TIDMHIK
RNS Number : 4984U
Hikma Pharmaceuticals Plc
07 April 2016
Hikma Pharmaceuticals PLC
2015 Annual Report & Accounts and Notice of 2016 Annual
General Meeting
In compliance with Listing Rule 9.6.1, Hikma Pharmaceuticals PLC
has submitted copies of the documents listed below to the National
Storage Mechanism and will shortly be available for inspection at
http://www.hemscott.com/nsm.do or http://www.morningstar.co.uk:
-- Annual Report & Accounts 2015
-- Notice of 2016 Annual General Meeting
-- Proxy form for the 2016 Annual General Meeting
Copies of the Annual Report and Notice of Meeting will also be
available on our website www.hikma.com. Hard copies are available
by writing to the Company Secretary, Hikma Pharmaceuticals PLC, 13
Hanover Square, London W1S 1HW or by attending the office in
person.
The Annual General Meeting will be held at 11:00 am on Thursday
12 May 2016 at The Westbury, Bond Street, Mayfair, London W1S
2YF.
In accordance with DTR 6.3.5, this announcement contains
information in the attached Appendices of the principal risk
factors (Appendix 1), a responsibility statement (Appendix 2) and
details of related party transactions (Appendix 3) which has been
extracted in full unedited text from the Annual Report and Accounts
2015. Where page numbers and notes are mentioned in the Appendix
these refer to page numbers and notes in the Annual Report and
Accounts 2015.
Enquiries:
Hikma Pharmaceuticals PLC
Peter Speirs, Company Secretary Tel: +44 (0)20 7399 2760
About Hikma
Hikma Pharmaceuticals PLC is a fast growing pharmaceutical group
focused on developing, manufacturing and marketing a broad range of
both branded and non-branded generic and in-licensed products.
Hikma's operations are conducted through three businesses:
"Branded", "Injectables" and "Generics" based primarily in the
Middle East and North Africa ("MENA") region, where it is a market
leader, the United States and Europe. In 2015, Hikma achieved
revenues of $1,440 million and profit attributable to shareholders
of $252 million.
Appendix 1 - Principal Risks and Uncertainties
During the year the Board also conducted a detailed review of
all the principal risks in the businesses, looking in detail at the
nature and scale of the risks being taken and the mitigation
approaches. The Board considers that it is possible that more than
one principal risk could escalate at any one point in time. It was
satisfied that these risks are being managed appropriately and
consistently with the target risk appetite.
The Group faces risks and uncertainties that could have a
material impact on its earnings and ability to trade in the future.
These principal risks are set out below.
Risk Description Mitigation and control
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Product
quality * Situations resulting in poor manufacturing and * Global quality programme which leads the
processes quality of products have the potential to manufacturing processes in all sites
Executive lead to:
responsibility:
Senior Vice * The 11 FDA approved facilities are regularly assessed
President o Harm to end users, by the regulator
for Technical manufacturing personnel
Affairs and the environment
resulting in liability * Documented procedures are continuously improved and
and reputational staff receive training on those procedures on a
issues regular basis
o Regulatory action
that could result
in the closure * Global quality issues team with extensive experience
of facilities and of implementing corrective action when issues arise
consequential loss
of opportunity
and potential failure * Global product liability insurance and crisis
to supply obligations management team
o Delayed or denied
approvals for new
products * Adopt a "quality by design" approach for all of our
o Product recalls manufacturing facilities
* Continued environment and health certifications
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
API sourcing
* API and raw materials represent one of the Group's * Maintaining alternative API suppliers for each of the
Executive largest cost components. As is typical in the Group's products, where possible
responsibility: pharmaceuticals industry, a significant proportion of
Director the Group's API requirements is provided by a small
of Corporate number of API suppliers * API suppliers are carefully selected and the Group
API & Strategic endeavours to build long-term partnerships with
Sourcing exclusive supply
* There is a risk that it will not be possible to
secure or maintain adequate levels of API supplies in
the future * The Group has a dedicated plant in Jordan that can
synthesise strategic and difficult to procure
injectable APIs where appropriate
* Regulatory approval of a new supplier can be lengthy
and supplies may be disrupted if the Group is forced
to replace a supplier which failed to meet applicable * Utilising supply chain models to maintain adequate
regulatory standards or terminated its arrangements API levels
with the Group
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
MENA & emerging
markets * Hikma operates in MENA and emerging markets which * Geographic diversity reduces the impact of issues
have high levels of political and social instability arising in one jurisdiction with extensive experience
Executive as well as economic and regulatory fluctuations that of operating in these environments and developing
responsibility: can result in a wide variety of business disruptions opportunities from change
Head of in those markets for a substantial period of time
MENA
* Strong regulatory team that proactively monitors
possible regulatory changes
* Building and nurturing local business relationships
whilst upholding the highest ethical standards
* Monitoring and reviewing economic developments
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
New product
pipeline * A significant proportion of Group profits derive from * Internal marketing and business development
a relatively small number of higher margin products departments monitor and assess the market for arising
Executive opportunities
responsibility:
VP of Corporate
Development * Expansive global product portfolio with increased
and VP of focus on high value products
Active
Pharmaceutical
Ingredients * Experienced internal regulatory teams developing
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products and overseeing joint venture activities
* Product related acquisitions (e.g. acquisition of
Roxane)
* Third party pharmaceutical product specialists are
assisting in the development of manufacturing
processes for new generic products where the patent
has recently expired
* Strong R&D teams that are assisted centrally in the
implementation and management of projects
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Industry
earnings * The dynamics of the generic pharmaceutical industry * Operating in wide range of countries, products and
includes numerous volatile elements such as therapeutic areas
Executive regulatory interventions, drug approval patterns,
responsibility: competitor strategies and pricing that are difficult
Divisional to anticipate and may affect profitability * Diversification of manufacturing capability and
Business capacity
Heads
* Active product life cycle and pricing management in
the MENA region
* Identify market opportunities and develop appropriate
pricing strategies whilst responsibly applying price
charges in the US
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Acquisitions
* The Group strategy is to pursue value adding * The mergers and acquisitions team undertake extensive
