Hikma Pharmaceuticals Regulatory News (HIK)

PRESS RELEASE

Hikma delivers a strong performance in Branded and Injectables and makes excellent strategic progress in US Generics, transforming the future prospects of the Group

Group revenue expected to be in the range of $2.0 billion to $2.1 billion in 2016, with continuing momentum into 2017

London, 16 March 2016 - Hikma Pharmaceuticals PLC ("Hikma", "Group") (LSE: HIK) (NASDAQ Dubai: HIK) (OTC: HKMPY) (rated Ba1 Moody's / BB+ S&P , both stable), the fast growing multinational pharmaceutical group, today reports its preliminary results for the year ended 31 December 2015.

Financial highlights

· Following an exceptionally strong year in 2014, Group revenue was $1,440 million, down 3%, or up 2% in constant currency1

· Group gross margin was in line with 2014 at 56.8%, reflecting good cost control across all business segments

· Core operating profit2 was $409 million, down 4%, or up 4% in constant currency, with strong profitability in Injectables and Branded offsetting expected declines in Generics

· Strong net operating cash flow of $366 million, despite a lower contribution from specific market opportunities in the Generics business

· Group profit attributable to shareholders was $252 million, down 9%, or up 2% in constant currency

· Proposed final dividend of 21 cents per share (32 cents per share for the full year), in line with the total dividend paid in 2014

· 2016 Group revenue expected to be in the range of $2.0 billion to $2.1 billion in constant currency, reflecting strong growth across all three business segments and the consolidation of ten months of revenue from Roxane

Strategic highlights

· Successful execution of the Group's growth strategy across all three business segments

· Launched 92 products and received 220 approvals, expanding and enhancing our global product portfolio

· Swift integration of Bedford, delivering new high value products for US Injectables, including three new product launches; on track to achieve target of 20 launches by 2017

· Transformational acquisition of Roxane brings significant scale and growth opportunities to the US business, adding a broad portfolio and large, differentiated pipeline

· Acquisition of EUP strengthens our capabilities in oncology and injectables in Egypt

· Balance sheet strengthened through inaugural bond issue, raising $500 million, and new $1.2 billion revolving credit facility, providing financial flexibility to support future growth

Said Darwazah, Chairman and Chief Executive Officer of Hikma, said:

"Following an exceptional 2014, our Branded and Injectables businesses performed strongly in 2015 and we made excellent strategic progress in US Generics, transforming the future prospects of the Group.

Our businesses in MENA are performing very well. We achieved excellent growth in our key markets in 2015 whilst continuing to invest in our pipeline to support future growth. In Europe, we made significant investments in our injectable manufacturing capabilities, utilising equipment transferred from the Ben Venue site. In the US, Bedford is now well integrated and the pace of new injectables launches is accelerating.

The integration of the acquisition of Roxane, which closed at the end of February, will be a key focus this year and will transform our non-injectables business in the US, adding complementary and well differentiated products, an attractive pipeline, proven R&D capabilities and greater overall scale.

We have taken important strategic steps this year. Our focus in the short term will be on integrating Roxane and delivering high value, differentiated product launches. From 2017, we expect the benefits from the investments that we have made in recent years - in R&D, M&A, co-development partnerships and licensing agreements - to accelerate. We have an exciting pipeline across our business segments that will drive accelerated and sustainable future growth."

Enquiries

Hikma Pharmaceuticals PLC

About Hikma

Hikma Pharmaceuticals PLC is a fast growing pharmaceutical group focused on developing, manufacturing and marketing a broad range of both branded and non-branded generic and in-licensed products. Hikma's operations are conducted through three businesses: "Branded", "Injectables" and "Generics" based primarily in the Middle East and North Africa ("MENA") region, where it is a market leader, the United States and Europe. In 2015, Hikma achieved revenues of $1,440 million and profit attributable to shareholders of $252 million.

