TIDMHIK
RNS Number : 6389C
Hikma Pharmaceuticals Plc
24 February 2022
Hikma delivers another year of profitable growth in 2021 and
announces share buyback
London, 24 February 2022 - Hikma Pharmaceuticals PLC ('Hikma' or
'Group'), the multinational pharmaceutical company, today reports
its preliminary audited results for the year ended 31 December
2021.
Siggi Olafsson, Chief Executive Officer of Hikma, said:
"Hikma delivered strong financial results in 2021, marking
another successful year of solid growth and continued strategic
momentum. Our operational strength and high quality standards
ensured our ability to provide customers with a consistent supply
of essential medicines in a challenging environment. I am grateful
to Hikma colleagues around the world for their steadfast commitment
to helping the millions of patients who rely on our medicines every
day.
As we look to 2022 and beyond, I am most excited about how we
are continuing to build and evolve our portfolio with important
investments and new partnerships. Our Injectables business is now
supplying US hospitals with sterile compounded pharmaceutical
products, has expanded into Canada, and is set to grow further with
the acquisition of Custopharm(1) and our expansion into US
biosimilars. Our Generics business is bringing more complex and
specialty products to market, launching Kloxxado(TM) and generic
Advair Diskus(R) in 2021, and with additional product launches
planned for this year. Our Branded business is delivering
consistent growth, with an increased focus on medications to treat
chronic illnesses. We have an exciting platform that will drive
continued growth and progress in the year ahead."
Highlights:
Reported results (statutory) 2021 2020 Constant currency(2)
$ million $ million Change change
------------ ----------- -------
Revenue 2,553 2,341 9% 7%
Operating profit 582 579 1% 3%
Profit attributable to shareholders 421 431 (2)% 2%
Cashflow from operating activities 638 464 38% -
Basic earnings per share (cents)(3) 182.3 182.6 0% 4%
Total dividend per share (cents) 54.0 50.0 8% -
------------------------------------- ------------ ----------- ------- ---------------------
Core results(4) (underlying) Constant currency
2021 2020 (2)
$ million $ million Change change
------------------------------- ------------ ----------- ------- ------------------
Core revenue 2,553 2,341 9% 7%
Core operating profit 632 566 12% 15%
Core profit attributable to
shareholders 450 408 10% 15%
Core basic earnings per share
(cents)(3) 194.8 172.9 13% 17%
------------------------------- ------------ ----------- ------- ------------------
Strong 2021 performance
-- Group revenue up 9%, reflecting a good performance from all three businesses
-- Core operating profit up 12%, driven by a further step up in Generics margin
-- Core profit attributable to shareholders up 10%
-- Reported profit attributable to shareholders down 2% and basic EPS was flat
-- Strong cashflow from operating activities, up 38% to $638 million
-- Continued to invest 6% of revenue in R&D, with a growing
pipeline of complex and specialty products
-- Maintained healthy balance sheet, with net debt(5) of $420
million and low leverage at 0.6x net debt to core EBITDA(6, 7)
-- Full year dividend of 54 cents per share, up from 50 cents per share in 2020
Continued momentum, with growth in all three businesses
-- Injectables: Good revenue growth across all three
geographies, including in the US following a strong 2020.
Injectables core operating profit grew 5%, with a strong operating
margin of 37.5%
-- Generics: 10% revenue growth and core operating margin
improvement of 300 bps to 24.6%, reflecting a good performance from
recently launched products
-- Branded: Revenue grew 9%, reflecting a good contribution from
products used to treat chronic illnesses and core operating margin
was 18.7%, down from 20.6% in 2020. Excluding the impact of
currency and hyperinflation, revenue grew 5% and core operating
margin was stable
Further portfolio expansion and increased investment to support
growth
-- Launched generic Advair Diskus(R) in April and are gradually
growing market share, but expect competition to intensify in
2022
-- Expansion of specialty product offering in the US, including
the launch of Kloxxado(TM) 8mg naloxone nasal spray
-- Positioning for future growth in Injectables with the signing
of two US biosimilar agreements, the acquisition of Custopharm(8) ,
the launch of a new US compounding business and post year-end
expansion into Canada through acquisition of Teligent assets
-- Further complex medicines added to Branded portfolio,
including eight oral oncology products in Algeria
Share buyback
-- Announcing a share buyback programme of up to $300 million to be executed during 2022
-- Hikma's strategic focus remains unchanged, prioritising the
creation of further shareholder value through investing in organic
and inorganic growth
-- Buyback reflects the Group's strong cash generation, balance
sheet strength and the Board's confidence in the future growth
prospects of the business
-- The buyback has been sized to maintain balance sheet
efficiency whilst leaving significant headroom for continued
investment opportunities
New environmental target
-- Announcing new target to reduce Hikma's greenhouse gas emissions by 25% by 2030
2022 outlook
-- Injectables revenue growth in the low to mid-single digits,
with core operating margin in the range of 35% to 37%
-- Generics revenue growth in the range of 8% to 10% and core
operating margin in the range of 24% to 25%
-- Branded revenue expected to be in line with 2021. Excluding
the impact of hyperinflation in 2021, expect Branded revenue to
grow in the mid-single digits
Further information:
A pre-recorded presentation will be available at www.hikma.com
at 07:00 GMT. Hikma will also hold a live Q&A conference call
at 9:30am GMT, and a recording will be made available on the
Company's website.
To join via conference call please dial:
United Kingdom: 0800 640 6441
United Kingdom (local): 020 3936 2999
All other locations: +44 20 3936 2999
Access code: 446040
For further information please contact Tiina Lugmayer -
tlugmayer@hikma.com .
Hikma (Investors):
Susan Ringdal
EVP, Strategic Planning and Global +44 (0)20 7399 2760/ +44 (0)7776
Affairs 477050
Guy Featherstone +44 (0)20 3892 4389/ +44 (0)7795
Senior Investor Relations Manager 896738
Layan Kalisse +44 (0)20 7399 2788/ +44 (0)7970
Investor Relations Analyst 709912
Teneo (Press):
Charles Armitstead +44 (0)7703 330 269
About Hikma:
Hikma helps put better health within reach every day for
millions of people 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
8,700 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
Hikma Pharmaceuticals PLC (LSE: HIK) (NASDAQ Dubai: HIK) (OTC:
HKMPY) (LEI:549300BNS685UXH4JI75) (rated BBB-/stable S&P,
BBB-/stable Fitch)
STRATEGIC REVIEW
Throughout 2021 we have been driven by our purpose of putting
better health within reach, every day. This is evident in the
products we have launched, the investments we have made and the
ongoing supply of important medicines across the geographies in
which we operate.
Strategic progress across the Group
Our Injectables business saw good growth in 2021 across all our
regions. Thanks to the breadth of our portfolio, flexible global
manufacturing facilities and our resilient supply chain, this is a
strong and differentiated business. In the US, we continue to play
a leading role in supplying hospitals with the medicines they need
and are now a top two supplier of generic injectable medicines by
volume, with a portfolio of over 120 products. Since December, we
are also supplying hospitals with compounded pharmaceutical
products out of our new sterile compounding facility in Dayton, New
Jersey.
We remain focussed on having a portfolio fit for the future,
with ongoing new launches, and have made exciting progress this
year building our portfolio and pipeline through acquisition and
partnership, including for biosimilars in the US.
We already have experience commercialising biosimilars in MENA,
where these products contributed to our growth in 2021. We are
achieving good growth in Europe, as we increase supply of our own
products and enter new markets, such as France. We have also
benefitted from valuable contract manufacturing opportunities,
leveraging our extensive lyophilisation capacity in Portugal.
Our Generics business delivered strong revenue growth and margin
expansion in 2021, as we have focussed on important new launches,
optimised the cost base and drove operating efficiencies.
We added several products to our Generics portfolio in 2021,
including the launches of generic Advair Diskus(R) and our novel
naloxone nasal spray, Kloxxado(TM). These important product
launches demonstrate our move towards more complex generic
medicines and specialty branded products. In total we launched
seven products while also continuing to invest in our state-of-the
art manufacturing facility in Columbus, Ohio. Our local presence in
the US enabled us to respond quickly to customer needs and minimise
supply disruptions arising from challenges related to the COVID-19
pandemic.
In our Branded business, we have continued to strengthen our
market position and we are now ranked the fourth largest
pharmaceutical company in the MENA region, by sales. The strategy
of tiering the markets is delivering. Our Algeria business saw
particularly good growth as we launched new products, including
from our new oral oncology plant, the first local Algerian facility
producing oral oncology products. We are also seeing good growth in
our other markets, including Jordan, Morocco and UAE. Our continued
focus on building a portfolio of high-value treatments for chronic
illnesses is driving revenue growth, enhancing our market position
and strengthening our customer relationships.
Investing in R&D, new technologies and capabilities and
deploying our balance sheet
We continue to invest in R&D to develop products where we
see a patient need. In 2021, we spent 6% of revenue on R&D, in
line with our target of 6% to 7%. We also strengthened our R&D
capabilities, including adding a new site for complex injectables
in Warren, New Jersey.
Throughout the year, we continued to expand our manufacturing
capacity, and enhance existing facilities to stay at the forefront
of manufacturing excellence. We invested in a new facility in
Dayton, New Jersey, which will carry out sterile compounding
activities for our Injectables business. With our focus on quality
and our deep relationships with hospitals in the US, we will be
able to satisfy a growing need for ready-to-administer formats of
medicines. In addition to this, we also invested in new filling
lines, expanded warehousing and enhanced capabilities across our
operational footprint.
Partnerships are also integral to Hikma's strategy. 2021 saw
continued momentum as we entered into new partnerships and built on
existing ones in each of our businesses. Some of these
opportunities will contribute in the near term, while others will
help to drive future growth. The biosimilar deals we signed with
Bio-Thera and Gedeon Richter will enable us to bring important
complex injectable medicines to the US in the medium term.
We are also leveraging our balance sheet to deliver attractive
inorganic growth opportunities. In 2021, as part of the growth
plans for our Injectables business, we announced the acquisition of
Custopharm, which remains subject to FTC approval. Upon closing,
this will bring an existing portfolio of differentiated products
and additional pipeline products and enhanced R&D capabilities.
Post year-end, we announced our expansion in Canada with the
acquisition of Teligent's Canadian assets. Our teams will continue
to assess opportunities as they arise to ensure we are deploying
our capital in line with our strategy and delivering long-term
value to our shareholders.
Capital allocation priorities and share buyback
Alongside our 2018 capital markets day, the Board set out its
capital allocation priorities which have guided our deployment of
cash flows over recent years. These priorities remain unchanged
1. Reinvesting for growth
2. Building long-term partnerships
3. M&A in-line with strategy
4. Maintaining a consistent dividend pay-out
Hikma has also maintained a strong balance sheet underpinned by
strong free cash flow generation. The Board is today announcing a
share buyback of up to $300 million which will balance the
maintenance of an efficient balance sheet whilst retaining
substantial flexibility for continued investment and M&A.
Caring for our people
Hikma is an inclusive place to work, underpinned by our strong
culture of progress and belonging and our values: innovative,
caring and collaborative.
Throughout 2021, we worked to reinforce our values and ensure
they are reflected in our strategy, practices and policies. Shaping
our culture and equipping our people with the right tools to be at
their best continues to be of absolute importance. We evolved our
Diversity, Equity and Inclusion Committee, which supports diversity
and inclusion initiatives, such as our new employee resource groups
programme, and continued to invest in upskilling our people through
a number of hybrid learning and development programmes.
In a year where our people continued to adapt and stepped up to
keep our plants operational, our strong culture of progress and
belonging enabled us to be resilient, perform at our best and
provided us with the opportunity to explore new ways of working
together both across the business and with our partners and
customers.
Acting responsibly
Underpinning all of this, we are ensuring we operate responsibly
in all aspects of what we do. First and foremost, we have a
responsibility for our customers and their patients, who rely on
our important medicines every day; but our mission to advance
health and wellbeing also extends to the broader wellbeing of the
communities in which we operate. It extends to ensuring that our
own people are empowered by an inclusive culture where everyone can
thrive, and to understanding and minimising our impact on the
environment. We have spent time assessing this impact and
understanding how we can minimise it, and are pleased that the
Board has approved a new target to reduce our greenhouse gas
emissions by 25% by 2030, compared to a 2020 baseline. Finally,
operating responsibly extends to building trust and ensuring
quality in all that we do, by upholding ethical standards and
acting with integrity.
Outlook
Our strategy continues to deliver results and we are pleased
with the progress made to date, which is reflected in this strong
set of results. Looking at 2022, the business is well positioned to
continue to grow, benefitting from our broad portfolio and
pipeline, as well as our high-quality operations.
For Injectables, as the COVID-19 volatility continues to ease
and we see a gradual return of elective surgeries, we expect for
revenue to grow in the low to mid-single digits, supported by new
product launches. We expect core operating margin to be in the
range of 35% to 37%. Our guidance does not include a contribution
from Custopharm, which remains subject to FTC approval.
