Annual report 2014 of the Galenica Group and Galenica Ltd.

Transcription

1 Full Version Annual report 2014 of the Galenica Group and Galenica Ltd. The Galenica Group excellence in the healthcare market

2 2 Galenica Group Milestones 2014 January February March April Code of Conduct To assume the responsibility for sustainability regarding procurement, Galenica has developed a code of conduct for its suppliers which is valid throughout the Group. Maltofer turns 50 Maltofer, the drug developed in St. Gallen, was first launched in Peru on 7 February 1964 and is now available to patients in more than 80 countries. AllergyCheck Amavita and Coop Vitality pharmacies have been offering a test checking for allergies since 1 March throughout Switzerland. The ten most common respiratory allergy triggers are tested. Vascular check The Galexis vascular check enables pharmacists to provide their customers with important information on the condition of their blood vessels within five minutes. May June July August Annual General Meeting Health Day Ferinject New Vision In 2014, the Board of Directors of Galenica Ltd. already submitted the amendments to the Articles of Association, required by the VegüV, to the Annual General Meeting for its resolution. On the third Swiss Health Day, everyone interested had the opportunity to get a free health check in their Amavita pharmacy. The results of the CONFIRM-HF study demonstrate that Ferinject improves exercise capacity in patients with chronic heart failure. A new management structure with two CEOs focuses on the development of Vifor Pharma and Galenica Santé with the vision of creating two independent listed companies. September October November December Velphoro Groundbreaking Compliance Opinio After Velphoro received EU marketing authorisation at the end of August, preparations ran at full speed in September for the first European launch, which took place in Germany in October. The groundbreaking ceremony for the extension of the Galexis Niederbipp site took place on 13 October. An investment for 3,300m 2 storage space or 9,000 additional articles respectively. With the web-based Senaca system, MediService supports patients in adapting their lifestyle habits in a structured and planned way. 61% of employees completed the Group-wide employee survey; employee motivation shows a pleasing 73 points out of 100.

3 Content Galenica Group 3 Annual Report 2014 Galenica Group 4 Key figures of the Galenica Group 6 Statement by the Executive Chairman Mastering high hurdles together Last summer, Vifor Pharma completed a further inspection by the US Food and Drug Administration (FDA). We take a look behind the scenes of this successfully mastered challenge in brief 18 Vision, mission, values and strategy 22 A working day at Galenica 54 Corporate Governance 70 Remuneration report 84 Sustainability 98 Human Resources Reporting Comprehensive healthcare service partner Swiss healthcare is continuously changing and with it, the needs and demands of patients. Galenica Santé is confronting these changes as a diversified group with specialist services Foreword CEO Vifor Pharma 26 Vifor Pharma 36 Foreword CEO Galenica Santé 38 Retail 42 Logistics 46 HealthCare Information Coverage 32 Mastering high hurdles together 50 Comprehensive healthcare service partner Financial Statements Galenica Group 170 Galenica Ltd. Annex 178 Glossary 184 Addresses of companies of the Galenica Group

4 4 Galenica Group Key figures of the Galenica Group ) Key figures are reported for each Business unit not taking into account Corporate and eliminations Net sales 1) by Business unit in million CHF Net sales by region in million CHF Number of employees Galenica Group 3,416.3 Galenica Group 3,416.3 Galenica Group 7,712 Galenica Group Vifor Pharma CHF million Galenica Santé CHF 2,781.9 million Switzerland CHF 2,892.4 million Europe CHF million Americas CHF million Other countries CHF 69.0 million Galenica Ltd. 43 Vifor Pharma 1,952 Galenica Santé 5,717 EBITDA 1) by Business unit in million CHF EBIT 1) by Business unit in million CHF Net profit in million CHF Galenica Group Galenica Group Galenica Group Vifor Pharma CHF million Galenica Santé CHF million Vifor Pharma CHF million Galenica Santé CHF million Attributable to shareholders of Galenica Ltd. CHF million Share of minority interests CHF 27.5 million in million CHF 2014 Excluding one-time effects 2013 Change Including one-time effects Net sales 3, , % 3, % Personal costs % % EBITDA % % in % of net sales 13.1% 13.2% 13.9% EBIT in % of net sales % % +0.7% % Income taxes % % Net profit Attributable to shareholders of Galenica Ltd. Share of minority interests % +10.4% 28.8% Change 5.2% 6.8% 4.0% 28.8% Investment in property, plant and equipment and intangible assets % Investment in R&D % Employees at reporting date (FTE) 6,348 6, % Cash flow from operating activities % Total assets 3, , % Shareholders equity 1, , % Equity ratio 54.6% 50.7% Net debt % Gearing 19.5% 28.1 %

5 Key figures of the Galenica Group Galenica Group 5 Share price performance in percent 2,400% 2ʼ400% 2ʼ100% 2,100% 1,800% 1ʼ800% 1,500% 1ʼ500% 1,200% 1ʼ200% 900% Swiss Performance Index (SPI) 600% 300% 0% % +2,000% total shareholder return p.a. from 1995 (start of transformation strategy) to 2014 cumulative growth in the share price from 1995 (start of transformation strategy) to 2014 Share information in CHF Share price at reporting date Highest share price for the year Lowest share price for the year Stock exchange capitalisation at reporting date in million CHF 5, ,815.4 Earnings per share 1) ) Shareholders equity per share 1) Gross dividend per share ) Pay-out ratio 3) 34.2% 30.6% Price-earnings ratio 4) ) Attributable to the shareholders of Galenica Ltd. 2) According to Board of Directors proposal to Annual General Meeting on 7 May ) Gross dividend in % of net profit per share 4) Net profit per share in relation to the stock exchange rate at reporting date 5) CHF without taking into account the positive one-time effects % gross dividend per share in CHF pay-out ratio earnings per share in CHF