A presentation for analysts and investors will be held today at 09:30 UK time at FTI Consulting, 200 Aldersgate, Aldersgate Street, London EC1A 4HD. To join via conference call please dial: +44 (0) 203 003 2666 or 0808 109 0700 (UK toll free). Alternatively you can listen live via our website at www.hikma.com. A recording of both the meeting and the call will be available on the Hikma website. A video interview of Said Darwazah, Chairman and CEO, is available at www.hikma.com. The contents of the website do not form part of this preliminary results announcement.

Business and financial review

The business and financial review set out below summarises the performance of Hikma's three main business segments, Branded, Injectables and Generics, for the year ended 31 December 2015.

Group revenue by business segment

Group revenue by region

Branded

2015 highlights:

· Branded revenue up 3% to $570 million, or up 13% in constant currency

· Double digit growth in constant currency in Egypt, the GCC and Morocco and an excellent recovery in Algeria

· Branded core operating profit up 6% to $118 million, up 34% in constant currency

· Branded core operating margin was 20.7%, or 24.0% in constant currency

· Expecting the Branded business to perform in line with historical trends in 2016, on a constant currency basis

Summary financial highlights - Branded

Branded revenue increased by 13% in 2015, before the impact of adverse movements in the Algerian dinar, Moroccan dirham, Tunisian dinar, Egyptian pound and Sudanese pound against the US dollar. On a statutory basis, Branded revenue increased by 3% to $570 million, compared with $551 million in 2014. Through a continued focus on strategic, higher value products and new product launches, we achieved double digit growth, on a constant currency basis, in each of our top markets - Algeria, Egypt, the GCC and Morocco.

In Algeria, revenue increased by 24%, or 54% in constant currency, following the restructuring we undertook in 2014. Our Egyptian business grew by 18% in constant currency, reflecting successful recent product launches, including one product for which Hikma was the first supplier on the market. In the GCC, which includes Saudi Arabia and the UAE, revenue increased by 14%, driven by the prioritisation of strategic products, stronger distribution capabilities, and the broadening of our customer base, with an increased focus on institutions. Revenue in Morocco also grew in the double digits in constant currency, driven by new product launches and an enhanced focus on strategic products. These strong performances more than offset lower sales in Iraq and Libya, where political disruptions persist, and in Sudan, which continues to suffer from hyperinflation.

During 2015, the Branded business launched a total of 54 products across all markets, including one new compound and two new dosage forms and strengths. The Branded business also received 139 regulatory approvals across the region.

Revenue from in-licensed products increased from $219 million to $225 million in 2015, representing 40% of Branded revenue, in line with 2014. We signed three new licensing agreements for innovative products during 2015, which will help us to grow our portfolio of higher value products in growing therapeutic categories.

One of the licensing agreements signed during the year was with Vitabiotics, the UK's largest nutraceutical and vitamin company. Under the terms of the agreement, Hikma has the exclusive rights to register, market, distribute, and sell five of Vitabiotics' leading specialist products in 15 of its MENA markets. In addition, we have the exclusive rights to market, distribute and sell the full Vitabiotics product range in five of these markets. Our large sales and marketing teams are well positioned to drive strong demand for Vitabiotics' rich portfolio of products, which include some of the fastest growing supplements in the UK and eight brand leaders.

Branded gross profit increased by 4% to $277 million in 2015 and gross margin was 48.6%, compared to 48.5% in 2014. The benefit of a more favourable product mix, the strong recovery in Algeria and good control of costs were offset by the net impact of exchange rates.

Core operating profit, which excludes the amortisation of intangibles of $8 million and exceptional severance costs of $5 million, increased by 6% to $118 million, or 34% in constant currency basis. Core operating margin was 20.7%, or 24.0% in constant currency, up from 20.1% in 2014. This margin improvement primarily reflects careful management of operating expenses during the year.

In 2016, we expect the Branded business to perform in line with historical trends, on a constant currency basis. We expect revenue growth to be driven by strong underlying market growth, our focus on strategic products and the strength of our sales and marketing teams. Improvement in the Branded core operating margin is expected to be driven by revenue growth and operational leverage.

