Annual Report 2006. Value through Innovation. nopq

Annual Report 2006 Value through Innovation nopq

Financial Highlights Boehringer Ingelheim group of companies Amounts in millions of EUR, unless otherwise indicated 2006 2005 change Net sales 10,574 9,535 11 % by region Europe 31 % 33 % Americas 51 % 48 % Asia, Australasia, Africa 18 % 19 % by business area Human Pharmaceuticals 96 % 96 % Animal Health 4 % 4 % Research and development 1,574 1,360 16 % Personnel costs 2,836 2,671 6 % Average number of employees 38,428 37,406 3 % Operating income 2,140 1,923 11 % Operating income as % of sales 20.2 % 20.2 % Income after taxes 1,729 1,514 14 % Income after taxes as % of sales 16.4 % 15.9 % Shareholders equity 5,175 4,609 12 % Return on shareholders equity 37.4 % 34.2 % Cash flow 2,317 2,069 12 % Investments in tangible assets 596 532 12 % Depreciation of tangible assets 419 439-5 % Top 5 products Prescription Medicines Net sales 2006 in millions of EUR change spiriva 1,381 45.2 % micardis 967 33.6 % flomax 922 27.8 % combivent 671 19.6 % mobic 579-31.8 % Top 5 products Consumer Health Care Net sales 2006 in millions of EUR change dulcolax 122.0 6.2 % mucosolvan 108.3 18.6 % pharmaton 95.6 8.2 % buscopan 71.2 19.6 % bisolvon 67.1 0.4 %

Contents 1 Value Through Innovation 2 The Shareholders Perspective 4 Key Aspects of 2006 9 Our Caring Culture 10 There is help 14 Our People 18 Caring for our Neighbours 22 Our Environment & Employee Safety 27 Our R & D Drive 28 Targeting tomorrow s therapies 32 Our R & D Strategy 38 Our Expertise in Landmark Studies 40 From Mind to Man The R & D Process 42 New Biological Entities (NBE) 43 Biomarker & Pharmacogenetics 45 Serving Patients * 46 I wake up refreshed... 49 Human Pharmaceuticals 60 My recovery came fast 78 Now I know how to keep them under control 80 From Plant to the Pharmacy The buscopan Story 81 Consumer Health Care 84 Our friend Tom 87 Animal Health There is help In Kenya, about 50,000 newborn babies a year are estimated to acquire HIV from their infected mothers. Worldwide UNAIDS talks of 2.3 million cases of AIDS-diseased children. [page 10] Targeting tomorrow s therapies Focusing on both biopharmaceutical and small molecule drugs, Boehringer Ingelheim has embarked on a major drive to discover and develop new cancer drugs. [page 28] 91 Our Customer Orientation 92 Biopharmaceuticals How Innovations are Made 95 Pharmaceuticals Production and Pharma Chemicals 97 Counterfeits A Real Threat for Patients 99 Group Management Report 115 Consolidated Financial Statements 2006 116 Overview of the Major Consolidated Companies 118 Consolidated Balance Sheet 119 Consolidated Profit and Loss Statement 120 Cash Flow Statement 121 Statement of Changes in Group Equity 122 Notes to the Consolidated Financial Statements 2006 140 Auditor s Report Our friend Tom Every year, about 10 % of all horses suffer from equine colic, a disease that can prove life-threatening. [page 84] Now I know how to keep them under control Abdominal pains and cramps, a widespread ailment, is more common in women than in men and can affect people still in their teens. [page 78] My recovery came fast Stroke is a serious disease. It is the third leading cause of death after heart disease and cancer and the most important reason for medical disability. [page 60] I wake up refreshed... Hypertension is not only an unpleasant condition that keeps people from doing what the things they like. It is also a serious cardiovascular risk that can be the precursor to stroke and heart attack. [page 46] 142 Glossary Flap Comparison of Balance Sheet / Financial Data 1997 2006 * The patient reports are authentic reports which refer to personal experience only. Please acknowledge that other patients may experience different treatment results. Individual treatment schemes have always to be discussed between patient and physician case by case. please turn over

Value through Innovation Our vision drives us forward. It helps us to foster value creation through innovation throughout our company and to look to the future with constantly renewed commitment and ambition. Boehringer Ingelheim is a research-driven group of companies dedicated to researching, developing, manufacturing and marketing pharmaceuticals that improve health and quality of life. Our business consists largely of Prescription Medicines, Consumer Health Care, Biopharmaceuticals and Animal Health. We focus on the production of innovative drugs and treatments that represent major therapeutic advances. Excellence in innovation and technology guides our actions in all areas. Our products have long been highly successful in the treatment of respiratory, cardiovascular, central nervous system, urological and virological disorders. In addition we have intensified our research into the immune system, metabolic diseases and oncology. Boehringer Ingelheim, which currently has more than 38,400 employees, has 137 affiliated companies spread around the globe. We have research and development facilities in ten countries and production plants in more than 20. Our Human Pharmaceuticals research and development in our Prescription Medicine spending corresponds to about 18 % of net sales in this business. Our headquarters is at Ingelheim, the German town where the company was founded in 1885.

