REG - Hikma Pharmaceutical - Half-year Report
08/08/2024 07:00
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RNS Number : 6285Z Hikma Pharmaceuticals Plc 08 August 2024
Hikma delivers strong H1 performance and upgrades Group guidance
London, 8 August 2024 - Hikma Pharmaceuticals PLC and its subsidiaries
('Hikma' or 'Group'), the multinational pharmaceutical company, today reports
its Interim Results for the six months ended 30 June 2024.
Riad Mishlawi, Chief Executive Officer of Hikma, said:
"We had an excellent first half of the year. All of our businesses contributed
to our strong performance, delivering 10% Group revenue growth. We launched
new products across all regions, entered new markets in Europe, and further
strengthened our leadership team.
Our Branded business performed extremely well, benefitting from the ongoing
investment in growing our portfolio of oncology and chronic treatments.
Injectables is maintaining good momentum, with new launches and recently added
capacity driving growth, while our strategic acquisition of Xellia's products,
manufacturing facility and R&D assets, once closed, will support the
long-term prospects of this business. Generics continues to differentiate
through our focus on more complex products and the quality of our US-based
manufacturing capabilities. The outlook for 2024 remains strong and we are
pleased to upgrade Group revenue and profit guidance."
Group H1 highlights:
Reported results (statutory) H1 2024(1) H1 2023(1) Change Constant currency(2)
$ million change
Revenue 1,569 1,427 10% 10%
Operating profit 351 245 43% 48%
Profit attributable to shareholders 226 131 73% 82%
Cashflow from operating activities 198 222 (11)% -
Basic earnings per share (cents) 102 59 73% 81%
Interim dividend per share (cents) 32 25 28% -
----
Core results(3) (underlying) H1 2024 H1 2023 Change Constant currency(2)
$ million change
Revenue 1,569 1,427 10% 10----%
Core operating profit 402 401 0% 3%
Core EBITDA(4) 453 451 0% 3%
Core profit attributable to shareholders 283 284 0% 4%
Core basic earnings per share (cents) 128 129 (1)% 3%
Strong first half performance
· Group revenue up 10% with growth in all three business segments
· Core operating profit flat year-on-year, with a very strong performance
in the Branded business offsetting the expected reduction in Generics
profitability. In constant currency (cc), core operating profit grew 3%
· Strong Group core EBITDA margin of 28.9% (H1 2023: 31.6%)
· Cashflow from operating activities, down 11% to $198 million, reflecting
investment in working capital primarily related to growth across the Group
· Robust balance sheet maintained with net debt(5) to core EBITDA(6) of
1.3x at 30 June 2024 (31 December 2023: 1.2x)
· Interim dividend of 32 cents per share, up 28%
Revenue growth in all three businesses
· Injectables(7) revenue growth of 4%, reflecting good growth in North
America and MENA and strong demand for our own products in Europe. Core
operating profit flat with a good margin of 36.3%, reflecting the H2 weighting
of contract manufacturing (CMO) revenue, as expected
· Branded revenue growth of 12% (cc growth: 13%), reflecting a very good
performance across our markets, driven by our oncology and chronic portfolio
and early fulfilment of tenders. Core operating profit up 24% (cc growth:
34%), with very strong core operating margin of 30.8%
· Generics revenue growth of 15%, driven by good demand across our product
portfolio, and strong core operating margin of 19.7%. Core operating profit
down 15%, reflecting the expected lower profitability from our authorised
generic of sodium oxybate
Strategic updates
· Announced the acquisition of parts of the Xellia Pharmaceuticals
business, which will add marketed products, pipeline projects, extensive
manufacturing capabilities and a new research and development (R&D) centre
to our Injectables business (subject to FTC approval)
· Launched Combogesic(®), our first speciality injectable product in the
US, and expanded commercial presence in Europe with entries into Spain and the
UK
· Strengthened product mix in our Branded business through continued shift
towards higher value medicines
· Improved access to diabetes treatments and strengthened our position as a
leading supplier of oncology medicines in our Branded business, with 43%
growth in revenue from oncology products and 50% from diabetes products
Outlook for full year 2024
· Group revenue growth of 6% to 8%, up from 4% to 6%
· Group core operating profit of $700 million to $730 million, up from
$660 million to $700 million
Further information:
A pre-recorded presentation will be available at www.hikma.com
(http://www.hikma.com) at 07:00 BST. Hikma will also hold a live Q&A
conference call at 09:30am BST, and a recording will be made available on the
Company's website.
To join via conference call please dial:
United Kingdom (toll free): +44 800 358 1035
United Kingdom (local): +44 20 3936 2999
Access code: 229737
For further information please contact Deepa Jadeja - djadeja@hikma.com
(mailto:djadeja@hikma.com) .
Hikma (Investors):
Susan Ringdal +44 (0)20 7399 2760/ +44 (0)7776 477050
EVP, Strategic Planning and Global Affairs
Guy Featherstone +44 (0)20 3892 4389/ +44 (0)7795 896738
Director, Investor Relations
Layan Kalisse +44 (0)20 7399 2788/ +44 (0)7970 709912
Senior Associate, Investor Relations
Teneo (Press):
Doug
Campbell
+44 (0)7753 136628
About Hikma:
Hikma helps put better health within reach every day for millions of people
around the world. For more than 45 years, we've been creating high-quality
medicines and making them accessible to the people who need them.
Headquartered in the UK, we are a global company with a local presence across
North America, the Middle East and North Africa (MENA) and Europe, and we use
our unique insight and expertise to transform cutting-edge science into
innovative solutions that transform people's lives. We're committed to our
customers, and the people they care for, and by thinking creatively and acting
practically, we provide them with a broad range of branded and non-branded
generic medicines. Together, our 9,100 colleagues are helping to shape a
healthier world that enriches all our communities. We are a leading licensing
partner, and through our venture capital arm, are helping bring innovative
health technologies to people around the world. For more information, please
visit: www.hikma.com
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Hikma Pharmaceuticals PLC (LSE: HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY)
(LEI:549300BNS685UXH4JI75) (rated BBB-/stable S&P and BBB-/positive Fitch)
STRATEGIC REVIEW
We have made excellent progress in the first half of 2024 as we continue to
position ourselves for the future.
We are a top three provider of generic sterile injectables by volume(8) and a
key supplier of non-injectable generic medicines in the US. In the MENA
region, we are the second largest pharmaceutical company by sales(9).
In April, we appointed a new President of our Generics business, Hafrun
Fridriksdottir. With Riad Mishlawi promoted to CEO last September, and Dr
Bill Larkins taking on the role of President of Injectables, we have
strengthened our experienced leadership team and are well placed to deliver
our growth strategy.
Injectables
Our Injectables business, which manufactures and supplies generic injectables
medicines to hospitals across North America, Europe and MENA, had a positive
start to the year across our geographies. We are seeing good demand across
our markets, have launched 39 products, enhanced our pipeline and are
investing across the business.
In June we announced the acquisition of parts of the US finished dosage form
business of Xellia Pharmaceuticals (subject to US FTC approval). This exciting
transaction includes a commercial portfolio and pipeline of differentiated
products, a manufacturing facility in Cleveland, Ohio, sales and marketing
capabilities, and an R&D centre in Zagreb, Croatia. Hikma will pay a cash
consideration of $135 million, and an additional contingent consideration of
up to $50 million, subject to the achievement of certain regulatory and
commercial milestones. The acquisition will be neutral to Group core
earnings in the first 12 months following closing, and accretive thereafter.
Importantly, it will add significant scale to our US operations as well as the
potential to further develop our pipeline with the experienced Zagreb team.
In North America, our US portfolio now has over 160 products and continues to
expand. The breadth of our product offering reduces our reliance on any one
single product and enables us to capture market opportunities. Our Canadian
business is also growing well, with seven new launches in the first half.
In MENA, both our own products and our in-licenced biosimilar franchise
continue to drive success. We have also made good progress with our new
plants in Algeria and Morocco, which are now in the final stages of
preparation for commercial production, expected in 2025.
In Europe, we officially entered Spain and the UK during the first half of
2024 and are now supplying products across the largest European markets.
With our facilities in Portugal, Germany and Italy, we have a flexible and
short supply chain, which allows us to address drug shortage situations. We
continue to expand our portfolio through new launches and are seeing good
demand for our own products across our markets. Revenue from our CMO business
was low in the first half due to the timing of contracts, which are weighted
towards the second half of this year.
Branded
Our Branded business, which supplies branded generics and in-licensed patented
products across the MENA region, has continued its excellent momentum,
benefitting from our oral oncology portfolio and the overall focus on
medications used to treat chronic illnesses. Recent launches have been an
important driver of this growth, resulting from our ongoing investments into
R&D and partnerships. We are also expanding our presence in the diabetes
and oncology markets, launching new products across the region and
increasing the market share of our existing products.
This strong performance, as well as the early fulfilment of tenders,
particularly for our oncology portfolio, more than offset foreign exchange
headwinds, predominantly in Egypt where the pound devalued by around 60% in
the first half. The timing of tenders results in revenue and operating profit
being strongly weighted towards the first half.
Generics
Generics, which supplies oral and other non‑injectable generic and specialty
products to the US retail market, performed well in the first half, with good
volume growth driving our top-line performance.
Hafrun Fridriksdottir was appointed as President of Generics during the first
half. As an experienced R&D and product development leader, Hafrun will
help further expand Hikma's product portfolio and pipeline, building on our
position as a market-leading domestic US manufacturer and supplier of generic
medicines.
Our authorised generic of sodium oxybate continues to perform well on a
revenue basis, albeit at a significantly reduced margin when compared to the
first half of 2023 due to the expected increase in royalties payable.
