Welcome to our 2020 Annual Report Our performance

Revenue Operating profit Hikma puts ($m) ($m) better health $2,341m $579m 4 Executive Chairman’s 26 Business and +6% +17% within reach, statement financial review We are delivering results and investing Achieved strong organic growth in the future to drive sustainable over our three business segments. every day. 1 2 long-term growth and create value Core operating profit EBITDA for stakeholders. ($m) ($m) $566m $670m +11% +13% By creating high-quality products and making them accessible to those who need Profit to shareholders Basic earnings per share ($m) (cents) them we are helping to shape a healthier world that enriches $431m 182.6c

all our communities. 6 Chief Executive 38 Sustainability (11)% (9)% Officer’s statement We have a duty of care towards patients, communities, our people The resilience and commitment and the environment. of our people in a challenging year enabled us to maintain supply Core basic earnings per share3 Dividend per share of vital medicines for patients. (cents) (cents) Strategic report Corporate governance 2 What we do 63 Message from our Executive Chairman 4 Executive Chairman’s statement 64 Corporate governance at a glance 172.9c 50c 6 Chief Executive Officer’s statement 66 Board of Directors 9 Investment case 68 Executive Committee 10 Our response to COVID-19 70 Governance report Deliver +15% +14% 12 Our strategy 74 Committee reports 14 Our progress 90 Remuneration report 16 Our markets 105 Directors’ report 18 Our business model Better health. 20 Stakeholder engagement Financial statements Within reach. 1. Core results are presented to show the underlying performance of the Group, excluding the exceptional Every day. items and other adjustments set out in Note 6 in the Notes to the consolidated financial statements. 110 Independent auditors’ report Build Business and financial review A reconciliation from core to reported operating profit is included within the Consolidated income 118 Consolidated financial statements 26 Group overview statement in the Financial statements 123 Notes to the consolidated 28 Injectables Inspire 2. EBITDA is earnings before interest, tax, depreciation, amortisation and impairment charges. financial statements EBITDA is a non-IFRS measure, see page 36 for a reconciliation to reported IFRS results 30 Generics 62 171 Company financial statements 3. Core basic earnings per share is reconciled to basic earnings per share in Note 15 in the Notes 32 Branded Corporate 173 Notes to the Company to the consolidated financial statements 34 Group performance financial statements governance Sustainability The Board has continued to deliver 38 Sustainability Shareholder information Risk management strong governance and strategic 179 Shareholder information 12 52 Risk management 180 Principal Group Companies Our strategy oversight in a challenging 60 Compliance and Advisers Our purpose is to make healthcare environment. more accessible by delivering on our three strategic priorities.

Hikma Pharmaceuticals PLC Annual Report 2020 1 What we do

We develop, manufacture and market a broad range of generic pharmaceutical products across the US, MENA and Europe. c.8,600 31 7 780+ employees manufacturing plants R&D centres products We are also a leading licensing partner. in 11 countries

Our markets Our business segments

Segmental core revenue Injectables $977m (2019: $890m) Generics $744m (2019: $719m) Branded $613m (2019: $583m) US MENA Europe & ROW Other $7m (2019: $11m) c.1,900 c.5,700 c.1,000 employees employees employees

US % Group core revenue Our large manufacturing facilities in the United States (US) – one US 60% (2019: 61%) for injectables and one for non-injectables – supply products across MENA 33% (2019: 33%) a broad range of therapeutic areas, including respiratory, oncology and pain management. We also have two dedicated R&D facilities Europe & ROW 7% (2019: 6%) Injectables Generics Branded to support sustainable growth. Our Injectables business develops Our Generics business develops Our Branded business develops MENA and manufactures generic injectable and manufactures oral and other and manufactures branded generics We sell branded generics and in-licensed patented products products. Our products are sold non-injectable generic products. and markets and sells in-licensed across the Middle East and North Africa (MENA). We have across our markets and are primarily Our products are sold in the patented products in MENA. Our manufacturing facilities in seven countries, including US FDA- used in hospitals. US retail market. products are sold in the retail and inspected plants in Jordan and Saudi Arabia. Around 2,000 sales hospital markets. representatives and support staff market our brands to healthcare professionals across 18 markets.

Europe and the rest of the world (ROW) We have injectable manufacturing facilities in Portugal, Germany and Italy, with 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.

2 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 3 Executive Chairman’s statement

In Beirut, following the terrible explosion in Further detail on the activities of the Board At Hikma we focus on quality and August, we were on the ground immediately, and its Committees are set out in the delivering medicines, which we donated to Corporate governance section of this report hospital groups in the region. We also worked on pages 62-108. I would like to reliability in everything we do. with the charity Anera in Lebanon to help provide specialised medicine to nearly 100 Financial performance and thank all of children suffering from sickle cell disease. shareholder returns You can read more about our community Hikma performed well in 2020 with good our employees, outreach and stakeholder considerations revenue growth and an improvement in core on pages 23 and 39-43 of this report. profitability. as well as our The business has cemented its strength in Our culture and our people customers, Said Darwazah the debt capital markets, with the raising of a In 2020 we introduced our new corporate new $500 million Eurobond in July, following suppliers, Executive Chairman culture programme anchored on the twin the repayment of our previous bond in April. pillars of progress and belonging, and Furthermore, during the year we achieved shareholders powered by three core values: innovation, investment grade status from two ratings collaboration and caring. These values agencies – an accomplishment which and other guide our behaviours and help foster an reflects the quality of the business. environment where everyone is appreciated and can do their best work. In June, Boehringer Ingelheim (BI) exited stakeholders as entirely from its strategic stake in Hikma, We conducted a company-wide employee and we took this unique opportunity to utilise we look forward survey, for which we had a 90% response our balance sheet strength and repurchase rate. The results show our engagement a portion of BI’s holding. The purchase to continued scores improving, highlighting the pride highlights the Board’s conviction in the that employees have in working for Hikma. continued success of Hikma and its success in 2021. We value diversity in our workforce, and we long-term growth prospects. Our strong are implementing policies and programmes, balance sheet enabled us to comfortably to ensure that we are the inclusive and undertake this transaction whilst maintaining inspiring place to work that our founder set continued financial flexibility. out to establish. We remain committed to paying a dividend We have established the Diversity Equity to our shareholders. Acknowledging the and Belonging (DEB) Task Force, a sub- strong financial performance in 2020, as well committee of the Executive Committee, as our robust balance sheet, the Board has to oversee the adoption of a more inclusive recommended a final dividend of 34 cents approach to employee recruitment, retention per share. Combined with the interim and promotion. In the US we have divided of 16 cents per share, this represents established the Black Employees Advisory a 14% increase in the total dividend for the Board, an employee-led initiative to enhance full year in 2020, to 50 cents per share our diversity, equity and belonging goals. (approximately 36 pence per share), up from 44 cents per share (approximately 34 pence Importance of our purpose Quality and reliability Communities and our responsibility Corporate governance per share) in 2019. Our values Hikma’s purpose to put better health within A founding principle of Hikma is the to give back Our CEO, Siggi Olafsson, has been in the role To foster a culture of progress and reach, every day drives us to bring important, importance we place on quality and Fulfilling our purpose of putting better health for three years now and I am delighted with Future prospects The strategy we set out when Siggi joined belonging, we have three core values: quality and affordable medicines to people reliability. Our customers trust us to deliver within reach every day is not only about the progress we have made since he joined. Hikma in 2018 is delivering results. A focus who need them. In 2020, the COVID-19 high-quality and affordable medicines when providing medicines. We have a strong Siggi has energised the business, helped us on the foundation has helped deliver pandemic truly galvanised this mission. I am they need them. In recent years we have legacy of supporting the communities in build on our strong foundations, and not Innovation a strong performance this year, and our proud of the role we have played, along with invested significantly to ensure we maintain which we live and work, and in 2020 these lost sight of the important qualities and We keep learning, inspire others pipeline is expanding as we continue many others in the pharmaceutical industry, this quality and reliability as we grow. efforts were particularly important. principles upon which Hikma was founded. and find a better way in coming together to help healthcare One example of this investment is our new to invest in R&D to drive future growth. In the US, our teams worked together to This year we have seen continued evolution professionals and healthcare systems high-containment facility in Portugal, Our people and culture are vital to our Collaboration make food donations, tackling the issue of the Board, with the appointment in May manage the disease. which proved vital in fulfilling demand success and we continue to focus on We keep it simple, deliver of food security brought about by the of Douglas Hurt, who has taken on the role for our Injectables products this year. the importance of a diverse and energised together and take ownership Throughout this challenging year, we pandemic. Together we helped provide more of Chair of the Audit Committee, and the prioritised the health and safety of our We responded quickly at the outset of the workforce. I would like to thank all of than 600,000 meals through our food bank departure in June of Dr Jochen Gann, who Caring employees and I would like to thank them pandemic, adapting our ways of working to made a valuable contribution to Hikma our employees, as well as our customers, partnerships in Ohio and New Jersey, where We make a difference, do the all for their continued hard work and adopt social distancing at our facilities. All during his tenure. More recently Robert suppliers, shareholders and other our key operational centres are located. right thing and respect others dedication during these challenging times. of our plants were operating at the highest Pickering, who joined the Board in 2011 stakeholders as we look forward to Our employees are driven by our purpose, capacity possible under the circumstances and served as Senior Independent Director continued success in 2021. meaning they have continued to make an as our people worked overtime to meet the from 2014, stepped down. Robert has been important and meaningful impact not only in surge in demand. Through these efforts, a tremendous asset to Hikma and provided Find out more about our values on page 25. the fight against COVID-19, but in continuing we ensured that as many of our geographies invaluable counsel over the past ten years, to provide a reliable supply of the important went into lockdown, Hikma’s high-quality for which I am deeply grateful. medicines needed by all our customers and products continued to reach customers patients around the world. and patients around the world.

4 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 5 Chief Executive Officer’s statement

Our aim is to be a trusted and reliable partner, putting better health Our Injectables business within reach, every day. played a key role in the early response to the pandemic.

Siggi Olafsson Chief Executive Officer

Executing on our strategy Our Generics business now has a core Our Injectables and Branded business have Our strategy is focused on three pillars: operating margin percentage in the low also strengthened and delivered on their twenties. We have expanded our profitability pipelines. The Injectables team added 77 significantly in recent years, from 4% in 2017, products to our global portfolio and signed Deliver more from and I have the team to thank for this new licensing deals. In the US we launched a strong foundation achievement. We ensured we were in propofol during the year, an important constant touch with our customers as we product in the treatment of COVID-19 focused on reinforcing these relationships patients. In MENA we agreed to licence and Build a portfolio that through an emphasis on maintaining high distribute Sun Pharma’s ILUMYATM, an anticipates future service levels. We have also continued to innovative biologic injectable product for health needs leverage our manufacturing flexibility, the treatment of psoriasis, strengthening enabling us to adjust production to meet our biotechnology and dermatology demand, whilst also limiting backorders. portfolio. Meanwhile the Branded team has Inspire and enable continued to launch new products, including Our Branded business has once again Reagila® (cariprazine), a medicine licensed our people delivered good revenue growth in constant from Gedeon Richter, used in the treatment currency and stable margin despite some of schizophrenia and other mental illnesses. COVID-19 pandemic-related disruptions. Several of our launches were carried out We benefited from our strategic focus on virtually, with much of our promotional our Tier 1 markets, with good performances activity moving away from in-person in Algeria, Egypt and Saudi Arabia. I am interaction during the period due to social thankful to the team for navigating the distancing measures. market environment, adapting our ways of working and ensuring that our strong presence in the MENA region is maintained.

We faced a year of challenges and Operating in challenging times As a result of our early actions, we were able Championing our people opportunities in 2020. I am enormously to supply our customers with vital medicines, When the impact of the pandemic began to Our talented and dedicated employees proud of how adaptive and resilient our ensuring that we delivered on our purpose of be felt around the world, we reacted quickly, Building on our strong foundation Expanding the portfolio are the lifeblood of Hikma, and critical to employees were in the face of a global taking early measures not only to safeguard putting better health within reach, every day. When we set out our strategy in 2018, we During 2020, we continued to launch our strategy is the recruitment and retention pandemic and am grateful for their our employees, but also to ensure Whilst we saw strong demand for certain highlighted the importance of Hikma’s strong new products and grow our pipeline. Our of the best talent. I firmly believe that having unwavering commitment to maintaining consistency of supply of critical medicines. products used in the treatment of COVID-19 foundation and it is through our focus on Generics business had six launches in the a culture which engages and energises our the supply of vital medicines for patients We set up response teams at group, regional patients, we also remained focused on this that we have been able to meet the year, including generic Zortress®, where people results in a stronger business. across our markets. and local levels, to ensure consistent our broader portfolio, continuing to make challenges presented in 2020. we launched as the only available generic. communication. Those of our employees As set out in the Chairman’s statement, I would like to thank every one of our high-quality and affordable medicines We also accelerated our launch of icosapent who could work from home did so. Our Our Injectables business played a key role we have worked on our culture and values employees for their hard work during this accessible, to enable people with other ethyl capsules, following receipt of US FDA operations teams adjusted our shift in the early response to the pandemic. In during 2020. This has been an important challenging time. conditions to live their lives. approval and a favourable court ruling in schedules and introduced social distancing the US, many of our established respiratory, project for Hikma and I am excited by the the year. We launched with limited quantities protocols that enabled us to keep our plants pain, anaesthetic and sedative products evolution that has taken place. We are and expect to increase our supply over the operational. Meanwhile, our procurement were in high demand in intensive care wards, committed to building a culture of progress course of 2021. We were pleased to receive team worked tirelessly with our suppliers as hospitals managed a significant number and belonging, where everyone at Hikma approval for generic Advair Diskus® at the to manage and prevent any potential issues of ventilated COVID-19 patients. can do their best work. end of the year. We have temporarily paused in our ability to deliver finished products. In Europe, we further expanded our the launch of this product while the FDA manufacturing facilities and won important reviews an amendment to the application. contract manufacturing business, including For more information on generic Advair for the manufacture of remdesivir, one of the Diskus® please see page 31 of this report. key drugs to be used to treat patients with COVID-19. In MENA our injectable biosimilar products continued to perform well as we launched into new markets.

6 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 7 Chief Executive Officer’s statement Investment case continued

We have a track record of creating value for our stakeholders. By focusing on our strategic priorities and leveraging our strengths, we can build upon our success.