Injectables

2015 highlights:

· Global Injectables revenue of $710 million, in line with 2014 and guidance; in constant currency, Injectables revenue was up 3%

· Core operating margin increased to 43.9%, from 37.2% in 2014, well ahead of guidance, through a combination of a favourable product mix, better cost control and operating leverage

· Launched first three Bedford products and expecting a further nine Bedford launches in 2016

· Successfully resolved US FDA Warning Letter at Portuguese facility

· Expecting mid to high-single digit revenue growth in 2016 and core operating margin to return to a more normalised level of around 36%

Summary financial highlights - Injectables

Injectables revenue by region

In 2015, our global Injectables revenue was $710 million, in line with our expectations following the extremely strong performance in the prior year, when revenue increased by 33%, driven in part by specific market opportunities. In constant currency, global Injectables revenue increased by 3%.

US Injectables revenue was $546 million, in line with 2014. During the year, we benefited from our broad product portfolio and the continuation of certain specific market opportunities. The impact of increased competition for some of our existing products was offset by new product launches. Bedford is now well integrated into our global Injectables business and we are ahead of schedule with the technical transfer of the former Bedford products to our manufacturing sites. Three of the approvals received during the year were for former Bedford products, demonstrating the strength of our R&D and regulatory capabilities, and we are confident that we will achieve our target of 20 Bedford product launches by the end of 2017.

In November 2015, we sold the Ben Venue manufacturing facilities in Bedford, Ohio to Xellia Pharmaceuticals. The Ben Venue site included four manufacturing plants and a Quality and Development Centre ("QDC") with a team of R&D scientists. We have retained the QDC and Bedford's strong R&D team to expedite the technical transfer and reactivation of Bedford's products. We have also transferred equipment, including lyophilisers and filling lines, to our other global manufacturing facilities in the US and Europe to support our future growth plans.

MENA Injectables revenue increased by 2% to $92 million, or by 14% in constant currency. Strong growth in Algeria, Saudi Arabia and Egypt more than offset declines in Iraq and Sudan. We have enhanced our focus on sales and marketing for injectable products in MENA and expanded our dedicated Injectables team.

In September 2015, we agreed to acquire EIMC United Pharmaceuticals ("EUP"), strengthening our oncology and injectables capabilities in Egypt. The acquisition was completed in February 2016. EUP brings an attractive portfolio in these two important growth areas for Hikma, with the potential to add around 50 products by 2020. It also adds a manufacturing facility in Egypt with both oral and injectables lines. We will leverage our established market position in Egypt and large sales and marketing team to maximise the potential of EUP.

European Injectables revenue decreased by 4% to $72 million and increased by 15% in 2015 in constant currency. Higher demand for certain products and new contract manufacturing business contributed to the strong performance. In 2015, we expanded our EU registration teams and our sales and marketing capabilities in order to cover new European markets. These efforts are expected to start generating sales in 2016.

In November 2015, we received a letter from the US Food and Drug Administration ("FDA") closing out the Warning Letter received in October 2014 in respect of the manufacturing plant in Portugal. This demonstrates that the corrective actions taken in response to the Warning Letter were fully reviewed and accepted by the US FDA.

Injectables gross profit increased by 4% to $449 million in 2015, compared with $431 million in 2014. Gross margin increased to 63.2%, compared with 60.4% in 2014. This reflects continued strong sales from certain market opportunities in the US, a good performance from other higher value products and efficient management of manufacturing overhead.

Core operating profit, which excludes the gain from the sale of the Ben Venue site, related hibernation costs, proceeds from legal claims and the amortisation of intangible assets other than software, increased by 18% to $312 million in 2015. Core operating margin increased to 43.9%, up from 37.2% in 2014. The strong improvement in core operating margin reflects operational leverage resulting from good control of sales and marketing and general and administrative expenses and better management of inventories. The improvement also reflects lower R&D expenses, as $23 million of R&D expenses related to the technical transfer of the former Bedford products was capitalised on the balance sheet, in line with our accounting policies.