We are also making progress with our CMO offering and continue to pursue
contracts that will leverage the quality and capabilities of our Columbus
facility.
Outlook for full year 2024
We now expect Group revenue to grow in the range of 6% to 8%, up from previous
guidance of 4% to 6% growth, and for core operating profit to be in the range
of $700 million to $730 million, up from previous guidance of $660 million to
$700 million.
We continue to expect Injectables revenue to grow in the range of 6% to 8% and
for core operating margin to be in the range of 36% to 37%. Revenue and profit
growth will be weighted towards the second half of the year primarily due to
the timing of fulfilling CMO business, as expected.
We now expect Branded revenue to grow in the high single-digits in constant
currency, or in the range of 6% to 8% on a reported basis, up from previous
guidance of mid to high single-digits in constant currency, or low-single
digits on a reported basis. We expect reported core operating margin to be
around 25% (2023: 23.9%), versus previous guidance of slight growth in
reported core operating profit. Given the timing of tender deliveries,
particularly for our high-value oncology products, and an expected second half
weighting of operating costs, Branded revenue and core operating profit will
be weighted towards the first half.
Given the strong performance in the Generics business in the first half, we
now expect Generics revenue to grow in the range of 5% to 7%, up from previous
guidance of 3% to 5%, and core operating margin to be between 16% to 17%,
compared to previous guidance of mid-teens. We expect increased competition on
certain products and higher R&D costs in the second half.
We continue to expect Group core net finance expense to be around $91 million
and the core effective tax rate to be in the range of 22% to 23%.
We now expect Group capital expenditure to be in the range of $140 million to
$160 million.
FINANCIAL REVIEW
The financial review set out below summarises the performance of the Group and
our three main business segments: Injectables, Branded and Generics, for the
six months ended 30 June 2024.
Group
$ million H1 2024 H1 2023 Change Constant currency
change
Revenue 1,569 1,427 10% 10%
Gross profit 756 715 6% 5%
Core gross profit 756 733 3% 3%
Core gross margin 48.2% 51.4% (3.2)pp (3.5)pp
Operating profit 351 245 43% 48%
Core operating profit 402 401 0% 3%
Core operating margin 25.6% 28.1% (2.5)pp (1.8)pp
Core EBITDA 453 451 0% 3%
Core EBITDA margin 28.9% 31.6% (2.7)pp (2.1)pp
Group revenue grew 10%, with all three businesses performing well.
Core gross profit grew 3% and core gross margin was 48.2%, reflecting strong
performance in Branded, offsetting the expected reduction in Generics
profitability as a result of the increased royalty payments on our authorised
generic of sodium oxybate.
Group operating expenses were $405 million (H1 2023: $470 million). Group core
operating expenses were $354 million (H1 2023: $332 million).
Group selling, general and administrative (SG&A) expenses were $325
million (H1 2023: $304 million). Core SG&A expenses were $280 million (H1
2023: $260 million). The increase primarily reflects higher employee benefits,
legal expenses and continued investment in sales and marketing in the US,
primarily related to the launch of our specialty injectable product,
Combogesic(®).
Core and reported R&D expenses were $61 million (H1 2023: $64 million),
representing 3.9% of revenue (H1 2023: 4.5%). We expect R&D spend to be
weighted towards the second half of the year.
Other net operating expenditure was lower than the prior period at $19 million
(H1 2023: $56 million), primarily reflecting the impairment charge taken on
our Sudanese business in H1 2023. Core other net operating expense was $13
million (H1 2023: $4 million), primarily comprising foreign exchange related
costs.
Group revenue by business segment
$ million H1 2024 H1 2023(10)
Injectables(10) 609 39% 584 41%
Branded 419 27% 375 26%
Generics 528 33% 460 32%
Others(10) 13 1% 8 1%
Total 1,569 1,427
Group revenue by region
$ million H1 2024 H1 2023
North America 944 60% 848 59%
MENA 518 33% 468 33%
Europe and ROW 107 7% 111 8%
Total 1,569 1,427
Injectables
$ million H1 2024 H1 2023(10) Change Constant currency change
(revised)
Revenue 609 584 4% 5%
Gross profit 327 325 1% 1%
Core gross profit 327 328 0% 0%
Core gross margin 53.7% 56.2% (2.5)pp (2.4)pp
Operating profit 190 175 9% 10%
Core operating profit 221 221 0% 1%
Core operating margin 36.3% 37.8% (1.5)pp (1.2)pp
Injectables revenue grew 4% in the first half, with good growth in North
America and MENA and strong demand for our own products in Europe.
In North America, we are seeing growth across the base business. We continue
to benefit from our strong commercial team, broad portfolio and recent
launches, enabling us to fulfil the good market demand.
In Europe and rest of world (ROW), revenue declined due to the timing of CMO
business, which is weighted to the second half. Growth in our own products was
17%, with a strong performance across all our established and new European
markets.
In MENA, we are seeing good growth across most of our markets, with our
biosimilar franchise continuing to perform well and good demand across our
broad portfolio, supported by new launches.
Injectables core gross profit was flat with gross margin contracting due to
product mix and an increase in employee costs.
Injectables operating profit grew 9%, reflecting the impact of the $15 million
impairment charge taken on our Sudanese business in H1 2023. Injectables core
operating profit was flat, and core operating margin was 36.3%, down from
37.8% in H1 2023, due to the change in gross margin.
During H1 2024, the Injectables business launched 13 products in North
America, seven in MENA, and 19 in Europe and ROW. We submitted 43 filings to
regulatory authorities across all markets. We further developed our portfolio
through new licensing agreements.
Branded
$ million H1 2024 H1 2023 Change Constant currency change
Revenue 419 375 12% 13%
Gross profit 232 184 26% 25%
Core gross profit 232 199 17% 15%
Core gross margin 55.4% 53.1% 2.3pp 1.3pp
Operating profit 126 24 425% 470%
Core operating profit 129 104 24% 34%
Core operating margin 30.8% 27.7% 3.1pp 5.3pp
The Branded business performed very well in the first half, with revenue up
12%. This reflects strong demand across our markets, driven by our growing and
differentiated product portfolio, enhanced by the timing of tenders in certain
markets, primarily for our oncology products.
Branded reported gross profit grew 26% and core gross profit grew 17%, with
core gross margin improving by 2.3 percentage points, reflecting our ongoing
focus on oncology products and medicines used to treat chronic illnesses, and
the weighting of tenders towards the first half.
Branded reported operating profit increased significantly, reflecting the
impact of the $77 million impairment charge taken on our Sudanese business in
H1 2023. Core operating profit grew 24%, reflecting the strong gross profit
performance. This performance more than offset the negative impact of foreign
exchange related to the currency devaluation in Egypt. In constant currency,
Branded core operating profit grew 34%.
During H1 2024, the Branded business launched 19 products and submitted 23
filings to regulatory authorities. Revenue from in-licensed products
represented 28% of Branded revenue (H1 2023: 28%).
Generics
$ million H1 2024 H1 2023 Change
Revenue 528 460 15%
Gross profit 197 209 (6)%
Core gross profit 197 209 (6)%
Gross margin 37.3% 45.4% (8.1)pp
Operating profit 87 97 (10)%
Core operating profit 104 122 (15)%
Core operating margin 19.7% 26.5% (6.8)pp
Generics revenue grew 15% in the first half, due to a strong performance
across the portfolio.
The 6% decrease in Generics core and reported gross profit and the reduced
gross margin to 37.3% was primarily due to the higher royalties payable on our
authorised generic of sodium oxybate, when compared to the same period last
year. This was partially offset by a strong product mix across the base
business.
Generics core operating profit decreased primarily due to the reduction in
gross profit.
The strong core operating margin in H1, when compared to our full year
guidance of 16% to 17%, reflects the strong product mix in the first half and
low R&D spend, which we expect to ramp up in the second half of the year.
During H1 2024, we launched one product and submitted two filings to
regulatory authorities.
Other businesses
Other businesses comprise our 503B compounding business, as well as Arab
Medical Containers (AMC), a manufacturer of plastic specialised medicinal
sterile containers and International Pharmaceuticals Research Centre (IPRC),
which conducts bio-equivalency studies. Other businesses contributed revenue
of $13 million (H1 2023: $8 million(11)) with an operating loss of $3 million
(H1 2023: $5 million loss) as we continue to invest in the development of our
compounding business.
Research and development
Our investment in R&D and business development is core to our strategy and
enables us to continue expanding the Group's product portfolio.
H1 2024 submissions(12) H1 2024 approvals(12) H1 2024 launches(12)
Injectables 43 41 39
North America 9 11 13
MENA 8 8 7
Europe 26 22 19
Generics 2 1 1
Branded 23 23 19
Total 68 65 59
Net finance expense
H1 2024 H1 2023 Change Constant currency change
Finance income 4 3 33% 43%
Finance expense 68 46 48% 49%
Net finance expense 64 43 49% 49%
Core finance income 4 3 33% 43%
Core finance expense 44 44 0% (1)%
Core net finance expense 40 41 (2)% 1%
Reported net finance expense increased to $68 million primarily due to the
remeasurement of contingent consideration related to our Generics business.
Core net finance expense was $40 million, in line with H1 2023.
We continue to expect core net finance expense to be around $91 million for
the full year.
Tax
The Group incurred a reported tax expense of $59 million (H1 2023: $71
million). Excluding the tax impact of exceptional items and other adjustments,
the Group core tax expense was $77 million in H1 2024 (H1 2023: $76 million).
The core effective tax rate(13) for H1 2024 was 21.2% (H1 2023: 21.1%). We
continue to expect the Group's core effective tax rate to be between 22% to
23% for the full year.