For Generics, we expect revenue to grow in the range of 8% to
10% and for core operating margin to be in the range of 24% to 25%.
This reflects a good contribution from new and recent launches,
which we expect will more than offset an acceleration in price
erosion. Our guidance assumes a mid-year launch of sodium
oxybate.
For Branded, we expect revenues in 2022 to be in line with 2021.
Excluding the impact from hyperinflation in 2021, we expect Branded
revenue to grow in the mid-single digits.
We expect Group core net finance expense to be around $55
million and the core effective tax rate to be in the range of 22%
to 23%.
We expect Group capital expenditure to be in the range $160
million to $180 million.
FINANCIAL REVIEW
The financial review set out below summarises the reported and
core(9) performance of the Hikma Group and our three main business
segments, Injectables, Generics and Branded, for the year ended 31
December 2021
.
Group
Constant
2021 2020 currency
$ million $ million Change change
Revenue 2,553 2,341 9% 7%
------------ ----------- -------- ----------
Core revenue 2,553 2,341 9% 7%
------------ ----------- -------- ----------
Gross profit 1,301 1,201 8% 6%
------------ ----------- -------- ----------
Core gross profit 1,301 1,213 7% 5%
------------ ----------- -------- ----------
Core gross margin 51.0% 51.8% (0.8)pp (0.8)pp
------------ ----------- -------- ----------
Operating profit 582 579 1% 3%
------------ ----------- -------- ----------
Core operating profit 632 566 12% 15%
------------ ----------- -------- ----------
Core operating margin 24.8% 24.2% 0.6pp 1.7pp
------------ ----------- -------- ----------
EBITDA 727 670 9% 10%
------------ ----------- -------- ----------
Core EBITDA 727 674 8% 10%
------------ ----------- -------- ----------
Group revenue grew 9% reflecting growth in each of our three
businesses. Group gross margin reduced slightly, primarily due to a
shift in product mix in our Injectables and Branded businesses.
Group operating expenses were $719 million (2020: $622 million).
Excluding adjustments related to the amortisation of intangible
assets (other than software) of $73 million (2020: $42 million) and
net income from exceptional items of $23 million (2020: $67
million), Group core operating expenses were $669 million (2020:
$647 million).
Selling, general and administrative (SG&A) expenses were
$561 million (2020: $509 million). Excluding the amortisation of
intangible assets (other than software) and exceptional items, core
SG&A expenses were $488 million (2020: $464 million), up 5%,
reflecting good control of costs while increasing spend in certain
areas such as sales and marketing for specialty products in the
Generics business and a gradual return to pre-COVID marketing
activities in our Branded business.
Research and development (R&D) expenses were $143 million
(2020: $137 million). This reflects an increase in the second half
as the Group focussed on the future pipeline. Core R&D was 6%
of Group core revenue, in line with our strategy.
Other net operating expenses were $15 million (2020: $26 million
income). Excluding exceptional items(10) , core other net operating
expenses were $38 million (2020: $44 million), which primarily
comprised foreign exchange-related costs.
The improvement in core operating margin to 24.8% was primarily
driven by the good performance in the Generics business.
Group core revenue by business segment
2021 2020
$ million $ million
Injectables 1,053 41% 977 42%
-------- ---- ------- ----
Generics 820 32% 744 32%
-------- ---- ------- ----
Branded 669 26% 613 26%
-------- ---- ------- ----
Others 11 0% 7 0%
-------- ---- ------- ----
Total 2,553 2,341
-------- ---- ------- ----
Group core revenue by region
2021 2020
$ million $ million
US 1,511 59% 1,406 60%
------- ---- ------- ----
MENA 847 33% 770 33%
------- ---- ------- ----
Europe and ROW 195 8% 165 7%
------- ---- ------- ----
Total 2,553 2,341
------- ---- ------- ----
Injectables
2021 2020
Constant
currency
$ million $ million Change change
Revenue 1,053 977 8% 6%
----------- ----------- -------- ----------
Core revenue 1,053 977 8% 6%
----------- ----------- -------- ----------
Gross profit 581 563 3% 2%
----------- ----------- -------- ----------
Core gross profit 581 563 3% 2%
----------- ----------- -------- ----------
Core gross margin 55.2% 57.6% (2.4)pp (1.9)pp
----------- ----------- -------- ----------
Operating profit 351 354 (1)% 1%
----------- ----------- -------- ----------
Core operating profit 395 377 5% 6%
----------- ----------- -------- ----------
Core operating margin 37.5% 38.6% (1.1)pp 0.3pp
----------- ----------- -------- ----------
Injectables revenue grew 8% in 2021, benefitting from our broad
portfolio, geographic spread, flexible manufacturing capabilities
and new launches across our regions.
US Injectables revenue grew 4% to $691 million (2020: $662
million), reflecting a good performance from new launches while
maintaining demand for our broad product portfolio.
MENA Injectables revenue was $180 million, up 13% on a reported
basis and 4% on a constant currency basis (2020: $160 million).
This growth reflects a strong performance across most of our
markets and good demand for our growing biosimilar portfolio where
we continue to grow the market by increasing patient access. This
more than offset temporary disruptions in some markets.
European Injectables revenue was $182 million, up 17% (2020:
$155 million). In constant currency, European Injectables revenue
increased by 13%. This reflects a good performance from our own
products, recent launches and continued demand for contract
manufacturing.
Core gross profit grew 3% to $581 million and gross margin
declined to 55.2%, reflecting a normalisation in product mix
following the strong demand for COVID-19 related products in
2020.
Injectables core operating profit, which excludes the
amortisation of intangible assets (other than software)(11) grew 5%
and core operating margin was 37.5%, compared with 38.6% in 2020.
In constant currency, core operating profit grew 7% and core
operating margin remained largely stable, reflecting good control
of costs.
During the year, the Injectables business launched 15 products
in the US, 29 in MENA and 34 in Europe. We submitted 93 filings to
regulatory authorities across all markets. This primarily reflects
our efforts to expand our European portfolio and register products
in new European markets. We also signed new licensing deals,
including to enter the US biosimilar market.
In 2022, we expect Injectables revenue to grow in the low to
mid-single digits . We expect core operating margin to be in the
range of 35% to 37%.
Generics
2021 2020
$ million $ million Change
Revenue 820 744 10%
----------- ----------- -------
Core revenue 820 744 10%
----------- ----------- -------
Gross profit 388 329 18%
----------- ----------- -------
Core gross profit 388 341 14%
----------- ----------- -------
Core gross margin 47.3% 45.8% 1.5pp
----------- ----------- -------
Operating profit 217 203 7%
----------- ----------- -------
Core operating profit 202 161 25%
----------- ----------- -------
Core operating margin 24.6% 21.6% 3.0pp
----------- ----------- -------
The good revenue growth in our Generics business, up 10% in
2021, was primarily driven by a strong performance from recently
launched products, which more than offset increased price
erosion.
Generics core gross profit growth and margin expansion was
primarily due to product mix, with good demand for profitable
recent launches.
We delivered a strong improvement in Generics core operating
profit, which excludes the amortisation of intangible assets (other
than software) and exceptional items(12) , mostly due to the
improvement in gross profit. While sales and marketing spend
increased as a result of the expansion of our specialty business,
this was partially offset by good control of other operating
expenses. For the year, Generics core operating margin was 24.6%,
ahead of our guidance of 22% to 24%.
In 2021, the Generics business launched seven products and
submitted five files to regulatory authorities.
In 2022, we expect Generics revenue to grow in the range of 8%
to 10%. We expect core operating margin to be in the range of 24%
to 25%.
Branded
2021 2020
Constant
currency
$ million $ million Change change
Revenue 669 613 9% 5%
----------- ----------- -------- ----------
Core revenue 669 613 9% 5%
----------- ----------- -------- ----------
Gross profit 328 307 7% 0%
----------- ----------- -------- ----------
Core gross profit 328 307 7% 0%
----------- ----------- -------- ----------
Core gross margin 49.0% 50.1% (1.1)pp (2.0)pp
----------- ----------- -------- ----------
Operating profit 104 120 (13)% (7)%
----------- ----------- -------- ----------
Core operating profit 125 126 (1)% 5%
----------- ----------- -------- ----------
Core operating margin 18.7% 20.6% (1.9)pp 0.0pp
----------- ----------- -------- ----------
Our Branded business continued to deliver growth in 2021, with
revenue up 9%, which includes the impact of hyperinflation. In
constant currency, revenue grew 5%, with a good performance across
our markets, particularly in Algeria, where we saw the benefits of
our new oncology plant, and in Egypt, where we benefitted from
strong demand for our chronic treatments. Our chronic treatments
also saw good demand in our retail business in Saudi Arabia, which
partially offset lower demand in the government tender business.
Other markets, including Jordan, UAE and Morocco grew strongly.
Across the region we benefitted from our focussed commercial
efforts, a responsive supply chain and the breadth of our
portfolio.
Core gross profit grew 7% and, on a constant currency basis,
core gross profit was flat primarily due to an increase in
slow-moving inventory resulting from pandemic-related demand
fluctuations. C ore gross margin contracted slightly to 49.0%.
Core operating profit, which excludes the amortisation of
intangibles (other than software) and exceptional items(13) , fell
1%. In constant currency, core operating profit grew 5% as higher
investment in R&D and increased sales and marketing spend due
to activities returning to pre-COVID levels was offset by good
control of G&A costs. Core operating margin decreased primarily
due to devaluation of the Sudanese pound. In constant currency,
core operating margin was stable.
During the year, the Branded business launched 87 products and
submitted 144 filings to regulatory authorities. Revenue from
in-licensed products represented 36% of Branded revenue (2020:
37%).
We expect Branded revenue in 2022 to be in line with 2021.
Excluding the impact of hyperinflation in 2021, we expect Branded
revenue to grow in the mid-single digits.
Other businesses
Other businesses, which primarily comprises Arab Medical
Containers (AMC), a manufacturer of plastic specialised medicinal
sterile containers, and International Pharmaceuticals Research
Centre (IPRC), which conducts bio-equivalency studies, contributed
revenue of $11 million in 2021 (2020: $7 million) with an operating
profit of $2 million (2020: $nil).
Research and development
Our investment in R&D and business development enables us to
continue expanding the Group's product portfolio. During 2021, we
had 172 new launches and received 243 approvals. To ensure the
continuous development of our product pipeline, we submitted 242
regulatory filings.
2021 submissions(14) 2021 approvals 2021 launches(14)
(14)
Injectables 93 114 78
--------------------- --------------- ------------------
US 13 12 15
--------------------- --------------- ------------------
MENA 24 66 29
--------------------- --------------- ------------------
Europe 56 36 34
--------------------- --------------- ------------------
Generics 5 5 7
--------------------- --------------- ------------------
Branded 144 124 87
--------------------- --------------- ------------------
Total 242 243 172
--------------------- --------------- ------------------
Net finance expense
Constant
currency
2021 2020 Change change
Finance income 30 47 0% 4%
----- ----- ------- ----------
Finance expense 69 69 13% 17%
----- ----- ------- ----------
Net finance expense 39 22 0% 4%
----- ----- ------- ----------
Core finance income 1 9 13% 17%
----- ----- ------- ----------
Core finance expense 56 54 - -
----- ----- ------- ----------
Core net finance expense 55 45 - -
----- ----- ------- ----------
On a reported basis, net finance expense was $39 million (2020:
$22 million). This comprised $30 million finance income and $69
million finance expense. Excluding exceptional items(15) , core net
finance expense was $55 million (2020: $45 million). This comprised
$1 million finance income and $56 million finance expense. The
increase compared with 2020 in part reflects a drop in interest
income over the course of 2021 due to a reduction in interest
rates, and a slight increase in expenses related to the refinancing
of our revolving credit facility.
We expect core net finance expense to be around $55 million in
2022.
Profit before tax
Reported profit before tax decreased to $544 million (2020: $558
million), primarily reflecting an increase in the amortisation of
intangibles (other than software), from $42 million to $73 million,
due to new product launches. Excluding the amortisation of
intangibles (other than software) and exceptional items(16) , core
profit before tax was $578 million (2020: $522 million), up 11%,
reflecting the strong performance of our three business
segments.
Tax
The Group incurred a reported tax expense of $124 million (2020:
$128 million) and a reported effective tax rate of 22.8% (2020:
22.9%). Excluding exceptional items, Group core tax expense was
$129 million (2020: $115 million). The core effective tax rate
increased slightly to 22.3% (2020: 22.0%), primarily due to a
change in the earnings mix.
We expect the Group core effective tax rate to be in the range
of 22% to 23% in 2022.
Profit attributable to shareholders
Profit attributable to shareholders was $421 million (2020: $431
million). Core profit attributable to shareholders increased by 11%
to $450 million (2020: $408 million).
