TIDMHIK
RNS Number : 2242W
Hikma Pharmaceuticals Plc
15 April 2019
Hikma Pharmaceuticals PLC
(the 'Company')
Publication of 2018 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 2018 (the '2018 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 15 April 2019:
-- 2018 Annual Report
-- 2019 Notice of Annual General Meeting
-- Proxy form for the 2019 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 Company's Annual General Meeting will be held at 10:00 am on
Friday 17 May 2019 at Sofitel,
St James, 6 Waterloo Place, London SW14 4AN.
The information included in the unaudited preliminary results
announcement released on 13 March 2018, together with the
information in the Appendices to this announcement which is
extracted from the 2018 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 2018
Annual Report in full. Page and note references in the Appendices
below refer to page and note references in the 2018 Annual
Report.
Enquiries:
Hikma Pharmaceuticals PLC
Peter Speirs
Company Secretary
15 April 2019
Appendix 1 - Principal Risks and Uncertainties
The Group faces risks and uncertainties that could have a
material impact on its earnings and ability to trade in the future.
These are determined via robust assessment considering our risk
context by the Board of Directors with input from executive
management. These risks and uncertainties are set out below. The
contents of this table should not be considered as an exhaustive
list of all the risks and uncertainties the Group faces.
The Board is satisfied that these risks are being managed
appropriately and consistently with the target risk appetite.
Risk and description Mitigating actions
Industry earnings
The commercial viability
of the industry * Securing key talent to manage complex commercial
and business model environment and develop our business
we operate may change
significantly as
a result of political * Growth and expansion in existing markets with new
action, products and in new therapeutic areas
economic factors,
societal pressures,
regulatory interventions * Portfolio management programmes to focus on strategic
or changes to participants products that support revenue, profit and margin
in the value chain targets
of the industry.
* 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 * Align selection process for pipeline products to
new products that ensure optimal use of our expansive global product
meet market needs portfolio with increased focus on specialty products
to provide continuous with high value and differentiation
source of future
growth.
* Strategic oversight of pipeline delivery through
dedicated global project management office
* Product-related acquisitions to bolster pipeline
* Third-party pharmaceutical product specialists
brought in to assist in the development of
manufacturing processes for new generic products
-------------------------------------------------------------
Organisational development
Developing, maintaining
and adapting organisational * Strengthening teams with key talent appointed to fill
structures, management strategic regional and global positions
processes and controls,
and talent pipeline
to * Deployment of Group-wide human capital management
enable effective system
delivery by the
business in the
face of rapid and * Developing global programmes that attract, manage and
constant internal develop talent within the organisation
and external change.
* Ongoing updates to organisation design, structures
and accountabilities to maintain empowerment in
decision-making and bring appropriate level of
governance
-------------------------------------------------------------
Reputation
Building and maintaining
trusting and successful * Internal and external monitoring of issues that may
partnerships with impact reputation
our many stakeholders
relies on developing
and sustaining * Increasing investment in corporate social
our reputation responsibility initiatives including sustainability
as one of our most reporting
valuable assets.
* Establishment and development of strategic industry
and community partnerships
* Communication and engagement programmes on
appropriate use of products
* Strengthening communication and corporate affairs
capabilities in our core geographies
-------------------------------------------------------------
Ethics and compliance
Maintaining a culture
underpinned by * Board level oversight from the Compliance,
ethical decision-making, Responsibility and Ethics Committee (see pages 79 and
with appropriate 80 for details)
internal controls
to ensure staff
and third parties * Code of Conduct approved by the Board, translated
comply with our into seven languages and rolled out to all staff
Code of Conduct,
associated principles
and standards, * Active participation in international anti-corruption
as well as all initiatives
applicable legislation.
* Anti-bribery and corruption, sales and marketing, and
other compliance programmes implemented and monitored
through internal compliance assessments
* Implementation of third-party due diligence and
oversight programme
-------------------------------------------------------------
Information, technology and infrastructure
Ensuring integrity,
confidentiality * IT organisational structure designed to enable
and resilience coordinated, consistent and comprehensive enterprise
of data, securing approach
information stored
and/or processed
internally or externally, * Industry-standard information security solutions and
maintaining and best practice processes adopted and adapted for local
developing technology and Group requirements
systems that enable
business processes,
and in ensuring * Cyber-risk activity monitored and changes implemented
infrastructure as necessary to combat evolving threats
supports the organisation
effectively.
* Partnership established with strategic third parties
to implement and maintain a robust
* Group-wide information security framework
* Investment in enterprise-wide standardisation
initiative incorporating data management, access and
process control, and risk management
-------------------------------------------------------------
Legal, regulatory and intellectual property
Adapting to changes
in laws, regulations * Continuous assessment of developments in legal and
and their application, regulatory frameworks and impact on the organisation
managing litigation,
governmental investigations,
sanctions, contractual * Internal communication and training on policies and
terms and conditions, processes drives awareness and understanding and
and potential business builds a compliance culture
disruptions.
* External advice procured to provide independent
services and ensure highest standards
* Strengthened experience and capability for managing
intellectual property matters
------------------------------------------------------------
Inorganic growth
Identifying, accurately
pricing and/or realising * Extensive due diligence of each acquisition in
expected benefits from partnership with external support, including
acquisitions or divestments, financial and legal advisers, investment banks, and
licensing, or other industry specialists in order to strategically
business development identify, value, and execute transactions
activities.
