![]() #### © Hikma Pharmaceuticals PLC #### Annual Report 2021 ### Better health. ### Within reach. ### Every day. ![]() Welcome to our 2021 Annual Report Strategic report 2 What we do 4 Executive Chairman’s statement 6 Chief Executive Ocer’s strategic review 10 Investment case 12 Stakeholder engagement 18 Our markets 20 Our business model 22 Our progress Business andnancial review 24 Group overview 26 Injectables 28 Generics 30 Branded 32 Group performance Sustainability 37 Acting responsibly 50 TCFD Risk management 54 Risk management 64 Compliance Corporate governance 67 Message from our Executive Chairman 68 Corporate governance at a glance 70 Board of Directors 72 Executive Committee 74 Governance report 80 Committee reports 89 Remuneration report 111 Directors’ report Financial statements 116 Independent auditors’ report 124 Consolidated nancial statements 129 Notes to the consolidated nancialstatements 180 Company nancial statements 182 Notes to the Company nancialstatements Shareholder information 187 Shareholder information 188 Principal Group Companies andAdvisers By creating high-quality productsand making them accessible to thosewho need themwe are helping to shape a healthier world that enriches allour communities. See howour strategy helps us shape a healthier world onpage 6 ## Hikma puts better ## health within reach ## every day. Cover image Samantha Roe is a recent graduate of Ohio University with a BS in Chemistry and a minor in Biological Sciences. Samantha joined Hikma in May 2019 and is a scientist inthe Analytical Research &Development department, where she helps to develop new generic drug products. Samantha is a member of theR&D 5S Team, which isfocused on optimising workplace eciency and productivity, and has recentlybecome the Columbus site leader fortheCorporate Social Responsibility programme. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 1 STRATEGIC REPORT #### Our performance See howwe performed in ourBusiness and nancial review on page 24. We act responsibly, advancing health and wellbeing, empowering ourpeople, protecting the environment and building trust through quality in everything we do. Read moreon page 36. #### Financial highlights Change vs2020 Change vs2020 Revenue Operating prot $2,553m +9% $582m +1% Core 1 operating prot EBITDA 2 $632m +12% $727m +9% Prot to shareholdersBasic earnings per share $421m (2)% 182.3c 0% Core basic earnings per share 3 Dividend per share 194.8c +13% 54.0c +8% #### Non-nancial highlights Instructor-led learning hours forourpeople Established a target to reduce our Scope 1 and 2 GHG emissions by 25% by 2030 4 47,000 25% 1.Core results are presented to show the underlying performance of the Group, excluding the exceptional items and other adjustments set out inNote 6 of the Group consolidated nancial statements. A reconciliation from core to reported operating prot is included within the Consolidated incomestatement inthe Financial statements 2.EBITDA is earnings before interest, tax, depreciation, amortisation, assets write-down and impairment charges. EBITDA is a non-IFRS measure, seepage 34 for areconciliation to reported IFRS results 3.Core basic earnings per share is reconciled to basic earnings per share in Note 15 of the Group consolidated nancial statements 4.Committed to reducing Scope 1 and Scope 2 greenhouse gas emissions by 25% by 2030, using a 2020 baseline year ![]() 2 Hikma Pharmaceuticals PLC Annual Report 2021 #### What we do We bring patients across the US, MENA and Europe abroad range ofgeneric, specialty and branded pharmaceuticalproducts. #### Our marketsUS c. 2,000 employees #### Europe & ROW c. 1,050 employees #### MENA c. 5,650 employees US Our large manufacturing facilities in the United States (US) supply generic and specialty products across a broad range oftherapeutic areas, including respiratory, oncology and pain management. We also have three R&D facilities to support sustainable growth. #### MENA We sell branded generics and in-licensed patented products across the Middle East and North Africa (MENA). We have manufacturing facilities in seven countries, including US FDA-inspected plants in Jordan and Saudi Arabia. Around 2,000 sales representatives and support sta market our brands to healthcare professionals across 18markets. #### Europe and rest of the world #### (ROW) Our injectable manufacturing facilities in Portugal, Germany and Italy have a range ofcapabilities including dedicated capacity for oncology and cephalosporins. These facilities supplyinjectable products to the US and MENA and a growing number of markets inEurope. 59% Group core revenue (2020: 60%) 33% Group core revenue (2020: 33%) 8% Group core revenue (2020: 7%) ![]() Hikma Pharmaceuticals PLC Annual Report 2021 3 STRATEGIC REPORT c. 8,700 Employees 32 Manufacturing plants 7 R&D centres 670+ Products #### Our business segmentsSegmental revenue #### Injectables We supply hospitals across our markets with generic injectables, supported by our manufacturing facilities in the US, Europe and MENA. In the US, we have broadened our product oering to include compounded sterile injectables. #### Generics We supply oral and other non-injectable generic and specialtybranded products in the USretail market, leveraging our state-of-art manufacturing facility inColumbus, Ohio. #### Branded We supply branded generics and in-licensed patented products from our local manufacturing facilities to retail and hospital customers across the MENA region. Injectables $1,053m (2020: $977m) Branded $669m (2020: $613m) Generics $820m (2020: $744m) Other $11m (2020: $7m) ![]() 4 Hikma Pharmaceuticals PLC AnnualReport 2021 #### Executive Chairman’s statement Executing on our purpose The pandemic has presented challenges for us, for ourcustomers and, most critically, for patients. Remaining focused on our purpose – to put better heath within reach, every day – we have navigated these challenges successfully. Since the outset of the pandemic, we have been committed to making sure patients have the medicines they need, when they need them. We have listened to our customers – healthcare professionals, hospitals, pharmacists, wholesalers – and have responded quickly and eectively to their rapidly changing demands, leveraging the breadth of our portfolio andthe quality and exibility of our US, Europe and MENA-based manufacturing facilities. At the same time, we have continued to strengthen ouroperations so that we can better serve our customers. We have placed an enhanced focus on our procurement practices, carefully managed inventory levels and engaged regularly with our suppliers. Throughout the pandemic, our people have shown anunwavering commitment to serving patient needs, despite the many challenges that were presented. We care for our employees and have worked hard to make sure that they are benetting from a strong culture and inclusive work environment and that they have attractive development opportunities. #### We operate with one driving purpose:to put #### better health within reach every day. Said Darwazah Executive Chairman ![]() Hikma Pharmaceuticals PLC Annual Report 2021 5 STRATEGIC REPORT I am immensely proud of how our peoplehave continued to deliver on our purpose in the face of ongoing disruption from the pandemic 17.1% Return on invested capital  Generating returnsfor our shareholders Hikma has once again delivered a strong nancial performance in 2021, growing revenue, expanding core operating margin and generating strong cash ow. Group core basic earnings per share in 2021 grew by13%. Return on invested capital 1 was17.1%, demonstrating oureciency at allocating capital andgenerating value. This growth is consistent with our long track record of creating value for our shareholders. Over the last ten years to 31 December 2021, we have delivered a total shareholder return of 313%, compared with 94% for the FTSE 100 and 177% for FTSE 350 healthcare companies. We remain committed to our consistent dividend payments and are pleased to conrm a nal dividend of 36 cents per share for 2021. Combined with the interim dividend of 18 cents per share, this represents a8% increase in the total dividend for 2021. Reinforcing our commitment to quality At Hikma, we continue to stress the importance of quality and reliability. Quality underpins our business in dierent ways, be it the medicines we deliver to our customers, the facilities and processes we have in place to create and sell those medicines, as well as thequality of our people. We have built our reputation on manufacturing high-quality medicines, and it is important we ensure that quality remains at the core of what we do. We maintain this quality focus through a variety of means, including internal quality culture campaigns, ongoing quality audits of our manufacturing sites and key suppliers run by our Quality team, continuous monitoring and improvement of quality metrics and the provision of reports to the Executive Committee bythe Hikma Quality Council. In 2021 we introduced a new Code of Conduct, with quality at its centre. Our Code calls on us to adhere to the highest ethical standards and to maintain the trust of our colleagues, customers and ultimately the patients we serve. Our responsibility We are focused on putting better health within reach for patients, but our approach to operating responsibly goes beyond this. We work hard to ensure we are also helping our communities in other ways: through medicine and food donations, our work in supporting education or helping in crisis situations. We also closely track our impact on the environment, and for the rst time this year have introduced a target to reduce our carbon emissions. The ‘Acting responsibly’ section ofthis report, on pages 37 to 49 provides more information on all of our work on these areas, with some case studies demonstrating what we are doing. Board evolution Looking to 2022 and Board composition, Pamela Kirby will not stand for re-election to the Board at our Annual General Meeting in April. Pam joined the Board in 2014 and assumed the role of Remuneration Committee Chair in 2016. On behalf of the Board, I extend our heartfelt appreciation to Pam for her steady and thoughtful counsel during her tenure. Nina Henderson will take over as Remuneration Committee Chair. Nina joined the Board in 2016 and will bring extensive executive management and board experience to this important role. Driving future growth Hikma has three strong businesses, an extensive product portfolio and a broad footprint of high-quality, exible manufacturing facilities, all of which contribute to the good market positions we hold. We are now looking to build on this, with a focus on increasingly complex and specialised medicines, and capitalising on the growth opportunities that best benet our customers and all our stakeholders. Importantly, in 2021, we made great strategic progress on this, with acquisitions and business developmentopportunities adding to the growth potential. We have a strategy inplace which is delivering results, as demonstrated byour strong nancial performance in 2021, and Ilookforward to keeping you updated as we continue to grow. 1.Return on invested capital is calculated as core operating prot aerinterest and tax divided by invested capital (calculated as totalequity plus net debt) ![]() 6 Hikma Pharmaceuticals PLC Annual Report 2021 #### Chief Executive Ocer’s strategic review We havedeliveredanother strong nancial performancethroughthesuccessfulexecution ofourstrategy, and we are investing for the future. Siggi Olafsson Chief Executive Ocer The past year has been one of continued progress forHikma. We have launched important products across our markets, developed ourportfolio and pipeline and achievedconsistency and reliability of supply in a market that has continued to be impacted by the pandemic. While delivering for patients today, we have also invested for the future, ensuring we are well placed to continue to thrive and deliver on our purpose over the long term. Crucially, we are doing this while acting responsibly, making a positive impact onthe communities in which we operate as well asminimising our impact on the environment. #### Strategic progress In early 2018, I set out strategic priorities for the Group – to deliver more from our foundation, to build a portfolio that anticipates future health needs and to inspire and enable our people. Since then, we have made excellent progress against all three priorities. Each of our businesses as well as our Group functions are on a stronger footing today and we are well placed as we look towards our next chapter of growth. Better health. Within reach. Every day. #### Deliver #### Build #### Inspire ![]() Hikma Pharmaceuticals PLC Annual Report 2021 7 STRATEGIC REPORT Our strategy continues to deliver good nancial results and we were pleased to grow revenue 9% and core operating prot 12% in 2021 Deliver more from a strong foundation Our KPIs: – Core revenue – Core operating prot – Return on invested capital Build a portfolio that anticipates future health needs Our KPIs: – Core revenue from new products launched Inspire andenable our people Our KPIs: – Employee enablement – Employee engagement To nd out more see ‘Our progress’ on page 22. Strong nancial performance We grew Group revenue 9% in 2021, to $2,553 million and Group core operating prot was $632 million, an increase of 12% on 2020. This impressive performance was also reected in our cash ow, with cash ow from operating activities up 38% to $638 million. We were able to invest in acquisitions and business development opportunities while also maintaining astrong balance sheet, exiting the year with gearing of0.6x net debt to core EBITDA. Our Injectables business achieved good growth in 2021 across all our regions. Thanks to the breadth of our portfolio, extensive and exible manufacturing facilities and our resilient supply chain, this remains astrong, dierentiated business. In the US, we continue to play a leading role in supplying hospitals with the medicines they need and are the second largest supplier of generic injectables by volume, with our portfolio of over 120 products. Since December, wearealso supplying hospitals with compounded pharmaceutical products out of our newsterile compounding facility in Dayton, New Jersey. We remain focused on having a portfolio t for the future, with ongoing new launches, and are also building our portfolio and pipeline through acquisition and partnership, including licensing two new biosimilars for the US. We already have experience commercialising biosimilars in MENA, where these products contributed to our growth in 2021. We are seeing goodgrowth in Europe, as we increase supply of ourown products, and enter new markets, such asFrance.We have also benetted from valuable contract manufacturing opportunities, leveraging ourextensive lyophilisation capacity in Portugal. Our Generics business has seen signicant revenue growth and margin expansion in recent years. Since Ijoined in February 2018, we have grown Generics revenue at a CAGR of 6% and, through our continuousfocus on optimising our cost base and driving operating eciencies, our margins are now some ofthe highest in the industry. While the US generic market remains highly competitive, as evidenced byaccelerating price erosion, we are demonstrating our ability to more than oset competitive pressures through our strong commercial and manufacturing capabilities and the successful execution of our pipeline. In 2021, we added seven new products to our Generics portfolio, including generic Advair Diskus® and our novel naloxone nasal spray, Kloxxado™,an important new treatment for reversing the eects of opioid overdose. These two products are great examples ofthe more complex generic and specialty branded medicines that we are prioritising and producing fromour state-of-the-art manufacturing facility inColumbus, Ohio. In our Branded business, we have continued to strengthen our market position across the region. Ourstrategy of tiering these markets – focusing investment in markets with the highest potential – is paying o, with two of our Tier One markets – Algeria and Egypt – performing strongly in 2021, more than osetting changes in the tender market in Saudi Arabia during the year. Our business in Algeria is benetting from new product launches and a new oral oncology plant – the rst of its kind in Algeria. We are also seeing good growth in our other markets such as Morocco, Jordan and UAE. Partnerships are of particular importance to our Branded business and we continued to sign new licensing agreements in 2021, strengthening our pipeline of innovative products for our MENA markets. We have also built on our in-house R&D eorts and ourpipeline of our own branded generics. To nd out more see ‘Business and nancial review’ onpages 24 to 34. ![]() 8 Hikma Pharmaceuticals PLC Annual Report 2021 #### Chief Executive Ocer’s strategic review #### continued Investing in new technologies andcapabilities In 2021, we continued to expand our manufacturing capacity and enhance existing facilities to stay at the forefront of manufacturing excellence. We invested in new lling lines, expanded warehousing and enhanced capabilities across our operational footprint. We also invested in a new facility in Dayton, New Jersey which will carry out sterile compounding activities for our Injectables business. With this new facility, 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. Utilising our balance sheet We are deploying our balance sheet to build our growth prospects. In 2021 we announced the acquisition of Custopharm, which will expand our portfolio of marketed products, bring promising new pipeline opportunities, and expand our R&D capabilities. Post year-end, we announced our expansion into 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 valueto our shareholders. Building our culture of progress andbelonging 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 reected 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. To this end, 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 when our people continued to adapt and stepped up to keep our business operational, our strong culture enabled us to be resilient, perform at our best and provided us with the opportunity to explore new ways of working together both internally and with our partners and customers. You can nd more information on how we train and retain the best talent in the ‘Acting responsibly’ section of this report on page 42. #### Strategic priorities Adding dierentiated products throughR&DandBD As we look ahead, we are building a dierentiated portfolio that anticipates future health needs. This ambition is being realised as we add complex and specialty products to our portfolio and pipeline and isfundamental to ensuring we continue to grow. Our R&D eorts are focussed on developing products where there is 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, expanding our R&D network with the development of a new site for complex injectables in Warren, New Jersey, and we will be adding R&D capabilities through the acquisition of Custopharm 1 , the generic injectables business. Partnerships are integral to Hikma’s strategy. In 2021, 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. Partnerships are 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 Selected deals signed in 2021: #### April AFT Pharmaceuticals for Combogesic® IV in the US Melinta Therapeutics for Vabomere® and Orbactiv® in MENA #### August Bio-Thera Solutions for ustekinumab (biosimilar to Stelara®) inthe US #### September FAES Farma for Bilastine tablets inthe US #### November Almirall for Finjuve™ in MENA #### December Gedeon Richter for denosumab (biosimilars to Prolia® and Xgeva®) inthe US 1.Subject to FTC approval ![]() Hikma Pharmaceuticals PLC Annual Report 2021 9 STRATEGIC REPORT 0.6x Net debt to EBITDA We have a duty toact responsibly: for our people, patients, communities and the planet Long-term, #### sustainablegrowth By executing on R&D, establishing strong partnerships, expanding our specialty portfolio and building our compounding business, we will further diversify and transform our business in order to achieve the next phase of growth. As we do this, we must also ensure we are operating responsibly in all aspects of what we do. We have identied four focus areas where we can drive positive impact: advancing health and wellbeing, empowering our people, protecting the environment and we building trust through quality in everything we do. We have a responsibility for our customers and their patients, who rely on our important medicines every day. Our mission to advance health and wellbeing also applies to the broader wellbeing of the communities in which we operate and it extends to ensuring that our own people are empowered by an inclusive culture where everyone can thrive. We are committed to protecting the environment, areassessing our environmental impact and understanding how we can minimise it. I am very pleased that the Board has approved a new target to reduce our greenhouse gas emissions by 25%by 2030, compared to a 2020 baseline. Conclusion 2021 has been another year of growth for Hikma, as well as one of advancing our future ambition. With our expansion into compounding and securing a future entry into the US biosimilar market, we are continuing to ensure we remain a top Injectables business in the US, whilst also expanding our presence in Europe and MENA. For our Generics business, we are taking strides forward in dierentiating our portfolio, with specialty, marketed products such as Kloxxado™, and complex generics such as generic Advair Diskus®. Our Branded business continues to deliver consistent growth, leveraging our well-established presence, reputation and expertise in the MENA region. I am excited about how far we have come in the past few years, and by the opportunities we have for the future, as we continue to put better health within reach in 2022 and beyond. How we are acting responsibly Advancing health and wellbeing Empowering our people Protecting theenvironment Buildingtrust through quality ineverything we do To nd out more see ‘Acting responsibly’ on pages 37 to 49. ![]() 10 Hikma Pharmaceuticals PLC Annual Report 2021 #### Investment case Astrongbusinessmodel with signicantopportunities to further enhance our portfolio to drive growth and delivervalue for shareholders. #### Solid platform forgrowth – Broad portfolio of over 670 high-quality products across threebusinesses – Agile supply chain, exible manufacturing and leading technicalcapabilities – Leading supplier of both generic injectable and non-injectable products in the US, the largest pharmaceutical market globally – Leading market position in MENA (4th largest pharmaceutical company by sales) and a growing presence in Europe – Trusted partner known for our commitment to quality and reliability of supply Revenue by segment Injectables..........$1,053m Gene rics.................$820m Bran ded..................$669m Othe r...........................$11m Revenue by geography U S ................................. 59% MENA............................ 33% Europe & ROW.............. 8% #### Increasingly diverse portfolio #### andpipeline – Growing presence in underserved, niche areas with an increased focus on specialty and complex products, which oer less competition and potential for further margin growth – Developing portfolio of biosimilars for the US market – Focus on higher-value therapeutic areas such as respiratory, CNS and oncology – Continued investment in R&D, new partnerships, strategic acquisitions and geographic expansion into certain markets 7 R&D centres 6% R&D spend as % of revenue 280+ products in our pipeline 19+ products added in 2021 through business development #### Excellent nancial discipline with #### astrong balance sheet and robust #### cash generation – Good cash ow generation, with $638 million operating cash ow in 2021 and low leverage of 0.6x net debt/core EBITDA 2 – Disciplined approachto cash management and acquisitions – Strong balance sheet that provides nancial exibility to support future growth $638m operating cash ow 25% operating cash ow/revenue Proven track recordof #### deliveringvalue forshareholders #### andaclear vision forgrowth – Group revenue CAGR 1 of 7% and core EBITDA 2 CAGR of 10% since2018 – TSR 3 of 313% over the last ten years – Progressively increasing dividend 7% Group revenue growth at athree-year CAGR 313% TSR over the last ten years 1Compound annual growth rate (CAGR) is a measure of mean annual return 2Core EBITDA is earnings before interest, tax, depreciation, amortisation, assets write-down and impairment charges/reversals. EBITDA is a non-IFRS measure, seepage34 for a reconciliation to reported IFRS results 3Total shareholder return (TSR) is the performance of Hikma shares including dividendspaid ![]() Hikma Pharmaceuticals PLC Annual Report 2021 11 STRATEGIC REPORT #### Solid platform forgrowth – Broad portfolio of over 670 high-quality products across threebusinesses – Agile supply chain, exible manufacturing and leading technicalcapabilities – Leading supplier of both generic injectable and non-injectable products in the US, the largest pharmaceutical market globally – Leading market position in MENA (4th largest pharmaceutical company by sales) and a growing presence in Europe – Trusted partner known for our commitment to quality and reliability of supply Revenue by segment Injectables..........$1,053m Gene rics.................$820m Bran ded..................$669m Othe r...........................$11m Revenue by geography U S ................................. 59% MENA............................ 33% Europe & ROW.............. 8% #### Increasingly diverse portfolio #### andpipeline – Growing presence in underserved, niche areas with an increased focus on specialty and complex products, which oer less competition and potential for further margin growth – Developing portfolio of biosimilars for the US market – Focus on higher-value therapeutic areas such as respiratory, CNS and oncology – Continued investment in R&D, new partnerships, strategic acquisitions and geographic expansion into certain markets 7 R&D centres 6% R&D spend as % of revenue 280+ products in our pipeline 19+ products added in 2021 through business development #### Excellent nancial discipline with #### astrong balance sheet and robust #### cash generation – Good cash ow generation, with $638 million operating cash ow in 2021 and low leverage of 0.6x net debt/core EBITDA 2 – Disciplined approachto cash management and acquisitions – Strong balance sheet that provides nancial exibility to support future growth $638m operating cash ow 25% operating cash ow/revenue Proven track recordof #### deliveringvalue forshareholders #### andaclear vision forgrowth – Group revenue CAGR 1 of 7% and core EBITDA 2 CAGR of 10% since2018 – TSR 3 of 313% over the last ten years – Progressively increasing dividend 7% Group revenue growth at athree-year CAGR 313% TSR over the last ten years 1Compound annual growth rate (CAGR) is a measure of mean annual return 2Core EBITDA is earnings before interest, tax, depreciation, amortisation, assets write-down and impairment charges/reversals. EBITDA is a non-IFRS measure, seepage34 for a reconciliation to reported IFRS results 3Total shareholder return (TSR) is the performance of Hikma shares including dividendspaid Hikma is focused on delivering growth over the long term ![]() 12 Hikma Pharmaceuticals PLC Annual Report 2021 #### Stakeholder engagement At Hikma, we are committed to acting in the best interest of all our stakeholders #### Stakeholders and the Board The Board of Hikma considers its duties to shareholders and the wider community at eachBoard and Committee meeting and is particularly aware of its duty to promote the success of the Group for the benet of all its stakeholders. Over the next few pages we set out how we engage with our key stakeholders and buildconsideration of stakeholder issues into our decision making, in accordance with Section 172 of the Companies Act 2006. The Board is responsible for the entire Annual Report and, therefore, directs readers to the following pages in relation to the stakeholder and non-stakeholder elements of its duty to promote the success of the Group: – likely consequences of any decision in the long term: the strategicoverview on pages 4to9 – the impact of the Group’s operations on the environment: the Acting responsibly section on pages44 to 47 – the aim of the Group to maintain a reputation for high standards of business conduct: the sections of the strategic report related to product quality and safety on page 61 and theCompliance, Responsibility and Ethics Committee report on pages 87 to 88 – the need to act fairly as between members of the Group: the corporate governance report on pages 66 to 114 Strong engagementwith all our stakeholders iskey todriving the long-term sustainable growth of our business. It allows us to better understand their needsand informs our day-to-day commercial and operational decisions, aswell as ourlong-term investments in our business and our people. Developing strong relationships with our stakeholders has never been more important, particularly during the uncertainty caused by the COVID-19 pandemic. Our teams have worked hard to stay connected to all of ourstakeholders, including the patients who use our medicines, healthcare professionals, our customers, our employees and the wider community. For more than 40 years,we have transformed people’s livesby makinghigh-qualitymedicinesmore accessibletothe patients that need them. Patients and healthcare professionals Customers Employees refer to Acting responsibly page 37 Communities refer to Acting responsibly page 37 Government and regulators Suppliers Investors refer to Investment case page 10 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 13 STRATEGIC REPORT 6% of revenue spent on core R&D to improve access to high- quality, aordable medicines Why is it important to engage with this group and what do they expect from us? Patients and HCPs need us to: – consistently provide a broad portfolio of products – improve access to high-quality, aordable medicines It is essential that we align our commercial activities, operations and R&D eorts to the changing needs of patients and HCPs. How we engage across the Group – Our commercial teams meet regularly with doctors and hospital clinicians to better understand their needs and keep them informed about our products – In MENA, we run regular forums bringing together key opinion leaders, doctors and global research institutes to share knowledge and raise awareness of healthcare trends and disease management – We meet with patient advocacy groups for diseases such asmultiple sclerosis, cardiovascular disease and diabetes How we engage at Board level – The Board receives regular reports from the Chief Executive Ocer which include feedback from patients and healthcare professionals – The Compliance, Responsibility and Ethics Committee is responsible for direct oversight of the Group’s approach to ethical issues associated with HCPs – Our management teams present to the Board at least once per year, providing updates on the needs of patients and healthcare providers across our markets Outcomes and actions – Launched Reagila® in MENA through our partnership withGedeon Richter, the rst product in the region that is proven to address both positive and negative symptoms ofschizophrenia – Launched Kloxxado TM (naloxone hydrochloride) nasal spray8mg in the US, an important treatment for reversing opioid overdose – In MENA, we regularly update HCPs with the most recent studies and product information. In 2021, we returned to in-person meetings – Established a compounding business in the US to ll a market need and provide ready-to-administer drug products which help improve the speed and safety of patient care Patients and #### healthcareprofessionals Our purpose is to put better health within reach, every day for healthcare professionals (HCPs) and their patients. We engage with doctors, clinicians and pharmacists tobetter understand their needs, helping them treatthe patients they serve. Why is it important to engage with this group and what do they expect from us? Our employees expect us to: – support themand providedevelopmentand growth opportunities – protect their health and safety – foster a diverse and inclusive culture The passion and commitment of our people to our purpose and values is key to delivering our brand promise and supports our growth plans. One of our key strategic priorities is to build a culture that inspires and enables our people, one in which they are empowered to drive innovation and are committed to caring for customers, patients and communities around the world. How we engage across the Group – We oer learning and development opportunities for our people. Hikma Academy serves as a training hub through which we can coordinate and optimise learning and developmentactivities – Our Group-wide principles for ensuring employee health and safety are outlined in our Group Environmental, Health and Safety Policy Statement. We also have local policies and procedures inplace – We conduct regular employee surveys and use this feedback to improve our performance and culture – We have an active internal communications programme to keep employees engaged and informed on Group strategy, progress and development – We established the Diversity, Equity and Inclusion Committee to continue to create a culture where everyone feels they belong How we engage at Board level – Nina Henderson has Boardlevel responsibility foremployee engagement. Shereports on employee issues as required during Board or Committee business. A report on her activities is included on page 67 – The Board receives regular reports on communications activities with employees, the bi-annual employee engagement survey and events or feedback that are reported by the Chief Executive Ocer Outcomes and actions – Hosted a virtual global leadership conference for the top160 Hikma leaders – Established a Diversity, Equity and Inclusion Committee,which is comprised of members from theExecutive Committee – Established guidelines to create Employee Resource Groups (ERGs) – Launched a new leadership programme designedto improve leadership eectiveness and capabilities for our people managers, therebystrengthening employee enablement and increasingengagement. With 150 people managers through this programme in 2021, it will be rolled out annually to cover all target employees #### Employees Our employees have always been at the heart ofeverything we do. As the driving force behind Hikma’sgrowth and success, our people are our mostvaluable asset. ![]() 14 Hikma Pharmaceuticals PLC Annual Report 2021 #### Stakeholder engagement #### continued Why is it important to engage with this group and what do they expect from us? Customers need us to: – oer a broad product portfolio – have a consistent and reliable supply of medicines – maintainservice levels Our commercial teams work closely with our dierent customers to understand their needs, reduce drug shortages and ensure we invest in the products, manufacturing capacity and capabilities needed to meet their requirements. How we engage across the Group – We have commercial, sales and marketing teams dedicated to our varied customer groups in the US, MENA, and Europe – Our customer discussions inform our pipelinedecisions, in an eort to bring them the products most in need How we engage at Board level – Commercial leads present to the Board at least once ayearproviding updates on our customer relationships andhow we are meeting customer needs – As part of its strategic review process, the Board reviewsinformation on the generic pharmaceutical customer landscape – The Board periodically receives industry updates from leading external professional groups Outcomes and actions – Launched 172 products across our markets – Continued to work closely with our customers tounderstandtheir needs #### Customers Our customers are our business partners and we are committed to providing themwith a consistent and reliable supply of high-quality medicines. We work closely with Group Purchasing Organisations (GPOs), hospitals, healthcare professionals, retailers, wholesalers and othersto buildstrong relationships andenhance service levels. 172 Products launched across our markets #### Delivering for our #### customers When our customers need us, we’re right there within reach – ready to react quickly and collaboratively to meet their needs. By being highly responsive, anticipating needs and infusing every interaction with professionalism and respect, we are creating strong and lasting partnerships that benet everyone – especially the hospitals, doctors and patients who rely on our medicines. Our customers can truly lean on us for high-quality medicines and excellent service. This has been especially true during the challenges of the global pandemic where we continued toprovide uninterrupted access tourgently needed medicines for treating COVID-19 and many other medical conditions. We recently launched a new marketing campaign across US trade and social media channels to distinguish Hikma by illustrating how customers can “Lean on Us” at all times for our unwavering commitment to them and the patients they serve. Ultimately, our commitment and passion for the greater good will always be what drives us forward. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 15 STRATEGIC REPORT Why is it important to engage with this group and what do they expect from us? Our communities value our eorts to: – improve healthcare quality and access to medicines – strengthen educational infrastructures – support local communities and people in need – minimise our environmental impact Since its inception, Hikma has been dedicated to transformingpeople’s lives by providing the medicines they need and supporting the communities where we live and work.Making positive contributions to the communities wherewe operate, and providing assistance to those in need, supports our long-term, sustainable growth, while positively impacting society. We also strive to minimise our environmental impacts and are committed to making our operations moreenergy ecient. How we engage across the Group – We have developed collaborative partnerships and programmes to promote positive change and address the needs of our communities. These initiatives include increasing access to medicine, supporting education and assisting refugees and low-income groups – We have an internal cross-functional working group who meet on a regular basis to progress our understanding on climate-related risks and opportunities and are working to achieve our greenhouse gas emissions reduction target How we engage at Board level – The Board of Directors have overarching oversight of our ESG strategy – Our Executive Vice President of Business Operations, who reports directly into our CEO, leads our ESG reporting as well as our internal cross-functional working group integrating TCFD into our business. More information on our sustainability eorts can be found on page 36 to 52 and on our corporate governance and our management of ESG issues on page 67 Outcomes and actions – As part of Hikma’s Black Employee Advisory Board’s community outreach forunderserved and underrepresented communities, the team launched a programme todevelop STEM (Science, Technology, Engineering and Math) talent in primary schools in the US – Donated 50,000 doses of injectable naloxone to help expand non-prot access to a life-saving treatment for reversing opioid overdoses – Established a target to reduce our Scope 1 and 2 greenhouse gas emissions by 25% by 2030, using a 2020 baseline year Communities and #### environment Our vision is to create a healthier world that enriches all our communities bydeveloping high-quality medicines and makingthem accessible tothose who need them. We are aresponsible and sustainable company andhave a duty of care towards our communities andthe environment. $3.2 million of medicines donated in 2021 Employees caring for #### ourcommunities Our employees care deeply about helping people, through our medicines and through community engagement to help those in need.Across our locations Hikma employees volunteer to help their neighbours in many ways– by raising money, donating food and medicines, and supporting education initiatives. Through our Black Employees Advisory Board in the US, we launched a pilot programme in 2021 to introduce STEM education to young students in underserved communities. STEM stands for science, technology, engineering and math education, disciplines and skills vital to workforce development and higher earning career opportunities. In the US, women and minorities are oen underrepresented in STEM-related jobs. Students who participated in Hikma’s 12-week STEM programme learned how to design, build and y their own electric drones. Teachers helped the students develop new technical and problem-solving skills. The programme also helped students to build condence and explore new opportunities for personal growth. Students and their parents had high praise for the programme. Plans are underway to expand Hikma’s STEM programme tounderserved neighbourhoods in several Ohio and New Jersey communities with Hikma facilities. ![]() 16 Hikma Pharmaceuticals PLC AnnualReport 2021 #### Stakeholder engagement #### continued Why is it important to engage with this group and what do they expect from us? Our suppliers want us to: – uphold high ethical standards – operate in a responsible and sustainable manner – work collaboratively to build strong relationships Our suppliers are critical to our business, and their products and expertise support us in the delivery of high-quality medicines to patients around the world. Working together and building strong relationships not only enables us to deliver on our brand promise but it also ensures we have a sustainable and resilient supply chain. Operating responsibly and ethically is vital to our long-term success, and we work with our suppliers to ensure the social and ethical standards we require are upheld. How we engage across the Group – We conduct quality audits prior to on-boarding any new API supplier and on a regular basis for our current supplier base – We ask our suppliers to commit to upholding the principles of our Code of Conduct, including fundamental standards on human rights and modern slavery – We conduct initial and periodic due diligence to assess third-party risks – We are measuring and reporting on the greenhouse gas (GHG) emissions originating from oursupplier base – We have started to measure the sustainability prole of our supplier base How we engage at Board level – The Board receives updates on supplier issues as part ofitsreview of operational matters, such as consideration ofAPI supply restrictions resulting from pandemic- relateddisruption – The Board oversees the Group’s risk programme and receives reports on relevant issues, which include a specic principal risk for API and third-party risk management – The Compliance, Responsibility and Ethics Committee is responsible for direct oversight of the Group’s approach to ethical issues associated with suppliers Outcomes and actions – Our long-term relationships with our suppliers have allowed us to ensure continuity of supply to our customers during the COVID-19 pandemic – 96% of our supplier base has been assessed as part of our third-party risk management – Started measuring GHG emissions originating from our supplier base, which is reported on page 46 – Initiated a collaboration with EcoVadis, a leader in sustainability ratings, to assess our main suppliers #### Suppliers We have an extensive global network of suppliers who provide us with the products needed for us to deliver our medicines. We actively engage with our suppliers toensure the social and ethical standards we require are upheld. 32 Manufacturing plants Why is it important to engage with this group and what do they expect from us? Our regulators expect us to: – adhere to regulatory requirements – maintain high-quality manufacturing facilities – provide safe and eective medicines Quality is in everything we do and has been since our inception. We need to ensure that our quality systems operate in full compliance with the requirements of international agencies as well as domestic regulatory bodies. How we engage across the Group – We have strong internal regulatory and quality teams who ensure our quality systems operate in full compliance with the regulatory requirements of the FDA, the EMA, MENA health authorities and other regulatory agencies across ourmarkets – We work closely with local governments and regulatory bodies to ensure current and proposed regulations and policies support patients’ needs and our operations How we engage at Board level – The Board receives regular reports on relations with regulators, particularly from a manufacturing quality and product approval perspective, and receives an update on legal matters at each meeting – The Board oversees the Group’s risk programme and receives reports on relevant issues, which include specic principal risks covering product quality and safety and legal, regulatory and intellectual property Outcomes and actions – Engaged regularly with the dierent regulatory bodies andhave a strong quality track record – Supported the FDA in their training eorts by hosting avirtual training session at our Columbus site for over 50participants – Engaged with the FDA Drug Shortage Oce to partner on long-term solutions for addressing US drug shortages – Engaged on policy and legislative consultation as a member of the Association of Accessible Medicines #### Government and regulators Our industry is highly-regulated and we must operate inaccordance with a wide range of industry and government policies and regulations including those ofthe US Food and Drug Administration (FDA), the European Medicines Agency (EMA), MENA health authorities andother regulatory agencies across ourmarkets. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 17 STRATEGIC REPORT Why is it important to engage with this group and what do they expect from us? Our investors want us to: – deliver sustainable long-term value – eectively communicate our long-term strategy, nancial and operational performance and growth drivers – meet industry and global standards for good environmental, social and governance (ESG) practices We ensure our investors have an in-depth understanding of our operations, nancial performance, growth drivers and ESG eorts. The Board receives regular updates and feedback on these activities. This helps ensure that the views of our investors are considered in the Board’s decision-making. How we engage across the Group – We maintain regular contact with our shareholders through a comprehensive investor relations (IR) programme of conferences, roadshows and meetings – We maintain regular dialogue with ourdebt holders and rating agencies – We communicate our strategy and nancial performance through regular nancial reporting and investor events, suchas the Annual General Meeting (AGM) – A targeted external communications programme ensures we are informing key audiences on our strategic progress and impact on our communities How we engage at Board level – The Board receives regular updates on the IR programme, including investor feedback from the AGM, IR meetings and investor perception studies – The Executive Directors are informed of investor engagement activities on aregular basis – The Non-Executive Directors make themselves available tomeet with investors as required in the conduct of theirresponsibilities (eg as Chair of a committee) and areavailable to shareholders at the AGM to answer relatedquestions Outcomes and actions – We maintained regular contact with our analysts and investors to give business updates. We attended 14 conferences and met with 136 investors in 2021 – We hosted a series of meet the management virtual events to increase access to our senior leadership team for the investment community #### Investors We maintain regular contact with investors to ensure they have a strong understanding of our business. Our investors are largely global institutions and include both equity and debt holders. 14 Investor conferences attended #### In 2021, we hosted a series #### ofmeet the management #### events to showcase our three #### business segments ![]() 18 Hikma Pharmaceuticals PLC Annual Report 2021 2026 2021 $99$82 Global context The global pharmaceutical market continued to grow in 2021. The social, demographic and economic dynamics within the pharmaceutical industry are changing rapidly. The pandemic has prompted an acceleration in many of the key trends shaping the industry, creating opportunities for generic pharmaceutical companies. The need for more aordable healthcare solutions is driving an increase in generic penetration – the global generic prescription market is forecast to grow at a CAGR ofaround 3.8% over the next ve years 1 . #### Our markets #### Evolving demographic #### andmarket trends 1.Evaluate Pharma, World Preview 2021, Outlook to 2026, July 2021 2.United Nations, Global Issues, Ageingavailableat https://www.un.org/en/global-issues/ageing 3.WHO, Noncommunicable diseases available athttps://www.who.int/news-room/fact-sheets/detail/ noncommunicable-diseases 4.AAM, The U.S. Generic & Biosimilar Medicines Savings Report, October 2021 5.IQVIA, US Pharmaceutical Trends, Issues and Outlook for NACDS TSE, August 2021 6.IQVIA, Assessing theGlobal Burden ofPost-COVID-19 Conditions,December 2021 7.McKinsey & Company, An inection point for biosimilars, June 2021 Global generics prescription market 1 ($billion) Keytrends CHANGING DEMOGRAPHICS A growing population and a rise in life expectancy worldwide isleading to increased demand for healthcare. According to the United Nations, 16% of the world population is expected to be aged over 65 by 2050 2 . This rapid shi in demographics, as well as changing lifestyles, is contributing to an increase in noncommunicable diseases (NCDs), mainly cardiovascular disease, cancer, respiratory disease and diabetes 3 . Almost 70% of deaths worldwide are caused by NCDs. This growing epidemic poses challenges for global economies and threatens to overwhelm health systems 3 . Strategic response We are committed to improving patients’ access to high-quality, aordable medicines. We are continuously investing in our manufacturing sites toenable us to meet current and future needs of patients worldwide. In MENA, we have a large sales, marketing and support team that dedicate their time to meet with doctors, clinicians and pharmacists to better understand their needs. In the US, we have strong relationships withour customers. Our discussions with them help inform our pipeline decisions in an eort to bring them the products most in need. Keytrends PRICING AND ACCESS The need for more aordable healthcare has never been more important as countries navigate the economic impact of the pandemic. Governments are looking to increase patient access to high-quality, aordable medicines and this need for more cost-eective healthcareis drivingan increasein generic penetration. In the US, 90% of prescriptions lled are forgeneric medicines, whilegenerics represent only 3% of healthcare spending. Over the last ten years, the US healthcare system has saved nearly $2.4 trillion byusing genericmedicines 4 . Strategic response Generic medicines play an important role in helping alleviate pressures on globalhealthcare budgets. As a company whose purpose is to put better health within reach, every day, we are committed to increasing patients’access to more aordable healthcare. In 2021, we launched 172 products across our markets and our continuous investment in R&D and manufacturing capabilities enables us to meet patients’ growing demand. Find out more about our access to medicine on page 38. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 19 STRATEGIC REPORT Keytrends Strategic response THE IMPACT OF COVID - 19 The pandemic demonstrated the vital role of the healthcare industry, particularlythe generics sector.At the start of the pandemic, we were operating at full capacity, prioritising the manufacture ofproducts that were in highest demand, whilst continuing to maintain supply acrossour broader portfolio. While there is still volatility in the market, we are focused on ensuring that our exible, high-quality manufacturing capabilities and resilient supply chain can continue to underpin our ability to provide a consistent supply of medicines to our customers. Aspart of our strategy and to mitigate supply risk, wecontinue to qualify alternate sources of raw materials. By growing our portfolio, we will also ensure we have the products our patients need. The COVID-19 pandemic has impacted the lives ofmillions of people and communities around the world, creating signicant uncertainties. Patients were cautious to enter hospitals, causing a signicant diagnostic gap. There were c.1 billion missed diagnostic visits in 2020, which represents a20% decline on total expected diagnostic visits in a normal year 5 . Missed visits have had a direct impact on prescription utilisation and elective procedures. While the pharmaceutical industry has shown great agility during the COVID-19 pandemic, it also raised concerns around the resilience of supply chains. This has prompted calls for local API and intermediate productionand some countries, suchas the US, are also looking to increase local production of nished goods. The pandemic continues to impact and shape theglobal healthcare sector today. A large number of COVID-19 patients have a range of persisting health conditions that are having a longer term eect on their central nervous, cardiovascular and respiratory systems 6 . Keytrends Strategic response GROWTH IN BIOSIMILAR UPTAKE Tapping into the growth of the biosimilar market in the US has been an area of focus for Hikma. We are leveragingour established commercial capabilities inthe US to build a highly complementary portfolio of biosimilar products through licensing. In 2021, we signed an agreement with Bio-Thera Solutions for ustekinumab, a proposed biosimilar to Stelara®, and with Gedeon Richter for denosumab, a proposed biosimilar referencing Prolia® and Xgeva®. In MENA, through our partnership with Celltrion, we have launched three biosimilar products in the MENA region:Remsima®, Truxima® and Herzuma®. Biosimilars are gaining more momentum as adoption in the US improves. It is estimated that global biosimilar sales were over $15 billion in 2020, a 56% annual growth rate since 2015. The market is expected to continue its double-digit growth, reaching more than $30 billion by 2025 7 . Biosimilar uptake varies by country. Europe makes up half of the market by value and there are more than 60 products approved. In the US, the FDA has published new guidance on interchangeability, providing greater clarity for developing companies. This has helped recently launched biosimilars achieve a rapid uptake compared to previous years. As the regulatory environment continues to evolve in the US, and in China and Japan, we expect to see an increase in biosimilaradoption 7 . 16% of the world population is expectedto be overthe age of 65by2050 2 56% annual growth rate of the global biosimilar market since 2015 7 ![]() 20 Hikma Pharmaceuticals PLC Annual Report 2021 #### Injectables #### Generics Branded #### Our business model Our diversiedbusiness model allows us to respondto the many opportunities and risks weface,while delivering for our stakeholders. #### Better health within reach every day #### Our business segments Seeour business and nancial review onpage 24 #### Our resources Financial Investment in R&D, manufacturing facilities, partnerships and M&A enables us to expand our productportfolio, technical capabilities andoperations. People We have a highly skilled, diverse and eective workforce. Through continuous investment in the development of our peopleand by hiring new talent, we secure our future. Values Our values promote a culture thatis innovative, collaborative and caring, ensuring the sustainability of our business. Relationships Strong relationships with regulators and health authorities across all our markets, andsuccessful collaborations with industrypartners, enable us to achieve ourshared objectives. Capabilities We have extensive commercial, R&D, manufacturing and distribution capabilities across our markets focused on quality andeciency. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 21 STRATEGIC REPORT #### The value we create Patient benets We provide patients across our markets with high-quality and aordable medicines. 670+ Products Employee engagement By focusing on the engagement and development of our people, weprovide long and rewarding careers for our talented and diverse workforce. 73% Employee engagement 2020 score Shareholder returns We have a long history of creating value forourshareholders. 313% Total shareholder return over last ten years Sustainable business We act responsibly, advancing health and wellbeing, empowering our people, protecting the environment and building trust through quality in everything we do. – Our employees completed 47,000 instructor-led learning hours – Established a target to reduce our Scope 1 and 2 greenhouse gas emissions by 25% by 2030, using a 2020 baseline year Find out more about our key performanceindicators on page 22 Find out more about how we are managingrisk on page 54 #### What we do Oer a broad product portfolio We oer a broad and dierentiated portfolio ofmore than 670 products. It includes high-quality generic and branded generic medicines and a growing number of in-licensedandspecialty products. 670+ Products Market across geographies We distribute our products in our markets through experienced sales and marketing teams. In the MENA region, around 2,000 representatives and support sta market our brands to doctors and pharmacists, while oursales teams in the US and Europe sell to a broad range of customers, including the leading wholesalers, pharmacy chains, governments and hospital purchasing organisations. c.2,000 sales representatives market our products across MENA Develop and innovate We are building a pipeline of products to meet the evolving needs of patients and healthcare professionals through investments in internal R&D, partnerships and strategic acquisitions. 6% Group revenue invested in core R&D (2020: 6%) Manufacture and maintain quality Our extensive and high-quality manufacturing capabilities are at the heart of what we do. We have 32 plants across the Group that supply our global markets with a broad range of injectable and non-injectable products, including 13 US FDA-inspected plants and 12 EMA-inspected plants. 32 manufacturing plants 13 US FDA-inspected plants 12 EMA-inspected plants ![]() 22 Hikma Pharmaceuticals PLC Annual Report 2021 #### Our progress We aredelivering on ourstrategy and #### measuring ourperformance with key #### performance indicators (KPIs). Strategic priority #### Deliver more from #### a strong foundation #### Build a portfolio that #### anticipatesfuture needsInspire and enable our people KPI Core 1 revenue ($m) Core 1 operating prot ($m) Return on invested capital 3 (%) Core revenue from new productlaunches (%) Employee enablement (%) Employee engagement (%) $2,553m $632m 17.1% 9% 64% 73% 1,936 2,076 2,203 2,341 2,553 2017201820192020 2021 386 460 508 566 632 2017201820192020 2021 16.2 17.1 15.1 18.6 17.0 2017201820192020 2021 2020 score 1 2020 score 1 Description Total annual core revenue generated across all businesses Core operating protCore operating prot aer tax divided by invested capital (calculated as total equity plus netdebt 4 ) Percentage of core revenue contribution from products launched in 2021 and the second half of 2020 Global employee enablement scoreGlobal employee engagement score Why is it a KPI? This measures our ability to maximise value from our current product portfolio across our global markets and generate revenue from new launches This measures our ability to grow revenue and maintain quality whiledelivering eciencies and ensuring cost control This measures our eciency in allocating capital to businesses andprojects This measures our ability to extract value from our global product pipeline This measures whether people nd theirwork fullling and rewarding and whether they feel supported to achieve their full potential This measures people’s pride in working for Hikma, their willingness to recommend Hikma as an employer and their desire to staylong term 2021 performance Group core revenue increased by9% reecting good performance from all three business segments, supported by strong recent productlaunches The increase in core operating protwas driven by good revenue growth across all three business segments and strong growth in Generics protability The increase in return on invested capital reects the improvement in core operating prot, primarily driven by a strong step up in Generics protability, lower total debt and strong cash ow In 2021, revenue from new product launches was 9% of Group core revenue, upfrom 7% in 2020. This reects the strong contribution from new launches in Generics and good contribution from Injectable andBranded launches. This shows good progress towards achieving our goal of 10% of revenue from new launches by 2023 1.Hikma runs a global employee engagement survey every two years. As such, we do not have the enablement and engagement percentages forreporting purposes this year. In2021, we conducted an accountability index survey tomeasure the level of action planning conducted by managers post the last all-employee engagement survey. Itshowed an 18 point improvement in the accountability index score when compared to2020 Link to remuneration R R 2 R 1.Core results are presented to show the underlying performance of the Group, excluding the exceptional items and other adjustments set out in Note 6 in the Notes to the consolidated nancial statements. A reconciliation from core to reported operating prot is included within the Consolidated income statement in the Financial statements 2.Core operating prot is measured before R&D costs when used as one of the performance criteria for determining the Executive Directors’ remuneration 3.See reconciliation on page 34 4.Group net debt is calculated as Group total debt less Group total cash. Group total debt excludes co-development agreements and contingent liabilities ![]() Hikma Pharmaceuticals PLC Annual Report 2021 23 STRATEGIC REPORT Find out more about ourstrategy on page 6 Find out more about how we are managing risk on page 54 Find out more about our remuneration on page 89 Strategic priority #### Deliver more from #### a strong foundation #### Build a portfolio that #### anticipatesfuture needsInspire and enable our people KPI Core 1 revenue ($m) Core 1 operating prot ($m) Return on invested capital 3 (%) Core revenue from new productlaunches (%) Employee enablement (%) Employee engagement (%) $2,553m $632m 17.1% 9% 64% 73% 1,936 2,076 2,203 2,341 2,553 2017201820192020 2021 386 460 508 566 632 2017201820192020 2021 16.2 17.1 15.1 18.6 17.0 2017201820192020 2021 2020 score 1 2020 score 1 Description Total annual core revenue generated across all businesses Core operating protCore operating prot aer tax divided by invested capital (calculated as total equity plus netdebt 4 ) Percentage of core revenue contribution from products launched in 2021 and the second half of 2020 Global employee enablement scoreGlobal employee engagement score Why is it a KPI? This measures our ability to maximise value from our current product portfolio across our global markets and generate revenue from new launches This measures our ability to grow revenue and maintain quality whiledelivering eciencies and ensuring cost control This measures our eciency in allocating capital to businesses andprojects This measures our ability to extract value from our global product pipeline This measures whether people nd theirwork fullling and rewarding and whether they feel supported to achieve their full potential This measures people’s pride in working for Hikma, their willingness to recommend Hikma as an employer and their desire to staylong term 2021 performance Group core revenue increased by9% reecting good performance from all three business segments, supported by strong recent productlaunches The increase in core operating protwas driven by good revenue growth across all three business segments and strong growth in Generics protability The increase in return on invested capital reects the improvement in core operating prot, primarily driven by a strong step up in Generics protability, lower total debt and strong cash ow In 2021, revenue from new product launches was 9% of Group core revenue, upfrom 7% in 2020. This reects the strong contribution from new launches in Generics and good contribution from Injectable andBranded launches. This shows good progress towards achieving our goal of 10% of revenue from new launches by 2023 1.Hikma runs a global employee engagement survey every two years. As such, we do not have the enablement and engagement percentages forreporting purposes this year. In2021, we conducted an accountability index survey tomeasure the level of action planning conducted by managers post the last all-employee engagement survey. Itshowed an 18 point improvement in the accountability index score when compared to2020 Link to remuneration R R 2 R 1.Core results are presented to show the underlying performance of the Group, excluding the exceptional items and other adjustments set out in Note 6 in the Notes to the consolidated nancial statements. A reconciliation from core to reported operating prot is included within the Consolidated income statement in the Financial statements 2.Core operating prot is measured before R&D costs when used as one of the performance criteria for determining the Executive Directors’ remuneration 3.See reconciliation on page 34 4.Group net debt is calculated as Group total debt less Group total cash. Group total debt excludes co-development agreements and contingent liabilities ![]() 24 Hikma Pharmaceuticals PLC AnnualReport 2021 Reported results (statutory) 2021 $million 2020 $million Change Constant currency 1 change Revenue 2,553 2,341 9% 7% Operating prot 582 579 1% 3% Prot attributable toshareholders 421 431 (2)% 2% Cash ow from operatingactivities 638 464 38% – Basic earnings per share(cents) 2 182.3 182.6 0% 4% Total dividend per share(cents) 54.0 50.0 8% – Core results 3 (underlying) 2021 $million 2020 $million Change Constant currency 1 change Core revenue 2,553 2,341 9% 7% Core operating prot 632 566 12% 15% Core prot attributable toshareholders 450 408 10% 15% Core basic earnings pershare(cents) 2 194.8 172.9 13% 17% Strong 2021 performance – Group revenue up 9%, reecting a good performance from all threebusinesses – Core operating prot up 12%, driven by a further step up in Genericsmargin – Core prot attributable to shareholders up 10% – Reported prot attributable to shareholders down 2% and basic EPS was at – Strong cashow 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 4 of $420 million and low leverage at 0.6x net debt to core EBITDA 5,6 – 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 prot 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%, reecting a good performance from recently launched products – Branded: Revenue grew 9% reecting 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 hyperination, revenue grew 5% and core operating margin was stable Further portfolio expansion and increased investment to support growth – Launched generic Advair Diskus® in April and are gradually growing market share, but expect competition to intensify in 2022 – Expansion of specialty product oering 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 7 , 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 1Constant 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 hyperination accounting.In 2021 Lebanonand Sudan were considered hyperinationary economies, therefore the spot exchange rate as at 31 December 2021 was used to translate the results of these operations into US dollars 2In June 2020, Hikma purchased 12.8 million ordinary shares from Boehringer Ingelheim, which are being held in treasury 3Core 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 6 of the Group consolidated nancial statements. Core results are anon-IFRS measure and a reconciliation to reported IFRS measures is provided on page33 4Group 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 34 for a reconciliation of Group net debt to reported IFRS gures 5Core EBITDA is earnings before interest, tax, depreciation, amortisation, assets write-down and impairment charges/reversals. EBITDA is a non-IFRS measure, see page34 for a reconciliation to reported IFRS results 6Net debt to core EBITDA is calculated as Group net debt divided by core EBITDA and is considered a useful measure of the Group’s nancingdecision 7Subject to FTC approval #### Business and nancial review I am pleased with our performancein 2021, with growthinallthreebusinesses.We have continued tolaunch new products while benetting from the breadth ofourportfolio. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 25 STRATEGIC REPORT 1Exceptional 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 soware) was $73 million. Refer to Note 6 of the Group consolidated nancial statements forfurther information #### Group Group revenue grew 9% reecting growth in each of our three businesses. Group gross margin reduced slightly, primarily due to a shi 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 soware) 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 soware) and exceptional items, core SG&A expenses were $488 million (2020: $464 million), up 5%, reecting 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 reects an increase in the second half as the Group focused 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 1 , 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. Khalid Nabilsi Chief Financial Ocer ![]() 26 Hikma Pharmaceuticals PLC Annual Report 2021 #### Business and nancial review #### continued We supply hospitals across our markets with generic injectables, supported by our manufacturing facilities in the US, Europe and MENA. In the US, we have broadened our productoering to include compounded sterile injectables. # Injectables ![]() Hikma Pharmaceuticals PLC Annual Report 2021 27 STRATEGIC REPORT Injectables revenue grew 8% in 2021, benetting from our broad portfolio, geographic spread, exible manufacturingcapabilities andnew launches across our regions. US Injectables revenue grew 4% to $691 million (2020: $662 million), reecting 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 reects 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 oset 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reects a good performance from our own products, recent launches and continued demand forcontract manufacturing. Core gross prot grew 3% to $581 million and gross margin declined to 55.2%, reecting a normalisation in product mix following the strong demand for COVID-19 related products in 2020. Injectables core operating prot, which excludes the amortisation of intangible assets (other than soware) 1 grew 5% and core operating margin was 37.5%, compared with 38.6% in 2020. In constant currency, core operating prot grew 7% and core operating margin remained largely stable, reecting 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 lings to regulatory authorities across all markets. This primarily reects our eorts 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. Financial highlights 2021 $million 2020 $million Change Constant currency change Revenue 1,053 977 8% 6% Core revenue 1,053 977 8% 6% Gross prot 581 563 3% 2% Core gross prot 581 563 3% 2% Core gross margin 55.2% 57.6% (2.4)pp (1.9)pp Operating prot 351 354 (1)% 1% Core operating prot 395 377 5% 6% Core operating margin 37.5% 38.6% (1.1)pp 0.3pp 1Exceptional items comprised a $10 million impairment of product related intangibles and a $1 million intangible assets write-down. Amortisation of intangible assets (other than soware) was $33 million. Refer to Note 6 of the Group consolidated nancial statements for further information 2020 2021 37.5 38.6 Core operating margin (%) Core revenue ($m) 977 1,053 2020 2021 1,053 Core revenue by region ($m) US...................................................................................... 691 (66%) MENA................................................................................. 180 (17%) Euro pe............................................................................... 182 (17%) We are benetting from strong commercial capabilities across our markets and exible,high- quality operations Outlook for 2022 WeexpectInjectables revenue to grow in thelow to mid-single digits. We expect core operating margin to bein the range of 35% to 37%. ![]() 28 Hikma Pharmaceuticals PLC Annual Report 2021 #### Business and nancial review #### continued #### We supply oral and other #### non-injectable generic #### andspecialty branded #### products in the US retail #### market, leveraging our #### state-of-art manufacturing #### facility in Columbus, Ohio. # Generics ![]() Hikma Pharmaceuticals PLC Annual Report 2021 29 STRATEGIC REPORT 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 oset increased price erosion. Generics core gross prot growth and margin expansion was primarily due to product mix, with gooddemand for protable recent launches. We delivered a strong improvement in Generics core operating prot, which excludes the amortisation of intangible assets (other than soware) and exceptional items 1 , mostly due to the improvement in gross prot. While sales and marketing spend increased as a result of the expansion of our specialty business, this was partially oset 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 ve les to regulatory authorities. Financial highlights 2021 $million 2020 $million Change Revenue 820 744 10% Core revenue 820 744 10% Gross prot 388 329 18% Core gross prot 388 341 14% Core gross margin 47.3% 45.8%1.5pp Operating prot 217 203 7% Core operating prot 202 161 25% Core operating margin 24.6% 21.6% 3.0pp Core operating margin (%) 2021 2020 24.6 21.6 744 820 2020 2021 Core revenue ($m) We are delivering strong operating prot expansion, benetting from recently launched products Outlook for 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%. 1Exceptional 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 soware) was $30 million. Refer to Note 6 of the Group consolidated nancial statements forfurther information ![]() 30 Hikma Pharmaceuticals PLC Annual Report 2021 #### Business and nancial review #### continued #### We supply branded generics #### and in-licensed patented #### products from our local manufacturingfacilitiesto #### retailand hospital customers #### across the MENA region. # Branded ![]() Hikma Pharmaceuticals PLC Annual Report 2021 31 STRATEGIC REPORT Our Branded business continued to deliver growth in 2021, with revenue up 9%, which includes the impact of hyperination. In constant currency, revenue grew 5%, with a good performance across our markets, particularly in Algeria, where we saw the benets of our new oncology plant and in Egypt, where we benetted from strong demand for our chronic treatments. Our chronic treatments also saw good demand in our retail business in Saudi Arabia, which partially oset lower demand inthe government tenderbusiness. Other markets, including Jordan, UAE and Morocco grew strongly. Across the region we benetted from our focussed commercial eorts, a responsive supply chain and the breadth of our portfolio. Core gross prot grew 7% and, on a constant currency basis, core gross prot was at primarily due to an increase in slow-moving inventory resulting from pandemic-related demand uctuations. Core gross margin contracted slightly to 49.0%. Core operating prot, which excludes the amortisation of intangibles (other than soware) and exceptional items 1 , fell 1%. In constant currency, core operating prot grew 5% as higher investment in R&D and increased sales and marketing spend due to activities returning to pre-COVID levels was oset 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 lings to regulatory authorities. Revenue from in-licensed products represented 36% of Branded revenue (2020: 37%). Financial highlights 2021 $million 2020 $million Change Constant currency change Revenue 669 613 9% 5% Core revenue 669 613 9% 5% Gross prot 328 307 7% 0% Core gross prot 328 307 7% 0% Core gross margin 49.0% 50.1% (1.1)pp (2.0)pp Operating prot 104 120 (13)%(7)% Core operating prot 125 126 (1)% 5% Core operating margin 18.7% 20.6% (1.9)pp 0.0pp 1Exceptional items comprised a $11 millionintangibleassets write-down. Amortisation of intangible assets (other than soware) was $10 million. Refer to Note 6 of the Group consolidated nancial statements forfurther information 2021 2020 18.7 20.6 Core operating margin (%) 2021 2020 669 613 Core revenue ($m) Our growthis increasingly coming from medicines used to treat chronic illness Outlook for 2022 WeexpectBranded revenue in 2022 to bein line with 2021. Excluding the impact of hyperination in 2021, we expect Branded revenue togrow in the mid-single digits. ![]() 32 Hikma Pharmaceuticals PLC Annual Report 2021 #### Business and nancial review #### continued 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 prot 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 lings. 2021 submissions 1 2021 approvals 1 2021 launches 1 Injectables 93 114 78 US 1312 15 MENA 24 66 29 Europe 56 36 34 Generics 557 Branded 144 124 87 Total 242 243 172 Net nance expense 2021 2020Change Constant currency change Financeincome 30 47 0% 4% Finance expense 69 69 13% 17% Net nance expense 39 22 0% 4% Core nance income 1 9 13% 17% Core nance expense 56 54 –– Core net nance expense 55 45 –– On a reported basis, net nance expense was $39 million (2020: $22million). This comprised $30 million nance income and $69million nance expense. Excluding exceptional items 2 , core net nance expense was $55 million (2020: $45 million). This comprised $1 million nance income and $56 million nance expense. The increase compared with 2020 in part reects 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 renancing of our revolving credit facility. We expect core net nance expense to be around $55 million in 2022. Prot before tax Reported prot before tax decreased to $544 million (2020: $558 million), primarily reecting an increase in the amortisation of intangibles (other than soware), from $42 million to $73 million, due to new product launches. Excluding the amortisation of intangibles (other than soware) and exceptional items 3 , core prot before tax was $578 million (2020: $522 million), up 11%, reecting 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 eective tax rate of 22.8% (2020: 22.9%). Excluding exceptional items, Group core tax expense was $129 million (2020: $115 million). The core eective tax rate increased slightly to 22.3% (2020: 22.0%), primarily due to a change in the earnings mix. We expect the Group core eective tax rate to be in the range of 22% to 23% in 2022. Prot attributable to shareholders Prot attributable to shareholders was $421 million (2020: $431million). Core prot attributable to shareholders increased by11% to $450 million (2020: $408 million). Earnings per share 20212020Change Constant currency change Basic earnings per share (cents) 182.3182.6 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) 231236 –– Weighted average number of Ordinary Shares for the purposes of diluted earnings(‘m) 233238 –– The increase in core earnings per share reects 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 rst half of 2020. 1New products submitted, approved and launched by country in 2021 2Exceptional items comprised $29 millionnon-cash nance incomerelated to the remeasurement of contingent consideration relatedto the Generics business and $13millionnon-cash nance expense related tothe unwinding andremeasurement ofcontingent consideration related to the Generics business 3Exceptional 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 nance income due to the remeasurement of contingent consideration. Amortisation of intangible assets (other than soware) was $73 million. Refer to Note 6 of the Group consolidated nancial statements for further information ![]() Hikma Pharmaceuticals PLC Annual Report 2021 33 STRATEGIC REPORT Dividend The Board is recommending a nal 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 ow, working capital and net debt The Group generated strong operating cash ow of $638 million (2020: $464 million). This change primarily reects the good performance of the Group, combined with a focussed eort 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 reects our strong cash ow 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), eective as of January 2022, allowing us the exibility 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). On 24 February 2022, the Group announced 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 nancial exibility 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). Outlook 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 reects a good contribution from new and recent launches, which we expect will more than oset 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 hyperination in 2021, we expect Branded revenue to grow in the mid-single digits. We expect Group core net nance expense to be around $55 million and the core eective 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. Denitions 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 dierently 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-o 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 6 of the Group consolidated nancial statements. Group operating prot 2021 $million 2020 $million Core operatingprot 632 566 Intangible assets write-down (13) – Jordan warehouse re incident– 11 GxA inventory related provisions– (15) MENA severance and restructuringcosts – (3) Net impairment reversal of product related intangibles 36 62 Intangible assets amortisation other than soware (73) (42) Reported operating prot 582 579 ![]() 34 Hikma Pharmaceuticals PLC Annual Report 2021 #### Business and nancial review #### continued 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 hyperination accounting. EBITDA EBITDA is earnings before interest, tax, depreciation, amortisation, assets write-down and impairment charges/reversals. EBITDA 2021 $ million 2020 $ million Reported operating prot 582 579 Depreciation, amortisation, assets write- down and impairment charges/reversals 145 91 Reported EBITDA 727 670 Exceptional items: Jordan warehouse re incident– (11) Assets write o – inventory-related provisions – 12 MENA severance and restructuringcosts –3 Core EBITDA 727 674 Working capital days We believe Group working capital days provide 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 nancing 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 $ million 31 Dec 2020 $ million Short-term nancial debts (112) (158) Short-term leases liabilities (9) (10) Long-term nancial 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) ROIC ROIC is calculated as core operating prot aer interest and taxdivided by invested capital (calculated as total equity plus netdebt). This measures our eciency in allocating capital to protable investments. ROIC 2021 $ million 2020 $ million Core operating prot 632 566 Totaltax (137) (121) Core operatingprot before tax 495 445 Net debt 420 605 Equity 2,467 2,148 Invested capital 2,887 2,753 ROIC 17.1% 16.2% ![]() Hikma Pharmaceuticals PLC Annual Report 2021 35 STRATEGIC REPORT ![]() 36 Hikma Pharmaceuticals PLC Annual Report 2021 #### Sustainability In this section 37 Acting responsibly 38 Advancing health and wellbeing 42 Empowering our people 44 Protecting the environment 48 Building trust through quality in everything we do 50 Aligning with the Task Force for Climate-related FinancialDisclosures (TCFD) We have a duty of caretowards patients, #### communities, our people #### and the environment. Wearea responsibleand sustainable company, anduse our business to #### promote positive change. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 37 STRATEGIC REPORT Businesses have a crucial role to play as stewards for future generations. At Hikma, we strive to put better health within reach, every day and make a dierence to people’s lives. We have a duty to act responsibly: for our people, patients, communities and the planet. That is why we have identied four focus areas where we can drive positive impact. We advance health and wellbeing; we empower our people; we protect the environment; and we build trust through quality in everything we do. This Acting responsibly section in the Annual Report provides a glance at some of our sustainability eorts. A more comprehensive overview can be found in our Sustainability Report 2021 to be published in the second quarter of 2022. #### Acting responsibly at Hikma Advancing heath and wellbeingp38 Providing better healthcare and supporting ourcommunities – Access to medicines – Corporate social responsibility • Providing better health • Supporting education • Helping people in need Empoweringour peoplep42 Shaping an inclusive culture where everyone canthrive – Recruitment, retention and promotion – Diversity, equity and inclusion – Ensuring health and safety Protecting theenvironmentp44 Minimising our impact on the planet – Reduction of greenhouse gas emissions (GHG) – Sustainable supply chain – Water management – Waste management Building trust through quality in everything we dop50 Upholding ethical standards and acting with integrity – Ethics and compliance – Product quality and safety – Corporate governance ![]() During the year, we donated $3.2m of medicine (value based on cost of goods). 38 Hikma Pharmaceuticals PLC Annual Report 2021 #### Acting Responsibly #### continued Advancing health and wellbeing #### Providing better healthcare #### and supporting our #### communities #### Access to medicines We consider access to medicine to be one of our highest sustainability priorities. As a generics pharmaceutical company, we are in the business of making medicines bothaordableand accessible across our geographies, which is consistent with our purpose to put better health within reach, every day. Across the MENA region, where we have a broad local manufacturing presence and are the fourth largest company in region according to sales, we develop, produce and distribute important medicines, making sure that underserved populations have access to the medicines they need, when theyneed them. In the US, where we are a top-10 generics company, we are a proud member of the Association for Accessible Medicines (AAM), an advocacy group that advances access to generic medicines. Through this partnership, along with our generic peer companies, we strive to get safe, eective and less costly medicines into the hands of patients across the US who need them. In Europe, we have three manufacturing sites, sell our products in several countries and continue to expand. Our broad portfolio of medicines, frequent new product launches and focus on expanding our product pipeline allow us to increase access to medicines in each of the countries in which we operate. Medicine donations We have an active medicine donation programme, through which we provide direct support to those people and communities that need it most: including low-income groups, displaced persons, children with life-threatening illnesses, and patients without sucient medical coverage. During 2021, we continued to support our partners including Direct Relief, Dispensary of Hope, Americares, the Brother’s Brother Foundation, the National Children’s Cancer Society, Save the Children and others. During the year, we donated $3.2 million of medicine (value based on cost of goods). Our medicine donations in 2020 were higher than 2021 due mainly to our response to the medical emergency following the explosion in Beirut, Lebanon. Medicine donations (COGS)$m 3.1 4.1 3.2 20192020 2021 Addressing medicine shortages Hikma’s broadportfolio and exible manufacturing capabilities enable us to quickly respond to urgent needs for important medicines, especially when critical shortages exist. In the US, we work closely with the US Food and Drug Administration (FDA) to anticipate and address shortages of vital medicines. We have done this consistently throughout the pandemic by altering our manufacturing schedules to prioritise production of medicines in short supply that hospitals need for treating their most seriously ill COVID-19 patients. Hikma has played a leading role in addressing US drug shortages, launching more than 20 medicines into shortage situations in recent years and receiving an award from the FDA for our eorts. As a generics pharmaceutical company, we are in the business of making medicines both aordable and accessible across our geographies ![]() Hikma Pharmaceuticals PLC Annual Report 2021 39 STRATEGIC REPORT #### Corporate social responsibility We work across three focus areas to address socio-economic hardships and to provide relief to those most in need. Providing better health: We work to address unmethealthcare needs byconducting community outreach and providing in-kind medicine donations to patients in need. Supporting education: We are committed to providing our people and communities with opportunities to realise their full potential through continuous learning and development. Helping people in need: We believe in supporting the communities we live and work in through local non-prot sponsorships and empowering our employees to support our neighbours in need. We address socio‑economic hardships and provide relief to thosemost in needacross ourgeographies More than: 4,700 volunteers Nearly: 8,300 hours of volunteering Engaging communities across: 13 countries Hikma employee volunteering in 2021 ![]() 60 Held self screening training sessions for 60women in Portugal 270 Organised online and in-person public awareness campaigns across MENA, with 270 attendees 135 Provided free mammogram screening for 135women in Jordan, Egypt and Sudan 40 Hikma Pharmaceuticals PLC Annual Report 2021 #### Acting Responsibly #### continued #### Global breast cancer #### awareness campaign Our annual campaign engages employees and raises awareness about the value of early detection and treatment. As part of our campaign, we oer employees self-screening training, educational lectures and facilitated appointments with doctors. We also extended our support to various organisations, providing nancial donationsand material support to hospitals and charities in the US, Jordan, Morocco, Sudan and Egypt. More than $85,000 donated to the US National Breast Cancer Foundation and the King Hussein Cancer Foundation in Jordan #### Providing better health ![]() Hikma Pharmaceuticals PLC Annual Report 2021 41 STRATEGIC REPORT #### Partnering with the United #### Nations High Commissioner for Refugees (UNHCR) to #### strengthen access to higher #### education for refugees In 2021, we partnered with the UNHCR to support their DAFI (Albert Einstein German Academic Refugee Initiative) scholarship programme with the goal of providing higher education scholarships and internship opportunities for 40 refugees in Jordan, Egypt and Algeria. This programme supports the UNHCR objective of increasing the proportion of young refugees enrolled in higher education programmes from 3% to 15% by 2030. #### Strengthening food #### security in our #### communities We continue to address food shortages caused by overstretched support systems and situations of poverty, organising extensive meal donation activities in several locations. 950 Meals donated to low-income families bypartnering with local Jordanian charities Taalof Alkhair and Tkiyet UmAli. 115,000 Meals donated across local banks and pantry partners in the US. 5,000 Distributed food packages to more than 5,000people in need in Algeria, Egypt, Morocco, Saudi Arabia, Iraq, Lebanon, Sudanand Tunisia. #### Supporting education #### Helping people in need ![]() 42 Hikma Pharmaceuticals PLC AnnualReport 2021 #### Acting Responsibly #### continued Empowering ourpeople #### Shaping an inclusive culture #### where everyone can thrive Our people are at the heart of our culture of progress and belonging. We have taken actions in several areas to empowerour people. #### Recruitment, retentionandpromotion We support our employees through their journey at Hikma by providing a conducive environment for them to learn and grow. During the pandemic, we continued to focus on learning and development, providing hybrid(virtual andface-to-face) programmes. We increased our focus on leadership development through bespoke programmes that align with our newcultural values. We are taking a number of steps to ensure we recruit the best talent, including partnering with various universities and enhancing our recruitment criteria. Aspart of these eorts, we are also seeking to recruit more diverse talent. In 2021, we recruited 37% women and 63% men. We will continue these eorts in 2022. Our people are at the heart of our culture of progress and belonging Total: 13%12% Turnover (men) 14% Turnover (women) Voluntary and involuntary turnover – 2021 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 43 STRATEGIC REPORT 3,821 Active learners 6,000 Readinghours completed 47,000 Instructor led learning hours delivered for 35% of our employees 13,000 Video-based learninghours completed #### Diversity, equity and inclusion In 2020, we established the Diversity, Equity and Inclusion (DEI) Committee, led bythree Executive Committee members, in order to ensure we continue to create aculture where everyone feels they belong. In the US, we established our rst employee resource group: the Black Employees Advisory Board. Continuing on thework done in 2020, in 2021, the DEI Committee developed guidelines to create Employee Resource Groups (ERGs) and an additional ERG was created: the Hikma Women’s Network. Both ERGs will assist with ensuring a more inclusive culture where all employees can thrive. #### Ensuring health and safety Employee health and safety In order to emphasise the importance of employee health and safety, in 2021 we updated our Group Environmental Health and Safety Policy Statement and had it issued by our CEO. The statement rearms our commitment to employee health and safety. COVID‑19 During 2021, Hikma continued to take measures to protect our employees during the COVID-19 pandemic. We monitored and adjusted our mitigation strategies as new information and guidance became available. We provided our employees with vaccination information and encouraged them to get vaccinated when eligible. We hosted vaccination clinics for employees and their families at some of our larger facilities. Impact on employee learning and development: iLearn platform ![]() 44 Hikma Pharmaceuticals PLC AnnualReport 2021 2018 128,277 2019 124,812 2021 116,799 2020 144,899 Scope 1Scope 2 #### Acting Responsibly #### continued Protecting the environment #### Minimising our impact #### onthe planet We are improving the way we monitor our environmental impacts, strengthening the oversight and management of our energy consumption, emissions, water and waste. We also continue to pursue actions to improve our energy eciency and have developed an emissions reduction target forScope 1 and 2 emissions. #### Greenhouse gas emissions:Scope1and 2 During the 2021 reporting period, our measured Scope 1 and 2 emissions (market-based) were 116,779 tonnes of carbon dioxide equivalent (tCO 2 e). This marks a decrease between 2020 and 2021 of 19%, due largely to our continued investment in renewable energy and improved eciencies. Using the location-based method, our Scope 1 and 2 emissions reduced by 8% between 2020 and 2021. Our reporting of Scope 1 and 2 emissions has been prepared in accordance with our regulatory obligation to report greenhouse gas (GHG) emissions pursuant tothe Companies Act (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 which implement the government’s policy on Streamlined Energy and Carbon Reporting. We have put in place a target to reduce our Scope 1 and 2 GHG emissions by 25% by 2030, using a 2020 baseline GHG emissions (tCO 2 e) Energy consumption (MWh) 2021 2020 UK Rest of the world Total UK Rest of the world Total Electricity 116 177,856177,972 129 223,634 223,763 Fuels 1 – 201,641201,641 871 217,644 218,514 1Natural gas and transportation fuels (petrol and diesel). Reported fuel use in 2020 for the UK is an estimate that was developed based on employee headcount. The 2021 disclosure is based on actual data for which there was no reported fuel consumption generated out of the UK. #### 116,779 tCO 2 e Scope 1 and 2 emissions (market-based) total. Between 2020 and 2021, a decrease of 19% 2021 2020 Scope 1 – Combustion of fuel and operation offacilities 40,450 47,372 Scope 2 (market-based) – Electricity 76,328 97,527 Total Scope 1 and 2 emissions (market‑based) 116,779 144,899 Scope 2 (location-based) – Electricity 90,031 94,949 – Emissions from the consumption of electricity are reported in tCO 2 e. However, since the International Energy Agency emission factors for electricity currentlyaccount forcarbon dioxide emissions only, part of theseemissions are in tCO 2 – 2020 data has been revised due to improved data availability, quality andaccuracy ![]() Hikma Pharmaceuticals PLC Annual Report 2021 45 STRATEGIC REPORT 0k30k60k90k120k 150k 2020 2021 Natural gas combustion (Scope 1) Diesel and petrol combustion (including for vehicle-use) Purchased electricity – standard (Scope 2) Purchased electricity – renewable (Scope 2) LPG/Propane combustion (Scope 1) Refrigerants (Scope 1) GHG emissions breakdown by source (market‑based) Emissions intensity: revenue ($m) 1 2021 2020 Scope 1 and 2 emissions (market-based)/revenue 45.7 61.9 Scope 1 and 2 emissions (location-based)/revenue 51.1 60.8 1Emissions intensity is calculated using Group-wide revenue ($m) – Revenue 2020:2,341 – Revenue 2021: 2,553 Our UK oce The Group operates one location within the United Kingdom, where we are listed, which is an oce building that is managed by a third party. During the year, the UK site consumed 116,392 kWh (2020: 128,654 kWh) of energy, which is equivalent to 25 tCO 2 e. The energy consumption is measured by meter readings provided by the managing agent and relates to electricity used for heating, cooling and general oce power. The Group does not provide transport within the UK other than via private hire vehicles for which consumption data is not available. During the year, the UK site was assessed by an independent expert for the potential to improve energy eciency, and recommendations were provided for actions to be undertaken in the future. Proportion of Group emissions derived from the United Kingdom and oshore area UK 0.02% Measures to improve eciency and reduce our carbonfootprint We continue to improve the energy eciency of our operations. As part of our eorts to reduce our GHG emissions from our sites in the USA, we supported the generation of35,000 MWh of clean energy generated in the US in 2021 through the acquisition of Renewable Energy Certicates (RECs). Those acquired Renewable Energy Certicates were certied under Green-e Renewable Energy Standard for Canada and the United States v3.5 ensuring strong compliance with standards, quality assurance and proper oversight. Also, in Germany, Italy, Portugal and Sudan, we procure a portion of our electricity from renewable sources. In Tunisia, we installed our rst combined cooling, heat and power (CCHP) system, helping to reduce costs and emissions at our locations there. In other locations such as Egypt and Morocco, we continued our roll-out of more ecient light emitting diode (LED) xtures. In locations including Jordan and Tunisia, we installed building management systems (BMS) which provide economic and sustainability benets. Target We have put in place a target to reduce our Scope 1 and 2 GHG emissions by 25% by 2030, using a 2020 baseline. The target was developed using the absolute contraction approach and is in line with the Paris Climate Agreement’s well-below 2°C scenario. Our approach to achieve the target We are committed to achieving our emissions reduction target while continuing to deliver on our strategy and grow the business. We have taken signicant steps in 2021 to reduce our Scope 1 and 2 emissions. Our purchase of RECs in the US provided substantial Scope 2 emissions reductions for 2021. Our preferred approach for Scope 2 emissions reductions is to contribute to the growth of the renewable energy capacity of the grid. We will be exploring such opportunities in 2022 and onwards. In addition to our actions towards achieving our Scope 1 and 2 emissions target, we will focus in 2022 on identifying opportunities to make a meaningful impact on our Scope 3 emissions. In Tunisia, we installed our rst combined cooling, heat and power (CCHP) system, helping to reduce costs and emissionsat our locations there ![]() 46 Hikma Pharmaceuticals PLC Annual Report 2021 #### Acting Responsibly #### continued Methodology for Scope 1 and 2 We quantify and report our organisational GHG emissions in alignment with the World Resources Institute’s Greenhouse Gas Protocol Corporate Accounting and Reporting Standard and in alignment with the Scope 2 Guidance. We consolidate our organisational boundary according to the operational control approach, which includes all our facilities. Due to this boundary, joint ventures with less than 50% holding are not included as we do not have operational control. We have adopted a materiality threshold of 5% for GHG reporting purposes. In some cases, where data is missing, it has been estimated using the following methodology: using data from one year prior to the month to be estimated or previous year as proxy, calculate an average daily consumption over that period and applying that to the number of days within the month to be estimated. We conducted an in‑depth analysis of our supply chain to understand the size of our Scope 3 footprint #### GHG emissions: Scope 3 We conducted an in-depth analysis of our supply chain to understand the size of our Scope 3 footprint and performed a relevance assessment to identify the most material and relevant categories with the support of an external partner. In line with Greenhouse Gas Protocol technical guidance for calculating Scope 3 emissions, we use acombination of a spend-based method and, wherever possible, an average-data method leveraging respectively Exiobase 3.4 and Ecoinvent 3.7.1 databases. Our methodology incorporates supplier location, ination and currency rates in order to increase the accuracy of our reporting. For most relevant categories, as reected below, full year 2021 Scope 3 emissions are estimated, at 837,227 tCO 2 e and have been externally veried. Scope 3 emissions for these categories represent 88% of all Hikma emissions to manufacture, promote and distribute its products. Other Scope 3 categories were either not signicant enough for reporting or not applicable. Moving forward, we will be looking at engaging with our supplier base to obtain supplier specic or product level emissions data to improve our Scope 3 data quality and identify opportunities to reduce our carbon footprint. GHG emissions, Scope 3 (tCO 2 e) Scope 3 category Category description tCO 2 e Vericationlevel 1Purchase of goods and services 742,987 Limited assurance 2 Capital goods 27,694 Limited assurance 3Fuel- and energy-related activities (FERA) (not included in Scope 1 or Scope 2) 39,166 Reasonable assurance 4 Upstream transportation anddistribution 27,380 Limited assurance Total 837,227 The GHG sources that constituted our operational boundary for Scope 1 and 2 are: Scope 1: – Natural gas combustion – Diesel combustion – Petrol combustion – LPG/Propane combustion – Vehicleemissions – Refrigerants Scope 2: – Purchased electricity – standard – Purchased electricity – renewable ![]() Hikma Pharmaceuticals PLC Annual Report 2021 47 STRATEGIC REPORT Verication of Scope 1 and 2 and #### FERA emissions data Carbon Credentials Energy Services Ltd (Carbon Intelligence) has been contracted by Hikma Pharmaceuticals PLC for the independent third-party verication of direct and indirect carbon dioxide equivalentemissions (CO 2 e) as provided in the 2021company Annual Report and accounts to areasonable level of assurance in relation to ISO14064-3 Greenhouse gases. Veried emissions by scope include: Scope 1 emissions – Combustion of gaseous fuels (natural gas, diesel, petrol and LPG) – Fugitive refrigerant gases Scope 2 emissions – Purchased electricity consumption (location and market-based) Scope 3 emissions – Fuel- and energy-related activities (not included inScope 1 or Scope 2) Carbon Intelligence concludes withreasonable assurance, using the ISO 14064-3 standard, that theGHG assertion is materially correct, is a fair representation of the GHG emissions data and information and is prepared in accordance with the relevant criteria. The full verication statement can befound here www.hikma.com/sustainability. #### Water and waste management We have programmes and practices in placeto manage water and waste and we comply with all relevant laws and regulations in this regard. The use of water is critical for the pharmaceutical manufacturing process. In 2021, we conducted a water screening exercise with external consultants to identify water-related risks in the short, medium and long term. The analysis included 20 manufacturing sites across 11 countries and, using various evaluation tools such as the WorldResources Institute Aqueduct and World Wildlife Fund Water Risk Filter, assessed risks at each location. The study also included a general climate analysis, whereby we assessed how water-related risks might be aected by climate change in the medium and long term. Through the analysis, we identied which sites had the greatest exposure to water scarcity. In 2022, we will work with relevant sites to improve understanding of how water is withdrawn, used and discharged from them and this knowledge will help us identify water conservation opportunities. We are also improving the way in which we monitor andmanage our waste, and are actively measuring theamount of hazardous and non-hazardous waste generated through our operations. More information about water and waste management will be included in our 2021 Sustainability Report. #### Limited assurance of specicScope3 categories For external assurance of the remaining three Scope 3 categories (Purchase of goods and services, Capital goods and Upstream transportation and distribution), we worked with an external third party, Sievo Oy, to assess our carbon footprint for these categories. Sievohas contracted EY under a ‘limited assurance engagement’, as dened by InternationalStandards onAssurance Engagements 3000 (ISAE 3000) to report on themethodology and theemission factors used behind ‘CO 2 Analytics’ tool (the Tool) as of 21January 2022 (all together the ‘Emission Information’). The full assurance statement can befound at www.hikma.com/sustainability. ![]() 48 Hikma Pharmaceuticals PLC Annual Report 2021 #### Acting Responsibly #### continued Buildingtrust through quality in everything wedo #### Upholding ethical #### standards and acting #### with integrity #### Ethics and compliance Hikma is committed to upholding the highest ethical standards in the conduct of its global business operations, which is grounded in our values of caring, innovation, and collaboration. Our values serve as the foundation for a strong governance framework that is fundamental to our long-term organisational success. Our Code of Conduct sets out behaviours we expect from our employees as we conduct our business, and provides an overview of our legal, regulatory, and ethical requirements. Our Code provides guidance to our employees and partners on the ethics of Hikma’s business activities through the identication anddiscussion of various risks associated with ourbusiness. In addition to our Code, we have also developed policies and procedures designed to help employees and third parties put these behaviours into practice. Hikma employees, ocers and Directors are trained on the Code of Conduct as part of their induction and are provided refresher training on a periodic basis. Through our global compliance programme we have adopted internal controls and management processes to ensure the responsible and ethical conduct of our business. This includes compliance with all relevant global and local laws, codes and regulations wherever we operate. We believe in transparency and promote a culture that encourages employees to raise any concerns about potential violation of laws and regulations, or any other behaviours or incidents that do not comply with our Code of Conduct. In addition, our speak up line provides both internal and external stakeholders a resource to use to raise concerns about suspected misconduct condentially. All cases received are reviewed by our Legal and Compliance teams, and investigated, as appropriate, by Legal and Compliance personnel. Substantiated violations of our Code of Conduct, or other policies and procedures are addressed through our disciplinary procedures. Our Compliance, Responsibility and Ethics Committee provides oversight of our global compliance programme and the management of associated risks, including bribery and corruption. We have a zero tolerance policy for bribery and corruption at Hikma. As a publicly listed company on the London Stock Exchange (LSE), we are subject to the regulations of the UK Listing Authority. We also comply with the UK Bribery Act 2010 and the US Foreign Corrupt Practices Act, as well as global anti-corruption standards and local anti-bribery and corruption laws. In 2021, we implemented RiskRate, an automated third-party risk management system through which allnew third-party suppliers to the Group are entered and monitored through the Group’s third-party risk management programme. We also established a stand-alone global Non-Retaliation Policy to rearm Hikma’s commitment to open-door communication and the protection of individuals who raise issues and concerns in good faith. Hikma employees, ocers and Directors are trained on the Code of Conduct as part of their induction and are provided refresher training on a periodic basis Founding member of thePartnering #### Against Corruption Initiative (PACI) Hikma is a founding member of the Partnering Against Corruption Initiative (PACI), a cross-industry collaborative eort established through the World Economic Forum dedicated to promoting compliance and eliminating corruption. We are also members of the Business 20 (B20) Anti-Corruption Working Group. The B20 represents the business voice of the G20 group of governments and the Anti-Corruption Working Group has a mandate to help companies improve their ethical conduct. ![]() This year, our FTSE4Good Index score was 3.2 placing us in the 69th percentile as compared toother industry peer members. Hikma Pharmaceuticals PLC Annual Report 2021 49 STRATEGIC REPORT #### Product quality and safety Ensuring quality is inherent in every step we take in developing and manufacturing our medicines. Each ofour pharmaceutical ingredients and nished doses undergo multiple, thorough quality testing and inspection.The Quality team is a global team tasked with undertaking ongoing quality audits around the world in our manufacturing sites. The health and safety of our patients is at the heart of what we do. We operate a rigorous pharmacovigilance system to prevent patient harm and to promote the safe and eective use of our products. We have globally aligned processes to detect, evaluate and communicate any change to the benet-risk ratio of our products and to implement timely corrective and preventative actions. We conduct our pharmacovigilanceactivities globally across the whole lifespan of our products, complying with all local regulations and safety reporting timelines. Maintaining our membership of the #### FTSE4Good Index For the seventh consecutive year, we maintained our membership of the FTSE4Good Index Series – an index of LSE-listed companies that demonstrate strong Environmental, Social and Governance (ESG) practices as measured against globally recognised standards. The FTSE4Good evaluates companies’ eectiveness in addressing issues such as human rights, anti-corruption, environmental performance, health and safety, and community engagement. Their assessments are used by a wide variety of market participants to develop responsible investment funds and other products. Our ESG rating in 2021 was 3.2, placing us in the 69th percentile as compared to industry peers that are listed in the index. Our aim is to continue improving our management of ESG issues. Pharmacovigilance is monitored at the highest levels ofour business and is included in our Enterprise Risk Management framework, which is overseen by the Executive Committee and the Board on a regular basis. To ensure our pharmacovigilance system is achieving its objectives, we monitor our worldwide compliance metrics every month. These are recorded in monthly operational reports and reviewed in global and regional pharmacovigilance meetings. #### Corporate governance In 2021, we conducted a Group-wide review of our environmental, social and governance (ESG) strategy. As part of this review, we re-examined which ESG issues are of greatest importance to Hikma as well as our key stakeholders. These issues will be described inmore detail in our 2021 Sustainability Report. While certain elements of our ESG strategy are governed by various board committees, our Board ofDirectors have overarching oversight of our ESG strategy including environmental aspects and TCFD strategy and reporting. Our Executive Vice President (EVP) of Business Operations, who reports directly into our CEO, leads our ESG reporting as well as our internal cross- functional working group integrating TCFD into our business. Our CSR strategy is governed by the Compliance, Responsibility and Ethics Committee. More information on our corporate governance and our management of ESG issues can be found on page68. The Board of Directors have overarching oversight of our ESG strategy ![]() 50 Hikma Pharmaceuticals PLC AnnualReport 2021 #### Aligning with the TCFD We used a mixture of qualitative and quantitative modelling to understand how climate‑related risks and opportunities may change under dierent climate futures #### Aligning with the TCFD We are continuously aligning our internal processes and public disclosures with the Task Force for Climate-related Financial Disclosures (TCFD). In accordance with Listing Rule LR 9.8.6 (8) weare including disclosures that are consistent with the TCFDRecommendations, recognising that we will continue to improve our implementation of the recommendations, especially in the area of strategy resilience and the improvement of metrics and targets.This section summarises our progress as of 31December 2021 against the four TCFD categories which include: Governance: our governance structure to provide eective oversight over our climate-related risks andopportunities Strategy: our evaluation of the actual and potential impacts of climate-related risks and opportunities on our business, strategy, and nancial planning over the short, medium, and long term Risk management: how we identify, assess, and manage climate-related risks Metrics and targets: our progress on setting metrics and targets to assess and manage our material climate-related risks and opportunities #### Governance Board level oversight Our Board of Directors retains overarching oversight ofour TCFD strategy including our climate-related risksand opportunities. We are planning to conduct additional Board training in 2022. Management level leadership At the management level, we bring together the expertise of many senior leaders from across our organisation given the diverse nature of our climate- related risks and opportunities. Our Executive Vice President (EVP) of Business Operations, who reports directly into our CEO, leads our internal cross- functional working group integrating TCFD recommendations into our business. As Chair of this working group, she drives progress in understanding Hikma’s climate-related risks and opportunities, bringing together the relevant expertise and provides updates directly to the Board as a whole. Our TCFD working group meets on a regular basis with external consultant support with the objective to progress our understanding of Hikma’s climate-related risks and opportunities and to take appropriate action. #### Strategy Climate‑related risks and opportunities andtheir impact With the assistance of third-party climate expertise, Hikma undertook an identication and assessment project to better understand the top climate-related risks and opportunities that could be signicant to Hikma’s business. The following were selected for further modelling of their nancial impact based on strategic importance to Hikma, correlation with other projects and initiatives and granular data availability for modelling. Physical risks – Impact of storms and ooding on our facilities andoperations Transition risks – Impact of carbon pricing on the raw materials costs of some of our most energy intensive inputs such as APIs and packaging – Changes in investor preferences around ESG impacting our market valuation Opportunities Our exposure to energy pricing changes was reviewed. Alongside this energy modelling, we reviewed various strategic opportunities to reduce our energy risk and reduce our carbon impact by changing our energy mix, setting an energy strategy, and reducing our overall demand through eciencies. We will continue to work on our transition plan in 2022. Methodology We used a mixture of qualitative and quantitative modelling to understand how these risks and opportunities may change under dierent climate futures as well as three dierent time horizons. We used the Bank of England’s reference climate scenarios to understand the potential future physical dierences in climate driven by temperature changes, outlined in the Representative Concentration Pathways (RCP). Also, we have used the Shared Socioeconomic Pathways (SSPs). Through this exercise we were able to better understand the potential nancial impacts of the identied climate risks and opportunities, which will be input into our strategic planning. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 51 STRATEGIC REPORT Carbon pricing impacts on our supply chain We looked at projected carbon pricing in several regions under dierent climate scenarios, and the potential pass-on cost that could occur within our supply chain inating our costs. As APIs and packagingmaterials are some of our most energy andcarbon intensive procured goods, it is these materials that would likely be impacted the most bythe introduction of carbon prices and therefore formed the basis of our modelling. We have a sustainable procurement programme in place to better understand the carbon impacts of the goods and services we procure. As a key mitigation, weintend to engage with our main materials suppliers to understand their goals to reduce carbon, move to renewable energy and increase energy eciencies in their production. Through supplier engagement, we anticipate we can partly mitigate the impact of carbon pricing pass-on in the future. Investor preference change Investor preferences around ESG credentials are changing. We modelled the potential impact on our market valuation, from shiing investor allocations away from assets which do not meet ESG requirements and from decreasing ESG benchmark ratings. Hikma is already engaging and communicating with investors on ESG-related matters including climate. By ensuring we continue to strengthen and communicate our climate and sustainability ambitions and performance, this risk is mitigated. See our Acting responsibly section, page 37, for more information on our performance this year. Energy pricing changes and our energy strategy While energy costs to our business make up only approximately 1% of total costs, energy is highly linkedto our sustainability strategy and our continued eorts to reduce our impact on the environment; particularly through energy eciency and moving to renewable energy. We modelled multiple opportunities to understand how we mitigate and enhance our energy strategy over time, including dierent energy mixes in our dierent regions andachievement of dierent energy eciency goals. This modelling work will provide input into our energy transition plan. Physical impacts on our facilities Given our geographical spread across many regions wehave varying levels of exposure to physical risks of climate change in our dierent locations. The modelling of increasing risk of storms and ood causing damage to our facilities, as well as disruption to our operations, show that we have limited direct exposure to these acute risks in a future 1.5°C and well-below 2°C world. However, as the risk increases under a business-as-usual scenario whereglobal warming exceeds 3°C there is some potential risk for our facilities. With the insights from our modelling and understanding that these risks are not signicant to our sites at this stage, we will continue to engage with our operational facilities teams in the highest risk regions to ensure our business continuity and recovery processes are t for purpose. The insights of this analysis were used in the stress testing for the longer-term viability assessment (see page 63). The results of our nancial impact assessment determine that climate change is not expected to have a material impact on the Group’s viability in the longer‑term Resilience of Hikma’s strategy From our nancial impact modelling we were able to understand how certain areas of our business could be impacted by climate change. The table below summarises the key insights from our nancial impact modelling conducted this year for the ve risks and opportunities. Summary ndings The results of our nancial impact assessment show that climate change is not expected to have a material impact on the Group’s viability in the longer term. The longer-term is considered to be a time period of three years. This is in line with the timeframe used in the longer-term viability assessment (see page 63). We recognise that climate- related risks will continue to develop over a signicantly longer period and assess that Hikma will be able to adapt its strategy and respond appropriately to any such risks that may threaten to have a material impact on the Group. We will continue to use the insights outlined above over the coming year to strengthen our monitoring metrics and understand where we need to improve our mitigation controls. ![]() 52 Hikma Pharmaceuticals PLC Annual Report 2021 #### Aligning with the TCFD #### continued We will continue to build on our climate‑related risk identication and modelling by working with key stakeholders #### Risk management Process for identifying and assessing climate‑related risks We identify and assess climate related risks using arange of approaches. We conducted a risk identication and assessment exercise as part of theenterprise risk management process with all risk owners across the business. The outcomes of this review fed in to the TCFD Working Group’s assessment of the most relevant climate-related risks for Hikma. We engaged external experts to support the TCFD Working Group to identify and assess climate-related risks using climate science data and known pathways. We use three timeframes to review and assess the likelihoodand impacts of our climate risks and impacts. The rst timeframe was for a period of threeyears, aligned with the longer-term viability assessment (see page 63). We also considered how climate-related risks might impact the Group further into the future. Process for managing climate‑related risks and integration of risk management processes Climate-related risks are identied, assessed, and managed by teams across the organisation depending on the nature of the risk. Our risk management framework (see page 54-61) provides a structure for signicant risks to be escalated and integrated into ourenterprise risk management process. In 2021 we also established the TCFD Working Group, a cross- functional team to consolidate assessments on this emerging risk area. Examples of how climate-related risks are managed and integrated into existing risk management activitiesinclude: – Longer term viability assessment: environment and climate change related risks included in the scenario modelling (see page 63) – Crisis and continuity management programme: siteassessments of physical risks and controls (seepage60) Looking forward to the coming year, environment and climate change will continue to be a focus area and will continue to be part of the enterprise risk management framework (see page 54-61). We will continue to build on our risk identication and modelling by working with key stakeholders across our business to understand existing risk mitigation controls and processes in place.Where we identify any control gaps or areas ofimprovement, we will build clear action plans andownership to drive this forward to ensure our long-term resilience. #### Metrics and targets Metrics to assess climate‑related risks andopportunities We have taken steps to understand the nancial impacts of some of our material risks and opportunities. The next steps are to improve the metrics by which we monitor these risks and capture opportunities, and the eectiveness of our controls. We also continue to improve our environmental metrics in relation to emissions, energy, water, and waste management. The RemunerationCommittee determined the CEO’sperformance target for 2021 which ensures thatclear progress is being made with respect to thedevelopment and execution of the Group’s Environmental, Social and Governance strategy, which includes the Group’s climate-related programmes. This also includes the identication of climate-related risks and opportunities and the management thereof. Disclosures of Scope 1 and 2 targets An overview of our emissions targets, our carbon footprint and metrics on our energy consumption can be found in the Protecting the environment section of our Annual Report, see pages 44. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 53 STRATEGIC REPORT ![]() 54 Hikma Pharmaceuticals PLC Annual Report 2021 #### Risk management #### In 2021, our risk assessments #### informed our decision-making #### on prioritisation and allocation #### of resources across the Group In this section 55 Risk management framework 56 Risk management activities 58 Principal risks and uncertainties 62 Going concern 63 Longer-term viability ![]() Hikma Pharmaceuticals PLC Annual Report 2021 55 STRATEGIC REPORT 1.Full committee terms of reference are available on www.hikma.com #### Risk management framework Risk context Our purpose is to put better health within reach, every day for healthcare professionals and their patients. We bring patients across the US, MENA and Europe abroad range of generic, specialty and branded pharmaceutical products. The future is uncertain and it carries risk and opportunity for our business. These risks and opportunities may be related to our strategy and delivery of our objectives, the activities and processes of the organisation, the expectations ofour stakeholders, or our key relationships and dependencies. Find out more about the internal and external context for risk management for the Group in the ‘CEO’s strategic review’ (pages 6–9), ‘Our markets’ (pages 18–19) and ‘Our business model’ (pages 20–21). Risk strategy Eective management of risk and opportunity is fundamental for the long-term success for the Group. We operate an Enterprise Risk Management (ERM) framework to ensure that we are comprehensive and structured in our approach. The framework delivers athorough view of our risk exposure to inform ourdecision-making and enable the alignment, eectiveness and eciency of our strategic, tactical, operational and compliance processes. The approach ensures we full our obligations and provides assurance that our activities are appropriately controlled. Risk appetite The Board determines the nature and extent of the principal risks it is willing to take and communicates this through the Group risk appetite. The risk appetite outlines expected management strategies and details limits and tolerances on risk exposure for each of the principal risks. It forms the foundation of the ERM framework and guides management decision-making across the Group. The risk appetite is reviewed twice ayear at Board-level and is monitored by management on an ongoingbasis. Risk governance The Board has ultimate responsibility for the Group’s approach to risk management and internal control. On behalf of the Board, the Audit Committee oversees risk management for the Group as part of its responsibilities for internal control. The Audit Committee reviews the material risks facingthe Group, considering dierent sources of assurance, including executive management, internal audit and external audit. The Chair of the Audit Committee is a standing member of the Compliance, Responsibility and Ethics Committee (CREC) ensuring connection between the Board committees with risk oversight responsibilities 1 . Internal audit provides independent assurance of the Group’s internal control environment. For more details on our internal audit approach see page 83. The ERM oce enables and drives the implementation of eective risk management practices through the organisation, guides global risk owners in assessing and reporting their risks, coordinates emerging risk assessments, and establishes partnerships across theorganisation to promote and develop a responsible risk culture. Complianceand control functions withprofessional expertise in managing risk in specialist areas are in place across the organisation. The CEO and Executive Committee have direct ownership of risk management for the Group. Risk management accountability is fully embedded within their executive responsibilities and includes assessments of strategic, tactical, operational and compliance related opportunities and risks. As part of the risk governance framework, senior executives are assigned responsibility for specic principal risks. These global risk owners coordinate riskmanagement activities across the organisation with support from management teams to ensure risk exposure is managed appropriately and in line with therisk appetite. Risk management occurs across the organisation Complementary management structures provide assurance over our risk management and internal control through standards, accountability, oversight, independent andexternal assessments. Executive accountability Executive Committee Global risk owners External consultants Compliance andcontrol Corporate Compliance Quality Compliance Group Risk Oce Financial Compliance Other compliance teams Front-line management Operational activity Management reviews Board oversight Board of Directors Audit Committee CREC Independent assurance Internal audit External consultants External audit Eective management of risk and opportunity is fundamental for the long-term success for the Group ![]() 56 Hikma Pharmaceuticals PLC AnnualReport 2021 In our risk assessments we analyse our current risk exposure (given the controls we already have in place) and the opportunity forfurther management action to mitigate the risk. Risks with higher risk exposure and opportunity forfurther management action are categorised as ‘Priority focus’. Risks with higher risk exposure but without reasonable opportunity for further management action are ‘Closely monitor’ risks. Risks assessed as having lower risk exposure are either ‘Improve’ if there are reasonable actions that management can take, or ‘Continue to operate’ if noadditional actions are considered necessary. This approach helps guide our decision-making for risk response, prioritisation, and allocation of resources across the Group. Risk management activities in 2021 Reviewed the risk management framework, risk appetite, and principalrisks Monitored enterprise-wide key risk indicators aligned to risk appetite to assess risk exposure Developed long-term climate related risk scenario models Enhanced business continuity management for all manufacturing facilities Rened scenario modelling approach for signicant risk events based on principal and emerging risks a longer term that may have signicant impact on our ability to achieve our objectives. Emerging risks are oen driven by forces outside our control. Although emerging risks may be mitigated by existing control frameworks, they need to be assessed to determine if any aspects fall outside current processes or if the controls in place may become inadequate as the risk develops. Our approach involves establishing cross-functional teams to assess the risks and opportunities recognising these may develop over an extended timeframe.The risk assessmentmethods deployed vary and may involve engaging with external experts, scenario modelling, engagement withexisting risk mitigation programmes, and development of risk mitigation and control strategies that will be sustainable over the longer term. Priorities for 2022 In addition to core activities, in 2022 we will further embed our crisis and continuity management processes to strengthen our organisational resilience, with a focus on reviewing and integrating our IT Continuity and Disaster Recovery capabilities. We will continue to develop partnerships between compliance and control functions to bring greater assurance for the Group. We will further develop ouremerging risk assessment processes, including a focus on emerging climate- related risks alongside our alignment with the recommendations from the Task Force on Climate- related Financial Disclosures (see pages 50–52 for more details). In line with good practice, we will conduct an independent external assessment of ourrisk management programme to provide assurance to management and the Board. #### Risk management activities Risk management activities occur at all levels of the organisation. The risk governance framework provides structure for these activities to ensure consistency ofapproach, alignment to the risk appetite and monitoring of our risk exposure across the organisation. The ERM oce coordinates regular risk assessments to review management of risks we already know about, and to identify, analyse and evaluate new and emerging risks. These assessments are consolidated through the ERM oce and reported to the Executive Committee by theglobal risk owners. Summarised reports and key outcomes are reviewed by the Audit Committee and Board. In addition to the core reporting processes described, a range of key risk management activities occurred during the year. Risk management in practice Recognising risk as the eect of uncertainty on objectives, our ability to manage risk enables delivery of our objectives. To ensure our assessments and management of risk are action-oriented we categorise our risks considering not just signicance of risk exposure, but also the opportunity for management action, described in the ‘Risk response decision- making’ section below. Examples of our risk management in practice are seen in the ‘Hikma Egypt CCM engagement’ and ‘Hikma Morocco risk assessment’ case studies on the next page. Emerging risks Emerging risks are those that are newly identied and have the potential to become signicant risks for the Group, those that may already be well known but that are rapidly changing, or those that are developing over Risk exposure Opportunity forfurther management action Closely monitor #### Continue to operate #### Priority focus #### Improve #### Risk response decision-making #### Risk management #### continued ![]() Hikma Pharmaceuticals PLC Annual Report 2021 57 STRATEGIC REPORT Risk management activities occur at all levels of the organisation #### Case study: Hikma Morocco #### risk assessment Aligned to the Group-level enterprise risk management process, cross-functional country- level risk assessments are conducted periodically. The ERM Oce partners with Compliance to coordinate these engagements and provide support to local leadership teamsin identifying, analysing and evaluating risks, and to connect with regional and Group functions for support andexpertise. The engagement with Hikma Morocco was oneofmany projects completed in 2021. The project was delivered with a hybrid on-site and remote support. Through local functional risk workshops and senior management reviews the understanding ofthe risks facing Hikma Morocco was enhanced and risk response decisions taken for ‘Priority focus’ and ‘Improve’ risks. #### Case study: Hikma Egypt CCM engagement Our Crisis and Continuity Management (CCM) Programme isdesigned to develop and embed capabilities across all parts of Hikma for key CCM disciplines: Crisis Management, Business Continuity (including IT Continuity and Disaster Recovery), and Emergency Response. Country and site engagements coordinated by the CCM Programme provide local management teams with a structured approach to focus on this risk management activity with access to internal and external subject matter expertise, and the opportunity to share good practice across the Group. The CCM engagement with Hikma Egypt was one of many such projects completed in 2021 and followed a tried and tested project plan. Aer initial kick o with the General Manager and senior leadershipteam members, local and programme subject matter experts for each of the CCM disciplines reviewed existing arrangements, assessed changes in the organisation and business priorities, and updated processes and procedures. All locations, business activities, departments and key dependencies were considered. The culmination of the engagement were CCM workshops and exercises that provided training forlocal management in handling various types ofdisruption. ![]() 58 Hikma Pharmaceuticals PLC AnnualReport 2021 #### Risk management #### continued #### Principal risks and uncertainties The Group faces risks from a range of sources that could have a material impact on our nancial commitments and ability to trade in the future. The Board has performed a robust assessment of the principal risks for the Group considering our risk context and input from executive management. Through this assessment, the Board has determined that the principal risks facing the Group have not materially changed over the year and that there are no new principal risks to be added. The set of principal risks should not be considered as an exhaustive list of all the risks the Group faces. Certain risk factors are outside the control of management. The Board recognises that the principal risks are dynamic and that management of these risks must be continuous as the risk environment changes. The Board is satised that the principal risks are being managed appropriately and consistently with the target risk appetite. Eectively managing these risks is directly linked to the performance of our strategic KPIs (see pages 22–23) and the delivery of the strategic priorities outlined on pages 6–9. Our principal risks are set out below with examples of management actions that help to control the risk; the actions described do not include all actions taken by management. Industry dynamics Risk description Managementactions The commercial viability of the industry and business model we operate may change signicantly asa result of political action, economic factors, societal pressures, regulatory interventions or changes to participants in the value chain of the industry. – Growth and expansion in existing markets and by entering new geographic areas eg Canada and France – Capital investment in the countries in which we operate to ensure continued market access eg sterile injectable 503B compounding business in the US, Algeria oral oncology – Development of capacity and diversication of capability through dierentiated technology – Collaboration with externalpartners for development andin-licensingpartnerships – Continuous alignment of commercial and R&D organisations to identify market opportunities and meet demand through internal portfolio – Active product life cycle and pricing management – Leveraging the quality, reliability and exibility of our manufacturing facilities for partnerships (such as contract manufacturing) – Working with a broad range of customers and expanding our relationships to cover new customers andpurchasing models Product pipeline Risk description Managementactions Selecting, developingand registering new products that meet market needs and are aligned with Hikma’s strategy to provide a continuous source of future growth. – Invested in R&D with development of existing facilities, including a new R&D site for complex injectables in Warren, New Jersey – Developed R&D expertise to develop complex generic products – Established dedicated in-house laboratory and developed external partnerships to mitigate extractables and leachables for container closure systems risk prole in line with developing regulatory requirements – Bolstered pipeline through business development deals and established strategic partnerships to introduce new technologies in our regions – Recruited new talent (eg Head of Development in MENA) and developed internal capabilities (eg clinical expertise, injectable formulation) Organisational development Risk description Managementactions Developing, maintaining and adapting organisational structures, management processes and controls, and talent pipeline toenable eective delivery bythebusiness in the face of rapidandconstant internal and external change. – Advanced our Diversity, Equity and Inclusion programme with global and local initiatives – Launched global leadership development programmes to support our growth and the evolution of our culture – Strengthened teams with key talent appointed to ll strategic regional and global positions, including development of change management capability – Advanced our succession management process to improve our resilience in key positions – Globalised our talent acquisition process – Continued to create exible working environments in response to COVID-19 challenges to support our employees and their families – Continued to drive standardisation of HR processes through Group-wide human capital management system – Continued to deploy enhanced learning materials to support employees through the organisation-wide learning management system ![]() Hikma Pharmaceuticals PLC Annual Report 2021 59 STRATEGIC REPORT Reputation Risk description Managementactions Building and maintaining trusted and successful partnerships with our stakeholders relies on developing andsustaining our reputation as one ofour most valuable assets. – Internal and external monitoring and management of issues that may impact reputation – External communications initiatives – Investor andanalyst engagement activities – Established working group to integrate environment and climate-related matters into the business – Conducted nancial impact analysis of climate-related risks and opportunities (see page 51) – Developed comprehensive ActingResponsibly framework (see pages 37–49) – Established and developed strategic industry and community partnerships – Deployed internal communication programmes to support employee engagement Ethics and compliance Risk description Managementactions Maintaining a culture underpinned byethical decision making, with appropriate internal controls to ensure sta and thirdparties