The Shareholders Perspective Dear Reader, Family-owned companies such as Boehringer Ingelheim are attracting considerable interest these days. As their strategy and investments are often directed towards ensuring the continuation of the company in the long term, family-owned companies have often proved to be particularly stable and crisis-resistant, especially in the volatile market conditions of recent years. The success of value-based family-owned companies is also confirmed by various surveys and indices comparing family-owned companies with listed ones. It is borne out by our own success as well. Boehringer Ingelheim s sales growth this past financial year exceeded the market average for the seventh year in a row, allowing us to improve our world market share yet again. Benchmarking operating margins also show Boehringer Ingelheim to be well positioned. That our commercial success has also allowed the corporation to take on more employees is particularly gratifying. Over the past ten years, Boehringer Ingelheim has increased its personnel capacity by 5 % per annum on average. We are a research-driven pharmaceutical company. The guiding principles in our Leitbild give top priority to the development of innovative medicines for the benefit of patients worldwide. The same applies to our endeavours in animal health as well. Innovation and the quality of our products drive our success and materialise many years of research and development. The development of innovative substances with an efficacy superior to those already available will be crucial to our success in the future. The market demands that productivity be constantly raised throughout the value chain. Our employees are the driving force behind the innovations required at any one stage of our complex processes. We rely on their integrity and commitment. It is also important for us to remain an employer of choice for our own employees and for people outside the company. That Boehringer Ingelheim, as numerous external comparisons have shown, is one of the most interesting and desirable employers in many countries is a source of great pride. Boehringer Ingelheim certainly has the corporate culture, the size and the structure to enable us to identify with a common strategy and to help shape it, too. Such an environment is essential to innovation and excellence. We believe that our corporate culture, with its focus on how we work together in a great team, is a significant prerequisite for motivating our employees to achieve still more innovative solutions for patients, progress and economic success. The year 2006 was again one of market consolidation in the pharmaceutical industry. And this trend with mergers and acquisitions is most likely to continue. The main reason for this is a very simple one: lack of productivity in R&D. Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Christian Boehringer, Chairman of the Shareholders Committee Boehringer Ingelheim s shareholders have set the course for the future in such a way that we can continue to build on the successful development of recent years as an independent company. This applies not only to the corporate strategy decided jointly with the Board of Managing Directors, but also to the make-up of both the Board and the Shareholders Committee. After 32 years of highly successful commitment to Boehringer Ingelheim, as Chairman of the Board of Managing Directors, and since 2001 as Chairman of the Shareholders Committee too, Dr Heribert Johann took well deserved retirement as of 31 December 2006. Dr Johann played a key role in shaping our company s strategic development over the past 15 years and we are profoundly grateful to him for his unflagging commitment to Boehringer Ingelheim. We are confident of the continued motivation and loyalty of our employees, the expertise and experience of the Board and constructive commitment of our Advisory Board in the future. On behalf of the shareholders of Boehringer Ingelheim, allow me to congratulate all those I have mentioned on the very successful financial year 2006. Thank you all for your tremendous efforts. We look forward to continuing to work closely with our employees, the Board of Managing Directors and the Advisory Board for the good of Boehringer Ingelheim as a whole. Despite what is sometimes a difficult economic and political environment, and some highly competitive markets, we are confident that we are set to remain one of the world s leading pharmaceutical companies. The commitment of the owner-family to Boehringer Ingelheim, meanwhile, has been further strengthened by two important decisions taken in 2006: the move of family member Hubertus von Baumbach to the Board of Managing Directors at the beginning of 2009 and the increased involvement of other family members in the Shareholders Committee, which is now chaired again by a family member representing the increased commitment of the fourth generation of shareholders. Christian Boehringer Chairman of the Shareholders Committee The Shareholders Perspective

