Annual Report 2009 THE PARTNER OF CHOICE IN DENTISTRY

Transcription

1 Annual Report 2009 THE PARTNER OF CHOICE IN DENTISTRY

2 Nobel Biocare is the world leader in innovative restorative and esthetic dental solutions. The company provides dental professionals with advanced science-based solutions from tooth to root, including dental implants, all-ceramic crowns, bridges and laminates, guided surgery solutions, scanners and biomaterials.

3 Key figures. Revenue growth in local currencies (%) Revenue growth 2009 by region (lc) Return on equity (%) Asia/ Pacific 5.1% North America 6.0% EMEA 7.4% Latin America/ RoW 46.9% Gross margin (%) EBIT margin (%) Cash flow from operations (EUR mn) Employees worldwide Personnel costs per employee (EUR 000) CO 2 (kg) per produced unit CO 2 per produced unit is calculated as a combination of electricity, paper and water consumption based on Elmix Sweden & USA (electricity conversion factors: Sweden 110 g; USA 800 g CO 2 / kwh).

4 Key Financials in EUR mn 2009 Change (in %) Revenue Gross profit Profit from operations (EBIT) Profit before tax Cash and cash equivalents Shareholders equity Basic earnings per share 3 (EUR) Dividend per share 3,4 (CHF) Share price at year-end 3 (CHF) In local currencies. 2 Including bank overdraft. 3 Figures for 2007 and 2006 adjusted to reflect the 2008 share split. 4 Proposed dividend for 2010.

5 Contents. Annual Review 02 Achievements Nobel Biocare at a glance 04 Letter to shareholders 06 Financial performance 11 Business presentation 25 Market and strategy 26 Research and development 29 Products 32 Operations 42 Corporate social responsibility 44 Employees 46 Financial reporting 83 Key figures 84 Financial review 85 Risk management & ICS 88 Consolidated financial statements 95 Parent company accounts 150 Share information 167 Other 172 Addresses 172 Disclaimer 174 Corporate Governance 49 Corporate Governance report 50 Remuneration report 75

6 2 Nobel Biocare Annual Report 2009 Annual review Achievements Setting new standards in CAD/CAM dentistry. Early in the reporting year, we launched allnew NobelProcera technologies, materials, and products. The launch encompassed a next generation optical scanner using innovative conoscopic holography, a new 3D design software and an expanded range of materials and products. With NobelProcera, CAD/CAM dentistry has reached a new level of sophistication. The 2009 launch of NobelProcera is the most comprehensive technology, material and CAD/CAM product introduction in recent Nobel Biocare history. w more on page 35 Celebrating 10 years of enhanced osseointegration. Nobel Biocare celebrated the tenth anniversary since the development of the proprietary dental implant surface, TiUnite. The main benefit of TiUnite is a significantly reduced period of risk after implant insertion. During its first five years on the market, more than 80 scientific publications documenting pre-clinical and clinical investigations have been published, supporting the clinical success of TiUnite implants. Two studies demonstrating the long-term stability of TiUnite were presented at the AO meeting this year. w more on page 29 Continued success of next generation implant. The bone-level implant NobelActive, launched in 2008, continued to attract new customers and enjoyed strong acceptance from leading clinicians worldwide. To date, we have sold close to 300'000 Nobel- Active implants which makes it the most successful product introduction in company history. During 2009, we expanded the NobelActive range with various extensions and included it for use with NobelGuide. w more on page 34 Enhancement of manufacturing performance. This year, we introduced the Ultra Plant concept to upgrade the performance of our existing manufacturing facilities for dental implants. This new approach combines full digitization and continuous flow production. The Ultra Plant concept was applied in 2009 to the Yorba Linda site, where production started in July. This successful project stands for our ongoing effort to streamline our processes in order to increase operational efficiency. w more on page 42

7 Achievements Successful regional customer events. Throughout the year, Nobel Biocare organized numerous events to foster the partnership with our customers. Most noticeable were the Australian Scientific Symposium in May, the two-day Deutscher Kongress in Salzburg, Austria, the Velocity dinners in the US, the Nobel Biocare Esthetic Forum in Tokyo or our presence at various industry meetings, such as the EAO in Monaco or the FDI in Singapore. Our approach to these events exhibits our new event culture, which is customized to the specific information and educational needs of our customers. w more on page 14 Strengthening the organization. In 2009, we have been dedicating substantial effort to making our organization stronger and more efficient. A product management structure has been introduced and numerous cost streamlining measures have been implemented to guarantee our strong profitability. Yet we have also made substant ial investments for the future: Numerous, highly skilled and experienced dental industry experts have joined or re-joined Nobel Biocare, our global sales force has been undergoing a new, rigorous training curriculum, and last, but not least, our new brand identity has been successively rolled out in all our major markets. w more on page 42 Establishment of Scientific Symposia. As the scientific highlight of the year, the first Brånemark Scientific Symposium was organized in Gothenburg and brought together 200 world-leading dental experts to exchange information and experience. The program focused on future developments of osseointegration for use in intra- and extraoral implant-based rehabilitations. Professor Per-Ingvar Brånemark personally attended the Symposium and delivered the opening speech. w more on page 31