Earnings per share
Constant
currency
2021 2020 Change change
Basic earnings per share (cents) 182.3 182.6 0% 4%
------ ------ ------- ----------
Core basic earnings per share
(cents) 194.8 172.9 13% 17%
------ ------ ------- ----------
Diluted earnings per share (cents) 180.7 181.1 0% 4%
------ ------ ------- ----------
Core diluted earnings per share
(cents) 193.1 171.4 13% 17%
------ ------ ------- ----------
Weighted average number of Ordinary
Shares for the purposes of basic
earnings ('m) 231 236 - -
------ ------ ------- ----------
Weighted average number of Ordinary
Shares for the purposes of diluted
earnings ('m) 233 238 - -
------ ------ ------- ----------
The increase in core earnings per share reflects the strong
performance of the Group and the value for shareholders created by
the Group's buy back of 12.8 million ordinary shares in the first
half of 2020.
Dividend
The Board is recommending a final dividend of 36 cents per share
(approximately 26 pence per share) (2020: 34 cents per share)
bringing the total dividend for the full year to 54 cents per share
(approximately 40 pence per share) (2020: 50 cents per share). The
proposed dividend will be paid on 28 April 2022 to eligible
shareholders on the register at the close of business on 18 March
2022, subject to approval at the Annual General Meeting on 25 April
2022.
Net cash flow, working capital and net debt
The Group generated strong operating cash flow of $638 million
(2020: $464 million). This change primarily reflects the good
performance of the Group, combined with a focussed effort to
optimise inventories following COVID-19 related stocking in 2020.
The resultant decrease in inventory days drove an improvement in
working capital days, which decreased by 26 days to 238 days.
Capital expenditure was $145 million (2020: $172 million). In
the US, $56 million was spent upgrading equipment and adding new
technologies for our Generics and Injectables businesses, including
our new compounding facility in Dayton, New Jersey. In MENA, $66
million was spent on strengthening and expanding manufacturing
capabilities. In Europe, we spent $23 million on strengthening our
capabilities. We expect Group capital expenditure to be in the
range of $160 million to $180 million in 2022.
The Group's total debt decreased to $846 million at 31 December
2021 (31 December 2020: $932 million). This decrease primarily
reflects our strong cash flow generation which enabled a reduction
in short-term borrowing, while we maintained the repayment schedule
of long-term loans.
During the year, we upsized, amended and extended our revolving
credit facility (RCF), effective as of January 2022, allowing us
the flexibility to pursue strategic opportunities. The RCF remained
undrawn at year end.
The Group's cash balance at 31 December 2021 was $426 million
(2020: $327 million).
The Group's net debt (excluding co-development agreements and
contingent liabilities) was $420 million at 31 December 2021 (31
December 2020: $605 million). We continue to have a strong balance
sheet, with a net debt to core EBITDA ratio of 0.6x (31 December
2020: 0.9x).
Today we are also announcing a share buyback programme of up to
$300 million to be executed during 2022. This takes into account
the strength of our balance sheet and low leverage ratio while
maintaining the financial flexibility needed to invest in the
business and pursue inorganic growth opportunities.
Balance sheet
Net assets at 31 December 2021 were $2,467 million (31 December
2020: $2,148 million). Net current assets were $1,078 million (31
December 2020: $894 million).
The Board
The Board of Directors that served during the twelve-month
period to 31 December 2021 and their respective responsibilities
can be found on the Leadership team section of www.hikma.com .
Cautionary statement
This preliminary announcement has been prepared solely to
provide additional information to the shareholders of Hikma and
should not be relied on by any other party or for any other
purpose.
Definitions
We use a number of non-IFRS measures to report and monitor the
performance of our business. Management uses these adjusted numbers
internally to measure our progress and for setting performance
targets. We also present these numbers, alongside our reported
results, to external audiences to help them understand the
underlying performance of our business. Our core numbers may be
calculated differently to other companies.
Adjusted measures are not substitutable for IFRS results and
should not be considered superior to results presented in
accordance with IFRS.
Core results
Reported results represent the Group's overall performance.
However, these results can include one-off or non-cash items which
are excluded when assessing the underlying performance of the
Group. To provide a more complete picture of the Group's
performance to external audiences, we provide, alongside our
reported results, core results, which are a non-IFRS measure. Our
core results exclude the exceptional items and other adjustments
set out in Note 5 of the Group consolidated financial
statements.
Group operating profit 2021 2020
$million $million
Core operating profit 632 566
---------- ----------
Intangible assets write-down (13) -
---------- ----------
Jordan warehouse fire incident - 11
---------- ----------
GxA inventory related provisions - (15)
---------- ----------
MENA severance and restructuring costs - (3)
---------- ----------
Net impairment reversal of product related
intangibles 36 62
---------- ----------
Intangible assets amortisation other
than software (73) (42)
---------- ----------
Reported operating profit 582 579
---------- ----------
Constant currency
As the majority of our business is conducted in the US, we
present our results in US dollars. For both our Branded and
Injectable businesses, a proportion of their sales are denominated
in a currency other than the US dollar. In order to illustrate the
underlying performance of these businesses, we include information
on our results in constant currency.
Constant currency numbers in 2021 represent reported 2021
numbers translated using 2020 exchange rates, excluding price
increases in the business resulting from the devaluation of the
Sudanese pound and excluding the impact from hyperinflation
accounting.
EBITDA
EBITDA is earnings before interest, tax, depreciation,
amortisation, assets write-down and impairment
charges/reversals.
EBITDA 2021 2020
$ million $ million
Reported operating profit 582 579
----------- -----------
Depreciation, amortisation, assets
write-down and impairment charges/reversals 145 91
----------- -----------
Reported EBITDA 727 670
----------- -----------
Exceptional items:
----------- -----------
Jordan warehouse fire incident - (11)
----------- -----------
Assets write off - inventory-related
provision - 12
----------- -----------
MENA severance and restructuring
costs - 3
----------- -----------
Core EBITDA 727 674
----------- -----------
Working capital days
We believe Group working capital days provides a useful measure
of the Group's working capital management and liquidity. Group
working capital days are calculated as Group receivable days plus
Group inventory days, less Group payable days. Group receivable
days are calculated as Group trade receivables x 365, divided by 12
months Group revenue. Group inventory days are calculated as Group
inventory x 365, divided by 12 months Group cost of sales. Group
payable days are calculated as Group trade payables x 365, divided
by 12 months Group cost of sales.
Group net debt
We believe Group net debt is a useful measure of the strength of
the Group's financing position. Group net debt is calculated as
Group total debt less Group total cash. Group total debt excludes
co-development agreements and contingent liabilities.
Group net debt 31 Dec 2021 31 Dec 2020
$ million $ million
Short-term financial debts (112) (158)
------------ --------------
Short-term leases liabilities (9) (10)
------------ --------------
Long-term financial debts (651) (692)
------------ --------------
Long-term leases liabilities (74) (72)
------------ --------------
Total debt (846) (932)
------------ --------------
Cash, cash equivalents and restricted
cash 426 327
------------ --------------
Net debt (420) (605)
------------ --------------
Forward looking statements
This announcement contains certain statements which are, or may
be deemed to be, "forward looking statements" which are prospective
in nature with respect to Hikma's expectations and plans, strategy,
management objectives, future developments and performance, costs,
revenues and other trend information. All statements other than
statements of historical fact may be forward-looking statements.
Often, but not always, forward-looking statements can be identified
by the use of forward looking words such as "aims", "anticipates",
"believes", "budget", "estimates", "expects", "forecasts", "goals",
"intends", "objectives", "outlook", "plan", "project", "risks",
"seek" "scheduled", "targets" or words or terms of similar
substance or the negative thereof, as well as variations of such
words and phrases or statements that certain actions, events or
results "could", "may", "might", "probably", "should", "will" or
"would" be taken, occur or be achieved.
By their nature, forward looking statements are based on current
expectations and projections about future events and are therefore
subject to assumptions, risks and uncertainties that are beyond
Hikma's ability to control or estimate precisely and which could
cause actual results or events to differ materially from those
expressed or implied by the forward looking statements. In
particular, these include statements relating to future actions,
product authorisations, future performance or results of current
and anticipated products, sales efforts, expenses, the outcome of
contingencies such as legal proceedings, dividend payments and
financial results. Where included, such statements have been made
by or on behalf of Hikma in good faith based upon the knowledge and
information available to the Directors on the date of this
announcement. Accordingly, no assurance can be given that any
particular expectation will be met and Hikma's shareholders are
cautioned not to place undue reliance on the forward-looking
statements. Forward looking statements contained in this
announcement regarding past trends or activities should not be
taken as a representation that such trends or activities will
continue in the future.
Other than in accordance with its legal or regulatory
obligations (including under the UK Market Abuse Regulation and the
UK Listing Rules and the Disclosure Guidance and Transparency Rules
of the Financial Conduct Authority), Hikma does not undertake to
update the forward looking statements contained in this
announcement to reflect any changes in events, conditions or
circumstances on which any such statement is based or to correct
any inaccuracies which may become apparent in such forward looking
statements. Except as expressly provided in this announcement, no
forward looking or other statements have been reviewed by the
auditors of Hikma. Any forward looking statement above and all
subsequent oral or written forward looking statements attributable
to Hikma or any of its members, directors, officers or employees or
any person acting on their behalf are expressly qualified in their
entirety by this cautionary statement. Past share performance
cannot be relied on as a guide to future performance. Nothing in
this announcement should be construed as a profit forecast.
Neither the content of Hikma's website nor any other website
accessible by hyperlinks from Hikma's website are incorporated in,
or form part of, this announcement.
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 principal risks are determined via robust
assessment considering our risk context by the Board of Directors
with input from executive management. The principal risks facing
the company have not materially changed over the year and they are
set out in the 2021 annual report on pages 54 - 63, which will be
available on 16 March 2022. The Board recognises that certain risk
factors that influence the principal risks are outside of 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.
1 Subject to FTC approval
(2) Constant currency numbers in 2021 represent reported 2021
numbers translated using 2020 exchange rates, excluding price
increases in the business resulting from the devaluation of the
Sudanese pound and excluding the impact from hyperinflation
accounting. In 2021 Lebanon and Sudan were considered
hyperinflationary economies, therefore the spot exchange rate as at
31 December 2021 was used to translate the results of these
operations into US dollars
(3) In June 2020, Hikma purchased 12.8 million ordinary shares
from Boehringer Ingelheim, which are being held in treasury
(4) Core results throughout the document are presented to show
the underlying performance of the Group, excluding the exceptional
items and other adjustments set out in Note 5 of the Group
consolidated financial statements. Core results are a non-IFRS
measure and a reconciliation to reported IFRS measures is provided
on page 14
(5) Group net debt is calculated as Group total debt less Group
total cash, including restricted cash. Group net debt is a non-IFRS
measure. See page 15 for a reconciliation of Group net debt to
reported IFRS figures
(6) Core EBITDA is earnings before interest, tax, depreciation,
amortisation, assets write-down and impairment charges/reversals.