Key Aspects of 2006 2006 was again a rewarding year for Boehringer Ingelheim. We grew faster than the market average for the seventh year in succession. While the global pharmaceutical markets are changing and mergers and consolidation efforts continue, we again maintained our successful course as an independent and dynamically growing pharmaceutical company. We are proud that we once again achieved our overall goal of helping people by making our medications available to patients through researching and developing new and innovative drugs. Our economic success in recent years mirrors the value of our medications for patients. Market analyses by the healthcare information provider IMS confirm that our +8.4 % growth rate was appreciably healthier than that of the pharmaceutical market in general (+6.1 %). Although our growth curve flattened out as a result of the generic competition that our antirheumatic drug mobic has been facing in the USA since summer 2006, we increased our market share in 2006 worldwide and in the USA to about 2 %. Overall, we are happy with our 2006 results. Success in serving patients Boehringer Ingelheim is a pharmaceutical company that generates almost 80 % of its net sales with prescription medicines. Yet we do not measure our success in financial key figures alone, but also, and of equal importance, in terms of the acceptance of our products and programmes. For instance, in conjunction with our donation programme for the anti-aids product viramune, we have so far succeeded in providing medication for almost 1 million mother-child pairs in around 60 countries for the prevention of mother-to-child transmission of HIV. About six million patients benefited from our product spiriva for chronic obstructive pulmonary disease (COPD). The number of patients using our anti-hypertension medicine micardis amounted to more than four million in 2006. Value through Innovation Naturally, the success of our products is reflected in our business results. In 2006, our net sales across all business areas grew by 11 % to almost EUR 10.6 billion. We were also pleased that we were able to increase the number of our employees by 3 % to 38,428 and so offer more than 1,000 new and qualified jobs around the world. Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Members of the Board of Managing Directors: Dr Hans-Jürgen Leuchs Dr Andreas Barner Dr Alessandro Banchi Prof. Marbod Muff (from left to right) The Prescription Medicines business area, which grew by 15 % to EUR 8.3 billion (compared to 2005) made the greatest contribution to sales growth. The most important products driving this growth included our leading product spiriva, with sales up 45 % to EUR 1.4 billion, micardis which grew by 34 % to EUR 967 million, and flomax /alna, for benign prostatic hyperplasia, which grew by 28 % to EUR 922 million. In US dollar terms, micardis and flomax thus represent two more Boehringer Ingelheim blockbusters alongside spiriva. In 2006, we were granted marketing authorisation for sifrol in the indication restless legs syndrome (RLS), both in Europe and the USA. Important and innovative clinical studies (phase I-IV) continued successfully, involving about 90,000 patients worldwide. These included the ontarget study (micardis ), uplift (spiriva ) and profess (aggrenox / micardis ). Well-filled pipeline Our product pipeline has further improved and is being progressively filled with substances from our research. We focus on respiratory and cardiovascular diseases, virology, central nervous system, immunology, metabolic diseases and oncology. In this last therapeutic area, for example, three anti-cancer drug candidates are now in clinical phase II development. Our projects are complemented by strategic alliances and the in-licensing of new compounds and technologies. Our late-stage pipeline also progressed well in phase III, and we were able to file the first indications of our lead anti-thrombotic compound dabigatran for registration in Europe at the beginning of 2007. Investments in research and development in our prescription medicines increased again in 2006, up by 16 % to about EUR 1.5 billion; this corresponds to around 18 % of sales in this business area. Overall, our Consumer Health Care (CHC) business showed good development, in spite of an increase in sales of only 1 % to EUR 1.1 billion. Key Aspects of 2006

This growth was clearly restrained by the weakness of the Japanese market, where we generate almost 30 % of our CHC business. Excluding Japan, we achieved strong growth of about 9 %. Our international core brands, in particular dulcolax, pharmaton and buscopan, showed wholly positive development. As an outstanding complement to our gastrointestinal disease business, we successfully acquired zantac (for heartburn) for the important US market. Our CHC business accounted for about 10 % of our total net sales. Our Biopharmaceuticals business segment, which embraces contract manufacture and development for our international customers, declined by 8 % to EUR 503 million. This development was expected, despite plant running at full capacity, as the 2005 business year benefited from extraordinary effects caused by special projects that helped boost sales by 40 %. Boehringer Ingelheim is not only strategically committed to the Human Pharmaceuticals business but also to Animal Health. Here, sales in 2006 rose by 4 % to about EUR 374 million, giving growth above the market average. Adjusted for extraordinary and currency effects the Animal Health business grew by 8 %. According to the market research institute Wood Mac- Kenzie, Boehringer Ingelheim, with a market share of about 3 %, ranks 10th in the international ranking of animal health companies. The most important products in this business area include the anti-inflammatory product metacam, vetmedin, a product for treating chronic heart disease in dogs, as well as the pig vaccines enterisol ileitis (against diarrhoea) and ingelvac prrs (against porcine reproductive and respiratory syndrome). The outlook remains good The picture seen in recent years has not changed. Boehringer Ingelheim s growth in 2006 was excellent across all regions of the world. The Americas region grew very well in spite of the sales decrease of mobic due to generic competition in the USA, with sales rising by 18 % to EUR 5.4 billion. But not only the USA (+20 % to 4.5 billion) performed well. Other countries, in particular Mexico, with its vigorous 27 % growth (to EUR 300 million), put in an excellent performance, too. Europe showed a rather gratifying development, growing by 6 % to EUR 3.3 billion. France (+19 % to EUR 263 million), the Regional Center Vienna with its expanding East European business (+13 % to EUR 362 million) and Spain (+10 % to EUR 349 million) developed very well. That Germany, on the other hand, stagnated in 2006 (+1 % to EUR 822 million) was a result of the expiry of our patent on alna on top of the very difficult pharmapolitical impacts. In the Asia, Australasia, Africa (AAA) region, Japan is showing encouraging signs of growth (currency adjusted +6 % to EUR 1.2 billion). In Japan, we were for the second year in a row the fastest growing company among the top 25 in prescription medicines; we would like to pay a special tribute to our Japanese employees. Gratifying growth and effective cost management led to increased operating income for the company, as reflected in our results. Operating income rose by 11 % to over EUR 2.1 billion. This corresponds to a return on sales of 20.2 %. Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