comply with ourCode ofConduct, associated policies andprocedures, as well asallapplicablelegislation. – Updated Code of Conduct and various Corporate Compliance policies, including Conict of interest, Speak Up, Third party due diligence, and Non-retaliation – Strengthened Compliance leadership team, including US Compliance Ocer role – Active participation ininternational anti-corruption initiatives, includingthe Partnering Against Corruption Initiative (PACI) and the Business 20 Anti-Corruption Working Group (see page 48) Information and cyber security, technology and infrastructure Risk description Managementactions Ensuring the integrity, condentiality, availability and resilience of data, securing information stored and/or processed internally or externally fromcyber and non-cyber threats, maintaining and developing technology systems that enable business processes, and ensuring infrastructure supports the organisation eectively. – Strengthened IT leadership team and rolled out new operating model – Continual assessment and enhancement of cyber controls to support business strategy and changingthreat landscape – Initiated a strategic IT continuity and disaster recovery programme to validate resilience – Developed management of Segregation of Duty structure for Financial systems in line with businessrequirements – Launched implementation of enhanced Global QMS to mitigate legacy application risk Legal, regulatory and intellectual property Risk description Managementactions Complying with laws and regulations, and their application. Managing litigation, governmental investigations, sanctions, contractual terms and conditions and adapting to their changes while preserving shareholder value, business integrity and reputation. – Continuous assessment of developments in legal and regulatory frameworks and impact on the organisation – Continued to manage complex litigation activity related to the manufacture, sale and distribution of opioidproducts – Developed and updated policies and procedures in response to changes in the risks facing the Group, including the protection and security of personal data, the registration and maintenance of IP assets, and compliance with economic sanctions, export controls and trade restrictions – Provided oversight on pricing committees assessing price increase to ensure thorough assessment ofbusiness needs – Implemented controls and procedures to address risk of IP litigation in jurisdictions where Hikma markets itsproducts – Internal communication and training to raise awareness, ensure understanding and build a compliance culture across the organisation – Ongoing assessment and monitoringof general litigation activity inthe US pharmaceutical environment – Engaged external counsel for independent specialist advice ![]() 60 Hikma Pharmaceuticals PLC Annual Report 2021 #### Risk management #### continued #### Principal risks and uncertainties continued Inorganic growth Risk description Managementactions Identifying, accurately pricingand realising expected benets from acquisitions or divestments, licensing, or other business development activities. – Maintained a healthy pipeline of opportunities to achieve Hikma growth strategy – Entered the US biosimilar market via licensing deals with Gedeon Richter and Bio-Thera – Aligned business development practices across the businesses – Extensive due diligence of each acquisition in partnership with external support in order to strategically identify, value, and execute transactions – Extensive Board engagement to review major acquisitions proposed by the Executive Committee to ensure strategic alignment – Post-acquisition performance (nancial and non-nancial) monitored closely to ensure integration and delivery on business plan – Post-transaction reviews highlight opportunities to improve eectiveness of processes Active pharmaceutical ingredient (API) and third-party risk management Risk description Managementactions Maintaining availability of supply, quality and competitiveness of API purchases and ensuring proper understanding and control of third-party risks. – Maintained rigorous selection and qualication process for new API suppliers – Strong focus on building long-term supply contracts and strategic partnerships – Continued to secure API supply continuity for high-value products through qualication of alternate suppliers, stocking strategies and supply chain modelling – Strengthened alignment with R&D and commercial teams to support scale up of API requirements for productlaunches – Increased sourcing capabilities and presence in key API markets to secure access to capacity and innovation – Third party due diligence process for onboarding and continuous monitoring of third-parties fully automated Crisis response and business continuity Risk description Managementactions Preparedness, response, continuity and recovery from disruptive events, such as natural catastrophe, economic turmoil,operational issues, pandemic, political crisis, andregulatory intervention. – Responded to disruptive events with values-led decision-making and prioritising the protection of the health and safety of our employees and patients – Embedded our crisis and continuity management (CCM) programme – Standardised business impact analysis and updated business continuity plans for all manufacturing sites – Aligned IT Continuity and Disaster Recovery and CCM programmes – Continued crisis management training to employees across the organisation to develop our resilience capability – Established a CCM community of practice to develop expertise across the Hikma network ![]() Hikma Pharmaceuticals PLC Annual Report 2021 61 STRATEGIC REPORT Product quality and safety Risk description Managementactions Maintaining compliance with current Good Practices for Manufacturing (cGMP),Laboratory(cGLP), Compounding (cGCP), Distribution (cGDP) and Pharmacovigilance (cGVP) by sta, and ensuring compliance is maintained by allrelevant third parties involved inthese processes. – Hikma Quality Council provides oversight and shares best practice across the Group – Quality and safety culture driven throughout the organisation by global initiatives and regularly reinforced bycommunication fromsenior executives – Facilities maintained as inspection-ready for assessment by relevant regulators – Continuously improved documented procedures and conducted regular sta training – Oversaw cGMP compliance of third parties supplying APIs, raw materials, packaging components and otherservices – Maintained environmentand health certications and drove continuous improvements – Continuous monitoring of the safety of products to detect any change to risk-benet – Global pharmacovigilance programme in place supported by globalised systems – Strengthened teams to respond to changing PV requirements, particularly in MENA – Upgraded global product portfolio system to improve access to accurate and timely product information Financial control and reporting Risk description Managementactions Eectively managing income, expenditure, assets and liabilities, liquidity, exchange rates, tax uncertainty, debtor and associatedactivities, and in reporting accurately, in a timely manner andincompliance with statutory requirements and accounting standards. – Strengthened leadership team with key appointments, including US CFO, MENA Finance Director, and Head of Financial Compliance – Initiated source to pay transformation project to digitise source to contract and procure to pay processes – Mitigated segregation of duty risks with roll out of access control module and standardised authority matrix – Introduced data mining methods to enhance nancial compliance monitoring activities – Automated additional nance processes, including Order to cash, Making Tax Digital ![]() 62 Hikma Pharmaceuticals PLC Annual Report 2021 #### Risk management #### continued Severe but plausible downside risk scenarios areused to test theviability of theGroup #### Going concern and longer-termviability In accordance with theUK Corporate Governance Code provisions 4.28–31 and other regulatory disclosure requirements, Going concern and longer- term viability assessments are provided. Assessment of position andprospects The Group’s current and forecast nancial positions are used to assess the going concern position and longer-term viability. The position and prospects of the Group are assessed at Executive Committee meetings and at the end of the nancial year. The assessments consider strategic and operational updates, principal and emerging risks, nancial reporting and forecasting from the Chief Financial Ocer, and through the development of a business plan. Thebusiness plan takes into account our current position, specic risks and uncertainties facing the business and known changes to our organisation and business model. The Executive Committee assesses the future strategic positioning of Hikma as a company in thecontext of the changing macroeconomic and healthcare environment. Aspects of this analysis areshown in ‘Global context’ and ‘Key trends’ (seepages 18–19). These various assessments are presented to the AuditCommittee and Board of Directors for independent scrutiny of management’s assumptions and modelling approach. The Board also receives regular updates on operational, strategic and nancial matters from executives. Financial position The goingconcern and longer-term viability assessments are based on the nancial position (asat31 December 2021): – net cash ow from operating activities was $638million – overall net debt was $420 million (0.6 times coreEBITDA) – available borrowing capacity is $1,086 million of committed undrawn long-term (see Note 28 of the Group consolidated nancial statements on page 160). These facilities are well-diversied across the subsidiaries of the Group and are with a number of nancial institutions 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 armed by S&P and Fitch. Future prospects The Group’s base case forecasts take into account reasonable possible changes in trading performance, including those that may arise related to the COVID-19 pandemic, facility renewal sensitivities, and maturities of long-term debt. Assumptions Financial modelling for the business plan and the goingconcern and viability assessments is subject toassumptions related to: – launch and commercialisation ofnew products – market share and product demand rates – maintenance of certain product prices – political and social stability – ability to renance existing debt on similar terms – ability to increase operational eciency and reduce central costs – eective tax rate being within the current guidancerange #### Going concern For the purposes of assessing the going concern position the base case and a forecast including severe but plausible downside risks were analysed over the18-month period from the date of signing the nancial statements. The analysis shows that Hikma is well-placed to manage its business and nancial risks successfully despite current uncertainties and conrms that the going concern basis should be used in preparing the nancial statements. 1.Fitch, Moody’s and S&P or any of their aliates or successors. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 63 STRATEGIC REPORT Our assessments show that Hikma is resilient to downside risk scenarios #### Longer-term viability Viability period The longer-term viability of the Group is assessed for a period longer than for the going concern analysis. The longer-term viability assessment was conducted for a period of three years, ending on 31 December 2024. This is the timeframe for acquisitions and business development opportunities tobecome integrated into our business, and for pipeline products to contribute as marketed products. Our forecasts are more accurate in the near term than in the long term and this limitation also applies to our viability assessments. Stress testing, modelling andsensitivity analysis Managementdeveloped severe but plausible multi-event risk scenarios that could impact the business adversely. The Group’s strategic objectives, principal risks (PR), assessments of longer-termemerging risks(ER), management input, real-world examples and the nancial modelling assumptions listed above wereused to design the scenarios. Realistic but extremelysevere adjustments were further applied forsensitivity analysis. The following hypothetical severe but plausible multi-event risk scenarios were assessed. Longer-term viability scenarios – Scenario1: Industry dynamics (PR): Signicant adverse changes to the pricing environment including price erosion over and above business plan assumptions were considered in addition to currency devaluation eects for various MENA markets – Scenario 2: Product pipeline (PR): Signicant andextensive delays to strategic product launches were assessed, in particular for complex and specialty products – Scenario3: Ethics and compliance (PR): The implications of a systemic failure of the corporate compliance programme leading to a regulator investigation were explored, including reputational impact, nes and legal fees, loss of sales, remediation expenses, and additional compliance costs – Scenario4: Product quality and safety (PR): Aprolonged regulator-imposed restriction of a majorUS FDA-inspected manufacturing plant was modelled factoring in loss of sales, remediation expenses, as well as reduction to operating costs – Scenario5: Crisis response and business continuity (PR): Escalation and development of situations of political and social instability in MENA markets were assessed with loss of sales recognised – Scenario6: API and third-party risk management (PR): Signicant disruptions to our raw and packaging materials supply chain were modelled, aswell as increased import taris and global inationary pressures – Scenario7: Climate change (ER): Disruption through extreme weather events was assessed with storms and ooding events impacting certain facilities resulting in property damage and business interruption (see also our disclosures related to climate change on pages 50–52) – Scenario8: Information and cyber security, technology and infrastructure (PR): Cyber attacks impacting endpoints and ERP systems were modelled with potential loss of sales, general business interruption, and response and remediation costs Longer-term viability analysis The consequences of each of these severe but plausible multi-event risk scenarios were modelled independently over the forecast period and the impacts on EBITDA, ability to meet our debt obligations, and cash ow were determined. The assessment shows that although the scenarios aresevere they do not threaten the viability of Hikma.Headroom was comfortably maintained throughout the viability period for each of the multi-event risk scenarios. The assessment and analysis did not rely on management actions that could be taken in the circumstances to reduce theimpact and consequences of the risk events. Such actions, the ongoing implementation of the ERM programme, and investment in infrastructure and change initiatives are anticipated to continue to enhance organisational resilience and support longer-term viability. The outcome of these various quantitative and qualitative assessments leads management to believe that Hikma is resilient to downside risk scenarios. This is largely as a result of our nancial position (in particular our strong balance sheet and low levels of debt) and is supported by the fact that our business is well-diversied through geographic spread, product diversity, and large customer and supplier base. Further details are provided in the ‘CEO’s strategic review’ (pages 6–9), ‘Our markets’ (pages 18–19), and‘Our business model’ (pages 20–21). ![]() 64 Hikma Pharmaceuticals PLC Annual Report 2021 #### Compliance Non-nancial disclosures The table below summarises our position on matters relevant to the Non-Financial Reporting Directive, in line with the requirements of Sections 414CA and 414CB of the Companies Act 2006. All references made are to publicly accessible information. Summary Further information and policies Our business model – Our diversied business model allows us to respond tothe many opportunities and risks we face, while delivering value forour stakeholders – Our business model, pages 20–21 Principal risks – Our risk management framework is designed to ensure wetake a comprehensive view of risk. This includes nancial and non-nancial risks that may impact our business and stakeholders – Risk management, pages 54–63 Environmental matters – We are committed to making our operations more energy ecient and environmentally responsible – We are improving the way we monitor our impacts, pursuing projects that reduce our footprint – We have put in place a target to reduce our Scope 1 and 2 GHG emissions by 25% by 2030, using a 2020 baseline – We are aligning our internal processes and our publicdisclosures are consistent with the Task ForceonClimate-related Financial Disclosures (TCFDrecommendations – Board-level oversight of environmental sustainability – Environmental matters are incorporated in our risk management framework – Protecting the environment, pages 44–47 – GHG emissions reduction target, page 45 – Climate-related risks and opportunities and their impact, pages 50–52 Employees – Our employees have always been at the heart ofeverything we do. As the driving force behind Hikma’sgrowth and success, our people are our mostvaluable asset – We are committed to investing in the development ofourworkforce and in protecting their health and safety.We have c.8,700 employees across the US, MENA,Europe and ROW – Stakeholder engagement: Employees, page 13 – Empowering our people, pages 42–43 – Code of Conduct 1 – Upholding ethical standards and acting with integrity, pages 48–49 – Group Environmental, Health and Safety PolicyStatement 1 – Principal risk: Organisational development, page58 Social matters – In all of our markets, we work to meet social needs locally and improve lives. We have developed programmes in keyareas to address social challenges: • providing better health • supporting education • helpingpeoplein need – Where our activities relate to other social matters, we seekto understand the perspective of all stakeholders, determine our role and make clear our position based onour values and purpose – Stakeholder engagement, pages 12–17 – Advancing health and wellbeing, pages 38–41 – Addressing drug shortages in the US 1 – Animal testing position 1 – Principal risk: Reputation, page 59 1.Our public policies, codes and statements are available on www.hikma.com ![]() Hikma Pharmaceuticals PLC Annual Report 2021 65 STRATEGIC REPORT Summary Further information and policies Respect for human rights – We respect and uphold the principles of the Universal Declaration of Human Rights both within Hikma and across our value chain – We object in the strongest possible terms to the use of any of our products for the purpose of capital punishment – Upholding ethical standards and acting with integrity, pages 48–49 – Modern slavery act policy statement 1 – Use of products in capital punishment 1 – Principal risk: Reputation, page 59 Anti-bribery and corruption – Our Compliance, Responsibility and Ethics Committee (CREC) leads our eorts to strengthen anti-bribery and corruption (ABC) policies and manage associated risks – As a publicly-listed company on the London Stock Exchange (LSE), we abide by the regulations of the UK Listing Authority. We operate in compliance with the UK Bribery Act 2010, the Foreign Corrupt Practices Act (FCPA) as well as local laws and regulations – Upholding ethical standards and acting with integrity, pages 48–49 – Code of Conduct 1 – Principal risk: Ethics and compliance, page 59 – Compliance, Responsibility and Ethics Committee report, pages 87–88 Non-nancial KPIs – We monitor the position, performance and impact of Hikma across a wide range of nancial and non-nancial KPIs. Non-nancial KPIs are used to measure progress towards our strategic priorities (pages 22–23), our exposure to risks (pages 58-61), and are in place in other areas throughout the organisation as part of Hikma’s long-term sustainable growth strategy and our commitment to helping people and improving the communities in which we operate – Voluntary and involuntary turnover, page 42 – GHG emissions reduction target, page 45 – Minimising our impact on the planet, pages 44–47 – Employees enablementand engagement, page23 – Audit Committee report, pages 83–86 – Compliance, Responsibility and Ethics Committee report, pages 87–88 The Strategic report was approved by the Board of Directors and signed on its behalf by: Sigurdur Olafsson Chief Executive Ocer 23 February 2022 ![]() 66 Hikma Pharmaceuticals PLC Annual Report 2021 #### Corporate governance Duringtheyear, #### wereviewed our governance approach, madeenhancements, andconrmedthe #### strengthof our existing #### arrangements. In this section 67 Chair overview 68 Corporategovernance at a glance 70 Leadership 74 Structure 80 Nomination and Governance Committee 83 Audit Committee 87 Compliance, Responsibility and Ethics Committee 89 Remuneration Committee 93 Remuneration policy summary 96 Annual report on remuneration 111 Directors’ report ![]() Hikma Pharmaceuticals PLC Annual Report 2021 67 GOVERNANCE #### Chair overview #### Dear Shareholders The past year has involved steady progress in the development of the Board and the governance of our organisation, including undertaking a full board evaluation process with an external expert. The process ensured that the Board assessed and challenged its approach to ensure we obtain the maximum value from our Board meetings. We have made several enhancements as a result, and I am pleased to report that our overall approach to governance continues to be eective. Board practices The continuation of the COVID-19 pandemic has resulted in further development of our Board practices. Whilst the Board continues to operate eectively in a virtual environment, we managed to bring the members together for two meetings in the second half of the year. We have found that in person meetings have signicant benets in terms of social cohesion,innovation and development.At thesame time,virtual meetings have signicant benets in terms of time eciency, availability and focus. As we move forward, the Board will operate in a hybrid environment bringing together the benets of both of these approaches. Board and Committee composition Over the last few years we have brought several new Directors onto the Board, said goodbye to Independent Directors of longer tenure, and transitioned the Chairs of the Audit Committee and Nomination and Governance Committee. Accordingly, during 2021, we have not made any changes to our Board. Dr. Pamela Kirby, our chair of the Remuneration Committee, has decided not to seek re-election at the Annual General Meeting. Iwould like to thank Pam for her dedicated and thoughtful leadership of the Committee. Nina Henderson has kindly agreed to lead the Committee going forward. As we move into 2022, we will be looking to take steps to refresh the Board and prepare for further succession. During this exercise, we will be cognisant of our gender diversity target (see page 81 for further details). As has been our practice for several years, we desire for new Directors to have time to understand the culture, history, and operations of Hikma before undertaking additional responsibilities. Culture and strategy The Board reviewed and approved management’s plans for several strategic initiatives during the year, including the expansion of our pipeline through investments in biosimilars and the acquisition of Custopharm. We further approved management’s proposal to expand the capacity of our specialist injectables business. In the second half of 2021, we conducted our annual strategic review, in which we conrmed our progress and assessed several new opportunities. At the end of the year, following two years of oversight and development Said Darwazah Executive Chairman by the Board, we launched our sterile injectable compounding business in the US, which will bring the high-quality systems of a major pharmaceutical manufacturer to theniche compounding market. Overall, the Board is condent that the Group is well positioned to continue to deliver on our pipeline and improve patients’ access to high-quality, aordable medicines. During 2020, following engagement with our colleagues and a thorough review of our culture by the Board, we introduced a new set of corporate values which focused on being caring, innovative, and collaborative. These values build on my father’s vision of Hikma as a company with high ethical standards, where our people thrive in a supportive environment. The majority of the Board met and worked with my father, and so have rst-hand experience of how he wanted to develop our culture. In the Boardroom, we are reminded of our values regularly and are guided by them when making decisions such as acquiring Custopharm (being innovative), supporting our team in Lebanon during the country’s challenging period (caring), and the nature of relations between the Board and the Executive Committee (collaborative). During 2021, the Executive team undertook signicant eorts to promote these values throughout the organisation. The team and the Chief Executive Ocer presented to the Board updates on progress and feedback from colleagues throughout the year. Further details are available on page 8. #### Strong governance and strategy ESG Early in 2021, we determined that our Board of Directors would have overarching oversight of our ESG strategy including environmental aspects and TCFD strategy and reporting. This builds upon the work of our board committees that have responsibility for certain elements of our ESG work streams. The Chief Executive Ocer has fundamentally reviewed and enhanced the Group’s ESG strategy with a particular emphasis on the Group’s emissions and impact on the environment. Further information is available in our new and enhanced disclosures on pages 36 to 52. Nina Henderson is our independent Boardmember who helps ensure that employee perspectives are considered when undertaking Board and Committee business and, outside of our Executive Directors, ensuring that the Board is visible amongst our colleagues. The engagement programme has been sponsored internally by the Chief Executive Ocer and has been developed to ensure that we comply with social distancing requirements. This year’s activities included participation in: – a site visit to the Columbus facility and meetings with employees – the 2021 Global Leadership Conference which included c.160 of the Group’sleaders – Chief Executive Ocer virtual briengs to all colleagues Nina formally reports to the Board on her ndings at each meetingaswe consider formal business, such as during the grading structure review, employee engagement survey and during remunerationconsiderations. Stakeholders The Board undertakes signicant eorts to understand and take account of the needs and perspectives of our customers, suppliers, employees, investors and the communities in which we operate. Further details are available on pages 12 to 17. If there are any matters that you wish to discuss, please do not hesitate to contact me. Said Darwazah Executive Chairman ![]() 68 Hikma Pharmaceuticals PLC Annual Report 2021 90% Huma n resources 100% G ov er nance 90% Commercial 100% Pharmaceutical 80% Manufacturing 100% Regulator y an d political 100% Liste d environment 100% Fina nc e 80% Sales 80% Busines s ethic s an d in tegrity 100% Strateg y an d risk 90% Europe 100% Global 90% US 70% UK 50% MENA USA Ireland Jordan UK Iceland #### Corporate governance #### At a glance Highlights 2021 – Undertook a full interview-based Board evaluation with Independent Audit – Developed the medium-term succession plan for Non-Executive Directors and Executive management – Embedded and strengthened the Board and Committee changes made in 2020 – Moved to a hybrid meeting approach, gaining the benets of both in-person and virtual arrangements Priorities 2022 – Seeking to increase independent representation on the Board – Consider succession for the Committee chairs and additional responsibilities – Making further progress towards achieving our gender diversitytarget – Implementing changes to our governance structure in an orderly and considered manner Experience The percentage of the Board with direct experience in the followingareas: Geographical experience Country of origin ![]() Hikma Pharmaceuticals PLC Annual Report 2021 69 GOVERNANCE 20 21 20 20 20 22 20 21 Attendance Directors Meetings attended (9scheduled and 2unscheduled) % Said Darwazah 11/11 100% Siggi Olafsson 11/11 100% Mazen Darwazah 11/11 100% Pat Butler 1 10/11 91% Ali Al-Husry 11/11 100% Dr Pamela Kirby 11/11 100% John Castellani 11/11 100% Nina Henderson 11/11 100% Cynthia Flowers 11/11 100% Douglas Hurt 11/11 100% 1.Pat Butler was unable to attend one meeting called at very short notice. A time had beenchosen to achieve maximum attendance and, unfortunately, it meant at least oneDirector would not be available. Time 2021 2020 Corporate governance 10% 13% Financial performance 13% 14% Performance andoperations 11% 30% Risk 5% 12% Strategy and acquisitions 60% 31% Composition February 2022 February 2021 Executive Chairman and Chief Executive Ocer 20%20% Other Executive Directors 10%10% Non-Independent NED 10%10% Independent NED 60%60% Independent Director tenure (as at 23 February 2022) Number % 0—3 years 2 33% 4—6 years 2 33% 7—9 years 2 33% Diversity (as at 31 December 2021) Board Women 3 (30%) Men 7(70%) Minority Ethnic 1 3 (30%) White 7 (70%) Executive Committeereports 2 Women 22(31%) Men 50(69%) Minority Ethnic 1, 3 43(60%) White 29 (40%) Executive Committee Women 3(27%) Men 8 (73%) Minority Ethnic 1 7 (64%) White 4 (36%) Group Women 2,978(35%) Men 5,613(65%) 1.Minority Ethnic data relates to colleagues who identify with one of the relevant categories under the Parker Review data collection exercise 2.People reporting to members of theExecutive Committee 3.Data from Hikma’s US operations only ![]() 70 Hikma Pharmaceuticals PLC Annual Report 2021 Find detailed Directors’ biographies at: www.hikma.com/about/leadership/ CC N A C R A N C R #### Leadership #### Board of Directors SAID DARWAZAH, 64 EXECUTIVE CHAIRMAN Appointed: 1 July 2007 | Joined Hikma: 1981 Nationality: Jordanian Board experience: Experience: Said served as Chief Executive Ocer from July 2007 to February 2018 and has served as Chair since May 2014. Said has over 40 years of experience in extensive leadership roles at Hikma. Qualications: Industrial Engineering degree from Purdue University,MBA from INSEAD. Other appointments: Chairman of the Queen RaniaFoundation and Chairman of Royal JordanianAirlines. Vice Chairman of Capital Bank, Jordan. Board Member of INSEAD, and Dash Ventures Limited. SIGGI OLAFSSON, 53 CHIEF EXECUTIVE OFFICER Appointed: 20 February 2018 | JoinedHikma: 2018 Nationality: Icelandic Board experience: Experience: Siggi has signicantly enhanced the leadership and strategy of the Group since joining as Chief Executive Ocer in 2018. Siggi has a wealth of international experience in the pharmaceutical industry, havingheld senior roles with Actavis Pharma Inc., Pzer Inc. and Omega Farma. Siggi served as President and CEO of Global Generic Medicines at Teva Pharmaceuticals. Qualications: MS in Pharmacy (Cand Pharm) fromtheUniversity of Iceland, Reykjavik. Other appointments: None. MAZEN DARWAZAH, 63 EXECUTIVE VICE CHAIRMAN, PRESIDENT OF MENA Appointed: 8 September 2005 | Joined Hikma: 1985 | Nationality: Jordanian Board experience: Experience: Mazen has led and expanded our business in MENA region and is a Group-level strategic ambassador in his role as Vice Chairman. Since listing, he has Group level responsibility inhisrole as Executive Vice Chairman and executive responsibility for leading Hikma’s uniqueMENA business. Qualications: BA inBusiness Administration fromthe Lebanese American University, Advanced Management Plan from INSEAD. Other appointments: Senator in the Jordanian Senate. Trustee of Birzeit University and King’s Academy. Member of the HM King Abdullah Economic Policy Council. PATRICK BUTLER, 61 SENIOR INDEPENDENT DIRECTOR Appointed: 1 April 2014 | JoinedHikma: 2014 Nationality: Irish Board experience: Experience: Pat was Senior Director at McKinsey & Co. During 25 years at McKinsey, he focused on strategic, nancial and structuring advice to large corporations. Pat qualied in the audit and tax practice of Arthur Andersen. Qualications: Chartered accountant. First-class honours degree in Commerce andpostgraduate diploma in Accounting and Corporate Finance from University College Dublin. Other appointments: Chairman of Aldermore Group PLC and Mischon de Raya PLC. Director ofThe Ardonagh Group Limited and Res Media Limited. Trustee of the Resolution Foundation. ALI AL - HUSRY, 64 NON - EXECUTIVE DIRECTOR Appointed: 14 October 2005 | Joined Hikma: 1981 Nationality: Jordanian Board experience: Experience: Ali held various management and leadership roles within Hikma before stepping into an advisory role in 1995, when he founded Capital Bank of Jordan, focusing on commercial and investment banking. Ali served as Chief Executive Ocer of Capital Bank until 2007. Qualications: Mechanical Engineering degree fromthe University of Southern California, MBA fromINSEAD. Other appointments: Director of Endeavour Jordan, Microfund for Women, Capital Bank of Jordan, and DASH Ventures Limited. DR PAMELA KIRBY, 68 INDEPENDENT NON - EXECUTIVE DIRECTOR Appointed: 1 December 2014 | Joined Hikma: 2014 Nationality: British Board experience: Experience: Dr Kirby was Chief Executive Ocer of QuintilesTransnational Corp, and held senior executive positions at F Homann-La Roche and AstraZeneca. Previously, Dr Kirby chaired Scynexis, was Senior IndependentDirector of Informaand held non-executivepositions with Smith& Nephew and NovoNordisk. Qualications: First-class BSc degree in Pharmacology, and Clinical Pharmacology PhD from the University of London. Other appointments: Director of DCC PLC and Reckitt Benckiser Group PLC. Supervisory Board Member of Akzo Nobel NV. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 71 GOVERNANCE Committees A Audit Committee C Compliance, Responsibility and EthicsCommittee N Nomination and Governance Committee R RemunerationCommittee Chair Board experience Business ethics and integrity Commercial Finance Governance Human resources Listed environment Manufacturing Pharmaceutical Regulator yandpolitical Sales Strategy and risk A N C R A N R A C R A C N R JOHN CASTELLANI, 71 INDEPENDENT NON - EXECUTIVE DIRECTOR Appointed: 1 March 2016 | Joined Hikma: 2016 Nationality: American Board experience: Experience: John was President and Chief Executive Ocer of Pharmaceutical Research and Manufacturers of America (PhRMA) and Business Roundtable. During his career John has also held senior positions withBurson-Marsteller, Tenneco, and General Electric. Qualications: BSc in Biology from Union College Schenectady,New York. Other appointments: Vice Chairman of the Johns Hopkins MedicineNational Capital Region Executive Governance Committee. Director of 5th Port. Trustee of The Johns Hopkins Medical System Sibley Memorial Hospital, Washington, DC. Member of the Advisory Board of RSR Partners. NINA HENDERSON, 71 INDEPENDENT NON - EXECUTIVE DIRECTOR Appointed: 1 October 2016 | JoinedHikma: 2016 Nationality: American Board experience: Experience: Nina assumed Board-level responsibility for employee engagement in January 2019. Nina was Corporate VP of Bestfoods and President of Bestfoods Grocery prior to its acquisition by Unilever. During a 30-year career with Bestfoods, and its predecessor company CPC International, she held a wide variety of Global and North American executive general management and marketing positions. Nina has served as a director of Royal Dutch Shell, AXA Financial, The Equitable Companies, DelMonte, Pactiv and Walter Energy. Qualications: Honours graduate and BSc from DrexelUniversity. Other appointments: Non-Executive Director of CNO Financial Group Inc and IWG PLC, Vice Chair of the Board of Drexel University, Director of the Foreign Policy Association andVisiting Nurse Service of New York, Inc. CYNTHIA FLOWERS, 62 INDEPENDENT NON - EXECUTIVE DIRECTOR Appointed: 1 June 2019 | Joined Hikma: 2019 Nationality: American Board experience: Experience: Cynthia was President and CEO of the North American divisions of the global pharmaceutical companies Ipsen and Eisai, and also held leadership positions at Amgen and Johnson & Johnson. Cynthia isa non-executive director of Caladrius Biosciences Inc. and G1 Therapeutics Inc., where she chairs the Compensation Committee. Qualications: Cynthia holds a BSN from the University of Delaware and Executive MBA from Wharton School at the University of Pennsylvania. Other appointments: Non-executive Director of Caladrius Biosciences Inc. and G1Therapeutics Inc., where she chairs the Compensation Committee. Member of an angel investment group associated with the University of North Carolina. DOUGLAS HURT, 65 INDEPENDENT NON - EXECUTIVE DIRECTOR Appointed: 1 May 2020 | Joined Hikma: 2020 Nationality: British Board experience: Experience: Douglas was the Finance Director of IMI PLC. Prior to this, he held a number of senior nance and general management positions at GlaxoSmithKline PLC, previously having worked at Price Waterhouse. His career has included several years working in the US as a Chief Financial Ocer and signicant experience in European businesses as an Operational and Regional Managing Director. Qualications: Chartered Accountant, MA (Hons) in Economics fromCambridge University. Other appointments: Non-executiveDirector and Chair of the Audit Committee of Vesuvius PLC, Countryside Partnerships PLC andBritish StandardsInstitution. Senior independentdirector of Countryside and Vesuvius. PETER SPEIRS COMPANY SECRETARY Appointed: 2 April 2012 | JoinedHikma: 2010 Nationality: British Role: Peter is responsible for advising on governance, executive remuneration, and listing related matters. Peter joined Hikma as Deputy Secretary and previously held roles with Barclays and Pool Re. Qualications: Fellow of the Chartered Governance Institute. Law degree from the University of East Anglia. ![]() 72 Hikma Pharmaceuticals PLC Annual Report 2021 The full biographies of Hikma’s Executive Committee can be found on the Hikma website: www.hikma.com/about/leadership/ #### Leadership #### Executive Committee SIGGI OLAFSSON CHIEF EXECUTIVE OFFICER Joined: 2018 Nationality: Icelandic For further biographical details please see page 70. MAZEN DARWAZAH EXECUTIVE VICE CHAIRMAN, PRESIDENT OF MENA Joined: 1985 Nationality: Jordanian For further biographical details please see page 70. KHALID NABILSI CHIEF FINANCIAL OFFICER Joined: 2001 Nationality: Jordanian Role: Khalid is responsible for Group nance, including reporting and capital management. Khalid has held several nancial positions during 21years with Hikma, including VP Finance. Qualications: Certied Public Accountant. MBA from the University of Hull. SHAHIN FESHARAKI CHIEF SCIENTIFIC OFFICER Joined: 2019 Nationality: American Role: Shahin is responsible for all research and development activities in Hikma and has a strategic responsibility for enhancing Hikma’s product pipeline. Qualications: PhD in Pharmaceutical Technology from the University of Mumbai, and BSc in Pharmacy and MS in Experimental Pharmacology from PuneUniversity. HUSSEIN ARKHAGHA CHIEF COUNSEL Joined: 2001 Nationality: Jordanian Role: Hussein established the globallegal department and sets its strategic direction. Priortohis appointment as Chief Counsel, he heldseveral positions at Hikma, including Head Legal/MENA, Head of Shareholders’ Department and Head of Tax. Qualications: Hussein is a qualied lawyer in Jordan and holds a Master’s degree in International Business Law from the University of Manchester, under theUK Chevening Scholarship Programme. BRIAN HOFFMANN PRESIDENT, GENERICS Joined: 2009 Nationality: American Role: Brian is responsible for all aspects of the Generics division in the US. Brian has signicant strategic and operationalexperience from leadership roles at Hikma and prior consulting roles. Qualications: BA in Business Administration from Boston University. MBA from the University of Chicago. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 73 GOVERNANCE BASSAM KANAAN EXECUTIVE VICE PRESIDENT, CORPORATE DEVELOPMENT AND M&A Joined: 2001 Nationality: Jordanian Role: Bassam hasGroup levelresponsibility for strategic development, acquisitions and alliances. Bassam hasheld several executive positions during 21 years with Hikma, including Chief Financial Ocer. Qualications: US Certied Public Accountant and Chartered Financial Analyst. BA from Claremont McKenna. International Executive MBA from Kellogg/Recanati Schools of Management. MAJDA LABADI EXECUTIVE VICE PRESIDENT, ORGANISATIONAL DEVELOPMENT Joined: 1985 Nationality: Jordanian Role: Majda hasGroup level responsibility for human resources. Majda has held several executive positions during 37 years with Hikma, including VP Injectables and VP MENA Operations. Qualications: BA from the American University of Beirut. Master’s degree from Hochschule Fur Okonomie, Germany. Advanced Management Programme at INSEAD. RIAD MISHLAWI PRESIDENT, INJECTABLES Joined: 1990 Nationality: Lebanese Role: Riad is responsible for all aspects of the Injectables division globally.Riad has signicant pharmaceutical and operational experience from leadership roles at Hikma and Watson Pharmaceuticals. Qualications: BSc in Engineering and a MS in Engineering and Management from George Washington University. HENRIETTE NIELSEN EXECUTIVE VICE PRESIDENT, BUSINESS OPERATIONS Joined: 2018 Nationality: Danish Role: Henriette is responsible for the Business Operations divisionwhich includes Risk, IT, ESG, and Digital and Business Improvement. In addition, Henriette assumes the overall responsibility of Hikma Ventures, Hikma’s venture capital fund. Qualications: Law Degree from the University of Copenhagen. Master of Laws from the University of Edinburgh. SUSAN RINGDAL EXECUTIVE VICE PRESIDENT, STRATEGIC PLANNING AND GLOBAL AFFAIRS Joined: 2005 Nationality: American Role: Susan is responsible for strategic planning, investor relations, communications, corporate aairs and business intelligence. Prior to joining Hikma, Susan worked for Alliance Unichem and Morgan Stanley. Qualications: BA in History from Cornell University. MBA from London Business School. ![]() 74 Hikma Pharmaceuticals PLC Annual Report 2021 #### Structure #### UK Governance Code #### Code Compliance The Board is committed to the standards of corporate governance set out in the UK Corporate Governance Code (the UK Code) published in July 2018 and the Markets Law of the Dubai Financial Services Authority (the Markets Law). The report on pages 67 to 114 describes how the Board has applied the Main Principles of the UK Code and Markets Law throughout the year ended 31 December 2021. The UK Code is available at www.frc.org.uk. The Board considers that this AnnualReport provides the informationshareholders need to evaluate how we have complied with our current obligations under the UK Code and Markets Law. The Board acknowledges that Said Darwazah holding the position of Chairman and Chief Executive Ocer until February 2018 and, since that point, Executive Chairman, requires explanation under the UK Code. Throughout the year and up until the date of this report, Hikma was in compliance with the UK Code other than in respect of the Executive Chairman position, the degree of direct engagement with the workforce regarding executive remuneration (which is discussed in the Remuneration report on page 90), and the Chief Executive Ocer’s pension contribution level being slightly less than 5% above the general workforce (which is discussed in the Remuneration report on page 90). The Board considers that the areas of non-compliance are likely to continue for the medium-term. Should shareholders require any further information relating to these matters, questions may be directed to the Company Secretary. #### Chair Role The Executive Chairman leads the Board of Directors of the Company. The Executive Chairman guides, oversees, and engages with the Chief Executive Ocer in setting and delivering the strategic vision for the Company and optimising the Company’s long-term potential. Rationale The Board acknowledges that Said Darwazah’s position as Executive Chairman, having previously served as Chief Executive Ocer, and his tenure as a Director are departures from the UK Code. The Executive Chairman role was created in February 2018, following the appointment of Siggi Olafsson as Chief Executive Ocer. Previously, Said Darwazah was the Chairman and Chief Executive Ocer. The change of roles and appointment of a Chief Executive Ocer has caused a reduction in Said’s executive responsibilities, whilst still retaining his strategic input. The Board considers that the transfer of responsibilities from Said to Siggi has been very successful and that the Chief Executive Ocer has been fully empowered by the Executive Chairman. The Board considers it is important to retain corporate memory, important relationships and the family culture of the organisation. Therefore, it is valuable to retain Said Darwazah’s services in a strategic capacity. The Board consulted shareholders prior to Said’s appointment as Chairman and Chief Executive Ocer in May 2014 and following the change to the position of Executive Chairman in February 2018. The Independent Non-Executive Directors met as a group twice during 2021 to review the Board structure and concluded that the Executive Chairman role should continue. The Board is focused on the commercial success of Hikma and believes that continuing the position of Executive Chairman for a period of time is the best way to achieve success for Hikma, because: – Continuity of strategy: Said Darwazah has been a driving force behind the strategic success of the business since 2007 and the Board believes that it is important for the continued success of the Group that he remains in a strategic role – Executive Chairman’s role: the Executive Chairman position is highly visible inside and outside Hikma, acting as an ambassador with business partners and adviser to the organisation – Business partners: a signicant number of Hikma’s key political and commercial relationships across the MENA region are built on the long-term trust and respect for the Darwazah family where the role of the Executive Chairman remains key The Board continues to operate the following enhanced controls: – Governancestructure review: the Independent Directors meet at least bi-annually in a private session chaired by the Senior Independent Director. This meeting includes considerationof the appropriateness of the governance structure, the division of responsibilities between the Executive Chairman and the Chief Executive Ocer and safeguards for shareholders – Committee Chair roles: the Chairs of the Board Committees and the Director responsiblefor employee engagement, undertakea signicant amount of work in the discharge of their responsibilities – Transparency and engagement: Hikma has always had the highest regard for shareholders, with several of the original investors from before listing still investing and supporting Hikma today. Over the c.16 years since otation Hikma has maintained the highest standards of shareholder engagement, which reects the importance placed in maintaining strong investor relations andgovernance – Senior Independent Director role: the Senior Independent Director has joint responsibility, with the Executive Chairman, for setting the Board agenda, agreeing action points and the minutes of the meetings ![]() Hikma Pharmaceuticals PLC Annual Report 2021 75 GOVERNANCE #### Executive Chief Executive Ocer The members of Hikma’s Executive Committee report to the ChiefExecutive Ocer, who reports to the Executive Chairman. TheChief Executive Ocer chairs the Executive Committee, whichdevelops strategic initiatives and ensures the delivery of the approved strategyand performance of the Company. The Chief Executive Ocer makes strategic proposals and reports on operational developments to theBoard. Executive Vice Chairman When required, the Executive Vice Chairman acts as alternate to theExecutive Chairman and is an alternative point of contact and sounding board for management and the Directors. #### Non-Executive Directors Independence The Board reviewed and considered the independence of each Non-Executive Director during the year as part of the annual corporate governance review, which included consideration of progressive refreshment of the Board. The Board considers Pat Butler, Dr Pamela Kirby, John Castellani, Nina Henderson, Cynthia Flowers and Douglas Hurt to be independent. These individuals provide extensive experience of international pharmaceutical, nancial, corporate governance and regulatory matters and were notassociated with Hikma prior to joining the Board. The Board does not view Ali Al-Husry as an Independent Director due to the length of his association with Hikma, having held an executive position with Hikma prior to listing and his involvement with Darhold Limited, Hikma’s largest shareholder. However, he continues to bring to the Board broad corporate nance experience, in-depth awareness of the Group’s history, and a detailed knowledge of theMENA region, which is an important and specialist part of the Group’s business. Senior Independent Director The Senior IndependentDirector responsibilities include: – involvement in setting the Board agenda, action points and theminutes – leading the Board in matters of Board composition, eectiveness and evaluation, particularly in relation to the performance of the Executive Chairman – providing a communication channel between the Executive Chairman and IndependentDirectors – leading the Independent Directors on their assessment of theappropriateness of the governance structure and safeguards for shareholders – acting as an alternate point of contact for shareholders andmaintaining contact with principal investors and representativebodies Employee engagement This Director-level role is responsible for ensuring, where appropriate, that employee perspectives are taken into account in the Board’s decision-making processes. Nina Henderson hasundertaken the employee engagement role since January 2019 and further details on her activities during 2021 are included in the Chair’s statement on page 67. Company Secretary The Company Secretary reports to the Executive Chairman and supports each Board member in the delivery of their duties and specic responsibilities. The role proles are reviewed regularly and detailed on the Hikma website at www.hikma.com/investors/corporate-governance/ board-roles-and-responsibilities/ #### Applied Governance The Board has a well developed and broad system of governance which includes detailed procedures that are set out in the Board Governance Manual, extensive Group Policies and a secure communications system. The Board has clearly established responsibilities in the matters reserved which ensures a regular cycle of work and that management are clear when additional oversight and approval is required. The Executive Chairman works with the Chief Executive Ocer andthe Senior Independent Director to develop the priorities and agenda for the Board and its Committees, to agree action points andminutes arising from meetings, and formulate appropriate responses to governance matters such as succession, eectiveness and regulatory developments. As the Chairman is active in the strategic leadership of the business, Hikma maintains a balance of independence through placing a greater emphasis on the role of the Senior Independent Director (SID). The SID is actively involved in the agenda setting process working together with the Chief Executive Ocer and consulting with the Executive Chairman. The SID takes responsibility for working with the Company Secretary on matters around Board process and non-executive succession. Additionally, the SID works with the Executive Chairman to review and agree the action points and minutes arising from meetings, to ensure that meetings maintain focus on independent oversight, and toformulate appropriate responses to governance matters such as Board information, eectiveness and the Board’s response to regulatory developments. The Chief Executive Ocer works with the Executive Chairman in matters such as strategy, addressing points raised by the Board and its Committees, developing plans for executive succession, and the Company’s culture. The Chief Executive Ocer engages with other Directors as required in the delivery of his role. The Chief Executive Ocer facilitates and guides the Board’s discussions on matters relating to business development, capital expenditure, operational performance,and organisational development. ![]() 76 Hikma Pharmaceuticals PLC Annual Report 2021 The Board holds approximately nine scheduled meetings a year and also meets as required. The Board agenda comprises matters from the regular cycle of work (eg Annual Report, budgeting, results announcements and dividend), ad hoc matters arising from action points, the implementation ofstrategy (egbusiness development andacquisitions) and regulatory, risk, and operational developments. The Executive Chairman, Senior Independent Director and Chief Executive Ocer work together to agree the agenda for meetings, theaction points arising, and in leading Board meetings on dierenttopics. In the light of the suggestions contained in the 2021 report on the Board’s eectiveness, during the year the Board introduced some changes to the way Board meetings work. Board meetings are now typically divided into three parts: – The rst part of the meeting is conducted without management present. The Executive Chairman provides an overview of the meeting business to be considered by the Board. The Chief Executive Ocer outlines matters of importance in terms of the operational developments of the Group and the meeting business. The Executive Chairman and Senior Independent Director lead discussions regarding governance matters – For the second part of the meeting, the Executive Committee members join to present subject areas for which they are responsible, to ensure wider awareness of matters of importance tothe Group and to assist with their personal development and succession planning – The nal part of the meeting occurs without management, it provides the Board’s Committees and Director responsible for employee engagement withan opportunity to report on their work and for Directors to privately discuss and consider matters arising from the second part of the meeting The Company Secretary attends for the entirety of Board and Committee meetings to ensure that records are retained and advice is provided as required. The Company Secretary does not attend meetings of the Independent Directors or meetings between the Executive Chairman and the Independent Directors, which occur at least twice a year. The Board receives regular reports at each meeting on cultural matters both from the Director responsible foremployee engagement and the Chief Executive Ocer. The Chief Executive Ocer reports the results of the employee opinion survey on a bi-annual basis. Further information on the Group’s activities that relate to culture is available on page 8. #### Commitment and interests The Nomination and Governance Committee considers the commitment of all Directors both in terms of dedication to the role and their time availability. In order to ensure an appropriate balance of skills and diversity across the Boardroom, the Committee has made accommodations to the Board calendar to maximise availability and has acknowledged that there are times when this may mean that full attendance may not be achieved. The Committee considers that Hikma gains more from high-quality Directors than it loses from occasional situations where full attendance cannot be achieved. Having reviewed commitment and attendance during the year, the Committee has concluded that all Directors are fully dedicated, commit an appropriate amount of time to their roles, and are readily available at short notice. The Committee monitors the external appointments of Directors from both an availability and conict of interest perspective, while noting that experiences with other organisations can enhance a Director’s ability to perform the role. Directors must obtain prior approval before accepting additional external appointments. The Board and Nominations and Governance Committee consider that the Directors’ external commitments do not negatively impact their ability to perform their roles and that any signicant appointments have been explained in the Annual Report. The outside interests of Directors are detailed on pages 70 to 71. #### Committees The Board has appointed four Board Committees to assist with the delivery of the Board’s responsibilities. The reports of those Committees are available on pages 78 to 110. The Chair of each Committee engages with stakeholders as is necessary in the conduct of the Committee’s business. The Chairs are available to answer shareholders’ questions at the AGM and by direct correspondence through the Company Secretary (cosec@hikma.com). #### Structure #### UK Governance Code continued ![]() GOVERNANCE Hikma Pharmaceuticals PLC Annual Report 2021 77 ![]() 78 Hikma Pharmaceuticals PLC Annual Report 2021 Please visit ourwebsite formore information on Committees: www.hikma.com/investors/corporate-governance/key-committees The full Committee report is on pages 83 to 86.The full Committee report is on pages 80 to 82. #### Structure #### Committee overview 2021 highlights – Undertook an externally assisted, interview and observation based Boardevaluation – Considered the key aspects of the medium-term succession plan for Non-Executive Directors – Reviewed the new plan for executive succession and assessment of executivecapabilities and development 2022 priorities – Seek additional independentrepresentation on theBoard – Seek to further enhance gender diversity at the Board – Review the roles and responsibilities of Independent Directors including the chairing of Committees – Further develop the plan for succession of Executive Directors – Review Board structure and plan for succession of the Committee Chairs and additionalresponsibilities of Independent Directors Allocation of time Corporate governance 50% Independence 17% Skillsand experience 11% Succession 22% Members and attendance Member Meetings Attendance Pat Butler (Chair) 3/3 100% Mazen Darwazah 3/3 100% Nina Henderson 3/3 100% Cynthia Flowers 3/3 100% Douglas Hurt 3/3 100% Nomination and Governance Committee Audit Committee 2021 highlights – Planned for the succession of the senior statutory auditor – Continued to monitor developments arising from the internal auditprogramme – Reviewed plans for managing distributable reserves – Reviewed further enhancements to our risk programme 2022 priorities – Induction of the new senior statutory auditor – Monitoring and enhancing our risk and internal audit programmes – Continuously improving our disclosures Allocation of time Corporate governance 3% External audit 16% Financial performance 24% Forecast and accounting 24% Internalaudit 19% Risk 14% Members and attendance Member Meetings Attendance Douglas Hurt (Chair) 4/4 100% Pat Butler 4/4 100% Dr Pamela Kirby 4/4 100% John Castellani 4/4 100% Nina Henderson 4/4 100% Cynthia Flowers 4/4 100% ![]() Hikma Pharmaceuticals PLC Annual Report 2021 79 GOVERNANCE The full Committee report is on pages 87 to 88.The full Committee report is on pages 89 to 110. Compliance, Responsibility and Ethics Committee Remuneration Committee 2021 highlights – Engaged with our Group-wide review of our environmental and CSRstrategy – Continued to monitor ABC compliance developments and our speak upprogramme – Completed third-party due diligence process across remaining geographies – Reviewed the Group’s data protection arrangements following the Board’s request that the Committee assume responsibility for this area – Considered management’s proposals to further enhance our cross-border trade procedures 2021 highlights – Monitored progress against performance targets, including the milestones for the business plan – Developed ESG performance targets for the CEO – Continued to enhance the linkage between employees and executive compensation matters – Benchmarked executive compensation including reviewing regional variations to structure 2022 priorities – Assist with the delivery of the ethical and social responsibility aspects of our ESG programme – Continue to monitor our reporting lines and business integrity processes – Review the delivery of process enhancements across our programmes 2022 priorities – Review the remuneration policy and its alignment with the Group’s strategy and business environment – Monitor progress against the ESG targets for the Executive Directors – Manage the transition to a new Committee chair Members and attendance Member Meetings Attendance John Castellani (Chair) 4/4 100% Siggi Olafsson 4/4 100% Mazen Darwazah 4/4 100% Pat Butler 1 3/4 75% Dr Pamela Kirby 4/4 100% Nina Henderson 4/4 100% Douglas Hurt 4/4 100% 1.Pat Butler was unable attend the meeting due to a pre-arranged commitment. Allocation of time Wider employee issues 17% Corporate governance 15% Developing practices 33% Setting executive remuneration 35% Allocation of time ABC programme 41% Anti-trust, AML and trade sanctions 20% Corporate governance 14% ESG and CSR 25% Members and attendance Member Meetings Attendance Dr Pamela Kirby (Chair) 4/4 100% Pat Butler 4/4 100% John Castellani 4/4 100% Nina Henderson 4/4 100% Cynthia Flowers 4/4 100% Douglas Hurt 4/4 100% ![]() 80 Hikma Pharmaceuticals PLC Annual Report 2021 Patrick Butler Chair, Nomination and Governance Committee and Senior Independent Director #### Nomination and Governance Committee #### Letter from the Chair #### Dear Shareholders I am writing to you in my roles as the Senior Independent Director and Chair of the Nomination and Governance Committee (NGC). In these roles, I help steer the development of the Group’s governance and succession arrangements. Succession The Committee oversees succession for both executives and Independent Directors. In terms of executives, the Committee isresponsible for the Executive Directors and for ensuring that appropriate arrangements are in place for senior positions below Board level. Executive During 2021, the Board reviewed and updated the succession plan and talent development framework that seeks to ensure that we have arrangements to manage executive succession. The medium-term plans have been discussed and developed taking into account views from a wide range of stakeholders within Hikma. These plans were presented to and discussed by the whole Board. In terms of succession for Executive Directors, the Committee has considered the potential for medium-term change, taking into account the assessment of internal talent, and has the necessary relationships with executive recruitment specialists. As a result, the Committee considers it is well positioned. Independent During 2019 and 2020 we welcomed two new directors and in late 2020 we transitioned the Senior Independent Director role and chairs of the Audit Committee and NGC. These changes have allowed us to use 2021 to develop a new plan for the succession of Independent Directors over the medium term. Dr Pamela Kirby is standing down at the Annual General Meeting and I will reach nine years’ service in 2023. Accordingly, we will be looking to nd candidates to increase the level of independent representation on the Board during the course of 2022. During this process, the NGC will be mindful of the Board’s commitment to have at least 33% Directors identifying as women. The NGC will also review the additional commitments of Directors in terms of Committee Chairs and other responsibilities with a view to ensuring a smooth transition of responsibilities. The Board considers it is important for those undertaking these additional responsibilities to have sucient time to build experience of Hikma and relationships with relevant colleagues in advance. In terms of succession for the chairing of Board Committees, I am pleased to report that Nina Henderson has kindly agreed to continue Pam’s thoughtful leadership of the Remuneration Committee. Balance During the year, the NGC reviewed the composition of the Board. Thisreview included consideration of the skills and attributes of eachmember, the balance between constructive challenge and empowerment of the executive, the results of the recent Board evaluation exercise and the current and desired level of diversity inthe Boardroom (see page 69 and 81). I am pleased to report that theNGC conrms that the Board continues to operate eectively andthat each member is valued for the experience and skills that they bring. Skills and experience The NGC continues to believe that a longer induction period is desirable for newIndependent Directors toallow forbuilding understanding of the business and, where succession for a Committee Chair is taking place, the transfer of knowledge and relationships associated with the particular committee. Additionally, the Board believes it is important for all Directors to have signicant international experience at an executive level, a challenging yet consensual style, and the highest level of integrity. The Committee regularly considers whether there may be gaps in fullling the specic and in-depth experience that the Board requires as a whole, which focuses on the following areas: – strategy, culture and leadership – business environment in both the US and the MENA region – pharmaceutical manufacturingand distribution – development of new healthcare capabilities – listing regulations, investor perceptions and governance Hikma supports Directors in their continued professional development. As the Directors are highly experienced, their trainingneeds tend to be related to either ensuring awareness ofchanges in the business, political and regulatory environments, orbespoke training on particular areas for development. Therefore, Hikma nancially supports specic training requests and ensures thatDirectors are briefed by internal and external advisers on a regular basis. During the year, the Board received briengs on matters such as thepharmaceutical competitive environment, the development ofbiosimilars, healthcare business development activity, crisis management, investor perceptions, business intelligence, capital markets and listing related developments. Tenure The Committee’s policy on tenure is that the Independent Non- Executive Directors are normally expected to serve for a period ofnine years or, if required to facilitate an orderly transfer of responsibilities, the next Annual General Meeting (AGM) of the Company following the ninth anniversary of their appointment. Their appointments are formally reviewed aer three years and at six years a more rigorous review process is undertaken. Other than Dr Pamela Kirby, each member of the Board will stand for election or re-election at the 2022 AGM. The position of each Director was closely reviewed during the year as part of the consideration of succession arrangements, independence issues, the bi-annual governance structure reviews, the Board and Committee evaluation processes and the ongoing dialogue between the Executive Chairman and the Senior Independent Director. Time commitment The NGC continues to review the external commitments of each Director with a view to ensuring that the benets of the additional experience from their external commitments are not outweighed byreductions in the commitment to the Company. The Directors achieve excellent attendance and spend signicant time delivering their responsibilities. Accordingly, the NGC considers that there is currently an appropriate balance. The Committee will continue to monitor the situation. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 81 GOVERNANCE Diversity The Board approved Hikma’s diversity policy, which applies to the whole Group, including the Board. Hikma’s objective is to continue toensure that it has an inclusive workplace that welcomes dierent cultures, perspectives, and experiences from across the globe. Hikmais committed to employing andengaging talented people, irrespective of their race, colour, religion, age, sex, sexual orientation, marital status, national origin, present or past history of mental or physical disability and any other factors not related to a person’s ability to perform the relevant role. Hikma’s inclusive workplace welcomes dierentcultures, perspectives, and experiences from across the globe One of the three pillars of the Group’s strategy is to ‘inspire and enable our people’. The Group’s policy and approach to diversity, succession and appointments are a core part of this pillar. The Board monitors the diversity metrics which are detailed on page 69 and uses these as a reference point when considering the level of achievement against its diversity objective (detailed above). Hikma has successful empowerment andtalent development programmes tohelp all employees make the most of their potential, for more information please see pages 8 and 13. This diversity policy is included in our Code of Conduct and communicated to all employees. Further detail on employee diversity is provided on page 69. The Group’s talent acquisition policies for the three most senior sta grades require a balanced list of candidates that ensures diversity. Ethnicity The Board considers that it has demonstrated strong ethnic diversity since the formation of Hikma and has three Directors identifying as Minority Ethnic representing 30% of the Board, including the Executive Chairman. Accordingly, the Board has achieved and wholeheartedly supports and adopts the Parker recommendation tohave at least one Director identifying as minority ethnic. Gender Since its founding, Hikma has actively promoted gender diversity across its operations. The NGC was pleased to be able to improve gender diversity in the Boardroom over the past few years. The Board has adopted the Hampton-Alexander target to achieve at least 33% of Board members identifying as women. The processes to enhance the level of independent representation on the Board during the course of 2022 will take into account the desire to achieve this target. Governance review As in previous years, the NGC undertook the annual review of the Group’s governance arrangements in conjunction with the Company Secretary. This year the exercise included a thorough review of the structure of the Board, Board Governance Manual, and compliance with the UK Governance Code and supporting governance guidance. Evaluation and performance During 2021, we undertook a full, externally moderated interview andobservations-based Board evaluation with Independent Audit Limited (IAL). IAL were appointed following a competitive tender process during 2020. Our previous provider of board evaluation services had worked with us for circa nine years and the Board considered it was an appropriate point to refresh our approach. IAL do not perform any other consultancy services for the Group. As part of the refreshment of our approach to Board evaluation, we have adopted the ‘Principles of Good Practice for listed companies using external Board reviewers’ which were published by the Corporate Governance Institute in January 2021. We conrm that IAL have adopted the ‘Code of Practice for Board reviewers’ and that we have agreed with IAL the description of the Board evaluation process detailed on this page and the disclosures which reect opinions attributed to IAL. IAL started working with the Board in 2021 and have not provided any other services to Hikma prior to this. In discharging their duties, several Independent Directors have engaged with IAL as part of the evaluation work undertaken by other companies and organisations where they have a governance role. Process The most recent evaluation process was coordinated by the Senior Independent Director at the request of the Executive Chairman. IALobserved the conduct of one meeting of the Board and each Committee and conducted a private interview with each Director, theCompany Secretary, and selected members of management. Based on the observations and feedback. IAL produced a report which they discussed with the Senior Independent Director and Company Secretary and, subsequently, with the Executive Chairman. As a result of these meetings, the Senior Independent Director and Company Secretary prepared a note for the Board which detailed aproposed response to the points raised. IAL provided their feedback on the response note. IAL’s full report and the response note were subsequently reviewed by the full Board in a meeting withonly Board members, IAL’s representative, and the Company Secretary present. Further to that meeting, the responses to the points raised (see the table on this page) were rened and agreed atasubsequent Board meeting. The results of the 2021 evaluation process formed part of the Executive Chairman’s appraisal of the overall eectiveness of the Board and its members and the assessment of the Executive Chairman’s performance by the other members of the Board. Additionally, during the period between assessments, the Directors suggest and promote improvements as they arise. Results Our response to the issues raised in the 2021 Board evaluation reportare: Observations Action taken Facilitating discussion IAL noted that there may be opportunities for more extensive Board discussion by making adjustments to the way in which information is shared and meetings are structured. The Board adopted IAL’s recommendation that there should be more opportunity for discussions without management present. Additionally, the Board restructured its meetings into three parts and requested that Executive Committee members attend the information sharing part of the new meeting structure (which is detailed on pages 75 and 76). This ensures that executives are aware of the key issues that may aect their Group- level responsibilities and the Board believes this makes for a fuller and more informed discussion and strengthens the relationship between Directors and management. The Board adopted IAL’s recommendations that board time without management should be adjusted so that they chiey take place at the beginning and the end of the meeting. The Board considered that the Chief Executive Ocer’s highly informative brieng did not require a written submission as to do so could reduce the free owing and informative nature of the report and, nevertheless, any important matters were documented in the minutes. ![]() 82 Hikma Pharmaceuticals PLC Annual Report 2021 #### Nomination and Governance Committee #### Letter from the Chair continued Observations Action taken Positioning and summarising IAL observed some meeting items being positioned and summarised by the presenters The Board reviewed the positioning of meeting business and concluded that theExecutive Chairman should lead the rst part of the meeting where the key discussions are held onmatters related to governance, major strategic initiatives, and nance. The Board considers the Chairman’s leadership in the rst part of the meeting ensures that discussions are appropriately framed and directors have an opportunity to discuss aspects without management. Presentation and purpose IAL observed that improvements could be made to the positioning of papers, dening their purpose andsetting out the issues that the Board may choose to focus on in its discussions. Furthermore, this would give an opportunity to reduce the length of management presentations The Board has adapted its agenda to make clear whether items require approval, input or are for information only. This has ensured that less meeting time is spent on matters that are for information only and the material is available in advance. The Board considers that management’s highly informative and comprehensive papers and presentations signicantly add to the processes for making decisions and developingideas and, therefore, has not signicantly altered the processes related to presenting and positioning matters for approval or input. All presentations include an appropriate opportunity for questioning. Governance disclosure IAL observed that the governance disclosure in the AnnualReport could more fully explain the conduct of Board meetingsand the roles of relevant parties The Board has reviewed its governance disclosure and enhanced the description of the roles of the Chairman, Chief Executive Ocer, and SeniorIndependent Director and the explanation of the way in which meetings are conducted through the ‘Applied Governance’ section on pages 75 and 76. During the year, I met separately with the Independent Directors, the Chairman and the Chief Executive Ocer in order to undertake an assessment of the performance of the Board. We concluded that the Board continues to operate eectively and that a signicant number of enhancements have been made over the recent period, particularly since the Chief Executive Ocer joined in February 2018. The next Board evaluation exercise will be undertaken during 2022 and reported in the following Annual Report. The evaluation process has helped us recognise strengths and make further enhancements Conclusions and actions In relation to the most recent assessment exercise, the Board has reviewed its approach and made modications where it believes that additional value can be obtained and has enhanced the disclosure of its governance arrangements (see pages 75 and 76 for further details). Additionally, the Board considered that it continued to operate eectively with particular strengths in the following areas: – the strategic leadership of the Executive Chairman – the eective relationship between Executive Chairman and the Chief Executive Ocer – the commitment to doing the right things – the energy and dedication of the executive management team and Board Directors – our approaches to setting and monitoring risk appetite Executive Chairman’s appraisal The Executive Chairman and I meet regularly to discuss matters including the performance of the Board and how his role helps deliver and enhance that performance. This builds on discussions that I hold with the Independent Directors which occur bi-annually and commentary received through the board evaluation process. The Executive Chairman’s performance is also reviewed by the Remuneration Committee as part of the determination of performance-based compensation. Director appraisal The Executive Chairman, having taken into account the comments from the Board evaluation and discussions with the Senior Independent Director and Chief Executive Ocer, reviewed the performance of each of the Directors during the year and concluded that each Director contributes eectively to the Board, brings particular areas of skill and experience that ensure the Board as a whole has the right capabilities, and devotes sucient time to their role. The NGC has concluded that the relevant Directors be recommended to shareholders for re-election at the 2022 AGM. For and on behalf of the Nomination and Governance Committee. Patrick Butler Chair, Nomination and Governance Committee 23 February 2022 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 83 GOVERNANCE Douglas Hurt Chair, Audit Committee #### Audit Committee #### Letter from the Chair #### Dear Shareholders I am pleased to report that the Committee has had another year ofsolid progress in its oversight of the matters delegated to it by theBoard. During the year, the Committee continued to play a key role in assisting the Board in its oversight of nancial reporting, forecasting and auditing matters. The Committee’s activities included reviewing and monitoring the integrity of the Group’s nancial information, the Group’s systems of internal controls and risk management, and the internal and external audit process. #### Ensuring resilience and clear reporting Pandemic impacts The COVID-19 pandemic continued to create challenging conditions in 2021, which required a high level of adaptability and resilience from our nancial reporting and external audit teams. The Committee is pleased to report that all the relevant processes under its oversight have continued to operate in an eective manner during the pandemic. We recognise that we owe a lot to the commitment of our colleagues and their strong relationships with internal and external auditorsand advisers. In terms of the impacts of the pandemic on our nancial performance, we have continued to experience changes to the mix of products required by hospitals and patients. The Group has performed well throughout the pandemic and at the end of the nancial year had undrawn committed nancing facilities in excess of $1,000 million. Theviability statement and going concern assumptions have been critically reviewed and the Group is in a strong nancial position. Verication During the year, management reviewed the mechanisms to enhance the assurance process related to the qualitative disclosures in the Annual Report (beyond the audit, adviser review and internal review processes). As a result, the qualitative disclosures have been reviewed by our internal teams who are responsible for each section of the Annual Report and who have provided additional verication and support material in respect of each material statement of fact. This enhancement assisted the Committee in its determination thatthe report and accounts taken as a whole are fair, balanced andunderstandable. Distributable reserves The Committee is aware that the FRC is encouraging organisations to provide greater clarity on their distributable reserves position. During the year, management re-assessed the Group’s distributable reserves in line with FRC guidance. The Committee has reviewed and approved the distributable reserves disclosure in the nancial statements (see page 181 for further details). The Committee has also reviewed a proposal by management to convert the Group’s merger reserve (which was created when the business listed in 2005 and as a result of the acquisition of the Columbus facility in 2016) into further distributable reserves. This merger reserve reduction process has been undertaken by several other listed companies. It is an ordinary course legal procedure undertaken with guidance from our legal advisers and subject to shareholder approval at the Annual General Meeting and the approval of the Court. It should result in the Company’s distributable reserves increasing signicantly in excess of the current dividend requirements, thereby creating greater exibility for the future. Shareholders will nd further details of the merger reserve reduction in the AGM notice on pages 6 to 7. Internal audit The internal audit of Hikma is performed by Ernst & Young (EY), who report directly to the Chair of the Committee. There is a regular programme of interaction between EY and the Committee. EY assess each facility and the Group’s major processes over a three-year period. For major sites, assessments are more frequent. Management is required to respond to ndings within a short time period, complete all process improvements within two years and ensure at least 80% of high-risk ndings are resolved within six months. The Committee has received reports on the ndings of the programme and is pleased to report that management has responded appropriately to any new ndings and has made good progress in delivering its plans for enhancements that have previously been identied. During the year, the Committee monitored progress with the internal audit programme for 2021 and reviewed and approved the plan for 2022. EY and management work closely together to deliver the internal audit plan, develop action plans for points raised, and ensure that the Committee receives appropriate and timely information. The Committee is pleased with the progress and commitment of management and the internal auditors. During the year, the Committee continued to monitor the performance and independenceof the internal auditors in accordance with the policies that have been established. The Committee concluded that EY continue to perform an eective internal audit programme and remainindependent. The Committee considers that EY bring signicant pharmaceutical and MENA market experience which iscomplemented by the experience of other third-party experts where required. External audit The external audit was undertaken by PricewaterhouseCoopers LLP (PwC) and has been since their appointment in May 2016. PwC were appointed following a competitive tender process. Mr Darryl Phillips was appointed as a key audit partner in 2017 before subsequently becoming the senior statutory auditor in May 2019. MrPhillips has served the maximum time allowed on the audit of Hikma and will hand over his responsibilities to Mr Nigel Comello. Mr Comello is a partner in the audit practice of PwC who was selected following internal assessments by PwC. Following a brieng by PwC regarding the selection process, the Committee reviewed and approved the appointment. The Committee welcomes Mr Comello to the role and thanks Mr Phillips for his dedicated service. ![]() 84 Hikma Pharmaceuticals PLC Annual Report 2021 #### Audit Committee #### Letter from the Chair continued Eectiveness During the year, the Committee reviewed the work of PwC and concluded that they provide an eective audit, have constructive relationships with the relevant parties and that Mr Phillips provided clear and constructive leadership to the audit team. As part of this review the Committee examined the following areas: – Audit quality and technical capabilities: the Committee considered that the auditors undertook an eective and in-depth assessment and verication exercise in respect of the nancial statements and associated disclosures for the year ended 31 December 2021 and that the level of expertise PwC brought to bear was high. The Committee provides feedback on the auditor’s performance as part of the regular meetings with them without management present, takes into account the reports and analysis ofthe Financial Reporting Council, and believes that there is an open and appropriately challenging relationship between the audit leadership team, the Audit Committee and management – Independence: the Committee regularly reviews the independence safeguards of the auditors and remains satised that auditor independence has not been compromised. The Committee’s policyon the provision of non-audit services is that all such proposed services require the approval of the Committee in advance of an instruction. The Committee is satised that the auditors are independent – Challenge and judgement: the Committee considers that PwC provide signicant challenge to the management team which results in the Company’s position being fully considered and supported and, where appropriate, further strengthened. The Committee believes that PwC has demonstrated well considered and clear- sighted judgement in the matters on which it has provided opinion and has been open to an appropriate level of challenge and debate – Non-audit fees: the Committee’s policy is that the external auditors should not undertake any work outside the scope of their annual audit and the review of the interim nancial statements. The Committee has discretion to grant exceptions to this policy where it considers that exceptional circumstances exist and that independence can be maintained, whilst having due regard to the FRC’s ethical standards for auditors. The Committee’s approval isrequired to instruct PwC to perform non-audit services. PwC provided assurance services related to the interim review and other audit related assurance work with a value of $200,000 (2020: $210,000). In 2020, PwC provided services related to the bond oering totalling $208,000, but no such services were provided in 2021. These services are within the ordinary course of services provided by the auditor The Committee conrms that the statutory audit services for the nancial year under review were conducted in compliance with the Competition and Markets Authority Order, and a competitive audit tender process was undertaken in 2015. Audit tendering PwC were appointed as auditors in May 2016, therefore, the current Annual Report is the sixth report that they have audited. PwC rotated the Senior Statutory Auditor in 2019 and, as noted earlier on this page, a further rotation will occur in 2022. This follows the Chair of the Audit Committee being transferred to Douglas Hurt in December 2020. The Committee considers it is prudent to allow time for one signicant change to become embedded before embarking on another. In accordance with the audit tendering guidelines, the Committee conrms that it is not expecting to undertake a tender exercise until 2025. The Committee will keep the situation under review and report to shareholders accordingly. Fees Auditor’s fee ($m) $3.5m PwC 1 Ja n – 31 Dec 2021 1 Ja n – 31 Dec 2020 5.7% 94.3% 12.0% 88.0% $3.3m $0.2m $2.8m $0.4m Audit related fees Other non-audit services Position and prospects During the year, management undertook an annual review of its strategic direction and an extensive assessment of the Group’s short-term and medium-term prospects which are included in the budget for the following year and the ve-year business plan, respectively. Management presented and received the Board’s approval and commentary on the full strategy, budget and business plan. Having taken account of how the business has responded to the challenges of the commercial environment, the business plan, principal risks and uncertainties facing the Group and other relevant information, the Committee has concluded that the Group continues to have attractive prospects for the future. Going concern and longer-term viability The Group has a selection of scenarios with severe but plausible downside assumptions based upon the Group’s principal risks and uncertainties. Each year, management models the impact of these scenarios occurring as part of the going concern and viability analysis. In respect of the most recent assessment, the scenarios took into account the Group’s principal risks, management’s view on current signicant risks, and longer-term emerging risks which are detailed in the viability disclosure on page 63. The Committee reviewed the outcomes from the scenario analysis and concluded that the Group could reasonably respond to the challenges and ensure the continued survival of the business. The impact of a scenario (involving several risk events) has consistently been manageable for the Group, while acknowledging that it may result in a short-term set back. The Directors considered the going concern position as detailed on page 62. Having reviewed and challenged the downside assumptions, forecasts and mitigation strategy of management, the Directors believe that the Group is adequately placed to manage its business and nancing risks successfully. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of signing the nancial statements. Therefore, the Directors continue to adopt the going concern basis in preparing the nancial statements. The Directors, having considered the longer-term viability assessment as detailed on page 63, conrm that they have areasonable expectation that Hikma will be able to continue inoperation and meet its liabilities as they fall due and over the viability period which ends on 31 December 2024. See page 63 forfurther details. Signicant matters As part of its work reviewing the nancial performance of the Group and the report of the auditors, the Audit Committee considered and discussed the following important nancial matters: ![]() Hikma Pharmaceuticals PLC Annual Report 2021 85 GOVERNANCE – Goodwill and intangible assets – valuations and disclosures: As inprevious years, management undertook the impairment test exercise in respect of each of the four Cash Generating Units (CGU) and the Group’s other intangible assets. In respect of the Branded, Injectables and Generics business divisions that constitute three of the CGUs, no new impairment indicators were identied and, therefore, management concluded that the existing headroom continued to be sucient. In respect of the Generic Advair Diskus® CGU, management had recommended an impairment reversal of $46 million at the half year review and subsequently instructed an external party to assess the fair value of the CGU less the cost of sale. Following this valuation, management concluded that no further adjustment was required. The review of product related intangibles resulted in an impairment charge of $23 million and an impairment reversal of $14 million. The Committee reviewed management’s approachand recommendations and concluded that the proposals were appropriate. – Revenue recognition: The Committee reviewed the Group’s policies for revenue recognition and the application of those policies by management. The Committee reviewed the model applied by management to arrive at the chargebacks, which estimates the ‘in-channel’ inventories held by wholesalers and the chargeback rate being the dierence between the contracted price with indirect customers and the wholesaler’s invoice price. Similar reviews were undertaken of thedeductions to revenue made forcustomer rebates, returns and indirect non-customer and government rebates. The Committee also agreed the disclosures around these year-end estimates and the sensitivity of the estimates to changes in assumptions. – Taxation: Hikma’s worldwide operations are highlyintegrated and involve a number of cross-border supply chains, which results in judgement being required to estimate the potential tax liabilities indierent jurisdictions. During the year, the Committee and Board received presentations from the Head of Tax regarding the potential direction of tax planning activities and enhancements to the resources available to the department, the control environment foroperational eectiveness and reporting. The Committee took advice from professional services rms and management in assessing the reasonableness of the Group’s provisions for uncertain tax positions which amounted to $44 million and in reviewing the deferred tax assets in key markets which amounted to$183 million. The Committee reviewed the appropriateness of the disclosures in the Annual Report, and reviewed and approved theGroup’s tax strategy statement, which is available on the Company’s website – Contingent Liability: Following receipt of a notication from HMRC in the UK conrming that the Company is not a beneciary of state aid, the Group no longer holds a contingent liability relating to associated UK and EU litigation. The Committee reviewed and concurred withthe conclusion – Hyperinationary economies: The Group operates in Lebanon and Sudan which have experienced ination in excess of 100% over a three-year period and, therefore, are considered to be hyperinationary economies in accordance with IAS 29. In accordance with the International Financial Reporting Standards the nancial statements for the relevant entities have been restated to reect the current purchasing power using the ocial exchange rate of those economies resulting in a reduction to the Group’s net income of circa $10 million and an increase in the Group’s revenue of circa $43 million. The Committee reviewed and approved management’s approach to ascertaining the nancial impact of this event in accordance withthe accounting standard – Cloud based soware: In response to the IFRIC April 2021 agenda decisions regarding cloudcomputing arrangement customisation and congurationcosts treatment. Management undertook an assessment of the Group’s soware-related intangible assets and concluded that circa $13 million of assets should be expensed as a cost instead of being capitalised. The Committee concurred that the amount was not material to the prior year results and that it should be treated as an exceptional item in the current year #### Understanding the key judgemental #### matters Fair, balanced and understandable Hikma is committed to clear and transparent disclosure and seeks tocontinuously improve the clarity of its reporting. At the request of the Board, the Audit Committee considers whether Hikma’s Annual Report is fair, balanced and understandable and that the narrative section of the report is consistent with the nancial information. TheCommittee’s assessment is underpinned by a report from the Reporting Committee, which comprises representatives from nance, investor relations, risk, communications and governance, following their comprehensive review of the Annual Report. The Reporting Committee’s work is supported by divisional and functional heads, asrequired. The Reporting Committee’s activities include: – initiating the review process for the Annual Report signicantly before the year-end, considering external developments, issuing guidance to contributors and identifying areas for improvement – obtaining input from external advisers, including the auditors, designers, corporate brokers and public relationsadvisers – undertaking several multi-functional reviews of the disclosures as awhole prior to the publication of the Annual Report to ensure consistency andaccuracy across the document as a whole – overseeing an extensive verication process to ensure the accuracy of disclosures Each member of the Audit Committee and the Reporting Committee is satised that the 2021 Annual Report is fair, balanced and understandable and hasrecommended the adoption of the Report and Accounts to the Board. Reporting controls Hikma’s key controls and risk management systems relating to thenancial reporting process include the enterprise resource planning system, the external audit at subsidiary and Group levels, the processes in the ‘Fair, balanced and understandable’ and ‘Verication’ sections described earlier in this letter, the review ofthenancial statements and disclosures that is undertaken by theExecutive Committee, and detailed internal nancial control processes necessitating the verication of nancial records at alocal,regional and Group level. #### Managing risk and uncertainty Risk management and internal control Risk management The Committee has continued to receive reports on the operation of the Group’s enterprise risk management framework which includes the material controls and programme for enhancing the Group’s mitigation eorts. As in previous years, management and the Board have undertaken a thorough assessment of the Group’s emerging risks as well as the annual review of the principal risks. The Committee and the Board have considered the principal risks facing the Group and we have decided that no adjustments were required in the year under review. The Board and management have also reviewed the appetite for those principal risks and have concluded that it remains appropriate. Aer a review of those risks that present a greater potential risk in the near term, the Board received additional information on the Group’s data security initiatives. Further ![]() 86 Hikma Pharmaceuticals PLC Annual Report 2021 #### Audit Committee #### Letter from the Chair continued information regarding the Group’s risk management activities isavailable in the Risk management section on pages 54 to 63. Internal control The Board conrms that it is ultimately responsible for ensuring that Hikma’s systems of internal controls and risk management remain eective. The key elements of our internal control framework are asfollows: – a documented and disseminated reporting structure with clear policies, procedures, authorisation limits, segregation of duties and delegated authorities – written policies and procedures for material functional areas with specic responsibility allocated to individual managers – a comprehensive system of internal nancial reporting that includes regular comparison of results against budget and forecast and a review of KPIs, each informed by management commentary – an established process for reviewing the nancial performance and providing support to Hikma companies and associates together with direct support from Hikma’s nance function – annual budgets, updated forecasts and medium-term business plans for Hikma that identify risks and opportunities and that are reviewed and, where appropriate, approved by the Board – a dened process for controlling capital expenditure which is detailed in the governance framework The Board is satised that Hikma’s systems for internal control accord with the FRC’s guidance, and have been in place throughout the year under review and up to the date of approval of the Annual Report and Accounts. The Board reviews the eectiveness of these systems at least annually as part of the processes for the Annual Report and risk management. The Board has not identied any material weaknesses. In making this assessment, the Board takes into account: – Riskmanagement: the enterprise risk management framework that provides a structure for risk management activities to occur at all levels of the organisation, including management of the principal risks and uncertainties (detailed on pages 59 to 61). Risk reporting processes ensure the Executive Committee and the Board are engaged in the design and implementation of new control initiatives and provide oversight of existing programmes – Internal audit: the Committee receives regular reports from the internal auditors and other third-party experts who review relevant parts of the Group business operations, assess Hikma’s processes, identify areas for improvement, monitor progress, and undertake their own assessment of the risks facing Hikma – Financial performance: Hikma’s nancial performance and forecasting reports are reviewed by the Board to aid the understanding of the underlying performance of the business, deviations from expectations and management’s operational challenges and responses – Ethics: the business integrity and ethics procedures and controls that are led by the Compliance, Responsibility and Ethics Committee (CREC). To ensure consistency and awareness between these Committees’ responsibilities, the Audit Committee Chair is a standing member of the CREC – Governance: the Board and Group-level controls and processes that make up our approach to governance that is led by the Nomination and Governance Committee and includes all appropriate nancial and non-nancial controls – External auditor: the regular and condential dialogue with the external auditor Membership of the Committee The Committee comprises solely of Independent Directors all of whom have relevant nancial experience. I am considered by the Board to have signicant recent and relevant nancial experience chiey related to my work with other audit committees, having been anance director of another listed entity and having held senior nancial positions in other entities. Biographical details of the Committee members can be found pages 70 to 71. The Board is satised that the Committee has the resources and expertise to fullits responsibilities. As Chair of the Audit Committee, I remain available to shareholders and stakeholders should they wish to discuss any matters within this report or under the Committee’s area of responsibility whether at the AGM or by writing to the Company Secretary. Douglas Hurt Chair, Audit Committee 23 February 2022 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 87 GOVERNANCE John Castellani Chair, Compliance, Responsibility and Ethics Committee #### Compliance, Responsibility and Ethics Committee #### Letter from the Chair #### Dear Shareholders During 2021, the Compliance, Responsibility and Ethics Committee (CREC) continued to promote and oversee our commitments to business integrity, quality, communities and ethical conduct. This report focuses on the matters that the Committee addressed during the year. Further details related to the structure of our ABC compliance and integrity programme are available on our website. Ethics Modern slavery Hikma is committed to ensuring that modern slavery in the form of forced or compulsory labour and human tracking does not take place in any of its businesses or supply chains across the globe. Keymeasures in support of this goal include: – training Hikma sta on labour standards and how to recognise and respond to any incidences of modern slavery – undertaking periodic analysis of any modern slavery risk in Hikma’s businesses and supply chains – carrying out appropriate due diligence – engaging with supply chain partners and the operational part of ourbusiness if and when any issues arise Corporate Social Responsibility The Committee oversaw, encouraged and supported the corporate social responsibility programme which is so clearly linked to our founder’s desire to improve lives, particularly through health, educational anddevelopmentopportunities for the least privileged. Our social responsibility report provides a detailed assessment of our key eorts which is available on pages 36 to 53. Ethical issues The Committee oversaw Hikma’s response to ethical issues arising during the year. There are no matters to report. #### Integrity, quality and community Anti-bribery and corruption ABC programme Our ABC compliance programme continues to perform in a highly eective manner. The ABC programme has strong support from the Board, the CREC and the Chief Executive Ocer. The Chief Compliance Ocer reports to the Chief Counsel and has direct access to the Committee. I am pleased to update you on our progress with our programme to assess the ABC practices of our suppliers. During the year, we completed the roll out of new third-party due diligence processes across all our major areas of operation. Where relevant, appropriate action has been taken. Commitment to integrity The Committee and the Board are very proud of Hikma’s commitment to high standards of business integrity. It includes the Board’s long-standing, zero-tolerance of bribery and corruption which has been demonstrated in numerous instances, including being a founding member of the World Economic Forum’s Partnering Against Corruption Initiative. Code of Conduct The Committee continues to oversee the development and promotion of Hikma’s Code of Conduct, which embodies the important moral and ethical values that are critical to the Group’s success. The Code guides all the Committee’s activities and is the key reference point for all our employees. During 2021, management reviewed and updated the Code of Conduct to ensure that it remains appropriate, relevant and easily understood. The changes were reviewed and endorsed by the Committee and approved by the Board. Speak up The Committee has reviewed the speak up procedures and reports during the year and remains satised that the process continues to operate eectively. The procedures, which include a Committee of senior and independent corporate employees that undertake proportionate investigations andimplement correctiveaction, are appropriate andeective. The Committee continued to receive regular reports on issues identied through the Group-wide speak up arrangements, which include condential reporting lines that report directly to the previously mentioned Investigations Committee. The programme includes Group-wide reporting soware and a communications system provided by an independent third party. This system ensures that colleagues can report condentially or in anonymity. The overall level of reports is within the normal range for an organisation of our size. The Chair of the Audit Committee is a standing member of the CREC and vice versa, which ensures that any relevant issues are considered by the right people within our governance structure. Both Committee Chairs report all relevant matters considered by their Committee to the next Board meeting. Speak up matters are reported and considered as part of this process. ![]() 88 Hikma Pharmaceuticals PLC Annual Report 2021 #### Compliance, Responsibility and Ethics Committee #### Letter from the Chair continued Training During the year, we continued with our training programmes for theCode of Conduct, ABC, anti-money laundering and related matters. The programmes have been developed with assistance fromexternalexperts and are provided to employees virtually through their personalised corporate training portal. Our training programmesinclude worked examples and tests to ensure andenhance understanding. The Board has fully supported the trainingprogrammes and has undertaken the aspects that apply toallcolleagues. Auditing and Monitoring The Committee receives regular updates on the internal auditing andmonitoringprogramme conducted by the Hikma Compliance team. Inaddition, the Committee retains independent third parties toconduct periodic audits of the compliance programme and relatedactivities. #### Doing the right thing and ensuring #### compliance Regulations Anti-trust, anti-money laundering (AML) and trade sanctions The Chief Counsel oversees Hikma’s compliance with the anti-trust, AML and trade sanctions legislation, amongst other matters. The Chief Counsel has created procedures for the management of these matters which have been reviewed and approved by the CREC. The Chief Counsel reports to the CREC on relevant matters that arise, including pertinent changes to the regulatory landscape. The legal team has developed a training programme on anti-trust, AML, prevention of tax evasion and trade sanctions, which has been undertaken by colleagues whose roles require training or awareness. Criminal Finances Act The Chief Counsel is responsible for ensuring compliance with the Criminal Finances Act. The CREC has approved procedures that have been recommended by the Chief Counsel and reviewed those procedures at appropriate intervals. The procedures are designed to respond to the requirements of the prevention of tax evasion legislation from the UK Government. Hikma’s processes and procedures in this regard are proportionate to its risk of facilitating tax evasion, which is relatively low. Hikma is steadfast in applying the principles of the UK tax evasion legislation across its businesses and will continue to oversee matters of compliance. Data protection The Chief Counsel is responsible for Hikma’s data protection policies which are designed to ensure compliance with relevant legislation. The policies were considered by the Board at the point of implementation of the General Data Protection Regulation and wereupdated and then reviewed by the Committee during 2021. I am available at any time to discuss with shareholders any matter ofconcern. For and on behalf of the Compliance, Responsibility and Ethics Committee. John Castellani Chair, Compliance, Responsibility and Ethics Committee 23 February 2022 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 89 GOVERNANCE Pamela Kirby Chair, Remuneration Committee #### Remuneration Committee #### Letter from the Chair #### Dear Shareholders I am pleased to present our 2021 Remuneration Report. I have decided not to stand for re-election to the Board of Hikma at the 2022 AGM, consequently I will cease my role as Chair of the Committee at that point. I am delighted that Nina Henderson has agreed to lead theCommittee going forward. Nina and I have worked closely on remuneration issues over a number of years and I am pleased that Iwill leave the Committee in good hands. Remuneration Policy The policy for the remuneration of Executive Directors provides asalary, benets and pension sucient to be market competitive. Thisapproach is adopted across the organisation in order to align theentire culture of Hikma. The policy focuses the Executive Directors on the incentive opportunity available from the Executive Incentive Plan (EIP) which chiey requires the delivery of annual nancial performance targets. These targets apply to the Group bonus scheme in which all colleagues participate and, therefore, ensure clarity for our employees and builds further on the cultural alignment objective. The nancial targets derive from the Group’s ve-year business plan and, therefore, require the delivery of the Group’s medium-term strategy which ensures that the shareholder experience and pay outcome are aligned, predictable and proportional. The targets are set above both the prior year outturn and the prior year target ensuring that longer-term nancial performance is delivered and builds further on the proportionality objective. Further information on the rationale for the targets is available on page 98. The EIP, which applies to the top two levels of management, diverges slightly from the bonus scheme that operates for more junior employees. The divergence enables the Company to reduce the prioryear awards of senior management if performance is not suciently maintained in the current year. This operates through theestablishment of forfeiture performance levels such as those detailed on pages 100 to 105. Additionally, for executive directors only, a clawback policy applies to all awards which ensures that behavioural and reputational risks are mitigated. These measures ensure that the emergence of material risks to the Group are reected in pay outcomes. Our remuneration policy was adopted in 2014. The changes madesince that point have been in response to points raised byinvestorsand the governance community as well as our enhancedunderstanding of how the arrangements align colleagues to deliver value: – Reducing the overall number of targets for each director thereby enhancing clarity and ensuring simplicity – Increasing the weighting of the nancial targets thereby increasing the objectivity in the determination of awards and making the outcome moreproportionateto the shareholder experience – Limiting salary increases to the level of the local workforce thereby ensuring fairness and clarity for our employees. Additionally, this ensures that increases are limited to a sustainable level for the entire business. During 2022, we will be applying our existing policy and reviewing its eectiveness and areas for improvement. #### Aligning outcomes Performance outcome The nancial targets that the Committee established for the directors for 2021 were very stretching. The Group revenue target was $2,529million (2020: $2,299 million) and the core operating prot before R&D target was $785 million (2020: $667 million). These targets have increased by 18% and 31% over the last two years. In respect of the performance outcome for 2021, you will see from the performance tables on pages 100 to 105 that the revenue and prot outcomes were around the level of our challenging expectations. The strategic elements of the performance targets for 2021 related to our approach to Environmental, Social and Governance (ESG) issues and our plans for ensuring leadership succession. Both of these elements are core to Hikma’s ability to continue to deliver its strategic plans and create value for society. During 2021, the Board requested that the Chief Executive Ocer dene the Group’s ESG strategy with a particular emphasis on the Group’s emissions and impact on the environment. The project has been completed successfully. We have established and tested where we are with our current arrangements, modelled our climate impact, approved a longer-term target for the reduction of greenhouse gas emissions and developed plans to deliver that target. The exercise enabled the Group to identify opportunities to reduce its greenhouse gas emissions by 19% compared to the prior year. As we move forward, the opportunities for further reductions will become more challenging and must be delivered whilst growing the business resulting in signicant eort being required to achieve a 25% reduction (from the level in 2020) by 2030. The Committee has determined the performance level for this target as Maximum. In relation to leadership succession, the Chief Executive Ocer has developed solid succession plans for each role at the Executive Committee and identied and ranked the mission critical roles, including assessing internal talent. The ability of the Company to deliverits operational performance and strategic projects overthe longer term will be dependenton the continued strength of its leadership team. This work is critical to the future of the Group and the Committee. Excellent progress has been made and, therefore, theCommittee has rated the performance as Above Target. Overall, the nancial performance has been assessed as close to the target level and the strategic performance as above target, resulting in an overall performance determination slightly above the target level. The Committee noted that the Company has performed strongly in terms of Total Shareholder Return (TSR) since the Chief Executive Ocer joined in 2018, but the TSR performance has declined somewhat during the year under review. The Committee reviewed the bonus outcomes for colleagues across the organization and noted that the trend was for bonuses to be reduced slightly year on year. Accordingly, the Committee considers that the remuneration policy has operated successfully in that: there is alignment between the amounts paid to Executive Directors and the wider workforce; the longer-term strategy is on target; and the short-term shareholder experience isaligned withthe performanceoutcome. Therefore,the ![]() 90 Hikma Pharmaceuticals PLC Annual Report 2021 #### Remuneration Committee #### Letter from the Chair continued Committee has not adjusted the quantitative outcome of the performancemetrics. Future performance targets As noted earlier in this letter, we believe the current approach to performance targets is delivering and, therefore, we are continuing with our existing approach to nancial targets. They will continue to represent at least 80% of the overall performance outcome and the budget for 2022 (which was approved by the Board in December 2021) has been used to determine target level of performance. In relation to the strategic targets, the Executive Chairman will continue to have a Return on Invested Capital target because this reects the long-term nature of his role. The Chief Executive Ocer and Executive Vice Chairman are responsible for delivering strategic priorities and, therefore, their strategic targets are linked to the continued delivery of our ESG programme (see pages 37 to 52 for further details). Pension contribution Hikma’s pension contributions for Executive Directors are aligned with the workforce contribution of c.10% of salary, other than in respect of the Chief Executive Ocer who receives a contribution of14.1% of his current salary. The Chief Executive Ocer’s pension contribution has been frozen resulting in it reducing from 15% of salary over the last two years. The Committee will seek to align thispension contribution with the wider workforce in the event ofachange of the position holder. The benchmarking information received by the Committee conrms that the contribution level is atthe lower end of expectations for this position. Salaries The Committee undertook a benchmarking exercise during the year which took into account the normal, size adjusted market data from the FTSE 100 and global pharmaceutical market. Additionally, the Committee requested an exercise to provide further information on market practices in the MENA region. Having considered the market data and packages of the Executive Directors, the Committee determined that the Executive Chairman was well positioned against his peers and, accordingly, no increase was required. In relation to the Chief Executive Ocer, the Committee approved an increase of 3.5% which takes into account that his total package is signicantly below our US peers and a c. 3.5% increase being the average increase for the Group’s workforce. The Vice Chairman’s salary was increased by 3.5% in line with the approach across the Group and the salary benchmarking data. Wider employee context The Committee does not directly consult employees on the remuneration aspects contained in this report, but receives regular updates on employee feedback through the work of the Director responsible for employee engagement, the Group human capital department and the bi-annual employee cultural survey, which is conducted by an external organisation. The Committee reviews the pay proposals in terms of salary increments and performance pay for employees at a jurisdictional and Group level. The maximum salary increment for an executive director is set by reference to the salary increment for the jurisdiction of operation and the wider employee bonus pool is determined by reference to performance against the same nancial metrics that apply to the Executive Directors. In terms of pay gaps, the Committee notes that the Company’s peers typically have a pay ratio of 1:100 (employees:CEO total pay) or more whereas the Company’s position is c. 1:28 (2021 total pay: $187,444 for UK/Group employees: $5,307,358 for the Chief Executive Ocer). Accordingly, the Committee considers that the approaches to pay for the workforce and Executive Directors are aligned and, therefore, do not require signicant additional explanation. The Committee is regularly briefed on the wider employee pay policies and practices throughout the Group, including the internal Living Wage report and the level of pay in each one of our jurisdictions, which takes account of the cost of living. We continue tobe fully committed to provide a Living Wage to all our employees. Engagement At the 2021 AGM (further information is available on page 92) shareholders were supportive of the report on remuneration. The Committee has not sought to implement policy changes or made signicant adjustments to the Executive Directors’ compensation. Accordingly, the Committee did not conduct any one to one shareholder engagement activity during theyear. Comments receivedon the Company’s remuneration policy will be taken into consideration in the remuneration policy review that is due in 2022 and will be reported to shareholders next year. Discretion The Committee oversees the application of discretion in accordance with the Remuneration Policy. The Committee has not applied this discretion during the year under review. I remain open to discussion with shareholders should there be any matters that they wish to raise directly. Dr Pamela Kirby Chair, Remuneration Committee 23 February 2022 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 91 GOVERNANCE #### Remuneration dashboard TSR and total executive pay Over the last ten years, Hikma has performed strongly against its UKpeers in Hikma’s index (FTSE 100) and sector (FTSE 350 Pharmaceuticals & Biotechnology segment, a relatively small group ofcompanies that are mainly focused on developing new medicines). 0 1 2 3 4 5 6 0 100 200 300 400 500 600 Average total pay to Executive Directors ($m) TSR from 1 January 2012 Average Executive Director pay Hikma Pharmaceuticals PLC TSR 20132014201520162017201820192020 2021 1.7 3.3 4.3 6.0 4.9 3.2 4.3 3.7 4.6 4.3 FTSE 100 TSR FTSE 350 Pharmaceuticals & Biotechnology TSR 2012 Generic pharmaceutical peers Hikma operates within a sub-set of the pharmaceutical industry that focuses on generic medicines, mainly in the US market. Hikma requires access to the US generic pharmaceutical environment to recruit its specialised and extensive talent pool. The Committee viewed Hikma’s strong relative performance since Siggi Olafsson joined in February 2018 as an important factor in determining the Executive Directors’ performance awards. Strong TSR performance since Siggi Olafsson’s appointment Large Cap Specialty/Generics 1 20 Feb 18 20 Aug 18 20 Feb 19 20 Aug 19 20 Feb 20 20 Aug 20 20 Feb 21 20 Aug 21 31 Dec 20 141.66% (62.42%) 40.65% (83. 58%) 0 50 100 150 -100 -50 200 Hikma US Mid Cap Generics and Injectables 3 CEEMEA Healthcare 2 1.Large Cap Specialty/Generics includes Teva, Viatris and Perrigo 2.CEEMEA Healthcare includes KRKA, Aspen, Adcock and Gedeon 3.US Mid Cap Generics and Injectables includes Amneal, Amphastar, Lannett, Advanz and Mallinckrodt Value of executive holdings Hikma’s Executive Directors have substantial equity interests, whichstrongly aligns their long-term interests with shareholders. 0 5 10 15 20 25 30 35 40 Executive Director shareholding value ($m) Share price ($) Executive Director shareholding Share price (as at year-end in US dollars) 20152014 201620172018 20192020 2021 782 591 551 523 561 470 30.74 33.37 23.29 15.30 21.89 26.40 34.43 680 30.03 347 0 100 200 300 400 500 600 700 800 Shareholder approval Annual report on remuneration (23 April 2021 AGM) Votes available 230,771,404 Votes cast 177,078,354 For 90.4% Against 9.6% Withheld 4 1,198,566 Annual report on remuneration (30 April 2020 AGM) Votes available 242,543,355 Votes cast 199,924,407 For 95.16% Against 4.84% Withheld 4 2,894,616 Remuneration Policy (30 April 2020 AGM) Votes available 242,543,355 Votes cast 199,924,378 For 95.5% Against 4.5% Withheld 4 2,894,646 4.Under the Companies Act 2006 votes ‘Withheld’ are not a valid vote and, therefore, are discounted when considering approval at a general meeting ![]() 92 Hikma Pharmaceuticals PLC Annual Report 2021 #### Remuneration Committee #### continued #### Remuneration and performance summary This report (on pages 92 to 110) complies with The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). Performance components 2020 2021 Sales $2,341 million 9% $2,553 million Core operating prot before R&D $703 million 10% $775 million Share price 2,518p -12% 2,219p Dividend 50 cents 8% 54 cents Employee compensation $560 million 4% $583 million Shareholderimplementationapproval 95.16% 90.4% Shareholder policy approval 95.5% N/A Total remuneration Executive Director 2020 ($000) 2021 ($000) 2022 ($000) (estimate) Said Darwazah 4,060 13% 4,585 15% 5,252 Siggi Olafsson 3,719 43% 5,307 56% 8,262 Mazen Darwazah 3,227 12% 3,809 1% 3,863 Components 2020 ($000) 2021 ($000) 2022 ($000) (estimate) Salary 1 Said Darwazah 1,018 0% 1,018 0% 1,018 Siggi Olafsson 1,133 3% 1,167 4% 1,208 Mazen Darwazah 717 5% 753 4% 780 Bonus 2 Said Darwazah 1,855 -15% 1,568 -3% 1,527 Siggi Olafsson 2,252 -16% 1,895 -4% 1,812 Mazen Darwazah 1,297 -5% 1,232 -5% 1,169 Share awardsvested 3 Said Darwazah 1,047 80% 1,875 38% 2,583 Siggi Olafsson 0 N/A 2,047 146% 5,039 Mazen Darwazah 1,064 60% 1,700 5% 1,787 Pensions Said Darwazah 69 0% 69 0% 69 Siggi Olafsson 170 -6% 160 3% 165 Mazen Darwazah 56 4% 58 5% 61 Other benets Said Darwazah 70 -21% 55 0% 55 Siggi Olafsson 163 -77% 38 0% 38 Mazen Darwazah 93 -29% 66 0% 66 1.Salary: The average rise for salaries across Hikma in 2021 was 3.5% 2.Bonus: The bonus gure comprises Elements A and C of the EIP. See page 95 for further explanation. The 2022 estimate presumes target performance 3.Share awards vested: 2021 gures represent Element B of the 2019 EIP and Element C of the 2018 EIP exercised during that year. 2022 is an estimation of the value of Element B of the 2020 EIP and Element C of the 2019 EIP that are to vest in that year, using 31 December 2021 vesting percentages, share prices and exchange rates ![]() Hikma Pharmaceuticals PLC Annual Report 2021 93 GOVERNANCE Non-Executive Directors’ fees Non-Executives 2020 (£000) 2021 (£000) 2022 (£000) (estimate) Non-Executive Directors’ average total fee 1 97.1 8% 104.6 3% 107.6 1.NED fees: The average Non-Executive Director’s fee includes basic fee, Committee membership fee, fees for specic additional responsibilities, and Committee Chair fees. A full breakdown of fees on page 109. The average fee changes reect the handover of Committee responsibilities and retirement and appointment of Non-Executive Directors #### Remuneration Policy Summary The Directors’ Remuneration Policy (the Policy) is summarised below. It is also detailed in full on pages 79 to 84 of the 2019 Annual Report and can also be found on the website at: www.hikma.com/investors/corporate-governance/key-committees/remuneration-committee/. The Policy was approved at the AGM held on 30 April 2020. The Policy took eect from this date and may operate for up to three years. E leme n t C –rest ri cte d sh ares E le men t B – de ferred sh ares E le men t A – cas h bonus Pension Bas e salary Benets Total remu ne ration Variable element s – Executiv e Incentive Pla n ( EI P) Fixe d e leme nts Fixed elements Purpose and link to strategy Operation #### Fixed elements Base salary Provides a base level of remuneration to support recruitment and retention of Directors with the necessary experience and expertise to deliver the Group’s strategy. Salaries are set with reference to: pay increases for the general workforce acting as an upper limit unless exceptional circumstances exist; salaries in peer companies from the pharmaceutical sector and UK listed companies; Company performance; and aordability. Benets An appropriate package of market competitive benets to ensure executives are rewarded and focused. Benets may include, but are not limited to: healthcare; school fees; company cars; life insurance; relocation where it is required by the Company; and tax equalisation where the director becomes tax resident in a jurisdiction as a result of the role. Pension An appropriate level of pension contribution to ensure executives are provided with a retirement standard commensurate with their role. The Company operates dened contribution arrangements in its main operational jurisdictions and executives participate in these arrangements. A cash supplement in lieu of pension may be paid provided that the total pension payment does not exceed the maximum opportunity. ![]() 94 Hikma Pharmaceuticals PLC Annual Report 2021 #### Remuneration Committee #### continued Executive Incentive Plan (EIP) Performance awards that incentivise Directors to deliver annual nancial performance targets and certain key strategic deliverables, with the majority of awards made in shares to ensure that medium-term performance is delivered. The Remuneration Committee sets annual performance targets for awards under the EIP, in accordance with the rules of the EIP. Annual performance metrics are based on: – Financial metrics: At least 80% of the performance award, with specic targets based on the budget that is approved prior to the performance period. The precise targets will be determined by the Committee on an annual basis – Strategic deliverables: Up to 20% of the performance award is based on the delivery of specic, subjective targets that are set by the Committee in order to ensure that key milestones in the Company’s strategy are delivered At the end of each year the Committee determines the level of performance for the prior year. Based on the performance, the Committee makes the following awards: Element Maximum award % of salary Payout mechanism Vesting period Risks aer award Additional requirements Treatment under the remuneration regulations A 150% Cash bonus Immediate – Clawback None Cash bonus B 150% Deferred Shares 2 years – Forfeiture – Clawback –Share price – Employed All shares vesting are subject to a holding period aer vesting. These shares may not be sold until 5 years aergrant. Share award C 100% Restricted Shares 3 years – Clawback –Share price – Employed Bonus 1 deferred in shares 1.The Regulations require Element C to be included in the ’Bonus’ component for reporting purposes, although it is an award of shares that will vest three years aer grant A holding requirement applies to Elements B and C ensuring that shares may not be sold until ve years from the point of grant. Following cessation of employment of an Executive Director, the Company’s policy is that the Director must hold for a period of two years the lower oftheshares held on cessation of employment or shares equivalent to 300% of the nal, annualised salary. In relation to disclosure of performance targets: – Prior year (2021): full details of the previous year’s performance targets, their level of satisfaction and the resulting performance remuneration are disclosed on pages 100 to 105 – Future year (2022): the nature and weighting of future performance targets are disclosed on page 98. Malus and clawback provisions apply. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 95 GOVERNANCE Illustration of policy The following charts show the value of each of the main elements of the compensation package provided to the Executive Directors during 2021 and the potentialavailable for 2022 (dependent upon performance). Threshold 2022 2 0 21 Target Maximum Act ua l Total remuneration $000 Elements A & CElement B S ai d Da rwazah Siggi Olafsson 2,159 1,527 41% 1,018 28% 2,545 49% 2,817 45% 1,527 29% 2,291 37% Threshold 2022 2021 Target Maximum Act ua l Total remuneration $000 Elements A & CElement B Fixed 2,619 302 12% 1,812 41% 3,020 48% 1,895 42% 1,812 29% 1,217 27% 1,142 53% Fixed 1,142 31% 1,142 22% 1,142 18% 1,142 31% 1,411 54% 1,411 32% 1,411 23% 1,411 19% 1,365 30% Maze n Da rwazah Threshold 2022 2021 Target Maximum Equity growth Act ua l Equity growth Equity growth Total remuneration $000 Elements A & CElement B Fixed 1,685 1,169 41% 780 27% 1,949 48% 2,169 45% 1,232 42% 1,169 29% 1,754 36% 2,0003,0004,0005,0006,0007,0008,000 2,0003,0004,0005,0006,0007,0008,000 2,0003,0004,0005,0006,0007,0008,000 1,000 905 54% 905 32% 905 22% 905 19% 877 30% 763 35% 1,000 1,000 792 27% 1,208 27% 3,359 45% 7,488 4,477 195 12% 2,854 4,023 4,828 2,901 254 12% 906 35% 6,243 2,718 36% 3,687 5,214 6,250 3,734 1,024 27% 1,568 42% 4,431 585 35% The following notes are applicable to the above calculations: – Salary, benets and pensioncomprise ‘Fixed’ remuneration – Elements A and C of the EIP comprise the bonus and; Element B comprises the share award. Elements A, B and C of the EIP are made in theyear aer the performance is achieved (eg for the 2022 illustration, the bonus would be paid and the share awards be granted in 2023. The share awards would vest two or three years later). Please note that the Remuneration and performance summary on page 92 uses share awards vesting (ie actual shares received, not those granted) during the period in order to make clear the dierence between potential remuneration and what the Executive Director receives in practice – ‘Equity growth’ presumes a 50% increase in the value of shares granted under the EIP in respect of that year and that the executive remains inplace for the holding period (ie the award vests) ![]() 96 Hikma Pharmaceuticals PLC Annual Report 2021 #### Annual report on remuneration #### Annual report on remuneration The information presented on pages 96 to 110 has been audited by PwC, as indicated. Director and average employee compensation change The table below shows the percentage change in the Chief Executive Ocer’s (CEO) salary, benets and bonus between 2020 and 2021 compared with the percentage change in the average of each of those components of pay for employees (excluding the Executive Directors). Salary Benets Bonus 2021 2020 Percentage change from 2020 (from 2019) 2021 2020 Percentage change from 2020 (from 2019) 2021 2020 Percentage change from 2020 (from 2019) Executive Chairman $1,018,000 $1,018,000 0.0% (0.0%) $55,465 $70,323 -21.1%(-15.6%) $1,568,281 $1,879,388 -16.6% (-1.3%) CEO $1,166,990 $1,133,000 3.0% (3.0%) $37,930 $163,231 -76.8%(-72.3%) $1,895,381 $2,141,419 -11.5% (5.2%) Vice Chairman $753,144 $717,155 5.0%(0.0%) $65,166 $92,892 -29.8% (0.7%) $1,232,175 $1,312,176 -6.1%(-1.1%) Pat Butler $145,469 $149,730 -2.8% (2.0%) $0 $0 0.0%(0.0%) $0 $0 0.0% (0.0%) Ali Al-Husry $118,405 $112,298 5.4% (3.5%) $728 $2,002 -63.6% (-39.7%) $0 $0 0.0%(0.0%) Dr Pamela Kirby $145,469 $137,966 5.4%(2.9%) $0 $0 0.0% (0.0%) $0 $0 0.0% (0.0%) John Castellani $145,469 $137,966 5.4%(2.9%) $8,747 $12,443 -29.7% (-23.9%) $0 $0 0.0% (0.0%) Nina Henderson $145,469 $137,966 5.4%(2.9%) $8,556 $12,170 -29.7% (-17.8%) $0 $0 0.0% (0.0%) Cynthia Flowers $131,937 $125,132 5.4% (76.9%) $5,568 $7,813 -28.7% (0.0%) $0 $0 0.0% (0.0%) Douglas Hurt $159,001 $85,560 85.8%(0.0%) $0 $0 0.0% (0.0%) $0 $0 0.0%(0.0%) Employees ($m) $318 $306 3.9%(2.0%) $112 $105 6.7% (1.0%) $61 $56 8.9% (0.0%) Number of employees 8,703 8,681 0.3%(1.2%) 8,703 8,681 0.3%(1.2%) 8,703 8,681 0.3%(1.2%) Average per employee $35,160 $35,249 -0.3% (0.8%) $12,065 $12,095 -0.2% (-0.2%) $6,435 $6,451 -0.2% (-1.2%) Average per UK/PLC employee $129,295 $111,370 16.1% (1.3%) $4,218 $9,234 -54.3% (34.8%) $44,681 $37,887 17.9% (5.7%) Hikma’s pay review, which took eect from 1 January 2021, awarded average percentage increases in wages and salaries of 3.5% (2020: 3.0%) for existing employees (with certain exceptions for jurisdictions experiencing very high ination). The nature and level of benets to employees in the year ended 31 December 2021 were broadly similar to those in the previous year (2020: unchanged). UK gender and CEO pay ratios Hikma has 35 employees in the UK (who work for the Group holding company) and, as a result, is exempt from gender pay and average employee: CEO pay disclosure requirements. The small number of employees and signicant diversity of roles and seniority in the UK results insignicant challenges in obtaining comparable gender data. The ratio of total CEO pay to the average Group employee is 28:1 using a simple average methodology. Hikma is committed to paying fairly and not discriminating on gender or other grounds. Relative importance of spend on pay The following table sets out the total amount spent in 2021 and 2020 on remuneration of Hikma’s employees and major distributions toshareholders. Distribution expense 2021 2020 % change from 2020 to 2021 Employee remuneration $583 million $560 million 4.1% Distributions toshareholders 1 $120 million $477 million -74.8% 1.The Company purchased 12.8 million shares during 2020 at a cost of $368 million, which is included in the distributions to shareholders in accordance with the regulations. Those shares are held in treasury and do not receive dividends ![]() Hikma Pharmaceuticals PLC Annual Report 2021 97 GOVERNANCE Employee cost and average executive pay ($m) Executive Director pay ($m) Average employee cost ($) Executive Director pay Average employee cost 2014201520162017 2018 20192020 2021 48,186 50,355 55, 762 55,8 62 53,727 53,796 53,625 3.7 4.6 62,622 4.34.3 4.9 5.9 4.3 3.2 0 10,000 20,000 30,000 40,000 50,000 60,000 0 1 2 3 4 5 6 Committee membership and attendance Members and attendance Member Meetings Attendance Dr Pamela Kirby (Chair) 4/4 100% Pat Butler 4/4 100% John Castellani 4/4 100% Nina Henderson 4/4 100% Cynthia Flowers 4/4 100% Douglas Hurt 4/4 100% Advice and support The Committee seeks the assistance of senior management (Chief Executive Ocer, EVP Organisational Development, Group Total Reward Director and Company Secretary) on matters relating to policy, performance and remuneration, but ensures that no ocer or employee takes part in discussions relating to their own remuneration or benets. Willis Towers Watson (WTW) continued to provide independent advice to the Committee, at the Committee’s request, in relation to market practice, UK corporate governance best practice, and incentive plan target setting. WTW also provided the Human Capital department with broad benchmarking and incentive operation advice that related to employees below Board level. A policy fee structure is in place for the provision of advice and is used to determine a quote for each project before it is undertaken. The total fees for advice to the Committee during the year were $39,383 (2020: $90,929), which were determined in accordance with a pre-agreed fee matrix applied to a schedule of regular projects which are undertaken by WTW. For ad hoc projects, an estimate is provided based on the specication for the work. The Committee reviewed the performance of WTW during the year and fees received, concluding that WTW remained independent and continued to provide high-quality service. WTW were appointed by the Committee in 2016 following a competitive tender process. WTW adheres to the Remuneration Consultants Group Code of Conduct. During the year, the Committee instructed Mercer to undertake a region specic benchmarking exercise for which a fee of $8,000 (2020: $8,000) was paid. Mercer are a recognised expert in the region in question. Policy implementation 2021 Policy deviation During 2021, the Committee has not deviated from the remuneration policy approved by shareholders at the AGM on 30 April 2020. Salaries, benets and pension Please see the Chair’s letter (page 90) for commentary on salaries. The application of benets and pension is unchanged. Salary Change Executive Director Individual 2022 2021 % Executive ChairmanSaid Darwazah $1,018,000 $1,018,000 0.00% Chief Executive Ocer Siggi Olafsson $1,207,834 $1,166,990 3.50% Executive Vice Chairman Mazen Darwazah $779,504 $753,013 3.50% ![]() 98 Hikma Pharmaceuticals PLC Annual Report 2021 #### Annual report on remuneration #### continued Executive Incentive Plan (EIP) For 2022, the Committee has determined that the performance criteria for the Executive Directors will be: Area Description Weight Rationale Financial Group/divisional revenue 40% Historically, the pricing of generic pharmaceutical products has decreased with time. The Committee is cognisant that this could lead to declining revenue over the longer term, which couldultimately result in a declining business overall. By ensuring that a signicant proportion ofperformance remuneration is based on revenue, the Committee is able to ensure that the Executive Directors are focused on mitigating pricing declines by maximising the potential of thein-market portfolio, launching new products, and developing the pipeline. Please see page 22 of the Strategic report for the detail on this target. Group/divisional coreoperating protbefore R&D 40% Ultimately, core operating prot is a key measure of value to Hikma’s shareholders. Given the highly competitive business environment in which Hikma operates, the Executive Directors must focus continuously on optimising Hikma’s cost base. The Committee wants the Executive Directors to deliver an optimised cost base without putting at risk the longer-term prospects of the business byunderinvesting in R&D. Therefore, R&D costs have been excluded from this criterion. Please see page 22 of the Strategic report for the detail on this target. Strategic Strategic deliverables 20% The targets are designed to ensure that the Executive Directors deliver the ESG strategy and target to reduce Greenhouse Gas emissions by 25% by 2030 that is detailed on pages 22 and 23 of this report. Further details will be disclosed on measurement. Disclosed on measurement The Remuneration Committee is of the opinion that the disclosure of high-level forward-looking targets provides shareholders with an awareness of direction and outcomes but, given the commercial sensitivity arising in relation to the detailed nancial and strategic targets used for the EIP, disclosing precise targets for the EIP in advance would not be in shareholders’ interests. This avoids the risk of Hikma inadvertently providing a prot forecast or giving our international competitors access to sensitive information or an unfair advantage. Actual targets, performance achieved and awards made are published at the end of the performance period so shareholders can fully assess the basis for any pay-outs under the EIP. Structure (applicable to EIP from 2020 to 2022) Elements Total A Cash bonus B Deferred shares C Restricted shares Forfeiture 0%0%0% 0% award + forfeit 50% outstanding ElementB Below minimum 0%0%0% 0% award Minimum 25%25%25% 75% award Target 100%100% 50% 250% award Maximum 150%150% 100% 400% award Single total gure (audited) The following table shows a single total gure of remuneration in respect of qualifying services for the 2021 nancial year for each Executive Director, together with comparative gures for 2020. Director Year Salary $ Benets $ Bonus (EIPElements A and C) $ Shares Vested (EIP Element B) $ Pension $ Total$ Total Fixed $ Total Variable $ Said Darwazah 2021 1,018,000 55,465 1,568,281 1,875,447 68,926 4,586,119 1,142,391 3,433,728 2020 1,018,000 70,323 1,855,055 0 68,946 3,012,324 1,157,269 1,855,055 Siggi Olafsson 2021 1,166,990 37,930 1,895,381 2,047,007 160,050 5,307,358 1,364,970 3,942,388 2020 1,133,000 163,231 2,252,369 0 169,950 3,718,550 1,466,181 2,252,369 Mazen Darwazah2021 753,14465,1661,232,175 1,294,742 58,4843,403,710 876,793 2,526,917 2020 717,155 92,892 1,297,238 508,838 55,765 2,671,888 865,812 1,806,076 The EIP performance criteria for 2021 are detailed on pages 100 to 105. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 99 GOVERNANCE Benets Said Darwazah received transportation benets of $40,303 (2020: $55,216) and medical benets of $15,162 (2020: $15,107). Siggi Olafsson received transportation benets of $19,992 (2020: $19,992), housing benets of $nil (2020: $110,903) related to his stay in the UK and medical benets of $17,938 (2020: $32,336). Mazen Darwazah received transportation benets of $35,064 (2020: $64,603) and medical benets of $30,102 (2020:$28,289). Social security payments made in Jordan, that are required to be paid by Jordanian law, are not considered to be a benet. Pension Said Darwazah and Mazen Darwazah participate in the Hikma Pharmaceutical Dened Contribution Retirement Benet Plan (the Jordan Benet Plan) on the same basis as other employees located in Jordan. Under the Jordan Benet Plan, Hikma matches employee contributions made, up to a maximum of 10% of applicable salary. Participants become entitled to all of Hikma’s contributions once they have been employed for ten years. Before that point, there is a staggered scale which starts at three years of employment. Said Darwazah and Mazen Darwazah have served for in excess of ten years and receive their benets under the Jordan Benet Plan because they are over 60 years of age. In respect of 2020, Siggi was due to receive a pension contribution of $165,000 which represented 14.6% of his salary. However, a calculation error was made resulting in an overpayment of $4,950which has been deducted from the 2021 payment. Hikma Pharmaceuticals PLC does not and has not operated a dened benet scheme. Additional Information The following additional information is available in the Remuneration Committee’s report: – Director and average employee compensation change: please see page 97 – Relative performance and spend on pay: please see page 91 – AGM voting: please see page 92 Vested share awards During 2021, the following share awards vested for the Executive Directors. The total shares vested in 2021 are summarised in the following threetables. EIP Under the EIP, performance criteria must be met before an award is granted. There are three award types under the EIP which are treated in the following manner in respect of the table above: – Element A – a cash bonus that is payable immediately and attributed to the earnings for the performance year – Element B – an award of shares that vests two years aer grant subject to there being no forfeiture events and is attributed to the earnings inrespect of the year in which it vests (i.e. two years aer being granted) – Element C – an award of shares that vests three years aer grant and, due to their being no further performance requirements, is attributed tothe earnings for the performance year in the same manner as Element A The tables below detail share awards (Elements B and C) vesting during the year ended 31 December 2021. Whilst these shares vested during 2021, they are attributed to earnings as detailed in the paragraph above. Said Darwazah — EIP Maximum number of shares capable of vesting — Element B 61,666 Maximum number of shares capable of vesting — Element C Nil Forfeiture Nil Vesting price Nil Number of vested shares 61,666 Total value of vested shares 1 $1,875,447 1.Share price on vesting was £21.94 and was $1.386 to £1 under Element C Siggi Olafsson — EIP Maximum number of shares capable of vesting — Element B 67,307 Maximum number of shares capable of vesting — Element C Nil Forfeiture Nil Vesting price Nil Number of vested shares 67,307 Total value of vested shares 2 $2,047,007 2.Share price on vesting was £21.94 and was $1.386 to £1 under Element C Mazen Darwazah — EIP Maximum number of shares capable of vesting — Element B 42,572 Maximum number of shares capable of vesting — Element C 12,042 Forfeiture Nil Vesting price Nil Number of vested shares 54,614 Total value of vested shares 3 $1,700,169 3.Share prices on vesting were £21.94 and £23.84 and there were $1.386 and $1.413 to £1 under Element B and Element C, respectively Share price appreciation The increase in value of the above awards from the point of grant to the point of vesting was $498,437 in relation to Said Darwazah, $544,042 inrelation to Siggi Olafsson, and $582,439 ($344,108 in relation to Element B and $238,331 for Element C) in relation to Mazen Darwazah. ![]() 100 Hikma Pharmaceuticals PLC Annual Report 2021 2021 Performance outcome: Executive Chairman (audited) Readers are directed to the commentary on business performance that is included in the Chair’s letter on pages 89 to 90. The following table sets out the performance conditions and targets for 2021 and their level of satisfaction: Performance conditionPerformance levelAchievement Application SectionDescription Rationale and measurement Weighting Forfeiture 0% salary awarded Minimum 75% ofsalary awarded Target 250% of salary awarded Maximum 400% of salary awarded Results Achievement % of salary Financial Core revenueHistorically, the pricing of generic pharmaceutical products has decreased with time. The Committee is cognisant that this could lead to declining revenue over the longer term, which couldultimately result in a declining business overall. By ensuring that a signicant proportion of performance remuneration is based on revenue, the Committee is able to ensure that the Executive Directors are focused on mitigating pricing declines by maximising the potential of the in-market portfolio, launching new products, and developing the pipeline. See page 22 of the Strategic report for further detail on the performance related to this target. 45% Target -30% $1,770 million Target -10% $2,276 million Target $2,529 million Target +10% $2,782 million Core revenue of $2,553 million Target to maximum 118.9% of salary Core Operating Prot (COP) before R&D Ultimately, COP is a key measure of value to Hikma’s shareholders. Given the highly competitive business environment in which Hikma operates, the Executive Directors must focus continuously on optimising Hikma’s cost base. The Committee wants the Executive Directors to deliver an optimised cost base without putting at risk the longer-term prospects of the business by underinvesting in R&D. Therefore, R&D costs have been excluded from this criterion. See page 22 of the Strategic report for further detail on the performance related to this target. 45% Target -30% $550 million Target -10% $707 million Target $785 million Target +10% $864 million COP before R&D of $775 million Threshold to target 102.4% of salary Strategic Return on Invested Capital (ROIC) Hikma invests signicant capital to expand its product portfolio and pipeline and improving its high-quality manufacturing capabilities. Over the longer term, these activities ensure that margins can be maintained through manufacturing more complex/specialty products and capturing greater market share, respectively. The extensive range of capital investments have various timeframes for delivering new capabilities and enhancing Hikma’s competitive position. The performance of previous and existing projects is monitored by the Board on a project by project basis. ROIC provides a Group-level method of assessing the time and cost to deliver projects and their ultimate returns over a one-year timeframe. See page 22 of the Strategic report for further detail on the performance related to this target. 10% Target -32% 11.0% Target -10% 14.6% Target 16.2% Target +10% 17.8% ROIC of 17.1%Target to maximum 33.3% of salary Total 100% Unacceptable Acceptable Good Excellent 254.6% The above performance results in performance remuneration under the EIP as follows (audited): Participant Calculation Receive Executive EIP Element Salary Maximum potential (% of salary) Application % of salaryValue of bonus/shares Receive Notes Executive Chairman A $1,018,000 150% 100.6% $1,023,958 Cash now (February 2022) B 150% 100.6% $1,023,958 Shares in 2 years from February 2022 All shares vesting are subject to a holding period aer vesting. These shares may not be sold until 5 years aer grant. C 100% 53.5% $544,323 Shares in 3 years from February 2022 Total 400% 254.7% $2,592,239 #### Annual report on remuneration #### continued ![]() Hikma Pharmaceuticals PLC Annual Report 2021 101 GOVERNANCE 2021 Performance outcome: Executive Chairman (audited) Readers are directed to the commentary on business performance that is included in the Chair’s letter on pages 89 to 90. The following table sets out the performance conditions and targets for 2021 and their level of satisfaction: Performance conditionPerformance levelAchievement Application SectionDescription Rationale and measurement Weighting Forfeiture 0% salary awarded Minimum 75% ofsalary awarded Target 250% of salary awarded Maximum 400% of salary awarded Results Achievement % of salary Financial Core revenueHistorically, the pricing of generic pharmaceutical products has decreased with time. The Committee is cognisant that this could lead to declining revenue over the longer term, which couldultimately result in a declining business overall. By ensuring that a signicant proportion of performance remuneration is based on revenue, the Committee is able to ensure that the Executive Directors are focused on mitigating pricing declines by maximising the potential of the in-market portfolio, launching new products, and developing the pipeline. See page 22 of the Strategic report for further detail on the performance related to this target. 45% Target -30% $1,770 million Target -10% $2,276 million Target $2,529 million Target +10% $2,782 million Core revenue of $2,553 million Target to maximum 118.9% of salary Core Operating Prot (COP) before R&D Ultimately, COP is a key measure of value to Hikma’s shareholders. Given the highly competitive business environment in which Hikma operates, the Executive Directors must focus continuously on optimising Hikma’s cost base. The Committee wants the Executive Directors to deliver an optimised cost base without putting at risk the longer-term prospects of the business by underinvesting in R&D. Therefore, R&D costs have been excluded from this criterion. See page 22 of the Strategic report for further detail on the performance related to this target. 45% Target -30% $550 million Target -10% $707 million Target $785 million Target +10% $864 million COP before R&D of $775 million Threshold to target 102.4% of salary Strategic Return on Invested Capital (ROIC) Hikma invests signicant capital to expand its product portfolio and pipeline and improving its high-quality manufacturing capabilities. Over the longer term, these activities ensure that margins can be maintained through manufacturing more complex/specialty products and capturing greater market share, respectively. The extensive range of capital investments have various timeframes for delivering new capabilities and enhancing Hikma’s competitive position. The performance of previous and existing projects is monitored by the Board on a project by project basis. ROIC provides a Group-level method of assessing the time and cost to deliver projects and their ultimate returns over a one-year timeframe. See page 22 of the Strategic report for further detail on the performance related to this target. 10% Target -32% 11.0% Target -10% 14.6% Target 16.2% Target +10% 17.8% ROIC of 17.1%Target to maximum 33.3% of salary Total 100% Unacceptable Acceptable Good Excellent 254.6% The above performance results in performance remuneration under the EIP as follows (audited): Participant Calculation Receive Executive EIP Element Salary Maximum potential (% of salary) Application % of salaryValue of bonus/shares Receive Notes Executive Chairman A $1,018,000 150% 100.6% $1,023,958 Cash now (February 2022) B 150% 100.6% $1,023,958 Shares in 2 years from February 2022 All shares vesting are subject to a holding period aer vesting. These shares may not be sold until 5 years aer grant. C 100% 53.5% $544,323 Shares in 3 years from February 2022 Total 400% 254.7% $2,592,239 ![]() 102 Hikma Pharmaceuticals PLC Annual Report 2021 #### Annual report on remuneration #### continued 2021 Performance outcome: Chief Executive Ocer (audited) Readers are directed to the commentary on business performance that is included in the Chair’s letter on pages 89 to 90. The following table sets out the performance conditions and targets for 2021 and their level of satisfaction: Performance conditionPerformance levelAchievement Application SectionDescription Rationale and measurement Weighting Forfeiture 0% salary awarded Minimum 75% ofsalary awarded Target 250% of salary awarded Maximum 400% of salary awarded Results Achievement % of salary Financial Core revenueHistorically, the pricing of generic pharmaceutical products has decreased with time. The Committee is cognisant that this could lead to declining revenue over the longer term, which couldultimately result in a declining business overall. By ensuring that a signicant proportion of performance remuneration is based on revenue, the Committee is able to ensure that the Executive Directors are focused on mitigating pricing declines by maximising the potential of the in-market portfolio, launching new products, and developing the pipeline. See page 22 of the Strategic report for further detail on the performance related to this target. 40% Target -30% $1,770 million Target -10% $2,276 million Target $2,529 million Target +10% $2,782 million Core revenue of $2,553 million Target to maximum 105.7% of salary Core Operating Prot (COP) before R&D Ultimately, COP is a key measure of value to Hikma’s shareholders. Given the highly competitive business environment in which Hikma operates, the Executive Directors must focus continuously on optimising Hikma’s cost base. The Committee wants the Executive Directors to deliver an optimised cost base without putting at risk the longer-term prospects of the business by underinvesting in R&D. Therefore, R&D costs have been excluded from this criterion. See page 22 of the Strategic report for further detail on the performance related to this target. 40% Target -30% $550 million Target -10% $707 million Target $785 million Target +10% $864 million COP before R&D of $775 million Threshold to target 91.0% of salary Strategic Environmental, Social, and Governance Strategy During 2021, the Board requested that the Chief Executive Ocer fundamentally review the Group’s ESG strategy with a particular emphasis on the Group’s emissions and impact on the environment (further commentary is available on page 89). 10% Committee assessment of the longer term corporate targets for improving the Group’s emissions and environmental performance and the medium term strategy for delivering those targets. Current status ascertained. Responsiblelong-term targets approved. Strategic plan delivered. Maximum determined by the Committee 40.0% of salary Leadershipsuccession and development The ability of the Company to deliver its operational performance and strategic projects over the longer term will be dependent on the continued strength of its leadership team. The Board requested that the Chief Executive Ocer develop plans for succession for the top leadership roles and the mission critical roles, including assessing internal talent and creating development plans (further commentary is available on page 89). 10% Committee assessment of the succession plans for the Group thatwere presented to the Board in December 2021. Succession plans for all Executive Committee roles and identication ofmission critical roles. Above target determined by the Committee 30.0% of salary Total 100% Unacceptable Acceptable Good Excellent 266.7% The above performance results in performance remuneration under the EIP as follows (audited): Participant Calculation Receive Executive EIP Element Salary Maximum potential (% of salary) Application % of salaryValue of bonus/shares Receive Notes Chief Executive Ocer A $1,166,990 150% 104.3% $1,217,183 Cash now (February 2021) B 150% 104.3% $1,217,183 Shares in 2 years from February 2022 All shares vesting are subject to a holding period aer vesting. These shares may not be sold until 5 years aer grant. C 100% 58.1% $678,198 Shares in 3 years from February 2022 Total 400% 266.7% $3,112,564 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 103 GOVERNANCE 2021 Performance outcome: Chief Executive Ocer (audited) Readers are directed to the commentary on business performance that is included in the Chair’s letter on pages 89 to 90. The following table sets out the performance conditions and targets for 2021 and their level of satisfaction: Performance conditionPerformance levelAchievement Application SectionDescription Rationale and measurement Weighting Forfeiture 0% salary awarded Minimum 75% ofsalary awarded Target 250% of salary awarded Maximum 400% of salary awarded Results Achievement % of salary Financial Core revenueHistorically, the pricing of generic pharmaceutical products has decreased with time. The Committee is cognisant that this could lead to declining revenue over the longer term, which couldultimately result in a declining business overall. By ensuring that a signicant proportion of performance remuneration is based on revenue, the Committee is able to ensure that the Executive Directors are focused on mitigating pricing declines by maximising the potential of the in-market portfolio, launching new products, and developing the pipeline. See page 22 of the Strategic report for further detail on the performance related to this target. 40% Target -30% $1,770 million Target -10% $2,276 million Target $2,529 million Target +10% $2,782 million Core revenue of $2,553 million Target to maximum 105.7% of salary Core Operating Prot (COP) before R&D Ultimately, COP is a key measure of value to Hikma’s shareholders. Given the highly competitive business environment in which Hikma operates, the Executive Directors must focus continuously on optimising Hikma’s cost base. The Committee wants the Executive Directors to deliver an optimised cost base without putting at risk the longer-term prospects of the business by underinvesting in R&D. Therefore, R&D costs have been excluded from this criterion. See page 22 of the Strategic report for further detail on the performance related to this target. 40% Target -30% $550 million Target -10% $707 million Target $785 million Target +10% $864 million COP before R&D of $775 million Threshold to target 91.0% of salary Strategic Environmental, Social, and Governance Strategy During 2021, the Board requested that the Chief Executive Ocer fundamentally review the Group’s ESG strategy with a particular emphasis on the Group’s emissions and impact on the environment (further commentary is available on page 89). 10% Committee assessment of the longer term corporate targets for improving the Group’s emissions and environmental performance and the medium term strategy for delivering those targets. Current status ascertained. Responsiblelong-term targets approved. Strategic plan delivered. Maximum determined by the Committee 40.0% of salary Leadershipsuccession and development The ability of the Company to deliver its operational performance and strategic projects over the longer term will be dependent on the continued strength of its leadership team. The Board requested that the Chief Executive Ocer develop plans for succession for the top leadership roles and the mission critical roles, including assessing internal talent and creating development plans (further commentary is available on page 89). 10% Committee assessment of the succession plans for the Group thatwere presented to the Board in December 2021. Succession plans for all Executive Committee roles and identication ofmission critical roles. Above target determined by the Committee 30.0% of salary Total 100% Unacceptable Acceptable Good Excellent 266.7% The above performance results in performance remuneration under the EIP as follows (audited): Participant Calculation Receive Executive EIP Element Salary Maximum potential (% of salary) Application % of salaryValue of bonus/shares Receive Notes Chief Executive Ocer A $1,166,990 150% 104.3% $1,217,183 Cash now (February 2021) B 150% 104.3% $1,217,183 Shares in 2 years from February 2022 All shares vesting are subject to a holding period aer vesting. These shares may not be sold until 5 years aer grant. C 100% 58.1% $678,198 Shares in 3 years from February 2022 Total 400% 266.7% $3,112,564 ![]() 104 Hikma Pharmaceuticals PLC Annual Report 2021 #### Annual report on remuneration #### continued 2021 Performance outcome: Executive Vice Chairman (audited) Readers are directed to the commentary on business performance that is included in the Chair’s letter on pages 89 to 90. The following table sets out the performance conditions and targets for 2021 and their level of satisfaction: Performance conditionPerformance levelAchievement Application SectionDescription Rationale and measurement Weighting Forfeiture 0% salary awarded Minimum 75% ofsalary awarded Target 250% of salary awarded Maximum 400% of salary awarded Results Achievement % of salary Financial Core revenueHistorically, the pricing of generic pharmaceutical products has decreased with time. The Committee is cognisant that this could lead to declining revenue over the longer term, which couldultimately result in a declining business overall. By ensuring that a signicant proportion of performance remuneration is based on revenue, the Committee is able to ensure that the Executive Directors are focused on mitigating pricing declines by maximising the potential of the in-market portfolio, launching new products, and developing the pipeline. See page 22 of the Strategic report for further detail on this target. 25% Target -30% $1,770 million Target -10% $2,276 million Target $2,529 million Target +10% $2,782 million Core revenue of $2,553 million Target to maximum 66.1% of salary Core Operating Prot (COP) before R&D Ultimately, COP is a key measure of value to Hikma’s shareholders. Given the highly competitive business environment in which Hikma operates, the Executive Directors must focus continuously on optimising Hikma’s cost base. The Committee wants the Executive Directors to deliver an optimised cost base without putting at risk the longer-term prospects of the business by underinvesting in R&D. Therefore, R&D costs have been excluded from this criterion. See page22 of the Strategic report for further detail on this target. 25% Target -30% $550 million Target -10% $707 million Target $785 million Target +10% $864 million COP before R&D of $775 million Threshold to target 56.9% of salary MENA revenueThe Executive Director is responsible for this region. The Committee considered nancial metrics tobe the best method of ensuring delivery of the strategy that could be measured in an objective manner that is readily understandable by investors. Measured by target MENA revenue compared to audited MENA revenue for the year ended 31 December 2021. See pages 30 and 31 of the Business and nancial review for further detail on this target. 15% Target -23% $624 million Target -10% $730 million Target $811 million Target +10% $892 million MENA revenue of $807 million Threshold to target 36.2% of salary MENA COP before R&DThe Executive Director is responsible for this region. The Committee considered nancial metrics to be the best method of ensuring delivery of the Board-approved strategy that could be measured in an objective manner that is readily understandable by investors. Measured by target MENA COP compared to audited MENA COP for the year ended 31 December 2021. To align the approach with the Group target, R&D and Group costs have been removed from the measurements of this target. See pages 30 and 31 of the Business and nancial review for further detail on this target. 15% Target -30% $145 million Target -10% $186 million Target $207 million Target +10% $228 million MENA COP before R&D of $209 million Target to maximum 39.6% of salary Strategic Environmental, Social, and Governance Strategy During 2021, the Board requested that the Vice Chairman fundamentally review the Group’s ESG strategy for the MENA region with a particular emphasis on the division’s emissions and impact on the environment (further commentary is available on page 89). 10% Committee assessment of thelonger-term corporate targets for improving the MENA region emissions and environmental performance and the medium-term strategy for delivering thosetargets. Current status ascertained. Responsiblelong-term targets approved. Strategic deliverplan delivered. Maximum determined by the Committee 40.0% of salary Leadershipsuccession and development The ability of the Company to deliver its operational performance and strategic projects over the longer term will be dependent on the continued strength of its leadership team. The Board requested that the Vice Chairman develop plans for succession for the top leadership roles and the mission critical roles in the MENA region, including assessing internal talent and creating development plans (further commentary is available on page 89). 10% Committee assessment of the succession plans for the MENA region that were presented to the Board in December 2021. Succession plans for all MENA region roles and identication of mission critical roles. Above target determined by the Committee 30.0% of salary Total 100% Unacceptable Acceptable Good Excellent 268.8% The above performance results in performance remuneration under the EIP as follows (audited): Participant Calculation Receive Executive EIP Element Salary Maximum potential (% of salary) Application % of salaryValue of bonus/shares Receive Notes Executive ViceChairman A $753,013 150% 105.2% $792,237 Cash now (February 2022) B 150% 105.2% $792,237 Shares in 2 years from February 2022 All shares vesting are subject to a holding period aer vesting. These shares may not be sold until 5 years aer grant. C 100% 58.4% $439,938 Shares in 3 years from February 2022 Total 400% 268.8% $2,024,412 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 105 GOVERNANCE 2021 Performance outcome: Executive Vice Chairman (audited) Readers are directed to the commentary on business performance that is included in the Chair’s letter on pages 89 to 90. The following table sets out the performance conditions and targets for 2021 and their level of satisfaction: Performance conditionPerformance levelAchievement Application SectionDescription Rationale and measurement Weighting Forfeiture 0% salary awarded Minimum 75% ofsalary awarded Target 250% of salary awarded Maximum 400% of salary awarded Results Achievement % of salary Financial Core revenueHistorically, the pricing of generic pharmaceutical products has decreased with time. The Committee is cognisant that this could lead to declining revenue over the longer term, which couldultimately result in a declining business overall. By ensuring that a signicant proportion of performance remuneration is based on revenue, the Committee is able to ensure that the Executive Directors are focused on mitigating pricing declines by maximising the potential of the in-market portfolio, launching new products, and developing the pipeline. See page 22 of the Strategic report for further detail on this target. 25% Target -30% $1,770 million Target -10% $2,276 million Target $2,529 million Target +10% $2,782 million Core revenue of $2,553 million Target to maximum 66.1% of salary Core Operating Prot (COP) before R&D Ultimately, COP is a key measure of value to Hikma’s shareholders. Given the highly competitive business environment in which Hikma operates, the Executive Directors must focus continuously on optimising Hikma’s cost base. The Committee wants the Executive Directors to deliver an optimised cost base without putting at risk the longer-term prospects of the business by underinvesting in R&D. Therefore, R&D costs have been excluded from this criterion. See page22 of the Strategic report for further detail on this target. 25% Target -30% $550 million Target -10% $707 million Target $785 million Target +10% $864 million COP before R&D of $775 million Threshold to target 56.9% of salary MENA revenueThe Executive Director is responsible for this region. The Committee considered nancial metrics tobe the best method of ensuring delivery of the strategy that could be measured in an objective manner that is readily understandable by investors. Measured by target MENA revenue compared to audited MENA revenue for the year ended 31 December 2021. See pages 30 and 31 of the Business and nancial review for further detail on this target. 15% Target -23% $624 million Target -10% $730 million Target $811 million Target +10% $892 million MENA revenue of $807 million Threshold to target 36.2% of salary MENA COP before R&DThe Executive Director is responsible for this region. The Committee considered nancial metrics to be the best method of ensuring delivery of the Board-approved strategy that could be measured in an objective manner that is readily understandable by investors. Measured by target MENA COP compared to audited MENA COP for the year ended 31 December 2021. To align the approach with the Group target, R&D and Group costs have been removed from the measurements of this target. See pages 30 and 31 of the Business and nancial review for further detail on this target. 15% Target -30% $145 million Target -10% $186 million Target $207 million Target +10% $228 million MENA COP before R&D of $209 million Target to maximum 39.6% of salary Strategic Environmental, Social, and Governance Strategy During 2021, the Board requested that the Vice Chairman fundamentally review the Group’s ESG strategy for the MENA region with a particular emphasis on the division’s emissions and impact on the environment (further commentary is available on page 89). 10% Committee assessment of thelonger-term corporate targets for improving the MENA region emissions and environmental performance and the medium-term strategy for delivering thosetargets. Current status ascertained. Responsiblelong-term targets approved. Strategic deliverplan delivered. Maximum determined by the Committee 40.0% of salary Leadershipsuccession and development The ability of the Company to deliver its operational performance and strategic projects over the longer term will be dependent on the continued strength of its leadership team. The Board requested that the Vice Chairman develop plans for succession for the top leadership roles and the mission critical roles in the MENA region, including assessing internal talent and creating development plans (further commentary is available on page 89). 10% Committee assessment of the succession plans for the MENA region that were presented to the Board in December 2021. Succession plans for all MENA region roles and identication of mission critical roles. Above target determined by the Committee 30.0% of salary Total 100% Unacceptable Acceptable Good Excellent 268.8% The above performance results in performance remuneration under the EIP as follows (audited): Participant Calculation Receive Executive EIP Element Salary Maximum potential (% of salary) Application % of salaryValue of bonus/shares Receive Notes Executive ViceChairman A $753,013 150% 105.2% $792,237 Cash now (February 2022) B 150% 105.2% $792,237 Shares in 2 years from February 2022 All shares vesting are subject to a holding period aer vesting. These shares may not be sold until 5 years aer grant. C 100% 58.4% $439,938 Shares in 3 years from February 2022 Total 400% 268.8% $2,024,412 ![]() 106 Hikma Pharmaceuticals PLC Annual Report 2021 #### Annual report on remuneration #### continued #### Outstanding share awards (audited) Hikma continued to operate the EIP in 2021. The outstanding share awards under the EIP in respect of each of the Executive Directors are: Participant Share scheme Quantum Director Scheme description 1 Type of interest Date of award Date of vesting Basis of award Shares (max) Face value 2 Said Darwazah EIP Element C Conditional award 12-Mar-1912-Mar-22 85% of salary 38,862 $867,778 EIP Element B Conditional award 27-Feb-2027-Feb-22 117% of salary 47,169 $1,194,310 EIP Element C Conditional award 27-Feb-2027-Feb-23 67% of salary 27,057 $685,078 EIP Element B Conditional award 25-Feb-2125-Feb-23 116% of salary 34,827 $1,182,028 EIP Element C Conditional award 25-Feb-21 25-Feb-24 66% of salary 19,830 $673,028 Total 167,745 (2020: 174,754) $4,602,222 (2020:$4,124,176) Siggi Olafsson EIP Element C Conditional award 12-Mar-1912-Mar-22 87% of salary 42,676 $952,965 First Year Award (EIP C Equivalent) Conditional award 12-Mar-1912-Mar-22 150% of salary 72,000 $1,607,760 EIP Element B Conditional award 27-Feb-2027-Feb-22 122% of salary 53,148 $1,345,709 EIP Element C Conditional award 27-Feb-2027-Feb-23 72% of salary 31,426 $795,709 EIP Element B Conditional award 25-Feb-2125-Feb-23 124% of salary 41,527 $1,409,434 EIP Element C Conditional award 25-Feb-21 25-Feb-24 74% of salary 24,836 $842,934 Total 265,613 (2020: 266,557) $6,954,511 (2020: $6,205,108) Mazen Darwazah EIP Element C Conditional award 12-Mar-1912-Mar-22 83% of salary 26,514$592,056 EIP Element B Conditional award 27-Feb-2027-Feb-22 117% of salary 32,993 $835,377 EIP Element C Conditional award 27-Feb-2027-Feb-23 67% of salary 18,831 $476,499 EIP Element B Conditional award 25-Feb-2125-Feb-23 115% of salary 24,319 $825,379 EIP Element C Conditional award 25-Feb-21 25-Feb-24 66% of salary 13,903 $471,859 Total 116,560 (2020: 132,952) $3,201,170 (2020: $3,021,663) 1.The performance criteria for Elements B and C of the EIP are assessed before a grant is considered. Additionally, Element B is subject to forfeiture criteria for the rst two years aer grant, which are detailed each year as part of the next year’s EIP performance criteria on pages 100 to 105 2.The face value is the value at the point of grant which is the 30-day average to the 31 December of the performance year. The face value (30-day average price) in respect of awards granted in 2019 was $22.33 (£17.63p), 2020 $25.32 (£19.30p), and 2021 $33.94 (£25.25p). The actual value received by Executive Directors under the share incentive arrangements is dependent upon the share price of Hikma at the time of vesting, the satisfaction of performance criteria and the non-occurrence of forfeiture events (EIP Element B only) 3.The minimum value of the awards at vesting will be the share price on the day of vesting multiplied by the number of shares vesting. If the Executive Director leaves employment during the vesting period, the normal position is that zero shares vest. If all the forfeiture conditions occur in each year of the vesting period under Element B only, zero shares will vest. The weightingof each forfeiturecondition has aproportional impact on the vesting percentage underElement Bonly ![]() Hikma Pharmaceuticals PLC Annual Report 2021 107 GOVERNANCE The applicable share prices for Hikma during the period under review were: Date Market price (Closing price) 1 January 2021 2,518p 31 December 2021 2,219p 2021 Range (low to high) 2,186p to2,690p 23 February 2022 2,013p Dilution In accordance with the guidelines set out by the Investment Association, Hikma can issue a maximum of 10% of its issued share capital in arolling ten-year period to employees under all its share plans and a maximum of 50% of this (representing 5% of issued share capital) for discretionary share plans. The following table summarises the current level of dilution resulting from Hikma’s share plans since 2011: Type of plan Granted in a rolling ten-year period Granted during the year Discretionary Share Plans (5% Limit) 3.66% 0.38% Director share interests (audited) Said Darwazah, Mazen Darwazah and Ali Al-Husry are Directors and shareholders of Darhold Limited. Darhold holds 60,000,000 Ordinary Shares in Hikma. The table below breaks down their shareholdings in Hikma by shares eectively owned through Darhold and shares held personally or by connected people. The cancellation and issuance of shares in Darhold and Hikma, as well as changes in the number of Hikma shares held by Darhold, can lead to a degree of variation in the ‘Eective Hikma shares’. Darhold Personal Director Interest in Darhold Eective Hikma shares Shares (incl.connected people) Total shareholding Said Darwazah 22.32% 13,393,875 650,070 14,043,945 Mazen Darwazah 1 11.61% 6,965,543 1,248,8508,214,393 Ali Al-Husry 2 8.25% 4,952,513 1,162,8116,115,324 1.Mazen Darwazah holds his shares in Darhold Limited through a family trust 2.Ali Al-Husry holds his shares in Hikma and Darhold Limited through a family trust The following table sets out details of the Directors’ shareholdings in Hikma and, where there are shareholding requirements, whether these have been met: Ownership requirements Total Scheme Interests Total Director Percentage of salary Number of shares Requirement fullled? Shares owned 3 EIP subject to performance (ElementB) EIP subject to service (ElementC) Share interests Said Darwazah 300 % 101,707 Yes 14,043,945 81,996 85,749 14,211,690 Siggi Olafsson 300 % 116,952 Yes 55,513 94,675 170,938 321,126 Mazen Darwazah 4 300 % 75,245 Yes 8,214,393 57,312 59,248 8,330,953 Ali Al-Husry 5 6,115,3246,115,324 Pat Butler 3,8753,875 Dr Pamela Kirby 4,8174,817 John Castellani 3,5003,500 Nina Henderson 7,1007,100 Cynthia Flowers 1,1001,100 Douglas Hurt 1,5001,500 3.Including shares eectively owned through Darhold as per the table above 4.Mazen Darwazah holds his shares in Darhold Limited through a family trust, in which he has a benecial interest 5.Ali Al-Husry holds his shares in Hikma and Darhold Limited through a family trust, in which he has a benecial interest There have been no changes in the interests of the Directors in the shares of Hikma between 31 December 2021 and the date of this report. The share price used to calculate whether the shareholding requirements have been met is the price on 31 December 2021 of £22.19p and foreign exchange rate of $1.353 to £1 on the same date. ![]() 108 Hikma Pharmaceuticals PLC Annual Report 2021 #### Annual report on remuneration #### continued Director share interests (audited) continued The following table sets out the changes in the share interests of Directors during the year under review and up to the date of this report. Other than as detailed in the table, the Directors’ share interests in Hikma did not change during the period. DirectorDate Event Number of shares Douglas Hurt 2-Mar-21 Market Purchase of Shares 1,500 Said Darwazah 12-Mar-21 Vesting of 2018 EIP Element B. Retained all shares 61,666 Siggi Olafsson 12-Mar-21 Vesting of 2018 EIP Element B. Retained some shares 35,513 Mazen Darwazah 12-Mar-21 Vesting of 2018 EIP Element B. Retained all shares 42,572 Nina Henderson 17-Mar-21 Market purchase of shares 1,600 Mazen Darwazah 17-May-21 Vesting of 2018 EIP Element C. Retained all shares 12,042 Scheme interests The following table sets out details of the ‘scheme interests’ of the Directors. Element B and C of the EIP have been included because they have service conditions in excess of one year. Type of interest Share interests with performance measures Vested but unexercised Director Shares Share options Yes No Said Darwazah 167,745 — 81,996 85,749 — Siggi Olafsson 265,613 — 94,675 170,938 — Mazen Darwazah 116,560 — 57,312 59,248 — All other directors————— Total shareholder return During the last ten years, Hikma performed strongly against its UK peers in Hikma’s index (FTSE 100) and sector (FTSE 350 Pharmaceuticals & Biotechnology segment, a relatively small group of companies that are mainly focused on developing new drugs). The Remuneration Committee has chosen these comparators because it uses executive compensation benchmarking data from the FTSE 100 and the pharmaceutical industry when considering compensation for the ExecutiveDirectors. -100 0 100 200 300 400 500 Dec 11Dec 12Dec 13Dec 14Dec 15Dec 16Dec 17Dec 18Dec 19Dec 20 Dec 21 Hikma Pharmaceuticals PLC FTSE 100 FTSE 350/Pharmaceuticals & Biotechnology ![]() Hikma Pharmaceuticals PLC Annual Report 2021 109 GOVERNANCE Remuneration table The following table sets out the total remuneration, including amounts vesting under short-term and long-term incentive plans, for each nancial period in respect of the Directors holding the positions of Executive Chairman and Chief Executive Ocer. The total gures for the nancial years 2017 and 2016 are higher than would otherwise be the case due to a change of incentive plan. In accordance with the Regulations, the 2017 and 2016 totals include LTIPs vesting during the relevant period (which were granted three years before) and Element C of the EIP which was granted in respect of the relevant period. The Regulations require Element C to be treated in a similar way to the annual bonus, although it is an award of shares that will vest three years aer grant. The nal LTIP awards vested in 2017 and, therefore, do not impact the Share Awards percentage for 2018 onwards. Said Darwazah — Executive Chairman Siggi Olafsson — Chief Executive Ocer Year Total Bonus as % max 1 Share awards as % max 2 Total Bonus as % max 1 Share awards as % max 2 2021 $4,586,119 62% 67% $5,307,358 65% 70% 2020 $4,059,653 73% 77% $3,718,549 80% 83% 2019 $4,448,934 74% 78% $4,121,724 78% 82% 2018 $4,501,217 88% 90% $5,260,957 89% 91% 2017 $3,538,646 0%0% N/AN/AN/A 2016 $6,308,238 71% 68% N/AN/AN/A 2015 $7,316,042 98%98% N/AN/AN/A 2014 $5,056,255 100% 70% N/AN/AN/A 2013 $3,956,836 100% 62% N/AN/AN/A 2012 $3,296,000 80%50% N/AN/AN/A 1.The ‘Bonus as % max’ column comprises cash under Element A of the EIP paid immediately and shares under Element C of the EIP that are released three years aer grant 2.The ‘Share awards as % max’ column includes Element B of the EIP, shares that vest in two years from the date of grant provided that the Executive remains in employment and forfeiture events have not occurred Non-Executive Directors(audited) During the year, the Executive Directors reviewed the fees paid to Non-Executive Directors. The conclusion of the review was that the base fee should be increased by 3.4% to £90,500 (2021: £87,500) and the other fees should remain unchanged (Committee membership fee of £10,000 and Committee Chair and additional responsibility fees of £10,000 (Audit Chair £20,000)). The base fee was last increased in 2020 and other elements were last increased in 2019. The table below details the fees paid to Non-Executive Directors during the year under review and the prior year. Certain Directors joined, retired or changed roles during the periods and their fees have been pro-rated for time served in the relevantposition: Fee (all elements) £000 Taxable benets 1 £000 Total £000 Name Board position 2021 2020 2021 2020 2021 2020 Robert Pickering 2 Independent Director – 103.8 – 0.0 – 103.8 Pat Butler 2 Senior IndependentDirector 107.5 116.7 0.0 0.0 107.5 116.7 Dr Pamela Kirby Remuneration Committee Chair 107.5 107.5 0.0 0.0 107.5 107.5 Ali Al-HusryNon-Executive Director 87.5 87.5 0.5 1.6 88.0 89.1 Dr Jochen GannNon-Executive Director – 43.8 – 8.8 – 52.5 John CastellaniCRE Committee Chair 107.5 107.5 6.5 9.7 114.0 117.2 Nina HendersonIndependent Director and Employee Engagement Lead 107.5 107.5 6.3 9.5 113.8 117.0 Cynthia Flowers Independent Director 97.5 97.5 4.1 6.1 101.6 103.6 Douglas Hurt Audit Committee Chair 117.5 66.7 0.0 0.0 117.5 66.7 1.‘Taxable benets’ includes certain accommodation expenses for Non-Executive Directors that are wholly related to their attendance at Board meetings and are in accordance with normal Hikma expense policy. These expenses are treated as taxable benets by the UK authorities and, where appropriate, the above gure includes the corresponding tax contribution 2.Pro-rated fees in respect of time served and position changes. Robert Pickering served as Senior Independent Director until 1 December 2020 and retired from the Board on 18 December 2020. Pat Butler served as Audit Committee chair until 1 December 2020, when he became the Senior Independent Director. Douglas Hurt joined the Board on 1 May 2020 and became Chair of the Audit Committee on 1 December 2020 ![]() 110 Hikma Pharmaceuticals PLC Annual Report 2021 #### Annual report on remuneration #### continued Payments to past Directors (audited) There were no payments to past Directors during the nancial year. Payments for loss of oce (audited) There were no payments for loss of oce during the nancial year. Terms of appointment and service Service contracts The details of the service contracts of the Executive Directors of Hikma in force at the end of the year under review, which have not changed during the year and are available for inspection at Hikma’s registered oce at 1 New Burlington Place, London W1S 2HR, were: Executive Director Company notice period Contract dateUnexpired term of contract Potential termination payment Said Darwazah 12 months 1 July 2007 Rollingcontract 12 months’ salary and benets Siggi Olafsson 12 months 20 February 2018 Rolling contract 12 months’ salary and benets Mazen Darwazah 12 months 25 May 2006 Rolling contract 12 months’ salary and benets The Executive Directors are not appointed for a specied term and, therefore, do not have an outstanding term that requires disclosure. Letters of appointment The Non-Executive Directors have letters of appointment with Hikma, not service contracts, which are available for inspection at Hikma’s registered oce at 1 New Burlington Place, London W1S 2HR. Appointments are made for a period of 36 months and then reviewed. Non-Executive Director Date ofappointment Notice payment Ali Al-Husry14 October 2005 1 month Pat Butler 1 April 2014 1 month Dr Pamela Kirby1 December 2014 1 month John Castellani1 March 2016 1 month Nina Henderson 1 October 2016 1 month Cynthia Flowers1 June 2019 1 month Douglas Hurt 1 May 2020 1 month Hikma complies with the UK Corporate Governance Code requirement that all Directors be subject to annual election by shareholders. External appointments Hikma recognises that Executive Directors may be invited to take up non-executive directorships or public sector and not-for-prot appointments, and that these can broaden the experience, network and knowledge of the Director, from which Hikma can benet. ExecutiveDirectors may accept external appointments as long as they do not lead to a conict of interest and are allowed to retain any fees. During the year under review, Said Darwazah and Mazen Darwazah received fees of $4,100 (2020: $4,100), and $20,700 (2020:$19,250), respectively, relating to external appointments which are detailed in their Director proles on page 70. The process for controlling external commitments is described in the governance statement on page 76. Closingstatement We have continued to develop our approach to remuneration reporting this year and the Committee hopes that this has aided your understanding of our Remuneration Policy and practices. Please do not hesitate to contact me if you have any questions or observations. For and on behalf of the Remuneration Committee Dr Pamela Kirby Chair of the Remuneration Committee 23 February 2022 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 111 GOVERNANCE #### Directors’ report Report of the Directors toshareholders and stakeholders The Directors submit their report together with the audited nancial statements for the year ended 31 December 2021. This report forms the management report for the purposes of the Disclosure and Transparency Rules. Readers are asked to cross refer to the other sections of the Annual Report to the extent necessary to meet Hikma’s reporting obligations as follows (statements that are not applicable have been excluded): – Likely future developments of Hikma: Strategic report and the Business and nancial review, pages 1 to 35 – Long-term incentive schemes: Directors’ remuneration report, page107 – Related party transactions: Note 38 to the Group nancial statements, page 175 – Going concern statement: Risk management report, page 62 – Long-term viability statement: Risk management report, page 63 – Names and biographical details of the Directors: corporate governance report, pages 70 and 71 – Independence of Non-Executive Directors: corporate governance report, page 75 – Directors’ share interests: Directors’ remuneration report, pages 89 and 110 – Greenhouse gas emissions: Sustainability report, pages 44 to 52 – Financial instruments and risk: Note 29 to the Group nancial statements, pages 161 to 167 – Stakeholder and S.172 Statement, pages 12 to 17 – corporategovernance statement including the applicable governance code: pages 74 and 76 – internal control and risk management systems for the nancial reporting process: pages 85 and 86 – composition and operation of the administrative, management andsupervisory bodies and committees: pages 70 to 73 – diversity policy and its application: pages 69 and 81 For the purposes of Listing Rule 9.8.4, shareholders are directed inaccordance with the following table to notes in the Group nancialStatements: Item Reference Interest capitalised and associated tax relief Page 112 Publication of unaudited nancial informationNone Details of long-term incentive schemes See Note 37 on pages 172 to 174 Waiver of emoluments by Directors None Allotment of securities for cash, including bymajor subsidiaries None Controlling entities/parent undertakings ofHikma None Contracts of signicance with a material interest of a Director or controlling shareholdersNone Services provided to Hikma by controlling shareholdersNone Arrangements by which shareholders have agreed to waive current or future dividends See Note 31 on pages 167 and 168 Controlling shareholder agreements and associated obligations Hikma does not have any controlling shareholders within the meaning of the Listing Rules Principal activity The principal activities of Hikma are the development, manufacture andmarketing of a broad range of generic, branded and in-licensed pharmaceutical products. Hikma’spharmaceutical operations are conducted through three business segments: Injectables, Generics, and Branded. The majority of Hikma’s operations are in the MENA region, the US and Europe. Hikma does not have overseas branches within the meaning of the Companies Act 2006 (the Act). Hikma’s net sales, gross prot and segmental results are shown by business segment in Note 5 to the Group nancial statements onpages 140 and 141. Results Hikma’s reported prot for the year in 2021 was $420 million (2020:$431million). Dividend The Board is recommending a nal 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, approximately 36 pence per share). The proposed dividend will be paid on 28 April 2022 to eligible shareholders on the register at the close of business on 28 March 2022, subject to approval at the AnnualGeneral Meeting on 25 April 2022. Creditor payment policy Hikma’s policy, which is also applied by all subsidiaries and will continue in respect of the 2022 nancial year, is to settle terms ofpayment with all suppliers when agreeing the terms of each transaction and to ensure that we abide by those terms of payment.Trade creditors ofHikma at 31 December 2021 were equivalent to 76days’ purchases (2020: 91 days), based on Group trade payables multiplied by 365, divided by trailing 12 months Groupcost of goods sold. Donations During the year Hikma made charitable donations of approximately $4.0 million (2020: $6.8 million): Type ofdonation Amount donated in 2020 ($) Amount donated in 2021 ($) Local charities serving communities in which Hikma operates 2,731,248 763,155 Medical (donations in kind) 4,068,232 3,188,896 Political donations and expenditure nilnil Total 6,799,480 3,952,051 Hikma’s policy prohibits the payment of political donations and expenditure within the meaning of the Act. ![]() 112 Hikma Pharmaceuticals PLC AnnualReport 2021 #### Directors’ report #### continued Research and development Hikma’s investment in research and development (R&D) during 2021represented 5.6% of Group revenue (2020: 5.9%). Further detailson Hikma’s R&D activities can be found on pages 8, 10, 18, 19, 21, 23 and 32. Interest The interest capitalised during the year under review was $nil (2020:$nil). The tax impact related to the capitalised interest was $nil (2020: $nil). Signicant contracts Due to the nature of Hikma’s business, members of Hikma are party toagreements that could alter or be terminated upon a change ofcontrol of Hikma following a takeover. However, none of these agreements is individually deemed to be signicant in terms of its potential impact on the business of Hikma taken as a whole. The Directors are not aware of any agreements between Hikma and its Directors or employees that provide for compensation for loss of oce or employment that occurs because of a takeover bid. There are no persons, with whom Hikma has contractual or other arrangements, who are deemed to be essential to the business ofHikma. Directors It is the Board’s policy that all Directors should retire and, should the Director wish to continue in oce, seek election or re-election on an annual basis. Accordingly, SaidDarwazah, Siggi Olafsson, Mazen Darwazah, Patrick Butler, AliAl-Husry, John Castellani, Nina Henderson, Cynthia Flowers and Douglas Hurt will seek re-election atthe AGM. Indemnities and insurance Hikma maintains an appropriate level of Directors’ and Ocers’ insurance. The Directors benet from qualifying third-party indemnities made by Hikma that were in force during the year and as at the date of this report. These indemnities are uncapped in amount in relation to losses and liabilities which Directors may incur to third parties in the course of the performance of their duties. Auditors Each person who was a Director of Hikma at the date when this report was approved conrms that: – so far as the Director is aware, there is no relevant audit information of which Hikma’s auditors are unaware – the Director has taken all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that Hikma’s auditors are aware ofthat information This conrmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006. Employee engagement Nina Henderson undertook the employee engagementactivities, asdescribed on page 67. Hikma continued to operate its existing employee engagement mechanisms which include intra-Group communications, social networking, an open door policy for legitimate union representatives and the operation of share incentive arrangements. Hikma does not discriminate against a potential employee on grounds of disability and will make reasonable adjustments to employ and develop disabled people. Stakeholder engagement Further information on the Board’s engagement with stakeholders isdetailed on pages 12 to 17. Equity Capital structure Details of the issued share capital, together with movements in the issued share capital during the year, can be found in Note 31 to the Group nancial statements on pages 167 and 168. Hikma has one class of Ordinary Shares of 10 pence each (Shares) which carries no right to xed income. Each share carries the right to one vote at general meetings of Hikma. As at 31 December 2021: Type Nominal value In issue Issued during the year Shares 10 pence 244,331,288 999,108 During 2021, Hikma issued Ordinary Shares solely pursuant to the exercise of options under the 2005 Long Term Incentive Plan, 2009 Management Incentive Plan, 2018 Management Incentive Plan, and 2014 Executive Incentive Plan. There are no specic restrictions on the size of a holding or on the transfer of shares, which are both governed by the general provision Hikma’s Articles of Association (the Articles) and prevailing legislation. The Directors are not aware of any agreements between holders of Hikma’s shares that may have resulted in restrictions on the transfer of securities or on voting rights. No person has any special rights with regard to the control of Hikma’s share capital and all issued shares are fully paid. During 2020, the Company purchased 12,833,233 Shares from Boehringer Ingelheim (the ‘Treasury Shares’). The Treasury Shares are held in treasury and, accordingly, do not receive dividends and do not exercisevoting rights. ![]() Hikma Pharmaceuticals PLC Annual Report 2021 113 GOVERNANCE Share buyback At the Annual General Meeting (AGM) on 23 April 2021, shareholders gave the Directors authority to purchase shares from the market up to an amount equal to 10% of Hikma’s issued share capital at that time. This authority expires at the earlier of 30 June 2022 or the 2022 AGM, which is scheduled for 25 April 2022. Share issuance At the AGM on 23 April 2021, the Directors were authorised to issue relevant securities up to an aggregate nominal amount of £8,111,072 and to be empowered to allot equity securities for cash on a non-pre-emptive basis up to an aggregate nominal amount of £1,216,660 at any time up to the earlier of the date of the 2022 AGM or 30 June 2022. The Directors propose to renew these authorities at the 2022 AGM for afurther year. In the year ahead, other than in respect of Hikma’s obligations to satisfy rights granted to employees under its various share-based incentive arrangements, and in relation to the merger reserve reduction that is subject to shareholder approval at the AGM, the Directors have no present intention of issuing any additional share capital of Hikma. Details of the employee share schemes are set out in Note 37 to the Group nancial statements on pages 172 to 174. Any Shares held by the Hikma Pharmaceuticals Employee Benet Trust (EBT) and are detailed in Note 31 to the Group nancial statements on page 168. TheEBT has waived its right to vote on any shares it holds and also toits entitlement to a dividend. Other than the shares held by the EBTthe Treasury Shares, no other shareholder has waived the right toa dividend. Annual General Meeting The AGM of Hikma will be held at Hikma Oces, 5th oor, 1 New Burlington Place, London W1S 2HR on Monday, 25 April 2022, starting at1.00 p.m. and arrangements are in place for virtual attendance. TheNotice convening the meeting is given in a separate document accompanying this document, and includes acommentary on the business of the AGM, explains how shareholders can take part either in person or virtually, and notes to help shareholders exercise their rights at the meeting. Hikma provides for the vote on each resolution to be by poll rather than by show of hands. This provides for greater transparency and allows the votes of all shareholders to be counted, including those cast by proxy. The level of proxies lodged for each resolution is projected onto a screen as each resolution is put to the meeting. A‘vote withheld’ explanation is included in the Notice. The powers of the Directors are determined by the Articles, the UK Code and other relevant UK legislation. The Articles give the Directors the power to appoint and remove Directors. The power to issue and allot shares contained in the Articles is subject to shareholder approval at each AGM. The Articles, which are available on the website, may only be amended by special resolution of the shareholders. Substantial shareholdings As at the date of this document, Hikma had been notied pursuant to sections 89A to 89L of the Financial Services and Markets Act 2000 and Rule 5 of the Disclosure and Transparency Rules of the UKLA of the following interests in the voting rights attaching to the share capital of Hikma: Name of shareholderNumber of shares Percentage held 1 Darhold Limited 2 60,000,000 25.92% Capital Group International 11,385,712 4.92% Wellington Management Group LLP 11,556,882 4.99% BlackRock Group 11,573,836 5.00% 1.The percentages detailed relate to voting rights in the Company. Therefore, the Treasury Shares and shares held by the EBT have been excluded from the denominator for this calculation 2.Said Darwazah, Mazen Darwazah and Ali Al-Husry, each being a Director and shareholder of Hikma, are shareholders and Non-Executive Directors of Darhold Limited. See page 107 for details of their interests in Darhold Limited Since the year end, Blackrock Group notied the Company that theirholding had increased to 11,844,039 representing 5.10% of thevoting capital. Pre-emptive issue of shares During the year under review, and in the period since the date of Hikma’s Initial Public Oering on 1 November 2005, Hikma did not issue any shares pursuant to an authority given by shareholders at an AGM to issue shares for cash on a non-pre-emptive basis, other than in respect of the placing undertaken on 17 January 2008. Post balance sheet events 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cash consideration of $46 million. Due to the proximity of thecompletion of the transactions to the date of issuance of the consolidated nancial 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 for workingcapital. On 23 February 2022, the Board authorised management to undertake a share buyback with a value of up to $300 million. Furtherdetails are available in the announcement of the preliminaryresults which was to be made on 24 February 2022. ![]() 114 Hikma Pharmaceuticals PLC AnnualReport 2021 #### Directors’ Responsibilities Statement Directors’ responsibilities statement The Directors are responsible for preparing the Annual Report andthenancial statements in accordance with applicable law andregulation. Company law requires the Directors to prepare nancial statements for each nancial year. Under that law the Directors have prepared the Group nancial statements in accordance with UK-adopted international accounting standards and the Company nancial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law). In preparing the Group nancial statements, the Directors have also elected to comply with International Financial Reporting Standards issued by the International Accounting Standards Board (IFRSs as issued by IASB). Under company law, Directors must not approve the nancial statements unless they are satised that they give a true and fair view of the state of aairs of the Group and Company and of the prot or loss of the Group for that period. In preparing the nancial statements, the Directors are required to: – select suitableaccounting policies and then apply themconsistently – statewhether applicable UK-adopted international accounting standards and IFRSs issued by IASB have been followed for the group nancial statements and United Kingdom Accounting Standards, comprising FRS 101 have been followed for the Company nancial statements, subject to any material departures disclosed and explained in the nancial statements – make judgements and accounting estimates that are reasonable and prudent;and – prepare the nancial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continuein business The Directors are responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for keeping adequate accounting records that are sucient to show and explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the nancial position of the Group and Company and enable them to ensure that the nancial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of nancial statements may dier from legislation in otherjurisdictions. Directors’ conrmations The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s and Company’s position and performance, business model and strategy. Each of the Directors, whose names and functions list in the Directors’ report conrm that, to the best of their knowledge: – the Group nancial statements, which have been prepared in accordancewith UK-adopted international accounting standards and IFRSs issued by IASB, give a true and fair view of the assets, liabilities, nancial position and prot of the Group; – the Company nancial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities, and nancial position of the Company; and – the Annual Report and nancial statements includes a fair review of the development and performanceof the business andthe position of the Group and Company, together with a description of the principal risks and uncertainties that it faces Electronic communications Hikma’s preference is to communicate through Hikma’s website, ratherthan in paper form. Shareholders are encouraged to visit the website to access Hikma’s Annual Reports and half-year and nal results presentations. Shareholders who wish to receive paper communications can elect to do so through Hikma’s registrars, LinkAsset Services ( www.hikmashares.com ). On behalf of the Board Said Darwazah Executive Chairman 23 February 2022 Sigurdur Olafsson Chief Executive Ocer 23 February 2022 ![]() FINANCIAL STATEMENTS Hikma Pharmaceuticals PLC Annual Report 2021 115 #### Financial statements We deliver accurate, high-qualityand #### timelyinformation #### toallstakeholders #### withthe utmost #### integrity and eciency. In this section 116 Independent auditors’report 124 Consolidated nancial statements 129 Notes to the Consolidated nancial statements 180 Company nancial statements 182 Notes to the Company nancial statements ![]() 116 Hikma Pharmaceuticals PLC Annual Report 2021 #### Independent auditors’ report to the members #### of Hikma Pharmaceuticals PLC #### Report on the audit of the nancial statements Opinion In our opinion: – Hikma Pharmaceuticals PLC’s Group nancial statements and Company nancial statements (the “nancial statements”) give a true and fair view of the state of the Group’s and of the Company’s aairs as at 31 December 2021 and of the Group’s prot and the Group’s cash ows for the year then ended; – the Group nancial statements have been properly prepared in accordancewith UK-adopted international accounting standards; – the Company nancial statements have been properly prepared in accordancewith United KingdomGenerallyAccepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework”, and applicable law); and – the nancial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the nancial statements, included within the Annual Report, which comprise: the consolidated and Company balance sheets as at 31 December 2021; the consolidated income statement and the consolidatedstatement of comprehensive income, the consolidated cash ow statement, and theconsolidated and Company statements of changes in equity for the year then ended; and the notes to the nancial statements, which include a description of the signicant accountingpolicies. Our opinion is consistent with our reporting to the Audit Committee. Separate opinion in relation to IFRSs as issued bytheIASB As explained in note 2 to the nancial statements, the Group, in addition to applying UK-adopted international accounting standards, has also applied international nancial reporting standards (IFRSs) asissued by the International Accounting Standards Board (IASB). In our opinion, the Group nancial statements have been properly prepared in accordance with IFRSs as issued by the IASB. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the nancial statements section of our report. We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis for our opinion. Independence We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the nancial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fullled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided. Other than those disclosed in Note 7, we have provided no non-audit services to the Company or its controlled undertakings in the period under audit. Our audit approach Overview Audit scope – Our audit included full scope audits of four components, specied procedures on specic nancial statement line items of one additional component, central audit procedures on specic nancial statement line items of two components and audit procedures performed centrally over specic material balances at locations around the Group. Full scope components account for 72% of consolidated revenue, 73% of the adjusted prot measure we use as a basis for determining materiality and 79% of consolidated totalassets. – This year we have also specically set out our consideration of the impact of climate change on the audit which is further explained below. As explained in the Sustainability Report, the Group is clearly mindful of its impact on the environment and is focussed on ways to reduce climate related impacts. In planning and executing our audit we have considered the Group’s risk assessment process and this, together with discussions with our own sustainability specialists, provided us with a good understanding of the potential impact of climate change on the nancial statements. Based on this, we understand that the key impact to the Group could be a potential increase in input costs for energy intensive supplies like APIs and packaging materials due to carbon pricing. This would most likely impact the nancial statement line items and estimates associated with future cash ows since the impact of climate change is expected to become more notable in the medium to long term. Thekey areas impacted include valuation of goodwill and intangibleassets and recoverability of the Group’s deferred tax assets. We note that management’s assessment is that the impact on Hikma is immaterial, nevertheless, while auditing the estimates associated with the forecasts, we have challenged management onreecting the impact of climate change and any climate change related commitments in the cash ows. We have not identied anymatters as part of this work which contradict the disclosures inthe Annual Report or lead to any material adjustments to the nancial statements. Key audit matters – Valuation of goodwill and intangible assets (Group) – Valuation and accuracy of gross to net rebate and return adjustments in the US (Group) – Reorganisation of holding companies under Hikma Pharmaceuticals PLC (Company) Materiality – Overall Group materiality: $25 million (2020: $24 million) based onapproximately 5% of prot before tax aer adjusting for all exceptional items and otheradjustments except foramortisation ofintangible assets other than soware. – Overall Company materiality: $21.6 million (2020: $21.6 million) based on 1% of total assets, capped based on overall Group materiality. – Performance materiality: $18.75 million (2020: $18 million) (Group) and $16.2 million (2020: $16.2 million) (Company). ![]() Hikma Pharmaceuticals PLC Annual Report 2021 117 FINANCIAL STATEMENTS The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the nancial statements. Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most signicance in the audit of the nancial statements of the current period and include the most signicant assessed risks of material misstatement (whether or not due to fraud) identied by the auditors, including those which had the greatest eect on: the overall audit strategy; the allocation of resources in the audit; and directing the eorts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the nancial statements as a whole, and in forming our opinion thereon, and we donot provide a separate opinion on these matters. This is not a complete list of all risks identied by our audit. ‘Reorganisation of holding companies under Hikma Pharmaceuticals PLC’ is a new key audit matter this year. ‘Tax including completeness and valuation of provisions for uncertain tax positions’ and ‘Impact ofCOVID-19’, which were key audit matters last year, are no longer included because of the reduced level of judgement in respect of uncertain tax positions following simplication of Hikma’s tax structure in 2019 and further clarity on the treatment of certain tax matters; and due to the insignicant impact of COVID-19 on business performance and control environment, and the audit process due to well established ways of remote working. Otherwise, the key audit matters below are consistent with last year. ![]() 118 Hikma Pharmaceuticals PLC Annual Report 2021 Valuation of goodwill and intangible assets (Group) Key audit matterHow our audit addressed the key audit matter At 31 December 2021, the Group had goodwill of $285 million (31 December 2020: $289 million) and intangible assets of $607 million (31 December 2020: $587 million) comprising product-related intangible assets, soware and other identied intangible assets such as marketingrights, customer relationships and trademarks. These are contained within four cash generating units (CGUs): Generics, Generic Advair Diskus®, Branded and Injectables. All CGUs containing goodwill and indenite-lived intangible assets must be tested for impairment annually and nite-life intangible assets are tested when there is an indication of impairment. An impairment is booked when the carrying value exceeds the recoverable amount. Judgement is required in assessing whether an impairment trigger event has happened and there is signicant estimation uncertainty in respect of calculating the recoverable value of CGUs and assets to determine whether an impairment charge should be booked. Impairment wasdetermined to be a signicant risk for the Generics, Generic Advair Diskus® and Branded CGUs. Additionally, the Group must consider whether there are indicators of impairment reversal at each reporting date. Such indicators are usually theopposite of the indicators of impairment that previously gave rise to the impairment and there is judgement involved in assessing the existence of theseimpairment reversal indicators. Once indicators for impairment reversal are identied, the determination of recoverable values requires signicant estimation on the part of management in determining the higher of the value inuse (VIU) and fair value less costs to dispose (FVLCTD) for the relevant individual assets or CGUs. These reversal considerations are relevant to the Generics and Generic Advair Diskus® CGUs in particular due to the impairment recorded in 2017 in relation to these CGUs. During 2021, no impairment has been recorded on a CGU level. Impairment of$23 million was recorded in respect of product related intangibles; a furtherimpairment of $1 million was recorded in respect of other intangible assets. Animpairment reversal of $60 million has been recorded on individual marketed product related intangibles, including $46 million in respect of Generic Advair Diskus®. Refer to the Audit Committee review of areas of signicant judgement on pages84-85, signicant accounting policies (note 2), critical accounting judgements and key sources of estimation uncertainty (note 3) and goodwill and other intangible assets (note 16) in the Group nancial statements. We assessed the determination of the CGUs identied for the impairment calculation by considering the CGUs previously used as well as from ourunderstanding of the business as it develops and how it is monitored. Weconclude that management’s determination of four CGUs in 2021 isreasonable. With support from our internal valuations experts we performed the followingprocedures: – Understood management’s process for forecasting cash ows; – Evaluated the appropriateness of the methodology used in the relevant impairment models; – Tested the completeness and accuracy of the models as well as the underlying data used in the models, including reconciling the cash ows tothe Board approved plan (which includes the impact of COVID-19 and climate change impact considerations); – Evaluated the signicant assumptions used by management in determining future cash ows, including cash ow growth or decline, pricing and protability, timing and probability of regulatory success for key products; – Our internal valuations experts assessed the reasonableness of the valuation methodology, discount rates, long term growth rate and mathematical accuracy; – We also compared management forecasts to analyst consensus cash ows for theGenerics, Injectables and Branded businesses and the Generic Advair Diskus® CGU and challenged management where there were signicant dierences; – Performed a retrospective comparison of forecasted revenues and costs toactual past performance including challenging management to produce additional analysis on a constant currency basis; and – For the Generic Advair Diskus® CGU and intangible asset valuation, wechallenged management’s weighting of scenarios within the valuationmodel based on the expected impact of competition and regulatory updates. Based on our work we determined our own sensitivities and applied these tomanagement’s models for each of the four CGUs. We found management’s conclusions on the CGUs and indenite-lived intangible asset impairment assessments to be reasonable, although the headroom on the Generic Advair Diskus® CGU is more sensitive to the key assumptions around growth and discount rates. Additional disclosures have been included by management in accordance with IAS 36. We conclude the analyses performed and disclosed in note 16 of the Group nancial statements are reasonable. We also validated the appropriateness of the related disclosures in notes 2 and 3 of the Group nancial statements. We also tested management’s impairment indicators assessment for nite life intangible assets and found this to be reasonable. For impairment reversal considerations, we audited management’s assessment of impairment reversal indicators both at the CGU level (Generics and Generic Advair Diskus®) and at the individual intangible asset level taking into account the conditions in the US generics market and factors relating to Generic Advair Diskus® and consulted with our internal technical accounting experts on the accounting judgements involved. Where indicators for impairment reversal were identied, we tested management’s cash ow models for recoverable value in line with our testing over the CGU level models and agreed the cash ows to the Board approved business plan. Based on our procedures, we concluded it was appropriate to reverse $60 million of impairment on specic marketed products which showed discrete and sustained recovery inperformance. Weconsider management’sposition on not reversing impairment of the Generics CGU to be reasonable based on key judgements disclosed in note 3 to the Group nancial statements. #### Independent auditors’ report to the members #### of Hikma Pharmaceuticals PLC #### continued ![]() Hikma Pharmaceuticals PLC Annual Report 2021 119 FINANCIAL STATEMENTS Valuation and accuracy of gross to net rebate and return adjustments in the US (Group) Key audit matterHow our audit addressed the key audit matter Management is required to make estimates in respect of revenue recognition and specically, the level of returns and indirect rebates that will be realised against the Group’s revenue. These estimates are complex, material to the nancial statements and require signicant estimation by Directors to establish an appropriate provision, hence the reason for inclusion as an area of focus. The signicant estimates relate to revenue recognition through indirect rebates and returns in the US for which the Group recorded revenue deductions for the year ended 31 December 2021 of $211 million (2020: $174 million). Chargebacks and direct rebates are no longer considered a signicant risk due to the lower level of estimation compared to the other categories of provision and to the limited number of misstatements in previous years on this category. The Directors have determined a provision of $196 million to be necessary at31December 2021 (2020: $154 million) in respect of indirect rebates and returns. Refer to the Audit Committee review of areas of signicant judgement on pages 84-85, signicant accounting policies (note 2), critical accounting judgements and key sources of estimation uncertainty (note 3), trade and otherreceivables (note 21) and other current liabilities (note 27) in the Group nancial statements. Working alongside our US component team, we considered the Group’sprocesses for making judgements in this area and performed thefollowing procedures: – Assessed the revenue recognition policy and tested the operating eectiveness of certain applicablecontrolsin placearound this process; – Tested returns, and rebates payments and credit memos throughout the year by agreeing selected transactions back to the underlying source documentation including customerclaims andpayment information; – Performed analytical procedures over channel inventory for major wholesalers for which data was obtained from a third party service provider; – Developed an independent expectation or tested management’s process for the largest elements of the provisions as at 31 December 2021 using assumptions and inputs based on contracted prices and rebate terms, historical rebates, discounts, validated channel inventory levels, and invoices received or payments made, as applicable, subsequent to year-end to validate the provisions. We compared this expectation to the actual provision recognised by the Group; and – Considered the historical accuracy of the Group’s estimates in previous years and the eect of any adjustments to prior years’ provisions in the current year’s results. Based on the procedures performed, we did not identify any material dierences between our independent expectations andthe provisions recorded. We also evaluated the disclosures in note 2, note 3, note 21 and note 27 of the Group nancial statements which we considered appropriate. Reorganisation of holding companies under Hikma Pharmaceuticals PLC (Company) Key audit matterHow our audit addressed the key audit matter In the current year, the holding company structure under Hikma Pharmaceuticals PLC was simplied by liquidating two downstream holding companies and transferring the net assets up to the Company by way of a dividend of$2,179 million primarily via anon-cash intercompany transfer. Following this, the Company wrote down its investment in the intermediate holding subsidiary by $2,222 million. The net impact of the restructuring on theCompany was a loss of $43 million with an equivalent decrease in distributable reserves. Refer to investment in subsidiaries (note 4) and prot for the year (note 12) inthe Company nancial statements. We inspected the Board minutes for the subsidiaries being liquidated toconrm that the members have resolved to liquidate the companies. We also inspected the Board minutes for the subsidiary paying the dividend to conrm the dividend was appropriately approved. We understood the transaction that was being undertaken and conrmed the treatment was in accordance with the accounting policies and accounting standards. We also veried the journal entries for the liquidation and the dividend payment. We agree with management’s write-down of the Company’s investment in theintermediate holding company following the Company’s receipt of the netassets of the underlying holdings as a dividend, as this represents a valid trigger for impairment. In addition to auditing the accounting entries, we considered the impact ondistributable reserves with support from our internal experts to help us validate the impact of the restructuring on the distributable reserves of Company. We did not identify any issues in this regard. Based on the procedures performed we did not identify any material adjustments from the reorganisation. ![]() 120 Hikma Pharmaceuticals PLC Annual Report 2021 How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the nancial statements as a whole, taking into account the structure of the Group and the Company, the accountingprocesses and controls, andthe industry in which they operate. Procedures were performed prior to year-end to evaluate component auditor procedures and controls, and oversight discussions were undertaken by senior team members withcomponent auditors, to rene the audit approach and ensure sucient oversight of component auditors. As at 31 December 2021, Hikma Pharmaceuticals PLC had in total 57 subsidiaries and one joint venture as part of the Group. These entities may operate solely in one segment but more commonly operateacross two. Eachterritory (component) submits aGroup reporting package to Hikma’s central accounting team including its income statementand balancesheet prepared under Group accounting policies which are in compliance with IFRSs. We requested component teams in the US (Hikma USA), Jordan (Hikma Jordan) and Algeria (Hikma Algeria) to audit reporting packages of certain entities in these territories and report the results of their full scope audit work to us. This work was supplemented by a full scope audit of Hikma Pharmaceuticals PLC carried out by the Group engagement team. We also requested our component team in Portugal to perform specied procedures over specic balances in Hikma Portugal. Additionally, procedures were carried out by the Group audit team over specic balances in Hikma International Ventures Limited and Hikma International Pharmaceuticals; and, other procedures were performed centrally on the consolidation, taxation and specic material balances not covered by component auditors. Due to travel restrictions as a result of COVID-19, we have not been able to perform componentoversight visits. Nevertheless, we have accordingly increased the frequency of communication withour component teams through conference calls at the planning, execution and completion stages including increasing the involvement from senior team members from both sides. We have attended meetings withlocal management alongside ourcomponent auditors, reviewed selected working papers for all nancially signicantand material components, attended component audit clearance meetings as part of the interim and year end audit work, and performed other forms of oversightas considered necessary depending on the signicance of the component and the extent ofaccounting and audit issues arising. Full scope components account for 72% of consolidated revenue, 79% of consolidated totalassets and 73% of the adjusted prot measure we used as abasis for determining materiality. Materiality The scope of our audit was inuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual nancial statement line items and disclosures and in evaluating the eect of misstatements, both individually and in aggregate on the nancial statements as a whole. Based on our professional judgement, we determined materiality for the nancial statements as a whole as follows: Financial statements – Group Financial statements– Company Overall materiality $25 million (2020: $24 million).$21.6 million (2020: $21.6 million). How we determined it Approximately 5% of prot before tax aer adjusting for all exceptional items and other adjustments except for amortisationof intangible assets other than soware 1% of total assets, but capped at $21.6 million based on overall Group materiality Rationale forbenchmark applied The Group’s principal measure of earnings is core prot. Management believes that it reects the underlying performance of the Group and is a more meaningful measure of the Group’s performance. We took the equivalent reported measure into account in determining our materiality but did not add back certain non-coreitems unless we deemed them to be non-recurring in nature. Our materiality would have been higher if we had adjusted for all non- core items. The Company holds the Group’s investments and performs treasury functions on behalf of the Group. The strength of the balance sheet is the key measure of nancial health that is important to shareholders since the primary focus for the Company is the payment of dividends and servicing of debt. For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between $5 million and $21.6 million. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2020: 75%) of overall materiality, amounting to $18.75 million (2020: $18 million) for the Group nancial statements and $16.2 million (2020: $16.2 million) for the Company nancial statements. #### Independent auditors’ report to the members #### of Hikma Pharmaceuticals PLC #### continued ![]() Hikma Pharmaceuticals PLC Annual Report 2021 121 FINANCIAL STATEMENTS In determining the performance materiality, we considered a number of factors–the history of misstatements, risk assessment and aggregation risk and the eectiveness of controls–and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit Committee that we would report to them misstatements identied during our audit above $1.2 million (Group audit) (2020: $1.2 million) and $1.2 million (Company audit) (2020: $1.075 million) as well as misstatements below those amounts that, inour view, warranted reporting for qualitative reasons. Conclusions relating to going concern Our evaluation of the Directors’ assessment of the Group’s and the Company’s ability to continue to adopt the going concern basis of accounting included: – agreeing the underlying cash ow projections to Board approved forecasts, assessing how these forecasts are compiled, and assessing the accuracy of management’s forecasts; – evaluating the key assumptions within management’s forecasts; – considering liquidity and available nancial resources; – considering compliance with covenants in the current year and ability to comply with these at each future covenant reporting date in the going concern period; – assessing whether the plausible downside scenario prepared by management appropriatelyconsidered theprincipal risks facing thebusiness; and – evaluating the feasibility of management’s mitigating actions in theplausible downside scenario. Based on the work we have performed, we have not identied any material uncertainties relating to events or conditions that, individually or collectively, may cast signicant doubt on the Group’s and the Company’s ability to continue as a going concern for a period of at least twelve months from when the nancial statements are authorised for issue. In auditing the nancial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the nancial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Group’s andtheCompany’s ability to continue as a going concern. In relation to the Directors’ reporting on how they have applied the UKCorporate Governance Code, we have nothing material to add ordraw attention to in relation to the Directors’ statement in the nancial statements about whether the Directors considered it appropriate to adopt thegoing concernbasis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of thisreport. Reporting on other information The other information comprises all of the information in the Annual Report other than the nancial statements and our auditors’ report thereon. The Directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Our opinion on thenancial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurancethereon. In connection with our audit of the nancial statements, our responsibility is to read the other information and, in doing so, consider whetherthe other informationis materially inconsistent with the nancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the nancial statements or a material misstatement of the other information. If, based on the work we haveperformed, we conclude that there is a material misstatement ofthis other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors’ report for the year ended 31 December 2021 is consistent with the nancial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Directors’ report. Directors’ Remuneration In our opinion, the part of the Annual report on remuneration to beaudited has been properly prepared in accordance with the Companies Act 2006. Corporate governance statement The Listing Rules require us to review the Directors’ statements inrelation to going concern, longer-term viability and that part of thecorporate governance statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specied for our review. Our additional responsibilities withrespect to the corporate governance statement as other informationare described in the Reporting on other information section of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the nancial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to: – The Directors’ conrmation that they have carried out a robust assessment of the emerging and principal risks; – The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated; – The Directors’ statement in the nancial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identication of any material uncertainties to the Group’s and Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the nancial statements; – The Directors’ explanation as to their assessment of the Group’s and Company’s prospects, the period this assessment covers and why the period is appropriate; and – The Directors’ statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention toany necessary qualications or assumptions. ![]() 122 Hikma Pharmaceuticals PLC Annual Report 2021 Our review of the Directors’ statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statement; checking that the statement isinalignment with the relevant provisions of the UK Corporate Governance Code;and consideringwhether the statement is consistent with the nancial statements and our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit. In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the nancial statements and our knowledge obtained during the audit: – The Directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and providesthe information necessary for the members to assess theGroup’s and Company’s position, performance, business modeland strategy; – The section of the Annual Report that describes the review of eectiveness of risk management and internal control systems; and – The section of the Annual Report describing the work of the AuditCommittee. We have nothing to report in respect of our responsibility to report when the Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code specied under the Listing Rules for review by the auditors. Responsibilities for thenancial statements andtheaudit Responsibilities of the directors for the nancialstatements As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the nancial statements in accordance with the applicable framework and for being satised that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of nancial statements that are free from material misstatement, whether due to fraud or error. In preparing the nancial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concernbasis of accountingunless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the nancialstatements Our objectives are to obtain reasonable assurance about whether the nancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inuence the economic decisions of users taken on the basis of these nancial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the Group and industry, we identied that the principal risks of non-compliance with laws and regulations related to patent protection, product safety (including but not limited to the United States Food and Drug Administration regulations), competition and antitrust laws, pricing practices and legislation, tax legislation, and anti-bribery and corruption legislation (including but not limited to the Foreign Corrupt Practices Act), and we considered the extent to which non-compliance might have a material eect on the nancial statements. We also considered those laws and regulations that have a direct impact on the nancial statements such as the Companies Act 2006 and Listing Rules of the Financial Conduct Authority (FCA). We evaluated management’sincentives and opportunities for fraudulent manipulation of the nancial statements (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate nancial results and management bias in accounting estimates. The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group engagement team and/or component auditors included: – discussions with management and the Group’s legal counsels, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud; – assessment of matters reported on the Group’s whistleblowing hotline and results of management’s investigation of such matters; – challenging assumptions made by management in its signicant accounting estimates particularly in relation to estimation of rebate and return provisions and valuation of intangible assets (see related key audit matters above); and – identifying and testing journal entries, in particular any journal entries posted with unusual account combinations, journals posted by senior management, journals posted and reviewed by the same individual andconsolidation journals. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non- compliance with laws and regulations that are not closely related to events and transactions reected in the nancial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud mayinvolve deliberate concealment by, for example,forgery or intentionalmisrepresentations, orthrough collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will oen seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the nancial statements is located on the FRC’s website at: www.frc.org. uk/auditorsresponsibilities. This description forms part of our auditors’ report. #### Independent auditors’ report to the members #### of Hikma Pharmaceuticals PLC #### continued ![]() Hikma Pharmaceuticals PLC Annual Report 2021 123 FINANCIAL STATEMENTS Use of this report This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. #### Other required reporting Companies Act 2006 exception reporting Under the Companies Act 2006 we are required to report to you if, inour opinion: – we have not obtained all the information and explanations we require for our audit; or – adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or – certain disclosures of Directors’ remuneration specied by law are not made; or – the Company nancial statements and the part of the Annual report on remuneration to be audited are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Appointment Following the recommendation of the Audit Committee, we were appointed by the members on 11 May 2016 to audit the nancial statements for the year ended 31 December 2016 and subsequent nancial periods. The period of total uninterrupted engagement issixyears, covering the years ended 31 December 2016 to 31December 2021. #### Other matter In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these nancial statements will form part of the ESEF-prepared annual nancial report led on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual nancial report will be prepared using the single electronic format specied in the ESEF RTS. Darryl Phillips (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 23 February 2022 ![]() #### Consolidated income statement For theyear ended 31December2021 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Note $m$m$m $m$m$m Revenue 4 2,553 – 2,553 2,341 – 2,341 Cost ofsales (1,252) – (1,252) (1,128)(12) (1,140) Gross profit/(loss) 1,301 – 1,301 1,213 (12) 1,201 Selling, general andadministrativeexpenses (488) (73)(561) (464) (45)(509) Net impairmentlosson financial assets ––– (2) – (2) Research anddevelopment expenses (143) – (143) (137) – (137) Other operatingexpenses 9 (40) (37) (77) (47) (7) (54) Other operatingincome 9 2 60 62 3 77 80 Total operating(expenses)/income (669) (50) (719) (647) 25 (622) Operating profit/(loss) 5 632 (50) 582 566 13 579 Finance income 10 1 29 30 9 38 47 Finance expense 11 (56) (13) (69) (54)(15) (69) Gain from investment atfairvaluethroughprofit and loss (FVTPL) ––– 1 – 1 Results from jointventure 1 – 1 ––– Profit/(loss)before tax 578(34) 544 522 36 558 Tax 12 (129) 5 (124) (115)(13) (128) Profit/(loss)for theyear 449 (29) 420 407 23 430 Attributableto: Non-controllinginterests 32 (1) – (1) (1) – (1) Equity holdersofthe parent 450 (29) 421 408 23 431 449 (29) 420 407 23 430 Earnings pershare (cents) Basic 15 194.8 182.3 172.9 182.6 Diluted 15 193.1 180.7 171.4 181.1 124 Hikma Pharmaceuticals PLC AnnualReport 2021 ![]() Consolidated statementof #### comprehensive income For theyear ended 31December2021 2021 Reported results 2020 Reported results Note $m $m Profit forthe year 420 430 Other comprehensiveincome Items thatmaysubsequentlybe reclassified totheconsolidatedincomestatement, netoftax: Currency translationand hyperinflation movement (22) 39 Items thatwillnotsubsequently bereclassified tothe consolidatedincome statement, net oftax: Remeasurement ofpost-employment benefitobligations 26 (1) (1) Changein investments atfairvalue thro ughother comprehensiveincome (FVTOCI) 19 14 2 Total othercomprehensive income fortheyear (9) 40 Total comprehensive income fortheyear 411 470 Attributableto: Non-controllinginterests 2 2 Equity holdersof theparent 409 468 411 470 Hikma Pharmaceuticals PLC Annual Report 2021 125 FINANCIAL STATEMENTS ![]() #### Consolidated balance sheet At 31December 2021 2021 2020 (restated) 1 Note $m $m Non-current assets Goodwill 16 285 289 Other intangible assets 16 607 587 Property,plant andequipment 17 1,072 1,009 Right-of-use assets 33 74 59 Investments injoint ventures 18 10 9 Deferred taxassets 13 183 221 Financial andother non-currentassets 19 47 39 2,278 2,213 Current assets Inventories 20 695 757 Income taxreceivable 60 36 Trade andotherreceivables 1 21 816 700 Collateralisedand restricted cash – 4 Cash andcash equivalents 22 426 323 Other currentassets 1 23 97 102 2,094 1,922 Total assets 4,372 4,135 Current liabilities Short-termfinancial debts 24 112 158 Lease liabilities 33 9 10 Trade andotherpayables 25 468 470 Income taxpayable 57 72 Otherprovisions 26 31 28 Other currentliabilities 27 339 290 1,016 1,028 Net currentassets 1,078 894 Non-current liabilities Long-term financialdebts 28 651 692 Lease liabilities 33 74 72 Deferred tax liabilities 13 24 31 Other non-currentliabilities 30 140 164 889 959 Total liabilities 1,905 1,987 Net assets 2,467 2,148 Equity Share capital 31 42 41 Share premium 282 282 Other reserves (60) (80) Retained earnings 2,189 1,892 Equity attributable toequity holders oftheparent 2,453 2,135 Non-controllinginterests 32 14 13 Total equity 2,467 2,148 1.In2021, prepaymentshavebeenreclassifiedunder othercurrentassetswhich were previouslyclassifiedundertradeand othe r receivables, andhence at31 December 2020numbers have beenrestated reflecting $56million reclassificationfromtradeand other receivablesto othercurrent assets. Had this reclassification bee n appliedat 1January 2020,these line itemswouldhave beenrestatedby $49 million. (seeNotes 21and23) The consolidated financialstatements ofHikma Pharmaceuticals PLC, registerednumber 5557934, onpages124 to179were approve d bythe Boardof Directors on23 February2022 andsigned onits behalf by: Said Darwazah ExecutiveChairman 23 February 2022 Sigurdur Olafsson ChiefExecutiveOfficer 126 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() #### Consolidated statement #### of changes in equity For theyear ended 31December2021 Merger and revaluation reserves 1 $m Translation reserve $m Total other reserves $m Retained earnings $m Share capital $m Share premium $m Equity attributable to equity shareholders of the parent $m Non- controlling interests $m Total equity $m Balance at 1January 2020 57 (235) (178) 1,97241282 2,117 12 2,129 Profit forthe year 2 62 – 62 369 –– 431 (1) 430 Changeinfairvalueof investmentsatFVTOCI(Note 19) –– – 2 –– 2 – 2 Remeasurementofpost- employmentbenefitobligations (Note26)–– – (1) –– (1) – (1) Currency translation and hyperinflation movement –36 36 ––– 36 3 39 Total comprehensive income for theyear 6236 98 370–– 468 2 470 Total transactionswithowners, recogniseddirectly in equity Costofequity-settledemployee sharescheme(Note37) –– – 27 –– 27 – 27 Dividends paid(Note 14) –– – (109) –– (109) (1) (110) Share buyback (Note31) –– – (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 forthe year 2 48 – 48 373 –– 421 (1) 420 Changeinfairvalueof investmentsatFVTOCI(Note 19) –– – 14 –– 14 – 14 Realisationofrevalu ation reserve (3) – (3) 3 –– – – – Remeasurementofpost- employmentbenefitobligations (Note26)–– – (2) –– (2) – (2) Taxarising onremeasurementof post-employment benefit obligations –– – 1 –– 1 – 1 Currency translation and hyperinflation movement –(25) (25) ––– (25) 3 (22) Total comprehensive income for theyear 45 (25) 20 389 –– 409 2 411 Total transactionswithowners, recogniseddirectly in equity Costofequity-settledemployee sharescheme(Note37) –– – 29 –– 29 – 29 Exerciseof employeesshare scheme –– – (1) 1 – – – – Dividends paid(Note 14) –– – (120) –– (120) (1) (121) Balance at 31 December 2021 164 (224) (60) 2,189 42 282 2,453 14 2,467 1.Mergerand revaluation reservesmainlyrelates toColumbus businessacquisitionin 2016 2.A netImpairment reversalof $48millionhas beenallocatedfromretained earningsto themerger andrevaluation reservesin relationtoColumbusbusiness acquisitio nintangible assets (2020: $62million) (Notes6and 16) Hikma Pharmaceuticals PLC Annual Report 2021 127 FINANCIAL STATEMENTS ![]() #### Consolidated cash flow statement For theyear ended 31December2021 2021 2020 Note$m $m Cash flows fromoperatingactivities Cash generatedfrom operations 34 767 525 Income taxespaid (131) (68) Income taxesreceived 2 7 Net cashinflow fromoperating activities 638 464 Cash flowfrominvestingactivities Purchases ofproperty,plant andequipment (145) (172) Purchase ofintangible assets (84) (52) Proceeds fromsaleof investment atFVTOCI 5 – Additions ofinvestments atFVTOCI (3) (5) Proceeds frominvestment divestiture 1 2 Contingent considerationpaid (17) (60) Interest incomereceived 2 7 Investmentrelatedamounts released from/(heldin) escrow account 3 (3) Net cashoutflow frominvestingactivities(238) (283) Cash flowfromfinancingactivities Proceeds from issueof long-termfinancialdebts 10 1,543 Repayment oflong-term financialdebts (45) (1,372) Proceeds fromshort-term borrowings 383 430 Repayment ofshort-termborrowings (431) (367) Repayment oflease liabilities (31) (14) Dividends paid 14 (120) (109) Dividends paid tonon-controlling shareholders ofsubsidiaries (1) (1) Interest andbankcharges paid (50) (39) Share buyback – (375) Commitment feesreceivedrelatedto theshare buyback – 7 Payment toco-development andearnout paymentagreement (2) (1) Net cashoutflow fromfinancingactivities (287) (298) Net increase/(decrease) in cash and cashequivalents113 (117) Cash andcash equivalentsat beginning ofyear 323 442 Foreign exchangetranslationmovements (10) (2) Cash andcash equivalentsatend ofyear 22 426 323 128 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() #### Notes to the consolidated #### financial statements 1. Adoptionof new an drevised standards The followingrevisedStandards and Interpretations have beenissued and areeffectivefor annual periods beginningon 1January 2021. The Group hasnot earlyadopted anyot herstandard, interpretation or amendment thathas been issuedbut is notyeteffective. — Interest Rate BenchmarkReform– Phase2:Amendments toIFRS 9, IAS 39,IFRS 7,IFRS 4and IFRS16 The amendments providetemporary reliefswhich addressthe financial reporting effects whenan interbank offeredrate(IBOR) isreplaced with an alternativenearly risk-free interest rate(RFR).The amendments include thefollowing practical expedient: Apracticalexpedient torequire contractual changes,or changesto ca sh flowsthat aredirectly required by thereform, to betreatedas changesto afloatinginterest rate, equivalent toamovement in amarket rate ofinterest. These amendmentshad nosignificant impacton theconsolidated financial statementsof theGroup. Th eGroup intendsto use thepractical expedients infuture periods if theybecomeapplicable. — IFRIC agenda decision– Configuration andcustomisation costs ina Cloud ComputingArrangement The March2021 IFRSInterpretation Committee update includedan agenda decisionon configuration and customisation costsin acloud computingarrangementinvolvingSo ftwareasa Service (SaaS).The agenda decisionincluded guidanceon howentities shouldaccount for such configurationand customisationcosts. The Grouphas adopted theIFRIC update asa changein accounting policy. The impactrelatingto prior yearwas notmaterial andtherefore the applicationwas notretrospectivel y applied andwas recognisedinthe current yearconsolidated income st atementas exceptional item(Notes 6, 9and 16). 2. Significant accountingpolicies #### General information Hikma PharmaceuticalsPLC isa public limitedliability company incorporatedand domiciled inUnit edKingdom underthe Companies Act 2006. Theaddressof theregistered office is givenon page188. The Group’sprincipalactivities are thedevelopment, manufacturing, marketing andselling ofa broadrange ofgeneric, brandedand in- licensed pharmaceuticalproducts insolid,semi-solid,liquidand injectablefinaldosage forms. #### Basis of preparation Hikma Pharmaceuticals PLC’sconsolid ated financialstatements have been preparedin accordance with: (i)UK-adopted InternationalAccountingStandards andwith the requirementsof theCompanies Act2006 as applicable tocompanies reporting underthose standards. On 31December 2020, IFRSas adoptedby theEuropeanUnion at that datewas brought intoUK law and becameUK-adopted International AccountingStandard s, withfuturechanges being subject toendorsement by theUKEndorsement Board.The Group transitioned toUK-adopted Internat ional AccountingStandards inits consolidated financial statements on1January2021. This change constitutes achangein accounting framework. However,thereis no impact onrecognition, measurementor disclosurein theperiod reported asa resultof thechange inframework (ii)IFRSasissued bythe International AccountingStandardsBoard(IASB) The consolidatedfinancial statemen tshave beenprepared under the historical cost convention,except forthe revaluation to fairvalue of certainfinancialassets andliabilities. The accounting policiesincluded inthis notehavebeen applied consistently otherthan wherenew policieshave beenadopted. The Group’s previously published consolidated financial statements were prepared inaccordance with: (i)IFRS inconformity withthe requirementsof theCompanies Act2006 and theapplicablelegal requiremen tsof theCompaniesAct 2006.In addition tocomplyingwith IFRSin conformity withtherequirements of theCompaniesAct 2006,2020 fi nancial statementsalso comply with IFRSadoptedpursuant toRegulation(EC) No.1606/2002 asit applies intheEuropeanUnion (ii)IFRSasissued bythe International AccountingStandardsBoard(IASB) The presentationaland functionalcu rrency of HikmaPharmaceuticals PLC isthe US dollarasthe majorityof theCompany’sbusiness is conducted inUSdollars. #### Going concern The Directors believethat the Groupis well diversified dueto its geographic spread, productdiversityandlarge customerandsupplier base. Takinginto account theGroup’s current position andits principal risks for aperiodlonger than12 m onths fromthe dateof signingthe consolidated financial statement, a goingconcern analysishasbeen prepared using realistic scenariosapplying aseverebutplausible downside whichshowssufficient liquidityheadroom. Therefore, the Directorsbelieve that theGroup anditssubsidiariesare adequately placed tomanage its businessand financing risks successfully,despite the currentuncertain economicoutlook . Havingassessedthe principal risks, theDirectors considered ita ppropriate to adoptthe goingconcern basis of accountingin preparingthe consolidated financial statements. (see page62). Financialcovenantsare suspendedwhile the Group retainsits investmentgrade status fromtworating agencies 1 . Nevertheless, the covenants aremonitored andthe Groupwas incompliance on31 December 2021and expects tore mainin compliance withthose covenants forthe yearending inDece mber 2022even in thesevere but plausibledownside scenarios. Asof31 December2021 theGroup’s investmentgrade rating wasaffirmedby S&Pand Fitch. 1. Ratingagencies: means eachof Fitch, Moody’sand S&Por any oftheir affiliates orsuccessors Hikma Pharmaceuticals PLC Annual Report 2021 129 FINANCIAL STATEMENTS #### Notes to the consolidated financial statements #### continued 2. Significant accountingpolicies continued #### Basis of consolidation The consolidated financialstatements incorporatetheresults ofHikma PharmaceuticalsPLC (theCompany) andentities controlledby the Company (together theGroup). Control isachieved whenthe Group is exposed, orhas rights, tovariable returnsfromits involvement withthe investeeand hastheability toaffect those returns through itspower over the investee. The consolidated financialstatements include: — the assets andliabilities, results an dcashflows ofthe Companyand its subsidiaries (entities thatare controlledby theGroup, through the power ofgoverning thefinancialandoperatingpoliciesto obtain benefits fromits activities) — the Group’s shareof the resultsand net assetsofjointventures All subsidiaries and theCompanyfinancialstatementsconsolidatedare made upto 31 December eachyear. Interests acquiredinentities areconsolidated fromthe datethe Group acquires control and interestssoldare de-consolidatedfrom thedate control ceases. Goodwilliscapitalised asa separateitem inthecase ofsubsidiariesand as partof thecost ofinvestment inthecase ofjoint ventures andassociates. Transactions andbalances between su bsidiariesare eliminated andno profit before taxistaken onsales betweensubsidiariesuntilthe products are soldtocustomers outsidetheGroup. Transactionswith non-controlling interests arerecordeddirectlyinequity. Deferredtax relief onunrealisedintra-groupprofitis accounted foronly to theextent thatit is considered recoverable. #### Business combinations The acquisition ofsubsidiaries isaccountedfor usingthe acquisition method. All identifiable assets,liabilities andcontingentliabilities acquired aremeasured atfairvalue on theacquisitiondate.All acquisitionrelatedcosts arerecognised inthe consolidated income statement asincurred. The considerationismeasured at theaggregatefairvalues ofassets given,liabilitiesincurred or assumed,andequityinstrumentsissued by the Groupin exchangefor controlof the acquiree,at the acquisitiondate. Where applicable,this consideration mayincludethefair value ofassets or liabilitiesresultingfrom acontingent consideration arrangement. Contingent considerationclassifiedas anassetor liabilityis afinancial instrumentand, within thescope of IFRS 9‘FinancialInstruments’, is measured atfairvalue, withchanges infairvaluerecognisedin the consolidatedincome statem ent in linewith IFRS 9. Subsequent changes tothose fairvalues can onlyaffectthe measurementof goodwill, where theyoccur during the ‘measurement period’ andare as aresult of additional information becomingavailable about factsand circumstances thatex isted atthe acquisition date. All other changesaredealt within accordan ce withrelevant IFRSs.Thiswill usually meanthat changes inthe fairvalueof consideration are recognisedin theconsolid ated incomestatement. Where abusinesscombination isachievedin stages,the Group’s previouslyheld interests intheacqu iredentity areremeasured to fair value atthe acquisition date(i.e. thedate theGroup attains control). The resulting gainor loss,if any,isrecognisedin theconsolidated income statement. Goodwillarisingonacquisitionis re cognised asan assetandinitially measuredat cost,being theexcess of theaggregate ofconsideration, non- controllinginterest and fairvalue ofpreviously heldequityinterest overthe fairvaluesof the identifiablenet assetsacquired.If,after reassessment,the Group’sinterest inthe netfair valueofthe acquiree’sidentifiable assets, liabilitiesandacquiredcontingent liabilities exceedsthe costofthe consideration,the excessis recognised immediatelyin theconsolidated incomestatement. The non-controllinginterest intheacquireeis initiallymeasured atthe non-controllinginterest’sproportionof the netfairvalueof theassets, liabilitiesandacquired contingent liabilitiesrecognised. If theinitialaccounting fora business combination isincomplete bythe end ofthe reportingperiodin whichthe combinationoccurs,the Group reports provisionalamounts for theitemsforwhich theaccountingis incomplete.Those provisional amounts areadjustedduringthe measurement period, oradditionalassets orliabilities arerecognised, to reflectnewinformation obtainedabout factsand circumstancesthat existed asof the acquisition datethat , ifknown, wouldhave affected the amounts recognisedas of thatdate. The measurement periodis the peri odfromthe dateofacquisition to thedate theGroup obtains comp lete information about factsand circumstances that existedas of theacquisitiondate and issubject to amaximum ofoneyear. #### Investments in joint ventures Joint venturesareentities thatthe Gr ouphas theabilityto exercise joint control overtheir economic activities andnet assets. The results andassets and liabilities of jointventuresare incorporated in theseconsolidated financial statements usingthe equitymethod of accounting,wherethe investment s arecarriedin the consolidated balance sheetatcost asadjustedfor post-acquisition changesin the Group’s shareof the netassets of th e jointventure, lessanyimpairment in thevalue ofindividualinvestments.Lossesof ajoint venturein excess of theGroup’s interestinthat joint venture (whichincludesanylong-term interests that,in substance,form pa rtofthe Group’snet investment in the jointventure) are recognisedonlytothe extentthat theGroup has incurredlegal orconstructiveobligati onsor made payments onbehalfof the joint venture. Any excessofthe costof acquisition overthe Group’s shareof thenet fair value ofthe identifiable assets, liabilities and acquired contingent liabilitiesof the joint venturerecognisedat thedate ofacquisitionis recognised asgoodwill. The goodwill isincludedwithinthe carrying amount ofthe investment and isassessedfor impairment as partof that investment.Any impairmentchargesare recognisedimmediately inthe consolidated income statement. Where aGroup entity transactswith a joint venture ofthe Group,profits and lossesare eliminatedto theextent oftheGroup’sinterest inthe relevantjoint venture. Theaggregateof Group’s share of profitorlosses after taxof jointventures isshown ontheface ofthe consolidatedincome statement belowoperating profit an d representsprofit aftertax. 130 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 2. Significantac counting policies continued #### Foreign currencies Foreign currencytransactions, beingtransactions denominatedin a currency otherthan anindividual Group entity’sfunctional currency, are translated intothe relevant functionalcurrencies of individualGroup entities ataverage ratesfor therelevant monthlyaccounting periods, which approximate toactual rates.Monetary assets andliabilities arising from foreigncurrency transactions are retranslated atexchange rates prevailing at thereporting date.Exchangegains andlosses on loans and onshort-term foreigncurrency bo rrowingsand deposits areincluded within financeincome andexpense. Exchangedifferences onall other foreign currencytransactions arereco gnisedin operating profitin the individual Groupentity’saccountingrecords. Non-monetaryitemsarising from foreigncurrency transactionsar e notretranslatedin theindividual Group entity’saccounting records.Inthe Consolidated Financial Statements, incomeand expense items forGroup entitieswitha functional currencyother thanUS dolla rsare translatedinto USdollars at averageexchangerates, whichapproximate to actual rates,for the relevant accounting periods.Assetsand liabilitiesaretranslatedat the US dollarexchange rates prevai ling atthe reporting date. Exchange differencesarising onconsolidationarerecognised inthe consolidated statement ofothercomprehensiveincome.Onthe disposalof foreign operationentities,theaccumulatedforeign exchangegains/losses arereclassifiedfrom OCItothe consolidatedincome statement. #### Hyperinflationary economies Inhyperinflationary economies,when translatingtheresultsof operations intoUSdollars,assets, liabilities, income statementand equityaccounts are translatedatthe rateprevailing onthebalancesheet date.In territories wherethere arerestrictionson thefree accesstoforeign currencyor multipleexchange rates,the applicablerates ofexchange areregularly reviewed.Lebanon andSudan wereconsidered tobe hyperinflationary economies inthe yearended 31December 2021at whichdate the prevailingrates were436.28 Sudanese poundper USdollar and 1,507.5 Lebanesepound per USdollar.Any gain orlosson netmonetary asset/liabilityisrecognisedin theconsolidatedincome statement.The effect ofinflation on non-monetaryasset/liability is recognised in other comprehensiveincomewithinequity. #### Revenue recognition Under IFRS15 revenueis recognised inthe consolidatedincome statement whencontrol of thegoodsor servicesaretransferred to the customerat anamount thatreflects theconsideration towhich the Group expectstobe entitledin exchange forthose goodsand services. The point atwhich control passesisdetermined by eachcustomer arrangement, butgenerally occurs on deliveryto thecustomer. The Groupmanufactures certainmedicines onbehalf ofsome customers. Therevenue fromproviding contractmanufacturing services is recognised whenthesemedicines are approvedbythe qualitycontrol department. There isno alternativeuseof thesemedicines and also the Group hasenforceableright topaymentsonce thesemedicines are quality approved. The Group hasgenerallyconcludedthat itactsas principal inits revenue arrangements because ittypically controls thegoods beforethe transfer to thecustomer. Revenue representsthe amountsreceivable afterthe deductionof discounts, valueadded tax,other salestaxes, allowancesgiven, provisions for chargebacksandaccruals forestimated futurerebates, returns andprice adjustments.The methodologyand assumptionsused to estimaterebates and returns are monitored andadjusted regularlyin light ofcontractual andhistorical information. The Groupdoes notexpect tohaveany contractswhere theperiod between thetransfer of thepromised goods orservices tothe customer and paymentby the customerexceeds oneyear.As aconsequence, the Groupdoes notadjust anyof the transactionprices forthe time value of money. Variable consideration The ultimate netsellingpriceis calculatedusingvariableconsideration estimates forcertain grossto netadjustments. #### Chargebacks Theprovisionfor chargebacksis themostsignificantand complexestimate usedin therecognition ofrevenue. Inthe US,the Groupsells itsproducts directlytowholesaledistributors, genericdistributors,retail pharmacy chains andmail-order pharmacies.The Groupalso sellsits products indirectlyto independentpharmacies, managedcare organisations, hospitals,and grouppurchasingorganisations, collectivelyreferred toas ‘indirect customers’.The Group entersinto agreementswithitsindirect customers toestablishpricing forcertainproducts. Theindirectcustomers thenindependentlyselecta wholesalerfromwhich theypurchasethe productsat agreed-uponprices. TheGroupwillprovide creditto the wholesalerforthe differencebetweenthe agreed-upon pricewiththe indirectcustomer andthewholesaler’s invoice price.This creditiscalled achargeback. Theprovisionforchargebacks isbased onhistorical sell-throughlevels bythe Group’swh olesale customerstothe indirect customers, andestimatedwholesaler inventorylevels. Assalesare made tolargewholesale customers, theGr oupcontinuallymonitors thereserve forchargebacks andmakes adjustmentswhen itbelieves thatactual chargebacksmaydiffer from estima tedreserves (seeNote21for chargebacks sensitivityanalysis). #### Returns The Grouphas aproduct returnpolicy thatallows customers toreturn the productwithina specifiedperiodprior toand subsequent tothe expiration date.Provisions forreturn s arerecognised as areductionof revenuein theperiod inwhichtheunderlying sales arerecognised. The Groupestimates itsprovision forreturns based onhistorical experience, representing management’sbest estimate.While such experience hasenabledreasonableestimations inthepast, historymay not alwaysbe an accurateindicator offuture returns. TheGroup continually monitorsthe provisions for returns andmakes adjustments when itbelievesthat actual productreturns maydifferfrom established reserves (seeNote27 forreturnsensitivityanalysis). #### Rebates In theUS, rebatesare granted towholesalerdistributorsand direct customers. Rebates arealso granted tohealthcare authorities andunder contractual arrangementswith certain indirect customers.Products sold in theUS arecovered by variousprogrammes (such asMedicaid)under which productsare soldat adiscount. The Groupestimatesits provision for rebatesbased oncurrent contractualterms andconditions aswellas historical experience, changes tobusinesspractices andcreditterms.While suchexperience has enabledreasonableestimations inthe past,history maynot always be anaccurateindicator of futurerebate liabilities.The Groupcontinually monitors theprovisionsfor rebates andmakes adjustments whenit believes that actualrebatesmay differ fromestablishedreserves. All rebates arerecognised inthe period inwhich theunderlying salesare recognised asa reduction ofrevenue (see Notes21 and 27for rebates sensitivity analysis). Hikma Pharmaceuticals PLC Annual Report 2021 131 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 2. Significant accountingpolicies continued Performance obligation Free goods Free goodsareissued tocertain custom ers as analternativeto discounts. Under IFRS15 these freegoods give riseto aseparateperformance obligation,whichrequires managementto allocatethetransaction price to theoriginalgoods andthe relatedfreegoods. Revenue forfree goodsis recognised whentheyare transferred tothe customerand a contract liabilityis recognised for theperformanceobligationsthatwill besatisfied in thefuture. #### Share-based payments At theCompany’sdiscretion andsubjectto theachievement of Group and personalperformancecriteriain theprior year, employees (including Executive Directors)ofthe Groupreceiveperformance basedremuneration intheform ofshare-based payments,whereby employeesrendertheir servicesin exchange fo rshares or rightsover shares (equity-settled transactions) undereither the 2014 ExecutiveIncentive Plans(EIP) or the 2009and2018 ManagementIncent ive Plan(MIP). Refer toNote 37 formore details. IFRS 2‘Share-BasedPayments’requires anexpense tobe recognisedwhen the Groupbuys goodsorservices in exchangeforshares orrightsover shares (share-basedpayments) orin exchangeforother equivalentassets. The costof share-based payments’transactionswith employeesis measured byreferenceto thefairva lue atthe dateatwhich theshare- based paymentsaregranted.The fairvalue of theEIP and MIPare determined based onBlack-Scholes methodology fornil-cost options using theshare priceas atthe date of grant discounted by dividend yield. Noaccount istaken ofanyperformance conditions. The costof share-based paymentsis recognised, togetherwith a correspondingincreasein equity,ona straight-linebasis over theyear of performanceand thevesting periodafterthe grantdate basedonthe Group’s estimateof cost ofequityinstrumentsthat will eventuallyvest. The Grouprevisesits estimateofthe numberofequity instruments expected tovestand theimpactof th erevision oftheoriginal estimates, if any, isrecognisedinthe consolidated income statement, suchthatthe cumulative expense reflectsthe revised estimate,with a corresponding adjustment toequity reserves. The dilutive effectof outstandingshare-based payments isreflected as additionalshare dilution inthecomputationof diluted earnings pershare. #### Retirement benefit costs — Payments madeto definedcontributionretirement benefit schemes are chargedas an expenseas theyfall due.Payments madeto state- managed retirementbenefit schemes are dealt withaspayments to defined contribution schemeswhere the Group’sobligations underthe schemes areequivalent tothose arisingin adefined contribution retirement benefitscheme. (Note40) — Incertaincountries andentities,the Grouphas post-employment definedbenefit plans.Accordingly, valuationsof theobligations under thoseplansare carriedout andanychangesin netliability dueto actuarialvaluationsand changesin assumptions aretaken asre- measurementgains orlosses inother comprehensiveincome.Changes inthe present valueofthe definedbenefit obligationsresultingfrom plan amendmentsor curtailmentsare recognisedimmediately inthe consolidated incomestatementaspast servicecosts — End of servicepayments areprovidedfor based onemployees’final salariesand allowancesand theircumu lative yearsof service. (Note 26) #### Dividend income Income from investments isrecognisedwhen the shareholders’ rightsto receive payment havebeen established. #### Leases In accordancewithIFRS 16,the Gr oupappliesa singlerecognitionand measurement approach for allleases, except forshort-termleases and leases of low-value assets.The Group recogniseslease liabilitiesto make lease paymentsand right-of-useassets representingthe right touse the underlying assets: — Right-of-use assets:The Grouprecognisesright-of-useassets atthe commencement dateof the lease(i.e.the datetheunderlyingasset is availablefor use).Right-of-use assets aremeasured atcost, lessany accumulated depreciation andimpairment losses, andadjusted for any remeasurement oflease liabilities. Thecost ofright-of-useassets includesthe amount oflease liabilitiesrecognised,initialdirect costs incurred, andlease paymentsmade ator beforethe commencement date lessanyleaseincentivesreceived. Unless theGroupis reasonably certain of obtainingownership ofaleased assetat theend ofthe lease term,the recognisedright-of-useassets aredepreciated ona straight- linebasis overthe shorterof itsesti matedusefullife andthe leaseterm. Right ofuse of assetsare depreciated ona straight-linebasis atthe followingdepreciationrates: Buildings4%to50% Machinery andEquipment20% to33% Vehicles13% to50% — Leaseliabilities: atthecommencementdate ofthe lease,the Group recogniseslease liabilitiesmeasured atthe presentvalueof lease paymentsto bemade overthelease term.The leasepayments include fixedpayments(including in-substancefixed payments),less anylease incentivesreceivable,variablelease paymentsthat dependonan index orarate, andamountsexpected tobepaid underresidualvalue guarantees. Thelease paymentsalso includetheexercise priceof a purchase option,payments foroptional extension periodsand payments ofpenalties forterminatingalease whenthese options arereasonably certain tobe exercisedbythe Group.The discountrate usedto calculate thelease liabilitiesis theincrementalborrowing rate(IBR). TheGroup estimatesthe IBRusing observableinputs(suchas marketinterest rates) whenavailable andis requiredtomake certainentity-specificestimates (suchasthe subsidiary’sstand-alonecreditprofile) — Short-termleases andleases oflow-value assets:theGroupapplies theshort-term leaserecognition exemptionto itsshort-termleases ofmachinery andequipment(iethose leasesthat havealeaseterm of 12 monthsorless fromthecommencementdate anddonot containa purchase option). Italso appliestheleaseof low-valueassets recognition exemption toleases ofofficeequipm ent thatare consideredof lowvalue (i.e.below $5,000).Lease payments on shortterm leasesand leasesof low-valueassetsare recognisedas anexpenseona straight-line basis overthe leaseterm 132 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 2. Significantac counting policies continued #### Taxes The Group providesforincome taxaccording to the lawsand regulations prevailingin thecountries where theGroup operates.Furthermore, the Group computesand records deferred taxassets andliabilities according to IAS12 ‘IncomeTaxes’. The taxexpense representsthe sum ofthe current taxin the current period anddeferred tax. CurrentIncomeTax Current incometax assets andliabilities aremeasured atthe amount expected tobe recovered fromor paidto the taxationauthoritieswithin one year. The currenttaxincurred inthe period isbasedon taxableprofitfor the yearand prioryear movement accounted forin the currentyear. Taxable profit differs fromnet profit as re ported inthe consolidated income statement because itexcludes item s of incomeor expense thatare taxable ordeductible in otheryears and itfurther excludesitems thatare never taxable ordeductible.The Group’s taxincurredis calculated using tax ratesthat have beenenacted or substantivelyenactedby the consolidated balance sheetdate. Deferred tax Deferred taxis the taxexpected to bepayableor recoverableon differences betweenthe carryingamount s ofassetsand liabilities inthe consolidated financial statements and thecorresponding taxbases used in thecomputation oftaxable profit and isaccounted for usingthe consolidatedbalancesheet liability method. Deferredtax liabilitiesare generallyrecognised forall taxabl etemporary differencesand deferred tax assetsare recognised tothe extent thatit isprobablethattaxable profits will beavailableagainstwhichdeductible temporary differences will reverse. Tothe extentthe temporary differencearisesfrom goodwill or from theinitialrecognition(other than ina businesscombination) of other assetsand liabilitiesin atransa ction thataffects neitherthe taxable profit northe accountingprof it, nodeferred taxis provided. Deferred tax liabilities are recognised fortaxable temporary differences arisingon investmentsin subsidiaries,andinterestsin joint ventures, except wheretheGroup isable toc ontrol thereversal of thetemporary difference and itisprobable thatth e temporary difference will notreverse in theforeseeablefuture. Deferred taxis calculatedat thetaxrates thatareexpected toapply in the periodwhen theliabilityis settled, orthe assetis realised.Deferredtax is chargedorcredited inthe consolidated incomestatement,except when itrelates toitems chargedor cr editeddirectly toequity,in which case thedeferredtax isalso dealtwithinequity. Deferred taxassets andliabilitiesare offset whenthere is alegally enforceable right tooffsetcurrent taxassets against currenttax liabilities and whenthey relate toincome taxes leviedby the sametaxation authority andthe Group intendsto settle itscurrenttax assetsand liabilities on anet basis. The carryingamount ofdeferredtax assetsis reviewedat each consolidated balance sheetdate andreduced to theextentthat itis no longer probable that sufficienttaxable profitswillbe available toallow all or partof the assetto be recovered. Uncertain taxposition In linewith IFRIC 23,ifit isconsideredprobable thata taxauthoritywill accept anuncertain taxtreatment,the taxcharge should becalculated on thatbasis. Ifit isnot consideredprobable, theeffect of theuncertainty should beestimatedand reflectedin the taxcharge.In assessingthe uncertainty,it isassumedthatthe taxauthoritywill have full knowledge of allinformation relatedto the matter. #### Exceptional items and other adjustments We usea numberof non-IFRSmeasures toreport and monitorthe performance ofour business.Manage ment usestheseadjusted numbers internallyto measureourprogress and forsetting performancetargets. We alsopresent these numbers,alongsideour reportedresults,to external audiences tohelp themun derstandthe underlying performance of ourbusiness. Ouradju sted numbers maybe calculateddifferently to other companies. Adjustedmeasures arenot substitutablefor IFRSnumbers andshould not beconsidered superior to resultspresentedin accordance withIFRS. #### Core results Reported results representthe Grou p’s overallperformance.However, these resultscan includeone-off ornon-cash items thatmask the underlying performanceof theGrou p. Toprovidea morecomplete pictureof theGroup’s performancean d toimprove comparability of our consolidated financial statementsto externalaudiences, weprovide, alongside ourreported results,core results, which area non-IFRS measure. Werepresent and discuss ourGroup andsegmentalfinancials reconciled between reportedand core results. Thispresentationallows forfull visibility and transparency of our financialsso thatshareholders are ableto clearlyassess theperformance factors ofthe Group. Our coreresultsexclude theexcepti onalitems andother adjustmentsset out inNote 6in the Notesto the consolidated financial statements. Exceptional items Exceptional itemsrepresent adjustmentsfor costsand profitswhich managementbelievestobe exceptional in naturebyvirtueof theirsize or incidence,orhave adistortive effectoncurrentyear earnings,such ascosts associatedwith businesscombinations, one-offgains andlosseson disposal ofbusinesses assets,reorganisation costsandanyexceptional itemsrelatedto taxsuchassignificant taxbenefit/expenseassociated with previouslyunrecogniseddeferred taxassets/liabilities. Other adjustments These includeamortisation, impairment charge/reversalof intangible assets excludingsoftwareandfinance incomeand expenseresulting from remeasurement andunwinding of contingent considerationand co-developmentearnout paymentagreementfinancial liabilities. #### Intangible assets An intangible asset isrecognisedif all thebelow conditionsare met: — it is identifiable — it is probablethat theexpected future economicbenefits thatare attributableto theasset will flowto the Group — the cost ofthe asset canbe measuredreliably The probability ofexpected future economic benefitsisassessed using reasonable andsupportable assumpti ons thatrepresentmanagement’s best estimateof theset ofeconomic conditions thatwill existover the usefullife ofthe asset.The assets areamortisedon astraight-linebasis on thefollowing amortisation rates: Customer relationships10% Product related intangibles5% to33% Trade names10% Marketing rights7% to 33% Software10% to33% Hikma Pharmaceuticals PLC Annual Report 2021 133 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 2. Significant accountingpolicies continued Judgement isused toassess thedegree ofcertainty attachedto theflow of futureeconomic benefitsthat are attributable tothe useofthe asset on thebasis of theevidence available at thetimeof initial recognition, giving greaterweightto external evidence. Expenditures onresearchand development activitiesarecharged to the consolidatedincome statement,except onlywhen the criteria for recognisingan internally generated intangible assetis met,which is usually whenapprovalfromthe relevantregulatory authorityis considered probable. Also, theGroupengages withthird-party researchand development companies todevelop productson itsbehalf.Substantial payments made tosuchthird partiesto fund researchand developmentefforts are recognised asintangibleassets ifthe capitalisation criteria foran intangibleasset are met,whichtypicallyis when licence feesand certain milestone payments aremade, all otherpayments arecharged tothe consolidated incomestatement. Principalintangibleassetsare: (a) Goodwill: arisingina businesscombination andis recognised as an assetatthe datethat controlis acquired(theacquisitiondate). Goodwillis measured asthe excessof the sum oftheconsideration transferred,the amount ofanynon-controllinginterestin the acquiree and thefair valueof the acquirer’spreviously heldequityinterest(if any) inthe entity overthe netofth eacquisition-datefairvalue of the identifiableassets,liabilitiesand acquired contingent liabilities. If,after reassessment, theGroup’sinterestin thefairvalue oftheacquiree’s identifiable netassetsexceed s thesum of theconsideration transferred,the amount ofanynon-controllinginterestin the acquiree and thefair valueof theacquirer’s previously heldequity interestin the acquiree(if any), theexcess isrecognisedimmediately in the consolidated income statement as abargain purchasegain. On disposalof asubsidiary, the a ttributableamount ofgoodwillis includedin thedeterminationofany profit orloss on disposal inthe consolidated incomestatement (b) Product relatedintangibles: (i)Product filesand in-licensedproductsrecognised through acquisitionsand partnershipsare amortised overtheir useful economic livesonce theassetis readyfor use (ii)In processproductfiles recognised on acquisitionareamortised over theuseful economic lifeonce theasset isready foruse (c) Purchased software: isamortised over theuseful economiclife when the assetis ready foruse Other identified intangibles are: (d) Customerrelationships: representthe valueattributedto thelong- term relationships heldwith existing customersthat the Group acquired on businesscombinatio ns. Customer relationshipsare amortised over their useful economiclife (e) Trade names: are amortisedover theiruseful livesfrom the date of acquisition (f) Marketing rights: areamortised overtheir useful livescommencing in the yearin which the rightsfirstgenerate sales #### Property, plant and equipment Property,plant andequipment have beenstated atcoston acquisition and aredepreciatedon astraight-linebasis exceptforlandat the followingdepreciationrates: Buildings2% to33% Machinery andequipment5%to 25% Vehicles, fixtures andequipment8% to33% A unitof productionmethod ofdeprec iationis applied tooperations in their start-up phase,as thisreflectsthe expected patternof consumption of thefuture economic benefitsem bodied inthe assets. Whenthese assets arefully utilised,a straight-linemethodof depreciation isapplied. Projects underconstruction are notdepreciated untilconstruction has been completedand assets are consideredreadyfor use. Any additional coststhat extendthe useful lifeof property, plantand equipment arecapitalised. Whenever therecoverableamountof anasset isimpaired,the carrying value isreduced tothe recoverableamount andthe impairment lossis taken tothe consolidated incomestatement.Projectsunder construction are carriedatcost,less anyrecognised impairmentloss. Depreciationof these assets,on the samebasisas otherproperty, plant andequipment assets, commenceswhen theassets areready fortheir intendeduse. The gainorloss arisingon thedisposalor retirementofan assetis determined asthe difference between thesalesproceeds andthe carryingamount of theasset andis recognisedin the consolidated income statement. 