6 6 Galenica Group One Group, two strategies and the vision of creating two independent listed companies Etienne Jornod The announcement of a possible division of the Galenica Group is based on the performance of our activities over recent months and comes after 19 consecutive years of average double-digit growth in Group profit annually, along with a rise of about 2,000% in company value over this period % profit growth after deduction of minority interests +2,000% cumulative growth in the share price from 1995 (start of the transformation strategy) to 2014 Dear Shareholders, Ladies and Gentlemen, The year 2014 has been marked by two key developments in particular. Firstly, we have made excellent progress in our pharmaceutical activities: following FDA approval of Injectafer and its commercialisation in the USA since the second half of 2013, this market is already today a significant growth driver for this strategically important product. In March 2014, our novel phosphate binder Velphoro was also launched in the USA, and was brought to market in the first European countries in the fourth quarter of the year, following EU authorisation. Secondly, in August we introduced a new management structure, starting a new phase in the long-term Galenica journey: one Group, two strategies and the vision of creating two independent listed companies within three to five years. Since 1995, the Galenica Group has undergone a transformation based on a strategy that we have implemented systematically and with success. Today, Galenica consists of more than 7,700 employees, all of whom have contributed to the fact that today we: are the world leader in iron deficiency therapy; have a solid position in the markets for nephrology and immunostimulants; stand for the largest network of pharmacies in Switzerland and are the leading logistics partner with state-of-the-art infrastructure and innovative services in the field of scientific information related to medicines.

7 Statement by the Executive Chairman Galenica Group 7 The Galenica journey continues Ferinject expansion Velphoro penetration Six other projects Stock exchange revolution Alliance Boots partnering US Venofer explosion Pharmacy chain revolution Vifor Pharma Ltd. (Listed) Galenica Santé Ltd. (Listed) Specialty Pharma Aspreva, OM Pharma, Sun Store Sales Affiliates Venofer in the USA Vifor Fresenius Medical Care Renal Pharma Culture shock Restructuring Dispensing doctors Iron/OTC The announcement of a possible division of the Galenica Group is based on the performance of our activities over recent months and comes after 19 consecutive years of average double-digit growth in Group profit annually and a rise of about 2,000% in company value over this period. The Board of Directors wanted to take all necessary measures to ensure the success of this new period so crucial for our future. The appointment of two CEOs to run the Group is a concrete sign of the willingness to make structural changes at the highest executive level. Important organisational modifications have been made in recent months, all of which are already fully operational. Galenica Santé: further development of existing strengths in a targeted manner With the appointment of Jörg Kneubühler as CEO, Galenica Santé has a very experienced management team with an impressive track record, which will be needed to handle future challenges successfully. The main objectives are to further develop the existing strengths of Galenica Santé in a targeted manner and to enhance and benefit from the important potential for synergies. Vifor Pharma: after a phase of product registrations, the top priority is now to fully exploit the commercial potential of key growth drivers For Vifor Pharma, the objective has been to strengthen the management team and create a culture which is even more entrepreneurial and market-focused. Under the leadership of the new CEO Søren Tulstrup, senior executives with broad international experience have been hired from US-based specialty pharma companies. Vifor Pharma is now shifting from a phase of new drug registrations to commercialisation, with international markets as the top priority. We assume that the Group will probably divide within the next three to five years, maybe earlier if the two entities achieve the necessary critical size in the meantime. Otherwise, the Group stays as it is now. The new phase does not change our values and principles: we are not looking for shortterm profit. We are pursuing our long-term strategy systematically and consistently. We hope that our existing and new shareholders support us in this regard. This is the key to success. We would like to thank them for their trust. Etienne Jornod Executive Chairman