The outlook for further business development at Boehringer Ingelheim remains good. Drugs with patent protection or exclusivity will continue to be our main growth drivers. These products are expected to account for more than 60 % of net sales in 2007. We also expect to grow in line with the market in 2007 due to the generic competition of mobic in the USA, which will put pressure on our growth rate for the first half of the year. However, our major products still have high growth potential. We also hope that 2007 will see registration granted in Europe for our new and, for patients, innovative device, the respimat Soft Mist Inhaler, for our most important product spiriva. And more importantly, we rely on top-class worldwide teams of highly committed and skilled employees. In spite of the increasing health policy restrictions in many countries, we continue to look towards the future with optimism. Dr Alessandro Banchi Dr Andreas Barner Dr Hans-Jürgen Leuchs Prof. Marbod Muff Key Aspects of 2006

Shareholders Committee Advisory Board Board of Managing Directors Dr Heribert Johann (until 31. 12. 2006) Chairman of the Shareholders Committee Christian Boehringer (from 1. 1. 2007) Chairman of the Shareholders Committee Albert Boehringer Christoph Boehringer Ferdinand von Baumbach Hubertus von Baumbach Dr Mathias Boehringer Prof. Michael Hoffmann-Becking Attorney at Law, Düsseldorf Chairman of the Advisory Board Dr Rolf-E. Breuer Chairman of the Supervisory Board Deutsche Bank AG, Frankfurt (Main) Prof. Fredmund Malik Chairman of the Board Managementzentrum St. Gallen Holding AG Prof. Axel Ullrich (until 30. 6. 2006) Director of the Max Planck Institute for Biochemistry, Martinsried Dr Heinrich Weiss Chairman of the Board SMS AG, Düsseldorf Dr Alessandro Banchi Corporate Board Division Chairman of the Board Corporate Board Division Pharma Marketing and Sales Dr Andreas Barner Vice-Chairman of the Board Corporate Board Division Pharma Research, Development and Medicine Dr Hans-Jürgen Leuchs Corporate Board Division Operations Corporate Board Division Animal Health Prof. Marbod Muff Corporate Board Division Finance Corporate Board Division Human Resources

Our caring culture

There is help The woman who came to my hospital was pregnant. Her husband accompanied her. And she had AIDS. When I asked her how she had acquired the disease she just turned to her husband and glanced at him. He lowered his head and looked at the ground. Dr Charles Wanyonyi, Medical Director of Pumwani Maternity Hospital in Nairobi, Kenya, has seen many patients like this woman. Promiscuity, carelessness, superstition or lack of information and education contribute to the spread of the deadly disease. Stigma and discrimination also have a persistent, negative impact in many countries. In Kenya, about 50,000 newborn babies are estimated to acquire HIV from their infected mothers every year. Worldwide, UNAIDS talks of 2.3 million cases of AIDS-diseased children. Most of them will die before they are five years old. Hence the forceful call from former UN Secretary-General Kofi Annan, a man deeply committed to the struggle against AIDS: We must prevent the cruellest, most unjust infections of all those that pass from mother to child. The infection does not necessarily occur only in the womb during pregnancy. The baby may also come into contact with the mother s infected body fluids during labour and delivery. Finally, they may acquire the virus from their HIV-positive mother s breastmilk. Without treatment, around 15 30 % of babies born to HIV-positive women will become infected with HIV during pregnancy and delivery. A further 5 20 % will become infected through breast feeding. There is help. Adelaide Moraa Ayiechad, a midwife from Dr Wanyonyi s hospital in Kenya, says: A baby can be protected from contracting HIV by using nevirapine, so long as the medication is given in time. Nevirapine, marketed by Boehringer Ingelheim worldwide under the tradename viramune, has proven to significantly reduce the transmission of the virus from mother to child. Just one tablet taken by the mother during labour and a dose of viramune suspension given to the baby within the first 72 hours after birth can reduce the rate of transmission by about 50 %, as demonstrated in clinical studies. Saving hundreds of thousands of lives In its commitment to expanding access to antiretroviral therapy for developing countries, Boehringer Ingelheim has since 2000 been giving free access to nevirapine through the viramune Donation Programme (VDP). The company currently donates the product to 156 programmes in 59 countries in Africa, Asia, Latin America and Eastern Europe. continued on page 12

Examination at Pumwani Maternity Hospital, Nairobi, Kenya, where HIV-infected women and their babies receive treatment with nevirapine to prevent mother-to-child transmission of HIV.