Delivering a strong financial Positioned well for the future Our business is uniquely positioned, performance The Group performed well in 2020 and we Unique and with three main business segments. By executing our strategy, in 2020 core have started 2021 in a strong position. I am diversified In 2020 we Group revenue grew 6% to $2.3 billion and excited about the opportunities ahead for We have a broad and diversified core Group operating profit grew 11% to each of our three businesses. The Branded business product portfolio and a growing refreshed Hikma’s $566 million. This strength was also reflected business has demonstrated its resilience model pipeline of new medicines, that are in our cash flow, with a net operating cash and adaptability, which we will leverage sold in the retail and hospital markets. values, and now flow of $464 million. in 2021 as we introduce new products to the market. Our Injectables business is Revenue by segment Revenue by region As a result of this good cash performance, an established top three player in the US, have the twin pillars and accounting for our capital investments Injectables $977m US $1,406m and continues to show significant growth Generics $744m MENA $770m made during the year, as well as the share in Europe and MENA. For Generics, we have of progress and buyback, we exited the year with a robust Branded $613m Europe & ROW $165m a strong pipeline of opportunities ahead Other $7 million belonging at the balance sheet, and gearing of 0.9x net debt and look forward to building on the strong to core EBITDA. 2020 performance. We are the third largest generic heart of our culture. I am profoundly aware of the important Strong market Operating responsibly injectable manufacturer and a Top 10 #3 #5 impact Hikma has in improving the lives of Hikma is committed to providing better position top ten generic company in the US. generic company largest generic largest millions of people around the world, and the in the US injectable pharmaceutical health, supporting education and helping In MENA, we are one of the largest people in need. communities in which we operate. I would manufacturer company like to thank all of our stakeholders, including pharmaceutical companies with in MENA We have several charitable partnerships employees, customers, partners and very strong brand awareness. across our markets, including with Save the shareholders, who collectively enable us Children and the Prince’s Trust, through to put better health within reach, every day. which we support the education of young Commitment We have built our reputation on people in need. manufacturing high-quality medicines. 30+ +1 to quality Quality is embedded in our people, US FDA inspections of Hikma added new high containment We are undertaking a review of our impacts facilities over the last five plant in Portugal following our relationships and our thinking. around Environmental, Social and years. We have a strong successful FDA inspection Governance (ESG) issues in 2021. As a part Our excellent track record of regulatory quality record of this, we are working to understand better compliance has made us the partner of our impact on the environment, and to align choice for our customers and patients. our environmental disclosure and internal processes with the recommendations of We have a large and growing pipeline, the Task Force on Climate-related Financial Large and with an increasing proportion of 500+ 30 Disclosures (TCFD). This will ensure effective growing differentiated and complex products. products in our pipeline US products under management of climate-related issues within development or submitted pipeline We complement our internal R&D our business as we work to both adapt to a are classified as complex changing environment and limit our negative with partnerships and M&A. environmental impact where we can. You can read more about the initiatives in place in the Sustainability section of this report, on pages 38-51. Strong balance We consistently generate strong cash flow. Our disciplined approach to cash $464m 52% 0.9x sheet and cash management and acquisitions ensures operating free cash flow/ net debt/ cash flow core operating core EBITDA generation we maintain a strong balance sheet profit1 and gives us the financial flexibility 1. Free cash flow is defined as net cash inflow from operating activities less to support future growth. purchases of property, plant and equipment

8 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 9 Our response to COVID-19

As the COVID-19 pandemic continues to Hikma has a legacy of supporting the impact people and communities around communities in which the world, the health and safety of our people we live and work and the millions who count on our medicines remains our top priority.

Business response Protecting our employees Supporting food security Hikma and its employees made food donations in our to COVID-19 We are committed to the health and safety of our employees. communities through several initiatives including our US When the World Health Organization declared the COVID-19 matching donation campaign, distributing meal vouchers We are fully committed to providing our customers and their outbreak a public health emergency of international concern in Morocco, and shipping meals to those patients the medicines they need. Since the onset of the in January, we established a Group Incident Response Team in need in Jordan and Portugal. pandemic in early 2020 we have prioritised the manufacture to keep our employees well informed. 600,000 of medicines that have been in highest demand, such as Ensuring food security has become more essential during During the various containment and closure measures put respiratory, pain, anaesthetics and sedatives. We have the pandemic, and we remain passionate about assisting in place around the world, our staff who were able to work Hikma and its employees been operating at the highest capacity possible under those in need in our communities. from home did so. Our IT teams worked hard to ensure all the circumstances to meet the increased demand. donated more than 600,000 meals remote-working employees were enabled to do so. We also Our manufacturing sites operate to a high standard of put in place workshops and courses to help employees with to our communities through Find out more about our food donation activities on page 43 hygiene and, in some cases where required, under sterile managing worry, anxiety and stress related to the pandemic. several initiatives including our conditions. In addition, we have implemented measures For those in our plants, recognised as essential workers, recommended by health authorities to minimise risk US matching donation campaign we increased cleaning and changed work practices to including additional levels of cleaning, enhanced ventilation maximise social distancing. Local response teams addressed and installation of protective barriers. suspected and confirmed cases among our employees and We are always proactively managing our inventory and stock took action to identify close contacts and coordinate actions levels, transportation options and the availability of raw to protect the remaining site population. To demonstrate our materials and component parts. Through 2020 we worked appreciation for the extraordinary hard work and dedication closely with our supplier networks to ensure business of our essential workers, we provided increases in monthly pay continuity and maintained higher inventory levels to ensure during some of the most challenging months of the pandemic. continuity of supply. We did see some impact on our sales and marketing teams Find out more about our protection of employees in the in MENA, where our operations were impacted by social sustainability section on page 46 and in the risk report on page 54 Generic medicines: a hidden hero distancing measures. In response, we moved to virtual detailing of doctors, and hosted well-attended webinars. in the fight against COVID-19

We have also seen a reduction in demand for products The generics sector this year has been a vital, if often less visible, partner used in elective surgeries as these procedures have been in the fight against COVID-19. Our people have worked tirelessly throughout put on hold while the treatment of COVID-19 is prioritised. the year to continue to supply hospitals and healthcare professionals with In the MENA region, our anti-infectives products have seen the priority medicines needed for treating seriously ill patients. lower demand this year as social distancing measures have Hikma responds to reduced the prevalence of illness in communities. The treatment of COVID-19 can involve the administration of a wide 84% range of medicines supplied by the generics sector. Our reliable supply COVID-19 shortage While we did see some COVID-19 pandemic-related of employees surveyed of products such as respiratory medicines, anaesthetics, sedatives and challenges, the business performed well in the year and we anti-infectives has been crucial in ensuring patients can be intubated, with launch of propofol did not put any employees on furlough or make redundancies thought Hikma responded ventilated and medicated when treating the most severe aspects of injectable emulsion as a result of the pandemic, nor did we receive any effectively to the this illness. government support. May 2020 COVID-19 pandemic Hikma has also been able to leverage its flexible manufacturing facilities Our long-standing commitment to our local communities to partner with other companies in producing vital drugs, such as remdesivir. remains strong and we have been providing funding, medicine donations, food and other essentials, with We are proud of the role generics have played in responding to this examples provided here, and later in this report. global health crisis.

10 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 11 Our strategy

Strategic review Our strategy is to make better health Management conducts a review of our strategy on an annual basis in partnership with the Board. The comprehensive approach assesses more accessible by delivering more from ‘our progress’, ‘our markets’ and ‘our business model’ to identify and our strong foundation, building our portfolio analyse strategic risks and opportunities over the short and long term. and inspiring and enabling our people. We have a unique business Our focus is on: Our KPIs: model, a differentiated footprint – Growing our existing business – Core revenue and a strong commitment to – Controlling costs and improving – Core operating profit quality. We are building and processes – Return on invested capital enhancing these assets to – Building customer relationships drive sustainable growth. – Enhancing our operations Our strategy – Ensuring full quality compliance Deliver

Today’s pipeline is tomorrow’s Our focus is on: Our KPIs: Better health. product. We are investing in our – Building portfolio momentum – Core revenue from new Within reach. pipeline to meet the future needs – Investing in specialised products launched Every day. of patients and increase access products and technologies Build to high-quality medicines. – Improving speed to market of pipeline – Partnering to bring innovative products to market Inspire

Our people are delivering Our focus is on: Our KPIs: our strategy. Our strong brand – Developing behavioural – Employee enablement and clear purpose support competencies and talent – Employee engagement a culture that enables us to – Building a strong culture achieve our goals. of progress and belonging – Embedding our values of innovation, collaboration Deliver more Build a portfolio Inspire and caring from a strong that anticipates future and enable – Promoting diversity, equity and belonging foundation health needs our people

Find out more about our key performance indicators see page 14

12 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 13 Our progress

We are delivering on our strategy and Find out more about our strategy on page 12 measuring our performance with key Find out more about how we are managing risk on page 52 performance indicators (KPIs). Find out more about our remuneration on page 90

Strategic Deliver more from Build a portfolio that Inspire and enable our people priority a strong foundation anticipates future needs

KPI Core revenue Core operating profit Return on invested capital2 Core revenue from new product Employee enablement Employee engagement ($m) ($m) (%) launches (%) (%) (%) $2,341m $566m 16.2% 7%

566 2,341 2,203 508 2,076 1,950 460 1,936 419 386 18.6 17.0 16.2 15.1 10.6 64% 73% (20181: 65%) (20181: 69%)

2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

Description Total annual core revenue Core operating profit Core operating profit after tax Percentage of core revenue contribution Global employee enablement score Global employee engagement score generated across all businesses divided by invested capital from products launched in 2020 and the (calculated as total equity plus second half of 2019 net debt)

Why is it a KPI? This measures our ability to This measures our ability to grow This measures our efficiency in This measures our ability to extract This measures whether people find their This measures people’s pride in working maximise value from our current revenue and maintain quality allocating capital to businesses value from our global product pipeline work fulfilling and rewarding and whether for Hikma, their willingness to recommend product portfolio across our global while delivering efficiencies and and projects they feel supported to achieve their full Hikma as an employer and their desire markets and generate revenue from ensuring cost control potential to stay long term new launches

2020 Group core revenue increased The increase in core operating Return on invested capital In 2020, revenue from new product Our employee enablement score Employee engagement improved by performance by 6% reflecting good demand profit was driven by good revenue remained strong at 16.2%. This was launches was 7% of Group core revenue, decreased by 1%, compared to our 2018 4 percentage points since 2018. This for our in-market products and growth across all three business slightly lower than 2019, reflecting up from 4% in 2019. This reflects the survey. We are working to improve reflects increased communication and new product launches segments and growth in profit of our the adverse impact of foreign better than expected contribution from employee enablement across our collaboration across the Group, particularly Generics and Injectables businesses exchange on core operating profit new launches in Generics and good organisation. In 2020 we introduced our around addressing employee concerns contribution from Injectable launches new culture framework and refreshed our in relation to COVID-19 values. We are implementing new initiatives to promote our values and enable employees to do their best work

Link to 1 R R R remuneration

1. As one of the performance criteria for determining the Executive Directors’ remuneration, core operating profit is measured before R&D costs 1. In 2019, we conducted an all-employee global culture survey, which produced qualitative results. We did not carry out 2. See reconciliation on page 36 our usual data driven all-employee survey, and therefore we do not have the enablement and engagement percentages for reporting purposes for 2019

14 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 15 Our markets

Key trend Key trend Key trend Key trend Key trend Evolving demographic and market Changing demographics Changing supply chain Pricing and access Evolving competitive Biosimilars and environment complex generics trends continue to drive growth. The world’s population continues The pharmaceutical supply chain In recent years, higher demand The generic industry is highly Despite being available in Europe to grow and is ageing rapidly. It is is a global and integrated network for healthcare, primarily driven competitive. This, coupled with and other parts of the world for expected to increase by 2 billion developed over many decades. by an ageing population and portfolio rationalisation and quality some time, the development and The global pharmaceutical market has been shaped by key trends in people by 2050. The number The COVID-19 pandemic has chronic illnesses, led to increased issues, can cause occasional approval of biosimilars has been recent years, including demographic shifts, evolving competitive and of people aged 65 and older raised questions about the pressures on budgets. In addition, shortages of critical medicines. slower in the US. However, this is expected to double over this resilience and vulnerability COVID-19 has caused a global is beginning to shift and we have New organisations and distribution market dynamics and increased pressure on healthcare budgets. Our period and to make up 16% of of supply chains. As a result, economic downturn, accelerating seen a steady acceleration of 2,3 channels with refreshed business the population . This ageing onshoring, which seeks to the need for governments to put in physician acceptance in the past models have started to emerge, strategic priorities and business model allow us to capture opportunities population, as well as a change in strengthen domestic capabilities, place cost containment measures two years. Biosimilar products in part to help alleviate drug lifestyles, is leading to an increase is becoming an increasingly to maintain sustainable healthcare launched in 2019 are achieving and overcome challenges in a rapidly changing industry. 6 shortages and increase patients’ in chronic non-communicable common theme as governments budgets . a higher uptake in their first year access to medicine. These include diseases, such as heart disease, look to de-risk their supply chains. compared to those launched in 4 The need for more affordable Civica Rx, a not-for-profit cancer and diabetes . In the pharmaceutical sector, both previous years, with market share healthcare solutions will result organisation with the purpose of 1 Europe and the US are looking to expected to reach around 50% to Global generics market 2025 in higher utilisation of generic reducing drug shortages in the US increase focus on domestic 60% in the second year10. These medicines. In the US, 90% of by creating a consistent and ($ billion) manufacturing of critical active trends are tracking closely to what 2020 prescriptions filled are for reliable supply of medicines. More pharmaceutical ingredients (APIs) is seen in Europe. The biosimilar generic medicines, accounting recently, Amazon has launched and certain finished products. market in the US is growing and for only 20% of prescription an online delivery service for 7 presents a number of As a result, shifts in the global drug spending . In 2020, generics prescription medicines9. pharmaceutical supply chain are played an important role in the opportunities – sales are expected $277 beginning to take place, with an fight against COVID-19. Generic to reach $80 billion over the next 10 increasing need to have multiple substitution is increasingly five years . sources of supply across different encouraged as a solution. Complex generics are also geographies to mitigate shortages. becoming an area of focus. As the This is still at a very nascent stage, market becomes saturated with however, and dependence on commodity generics, companies imported raw materials will remain are looking to differentiate their high for the foreseeable future portfolios and deliver more value $232 in order to maintain affordable to patients by developing complex 5 pricing and reliable supply . generics. This requires significant development expertise and regulatory pathways are still unclear11.

