring strategic partnerships
proper understanding and
control of third-party
risks. * Continued to implement strategy for continuity of API
supply for high-value products through alternative
API suppliers, stocking strategies, and supply chain
modelling
* Ensured continuity of supply for our products through
collaboration with suppliers to absorb COVID-19
pandemic-related disruptions
* Developed capabilities of vertically integrated plant
in Jordan to synthesise selected strategic APIs
* Implemented enhanced third-party due diligence
process to reinforce vendor qualification process
* Enhanced management of inventory levels to increase
resilience of our supply chain
* Established remote audit and monitoring process for
API third-party suppliers due to travel constraints
-------------------------------------------------------------
Crisis response and business continuity
Preparedness, response,
continuity and recovery * Coordinated activation, structure and processes for
from disruptive events, COVID-19 incident response teams. See 'Our response
such as natural catastrophe, to COVID-19' on pages 10 and 11 for more details.
economic turmoil, operational
issues, pandemic, political
crisis, and regulatory * Established crisis and continuity management
intervention. programme to continue implementation of
organisational resilience framework
* Rolled out crisis management training to c.8,000
employees to develop capability across the Group
* Corporate insurance programme alignment to ensure
appropriate coverage of high-impact, lowlikelihood
events
-------------------------------------------------------------
Product quality and safety
Maintaining compliance
with current Good Practices * Hikma Quality Council provides oversight and shares
for Manufacturing (cGMP), best practice across the Group
Laboratory (cGLP), Distribution
(cGDP) and Pharmacovigilance
(cGVP) by staff, and ensuring * Quality and safety culture driven throughout the
compliance is maintained organisation by global initiatives, and regularly
by all relevant third reinforced by communication from senior executives
parties involved in these
processes.
* Board conducted a deep dive review of the corporate
quality programme and results of quality compliance
audits
* Global implementation of quality systems that ensure
valid consistent manufacturing processes leading to
the production of quality products
* Facilities maintained as inspection-ready for
assessment by relevant regulators
* Documented procedures continuously improved and
regular staff training
* Oversaw cGMP compliance of third parties supplying
APIs, raw materials, packaging components and other
services
* Maintained environment and health certifications and
drove continuous improvements
* Continuous monitoring of the safety of products to
detect any change to risk-benefit
* Global pharmacovigilance programme in place supported
by globalised systems
-------------------------------------------------------------
Financial control and reporting
Effectively managing income,
expenditure, assets and * Enhanced financial control procedures and increased
liabilities, liquidity, proportion of automated controls
exchange rates, tax uncertainty,
debtor and associated
activities, and in reporting * Continued oversight and control by the financial
accurately, in a timely compliance monitoring programme to ensure adherence
manner and in compliance to Group accounting policies
with statutory requirements
and accounting standards.
* Improved reporting efficiency and reduced reporting
timeframes with new systems and tools
* Enhanced budgeting and forecasting processes with new
systems and tools
* Introduced a more flexible hedging strategy to
mitigate currency and interest rate exposure risks
* Strengthened and restructured Global tax team
* Continued automation of banking processes to minimise
risk of fraud and reduce human error
-------------------------------------------------------------
Appendix 2 - Directors' Responsibility Statement
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the group financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. Additionally, the Financial
Conduct Authority's Disclosure Guidance and Transparency Rules
require the Directors to prepare the group financial statements in
accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union and company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101 "Reduced
Disclosure Framework", and applicable law). In preparing the group
financial statements, the Directors have also elected to comply
with IFRSs, issued by the International Accounting Standards Board
(IASB).
Under company law, Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of the
profit or loss of the group for that period. In preparing the
financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- state whether for the group and company, international
accounting standards in conformity with the requirements of the
Companies Act 2006 and, for the group, international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union and IFRSs issued by
IASB have been followed for the group financial statements and
United Kingdom Accounting Standards, comprising FRS 101 have been
followed for the company financial statements, subject to any
material departures disclosed and explained in the financial
statements;
- make judgements and accounting estimates that are reasonable and prudent; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and company
will continue in business
The Directors are also responsible for safeguarding the assets
of the group and company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group's and
company's transactions and disclose with reasonable accuracy at any
time the financial position of the group and company and enable
them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the IAS
Regulation.
The Directors are responsible for the maintenance and integrity
of the company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Directors' confirmations
The Directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the group's
and company's position and performance, business model and
strategy.
Each of the Directors, whose names and functions are listed in
Directors' report confirm that, to the best of their knowledge:
- the group financial statements, which have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and, international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union and IFRSs issued
by IASB, give a true and fair view of the assets, liabilities,
financial position and profit of the group;
- the company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS
101, give a true and fair view of the assets, liabilities,
financial position and profit of the company; and
- the Annual Report and financial statements includes a fair
review of the development and performance of the business and the
position of the group and company, together with a description of
the principal risks and uncertainties that it faces.
On behalf of the Board
Said Darwazah Sigurdur Olafsson
Executive Chairman Chief Executive Officer
24 February 2021 24 February 2021
Appendix 3 - Related Party Transactions
Transactions between Hikma Pharmaceuticals PLC (Hikma) and its
subsidiaries (together, the Group) have been eliminated on
consolidation and are not disclosed in this Note. Transactions
between the Group and its joint ventures and other related parties
are disclosed below.