Profit attributable to shareholders and earnings per share
Profit attributable to shareholders was $226 million (H1 2023: $131 million).
Core profit attributable to shareholders was $283 million (H1 2023: $284
million). Reported basic earnings per share was 102 cents (H1 2023: 59 cents).
Core basic earnings per share was 128 cents (H1 2023: 129 cents).
Dividend
The Board is recommending an interim dividend of 32 cents per share (H1 2023:
25 cents per share). As stated in 2023, our interim dividend is now
calculated as approximately 45% of the prior year's total dividend. We also
intend to progressively increase our total dividend, with a payout ratio in
the range of 30% to 40%, reflecting the Board's confidence in the long-term
growth prospects for the Group. The interim dividend will be paid on 20
September 2024 to eligible shareholders on the register at the close of
business on 16 August 2024.
Net cash flow, working capital and net debt
The Group generated operating cash flow of $198 million (H1 2023: $222
million). This reflects higher investment in working capital related to growth
across the Group.
Group working capital days were 251 at 30 June 2024. Compared to the position
at 31 December 2023, Group working capital days increased by 8 days from 243
days.
Cash capital expenditure was $69 million (H1 2023: $84 million). In the US,
$19 million was spent on upgrades and capacity expansion across our Cherry
Hill, Dayton, and Columbus sites. In MENA, $32 million was spent strengthening
and expanding our local manufacturing capabilities, including for general
formulations in Tunisia and Algeria, as well as finalising our two new
Injectables production sites in Algeria and Morocco. In Europe, we spent $18
million enhancing and expanding our manufacturing capabilities in Portugal and
Italy. We now expect Group capital expenditure to be around $140 million to
$160 million in 2024.
The Group's total debt was $1,276 million at 30 June 2024 (31 December 2023:
$1,191 million).
The Group's cash balance was $236 million (31 December 2023: $215 million).
The Group's net debt was $1,040 million at 30 June 2024 (31 December 2023:
$976 million)(14). We continue to have a strong balance sheet with a net debt
to core EBITDA ratio of 1.3x (31 December 2023: 1.2x).
Net assets
Net assets at 30 June 2024 were $2,300 million (31 December 2023: $2,209
million). Net current assets increased to $905 million (31 December 2023: $761
million). This was primarily driven by an increase in inventories and
receivables.
Statement of Directors' responsibilities
The directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' (IAS 34), IAS 34 as issued by the
International Accounting Standards Board (IASB), and the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority and that the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the first
six months and their impact on the condensed set of financial statements, and
a description of the principal risks and uncertainties for the remaining six
months of the financial year; and
· material related-party transactions in the first six months and any
material changes in the related-party transactions described in the last
annual report.
The maintenance and integrity of the Hikma Pharmaceuticals PLC website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that might have occurred to the interim
financial statements since they were initially presented on the website.
By order of the Board
Said Darwazah Riad Mishlawi
Executive Chairman Chief Executive Officer
7 August 2024 7 August 2024
The Board of Directors that served during all or part of the six-month period
to 30 June 2024 and their respective responsibilities can be found on the
Leadership team section of www.hikma.com (http://www.hikma.com) . This
excludes Pat Butler, who stepped down from his position as a Non-Executive
Director on 29 February 2024.
Cautionary statement
This Interim Results announcement has been prepared solely to provide
additional information to the shareholders of Hikma and should not be relied
on by any other party or for any other purpose.
Definitions
We use a number of non-IFRS measures to report and monitor the performance of
our business. Management uses these adjusted numbers internally to measure our
progress and for setting performance targets. We also present these numbers,
alongside our reported results, to external audiences to help them understand
the underlying performance of our business. Our core numbers may be calculated
differently to other companies.
Adjusted measures are not substitutable for IFRS results and should not be
considered superior to results presented in accordance with IFRS.
Core results
Reported results represent the Group's overall performance. However, these
results can include one-off or non-cash items which are excluded when
assessing the underlying performance of the Group. To provide a more complete
picture of the Group's performance to external audiences, we provide,
alongside our reported results, core results, which are a non-IFRS measure.
Our core results exclude the other adjustments and exceptional items set out
in Note 5.
Constant currency
As the majority of our business is conducted in the US, we present our results
in US dollars. For both our Branded and Injectable businesses, a proportion of
their sales are denominated in currencies other than the US dollar. In
order to illustrate the underlying performance of these businesses, we include
information on our results in constant currency.
Constant currency numbers in H1 2024 represent reported H1 2024 numbers
translated using H1 2023 exchange rates, excluding price increases in the
business resulting from the devaluation of currencies.
EBITDA
EBITDA is earnings before interest, tax, depreciation, amortisation,
impairment charges, adjusted for exceptional items and other adjustments.
EBITDA H1 2024 H1 2023
$ million
Reported operating profit 351 245
Depreciation 47 48
Amortisation 49 48
Impairment charges 6 46
Impairment on financial assets - 42
Provision against inventories - 18
Impairment charge on other current assets - 2
Cost from halted operations in Sudan - 2
Core EBITDA 453 451
Core EBITDA for the twelve months ending 30 June 2024, which is used in the
calculation of net debt to core EBITDA, was $813 million.
Working capital days
We believe Group working capital days provides a useful measure of the Group's
working capital management and liquidity. Group working capital days are
calculated as Group receivable days plus Group inventory days, less Group
payable days. Group receivable days are calculated as Group trade receivables
x 365, divided by trailing 12 months Group revenue. Group inventory days are
calculated as Group inventory x 365 divided by trailing 12 months Group
reported cost of sales. Group payable days are calculated as Group trade
payables x 365, divided by trailing 12 months Group reported cost of
sales(15).
Group net debt
We believe Group net debt is a useful measure of the strength of the Group
financial position. Group net debt includes long and short-term financial
debts (Note 12), lease liabilities, net of cash and cash equivalents (Note 9)
and restricted cash.
Group net debt Jun-24 Dec-23
$ million
Short-term financial debts (206) (150)
Short-term lease liabilities (9) (11)
Long-term financial debts (1,017) (975)
Long-term lease liabilities (44) (55)
Total debt (1,276) (1,191)
Cash 236 205
Restricted cash - 10
Net debt (1,040) (976)
Forward looking statements
This announcement contains certain statements which are, or may be deemed to
be, "forward looking statements" which are prospective in nature with respect
to Hikma's expectations and plans, strategy, management objectives, future
developments and performance, costs, revenues and other trend
information. All statements other than statements of historical fact may be
forward-looking statements. Often, but not always, forward-looking statements
can be identified by the use of forward looking words such as "intends",
"believes", "anticipates", "expects", "estimates", "forecasts", "targets",
"aims", "budget", "scheduled" or words or terms of similar substance or the
negative thereof, as well as variations of such words and phrases or
statements that certain actions, events or results "may", "could", "should",
"would", "might" or "will" be taken, occur or be achieved.
By their nature, forward looking statements are based on current expectations
and projections about future events and are therefore subject to assumptions,
risks and uncertainties that are beyond Hikma's ability to control or estimate
precisely and which could cause actual results or events to differ materially
from those expressed or implied by the forward looking statements. Where
included, such statements have been made by or on behalf of Hikma in good
faith based upon the knowledge and information available to the Directors on
the date of this announcement. Accordingly, no assurance can be given that any
particular expectation will be met and Hikma's shareholders are cautioned not
to place undue reliance on the forward-looking statements. Forward looking
statements contained in this announcement regarding past trends or activities
should not be taken as a representation that such trends or activities will
continue in the future.
Other than in accordance with its legal or regulatory obligations (including
under the Market Abuse Regulation ((EU) No. 596/2014) and the UK Listing Rules
and the Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority), Hikma does not undertake to update the forward looking statements
contained in this announcement to reflect any changes in events, conditions or
circumstances on which any such statement is based or to correct any
inaccuracies which may become apparent in such forward looking
statements. Except as expressly provided in this announcement, no forward
looking or other statements have been reviewed by the auditors of Hikma. All
subsequent oral or written forward looking statements attributable to Hikma or
any of its members, directors, officers or employees or any person acting on
their behalf are expressly qualified in their entirety by the cautionary
statement above. Past share performance cannot be relied on as a guide to
future performance. Nothing in this announcement should be construed as a
profit forecast.
Neither the content of Hikma's website nor any other website accessible by
hyperlinks from Hikma's website are incorporated in, or form part of, this
announcement.
Principal risks and uncertainties
The Group faces risks from a range of sources that could have a material
impact on our financial commitments and ability to trade in the future. The
principal risks are determined via robust assessment considering our risk
context by the Board of Directors with input from executive management. The
principal risks facing the company have not materially changed in the last six
months, and are set out in the 2023 annual report on pages 71 - 74. The Board
recognises that certain risk factors that influence the principal risks are
outside of the control of management. The Board is satisfied that the
principal risks are being managed appropriately and consistently with the
target risk appetite. The set of principal risks should not be considered as
an exhaustive list of all the risks the Group faces.
Principal risks What does the risk cover?
Industry dynamics The commercial viability of the industry and business model we operate may
change significantly as a result of geopolitical events, macroeconomic
factors, local political action, societal pressures, regulatory interventions
or changes to participants in the value chain of the industry.
Product pipeline Selecting, developing and registering new products that meet market needs and
are aligned with Hikma's strategy to provide a continuous source of future
growth.
People Developing, maintaining and adapting organisational structures, management
processes and controls, and talent attraction and retention to enable
effective delivery by the business in the face of rapid and constant internal
and external change.
Reputation Building and maintaining trusted and successful partnerships with our
stakeholders relies on developing and sustaining our reputation as one of our
most valuable assets.