Strategic response Strategic response Strategic response Strategic response Strategic response Global context We are committed to improving We have global manufacturing and Generic medicines are part of the Our teams continuously monitor Through our partnership with The COVID-19 pandemic has impacted the lives of billions of people patients’ access to high-quality, distribution sites. Over the past 10 solution to rising healthcare costs. the competitive environment and Celltrion, we have launched three affordable medicines. Our teams years, Hikma has made significant At Hikma, we are committed to its evolving dynamics. We have biosimilar products in MENA – and their communities around the world. As countries went into meet with healthcare investments in building its US and increasing patients’ access to a broad product portfolio, Remsima®, Truxima® and lockdown, people were faced with new challenges and economies saw professionals regularly to better EU manufacturing capabilities. more affordable healthcare. As a high-quality operations and a Herzuma®. Our strong commercial understand their needs. We invest We currently operate state-of-the- member of the Association for steady stream of new product capabilities and breadth of reach a slowdown in growth. At the same time, the industry continues to adjust around 6% to 7% of our Group art manufacturing facilities in Accessible Medicines in the US, we launches across our markets, in the region has enabled us to to changing demographics, evolving supply chains and shifting market revenue in R&D to develop a Cherry Hill (NJ), Columbus (OH), are active in advocating for policy which help us to be resilient to enhance patient access to these pipeline and portfolio of products and Portugal which produce the solutions that will further increase the changing landscape. important treatments. As the US and competitive dynamics. that meet the healthcare needs majority of the injectable and the utilisation of generic medicines biosimilar market evolves, we are We work closely with all of our of our patients. generic medicines. at the state and federal levels. evaluating the market opportunity customers to better understand and potential entry points. The global pharmaceutical market continues to grow and access to In 2020, through stocking In 2020, we launched 154 new their needs and build strong strategies and supply chain products across our markets. relationships. Hikma is increasingly One of Hikma’s key strategic affordable healthcare has never been more important. The market share modelling, we maintained When there are two generics on recognised as a reliable partner priorities is to build a portfolio of generic medicines is expected to grow at a CAGR between 3.5% and continuity of API supply. We are the market, the average price of a to customers. In 2019, we formed of products that meets the future 1 constantly evaluating product will drop by around 50%8, a partnership with Civica Rx and needs of healthcare professionals 4% over the next five years . opportunities to qualify alternate accelerating as more generics are supplying them with essential and their patients. We do this sources to mitigate supply risk. enter the market. injectable products, in line with through investment in internal 1. IQVIA Forecast Link, 2020 our mission to make high-quality R&D, which is increasingly focused 2. United Nations, world population ageing highlights, 2020 healthcare available to those who on complex products – 30 3. United Nations, world population prospects, 2019 4. WHO, global health and ageing need it. products under development or 5. CPhI Annual Report 2020: postulating the post COVID pharma paradigm Find out more about our Find out more about how we respond submitted in the US are classified 6. Fitch Solutions, trends shaping the post-COVID-19 pharmaceuticals & healthcare market, 2020 suppliers on page 24. to patients on page 21. as complex. We also look for 7. Association for Accessible Medicines, 2020 generic drug & biosimilars, access & savings in the US report opportunities to add complex 8. FDA, generic competition and drug prices available at https://www.fda.gov/about-fda/center-drug-evaluation-and-research-cder/ products through licensing generic-competition-and-drug-prices 9. Amazon launches online pharmacy in challenge to traditional retailers, available at https://www.ft.com agreements. 10. IQVIA, biosimilars in the United States 2020-2024, October 2020 11. IQVIA, complex generics: charting a new path

16 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 17 Our business model

Our diversified business model allows us to respond to the many opportunities and risks we face, while delivering value for our stakeholders.

Better health. Within reach. Every day. The value we create

Our resources What we do Patient benefits We provide patients across our markets with high-quality and affordable medicines. Offer a broad product portfolio Financial We offer a broad and differentiated portfolio of 780+ 780+ Investment in R&D, manufacturing facilities, more than 780 products. It includes high- Products Products partnerships and M&A enables us to expand quality generic and branded generic medicines our product portfolio, technical capabilities and a growing number of in-licensed products. and operations. Our business segments Employee engagement By focusing on the engagement and Market across geographies development of our people, we provide We distribute our products in our markets c. 2,000 long and rewarding careers for our People through experienced sales and marketing sales representatives talented and diverse workforce. We have a highly skilled, diverse and teams. In the MENA region, around 2,000 market our products effective workforce. Through continuous representatives market our brands to doctors across MENA investment in the development of our 73% and pharmacists, while our sales teams in Employee engagement score people and by hiring new talent, we secure the US and Europe sell to a broad range of Injectables our future. customers, including the leading wholesalers, pharmacy chains, governments and hospital purchasing organisations. Shareholder returns We have a long history of creating value Values for our shareholders. Our refreshed values promote a culture Develop and innovate that is innovative, collaborative and caring, We are building a pipeline of products to meet 6% 257% ensuring the sustainability of our business. the evolving needs of patients and healthcare Group revenue Total shareholder return Generics Branded professionals through investments in internal invested in core R&D over last ten years R&D, partnerships and strategic acquisitions. (2019: 6%)

Relationships Sustainable business See our business and financial review Strong relationships with regulators and Manufacture and maintain quality By acting responsibly and with integrity, on page 26 health authorities across all our markets, Our extensive and high-quality 31 we are benefiting the communities and successful collaborations with manufacturing capabilities are at the heart manufacturing plants in which we operate. industry partners, enable us to achieve of what we do. We have 31 plants across the – Founding member of the Partnering our shared objectives. Group that supply our global markets with a 12 Against Corruption Initiative broad range of injectable and non-injectable US FDA-inspected – Member of the United Nations products, including 12 US FDA-inspected plants Global Compact and FTSE4Good plants and 12 EMA-inspected plants. Capabilities 12 We have extensive commercial, EMA-inspected manufacturing and distribution operations Find out more about our key plants performance indicators on page 14 across our markets focused on quality and efficiency. Find out more about how we are managing risk on page 52

18 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 19 Stakeholder engagement

Engaging our stakeholder groups and considering their needs is a top priority.

Patients and healthcare professionals

In a year that posed many challenges due Who is this stakeholder group? to the COVID-19 pandemic, we remained Our purpose is to put better health within reach, every day for healthcare focused on our relationships with our Stakeholders and the Board professionals and their patients. We engage with doctors, clinicians and stakeholders. Our teams have worked harder pharmacists to better understand their needs, helping them treat the patients The Board of Hikma considers its duties to – likely consequences of any decision in than ever to ensure customers, healthcare they serve. shareholders and the wider community at the long term – the strategic overview professionals and the patients they care for each Board and Committee meeting and on pages 4 to 8 get the medicines and support they need, Why is it important to engage with this group is particularly aware of its duty to promote – the impact of the Company’s operations while at the same time focusing on our strong and what do they expect from us? the success of the Company for the benefit on the environment – the sustainability and diverse network of partners, who enable Patients and healthcare professionals need us to: of all its stakeholders. Over the next few report on pages 38 to 51 us to maintain a consistent supply of – consistently provide a broad portfolio of products pages we discuss the way that we engage – the desirability of the company essential medicines. Continuous – improve access to high-quality, affordable medicines with our key stakeholders and build maintaining a reputation for high engagement with all our stakeholders is key consideration of stakeholder issues into standards of business conduct – the It is essential that we align our commercial activities, operations and to driving the long-term sustainable growth R&D efforts to the changing needs of patients and HCPs. our decision making, in accordance with sections of the strategic report related of our business. It allows us to better Section 172 of the Companies Act 2006. to product quality and safety on page understand their needs and informs our 58 and the compliance, responsibility How we engage across the Company day-to-day commercial and operational The Board is responsible for the entire and ethics committee report on pages 81 – Our commercial teams meet regularly with doctors and hospital clinicians decisions, as well as our long-term Annual Report and, therefore, directs to better understand their needs and keep them informed about our product to 82 investments in our business and our people. readers to the following pages in relation offering and latest clinical data – the need to act fairly as between to the stakeholder and non-stakeholder Supporting healthcare – In MENA, we run regular forums bringing together key opinion leaders, members of the Company – the doctors and global research institutes to share knowledge and raise elements of its duty to promote the corporate governance report on awareness of healthcare trends and disease management success of the Company: professionals and patients – We meet with patient advocacy groups for diseases such as multiple pages 62 to 71 sclerosis, cardiovascular and diabetes It is important that we ensure healthcare professionals (HCPs) have the support they need to care for their patients, particularly How we engage at Board level during challenging times. In MENA, we have a large sales, – The Board receives regular reports from the Chief Executive Officer marketing and support team that dedicate their time to meet with which include feedback from patients and healthcare professionals doctors, clinicians and pharmacists. In 2020, our teams were able and an in-depth review of our manufacturing quality programme Find out more about Stakeholder to respond quickly to the challenges posed by social distancing – The Compliance, Responsibility and Ethics Committee is responsible for engagement and our approach to S172. restrictions and were able to find new ways to reach healthcare direct oversight of the Company’s approach to ethical issues associated with HCPs providers across the region. Employees We hosted over 50 well attended webinars with both international CEO statement 6-8 Outcomes and actions and local speakers, which reached doctors and healthcare Investors – We worked closely with HCPs throughout the COVID-19 pandemic, How we create value 9 professionals across the entire MENA region. These were aimed prioritising the manufacture of medicines in highest demand including at increasing knowledge about COVID-19 and sharing experiences respiratory, pain, anaesthetics, sedatives and other support medications Governance and information about dealing with different therapeutic areas – In 2020, we conducted COVID-19 awareness campaigns to assist Corporate governance 62-108 patients, doctors and pharmacists in MENA to understand risks and Environment during this time. In addition, our teams helped facilitate access public health guidance Sustainability 48-51 between HCPs and their patients by rolling out disinfectant High standards of conduct campaigns and safety kits. Sustainability 44 Community Sustainability 39-43 Long term Our strategy 12-13 Risk management 52-59 Viability statement 59 Governance 62-108

20 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 21 Stakeholder engagement continued

Customers Employees Communities Government & regulators

Who is this stakeholder group? Who is this stakeholder group? Who is this stakeholder group? Who is this stakeholder group? Our customers are our business partners and we are committed to providing Our employees have always been at the heart of everything we do. Our vision is to create a healthier world that enriches all our communities Our business is highly-regulated and we must operate in accordance with them with a consistent and reliable supply of high-quality medicines. We work As the driving force behind Hikma’s growth and success, our people by developing high-quality medicines and making them accessible to those a wide range of industry and government policies and regulations including closely with Group Purchasing Organisations (GPOs), hospitals, healthcare are our most valuable asset. who need them. We invest in our communities through three focus areas: those of the US Food and Drug Administration (FDA), the European professionals, retailers, wholesalers and others to build strong relationships – providing better health Medicines Agency (EMA) and the regulatory bodies in each of our markets. and enhance service levels. – supporting education Why is it important to engage with this group – helping people in need Why is it important to engage with this group Why is it important to engage with this group and what do they expect from us? and what do they expect from us? and what do they expect from us? Our employees expect us to: – support them and provide development and growth opportunities Why is it important to engage with this group Our regulators expect us to: Customers need us to: – protect their health and safety – adhere to regulatory requirements – offer a broad product portfolio – foster a diverse and inclusive culture and what do they expect from us? – maintain high-quality manufacturing facilities – have a consistent and reliable supply of medicines Our communities value our efforts to: – provide safe and effective medicines – maintain service levels The passion and commitment of our people to our purpose and values is – improve healthcare quality and access through donations and support key to delivering our brand promise and supports our growth plans. One of – strengthen educational infrastructures Quality is in everything we do and has been since our inception. We need Our commercial teams work closely with our different customers to understand our key strategic priorities is to build a culture that inspires and enables our – support local communities and people in need to ensure that our quality systems operate in full compliance with the their needs, reduce drug shortages and ensure we invest in the products, people, one in which our colleagues are empowered to drive innovation and requirements of international agencies as well as domestic regulatory bodies. manufacturing capacity and capabilities to meet their requirements. are committed to caring for customers, patients and communities around Since its inception, Hikma has been dedicated to transforming people’s the world. lives by providing the medicines they need and supporting the communities How we engage across the Company where we live and work. Making positive contributions to the communities How we engage across the Company where we operate, and providing assistance to those in most need, supports – We have strong internal regulatory and quality teams who ensure our – We have commercial and sales and marketing teams dedicated to our varied How we engage across the Company our long-term, sustainable growth, while positively impacting society. customer groups in the US, MENA, and Europe quality systems operate in full compliance with the regulatory requirements – We offer continuous learning and development opportunities for our people. of the FDA, the EMA, and the regulatory bodies of our other markets – Our customer discussions inform our pipeline decisions, in an effort to bring We also strive to minimise our environmental impacts in the communities where them the products most in need Hikma Academy serves as a training hub through which we can coordinate – We work closely with local government and regulatory bodies to ensure and optimise learning and development activities we operate and are committed to making our operations more energy efficient. current and proposed regulations and policies support patients’ needs – Our Group-wide principles for ensuring employee health and safety are and our operations How we engage at Board level outlined in our OHSEE Policy statement. We also have local policies and – As part of its strategic review process, the Board reviews information on procedures in place How we engage across the Company the generic pharmaceutical customer landscape – We conduct regular employee surveys and use this feedback to address How we engage at Board level – The Board periodically receives industry updates from leading external opportunities and improve performance and culture – We have developed collaborative partnerships and programmes to promote – The Board receives regular reports on relations with regulators, particularly professional groups – We have an active internal communications programme to keep employees positive change and address the needs of our communities. These initiatives from a manufacturing quality and product approval perspective, and engaged and informed on Company strategy, progress and development include increasing access to medicine through donations, supporting receives an update on legal matters at each meeting education and assisting refugees and low-income groups – The Board oversees the Group’s risk programme and receives reports Outcomes and actions on relevant issues, which include specific principal risks covering – We worked closely with our customers to understand their needs during How we engage at Board level product pipeline, product quality and safety and legal, regulatory the height of the pandemic and focused on maintaining continuity of supply – Nina Henderson leads the Board’s response to employee engagement How we engage at Board level and intellectual property of our broad product portfolio requirements. Nina reports on employee issues in each Board meeting and – The Compliance, Responsibility and Ethics Committee is responsible for – In the US, we shifted manufacturing schedules and ramped up production as required during Board or Committee business. A report on her activities direct oversight of the Company’s sustainability and corporate social of fentanyl 50ml vials, the dosage strength needed by hospitals to prepare is included on page 63 responsibility (CSR) programme. The Committee receives bi-annual reports Outcomes and actions infusion bags for ventilator patients, and dexamethasone tablets to meet – The Board receives regular reports on communications activities with on the Company’s activities and reviews the Company’s sustainability – We regularly engage with the different regulatory bodies and have a strong increased demand employees, the annual employee engagement survey and events or strategy on an annual basis. The Committee reports its activities to the quality track record. Due to COVID-19, the FDA conducted a paper-based – We launched 154 products across our markets in 2020, some of which are feedback that are reported by the Chief Executive Board, which also receives regular updates, including on sustainability inspection of our new high containment facility in Portugal, which resulted used for COVID-19 patients matters, from the Chief Executive in no observations and the plant was approved – In 2020, we saw an improvement in providing customers the products – The FDA approved our facilities in Portugal and Germany based on local they need with faster turnaround times, by working together and Outcomes and actions authority cGMP inspections and the mutual recognition agreement between improving processes – We launched an online learning initiative, iLearn, providing employees Outcomes and actions the FDA and EMA with access to a wide range of learning materials in different languages – In 2020, we increased our in-kind medicine donations to people in need – In 2020, we hosted 25 new FDA investigators at our Columbus facility for to further their professional and personal development – We provided more than 600,000 meals to people in need in the US training purposes – We established a Black Employees Advisory Board in the US, an employee- through a matching donation campaign to support local food banks led initiative to enhance diversity, equity and belonging – We contributed to the Lebanon appeal for the immediate needs of children – In 2020, we hosted a virtual global leadership conference for the top 160 and families in the aftermath of the explosion in Beirut Hikma leaders – We increased dialogue with employees through frequent live calls hosted by the CEO and members of management – We are implementing initiatives to promote diversity, equity and belonging – We improved employee engagement by four points overall; 82% of employees felt our communications and response to employee concerns in relation to COVID-19 were very effective