8 4 Nobel Biocare Annual Report 2009 Annual review Nobel Biocare at a glance. Mission Our mission is to be the most desirable partner in science-based solutions that help dental professionals make a real and lasting difference to the well-being of their patients, empowering them to lead healthier and more satisfying lives. Science Nobel Biocare is dedicated to providing innovative, safe and effective solutions that are backed by scientific evidence. The company adheres to the highest scientific standards for all its solutions and builds upon a 40-year heritage in scientific research. w more on page 29 Complete solutions As a complete solution provider, Nobel Biocare provides the most comprehensive portfolio of restorative and esthetic solutions from tooth to root. We offer the entire range of dental implants, prosthetics, guided surgery solutions, scanners and biomaterials. We also offer innovative treatment concepts designed to optimize restorative dental treatment. w more on page 32 Most complete solutions portfolio in the industry Dental implants Fixed and removable edentulous solutions Equipment scanner technology Standardized and customized abutments Bridges on natural teeth and implants Single crowns on natural teeth and implants

9 Nobel Biocare at a glance 5 People Nobel Biocare builds on a team of more than 2,200 dedicated and highly skilled employees from around the world. w more on page 46 Markets Nobel Biocare is the world market leader in dental implants and CAD/CAM-based crowns and bridges. We hold leading market positions in North America, Europe and Asia. w more on page 26 Financials We are committed to creating value for our shareholders through profitable and sustainable growth. Nobel Biocare is listed at the SIX Swiss Exchange and included in the Swiss Leader Index (SLI). w more on page 75 Global presence Nobel Biocare has the broadest geographic coverage in the industry with 35 direct representations and serves together with distributors a total of 70 countries. The company is headquartered in Zurich, Switzerland. Revenue 2009 by regions (%) North America 34% Asia Pacific 19% Rest of the World 2% EMEA 45%

10 6 Nobel Biocare Annual Report 2009 Annual review Letter from the Chairman. Dear Shareholders, The fact that the financial and economic crisis would also slow demand for dental restorations was something many among us did not believe, even well into But following the collapse of Lehman Brothers, which briefly threatened a meltdown in the global financial system, it became apparent just what massive damage had been inflicted on the real economy. And it was precisely markets of importance to Nobel Biocare that were hit hardest: the USA and Spain, for example. Although the world economy is still far away from its precrisis growth rates, it now looks as if government financial injections on a historic scale have managed to stabilize the situation. However, none of that could be anticipated back in winter 2008/09. Given uncertain circumstances, the Board of Directors and management set two clear priorities at that time: liquidity and margins. As you can see from this Annual Report, your company has reached these objectives despite all the adversity. But we did more than just cut down on costs; we also achieved structural improvements that will yield positive results in the coming years. And beyond that: our focus on fundamentals included successfully launching initiatives that will induce growth. Here of course I am thinking primarily about the launch of the new and in many ways pioneering NobelProcera system. With this development, Nobel Biocare is giving existing and new customers the possibility to provide better service, with greater ease. Your company currently the number 1 for implants will also become a leader in prosthetics thanks to the NobelProcera system. Markets have shrunk under the effects of the economic crisis and our sales could not escape this development. Yet all the same: besides the NobelProcera launch, the people working for Nobel Biocare have achieved respectable successes in A further rise in sales of our NobelActive implant is just one example. In 2009, the Board of Directors again prioritized the continuous and careful optimization of processes, on whatever level it was necessary. The extent and scope of these endeavors are perhaps difficult to grasp from outside the company. This makes it all the more satisfying that Nobel Biocare could clearly enhance its reputation among customers and in the scientific community during the course of the year. Indeed, that is the mission started by the present management in I have my doubts whether Nobel Biocare could have so successfully mastered the crisis and the 2009 financial year without the aforementioned priorities set by the current leadership. Against a backdrop of economic turmoil, sales figures are not yet back to what they once were, or where we would like to see them. Yet, the progress achieved during the year has laid the foundation to that end. Nobel Biocare is more determined, professional and motivated than ever before. Your company s technologies, platforms and solutions are well up to par. And management is aware that credibility and reputation are the most valuable assets a business can have. Despite the economic climate, all of that fills me with great confidence in the future of Nobel Biocare. This is the last occasion that I shall be addressing you as Chairman of the Board of Directors of Nobel Biocare, since I shall no longer be standing for re-election. During the course of my six years in office, you may have noticed how I always very much enjoyed contact with you, the owners of our company, both institutional and private. I ask you to place similar confidence in my successor. And I hope that you will retain your interest in Nobel Biocare. The people running the company know that creating sustainable value for customers, investors and partners is not to be achieved through hyped-up successes or short-term optimizations, but rather through continuous, credible, hard work. I trust that this is also exactly what you wish for and support. My great thanks for your confidence. Rolf Soiron Chairman of the Board of Directors