* Executive Committee review of major acquisitions
before they are considered by the Board
* The Board spends a significant amount of time
reviewing major acquisitions to ensure strategic
alignment
* Dedicated integration project teams led by the
business head responsible
* 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
------------------------------------------------------------
Supply chain and active pharmaceutical ingredient (API) sourcing
Maintaining continuity
of supply of finished * Continuity of API supply maintained for high-value
product and products through alternative API suppliers, stocking
managing cost, quality strategies, and supply chain modelling
and appropriate oversight
of third parties
in our supply chain. * Rigorous selection process for API suppliers and
focus on building long-term supply contracts
* Vertically integrated plant in Jordan to synthesise
selected strategic injectable APIs
* Strengthening trade compliance capability to ensure
compliance and drive efficiency
* Programmes rolled out across the Group to ensure
compliance with serialisation requirements for US,
Europe and MENA
------------------------------------------------------------
Crisis response and continuity management
Preparedness, response,
continuity and recovery * Continued strengthening of central oversight of
from crisis events, systems, processes, and capabilities to enhance our
such as natural catastrophe, Group-wide resilience and crisis preparedness
economic turmoil,
operational issues,
political crisis, * Updated crisis management framework to enhance our
and regulatory intervention. ability to respond effectively to crises, and to
expedite the restoration of critical processes after
disruption
* Identified key third parties involved in preparedness,
response and recovery with updated framework
* Corporate insurance programme aligned to ensure
appropriate coverage of high-impact, low-likelihood
events
--------------------------------------------------------------
Product quality and safety
Maintaining compliance
with current Good * Quality culture driven throughout the organisation by
Practices for global quality initiatives, and regularly reinforced
Manufacturing (cGMP), by communication from senior executives
Laboratory (cGLP),
Distribution (cGDP)
and Pharmacovigilance * Global implementation of quality systems that ensure
(cGVP) by staff, valid consistent manufacturing processes leading to
and ensuring the production of quality products
compliance is maintained
by all relevant third
parties involved * Facilities maintained as inspection-ready for
in these processes. assessment by relevant regulators
* Documented procedures continuously improved and
regular staff training
* Continued environment and health certifications
* Global pharmacovigilance programme in place
--------------------------------------------------------------
Financial control and reporting
Effectively managing
treasury activities, * Extensive financial control procedures implemented
tax position, income, and assessed annually as part of the financial
expenditure, assets compliance monitoring programme
and liabilities,
and debtors, and
reporting accurately * Network of banking partners maintained for lending
and in a timely manner and deposits
in compliance with
statutory requirements
and accounting standards. * 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
12 March 2019
Sigurdur Olafsson
Chief Executive Officer
12 March 2019
Appendix 3 - Related Party Transactions
Related party transactions: Note 40 of the financial statements,
page 162.
Transactions between 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 2018, the Group entered into
the following transactions with related parties:
Boehringer Ingelheim GmbH ('BI'): is a related party of Hikma
because BI owns 16.6% (2017: 16.6%) of the share capital of Hikma,
controls 11.8% (2017: 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 $66.6 million (2017: $79.1 million) and the Group total
purchases from BI amounted to $5.1 million (2017: $10.6 million).
As at the year end, the amount owed from BI to the Group was $18.1
million (2017: $43.8 million). Additionally, balances arising from
the acquisition of the Columbus business from BI relating to
contingent consideration are disclosed in notes 24, 28 and 32.
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 $7.5 million (2017: $11.8 million) and utilisation of
facilities granted by Capital Bank to the Group amounted to $nil
(2017: $nil). The interest income is within the market range.
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 24.85% (2017: 24.93%) 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 (2017:
$2.5 million). During 2017, Hikma and MIDROC agreed not to proceed
with and to liquidate the venture.
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 49.0% interest in the
joint venture (JV) with Haosun (2017: 30.1%). During 2018, total
purchases from Haosun were $2.3 million (2017: $1.4 million). At 31
December 2018, the amount owed from Haosun to the Group amounted to
$0.2 million (2017: $1.6 million). During the year Hikma acquired
an additional stake in Haosun bringing the total ownership to 49.0%
(note 18).
Labatec Pharma ('Labatec'): is a related party of the Group
because Labatec is owned by the family of two directors of Hikma.
During 2018, total Group sales to Labatec amounted to $2.9 million
(2017: $1.8 million). As at the year end, the amount owed by
Labatec to the Group was $0.3 million (2017: $0.3 million).
Remuneration of key management personnel
The remuneration of the key management personnel (comprising the
Executive and Non-Executive Directors and certain of senior
management as set out in the Directors' 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 81 to 104.
2018 2017
$m $m
Short-term employee benefits 17.4 11.0
----- -----
Share-based payments 8 10.2
----- -----
Post-employment benefits 0.1 10.3
----- -----
Other benefits 0.8 0.6
----- -----
26.3 32.1
----- -----
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're 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 8,400 colleagues are helping to
shape a healthier world that enriches all our communities. We are a
leading licensing partner in the MENA region, 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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