22 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 23 Stakeholder engagement continued

Suppliers Investors

Who is this stakeholder group? Who is this stakeholder group? We have an extensive global network of suppliers who provide us with the We maintain regular contact with investors to ensure they have a strong Ensuring continuity products needed for us to deliver our medicines. We actively engage with our understanding of our business. Our investors are largely global institutions suppliers to ensure our principles of human rights and high-quality standards and include both equity and debt holders. of supply are upheld. Why is it important to engage with this group The impact we have on people’s lives is far-reaching and it is important we ensure reliable supply of our medicines to our Why is it important to engage with this group and what do they expect from us? and what do they expect from us? customers. At Hikma, our teams have shown tremendous Our investors expect us to: commitment and contribution to ensure that both patients and Our suppliers want us to: – deliver sustainable long-term value – uphold high ethical standards – effectively communicate our long-term strategy, financial and operational communities have access to the medicines they depend on. In – operate in a responsible and sustainable manner performance and growth drivers 2020, our procurement team maintained direct contact with our – work collaboratively to build strong relationships – meet industry and global standards for good environmental, social and suppliers to understand the disruptions on their operations as a governance (ESG) practices result of the COVID-19 pandemic. We have put in place inventory 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 We ensure our investors have an in-depth understanding of our operations, strategies and worked closely with our suppliers to maintain world. Working together and building strong relationships not only enables financial performance, growth drivers and ESG efforts. The Board receives the necessary levels of inventory needed for the production us to deliver on our brand promise but it also ensures we have a sustainable regular updates and feedback on these activities. This helps ensure that the of important medicines. In addition, our team implemented and resilient supply chain. views of our investors are considered in the Board’s decision-making. online solutions for auditing and monitoring API sources, until Operating responsibly and ethically is vital to our long-term success, and onsite audits can be performed again, to mitigate exposure we work with our suppliers to ensure the social and ethical standards we How we engage across the Company to risk and maintain the safety of our auditing teams. require are upheld. – We maintain regular contact with our shareholders through a comprehensive investor relations (IR) programme of conferences, roadshows and meetings How we engage across the Company – We maintain regular dialogue with our debt holders and rating agencies – We communicate our strategy and financial performance through regular – We conduct quality audits prior to on-boarding any new API supplier financial reporting and investor events, such as the Annual General Meeting and on a regular basis for our current supplier base – A targeted external communications programme ensures we are informing – We ask our suppliers to commit to upholding the principles of our Code key audiences on our strategic progress and impact on our communities of Conduct, including our standards on human rights and modern slavery – We conduct initial and periodic due diligence to assess third party risks and to reinforce adherence to our principles How we engage at Board level Building a strong culture – The Board receives regular updates on the IR programme, including investor How we engage at Board level feedback from the AGM, IR meetings and investor perception studies Having the right culture, one that supports our vision and enables – The Executive Directors are informed of investor engagement activities – The Board receives updates on supplier issues as part of its review of our strategy is critical to achieving long-term success. It is key for our on a regular basis employees to feel empowered and enabled and we are doing more operational matters, such as consideration of API supply restrictions – The Non-Executive Directors make themselves available to meet with resulting from COVID-19 related disruption investors as required in the conduct of their responsibilities (eg as Chair of to promote collaboration and communication across the organisation. – The Board oversees the Group’s risk programme and receives reports on a committee) and are available to shareholders at the AGM to answer related relevant issues, which includes a specific principal risk for API and third party questions Over the last two years, through surveys, conferences and direct risk management employee engagement, we listened and collected feedback from – The Compliance, Responsibility and Ethics Committee is responsible for employees to understand what we do well and how we need to direct oversight of the Company’s approach to ethical issues associated Outcomes and actions with suppliers evolve. In 2020, we were able to bring together our top 160 leaders – We maintained regular contact with our analysts and investors to give virtually for the third annual Global Leadership Conference and business updates. We attended 13 conferences and met with 158 investors introduced our new culture framework and refreshed values. Outcomes and actions in 2020 – Since March, all of our investor interaction has been virtual and we are We also introduced monthly Group-wide calls hosted by the CEO – We build long-term relationships with our suppliers. This has allowed us to now integrating virtual engagement into our longer term IR programme and members of management to ensure we maintain employee ensure continuity of supply to our customers during the COVID-19 pandemic – In June 2020, Boehringer Ingelheim, one of Hikma’s large shareholders, engagement and celebrate successes. – We implemented online quality audits to protect our employees during sold its entire holding in the Group. We took the opportunity to invest in the pandemic in their work to qualify new API sources and audit our our business and bought back 12.8 million shares, which are held in treasury. Our ambition at Hikma is to create a culture of progress and existing suppliers We reached out to our investor base, both current and potential investors, belonging, where everyone feels they can do their best work. – We rolled out new third-party due diligence process in the US and will to ensure they understood the strategic rationale expand the roll out to MENA and other geographies in 2021 to reinforce To support this, we are implementing new initiatives to promote our supplier qualification process and reduce our risk exposure our values of innovation, collaboration and caring.

24 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 25 Business and financial review

We performed well in 2020 and I am pleased Business and with the growth in each of our businesses. The broad portfolio has played an important role, financial review and our pipeline is delivering growth.

Khalid Nabilsi Chief Financial Officer

Strong financial performance Summary financial results

Constant – Core Group revenue up 6%, reflecting growth in all three businesses 2020 2019 currency4 Core results3 (underlying) $ million $ million Change change – Core operating profit up 11%, driven by strong growth in profit of Generics and Injectables Core revenue 2,341 2,203 6% 6% – Strong cashflow from operating activities of $464 million, whilst Core operating profit 566 508 11% 17% maintaining higher inventory levels to ensure continuity of supply Core profit attributable to during the COVID-19 pandemic shareholders 408 364 12% 20% – Continued investment in R&D of 6% of revenue, with growing Core basic earnings per share pipeline of complex products (cents)5 172.9 150.4 15% 23% – Healthy balance sheet, with net debt1 of $605 million and low 2 Constant leverage at 0.9x net debt to core EBITDA 2020 2019 currency4 Reported results (statutory) $ million $ million Change change – Full year dividend of 50 cents per share, up from 44 cents per share in 2019 Revenue 2,341 2,207 6% 6% Operating profit 579 493 17% 23% Ongoing strategic progress Profit attributable to shareholders 431 486 (11)% (5)% – Leveraged our strong foundation to meet increased demand for essential medicines used in the treatment of COVID-19, whilst Cashflow from operating continuing to maintain supply across our broader portfolio activities 464 472 (2)% – – Continued to expand our portfolio of differentiated products – Basic earnings per share (cents)5 182.6 200.8 (9)% (3)% launched 154 new products across our markets, including icosapent Total dividend per share (cents)5 50.0 44.0 14% – ethyl capsules Group revenue was $2,341 million in 2020. were $464 million (2019: $453 million), up The Group reported operating profit of Group core revenue grew 6% to $2,341 million 2%. The increase was primarily due to higher $579 million (2019: $493 million). Excluding – Received US FDA approval for generic Advair Diskus® and expect 1. Group net debt is calculated as Group total debt less Group total cash, including (2019: $2,203 million), reflecting growth in employee benefits. The impact of COVID-19 the impact of amortisation (other than to resume launch as soon as the US FDA completes their priority restricted cash. Group net debt is a non-IFRS measure. See page 36 for a reconciliation of Group net debt to reported IFRS figures each of our three businesses. Group core on SG&A expenses was broadly neutral software) and exceptional items, core review of the outstanding Prior Approval Supplement (PAS) 2. Core EBITDA is earnings before interest, tax, depreciation, amortisation and impairment gross profit1 grew 11% to $1,213 million (2019: with related increases in employee benefits operating profit increased by 11% to – Focused on building a culture of progress and belonging that charges/reversals. EBITDA is a non-IFRS measure, see page 36 for a reconciliation to $1,095 million), as a result of the growth offset by lower marketing and travel costs. $566 million (2019: $508 million) and core reported IFRS results in revenue across all business segments operating margin was 24.2% (2019: 23.1%). engages and enables our employees 3. Core results throughout the document are presented to show the underlying Research and development (R&D) expenses and particularly the strong performance in performance of the Group, excluding the exceptional items and other adjustments were $137 million (2019: $150 million). set out in Note 6 of the Group consolidated financial statements. Core results are a Generics and Injectables. Group core gross Excluding exceptional items, core R&D non-IFRS measure and a reconciliation to reported IFRS measures is provided on page 35 margin was 51.8% (2019: 49.7%). Continued momentum, with growth in all 4. Constant currency numbers in 2020 represent reported 2020 numbers translated expenses were $137 million (2019: $126 three businesses using 2019 exchange rates, excluding price increases in the business resulting from Group operating expenses were $622 million million). This reflects increased investment in 1. Beginning in 2020, inventory related provisions are the devaluation of currencies and excluding the impact from hyperinflation accounting. (2019: $595 million). Excluding adjustments our Injectables R&D programme, as we build reported under the cost of sales line item for both 2020 In 2020 Lebanon and Sudan were considered hyperinflationary economies, therefore – Injectables: Achieved double digit core operating profit growth related to the amortisation of intangible our pipeline of complex products. Core R&D and 2019 comparatives. In the 2019 audited financial the spot exchange rate as at 31 December 2020 was used to translate the results of statements, inventory related provisions were included reflecting the breadth of our product portfolio and the quality these operations into US dollars assets (other than software) of $42 million was 6% of Group core revenue. in other operating income/(expenses). The reason for and flexibility of our manufacturing facilities 5. In June 2020, Hikma purchased 12.8 million ordinary shares from Boehringer Ingelheim, (2019: $34 million) and net income from reclassification is to be in line with industry practice. Other net operating income1 was $26 million which are being held in treasury. Earnings per share is calculated using the weighted exceptional items of $67 million (2019: The effect of the adjustment on the operating profit – Generics: Delivered significant improvement in core operating average number of shares outstanding during the period. Dividend per share is (2019: $49 million income). Excluding $26 million), Group core operating expenses is shown in Note 2 of the Group consolidated financial margin, driven by the strength of new launches, a good performance calculated using the number of shares in issue at 31 December 2020 exceptional items2, core other net operating statements were $647 million (2019: $587 million). from in-market products, process efficiencies and our enhanced expenses were $44 million (2019: $8 million 2. In 2020, exceptional items comprised a $62 million net impairment reversal of product related intangibles focus on customer service levels Selling, general and administrative (SG&A) expense), primarily due to foreign exchange related to the Generics business, proceeds from an expenses were $509 million (2019: losses of $30 million as a result of significant insurance claim related to a warehouse fire at one – Branded: Achieved good growth in revenue, with a strong recovery $494 million). Excluding the amortisation foreign exchange movements in Sudan in of our facilities in Jordan of $11 million and $3 million in Algeria, while core operating profit declined due to the negative of intangible assets (other than software) the second half of the year, and $10 million related to PPE impairment on our generic Advair impact of foreign exchange Diskus®. Refer to Note 6 of the Group consolidated and exceptional items, core SG&A expenses of IT-related impairments. financial statements for further information

26 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 27 Business and financial review continued

While we saw considerable variability in was 38.6% (2019: 38.0%), reflecting the This primarily reflects our efforts to expand demand for our injectable products over improvement in gross profit, slightly offset our European portfolio and register products the course of 2020 due to the COVID-19 by an increase in R&D investment and the in new European markets. We also signed pandemic, we were able to leverage our impact of adverse foreign exchange new licensing deals, including an agreement broad product portfolio, new launches and movements of around $9 million, primarily with Sun Pharmaceuticals for ILUMYA™ and the flexibility of our manufacturing related to the Sudanese pound. In constant with Sesen Bio for Vicineum™. operations to meet changing customer currency, Injectables core operating profit In 2021, we expect Injectables revenue to needs and drive growth in Injectables grew 14%, and core operating margin grow in the mid-single digits, reflecting revenue and profitability. expanded by 1.6 percentage points. continued demand for COVID-19 related Injectables core revenue increased by 10% to During the year, the Injectables business products, particularly in the first half, and a Injectables $977 million (2019: $890 million). In constant launched 10 products in the US, 34 in MENA gradual return of elective surgeries over the currency, Injectables core revenue grew by 9%. and 33 in Europe. We submitted 230 filings course of the year. We expect core operating to regulatory authorities across all markets. margin to be in the range of 37% to 38%. US Injectables core revenue grew 4% to $662 million (2019: $636 million), reflecting good demand for certain products used in the treatment of COVID-19, which, along with the strength of the broader portfolio and new product launches, more than offset the impact of a decline in elective surgeries. Financial highlights MENA Injectables core revenue was $160 million, up 10% on both a reported and Constant constant currency basis (2019: $146 million). $ million 2020 2019 Change currency change Our Injectables business develops This growth reflects an increase in demand Revenue 977 894 9% 9% for COVID-19 related products and Core revenue 977 890 10% 9% continued growth of our biosimilar products and manufactures generic injectable as we increase our market share and Gross profit 563 509 11% 10% continue to launch into new markets. products, which are sold globally Core gross profit 563 505 11% 11% European Injectables core revenue was Core gross margin 57.6% 56.7% 0.9pp 1.1pp $155 million, up 44% (2019: $108 million). and primarily used in hospitals. In constant currency, European Injectables Operating profit 354 320 11% 13% revenue increased by 41%. This reflects a Core operating profit 377 338 12% 14% strong performance from our broad portfolio Core operating margin 38.6% 38.0% 0.6pp 1.6 pp and new launches, particularly in Italy and Germany, as well as good demand for 1. Amortisation of intangible assets (other than software) was $23 million. Refer to Note 6 of the Group consolidated contract manufacturing, including our supply financial statements for further information agreement with Gilead to manufacture remdesivir for injection. Injectables core gross profit increased by 11% to $563 million (2019: $505 million) and core gross margin increased to 57.6% (2019: Core revenue ($m) Injectables core revenue by region ($m) 56.7%), primarily reflecting revenue growth across all regions and an improvement in product mix in Europe and MENA. 2019 890 2020 2019 Injectables core operating profit, which 2020 977 excludes the amortisation of intangible assets (other than software)1 was $377 million (2019: $338 million). Core operating margin 977 890 Core operating margin (%)

2019 38.0

2020 38.6 US 662 (67.7%) US 636 (71.4%) MENA 160 (16.4%) MENA 146 (16.4%) Europe and ROW 155 (15.9%) Europe and ROW 108 (12.2%) Revenue $977m +9% Outlook for 2021 We expect Injectables revenue grow in the mid-single digits. We expect core operating margin to be in the range of 37% to 38%.