8 8 Galenica Group 2014 in brief

9 2014 in brief Galenica Group 9 Galenica Group Strategy: one Group, two strategies and the vision of creating two independent listed companies The Galenica Group is a diversified healthcare company and, with all its activities, a leading partner in the healthcare sector. The Group operates two Business units: Vifor Pharma, covering international pharma activities, and Galenica Santé, providing services mainly to the Swiss healthcare market. Both Business units operate independently and are successful, solid and profitable. They develop in a focused and successful way, sustainably and with the vision to achieve the critical size to become two listed and stand-alone companies. Business units Vifor Pharma Galenica Santé Business sectors Retail Logistics HealthCare Information Key figures 2014 Net sales: CHF 3,416.3 million EBITDA: CHF million EBIT: CHF million Net profit: CHF million Employees: 7,712 (6,348 full-time equivalents) Highlights of 2014 Following FDA approval of Injectafer and its commercialisation in the USA since the second half of 2013, this market has already become the one with the strongest sales. In March 2014, the novel phosphate binder Velphoro was also launched in the USA, and, after EU authorisation at the end of August, was brought to market in the first European countries in the fourth quarter of the year. Galenica Santé asserted itself very well in a stagnating market and launched additional new services. In August, a new management structure was introduced to support the vision of developing Vifor Pharma and Galenica Santé into two independent listed companies within three to five years. In 2014, the Galenica Group realised consolidated net sales of CHF 3,416.3 million (+1.7%). On a comparable basis, consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 0.8% to CHF million, earnings before interest and taxes (EBIT) by 0.7% to CHF million and net profit increased by 5.3% to CHF million before deduction of minority interests, and by 10.4% to CHF million after deduction of minority interests. Taking into account the positive onetime effects due to IAS 19 and the settlement of an international tax case in 2013, EBITDA declined by 4.2%, EBIT by 5.2% and net profit by 6.8% before deduction of minority interests, and by 4.0% after the deduction of minority interests. However, the one-time positive effects of CHF 23.1 million on 2013 EBITDA and EBIT and of CHF 38.6 million on net profit before and after deduction of minority interests only impacted the consolidated earnings of the Group, and not the earnings of the Business sectors. Galenica continued to invest in research and development, with CHF million (previous year: CHF million) for projects including clinical studies with Ferinject. Investments in property, plant and equipment and intangible assets totalled CHF 70.0 million (previous year: CHF 71.7 million). Outlook for 2015 Vifor Pharma is now shifting from a phase of new drug registrations to commercialisation, with the focus on international markets. The top priority is to fully exploit the commercial potential of key growth drivers, especially Ferinject /Injectafer. Galenica Santé will further develop its existing strengths in a targeted manner and enhance and benefit from significant potential for synergies. It is also planned to transfer the Vifor Pharma Consumer Healthcare activities that are primarily focused on the Swiss market into the Galenica Santé Business unit by mid % net profit increase compared to the previous year

10 10 Galenica Group Business unit Vifor Pharma 63 number of countries in which Ferinject was registred in 2014 Strategy: become an independent specialty pharma company Vifor Pharma is an international specialty pharma company that researches, develops, produces and markets its own pharmaceutical products. The company has three main areas of focus: iron deficiency with and without anaemia, infectious diseases/ OTX products and Consumer Healthcare (OTC, over-the-counter). Activity With its iron replacement products Fer inject /Injectafer, Venofer and Maltofer, Vifor Pharma is a leader in the treatment of iron deficiency, a widespread ailment around the world. The product portfolio is completed by Velphoro, a new drug developed by Vifor Pharma, to effectively control phosphorus levels in the blood for patients with chronic kidney disease on dialysis. To gain rapid and direct access to the various international markets, Vifor Pharma works through its own sales affiliates as well as with partners. The immuno-stimulant products Broncho-Vaxom and Uro-Vaxom supplement the portfolio of Vifor Pharma and offer potential for expansion. The Consumer Healthcare sector manufactures and markets over-the-counter products developed by Vifor Pharma, as well as products manufactured or sold under licence. Vifor Pharma plays a leading role in the area of non-prescription medicines in Switzerland.

11 2014 in brief Galenica Group 11 Highlights of 2014 The lead product Ferinject expanded further, with growth in existing markets and launches in new territories. The USA, where the drug is branded Injectafer, has now become the market with the strongest sales. The new phosphate binder Velphoro was launched in March 2014 in the USA by partner Fresenius Medical Care North America, followed by market approval by the European Medicines Agency (EMA) and the ensuing first launches in Europe in the second half of At the end of November, the Japanese partner Kissei Pharmaceutical Co., Ltd. filed an NDA for PA21 (Velphoro, brand name in the USA, Europe and Australia) in Japan. After a solid performance in 2013, Vifor Pharma Consumer Healthcare had a challenging Switzerland experienced the lowest level of flu incidence in the last four years, and the rainy summer impacted key product Anti-Brumm in particular. Outlook for 2015 The clearly stated aim is to develop Vifor Pharma into a successful stand-alone specialty pharma company. In 2015, the company will further adapt the organisation to become more effective and efficient. A clear focus will be on Ferinject and Injectafer. While the results achieved in the USA so far are promising, the uptake will take time and investments in market education are crucial. The focus of partner Fresenius Medical Care will be on the continued roll-out of Velphoro in the USA and Germany as well as further international expansion in Europe, Asia-Pacific and South America. Consumer Healthcare expects a more positive year in 2015 thanks to both organic and external growth. Companies Vifor Pharma Ltd., Sales affiliates OM Pharma SA, Vifor Fresenius Medical Care Renal Pharma Ltd. Key figures 2014 Net sales: CHF million EBITDA: CHF million EBIT: CHF million Employees: 1,952 (1,867 full-time equivalents) Activities of Vifor Pharma Iron replacement products Vifor Fresenius Medical Care Renal Pharma Ltd. Infectious Diseases/ OTX Consumer Healthcare Production for third parties (contract manufacturing) Focus on iron deficiency with or without anaemia. Key products: Ferinject / Injectafer, Venofer and Maltofer. Therapeutic areas: haemodialysis, non-dialysis chronic kidney disease (ND-CKD), cardiology, oncology, obstetrics and gynaecology, gastroenterology, patient blood management, women s health and paediatrics. Comprehensive clinical and scientific development programme in place. Strategic partnership between Galenica and Fresenius Medical Care. Key products: Velphoro, a non-calcium, ironbased phosphate binder to improve control of phosphate levels in dialysis patients; Venofer and Ferinject /Injectafer in the field of dialysis and pre-dialysis (CKD stage III V). Includes products for brain function and development, ear care, abdominal distension, chronic obstructive pulmonary disease, respiratory tract infections, lower urinary tract infections, chronic venous insufficiency, diabetic retinopathy, haemorrhoids, menometrorrhagia or heavy menstrual bleeding. Key products: Broncho-Vaxom, Uro-Vaxom, Doxium, Dicynone, Otalgan and Aero-OM. Manufactures and markets non-prescription drugs (over-the-counter products) developed by Vifor Pharma or sold under licence. Vifor Pharma plays a leading role in its home market Switzerland with key brands such as Algifor, Triofan, Perskindol or Anti-Brumm. Development and production of products for third parties. Diversified manufacturing equipment for the production of solid, semisolid and liquid forms.