Executive acquisitions to expand the product portfolio, acquire due diligence of each acquisition, including legal,
responsibility: manufacturing capabilities and expand in existing and financial, compliance and commercial, and utilise
Chief Strategy emerging markets. There is risk of misjudging key multiple valuation approaches in assessing target
and Corporate elements of an acquisition or failing to integrate acquisition value
Development the assets, particularly where they are distressed
Officer
* Executive Committee reviews major acquisitions before
* An acquisition of a large-scale target may entail they are considered by the Board
financing-related risks and operating expenses and
significantly increase the Group's leverage if
financed with debt * The Board is willing and has demonstrated its ability
to refuse acquisitions where it considers the price
is too high
* Dedicated integration project teams are assigned for
the acquisition, which are led by the business head
responsible for proposing the opportunity. Following
the acquisition of a target, the finance team, the
management team and the Audit Committee closely
monitor its financial and non-financial performance
* A variety of funding options are available to the
Group to finance acquisitions
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Compliance
* The pharmaceutical industry and certain MENA markets * Board level - Compliance, Responsibility and Ethics
Executive are considered to be higher risk in relation to sales Committee
responsibility: practices. Improper conduct by employees could
Chief seriously damage the reputation and licence to do
Compliance business * Code of Conduct approved by the Board, translated
Officer into seven languages and signed by all employees
* ABC compliance programme monitored by the CREC
* 2,200 employees received ABC compliance training in
2014 and in 2015
* Sales and marketing and other ABC compliance policies
and procedures are created, updated and rolled out
* Active participation in international anti-corruption
initiatives (e.g. PACI, UN Global Compact)
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Financial
* The Group is exposed to a variety of financial risks * Extensive financial control procedures have been
Executive similar to most major international manufacturers implemented andare assessed annually as part of the
responsibility: such as liquidity, exchange rates, tax uncertainty internal audit programme
Chief Financial and debtor default
Officer
* A network of banking partners is maintained for
lending and deposits
* Management monitors debtor payments and takes action
where necessary
* Where it is economic and possible to do so, the Group
hedges its exchange rate and interest rate exposure
* Management obtains external advice to help manage tax
exposures and has upgraded internal tax control
systems
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Legal,
intellectual * The Group is exposed to a variety of legal, IP and * Expert internal departments that enhance policies,
property regulatory risks similar to most relevant major processes, embed compliance culture, raise awareness
and regulatory international industries such as litigation, and train staff
investigations, sanctions and potential business
Executive disruptions
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responsibility: * First class expert external advice is procured to
General provide independent services and ensure highest
Counsel standards
* Board of Directors and management provide leadership
and take action as necessary
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Information
technology * If information and data are not adequately secured * Utilise appropriate levels of industry-standard
and protected (data security, access controls), thi information security solutions for critical systems
Executive s
responsibility: could result in:
Chief * Continue to stay abreast of cyber-risk activity and,
Information where necessary, implement changes to combat this
Officer o Increased internal/
external security
threats * Improved alignment between IT and business strategy
o Compliance and
reputational damages
o Regulatory and
legal litigation
in case of failure
to manage personal
data
o Reduced information
accountability
due to limited
sensitive data
access controls
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Organisational
growth * The fast growing pace of the organisation carries the * Keeping our organisation structures and
inherent risk to maintaining adequate talent accountabilities under review, and maintaining the
Executive acquisition strategies, organisational structure and flexibility to make changes smoothly as requirements
responsibility: or/management processes that serve the changing needs change
Corporate of the organisation. In turn, this may affect other
VP of HR risks within the Company
and MENA * Employ HR programmes that attract, manage and develop
Operations talent within the organisation
* Continuously upgrade management processes that meet
so that they become and remain the standard of a
global company of our size
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Reputational
* Reputational risk inescapably arises as a by-product * Monitor the internal and external sources that might
Executive of other risk and from taking intricate business signal reputational issues
responsibility: decisions. However, we view our reputation as one of
VP of Corporate our most valuable assets, as risks facing our
Strategy reputation may affect our ability to conduct core * Sustain corporate responsibility and ethics through
and Investor business operations transparent reporting and compliance with global best
Relations practices (e.g. GHG emissions, UN Global Compact)
and VP of
Communications
* Respond quickly and conscientiously to any issue that
threatens our reputation, and maintain access to
world class expertise that can help us in this
respect
---------------- --------------------------------------------------------------------- ------------------------------------------------------------
Appendix 2 - Directors' Responsibility Statement
Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Article 4 of the IAS
Regulation and have also chosen to prepare the Parent Company
financial statements under IFRSs as adopted by the EU. Under
company law the Directors must not approve the accounts unless they
are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for
that period. In preparing these financial statements, International
Accounting Standard 1 requires that Directors:
-- Properly select and apply accounting policies
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information
-- Provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance
-- Make an assessment of the Company's ability to continue as a going concern
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for protecting shareholder investments and
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on 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 the Company 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 the
Company 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 the Company's performance,
business model and strategy
By order of the Board
Said Darwazah
Chairman and Chief Executive
15 March 2016
Mazen Darwazah
Executive Vice Chairman
15 March 2016
Appendix 3 - Related Party Transactions
Related party transactions: Note 40 of the financial statements,
page 177.
Transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note.
Transactions between the Group and its associates and other
related parties are disclosed below.
Trading transactions:
During the year, Group companies entered into the following
transactions with related parties:
Darhold Limited: is a related party of the Group because it is
considered one of the major shareholders of Hikma Pharmaceuticals
PLC with an ownership percentage of 29.06% at end of 2015 (2014:
28.8%).Further details on the relationship between Mr Said
Darwazah, Mr Mazen Darwazah and Mr Ali Al-Husry, and Darhold
Limited are given in the Directors' Report.
Other than dividends (as paid to all shareholders), there were
no transactions between the Group and Darhold Limited during the
year.
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Capital Bank - Jordan: is a related party of the Group because
two Hikma Pharmaceuticals PLC board members are also board members
of Capital Bank - Jordan. Additionally a senior member of Hikma
management team is a board member of one company owned by Capital
Bank - Jordan. Total cash balance at Capital Bank - Jordan as of 31
December 2015 was $9.4 million (31 December 2014: $5.7 million).
Utilisation of facilities granted by Capital Bank - Jordan to the
Group amounted to $nil (31 December 2014: $nil). Interest
expense/income is within market rate.
Jordan International Insurance Company: is a related party of
the Group because one board member of the Company is also a board
member of Hikma Pharmaceuticals PLC. The Group's insurance expense
for Jordan International Insurance Company contracts during the
period was $0.5 million (2014: $0.2 million). The amounts due to
Jordan International Insurance Company were $0.4 million (2014:
$nil).
Labatec Pharma: is a related party of the Group because it is
owned by the Darwazah family. During 2015, the Group total sales to
Labatec Pharma amounted to $0.9 million (2014: $0.5 million). At 31
December 2015, the amount owed from Labatec Pharma to the Group was
$0.2 million (31 December 2014: $ 0.1 million).
Arab Bank: is a related party of the Group because one Hikma
Pharmaceuticals PLC senior management member is also a board member
of Arab Bank PLC. Total cash balance at Arab Bank was $55.7 million
(31 December 2014: $90.4 million). Utilisation of facilities
granted by Arab Bank to the Group amounted to $56.6 million (31
December 2014: $115.0 million). Interest expense/income is within
market rate.
American University of Beirut: is a related party of the Group
because one board member of the Group is also a trustee of the
University. During 2015, fees of $0.2 million (2014: $0.1 million)
were paid. At 31 December 2015, the amount owed to American
University of Beirut from the Group amounted to $nil (31 December
2014: $0.1 million).
HikmaCure: The Group holds a 50:50 joint venture (JV) agreement
with MIDROC Pharmaceuticals Limited. The JV is called HikmaCure.
Hikma and MIDROC invested in HikmaCure in equal proportions and
have committed to provide up to $22 million each in cash of which
$2.5 million has been paid in previous periods.
Unimark: During 2015, the Group has impaired the remaining
investment balance related to Unimark Remedies Limited. The
exceptional impairment of investment was $7 million. As at 31
December 2015, the Group held a non-controlling interest of 23.1%
in Unimark Remedies Limited. During 2015, the Group paid an amount
of $nil in relation to a products development agreement (2014: $2.5
million). Hikma's share in Unimark Remedies Limited is being
divested during 2016 for minimal value.
Haosun: The Group held a non-controlling interest of 30.1% in
Hubei Haosun Pharmaceutical Co., Ltd (Haosun) at 31 December 2015
(31 December 2014: 30.1%). During 2015, total purchases from Haosun
were $ 0.6 million (2014: $1.0 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 102 to 124.
2015 2014
$m $m
------------------------------ ----- -----
Short-term employee benefits 14.1 15.7
------------------------------ ----- -----
Share-based payments 6.2 2.4
------------------------------ ----- -----
Post-employment benefits 0.1 0.1
------------------------------ ----- -----
Other benefits 0.1 0.2
------------------------------ ----- -----
20.5 18.4
------------------------------ ----- -----
This information is provided by RNS
The company news service from the London Stock Exchange
END
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