28 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 29 Business and financial review continued

Our Generics business grew revenue and In December, we received US FDA approval In 2021, we expect Generics revenue to be expanded profitability in 2020, supported by for our generic Advair Diskus® and initiated in the range of $770 million to $810 million. a strong contribution from new launches and launch. In January 2021, we temporarily We expect core operating margin to be good demand for our differentiated portfolio. paused the launch of this product in order to around 20%, reflecting increasing sales We saw a slight increase in demand during process an amendment to our Abbreviated and marketing espenses, as we build our the first half and then again towards the New Drug Application (ANDA). This is branded portfolio, and higher R&D costs. end of the year for certain COVID-19 related classified as a Prior Approval Supplement products. Throughout the year, our teams (PAS) and needs to be reviewed by the FDA worked hard to ensure we maintained a before we can introduce our product to the high level of service for our customers. market. The PAS reflects enhanced packaging controls to meet new industry standards Generics Generics revenue grew 3% to $744 million adopted since the initial submission of the (2019: $719 million). A better than expected ANDA application and does not affect the contribution from new launches, as well as approved status of our ANDA. The FDA has the strength of our differentiated portfolio granted this supplement priority status. more than offset an acceleration of price erosion in the second half of the year. Generics core gross profit grew 14% to $341 million (2019: $300 million) and core gross margin increased to 45.8% (2019: 41.7%). Financial highlights This primarily reflected an improvement in the product mix as a result of both good demand for certain in-market products as well as the $ million 2020 2019 Change performance from new launches. Our Generics business develops Revenue 744 719 3% Generics core operating profit, which Gross profit 329 295 12% excludes the amortisation of intangible and manufactures oral and other assets (other than software) and exceptional Core gross profit 341 300 14% items1, increased by 30% to $161 million Core gross margin 45.8% 41.7% 4.1pp non-injectable generic products. (2019: $124 million). Core operating margin increased to 21.6% (2019: 17.2%). This Operating profit 203 151 34% Our products are sold in the US significant improvement in profitability Core operating profit 161 124 30% reflects the increase in core gross profit retail market. combined with process efficiencies. Core operating margin 21.6% 17.2% 4.4pp In 2020, the Generics business launched six 1. Exceptional items comprised a $62 million net impairment reversal of product related intangibles related to the Generics products and submitted six files to regulatory business, $15 million related to inventory related provision write down and PPE impairment for generic Advair Diskus® and $4 million related to proceeds from an insurance claim related to a warehouse fire at one of our facilities in Jordan. authorities. Launches included rufinamide, Amortisation of intangible assets (other than software) was $9 million. Refer to Note 6 of the Group consolidated financial generic Afinitor® and generic Zortress®, for statements for further information which we remain the sole generic in the market. During the year, we demonstrated our ability to challenge patents and obtain approvals for complex products. We received Core revenue ($m) Core operating margin (%) Outlook for 2021 US FDA approval for icosapent ethyl We expect Generics revenue to be in the capsules in May and following a successful range of $770 million to $810 million and court ruling, we launched the product in 2019 719 2019 17.2 core operating margin to be around 20%. November. Our ability to supply the market with this product is constrained at the 2020 744 2020 21.6 moment due to limited availability of the active pharmaceutical ingredient and we are working hard to improve supply quantities over the course of 2021.

Revenue $744m +3%

30 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 31 Business and financial review continued

Our Branded business had another good Core operating profit, which excludes the During the year, the Branded business year. We overcame challenges posed by amortisation of intangibles (other than launched 71 products and submitted 141 COVID-19, quickly switching our sales and software) and exceptional items1, was filings to regulatory authorities. Revenue marketing teams onto virtual platforms and $126 million, down 2% (2019: $129 million), from in-licensed products represented ensuring that our plants across the region and core operating margin was 20.6% (2019: 37% of Branded revenue (2019: 37%). could continue to operate safely. Our 22.1%). The decline reflects an increased We expect Branded revenue to grow in approach of tiering our markets continued expense of $22 million resulting from the mid-single digits in constant currency to deliver success, with our Tier 1 countries significant foreign exchange movements, in 2021. – Algeria, Saudi Arabia and Egypt – all primarily in Sudan. In constant currency, performing well, especially Algeria, which core operating profit grew 11% and core Branded recovered strongly following a more operating margin expanded by 1.2 challenging 2019. We saw a reduction in percentage points. The significant margin demand for certain products, including expansion in constant currency primarily anti-infectives, resulting from the pandemic, reflects the improvement in gross profit which was more than offset by a growth in and good control of costs. sales in our broader portfolio. Branded revenue was $613 million (2019: $583 million), up 5% on both a reported and constant currency basis. Financial highlights Branded core gross profit was $307 million, up 7% (2019: $287 million) and core gross Constant margin was 50.1% (2019: 49.2%). In constant $ million 2020 2019 Change currency change currency, core gross profit increased by 6%. Our Branded business develops and The improvement in gross margin reflects an Revenue 613 583 5% 5% improvement in the product mix. Gross profit 307 281 9% 8% manufactures branded generics and Core gross profit 307 287 7% 6% markets and sells in-licensed patented Core gross margin 50.1% 49.2% 0.9pp 0.1pp Operating profit 120 105 14% 30% products in MENA. Our products are Core operating profit 126 129 (2)% 11% sold in the retail and hospital markets Core operating margin 20.6% 22.1% (1.5)pp 1.2pp 1. In 2020, exceptional items comprised proceeds from an insurance claim related to a warehouse fire at one of our facilities in Jordan of $7 million and $3 million of severance and restructuring costs. Amortisation of intangible assets (other than software) was $10 million. Refer to Note 6 of the Group consolidated financial statements for further information

Core revenue ($m) Core operating margin (%) Outlook for 2021 We expect Branded revenue to grow in the mid-single digits in constant currency 2019 583 2019 22.1 in 2021.

2020 613 2020 20.6

Revenue $613m +5%

32 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 33 Business and financial review continued

Other businesses Research and development Net cash flow, working capital and Balance sheet Group operating profit $ million 2020 2019 Other businesses, which primarily Our investment in R&D and business development enables us to continue expanding the net debt Net assets at 31 December 2020 were comprises Arab Medical Containers (AMC), Group’s product portfolio. During 2020, we had 154 new launches and received 201 The Group generated strong operating cash $2,148 million (31 December 2019: Core operating profit 566 508 $2,129 million). Net current assets were a manufacturer of plastic specialised approvals. flow of $464 million (2019: $472 million). The R&D costs – (24) medicinal sterile containers and International slight decline versus 2019 reflects higher $894 million (31 December 2019: $377 million) To ensure the continuous development of our product pipeline, we submitted 377 regulatory Pharmaceuticals Research Centre (IPRC), Group working capital days – up 62 days to primarily due to a change in the debt Jordan warehouse fire filings. which conducts bio-equivalency studies, 264 days – as a result of a strategic decision maturity profile as a result of the repayment incident 11 (13) contributed revenue of $7 million in 2020 to maintain higher inventory levels to ensure of the Eurobond during the period and Proceeds from legal claim – 32 an increase in inventory levels. (2019: $11 million) with an operating profit 1 1 1 continuity of supply for customers during the 2020 submissions 2020 approvals 2020 launches Contingent consideration of zero (2019: zero). This reduction in pandemic. adjustment – 7 revenue is due to disruptions at IPRC Legal proceedings Capital expenditure was $172 million (2019: in the first half of the year as a result Injectables In October 2020, Hikma received a voluntary MENA severance and $119 million), ahead of expectations. As the of the COVID-19 pandemic. request for information from the US Federal restructuring costs (3) (7) US 15 16 10 market outlook improved through the Trade Commission requesting information MENA 55 41 34 second half of the year, we proceeded with Integration costs – 4 related to its investigation into whether several projects to expand and enhance our Europe 160 25 33 Amarin Pharma, Inc. has engaged in, or is Net impairment reversal capabilities. In the US, $89 million was spent engaging in, anticompetitive practices or of product related upgrading equipment and adding new unfair methods of competition relating to the intangibles 62 20 Generics 6 8 6 technologies for our Generics and drug Vascepa®. Hikma has also received a Injectables businesses. In MENA, $67 million Intangible assets subpoena duces tecum from the State of New was spent on strengthening and expanding amortisation other than York, Office of the Attorney General, seeking Branded 141 111 71 manufacturing capabilities. In Europe, we software (42) (34) information relevant and material to an spent $16 million on strengthening our Total 377 201 154 investigation related to Amarin Pharma, Inc. Assets write off (15) – capabilities, including finalising our new We are cooperating with all such demands. Reported operating profit 579 493 high containment facility. We expect Group capital expenditure to be in the range of Net finance expense Profit attributable to shareholders $140 million to $160 million in 2021. Definitions We use a number of non-IFRS measures to Core net finance expense was $45 million Profit attributable to shareholders was The Group’s total debt increased to report and monitor the performance of our (2019: $45 million). On a reported basis, net $431 million (2019: $486 million). The decline $932 million at 31 December 2020 business. Management uses these adjusted finance expense was $22 million (2019: zero), reflects the utilisation in 2019 of previously (31 December 2019: $685 million). This numbers internally to measure our progress which reflects non-cash net income of unrecognised tax losses and deferred tax increase primarily reflects the full utilisation and for setting performance targets. We $23 million resulting from the remeasurement benefits. Core profit attributable to of the Group’s $150 million 2017 International also present these numbers, alongside of the contingent consideration related to shareholders increased by 12% to $408 Finance Corporation (IFC) facility. During our reported results, to external audiences the Generics business. million (2019: $364 million). the year, the Group signed a new $200 million to help them understand the underlying We expect core net finance expense to be lFC loan facility which, along with the Group’s performance of our business. Our core around $50 million in 2021. Earnings per share revolving credit facility, was undrawn at numbers may be calculated differently Basic earnings per share was 182.6 cents year end. to other companies. Profit before tax (2019: 200.8 cents). Core basic earnings per share increased by 15% to 172.9 cents (2019: The Group cemented its strength in the Adjusted measures are not substitutable for Core profit before tax was $522 million (2019: 150.4 cents) and core diluted earnings per debt capital markets, with the raising of a IFRS results and should not be considered $465 million), up 12%, reflecting the strong share increased by 14% to 171.4 cents (2019: new 3.25% coupon $500 million Eurobond superior to results presented in accordance performance of our three business 149.8 cents). in July, following the repayment of our with IFRS. segments. Reported profit before tax was previous bond in April. During the year, $558 million (2019: $491 million). we also achieved investment grade status, Core results Dividend an accomplishment which demonstrates The Board is recommending a final dividend Reported results represent the Group’s Tax the quality of the business. of 34 cents per share (approximately 24 overall performance. However, these results The Group incurred a reported tax expense pence per share) (2019: 30 cents per share) The Group’s cash balance at 31 December can include one-off or non-cash items which of $128 million (2019: $4 million) and an bringing the total dividend for the full year 2020 was $327 million (2019: $443 million). are excluded when assessing the underlying effective tax rate of 22.9% (2019: 0.8%). This to 50 cents per share (approximately 36 This decrease is primarily related to the performance of the Group. To provide a more follows the utilisation in 2019 of previously pence per share) (2019: 44 cents per share). purchase of 12.8 million ordinary shares from complete picture of the Group’s performance unrecognised tax losses and deferred tax The proposed dividend will be paid on 26 Boehringer Ingelheim (BI) for $375 million, in to external audiences, we provide, alongside benefits recognised upon the internal April 2021 to eligible shareholders on the connection with BI´s disposal of its 16% stake our reported results, core results, which are a reorganisation of intangible assets. Excluding register at the close of business on 19 March in Hikma, which was settled through a non-IFRS measure. Our core results exclude exceptional items, Group core tax expense 2021, subject to approval at the Annual combination of cash and existing facilities. the exceptional items and other adjustments was $115 million (2019: $100 million). The core General Meeting on 23 April 2021. set out in Note 6 of the Group consolidated effective tax rate increased slightly to 22.0% The Group’s net debt (excluding co- financial statements. (2019: 21.5%), primarily due to a change in the development agreements and contingent earnings mix. liabilities) was $605 million at 31 December 2020 (31 December 2019: $242 million). This We expect the Group core effective tax rate increase primarily reflects the purchase of to be in the range of 22% to 23% in 2021. shares from BI, as outlined above. We have maintained a comfortable level of leverage with a net debt to core EBITDA ratio of 0.9x.