EBITDA is a non-IFRS measure, see page 15 for a reconciliation to
reported IFRS results
7 Net debt to core EBITDA is calculated as Group net debt
divided by core EBITDA and is considered a useful measure of the
Group's financing decision
(8) Subject to FTC approval
(9) Core results throughout the document are presented to show
the underlying performance of the Group, excluding the exceptional
items and other adjustments set out in Note 5 of the Group
consolidated financial statements. Core results are a non-IFRS
measure and a reconciliation to reported IFRS measures is provided
on page 14
1 (0) Exceptional items comprised a $60 million impairment
reversal of product related intangibles, a $24 million charge of
product related intangibles and a $13 million intangible assets
write-down. Amortisation of intangible assets (other than software)
was $73 million. Refer to Note 5 of the Group consolidated
financial statements for further information
(11) Exceptional items comprised a $10 million impairment of
product related intangibles and a $1 million intangible assets
write-down. Amortisation of intangible assets (other than software)
was $33 million. Refer to Note 5 of the Group consolidated
financial statements for further information
(12) Exceptional items comprised a $60 million impairment
reversal of product related intangibles and a $14 million
impairment charge of product related intangibles and a $1 million
intangible assets write-down. Amortisation of intangible assets
(other than software) was $30 million. Refer to Note 5 of the Group
consolidated financial statements for further information
(13) Exceptional items comprised a $11 million intangible assets
write-down. Amortisation of intangible assets (other than software)
was $10 million. Refer to Note 5 of the Group consolidated
financial statements for further information
(14) New products submitted, approved and launched by country in
2021
1(5) Exceptional items comprised $29 million non-cash finance
income related to the remeasurement of contingent consideration
related to the Generics business and $13 million non-cash finance
expense related to the unwinding and remeasurement of contingent
consideration related to the Generics business
(16) Exceptional items comprised a $60 million impairment
reversal of product related intangibles, a $24 million impairment
charge of product related intangibles, a $13 million intangible
assets write-down and $16 million net finance income due to the
remeasurement of contingent consideration. Amortisation of
intangible assets (other than software) was $73 million. Refer to
Note 5 of the Group consolidated financial statements for further
information
Hikma Pharmaceuticals PLC
Consolidated income statement
For the year ended 31 December 2021
2021 2020
Exceptional Exceptional
items items
and other and other
2021 adjustments 2021 2020 adjustments 2020
Core (Note Reported Core (Note Reported
results 5) results results 5) results
Note $m $m $m $m $m $m
--------- ------------- ---------- --------- ------------- ----------
Revenue 3 2,553 - 2,553 2,341 - 2,341
Cost of sales (1,252) - (1,252) (1,128) (12) (1,140)
--------- ------------- ---------- --------- ------------- ----------
Gross profit/(loss) 1,301 - 1,301 1,213 (12) 1,201
--------- ------------- ---------- --------- ------------- ----------
Selling, general and
administrative expenses (488) (73) (561) (464) (45) (509)
Net impairment loss
on financial assets - - - (2) - (2)
Research and development
expenses (143) - (143) (137) - (137)
Other operating expenses (40) (37) (77) (47) (7) (54)
Other operating income 2 60 62 3 77 80
--------- ------------- ---------- --------- ------------- ----------
Total operating
(expenses)/income (669) (50) (719) (647) 25 (622)
--------- ------------- ---------- --------- ------------- ----------
Operating profit/(loss) 4 632 (50) 582 566 13 579
--------- ------------- ---------- --------- ------------- ----------
Finance income 1 29 30 9 38 47
Finance expense (56) (13) (69) (54) (15) (69)
Gain from investment
at fair value through
profit and loss (FVTPL) - - - 1 - 1
Results from joint venture 1 - 1 - - -
--------- ------------- ---------- --------- ------------- ----------
Profit/(loss) before
tax 578 (34) 544 522 36 558
--------- ------------- ---------- --------- ------------- ----------
Tax 6 (129) 5 (124) (115) (13) (128)
--------- ------------- ---------- --------- ------------- ----------
Profit/(loss) for the
year 449 (29) 420 407 23 430
--------- ------------- ---------- --------- ------------- ----------
Attributable to:
Non-controlling interests (1) - (1) (1) - (1)
Equity holders of the
parent 450 (29) 421 408 23 431
--------- ------------- ---------- --------- ------------- ----------
449 (29) 420 407 23 430
--------- ------------- ---------- --------- ------------- ----------
Earnings per share (cents) 8
--------- ------------- ---------- --------- ------------- ----------
Basic 194.8 182.3 172.9 182.6
Diluted 193.1 180.7 171.4 181.1
--------- ------------- ---------- --------- ------------- ----------
Hikma Pharmaceuticals PLC
Consolidated statement of comprehensive income
For the year ended 31 December 2021
2021 2020
Reported Reported
results results
$m $m
---------- ----------
Profit for the year 420 430
Other comprehensive income Items that may subsequently
be reclassified to the consolidated income statement,
net of tax:
Currency translation and hyperinflation movement (22) 39
Items that will not subsequently be reclassified to
the consolidated income statement, net of tax:
Remeasurement of post-employment benefit obligations (1) (1)
Change in investments at fair value through other comprehensive
income (FVTOCI) 14 2
---------- ----------
Total other comprehensive income for the year (9) 40
---------- ----------
Total comprehensive income for the year 411 470
---------- ----------
Attributable to:
Non-controlling interests 2 2
Equity holders of the parent 409 468
---------- ----------
411 470
---------- ----------
Hikma Pharmaceuticals PLC
Consolidated balance sheet
At 31 December 2021
2021 2020 (restated)(1)
Note $m $m
------ -------------------
Non-current assets
Goodwill 9 285 289
Other intangible assets 9 607 587
Property, plant and equipment 1,072 1,009
Right-of-use assets 74 59
Investments in joint ventures 10 9
Deferred tax assets 183 221
Financial and other non-current
assets 47 39
------ -------------------
2,278 2,213
------ -------------------
Current assets
Inventories 695 757
Income tax receivable 60 36
Trade and other receivables
(1) 10 816 700
Collateralised and restricted
cash - 4
Cash and cash equivalents 426 323
Other current assets (1) 97 102
------ -------------------
2,094 1,922
------ -------------------
Total assets 4,372 4,135
------ -------------------
Current liabilities
Short-term financial debts 11 112 158
Lease liabilities 9 10
Trade and other payables 12 468 470
Income tax payable 57 72
Other provisions 31 28
Other current liabilities 339 290
------ -------------------
1,016 1,028
------ -------------------
Net current assets 1,078 894
------ -------------------
Non-current liabilities
Long-term financial debts 13 651 692
Lease liabilities 74 72
Deferred tax liabilities 24 31
Other non-current liabilities 140 164
------ -------------------
889 959
------ -------------------
Total liabilities 1,905 1,987
------ -------------------
Net assets 2,467 2,148
------ -------------------
Equity
Share capital 42 41
Share premium 282 282
Other reserves (60) (80)
Retained earnings 2,189 1,892
------ -------------------
Equity attributable to equity
holders of the parent 2,453 2,135
------ -------------------
Non-controlling interests 14 13
------ -------------------
Total equity 2,467 2,148
------ -------------------
1. In 2021, prepayments have been reclassified under other
current assets which were previously classified under trade and
other receivables, and hence at 31 December 2020 numbers have been
restated reflecting $56 million reclassification from trade and
other receivables to other current assets. Had this
reclassification been applied at 1 January 2020, these line items
would have been restated by $49 million. (Note 10)
Hikma Pharmaceuticals PLC
Consolidated statement of changes in equity
For the year ended 31 December 2021
Equity
attributable
to equity
Merger Total shareholders
and revaluation Translation other Retained Share Share of the Non-controlling Total
reserves(1) reserve reserves earnings capital premium parent interests equity
$m $m $m $m $m $m $m $m $m
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Balance at 1
January
2020 57 (235) (178) 1,972 41 282 2,117 12 2,129
Profit for the
year
(2) 62 - 62 369 - - 431 (1) 430
Change in fair
value
of investments
at
FVTOCI - - - 2 - - 2 - 2
Remeasurement of
post-employment
benefit
obligations - - - (1) - - (1) - (1)
Currency
translation
and
hyperinflation
movement - 36 36 - - - 36 3 39
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Total
comprehensive
income for the
year 62 36 98 370 - - 468 2 470
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Total
transactions
with owners,
recognised
directly in
equity
Cost of
equity-settled
employee share
scheme - - - 27 - - 27 - 27
Dividends paid
(Note
7) - - - (109) - - (109) (1) (110)
Share buyback - - - (368) - - (368) - (368)
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Balance at 31
December
2020 and 1
January
2021 119 (199) (80) 1,892 41 282 2,135 13 2,148
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Profit for the
year
(2) 48 - 48 373 - - 421 (1) 420
Change in fair
value
of investments
at
FVTOCI - - - 14 - - 14 - 14
Realisation of
revaluation
reserve (3) - (3) 3 - - - - -
Remeasurement of
post-employment
benefit
obligations - - - (2) - - (2) - (2)
Tax arising on
remeasurement
of
post-employment
benefit
obligations - - - 1 - - 1 - 1
Currency
translation
and
hyperinflation
movement - (25) (25) - - - (25) 3 (22)
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Total
comprehensive
income for the
year 45 (25) 20 389 - - 409 2 411
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Total
transactions
with owners,
recognised
directly in
equity
Cost of
equity-settled
employee share
scheme - - - 29 - - 29 - 29
Exercise of
employees
share scheme - - - (1) 1 - - - -
Dividends paid
(Note
7) - - - (120) - - (120) (1) (121)
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
Balance at 31
December
2021 164 (224) (60) 2,189 42 282 2,453 14 2,467
---------------- ------------ --------- --------- -------- -------- ------------- ---------------- -------
1 . Merger and revaluation reserves mainly relates to Columbus
business acquisition in 2016
2. A net Impairment reversal of $48 million has been allocated
from retained earnings to the merger and revaluation reserves in
relation to Columbus business acquisition intangible assets (2020:
$62 million) (Notes 5 and 9)
Hikma Pharmaceuticals PLC
Consolidated cash flow statement
For the year ended 31 December 2021
2021 2020
Note $m $m
------ --------
Cash flows from operating activities
Cash generated from operations 14 767 525
Income taxes paid (131) (68)
Income taxes received 2 7
------ --------
Net cash inflow from operating activities 638 464
------ --------
Cash flow from investing activities
Purchases of property, plant and equipment (145) (172)
Purchase of intangible assets (84) (52)
Proceeds from sale of investment at
FVTOCI 5 -
Additions of investments at FVTOCI (3) (5)
Proceeds from investment divestiture 1 2
Contingent consideration paid (17) (60)
Interest income received 2 7
Investment related amounts released
from/ (held in) escrow account 3 (3)
------ --------
Net cash outflow from investing activities (238) (283)
------ --------
Cash flow from financing activities
Proceeds from issue of long-term financial
debts 10 1,543
Repayment of long-term financial debts (45) (1,372)
Proceeds from short-term borrowings 383 430
Repayment of short-term borrowings (431) (367)
Repayment of lease liabilities (31) (14)
Dividends paid 7 (120) (109)
Dividends paid to non-controlling shareholders
of subsidiaries (1) (1)
Interest and bank charges paid (50) (39)
Share buyback - (375)
Commitment fees received related to
the share buyback - 7
Payment to co-development and earnout
payment agreement (2) (1)
------ --------
Net cash outflow from financing activities (287) (298)
------ --------
Net increase/(decrease) in cash and
cash equivalents 113 (117)
------ --------
Cash and cash equivalents at beginning
of year 323 442
Foreign exchange translation movements (10) (2)
------ --------
Cash and cash equivalents at end of
year 426 323
------ --------
Hikma Pharmaceuticals PLC
Notes to the consolidated financial statements
1. Accounting policies
General information
Hikma Pharmaceuticals PLC is a public limited liability company
incorporated and domiciled in United Kingdom under the Companies
Act 2006.
The Group's principal activities are the development,
manufacturing, marketing and selling of a broad range of generic,
branded and in-licensed pharmaceuticals products in solid,
semi-solid, liquid and injectable final dosage forms.
Basis of preparation
Hikma Pharmaceuticals PLC's consolidated financial statements
have been prepared in accordance with:
(i) UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
On 31 December 2020, IFRS as adopted by the European Union at
that date was brought into UK law and became UK-adopted
International Accounting Standards, with future changes being
subject to endorsement by the UK Endorsement Board. The Group
transitioned to UK-adopted International Accounting Standards in
its consolidated financial statements on 1 January 2021. This
change constitutes a change in accounting framework. However, there
is no impact on recognition, measurement or disclosure in the
period reported as a result of the change in framework
(ii) IFRS as issued by the International Accounting Standards
Board (IASB)
The consolidated financial statements have been prepared under
the historical cost convention, except for the revaluation to fair
value of certain financial assets and liabilities.
The accounting policies included in this note have been applied
consistently other than where new policies have been adopted.
The Group's previously published consolidated financial
statements were prepared in accordance with:
(i) IFRS in conformity with the requirements of the Companies
Act 2006 and the applicable legal requirements of the Companies Act
2006. In addition to complying with IFRS in conformity with the
requirements of the Companies Act 2006, 2020 financial statements
also comply with IFRS adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union
(ii) IFRS as issued by the International Accounting Standards
Board (IASB)
The presentational and functional currency of Hikma
Pharmaceuticals PLC is the US dollar as the majority of the
Company's business is conducted in US dollars.
Adoption of new and revised standards
The following revised Standards and Interpretations have been
issued and are effective for annual periods beginning on 1 January
2021. The Group has not early adopted any other standard,
interpretation or amendment that has been issued but is not yet
effective.
- Interest Rate Benchmark Reform - Phase 2: Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
The amendments provide temporary reliefs which address the
financial reporting effects when an interbank offered rate (IBOR)
is replaced with an alternative nearly risk-free interest rate
(RFR). The amendments include the following practical expedient: A
practical expedient to require contractual changes, or changes to
cash flows that are directly required by the reform, to be treated
as changes to a floating interest rate, equivalent to a movement in
a market rate of interest.
These amendments had no significant impact on the consolidated
financial statements of the Group. The Group intends to use the
practical expedients in future periods if they become
applicable.
- IFRIC agenda decision - Configuration and customisation costs
in a Cloud Computing Arrangement
The March 2021 IFRS Interpretation Committee update included an
agenda decision on configuration and customisation costs in a cloud
computing arrangement involving Software as a Service (SaaS). The
agenda decision included guidance on how entities should account
for such configuration and customisation costs.
The Group has adopted the IFRIC update as a change in accounting
policy. The impact relating to prior year was not material and
therefore the application was not retrospectively applied and was
recognised in the current year consolidated income statement as
exceptional item (Notes 5 and 9).
Exceptional items and other adjustments
We use a number of non-IFRS measures to report and monitor the
performance of our business. Management uses these adjusted numbers
internally to measure our progress and for setting performance
targets. We also present these numbers, alongside our reported
results, to external audiences to help them understand the
underlying performance of our business. Our adjusted numbers may be
calculated differently to other companies.