11 Letter to shareholders 7 Domenico Scala Chief Executive Officer Rolf Soiron Chairman of the Board

12 8 Nobel Biocare Annual Report 2009 Annual review Letter from the CEO. Dear Shareholders, The year 2009 was marked by the far-reaching effects of the global economic crisis. The turbulence has not passed without leaving its traces on Nobel Biocare: our financial results are evidence of the impact that the global recession has had on the dental market, which for the first time in its history experienced declining sales in the key regions. The foresighted actions of our Board and management, as well as the company s solid business model, nevertheless proved their worth in the very challenging 2009 financial year. We managed to bring our costs generally in line with the reduced revenue flows and, through the introduction of new products, simultaneously laid the foundation for future growth. For the 2009 financial year, Nobel Biocare recorded sales of EUR million and a net profit of EUR million. With this revenue trend in 2009, we were essentially on a par with developments in the overall market for dental implants. Although it also shrank in response to the crisis, the market nevertheless demonstrated con siderable resilience compared to other industries. Thanks to strict cost controls, Nobel Biocare was able to maintain an operating margin of 22.1 percent. Also on a positive note, we managed to strengthen our balance sheet in the face of this unfavorable business environment, kept our profit margins at an attractive level, and generated substantial cash flow. On the whole, our 2009 results reflect a solid and very profitable enterprise. Despite the economy-related decline in revenues, Nobel Biocare was able to maintain its strong position in all markets and generated profitable results. In North America, the impact of the financial and economic crisis was clearly felt during the entire year under review. In many cases, major dental procedures were postponed. As a result, Nobel Biocare recorded a revenue decrease of 1.9 percent in North America ( 6.0 percent in local currencies). The European markets (EMEA) suffered a 9.8 percent decline in revenues during the past financial year ( 7.4 percent in local currencies) in Spain, our high-volume market, the local real estate crisis had a particularly unfavorable effect on our business. Corrective measures introduced during the year are nevertheless showing results. The Asia Pacific region continued on its growth path and revenues increased by 4.1 percent ( 5.1 percent in local currencies). In the key Japanese market, Nobel Biocare was able to gain ground and further strengthen its market position. However, towards the end of the year, the pace of sales showed signs of decel eration. In growth markets such as Russia, India and China, Nobel Biocare once again enjoyed a satisfying course of business in The past months have clearly shown just how important the consequences of a limited focus on short-term profits can be. The fact that Nobel Biocare has been able to weather the crisis relatively well and can view the future with confidence is attributable to two factors: for one, we identified the onset of the economic downturn at an early stage and took countermeasures that enabled the company to emerge from the crisis even stronger than before; and secondly, our business activities are not aimed at achieving short-term successes. Our goal is to make Nobel Biocare the preferred partner in the dental industry and to be a provider of holistic solutions for restorative and esthetic dentistry. As a part of this, we direct our efforts toward long-term trends in the industry, such as new prosthetic solutions, the increasing digitization of the dental value chain, innovative manufacturing processes and improved treatment concepts. During the past financial year, we reached important milestones on the path to that goal. In 2009, the major thrust of our activities centered on the new launch of NobelProcera the largest prosthetics-related product launch in the history of our company as well as on the further market introduction of our Nobel Active implant. The CAD/CAM-based prosthetics platform Nobel- Procera enables us to manufacture individualized dental prosthetics for all indications and treatments, from a single tooth to complete prosthetics for fully edentulous patients. Nobel Biocare launched the new generation of NobelProcera in early The system encompasses innovative scanner and software technologies as well as a broad array of new materials. Additional materials and products are scheduled to follow in 2010 and will make NobelProcera the most comprehensive platform available for prosthetics solutions. The response to the NobelProcera product range has been extremely favorable order flow for the new scanner/software system has been very satisfying, and Nobel Biocare has attracted numerous dental labs as new customers.