During 2015, the Injectables business launched a total of 37 products across all markets, including six new compounds and 10 new dosage forms and strengths. The Injectables business also received a total of 79 regulatory approvals across all regions and markets, namely 39 in MENA, 26 in Europe and 14 in the US. We also signed one new licensing agreements during 2015.

We expect Injectables revenue growth to be in the mid- to high-single digits in 2016, with competition on marketed products being more than offset by new product launches from our R&D, business development and Bedford pipelines. We expect core operating margin to return to a more normalised level of around 36%, primarily due to a change in product mix and an increase in R&D expenses.

Generics

2015 highlights:

· Generics revenue of $151 million, in line with recent guidance and down 30% on 2014, reflecting the expected decline in specific market opportunities

· Generics core operating profit of $46 million, with a core operating margin of 30.5%

· Agreed to acquire Roxane Laboratories, transforming our prospects for the Generics business

· Expecting 2016 revenue in the range of $640 million to $670 million, including ten months of contribution from Roxane and taking into account the divestiture of certain legacy products associated with the acquisition of Roxane. Core Generics operating margin is expected to be in the low double digits

· Continue to expect 2017 Roxane revenues in the range of $700 million to $750 million and Roxane EBITDA margin of around 35% over the medium term

Summary financial highlights - Generics

Generics revenue was $151 million, in line with our most recent guidance and down 30% compared to $216 million in 2014. As expected, the specific market opportunity that contributed to the very strong performance in 2014 continued to decline significantly during the course of 2015 due to increased competition. This was partially offset by strong volume growth in the legacy portfolio.

In January 2015, we launched colchicine 0.6mg capsules under the brand name Mitigare, alongside an authorised generic for Mitigare. By July, we had established a nationwide salesforce and sales began to build gradually in the second half of the year, albeit more slowly than our initial expectations. We are confident that colchicine sales will continue to grow in 2016 given our ability to significantly improve managed care access, pharmacy shelf stock and physician and patient awareness.

Generics gross profit was $89 million, compared with $150 million in 2014, and gross margin was 58.9%, compared with 69.4% in 2014, as a result of the continued decline in revenue from specific market opportunities. Core operating profit was $46 million, compared with $113 million in 2014 and core operating margin was 30.5% in 2015, compared with 52.3% in 2014. In addition to the continued decline in revenue from specific market opportunities, higher sales and marketing spend related to the establishment of a branded salesforce contributed to the decline in core operating margin.

During 2015, the Generics business launched one new compound and one new dosage form and strength, and received two product approvals. The Generics business also signed new licensing agreements for 19 new products.

On 29 February 2016, following the satisfaction of the remaining conditions to closing including shareholder approval and the divestiture of three products from our legacy Generics business (representing approximately $20 million in revenue in 2015), we completed the Roxane acquisition.

The acquisition of Roxane transforms Hikma's position, scale and potential in the US generics market, establishing Hikma as the sixth largest company by revenue9. It adds significant breadth to our US portfolio, bringing 88 highly differentiated products in specialised and niche segments of the market, including oncology, respiratory, extended release and controlled substances. It also enhances our pipeline, adding 89 R&D projects, including 57 Paragraph IV products, 13 of which are first-to-file opportunities. The acquisition strengthens our ability to drive sustainable long-term growth, adding Roxane's highly experienced R&D team with a successful track record of bringing new and differentiated products to market as well as a best-in-class manufacturing facility and technological capabilities. We have planned extensively for the integration of Roxane and are working to swiftly integrate it within our US Generics business.

2016 revenue for the combined Generics business is expected to be in the range of $640 million to $670 million, including ten months of contribution from Roxane and taking into account the divestiture of certain legacy products. Core Generics operating margin is expected to be in the low double digits.

We expect Roxane's full year revenue in 2016 to be below $650 million as previously disclosed, with increased competition on the current marketed portfolio partially offset by revenue from recent and planned new product launches. Roxane's revenues are then expected to increase to between $700 million to $750 million in 2017 as new product launches accelerate. We continue to expect Roxane's EBITDA margin to reach around 35% over the medium-term. This high level of profitability will be achieved through the launch of certain high value products and specific cost savings, which are expected to be in the range of $35 million to $45 million by 2017. We continue to expect the acquisition to be slightly dilutive to core earnings per share ("EPS") in 2016 and strongly accretive to core EPS thereafter.