12 12 Galenica Group Business unit Galenica Santé Business sector Retail 491 own and partner pharmacies are part of the pharmacy network of Retail Strategy: innovative and integrated The Retail Business sector manages the leading Swiss pharmacy network. It is the intention of the Retail Business sector to play an active role in shaping the future of the deregulated and rapidly changing Swiss pharmaceutical market. With its different pharmacy formats, Retail is one of the most important partners for the various players in the healthcare market. Innovative and attractive services meet rising customer demands. Activity The pharmacy network of the Retail Business sector is the largest in Switzerland, with 318 Group-owned stores and 173 partner pharmacies. The network comprises the Amavita and Sun Store pharmacies, which are managed directly by Retail, the Amavita partner pharmacies, which are integrated under a franchise concept, as well as the Coop Vitality pharmacies, which are operated as a joint venture with Coop. The MediService specialty pharmacy focuses specifically on home healthcare for people with chronic illnesses. The brand name Feelgood s includes independent pharmacies for which the company Winconcept offers services and marketing concepts.

13 2014 in brief Galenica Group 13 Highlights of 2014 Transparency thanks to shelf pricing labelling. Shelf labelling was successfully introduced at Amavita and Sun Store, while the pilot test in Coop Vitality pharmacies was completed. This removes the need to label individual items, and makes prices and offers more visible to customers. The Sun Store webshop has been modernised to provide greater clarity and ease of use. Initial ehealth offerings. Personal electronic dossiers are now available to Amavita customers, a service that Sun Store customers have been enjoying for some time already. Electronic customer vaccination cards have been available at Coop Vitality since October 2014 and represent a further step towards ehealth. Outlook for 2015 Drug prices will see further reductions, and the market will remain competitive. Against this backdrop, the Retail Business sector is maintaining its strategy. Expansion will be primarily through like-for-like growth, targeted acquisitions and the opening of new pharmacies. This will strengthen the networks of both own and independent partner pharmacies. Among other things, ongoing improvements to business processes are to compensate for pressure on prices. At the same time, the Retail Business sector intends to gain new customers through a consistent focus on service and innovative offers. Finally, synergies are exploited wherever possible in the areas of product mix, purchasing and all services. Companies and pharmacy formats GaleniCare Management Ltd., Amavita pharmacies, Sun Store SA, MediService Ltd., Winconcept Ltd., Coop Vitality AG 1), 1) Consolidated at equity Key figures 2014 Net sales: CHF 1,251.2 million EBITDA: CHF 88.5 million EBIT: CHF 65.0 million Employees: 4,324 (3,287 full-time equivalents) IT-supported business processes. The newly introduced enterprise resource planning system (ERP), the optimised staff resource planning system (PEP) and the centralisation of various functions in category management are helping to improve efficiency within the company. The Galenica Santé pharmacy formats Amavita Sun Store Coop Vitality MediService Winconcept Largest pharmacy network in Switzerland. Founded and managed by GaleniCare. Product focus: prescription and non-prescription medicines and beauty products. Points of sale in attractive public locations. Strong customer focus (employee training, services, own-label brands). First pharmacy chain in Switzerland, has belonged to Galenica since 2009 and is managed by Galeni Care. Product focus: non-prescription medicines, beauty, wellness and health. Larger-than-average retail space in places with high customer traffic such as shopping centres. Joint venture between Coop and Galenica. Located in larger Coop centres. Comprehensive range in the fields of health, prevention and beauty combined with professional advice and services. Specialty pharmacy for care of patients with chronic illnesses. Home and Pharma Care therapy support service for in-home care of longterm patients, including specialist care and direct delivery of medications. Service provider for autonomous and independent pharmacies. Marketed under the Feelgood s brand. Management and marketing concepts for members focusing on communication and quality.

14 14 Galenica Group Business unit Galenica Santé Business sector Logistics 3,300m 2 new storage space planned at the Niederbipp distribution centre Strategy: tailored solutions The Logistics Business sector plays an important role in the Swiss pharmaceutical supply chain and provides country-wide integrated healthcare logistics services with proven modular solutions supporting the customers success. The strategy centres on strengthening market position and working in close cooperation with all market participants, with a focus on maintaining a high level of availability and systematically leveraging synergies. Activity As the leading pharmaceutical wholesalers in Switzerland, Galexis and Unione Farmaceutica Distribuzione ensure delivery within a few hours to all healthcare partners throughout the country. The companies supply pharmacies, physicians, drugstores and hospitals with over 80,000 referenced healthcare products. Alloga offers a broad range of specialised logistics services (prewholesale) to pharmaceutical and healthcare companies. This allows customers to concentrate on their core areas of expertise, such as research and development or marketing. G-Pharma handles and coordinates product purchasing, sales, warehousing and distribution of products for third parties and provides its customers with marketing support. Medifilm prepares medicines and food supplements individually on behalf of pharmacies according to the treatment plan for permanent and long-term patients (blister packaging).