Ethics and compliance Maintaining a culture underpinned by ethical decision-making, with appropriate
internal controls to ensure staff and third parties comply with our Code of
Conduct, associated policies and procedures, as well as all applicable
legislation.
Information and cyber security, technology and infrastructure Ensuring the integrity, confidentiality, availability and resilience of data,
securing information stored and/or processed internally or externally from
cyber and non-cyber threats, maintaining and developing technology systems
that enable business processes, and ensuring infrastructure supports the
organisation effectively.
Legal, regulatory and intellectual property Complying with laws and regulations, and advising on their application.
Managing litigation, governmental investigations, sanctions, contractual terms
and conditions and adapting to their changes while preserving shareholder
value, business integrity and reputation.
Inorganic growth Identifying, accurately pricing and realising expected benefits from
acquisitions or divestments, licensing, or other business development
activities.
Active pharmaceutical ingredient (API) and third-party risk management Maintaining availability of supply, quality and competitiveness of API
purchases and ensuring proper understanding and control of third-party risks.
Crisis and continuity management Developing, maintaining and adapting capabilities and processes to anticipate,
prepare for, respond and adapt to sudden disruptions and gradual change,
including natural catastrophe, economic turmoil, cyber events, operational
issues, pandemic, political crisis, and regulatory intervention.
Product quality and safety Maintaining compliance with current Good Practices for Manufacturing (cGMP),
Laboratory (cGLP), Compounding (cGCP), Distribution (cGDP) and
Pharmacovigilance (cGVP) by staff, and ensuring compliance is maintained by
all relevant third parties involved in these processes.
Financial control and reporting Effectively managing income, expenditure, assets and liabilities, liquidity,
exchange rates, tax uncertainty, debtor and associated activities, and
reporting accurately, in a timely manner and in compliance with statutory
requirements and accounting standards.
(( 1 )) Throughout this document, H1 2024 refers to the six months ended 30
June 2024 and H1 2023 refers to the six months ended 30 June 2023.
(2) Constant currency numbers in H1 2024 represent reported H1 2024 numbers
translated using H1 2023 exchange rates, excluding price increases in the
business resulting from the devaluation of currencies.
(3) Core results throughout the document are presented to show the underlying
performance of the Group, excluding exceptional items and other adjustments
set out in Note 5. Core results are a non-IFRS measure.
(4) Core EBITDA is earnings before interest, tax, depreciation, amortisation,
impairment charges, adjusted for exceptional items and other adjustments. Core
EBITDA is a non-IFRS measure, see page 13 for a reconciliation to reported
IFRS results.
(5) Group net debt is calculated as Group total debt less Group total cash.
Group net debt is a non-IFRS measure that includes long and short-term
financial debts (Note 12), lease liabilities, net of cash and cash equivalents
(Note 9) and restricted cash, if any. See page 14 for a reconciliation of
Group net debt to reported IFRS figures
(6) For the purposes of the leverage calculation, EBITDA is calculated for
trailing twelve months ended 30 June 2024. See page 13 for a reconciliation to
reported IFRS results and trailing twelve months EBITDA
(7) During H2 2023, the Group revised its Injectables operating segment.
Previously, the 503B compounding business was reported under the Injectables
segment and is now included within the Others segment. 503B compounding
business' H1 2023 revenue of $1 million and operating loss of $7 million have
therefore been reclassified to the Others segment. H1 2024 Others revenue was
$13 million (H1 2023: $8 million) with an operating loss of $3 million (H1
2023: $5 million loss).
(8) IQVIA MAT May 2024, generic injectable volumes by eaches, excluding
branded generics and Becton Dickinson
(9) IQVIA MIDAS Pharma Index MAT May-2024. Does not include hospital or tender
business
(10) During H2 2023, the Group revised its Injectables operating segment.
Previously, the 503B compounding business was reported under the Injectables
segment and is now included within the Others segment. 503B compounding
business' H1 2023 revenue of $1 million and operating loss of $7 million have
therefore been reclassified to the Others segment.
(11) During H2 2023, the Group revised its Others operating segment.
Previously, the 503B compounding business was reported under the Injectables
segment and is now included within the Others segment. 503B compounding
business' H1 2023 revenue of $1 million and operating loss of $7 million have
therefore been reclassified to the Others segment.
(12) New products submitted, approved and launched by country in H1 2024. MENA
numbers include only the five major markets (Algeria, KSA, Egypt, Morocco and
Jordan)
(13) Core effective tax rate is calculated as core tax expense as a percentage
of core profit before tax
(14) See page 14 for a reconciliation of Group net debt to reported IFRS
results
(15) Trailing 12 months Group revenue is calculated as Group revenue for the
12 months ending 30 June 2024 which equates to $3,017 million. Trailing 12
months Group reported cost of sales is calculated as Group reported cost of
sales for the 12 months ending 30 June 2024 which equates to $1,586 million
Independent review report to Hikma Pharmaceuticals PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Hikma Pharmaceuticals PLC's condensed consolidated interim
financial statements (the "interim financial statements") in the Interim
Results of Hikma Pharmaceuticals PLC for the 6 month period ended
30 June 2024 (the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 "Interim Financial Reporting" and as issued by the International
Accounting Standards Board (IASB) and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
● the Condensed consolidated interim balance sheet as at
30 June 2024;
● the Condensed consolidated interim income statement and the
Condensed consolidated interim statement of comprehensive income for the
period then ended;
● the Condensed consolidated interim statement of changes in
equity for the period then ended;
● the Condensed consolidated interim cash flow statement for the
period then ended; and
● the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Results of Hikma
Pharmaceuticals PLC have been prepared in accordance with UK adopted
International Accounting Standard 34 'Interim Financial Reporting' and as
issued by the International Accounting Standards Board (IASB) and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Interim Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the Group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the Directors
The Interim Results, including the interim financial statements, is the
responsibility of, and has been approved by the Directors. The Directors are
responsible for preparing the Interim Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Interim Results, including the
interim financial statements, the Directors are responsible for assessing the
Group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Interim Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the Company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
7 August 2024
Hikma Pharmaceuticals PLC
Condensed consolidated interim income statement
H1 2024 H1 2024 H1 2024 H1 2023 H1 2023 H1 2023
Core
Exceptional items and other adjustments
Reported results
Core
Exceptional items and other adjustments
Reported results
results
(Note 5)
results
(Note 5)
Note $m (Unaudited) $m (Unaudited) $m (Unaudited) $m (Unaudited) $m (Unaudited) $m (Unaudited)
Revenue 3 1,569 - 1,569 1,427 - 1,427
Cost of sales (813) - (813) (694) (18) (712)
Gross profit/(loss) 756 - 756 733 (18) 715
Selling, general and administrative expenses (280) (45) (325) (260) (44) (304)
Impairment loss on financial assets, net - - - (4) (42) (46)
Research and development expenses (61) - (61) (64) - (64)
Other operating expenses (14) (6) (20) (5) (52) (57)
Other operating income 1 - 1 1 - 1
Total operating expenses (354) (51) (405) (332) (138) (470)
Operating profit/(loss) 4 402 (51) 351 401 (156) 245
Finance income 4 - 4 3 - 3
Finance expense (44) (24) (68) (44) (2) (46)
Group's share of profit of joint venture 1 - 1 - - -
Profit/(loss) before tax 363 (75) 288 360 (158) 202
Tax 6 (77) 18 (59) (76) 5 (71)
Profit/(loss) for the half-year 286 (57) 229 284 (153) 131
Attributable to:
Non-controlling interests 3 - 3 - - -
Equity holders of the parent 283 (57) 226 284 (153) 131
286 (57) 229 284 (153) 131
Earnings per share (cents)
Basic 128 102 129 59
Diluted 127 101 128 59
Hikma Pharmaceuticals PLC
Condensed consolidated interim statement of comprehensive income
H1 2024 H1 2024 H1 2024 H1 2023 H1 2023 H1 2023
Core
Exceptional items and other adjustments
Reported results
Core
Exceptional items and other adjustments
Reported results
results
(Note 5)
results
(Note 5)
Note $m (Unaudited) $m (Unaudited) $m (Unaudited) $m (Unaudited) $m (Unaudited) $m (Unaudited)
Profit for the half-year 286 (57) 229 284 (153) 131
Other comprehensive expense
Items that may subsequently be reclassified to the consolidated income
statement, net of tax:
Currency translation and hyperinflation movement (41) - (41) - - -
Items that will not subsequently be reclassified to the consolidated income
statement:
Change in investments at fair value through other comprehensive income 8 (5) - (5) (5) - (5)
(FVTOCI)
Total other comprehensive income for the half-year (46) - (46) (5) - (5)
Total comprehensive income for the half-year 240 (57) 183 279 (153) 126
Attributable to:
Non-controlling interests 3 - 3 - - -
Equity holders of the parent 237 (57) 180 279 (153) 126
240 (57) 183 279 (153) 126
Hikma Pharmaceuticals PLC
Condensed consolidated interim balance sheet
30 June 31 December
2024
2023
Note $m $m
(Unaudited)
(Audited)
Non-current assets
Goodwill 383 388
Other intangible assets 711 712
Property, plant and equipment 1,094 1,096
Right-of-use assets 43 45
Investment in joint ventures 11 10
Deferred tax assets 235 226
Financial and other non-current assets 8 85 103
2,562 2,580
Current assets
Inventories 936 891
Income tax receivable 28 49
Trade and other receivables 937 824
Cash and cash equivalents 9 236 205
Other current assets 10 137 120
Assets classified as held for sale 11 11
2,285 2,100
Total assets 4,847 4,680
Current liabilities
Short-term financial debts 12 206 150
Lease liabilities 9 11
Trade and other payables 541 568
Income tax payable 84 74