Adjusted measures are not substitutable for IFRS numbers and
should not be considered superior to results presented in
accordance with IFRS.
Core results
Reported results represent the Group's overall performance.
However, these results can include one-off or non-cash items that
mask the underlying performance of the Group. To provide a more
complete picture of the Group's performance and to improve
comparability of our consolidated financial statements to external
audiences, we provide, alongside our reported results, core
results, which are a non-IFRS measure. We represent and discuss our
Group and segmental financials reconciled between reported and core
results. This presentation allows for full visibility and
transparency of our financials so that shareholders are able to
clearly assess the performance factors of the Group.
Our core results exclude the exceptional items and other
adjustments set out in Note 5 in the Notes to the consolidated
financial statements.
Exceptional items
Exceptional items represent adjustments for costs and profits
which management believes to be exceptional in nature by virtue of
their size or incidence, or have a distortive effect on current
year earnings, such as costs associated with business combinations,
one-off gains and losses on disposal of businesses assets,
reorganisation costs and any exceptional items related to tax such
as significant tax benefit/expense associated with previously
unrecognised deferred tax assets/liabilities.
Other adjustments
These include amortisation, impairment charge/reversal of
intangible assets excluding software and finance income and expense
resulting from remeasurement and unwinding of contingent
consideration and co-development earnout payment agreement
financial liabilities.
Intangible assets
An intangible asset is recognised if all the below conditions
are met:
- it is identifiable
- it is probable that the expected future economic benefits that
are attributable to the asset will flow to the Group
- the cost of the asset can be measured reliably
The probability of expected future economic benefits is assessed
using reasonable and supportable assumptions that represent
management's best estimate of the set of economic conditions that
will exist over the useful life of the asset. The assets are
amortised on a straight-line basis on the following amortisation
rates:
Customer relationships 10%
----------------------------- -----------
Product related intangibles 5% to 33%
----------------------------- -----------
Trade names 10%
----------------------------- -----------
Marketing rights 7% to 33%
----------------------------- -----------
Software 10% to 33%
----------------------------- -----------
Judgement is used to assess the degree of certainty attached to
the flow of future economic benefits that are attributable to the
use of the asset on the basis of the evidence available at the time
of initial recognition, giving greater weight to external evidence
.
Expenditures on research and development activities are charged
to the consolidated income statement, except only when the criteria
for recognising an internally generated intangible asset is met,
which is usually when approval from the relevant regulatory
authority is considered probable .
Also, the Group engages with third-party research and
development companies to develop products on its behalf.
Substantial payments made to such third parties to fund research
and development efforts are recognised as intangible assets if the
capitalisation criteria for an intangible asset are met, which
typically is when licence fees and certain milestone payments are
made, all other payments are charged to the consolidated income
statement.
Principal intangible assets are :
(a) Goodwill: arising in a business combination and is
recognised as an asset at the date that control is acquired (the
acquisition date). Goodwill is measured as the excess of the sum of
the consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's
previously held equity interest (if any) in the entity over the net
of the acquisition-date fair value of the identifiable assets,
liabilities and acquired contingent liabilities. If, after
reassessment, the Group's interest in the fair value of the
acquiree's identifiable net assets exceeds the sum of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and the fair value of the acquirer's
previously held equity interest in the acquiree (if any), the
excess is recognised immediately in the consolidated income
statement as a bargain purchase gain .
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of any profit or loss on disposal
in the consolidated income statement
(b) Product related intangibles :
(i) Product files and in-licensed products recognised through
acquisitions and partnerships are amortised over their useful
economic lives once the asset is ready for use
(ii) In process product files recognised on acquisition are
amortised over the useful economic life once the asset is ready for
use
(c) Purchased software: is amortised over the useful economic
life when the asset is ready for use
Other identified intangibles are :
(d) Customer relationships: represent the value attributed to
the long-term relationships held with existing customers that the
Group acquired on business combinations. Customer relationships are
amortised over their useful economic life
(e) Trade names: are amortised over their useful lives from the
date of acquisition
(f) Marketing rights: are amortised over their useful lives
commencing in the year in which the rights first generate sales
2. Going concern
The Directors believe that the Group is well diversified due to
its geographic spread, product diversity and large customer and
supplier base. Taking into account the Group's current position and
its principal risks for a period longer than 12 months from the
date of signing the consolidated financial statement, a going
concern analysis has been prepared using realistic scenarios
applying a severe but plausible downside which shows sufficient
liquidity headroom. Therefore, the Directors believe that the Group
and its subsidiaries are adequately placed to manage its business
and financing risks successfully, despite the current uncertain
economic outlook. Having assessed the principal risks, the
Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the consolidated financial
statements.
Financial covenants are suspended while the Group retains its
investment grade status from two rating agencies(1) . Nevertheless,
the covenants are monitored and the Group was in compliance on 31
December 2021 and expects to remain in compliance with those
covenants for the year ending in December 2022 even in the severe
but plausible downside scenarios. As of 31 December 2021, the
Group's investment grade rating was affirmed by S&P and
Fitch.
1.Rating agencies: means each of Fitch, Moody's and S&P or
any of their affiliates or successors
3. Revenue from contracts with customers
Business and geographical markets
The following table provides an analysis of the Group's reported
sales by segment and geographical market, irrespective of the
origin of the goods/services:
Injectables Generics Branded Others Total
Year ended 31 December 2021 $m $m $m $m $m
------------------------------ ------------ --------- -------- ------- ------
United States 691 820 - - 1,511
Middle East and North Africa 180 - 661 6 847
Europe and rest of the world 176 - 8 5 189
United Kingdom 6 - - - 6
------------------------------ ------------ --------- -------- ------- ------
1,053 820 669 11 2,553
------------------------------ ------------ --------- -------- ------- ------
Injectables Generics Branded Others Total
Year ended 31 December 2020 $m $m $m $m $m
------------------------------ ------------ --------- -------- ------- ------
United States 662 744 - - 1,406
Middle East and North Africa 160 - 605 5 770
Europe and rest of the world 149 - 8 2 159
United Kingdom 6 - - - 6
------------------------------ ------------ --------- -------- ------- ------
977 744 613 7 2,341
------------------------------ ------------ --------- -------- ------- ------
The top selling markets in 2021 are as below:
2021 2020
$m $m
--------------- ------- -------
United States 1,511 1,406
Saudi Arabia 218 223
Egypt 127 118
--------------- ------- -------
1,856 1,747
--------------- ------- -------
In 2021, included in revenue arising from the Generics and
Injectables segments are sales the Group made to two wholesalers in
the US accounting for equal to or greater than 10% of the Group's
revenue on an individual basis of $402 million (16% of Group
revenue) and $341 million (13% of Group revenue), in 2020: $333
million (14% of Group revenue) and $274 million (12% of Group
revenue).
The following table provides contract balances related to
revenue:
2021 2020
$m $m
----------------------------- -------------- --------------
Trade receivables (Note 10) 781 662
Contract assets - 3
Contract liabilities 213 162
----------------------------- -------------- --------------
Trade receivables are non-interest bearing and typical credit
terms in the US range from 30 to 90 days, in Europe 30 to 120 days,
and in MENA 180 to 360 days.
Contract liabilities mainly relate to returns and free goods
provisions.
4 . Business segments
For management reporting purposes, the Group is organised into
three principal operating divisions - Injectables, Generics and
Branded. These divisions are the basis on which the Group reports
its segmental information .
Core operating profit, defined as 'segment result', is the
principal measure used in the decision-making and resource
allocation process of the chief operating decision maker, who is
the Group's Chief Executive Officer .
Information regarding the Group's operating segments is reported
below:
Injectables 2021 2020
Exceptional Exceptional
items items
and other and other
2021 adjustments 2021 2020 adjustments 2020
Core (Note Reported Core (Note Reported
results 5) results results 5) results
$m $m $m $m $m $m
--------- ------------- ---------- --------- ------------- ----------
Revenue 1,053 - 1,053 977 - 977
Cost of sales (472) - (472) (414) - (414)
--------- ------------- ---------- --------- ------------- ----------
Gross profit 581 - 581 563 - 563
--------- ------------- ---------- --------- ------------- ----------
Total operating expenses (186) (44) (230) (186) (23) (209)
--------- ------------- ---------- --------- ------------- ----------
Segment result 395 (44) 351 377 (23) 354
--------- ------------- ---------- --------- ------------- ----------
Generics 2021 2020
Exceptional Exceptional
items items
and other and other
2021 adjustments 2021 2020 adjustments 2020
Core (Note Reported Core (Note Reported
results 5) results results 5) results
$m $m $m $m $m $m
--------- ------------- ---------- --------- ------------- ----------
Revenue 820 - 820 744 - 744
Cost of sales (432) - (432) (403) (12) (415)
--------- ------------- ---------- --------- ------------- ----------
Gross profit 388 - 388 341 (12) 329
--------- ------------- ---------- --------- ------------- ----------
Total operating expenses (186) 15 (171) (180) 54 (126)
--------- ------------- ---------- --------- ------------- ----------
Segment result 202 15 217 161 42 203
--------- ------------- ---------- --------- ------------- ----------
Branded 2021 2020
Exceptional Exceptional
items items
and other and other
2021 adjustments 2021 2020 adjustments 2020
Core (Note Reported Core (Note Reported
results 5) results results 5) results
$m $m $m $m $m $m
--------- ------------- ---------- --------- ------------- ----------
Revenue 669 - 669 613 - 613
Cost of sales (341) - (341) (306) - (306)
--------- ------------- ---------- --------- ------------- ----------
Gross profit 328 - 328 307 - 307
--------- ------------- ---------- --------- ------------- ----------
Total operating expenses (203) (21) (224) (181) (6) (187)
--------- ------------- ---------- --------- ------------- ----------
Segment result 125 (21) 104 126 (6) 120
--------- ------------- ---------- --------- ------------- ----------
Others (1) 2021 2020
Exceptional Exceptional
items items
and other and other
2021 adjustments 2021 2020 adjustments 2020
Core (Note Reported Core (Note Reported
results 5) results results 5) results
$m $m $m $m $m $m
--------- ------------- ---------- --------- ------------- ----------
Revenue 11 - 11 7 - 7
Cost of sales (6) - (6) (5) - (5)
--------- ------------- ---------- --------- ------------- ----------
Gross profit 5 - 5 2 - 2
--------- ------------- ---------- --------- ------------- ----------
Total operating expenses (3) - (3) (2) - (2)
--------- ------------- ---------- --------- ------------- ----------
Segment result 2 - 2 - - -
--------- ------------- ---------- --------- ------------- ----------
1.Others mainly comprises Arab Medical Containers LLC and
International Pharmaceutical Research Center LLC
Group 2020
2021 Exceptional
Exceptional items
items and and other
2021 other adjustments 2020 adjustments
Core (Note 2021 Reported Core (Note 2020 Reported
results 5) results results 5) results
$m $m $m $m $m $m
--------- ------------------- -------------- --------- ------------- --------------
Segment result 724 (50) 674 664 13 677
Unallocated expenses(2) (92) - (92) (98) - (98)
--------- ------------------- -------------- --------- ------------- --------------
Operating profit/(loss) 632 (50) 582 566 13 579
--------- ------------------- -------------- --------- ------------- --------------
Finance income 1 29 30 9 38 47
Finance expense (56) (13) (69) (54) (15) (69)
Gain from investment
at FVTPL - - - 1 - 1
Results from joint
venture 1 - 1 - - -
--------- ------------------- -------------- --------- ------------- --------------
Profit/(loss) before
tax 578 (34) 544 522 36 558
--------- ------------------- -------------- --------- ------------- --------------
Tax (129) 5 (124) (115) (13) (128)
--------- ------------------- -------------- --------- ------------- --------------
Profit/(loss) for the
year 449 (29) 420 407 23 430
--------- ------------------- -------------- --------- ------------- --------------
Attributable to:
Non-controlling interests (1) - (1) (1) - (1)
Equity holders of the
parent 450 (29) 421 408 23 431
--------- ------------------- -------------- --------- ------------- --------------
449 (29) 420 407 23 430
--------- ------------------- -------------- --------- ------------- --------------
2.Unallocated corporate expenses mainly comprise employee costs,
third-party professional fees and IT expenses
The following table provides an analysis of the Group
non-current assets(1) by geographic area:
2021 2020
------------------------------
$m $m
------------------------------ ------ ------
United States 1,083 995
------------------------------ ------ ------
Middle East and North Africa
Jordan 365 356
Others 321 307
------------------------------ ------ ------
686 663
------------------------------ ------ ------
Europe and rest of the world
Portugal 136 137
Others 52 55
------------------------------ ------ ------
188 192
------------------------------ ------ ------
United Kingdom 81 94
------------------------------ ------ ------
2,038 1,944
------------------------------ ------ ------
1.Non-current assets exclude investments in joint ventures,
deferred tax assets, and financial and other non-current assets
5. Exceptional items and other adjustments
Exceptional items and other adjustments are disclosed separately
in the consolidated income statement to assist in the understanding
of the Group's core performance.
Generics Injectables Branded Unallocated Total
2021 $m $m $m $m $m
--------------------------------- ----------------- ---------- ------------- --------- ------------- -------
Exceptional items
Other operating
Intangible assets write-down expenses (1) (1) (11) - (13)
--------------------------------- ----------------- ---------- ------------- --------- ------------- -------
Exceptional items (1) (1) (11) - (13)
---------------------------------------------------- ---------- ------------- --------- ------------- -------
Other adjustments
Impairment reversal Other operating
of product related intangibles income 60 - - - 60
Impairment of product Other operating
related intangibles expenses (14) (10) - - (24)
Intangible assets amortisation
other than software SG&A (30) (33) (10) - (73)
Remeasurement of contingent
consideration Finance income - - - 29 29
Unwinding and remeasurement
of contingent consideration
and other financial
liability Finance expense - - - (13) (13)
--------------------------------- ----------------- ---------- ------------- --------- ------------- -------
Exceptional items and
other adjustments included
in profit before tax 15 (44) (21) 16 (34)
---------------------------------------------------- ---------- ------------- --------- ------------- -------
Tax effect Tax 5
-------
Impact on profit for
the year (29)
-------
Exceptional items have been recognised in accordance with our
accounting policy outlines in Note 1, the details are presented
below:
Exceptional items
- Intangible assets write-down: $13 million write-down of
software representing prior year impact of the application of the
IFRIC April 2021 agenda decisions regarding cloud computing
arrangement customisation and configuration costs treatment. The
Group has adopted the IFRIC update as a change in accounting
policy. The impact relating to prior year was not material and
therefore the application was not retrospectively applied and was
recognised in the current year consolidated income statement as
exceptional item (Note 1)
Other adjustments
- Impairment reversal of product related intangibles: $60
million impairment reversal mainly related to generic Advair
Diskus(R) intangible asset as a result of launching the product
following FDA approval in April 2021 following an amendment
submitted to its Abbreviated New Drug Application in January 2021
(Note 9)
- Impairment of product related intangibles: $24 million
impairment charge of different product related intangibles due to a
decline in performance and forecasted profitability (Note 9)
- Intangible assets amortisation other than software of $73
million
- Remeasurement of contingent consideration finance income of
$29 million represents the income resulting from the valuation of
the liabilities associated with the future contingent payments in
respect of contingent consideration recognised through business
combinations
- Unwinding and remeasurement of contingent consideration and
other financial liability finance expense of $13 million represents
the expense resulting from the unwinding and the valuation of the
liabilities associated with the future contingent payments in
respect of contingent consideration recognised through business
combinations and the financial liability in relation to the
co-development earnout payment agreement
In the previous year, exceptional items and other adjustments
were related to the following:
Generics Injectables Branded Unallocated Total
2020 $m $m $m $m $m
---------------------------------- ----------------- ---------- ------------- --------- ------------- -------
Exceptional Items
Jordan warehouse fire Other operating
incident income 4 - 7 - 11
MENA severance and restructuring
costs SG&A - - (3) - (3)
Assets write off - PPE Other operating
Impairment expenses (3) - - - (3)
Assets write off - Inventory
Related Provision Cost of sales (12) - - - (12)
---------------------------------- ----------------- ---------- ------------- --------- ------------- -------
Exceptional items (11) - 4 - (7)
----------------------------------------------------- ---------- ------------- --------- ------------- -------
Other adjustments
Impairment of product Other operating
related intangibles expenses (4) - - - (4)
Impairment reversal of Other operating
product related intangibles income 66 - - - 66
Intangible assets amortisation
other than software SG&A (9) (23) (10) - (42)
Remeasurement of contingent
consideration Finance income - - - 38 38
Unwinding and remeasurement
of contingent consideration
and other financial liability Finance expense - - - (15) (15)
---------------------------------- ----------------- ---------- ------------- --------- ------------- -------
Exceptional items and
other adjustments including
in profit before tax 42 (23) (6) 23 36
----------------------------------------------------- ---------- ------------- --------- ------------- -------
Tax expenses associated
with previously unrecognised
deferred tax assets Tax (3)
-------
Tax effect Tax (10)
-------
Impact on profit for
the year 23
-------
Exceptional items
- Jordan warehouse fire incident: In 2020, Hikma recognised $11
million for insurance compensation related to a fire incident which
took place in 2019 at one of Hikma's Jordan facilities
- MENA severance and restructuring costs: of $3 million related
to one-off organisational restructuring in MENA that started in
2019 and finished in 2020
- Assets write off: In December 2020, Hikma submitted to the FDA
a Prior Approval Supplement (PAS) relating to generic Advair
Diskus(R). The amendment reflected enhanced packaging controls to
meet new industry standards adopted since the initial submission of
its ANDA application. As a result, the launch has been temporarily
paused and inventory amounting to $12 million was expected to
expire before launch and has been written off. In addition, $3
million of property, plant and equipment was written off
- Tax expense associated with previously unrecognised deferred
tax assets: A prior year adjustment to the tax expense associated
with previously unrecognised deferred tax assets of $3 million
arose as a tax return to provision adjustment
Other adjustments
- Impairment reversal of product related intangibles: $66
million impairment reversal in respect of specific product related
intangibles in the Generics segment which reflected a better than
expected performance of certain marketed products acquired through
business combination (Note 9)
- Impairment charge of product related intangibles of $4
million
- Intangible assets amortisation other than software of $42
million
- Remeasurement of contingent consideration finance income of $
38 million represents the income resulting from the valuation of
the liabilities associated with the future contingent payments in
respect of contingent consideration recognised through business
combinations
- Unwinding and remeasurement of contingent consideration and
other financial liability finance expense of $15 million represents
the expense resulting from the unwinding and the valuation of the
liabilities associated with the future contingent payments in
respect of contingent consideration recognised through business
combinations and the financial liability in relation to the
co-development earnout payment agreement
6. Tax
2020
2021 Exceptional
Exceptional items and
items and other
other adjustments
2021 adjustments 2021 Reported 2020 (Note 2020 Reported
Core results (Note 5) results Core results 5) results
$m $m $m $m $m $m
-------------- ---------------- --------------- -------------- ---------------- ---------------
Current tax:
Foreign tax 114 (7) 107 99 (2) 97
Adjustment
to prior
year (13) - (13) 1 3 2
Deferred tax
Current year 20 2 22 19 12 31
Adjustment
to prior
year 8 - 8 (2) - (2)
129 (5) 124 115 13 128
-------------- ---------------- --------------- -------------- ---------------- ---------------
UK corporation tax is calculated at 19.0% (2020: 19.0%) of the
estimated assessable profit made in the UK for the year .
The Group incurred a tax expense of $124 million (2020: $128
million). The effective tax charge rate is 22.8% (2020: 22.9%). The
reported effective tax rate is higher than the statutory rate
primarily due to the earnings mix .
Taxation for all jurisdictions is calculated at the rates
prevailing in the respective jurisdiction.
The charge for the year can be reconciled to profit before tax
per the consolidated income statement as follows:
2021 2020
$m $m
----- -----
Profit before tax 544 558
Tax at the UK corporation tax rate of 19% (2020: 19.00%) 104 106
Profits taxed at different rates 7 7
Permanent differences:
- Non-deductible expenditure 5 7
- Other permanent differences 2 -
- Research and development benefit (6) (3)
State and local taxes 7 8
Temporary differences:
- Rate change tax losses and other deductible temporary
differences for which no benefit is recognised 5 6
- Exceptional tax charge associated with previously
unrecognised tax losses (Note 5) - 3
Change in provision for uncertain tax positions 2 (8)
Unremitted earnings 3 4
Prior year adjustments (5) (2)
----- -----
Tax expense for the year 124 128
----- -----
Profits taxed at different tax rates relates to profits arising
in overseas jurisdictions where the tax rate differs from the UK
statutory rate. Permanent differences relate to items which are
non-taxable or for which no tax relief is ever likely to be due.
The major items are expenses and income disallowed where they are
covered by statutory exemptions, foreign exchange differences in
some territories and statutory reliefs such as research and
development.
Rate change tax losses and other deductible temporary
differences for which no benefit is recognised includes items for
which it is not possible to book deferred tax and comprise mainly
unrecognised tax losses.
The change in provision for uncertain tax positions relates to
the provisions the Group holds in the event a revenue authority
successfully takes an adverse view of the positions adopted by the
Group in 2021 and primarily relates to transfer pricing adjustment.
As at the consolidated balance sheet date, the Group held an
aggregate provision in the sum of $44 million (2020: $43 million)
for uncertain tax positions. The Group released $nil in 2021 (2020:
$8 million) due to the statute of limitations and released $7
million (2020: $4 million) following settlements with no final tax
adjustments required by the relevant tax authorities. This was
offset by new provisions and updates of $9 million booked in 2021
(2020: $4 million). The currency exchange differences for the year
is a $1 million reduction to the aggregate provision. In 2022, up
to $4 million could be released due to the statute of limitation
and settlements. If all areas of uncertainty were audited and all
areas resulted in an adverse outcome, management does not believe
any material additional tax would be payable beyond what is
provided.
Prior year adjustments include differences between the tax
liability recorded in the tax returns submitted for previous years
and the estimated tax provision reported in a prior period's
consolidated financial statements. This category also includes
adjustments to the tax returns (favourable) against which an
adverse uncertain tax position has been booked and included under
"change in provision for uncertain tax positions" above .
Publication of tax strategy
In line with the UK requirement for large UK businesses to
publish their tax strategy, the Group's tax strategy has been made
available on the Group's website.
7. Dividends
Paid in Paid in
2021 2020
$m $m
-------- --------
Amounts recognised as distributions to equity holders
in the year:
Final dividend for the year ended 31 December 2020
of 34.0 cents (31 December 2019: 30.0 cents) per share 78 72
Interim dividend during the year ended 31 December
2021 of 18.0 cents (31 December 2020: 16.0 cents) per
share 42 37
-------- --------
120 109
-------- --------
The proposed final dividend for the year ended 31 December 2021
is 36.0 cents (2020: 34.0 cents).
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting on 25 April 2022 and has
not been included as a liability in these consolidated financial
statements. Based on the number of shares in free issue at 31
December 2021 (231,498,055), the unrecognised liability is $83
million.
8. Earnings per share (EPS)
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the parent by the weighted
average number of Ordinary Shares. Diluted EPS is calculated by
dividing the profit attributable to ordinary equity holders by the
weighted average number of the Ordinary Shares outstanding during
the year plus the weighted average number of Ordinary Shares that
would be issued on conversion of all dilutive potentially Ordinary
Shares. The number of Ordinary Shares used for the basic and
diluted calculations is shown in the table below. Core basic
earnings per share and core diluted earnings per share are intended
to highlight the core results of the Group before exceptional items
and other adjustments.
2021 2020
Exceptional Exceptional
items items
and other and other
2021 adjustments 2021 2020 adjustments 2020
Core (Note Reported Core (Note Reported
results 5) results results 5) results
$m $m $m $m $m $m
--------- ------------- ---------- --------- ------------- ----------
Earnings for the
purposes of basic
and diluted EPS
being net profit
attributable to
equity holders
of the parent 450 (29) 421 408 23 431
--------- ------------- ---------- --------- ------------- ----------
Basic earnings per share has been calculated by dividing the
profit attributable to shareholders by the weighted average number
of shares in issue during the year after deducting Treasury shares
and shares held by the Employee Benefit Trust (EBT). Treasury
shares have no right to receive dividends and the trustees have
waived their rights to dividends on the shares held by the EBT.