15 2014 in brief Galenica Group 15 Highlights of 2014 With the DEAL offering from Galexis, pharmacists and druggists benefit from the best prices on offer in the market each week. In addition, the vascular check was introduced in 2014 to give pharmacy customers important information about the condition of their blood vessels within five minutes. Medifilm grew by around 40% in volume and had started to run out of capacity, so a fourth production machine was installed in Blister packaging is now available in French and Italian. In addition, the automatic control system was replaced, leading to increased quality and efficiency. Alloga created an explosion-proof storage room with around 1,500 storage spaces for technically and chemically challenging products such as sprays and medicines with solvents containing alcohol. It also introduced automatic release at the end of the picking process of each batch as a double check. Outlook for 2015 Pressure on costs will continue. The Logistics Business sector aims to strengthen customer competitiveness with high quality services and innovative offerings and to reduce costs via increased efficiency. Galexis will launch specific new offerings in In addition, the Niederbipp distribution centre will be extended and the Lausanne-Ecublens site will be modernised. Alloga will improve processes at the logistics and distribution centre in Burgdorf. Medifilm will continue to invest in infrastructure and technology, as well as in developing customer relationships throughout Switzerland. Companies Alloga Ltd., Galexis Ltd., Unione Farmaceutica Distribuzione SA G-Pharma AG Medifilm AG, Key figures 2014 Net sales: CHF 2,130.9 million EBITDA: CHF 46.8 million EBIT: CHF 31.4 million Employees: 1,214 (997 full-time equivalents) Logistics companies of Galenica Santé Galexis Market leader in Swiss healthcare logistics. Distribution centres in Niederbipp and Lausanne-Ecublens. Comprehensive product and service offerings. Supplies pharmacies, medical practices, drugstores, nursing homes and hospitals. Unione Farmaceutica Distribuzione Alloga G-Pharma Medifilm Leading pharmaceutical wholesaler and the only full-range supplier in Ticino. Distribution centre in Barbengo-Lugano with strong regional roots. Supplies pharmacies, drugstores, nursing homes and hospitals. Largest Swiss prew holesaler. Logistics centre in Burgdorf. Modular, processmanaged full-service offering along the entire supply chain. Logistics services in partnership with the pharmaceutical and healthcare industry. Launch and distribution of pharmaceutical and para pharmaceutical products. Service provider for own brands and commercial products from idea development to the brand. Marketing and sales services. Offers its range of products and services to all partners of the healthcare market. Swiss pioneer in the area of blister packaging of drugs for individual patients. Only Swiss blister packaging centre with wholesaling and manufacturing licence. Customers include pharmacies and nursing homes supplied with pharmaceuticals.

16 16 Galenica Group Business unit Galenica Santé Business sector HealthCare Information Nearly 1,900 doctors use the TriaMed software Strategy: promoting networking The management of data, information and knowledge as well as network functionalities are increasingly becoming a strategic success factor as service providers in the healthcare sector are under growing pressure to optimise processes, leverage synergies and realise cost benefits. The businesses of HealthCare Information maintain databases and develop management solutions tailored specifically to the needs of the networked healthcare market. The Documed and e-mediat products meet customer needs for IT tools quickly and efficiently, and offer them valuable support in their daily activities. The businesses play a key role in the ehealth Switzerland strategy through their broad expertise in creating and operating databases and developing management systems for the healthcare sector. Activity e-mediat is the leading provider of master data systems for the entire Swiss healthcare market. Documed publishes pharmaceutical information and provides the IT platform for regulatory drug information (Arzneimittelinformation Publikationsplattform Swissmedic, AIPS). HCI Solutions maintains databases and develops management solutions geared in particular to the needs of the networked healthcare market. TriaPharm is a total management software solution for pharmacies. TriaMed software was developed for physicians and is suitable for both individual and networked medical centres and group practices.

17 2014 in brief Galenica Group 17 Highlights of 2014 Doctors and pharmacists in the canton of Aargau have launched an innovative model for the electronic transmission of prescriptions. Regardless of the technical platform used, HCI Solutions guarantees that doctors will be able to transmit prescriptions electronically, and that pharmacists will be able to receive them. HCI Solutions has developed a new component called ActiveStock for TriaPharm. This simplifies goods cycle processes from ordering to checking incoming goods and expiry dates, guaranteeing more reliable inventory levels. TriaMed software is now used by nearly 1,900 doctors. The sales team was strengthened in 2014 to enable it to offer clients comprehensive assistance with the ehealth functionalities. Outlook for 2015 The coming year will once again focus on operational improvements. All processes in the Business sector will be gradually analysed and optimised. With myproducts and mypartner Documed is expanding the portal functions for data content in and the Index databases for pharmaceutical companies. Among other advantages, they can now input structured information into templates themselves. The user-friendliness of all software components in the HealthCare Information Business sector is to be improved. Companies HCI Solutions Ltd., Documed Ltd., e-mediat Ltd., Key figures 2014 Net sales: CHF 38.6 million EBITDA: CHF 8.4 million EBIT: CHF 5.0 million Employees: 179 (158 full-time equivalents) HealthCare Information companies of Galenica Santé HCI Solutions e-mediat Documed HCI Solutions maintains databases and develops management solutions tailored specifically to the needs of the networked healthcare market. TriaPharm is a total management software solution for pharmacies. TriaMed was developed for physicians and is suitable for both individual and networked medical centres and group practices. e-mediat specialises in establishing and operating databases for the Swiss healthcare industry. The company s broad experience in data distribution and processing in the healthcare market makes e-mediat the leading provider of master data systems in the health market. Documed, an intermediary between the pharmaceutical industry and healthcare specialists, publishes electronic information on pharmaceutical products, and provides the IT platform for the new system for regulatory drug information (Arzneimittelinfor mation Publikationsplattform Swissmedic, AIPS).