1. New products submitted, approved and launched by country in 2020

34 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 35 Business and financial review continued

Constant currency Working capital days As the majority of our business is conducted We believe Group working capital days Outlook for 2021 in the US, we present our results in US provides a useful measure of the Group’s dollars. For both our Branded and Injectable working capital management and liquidity. businesses, a proportion of their sales are Group working capital days are calculated as Group denominated in a currency other than the Group receivable days plus Group inventory We expect to benefit from our US dollar. In order to illustrate the underlying days, less Group payable days. Group continued investment in R&D across performance of these businesses, we receivable days are calculated as Group our businesses and we will look to fill include information on our results in trade receivables x 365, divided by 12 pipeline gaps through business constant currency. months Group revenue. Group inventory development days are calculated as Group inventory x 365 Constant currency numbers in 2020 divided by 12 months Group cost of sales. represent reported 2020 numbers Group payable days are calculated as Group translated using 2019 exchange rates, trade payables x 365, divided by 12 months Injectables excluding price increases in the business Group cost of sales. resulting from the devaluation of currencies We expect Injectables revenue to grow and excluding the impact from hyperinflation Group net debt in the mid-single digits. We expect accounting. In 2020 Lebanon and Sudan We believe Group net debt is a useful core operating margin to be in the were considered hyperinflationary measure of the strength of the Group’s range of 37% to 38%. economies, therefore the spot exchange rate financing position. Group net debt is as at 31 December 2020 was used to calculated as Group total debt less Group translate the results of these operations into total cash. Group total debt excludes Generics US dollars. co-development agreements and contingent liabilities. We expect Generics revenue to be in EBITDA the range of $770 million to $810 million EBITDA is earnings before interest, tax, Group net debt and core operating margin to be $ million Dec-20 Dec-19 depreciation, amortisation and impairment around 20%. charges/reversals. Short-term financial debts (158) (569) EBITDA $ million 2020 2019 Short-term leases Branded liabilities (10) (9) Reported operating profit 579 493 Long-term financial We expect Branded revenue to grow in debts (692) (48) the mid-single digits in constant Depreciation, currency. amortisation and Long-term leases impairment charges/ liabilities (72) (59) reversals 91 99 Total debt (932) (685) Net finance expense, tax and Reported EBITDA 670 592 Cash, cash equivalents capital expenditure Exceptional items: and restricted cash 327 443 We expect Group net finance expense to be around $50 million and the core R&D costs – 24 Net debt (605) (242) effective tax rate to be in the range of Jordan warehouse fire 22% to 23%. We expect Group capital incident (11) 13 ROIC expenditure to be in the range of ROIC is calculated as core net operating $140 million to $160 million. Assets write off 12 – profit after tax (NOPAT) divided by invested Proceeds from legal capital (calculated as total equity plus net claim – (32) debt). This measures our efficiency in Contingent allocating capital to profitable investments. consideration ROIC adjustment – (7) $ million 2020 2019 MENA severance and Core operating profit 566 508 restructuring costs 3 7 Tax (121) (104) Integration costs – (4) Core NOPAT 445 404 Core EBITDA 674 593 Net debt 605 242 Equity 2,148 2,129 Invested capital 2,753 2,371 ROIC 16.2% 17.0%

36 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 37 Sustainability

Supporting patients Sustainability and communities

The challenges that arose Our community engagement focus areas: in 2020, particularly as a result of the COVID-19 pandemic, made our Working to address unmet healthcare We have a duty of care towards patients, support for patients needs through community outreach and medicine donations and communities more Providing communities, our people and the environment. important than ever. better health Find out more on page 40 We are a responsible and sustainable company, We work across three and use our business to promote positive change. focus areas to address socio-economic hardships Enabling students to realise their full and to provide relief to potential by addressing learning needs and developing infrastructure those most in need. Supporting education Find out more on page 42

In this section

39 Supporting patients and communities 44 Operating responsibly and ethically Extending support to those in our 46 Enabling our people communities that need it most 48 Monitoring and minimising our environmental impact Helping people Find out more on page 43 in need

38 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 39 Sustainability continued

Facilitating medical consultations for more Providing better health than 180,000 people in Jordan We provide essential In response to the COVID-19 pandemic and the need to ensure patients are well informed, we supported the Jordanian medicines and support to Ministry of Health and digital health company Altibbi in the underserved people and to development of a National Coronavirus Hotline, enabling 330 participating doctors to provide medical consultations those facing crisis situations to more than 180,000 patients.

Responding to the 2020 medical emergency 330 2019 following the Beirut participating doctors provided medical consultations to more explosion than 180,000 patients

The explosion that tore through Beirut on August 4 resulted 2018 in the tragic loss of hundreds of lives and widespread devastation of homes and public infrastructure.

We responded immediately and worked alongside our Our response: partners to provide critical medicines and basic necessities Responding to medical to those most affected. needs resulting from $1.4m $3.1m $4.1m the floods in Sudan 26,000 We took urgent action to assist those in need following the people impacted by donations Addressing unmet $2.3m extreme floods that took place in Sudan in September. of essential medicine in medicine and healthcare The flooding affected more than 800,000 people and was resources donated amongst the most severe to be recorded in the region. In healthcare needs through to hospitals and the response, we donated essential medicines, funded provision our medicine donation Lebanese government of meals for people in need, and provided insecticides. 330 programme families provided with essential meals Through our medicine donation programme, we direct support to 2,129 6,000 those that need it most; including low-income groups, displaced treatments of essential shelter kits persons, children with life-threatening illness, and patients without hydroxyurea donated distributed by Save sufficient medical coverage. through Anera to the Children supported support treatments for 5,200 by Hikma donations During 2020, we strengthened our existing relationships with our chronic conditions families provided with insecticides partners including Direct Relief, Dispensary of Hope, Americares, to protect against the spread and the National Children’s Cancer Society. We also established of mosquito-borne diseases new partnerships with Save the Children and others to ensure our donations of essential medicines continue into the future. Photo: Tom Nicholson/Save the Children

40 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 41 Sustainability continued

Supporting back to The economic impacts of the school activities pandemic placed immense strain Supporting Helping people education in need on the most vulnerable segments of our societies. In response, we Our aim is to improve We organise efforts to have focused much of our outreach learning conditions support low-income groups, towards providing basic necessities and provide support to displaced persons and other to those most affected. students and teachers marginalised communities

Provided 5,700 Delivered essential Completed Extended computer students with career school supplies infrastructure coding courses to advice through our to 350 students in projects in two 300 young people in partnership with Portugal Sudanese schools, Jordan through the To help address the extreme food shortages caused Careervillage.org impacting 1,500 local NGO, Hello students World Kids by overstretched support systems, we organised extensive meal donation activities in several locations. We are thrilled TREE helps teachers address about our new Supporting the the trauma and unique learning needs of Syrian partnership Transforming refugee students in Jordan with Hikma. They Refugee Education are strengthening towards Excellence a ground-breaking (TREE) programme $100,000 USA Egypt programme that provided to support TREE is a teacher training and development TREE in 2020 600,000 meals 3,700 people programme that aims to improve the quality Collaborated with the provides crucial Distributed more than of education for Syrian refugees in Jordan. Egyptian Food Bank 600,000 meals to food banks The programme enables educators to more to provide meals to assistance to and pantries effectively address the trauma and unique 126 3,700 people teachers in learning needs of displaced children by incorporating psychosocial support and educators received Jordan and the emotional learning approaches for students. training and support for dealing with refugee children The aim is to provide training and support for student trauma 1,350 educators who in turn will help more than Portugal Jordan they teach. 745,000 students through the programme. 380 families 2,900 people TREE is an initiative of Save the Children and Organised an employee 60 Worked alongside the MIT Abdul Latif Jameel World Education donation campaign training sessions Taalof Alkhair to donate Lab (J-WEL), in cooperation with the Jordanian to support 380 low-income Kevin Watkins Ministry of Education, Community Jameel and provided food to 2,900 people Save the Children CEO families Dubai Cares. to educators

42 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 43 Sustainability continued

Operating responsibly and ethically

Hikma is committed to Our values serve as the foundation for a We believe in transparency and promote a strong governance framework that is culture that encourages employees to raise upholding the highest fundamental to our long-term organisational any concerns about potential violation of laws success. Our Code of Conduct sets out and regulations, or any other behaviours or ethical standards in behaviours we expect from our employees incidents that do not comply with our Code as we conduct our business, and provides an of Conduct. In addition, our speak up line the conduct of its global overview of our legal, regulatory, and ethical provides both internal and external business operations, requirements. Our Code provides guidance stakeholders a resource to use to raise to our employees and partners on the ethics concerns about suspected misconduct which is grounded in of Hikma’s business activities through the confidentially. All cases received are reviewed identification and discussion of various risks by our Legal and Compliance teams, and our values of caring, associated with our business. In addition to investigated, as appropriate, by Legal and innovation, and our Code, we have also developed policies Compliance personnel. Substantiated and procedures designed to help employees violations of our Code of Conduct, or other collaboration. and third parties put these behaviours into policies and procedures are addressed practice. Hikma employees, officers and through our disciplinary procedures. directors are trained on the Code of Conduct Our Compliance, Responsibility and Ethics as part of their induction and are provided Committee provides oversight of our global refresher training on a periodic basis. compliance programme and the Through our global compliance programme management of associated risks, including Maintaining our we have adopted internal controls and bribery and corruption. We have a zero- management processes to ensure the tolerance policy for bribery and corruption membership of the responsible and ethical conduct of our at Hikma. As a publicly listed company on the business. This includes compliance with London Stock Exchange (LSE), we are subject FTSE4Good Index all relevant global and local laws, codes to the regulations of the UK Listing Authority. and regulations wherever we operate. We also comply with the UK Bribery Act 2010 For the sixth consecutive year, we maintained our membership of and the US Foreign Corrupt Practices Act, as the FTSE4Good Index Series – an index of LSE-listed companies well as global anti-corruption standards and that demonstrate strong Environmental, Social and Governance local anti-bribery and corruption laws. (ESG) practices as measured against globally recognised standards. The FTSE4Good evaluates companies’ effectiveness in addressing issues such as human rights, anti-corruption, This year, our FTSE4Good environmental performance, health and safety, and community Index score increased from engagement. Their assessments are used by a wide variety of Founding member of market participants to develop responsible investment funds and other products. 3.0 to 3.5 the Partnering Against which improved our ranking as This year, our score increased from 3.0 to 3.5, which improved our compared to other member ranking as compared to other member companies from the 57th companies from the 57th Corruption Initiative (PACI) to the 78th percentile. We continue to score above the averages to the 78th percentile for both healthcare and pharmaceuticals sectors in all three ESG Hikma is a founding member of the Partnering Against categories. Our aim is to continue improving our management Corruption Initiative (PACI), a cross-industry collaborative effort of ESG issues, with a focus on strengthening our environmental established through the World Economic Forum dedicated to performance and disclosure in 2021. 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.

44 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 45 Sustainability continued

Learning and Breast 45 patients received development cancer support kits through our partnership with Enabling our Our digital learning platforms empower all our employees to awareness the US National Breast pursue personalised learning objectives. These platforms have Cancer Foundation people also been fundamental in ensuring accessibility to continued Our annual campaign learning as we adapted to new work from home guidelines. engages employees and raises awareness about the value of early detection and treatment. 80 +40,000 women received digital learning assets available to employees As part of our campaign, self-screening we offered employees training in Portugal Our people are our most self-screening training, educational lectures and valuable asset. We Ensuring health and safety facilitated appointments Online video courses taught by experts in with doctors. We also adapted health and safety distributed educational In response to the pandemic, it was essential for us to take measures that protect business, technology and digital skills 520 measures to address the the safety of our employees while maintaining continuity of our manufacturing materials, and donated operations and supply of medicines. encouragement cards and employees in unprecedented challenges kits of hope to hundreds MENA attended Some of the actions taken to effectively of breast cancer patients virtual awareness of the COVID-19 pandemic worldwide. sessions and continued expanding manage employee safety include: our global learning and 31% 17k 41k development programme Employee Number of Number of usage rate employee courses viewed by providing more readily Adapted work schedules learning hours by employees to reduce interaction and accessible digital Maintained multiple strengthen social distancing channels of communication between departments and resources to all employees. for employees to receive shifts, and instituted timely information, updates restrictions on travel and and advice regarding in-person meetings in line with Online books, audio books and technical health and safety issues. public health authority skills training guidelines. Diversity, equity and belonging

Hikma celebrates diversity and prides itself on a culture 22% 3.8k 47k of inclusion. We uphold the sixth principle of the United As part of the We Are Hikma Distributed personal protective Employee Number of Number of Nations Global Compact on the elimination of discrimination campaign, we established equipment to all employees usage rate employee pages viewed in the workplace. We hire on merit and are committed to webinars and online resources and implemented screening learning hours by employees employing and engaging talented people irrespective of for employees on themes measures including daily health their race, gender, religion, sexual orientation, age, marital related to mental wellbeing, checks and temperature status, national origin, present or past history of mental stress management and monitoring. or physical disability and any other factors not related to general awareness. a person’s ability to perform a role. Our objectives going forward: During the year, we conducted focus groups and peer-to- – improve the adoption rate of online resources peer discussions to evaluate opportunities to strengthen – develop Arabic language content our culture of belonging. We established an employee-led – introduce blended learning programmes that combine initiative – the Black Employees Advisory Board in the US – online materials with instructor-led learning activities and a Diversity, Equity and Belonging Task Force to direct a more inclusive approach to employee recruitment, retention and promotion.

46 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 47 Sustainability continued

Our performance Overall, our GHG emissions for scope 1 and 2 decreased by 0.4% year-on-year. We continue to invest in energy efficiency projects and renewable energy systems at multiple sites, and are adopting hybrid and electric vehicles where feasible. Since 2017, our reported GHG emissions of direct fuel usage and electricity consumption have decreased by 4%. Monitoring and minimising

Greenhouse gas emissions, tonnes of carbon 129,259dioxide 128,277 124,812 124,371 our environmental impact equivalent (tCO2e): 2017-2020

129,259 128,277 124,812 124,371 2017 2018 2019 2020 Scope 1 – direct combustion of fuel and operation of facilities 36,839 38,404 39,089 41,397 We are committed to We continue to achieve progress with This statement has been prepared in Scope 2 – electricity our environmental performance. We are accordance with our regulatory obligation consumption 92,421 89,873 85,723 82,974 making our operations improving the way we monitor our impacts, to report greenhouse gas (GHG) emissions Total scope 1 and 2 pursuing projects that reduce our footprint pursuant to the Companies (Directors’ emissions (location-based) 129,259 128,277 124,812 124,371 more energy efficient and and aligning with the recommendations Report) and Limited Liability Partnerships 2017 2018 2019 2020 of the Task Force for Climate-Related (Energy and Carbon Report) Regulations environmentally Disclosures (TCFD). More information on our 2018, which implement the UK government’s Scope 1 Scope 2 responsible. environmental performance and disclosure policy on Streamlined Energy and Carbon 2017 2018 2019 2020 is available in the sustainability section of Reporting. Our emissions have been verified Scope 1 Scope 2 hikma.com. to a reasonable level of assurance by an external third party according to the We measure our environmental impacts ISO 14064-3 standard. through several metrics which we continue Year-on-year change by emission source to refine and expand, including: – direct fuel usage (Scope 1) 2017 – electricity consumption (Scope 2) – renewable energy generation and usage – water consumption 2018

2019

2020

0k 10k 20k 30k 40k 50k 60k 70k 80k 90k 100k 110k 120k 130k

Natural gas combustion Petrol combustion Vehicle emissions Diesel combustion LPG/Propane combustion Refrigerants Electricity

Verification statement: Reasonable assurance Data notes: — We quantify and report our organisational GHG emissions in alignment with the Carbon Credentials Energy Services Ltd has been contracted by World Resources Institute’s Greenhouse Gas Protocol Corporate Accounting and Hikma Pharmaceuticals PLC for the independent third-party Reporting Standard and in alignment with the Scope 2 Guidance. We consolidate our verification of direct and indirect carbon dioxide equivalent emissions organisational boundary according to the operational control approach, which includes all our facilities. We have adopted a materiality threshold of 10% for GHG reporting (CO2e) as provided in the 2020 Company Annual Report and Accounts purposes. Non-manufacturing facilities with less than 150 staff, including our UK office to a reasonable level of assurance. Verified emissions by scope include: are not included as they fall below our materiality threshold. Joint ventures with less Scope 1 Emissions than 50% holding are not included as we do not have operational control. Emissions are reported from sites which represent 87% of total employees. Estimates of the emissions – combustion of gaseous fuels (natural gas, diesel, petrol and LPG) generated by offices that are below our materiality threshold are available in the – fugitive refrigerant gases sustainability section of hikma.com.