Other businesses

Other businesses, which primarily comprise Arab Medical Containers, a manufacturer of plastic specialised medicinal sterile containers, International Pharmaceuticals Research Centre, which conducts bio-equivalency studies, and the API manufacturing division of Hikma Pharmaceuticals Limited Jordan, contributed revenue of $9 million in 2015, unchanged from 2014. These other businesses had an operating loss of $5 million in 2015, also unchanged from 2014.

Group

Group revenue was $1,440 million in 2015, down 3% from 2014. Group gross profit decreased by 4% to $818 million, compared with $851 million in 2014. Group gross margin was 56.8% compared with 57.2% in 2014.

Group operating expenses declined by 3% to $437 million, compared with $449 million in 2014. Excluding the amortisation of intangible assets (other than software) and exceptional items, Group operating expenses declined by 4% to $409 million compared with $424 million in 2014. In 2015, amortisation of intangible assets other than software was $16 million, compared to $14 million in 2014. In 2015, exceptional items included within operating expenses were $12 million, compared to $11 million in 2014, and included acquisition and integration costs related to the Roxane transaction, severance costs and non-recurring hibernation costs at the Ben Venue site, offset by a gain from the sale of the Ben Venue site and a successful litigation settlement. The paragraphs below address the Group's main operating expenses in turn.

Sales and marketing expenses were $172 million, or 12% of revenue, compared with $171 million and 11% of revenue in 2014. An increase in marketing expenses related to the establishment of a nationwide branded salesforce in the US was offset by a reduction in marketing expenses in the MENA region and lower supply related penalties.

General and administrative expenses increased by $15 million to $200 million in 2015. Excluding exceptional severance costs in the MENA region and acquisition and integration related expenses, G&A expenses increased by $6 million, or 3%, primarily due to an increase in employee benefits.

In 2015, we continued to invest in R&D across our three businesses to drive future growth. Group R&D expenditure was $36 million in 2015, compared with $55 million in 2014. An additional $35 million was invested in the technical transfer of the former Bedford products to our facilities and other product acquisitions and was capitalised on the balance sheet. In total, R&D and product-related investment represented $71 million (5% of Group revenue) during the period, compared to $79 million (5% of Group revenue) in 2014. In 2016, we expect Group R&D expense to increase to around $150 million due to the consolidation of Roxane and its high levels of R&D spend.

Other net operating expenses decreased by $9 million to $29 million. Excluding exceptional items, these expenses decreased by $1 million primarily reflecting better inventory management and a decrease in foreign exchange losses, partly offset by the additional costs of maintaining the Ben Venue manufacturing facility that was acquired in the second half of 2014.

Core Group operating profit decreased by 4% to $409 million in 2015 and operating margin was 28.4% compared with 28.7% in 2014.

Research & Development10

The Group's product portfolio continues to grow as a result of our product development efforts. During 2015, we launched 8 new compounds. The Group's portfolio now stands at 588 compounds in 1,681 dosage forms and strengths.11 We manufacture and/or sell 76 of these compounds under licence from the licensor.

Across all businesses and markets, a total of 92 products were launched during 2015. In addition, the Group received 220 approvals.

To ensure the continuous development of our product pipeline, we submitted 505 regulatory filings in 2015 across all regions and markets. As of 31 December 2015, we had a total of 1,250 pending approvals across all regions and markets. At 31 December 2015, we had a total of 144 new products under development.

Results from associated companies

In 2015, we recognised a loss from associated companies of $2 million related to our minority interest in Unimark Remedies Limited ("Unimark"). In addition, we impaired the remaining investment balance related to Unimark by taking an impairment charge of $7 million. In 2016, we are divesting our interest in Unimark to satisfy US FTC requirements related to closing the Roxane transaction for minimal value.