13 Letter to shareholders 9 In parallel with the launch of NobelProcera, we followed through on the successfully initiated market introduction of the NobelActive implant system. NobelActive is the first implant that can be used for standard treatments as well as in situations with compromised bone structure. Thanks to this unique concept, more and more renowned clinicians are using NobelActive. In 2009, Nobel Biocare completed its product range through the addition of further product variations and complementary offerings; by year end, close to NobelActive implants had been sold. With its upcoming introduction of new technologies and products in the current year, Nobel Biocare will be in a position to offer the broadest range of implants, prosthetic products and technologies in the area of esthetic and restorative dental medicine. That also includes technologies and procedures for diagnosis, treatment planning and dental surgery, as well as for the development and manufacturing of related products. The year 2009 represented a great challenge for the management and employees of Nobel Biocare but the effort was worth it: Nobel Biocare has managed to considerably enhance its reputation and is now on track to become once again the company of reference in the dental market. In this regard, customer events have also made a great contribution, in particular the PI-Brånemark Scientific Symposium that Nobel Biocare conducted for the first time in More than 200 globally renowned medical professionals, researchers and dental experts attended this unique event in Gothenburg, Sweden, to discuss their experiences and exchange information. The discoverer of osseointegration, Professor Per-Ingvar Brånemark, opened the conference in person. The reactions were extremely positive, and customers, associations and opinion leaders alike warmly received this new style of open dialogue. During the year under review, senior management at Nobel Biocare was reinforced through the addition of two highly experienced leaders: William Bill Ryan took over as President and General Manager North America and bears responsibility for this important market. Bill brings with him more than 30 years of experience in the healthcare and dental industry. He is also a board member of several leading university dental schools in the USA. In addition, Ernst Zaengerle assumed responsibility as Head of Global Operations. He has extensive man agement experience in the production and supply chain areas. The company s midlevel management and sales teams were also strengthened. Although Nobel Biocare trimmed its workforce by 11.8 percent in 2009 as a result of cost-reduction measures, the company continued to invest in the professional qualifications of its employees as well as hired industry experts and talented sales people. IInvestors and shareholders judge the value of a company on the basis of the attractiveness of the market it addresses, its corporate strategy, as well as the management s ability to implement that strategy successfully. Nobel Biocare shares performed very well in As a result, we were able to regain a substantial portion of the shareholder value that was lost in the previous year. This favorable performance bears witness to the trust that has been placed in our company, but it also reflects the expectations shareholders have of us. We are conscious of that challenge and we can assure you that we will make every effort to solidify Nobel Biocare s Number one position in the dental industry. We operate in one of the most attractive segments of the healthcare sector and are present in this market with leading technologies, products and services. Moreover, we are the only company that can offer comprehensive solutions for the entire spectrum of dental indications. We invest in the development of new products and treatment procedures, even as we actively enhance and renew our existing product portfolio. We enter into partnerships with leading companies and research institutes in order to introduce a continual flow of new technologies and treatment procedures. Our eye is on improving the cost efficiency, competitiveness and profitability of Nobel Biocare. We tackle these tasks with determination and perseverance. As 2010 gets underway, signs of recovery are emerging in a number of the world s economies. However, it cannot be determined with sufficient certainty whether or not the cyclical trough is actually behind us. Nobel Biocare is planning on the assumption that the current situation remains fragile and is mainly underpinned by state-sponsored economic stimulus packages. In the dental market, which also

14 10 Nobel Biocare Annual Report 2009 Annual review depends on patients purchasing power, we anticipate that 2010 will witness a recovery. However, just how strong it might be is impossible to say at this point. I would like to thank you, our shareholders, on behalf of the entire Board of Directors and Executive Committee for your loyalty in what has indeed been a challenging year for all of us. We will continue to do our best to earn your continued trust by achieving commercial progress. In particular, we would also like to thank our employees for their great commitment. And not least of all, our thanks goes to the customers of Nobel Biocare for their partnership, as well as to the patients for the confidence they have in our products. Sincerely Domenico Scala Chief Executive Officer

