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Hikma Pharmaceuticals PLC Hikma Pharmaceuticals PLC Hikma Pharmaceuticals PLC 13 Hanover Square London W1S 1HW Annual Report 2005 UK www.hikma.com Annual Report 2005 A strategy for growth Hikma Pharmaceuticals PLC Contents 02 Group at a glance 43 Statement of Directors’ 04 Chairman and responsibilities Chief Executive’s review 44 Independent auditor’s report 06 Our strengths 46 Consolidated income statement 14 Business and financial review 47 Consolidated statement of 28 Board of Directors and recognised income and expenses senior management 48 Consolidated balance sheet 30 Report of the Directors 49 Consolidated cash flow statement 32 Board report on corporate 50 Notes to the consolidated financial governance statements 35 Audit Committee report 81 Hikma Pharmaceuticals PLC accounts 37 Board report on remuneration 87 Shareholder information 88 Company information Financial highlights Revenue Operating profit Profit attributable ($ million) ($ million) to shareholders ($ million) 43.9 +23.5% +10.3% 69.2 +17.1% 262.2 62.7 37.5 212.4 05 05 04 04* 05 04* Diluted earnings R&D costs per share (cents) ($ million) 16.5 +14.1% 28.3 +70.7% 24.8 9.7 05 05 04 04 *2004 figures restated to reflect a change in the presentation of the results of our associate, IPO costs and Medicaid rebates. Further information is given in Note 2 to the consolidated financial statements. Designed and produced by Radley Yeldar. Photography by Edward Webb. Printed by CTD Printers. Hikma Pharmaceuticals PLC 01 Hikma is a multinational pharmaceutical group dedicated to improving quality of life of people in the markets it serves through the development, manufacture and marketing of a broad range of generic and in-licensed pharmaceutical products Operational highlights • Achieved revenue growth for the Group of 23.5% with particularly strong performance in the Branded and Injectable businesses • Maintained gross margins for the Group at 51.8% • Increased investment in R&D by 70.7% to 6.3% of revenue • Delivered 17.1% growth in profit attributable to shareholders • Listed on London Stock Exchange with a market capitalisation at year end of £675 million ($1.2 billion) • Expanded into the lyophilised segment of the injectables market • Received FDA approval of the manufacturing facilities of our associate in Saudi Arabia • Launched ten new products*, received 98 regulatory approvals and submitted 73 regulatory filings during the year *New pharmaceutical compounds that are being launched for the first time by the Group or, for the first time, within a new business segment. 02 Hikma Pharmaceuticals PLC Group at a glance Diversified business Revenue by business segment Revenue by region 2005 2004 2005 2004 1. Generic Pharmaceuticals 43.9% 50.0% 1. Middle East and North Africa 42.4% 40.4% 2. Branded Pharmaceuticals 35.5% 34.8% 2. United States 49.8% 53.3% 3. Injectable Pharmaceuticals 18.8% 13.6% 3. Europe 7.8% 5.9% 3 3 3 3 1 1 1 1 2 2 2 2005 2 2004 Broad product portfolio Hikma sells 115 generic pharmaceutical products in 256 dosage strengths and forms in 34 countries. Hikma also sells 25 pharmaceutical products under promotion and distribution agreements with, or licences from, 12 originator pharmaceutical companies and one generic pharmaceutical company. The majority of Hikma’s operations are in the United States, the Middle East and North Africa (MENA) and Europe. Generic 2005 revenue Products $115.2 million 36 non-branded solid generic products Branded 2005 revenue Products $93.0 million 48 branded generic products 17 products under licence and/or promotion and distribution agreements Injectable 2005 revenue Products $49.3 million 31 branded and non-branded injectable products 8 products under licence and/or promotion and distribution agreements Hikma Pharmaceuticals PLC 03 Broad geographic coverage Our markets R&D centres Manufacturing plants (including JPI, 47.5% owned associate) Key markets Top products US ABC codeine Chloroquine phosphate Folic acid Lisinopril Lithium carbonate SR Key markets Top products Algeria, Jordan, Amoclan Saudi Arabia Oprazole Penamox Prograf Suprax Key markets Top products MENA, US, Europe Cefazolin sodium Ceftizoxime sodium Ceftriaxone sodium Cefuroxime sodium Ciprofloxacin 04 Hikma Pharmaceuticals PLC Chairman and Chief Executive’s review “We are confident that the strength and diversity of our business will enable us to continue to deliver organic growth at the Group level, and we will continue to look for new opportunities to grow through acquisition.” Overview 90 products under development across our three main I am pleased to report that 2005 was an extremely successful business segments – Generic, Branded and Injectable year for Hikma Pharmaceuticals PLC. We have achieved a Pharmaceuticals. strong set of financial results driven by new product launches, In our Branded and Injectable Pharmaceuticals businesses, better product targeting and enhanced sales and marketing we put considerable effort into developing our sales and capabilities, combined