A Kenyan mother, having just delivered twins, undergoes HIV counselling and testing under the prevention of mother-to-child transmission programme at Pumwani Hospital, Nairobi. continued from page 10 So far, a total of almost one million mother-and-child pair doses have been supplied free of charge, with the greatest proportion directed to sub-saharan Africa, epicentre of the AIDS pandemic. The VDP continues to develop and the numbers still receiving the medication are rising. The programme is open to any government, NGO, charitable organisation or other healthcare providers actively involved in the prevention of mother-to-child transmission (MTCT) based on local government approval and registration, according to World Health Organization (WHO) donation guidelines. Boehringer Ingelheim has contracted Axios International, a distributor of healthcare supplies in the developing world, to provide technical assistance to support the implementation of the VDP. Provided free of charge by Boehringer Ingelheim, nevirapine is straightforward to use and ideally should be part of a full treatment schedule. But if this is not possible, it can also be used alone. I feel tremendously privileged to have participated in the discovery and development of a drug that is having the impact that nevirapine is having throughout the world, says Professor John L. Sullivan from the University of Massachusetts Medical School, who has made a decisive contribution to the viramune clinical trials. The single-dose nevirapine regimen has won the support of the public health and HIV/AIDS treatment communities as, in some countries, it may be the only therapy available for preventing HIV transmission to infants during birth. Although the most recent WHO guidelines (2006) continue to recommend single-dose nevirapine use as a practical option in resource-limited settings, there is general agreement that whenever possible single-dose nevirapine should be used in combination with short courses of other antiretroviral drugs to decrease the development of resistance. In addition to the VDP programme, Boehringer Ingelheim has granted in the past years local and internationally operating manufacturers licenses to produce and sell nevirapine for use in anti-hiv combination therapy for the sub-saharan Africa. Boehringer Ingelheim has now expanded its access policy which will make it easier for local and internationally operating manufacturers to produce and sell nevirapine for treatment in anti-hiv combination therapy for the whole of Africa and least developed countries, according to the World Bank and UNDP standard. This new access policy is made available for all producers of nevirapine containing products pre-qualified by the WHO, irrespective of local patent issues or place of production. 12 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our caring culture Mothers deliver healthy babies Interview with Dr Charles Wanyonyi What is the situation in your area in terms of the HIV infection rate? The rate of HIV-infected people has gone down from 13 % in 2003 to at the moment 8-9 % of Kenya s population. This drop is showing that the rate is now stabilising and is being brought under control. How long have you been using nevirapine at your hospital? We introduced a prevention of mother-to-child transmission programme in 2003, the aim of which was to inform HIVpositive expectant mothers about how to protect a baby from contracting the virus. They are also told of the importance of using nevirapine and we have been using it since then. How many mother-child pairs have been treated with nevirapine so far? Since we started the programme, we have handled approximately 4,500 cases. What is your opinion of nevirapine in terms of its efficacy and safety? Nevirapine is very effective and has helped many HIV-positive mothers deliver healthy babies. I must say that there has been a drastic drop of mother-to-child transmission during delivery. I have seen the drug work in a baby whose blood had been in contact with the virus during birth and where a dose of nevirapine had been given, which had then caused the virus to be wiped out and the antibodies to disappear. Consultant obstetrician and gynaecologist Dr Charles Wanyonyi is Medical Director of Pumwani Maternity Hospital (PMH), the largest maternity institution in the East and Central Africa region. Located in Nairobi, the Kenyan capital, it is the most active site in Kenya for preventing mother-to-child transmission (PMTCT) of HIV. Dr Wanyonyi oversees the day to day running of PMH which provides antenatal, delivery and postnatal services, midwife training, research activities and healthcare programmes, such as PMTCT. VIRAMUNE Donation Programme 13