— Emissions from the consumption of electricity are reported in tCO2e. However, since the Scope 2 Emissions International Energy Agency emission factors for electricity currently account for carbon – purchased electricity consumption (location and market-based) dioxide emissions only, part of these emissions are in tonnes of carbon dioxide (tCO2). — Reported data from previous years are revised as we continue to improve the quality Carbon Intelligence concludes with reasonable assurance that the of our data collection and analysis. GHG assertion is materially correct, is a fair representation of the GHG — More details about our environmental performance metrics, including market-based emissions data and information and is prepared in accordance with scope 2 emissions, are available in the sustainability section of hikma.com. the relevant criteria.

48 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 49 Sustainability continued

Our renewable Water consumption Our TCFD disclosures In 2021, further work is planned to refine Climate impact identification our environmental priorities and incorporate energy capacity Measuring water consumption enables us to more effectively manage our environmental We are aligning our internal processes and TCFD recommendations into our business and materiality assessment impacts. The figures below indicate our cubic metre consumption by region. Information about public disclosures with the Taskforce on We continue to invest in renewable energy operations. We are undertaking a full assessment water treatment, waste management and indirect emissions can be found in the sustainability Climate-related Financial Disclosures (TCFD) infrastructure to reduce our footprint and of the material climate-related risks and section of hikma.com. recommendations. We have summarised our long-term overhead costs. We currently Risk management opportunities that have the potential progress to date in this section. have solar photovoltaic systems in four Water consumption by region, cubic metres (m3): 2020 We assess climate-related risks through to impact our business. We are using the locations – three in Jordan and one in our emerging risk management process. industry standard risk and opportunities Portugal. We also purchase electricity Governance The process involves engaging with external framework published by CDP (formerly the generated by renewables in Portugal and To ensure that sustainability topics are experts, scenario modelling and connecting Carbon Disclosure Project) as a foundation Sudan. This is reflected in our market-based considered at the highest level of decision to existing interrelated risk mitigation for the assessment. emissions available in the sustainability making, they have been placed under the programmes. The approach helps to ensure section of hikma.com. remit of our Compliance Responsibility and appropriate management attention is Ethics Committee (CREC). This includes provided to this developing area. reviewing and guiding our sustainability Further information on our principal risks, US MENA Europe & ROW strategy and tracking our progress towards sustainability-related goals, including enterprise risk management framework climate change. and emerging risk process can be found 452,000 240,000 327,000 on pages 52 to 59. Strategy Hikma aims to manage its impact on the Metrics and targets environment in a responsible manner, to We are developing metrics and targets adapt our organisation to climate change to measure our climate impact and assess and to avoid adverse impacts. climate-related risks and opportunities. These metrics will enable us to analyse In order to achieve this, we are assessing current and historical periods. our impact on the environment and the 9% 3 potential impact of climate change scenarios Details of our energy usage, water of our electricity m on our organisation. In 2020 a cross- consumption and carbon emissions consumption is derived functional team that included employees can be found on pages 48 to 50. from renewable sources from across regions and disciplines worked together to assess our climate-related risks and developed the scenario models that were used in our longer-term viability Improving energy efficiency assessments (see page 59).

Tunisia Portugal The installation of a co-generation heat and power system for The installation of a heat our sites in Tunisia improves thermal recovery system in the efficiency of steam use, Portugal saves approximately enabling a 30% decrease 480,000 kilowatt-hours (kWh) in electricity consumption. of energy per year.

LED lighting Columbus We continued our roll-out of At our site in Columbus, USA, more efficient light emitting we upgraded steam boiler diode (LED) fixtures, improving burners, saving an estimated efficiency across eight sites 466,000 kWh of electricity with annual energy savings in 2020. of over 300,000 kWh.

50 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 51 Risk management

Risk management framework Risk appetite The ERM office enables and drives the The Board determines the nature and extent implementation of effective risk Risk context of the principal risks it is willing to take and management practices and partners with global risk owners in assessing and reporting We develop, manufacture and market a communicates this through the Group risk Risk appetite. The risk appetite outlines expected their risks, and through coordination of broad range of generic pharmaceutical emerging risk assessments. products across the US, MENA and Europe. management strategies and details limits We are also a leading licensing partner. and tolerances on risk exposure for each Compliance and control functions with of the principal risks. It forms the foundation professional expertise in managing risk Risks are inherent in our business. They may of the ERM framework, guides management in specialist areas are in place across the management be related to our strategy and delivery of our decision-making across the Group and is organisation. objectives, the fundamental activities and reviewed and updated annually. processes of the organisation, meeting the The CEO and Executive Committee have expectations of our stakeholders, or arise Risk governance direct ownership of risk management for through key relationships and dependencies. The Board has ultimate responsibility for the the Group. Risk management accountability is fully embedded within their executive Find out more about the internal and Group’s approach to risk management and responsibilities and includes assessments external context for risk management for internal control. On behalf of the Board, the of strategic opportunities and risks. the Group in ‘Our strategy’ (pages 12 and 13), Audit Committee oversees risk management ‘Our markets’ (pages 16 and 17) and ‘Our for the Group as part of its responsibilities As part of the risk governance framework, business model’ (pages 18 and 19). for internal control. senior executives are assigned global The Audit Committee reviews the material risk owner responsibility for specific Risk strategy risks facing the Group, considering different principal risks. Effective management of risk is fundamental sources of assurance, including executive Global risk owners coordinate risk to delivering long-term success for the management, internal audit and external management activities across the Group. We operate an Enterprise Risk audit. The Chair of the Audit Committee organisation with support from management Management (ERM) framework to ensure is a standing member of the Compliance, teams to ensure risk exposure is managed In 2020, our risk management framework that we are comprehensive and structured Responsibility and Ethics Committee appropriately and in line with the risk appetite. in our approach. This framework delivers (CREC) ensuring connection between a thorough view on our risk exposure to 1. Full committee terms of reference are available the Board committees with risk oversight on www.hikma.com provided structure and stability in an environment inform our decision-making and enable responsibilities 1. the alignment, effectiveness and efficiency challenged by the COVID-19 pandemic of our strategic, tactical, operational and Internal audit provides independent compliance processes. This approach assurance of the Group’s internal control ensures we fulfil our obligations and environment. For more details on our internal provides assurance that our activities audit approach see pages 77 and 78. are appropriately controlled.

Risk management responsibilities

Board of Directors Internal audit ERM office Global risk owners In this section – Determine principal risks – Provides independent – Enable and drive effective – Implement effective risk – Define and communicate the assurance of the Group’s risk management practices management practices to 53 Risk management framework Group risk appetite internal control environment – Partner with global risk owners assess and manage risks 54 Risk management activities – Ensure overall effectiveness in risk assessment and across the organisation of the risk management reporting – Report on risk exposure and 55 Principal risks and uncertainties framework – Coordinate emerging risk risk management status – Review risk management assessments 59 Going concern key outcomes 59 Longer-term viability – Evaluate strategic risks and opportunities

Audit Committee CEO and Executive Committee Compliance and control functions Management teams

– Review the effectiveness – Review regular risk and – Develop, implement and – Manage risks and risk mitigation of internal controls and risk assurance reports to ensure monitor compliance to Group activities management systems Group operates within risk and functional policies and – Implement and monitor Group – Review risk and assurance appetite procedures and functional policies and reports from executive – Take enterprise view of risk – Identify and analyse procedures, and other internal management, internal audit exposure, consider inter- emerging risks controls and external audit relation of risks and evaluate – Identify and analyse – Consider risks highlighted by emerging risks emerging risks the CREC – Make decisions on prioritisation for risk response – Assess strategic opportunities and risks

52 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 53 Risk management continued

Risk management activities Key risk management Principal risks and uncertainties Risk management activities occur at all activities in 2020 The Group faces risks from a range of sources that could have a material impact on our financial commitments and ability to trade in the future. levels of the organisation. The risk The Board has performed a robust assessment of the principal risks for the Group considering our risk context and with input from executive governance framework provides structure management. Effectively managing these risks is directly linked to the performance of our strategic KPIs and the delivery of the strategic for these activities to ensure consistency of priorities outlined on pages 12–15. Our principal risks are set out below with examples of management actions that help to control the risk. approach, alignment to the risk appetite and The Board recognises that certain risk factors are outside the control of management. The Board is satisfied that the principal risks are being monitoring of our risk exposure. The ERM managed appropriately and consistently with the target risk appetite. The set of principal risks should not be considered as an exhaustive list office coordinates regular risk assessments of all the risks the Group faces, and the management actions described do not include all actions taken. to review management of existing risks, and to identify new and emerging risks (see Industry dynamics below). These assessments are consolidated through a process coordinated by the What does the risk cover? Management actions ERM office and reported to the Executive Committee by the global risk owners. Reviewed the risk management The commercial viability of the – Continuous improvement in annual strategic reviews, business planning, budgeting and forecasting framework, risk appetite, and processes to enable and drive efficient and effective execution of strategy Summarised reports and key outcomes are principal risks industry and business model we reviewed by the Audit Committee and Board. Risk operate may change significantly as – Growth and expansion in existing markets with new products and in new therapeutic areas In addition to the core reporting processes a result of political action, economic – Portfolio management programmes to focus on strategic products that support revenue, profit and described, a range of key risk management management factors, societal pressures, margin targets activities occurred during the year. regulatory interventions or changes – Development of capacity and diversification of capability through differentiated technology in practice to participants in the value chain – Capital investment in the countries in which we operate to ensure continued market access Developed scenario modelling – Active product life cycle and pricing management approach for stress testing and of the industry. Emerging risks COVID-19 brought unprecedented – Continuous alignment of commercial and R&D organisations to identify market opportunities and meet Emerging risks are those that are new and sensitivity analysis of significant risk events based on principal risks (see public health, crisis management and demand through internal portfolio may develop into a significant risk, those that longer-term viability assessment on business continuity challenges to the – Collaboration with external partners for development and in-licensing partnerships are known but are rapidly changing, or those page 59) world and our organisation. As the – Leveraging the quality, reliability and flexibility of our manufacturing facilities for partnerships (such as that are developing over the long term and pandemic developed during the year, contract manufacturing) may have significant impact on our ability our risk management capabilities were – Working with a broad range of customers and expanding our relationships to cover new customers to achieve our objectives. Emerging risks are and purchasing models, eg Civica Rx in the US brought to the fore. often driven by forces outside our control. Our response involved rapid stand Although emerging risks may be mitigated Monitored enterprise-wide key risk indicators aligned to risk up of cross-functional incident by existing control frameworks, they need appetite to assess risk exposure management teams at group, region, Product pipeline to be assessed to determine if any aspects country and site levels, connected to fall outside current processes or if the the Executive Committee and the Board. What does the risk cover? Management actions controls in place may become inadequate These teams shared common principles as the risk develops. Selecting, developing and – Selection process for new pipeline products with commercial teams established and operating effectively of putting the health and safety of our registering new products that meet – Optimised and standardised management of pipeline development cycle employees and patients first, open and Our approach involves establishing market needs and are aligned with – Continuous improvement of strategic oversight of pipeline delivery through dedicated global project cross-functional teams to assess strategic, Enhanced elements of insurance transparent communication, and values programme through integrated Hikma’s strategy to provide a management office and evidence-based decision making tactical, operational and compliance risks assessment of risk exposures and continuous source of future growth. – Bolstered pipeline through business development deals and opportunities recognising these risks control environment aligned to requirements from authorities. – Developed strategic planning tool to manage the pipeline projects aligning commercial, finance, regulatory, may develop over an extended timeframe. legal, and R&D – Established strategic partnerships to introduce new technologies in our regions to expand the pipeline The risk assessment methods deployed – Recruited new talent and developed internal capabilities vary and may involve engaging with external As a result of our efforts Hikma – Developed programme to improve utilisation of R&D sites to optimise internal network capabilities established effective safety measures for experts, scenario modelling, engagement – Established R&D procurement function to improve management of sourcing, quality and reliability with existing risk mitigation programmes, Established crisis and continuity our employees, maintained operations management programme to embed for R&D projects and development of risk mitigation and organisational resilience framework to deliver essential medicines, and control strategies that will be sustainable continued to meet the needs and over the longer term. expectations of our stakeholders. Organisational development Our risk management processes brought Priorities for 2021 Brexit structure, alignment and consistency In addition to core activities, in 2021 we With the withdrawal of the UK from the to our response. With our continuous What does the risk cover? Management actions will continue to roll out our upgraded European Union’s single market and customs improvement mindset, we have Developing, maintaining and – Strengthened teams with key talent appointed to fill strategic regional and global positions crisis response and business continuity union on 31 December 2020, we are enhanced our organisational resilience adapting organisational structures, – Implemented a new grading structure and initiated standardisation of job descriptions across the organisation management processes to strengthen monitoring for any implications arising for our through various initiatives, including management processes and – Drove standardisation of HR processes through Group-wide human capital management system and our organisational resilience. business as the new arrangements under the general training. controls, and talent pipeline to establishment of shared services hubs EU-UK Trade and Cooperation Agreement – Established flexible working approaches to support and enable employees as a result of disruption from the We will continue to develop partnerships To find out more see ‘Our response enable effective delivery by the come in to force. COVID-19 pandemic between compliance and control functions to COVID-19’ on pages 10 and 11. business in the face of rapid and to bring greater assurance for the Group. Our cross-functional reviews continue to constant internal and external – Deployed variety of enhanced learning materials to support employees through the organisation-wide learning management system assess that the exposure for the Group is change. We will further develop our emerging risk low and manageable. We have a small assessment processes, including a focus on footprint in the UK and limited dependence emerging climate-related risks alongside our on movement of people, goods, services c.8,000 alignment with the recommendations from and capital between the UK and Europe. Employees trained on crisis the Taskforce on Climate-related Financial management principles Disclosures. See page 51 for more details.