134 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 2. Significantac counting policies continued Impairment ofproperty, plant and equipment and #### intangible assets At thesame time eachyear, the Groupcarries out animpairment review for goodwill andintangible assetsthatare notyet ready foruse.At the year end,the Group reviewsthe carry ing amounts of itsproperty, plant and equipmentandintangible assetsthat are subjecttodepreciation and amortisation todetermine whether there isany indication thatthose assets havesuffered an impairment loss.Ifany suchindication exists,the recoverable amount ofthe assetis estimated todetermine theextent of the impairmentloss (if any). The recoverableamount isthe higherof fairvalue lesscosts tosell and value inuse (VIU). Inassessingvalue inuse, theestimatedfuture cash flows arediscountedto theirpresent value using apre-taxdiscount rate that reflectscurrent marketassessmentsof thetimevalue ofmoney and the risksspecificto theassetfor whichthe estimatesof futurecash flows have notbeen adjusted. If therecoverableamount ofan asse t (orcash-generating unit(CGU)) is estimated tobe less thanitscarrying amount,the carryingamount ofthe asset (orCGU)is reduced toits recoverable amount. Animpairmentloss is recognised immediately inthe consolidated income statement. When animpairment lossforthe asset, otherthan goodwill, subsequently reverses, thecarryingamount ofthe assetis increasedto therevised estimate ofitsrecoverable amount. However,the increasedcarrying amount shouldnot exceedthe carryingamount thatwould have been determined had therebeen no impairment inprioryears. Areversal of an impairment loss isrecognisedimmediatelyinthe consolidated income statement. Forassets excludinggoodwill,anassessment ismade ateach reporting datetodetermine whether thereis anindication thatpreviously recognised impairmentlosses nolongerexist orhavedecreased. If suchindication exists, theGroupestimates theassets’ orCGU’srecoverable amounts. A previously recognised impairment lossisreversedonly ifthere has been asustainedand discretechange inthe assumptionsand indicators used todeterminethe asset’srecoverableamount since thelast impairmentloss was recognised. Thereversalis limited sothat the carrying amountofthe assetdoes not exceedits recoverableamount, nor exceedthe carrying amountthat wouldhavebeen determined, net of depreciation andamortisation,had noimpairmentloss beenrecognised fortheasset inprioryears.Suchreversal isrecognised inthe consolidated incomestatement. Inlinewith IAS36, previouslyrecognisedimpairment lossesongoodwill arenot reversed,seeNote16. The Group’sgoodwilland intangibleassets are tested asfollows: (a)Goodwill isallocatedto eachof the Group’s cash-generatingunits. These cash-generatingunits are tested forimpairment annually, or more frequently whenthere isanindication thatthe unit maybe impaired.If therecoverable amount ofthe cash-generating unit isless than thecarrying amountof theunit, theimpairment lossis allocated first toreduce the carrying amountof anygoodwill allocated tothe unit andthen totheother assetsofthe unitpro-rataon thebasis of the carryingamount ofeach asse tinthe unit.An impairmentloss recognised forgoodwill isnot reversedin a subsequent period. The assumptionsused and sensitivity analysisin the impairmenttests are setout inNote 16 (b) Intangible assetsthat arenot yetready foruse arenot subject to amortisation andare testedannuallyfor impairment ormore frequently ifevents or changesincircumstancesindicate thatthey mightbe impaired.Other intangibleassets are testedfor impairment whenever eventsor changes incircumstances indicatethat the carrying amountmay notbe recoverable #### Inventories Inventoriesare statedat thelower of costand netrealisablevalue. Purchased productsare statedatacquisition costincludingalladditional attributable costsincurredinbringing eachproduct toits presentlocation andcondition. Thecosts ofown-manufacturedproductscomprise direct materialsand, whereapplicable,directlabour costsandany overheadsthat havebeen incurredinbringing theinventories totheir presentlocation and condition.Intheconsolidatedbalance sheet,inventory isprimarily valuedat historical costdetermined onamovingaverage basis,andthisvalueis used todetermine thecost ofsalesinthe consolidatedincomestatement. Net realisablevaluerepresents theestimated sellingpricein theordinary course ofbusiness, lessall estimatedcosts ne cessarytomake thesale. Inventory relatedprovisions aremade whennet realisablevalue islowerthancost, andfor slowmoving andshortdated inventory. #### Cash and cash equivalents Cash andcash equivalents comprisecash at bank,cashin handand highlyliquid investments withmaturi ties within threemonths or less. Money market depositscompriseinvestmentinfunds atFVTPL that are subjecttoinsignificantriskof ch anges infairvalue andcan bereadily converted intocash. Hikma Pharmaceuticals PLC Annual Report 2021 135 FINANCIAL STATEMENTS #### Notes to the consolidated financial statements #### continued 2. Significant accountingpolicies continued #### Financial instruments Financialassets and financial liabilitiesare recognisedon theGroup’s consolidated balance sheetwhenthe Groupbecomes apartyto the contractualprovisionsof theinstrument. Financial assets The Groupclassifies itsfinancialas sets inthe followingmeasurement categories: (i) Financialassets at FVTPL Listed shares,debt instrumentsand investment portfolios held bythe Group thatare traded inan active marketare classified asbeingfinancial assets atFVTPL and arestatedat fairvalue. Gainsand lossesarisingfrom changesin fairvaluearerecognisedin theconsolidatedIncome Statement, seeNote 23. (ii) Financialassets at FVTOCI The Group’s investments heldby itsventure capital subsidiaries are stated atFVTOCI with norecyclingof cumulative gainsor losses upon de-recognition.Investmentsin unlis ted sharesare measuredat cost minus anyimpairment andadjusted for observablepricechanges in orderlytransactionsfor theidentical ora similarinvestment ofthe same issuer under level3 valuation.Forinvestmentsin listed shares,fair value is readily determinable underlevel 1valuation,see Notes 19and 29. (iii) Financialassets at amortisedcost Trade receivables, loans, andothe r receivablesthat havefixed or determinable payments thatare notquotedinan activemarket are classified as‘financialassets at amortised cost’.These financialassets are measured atamortisedcost usingthe effectiveinterest method,less any impairment.Interestincomeis recognised byapplyingthe effective interest rate,except for short-term receivables when therecognitionof interest wouldbeimmaterial. In orderfor afinancial assetto be classifiedand measuredat amortised cost, itneedsto giveriseto cashflows thatare solelypayments of principaland interest (SPPI)on theprincipal amountoutstanding. This assessmentis referredto asthe SPPItest and isperformed at an instrument level. The Group’sbusinessmodel formanaging financial assetsrefers tohowit manages itsfinancial assetsin ordertogenerate cashflows.Thebusiness modeldetermines whether cashflowswillresultfrom collecting contractual cashflows, selling thefinancial assets,orboth.Financial assetsclassified andmeasured atamortisedcost arehe ldwithina businessmodel withthe objectivetoholdfinancial assetsin ordertocollect contractual cashflows. The effective interest method isa method ofcalculatingthe amortised cost ofa debtinstrument andof allocatinginterestincome overthe relevant period. Theeffectiveinterestrate isthe rate that exactly discountsestimatedfuture cashreceipts(includingall fees and points paid orreceived thatform anintegral part ofthe effective interest rate, transaction costsand other premiumsor discounts) through the expected lifeofthe debtinstrument, or, whereappropriate,a shorter period, tothenetcarrying amount oninitial recognition. Income isrecognised onan effectiv e interestbasisfor debtinstruments other thanthose financialassets classifiedas atFVTPL. For tradereceivables and contractassets,the Groupappliesa simplified approach incalculating expectedcredit loss. Th erefore, theGroup does not trackchangesin creditrisk,but instead recognisesa lossallowance based onlifetimeexpected credit lossesat each reportingdate.The Group has established aprovisionmatrix thatisbasedon itshistorical credit loss experience, adjustedforforward-lookingfactors specificto the debtorsandthe economicenvironment. Financial liabilities Financialliabilitiesare classified intwocategories:financialliabilities at FVTPLorfinancial debtsrepres entingloans andborrowings.The classification depends onthe natu reand purposeof the financial liabilitiesand isdetermined atthetime ofinitialrecognition. (i) Financialliabilities at FVTPL The Group currentlyhastwo financialliabilitiesat FVTPL asbelow: — co-developmentandearn outpayment agreementswiththird parties wherethe Groupearnsmilestone paymentsreflecting theachievement ofresearch anddevelopment; andcommercialisation milestones.Those paymentsare recognised asfina ncialliabilitiesoncereceived — contingent considerationarising from theColumbusbusiness acquisitionrepresentcontractualliabilitiestomake payments tothird partiesin theformof milestone pa ymentsthatare dependenton the achievement ofcertain USFDA approvalmilestones; andpayments based onfuturesales ofcertainproducts Financialliabilitiesat FVTPLare reva luedat theendof eachreporting period torepresent the value ofexpected future cashoutflows andthe difference ispresented asfinance co st/income.Thesefi nancialliabilities are currentlybooked underother non- currentliabilitiesand other current liabilitiesin theconsolidatedbalance sheet.(Note27 and30) (ii) Financialdebts Financialdebts are initially measured atfairvalue, net oftransaction costs andsubsequentlymeasuredat amortisedcost using theeffective interest method,with interest ex pense recognisedon aneffective interest method. The effective interest method isused for calculating the amortisedcost of afinancial liability andofallocatinginterest expense overtherelevant period.The calculationofeffectiveinterest rateis the ratethatexactly discounts estimated futurecash paymentsthrough theexpected lifeof the financial liability, or, whereappr opriate, ashorter period, tothe net carryingamount on initialrecognition. Afinancialliabilityisderecognisedwhenthe obligationunder theliability isdischarged orcancelled orexpires. Whenanexisting financial liabilityis replaced byanotherfrom thesame lenderon substantiallydifferent terms, ortheterms ofan existingliabilityaresubstantially modified,such an exchange ormodification istreatedas thederecognition ofthe original liabilityandtherecognitionofa new liability.The differenceintherespective carryingamountsis recognised inthe consolidatedincome statement. 136 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 2. Significantac counting policies continued #### Provisions Provisions arerecognised whenthe Group hasa present obligation (legal or constructive)as aresult ofapast event,itis probablethatan outflowof resources will berequiredto settle theobligationsanda reliableestimate can bemade ofthe amountof theobligation. #### Own shares — The Group providesfinance toth e trusteeofthe EmployeeBenefit Trust (EBT)whichis LinkMarket Service TrusteeLimitedto purchase shares tosatisfylong-term commitments arisingfrom the employee share planoperated bythe Company.These sharesare deducted from equity.(Note 31) — Treasury shares andany direct expensesassociated with themare recognised atcost and deducted fromequity. Nogainor loss is recognised intheconsolidated incomestatement onthe purchase, sale, issueor cancellation ofthe Group’sown equityinstruments. (Note 31) #### Cash dividend The Company recognisesa liabilitytopay adividendwhen the distribution isauthorised andno longerat thediscretion ofthe Company. In accordancewith thelaws of theUnited Kingdom,a finaldividend is recognised whenit isapproved by the majority ofshareholders andan interimdividendis recognisedwhen itis paid. #### Equity instruments Equity instruments issuedby the Grouparerecorded atthe proceeds received, netof direct issuecosts. 3. Critical accounting judgements andkey #### sources of estimation uncertainty In theapplication ofthe Group’sacco untingpolicies,whichare described in Note2, theDirectorsare required tomakejudgementsand estimates about thecarryingamounts ofassets andliabilities thatare notreadily apparent from other sources.The estimatesare basedon historical experience andother factorsthat are consideredto berelevant. Actual results maydiffer fromthese estimates. The estimatesarereviewed onan ongoing basis.Revisions toaccounting estimates arerecognised in theperiod in whichthe estimateis revised if the revisionaffects only thatperiod or in theperiod ofthe revision and future periods iftherevision affectsboth current andfuture periods. The Group’sDirectors believe thatth e followingaccounting policiesthat involve Directors’judgementsand estimatesare themost criticalto understanding andevaluating th e Group’s financialresults. #### Revenue recognition estimate (Notes 4and 5) The Group’srevenuerecognition policies requireDirectorsto make estimates of the net sellingprice, whichis madecomplicateddueto chargebacks, productreturnsand rebates.These arrangementsvary by productarrangementand buying group.Refer toNote2 formore details oneach ofthe underlyinges timates, andNote s 21and 27for sensitivityanalysis. #### Goodwill and intangible assets – impairment testing CGUs (Note 16) Testing forimpairment ofgoodwill andother assetsincluded withina cash generatingunit (CGU) toestab lish theappropriate valuation of the CGU. Thevaluation usedfor comparis on tothe carrying valueof thenet assets ofthe CGUrequires the foll owing key judgementsand estimates: Critical judgement — Determination ofthe CGU — Forreversalassessment oftheGenericsCGU, theGroupassessedthe events thatindicatedtheimpairmentbooked in2017 andconcluded that suchindicatorsstill existed,namely pricingpressures inthemarket, the increasing numberofgeneric products anddelays toapprovals ofmore complexproducts. Theexisting valuationheadroomabove thecarrying valueofthe GenericsCGU haspredominantly beencreatedbymarketed andpipeline productsthatwere notreflected intheGroup’s plansatthe timethatthe original impairmentwa s booked,andassuch didnotreflect areversal of theinitial impairmentindicators Critical estimates — Estimating afive-yearbusiness plan forthe purposesof forecasting free cashflows involves forecasting appropriatesalesandoperating expenses takingintoconsideration bothinternal and external information — Estimating futurecapitalexpenditures andworkingcapital requirements overthefive-year period — Estimating a discount ratethat appropriately reflectstheGroup’s weightedaverage costof capital as adjusted for specificrisk premiums reflecting risksinherent in achievingthe projectedfuturecash flows — Estimating an appropriate terminalgrowth rate beyondtheforecast period Product relatedintangibles (Note 16) Valuingintangibleassets uponinitial recognition asat the acquisition date andtestingforimpairmentrequire the following judgements and estimates: Critical judgement — For pipeline products, establishing the launchdate andprobability of asuccessfulproduct approval arecritical judgements — Determining whether animpairme ntindication hasoccurred for intangible assets. Insuch case theGroup firstassesses thequalitative factors todetermine whether itismore likely than notthat the fair value of theintangibleasset isless thanits carrying amount asa basis for determiningwhether itis necessaryto perform aquantitative impairmenttest — For previouslyimpairedassets, anassessmentis madeat each reporting dateto determine whetherthere is anindication that previously recognised impairment losses nolonger existor have decreased, ifsuch indicationexists, theGroup estimates theasset’s or CGU’srecoverable amount.Refer to Notes 2 and16 for moredetails Critical estimates — Estimatingrevenue forecasts (includingmarket size,estimated expected marketshare, number of competitors andnet selling prices) — Estimatingthe expectedeconomic usefullives ofthe product-related intangibles — Estimating the sales andthe allocationof marketing, research and development andother operatingco sts tothe individual product- related intangibles — Estimating a contributory assetcharge (onworkingcapital, fixedassets and workforce) — Estimating a discount rateand specificrisk premiums #### Contingent consideration (Notes 27,29 and 30) The determination of thefair valueof contingentconsideration is based on discountedcash flows.The critic alestimatesandjudgements taken into considerationfor contingent consideration fairvaluation arethe same asapplied for forecasting re venueoflaunchedand pipeline products described in‘Productrelatedintangibles’above. (See Note29 for sensitivity analysis) Hikma Pharmaceuticals PLC Annual Report 2021 137 FINANCIAL STATEMENTS #### Notes to the consolidated financial statements #### continued 3. Criticalaccountin gjudgements andkey #### sources of estimation uncertainty continued #### Taxation (Notes 12 and 13) Key sources ofestimation uncertainty The Grouphasmade thefollowingkey assumptionsconcerningthefuture, orother keysourcesof estimationunce rtaintyinthereporting periodthat mayhavea significantrisk ofcausing amaterial adjustmenttothe carrying amountsofassets andliabilities withinthenextfinancial year. Recognitionof deferredtax assets (Note13) The recognitionof deferredtax assetsis based onthe current forecast of taxable profitsarisingin the jurisdictionin whichthedeferred taxasset arises.A deferred taxasset isrecogn ised tothe extentthat there are forecasttaxable profits withina reasonableperiod. This exerciseis reviewedeach year and,to theextent forecastschange, an adjustmentto therecognised deferredtaxasset maybemade. Recognitionof deferredtax assets isdr iven bythe Group’s ability toutilise the deferredtaxasset whichis reliant onforecast taxable profits arising in the jurisdiction inwhichlossesare incurred. Tax auditrisk In common withmost internationalorganisations, theGroup is subject to auditfromrevenueauthoritiesfrom time totime. Where anoutflow of fundsis believed tobe probable anda reliableestimateof theoutcomeof the disputecan be made,management providesforits bestestimate of the liability. Theseestimates take into accountthe specif ic circumstances of eachdisputeand relevant external advice, areinherently judgemental and couldchangesubstantially overtime as newfacts emergeand each dispute progresses. Hikma continuesto invest initsfinancial systems to ensure thequalityof theGroup’s fina ncialdatawhichreduces therisk of an adverse revenue authorityaudit. Furthermore, Hikma continuesto believethat ithasmade adequate provision fortheliabilitieslikelyto arise from openassessmentsand audits.Where open issues exist,the ultimate liabilityfor such mattersmay varyfromthe amounts providedandis dependent uponthe outcomeof nego tiations withthe relevant tax authorities or,ifnecessary, litigationproceedings. Other risks In addition totax audits,the Group facesother potential taxrisks that could affectthe sustainabilityof th e Group’seffectivetax rate.The main risks arenotedbelow. Hikma regularly takesprofessionaladvice toensure the risksmentioned below areapprop riately analysedandmanagedwith any ultimate potential liability beingadequately provided. Transferpricing risk The transfer pricing riskcan arise froma differenceinview overthe pricingof cross-border, intercompany productsales andservices andof sales of assets.The standardbywhic h most authorities, andthe Group, assess thetransferprice iswhether it isset at arm’s length. Anupward adjustment by thetax authorityof oneterritory willnot necessarily result in thedownward adjustmentby theother territory, potentially leading to an increasedestimatedtax costthro ugha mismatchof taxdeductions and taxableincome,aswell asa potentialincreasearising out ofa rate arbitrage.The Grouphas consideredtherisk indetail andhas provided for potential taxadjustments sodoes not believethat anyadjustmentwill materiallyimpactthe rategoingforward. Valuation risk As partof areorganisationfollowingthe Columbus business acquisition in 2016 andthe 2019 business restructuring, certainassetsandliabilities were transferred intra-Group withexternalvaluations obtained.Ifthese valuationsare successfully challenged byrelevant taxauthorities,itcould adverselyimpact the taxrecorded onthe reorganisation. Sensitivity (Note 12) Where anuncertaintax positionaris es, theGroup will assesswhatthe probable outcome will be,assumingthe relevant taxauthority hasfull knowledge of thesituation. Whereit is assessed thatanexposure will give rise toan uncertaintaxposition , aprovision isbookedfor thebest estimate oftheliabilityinline withIFRIC23 principles.Hikma continues to re-evaluateexistinguncertain positions todetermine ifa changeinfacts and circumstanceshas occurredthatwo uld makeit necessary toadjust. #### Contingent liabilities Legal contingentliabilities The promotion, marketing andsale of pharmaceutical productsand medical devices ishighlyregulatedandthe operationsof market participants,such asHikma, areclosely supervisedby regulatory authoritiesand law enforcementag encies,includingthe FDAand the US Departmentof Justice.As aresult,the Groupis subjectto certain investigationsby governmentalagencies,aswell asothervariouslegal proceedings consideredtypicalto it s business relatingto employment, product liabilityand commercial disputes. (seeNote36) The critical areasofjudgementin relation tocontingent liabilities are as follows: — a possible obligation dependingonwhether someuncertainfuture event occursin relationto legalproceedingsand/or governmental agencies investigations — apresent obligationbut paymentis notprobable whereHikmadenies havingengagedin conductthatwouldgiverise toliabilitywith respectto thesecivil suitsand isvigorouslypursuingdefence of legalproceedings — a present obligation butthe amount cannotbe measuredreliably Tax contingentliabilities Due tothe Groupoperating across anumb er ofdifferent tax jurisdictions, it issubject toperiodic challenge bylocaltax authorities ona range oftax mattersarising inthe normalcourseof business. Thesechallenges generallyincludetransfer pricing arrangements, other international tax mattersand thejudgementalinterpretationoflocaltax legislation. 138 Hikma Pharmaceuticals PLC AnnualReport 2021 ![]() 4. Revenuefrom contra cts withcustomers #### Business and geographical markets The following tables provideananalysis of theGroup’s reportedrevenueby segment an dgeographicalmarket,irrespective of the originofthe goods/services: Injectables Generics Branded Others Total Y ear ended 31 December 2021 $m$m$m$m$m United States 691820 –– 1,511 Middle Eastand North Africa 180 – 661 6 847 Europe andrest oftheworld 176 – 8 5 189 United Kingdom 6 ––– 6 1,053820 669 11 2,553 Injectables Generics Branded OthersTotal Year ended 31 December 2020 $m$m$m$m$m United States 662 744 –– 1,406 Middle Eastand North Africa 160 – 605 5 770 Europe andrest oftheworld 149 – 8 2 159 United Kingdom 6 ––– 6 977 744 613 7 2,341 The topselling marketsin 2021 areasbelow: 2021 2020 $m $m United States 1,511 1,406 Saudi Arabia 218 223 Egypt 127 118 1,856 1,747 In 2021,included inrevenue arisingfrom theGenerics andInje ctablessegmentsare salestheGroup madeto twowholesalersin theUS accountingfor equalto or greaterthan10%of theGroup’s revenueonanindividual basisof$402million(16% ofGrouprevenue)and$341 mill ion(13%of Grouprevenue), in 2020:$333 million (14%of Grouprevenue) and$274 million(12% of Grouprevenue). The followingtable provides contra ct balancesrelated to revenue: 2021 2020 $m $m Trade receivables(Note21) 781 662 Contract assets(Note23) – 3 Contract liabilities(Note 27) 213 162 Tradereceivables arenon-interestbearing andtypical creditterms inthe USrange from30to90 days,in Europe30 to120 days, andin MENA180to 360days. Contract liabilitiesmainlyrelate toreturns andfree goods provisions. Hikma Pharmaceuticals PLC Annual Report 2021 139 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 5. Businesssegments For management reportingpurposes,the Grou pisorganised intothreeprincipaloperatingdivisions– Injectables, Generics and Branded. These divisions arethe basis onwhich theGr oup reports itssegmental information. Core operating profit, definedas‘segmentresult’,is the prin cipalmeasure usedin the decisi on-makingand resource allocatio nprocessof thechief operating decisionmaker, whois theGroup’s Chief ExecutiveOfficer. Informationregardingthe Group’s operating segments isreportedbelow: 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Injectables $m$m$m $m$m$m Revenue 1,053 – 1,053 977–977 Cost ofsales (472) – (472) (414) – (414) Gross profit 581 – 581 563 – 563 Total operatingexpenses (186) (44)(230) (186) (23)(209) Segment result 395 (44) 351 377 (23)354 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Generics $m$m$m $m$m$m Revenue 820 – 820 744 – 744 Cost ofsales (432) – (432) (403) (12) (415) Gross profit 388 – 388 341 (12)329 Total operatingexpenses (186) 15(171) (180) 54 (126) Segment result20215217 161 42 203 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Branded $m$m$m $m$m$m Revenue 669 – 669 613 – 613 Cost ofsales (341) – (341) (306) – (306) Gross profit 328 – 328 307 – 307 Total operatingexpenses (203) (21) (224) (181) (6)(187) Segment result125 (21) 104 126 (6) 120 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Others¹ $m$m$m $m$m$m Revenue 11 – 11 7–7 Cost ofsales (6) – (6) (5) – (5) Gross profit 5–5 2 – 2 Total operatingexpenses (3) – (3) (2) – (2) Segment result 2 – 2 ––– 1.Others mainlycomprisesArabMedicalContainersLL C andInternational Pharmaceutical Research Center LLC 140 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 5. Businesssegments continued 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Group $m$m$m $m$m$m Segment result 724 (50)674 664 13 677 Unallocated expenses¹ (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 atFVTPL ––– 1 – 1 Results from jointventure 1 – 1 ––– Profit/(loss)before tax578(34) 544 522 36 558 Tax (129) 5 (124) (115)(13) (128) Profit/(loss)for theyear 449(29)420 407 23 430 Attributableto: Non-controllinginterests (1) – (1) (1) – (1) Equity holdersof theparent 450 (29) 421 408 23 431 449(29)420 407 23 430 1.Unallocated corporateexpenses mainly compriseemploy ee costs, third-partyprofessional feesand ITexpenses The followingtable provides ananalysis of theGroupnon-current assets 2 bygeographic area: 2021 2020 $m $m United States1,083 995 Middle East andNorth Africa Jordan 365 356 Others 321 307 686 663 Europe andrest ofthe world Portugal 136 137 Others 52 55 188 192 United Kingdom 81 94 2,038 1,944 2.Non-current assetsexclude investmentsinjointventures,deferred tax assets,andfinancialand othernon-currentassets Hikma Pharmaceuticals PLC Annual Report 2021 141 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 6. Exceptionalitems andother adjustments Exceptional itemsand other adjustmentsare disclosed separately inthe consolidated incomestatement to assist inthe understa nding ofthe Group’s core performance. GenericsInjectablesBrandedUnallocatedTotal 2021 $m$m$m$m$m Exceptionalitems Intangibleasse tswrite-downOtheroperatingexpenses (1)(1) (11) – (13) Exceptional items (1)(1) (11) – (13) Otheradjustments Impairment reversalofproduct relate dintangiblesOther operating income 60–––60 Impairment ofproduct relatedintangib lesOtheroperatingexpenses (14)(10) –– (24) Intangible assetsamortisation otherthansoftwareSG&A (30)(33)(10) – (73) Remeasurementof contingent considerationFinanceincome ––– 2929 Unwindingand remeasurementof contingentconsideration andotherfinancial liability Finance expense ––– (13)(13) Exceptional itemsandother adjustments included in profit before tax 15 (44) (21) 16 (34) Tax effectTax 5 Impact on profitfor the year (29) Exceptional itemshave been recognisedin accordance withour accounting policyoutlines in Note2, thedetails are presentedbelow: #### Exceptional items — Intangible assetswrite-down:$13 million write-down of softwarerepresenting prioryear impactof theapplication ofthe IFRICApril 2021 agenda decisions regarding cloudcomputingarrangement customisation andconfigurationcoststreatment. TheGroup hasadopted theIFRI Cupdate as a changein accountingpolicy.The impactrelating topriorye ar was notmaterialand thereforethe application wasnot retrosp ectivelyappliedand was recognised inthe currentyear consolidated income statementas exceptionalitem (Note 1) #### Other adjustments — Impairment reversalof productrelated intangibles:$60 million impairmentreversal mainlyrelated to generic Advair Diskus®intangible assetas a result of launching theproductfollowingFDA approval inApril2021 following anamendmentsubmitted toits Abbreviated NewDrug Application in January 2021(Note16) — Impairment ofproduct related intangibles: $24 million impairment charge ofdifferentproductrelated intangibles dueto a decl ine in performance and forecasted profitability (Note 16) — Intangible assetsamortisation otherthan software of$73million — Remeasurementof contingentconsideration financeincome of$29million representsthe incomeresultingfrom the valuationof theliabilities associated withthe future contingent paymentsin respect of contingentconsideratio n recognised throughbusiness combinations (Notes27, 29 and 30) — Unwindingand remeasurementof contingentconsideration andother financial liabilityfinance expense of$13 millionrepresents theexpense resulting fromtheunwinding andthe valuationoftheliabilities associatedwiththefuture contingentpaymentsinrespect of contingent considerationrecognised throughbusiness combinations andthe financialliability inrelationtothe co-developmentea rnoutpayment agreement(Notes27 , 29and30) 142 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 6. Exceptionalitems and otheradjustments continued In theprevious year, exceptional items and ot heradjustments wererelated tothe following: GenericsInjectablesBrandedUnallocatedTotal 2020$m$m$m$m$m ExceptionalItems Jordan warehouse fireincidentOther operatingincome4–7–11 MENA severanceand restructuring costsSG&A––(3)–(3) Assetswrite off –PPE ImpairmentOtheroperatingexpenses(3)–––(3) Assetswrite off –InventoryRelatedProvisionCostof sales(12)–––(12) Exceptional items (11)–4–(7) Otheradjustments Impairmentof productrela ted intangiblesOther operatingexpenses(4)–––(4) Impairment reversalof productrelated inta ngiblesOther operating income66–––66 Intangible assetsamortisation otherthansoftwareSG&A(9)(23)(10)–(42) Remeasurementofcontingent considerationFinanceincome–––3838 Unwindingand remeasurementof contingentconsideration andotherfinancial liabilityFinance expense –––(15)(15) Exceptional itemsandotheradjustmentsincluding inprofitbefore tax 42(23)(6)2336 Tax expensesassociated withpreviously unrecognised deferredtax assetsTax(3) Tax effectTax(10) Impact on profitfor the year 23 #### Exceptional items — Jordan warehouse fireincident: In2020, Hikmarecognised $11 millionfor insurance compensationrelatedto afireincident whichtook placein 2019 at oneof Hikma’sJordan facilities — MENA severance andrestructuring costs:of $3 millionrelatedto one-off organisationalrestructuringin MENAthat started in2 019and finished in 2020 — Assets writeoff:In December2020, Hikmasubmitted tothe FDAaPrior ApprovalSupplement(PAS)relating togenericAdvair Diskus®.The amendment reflected enhanced packagingcontrols tomeet newindustry standardsadopted since theinitialsubmissionofits ANDA applicati on. Asa result, the launchhas beentemporarily pausedand inventoryamounting to $12million wasexpectedto expirebefore launchand has beenwrittenoff. In addition,$3 millionof property,plant andequipment waswritten off(Notes 9and 17) — Tax expense associatedwith previously unrecogniseddeferredtax assets:A prior yearadjustment to thetax expense associated withpreviously unrecognised deferredtax assets of$3 million arose asa taxreturn toprovision adjustment #### Other adjustments — Impairment reversal of productrelated inta ngibles:$66 millionimpairment reversalinrespectof specificproduct relatedintangiblesinthe Generics segment which reflecteda betterthanexpected performanceof ce rtain marketedproducts acquiredthrough businesscombination ( Note16) — Impairment chargeof productre latedintangiblesof$4 million — Intangible assetsamortisation othe rthan software of$42million — Remeasurement ofcontingent considerationfi nanceincome of $38 million representsth e income resulting from thevaluationof theliabilities associated withthe future contingent paym entsin respectof contingentconsideration recognisedthrough businesscombinations (Notes27, 29 and 30) — Unwinding andremeasurement of contingentconsideration andothe r financialliability finance expenseof $15million represents theexpense resultingfrom the unwindingand the valuationof theliabilities associatedwith thefuturecont ingent paymentsin respect of contingent consideration recognisedthrough businesscombinations andthe fi nancial liability in relation to theco-development earnout pa ymentagreement (Notes 27,29 and30) Hikma Pharmaceuticals PLC Annual Report 2021 143 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 7. Auditremuneration The Groupauditor’s remuneration on a worldwide basisis as below: 2021 2020 1 $m $m Fees tothe auditor forthe audit ofthe annualaccounts 1.4 1.0 Fees tothe auditor andits associates forthe audit oftheGroup's subsidiaries 1.9 1.9 Total audit fees3.3 2.9 Audit related assuranceservices 2 0.2 0.2 Other non-auditfees – 0.2 Total auditandnon-audit fees 3.5 3.3 1.Amountshavebeenrestatedto reflectfinalamounts billedinrelation to2020 2.Assurance services relate toreview procedures inrespect tothe interim financialinformation In 2020,non-audit feesof $0.2 millionwe re chargedrelating toa bondoffering. A description ofthe workofthe AuditComm itteeis setoutin theAuditCommitteereport on pages83 to 86andincludes anexp lanation ofhow auditorobjectivityand independence issafeguarded whennon-audit servicesare provided bythe auditor. 8. Staffcosts The averagemonthly number of employees (including Executive Directors)was: 2021 2020 Number Number Production 4,924 4,918 Sales, generaland administration 3,273 3,282 Research anddevelopment 506 481 8,703 8,681 2021 2020 $m $m Aggregateremuneration comprised: Wages, salaries andbonuses 407 392 Social securitycosts 38 39 Post-employmentbenefits 15 14 End ofservice indemnity 9 9 Share-based payments (Note37) 29 27 Car andhousingallowances 22 21 Health insurance 41 36 Other costsand employee benefits 22 22 583 560 144 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 9. Otheroperatingincome/expenses 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Other operating expense $m$m$m $m$m$m Impairment chargeof intangible assets – 2424 11 4 15 Intangibleassets write-down – 1313 ––– Impairment charge ofproperty,plant andequipment 1 – 1 33 6 Loss ondisposal/damage ofproperty, plantand equipment 1 – 1 2 – 2 Forex andnet monetaryhyperinflation losses,net 36 – 36 30 – 30 Others 2 – 2 1 – 1 40 3777 47 7 54 Exceptionalitems and otheradjustments comprise$24 millionimpair ment chargeinrelationto certainproduct relatedintangibl e assetsand$13million write-downof software representing prior year impactoftheapplication ofthe IFRI CApril 2021agenda decisionsregarding clo udcomputing arrangement customisation andconfiguration costs treatment. In 2020, exceptionalitem sand otheradjustments comprised $4mill ion impairment charge inrelation tocertain product relatedintangible assets inaddition to $3million writeoff ofproperty, plant andequi pment(Notes 6,16 and17). 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results Other operating income $m$m$m $m$m$m Impairment reversalof intangibleassets – 6060 – 6666 Others 2 – 2 3 11 14 2 60 62 3 77 80 Exceptional itemsand other adjustmentsrepr esent$60 million (2020:$66million)impa irmentreversalin relationto certainproduct related intangible assets (Notes6 and16). In 2020,the otheroperating incomeof $14million mainly comp rised $11 million forinsurance compensationrelated toa firein cident. 10. Finance income 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results $m$m$m $m$m$m Interest income 1 – 1 7–7 Remeasurement ofcontingent consideration (Notes 27,29 and30) – 2929 –3838 Other financeincome ––– 2–2 1 29 30 9 38 47 Hikma Pharmaceuticals PLC Annual Report 2021 145 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 11.Finance expense 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results $m$m$m $m$m$m Interest onbank overdrafts andloans 21 – 21 22–22 Interest onEurobond 18 – 18 15 –15 Unwinding andremeasurement of contingent consideration and other financial liabilities (Notes27, 29and 30) – 1313 –1515 Other bankcharges 13 – 13 13–13 Lease accretionof interest 4 – 4 4 –4 56 13 69 54 15 69 12. Tax 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results $m$m$m $m$m$m Current tax: Foreign tax 114 (7)107 99 (2) 97 Adjustmentto prior year (13) – (13) 1 3 2 Deferred tax(Note 13) Currentyear 20 222 1912 31 Adjustmentto prior year 8 – 8 (2)–(2) 129 (5) 124 11513128 UKcorporation taxis calculatedat19.0% (2020:19.0%)ofthe estimatedassessable profitmade inthe UKfor theyear. TheGroup incurreda taxexpenseof$124 million(2020:$128million).Theeffectivetax chargerateis 22.8%(2020: 22.9%).Th ereported effectivetaxrateis higherthan thestatutoryrate primarilydue tothe earningsmix. Taxation for alljurisdictions iscalculatedat the ratesprevailingin the respective jurisdiction. 146 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 12. Tax continued The chargefor the yearcanbe reconciled toprofitbeforetax perthe consolidated income statement asfollows: 2021 2020 $m $m Profit before tax 544 558 Tax atthe UK corporationtax rateof19% (2020:19.00%) 104 106 Profits taxedatdifferentrates 7 7 Permanent differences: – Non-deductible expenditure 5 7 – Other permanent differences 2 – – Research and developmentbenefit (6) (3) State andlocal taxes 7 8 Temporary differences: – Rate change taxlossesand otherdeductible temporarydifferences forwhich nobenefit isrecognised 5 6 – Exceptional tax charge associatedwithpr eviously unrecognisedtax losses(Note 6) – 3 Changein provision for uncertain tax positions 2 (8) Unremitted earnings 3 4 Prioryear adjustments (5) (2) Tax expensefor the year 124 128 Profitstaxedat differenttax ratesrelates toprofits arisinginoverseas jurisdictionswhere thetaxratediffersfrom theUKstatutoryrate. Permanent differences relatetoitemswhich arenon-taxable orfor whichno taxrelief iseverlikelyto bedue. Themajoritems areexpensesandincome disallowed wherethey arecovered bystatutoryexemptions, foreignexchange differences insometerritoriesand statutoryreliefssuchas researchanddevelopment. Rate changetax losses andother deductibletemporarydifferencesfor which nobenefitis recognised includesitems for which it isnotpossibleto book deferredtaxand comprisemainlyunrecognised taxlosses. The changein provisionfor uncertaintax positionsrelates tothe provisionsthe Groupholds inthe eventarevenue authority successfullytakes an adverse viewof thepositions adoptedby th eGroup in2021 andprimarilyrelatesto transfer pricingadjustment. Asat the cons olidatedbalancesheet date, theGroup held anaggregate provisi on inthe sumof $44million (2020:$43 million)for uncertaintax positions.The Grou p released$nilin 2021 (2020: $8million) due tothe statute oflimitations and released $7million (2020:$4 million) followingsettlements with nof inaltax adjustments required by therelevant tax authorities. Thiswas offset bynew provisions andupdates of$9 mill ionbooked in2021 (2020: $4million). The currency exchange differences forthe yearisa $1millionreduction tothe aggregateprovision. In2022, upto $4 millioncould bereleased dueto thestatute of limitationand settlements.Ifall areasofuncertainty wereaudite d andallareas resulted inan adverse outcome,management d oesnot believe any materialadditional taxwould bepayable beyond whatis provided. Prioryear adjustments includedifferences betweenthe taxliabilityrecorded inthe tax returnssubm ittedfor previousyears a ndthe estimatedtax provisionreportedin apriorperiod’sconsolidatedfinancial statements.This categoryalso includesadjustmentsto thetax re turns(favourable) against which anadverse uncertaintaxposition hasbeen bookedand includedunder “changein provisi on foruncertain taxpositions” ab ove. #### Publication of tax strategy In linewith theUK requirementfor large UKbusinesses topublish their tax strategy,the Group’staxstrategy hasbeen made available onthe Group’s website. Hikma Pharmaceuticals PLC Annual Report 2021 147 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 13. Deferredtax Certain deferred tax assetsand liabilities havebeen appropriatel y offset. The following istheanalysis of thedeferred tax b alances (afteroffset) for financialreportingpurposes: As at 31 December 2021 2020 $m $m Deferred tax liabilities (24) (31) Deferred taxassets 183 221 159 190 The belowtablerepresents thede ferredtaxmovementin2021: Product related provision Intangible assets Other provisions and accruals Unremitted earningsOthersTotal $m$m$m$m$m$m 1 January2021 111 76 18 (11) (4) 190 Credit/(charge) toincome(17)–(6)3(10)(30) Currency translation(loss) andhyperinflation impact–1––(2)(1) At 31December 2021 94 77 12 (8) (16) 159 The belowtablerepresents thede ferredtaxmovementin2020: Product related provision Intangible assets Other provisions and accruals Unremitted earnings Others Total $m $m $m $m $m $m 1 January2020 969920(7)15223 Credit/(charge) toincome1522(1)(4)(17)(29) Currency translation(loss) andhyperinflati on impact–(1)(1)–(2)(4) At 31December 2020111 76 18 (11) (4) 190 The Group hasa potential deferred taxasset of $234million (2020:$258million),of which$183million(2020:$221 million) h as beenrecognised. No deferred taxassethas beenrecognisedon grosstemporary differences totalling $208million (2020:$171 million)mainlydue to theunpredictability of therelated futureprofitstreams.$194million(2020: $168million) ofthesegross temporary differences relate tolosses,of which$186 millionare UK losses thatdon’t expire.No deferredtax is recognisedagainstthe lossesdueto significantuncertaintyregardingfuture taxa ble incomeforecasts inthe relevantjurisdictions.$3 millionof non-UKlossesare expected toexpire in 2022.The remain ing $14million representotheru nrecognised grossshort term temporary differencesthat relate tomultiplejurisdictions. During theyear a reduction inthe deferred taxliabilityhas been recognised ontemporary differ ences relatingto the unremitted earningsof overseas subsidiariesof $3million (2020:additionof $4million). Nodeferredtax liability has beenrecognisedon theremainingunrem itted earningsof $207 million (2020: $239million),as the Group isableto cont rol thetiming ofthe reversalof thesetemporary differences an ditis probable that they willnot reverse inthe foreseeable future. The Grouphas adjustedthe classification of $11 millionto better reflectthe nature ofdeferred tax balances, thishas beeni ncludedin thecurrentyear movement under“credit/(charge) toincome” and didnotresult inany impacton theconsolidated balance sheet.Deferredtaxes o n intangible assets relate todifferences between thetax deductions andthe bookdeductionsforintangibleassets. 148 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 14. Dividends Paid in 2021 Paid in 2020 $m $m Amounts recognisedas distributions to equity holdersinthe year: Final dividendfor the yearended 31 December2020 of 34.0cents (31December 2019:30.0 cents)per share 78 72 Interim dividend duringtheyear ended31 December 2021of18.0 cents(31December 2020:16.0 cents) pershare 42 37 120 109 The proposedfinal dividend forthe yearended 31 December 2021is 36.0cents (2020: 34.0cents). The proposedfinal dividend issubjectto approvalby shareholde rs attheAnnual General Meeting on25 April2022 and hasnot b een includedas a liabilityin theseconsolidated financialstatements.Based onthe numberof sharesinfree issue at31 December 2021(231,498, 055), theunrecognised liabilityis $83 million. 15. Earningspershare (EPS) Basic earnings pershare iscalculatedbydividing theprofitat tributable toequity holdersof theparent bythe weightedaver age number ofOrdinary Shares. Diluted EPSis calculated bydividingthe profitattribut able toordinary equity holders by the weightedaveragenumber ofthe Ordinary Shares outstanding during theyear plusthe weighted average numberof OrdinarySharesthat wouldbe issuedon conversionof alldilut ive potentially Ordinary Shares.The number of OrdinaryShares usedforthe basi cand diluted calculations isshownin thetable below. Core ba sicearningsper share and coredilutedearnings persh are areintended tohighlight thecore results ofthe Groupbefore exceptional itemsand other adjustments. 2021 Core results 2021 Exceptional items and other adjustments (Note 6) 2021 Reported results 2020 Core results 2020 Exceptional items and other adjustments (Note 6) 2020 Reported results $m$m$m $m$m$m Earnings forthe purposes ofbasic and dilutedEPSbeing net profitattributable to equityholders ofthe parent 450 (29) 421 40823431 Basic earnings pershare hasbeen calculatedby dividingthe profitattributabletoshareholders bythe weighted averagenumber ofsharesin issue during theyear after deducting Treasurysharesand sharesheld bythe EmployeeBenefitTrust (EBT ).Treasury shareshaveno ri ghttoreceive dividends andthe trustees havewaived theirrights todividends onthe shares heldby theEBT. The numbersof sharesused incalculatingbasic and dilutedearnings pershare arereconciled below: 2021 2020 Number Number Number of shares m m Weighted average numberof Ordinary Sharesfor the purposesof basicEPS¹ 231 236 Effect of dilutive potentially OrdinaryShares: Share-based awards 2 2 Weighted average numberof Ordinary Sharesfor the purposesof dilutedEPS 233 238 1.Weightedaverage numberof ordinaryshares hasbeencalculated bythe weightedaveragenumberof sharesin issueduringthe year after deducting Treasury shares andshares held bythe EBT (Note 31) 2021 Core EPS 2021 Reported EPS 2020 Core EPS 2020 Reported EPS CentsCents CentsCents Basic 194.8 182.3 172.9182.6 Diluted 193.1 180.7 171. 4 181.1 Hikma Pharmaceuticals PLC Annual Report 2021 149 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 16. Goodwilland other intangibleassets The changes inthe carrying valueof goodwilland other intangible assetsfor the yearsended31 December2021 and31 December 2020are asfollows: Goodwill Product-related intangiblesSoftware Other identified intangibles Total $m$m$m$m$m Cost Balance at1 January2020 690 1,033 147184 2,054 Additions – 8 12 16 36 Disposals –– (14) – (14) Translationadjustments7– –5 12 Balance at1January 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 at31 December 2021693 1,056 142 257 2,148 Accumulatedamortisation and impairment Balance at1 January2020 (408)(660) (75)(77) (1,220) Charge forthe year – (29) (10) (14) (53) Disposals –– 14 – 14 Impairmentreversal – 66 –– 66 Impairment charge – (5) (10) – (15) Translation adjustments –(1) – (3)(4) Balance at1January 2021(408)(629) (81) (94) (1,212) Write-down––1–1 Charge forthe year –(59) (11)(14)(84) Impairmentreversal – 60 –– 60 Impairment charge –(23) – (1) (24) Translation adjustments –1– 2 3 Balance at31 December 2021 (408) (650) (91)(107)(1,256) Carrying amount At 31December 2021 285 406 51 150 892 At 31December2020 289 412 64 111876 Of thetotalintangibleassets otherthan goodwill, $132 million (2020:$252 million)are under development and notyet subject to amortisation. 150 Hikma Pharmaceuticals PLC AnnualReport 2021 ![]() 16. Goodwill andother intangibleassets continued #### Goodwill Goodwillacquiredin abusiness combinationis allocated atacquisitiontothe cashgeneratingunits (CGUs) thatare expectedt o benefitfrom that business combination.The carryingamount ofgoodwill hasbeenallocatedas follows: As at 31 December 2021 2020 $m $m Branded 170 173 Injectables 115 116 Total 285 289 In accordancewiththe Grouppolicy, goodwill istestedannually forimpairment during the fourthquarter ormore frequently ifthere are indicators that goodwillmay beimpaired. #### Branded, Injectables and Generics CGUs Details related tothediscounted cash flowmodels usedin theimpairment testsof theBranded,Injectablesand GenericsCGUs a reasfollows: ValuationbasisVIU KeyassumptionsSales growth rates,informedby pricing and volumeassumptions Profitmargins andprofitmargin growthrates formarketedand pipeline products Expected launchdates for pipeline products Terminal growth rates Discount rates Determination ofassumptionsGrowth ratesareinternal foreca stsbased onboth internaland external market information, informedby historical experience andma nagement’sbest estimatesof thefuture Marginsreflect pastexperience, adjusted forexpectedchanges inthe future Establishingthe launch dateand probability of a successful productapprovalfor pipeline products Terminal growth ratesare basedonthe Group’sexperience inits markets Discount ratesforeach CGUare derivedfrom specificregions/countries Period ofspecific projectedcash flows5years, towhic h aterminal growthrate is thenapplied Terminal growth rateand discount rate Terminal growth rate (perpetuity) Pre-tax discount 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% Hikma Pharmaceuticals PLC Annual Report 2021 151 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 16. Goodwilland other intangibleassets continued The Groupperformedits annual goodwilland CGUimpairment testfor the Branded,Injectables an dGenerics. TheGroup’s modelis aVIU model based onthe discounted valueof thebest estimates derived from thekeyassumptionsto arrive attherecoverablevalue. This v alueisthen compared to thecarryingvalue ofthe CGU todeterm inewhetheran impairment isrequired. Inaddition,the Group modelssensitivitieson the VIUamounts calculated todetermine whether reasonable changesinkey assumptions couldlead toa potential impairment. Ifsuchreasonable changes would resultin animpairment, thenin accordancewith IAS36these are disclosed below. FortheBranded,Injectablesand Generics CGU stheGroup has determined that sufficient headroom 1 still existsunderreasonable changesin keyassumptions. Specifically, anevaluationof theCGUs was made assuming anincrease of two percentagepoin tsin thediscount rate,or a10% declinein the projectedcash flows,or a5% decli ne inthe projected cash flowsin the terminal yearor reducing theterminal growthrateby twopercentagepointsand inall cases sufficientheadr oom exists. Climate-relatedmatters: TheGroup monitors thedevelopmentof climate relatedrisks.At the currenttime, climate changeis no texpected tohavea material impact onthe consolidatedfinanc ial statements(see page50). The Groupco nducted asensitivityfor thepotential imp act of climatechange, specificallyassuming disruptionthroughex tremeweather events,such scenario hadmini mal impact onthe recoverable values of allCGUs. 1. Headroomisdefined asthe excess ofthe re coverable value, overthe carrying value of aCGU #### Generic Advair Diskus® CGU The Groupevaluatedgeneric Advair Diskus® asa separate CGU,ma inly dueto its distinctassets andliabilitiesand itsabilitytogeneratelargely independent cashflows. As perthe Grouppolicy, the launching ofgeneric Advair Diskus® following FDAapprovalin April2021 ofanamendment submitted to itsAbbreviated New DrugApplication inJanuary2021was considered asan indicator for animpairmentreversalassessment.As aresult, the Gro up evaluatedthe generic Advair Diskus® CGUrecoverableamountbased onfairvalue less costto sell (FVLCS)model,being the highervalue compa redto VIU. The evaluation resulted ina reversalof impairment of $46millionbringingthe revisedcarrying valueto $160 million. Thisva luation methodologyuses significantinputswhich arenot basedon observable market data,therefore thisvaluationtechniqueis classified asa level 3 valuation. Details relating to thediscountedcash flowmodel usedfor thegeneri c Advair Diskus® impairment test are asfollows: Valuationbasis FVLCS Key assumptionsSalesgrowth rates, informed bypricingand volume assumptions Profit margins andprofitmargingrowth rates Useful life Discount rates Determinationofassumptions Probability weighted averageof different possibilities onsales growthrates,informed byconversionrates from thebrandedproducts andcompetitor entries Margins reflectpast experience,adjusted forexpectedchanges inthe future Useful lifereflectsmanagement bestestimateof theproduct’sexpected economicbenefit Discount rateisderivedfrom thespecific region/country inwhich the CGU operates Period ofspecific projectedcashflows 5 years Useful life 15 years Post-tax discountrate 8% The Groupperformed sensitivityanalysisover thevaluation of thegeneric Advair Diskus® CGU.The sensitivity analysis assumed an increaseof two percentage pointsin the discountrate ora10% decline inthe projected cashflows. Applyingthose sensitivitieswould resultin animpairmentcharge against thegeneric Advair Diskus® CGUof approximately $13millionand $17million, respectively. 152 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 16. Goodwill andother intangibleassets continued #### Product-related intangible assets In-ProcessResearchand Development (IPR&D) IPR&D consistsof pipelineproducts of$6million mainly relate d toGenerics CGUof $5millionwith immaterialamountsallocatedto theBranded and InjectablesCGUs. At31 December 2020, IPR&Dbalancewas $170millionmainlyrelated togenericAdvair Diskus®of $138 million whichwaslaunched during theyear and transferred toproductrights. Theseintang iblesare notin useand accordingly,no amortisation hasbeen charged againstthem. The Groupperforms animpairment reviewof IPR&Dassets annually. The resultof thistest was animpairment chargeof$9 millio n (2020: $4million) Product rights Product rightsconsists ofmarketed produc tsof $400million (2020:$242 million)mainlyrelated togeneric AdvairDiskus®. Whenever impairment indicatorsareidentified fordefinitelife intangible assets,Hikma reconsiders theasset’sestimated econ omicbenefit, calculates the valueof theindividualassets orassetgroup’s cash flows and compares suchvalue against theindividualasset’s or asset group’s carryingamount. If thecarrying amount isgreater,the Grouprecords animpair ment loss for theexcess ofbook valueover thevaluation whichis basedon the discounted cashflows by applying anappropriate discount ratethat reflects therisk factors associatedwith the cashflows andthe CGUsunder which these productssit.Furthermore, ifthereis anindicationthat previously recognised impairme nt lossesno longer existor have decreased, the Group estimates theassets’ recoverableamounts. Apreviouslyrecognised impairmentloss is reversed onlyif there hasbeen asustained anddiscretechange in theassumptionsand indicatorsusedto determinethe asset’srecoverable amountsi nce the lastimpairmentloss was recognised. Thereversal is limitedso thatthe carryingamount of theasset does not exceedits recoverableamount, norexceed the carryingamount thatwould havebeen determined, netof depreciationand amortisa tion,had noimpairment loss beenrecognised for theasset in prioryears. Asat 31 December2021, the resultof thistesting wasan impairment chargeof $14 million(2020: $1million) relatedto differentproductsdue todecl inesin performance and forecastedprofitability,and animpairmentreversal of$60 million (2020: $66million)comprising$46 million related tothe genericAdvair Diskus® intangibleassetand $14million forotherproductsrela tedto the GenericsCGU duetoimproved performance. The Groupperformed sensitivityanalysis overthe valuation ofth e genericAdvair Diskus®intangibleasset. The sensitivity analysisassumedan increase oftwo percentagepointsin thediscount rateor a10 % declinein theprojected cash flows,applying thosesensitiviti eswould resultin an impairment charge againstthe genericAdvair Diskus® intangible assetof approximately$11 millionand $16million, respecti vely. #### Software Softwareintangiblesmainlyrepresentthe EnterpriseResource Planningsolutionsthat are beingimplementedin different operat ions acrosstheGroup in additionto othersoftware app lications. Thesoftwarehas anaverage estimated usefullifethat variesfromthree totenyea rs. In 2021, therewasno impairment ofsoftware (2020:$10 million). In 2021, theGroup recorded a$13 million write-downof software previously capitalised asaresult ofapplication ofthe IFRICApril2021 agenda decisions regarding cloudcomputingarrangement cu stomisation andconfiguration coststreatment. #### Other identified intangibles Otheridentifiedintangibles comprisecustomerrelationships, tradenamesandmarketing rightsof $150million (2020:$111 mill ion).The increaseduring theyearrepresent paymentsmadeto third parties inrelation tomarketing rightsandlicensing agreements. Followinga reviewof impairment indicators forotheridentifiedintangiblesas at31 December2021,there wasan impairmentcharge of$1 million(2020: $nil). Customerrelationships Customerrelationships representthevalue attributedto existingdirectcustomersthat theGroupacquiredonthe acquisitionofsubsidiaries.The customer relationshipshave anaverage estimatedusefullifeof 15years. Trade names Trade names weremainlyrecognisedon the acquisition ofHikma Germany GmbH(Germany)with estimated usefullives often years. Marketing rights Marketing rights areamortisedover theirusefullives commencing in theyear inwhich therights are readyfor use withestima teduseful lives varying from twoto tenyears. Hikma Pharmaceuticals PLC Annual Report 2021 153 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 17. Property,plan tand equipment Land and buildings Machinery and equipment Vehicles, fixtures and equipment Projects under construction 1 Total Cost $m$m$m$m$m Balance at1January 20205976851252331,640 Additions6208136170 Disposals(4)(34)(7)–(45) Transfers28833(114)– Translation adjustment971–17 Balance at1January 2021 636761 130 255 1,782 Additions18177104146 Disposals(3)(10)(6)(10)(29) Transfers28398(75)– Translation adjustment(3)(11)(1)(3)(18) Balance at31 December 2021 676796 138 271 1,881 Accumulateddepreciationand impairment Balance at 1January 2020(199)(420)(96)(13)(728) Charge forthe year(18)(36)(17)–(71) Disposals4327–43 Impairment(2)(4)––(6) Translation adjustment(4)(6)(1)–(11) Balance at1January 2021(219)(434)(107) (13) (773) Charge forthe year(15)(39)(17)–(71) Disposals3871028 Impairment(1)–––(1) Translation adjustment17––8 Balance at31 December 2021 (231) (458)(117) (3) (809) Carrying amount At 31December 2021 445 338 21268 1,072 At 31December 2020 417327232421,009 1.Accumulated depreciation andimpairment balanceat 1January 2020 of$13 millionwithin projects under construction relates to previous yearsimpairmentcharges Land isnot subject todepreciation. As at31 December 2021,the Group hadpledged property, plant and equipmentwith acarryingvalueof $8million(2020: $9milli on)as collateral forvarious long-termloans. Thisamountincludesspecificitems inthenet property, plant andequipmentofthe Group’sbusine ssesin Tunisia (2020: Tunisia). Depreciationof $50million (2020:$57 million) isincluded inthe costofsales, $16 million (2020:$10million)in sellingge neral andadministrative expenses and$5million (2020:$4 million)in researchanddevelopmentexpenses. As at31 December 2021,the Grouphad ente redinto contractual commitments for theacquisitionofproperty, plant andequipment amounting to $33million (2020: $60million). As at31 December2021, theGroupbooked animpairment chargeof$1 million (2020:$6million impairmentcharge, $3million was considered as exceptionalitemrelatedto property, plan t andequipment write off)(Notes 6and 9). 154 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 18. Investments injointventures The Group’ssharein HubeiHaosun Pharmaceutical CoLtd (China) was49% at 31December2021 (31December 2020: 49%)with aninvestment balance of$10 millionat 31December 2021(31 December2020: $9 million) andshare ofthe profitfor the yearended31 December 2021of $1million (2020: $nil). Below table represent investmentin jointventuresmovementduring theyear. For the year ended 31 December 2021 For the year ended 31 December 2020 $m $m Balance at1January9 11 Group's shareof profitof jointventures 1 – Liquidation of HikmaCure – (2) Balance at 31December 10 9 Summarisedfinancialinformationin respect oftheGroup’sinterests inHubeiHaosunPharmaceuticalsCo Ltdis set outbelow: As at 31 December 2021 As at 31 December 2020 $m $m Total assets 24 19 Total liabilities (6) (2) Net assets 18 17 Group's shareof net assetsofjoint ventures 9 8 For the year ended 31 December 2021 For the year ended 31 December 2020 $m $m Total revenue 8 6 Net profit 1 1 Group's shareof profit ofjointventures 1 – 19. Financialand othernon-current assets Asat 31 December 2021 2020 $m $m Investments atFVTOCI 36 25 Other non-currentassets 11 14 47 39 Investments atFVTOCI include eight investmentsthrough theGroup’sventure capitalarm,Hikma InternationalVentures and DevelopmentsLLC and Hikma Ventures Limited,which arenot held fortradingand whichthe Grouphas irrevocably electedat initialrecognitionto recognise inthis category. During theyear, the venturearm soldone of itsinvestments, invested intwo newcompanies and increased investment infourve ntures.One ofthe investmentsis alisted companywith areadily determinablefair valuethat falls underlevel 1valuation(Note 29).Itsvalue ismeasured atthe shareprice marketvalue. The other investments areunlisted shares withoutreadily determinable fair values thatfall underlevel3 valuat ion (Note 29),their valueis measured atcostminusany impairment, andadjustedfor observableprice changesin orderlytransactionsfor theidentical ora similar investmentof the sameissuer. In 2021,total changeinfair valuewas a gain of$14million(2020: $2million) recognisedin theother comprehensive income. Other non-currentassets mainlyrepresent longtermreceivables and asublease arrangement inthe US. Hikma Pharmaceuticals PLC Annual Report 2021 155 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 20. Inventories As at 31 December 2021 2020 $m $m Finished goods 245 283 Work-in-progress 92 95 Raw andpackingmaterials 373 394 Goods intransit 24 44 Spare parts 38 33 ProvisionagainstInventory 1 (77) (92) 695 757 1.The costof inventory relatedprovision recognised as anexpense inthe costof salesin the consolidatedincome statement w as$48 million (2020:$57 million). Inventories arestated net ofprovision asfollows: As at 1 January Additions Utilisation Translation adjustments As at 31 December $m$m$m$m $m Provisionsagainstinventoryin2021 92 48 (62)(1) 77 Provisionsagainstinventoryin2020 85 57 (50) – 92 21. Trade andotherreceivables As at 31 December 2021 2020 (restated) 1 $m $m Gross tradereceivables 1,107 973 Chargebacks andother allowances (275) (256) Related allowancefor expected credit loss (51) (55) Net tradereceivables 781 662 VAT andsalestax recoverable 32 35 Other receivables 3 3 Net tradeand other receivables 1 816 700 1.In 2021,prepaymentshave beenreclassifiedunderother currentassetswhichwerepreviouslyclassifiedunder tradeandothe rreceivables,and henceat31December2020numbershave beenrestated reflecting$56 millionreclassificationfrom tradeandother receivablesto othercurre ntassets.Hadthis reclassification bee n appliedat 1January2020,theseline itemswouldhave beenrestated by$49million. (see Note 23) The fairvalue ofreceivablesis estimatedto benot significantlydifferent from there spective carrying amounts. 156 Hikma Pharmaceuticals PLC AnnualReport 2021 ![]() 21. Trade andother receivables continued Trade receivables arestated net of provisions forchargebacks and expected creditloss allowanceasfollows: As at 31 December 2020 Additions, net Utilisation Translation adjustments As at 31 December 2021 $m$m$m$m $m Chargebacks andother allowances 256 2,160(2,141) – 275 Expected creditloss allowance 55 – (3)(1)51 311 2,160(2,144)(1)326 As at 31 December 2019 Additions, net Utilisation Translation adjustments As at 31 December 2020 $m$m$m$m$m Chargebacks andother allowances2801,865(1,889)–256 Expected creditloss allowance 552(1)(1)55 3351,867(1,890)(1)311 More detailson the Group’spolicyfor creditand concentration risk areprovided inNote 29. At 31December 2021,the provisionbalance relatingto chargeba cks was$201million(2020:$184million).Thekey inputsandas sumptionsincluded in calculating thisprovision areestimationsof ‘in channel’ inve ntory atthe wholesalers (includingprocessing lag)of 40days(2020: 40days) and the estimated chargeback ratesas informed byaveragehistorical chargebackcreditsadjusted forexpected chargebacklevels for new productsand estimated future salestrends. Based onthe conditionsexisting atthe balancesheet date,anincrease/decrease inthe estimate ofin channelinventory by 1dayincreases/decreasesthe provisionby $5million (2020:$5million), and ifthe overall chargebackra teof 55%(2020: 55 %)increases/decreases by onepercentagepoint theprovisionwould increa se/decreaseby $4 million (2020:$3million). At 31December 2021the provisionbalance relatingto customer rebateswas $55million (2020: $57million). The keyinputs andassumptions included in calculating thisprovision arehistoricalrelationshipsof re bates andpaymentsto revenue, pastpayment experience, estimat eof ‘inchannel’ inventory atthe wholesalers andestimatedfuturetrends. Based on theconditions existingat thebalance sheetdate, aten bas is point increase/decreasein therebatesrate of6.5%(2020: 7.8%)would increase/decreasethisprovision byapproximately $1million ( 2020: $1million). 22. Cashand ca sh equivalents As at 31 December 2021 2020 $m $m Cash atbanks and onhand 155 85 Time deposits 249 203 Money market deposits 22 35 426 323 Cash andcash equivalents includehighly liquidinvestments with maturitiesof three months orlesswhich are convertible toknown amounts ofcash and aresubjectto insignificant riskof changesin value. Money market depositscompriseinvestmentinfunds atFVTPL that aresubject to insignificant riskof changesinfair valueandcan bereadily converted intocashthat fall underlevel 1valuation(Note 29). Hikma Pharmaceuticals PLC Annual Report 2021 157 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 23. Othercurrent assets As at 31 December 2021 2020 (restated) 1 $m $m Prepayments 1 65 56 Investment atFVTPL 24 24 Others 8 22 97 102 1.In2021, prepaymentshavebeenreclassifiedunder othercurrentassetswhich were previouslyclassifiedundertradeand othe r receivables, andhence the2020 numbers have been restated reflecting $56millionreclassificationfromtradeandotherreceivables toother current assets.Hadthis reclassification beenapplieda t 1January 2020,these lineitems would havebeen restatedby $49million. (seeNote21) Investment atFVTPL representsthe agreementtheGroup enteredinto with anassetmanagement firmin 2015 tomanagea $20million portfolio of underlyingdebtinstruments. Theinvestment comprisesa portfolioof assets thatare managedby anassetmanager andismeas ured atfairvalue; any changesinfair value go throughthe consolidatedincome statement. Theseassetsare classifiedaslevel 1asthey arebased onquoted prices in activemarkets (Note 29). Others balance at31 December2021, mainlyrepresents compensationduefrom suppliersinrelation toinventoryprice adjustment. Theb alance at 31 December 2020mainlyrepresents insura ncecompensation receivable of $10million whichwas receivedduring theyear (Note 6) , compensation due fromsuppliersin relationto inventory priceadjustment of$5 millionand revenuecontractasset of$3 million. 24. Short-term financialdebts As at 31 December 2021 2020 $m $m Bank overdrafts 3 3 Import andexportfinancing 58 67 Short-term loans 3 47 Current portionof long-termloans (Note28) 48 41 112 158 2021 2020 % % The weightedaverage interest ratesincurred areas follows: Bank overdrafts 3.21 4.25 Bank loans(including thenon-current bankloans) 2.83 3.04 Eurobond 1 3.58 4.17 Import andexportfinancing 2 6.39 5.70 1.The Eurobond effective interest rateincludes unwindingof discountamount and upfrontfees 2.Importandexportfinancingrepresentsshort-termfinancing for the ordinarytrading activitiesoftheGroup 25. Tradeand otherpayables As at 31 December 2021 2020 $m $m Trade payables 262 279 Accrued expenses 194 175 Other payables 12 16 468 470 The fair valueofpayablesis estimated tobe notsignificantly differentfrom therespectivecarryingamounts. 