The numbers of shares used in calculating basic and diluted
earnings per share are reconciled below:
2021 2020
Number Number
Number of shares m m
------- -------
Weighted average number of Ordinary Shares for the purposes of basic EPS(1) 231 236
Effect of dilutive potentially Ordinary Shares:
Share-based awards 2 2
------- -------
Weighted average number of Ordinary Shares for the purposes of diluted EPS 233 238
------- -------
1.Weighted average number of ordinary shares has been calculated
by the weighted average number of shares in issue during the year
after deducting Treasury shares and shares held by the EBT
2021 2021 2020 2020
Core Reported Core Reported
EPS EPS EPS EPS
Cents Cents Cents Cents
--------- ------ ---------- ------ ----------
Basic 194.8 182.3 172.9 182.6
--------- ------ ---------- ------ ----------
Diluted 193.1 180.7 171.4 181.1
--------- ------ ---------- ------ ----------
9. Goodwill and other intangible assets
The changes in the carrying value of goodwill and other
intangible assets for the years ended 31 December 2021 and 31
December 2020 are as follows:
Other
Product-related identified
Goodwill intangibles Software intangibles Total
------------------------------------------
$m $m $m $m $m
------------------------------------------ --------- ---------------- --------- ------------- --------
Cost
Balance at 1 January 2020 690 1,033 147 184 2,054
Additions - 8 12 16 36
Disposals - - (14) - (14)
Translation adjustments 7 - - 5 12
------------------------------------------ --------- ---------------- --------- ------------- --------
Balance at 1 January 2021 697 1,041 145 205 2,088
------------------------------------------ --------- ---------------- --------- ------------- --------
Write-down - - (14) - (14)
Additions - 14 11 58 83
Reclassification - 3 - (3) -
Translation adjustments (4) (2) - (3) (9)
------------------------------------------ --------- ---------------- --------- ------------- --------
Balance at 31 December 2021 693 1,056 142 257 2,148
------------------------------------------ --------- ---------------- --------- ------------- --------
Accumulated amortisation and impairment
Balance at 1 January 2020 (408) (660) (75) (77) (1,220)
Charge for the year - (29) (10) (14) (53)
Disposals - - 14 - 14
Impairment reversal - 66 - - 66
Impairment charge - (5) (10) - (15)
Translation adjustments - (1) - (3) (4)
------------------------------------------ --------- ---------------- --------- ------------- --------
Balance at 1 January 2021 (408) (629) (81) (94) (1,212)
------------------------------------------ --------- ---------------- --------- ------------- --------
Write-down - - 1 - 1
Charge for the year - (59) (11) (14) (84)
Impairment reversal - 60 - - 60
Impairment charge - (23) - (1) (24)
Translation adjustments - 1 - 2 3
------------------------------------------ --------- ---------------- --------- ------------- --------
Balance at 31 December 2021 (408) (650) (91) (107) (1,256)
------------------------------------------ --------- ---------------- --------- ------------- --------
Carrying amount
------------------------------------------ --------- ---------------- --------- ------------- --------
At 31 December 2021 285 406 51 150 892
------------------------------------------ --------- ---------------- --------- ------------- --------
At 31 December 2020 289 412 64 111 876
------------------------------------------ --------- ---------------- --------- ------------- --------
Of the total intangible assets other than goodwill, $132 million
(2020: $252 million) are under development and not yet subject to
amortisation.
Goodwill
Goodwill acquired in a business combination is allocated at
acquisition to the cash generating units (CGUs) that are expected
to benefit from that business combination. The carrying amount of
goodwill has been allocated as follows:
As at 31 December
--------------------
2021 2020
$m $m
--------- ---------
Branded 170 173
Injectables 115 116
--------- ---------
Total 285 289
--------- ---------
In accordance with the Group policy, goodwill is tested annually
for impairment during the fourth quarter or more frequently if
there are indicators that goodwill may be impaired.
Branded, Injectables and Generics CGUs
Details related to the discounted cash flow models used in the
impairment tests of the Branded, Injectables and Generics CGUs are
as follows:
Valuation basis VIU
------------------------------ ---------------------------------- ---------- --------- ------ ------
Sales growth rates, informed
by pricing and volume
Key assumptions assumptions
Profit margins and profit
margin growth rates for
marketed and pipeline
products
Expected launch dates
for pipeline products
Terminal growth rates
Discount rates
------------------------------ ---------------------------------- ---------- --------- ------ ------
Determination of assumptions Growth rates are internal forecasts based
on both internal and external market information,
informed by historical experience and management's
best estimates of the future
Margins reflect past experience,
adjusted for expected
changes in the future
Establishing the launch
date and probability of
a successful product approval
for pipeline products
Terminal growth rates
are based on the Group's
experience in its markets
Discount rates for each
CGU are derived from specific
regions/countries
------------------------------ ---------------------------------- ---------- --------- ------ ------
Period of specific projected 5 years, to which a terminal
cash flows growth rate is then applied
------------------------------ ---------------------------------- ---------- --------- ------ ------
Terminal Pre-tax
Terminal growth rate growth discount
and discount rate rate (perpetuity) rate
--------------------- --------------
2021 2020 2021 2020
---------------------------------- ---------- --------- ------ ------
Branded 2.4% 2.4% 15.4% 16.6%
Injectables 2.1% 2.1% 10.2% 11.1%
Generics 2.3% 2.3% 9.9% 12.7%
----------------------------------------------------------------- ---------- --------- ------ ------
The Group performed its annual goodwill and CGU impairment test
for the Branded, Injectables and Generics. The Group's model is a
VIU model based on the discounted value of the best estimates
derived from the key assumptions to arrive at the recoverable
value. This value is then compared to the carrying value of the CGU
to determine whether an impairment is required. In addition, the
Group models sensitivities on the VIU amounts calculated to
determine whether reasonable changes in key assumptions could lead
to a potential impairment. If such reasonable changes would result
in an impairment, then in accordance with IAS36 these are disclosed
below.
For the Branded, Injectables and Generics CGUs the Group has
determined that sufficient headroom(1) still exists under
reasonable changes in key assumptions. Specifically, an evaluation
of the CGUs was made assuming an increase of two percentage points
in the discount rate, or a 10% decline in the projected cash flows,
or a 5% decline in the projected cash flows in the terminal year or
reducing the terminal growth rate by two percentage points and in
all cases sufficient headroom exists.
Climate-related matters: The Group monitors the development of
climate related risks. At the current time, climate change is not
expected to have a material impact on the consolidated financial
statements. The Group conducted a sensitivity for the potential
impact of climate change, specifically assuming disruption through
extreme weather events, such scenario had minimal impact on the
recoverable values of all CGUs.
1.Headroom is defined as the excess of the recoverable value,
over the carrying value of a CGU
Generic Advair Diskus(R) CGU
The Group evaluated generic Advair Diskus(R) as a separate CGU,
mainly due to its distinct assets and liabilities and its ability
to generate largely independent cash flows.
As per the Group policy, the launching of generic Advair
Diskus(R) following FDA approval in April 2021 of an amendment
submitted to its Abbreviated New Drug Application in January 2021
was considered as an indicator for an impairment reversal
assessment. As a result, the Group evaluated the generic Advair
Diskus(R) CGU recoverable amount based on fair value less cost to
sell (FVLCS) model, being the higher value compared to VIU.
The evaluation resulted in a reversal of impairment of $46
million bringing the revised carrying value to $160 million. This
valuation methodology uses significant inputs which are not based
on observable market data, therefore this valuation technique is
classified as a level 3 valuation. Details relating to the
discounted cash flow model used for the generic Advair Diskus(R)
impairment test are as follows:
Valuation basis FVLCS
-------------------- -------------------------------------------------------------------------------------------
Key assumptions Sales growth rates, informed by pricing and volume assumptions
Profit margins and profit margin growth rates
Useful life
Discount rates
-------------------- -------------------------------------------------------------------------------------------
Determination Probability weighted average of different possibilities on sales growth rates, informed by
of assumptions conversion rates from the branded products and competitor entries
Margins reflect past experience, adjusted for expected changes in the future
Useful life reflects management best estimate of the product's expected economic benefit
Discount rate is derived from the specific region/country in which the CGU operates
-------------------- -------------------------------------------------------------------------------------------
Period of specific
projected cash
flows 5 years
-------------------- -------------------------------------------------------------------------------------------
Useful life 15 years
-------------------- -------------------------------------------------------------------------------------------
Post-tax discount
rate 8%
-------------------- -------------------------------------------------------------------------------------------
The Group performed sensitivity analysis over the valuation of
the generic Advair Diskus(R) CGU. The sensitivity analysis assumed
an increase of two percentage points in the discount rate or a 10%
decline in the projected cash flows. Applying those sensitivities
would result in an impairment charge against the generic Advair
Diskus(R) CGU of approximately $13 million and $17 million,
respectively.
Product-related intangible assets
In-Process Research and Development (IPR&D)
IPR&D consists of pipeline products of $6 million mainly
related to Generics CGU of $5 million with immaterial amounts
allocated to the Branded and Injectables CGUs. At 31 December 2020,
IPR&D balance was $170 million mainly related to generic Advair
Diskus(R) of $138 million which was launched during the year and
transferred to product rights. These intangibles are not in use and
accordingly, no amortisation has been charged against them. The
Group performs an impairment review of IPR&D assets annually.
The result of this test was an impairment charge of $9 million
(2020: $4 million)
Product rights
Product rights consists of marketed products of $400 million
(2020: $242 million) mainly related to generic Advair
Diskus(R).
Whenever impairment indicators are identified for definite life
intangible assets, Hikma reconsiders the asset's estimated economic
benefit, calculates the value of the individual assets or asset
group's cash flows and compares such value against the individual
asset's or asset group's carrying amount. If the carrying amount is
greater, the Group records an impairment loss for the excess of
book value over the valuation which is based on the discounted cash
flows by applying an appropriate discount rate that reflects the
risk factors associated with the cash flows and the CGUs under
which these products sit. Furthermore, if there is an indication
that previously recognised impairment losses no longer exist or
have decreased, the Group estimates the assets' recoverable
amounts. A previously recognised impairment loss is reversed only
if there has been a sustained and discrete change in the
assumptions and indicators used to determine the asset's
recoverable amount since the last impairment loss was recognised.
The reversal is limited so that the carrying amount of the asset
does not exceed its recoverable amount, nor exceed the carrying
amount that would have been determined, net of depreciation and
amortisation, had no impairment loss been recognised for the asset
in prior years. As at 31 December 2021, the result of this testing
was an impairment charge of $14 million (2020: $1 million) related
to different products due to declines in performance and forecasted
profitability, and an impairment reversal of $60 million (2020: $66
million) comprising $46 million related to the generic Advair
Diskus(R) intangible asset and $14 million for other products
related to the Generics CGU due to improved performance.
The Group performed sensitivity analysis over the valuation of
the generic Advair Diskus(R) intangible asset. The sensitivity
analysis assumed an increase of two percentage points in the
discount rate or a 10% decline in the projected cash flows,
applying those sensitivities would result in an impairment charge
against the generic Advair Diskus(R) intangible asset of
approximately $11 million and $16 million, respectively.
Software
Software intangibles mainly represent the Enterprise Resource
Planning solutions that are being implemented in different
operations across the Group in addition to other software
applications. The software has an average estimated useful life
that varies from three to ten years.
In 2021, there was no impairment of software (2020: $10
million).
In 2021, the Group recorded a $13 million write-down of software
previously capitalised as a result of application of the IFRIC
April 2021 agenda decisions regarding cloud computing arrangement
customisation and configuration costs treatment.
Other identified intangibles
Other identified intangibles comprise customer relationships,
trade names and marketing rights of $150 million (2020: $111
million). The increase during the year represent payments made to
third parties in relation to marketing rights and licensing
agreements. Following a review of impairment indicators for other
identified intangibles as at 31 December 2021, there was an
impairment charge of $1 million (2020: $nil).
Customer relationships
Customer relationships represent the value attributed to
existing direct customers that the Group acquired on the
acquisition of subsidiaries. The customer relationships have an
average estimated useful life of 15 years.
Trade names
Trade names were mainly recognised on the acquisition of Hikma
Germany GmbH (Germany) with estimated useful lives of ten
years.
Marketing rights
Marketing rights are amortised over their useful lives
commencing in the year in which the rights are ready for use with
estimated useful lives varying from two to ten years.
10. Trade and other receivables
As at 31 December
----------------------------
2021 2020 (restated)(1)
--------------------------------------------
$m $m
-------------------------------------------- ------- -------------------
Gross trade receivables 1,107 973
Chargebacks and other allowances (275) (256)
Related allowance for expected credit loss (51) (55)
-------------------------------------------- ------- -------------------
Net trade receivables 781 662
-------------------------------------------- ------- -------------------
VAT and sales tax recoverable 32 35
Other receivables 3 3
-------------------------------------------- ------- -------------------
Net trade and other receivables(1) 816 700
-------------------------------------------- ------- -------------------
1. In 2021, prepayments have been reclassified under other
current assets which were previously classified under trade and
other receivables, and hence at 31 December 2020 numbers have been
restated reflecting $56 million reclassification from trade and
other receivables to other current assets. Had this
reclassification been applied at 1 January 2020, these line items
would have been restated by $49 million
The fair value of receivables is estimated to be not
significantly different from the respective carrying amounts.