15 Financial performance 11 Financial performance. Despite a challenging market environment, Nobel Biocare maintained strong profitability and generated a record cash flow. At the same time, major investments in the product portfolio have laid the groundwork for future growth. In 2009, Nobel Biocare generated total revenues of EUR million worldwide, 6.1 percent below the prior-year level. Adjusted for currency changes, the decrease versus 2008 was 7.7 percent. Reported operating profit (EBIT) was EUR million, or 3.2 percent lower than in the previous year (EUR million). The Group s EBIT margin before restructuring charges improved slightly to 24.4 percent despite lower sales. The reported EBIT margin also improved slightly to 22.1 percent from 21.5 percent in Restructuring charges amounted to EUR 13.0 million. The company s 2009 net profit declined only 3.6 percent to EUR million compared to EUR million in The decline in net profit was almost completely counterbalanced thanks to a lower tax rate and the cost saving measures that have been introduced. In that 2009 represented one of the most difficult years ever for the tooth replacement market, these overall results are to be viewed as favorable. Revenue development Lower consumer confidence led to a lower patient flow and the postponement of treatments in most markets. A lack of available financing in several markets added to the decreased demand for dental treatments. In most of the company s markets, dental treatments are not covered by insurance and therefore must be financed. North America, Spain and the UK were the markets hardest hit by the economic crisis. Given the high percentage of its business generated in North America and Spain, the Group suffered from an unfavorable country mix. It is therefore notable that the Group s revenues actually managed to develop in line with the dental implant market as a whole. Year-on-year growth was minus 6.0 percent in North America, minus 7.4 percent in the Europe, Middle East and Africa (EMEA) region and minus 5.1 percent in Asia Pacific (APAC). The initial signs of stabilization observed in the third quarter were confirmed in the fourth quarter of The sequential improvement was led by North America (plus 7.4 percent versus Q4 2008) and Asia Pacific (plus 2.1 percent versus Q4 2008) and followed by EMEA (minus 1.5 percent versus Q4 2008). Profitability: Gross profit and operating profit Despite the sudden and rapid deterioration of the markets in which Nobel Biocare operates, the Group managed to successfully protect its profitability both at the gross profit and operating profit margin (EBIT) level. Foresighted management actions to reduce costs, increase efficiency and reduce the number of selling units enabled the Group to maintain strong profitability despite declining revenues. As a result, the gross profit margin improved slightly to 80.6 percent before restructuring (80.5 percent as reported, versus 79.7 percent as reported in the previous year), and the reported EBIT margin improved to 22.1 percent (2008: 21.5 percent). Excluding restructuring charges, the 2009 EBIT margin was 24.4 percent (2008: 24.1 percent excluding exceptional items). Overall, currency management and development had a positive impact on both the gross profit and the EBIT margins. Foreign currency translation led to an approximate 0.3 percent improvement in the gross profit margin and added 1.3 percentage points to the EBIT margin. Net profit In 2009, net profit came in at EUR million (2008: EUR million), and was only 3.6 percent below the prior year. Reduced costs and a lower tax rate almost fully offset the decline in revenues and gross profit. As a result, the net profit margin improved slightly from 17.7 percent in 2008 to 18.2 percent in The reported earnings per share (EPS) was EUR 0.86 (2008: EUR 0.90). Investments in the future While the Group managed to reduce its cost base in line with the lower revenues, it nevertheless continued to invest substantially in the future. Over the past two years, Nobel Biocare has invested roughly EUR 200 million in the development of NobelProcera, the acquisitions of BioCad, Medicim and Alpha-Bio Tec, as well as its ongoing in-house R&D activities. The objective of these investments is not only to ensure the Group s leading position as a full-solution provider of implants and abutments, prosthetics and digital

16 12 Nobel Biocare Annual Report 2009 Annual review dentistry, but also to be the partner of choice for dental professionals and laboratories. Cash flow development and liquidity The Group s operating cash flow also developed favorably despite a difficult market environment, which led to lower revenues. The Group achieved a record operating cash flow of EUR million (2008: EUR million) thanks to a reduction in working capital. As a result, the Group holds significant cash reserves of EUR million (2008: EUR million) and was successful in negotiating a three-year syndicated banking facility of EUR 330 million during what was indeed a challenging funding environment. Dividend proposal The Board of Directors will propose to the Annual General Meeting the payment of an unchanged dividend of CHF 0.55 for each CHF 0.40 par value registered share. This corresponds to a payout ratio of 43 percent (previous year: 41 percent).

17 2009 was an eventful year. During the past twelve months, Nobel Biocare invested in its future and focused on building the most versatile portfolio for complete tooth restoration. The company laid the groundwork for becoming the world s leading dental company one that offers dental professionals the most advanced, integrated solutions for all indications. One that supports its customers in all aspects of the treatment process. And one that puts the needs of patients at the heart of its efforts. In 2009, Nobel Biocare moved an important step closer towards its goal: to be the partner of choice in dentistry.

18 Chicago, 02/2009: NobelProcera launched. NobelProcera technology for new-generation CAD/CAM dentistry was introduced at the 144 th Annual Chicago Dental Society s Midwinter Meeting, the largest dental show in North America. For the first time, conoscopic technology was employed in an optical scanner. NobelProcera combines cutting-edge 3D design software with new materials and products. Nobel Biocare now delivers individualized prosthetic solutions for every indication.

19 Cologne, 03/2009: A new brand experience. Nobel Biocare presents a new corporate brand at the 33 rd International Dental Show (IDS) the industry s largest exhibition. Over visitors from more than 130 countries could take an in-depth look at the most versatile product portfolio on the market today. They experienced how we combine our latest technology, product, and material advancements into full treatment solutions.

20 Yorba Linda, 07/2009: Enhanced manufacturing p e r f o r m a n c e. In Summer 2009, Nobel Biocare launched the Ultra Plant concept into operations in Yorba Linda, California (USA). This new manufacturing concept combines full digitization with continuous flow production. The new plant harnesses the latest techniques, processes, and technology to produce dental implants with shorter lead times, while guaranteeing high levels of service and quality.

21 Mahwah, 07/2009: Training for the future. Nobel Biocare supports its NobelProcera CAD/CAM technology with a comprehensive training program. This summer, key dental specialists and laboratory customers as well as specialized sales and support staff gathered at the NobelProcera Innovation Center in Mahwah (picture above) to experience high quality manufacturing processes firsthand. They tested the latest NobelProcera innovations and learned about the revolutionary new product and technology platform.