158 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 26. Other provisions Other provisionsrepresent theendof service indemnityprovisionsfor employeesof certainGroup subsidiariesincluding somei mmaterialamounts for definedbenefit plans.This provision iscalculated basedon relevantlawsin thecountries where eachGroupcompany operat es,in addition to their own policies. Fordefinedbenefitplans,changes innetliabilitydue toactuarialvaluationsand changesin assumptions resultedinremeasurementloss of $2million (2020: $1million). Movements on theprovision forend ofservice indemnity: 2021 2020 $m $m 1 January 28 23 Additions 11 10 Remeasurement ofpost-employment benefitobligations 2 1 Utilisation (10) (6) At 31December 31 28 27. Other current liabilities As at 31 December 2021 2020 $m $m Contract liability 213 162 Co-developmentand earnoutpayment (Notes29and 30) 2 2 Acquired contingentliability(Note 30) 15 18 Contingent consideration(Notes 29and 30) 12 13 Indirect rebateand other allowances 80 74 Others 17 21 339 290 Contractliabilities: The Groupallows customerstoreturn productswithina specifiedperiod priorto andsubsequenttothe expirationdate. Inaddition, freegoods areissuedtocustomers assaleincentives, reimbursement ofagreedupon expensesincurred bythe customeror ascompensation forexpired orreturned goods. At 31December 2021, theprovisionbalance relating toreturns was$193million(2020: $154million). Thekeyassumptions included incalculatingthis provision areestimationsof revenue estimatedtobe subjectto returns andthe estimatedreturns rate of1.74% (2020:1.47%)as informedby both historical returnrates andconsideration ofspecificfactors likeproduct datingand expiration,new productlaunches, entranc eof newcompetitors, and changesto contractualterms. Basedon theconditions existi ngat thebalance sheetdate, a ten-basis pointincrease/decreasein thereturns and allowances ratewould increase/decreasethis provision by approximately $11million (2020:$8 million). As at 31 December 2020 Additions Utilisation As at 31 December 2021 $m$m$m $m Contract liabilities 162 132 (81) 213 As at 31 December 2019 Additions Utilisation As at 31 December 2020 $m$m$m$m Contract liabilities142127(107)162 During theyear ended 31December 2021,$8 million(2020: $8million) revenuewas recognisedfrom transferringfree goodsto th e customers. Indirect rebatesandother allowances: mainlyrepresentrebates granted tohealthcare authorities andother partiesunder contractual arrangements with certainindirect customers. At 31December 2021the provisionbalance relatingto theindi rectrebateswas $56million(2020: $55million).The keyinputs andassumptions includedin calculating thisprovision arehistoricalrelationshipsof rebates andpaymentsto revenue, past paymentexperience , estimateof ‘inchannel’ inventory atthe wholesalers andestimatedfuturetrends. Based on theconditionsexisting atthe balancesheet date,a ten-bas is point increase/decreasein rebatesrate of2.1% (2020:2.7%) wouldincrease/decreasethis provisionby approximately $3million(2020 : $2million). Hikma Pharmaceuticals PLC Annual Report 2021 159 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 28. Long-termfinancial debts As at 31 December 2021 2020 $m $m Long-term loans 207 242 Long-term borrowings(Eurobond) 492 491 Less: currentportion oflong-term loans(Note 24) (48) (41) Long-term financialloans 651 692 Breakdown bymaturity: Within oneyear 48 41 In thesecond year 44 48 In thethirdyear 37 44 In thefourthyear 524 36 In the fifthyear 23 522 In thesixth year 22 21 Thereafter 1 21 699 733 Breakdown bycurrency: US dollar 620 642 Euro 44 54 Jordanian dinar 10 13 Algeriandinar 13 14 Saudi riyal 9 9 Moroccan dirham 3 – Tunisian dinar – 1 699 733 The loansare held atamortisedcost. Long-termloans amounting to$0.5million(31 December2020: $1million)are securedoncertain property, plant andequipment. Major arrangements enteredinto bythe Group were: a)A syndicatedrevolvingcreditfacilityof $1,175million wasenteredinto on 27October2015. Fromthe $1,175 million,$175 millionmatured on 24 December2019, $130millionmatured on January2021and the remaining $870millionmatureson 24December2023. At31 Decemb er2021 the facility hasan outstandingbalance of$nil (2020: $nil)and a$870 millionunused available limit(2020: $1,000million). On29 December 2021the facilityagreementhas beenincreased to$1,150 million available for 5yearstill Jan2027 effectivefrom 4 January 2022with anextensionoptions for additional2 years.The facilitycan beused for generalcorporate purposes b)A ten-year$150 million loanfromtheInternationalFinanceCorporationwas enteredinto on21 December 2017.Therewas full utilisation oftheloan since April2020.Quarterly equalrepayments of thelong-term loan havecommenced on15 March2021.The loan wasusedfor gener al corporate purposes. Thefacility matures on15 December2027 c) Hikmaissueda$500 million(carrying valueat 31 December 2021of$492 million, and fairvalueat 31December 2021of $515 million)3.25%, five- year Eurobondon 9July 2020with arating of (BBB-/Ba1)whichis duein July2025. Theproceeds oftheissuance were $494mill ion which were used forgeneral corporatepurposes d)An eight-year$200 million loan facility fromthe InternationalFinanceCorporationand Managed Co-lendingPortfolio program wasentered into on 26 October2020.There was noutilisation oftheloan as ofDecember 2021. Thefacility matureson15 September 2028and canbe usedfor general corporate purposes 160 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 29. Financial policies forriskma nagementand theirobjectives #### Credit and concentration of risk The Group’s principalfinancial assets arecash andcash equivalents,tradeand otherreceivables, andinvestments. The Group’s creditriskis primarily attributableto itstrade receivables.The amountspresented inthe consolidated balances heetare netof allowances for expectedcreditloss, chargebacks, and otherallowances.A provisionfor impairment ismade based on expectedcreditlosseswhich areestimated based onpreviousexperience, currentevents and forecastsof futu re conditions.A loanorreceivableis consideredimpaired wh enthere isno reasonable expectationof recovery,or whena debtorfails toma ke acontractualpayment fora specific periodwhich variesbas ed onthe type of debtor andthemarket inwhich theyoperate. The creditrisk onliquid investmentsis limitedbecausethe coun terparties arebanks with highcredit ratings assignedby inte rnational credit-ratingagencies. In linewith localmarket practice, customersin the MENA regionare offered relativelylong payment termscomparedto customer s inEuropeand the US. Duringtheyear ended31 December2021,the Group’slargest two customersin the MENA region represented 5.6%of Grouprevenue (2020: 6.2%), 4.3% fromone customerin SaudiArabia (202 0:4.1%), and1.3%from one customerin Egypt (2020:2.1% froma customerin SaudiA rabia). At 31 December2021, theamount ofreceivablesduefrom all customers basedin SaudiArabiawas$102 million(2020: $78million)a nd theamountof receivablesdue from allcustomers basedin Egyptwas $57million(2020: $42million). During theyear ended 31December 2021,three key USwholesalers represented38% ofGroup revenue (2020:35%). Theamount ofre ceivablesdue from allUS customers at31 December2021 was $332million(2020: $285million). The Groupmanages thisrisk throughthe implementation of string entcredit policies,proceduresand certain creditinsurance agreements. Trade receivable exposures aremanaged locallyin the operating unitswhere they arise. Credit limitsareset asdeemed appropr iatefor thecustomer, based ona number ofqualitative and quantitativefactors relatedto thecreditworthi ness of aparticular customer. TheGroup i s exposedto a varietyof customers ranging fromgovernment-backedagencies and largepriv atewholesalers toprivatelyowned pharmacies,and the underlyi nglocal economic risksvary across theGroup. Typical creditterms in theUSrange from30 to90 days,in Europe30 to120 days,and inMENA 180 to360 days. Where appropriate, theGroup endeavoursto minimiserisk bythe useof trade finance instrumentssuch aslettersof creditand insurance. The followingtable providesa summaryof theage of tradereceivables(Note 21): Past due Not past due on the reporting date Less than 90 days Between 91 and 180 days Between 181 and 360 days Over one year Total At 31December 2021 $m$m$m$m$m$m Expected creditlossrate 0.01% 0.05% 11.1% 14.3% 53.4%4.7% Gross tradereceivables asat 31 December 2021 910729 28 88 1,107 Related allowancefor expected creditloss –– (1) (4)(46)(51) Chargebacks andother allowances (275) –––– (275) Net tradereceivables 63572 8 2442781 Past due Not past due on the reporting date Less than 90 days Between 91 and 180 days Between 181and 360 daysOver one yearTotal At 31December2020 $m$m$m$m$m$m Expected creditlossrate 0.01%4.0%5.9% 12.5% 57.6% 5.7% Gross tradereceivables asat 31 December2020 780 7517 16 85973 Related allowancefor expected creditloss – (3) (1) (2)(49) (55) Chargebacks andother allowances (256) –––– (256) Net tradereceivables 524 72 16 14 36 662 Hikma Pharmaceuticals PLC Annual Report 2021 161 FINANCIAL STATEMENTS #### Notes to the consolidated financial statements #### continued 29. Financial policiesfor riskma nagement and theirobjectives continued #### Market risk The Group isexposed to foreignexchange andinterestrate risks. TheGroup’sobjectiveisto reduce,whereitis appropriate t odo so,fluctuations in earnings andcash flow associated withchangesin interestrates andfo reign currency rates.Management activelymonitors these exposuresto manage thevolatility relatingto these ex posuresby enteringinto avarietyof derivativefinancialinstruments,if needed. #### Capital risk management The Groupmanagesits capitaland monitorsits liquidity tohave reasonableassurancethat theGroup willbe able tocontinuea sa goingconcern and deliverits growthstrategy objectives, whilst reducingits cost of capital andmaximisingthe returnto shareholders throught he optimisationof the debt and equitymix. The Groupregularly review s the capitalstructure byconsidering the levelof availablecapitalandthe shortt omedium-termstrategic plans concerningfuture capital spend, aswellas theneedto meetdividends,banking co venants,and borrowing ratios. The Groupdefines capital asequityplus netdebtwhich includeslong andshort-term financial debts(Notes 24and 28), leaseliabilities(Note 33), net ofcash andcashequivalents (Note22)and collateralised andrestricted cash.Group netdebt excludesco-developmentand e arnout payments, acquired contingentliabilitiesand contingent consideration (Notes 27and 30). During theyear, theGroup continuedits strategy ofobtaining debt financing atboth theGroup level andat the operatingenti tieslevel. This enables the Group toborrowat competitive ratesand tobuild relationships with local, regionaland internationalbanks andis therefo re deemedto be themost effectivemeans ofraisingfinance, whilemaintaining thebalancebetweenborrowing cost,assetandliabilitymanagement,and consolidated balance sheet currencyrisk management. In orderto monitorthe availablenet funds,management reviews financial capitalreports ona mo nthly basis,in addition tothe continuousreview by the Grouptreasuryfunction. At 31December 2021,the Group’sgearingratio (totaldebt/equity)was 34%(2020: 43%). Thedecrease in theGroup’s gearing rat ioisdue to the increasein theGrouptotal equity asa resultof theprofitsge neratedduring theyearand thedecrease of thetotal debts. #### Cash management The Groupmanagesthe deploymentof cash balancesto predefinedlimits approved bythe Boardof Directors underthe cash/risk management policy.Per thepolicy,theGroup’s excesscashshould beheldwith highly ratedglobalandregional financial institutions.Theaim of thepolicyis to mitigatethe riskofholdingcash incertain currencies,countriesand financial institutions,through aspecific threshold.Th eGroupreviews thepolicy periodicallytomeet itsrisk appetite. #### Foreign exchange risk and currency risk The Groupuses the USdollar asits reporting currency andis th erefore exposed to foreignexchange movements primarily in the Euro, Algerian dinar, Sudanese pound,Japanese yen, Egyptian po und,Tunisian dinar, Lebanesepound and Moroccan dirham. Consequently,where possible, theGroup enters intovariouscontracts,whichchangein valueas foreign exchange rates change,to hedge againsttherisk ofmovement in foreign denominated assets and liabilities. Dueto thelack of open currencymarkets,the Algeriandinar, the Sudanese pound,the Tunisiandinar, theMoroccan dirhamand the Egyptianpound cannot behedged atreasonable cost.Where po ssible, theGroup usesfinancing facilitiesdenominatedin loca lcurrencies to mitigatethe risks.The Jordanian dinarand th eSaudiriyalhad noimpact onthe conso lidated incomestatement asthose currencies arepegged against theUS dollar. Lebanon andSudan wereconsidered tobe hyperinflationary econom iesin the year ended31 December2021. When translatingtheir resultsof operationsinto US dollars,assets, liabilities, incomestatement andequity accounts aretranslatedatthe rateprevailingon the balance sheetdate. At 31December 2021, theLebanese pound ratewas 1,507.5 perUS dollar,and theSudanesepound ra tewas 436.28 per USdollar. Currency risks,as definedby IFRS7, aris eonaccountof financial instruments being denominatedin a currency thatis othert han thefunctional currency of anentity andbeingof amonetary nature. 162 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 29. Financial policies forriskma nagementand theirobjectives continued The currenciesthat havea significant impact onthe Group accountsand theexchange ratesusedare asfollows: Period-end rates Average rates 2021 2020 2021 2020 US dollar /Euro 0.880 0.824 0.845 0.876 US dollar/Sudanese pound 1 436.280 120.000 –¹ –¹ US dollar /Algerian dinar 138.719 132.212 135.097 126.799 US dollar/Saudi riyal 3.750 3.750 3.750 3.750 US dollar/Pound sterling 0.739 0.731 0.727 0.779 US dollar/Jordanian dinar 0.709 0.709 0.709 0.709 US dollar/Egyptian pound 15.655 15.664 15.634 15.745 US dollar /Japaneseyen 115.080 103.200 109.805 106.770 US dollar/Moroccan dirham 9.280 8.905 8.992 9.502 US dollar /Tunisian dinar 2.887 2.705 2.802 2.812 US dollar/Lebanese pound 2 1,507.500 1,507.500 – 2 – 2 1.Inbothyears, Sudanhasbeena hyperinflationaryeconomyand Sudaneseoperationswere translatedusing the periodendrate 2.In bothyears, Lebanonhas been ahyperinflationary economy andLebanese operations weretranslated using theperiod endrate Net foreign currency financial assets/(liabilities) US dollar Euro Japanese yenOthers¹ 2021 $m$m$m$m Functional currency ofentity: – Jordanian dinar 241 21 (6)17 – Euro 30 ––– – Algerian dinar (2) ––– – Saudi riyal 7 (10) –– – Sudanese pound (31) ––– – Egyptian pound (12) 1 –– – Tunisiandinar 1 3 – 5 – Moroccan dirham (5)(4) –– – Lebanese pound ––– 5 229 11 (6)27 1.Others include Saudi riyal, Jordaniandinarand Pound sterling Net foreign currency financial assets/(liabilities) US dollar Euro Japanese yen Others¹ 2020 $m$m$m$m Functional currency ofentity: – Jordanian dinar 279 12 (6) 7 – Euro 32 ––– – Algerian dinar (5) ––– – Saudi riyal 7 (5) –– – Sudanese pound (26) ––– – Egyptian pound (14) ––– – Tunisiandinar 11 – 2 – Moroccan dirham (4)(5) –– – Lebanese pound (4) (1) – 3 – US dollar – 3 – 2 266 5 (6) 14 1.Others include Saudi riyal, Jordaniandinarand Pound sterling Hikma Pharmaceuticals PLC Annual Report 2021 163 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 29. Financial policiesfor riskma nagement and theirobjectives continued A sensitivity analysis basedon a 10%movement inforeign exchange rates wouldresult ina $26million translational increase/d ecrease onthe Group results. The Groupsets certain limitson liquid fundsper currency(other thantheUS dollar) andpercountry. #### Interest rate risk As at 31 December 2021 As at 31 December 2020 Fixed rate Floating rate Total Fixed rate Floating rate Total $m$m$m $m$m$m Financial liabilities Interest-bearingloans andborrowings 672 91 763 704 146 850 Lease liabilities 83 – 83 82 – 82 Financial assets Cash andcash equivalents – 271271 – 238238 An interest ratesensitivity analysisassumesan instantaneousonepercentage pointchangein interest ratesin all currenciesfrom theirlevelsat 31 December2021, with allother variablesheld constant.Based onthe composition oftheGroup’s netdebt portfolioas at31 D ecember 2021, a onepercentagepointincrease/decreaseininterest rates wouldresult in$2 million decrease/increasein netfinancecost per year(2020: $1million increase/decrease). As at31 December2021, $0.05million(2020: $47 million) oftheGroup’s utilised debtportfolio aswellas $1,243million (2020: $1,314million) ofthe Group’s unutiliseddebt facilities, have USDLIBOR asthebenchmark interest rate.The unutiliseddebtfacilitiesmainly relate to: — The Group’s syndicatedrevolving creditfacility of$870 million(2020: $1,000 million)(Note 28) — The InternationalFinanceCorporationloan of$200million (2020: $200million)(Note28) — Other smallerfacilities The Grouphas notidentified any otherIBOR exposuresthat are expe ctedto beimpacted byIBOR reform. Discussions onIBOR tran sitioningis ongoing withcounterparties,whilemonitoring themarket developments surrounding theIBOR reform. #### Fair value of financial assets and liabilities The fair valueoffinancialassets andliabilities isincluded at the amountat which theinstrument couldbe exchanged ina cu rrent transaction between willingparties, other than ina forced or liquidationsale. The following financial assets/liabilitiesare presented atth eir carrying value whichapprox imates totheir fairvalue: — Cashatbankand onhand,time depositand collateralisedandrestricted cash–dueto theshort- term maturitiesofthesefinancial instrumentsand giventhatgenerallytheyhavenegligiblecredit risk,manageme nt considersthe carryingamountsto benot significantly differ entfromtheirfairvalues — Short-term loans andoverdraftsapproximateto theirfair valuebecause of the shortmaturityof theseinstruments — Long-term loans –loans withvariablerates arere-priced inresponse toany changesin market ra tes andso managementconsiders theircarrying values tobenot significantlydi fferent fromtheir fairvalues Loans withfixed rate s relate mainly to: — $500 million(carryingvalue at31December2021 of$492million,and fairvalue at31 December 2021 of$515million)Eurobond accountedfor at amortisedcost. Thefairvalueis determined withreference toa quotedprice in anactive marketas atthebalance sheetdate (a level 1fair value) (Note 28) — A ten-year$150 million loanfrom theInternationalFinanceCorporationwith outstanding balance of$127million(fairvalue at 31 December 2021of $127million).Fair value isestimatedby discounting future cashflowsusingthe currentrates at which similar loans wouldbe made toborrowerswith similarcreditratings and forthe same remaining maturities ofsuchloans(a level2 fairvalue) — Receivables andpayables –thefairvalues of receivables andpayablesare estimated tonotbe significantly different from therespective carrying amounts Managementclassifiesitems thatarerecognised at fair valuebased on thelevelof theinputs usedin theirfair valuedetermi nation asdescribedbelow: — Level 1: Quotedprices inactive marketsforidentical assets orliabilities — Level 2: Inputs that areobservable for theassetor liability — Level3: Inputsthat arenot based onobservable market data 164 Hikma Pharmaceuticals PLC AnnualReport 2021 ![]() 29. Financial policies forriskma nagementand theirobjectives continued The following financial assets/liabilitiesare presented attheirfair value: Fair value measurements At 31 December 2021 Level 1Level 2Level 3Total Financial Assets Investments atFVTPL (Note 23) 24 –– 24 Money marketdeposit (Note22) 22 –– 22 Investments inlisted companiesat FVTOCI(Note 19) 14 –– 14 Investments inunlisted shares atFVTOCI (Note 19) –– 2222 Totalfinancial assets 60 22 82 Financial Liabilities Co-development andearnout paym entliabilities(Note 27and30) –– 44 Contingentconsiderationliabilityresultingfrom the acquisition ofthe Columbus business (Note 27and 30) ––7070 Total financial liabilities –– 7474 Fair value measurements At 31 December2020 Level 1Level 2Level 3Total Financial Assets Investments atFVTPL (Note23)24––24 Money marketdeposit (Note22)35––35 Investments inunlisted shares atFVTOCI (Note 19)––2525 Totalfinancial assets 592584 Financial Liabilities Co-developmentand earnoutpayment liabilities (Note 27and 30)––55 Contingentconsiderationliabilityresultingfrom the acquisition ofthe Columbus business (Note 27and 30) ––8989 Total financial liabilities ––9494 Hikma Pharmaceuticals PLC Annual Report 2021 165 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 29. Financial policiesfor riskma nagement and theirobjectives continued The followingtable presentsthe changes inLevel3 items fortheyear ended31 December 2021 andtheyear ended31 December 20 20: Financial assets Financial liabilities $m$m 1 January2020 18178 Settled –(61) Remeasurementof contingent consideration andother financial liability recognisedin financeincome–(38) Unwinding ofcontingent considerationand otherfina ncialliabilityrecognisedin finance expense–15 Additions 5– Change ininvestmentsat FVTOCI 2– Balance at31 December 2020and 1 January2021 2594 Settled – (4) Remeasurementof contingent consideration andother financial liability recognisedin financeincome – (29) Unwinding ofcontingent considerationand otherfi nancialliability recognisedin financeexpense – 13 Change infairvalue of investmentsat FVTOCI 24 – Additions 3 – Sale ofinvestment atFVTOCI (30) – Balance at31 December 2021 22 74 Contingent considerationliability representscontractualliability tomake paymentsto thirdparties inthe form ofmilestonepayments thatdepend on the achievementof certain USFD A approvalmilestones; and paymentsbased on fu ture sales ofcertainproducts. These liabilitie s were recognisedas part of theColumbusbusiness acquisition. The critical areasof estimatesin relationto thevaluation of thecontingentconsideration ar ethe probabilities assigned to reaching thesuccess-based milestonesand management’s estimate offuturesales.The valuat ionfor the paymentsthat arebased on futuresalesis based onadiscounted cash flow modelappliedto projected future salesfor aperiodof 15years using apost-tax discount rateof 8%.The keyassumption usedfor this valuationis the salesprojections informed bypricingan d volume assumptions which weredeterminedusing probabilityweightedaverageof differentpossibilities on salesgrowth rates.The valuationfor milestone paymentis ba sedon 100%probabilityof success-basedmilestonediscounted usingdiscount rate of 6.9%. If thefuture saleswere 5%higherorlower, thefair valueof the contingent consideration will increase/decrease by$4 millio n(2020: $4million) (Notes 27 and30). If theprobabilityassigned to reaching thesuccess-basedmileston es were 5%lower, thefair va lueof thecontingent considerat ionwill decrease by $1 million(2020: $1 million) (Notes27 and 30). #### Liquidity risk Less than one year One to five years More than five yearsTotal 2021 $m$m$m$m Interest-bearinglong-term loansandborrowings¹ (Note28) (70) (710) (23) (803) Interest-bearing short-term loansandborrowings¹ (Note24) (3) –– (3) Interest-bearing overdrafts¹ (Note24) (3) –– (3) Interest-bearingimport andexportloans¹ (Note24) (60) –– (60) Interest bearingfinance lease¹ (Note33) (12)(36) (71) (119) Trade payables andaccruals(Note 25) (456) –– (456) Co-developmentand earnoutpayment 1 (Notes27 and 30) (2) (3) – (5) Acquired contingentliability(Notes 27 and30) (15) (38) (30) (83) Contingent consideration 1 (Notes27and 30) (12) (49)(27) (88) (633)(836) (151)(1,620) 1.As these are interest-bearingliabilities,expectedinterest expensehave been includedinthebalance 166 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 29. Financial policies forriskma nagementand theirobjectives continued Less than one year One to five years More than five years Total 2020 $m$m$m$m Interest-bearing long-termloans andborrowings¹ (Note28) (64)(728) (42) (834) Interest-bearing short-term loansand borrowings¹(Note 24) (47) –– (47) Interest-bearing overdrafts¹ (Note24) (2) –– (2) Interest-bearingimport andexportloans¹ (Note24) (69) –– (69) Interest bearingfinancelease¹ (Note 33) (10) (49)(49) (108) Trade payables andaccruals (Note25) (454) –– (454) Co-developmentand earnoutpayment 1 (Notes27 and 30) (2) (3) – (5) Acquired contingentliability(Notes 27and30) (18) (46) (27) (91) Contingent consideration 1 (Notes27and 30)(13)(72) (26)(111) (679) (898) (144) (1,721) 1.Asthese are interest-bearingliabilities,expected interestexpensehavebeenincluded in the balance The Group regularlymonitors allcash,cash equivalents anddebt tomaintain liquidity needs.Thisis done byanalysing debt he adroom andexpected cash flows. TheGroupseeks tobe proactive initsliquiditymanagementto avoidany adverseliquidityeffect. At 31December 2021, theGroup had undrawnfacilities of $1,413 million(2020: $1,549million). Ofthese facilities, $1,086mil lion (2020: $1,232million) were committedlong termfacilities. 30. Othernon-current liabilities As at 31 December 2021 2020 $m $m Contingent consideration(Note 27and 29) 58 76 Acquired contingentliability(Note 27) 68 80 Co-developmentand earnoutpayment (Notes27 and29) 2 3 Others 12 5 140 164 Contingentconsideration andacquired contingent liabilities represent contractualliabilitiestomake payments tothird parties inthe formof milestone paymentsthat dependon theachievement ofcertain US FDA approval milestones;and payments basedon futuresales of certain products. Theseliabilities were recognisedaspart ofthe Columbusbusinessacquisition(see Note29 for sensitivity analysis) .In 2021,$14 million (2020: $15 million)of thisbalance wasreclassified to othercurrentliabilities. 31. Sharecapital Issued andfully paid –included in shareholders’ equity: As at 31 December 2021 2020 Number $m Number $m Ordinary Sharesof 10p each 244,331,28842 243,332,180 41 At 31December2021, ofthe issued sharecapital, 12,833,233 (2020: 12,8 33,233)are heldas Treasuryshares, nil(2020: 40,831) sharesare heldin the Employee BenefitTrust(EBT) and231,498,055 (2020: 230,458,116)shares arein freeissue. #### Own Shares Treasury Shares Hikma holds12,833,233 as Treasury sharesre latedto theShare buybackofits ownsharespreviously heldby BoehringerIngelhei mGmbH (BI) for £23.00/share ($28.76/share). Thevoting rights attachedto the Treasuryshares are notcapableof exercise.The market valueofthe Treasury shares held at31December 2021 was$385million(2020: $442million). Thebook valueof theTreasury sharesat 31December2021 are$ 368million (2020: $368million). Hikma Pharmaceuticals PLC Annual Report 2021 167 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 31. Sharecapital continued Shares heldinEBT EBT ofHikma holds nil(2020:40,831) Ordinary Sharesin theCompany.The trusteeofthe EBTis Apex Financial Services(Trust Company) Limited an independent trustee. Themarketvalue ofthe Ordinary Shares heldin theEBT at31 December2021 was $nil (2020: $1million).T hebook valueof the retained ownshares at 31December 2021 are$nil(2020:$1 mill ion).During theyear, theOrdinary Sharesheld inthe EBTwere used tosatisfy long- term commitments arising from theemployee share plansoperated bythe Company. 32. Non-controllinginterests 2021 2020 $m $m At 1January 13 12 Share oflosses (1) (1) Dividends paid (1) (1) Currency translationand hyperinflation movement 3 3 At 31December 14 13 33. Right-of-useasse tsandlease liabilities The carryingamounts ofright-of-use assetsrecognisedand themovements during theyear: BuildingsVehicles Machinery and EquipmentTotal $m$m$m$m As at1January 2020 436150 Additions 196–25 Sub-leasereclassificationtofinancialand ot hernon-currentassets (Note19)(4)––(4) Impairment charge (1)––(1) Depreciation expense(7)(4)–(11) As at31 December 2020and 1 January 2021 508159 Additions 274 – 31 Lease buyout (4) –– (4) Depreciation expense (7) (4)(1) (12) As at 31December2021 66 8 – 74 The carrying amountsof lease liabilitiesand themovements duringtheyear: 2021 2020 $m $m As at 1January82 68 Additions 32 24 Accretion of interest 5 4 Payments (36) (14) As at 31December 83 82 Current 9 10 Non-current 74 72 168 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 33. Right-of-useassets andlease liabilities continued The maturity analysisoflease liabilities: 2021 2020 $m $m Breakdown bymaturity: Within oneyear 9 10 In thesecond year 7 6 In thethirdyear 7 6 In thefourthyear 6 24 In the fifthyear 3 4 In thesixth year 2 2 Thereafter 49 30 83 82 At 31December2021,leaseliabilitiesincluded optional exte nsionperiods amounting to$39 million (2020: $13million). The followingare the amountsrecognisedin theconsolidated incomestatement: 2021 2020 $m $m Depreciation expenseof right-of-useassets (12) (11) Impairment of right-of-use assets – (1) Interest expense onleaseliabilities (5) (4) Expense relatingto short-termleases (1) (1) Total amountrecognised inthe consolidatedincomestatement (18) (17) 34. Cash generated from operatingactivities 2021 2020 $m $m Profit beforetax 544 558 Adjustmentsfor: Depreciation, amortisation, impairmentcharges/reversals andwrite-down of: Property,plant andequipment 72 77 Intangibleassets 61 2 Right ofUse ofAssets 12 12 Gain from investment atFVTPL – (1) Loss ondisposal/damage ofproperty, plantand equipment 1 2 Movement in provisions 2 4 Cost ofequity-settledemployee share scheme 29 27 Finance income (30) (47) Interest andbankcharges 69 69 Results from jointventure 1 – Foreign exchangeloss andnet monetaryhyperinflation impact 36 30 Changes inworking capital: Change intrade and otherreceivables (166) (47) Change inother currentassets 27 (14) Change ininventories 38 (180) Change intrade and otherpayables 14 6 Change inothercurrentliabilities 62 41 Change inother non-currentliabilities (5) (14) Cash flowfrom operating activities 767 525 Hikma Pharmaceuticals PLC Annual Report 2021 169 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 35. Reconciliation of net cashflowto movement innet debt Below tablerepresent a reconciliation ofnet cashflow to movementin net debt: 2021 2020 $m $m Interest-bearing loansand borrowings(Notes 24and28) Balance at1January850 617 Proceeds from issueof long-termfinancialdebts 10 1,543 Proceeds fromissue ofsh ort-term financial debts 383 430 Repayment oflong-term financialdebts (45) (1,372) Repayment ofshort-termfinancialdebts (431) (367) Amortisation of upfrontfees 3 – Foreign exchangetranslationmovements (7) (1) Balance at31 December 763 850 Lease liabilities (Note 33) Balance at1January 82 68 New leases 32 24 Repayment oflease liabilities (31) (10) Balance at31 December 83 82 Total Debt 846 932 Cash andcash equivalents (Note22) (426) (323) Collateralisedand restricted cash – (4) Net debt 420 605 36. Contingent liabilities #### Guarantees and letters of credit A contingentliabilityexisted atthe balancesheet date inrespect ofexternalguarantees and lettersof credit totalling $45 million(31 December2020: $41 million)arising inthenormalcourse ofbusiness. Noprovisionforthese liabilities hasbeenmade inthese consolidatedf inancialstatements. A contingent liability existedat the balance sheetdatefor astandby letterof credittotalling$10 million (2020:$8 million )for a potential stamp duty obligationthat may arise forrepaymentofa loanby interc ompany guarantors. It’snot probablethat the repaymentwillbe made bythe intercompany guarantors. #### Legal Proceedings The Group isinvolvedin anumberof legal proceedings inthe ordinary course ofitsbusiness,including actual orthreatenedl itigation andactualor potentialgovernmentinvestigationsrelatingto employmentmatters,product liability,commercialdisputes,pricing, salesandmarketing practices, infringementof IPrights, thevalidityof certain patents and competitionlaws. Most ofthe claimsinvolve highly complex issues. Oftenthese issuesaresubject to su bstantialuncertaintiesand, therefore,t he probability of aloss, if any,being sustainedand/or anestimate of theamount ofanyloss isdifficultto ascertain. Itis theGroup’spolicy toacc rue foramounts related to these legal matters ifit is probablethat aliabilityha s beenincurred and anamount is reasonably estimable. — In 2018, theGroup receiveda civil investigative demand fromthe USDepartmentofJusticerequestinginformationrelatedto products,pricing and related communications. In2017, theGr oup received asubpoena from aUS stateattorneygeneral andasubpoena fromtheUS Departmentof Justice. Hikma denieshaving engaged inany conductthat wouldgive riseto liability with respectto thesedemandsbut iscoop erating with all such demands.At thispoint, management doesnot believe sufficient evidence existsto makeanyprovision forthis — Starting in2016, several complaintshave beenfiled inthe UnitedStateson behalf ofputativeclasses of directand indirect purchasers ofgeneric drug products, aswell as several individualdirect purchasers opt-outplaintiffs (inc ludingtwo products). Thesecomplaints,which allegethatthe defendants engagedin conspiracies tofix, increase,maintainand/or stabilise the pricesofthe genericdrug productsnamed, h ave beenbrought against Hikma andvariousother defendants.The plaintiffs generally seekdamages andinjunctive reliefunderfederal antitrust law anddamages under variousstatelaws.Hikma denieshavingengaged inconduct thatwould give risetoliability withrespect to thesecivil suitsand isvigorously pursuing defense ofthese cases. Atthis point,management does notbelieve sufficientevidenceexists tomake anyprovision fo r this — Starting in June2020, several complaints have beenfiled in the UnitedStates on behalfofputative classesofdirect andindirect purchasersof Xyrem® against Hikmaand other defendants. Thesecomplaintsallege that JazzPharmaceuticals PLCandits subsidiariesentered i ntounlawful reverse paymentagreements witheach ofth e defendants, including Hikma, insettlingpatentinfringementlitigationoverXyrem® .The plaintiffs in theselawsuitsseek trebledamages and apermanent injunction. Hikma denieshavingengaged inconduct thatwould give riset o liability with respect totheselawsuitsand isvigorously pursuing defence ofthese cases.At thispoint, management doesnot believesuffici ent evidenceexists to makeany provision forthis 170 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 36. Contingent liabilities continued — Numerous complaintshave beenfiled withrespect to Hikma'ssa les, anddistribution, ormanufact ure of opioidproducts.Those c omplaints now total approximately682 in number.Thesela wsuits have beenfiledagainst distributo rs, branded pharmaceuticals manufacturers, pharmacies, hospitals, genericpharmaceuticals manufacturers,individuals, andother defendantsby anumber ofcities, counties,states, ot hergovernmental agencies andprivateplaintiffsin bothstate, andfederal, and Canadianprovincial courts.Most ofthefederal caseshavebeen consolidatedinto a multidistrictlitigationin theNorthern District ofOhio. Thesecases assert ingeneral that thedefendants allegedly engagedin impropermarketing and distributionof opioidsand thatdefendan ts failed todevelopand implement systemssufficient toidentifysuspicious order s ofopioid products and preventthe abuseand diversionof suchproducts. Plaintiffs seek avariety ofremedies, including restitution,civil penalties,disgorgement of profits, treble damages,attorneys'fees andinjunctiverelief.Hikma denies having engagedin conductthat wouldgiverise to liability withrespect to thesecivil suitsand isvigorously pursuingdefenseof these cases.At thispoint, management doesnot believe sufficient e vidence existsto make any provisionfor this — In November 2020, AmarinPharmaceuticals filed apatent infringe ment lawsuit againstHikmain theUnited StatesDistrictCourt forthe Districtof Delaware(No. 20-cv-1630) alleging thatHikma’ssalesand dist ributionof itsgenericicosapent ethyl productinfringes threeAmarin patents that describe certainmethods ofusing icosapentethyl. Amarinsought aninjunction barringHikmafrom sellingitsgeneric producta s well asunspecified damages. Hikma’sproduct isnot approved for thepatented methods butrather is ap provedonly fora differentindication not co veredby any valid patents. InJanuary2022the courtdismissedthe lawsuit against Hi kma, andas of this writingAmarin hasnot soughtto appeal the court’sdismissal. Hikma deniestheallegations andwill vigoro uslydefend againstthem if necessary.Managementdoes notbelieve sufficientevidenceexists tomake any provision fortheseissues #### Tax In April2019, theEuropean Commissionreleased itsdecision thatcertain taxexemptions offeredbythe UKauthorities could co nstituteState Aid and wherethis isthe case, therelevanttax willneed tobe paidto theUK taxauthorities. Th eUK Governmenthas subsequently appealedagainst this decision. Incommon withother UKheadquartered internationalcomp anies whosearrangementswere inline with currentUK CFC leg islation,Hikma could havebeen affectedby the outcomeof thisdecision andha d estimatedthe maximum potentialliability tobe approximately $2.4million. In 2021,formal letters ofconfirmations werereceived fromHMRC that confirmed thatHikma isnot a beneficiary ofStateAid in accordance withthe European Commission’sdecision andthe UK’sControlled ForeignCo mpany legislation. Following HMRC’sconfirmation, Hikmano lon gerrequiresa contingentliabilityin thisregard. Hikma Pharmaceuticals PLC Annual Report 2021 171 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 37. Share-based payments #### Executive incentive plan The 2014ExecutiveIncentive Plan (EIP)was approved byshareholdersat the2014 Annu al GeneralMeeting.The EIPis acombined cashbonus (element A),deferred shares(elementB) andrestricted shares (elementC) scheme. Under theEIP, the Company makes grantsof c onditional awards under elementsBand Cto theExecutive Directorsand seniorexec utives of theGroup.Awards under allelementsaredependento n theachievement of individual andGroup KPIsover one yearprior to grant. Theshares awardedunder elementB arenot released fora periodof two yearsduring which they aresubject toforfeiture conditions. Theshares awarded underelementC arenot released fora periodofthree yearsbut are notsubjectto a forfeiturecondition. Membersof the ExecutivesCommittee must retain 100%of thesharesreceived fromelements Band C fora p eriodof five years from thedateof grant. Details ofthe outstanding grants underthis plan areshown below: 2021 grants 2021 grants 2020 grants 2020 grants 2019 grants 2019 grants 2019 grants 2018 grants 2017 grants 2016 grants 2016 grants 2015 grantsTotal Y ear 2021 25 Feb25 Feb27 Feb27 Feb17 May12 March12 March16 May13 Apr11 May17 March10 AprilNumber Beginningbalance––184,355550,745216,834280,52931 3,288140,48450,10713,17151,35012,0121,812,875 Granted duringthe year157,64443 2,098––––––––––589,742 Exercisedduringtheyear–––(16,496)(205,463)–(313,288)(126,273)––––(661,520) Expiredduring theyear–(8,370)–(22,796)(11,371)–––––––(42,537) Outstandingat31December 157,644 423,728 184,355 511,453 – 280,529 –14,21150,10713,17151,350 12,012 1,698,560 Exercisableat31December–––––––14 ,21150,10713,17151,35012,012140,851 Weightedaverageremaining contractual life(years)2.151.151.160.16 –0.19–6.385.364.364.213.280.56 2020 grants 2020 grants 2019 grants 2019 grants 2019 grants 2018 grants 2017 grants 2016 grants 2016 grants 2015 grantsTotal Year 202027 Feb27 Feb17 May12 March12 March16 May13 Apr11 May17March10 AprilNumber Beginning balance––246,076280,529313,288503,460196,91818,17151,35024,0241,633,816 Grantedduring theyear184,355561,994––––––––746,349 Exercised duringtheyear –(11,249)(29,242)––(362,976)(146,811)(5,000)–(12,012)(567,290) Outstandingat 31December184,355550,745216,83428 0,529313,288140,48450,10713,17151,35012,0121,812,875 Exercisableat31December–––––26,98250,10713,17151,35012,012153,622 Weightedaverageremaining contractual life(years)2.161.160.38 1.190.197.386.365.365.214.281.80 172 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 37. Share-based payments continued The costof theEIP of$20 million (2020:$18 million)has been recorded intheconsolidatedincome statement aspart of sellin g, generaland administrativeexpenses andresearchand development expenses. The fairvalue per shareis the facevalue of shareson thedateof grantlessthe presentvalueof dividendsexpected tobe pa id duringthe vesting period. Valuationis basedon theBlack-Scholes methodologyfor nil-costoptions. The weightedaverageshare pricefor2021 is$32.60 (2020: $30.24). The detailsof fairvalueofthe ou tstandingshares areshown below: Date of grant Number granted The estimated fair value of each share option granted The share price at grantdate Expected dividend yield $$ % EIP 1 10/04/2015 338,80832.78 33.24 0.81% EIP 3B 17/03/2016 242,60826.2126.98 0.71% EIP 3C17/03/2016 206,26726.2126.98 0.71% EIP 411/05/2016 165,553 31.69 32.15 0.73% EIP 5B 13/04/2017428,528 23.5223.98 0.97% EIP 5C 13/04/2017 184,74123.2923.98 0.97% EIP 6B16/05/2018 440,231 18.45 19.09 1.71% EIP 6C 16/05/2018 113,456 18.14 19.09 1.71% EIP7 B 12/03/2019 313,288 21.0021.751.79% EIP7 C 12/03/2019 208,52920.63 21.751.79% EIP8 17/05/2019 246,076 21.4122.18 1.79% EIP912/03/2019 72,000 20.63 21.751.79% EIP 10B 27/02/2020 561,994 24.1024.911.67% EIP 10C 27/02/2020 184,355 23.7024.911.67% EIP 11B 25/02/2021 432,098 32.17 33.09 1.43% EIP 11C 25/02/2021 157,64431.71 33.09 1.43% The exercisepriceof theshare award is$nil. #### Management incentive plan The 2009Management IncentivePlan (MIP)wa s approved byshareholders atthe 2010 AnnualGeneral Meeting andthe 2018MIP wasa pprovedby shareholders atthe 2018Annual GeneralMeeting. Underthe MIP, theCompany makes grantsof conditional awardstomanagement ac ross theGroup below seniormanagement level.Awards aredependent onthe achiev ement ofindividualand GroupKP Isover oneyear andarethen subjectto atwo- year holdingperiod. Details ofthe outstanding grants underthisplan areshown below: 2021 grants2020 grants2019 grants2018 grants2017 grants2016 grants2015 grants2014 grants2013 grants 25 Feb27 Feb17 May16 May19 May11 May14 May11 June17MayTotal Y ear 2021 NumberNumberNumberNumberNumberNumberNumberNumberNumberNumber Outstandingat 1January–377,913394,26317,44536,9908,2548,8545,8903,013852,622 Granted duringtheyear341, 422––––––––341,422 Exercised duringthe year(1,376)(4,118)(363,799) (3,922)(1,106)(1,564)(1,209)–(1,325)(378,419) Expired duringthe year(2,559)(15,546)(30,464)(325)–––––(48,894) Outstanding at31 December 337,487358,249 – 13,198 35,884 6,6907,6455,890 1,688 766,731 Exercisable at31 December–––13,198 35,8846,6907,6455,8901,68870,995 Weightedaverageremaining contractuallife(years)1.150.16–6. 385.384.363.372.451.381.04 Hikma Pharmaceuticals PLC Annual Report 2021 173 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 37. Share-based payments continued 2020 grants2019 grants2018 grants2017 grants2016 grants2015 grants2014 grants2013 grants 27 Feb17 May16 May19 May11 May14 May11 June17 MayTotal Year 2020NumberNumberNumberNumber NumberNumberNumb erNumberNumber Outstandingat 1January–408,243400,87036,9908,2548,8545,8903,013872,114 Granted duringthe year381,546–––––––381,546 Exercised duringthe year(776)(6 ,832)(376,560)–––––(384,168) Expired duringthe year(2,857)(7,148)(6,865)–––––(16,870) Outstanding at31 December 377,913394,26317,44536,9908,2548,8545,8903,013852,622 Weighted average remaining contractual life (years)1.160.387.386.38 5.364.373.452.381.24 The costof theMIP of$9million (2020:$9 million)hasbeen recordedinthe consolid atedincomestatement aspart ofselling, generaland administrativeexpenses, costof sales andresearch and development expenses. The fairvalue pershare isthe facevalue of sharesonthe dateof grantless thepresent valueof dividends expectedto bepa idduring the vesting period. Valuation isbased onthe Black-Sc holes methodologyfor nil-costoptions. The weightedaverage shareprice for 2021is $32.60 (2020: $30.24). The detailsof fairvalue of theou tstandingshares areshownbelow: Date of grant Number granted The estimated fair value of each share option granted The share price at grant date Expected dividend yield $$ % MIP 5 17/05/2013 252,48214.6114.931.10 MIP 6 11/06/2014 225,904 27.7328.33 0.71 MIP 7 14/05/2015 145,918 32.1732.63 0.71 MIP 8 11/05/2016196,37331.7332.20 0.73 MIP 9 19/05/2017 273,72422.0922.54 1.01 MIP 10 16/05/2018 443,28818.4519.09 1.71 MIP 11 17/05/2019 436,10721.4122.181.79 MIP 12 27/02/2020 381,54624.1024.911.67 MIP 1325/02/2021341,42232.1733.09 1.43 The exercisepriceof theshare awardis$nil. 174 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 38. Related parties Transactions between HikmaPharmaceuticals PLC(Hikma)and itssubsidiaries (together,the Group)have beeneliminated on consolidation andare not disclosed inthisNote. Transactions betweenthe Groupand itsjointventures and otherrelated partiesare disclosedbelow . Trading transactions: During theyear ended 31December 2021,the Groupentered intothefollowing transactions withrelated parties: Darhold Limited (Darhold): is arelatedpartyof Hikmabecause threeDirectorsof Hikmajointlyconstitute themajorityof Directors andshareholders (with immediatefamily members)in Darholdandbecause Darholdow ns 24.56%(2020:24.66%)of thesharecapital and25.92% (2020:26.03%) voting capitalof Hikma.Other thandivide nds (aspaidto allshareholders), therewe re no transactionsbetween theGroup and D arholdLimited during the year. Hubei Haosun PharmaceuticalCo. Ltd(Haosun): is arelated party ofHikma because theGroup holds anon-controlling interestof 49% inthe joint venture (JV)withHaosun (2020: 49%). During theyear, total direct purchasesfromHaos un were$nilmillion(2020: $1.1million ).At31 December2021, the amountowed fromthe Groupto Haosunamounted to$nil (2020:$0.1million). In addition,in certaincountries theGroup purchasesfromHaosun indirectly.Duringthe yeartotal indirectpurchasesfromHaosun were$0.7million (2020:$1.1million). Labatec Pharma(Labatec): is arelated party of theGroup becauseLabatecis ownedbyth e family oftwo Directorsof Hikma.During theyear, total Group salesto Labatecamounted to$2 million (2020:$3 million) , andtotal Grouppurchases amount edto $0.5million (2020:$0. 6 million). Asat the year end,the amount owedby Labatec tothe Groupwas $0.6 million (2020: $0.7million). Al Tibbi: isarelated party ofthe Group becauseit is jointly controlled bya directrelation ofa seniorexecutive member ofthe Group and Dash Ventures, inwhichtwo Directors of theGrouphave acontrollinginterest. Duringthe year ended31 December 2020,the Grouprequestedthat AlTibbi providepatient referral services inresponseto COVIDmeasuresin Jordan. TotaltransactionswithAl Tibbi was$0.03 million ( 2020: $0.4 million) and the amountowed bythe Groupto Al Tibbiwas $nil(2020: $0.2million). #### Remuneration of key management personnel The remunerationof thekey managementpersonnel (comprisingthe ExecutiveDirectors, Non-Executive Directors andthe senior ma nagementas set outinthe Governancereport) ofthe Gr oupis setoutbelow inaggregateforeach ofthe categories specifiedin IAS 24‘Re lated PartyDisclosures’. Further informationabout the remunerationof theindividual Dire ctorsis provided inthe audite d partofthe Remuneration Comm itteereport on pages 89to110. 2021 2020 $m $m Short-term employee benefits 18.0 19.9 Share-based payments 12.9 11.1 Post-employment benefits 0.1 0.3 Other benefits 0.6 0.7 31.6 32.0 Hikma Pharmaceuticals PLC Annual Report 2021 175 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 39. Subsidiariesand jointventures The subsidiaries andjoint ventureofHikma Pharmaceuticals PLCare asfollows: Owned by the Group Ownership % Ordinary shares Ownership% Ordinary shares Company’s name Incorporated in Address of the registered office At 31 December 2021 At 31 December 2020 AlJazeeraPharmaceuticalIndustryS.A.R.L Algeria Zone d'Activité,Propriété N°379Section N°04 Staoueli, Algeria 99% 99% Algerie IndustrieMediterraneene DuMedicamentS.A.R.L. Algeria Zone d'Activité16/15Staoueli, Algeria 97% 97% Hikma PharmaAlgeria S.A.R.L. Algeria Zone d'Activité16/15Staoueli, Algeria 100% 100% SPAAl DarAl ArabiapourlaFabrication deMédicaments Algeria Zone d’ActivitéEl Boustane N°78,Sidi Abdellah, AlRahmania, Algeria 100% 100% HubeiHaosunPharmaceutical CoLtd China No20JuxianRoad, GedianEconomic andTechnology DevelopmentArea,Hubei,China 49% 49% HikmaCanada LimitedCanadaBlaney McMurtryLLP, Suite15000 2QueenStreet,TorontoONM5C3G5 100%100% Hikma Pharma S.A.E Egypt 12El-Esraa Street,El-Mohandeseen, LebanonSquare, Giza,Egypt 100% 100% HikmaPharmaceuticalsIndustriesS.A.E Egypt 16AhmedHosnyStreet,FirstZone,NaserCity, Cairo, Egypt 100% 100% HikmaSpecialisedPharmaceuticals(S.A.E) Egypt 10D,11D, IndustrialZone,BadrCity,Cairo,Egypt 98% 98% Hikmafor ImportationCo.LLC Egypt 16AhmedHosnyStreet,FirstZone,NaserCity, Cairo, Egypt 99% 100% HikmaPharma GmbH Germany Lochhamer Strasse13,82152, Martinsried,Germany 100% 100% Thymoorgan PharmazieGmbH Germany Schiffgraben 23, DE-38690, Goslar, OTVienenburg, Germany 100% 100% HikmaFinance(Ireland) Limited Ireland 2GrandCanalSquare,GrandCanalHarbour,Dublin2, Ireland – 100% HikmaItalia S.p.A Italy VialeCertosa10,27100,Pavia, Italy 100% 100% HikmaPharma Limited\* 1 Jersey 47Esplanade, StHelier,JE10BD,Jersey 100% 100% Arab MedicalContainers LLC Jordan P.O.Box 80,SahabIndustrial Estate,11512, Jordan 100% 100% ArabPharmaceuticalManufacturingPSC Jordan AlBuhaira– Salt,P.O.Box42,Jordan 100% 100% Future PharmaceuticalIndustries LLC Jordan P.O.Box 80,SahabIndustrial Estate,11512, Jordan – 100% HikmaInternationalPharmaceuticalsLLC(Exempt) Jordan 122Queen ZainAlSharafStreet, BayaderWadi Al-Seer, Amman,Jordan 100% 100% HikmaInternationalVenturesandDevelopment LLC (Exempt) Jordan Bayader WadiAl-Seer,Industrial Area,SaleemBin Al- HarethStreet, Building 21, P.O. Box 182400,Amman, 11118,Jordan 100% 100% Hikma Investment LLC\* Jordan Bayader WadiAl-Seer,Industrial Area,SaleemBin Al- HarethStreet, Building 21, P.O. Box 182400,Amman, 11118,Jordan 100% 100% HikmaPharmaceuticalsLLC Jordan Bayader WadiAl-Seer,Industrial Area,SaleemBin Al- HarethStreet, Building 21, P.O. Box 182400,Amman, 11118,Jordan 100% 100% HikmaUnitedRenewableEnergy Jordan Bayader WadiAl-Seer,Industrial Area,SaleemBin Al- Hareth Street,Building21, P. O.Box 182400,Amman,11118, Jordan – 100% 176 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 39. Subsidiariesand jointventure continued Owned by the Group Ownership % Ordinary shares Ownership % Ordinary shares Company’s name Incorporated in Address of the registered office At 31 December 2021 At 31 December 2020 InternationalPharmaceuticalResearchCentreLLC Jordan P.O.Box 963166,Amman, 11196,Jordan 51% 51% Sofia Traveland Tourism Jordan Mustafa SemreenComplex BuildingNo.29,Jamal Qaytoqa Street,Bayader WadiAl-Seer,Amman, Jordan 100% 100% Specialised forPharmaceutical IndustriesLLC Jordan Bayader WadiAl-Seer,Indust rial Area,SaleemBinAl- Hareth Street,Building21, P. O.Box182400,Amman, 11118, Jordan 100% 100% HikmaPharmaceuticalsCo.Ltd.,Almaty(Kazakhtan) RepresentativeOffice Kazakhstan Apt.1, House7, Building-28 ,“Keremet”Microdistrict, BostandykskiyDistrict, Almaty,A15C8X2,Kazakhstan 100% 100% AlJazeeraPharmaceuticalIndustriesLtdKSAP.O.Box106229 11666 Riyadh,Saudi Arabia 100%100% HikmaLibanS.A.R.L. Lebanon SariaBuilding,GroundFl oor, EmbassiesStreet, Bir Hassan,Beirut, Lebanon 67% 67% Sociétéde PromotionPharmaceutique duMaghreb (PromopharmS.A.) Morocco Zone IndustrielleduSahel, RueN. 7,Had Soualem, Province deSettat,Morocco 94% 94% HikmaPharma Benelux B.V Netherlands NieuweSteen36, 1625HV,Hoorn,Netherlands 100% 100% HikmaFarmaceutica,(Portugal) S.A Portugal EstradaRio DaMono.8,8a,8B-Fervenca,2705-906, Terugem SNT,Portugal 100% 100% Lifotec FarmaceuticaS.G.P.S S.A\* Portugal EstradaNacional9, Fervença,São JoãodasLampase Terrugem, Sintra,Portugal 100% 100% HikmaCare forMedicinesand MedicalSupplies Company PalestineWest BankAlBirah,Ramallah51%51% HikmaPharmaceuticals Palestine West BankAl Birah,Ramallah 100% 100% HikmaSlovakia s.r.oSlovakiaSeberíniho 1 82103Bratislava,Slovakia 100%100% HikmaEspana S.LSpainCA LLE MALDONADO,4 –BJ D 28006, MADRID Spain 100%100% Pharma IxirCo. Ltd Sudan RiyadArea,ObiedKhatimStreet,P.O.Box10461,Block No.21,HouseNo.420, Khartoum,Sudan 51% 51% SavannahPharmaceuticalIndustriesCo. Ltd Sudan RiyadArea,ObiedKhatimStreet,P.O.Box10461,Block No.21,HouseNo.420, Khartoum,Sudan 100% 100% Eurohealth InternationalS.A.R.L. 1 Switzerland Rue desBattoirs7,1205 Genève,Switzerland 100% 100% APMTunisie S.A.R.L. Tunisia ImpasseN°4-EnergieSolaire, ZoneIndustrielleLa Charguia 1,Tunis-Carthage, 2035,Tunisia 99% 99% STED'Industriee PharmaceutiqueIbn AlBaytar\* Tunisia 11Rue 8610Charguia1-2035 Tunis-Carthage, Tunisia 100% 100% STEHikmaPharmaTunisie Tunisia ImpasseN°4-EnergieSolaire, ZoneIndustrielleLa Charguia 1,Tunis-Carthage 2035,Tunisia – 2 100% STEMedicef Tunisia Avenue HabibBourguiba,Sidi Thabet,2020Ariana, Tunisia 100% 100% Hikma Pharmaceuticals PLC Annual Report 2021 177 FINANCIAL STATEMENTS ![]() #### Notes to the consolidated financial statements #### continued 39. Subsidiariesand jointventure continued Owned by the Group Ownership % Ordinary shares Ownership % Ordinary shares Company’s name Incorporated in Address of the registered office At 31 December 2021 At 31 December 2020 HikmaEmergingMarketsandAsiaPacificFZ-LLC 3 United Arab Emirates Premises 202-204,Floor 2,Building26, Dubai, UnitedArab Emirates 100% 100% HikmaInternationalTradingLimited 1 United Arab Emirates The OberoiCentre, Level15, Business Bay, P.O.Box36282, Dubai, UnitedArabEmirates 100% 100% HikmaMENA FZE\* 1 United Arab Emirates The OberoiCentre, Level15, Business Bay, P.O.Box36282, Dubai, UnitedArabEmirates 100% 100% Hikma(Maple)Limited UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom – 100% HikmaAcquisitions (UK)Limited\* 1 UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom – 100% HikmaHoldings (UK)Limited\* UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom – 100% HikmaUK Limited\* 2 UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom 100% 100% HikmaVentures Limited 1 UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom 100% 100% HikmacureLimited\* UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom – 50% West-WardHoldingsLimited\* UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom 100% 100% HikmaPharmaceuticalsInternationalLimited\* UnitedKingdom 1NewBurlingtonPlace,London,W1S2HR, UnitedKingdom 100% 100% HikmaIntelligenceLimitedUnited Kingdom 1 NewBurlingtonPlace,London,W1S 2HR, UnitedKingdom 100%100% Eurohealth (U.S.A.)Inc United States 200 Connell Drive,4 th Floor BerkeleyHeights, NJ07922 100% 100% HikmaSpeciality USA,Inc. United States 200ConnellDrive,4 th Floor BerkeleyHeights, NJ07922 100% 100% HikmaLabs Inc. United States Corporation TrustCompany ofNevada701SCarson Street Suite200, CarsonCity,NV 89701,United States 100% 100% West-Ward ColumbusInc. United States Corporation TrustCenter 1209OrangeStreet, Wilmington,NewCastleDE 19802,UnitedStates 100% 100% HikmaInjectables USA,Inc. United States Corporation TrustCenter 1209OrangeStreet, Wilmington,NewCastleDE 19802,UnitedStates 100% 100% HikmaPharmaceuticalsUSAInc. United States 200ConnellDrive,4 th Floor BerkeleyHeights, NJ07922 100% 100% HikmaFinanceUSA LLCUnitedStates200 ConnellDrive,4 th Floor BerkeleyHeights,NJ07922100%100% HikmaFranceFranceTour Cb2116 Placedel'Iris,Courbevoie92400100%– HikmaCaliInc.(Delaware)UnitedStatesCorporationTrustCenter, 1209OrangeStreet, WilmingtonDE1980 1,UnitedStates 100%– 1. Owned byPLC ‘theCompany’ 2.In 2021, STEHikma Pharma Tunisie wasmerged into STED'Industriee Pharmaceutique Ibn AlBaytar 3.In 2021,Hikma UKLimitedbecame fullyownedby Hikma PharmaceuticalsPLC,followinga Groupreorganisation The investments in subsidiaries areall statedat costinHikma PharmaceuticalsPLC andare consolidatedinline withIFRS10. The investments injointventuresare accoun ted forusing the equity method(Note 18). The Group’ssubsidiariesprincipallyoperate intrading pharmaceuticalsproducts and associatedgoods and services, exceptfor SofiaTraveland Tourism subsidiary which coordinates employees travel arrangements. Companiesmarked (\*)were incorporated as holdingcompanies . 178 Hikma Pharmaceuticals PLC AnnualReport 2021 ![]() 40. Definedcontribution retirementbenefit plan The Grouphas definedcontribution retirementplans infour of its subsidiaries:Hikma Pharmaceuticals PLC– United Kingdom, HikmaPharmaceuticals Limited (Jordan),ArabPharmaceutical Manufa cturing Coand Hikma Pharmaceuticals USAInc. Thedetailsof eachcontributionplan areas follows: #### Hikma Pharmaceuticals PLC Hikma Pharmaceuticals PLCcurrently hasa defined contribution pens ion planavailable for staffworkingintheUnited Kingdomw hereby Hikma PharmaceuticalsPLC contributes10%of basicsalary.Employees are immediately entitledto100% ofthe contributions. HikmaPha rmaceuticalsPLC contributions forthe yearended 31December 20 21were $0.3million (2020:$0.3million). #### Hikma Pharmaceuticals LLC Hikma Pharmaceuticals LLCcurrently hasan employee savingsplan whereby HikmaPharmaceuticals LLC fullymatches employees’ con tributions, which arefixed at 10%of basic salary. Employeesareentitled to 100% ofHikma PharmaceuticalsLLC contributions after threey ears ofemployment with theCompany. HikmaPharmaceuticalsLLC contributions forthe yearended 31December 2021were $3.2million (2020:$3 milli on). #### Arab Pharmaceutical Manufacturing PSC Arab Pharmaceuticals Manufacturing PSCcurrently has anemployee savingsplan wherebyArabPharmaceuticalsManufacturing PSCfu lly matches employees’ contributions, whichare fixedat 10%of basicsalary. Employeesare entitledto 100%of Arab Pharmaceuticals ManufacturingPSC contributions afterthree yearsof employmentwith theCompany. ArabPharmaceuticals Manufacturing PSCcontributions forthe ye ar ended 31 December2021 were$0.5 million(2020: $0.5million). #### Hikma Pharmaceuticals USA Inc.: (401 (k) Retirement Plan) Hikma Pharmaceuticals USAInc.has a401(k)-definedcontribution plan,which allows alleligible employees todefer aportion o f theirincome through contributions tothe plan.Eligible employees can begincontributing tothe planafter beingemployed for90 days.Employees ca n deferup to95% of their eligible income intothe plan,not toexceed $19,500 (2020:$19,500), notincluding catch-up contributions available toeligible employees as outlined bythe Internal RevenueService.The companymatches theempl oyees’ eligiblecontribution dollar-for-dollar onthe fir st6% of eligible pay contributed tothe plan.Employer contributionsvest 50%after tw oyears of serviceand 100% after threeyearsof service.Employees areconsidered to havecompleted oneyear ofservice forthe purposes ofvest ing uponthe completion of1,000 hours of serviceat anytime dur inga planyear. Employer contributionsto theplan forthe yearended 31December 2021were $10million (2020: $9million). Theassets ofthis plan areheld separately fromthoseof the Group.The only obligation ofthe Groupwith respectto this plan istomake specifiedcontributio ns. 41. Subsequent events Teligent Inc. acquisition On 17January 2022,Hikma announcedthat ithas agreedto acquiretheCanadian assetsof TeligentInc. (Teligent).The acquisit ionmarks Hikma’s expansion intoCanada andincludes a portfo lioof 25sterileinjectableproducts, three in-licenced ophthalmic productsand a p ipeline ofseven additional products,four ofwhich are approved byHealth Canada. The transactionwas completed on2 February2022 and Hikmapaid a cashconsideration of$46 million. Dueto the proximityof th e completion ofthe transaction tothe dateofissuance of theconsolidatedfinanc ial statements,theinitialvaluationfor thebusiness combinatio nand netassetsacquired is inprogress. Itis expectedthatmost ofthe considerationpaid isattributableto productrelated intangible assets andaround $2millionis attributable to workingcapital. #### Share buyback On 24February 2022, Hikmaannounced ashar e buybackprogramme ofup to$300 millionto beexecuted during2022. Thebuyback ha s been sized to maintain balance sheetefficiencywhilstleavingsignificantheadroomfor continued investment opportunities. TheBuybackre flects theGroup’s strong cashgeneration, balancesheet strengthand theBoard’s confidencein thefuture growthprospects ofthe business.It is worth notingthat since 31 December2021, theCompany hasreceived intercompany dividend s which increasedtheretained earnings balance available ford istributionafter year-end. Hikma Pharmaceuticals PLC Annual Report 2021 179 FINANCIAL STATEMENTS ![]() #### Company balance sheet At 31December 2021 2021 2020 (restated) 1 Note $m $m Non-current assets Property,plant andequipment 1 2 Right-of-use assets 7 9 Intangibleassets 3 15 27 Investments insubsidiaries 4 3,288 3,332 Due fromsubsidiaries 5 34 100 3,345 3,470 Current assets Trade andotherreceivables 1 10 14 Due fromsubsidiaries 5 88 49 Cash andcash equivalents 7 222 156 Other currentassets 1 6 28 30 348 249 Total assets 3,693 3,719 Current liabilities Other payables 2 2 Due tosubsidiaries 8 18 29 Short-termfinancial debts 9 21 21 Other currentliabilities 12 12 53 64 Net currentassets 295 185 Non-current liabilities Long-term financialdebts 9 105 129 Due tosubsidiaries 8 – 48 Financelease obligations 9 11 114 188 Total liabilities 167 252 Net assets 3,526 3,467 Equity Share capital 11 42 41 Share premium 282 282 Other reserves 1,746 1,746 Profit for theyear 12 150 483 Retained earnings 1,306 915 Equity shareholders’funds 3,526 3,467 1.In2021, prepaymentshavebeenreclassifiedunder othercurrentassetswhich were previouslyclassifiedundertradeand othe r receivables, andhence the2020 numbers have been restated reflecting $6 million reclassification fromtradeand otherreceivablesto othercurrentasse ts. Hadthisreclassification beenapplied at 1 January2020, these line itemswould have beenrestated by$3 million. (see Note 6) The financialstatements ofHikma PharmaceuticalsPLC, registerednumber5557934, onpages 180to 186wereapproved by the Boar dof Directorson 23 February 2022and signedon its behalfby: Said Darwazah ExecutiveChairman 23 February 2021 Sigurdur Olafsson ChiefExecutiveOfficer 180 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() #### Company statement #### of changes in equity For theyear ended 31December2021 Share capital Share premium Merger reserve Retained earnings Total $m$m$m$m$m Balance at1January 2020 41 282 1,746 1,3653,434 Profit for theyear –––483 483 Total comprehensive income fortheyear ––– 483483 Cost ofequity settled employeesharescheme –––2727 Dividends paid ––– (109)(109) Share buyback ––– (368)(368) Balance at31 December 2020and1 January202141 282 1,746 1,398 3,467 Profit for theyear ––– 150 150 Total comprehensive income fortheyear ––– 150150 Cost ofequity settled employeesharescheme –– – 29 29 Exercise ofemployees sharescheme 1 – –(1)– Dividends paid –– –(120)(120) Balance at31 December 2021 42 282 1,746 1,456 3,526 At 31December 2021,the Companyhad retainedearnings availabl efor distributionin excessof$320million, which isdetermine d withreference tothe Companies Act2006 and toguidanceissued bythe Institute ofCharteredAccountants inEngland andWalesin 2017. Hikma Pharmaceuticals PLC Annual Report 2021 181 FINANCIAL STATEMENTS #### Notes to the Company #### financial statements For theyear ended 31December2021 1. Adoptionof new and revised standards The natureofthe impacton theCompany of newand revised standards isthe sameasforthe Group.Detailsare givenin Note1 of theGroup consolidatedfinancialstatements. 2. Significantac counting policies #### Basis of accounting These financialstatements, forthe yearended 31 December2021 have been preparedin accordancewith FRS 101. As permittedby FRS 101,the Companyhas takenadvantageof the followingexemptionsfromthe requirements ofIFRS asbelow: — Paragraph 10(d) ofIAS1 ‘Presentationof Fina ncialStatements’ (statementof cashflows) — Paragraph 16 ofIAS 1‘Presentationof Financial St atements’ (statementof compliancewith allIFRS) — Paragraph 38A ofIAS 1 ‘Presentation ofFi nancialStatements’(requirementsfor minimal of twoprimarystatements, including ca sh flowstatements) — Paragraph 45B and 46to 52of IAS1 ‘Presentatio n ofFinancial Statements ’(Sharebased payment) — Paragraph 111 ofIAS 1‘Presentation ofFinancia l Statements’ (cashflow statementinformation) — IFRS 7 financialinstruments disclosure — Paragraph 17 of IAS24 ‘RelatedParties Disclosures’ — Paragraph 30 and31 of IAS8 ‘Accounting Policies,Changesin Accounting EstimatesandErrors’ — IAS 7 ‘Statement ofcash flows’ No individual profit andloss account isprepared asprovidedby section 408 ofthe CompaniesAct 2006. The financialstatements havebeen preparedon the historical costbasis.The principal accounting policiesadopted arethe same asthose setoutin Note 2of the Group consolidated financial statements withthe additionof thepolicies noted below. Investments insubsidiaries arestated atcost less, where appr opriate,provision forimpairment.Thecarryingvalue ofinvestmentsis reviewed for impairmentwhenthere isanindicationthat theinvestmentmight beimpaired. Anyprovision resultingfroman impairment review ischarged tothe Companyincomestatement. Testing forimpairment requiresmakingestimatesfor thevaluationof the investments. Intercompanyreceivables areclassified asfinancialassets atamortised costandaremeasured atamortisedcost usingthe effectiveinterestmethod lessanyimpairment.TheCompany appliesa generalapproach inca lculating expectedcreditloss.Atthe reporting date,all out standing balanceswere considered tohavelowcredit risk,therefore,anoperational simplificationwas appliedwhen assessing expectedcredit loss onatwelve-monthperiod basis. Equity-settled employee shareschemesare accountedfor in accordance withIFRS2 ‘Sharebased payment’. Thecurrent charge relating tothe subsidiaries’employeesis recharged tosubsidiarycompanies. 182 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 3.Intangible assets Software Total $m$m Cost Balance at1 January2020 3939 Additions 1111 Disposals 1 (10)(10) Balance at1January 2021 4040 Additions33 Write-down (5)(5) Disposals 1 (7)(7) Balance at31 December 2021 3131 Accumulatedamortisationand impairment Balance at1 January2020 (6)(6) Charge forthe year (2)(2) Impairment (5)(5) Balance at1January 2021 (13)(13) Charge forthe year (3)(3) Balance at31 December 2021(16)(16) Carrying amount At 31December 2021 1515 At 31December2020 2727 1.Disposals representsoftwaresoldto subsidiaries Details of usefullivesare includedinNote16 ofthe Group consolidatedfinancial statements. 4. Investmentsin subsidiaries The detailsof Investmentin subsidiariesarementioned inNote 39of theGroup consolidatedfinancial statements. The followingtableprovides themovement oftheinvestmentsin subsidiaries: 2021 2020 $m $m Beginning balance 3,332 3,331 Additions tosubsidiaries 2,179 1 Liquidation ofsubsidiaries (2,223) – Ending balance 3,288 3,332 The movementduring theyear representreorganisationof the Groupstructure throughtransfer/l iquation ofcertain holdingcomp anies, specifically liquidation of HikmaAcquisitions (UK) Limitedand additionof Hikm aUK Limited(see Note39 ofthe Groupconsolidated financia lstatements). Hikma Pharmaceuticals PLC Annual Report 2021 183 FINANCIAL STATEMENTS ![]() #### Notes to the Company financial statements #### continued 5. Duefrom subsidiaries #### Non-current As at 31 December 2021 2020 $m $m Hikma PharmaceuticalsLLC 30 40 Hikma Pharmaceuticals USAInc. – 8 Hikma EmergingMarkets and Asia PacificFZ-LLC 4 5 Hikma UKLimited – 4 Hikma MENAFZE – 43 34 100 #### Current As at 31 December 2021 2020 $m $m Hikma PharmaGmbH 1 1 Hikma Pharmaceuticals USAInc. 51 31 Hikma MENAFZE 10 – Hikma Pharma S.A.E 2 2 Promopharm 2 – Al JazeeraPharmaceuticals IndustriesJPI 8 – Hikam Pharmaceuticals InternationalLimited 1 1 Hikma EmergingMarkets and Asia PacificFZ-LLC 7 7 Others 6 7 88 49 The Companydoesnot expectany material cr editlosses frominter group receivables. 6. Other current assets As at 31 December 2021 2020 (restated) 1 $m $m Investments atFVTPL 24 24 Prepayments 1 4 6 28 30 1.In2021, prepaymentshavebeenreclassifiedunder othercurrentassetswhich were previouslyclassifiedundertradeand othe r receivables, andhence the2020 numbers have been restated reflecting $6 million reclassification fromtradeand otherreceivablesto othercurrentasse ts. Hadthisreclassification beenapplied at 1 January2020, these line itemswould have beenrestated by$3 million Investment atFVTPL: representsthe agreementthe Groupenteredinto withan assetmanagement firmin 2015to manage a$20 millionportfolio of underlyingdebtinstruments. Theinvestment comprisesa portfolioof assets thatare managedby anassetmanager andismeas ured atfairvalue; any changesinfair value go throughthe incomestatement. Th eseassetsare classified aslevel1 valuation asthey arebased o n quotedprices inactive markets.(see Note29 of theof theGroup consolidated financialstatements) 184 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() 7. Cash andcash equivalents As at 31 December 2021 2020 $m $m Cash atbanks and onhand 15 11 Time deposits 207 145 222 156 Cash andcash equivalents includehighly liquid investments with maturitiesof three months orlesswhich are convertible toknown amounts ofcash and aresubjectto insignificant riskof changesin value. 8. Dueto subsidiaries #### Non-current As at 31 December 2021 2020 $m $m Hikma MENAFZE – 48 – 48 #### Current As at 31 December 2021 2020 $m $m Hikma Investment LLC – 17 Hikma FarmaceuticaS.A 5 4 Hikma Pharma Limited 1 3 Hikma UKLimited 1 1 Hikma Pharmaceuticals LLC 10 2 Other 1 2 18 29 9. Financialdebts A syndicatedrevolving creditfacility of$1,175 millionwas entered intoon 27October 2015.Fromthe$1,175million, $175 mil lion matured on 24 December2019, $130million maturedon January2021 andthe remaining$870 millionmatures on24 December2023.At 31Decemb er2021 the facilityhas anoutstanding balance of $nil(2020:$nil) anda $870million unusedavailable limit(2020: $1,000million). On29December 2021 the facilityagreement has beenincreased to $1,150 millionavailablefor 5years tillJan2027 effective from4 January2022 w ith anextension optionsfor additionaltwo years. Thisfacilityis availablein twotranches,the first forHikma PharmaceuticalsPLC$760 million andthe second isfor Hikma Finance USA LLC$390 millionand bothtranches ca nbe usedforgeneral corporate purposes. A ten-year$150 million loanfrom theInte rnational FinanceCorporation wasentered intoon 21December 2017.There wasfull ut ilisation of theloan since April 2020.Quarterly equal repayments of thelong-term loanhave commencedon 15 March2021.The loan wasusedforgener al corporate purposes. Thefacility matures on15 December2027. An eight-year $200million loanfrom theInternational Finance Corporationand ManagedCo-lending Portfolio programwas entered into on 26 October2020.There was noutilisation oftheloan asof December 2021. Thefacilitymatures on15 September2028(Note 28) ofthe Group consolidated financial statements. The weightedaverageinterest ratesincurred by theGroup aredisc losed in Note24 ofthe of theGroup consolidatedfinancial s tatements. Hikma Pharmaceuticals PLC Annual Report 2021 185 FINANCIAL STATEMENTS ![]() #### Notes to the Company financial statements #### continued 10. Staffcosts Hikma Pharmaceuticals PLCcurrently hasan averageof35 employees (2020: 35employees) (excludi ngExecutive Directors);total compensation paid to themamounted to$10 million (2020:$12million),of which salariesandbonuses comprisean amount of$7million(2020: $8m illion) theremaining balance of $3million(2020: $4 million) mainly represents nationalinsurance contributionsand otheremployee benefits. 11. Share capital Issued andfully paid –included in shareholder's equity: As at 31 December 2021 2020 Number $m Number $m Ordinary Shares of10p each 244,331,28842 243,332,180 41 At 31December2021, ofthe issued sharecapital,12,833,233(2020: 12,833,233)areheld asTreasury shares, nil(2020: 40,831)shares areheldin the Employee BenefitTrust(EBT) and231,498,055 (2020:230,458,116) shares arein free i ssue(Note31) ofthe Groupconsolidatedf inancial statements. 12. Profitforthe year The net profitinthe Companyfor theyear is$150million(2020: $483 million). Includedin thenet profitfor theyear isan amount of $2,401million (2020: $510 million) dividendsincome offsetby$2,223 million write-offof investments insubsidiaries mainly asa resultofthe reorganisation ofthe Group structure(Note 4). Theremaining inco mestatementcomponents larg ely representgeneraland admi nistrative expensesand netfinancing expenses. Audit fees forthe Company aredisclosedin Note7 ofthe Group consolidated financial statements. 13. Contingentliabilities Acontingentliability existedat thebalancesheet datefor astandby letterof credittotalling $10million (2020:$8million) forpotentialstampduty obligation thatmayarise forrepayment ofa loanbyintercompany guarantors.It’snot probable thatthe repaymentwill bemade bythe intercompanyguarantors. In addition,the Company guaranteed HikmaFi nanceUSA LLC$500 million, 3.25%,fiveyear Eurobond issuedin July 2020 (Note28 ofthe Group consolidated financial statements)andguaranteed Hikma Pharmaceuticals USAInc. cont ingent consideration relatedto the Columb usbusiness acquisition(Note 27and30 ofthe Group consolidated financial st atements).It’s notprobablethat anyof theguaranteed entit ieswill defaulton the guaranteed obligations. 186 Hikma Pharmaceuticals PLC Annual Report 2021 ![]() Hikma Pharmaceuticals PLC Annual Report 2021 187 2022 nancial calendar 17 March 2021 nal dividend ex-dividend date 18 March 2021 nal dividend record date 25 April Annual General Meeting 28 April 2021 nal dividend paid to shareholders 4 August\* 2022 interim results and interim dividendannounced 17 August\* 2022 interim dividend ex-dividend date 18 August\* 2022 interim dividend record date 16 September\* 2022 interim dividend paid to shareholders \* Provisional dates Shareholding enquiries Enquiries or information concerning existing shareholdings should be directed to Hikma’s registrars, Link Registrars either: – in writing to Shareholder Services, Link Group, 10th Floor, Central Square, 29 Wellington Street, Leeds LS1 4DL – by telephone from within the UK on 0371 664 0300 – by telephone from outside the UK on +44 371 664 0300 or – by email – enquiries@linkgroup.co.uk Dividend payments – currency Hikma declares dividends in US dollars. Unless you have elected otherwise, you will receive your dividend in US dollars. Shareholders can opt to receive the dividend in pound sterling or Jordanian dinar. The Registrar retains records of the dividend currency for each shareholder and only changes them at the shareholder’s request. If you wish to change the currency in which you receive your dividend please contact the Registrars. Dividend payments – bank transfer Shareholders who currently receive their dividend by cheque can request a dividend mandate form from the Registrar and have their dividend paid direct into their bank account on the same day as the dividend is paid. The tax voucher is sent direct to the shareholder’s registered address. Dividend payments – international payment system If you are an overseas shareholder, the Registrar is now able to pay dividends in several foreign currencies for an administrative charge of£5.00, which is deducted from the payment. Contact the Registrar for further information. Website Press releases, the share price and other information on the Group areavailable on Hikma’s website www.hikma.com. Share listings London Stock Exchange Hikma’s Ordinary Shares of 10 pence each (Shares) are admitted to the Ocial List of the London Stock Exchange. They are listed under EPIC − HIK, SEDOL − B0LCW08 GB and ISIN – GB00B0LCW083. Further information on this market, its trading systems and current trading in Hikma’s shares can be found on the London Stock Exchange website www.londonstockexchange.com. Global Depository Receipts Hikma also has listed Global Depository Receipts (GDRs) ontheNasdaq Dubai. They are listed under EPIC – HIK and ISIN – US4312882081. Further information on the Nasdaq Dubai, its trading systems and current trading in Hikma’s GDRs canbe found on the website www.nasdaqdubai.com. American Depository Receipts (ADR) Hikma has an ADR programme for which BNY Mellon acts as Depository. One ADR equates to two shares. ADR are traded as a Level 1 (OTC) programme under the symbol HKMPY. Enquiries should be made to: BNY Mellon Shareowner Services PO Box 358516 Pittsburgh, PA 15252-8516 Tel: +1 201 680 6825 Tel: +1 888 BNY ADRS (toll-free within the US) E-mail: shrrelations@bnymellon.com Shareholder fraud The Financial Conduct Authority has issued a number of warnings to shareholders regarding boiler room scams. Shareholders may have received unsolicited phonecalls or correspondence concerning investment matters. These are typically from overseas based ‘brokers’ who target UKshareholders, oering to sell them what oen turn out to be worthless or high-risk shares in US or UK investments. These operations are commonly known as boiler rooms. These brokers can be very persistent and extremely persuasive. Shareholders are advised to be very cautious of unsolicited advice, oers to buy shares at a discount or oers of free company reports. If you receive any unsolicited investment advice: – obtain the correct name of the person and organisations – check they are authorised by the FCA by looking the rm up on www.fca.org.uk/register – report the matter to the FCA either by calling 0800 111 6768 or visit www.fca.org.uk/consumers – if the caller persists, hang up Details of the share dealing facilities sponsored by Hikma areincluded in Hikma’s mailings and are on Hikma’s website. Hikma’s website is www.hikma.com and the registered oce is 1 New Burlington Place, London W1S 2HR. Telephone number + 44 (0)20 7399 2760. #### Shareholder information ![]() 188 Hikma Pharmaceuticals PLC Annual Report 2021 #### Principal Group Companies and Advisers Hikma Pharmaceuticals PLC Registered in England and Wales number 5557934 Registered oce: 1 New Burlington Place London W1S 2HR UK Telephone: +44 (0)20 7399 2760 E-mail: uk-investors@hikma.com Hikma Pharmaceuticals USA Inc. 200 Connell Drive BerkeleyHeights New Jersey 07922 US Telephone: +1 908 673 1030 Hikma Pharmaceuticals LLC 21 Saleem Bin Hareth Street P.O. Box 182400 11118 Amman Jordan Telephone: +962 6 5802900 Hikma Farmacêutica (Portugal) S.A. Estrada Rio Da Mo no. 8 8A, 8B – Fervença 2705 – 906 Terrugem SNT Portugal Telephone: +351 21 9608410 #### Advisers Auditors PwC LLP 1 Embankment Place London WC2N 6RH UK Brokers Citigroup Global Markets Limited Canada Square London E14 5LB UK Morgan Stanley & Co. International PLC 25 Cabot Square Canary Wharf London E14 4QA UK Registrars Link Group, 10th Floor Central Square 29 Wellington Street Leeds LS1 4DL ![]() Printed in the UK by Pureprint. Pureprint is a CarbonNeutral ® company. Both manufacturing mill and the printer are registered to the Environmental Management System ISO14001 and are Forest Stewardship Council ® (FSC®) chain-of-custody certied. Design and production ![]() © Hikma Pharmaceuticals PLC 1 New Burlington Place London W1S 2HR UK T +44 (0)20 7399 2760 www.hikma.com