Provisions 151 152
Other current liabilities 11 389 384
1,380 1,339
Net current assets 905 761
Non-current liabilities
Long-term financial debts 12 1,017 975
Lease liabilities 44 55
Deferred tax liabilities 26 25
Provisions 7 7
Other non-current liabilities 13 73 70
1,167 1,132
Total liabilities 2,547 2,471
Net assets 2,300 2,209
Equity
Share capital 40 40
Share premium 282 282
Other reserves (323) (282)
Retained earnings 2,287 2,158
Equity attributable to equity holders of the parent 2,286 2,198
Non-controlling interests 14 11
Total equity 2,300 2,209
The condensed consolidated interim financial information of Hikma
Pharmaceuticals PLC for the six-month period ended 30 June 2024 was approved
by the Board of Directors on 7 August 2024 and signed on its behalf by:
Said Darwazah
Riad Mishlawi
Executive Chairman
Chief Executive Officer
Hikma Pharmaceuticals PLC
Condensed consolidated interim statement of changes in equity
Share Share Other reserves Translation reserve related to assets held for distribution Retained earnings Equity attributable to equity shareholders of the parent Non-controlling interests Total
capital
premium
equity
Merger and revaluation reserves Translation reserve Capital redemption reserve Total other reserves
Note $m $m $m $m $m $m $m $m $m $m $m
Balance at 31 December 2022 (audited) and 1 January 2023 40 282 35 (302) 2 (265) (14) 2,092 2,135 13 2,148
Profit for the half-year - - - - - - - 131 131 - 131
Change in the fair value of investments at FVTOCI - - - - - - - (5) (5) - (5)
Total comprehensive income for the half-year - - - - - - - 126 126 - 126
Total transactions with owners, recognised directly in equity
Cost of equity-settled employee share scheme - - - - - - - 10 10 - 10
Dividends paid 7 - - - - - - - (82) (82) - (82)
Other comprehensive income accumulated in equity related to assets no longer - - - (14) - (14) 14 - - - -
held for distribution
Balance at 30 June 2023 (unaudited) 40 282 35 (316) 2 (279) - 2,146 2,189 13 2,202
Balance at 31 December 2023 (audited) and 1 January 2024 40 282 35 (319) 2 (282) - 2,158 2,198 11 2,209
Profit for the half-year - - - - - - - 226 226 3 229
Change in the fair value of investments at FVTOCI - - - - - - - (5) (5) - (5)
Currency translation and hyperinflation movement - - - (41) - (41) - - (41) - (41)
Total comprehensive income for the half-year - - - (41) - (41) - 221 180 3 183
Total transactions with owners, recognised directly in equity
Cost of equity-settled employee share scheme - - - - - - - 15 15 - 15
Purchase of own shares held in employee benefit trust (EBT) - - - - - - - (3) (3) - (3)
Dividends paid 7 - - - - - - - (104) (104) - (104)
Balance at 30 June 2024 (unaudited) 40 282 35 (360) 2 (323) - 2,287 2,286 14 2,300
Hikma Pharmaceuticals PLC
Condensed consolidated interim cash flow statement
H1 H1
2024
2023
Note $m (Unaudited) $m (Unaudited)
Cash flows from operating activities
Cash generated from operations 14 234 288
Income taxes paid (36) (67)
Income taxes received - 1
Net cash inflow from operating activities 198 222
Cash flow from investing activities
Purchase of property, plant and equipment (69) (84)
Purchase of intangible assets (39) (23)
Addition of investments at FVTOCI (2) (5)
Proceeds from disposal of investment at FVTOCI - 1
Advance payment related to acquisition - (10)
Deposit received related to asset held for sale 1 -
Payments of contingent consideration liability (1) (1)
Interest income received 4 3
Net cash outflow from investing activities (106) (119)
Cash flow from financing activities
Proceeds from issue of long-term financial debts 211 537
Repayment of long-term financial debts (148) (546)
Proceeds from short-term borrowings 253 281
Repayment of short-term borrowings (219) (243)
Repayment of lease liabilities (16) (5)
Dividends paid 7 (104) (82)
Interest and bank charges paid (38) (39)
Decrease in restricted cash 10 -
Payment to co-development and earnout payment agreement (1) (1)
Net cash outflow from financing activities (52) (98)
Net increase in cash and cash equivalents 40 5
Cash and cash equivalents at beginning of the half-year 205 270
Foreign exchange translation movements (9) (3)
Cash and cash equivalents at end of the half-year 9 236 272
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements
1. General information
Hikma Pharmaceuticals PLC is a public limited liability company incorporated
and domiciled in the United Kingdom under the Companies Act 2006. The
registered office address is 1 New Burlington Place, London W1S 2HR, UK.
The Group's principal activities are the development, manufacturing, marketing
and selling of a broad range of generic, branded generic and in-licensed
patented pharmaceutical products in solid, semi-solid, liquid and injectable
final dosage forms.
2. Basis of preparation and accounting policies
The unaudited condensed consolidated interim financial statements (financial
statements) for the six months ended 30 June 2024 have been prepared on a
going concern basis in accordance with UK-adopted International Accounting
Standard 34 'Interim Financial Reporting' (IAS 34), as issued by the
International Accounting Standards Board (IASB), and the Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 31 December 2023,
which has been prepared in accordance with:
I. UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards.
II. International Financial Reporting Standards as issued by the
International Accounting Standards Board ("IFRS Accounting Standards").
The financial information does not constitute statutory accounts as defined in
section 435 of the Companies Act 2006. A copy of the statutory accounts for
2023 has been delivered to the Registrar of Companies. The auditors' report on
those accounts was unqualified, did not draw attention to any matters by way
of emphasis and did not contain any statement under Section 498 (2) or (3) of
the Companies Act 2006. These interim financial statements have been reviewed,
not audited.
The currency used in the presentation of the accompanying financial statements
is the US dollar ($) as most of the Group's business is conducted in US
dollars.
The accounting policies adopted in the preparation of the financial statements
are consistent with those followed in the
preparation of the Group's annual consolidated financial statements for the
year ended 31 December 2023 and the adoption of the new and amended standards
set out below, with the exception of changes in estimates that are required in
determining the provision for income taxes in accordance with IAS 34 at 30
June 2024.
New standards, interpretations and amendments
The following revised Standards and Interpretations have been issued and are
effective for annual periods beginning on 1 January 2024. The Group has not
early adopted any other standard, interpretation or amendment that has been
issued but is not yet effective.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
2. Basis of preparation and accounting policies continued
New standards, interpretations and amendments continued
IAS 1 (Amendments) Classification of Liabilities as Current or Non-Current
IAS 1 (Amendments) Non-current Liabilities with Covenants
IAS 7 and IFRS 7 (Amendments) Supplier Finance Arrangements
IFRS 16 (Amendments) Lease Liability in a Sale and Leaseback
These amendments had no significant impact on the condensed consolidated
interim financial statements of the Group but may impact the accounting for
future transactions and arrangements.
Going concern
The Directors have considered the going concern position of the Group at 30
June 2024. The Directors believe that the Group is well diversified due to its
geographic spread, product diversity and large customer and supplier base. The
Group's business activity, together with the factors likely to affect its
future development, performance and position are set out in this Interim
Results. The Interim Results also includes a summary of the financial
position, cash flow and borrowing facilities. At 30 June 2024 the Group had
undrawn long term committed banking facilities of $1,082 million. The Group's
total debt at 30 June 2024 was $1,276 million while the Group's cash and cash
equivalents at 30 June 2024 was $236 million making the net debt(1) $1,040
million. The Group's net debt to trailing core EBITDA of $813 million ratio
was 1.3x at 30 June 2024 (31 December 2023: 1.2x). Taking into account the
Group's current position and its principal risks for a period of at least 12
months from the date of this results announcement, a going concern assessment
has been prepared using realistic scenarios, and applying a severe but
plausible downside considering the principal risks facing the business. This
assessment demonstrated sufficient liquidity headroom. Therefore, the
Directors believe that the Group is adequately placed to manage its business
and financing risks successfully, despite the current uncertain economic and
political outlook. Having reassessed the principal risks, the Directors have
concluded it is appropriate to adopt the going concern basis of accounting in
preparing the interim financial information and there is no material
uncertainty requiring disclosure in this regard.
Financial covenants are suspended while the Group retains its investment grade
status from two rating agencies(2). As of 30 June 2024, the Group's investment
grade rating was affirmed by S&P and Fitch.
1. Net debt includes long and short-term financial debts and lease
liabilities, net of cash and cash equivalents and restricted cash, (if any).
Net debt excludes co-development and earnout payments, acquired contingent
liabilities and contingent consideration.
2. Rating agencies: means each of Fitch, Moody's and S&P or any of their
affiliates or successors
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
3. Revenue from contracts with customers
Business and geographical markets
The following table provides an analysis of the Group's reported revenue by
segment and geographical market, irrespective of the origin of the
goods/services:
Injectables Generics Branded Others Total
H1 2024 (unaudited) $m $m $m $m $m
North America 412 528 - 4 944
Middle East and North Africa 99 - 413 6 518
Europe and Rest of the World 92 - 6 3 101
United Kingdom 6 - - - 6
609 528 419 13 1,569
Injectables(1) Generics Branded Others(1) Total
H1 2023 (unaudited) (revised) $m $m $m $m $m
North America 387 460 - 1 848
Middle East and North Africa 94 - 370 4 468
Europe and Rest of the World 98 - 5 3 106
United Kingdom 5 - - - 5
584 460 375 8 1,427
1. During H2 2023, the Group revised its Injectables operating segment.
Previously, the 503B compounding business was reported under the Injectables
segment and is now included within the Others segment. 503B compounding
business H1 2023 revenue of $1 million has therefore been reclassified to the
Others segment.