Our people In pursuing our vision to create Value through Innovation, we build on the inspiration, expertise and dedication of our more than 38,400 people around the world. Their striving for continuous innovation and discovery of novel solutions enable us to maintain our growth, to sustain high-level performance and prepare for future challenges. Supported by our Leitbild (guiding principles) and our long-term strategic direction, we continue to focus on core issues for enhancing our people s capabilities and their passion to pursue our vision everywhere we operate. A key element of our sustained success at Boehringer Ingelheim is the way we work together. Guided by fundamental questions contained in Lead & Learn, our common cultural understanding, we are individually and collectively called on to shape an environment where creativity, challenge, team-spirit, respect and fairness flourish. Interdisciplinary teams throughout our organisations continue to support this aspiration with unconventional and inspirational ways of questioning, sharing and learning from each other. Preferred employer recognition The strength of our distinctive working culture is winning wide acknowledgement from prestigious, independent workplace surveys (see page 17). We regard these awards as an affirmation of our success in establishing a demanding yet highly attractive working environment. The surveys increasingly place us among the most preferred employers, giving us a competitive advantage in recruiting and retaining the best talent. In 2006, Boehringer Ingelheim was listed No. 2 among the top 20 employers of scientists in a respected survey among researchers in the USA and Europe (see page 15). Preparing for the future To ensure our sustained, positive development, a number of our organisations devoted substantial attention in 2006 to capitalising on opportunities to improve business and operating efficiency beyond existing continuous improvement. Hence, processes have been launched in which our employees have contributed powerful insights into how we can reinvent ourselves, create structures and processes for better serving the marketplace, reducing costs and redundancies, as well as working more efficiently and securing breakthroughs. 14 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our caring culture 2006 2005 2004 2003 2002 Personnel costs in millions of EUR 2,836 2,671 2,443 2,252 2,175 Personnel costs as % of net sales 26.8 28.0 29.9 30.5 28.7 Number of employees (incl. apprentices) 38,428 37,406 35,529 34,221 31,843 As many of our country organisations will be challenged by an increasingly ageing workforce and shortage of qualified new entrants, we have set out to emphasise the options available and the opportunities to be seized in this development. While measures promoting lifelong learning for all, diversity management, enabling better work-life balance, maintaining and enhancing physical, mental and social well-being are well anchored and the scope for improvement continuously scrutinised, we have now embarked on a course designed to prompt ideas and actions from everyone at Boehringer Ingelheim that will benefit all. A model of our successful adaptation to changing employment requirements is offered by Boehringer Ingelheim Germany. With kindergartens on two sites, educational supervision for schoolchildren during the summer holidays and interns for employee children, flexible working times, more than 100 varying part-time working models and access to elderly care services as well as emergency caring arrangements, the organi- The No. 2 for scientists Its clear orientation towards values makes Boehringer Ingelheim a top employer in the pharmaceutical industry, according to a web-based Science survey from October 2006. In particular, it found that the respectful treatment of employees, their loyalty and the social orientation of the company rank Boehringer Ingelheim the second most attractive employer (from number 8 last year) to scientists in the USA and Western Europe. Hans-Joachim Geppert, Head of Corporate Division Human Resources at Boehringer Ingelheim says: We try to provide a working environment for our employees where they can challenge assumptions, make decisions and where they find the freedom to implement innovations. In other categories, such as clear vision to the future or innovative leader in the industry, Boehringer Ingelheim also ranked top. The 656 respondents were mainly employed in the biopharmaceutical and biotechnology sector (67 %), where Boehringer Ingelheim is one of the leading international companies. Two thirds of the respondents held Ph.D.s. Our people 15

We believe the center will stand out noticeably among the many other outstanding benefits we offer, such as our excellent relocation policy, David Nurnberger, Senior Vice-President Human Resources, says. It might even be one of the main reasons a candidate would choose to work at Ridgefield, since working people with children can readily appreciate its value and convenience. At full capacity, the center will have about 35 teachers, all of whom must have a degree in either education or human service. The learning center is headed by Katrina Maloney, who has a degree in early childhood education and has worked with children for over 17 years. We are an early learning center; we re not babysitting children all day. We have very specific curricula, from infants all the way up to the oldest children at the center, Ms Maloney says. Company childcare enters new territory In an old orchard on Boehringer Ingelheim s sprawling US campus in Ridgefield, Connecticut, a long, one-story building fits discretely into its surroundings. This is the Apple Blossom Children s Learning Center, an exciting new venture in company childcare provision. The building reflects the architectural language of the site, Boehringer Ingelheim s US headquarters, where some 2,200 people are employed, many in research and development. The Apple Blossom Center, inaugurated in September 2006, will take care during the week of up to 156 children from only six weeks old up to 12 years of age. It is open from 6.30 a.m. to 6.30 p.m. A group has one or more rooms to itself, with the distribution dependent on the numbers enrolled in the various groups. The center, which assigns two teachers to every room, also provides private kindergarten and after-school care. It also has a drop-off programme. Boehringer Ingelheim provides childcare at several of its sites, focusing primarily on the pre-school age group. In Germany, the company s Ingelheim and Biberach sites run all-day crèches for very young children (both in cooperation with external partners), taking employees children and children from the surrounding community. The company s kindergarten provision is also conducted in cooperation with the local authorities at the Italian sites, Milan and Florence. In Spain, for example, the company runs an annual summer camp in which about 120 children took part in 2006. 16 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our caring culture sation received highly esteemed certification for its achievements and commitment to making the employment conditions more family-friendly (see page 16). Our German operating unit furthermore had 667 apprentices in 2006 (+2.6 %), again exceeding the previous year s total engaged in internal vocational programmes. Enhancing our capabilities To enhance the knowledge of our employees and support life-long learning, the Boehringer Ingelheim Academy, with its many options from vocational subjects to leadership development, offers all employees a unique source of information about available qualification and updating opportunities. Awards 2006 Our biannual International Management Development Programme is one of our popular leadership enhancement schemes and is the object of external industry benchmarking and research. Our international and interdisciplinary development approach involves around 100 potentials learning and working on stretching topics of strategic relevance over 14 months. International projects and assignments continue to be at the core of our global capability development strategy. Placements lasting up to two years have increased considerably. The aim of all these measures is to assign individuals to tasks in which their skill sets are most required and can best benefit the business, and to enable them to gain international experience in dealing successfully with different economies cultures, and business practices, while appreciating the rich diversity of our corporation. Country Ranking Survey Argentina 8 Best Employers in Argentina (Apertura Business Magazine) Austria 23 Great Place to Work: The best companies to work for in Austria Belgium The fastest growing large companies Brazil among Top 10 Great Place to Work: The best companies to work for in Brazil Brazil Great Place to Work: The best companies to work for in Latin America Denmark 7 Denmark s Best Workplaces Finland Great Place to Work: The best companies to work for in Finland France 12 Great Place to Work Netherlands The 49 Preferred Employers in the Netherlands Netherlands bronze Great Place to Work United Kingdom 40 100 Best Companies to Work for (Sunday Times) USA (Ben Venue) among Top 100 North Coast 99 Award USA/Europe 2 Science Survey Great Place to Work, USA, is an international initiative that has been undertaken for many years in various countries to evaluate the world of work and employee satisfaction. Our people 17