Trade receivables are stated net of provisions for chargebacks
and expected credit loss allowance as follows:
As at As at
31 December Additions, Translation 31 December
2020 net Utilisation adjustments 2021
$m $m $m $m $m
---------------------------------- ------------- ----------- ------------ ------------- -------------
Chargebacks and other allowances 256 2,160 (2,141) - 275
Expected credit loss allowance 55 - (3) (1) 51
---------------------------------- ------------- ----------- ------------ ------------- -------------
311 2,160 (2,144) (1) 326
---------------------------------- ------------- ----------- ------------ ------------- -------------
As at 31 As at
December Additions, Translation 31 December
2019 net Utilisation adjustments 2020
$m $m $m $m $m
---------------------------------- ---------- ----------- ------------ ------------- -------------
Chargebacks and other allowances 280 1,865 (1,889) - 256
Expected credit loss allowance 55 2 (1) (1) 55
---------------------------------- ---------- ----------- ------------ ------------- -------------
335 1,867 (1,890) (1) 311
---------------------------------- ---------- ----------- ------------ ------------- -------------
At 31 December 2021, the provision balance relating to
chargebacks was $201 million (2020: $184 million) within what
management believes is a reasonable range for the provision of $197
million to $205 million. The key inputs and assumptions included in
calculating this provision are estimations of 'in channel'
inventory at the wholesalers (including processing lag) of 40 days
(2020: 40 days) and the estimated chargeback rates as informed by
average historical chargeback credits adjusted for expected
chargeback levels for new products and estimated future sales
trends. Based on the conditions existing at the balance sheet date
an increase/decrease in the estimate of in channel inventory by 1
day increases/decreases the provision by $5 million (2020:
$5million) and if the overall chargeback rate of 55% (2020: 55%)
increases/decreases by one percentage point the provision would
increase/decrease by $4 million (2020: $3 million).
At 31 December 2021 the provision balance relating to customer
rebates was $55 million (2020: $57 million) within what management
believes is a reasonable range for the provision of $54 million to
$56 million. The key inputs and assumptions included in calculating
this provision are historical relationships of rebates and payments
to revenue, past payment experience, estimate of 'in channel'
inventory at the wholesalers and estimated future trends. Based on
the conditions existing at the balance sheet date, a ten basis
point increase/decrease in the rebates rate of 6.5% (2020: 7.8%)
would increase/decrease this provision by approximately $1 million
(2020: $1 million).
11. Short-term financial debts
As at 31 December
--------------------
2021 2020
$m $m
------------------------------------------ --------- ---------
Bank overdrafts 3 3
Import and export financing 58 67
Short-term loans 3 47
Current portion of long-term loans (Note
13) 48 41
------------------------------------------ --------- ---------
112 158
------------------------------------------ --------- ---------
2021 2020
% %
---------------------------------------------- ----- -----
The weighted average interest rates incurred
are as follows:
Bank overdrafts 3.21 4.25
Bank loans (including the non-current
bank loans) 2.83 3.04
Eurobond(1) 3.58 4.17
Import and export financing(2) 6.39 5.70
---------------------------------------------- ----- -----
1. The Eurobond effective interest rate includes unwinding of
discount amount and upfront fees
2. Import and export financing represents short-term financing
for the ordinary trading activities of the Group
12. Trade and other payables
As at 31 December
------------------ --------------------
2021 2020
------------------
$m $m
------------------ --------- ---------
Trade payables 262 279
Accrued expenses 194 175
Other payables 12 16
------------------- --------- ---------
468 470
------------------ --------- ---------
The fair value of payables is estimated to be not significantly
different from the respective carrying amounts.
13.Long-term financial debts
As at 31 December
---------------------------------------------------- --------------------
2021 2020
----------------------------------------------------
$m $m
---------------------------------------------------- --------- ---------
Long-term loans 207 242
Long-term borrowings (Eurobond) 492 491
Less: current portion of long-term loans (Note 11) (48) (41)
Long-term financial loans 651 692
Breakdown by maturity:
Within one year 48 41
In the second year 44 48
In the third year 37 44
In the fourth year 524 36
In the fifth year 23 522
In the sixth year 22 21
Thereafter 1 21
---------------------------------------------------- --------- ---------
699 733
---------------------------------------------------- --------- ---------
Breakdown by currency:
US dollar 620 642
Euro 44 54
Jordanian dinar 10 13
Algerian dinar 13 14
Saudi riyal 9 9
Moroccan dirham 3 -
Tunisian dinar - 1
---------------------------------------------------- --------- ---------
699 733
---------------------------------------------------- --------- ---------
The loans are held at amortised cost.
Long-term loans amounting to $0.5 million (31 December 2020: $1
million) are secured on certain property, plant and equipment.
Major arrangements entered into by the Group were:
a) A syndicated revolving credit facility of $1,175 million was
entered into on 27 October 2015. From the $1,175 million, $175
million matured on 24 December 2019, $130 million matured on
January 2021 and the remaining $870 million matures on 24 December
2023. At 31 December 2021 the facility has an outstanding balance
of $nil (2020: $nil) and a $870 million unused available limit
(2020: $1,000 million). On 29 December 2021 the facility agreement
has been increased to $1,150 million available for 5 years till Jan
2027 effective from 4 January 2022 with an extension options for
additional 2 years. The facility can be used for general corporate
purposes
b) A ten-year $150 million loan from the International Finance
Corporation was entered into on 21 December 2017. There was full
utilisation of the loan since April 2020. Quarterly equal
repayments of the long-term loan have commenced on 15 March 2021.
The loan was used for general corporate purposes. The facility
matures on 15 December 2027
c) Hikma issued a $500 million (carrying value at 31 December
2021 of $492 million, and fair value at 31 December 2021 of $515
million) 3.25%, five-year Eurobond on 9 July 2020 with a rating of
(BBB-/Ba1) which is due in July 2025. The proceeds of the issuance
were $494 million which were used for general corporate
purposes
d) An eight-year $200 million loan facility from the
International Finance Corporation and Managed Co-lending Portfolio
program was entered into on 26 October 2020. There was no
utilisation of the loan as of December 2021. The facility matures
on 15 September 2028 and can be used for general corporate
purposes
14. Cash generated from operating activities
2021 2020
-----------------------------------------------------------------
$m $m
----------------------------------------------------------------- ------- -------
Profit before tax 544 558
Adjustments for:
Depreciation, amortisation, impairment charges/reversals
and write-down of:
Property, plant and equipment 72 77
Intangible assets 61 2
Right of Use of Assets 12 12
Gain from investment at FVTPL - (1)
Loss on disposal/damage of property, plant and equipment 1 2
Movement in provisions 2 4
Cost of equity-settled employee share scheme 29 27
Finance income (30) (47)
Interest and bank charges 69 69
Results from joint venture 1 -
Foreign exchange loss and net monetary hyperinflation
impact 36 30
Changes in working capital:
Change in trade and other receivables (166) (47)
Change in other current assets 27 (14)
Change in inventories 38 (180)
Change in trade and other payables 14 6
Change in other current liabilities 62 41
Change in other non-current liabilities (5) (14)
----------------------------------------------------------------- ------- -------
Cash flow from operating activities 767 525
----------------------------------------------------------------- ------- -------
15. Contingent liabilities
Guarantees and letters of credit
A contingent liability existed at the balance sheet date in
respect of external guarantees and letters of credit totalling $45
million (31 December 2020: $41 million) arising in the normal
course of business. No provision for these liabilities has been
made in these consolidated financial statements.
A contingent liability existed at the balance sheet date for a
standby letter of credit totalling $10 million (2020: $8 million)
for a potential stamp duty obligation that may arise for repayment
of a loan by intercompany guarantors. It's not probable that the
repayment will be made by the intercompany guarantors.
Legal Proceedings
The Group is involved in a number of legal proceedings in the
ordinary course of its business, including actual or threatened
litigation and actual or potential government investigations
relating to employment matters, product liability, commercial
disputes, pricing, sales and marketing practices, infringement of
IP rights, the validity of certain patents and competition
laws.
Most of the claims involve highly complex issues. Often these
issues are subject to substantial uncertainties and, therefore, the
probability of a loss, if any, being sustained and/or an estimate
of the amount of any loss is difficult to ascertain. It is the
Group's policy to accrue for amounts related to these legal matters
if it is probable that a liability has been incurred and an amount
is reasonably estimable.
- In 2018, the Group received a civil investigative demand from
the US Department of Justice requesting information related to
products, pricing and related communications. In 2017, the Group
received a subpoena from a US state attorney general and a subpoena
from the US Department of Justice. Hikma denies having engaged in
any conduct that would give rise to liability with respect to these
demands but is cooperating with all such demands. At this point,
management does not believe sufficient evidence exists to make any
provision for this
- Starting in 2016, several complaints have been filed in the
United States on behalf of putative classes of direct and indirect
purchasers of generic drug products, as well as several individual
direct purchasers opt-out plaintiffs (including two products).
These complaints, which allege that the defendants engaged in
conspiracies to fix, increase, maintain and/or stabilise the prices
of the generic drug products named, have been brought against Hikma
and various other defendants. The plaintiffs generally seek damages
and injunctive relief under federal antitrust law and damages under
various state laws. Hikma denies having engaged in conduct that
would give rise to liability with respect to these civil suits and
is vigorously pursuing defense of these cases. At this point,
management does not believe sufficient evidence exists to make any
provision for this
- Starting in June 2020, several complaints have been filed in
the United States on behalf of putative classes of direct and
indirect purchasers of Xyrem(R) against Hikma and other defendants.
These complaints allege that Jazz Pharmaceuticals PLC and its
subsidiaries entered into unlawful reverse payment agreements with
each of the defendants, including Hikma, in settling patent
infringement litigation over Xyrem(R). The plaintiffs in these
lawsuits seek treble damages and a permanent injunction. Hikma
denies having engaged in conduct that would give rise to liability
with respect to these lawsuits and is vigorously pursuing defence
of these cases. At this point, management does not believe
sufficient evidence exists to make any provision for this
- Numerous complaints have been filed with respect to Hikma's
sales, and distribution, or manufacture of opioid products. Those
complaints now total approximately 682 in number. These lawsuits
have been filed against distributors, branded pharmaceuticals
manufacturers, pharmacies, hospitals, generic pharmaceuticals
manufacturers, individuals, and other defendants by a number of
cities, counties, states, other governmental agencies and private
plaintiffs in both state, and federal, and Canadian provincial
courts. Most of the federal cases have been consolidated into a
multidistrict litigation in the Northern District of Ohio. These
cases assert in general that the defendants allegedly engaged in
improper marketing and distribution of opioids and that defendants
failed to develop and implement systems sufficient to identify
suspicious orders of opioid products and prevent the abuse and
diversion of such products. Plaintiffs seek a variety of remedies,
including restitution, civil penalties, disgorgement of profits,
treble damages, attorneys' fees and injunctive relief. Hikma denies
having engaged in conduct that would give rise to liability with
respect to these civil suits and is vigorously pursuing defense of
these cases. At this point, management does not believe sufficient
evidence exists to make any provision for this
- In November 2020, Amarin Pharmaceuticals filed a patent
infringement lawsuit against Hikma in the United States District
Court for the District of Delaware (No. 20-cv-1630) alleging that
Hikma's sales and distribution of its generic icosapent ethyl
product infringes three Amarin patents that describe certain
methods of using icosapent ethyl. Amarin sought an injunction
barring Hikma from selling its generic product as well as
unspecified damages. Hikma's product is not approved for the
patented methods but rather is approved only for a different
indication not covered by any valid patents. In January 2022 the
court dismissed the lawsuit against Hikma, and as of this writing
Amarin has not sought to appeal the court's dismissal. Hikma denies
the allegations and will vigorously defend against them if
necessary. Management does not believe sufficient evidence exists
to make any provision for these issues
Tax
In April 2019, the European Commission released its decision
that certain tax exemptions offered by the UK authorities could
constitute State Aid and where this is the case, the relevant tax
will need to be paid to the UK tax authorities. The UK Government
has subsequently appealed against this decision. In common with
other UK headquartered international companies whose arrangements
were in line with current UK CFC legislation, Hikma could have been
affected by the outcome of this decision and had estimated the
maximum potential liability to be approximately $2.4 million.
In 2021, formal letters of confirmations were received from HMRC
that confirmed that Hikma is not a beneficiary of State Aid in
accordance with the European Commission's decision and the UK's
Controlled Foreign Company legislation. Following HMRC's
confirmation, Hikma no longer requires a contingent liability in
this regard.
16. Subsequent Events
Teligent Inc. acquisition
On 17 January 2022, Hikma announced that it has agreed to
acquire the Canadian assets of Teligent Inc. (Teligent). The
acquisition marks Hikma's expansion into Canada and includes a
portfolio of 25 sterile injectable products, three in-licenced
ophthalmic products and a pipeline of seven additional products,
four of which are approved by Health Canada.
The transaction was completed on 2 February 2022 and Hikma paid
a cash consideration of $46 million. Due to the proximity of the
completion of the transaction to the date of issuance of the
consolidated financial statements, the initial valuation for the
business combination and net assets acquired is in progress. It is
expected that most of the consideration paid is attributable to
product related intangible assets and around $2 million is
attributable to working capital.
Share buyback
On 24 February 2022, Hikma announced a share buyback programme
of up to $300 million to be executed during 2022. The buyback has
been sized to maintain balance sheet efficiency whilst leaving
significant headroom for continued investment opportunities. The
Buyback reflects the Group's strong cash generation, balance sheet
strength and the Board's confidence in the future growth prospects
of the business. It is worth noting that since 31 December 2021,
the Company has received intercompany dividends which increased the
retained earnings balance available for distribution after
year-end.
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END
FR SEIEDDEESEEE
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