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RNS Number : 7902G
Hikma Pharmaceuticals Plc
19 March 2020
 

 

Hikma Pharmaceuticals PLC
(the 'Company')

Publication of 2019 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 2019 (the '2019 Annual Report').

Hard copy versions of the following documents will be sent to those shareholders who have elected to receive paper communication on or about 19 March 2020:

·      2019 Annual Report

·      2020 Notice of Annual General Meeting

·      Proxy form for the 2020 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.

In compliance with Listing Rule 9.6.1 of the UK Financial Conduct Authority ('FCA'), the aforementioned documents will be submitted to the UK Listing Authority and will be available for public inspection at the National Storage Mechanism ('NSM')  www.morningstar.co.uk/uk/NSM

The information included in the unaudited preliminary results announcement released on 27 February 2020, together with the information in the Appendices to this announcement which is extracted from the 2019 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 2019 Annual Report in full. Page and note references in the Appendices below refer to page and note references in the 2019 Annual Report.

The Company's Annual General Meeting ('AGM') will be held at 10:00 am on Thursday 30 April 2020 at Sofitel, St James, 6 Waterloo Place, London SW14 4AN.

n light of the Covid-19 situation, the Board is putting in place arrangements for shareholders who may not be able to attend the meeting in person.  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.uk.com) - these questions will be answered at the meeting in the normal way.

Telephone

1.   Dial the appropriate telephone number from the list below.

2.   Enter the meeting ID (577 822 004) followed by #. 

3.   There is no participant ID, therefore, press #.

4.   You will automatically be placed on mute and will not be able to speak

 

UK: +442038924456

Jordan: +96265802909

US: +16142414100

Other international numbers available: https://hikma.zoom.us/zoomconference 

Meeting ID: 577 822 004

 

Web-Based Access

1.   Open a web browser, ideally Chrome

2.   Enter the web address https://hikma.zoom.us/j/577822004 

3.   Choose to 'Join with Computer Audio'

4.   You will automatically be placed on mute and will not be able to speak

 

Skype Access

1.   Open a web browser

2.   Enter the web address https://hikma.zoom.us/skype/577822004 

3.   Choose to 'Join Zoom Meeting'

4.   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.uk.com

Enquiries:

Hikma Pharmaceuticals PLC                                      

Peter Speirs


Company Secretary


19 March 2020



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. 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 model we operate may change significantly as a result of political action, economic factors, societal pressures, regulatory interventions or changes to participants in the value chain of the industry.

·      Growth and expansion in existing markets with new products and in new

·      therapeutic areas

·      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

Product Pipeline

Identifying, developing and registering new products that meet market needs and are aligned with Hikma's strategy
to provide continuous source of future growth.

·      Established Chief Scientific Officer role and globalised R&D function

·      Integrated selection process for pipeline products with commercial teams

·      Optimise use of our expansive global product portfolio with increased focus on

·      specialty products with high value and differentiation

·      Strategic oversight of pipeline delivery through dedicated global project

·      management office

·      Product-related acquisitions to bolster pipeline

 

Organisational development

Developing, maintaining and adapting organisational structures, management processes and controls, and talent pipeline to enable effective delivery by the business in the face of rapid and constant internal and external change.

·      Strengthened teams with key talent appointed to fill strategic regional and

·      global positions

·      Embedded Group-wide human capital management system

·      Developed global programmes that attract, manage and develop talent within

·      the organisation, such as the Lead Forward programme (see page 41 for details)

·      Ongoing updates to organisation design, structures and accountabilities to maintain empowerment in decision-making and bring appropriate level of governance

Reputation

Building and maintaining trusted and successful partnerships with our stakeholders relies on developing and sustaining our reputation as one of our most valuable assets.

·      Active external communications, and investor engagement programme, to build awareness of Group strategy and purpose

·      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)

·      Independent external review of Corporate Social Responsibility (CSR) activities

·      to support continuous improvement and effectiveness of programme

·      Establishment and development of strategic industry and community partnerships

·      Deployment of internal communication programmes to support employee engagement

·      Continuing to strengthen communication and corporate affairs capabilities

 



 

Ethics and compliance

Maintaining a culture underpinned by ethical decision-making, with appropriate internal controls to ensure staff and third parties comply with our Code of Conduct, associated policies and procedures, as well as all applicable legislation.

·      Board level oversight from the Compliance, Responsibility and Ethics Committee

·      (see page 73 for details)

·      Code of Conduct approved by the Board and delivered to all employees

·      Initiated programme to automate third-party due diligence and oversight programme

·      Developed and implemented policies and procedures to ensure compliance with new laws and regulations, including US pharmaceutical pricing transparency, California Consumer Privacy Act

·      Active participation in international anti-corruption initiatives

·      Update and implementation of compliance programmes, including anti-bribery and corruption, sales and marketing practices, data privacy, and other areas

Information and cyber security, technology and infrastructure

Ensuring integrity, confidentiality, availability and resilience of data, securing information stored and/or processed internally or externally from cyber and non-cyber threats, maintaining and developing technology systems that enable business processes, and ensuring infrastructure supports the organisation effectively.

·      IT organisational structure designed to enable coordinated, consistent and comprehensive enterprise approach

·      Industry-standard information security solutions and best practice processes adopted and adapted for local and Group requirements

·      Cyber-risk activity monitored and controls updated to combat evolving threats

·      Partnership established with strategic third parties to implement and maintain a robust Group-wide information security framework

·      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 application. Managing litigation, governmental investigations, sanctions, contractual terms and conditions and adapting to their changes while preserving shareholder values, business integrity and reputation.

 

·      Appropriate response to complex litigation activity related to the manufacture, sale and distribution of opioid products

·      Rigorous assessment and monitoring of litigation activity in US pharmaceutical environment

·      Continuous assessment of developments in legal and regulatory frameworks and impact on the organisation

·      Internal communication and training on policies and processes drives awareness and understanding and builds a compliance culture

·      External advice procured to provide independent services and ensure highest standards

 



 

Inorganic growth

Identifying, accurately pricing and realising expected benefits from acquisitions or divestments, licensing,

or other business development activities.

·      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 competitiveness of API purchases and ensuring proper understanding and control of third-party risks.

·      Continuity of API supply maintained for high-value products through alternative API suppliers, stocking strategies, and supply chain modelling

·      Rigorous selection process for API suppliers and focus on building long-term supply contracts

·      Vertically integrated plant in Jordan to synthesise selected strategic APIs

·      Benchmarking, price negotiation and alternate sourcing programmes ensure competitiveness

Crisis response and business continuity

Preparedness, response, continuity and recovery from crisis events, such as natural catastrophe, economic turmoil, operational issues, political crisis, and regulatory intervention.

·      Continued strengthening of central oversight of systems, processes, and capabilities

·      to enhance our Group-wide resilience and crisis preparedness

·      Implemented crisis management framework to enhance our ability to respond effectively to crises, and to expedite the restoration of critical processes after disruption (example activations include: Jordan warehouse fire incident, COVID-19 outbreak)

·      Established crisis response training programme to develop employee capability across the Group

·      Identified key third parties involved in preparedness, response and recovery

·      Corporate insurance programme aligned to ensure appropriate coverage of high-impact, low-likelihood events

 



 

Product quality and safety

Maintaining compliance with current Good Practices for Manufacturing (cGMP), Laboratory (cGLP), Distribution (cGDP) and Pharmacovigilance (cGVP) by staff, and ensuring compliance is maintained by all relevant third parties involved in these processes.

·      Establishment of a Hikma Quality Council (see page 7) to provide oversight and share

·      best practice across the Group

·      Quality and safety culture driven throughout the organisation by global initiatives, and regularly reinforced by communication from senior executives

·      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

·      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

Financial control and reporting

Effectively managing income, expenditure, assets and liabilities, liquidity, exchange rates, tax uncertainty, debtor and associated activities, and in reporting accurately, in a timely manner and in compliance with statutory requirements and accounting standards.

·      Extensive financial control procedures implemented, including increased proportion of automated controls, assessed annually as part of the financial compliance monitoring programme

·      Network of banking partners maintained for lending and deposits

·      Management monitors debtor payments and takes precautionary measures and action where necessary

·      Selected hedging of exchange rate and interest rate exposure

·      External advice to help manage tax exposures and upgraded internal tax control systems

 



Appendix 2 - Directors' Responsibility Statement

Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.

 

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 Financial Reporting Standards (IFRSs) as adopted by 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 the 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 and company for that period. In preparing the financial statements, the directors are required to:

 

·      select suitable accounting policies and then apply them consistently

·      state whether applicable IFRSs as adopted by 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

·      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 recordsthat are sufficient to show and explain the group 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.

 

We confirm to the best of our knowledge:

·      the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of Hikma and the undertakings included in the consolidation taken as a whole

·      the Strategic report includes a fair review of the development and performance of the business and the position of Hikma and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face

·      the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess Hikma's performance, business model and strategy

 

 

By order of the Board

Said Darwazah
Executive Chairman
26 February 2020

Sigurdur Olafsson
Chief Executive Officer
26 February 2020



Appendix 3 - Related Party Transactions

39. Related parties

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 associates, joint ventures and other related parties are disclosed below.

Trading transactions:
During the year ended 31 December 2019, the Group entered into the following transactions with related parties:

Boehringer Ingelheim GmbH (BI): is a related party of Hikma because BI owns 16.5% (2018: 16.6%) of the share capital of Hikma, controls 11.8% (2018: 11.8%) of the voting capital of Hikma, has the right to appoint a director of Hikma and a senior executive of BI holds a directorship of Hikma. The Group total sales to BI amounted to $64.7 million (2018: $66.6 million) and the Group total purchases from BI amounted to $1 million (2018: $5.1 million). As at the year end, the amount owed from BI to the Group was $7.3 million (2018: $18.1 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.

Capital Bank, Jordan: is a related party of Hikma because one director of Hikma is the founder and former Chief Executive Officer of Capital Bank. At the year end, total cash balance at Capital Bank was $8 million (2018: $7.5 million) and utilisation of facilities granted by Capital Bank to the Group amounted to $nil (2018: $nil).The interest expenses/commissions amounted to $0.8 million (2018: $0.7 million). The interest income is within market rate.

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 24.76% (2018: 24.85%) of the share and 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). Hikma and MIDROC have invested in Hikmacure in equal proportions of $2.5 million each in cash (2018: $2.5 million). During 2017 Hikma and MIDROC have agreed not to proceed with and to liquidate the venture. During 2018, Hikmacure granted two loans of $2.3 million each to the Group and MIDROC.

HMS Holdings SAL (HMS): is a related party of Hikma because HMS is owned by the family of two directors of Hikma. Other than dividends (as paid to all shareholders), 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% joint venture (JV) with Haosun (2018: 49%). During 2019, total purchases from Haosun were $3 million (2018: $2.3 million). At 31 December 2019, the amount owed from Hubei Haosun Pharmaceutical to the Group amounted to $0.2million (2018: $0.2 million).

Labatec Pharma (Labatec): is a related party of the Group because Labatec is owned by the family of two directors of Hikma. During 2019, total Group sales to Labatec amounted to $2 million (2018: $2.9 million), and total Group purchases amounted to $0.3 million (2018: $nil). As at the year end, the amount owed by Labatec to the Group was $0.4 million (2018: $0.3 million).

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 Governances' 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 75 to 103.


2019

$m

2018

$m

Short-term employee benefits

16.3

17.4

Share-based payments

9.5

8

Post-employment benefits

0.2

0.1

Other benefits

0.8

0.8


26.8

26.3

 

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


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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