22 Tokyo, 08/2009: Full customer dedication. 2'700 participants attended the Nobel Biocare Esthetic Forum in Tokyo, the largest event ever held by a dental company in Japan. Renowned Japanese and international dental experts discussed the very latest treatment modalities from less invasive, immediate loading concepts to leading-edge CAD/CAM technology. We shared insights and expertise with our partners. And put the customer at the center of everything we do.

23 Worldwide, 24/7: Strength from people. Our strength comes from our people s skill and dedication. We place a strong emphasis on common values, specialist knowledge and customer needs. This reinforces our customer-focused business model and innovation-driven corporate culture. During 2009, sales and service people worldwide have received the latest customized training for their functions. This underscores Nobel Biocare s commitment to have the best-trained, best-qualified staff in the industry.

24 Monaco, 09/2009: NobelActive success c o n t i n u e s. NobelActive was presented to over 4'000 participants at the EAO in Monte Carlo. It is the most successful product introduction in our history. With close to 300'000 implants sold to date, NobelActive continues to attract new customers every day. It also won acclaim among clinicians, who voted it Best Product 2009 on the peer review platform Dental Product Shopper (DPS).

25 Worldwide, 24/7: Ensuring uncompromised quality. Ensuring quality is of highest importance at Nobel Biocare. Thus, all products manufactured at Nobel Biocare s production sites are CE-certified and FDA-approved. BSI audits assure that global quality standards are maintained worldwide. Pictured above are controllers inspecting the quality of prosthetic components at the NobelProcera production site in Tokyo, Japan.

26 Yorba Linda, 09/2009: Dedicated customer support. To be a full solution provider not only means to offer a comprehensive range of products, but also to guarantee full customer service and support at all times. Our Yorba Linda site in Southern California which encompasses a standardized manufacturing plant, a large customer service center and a Training and Eduction facility delivers all these services from one single hand, at one single site.

27 Gothenburg, 10/2009: Committed to scientific excellence. 200 of the world s leading healthcare and dental experts gathered to exchange their knowledge and experience at the first P-I Brånemark Scientific Symposium. They engaged in a rich program of discussions focused on science and quality of life. And they charted the course of future developments in restorative and esthetic dentistry. The next Brånemark Symposium is planned for 2011.

28 Worldwide, 24/7: The only full solution provider. We endeavor to be the partner of choice for dental professionals worldwide. We are the only dental company to offer the entire range of standardized implants and abutments, individualized prosthetics, guided surgery solutions, as well as advanced materials, and to combine this with customer support, customized training and scientific expertise. We are the full solution provider in the industry for the benefit of dental professionals, and for the well-being of their patients.

29 25 Business presentation. Market and strategy 26 Research and development 29 Products 32 Operations 42 Corporate social responsibility 44 Employees 46

30 26 Nobel Biocare Annual Report 2009 Business presentation Market and strategy shaping industry trends. Tooth replacement is one of the most attractive markets in healthcare and offers attractive potential for sustainable, profitable growth. Nobel Biocare s strategy aims to leverage this potential by offering complete solutions for every patient indication. Properly functioning teeth are essential for a good quality of life. They enable people to eat a balanced diet, speak properly, prevent the resorption of jaw bone and maintain normal facial appearance. Yet worldwide, millions of people are affected by tooth loss, edentulism or periodontal disease. The main reasons for tooth loss are deficient care, accidents and illness. In the 1960s, the discovery of osseointegration engendered a quantum leap in the development of modern dental restorations. Today, dental implants are considered the solution of choice for the replacement of missing teeth, as they also help improve oral esthetics. Advanced implant and toothretained dental restorations are suitable for single, multipletooth as well as for partly or fully edentulous indications and demonstrate high survival rates and longevity. Aside from the replacement of teeth with implants, modern prosthetics complement the restorative options for missing or damaged teeth. Prosthetics can be tailor-made in terms of design, material and color to meet the specific clinical and esthetic needs of patients. Also, the development of implant-retained dentures offers new, cost-effective treatment options that cater to the needs of partly or fully edentulous patients. The tooth replacement market The tooth replacement market can be divided in two segments: standardized products such as dental implants and abutments; and individualized (CAD/CAM-based) dental prosthetics, such as crowns, bridges, abutments and overdentures, which are manufactured according the individual needs of patients. Both segments also encompass components for the placement of dental implants, e.g. drill kits, or equipment such as milling units, software and scanners for the design and production of individualized solutions. In 2008/9, the size of the dental implant market was estimated at around EUR 2.1 billion, excluding components. The size of the dental CAD/CAM market, including crowns and bridges and the respective manufacturing equipment, was approximately EUR 1 billion. This corresponds to a current total addressable market in excess of EUR 3 billion. In view of upcoming product launches like overdenture bars, temporary acrylic solutions and new, metal-based prosthetic solutions made of chrome cobalt or titanium, Nobel Biocare is in the process of doubling the addressable market as we tap the market for conventional crown and bridges. During much of this decade, both the dental implant and CAD/CAM market segments posted estimated growth rates well above 10 and 20 percent, respectively. However, in response to the recent global recession that evolved from the financial crisis, growth rates plunged and were in negative territory during the 2009 financial year 1. This is primarily because most dental restorations are patient-funded, with very little if any coverage being afforded by insurers. Hence, the level of disposable income is crucial in this regard, as it can translate into patients postponing or abstaining from treatments, especially when economic prospects are uncertain. With large disparities in disposable income, an estimated 6 to 10 percent of the world s population is edentulous. It goes without saying that vast potential lies in the market for treating those people. In the United States alone, more than 20 million people are believed to be missing all their teeth. Fundamentals and drivers Despite the recessive global economy witnessed in 2008 and 2009, the fundamentals of the tooth replacement market remain intact. The very low current use of advanced dental solutions, illustrated by extremely low dental implant penetration, and demographic developments in terms of a rapidly aging Western society, together represent a driver that will keep demand for tooth replacements and restorations high over the coming years. The restorative and esthetic dentistry market is becoming equally attractive. Advancements in minimally invasive treatment concepts and natural-looking esthetics as well as innovative materials open up new treatment options and address the increasing importance of lifestyle and beauty as