18 18 Galenica Group Vision, Mission, Values and Strategy

19 Vision, Mission, Values and Strategy Galenica Group 19 Our vision Thanks to our excellence in the healthcare market, with our activities we are a leading healthcare partner. As a Group, we represent a diversified healthcare company with two Business units: Vifor Pharma, with international pharma activities, and Galenica Santé, providing services mainly to the Swiss healthcare market. Both Business units operate independently and are successful, solid and profitable. They develop in a focused and successful way, sustainably and with the vision to achieve the critical size to become two listed, independent companies. Our mission Galenica Group: In our day-to-day work, we are passionately committed to the welfare of patients and the needs of our customers. It is our way of creating added value and benefits for customers, patients, employees, shareholders and partners in the long term. Vifor Pharma: We strive for excellence in our fields of expertise: with our leading iron therapies and other pharma specialties, we are noticeably improving patients quality of life right across the world. Galenica Santé: With our services and products, we are making a significant contribution to efficient, high-quality healthcare, mainly in Switzerland. Our key values Our five key values are the reference point for our actions and shape our conduct and decision-making each day. They therefore play an essential part in the implementation of the strategy and objectives and are a crucial element to our success. The five key values of Galenica We participate with passion and act as entrepreneurs. We build trust through credibility and competence. We show respect and know that together, we are stronger.

20 20 Galenica Group One Group, two strategies Following the Galenica Group s consistent and successful implementation of its transformation strategy since 1995, the Board of Directors concluded that the Group was ready to prepare a new phase. In August 2014, a new management structure with two CEOs was introduced to enable the different business models of Vifor Pharma and Galenica Santé to evolve in an even more focused way, taking into account their individual growth dynamics. The management structure was adjusted accordingly and organisational changes implemented just a few weeks later. Medium- to long-term vision: two listed, independent companies By taking these measures, the Board of Directors intended to ensure the success of this crucial new phase for the Galenica Group and to create optimum conditions for the Vifor Pharma and Galenica Santé Business units to be able to continue to develop in a focused and sustainable way, with the aim of becoming two listed, independent companies. Galenica anticipates that the Group will separate in three to five years time, or possibly earlier if the two Business units achieve the necessary critical size before then. Vifor Pharma Galenica has successfully strengthened and expanded its pharma business in recent years and made large investments in building a strong organisation. Thanks to its innovative proprietary product portfolio, an international commercialisation network comprising own affiliates and partners, and an organisation with first-class pharma expertise, Vifor Pharma is today a world leader in iron deficiency and has strong market positions in nephrology and immunostimulants. The focus over the past years has been on the development and international registration of the intravenous iron replace- The Galenica journey continues Ferinject expansion Velphoro penetration Six other projects Stock exchange revolution Alliance Boots partnering US Venofer explosion Pharmacy chain revolution Vifor Pharma Ltd. (Listed) Galenica Santé Ltd. (Listed) Specialty Pharma Aspreva, OM Pharma, Sun Store Sales Affiliates Venofer in the USA Vifor Fresenius Medical Care Renal Pharma Culture shock Restructuring Dispensing doctors Iron/OTC

21 Vision, Mission, Values and Strategy Galenica Group 21 ment product Ferinject (Injectafer in the USA) and the new phosphate binder Velphoro. These objectives have been met successfully: Ferinject is now registered in more than 60 countries and has also been on the market in the USA since mid-2013 under the name Injectafer. Velphoro was launched in the USA in March 2014 and received approval for the EU member states in August. Objective: a stand-alone specialty pharma company Thanks to its strong performance and development over the past years, Vifor Pharma now has the potential to become a successful stand-alone specialty pharma company, characterised by a strong entrepreneurial culture and a clear strategic focus. To ensure Vifor Pharma is able to achieve the critical size to become an independent listed company, it now needs to increase its market orientation and fully exploit the significant potential of its key growth drivers Ferinject /Injectafer and Velphoro. Changes to the organisational structure are designed to create the competitive, focused and agile organisation that will be needed. Provided that the necessary synergies and strategic fit are in place, organic growth will be complemented by growth through acquisition of products or companies as well as through strategic partnerships. Galenica Santé Galenica Santé has everything it takes for this unit too to become an independent listed company. The logistics organisation has a top-performing infrastructure and is now benefiting from measures taken to prepare for changes facing the market both today and in the future. HealthCare Information is a very innovative unit offering services and information that address changes under ehealth, which are currently being implemented by the Swiss authorities. Finally, with nearly 500 points of sale at the best locations in the country, the Galenica Group s network of own and partner pharmacies has become a benchmark in the sector. Objective: building on current strengths in a targeted manner The synergies between these three activities are promising and will enable Galenica Santé to respond to the challenges facing the sector in general, which should be developed further and exploited in a targeted manner. Furthermore, it is planned to transfer the activities of Vifor Pharma Consumer Healthcare, which mainly focus on the Swiss market, into the Galenica Santé Business unit in mid In addition, the attractiveness of the organisation should allow Galenica Santé over the next few years to expand its position in the field of services, own-brands and with respect to licences marketed in different areas. Focused international expansion with selected products and services can no longer be ruled out in the long-term. Retrospect From a pharmaceutical logistics provider to an international healthcare company Galenica was founded in 1927 by 16 Swiss French-speaking pharmacists who came together to create a central purchasing group. In 1938, Galenica laid the foundation for its current information management business by developing a scientific documentation service. From 1957 onwards, Galenica diversified beyond its existing distribution activities. In 1995, in response to the rapid and fundamental changes in market conditions, the Group s management developed a new strategy based on the vision of turning Galenica into a healthcare player that is engaged in the entire value chain in Switzerland. Thus in 1996, Galenica expanded its distribution activities to all players in the Swiss market (pharmacists, as well as self-dispensing physicians, drugstores and hospitals), set up ehealth companies and laid the foundation for its pharmacy chains with the creation of GaleniCare in In parallel, the Group focused on niches at the industrial level and began to expand internationally in the area of iron replacement products. These were fundamentally redesigned and repositioned by the research & development team, and became Venofer and Maltofer. They were joined by Ferinject /Injectafer, which was launched at the end of 2007, as well as other products, including the novel phosphate binder Velphoro. The acquisition of the Canadian pharmaceutical company Aspreva Pharmaceuticals in 2008 and of OM Pharma in 2009 as well as the development of an own distribution network led to the creation of what is today an international, fully integrated specialty pharma company, Vifor Pharma, with a broad range of products and projects.