The top selling markets are shown below:
H1 2024 H1 2023
$m $m
(Unaudited) (Unaudited)
United States 929 837
Saudi Arabia 145 146
Algeria 129 111
1,203 1,094
In H1 2024, revenue arising from the Generics and Injectables segments
included sales the Group made to two wholesalers in the US, each accounting
for equal to or greater than 10% of the Group's revenue: $200 million (13% of
Group revenue) and $178 million (11% of Group revenue). In H1 2023, revenue
included sales made to two wholesalers of $187 million (13% of Group revenue)
and $175 million (12% of Group revenue).
4. Business segments
For management reporting purposes, the Group is organised into three principal
operating divisions - Injectables, Generics and Branded. These divisions
are the basis on which the Group reports its segmental information.
Core operating profit, defined as 'segment result', is the principal measure
used in the decision-making and resource allocation process of the chief
operating decision maker, who is the Group's Chief Executive Officer.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
4. Business segments continued
Information regarding the Group's operating segments is reported below:
Injectables H1 2024 H1 2024 H1 2024 Reported H1 2023 H1 2023 H1 2023 Reported
Core
Exceptional items and other adjustments
results
Core
Exceptional items and other adjustments
results
results
(note 5)
$m (Unaudited)
results
(note 5)
(revised)(2)
$m
$m
(revised)(2)
$m
$m (Unaudited)
(Unaudited)
(Unaudited)
$m
(Unaudited)
(Unaudited)
Revenue 609 - 609 584 - 584
Cost of sales (282) - (282) (256) (3) (259)
Gross profit/(loss) 327 - 327 328 (3) 325
Total operating expenses (106) (31) (137) (107) (43) (150)
Segment result 221 (31) 190 221 (46) 175
Generics H1 2024 H1 2024 H1 2024 Reported H1 2023 H1 2023 H1 2023 Reported
Core
Exceptional items and other adjustments
results
Core
Exceptional items and other adjustments
results
results
(note 5)
$m (Unaudited)
results
(note 5)
$m (Unaudited)
$m
$m
$m
$m
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenue 528 - 528 460 - 460
Cost of sales (331) - (331) (251) - (251)
Gross profit 197 - 197 209 - 209
Total operating expenses (93) (17) (110) (87) (25) (112)
Segment result 104 (17) 87 122 (25) 97
Branded H1 2024 H1 2024 H1 2024 Reported H1 2023 H1 2023 H1 2023 Reported
Core
Exceptional items and other adjustments
results
Core
Exceptional items and other adjustments
results
results
(note 5)
$m (Unaudited)
results
(note 5)
$m (Unaudited)
$m
$m
$m
$m
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Revenue 419 - 419 375 - 375
Cost of sales (187) - (187) (176) (15) (191)
Gross profit/(loss) 232 - 232 199 (15) 184
Total operating expenses (103) (3) (106) (95) (65) (160)
Segment result 129 (3) 126 104 (80) 24
Others(1) H1 2024 H1 2024 H1 2024 Reported H1 2023 H1 2023 H1 2023 Reported
Core
Exceptional items and other adjustments
results
Core
Exceptional items and other adjustments
results
results
(note 5)
$m (Unaudited)
results
(note 5)
(revised)(2)
$m
$m
(revised)(2)
$m
$m (Unaudited)
(Unaudited)
(Unaudited)
$m
(Unaudited)
(Unaudited)
Revenue 13 - 13 8 - 8
Cost of sales (13) - (13) (11) - (11)
Gross profit - - - (3) - (3)
Total operating expenses (3) - (3) (2) - (2)
Segment result (3) - (3) (5) - (5)
1. Others mainly comprises Arab Medical Containers LLC, International
Pharmaceutical Research Center LLC and the 503B compounding business.
2. During H2 2023, the Group revised its Injectables operating segment.
Previously, the 503B compounding business was reported under the Injectables
segment and is now included within the Others segment. The 503B compounding
business H1 2023 revenue of $1 million and operating loss of $7 million have
therefore been reclassified to the Others segment.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
4. Business segments continued
Group H1 2024 H1 2024 H1 2024 Reported H1 2023 H1 2023 H1 2023 Reported
Core
Exceptional items and other adjustments
results
Core
Exceptional items and other adjustments
results
results
(note 5)
$m (Unaudited)
results
(note 5)
$m (Unaudited)
$m
$m (Unaudited)
$m
$m (Unaudited)
(Unaudited)
(Unaudited)
Segments' results 451 (51) 400 442 (151) 291
Unallocated expenses(1) (49) - (49) (41) (5) (46)
Operating profit/(loss) 402 (51) 351 401 (156) 245
Finance income 4 - 4 3 - 3
Finance expense (44) (24) (68) (44) (2) (46)
Group's share of profit of joint venture 1 - 1 - - -
Profit/(loss) before tax 363 (75) 288 360 (158) 202
Tax (77) 18 (59) (76) 5 (71)
Profit/(loss) for the half-year 286 (57) 229 284 (153) 131
Attributable to:
Non-controlling interests 3 - 3 - - -
Equity holders of the parent 283 (57) 226 284 (153) 131
286 (57) 229 284 (153) 131
1. Unallocated corporate expenses mainly comprise employee costs, third-party
professional fees and IT expenses.
5. Exceptional items and other adjustments
Exceptional items and other adjustments are disclosed separately in the
condensed consolidated income statement to assist in the understanding of the
Group's core performance.
H1 2024 Injectables Generics Branded Unallocated Total
$m $m $m $m $m
Exceptional items and other adjustments
Intangible assets amortisation other than software SG&A (25) (17) (3) - (45)
Impairment charge on property, plant and equipment and intangible assets Other operating (6) - - - (6)
expenses
Remeasurement of contingent consideration and other financial liability Finance expense - - - (23) (23)
Unwinding of contingent consideration and other financial liability Finance expense - - - (1) (1)
Exceptional items and other adjustments included in profit before tax (31) (17) (3) (24) (75)
Tax effect Tax 18
Impact on profit for the half-year (57)
- Intangible assets amortisation other than software of $45 million.
- Impairment charge on property, plant and equipment and intangible assets:
$6 million of impairment charge mainly relates to machinery and equipment
associated with discontinued projects.
- Remeasurement of contingent consideration and other financial liability:
$23 million primarily represents the finance expense resulting from the
valuation of the liabilities associated with the future contingent payments in
respect of contingent consideration recognised through business combinations.
- Unwinding of contingent consideration and other financial liability: $1
million primarily represents the finance expense resulting from the unwinding
of contingent consideration recognised through business combinations.
Tax effect
- The tax effect represents the tax effect on pre-tax exceptional items and
other adjustments which is calculated based on the applicable tax rate in each
jurisdiction.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
5. Exceptional items and other adjustments continued
H1 2023 Injectables Generics Branded Unallocated Total
$m $m $m $m $m
Exceptional items and other adjustments
Impairment and cost in relation to halted operations in Sudan -1 (15) - (77) - (92)
Intangible assets amortisation other than software SG&A (23) (17) (3) - (43)
Impairment charges Other operating (8) (8) - (5) (21)
expenses
Unwinding of contingent consideration and other financial liability Finance expense - - - (2) (2)
Exceptional items and other adjustments included in profit before tax (46) (25) (80) (7) (158)
Tax effect Tax 5
Impact on profit for the half-year (153)
1. The impact on the income statement line items is shown below.
- Impairment and costs in relation to halted operations in Sudan: In April
2023, violent conflict erupted in the Sudanese capital of Khartoum. The
conflict subsequently escalated in other areas of the country. The Group
evaluated the effect on the carrying values of the Group's assets, and as a
consequence, a loss of $90m was recognised to reflect the fall in the
recoverable amount of the assets listed below. A further $2 million of
employee benefits and other expenses from the halted operations was classified
as exceptional items.
Injectables Generics Branded Unallocated Total
$m $m $m $m $m
Provision against inventory Cost of sales (3) - (15) - (18)
Impairment charge on financial assets Net impairment loss on financial assets (12) - (30) - (42)
Impairment charge on intangible assets Other operating expenses - - (3) - (3)
Impairment charge on property, plant and equipment Other operating expenses - - (25) - (25)
Impairment charge on other current assets Other operating expenses - - (2) - (2)
Cost from halted operations in Sudan SG&A - - (1) - (1)
Cost from halted operations in Sudan Other operating expenses - - (1) - (1)
(15) - (77) - (92)
- Intangible assets amortisation other than software of $43 million.
- Impairment charges: mainly comprise $14 million in relation to product
related intangible assets and marketing rights as a result of the decline in
performance and forecasted profitability as well as the termination of a
business development contract, in addition to $5 million related to software.
- Unwinding of contingent consideration and other financial liability: $2
million finance expense represents the expense resulting from the unwinding of
contingent consideration recognised through business combinations and the
financial liability in relation to the co-development earnout payment
agreement.
Tax effect
The tax effect represents the tax effect on pre-tax exceptional items and
other adjustments which is calculated based on the applicable tax rate in each
jurisdiction.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
6. Tax
The Group incurred a tax expense of $59 million (H1 2023: $71 million). The
reported effective tax rate for H1 2024 is 20.5% (H1 2023: 35.1%),
representing the best estimate of the average annual effective tax rate
expected for the full year on a legal entity basis, applied to the pre-tax
income for H1 2024 and adjusted for the tax effect of any discrete items
recorded in the same period.
The prior year reported effective tax rate for the Group was higher than the
same period this year primarily as a result of the impairment charge in
relation to the situation in Sudan.
The application of tax law and practice is subject to some uncertainty and
amounts are provided where the likelihood of a cash outflow is probable.