31 Market and strategy 27 Market overview implants and abutments. Market positions in Nobel Biocare 2 Straumann 3 Biomet 3i Zimmer Dental Other Astra Tech Dentsply essential elements in the modern understanding of quality of life. Rising awareness of the possibilities afforded by modern dental solutions represents a societal trend that can be seen in the increasing number of treatments and minimally invasive surgeries undergone by patients of all ages, on every continent. Customer and industry trends General practitioners and oral surgeons respond to a market downturn by increasing their range of treatments and broadening their solutions portfolio. At the same time, dental laboratories look for ways to increase their efficiency and flexibility by reducing their labor time and by expanding their technological capabilities, without incurring large upfront investments. Both trends work in favor of Nobel Biocare, in that we represent a single source for all the available treatment options. NobelProcera offers clinicians the largest portfolio of dental products for all indications requiring effective treatment. These products enable dental laboratories to reduce their operating costs through outsourcing options such as central milling, which requires only a fraction of the investment involved in conventional systems. The need for effective and minimally invasive treatments, as well as the partial outsourcing of production from dental laboratories to industrialized providers, are two factors that are driving new advancements in dentistry. This is evidenced by the growing popularity of digital treatment planning and guided surgery solutions, and the growing digitization of the dental value chain. Competitive landscape On one hand, the tooth replacement industry encompasses a small group of premium providers that drive innovation, provide high-quality dental restorations backed by scientific research, and offer training for dental professionals. Within this group, Nobel Biocare differentiates itself by providing integrated, comprehensive treatment solutions for all indications, while most of its competitors only market selected products and components. On the other hand, there is a growing number of smaller companies that focus only on specific products and compete mainly on a price basis. They often emulate premium-brand products, yet provide limited support and offer little if any scientific documentation on their products. Regional differences National or regional dental markets are extremely diverse and shaped by many socioeconomic factors, such as the number of people with missing teeth, purchasing power, dental education level, dentist penetration and health insurance coverage for implant or prosthetic treatments. In the Europe, Middle East and Africa (EMEA) region, Nobel Biocare is a leading provider and is locally represented in 20 countries. Overall implant penetration is still low in most markets, but it varies greatly when expressed as a percentage of all tooth replacements made: from 23 percent in a mature market like Italy, to only 2 percent in the United Kingdom 2. Moreover, most European markets have only limited reimbursement schemes for advanced dental treatments. Nobel Biocare is the market leader in North America, the world s largest dental market. Sizeable segments of the US population have considerable purchasing power and are well informed about the possibilities for restorative and esthetic treatments. Lately, large insurance companies have started to cover implant treatments in their schemes, a development that is likely to have a positive influence on future sales. However, the US economy and thus American consumers were hardest hit by the mortgage crisis and subsequent de-leveraging of personal balance sheets, which in turn exerted a disproportionately large negative impact on the dental industry. Aside from North America and Western Europe, Nobel Biocare is also well positioned in Asia and the emerging economies of Eastern Europe. These dynamic economies are characterized by large urban populations and increasing purchasing power, factors which have fuelled the impressive growth rates of recent years. Despite substantial market fragmentation due to the unequal distribution of wealth, great potential lies especially in the BRIC markets (Brazil, Russia, India and China) due to the very low penetration of modern dental solutions. Nobel Biocare is a leading provider in the high-end market segments of the BRIC countries. Moreover, in Russia Nobel Biocare holds an approximate 40 percent share of the implant market. But also in highly developed markets such as Japan, where there is great demand for high-end restorative and esthetic solutions, Nobel Biocare commands a leading position, holding over one third of the dental implant market.