Trading transactions:
During the year ended 31 December 2020, the Group entered into
the following transactions with related parties:
Boehringer Ingelheim GmbH (BI): was previously a related party
of Hikma as until 22 June 2020 it owned 16.5% of the share capital
of Hikma, controlled 11.8% of the voting capital of Hikma and had
the right to appoint an independent Director of Hikma. The
independent Director appointed by BI was also a senior executive of
BI.
On 22 June 2020, BI announced its intention to exit in full its
investment in Hikma. BI sold all of its stake (40 million ordinary
shares) in Hikma, Hikma bought back 12.8 million shares on 23 June
2020 and holds them in treasury (Note 32). As of 31 December 2020,
BI did not hold any shares in Hikma.
On 25 June 2020, following the BI divestiture, the independent
Director appointed by BI on Hikma's board resigned with immediate
effect in accordance with the shareholder agreement between Hikma
and BI.
The Group total sales to BI during the year amounted to $62.2
million (2019: $64.7 million) and the Group total purchases from BI
during the year amounted to $1 million (2019: $1 million). As at
the year end, the amount owed from BI to the Group was $12 million
(2019: $7.3 million). Additionally, balances arising from the
acquisition of the Columbus business from BI relating to contingent
consideration are disclosed in Notes 24, 28 and 31.
Darhold Limited (Darhold): is a related party of Hikma because
three Directors of Hikma jointly constitute the majority of
Directors and shareholders (with immediate family members) in
Darhold and because Darhold owns 24.66% (2019: 24.76%) of the share
capital and 26.03% (2019: 24.76%) voting capital of Hikma. Other
than dividends (as paid to all shareholders), there were no
transactions between the Group and Darhold Limited during the
year.
HikmaCure Limited (HikmaCure): is a related party of Hikma
because HikmaCure is a 50:50 joint venture (JV) with MIDROC
Pharmaceuticals Limited (MIDROC). In 2017, Hikma and MIDROC Group
agreed not to proceed with the HikmaCure joint venture and to
liquidate it. As part of the liquidation process the joint venture
granted two loans of $2 million each to the Group and MIDROC Group.
In 2020, the liquidation process progressed and the loans were
settled against the initial investment amounts, liquidation is
expected to be finalised in 2021.
HMS Holdings SAL (HMS): is a related party of Hikma because HMS
is owned by the family of two Directors of Hikma and HMS held
1,350,000 Ordinary Shares (0.55% of the share capital and 0.59% of
the voting capital) in Hikma until 13 May 2020 when it disposed of
the entire holding. Other than the final dividend for 2019 (as paid
to all eligible shareholders on 7 May 2020), there were no
transactions between the Group and HMS during the year.
Hubei Haosun Pharmaceutical Co. Ltd (Haosun): is a related party
of Hikma because the Group holds a non-controlling interest of 49%
in the joint venture (JV) with Haosun (2019: 49%). During 2020,
total purchases from Haosun were $1 million (2019: $3 million). At
31 December 2020, the amount owed from Haosun to the Group amounted
to $nil (2019: $0.2 million) and the amount owed from the Group to
Haosun amounted to $0.1 million (2019: $nil).
Labatec Pharma (Labatec): is a related party of the Group
because Labatec is owned by the family of two Directors of Hikma.
During 2020, total Group sales to Labatec amounted to $3 million
(2019: $2 million), and total Group purchases amounted to $0.6
million (2019: $0.3 million). As at the year end, the amount owed
by Labatec to the Group was $0.7 million (2019: $0.4 million).
Al Tibbi: is a related party of the Group because its jointly
controlled by a direct relation to a senior executive member of the
Group and Dash Ventures, in which two Directors of the Group have a
controlling interest, During 2020, the Group requested that Al
Tibbi provide patient referral services in response to COVID
measures in Jordan. Total transactions with Al Tibbi was $0.4
million (2019: $nil) and the amount owed by the Group to Al Tibbi
was $0.2 million (2019: $nil).
Remuneration of key management personnel
The remuneration of the key management personnel (comprising the
Executive Directors, Non-Executive Directors and the senior
management as set out in the Governance report) of the Group is set
out below in aggregate for each of the categories specified in IAS
24 'Related Party Disclosures'. Further information about the
remuneration of the individual Directors is provided in the audited
part of the Remuneration Committee report on pages 83 to 104.
2020 2019
$m $m
Short-term employee benefits 19.9 16.3
----- -----
Share-based payments 11.1 9.5
----- -----
Post-employment benefits 0.3 0.2
----- -----
Other benefits 0.7 0.8
----- -----
32.0 26.8
----- -----
About Hikma
Hikma helps put better health within reach every day for
millions of people in more than 50 countries around the world. For
more than 40 years, we've been creating high-quality medicines and
making them accessible to the people who need them. Headquartered
in the UK, we are a global company with a local presence across the
United States (US), the Middle East and North Africa (MENA) and
Europe, and we use our unique insight and expertise to transform
cutting-edge science into innovative solutions that transform
people's lives. We're committed to our customers, and the people
they care for, and by thinking creatively and acting practically,
we provide them with a broad range of branded and non-branded
generic medicines. Together, our 8,600 colleagues are helping to
shape a healthier world that enriches all our communities. We are a
leading licensing partner, and through our venture capital arm, are
helping bring innovative health technologies to people around the
world. For more information, please visit: www.hikma.com
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END
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