with a continued focus on API sourcing, marketing capabilities, especially in the MENA region. manufacturing and operational efficiencies. Our performance We achieved market share gains in Saudi Arabia and in 2005 reinforces our track record of delivering growth maintained our market leading position in Jordan. We also and demonstrates the underlying strength of our diverse expanded into the technically challenging lyophilised segment business model. of the injectables market with the acquisition of the Italian On 1 November 2005 we successfully completed our manufacturing business, IBPP, in March 2005. In December initial public offering on the London Stock Exchange and on 2005, our Generic Pharmaceuticals business successfully 19 December 2005 we joined the FTSE 250. Through the offer renewed its sales contract with the Department of Veterans we raised gross proceeds of $124 million (£70.0 million) to be Affairs, an agency of the government of the United States, used to repay debt and fund capital investment projects across for the supply of Lisinopril. our core businesses. As of 31 December 2005, our market capitalisation was $1.2 billion (£675 million). Through our Board appointments listing we have enhanced our international profile, gained In anticipation of our IPO, three Non-Executive Directors were financial flexibility to grow our business both organically and appointed to the Board in October. In addition, Ali Al-Husry through acquisition, and enabled global investors to support joined the Board as a Non-Executive Director, having served our development. as a Director of Hikma Pharma Limited and other Group companies since 1991. Ali is Chairman and CEO of Financial results Export & Finance Bank in Jordan, as well as being a The Group performed well across all businesses in 2005, director of a number of other organisations. achieving revenue of $262.2 million, up 23.5% from 2004. Sir David Rowe-Ham joined the Board as senior independent Gross margin for the Group remained stable at 51.8%. Non-Executive Director and took up the position of Chairman Operating profit grew by 10.3% to $69.2 million, while of the Nomination Committee. A Chartered Accountant, operating margins decreased to 26.4%, compared to 29.5% Sir David is Chairman of Olayan Europe Ltd., BNP Paribas in 2004, primarily as a result of increased investment in South Asia Investment Co Ltd and Coral Products PLC. R&D and sales and marketing. The Group’s profit for the year increased by 17.1% to $43.9 million and diluted Michael Ashton joined the Board as a Non-Executive Director earnings per share grew by 14.1% to 28.3 cents. and took up the position of Chairman of the Remuneration Committee. Michael has been the chief executive of a number Business highlights of pharmaceutical companies and has over 32 years of We ended 2005 with a total of 140 products in our portfolio experience in the pharmaceutical industry. in 303 dosage strengths and forms, including the ten products Breffni Byrne also joined the Board as a Non-Executive Director, launched during the year and 25 under-licence products*. taking up the position of Chairman of the Audit Committee. During 2005 we were granted 98 regulatory approvals. Also a Chartered Accountant, Breffni is Chairman of NCB In addition, we submitted a total of 73 regulatory filings, Stockbrokers and a director of Irish Life and Permanent plc, including 37 new product applications**. As of 31 December Coillte Teoranta (the Irish state forestry company), Adsteam 2005, we had a total of 88 pending approvals and Europe Limited and other companies. Hikma Pharmaceuticals PLC 05 Dividend products sold in Algeria. We expect to be able to minimise the The Board has recommended a pro rata final dividend for the effect of these price declines by introducing new products and period from flotation to 31 December 2005 of 0.89 cents by increasing the sales volume, through greater promotion of per share (approximately 0.5 pence per share) equivalent to those Hikma products that are on the reference price list but approximately 5.34 cents on a full year basis. The proposed that have potential for sales growth. final dividend will be paid on 30 May 2006 to shareholders on the register on 28 April 2006, subject to approval at the Outlook Annual General Meeting. Our listing on the London Stock Exchange marks the beginning of an exciting new phase in Hikma’s development. Developments in 2006 In 2006, we will continue to improve the breadth and quality Early in 2006, we announced FDA approval of the of our product range and delivery of operational efficiencies manufacturing facilities of JPI, our associate company in with continued investment in research and development, Saudi Arabia, for the manufacture of oral cephalosporin sales and marketing and human resources. products for sale in the US market. The construction of Prospects for the Group’s overall business performance our new cephalosporin plant in Portugal is well underway are positive.

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