32 28 Nobel Biocare Annual Report 2009 Business presentation Crown and bridges market. Total market size: 4bn EUR CAD/CAM market. Total market size: 1bn EUR 3 Conventional crown and bridges 3.5bn EUR CAD/CAM crown and bridges 0.5bn EUR CAD/CAM equipment 0.5bn EUR Business strategy Since 2008, we have been taking the fundamental steps necessary to realign our strategy and organization in a way that puts us in the best possible position to benefit from a global economic recovery. As the market leader in restorative and esthetic dentistry, we are in the privileged position of being able to actively shape and steer industry trends. Thus, the main thrust of our strategy is to fully leverage the full solution provider concept and foster digitization in the dental value chain. Nobel Biocare is committed to bringing innovation to dental healthcare through the development of solutions that deliver substantial benefits to our customers i.e. dental professionals and their patients. We strive to achieve this by providing solutions from tooth to root, for every indication: from single-tooth small cases to fixed and removable dentures for edentulous patients. In doing so, we have focused over the past two years on complementing our product and service portfolio, especially in the area of prosthetics, and thereby made it the most comprehensive available in today s market. Nobel Biocare s product range encompasses parallel-walled and tapered bone- and tissue-level implants; temporary, healing and final abutments; the entire range of individualized, CAD/CAM-based abutments, crowns, bridges and laminates in different materials; as well as guided surgery solutions and, scanners and biomaterials. Given the breadth of this spectrum, Nobel Biocare has the unique ability to combine, interchange or substitute its products and thereby assemble the optimal solution for each individual indication while simultaneously guaranteeing high quality and compatibility. This unparalleled flexibility puts us in a leading position within the industry. References 1 MRG 2008, broker reports, Nobel Biocare estimates 2 Broker reports, Nobel Biocare estimates 3 MRG 2008, broker reports, Nobel Biocare estimates

33 Research and development 29 Research and development leading through innovation. Nobel Biocare builds on a rich heritage of research in restorative and esthetic dentistry. Two innovations form the basis for our commitment to developing safe and effective dental solutions the discovery of osseointegration, and NobelProcera. Our mission statement underscores our belief that sciencebased innovation is both the driving force in our industry, and necessary for empowering our customers to make real and lasting differences to their patients well-being, which is our ultimate goal. To realize this goal, we focus our efforts on engineering, materials and life science solutions that regenerate patients natural structures and physiology, restore or reconstruct their natural dentition, and optimize the success of dental therapy by replacing the root structure as needed. Subsequently, we are continuously aligning, optimizing and expanding our product portfolio to satisfy the requirements of our customers and their patients. Supplementing our own Research and Development (R&D) activities is an international network of collaborations with leading healthcare and dental universities, institutes and partner companies. The Nobel Biocare University Partner Program (NBUPP) currently consists of 22 world-leading dental universities, which are supported through funds and educational material relating to implantology and advanced prosthetics. In 2009, the University of Sheffield, UK, joined the program. Research and development activities at Nobel Biocare embrace basic research like material characterization and testing, the development of implants and prosthetic products, and the design of complete solutions and surgical treatment concepts. Moreover, our research and development initiatives are supported by pre-clinical studies as well as clinical research and post-market surveillance. This breadth of research is necessary to comply with our high-scientific standards and guarantee that every Nobel Biocare solution introduced to the market is thoroughly tested and backed by scientific documentation. A heritage of innovation Nobel Biocare builds upon a 40-year heritage of dental research, which has produced many innovations that have become standards within the dental industry: We can trace our scientific heritage back to 1952, when Professor Per-Ingvar Brånemark discovered that titanium integrates with bone. This process, which he termed osseointegration, revolutionized dentistry and created modernday dental implantology. In the early 1980s, Dr Matts Andersson began developing a method for standardizing the production of dental prosthetics using computer-aided design and computer-assisted manufacturing. His result was originally called Procera, an innovative CAD/CAM system for creating individualized dental prosthetics. Today, NobelProcera is a market leader for innovative, esthetic, and precision of fit CAD/CAM prosthetics. Structuring the surface of titanium dental implants with a thick, porous titanium oxide coating using spark anodization began in the early 1980s (Kurze et al. 1984, Neupert et al. 1986). In the late 1990s, Nobel Biocare developed its own process for growing titanium oxide in a predictable and controlled manner, in order to render a biomaterial that promotes rapid bone growth and faster osseointegration TiUnite (Albrektsson et al. 2000, Gottlow et al. 2000). Today, all Nobel Biocare dental implants feature this unique surface. Finally, in 2005, we launched a new concept that integrated all our solutions NobelGuide. This integrated treatment concept combines diagnostics, planning and guided dental implant rehabilitations with increased predictability, patient comfort and superior esthetic results. R&D objectives Nobel Biocare s research and development philosophy is founded on three pillars, with the ultimate goal of improving patient quality of life through new products, full solutions and innovative treatment concepts. These three pillars focus on: Developing innovative products and solutions to meet the needs of dental professionals by following patients varying esthetic and functional demands.