22 22 Galenica Group A working day at Galenica 1,300 kilograms of Anti-Brumm or 12,000 bottles are manufactured on average on a production day so that our customers can enjoy summer evenings without being bitten. 30,000 queries are registered daily at 25,300 Galenica shares were traded on average in 2014 on one trading day. 26,600 orders are processed in storage boxes of which approximately 1,600 cool boxes carefully and on time by Galexis, Alloga and Unione Farmaceutica Distribuzione in a day.

23 1,600 kilograms of Maltofer mixture are manufactured in one pro duction day at Vifor Pharma. This is used to make 4,000,000 chew-able tablets. A working day at Galenica Galenica Group ,400 entries are recorded by doctors every day in the TriaMed electronic patient dossiers. 26,700 kilometres are driven by our drivers each day to supply pharmacies, drugstores, medical practices and hospitals. This means that our drivers drive approximately 208 times around the world in a year. The vehicle fleet runs on diesel, and newly purchased vehicles have smaller capacity engines, resulting in 15% lower CO2 emissions per 100 kilometres. 30,000 times a day on average, customers show their StarCard or Suncard loyalty cards in our pharmacies. This allows them to benefit from interesting offers. 100,000 customers are served on average in a day in our own pharmacies and partner pharmacies. The average time spent advising a customer is 4 minutes 30 seconds.

24 24 Galenica Group Business unit Vifor Pharma

25 Foreword CEO Vifor Pharma Reporting 25 A new beginning for Vifor Pharma Dear Shareholders, Ladies and Gentlemen, In August 2014, the Galenica Board of Directors announced the preparation of a potential division of the Group into two separately listed companies. Thanks to its innovative proprietary product portfolio, an international commercialisation network comprising own affiliates and partners, and an organisation with first-class pharma expertise, Vifor Pharma is today a world leader in iron deficiency and has strong market positions in nephrology and within immunostimulants. Based on these strengths and its potential, Vifor Pharma intends to become a successful stand-alone specialty pharma company within the next three to five years. Vifor Pharma has continued to make good progress in the course of Our lead product Ferinject expanded further, with growth in existing markets and launches in new territories. In the USA, where the drug is branded Injectafer, it recorded its first full year of sales. In addition, our novel phosphate binder Velphoro was launched in March 2014 in the USA by our partner Fresenius Medical Care North America, followed by market approval by the European Medicines Agency (EMA) and the ensuing first launches in Europe in the second half of The financial figures reflect the continued growth of Vifor Pharma s key products. In 2014, the Business unit increased net sales by 6.6% to CHF million. Investments in research and development totalled CHF 98.1 million and were mainly directed at clinical studies with Ferinject to provide further evidence of the benefit of iron treatments in different therapeutic areas such as nephrology, gynaecology and cardiology. Earnings before interest and taxes (EBIT) decreased by 1.6% to CHF million, almost offsetting the planned decline in other operating income. Vifor Pharma has now reached an inflection point. It clearly has the potential to become a successful stand-alone specialty pharma company, operating as an agile, marketfacing organisation in close contact with its customers. It will, however, take time, dedication and focus to successfully implement our plans and realize our aspirations. As a first step, we need to prepare our organisation by becoming even more effective and efficient and putting in place the appropriate structures and processes to support our ambitious growth plans. To broaden our franchise in the marketplace, we will focus on growing our existing portfolio and on fully exploiting the potential of our key growth drivers, as well as pursuing inorganic growth opportunities in a targeted manner. Furthermore, it is planned to transfer the activities of Vifor Pharma Consumer Healthcare, which mainly focus on the Swiss market, into the Galenica Santé Business unit in mid I am proud to lead a strong management team and employees with excellent skills and full commitment. I look forward to working with the entire Vifor Pharma team to build a first class specialty pharma company and together achieve our ambitious and inspiring goals. Søren Tulstrup CEO Vifor Pharma Søren Tulstrup CEO Vifor Pharma Net sales in million CHF Vifor Pharma Galenica Group CHF 3,416.3 million EBIT in million CHF Vifor Pharma Galenica Group CHF million Number of employees 1,952 Vifor Pharma Galenica Group 7,712

