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Letter from the Chairman

Building for the future

We have a long history of improving lives by providing a reliable supply of high-quality, affordable medicines to doctors and patients. This was our founder’s vision and I am pleased to be carrying this on today. To achieve this in a fast-changing world, we need to be extremely competitive, agile and entrepreneurial.

A year of transformation

2016 was a year of transformation as we re-balanced and strengthened our business to position ourselves for future growth. As a result of these actions, I am pleased to say that our business has never been in  better shape strategically. Despite some challenging trading conditions in 2016, we grew by 35% to reach revenue of around $2.0 billion.

We have a clear strategy for growth, which centres on optimising our current portfolio, developing our people, deepening our investment in product development, expanding our manufacturing capabilities and looking for new M&A opportunities. As a well-diversified organisation, we are positioned to capture significant new opportunities and enter new markets, while continuing to grow in our traditional regions, the US and the MENA.

Strategic partnerships and M&A

We started the year with the completion of the Roxane Laboratories acquisition (now West-Ward Columbus), our largest and most significant acquisition to date, establishing us as a top ten US generics manufacturer. The integration of this acquisition and the successful ANDA filing for generic Advair were two of the key achievements of 2016.

In addition to this acquisition, we formed new strategic partnerships and expanded our relationship with some of our existing partners. This included broadening our agreement with Basilea Pharmaceutica International Ltd to be their exclusive licensing, supply and distribution partner in the MENA for their anti-infective Cresemba®. We also strengthened our partnership with Vectura with the signing of a US development and licence agreement for a generic long acting beta-agonist (LABA) for the treatment of asthma and COPD delivered using Vectura’s proprietary dry powder inhalation technology and device.

In 2016, we also made investments through our venture capital arm, Hikma Ventures, in Propeller Health, the leading digital solution for respiratory medicine, and in Chrono Therapeutics for their wearable transdermal smoking cessation device.

These types of partnerships and selective investments in innovative new technologies, in addition to strategic M&A, will remain vital to the business as we move forward.

Strengthening our portfolio

Across the Group, we have continued to optimise our product portfolio, prioritising products with the greatest promise and rationalising those that have become less attractive. New product introductions have also enhanced our portfolio in 2016, as we launched more than 200 products in different dosage forms and strengths globally, including the re-introduction of the products that came with our acquisition of Bedford Laboratories in 2014.

We have large and exciting pipelines for all of our businesses, with approximately 1,000 products in different dosage forms and strengths pending regulatory approval and around 400 in our development pipeline globally. It is imperative that we continue to invest in pipeline replenishment to underpin sustainable long-term growth and the investments we have been making in R&D support this. The development of generic Advair, which we hope will be approved in 2017, is an excellent example of our strategic focus on differentiated products.

Adding capacity

With strong demand for our currently marketed products and a sizeable pipeline, we are investing to ensure we have the capacity to continue delivering as we grow.
In particular, we have significantly increased our sterile injectables capacity, transferring high-quality machinery and equipment from the Bedford acquisition to our various sites in Portugal, Germany and the US.

This investment will enable us to quickly and efficiently execute our medium to long-term product launch programme and expand across all of our markets.

Driving better collaboration and efficiencies

We made good strides in 2016 to improve our operating processes and systems so we can do things better and faster. This includes the transfer of a number of members of our management team from across our geographies to our Group headquarters in London. This will enable greater collaboration between our businesses, as well as improving the speed and efficiency of decision making.

Across all of our markets we are focusing on efficiency. In HR and IT this has meant the introduction of new communications and management systems designed to improve connectivity and collaboration. At our 29 manufacturing facilities in 11 countries around the world, we are seeking to drive continuous manufacturing efficiencies while maintaining quality. Our sales teams have been effectively improving resource deployment and increasing productivity, enabling us to better and more cost-effectively meet the needs of doctors and patients.

Creating value for shareholders

We remain committed to creating value for our shareholders. Since Hikma listed on the London Stock Exchange in 2005 through to the end of 2016, we have delivered a total shareholder return of 343%. We are delighted with this performance, which exceeds that of the FTSE 250 index and the FTSE Pharmaceutical index, whose total shareholder return was 154% and 119% respectively over the same period. We have been able to achieve this in a manner that is transparent, ethical and sustainable. To that end, I am proud that we continue to be recognised by the FTSE4Good as a leader in good Environmental, Governance and Sustainability practices.

Looking ahead

As we look to 2017 and beyond, I believe that we have never been in a better position to deliver on the promise of our mission to provide high-quality, affordable medicines to people who need them. We’ve brought some excellent new talent into the business in 2016, and we continue to invest in the development and welfare of our people. I would like to thank my Hikma colleagues in all the parts of the world where we operate for their steadfast commitment and continued hard work.

Said Darwazah

Chairman and Chief Executive

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