Net finance expense

Net finance expense amounted to $54 million in 2015, up from $34 million in 2014. The increase is mainly attributed to the interest paid on the $500 million 4.25% Eurobond issued in April 2015. In 2016, we expect the Group's net finance expense to be around $62 million, reflecting increased interest expense and financing fees related to Roxane. In addition, we expect to incur other non-cash expenses resulting from the revaluation of the fair value of future royalty payments.

Profit before tax

Core profit before tax decreased by 8% to $355 million, compared with $387 million in 2014.

Tax

The Group incurred a tax expense of $64 million, compared with $80 million in 2014. The effective tax rate was 20.1%, compared with 22.1% in 2014. The reduction in the effective tax rate reflects increased earnings in lower taxed jurisdictions, combined with lower earnings in the US. In 2016, the effective tax rate is expected to be around 25%. This is expected to return closer to 2014 levels over the medium term.

Profit attributable to shareholders

Profit attributable to shareholders decreased by 9% to $252 million, compared to $278 million in 2014. Core profit attributable to shareholders decreased by 4% to $286 million in 2015, compared to $299 million in 2014.

Earnings per share

Basic earnings per share decreased by 10% to 126.6 cents in 2015, compared to 140.4 cents in 2014. Core basic earnings per share decreased by 5% to 143.7 cents, compared with 151.0 cents in 2014. Core diluted earnings per share decreased by 5% to 142.3 cents, compared with 149.5 cents in 2014.

Dividend

The Board is recommending a final dividend of 21 cents per share (approximately 14.6 pence) for 2015, bringing the total dividend for the full year to 32 cents per share (approximately 22.3 pence per share), in line with total dividend paid in 2014. The proposed dividend will be paid on 19 May 2016 to shareholders on the register on 8 April 2016, subject to approval at the Annual General Meeting on 12 May 2016.

Net cash flow, working capital and net debt

The Group generated operating cash flow of $366 million in 2015, down $59 million from $425 million in 2014. This reflects the lower contribution from specific market opportunities for the Generics business and higher working capital investments in the US. Working capital days were 177 days in 2015, in line with 2014 levels.

Capital expenditure was $82 million, compared with $91 million in 2014. Of this, $40 million was spent in MENA to upgrade and maintain our equipment and facilities across a number of markets. The remaining $42 million was spent in the US and Europe, primarily to expand our Injectables manufacturing capacity, including the installation of equipment from Ben Venue. In 2016, we expect Group capital expenditure to be around $200 million including Roxane.

The Group's net debt (excluding co-development agreements) stood at $135 million at the end of 2015, compared to $274 million at the end of 2014. In April 2015, we strengthened our financing capabilities with the issuance of a $500 million Eurobond due April 2020. The proceeds were partially used to refinance existing debt facilities, including Bedford bridge loan of $225 million.

On 29 February 2016, the acquisition of Roxane closed and the net cash consideration of $575 million (net of certain working capital and other adjustments) was paid to Boehringer. In addition, 40,000,000 new shares were issued to Boehringer at a price of 1881p, bringing the combined net consideration paid at closing to approximately $1.6 billion, using the US:GBP exchange rate of 1.3879:1. The cash consideration was funded through a combination of cash and the utilisation of the Group's existing debt facilities. Should certain further targets be met, further payments could be triggered.

Balance sheet

Net assets as at 31 December 2015 totalled $1,352 million, compared to $1,216 million in 2014. Net current assets increased to $768 million, compared to $172 million in 2014.

During the period, shareholder equity was negatively impacted by an unrealised foreign exchange translation loss of $67 million, primarily reflecting movements in the Euro, the Algerian dinar, Moroccan dirham, Egyptian pound and the Sudanese pound against the US dollar and the translation of net assets denominated in these currencies.

Summary and outlook

The Group performed well in 2015, and made excellent strategic progress. The Branded business remains well positioned to continue the strong performance achieved in 2015. In 2016, we expect the Branded business to perform in line with historical trends, on a constant currency basis, driven by strong underlying market growth, our focus on strategic products and the strength of our sales and marketing teams. Improvement in the Branded core operating margin is expected to be driven by revenue growth and operational leverage.