26 26 Reporting Vifor Pharma: World leader in iron deficiency -1.6 % EBIT decrease due to decline in other operating income CHF 98.1 million Strategic priorities 2015 Expand Ferinject in international markets, notably Injectafer in the USA with partner Luitpold Pharmaceuticals, Inc. Continue global roll-out of novel phosphate binder Velphoro Establish Vifor Fresenius Medical Care Renal Pharma in key markets Sales and operating result The Pharma Business unit showed a solid performance in the 2014 business year. Total net sales increased by 6.6% to CHF million. (Adjusted for currency effects, the increase was 7.5%.) Income from licensing fees for CellCept were CHF 91.8 million (previous year: CHF million). Investments in research and development totalled CHF 98.1 million ( 15.2%). They were mainly directed at clinical studies with Ferinject to provide further evidence for the benefit of iron treatments in various therapeutic areas such as nephrology, cardiology (chronic heart failure) and gynaecology. EBITDA was CHF million, down 1.2%, and consolidated earnings before interest and taxes (EBIT) decreased by 1.6% to CHF million. Thanks to considerable increase in sales, the planned decline in other operating income of CHF 46.6 million could be almost outweighed. investments in 2014 in research & development 63 number of countries in which Ferinject was registred in 2014

27 Vifor Pharma Reporting 27 Vifor Pharma Rx USA strongest sales market for Ferinject /Injectafer. The expansion of the leading iron replacement product Ferinject continued, with growth in existing markets and new market launches in 12 other countries. In total, global sales of Ferinject / Injectafer at Vifor Pharma increased by 19.0% to CHF million. These sales comprise own sales by Vifor Pharma sales affiliates and sales by partners, with Vifor Pharma receiving a share of partner sales. However, the IMS data reflect the actual market sales development, which continues to accelerate. In 2014 global market sales totalled approximately CHF 265 million, an increase of 42%. The USA, where the product is branded Injectafer, has now become the market with the strongest sales: in 2014, market sales rose by an average of more than 10% every month, which is a clear sign of continuously increasing acceptance of the drug. Annual sales in the USA were USD 50.5 million in 2014, resulting in net sales of CHF 15.6 million for Vifor Pharma. The number of units sold (100 mg) grew worldwide by 28%. In particular, Australia (355%), Great Britain and Ireland (34%), Spain (29%), Belgium (15%) and Germany (13%) posted solid increases. The number of 100 mg units sold in France declined by 26% due to the new regulatory restriction that intravenous iron replacement products can no longer be administered in medical practices, but only in hospitals. However, over the same period, sales volumes to hospitals have grown 170%, a clear sign that the transition from retail to hospital is taking place. Growth of 6% in the domestic Swiss market was once again pleasing, and illustrates very clearly the potential of Ferinject. Volume growth of the new 1,000mg vials was encouraging. They have been launched in key European countries such as Germany, Austria, Great Britain, the Nordics, France, the Netherlands, Portugal, Switzerland and Spain. First sales of Velphoro. The new phosphate binder Velphoro was launched in the US market in March 2014 by partner Fresenius Medical Care North America. Following market approval by the European Medicines Agency (EMA) at the end of August 2014, the 2500 first launches took place in Germany and Portugal in the fourth quarter. In total, Vifor Pharma generated sales of 2000CHF 14.9 million with Velphoro in Venofer defending 1500 market position. Venofer reported sales of CHF million in the year under review ( 11.9%). While in most regions sales 1000 were again impacted by pressure on prices, Vifor Pharma was able to grow its Venofer franchise in the 500 Asia Pacific region. Inventories impact sales development 0 of Maltofer. Sales of other iron replacement products amounted to CHF 60.2 million ( 5.1%) in total. Maltofer reported sales of CHF 50.5 million ( 4.0%), which were negatively impacted by the fact that partners such as those in Mexico and Brazil, for example, had large inventories to run down from the previous year. Sales of other prescription medicines, which are primarily marketed in Switzerland and Spain, were maintained almost at the prior-year level at CHF 71.5 million ( 0.4%), despite three products being removed from the portfolio in Spain. Broadening Ferinject /Injectafer franchise through research and marketing. By the end of 2014, Ferinject was registered in 63 countries worldwide, with new launches in 12 countries, many of them in Latin America and the Middle East, including Brazil, Chile, Kuwait and South Africa. In the USA, partner Luitpold Pharmaceuticals, Inc., expanded its team and focused on establishing Injectafer in the areas of haematology and oncology, working with prescribing physicians who manage the principal infusion centres where intravenous treatment is provided. The partner Global market for iron products Overall development in million CHF 2, , , , ,085 37% 36% 34% 33% Sub-market share 2014 Intravenous iron Total CHF 1,020 million 34% Market share Vifor Pharma Other (~1,700 corporations) (Source: IMS Midas; CHF/MNF, MAT 2014 Q3) 64% Vifor Pharma Sub-market share 2014 Oral iron 11 % Vifor Pharma Total CHF 1,322 million