54 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 55 Risk management continued

Principal risks and uncertainties continued

Reputation Legal, regulatory and intellectual property

What does the risk cover? Management actions What does the risk cover? Management actions

Building and maintaining trusted and – Coordinated COVID-19 pandemic communication programme to enable delivery of key messages Complying with laws and regulations, – Continuous assessment of developments in legal and regulatory frameworks and impact on the organisation successful partnerships with our to employees and external stakeholders using different channels and platforms and their application. Managing – Developed and updated policies and procedures in response to changes in the risks facing the Group stakeholders relies on developing – Internal and external monitoring and management of issues that may impact reputation (including litigation, governmental – Internal communication and training to raise awareness, ensure understanding and build a compliance culture and sustaining our reputation as one complex business and stakeholder environment related to drug pricing, and the manufacture, sale investigations, sanctions, across the organisation of our most valuable assets. and distribution of opioid products) contractual terms and conditions – Delivered new training programmes covering antitrust, international sanctions and the failure to prevent the – Established and developed strategic industry and community partnerships and adapting to their changes while facilitation of tax evasion – Deployed internal communication programmes to support employee engagement preserving shareholder value, – Managing complex litigation activity related to the manufacture, sale and distribution of opioid products business integrity and reputation. – Provided oversight on pricing committees assessing price increase to ensure thorough assessment of business needs – Ongoing assessment and monitoring of general litigation activity in US pharmaceutical environment – External counsel engaged for the provision of independent specialist advice Ethics and compliance – Controls and procedures implemented to address risk of potential IP litigation in jurisdictions where Hikma markets its products What does the risk cover? Management actions

Maintaining a culture underpinned by – Board-level oversight from the Compliance, Responsibility and Ethics Committee (see page 81) ethical decision making, with appropriate – Code of Conduct approved by the Board and delivered to all employees Inorganic growth internal controls to ensure staff and third – Automated third-party due diligence and oversight programme implemented – Policies and procedures developed to ensure compliance with new laws and regulations, including parties comply with our Code of What does the risk cover? Management actions Conduct, associated policies and US pharmaceutical pricing transparency, California Consumer Privacy Act procedures, as well as all applicable – Active participation in international anti-corruption initiatives Identifying, accurately pricing and – Continuous improvement of procedures for target identification, valuation, due diligence, transaction legislation. – Updated compliance programmes eg to adapt to COVID-19 pandemic related restrictions on salesforce realising expected benefits from execution and integration access to healthcare professionals, data privacy, and other areas acquisitions or divestments, – Aligned business development practices across the businesses licensing, or other business – Extensive due diligence of each acquisition in partnership with external support in order to strategically development activities. identify, value, and execute transactions – The Board spends a significant amount of time reviewing major acquisitions proposed by the Executive Committee to ensure strategic alignment Information and cyber security, technology and infrastructure – Post-acquisition performance (financial and non-financial) monitored closely to ensure integration and delivery on business plan What does the risk cover? Management actions – Post-transaction reviews highlight opportunities to improve effectiveness of processes

Ensuring the integrity, confidentiality, – Industry-standard information security solutions and best practice processes adopted and adapted availability and resilience of data, for local and Group requirements securing information stored and/or – Tailored Group-wide information security framework continuously enhanced to account for increase Active pharmaceutical ingredient (API) and third-party risk management processed internally or externally from and changes in cyber risk – Cyber security metrics defined to monitor the evolving threats and update controls cyber and non-cyber threats, What does the risk cover? Management actions maintaining and developing technology – Employee communication initiatives increased with greater emphasis on general and targeted risk areas (eg phishing awareness) systems that enable business processes, Maintaining availability of supply, – Applied rigorous selection process for API suppliers and focus on building long-term supply contracts – Group-wide programme established to coordinate strategic remediation of cyber audit findings and strategic partnerships and ensuring infrastructure supports the quality and competitiveness of API – Board conducted a deep dive review of the information security programme (see page 75) – Continued to implement strategy for continuity of API supply for high-value products through alternative organisation effectively. purchases and ensuring proper – New Chief Information Officer appointed understanding and control of API suppliers, stocking strategies, and supply chain modelling – Continued roll-out of enterprise-wide standardisation initiative incorporating data management and third-party risks. – Ensured continuity of supply for our products through collaboration with suppliers to absorb COVID-19 access control pandemic-related disruptions – Developed capabilities of vertically integrated plant in Jordan to synthesise selected strategic APIs – Implemented enhanced third-party due diligence process to reinforce vendor qualification process – Enhanced management of inventory levels to increase resilience of our supply chain – Established remote audit and monitoring process for API third-party suppliers due to travel constraints

Crisis response and business continuity

What does the risk cover? Management actions

Preparedness, response, continuity – Coordinated activation, structure and processes for COVID-19 incident response teams. See ‘Our response and recovery from disruptive events, to COVID-19’ on pages 10 and 11 for more details. such as natural catastrophe, – Established crisis and continuity management programme to continue implementation of organisational economic turmoil, operational resilience framework issues, pandemic, political crisis, and – Rolled out crisis management training to c.8,000 employees to develop capability across the Group regulatory intervention. – Corporate insurance programme alignment to ensure appropriate coverage of high-impact, low- likelihood events

56 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 57 Risk management continued

Principal risks and uncertainties continued Going concern and longer- Assumptions – Significant adverse changes to the pricing Financial modelling for the business plan and environment (PR: industry dynamics) term viability Product quality and safety the going concern and viability assessments – Major underperformance of the pipeline Assessment of position and prospects is subject to assumptions related to: to deliver strategic new products (PR: product pipeline) The Group’s current and forecast financial – launch and commercialisation of What does the risk cover? Management actions – Regulator investigation into systemic positions are used to assess the going new products failure of corporate compliance Maintaining compliance with current Good – Hikma Quality Council provides oversight and shares best practice across the Group concern position and longer-term viability. – market share and product demand rates programme (PR: ethics and compliance) Practices for Manufacturing (cGMP), – Quality and safety culture driven throughout the organisation by global initiatives, and regularly – maintenance of certain product prices reinforced by communication from senior executives The position and prospects of the Group – Prolonged regulator-imposed restriction of Laboratory (cGLP), Distribution (cGDP) and – political and social stability – Board conducted a deep dive review of the corporate quality programme and results of quality are assessed at Executive Committee a major US FDA-inspected manufacturing Pharmacovigilance (cGVP) by staff, and – ability to re-finance existing debt on similar compliance audits meetings and at the end of the financial year. plant (PR: product quality and safety) ensuring compliance is maintained by all terms – Global implementation of quality systems that ensure valid consistent manufacturing processes The assessments consider strategic and – Escalation of political or social instability relevant third parties involved in these – ability to increase operational efficiency leading to the production of quality products operational updates, principal and emerging in MENA markets (PR: crisis response processes. and reduce central costs – Facilities maintained as inspection-ready for assessment by relevant regulators risks, financial reporting and forecasting and business continuity) – effective tax rate being within the current – Documented procedures continuously improved and regular staff training from the Chief Financial Officer, and through – Disruption to API supply and increased guidance range – Oversaw cGMP compliance of third parties supplying APIs, raw materials, packaging components the development of a business plan. The import tariffs (PR: API and third-party and other services business plan takes into account our current risk management) – Maintained environment and health certifications and drove continuous improvements position, specific risks and uncertainties Going concern – Changing regulatory requirements and – Continuous monitoring of the safety of products to detect any change to risk-benefit facing the business and known changes disruption through extreme weather – Global pharmacovigilance programme in place supported by globalised systems For the purposes of assessing the going to our organisation and business model. events (ER: climate change) concern position the base case and a – Cyber attacks impacting endpoints and The Executive Committee assesses the forecast including severe but plausible ERP systems (PR: information and cyber future strategic positioning of Hikma as downside risks were analysed over the security, technology and infrastructure) Financial control and reporting a company in the context of the changing 12-month period from the date of signing macroeconomic and healthcare the financial statements. The consequences of each of these What does the risk cover? Management actions environment. Aspects of this analysis are multi-event risk scenarios were modelled The analysis shows that Hikma is well-placed shown in ‘Global context’ and ‘Key trends’ independently over the forecast period Effectively managing income, expenditure, – Enhanced financial control procedures and increased proportion of automated controls to manage its business and financial risks (see pages 16 and 17). and the impacts on EBITDA, ability to meet assets and liabilities, liquidity, exchange – Continued oversight and control by the financial compliance monitoring programme to ensure successfully despite current uncertainties our debt obligations, and cash flow were rates, tax uncertainty, debtor and associated adherence to Group accounting policies These various assessments are presented to and confirms that the going concern basis determined. activities, and in reporting accurately, in a – Improved reporting efficiency and reduced reporting timeframes with new systems and tools the Audit Committee and Board of Directors should be used in preparing the financial timely manner and in compliance with – Enhanced budgeting and forecasting processes with new systems and tools for independent scrutiny of management’s statements. The assessment shows that although the statutory requirements and accounting – Introduced a more flexible hedging strategy to mitigate currency and interest rate exposure risks assumptions and modelling approach. scenarios are severe they do not threaten standards. – Strengthened and restructured Global tax team The Board also receives regular updates the viability of Hikma. Headroom was – Continued automation of banking processes to minimise risk of fraud and reduce human error Longer-term viability on operational, strategic and financial comfortably maintained throughout the matters from executives. Viability period viability period for each of the multi-event Financial position In accordance with the UK Corporate risk scenarios. Governance Code, the longer-term viability The going concern and longer-term viability The assessment and analysis did not rely of the Group is assessed for a period longer assessments are based on the financial on management actions that could be taken than for the going concern analysis. The position (as at 31 December 2020): in the circumstances to reduce the impact longer-term viability assessment was and consequences of the risk events. – net cash flow from operating activities conducted for a period of three years, ending Such actions, the ongoing implementation was $464 million on 31 December 2023. This is the timeframe 1 of the ERM programme, and investment – overall net debt was $605 million for acquisitions and business development in infrastructure and change initiatives (0.9 times core EBITDA) opportunities to become integrated into are anticipated to continue to enhance – available borrowing capacity is $1,286 our business, and for pipeline products organisational resilience and support million of committed undrawn long-term to contribute as marketed products. Our longer-term viability. Risk management is fundamental and short-term banking facilities, including forecasts are more accurate in the near term unutilised import and export financing than in the long term and this limitation also The outcome of these various quantitative to our long-term success limits. These facilities are well-diversified applies to our viability assessments. and qualitative assessments leads across the subsidiaries of the Group and management to believe that Hikma is Stress testing, modelling and sensitivity are with a number of financial institutions resilient to downside risk scenarios. This is analysis largely as a result of our financial position Future prospects Management developed severe but plausible (in particular our strong balance sheet and The Group’s base case forecasts take into multi-event risk scenarios that could impact low levels of debt) and is supported by the account reasonable possible changes in the business adversely. The Group’s strategic fact that our business is well-diversified trading performance, including those that objectives, principal risks (PR) and through geographic spread, product may arise related to the COVID-19 pandemic, assessments of longer-term emerging risks diversity, and large customer and supplier facility renewal sensitivities, and maturities (ER) together with management input, base. Further details are provided in ‘Our of long-term debt. real-world examples and the financial markets’ (page 16), ‘Our business model’ modelling assumptions listed above were (page 18) and ‘Our strategy’ (page 12). used to design the scenarios. Realistic but extremely severe adjustments were further applied for sensitivity analysis.

1. At 31 December 2020, there were two covenants in place on the Group’s revolving and banking facilities with which the Group was in compliance. The Group also expects to be in compliance in the future.

58 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 59 Compliance

Non-financial 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 Summary Further information and policies Our business model – Our diversified business model allows us to respond to – Our business model, pages 18 and 19 Respect for – We respect and uphold the principles of the Universal – Operating responsibly and ethically, page 44 the many opportunities and risks we face, while human rights Declaration of Human Rights both within Hikma and – Modern slavery act policy statement1 delivering value for our stakeholders across our value chain – Use of products in capital punishment1 – We object in the strongest possible terms to the – Principal risk: Reputation, page 56 Principal risks – Our risk management framework is designed to ensure – Risk management, pages 52 to 59 use of any of our products for the purpose of we take a comprehensive view of risk. This includes capital punishment financial and non-financial risks that may impact our business and stakeholders Anti-bribery – Our Compliance, Responsibility and Ethics Committee – Operating responsibly and ethically, page 44 and corruption (CREC) leads our efforts to strengthen anti-bribery and – Code of Conduct1 Environmental – We are committed to making our operations more energy – Monitoring and minimising our environmental corruption (ABC) policies and manage associated risks – Principal risk: Ethics and compliance, page 56 matters efficient and environmentally responsible impacts, pages 48 to 51 – As a publicly-listed company on the London Stock – Compliance, Responsibility and Ethics Committee – We are improving the way we monitor our impacts, – Climate impact identification and materiality Exchange (LSE), we abide by the regulations of the report, page 81 pursuing projects that reduce our footprint assessment, page 51 UK Listing Authority. We operate in compliance with the – We are aligning our internal processes and public UK Bribery Act 2010, the Foreign Corrupt Practices Act disclosure with the Taskforce on Climate-related (FCPA) as well as local laws and regulations Financial Disclosures (TCFD) recommendations – Board-level oversight of environmental sustainability Non-financial KPIs – We monitor the position, performance and impact of – Environmental matters: Greenhouse gas emissions, through the Compliance, Responsibility and Ethics Hikma across a wide range of financial and non-financial page 49 Committee (CREC) KPIs. Non-financial KPIs are used to measure progress – Employees: Engagement and Enablement, page 15 – Environmental matters are incorporated in our risk towards our strategic priorities (pages 14 and 15), our – Audit Committee report, page 77 management framework exposure to risks (page 52), and are in place in other – Compliance, Responsibility and Ethics Committee areas throughout the organisation as part of Hikma’s report, page 81 Employees – Our employees have always been at the heart of – Stakeholder engagement: Employees, page 22 long-term sustainable growth strategy and our everything we do. As the driving force behind Hikma’s – Operating responsibly and ethically, page 44 commitment to helping people and improving growth and success, our people are our most valuable – Code of Conduct1 the communities in which we operate asset – Enabling our people, page 46 – We are committed to investing in the development of – Occupational health, safety, environment and our workforce and in protecting their health and safety. energy policy1 The Strategic report was approved by the Board of Directors and signed on its behalf by: We have c.8,600 employees across the US, MENA, – Principal risk: Organisational development, Europe and ROW page 55 Social matters – In all of our markets, we work to meet social needs locally – Stakeholder engagement, pages 20 to 25 and improve lives. We have developed programmes – Supporting patients and communities, page 39 in key areas to address social challenges: – Addressing drug shortages in the US1 – Animal testing position1 • providing better health Sigurdur Olafsson – Principal risk: Reputation, page 56 • supporting education Chief Executive Officer • helping people in need 24 February 2021 – 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

1. Our public policies, codes and statements are available on www.hikma.com

60 Hikma Pharmaceuticals PLC Annual Report 2020 Hikma Pharmaceuticals PLC Annual Report 2020 61