We expect Injectables revenue growth in the mid- to high-single digits in 2016, with competition on marketed products being more than offset by new product launches from our R&D, business development and Bedford pipelines. We expect core operating margin to return to a more normalised level of around 36%, due primarily to a change in product mix and higher R&D expenses.

2016 revenue for the combined Generics is expected to be in the range of $640 million to $670 million, including ten months of contribution from Roxane and taking into account the divestiture of certain legacy products. Core Generics operating margin is expected to be in the low double digits.

We expect Roxane's full year revenue in 2016 to be below $650 million, increasing to between $700 million to $750 million in 2017, as previsouly disclosed. We expect Roxane's EBITDA margin to reach around 35% over the medium-term. This high level of profitability will be achieved through the launch of high value products and cost savings, which are expected to be in the range of $35 million to $45 million by 2017. We continue to expect the acquisition to be slightly dilutive to core earnings per share ("EPS") as we integrate the business in 2016 and strongly accretive to core EPS thereafter.

Overall, we are expecting Group revenue in 2016 to be in the range of $2.0 to $2.1 billion including the contribution of ten months of revenue from Roxane, with continuing momentum into 2017.

Our statutory results in 2016 will be impacted by a number of exceptional, non-cash and other charges including the amortisation of intangible assets, an inventory step up, the revaluation of the fair value of future royalty payments and one-off acquisition and integration costs. In aggregate, these charges are currently expected to impact statutory net income by around $115 million.

Responsibility statement

The responsibility statement below has been prepared in connection with company's full annual report for the year ended 31 December 2015. Certain parts thereof are not included within this announcement.

We confirm to the best of our knowledge:

· The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;

· The business and financial review, which is incorporated into the strategic report, includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face: and

· The annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to access the company's performance, business model and strategy.

Cautionary statement

This preliminary announcement has been prepared solely to provide additional information to the shareholders of Hikma to assess the Group's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose.

Forward looking statements

This announcement may contain statements which are, or may be deemed to be, "forward looking statements" which are prospective in nature. 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.

Where included, such statements have been made by Hikma in good faith based on the information available to it up to the time of the approval of this announcement. By their nature, forward looking statements are based on current expectations, assumptions and projections about future events and therefore involve inherent risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements, and should be treated with caution. These risks, uncertainties or assumptions could adversely affect the outcome and financial effects of the plans and events described in this announcement. 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 and a variety of factors, many of which are beyond Hikma's control, could cause actual results to differ materially from those projected or implied in any forward-looking statements. You should not place undue reliance on forward-looking statements, which speak as only of the date of the approval of this announcement.

Except as required by law, Hikma is under no obligation to update or keep current the forward looking statements contained in this announcement 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 the 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.

Principal risks and uncertainties

The Board has resolved that the principal risks and uncertainties facing the Group are:

1Constant currency numbers in 2015 represent statutory 2015 numbers re-stated using average exchange rates in 2015

2Before the amortisation of intangible assets other than software and exceptional items included in operating profit, as set out in note 4 to the financial information; previously referred to as adjusted operating profit

3Earnings before interest, tax, depreciation and amortisation. EBITDA is stated before impairment charges and share of results from associated companies

4EBITDA before exceptional items

5Before the exceptional items and other adjustments as set out in note 4 to the financial information.

6In 2014, Hikma paid a total combined dividend of 32.0 cents per share, comprised of a full year dividend of 22.0 cents per share and a special dividend of 10.0 cents per share

7Before the amortisation of intangible assets other than software and exceptional items included in operating profit, as set out in note 4 to the financial information; previously referred to as adjusted operating profit.

8Before the amortisation of intangible assets other than software and exceptional items included in operating profit, as set out in note 4 to the financial information; previously referred to as adjusted operating margin

9IMS Healthcare, MAT sales value December 2015, adjusted to reflect recent M&A activity

10Products are defined as pharmaceutical compounds sold by the Group. New compounds are defined as pharmaceutical compounds being introduced for the first time during the period and existing compounds being introduced into a new segment

11Totals include 71 dermatological and cosmetic compounds in 282 dosage forms and strengths that are only sold in Morocco.