Global minimum tax
The Group is within the scope of the OECD Pillar Two model rules.
Under the legislation, the Group is liable to pay a top-up tax for the
difference between its Global Base Erosion (GloBE) effective tax rate per
jurisdiction and the 15% minimum rate.
7. Dividends
H1 2024 H1 2023
$m $m
(Unaudited) (Unaudited)
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2023 of 47 cents (2022: 37 104 82
cents) per share
104 82
The proposed interim dividend for H1 2024 is 32 cents (H1 2023: 25
cents) per share.
The proposed interim dividend will be paid on 20 September 2024 to eligible
shareholders on the register at the close of business on 16 August 2024 and
has not been included as a liability in these condensed consolidated interim
financial statements.
Based on the number of shares in free issue at 30 June 2024 of 221,747,575 the
total proposed interim dividend amount is $71 million.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
8. Financial and other non-current assets
30 June 31 December
2024
2023
$m $m
(Unaudited) (Audited)
Investments at FVTOCI 52 55
Advance payment related to non-financial assets 19 20
Restricted cash - 10
Other financial assets 14 18
85 103
Investments at FVTOCI mainly include venture capital investments which are not
held for trading and which the Group irrevocably designated as measured at
fair value through other comprehensive income.
During the period, the Group increased its investment in two existing ventures
by $2 million.
The total portfolio as at 30 June 2024 includes two investments in listed
companies with a readily determinable fair value that falls under level 1
valuation (Note 16), their values are measured based on quoted prices in
active markets. The other investments are unlisted shares without readily
determinable fair values that fall under level 3 valuation (Note 16). The fair
value is estimated by management based on the cost of investment and adjusted
as necessary for impairment and revaluations with reference to relevant
available information and recent financing rounds.
During the period, the total change in fair value was a net loss of $5 million
(H1 2023: net loss of $5 million) recognised in other comprehensive income.
Advance payment related to non-financial assets represents cash paid in
advance that will be mainly utilised against the future acquisition of product
licenses, materials or finished products.
Restricted cash balance as at 31 December 2023 represents the cash margin on a
long-term loan.
Other financial assets balance at 30 June 2024 and 31 December 2023 mainly
represented long-term receivables and a sublease arrangement in the US.
9. Cash and cash equivalents
30 June 31 December
2024
2023
$m $m
(Unaudited) (Audited)
Cash at banks and on hand(1) 133 118
Time deposits 103 86
Money market deposits - 1
236 205
1. As at 30 June 2024, cash at banks includes $53 million placed in interest
bearing accounts (31 December 2023: $56 million)
Cash and cash equivalents include highly liquid investments with maturities of
three months or less which are convertible to known amounts of cash and are
subject to insignificant risk of changes in value.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
10. Other current assets
30 June 31 December
2024
2023
$m $m
(Unaudited) (Audited)
Prepayments 81 72
Investment at FVTPL 24 24
Others 32 24
137 120
Investments at FVTPL comprise a portfolio of debt instruments that are managed by an asset manager and which the Group designated as measured at fair value through profit and loss. These assets are classified as level 1 as they are based on quoted prices in active markets (Note 16).
Others balances mainly represent compensation due from suppliers in relation
to inventory price adjustments.
11. Other current liabilities
30 June 31 December
2024
2023
$m $m
(Unaudited) (Audited)
Contract and refund liabilities 182 179
Co-development and earnout payment (Note 13 and 16) - 1
Acquired contingent liability (Note 13) 18 13
Contingent consideration (Note 13 and 16) 33 25
Indirect rebates and other allowances 138 145
Others 18 21
389 384
Contract and refund liabilities: the Group allows customers to return products
within a specified period prior to and subsequent to the expiration date. In
addition, free goods are issued to customers as sale incentives, reimbursement
of agreed upon expenses incurred by the customer or as compensation for
expired or returned goods.
Indirect rebates and other allowances: mainly represent rebates granted to
healthcare authorities and certain indirect customers under contractual
arrangements.
12. Financial debts
Short-term financial debts
30 June 31 December
2024
2023
$m $m
(Unaudited) (Audited)
Bank overdrafts 4 2
Import and export financing(1) 72 44
Short-term loans 3 -
Current portion of long-term loans 127 104
206 150
1. Import and export financing represents short-term financing for the
ordinary trading activities of the Group.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
12. Financial debts continued
Long-term financial debts
30 June 31 December
2024
2023
$m $m
(Unaudited) (Audited)
Long-term loans 646 582
Long-term borrowings (Eurobond) 498 497
1,144 1,079
Less: current portion of long-term loans (127) (104)
Long-term financial loans 1,017 975
Breakdown by maturity:
Within one year 127 104
In the second year 618 604
In the third year 104 100
In the fourth year 97 208
In the fifth year 196 59
In the sixth year 2 4
1,144 1,079
The loans are held at amortised cost.
Major loan arrangements include:
a) $1,150 million syndicated revolving credit facility that matures on 04
January 2029. At 30 June 2024, the facility had an outstanding balance of $100
million (31 December 2023: $nil) and a fair value of $100 million (31 December
2023: $nil) and an unutilised amount of $1,050 million (31 December 2023:
$1,150 million). The facility can be used for general corporate purposes.
b) A $500 million 3.25%, five-year Eurobond with a rating of BBB- (S&P
& Fitch) that matures on 9 July 2025. At 30 June 2024, the bond had a
carrying value of $498 million (31 December 2023: $497 million) and a fair
value of $485 million (31 December 2023: $481 million). The proceeds were used
for general corporate purposes.
c) A $400 million five-year syndicated loan facility that matures on 13
October 2027. At 30 June 2024, the facility had an outstanding balance of $187
million (31 December 2023: $315 million) and a fair value of $187 million (31
December 2023: $315 million). The proceeds were used for general corporate
purposes.
d) A $200 million eight-year loan facility from the International Finance
Corporation and Managed Co-lending Portfolio program that matures on 15
September 2028. At 30 June 2024, the facility had an outstanding balance of
$200 million (31 December 2023: $100 million) and a fair value of $200 million
(31 December 2023: $100 million). The proceeds were used for general corporate
purposes.
e) A $150 million ten-year loan facility from the International Finance
Corporation that matures on 15 December 2027. At 30 June 2024, the facility
had an outstanding balance of $75 million (31 December 2023: $86 million) and
a fair value of $69 million (31 December 2023: $80 million). The proceeds were
used for general corporate purposes.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
12. Financial debts continued
Long-term financial debts continued
At 30 June 2024, the Group is in full compliance with debt covenants. The
carrying value of long-term debts that contain covenants is immaterial as at
the reporting period. The covenants that are required to be complied with
after the end of the current interim period do not affect the classification
of the related borrowings as current or non-current at the end of the current
interim period. Therefore, all these borrowings remain classified as
non-current liabilities.
13. Other non-current liabilities
30 June 31 December
2024
2023
$m $m
(Unaudited) (Audited)
Contingent consideration (Note 11 and 16) 31 16
Acquired contingent liability (Note 11) 41 54
Others 1 -
73 70
Contingent consideration and acquired contingent liabilities represent
contractual liabilities to make payments to third parties in the form of
milestone payments that depend on the achievement of certain US FDA approval
milestones; and payments based on future sales of certain products. These
liabilities were recognised as part of the Columbus business acquisition in
2016. The current portion of these liabilities are recognised in other current
liabilities (Note 11).
The contingent consideration liability is accounted for as a financial
liability at fair value under IFRS 9 (Note 16).
The acquired contingent liability was recognised as part of the Columbus
business acquisition in 2016. On acquisition, the contingent liability was
recognised at fair value under IFRS 3 'Business Combinations' and it is
subsequently measured at the higher of the amount that would be recognised
under IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' and
the amount initially recognised less any settlements made in respect of the
liability.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
14. Cash generated from operating activities
H1 H1
2024
2023
$m $m
(Unaudited) (Unaudited)
Profit before tax 288 202
Adjustments for depreciation, amortisation and impairment charges of:
Property, plant and equipment 47 68
Intangible assets 50 69
Right-of-use of assets 5 5
Cost of equity-settled employee share scheme 15 10
Finance income (4) (3)
Finance expense 68 46
Foreign exchange loss and net monetary hyperinflation impact 14 6
Gain on termination of lease (1)
Group's share of profit of joint venture (1) -
Changes in working capital:
Change in trade and other receivables (130) (75)
Change in other current assets (19) (20)
Change in inventories (66) (86)
Change in trade and other payables (24) 32
Change in other current liabilities 3 37
Change in provisions 1 (1)
Change in other non-current liabilities (13) (5)
Change in other non-current assets 1 3
Cash flow from operating activities 234 288
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
15. Reconciliation of movement in net debt
H1 H1
2024
2023
$m $m
(Unaudited) (Unaudited)
Interest-bearing loans and borrowings (Note 12)
Balance at 1 January 1,125 1,213
Proceeds from issue of long-term financial debts 211 537
Proceeds from issue of short-term financial debts 253 281
Repayment of long-term financial debts (148) (546)
Repayment of short-term financial debts (219) (243)
Amortisation of upfront fees 2 1
Foreign exchange translation movements (1) -
Balance at 30 June 1,223 1,243
Lease liabilities
Balance at 1 January 66 70
Additions 4 4
Adjustments (1) -
Repayment of lease liabilities (16) (5)
Balance at 30 June 53 69
Total Debt 1,276 1,312
Cash and cash equivalents (Note 9) (236) (272)
Net debt(1) 1,040 1,040
1. Net debt includes long and short-term financial debts and lease
liabilities, net of cash and cash equivalents. Net debt excludes
co-development and earnout payments, acquired contingent liabilities and
contingent consideration.