Caring for our neighbours We are fundamentally committed to fostering economic and social well-being in the countries and communities where we operate. Both as a company and as individuals, we seek in a people-orientated and inspirational way to deliver value through innovation in all we do. We contribute actively to communities, charitable organisations and projects in research, science, education, healthcare, culture and environmental protection. Our commitment to our neighbours was again demonstrated across the world in 2006 in a broad range of activities involving thousands of our employees and substantial company resources, expressing our adherence to the principles of social responsibility in both developing and developed economies. Our employees enthusiasm for making personal contributions is noteworthy. Their contributions range from regularly giving part of their income to good causes to using their spare time to engage both at home and abroad in hands-on projects, such as building homes for the poor. Asia, Australasia, Africa Our subsidiary in Indonesia, which in 2005 provided immediate support to victims of the tsunami that devastated coastal regions in South- East Asia, held its third annual healthcare programme at its Bogor plant in 2006. The company gave free treatment and medicines for almost 250 local people, with 20 Boehringer Ingelheim employees, three doctors and two nurses dispensing healthcare. In the Philippines, we joined forces with Gawad Kalinga (GK To give care ) as a corporate donor to build homes for less fortunate Filipinos. Boehringer Ingelheim employees will help build homes for the local community over the next three years. Our Australian operation supported projects in other parts of the region, participating in the Collaboration for Health in Papua New Guinea Project and in the design and implementation of a pilot scheme to train healthcare workers in the treatment of people affected by HIV/AIDS. Substantial charitable activities continued in Australia, including funds donated to the Innisfail Hospital after the area was struck by Cyclone Larry. In South Africa, where we provided the prime funding for the country s first lung institute, the company also sponsors children in a Johannesburg childrens home as one of its many activities. In Botswana, the Boehringer Ingelheim Training and Facilitation Centre in Gabarone continued in 2006 to facilitate important conferences and educational events for healthcare professionals and government officials, especially related to AIDS ( Turning the Tide training programme). The year also saw the first pharmacy student commence studies at Rhodes University under a Boehringer Ingelheim-funded programme agreed with the Botswana government. Pharmacists on the programme are bonded to take up service in the public sector after completing their studies. Americas In North and South America, our company and employees were engaged in a comprehensive range of activities. In the USA, this involved 18 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our caring culture Open Day 2006 in Germany draws record attention Boehringer Ingelheim holds open days for employees families and friends, and the general public. The 2006 events in mid- September at the main German sites, Ingelheim and Biberach, attracted a record number of visitors keen to find out more about the research-based company. The opportunity to take a look behind the scenes in areas normally only accessible to the workforce drew a combined total of almost 25,000 people. The visitors, many of them enthusiastic children, came to the Boehringer Ingelheim sites to spend a day meeting the staff, seeing the research and manufacturing facilities and learning about the many-sided nature of pharmaceuticals. Open Day 2006 was designed to provide insight into the key technologies for the discovery, development and production of innovative drugs. There were also guided tours through a range of state-of-the-art buildings, including the company s plant for worldwide production of pharmaceutical substances and the new biopharmaceutical production unit. Broader interests were accommodated, too. Those interested familiarised themselves with the company s own power plant, the water purification plant and the on-site firefighters. Information on the wide choice of career opportunities at Boehringer Ingelheim was naturally provided as well. The events at Ingelheim and Biberach formed part of the nationwide initiative Responsible Care, organised by the National Federation of the Chemical Industry. Caring for our neighbours 19