12Totals include all compounds and formulations that are either launched or approved or pending approval across all markets, as relevant

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2015

CONSOLIDATED BALANCE SHEET

AT 31 DECEMBER 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2015

1. Accounting policies

Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2015 or 2014, but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies and those for 2015 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under S498 (2) or (3) of the Companies Act 2006. Hikma Pharmaceuticals PLC's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board. The financial statements have also been prepared in accordance with IFRSs adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared under the historical cost convention, except for the revaluation to market of certain financial assets and liabilities. The preliminary announcement is based on the Company's financial statements. The Group's previously published financial statements were also prepared in accordance with International Financial Reporting Standards. These International Financial Reporting Standards have been subject to amendment and interpretation by the International Accounting Standards Board and the financial statements presented for the years ended 31 December 2015 and 31 December 2014 have been prepared in accordance with those revised standards. Unless stated otherwise these policies are in accordance with the revised standards that have been applied throughout the year and prior years presented in the financial statements. The presentational and functional currency of Hikma Pharmaceuticals PLC is the US Dollar as the majority of the Company's business is conducted in US Dollars ($).

Adoption of new and revised standards

The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had any significant impact on the amounts reported in these financial statements, however, may impact the accounting for future transactions and arrangements.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments and IFRS 15 may have an impact on revenue recognition and related disclosures. Beyond the information above, it is not practicable to provide a reasonable estimate of the effects of IFRS 9, IFRS 15 and IFRS 16 until a detailed review has been completed.

2. Going concern

The Directors of Hikma ("Directors") believe that the Group is well diversified due to its geographic spread, product diversity and large customer and supplier base. The Group operates in the relatively defensive generic pharmaceuticals industry, which the Directors expect to be insulated from wider economic conditions.

The Group's overall net debt position was $135 million at 31 December 2015 compared to $274 million in December 2014. Operating cash flow in 2015 was $366 million, compared to $425 million in 2014. The Group has $1,374 million of undrawn short term and long term banking facilities, compared to $839 million in 2014, in addition to $205 million of unutilised import and export financing limits compared to $180 million in 2014. These facilities are well diversified across the subsidiaries of the Group and are with a number of financial institutions. The Group's forecasts, taking into account reasonable possible changes in trading performance, facility renewal sensitivities, maturities of long-term debt, and the acquisition of Roxane, show that the Group should be able to operate well within the levels of its facilities and their related covenants. The acquisition of Roxane has been financed through a combination of cash reserves, and utilization of the Group's existing debt facilities.

During the year the Group agreed to purchase Roxane from Boehringer Ingelheim, the transaction was closed on 29 February 2016. In addition to the payment of $575 million in cash, the transaction was also financed by the issue of 40 million shares, increasing the issued capital of the Company by 20%. Adjusting for the Roxane acquisition, our net debt at 31 December 2015 would have been $710 million.

After making enquiries, 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. The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors therefore continue to adopt the going concern basis in preparing the financial statements.

3. Segmental reporting

For management purposes, the Group is currently organised into three principal operating divisions - Branded, Injectables and Generics. These divisions are the basis on which the Group reports its segmental information.

The Group discloses underlying operating profit as the measure of segmental result, as this is the principle measure used in decision-making and resource allocation by the chief operating decision maker, who is the Group's Chief Executive Officer.

Information regarding the Group's operating segments is reported below.

The following is an analysis of the Group's revenue and results by reportable segment in 2015:

Segment result is defined as operating profit for each segment.

 "Others" mainly comprises Arab Medical Containers Ltd, International Pharmaceutical Research Center Ltd and the chemicals division of Hikma Pharmaceuticals Ltd (Jordan).

Unallocated corporate expenses are primarily made up of employee costs, professional fees, travel expenses and donations.

The following is an analysis of the Group's revenue and results by reportable segment in 2014: