Source - LSE Regulatory
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 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.

·      Continuous improvement in annual strategic reviews, business planning, budgeting and forecasting processes to enable and drive efficient and effective execution of strategy

·      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

·      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 that meet market needs and are aligned with Hikma's strategy to provide a continuous source of future growth

·      Selection process for new pipeline products with commercial teams established and operating effectively

·      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 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

·      Implemented a new grading structure and initiated standardisation of job descriptions across the organisation

·      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 partnerships with our stakeholders relies on developing and sustaining our reputation as one of our most valuable assets.

·      Coordinated COVID-19 pandemic communication programme to enable delivery of key messages to employees and external stakeholders using different channels and platforms

·      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 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

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

·      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 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.

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

·      Tailored Group-wide information security framework continuously enhanced to account for increase and changes in cyber risk

·      Cyber security metrics defined to monitor the 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 application. Managing litigation, governmental investigations, sanctions, contractual terms and conditions and adapting to their changes while preserving shareholder value, business integrity and reputation.

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

·      Developed and updated policies and procedures in response to changes in the risks facing the Group

·      Internal communication and training to raise 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 expected benefits from acquisitions or divestments, licensing, or other business development activities.

·      Continuous improvement of procedures for target identification, valuation, due diligence, transaction execution and integration

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

·      Applied rigorous selection process for API suppliers and focus on building long-term supply contracts and strategic partnerships

·      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 from disruptive events, such as natural catastrophe, economic turmoil, operational issues, pandemic, political crisis, and regulatory intervention.

·      Coordinated activation, structure and processes for COVID-19 incident response teams. See 'Our response to COVID-19' on pages 10 and 11 for more details.

·      Established crisis and continuity management 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 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.

·      Hikma Quality Council provides oversight and shares best practice across the Group

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

·      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 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.

·      Enhanced financial control procedures and increased proportion of automated controls

·      Continued oversight and control by the financial compliance monitoring programme to ensure adherence to Group accounting policies

·      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

Executive Chairman

24 February 2021

 

Sigurdur Olafsson

Chief Executive Officer

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

$m

2019

$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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