16. Fair value of financial assets and liabilities
The fair value of financial assets and liabilities is included at the amount
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale.
The carrying value of the following financial assets/liabilities are not
significantly different from their fair values, as explained below:
· Cash at bank and on hand and time deposits - due to the short-term
maturities of these financial instruments and given that they generally have
negligible credit risk, management considers the carrying amounts to be not
significantly different from their fair values
· Restricted cash (Note 8) - the fair value of restricted cash is not
considered to be significantly different from the carrying value
· Other financial assets (Note 8) - mainly represent long-term
receivables carried at amortised cost, of which the fair value is estimated
not to be significantly different from the respective carrying amounts
· Receivables and payables - the fair values of receivables and
payables are estimated to not be significantly different from the respective
carrying amounts
· Short-term loans and overdrafts approximate to their fair value
because of the short maturity of these instruments
· Long-term loans - loans with variable rates are re-priced in response
to any changes in market rates and so management considers their carrying
values to be not significantly different from their fair values
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
16. Fair value of financial assets and liabilities continued
Loans with fixed rates relate mainly to:
· $500 million 3.25% five-year Eurobond with a carrying value of $498
million at 30 June 2024 and fair value of $485 million accounted for at
amortised cost. The fair value is determined with reference to a quoted price
in an active market as at the balance sheet date (a level 1 fair value)
· A ten-year $150 million loan from the International Finance
Corporation with an outstanding balance of $75 million at 30 June 2024 and a
fair value of $69 million. Fair value is estimated by discounting future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities of
such loans (a level 2 fair value)
Management classifies items that are recognised at fair value based on the
level of the inputs used in their fair value determination as described below:
· Level 1: Quoted prices in active markets for identical assets or
liabilities
· Level 2: Inputs that are observable for the asset or liability
· Level 3: Inputs that are not based on observable market data
The following financial assets/liabilities are presented at their fair value:
Fair value measurements Level 1 Level 2 Level 3 Total
At 30 June 2024 (unaudited)
Financial Assets
Investments at FVTPL (Note 10) 24 - - 24
Investments in listed companies at FVTOCI (Note 8) 1 - - 1
Investments in unlisted shares at FVTOCI (Note 8) - - 51 51
Total financial assets 25 - 51 76
Financial Liabilities
Contingent consideration liability (Note 11 and 13) - - 64 64
Total financial liabilities - - 64 64
Fair value measurements Level1 Level2 Level3 Total
At 31 December 2023 (audited)
Financial Assets
Investments at FVTPL (Note 10) 24 - - 24
Money market deposit (Note 9) 1 - - 1
Investments in listed shares at FVTOCI (Note 8) 2 - - 2
Investments in unlisted shares at FVTOCI (Note 8) - - 53 53
Total financial assets 27 - 53 80
Financial Liabilities
Co-development and earnout payment liabilities (Note 11 and 13) - - 1 1
Contingent consideration liability (Note 11 and 13) - - 41 41
Total financial liabilities - - 42 42
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
16. Fair value of financial assets and liabilities continued
The following table presents the changes in Level 3 items for H1 2024, and the
year ended 31 December 2023:
Financial Financial
asset
liability
$m $m
Balance at 1 January 2023 (audited) 38 45
Settled - (8)
Remeasurement of contingent consideration and other financial liability - 2
recognised in finance expense
Unwinding of contingent consideration and other financial liability recognised - 3
in finance expense
Change in fair value of investments at FVTOCI (Note 8) (10) -
Additions of investments at FVTOCI (Note 8) 27 -
Sale of investment at FVTOCI (Note 8) (2) -
Balance at 31 December 2023 and 1 January 2024 (audited) 53 42
Settled - (2)
Remeasurement of contingent consideration and other financial liability - 23
recognised in finance expense (Note 5, 11 and 13)
Unwinding of contingent consideration and other financial liability recognised - 1
in finance expense (Note 5, 11 and 13)
Change in fair value of investments at FVTOCI (Note 8) (4) -
Additions of investments at FVTOCI (Note 8) 2 -
Balance at 30 June 2024 (unaudited) 51 64
17. Related party balances and transactions
No significant transactions between the Group and its associates and other
related parties were undertaken during the half-year. Any transactions between
the Company and its subsidiaries have been eliminated on consolidation.
18. Contingent liabilities
Standby letters of credit and letters of guarantees
A contingent liability existed at the balance sheet date in respect of standby
letters of credit and letters of guarantees totalling $45 million (31 December
2023: $55 million) arising in the normal course of business. No provision for
these liabilities has been made in these financial statements.
A contingent liability existed at the balance sheet date for standby letters
of credit totalling $14 million (31 December 2023: $14 million) for potential
stamp duty obligations that may arise from the repayment of loans by
intercompany guarantors. It is not probable that the repayment will be made by
the intercompany guarantors.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
18. Contingent liabilities continued
Legal proceedings
The Group is involved in a number of legal proceedings in the ordinary course
of its business, including actual or threatened litigation and actual or
potential government investigations relating to employment matters, product
liability, commercial disputes, pricing, sales and marketing practices,
infringement of IP rights, the validity of certain patents and competition
laws.
Most of the claims involve highly complex issues. Often these issues are
subject to substantial uncertainties and, therefore, the probability of a loss
being sustained and/or an estimate of the amount of any loss is difficult to
ascertain. It is the Group's policy to provide for amounts related to these
legal matters if it is probable that a liability has been incurred and an
amount is reasonably estimable.
In the proceedings noted herein, the Group currently believes it has
meritorious defences and intends to vigorously defend itself. From time to
time, however, the Group may settle or otherwise resolve these matters on
terms and conditions that it believes to be in its best interest. Litigation
outcomes and contingencies are unpredictable and excessive verdicts can
occur. Any legal proceeding, regardless of the merits, might result in
substantial costs to defend or settle or otherwise negatively affect our
business.
- In Re Generic Pharmaceuticals Pricing Antitrust Litigation. Starting
in 2016, more than 30 complaints have been filed against Group entities in the
United States on behalf of putative classes of direct and indirect purchasers
of generic drug products, as well as several individual direct action retailer
and third-party payor plaintiffs. These complaints allege that more than forty
generic pharmaceutical defendants, including the Group entities, engaged in
conspiracies to fix, increase, maintain and/or stabilise the prices and market
shares of certain generic drug products during the periods of approximately
2010 and 2016. The plaintiffs seek unspecified treble monetary damages, which
can be significantly higher than the profits Hikma made on the alleged drug
products, and equitable injunctive relief under federal and state antitrust
and consumer protection laws. The lawsuits have been consolidated in a
multidistrict litigation (MDL) court in the United States District Court for
the Eastern District of Pennsylvania (In re Generic Pharmaceuticals Pricing
Antitrust Litigation, No. 2724, (E.D. Pa.)). At this point in the proceedings,
the Group does not believe sufficient evidence exists to make a reasonable
estimate of any potential liability.
- Xyrem® (Sodium Oxybate) Antitrust Litigation. Starting in June 2020,
more than 20 complaints have been filed in the United States on behalf of both
individual plaintiffs and putative classes of direct and indirect purchasers,
as well as third party payors, of Xyrem® against certain Group entities, Jazz
Pharmaceuticals PLC, and other defendants. These complaints allege that Jazz
and its subsidiaries entered into unlawful "pay-for-delay" anticompetitive
reverse payment agreements with Hikma and other defendants in settling patent
infringement lawsuits over Xyrem® and delaying generic competition to
Xyrem®. The plaintiffs in these lawsuits seek treble monetary damages, which
can be significantly higher than the profits Hikma makes from selling the
generic version of Xyrem®, and equitable injunctive relief under federal and
state antitrust and consumer protection laws. Currently, most of these cases
have been consolidated for pretrial purposes in a multidistrict litigation
("MDL") court in the United States District Court for the Northern District of
California (In re: Xyrem (Sodium Oxybate) Antitrust Litigation, No.2966, (N.D.
Cal.)). A jury trial involving most of the MDL plaintiffs has been scheduled
to start on October 28, 2024 in California. Hikma was also named as a
defendant in a substantially similar action filed by Aetna Inc. in California
state court (Aetna Inc. v. Jazz Pharms., Inc. et al, No. 22 CV 010951 (Cal.
Super. Ct.)). The Aetna matter is in an early stage and does not yet have a
trial date. At this point, the Group does not believe sufficient evidence
exists to make a reasonable estimate of any potential liability.
Hikma Pharmaceuticals PLC
Notes to the condensed consolidated interim financial statements continued
18. Contingent liabilities continued
Legal proceedings continued
- Amarin Pharma Inc. v. Hikma Pharmaceuticals PLC. In November 2020,
Amarin Pharmaceuticals filed a patent infringement lawsuit against certain
Group entities in the United States District Court for the District of
Delaware (No. 20-cv-1630) alleging that Hikma's sales, distribution and
marketing of its generic icosapent ethyl product infringe three Amarin patents
that describe certain methods of using icosapent ethyl. Amarin sought an
injunction barring Hikma from selling its generic product as well as
unspecified damages. Hikma's product is not approved for the alleged patented
methods but rather is approved only for a different indication not covered by
any valid patents. In January 2022 the district court dismissed the lawsuit,
and Amarin appealed the court's ruling to the United States Court of Appeals
for the Federal Circuit. On June 25, 2024, the Federal Circuit reversed the
district court's decision, held that Amarin has plausibly pleaded a potential
claim for induced infringement, and remanded the case for further proceedings
at the district court. Hikma intends to appeal this panel decision for
reconsideration en banc by the Federal Circuit. At this point, the Group
does not believe sufficient evidence exists to make a reasonable estimate of
any potential liability.
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