In Latin America, our Mexican subsidiary in 2006 concluded its support programme for educating 6,370 poor children in schools in Xochimilco (Mexico City) by installing media rooms. Children from St Margaret Clitherow Primary School receiving their prizes one first prize and two runner-up awards in the 2006 Environmental Art Competition, an annual event in which children develop artwork reflecting the theme of recycling. Run by Boehringer Ingelheim UK for 10 year-old pupils, the competition fosters environmental awareness and supports the national curriculum for this age group. Five schools in the county of Berkshire took part in the competition. volunteering by our employees. A Day of Caring gave employees at our site in Ridgefield, Connecticut, the opportunity to volunteer for tasks to help the aged and deprived. Our US employees also participated in many sponsored events to raise funds for good causes. The Boehringer Ingelheim Cares Foundation Patient Assistance programme makes our products, worth millions of dollars, available to US patients who are without pharmaceutical insurance coverage and who meet certain household income levels. This is geared toward helping provide medication to those who need them most, including senior citizens and families on limited incomes. Our Brazilian company was committed in the social responsibility programme, Conectar, designed to help disabled people to prepare for the jobs market, using our human resources professionals in cooperation with other organisations. It also supported Associação Aliança pela Vida (Alliance for Life Association (ALIVI)) that provides shelter and care to adults and children living with AIDS. Europe In Germany, the scope of our community involvement is very broad, embracing kindergarten provision and assistance for the aged and disabled. The latest cooperation project between our Biberach site and the charitable organisation Heggbacher Einrichtungen provided two disabled people with much needed home improvements. Employees of the company s health and safety section volunteered their free time to refurbish an apartment. In the United Kingdom, we have developed close partnerships with local schools. Our UK employees also donate money to charitable causes under a payroll giving scheme and get two days off a year to work on community initiatives. Our Portuguese subsidiary is engaged with an NGO to support HIV-positive people. 20 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our caring culture Modern patronage Interview with Dr Patricia Rochard For almost five decades, the Internationale Tage (International Days) in Ingelheim have offered art enthusiasts a special insight into different world cultures, the works of individual artists and important art movements. Exhibitions on specific themes, such as the art of the South Seas, Japanese woodcuts, Fauvism and Expressionism, Viennese Biedermeier or the spirit of the 50s in Paris, not only fired visitors enthusiasm with the displayed works, but also through their conception and educational qualities. It all started with the idea of offering people a chance to get to know the life and culture of other nations and peoples in an international company setting. The central theme of cultural openness and continuing education prompted Dr Ernst Boehringer, co-owner of the family-owned Boehringer Ingelheim, to stage an annual cultural festival in 1959. The International Days team was subsequently led for almost three decades by Dr François Lachenal of Switzerland (1918 1997). Dr Patricia Rochard, a Frenchwoman who has been managing the International Days since 1988, has worked for the programme since 1975. Dr Rochard, in 2006 the International Days were devoted to the works of Andy Warhol. How did the exhibition handle the artist? By bringing together familiar and known dimensions in surprising contexts. This altered perspective highlighted unfamiliar and unknown aspects of his work. Your choice of subjects is extremely varied. Do you have an overall concept for the International Days? Rather than an overall concept, I d prefer to describe it as a basic or central idea. As sponsor and patron of the International Days, the owner family was, and still is, interested in conveying humanistic and cultural values. Thus, diversity, openness, education and insight are some of the crucial elements, or main pillars, of this idea. The International Days used to be devoted to country-specific themes. Due to increased mobility in our society and the wealth of information available, the image of the International Days has changed considerably since its early days. In recent years, the focus has increasingly been on themes intrinsic to art. What demands do you make of your exhibitions? First of all, they must be consistent with the basic idea behind the International Days. That means we can t make arbitrary choices or play catch-up, according to events, splendour or fashion trends. On the other hand, we can t choose subjects that are only accessible to a small circle of connoisseurs. The primary goal is to address both a wide audience interested in art and the professionals. It s not always easy to find the right balance, but we make every effort to do so by setting a high standard of quality when preparing the concept and selecting and presenting the exhibits. Has Boehringer Ingelheim some special motivation for supporting the International Days? The history of the International Days is the history of a commitment to culture that is steeped in tradition, the purpose of which is neither to achieve short-lived impact nor economic success. This is wholly in keeping with the spirit of modern patronage which also enjoys the support of the fourth generation of company owners. What is the theme of the exhibition in 2007? Picasso Variation & Metamorphosis. After Tinguely 2005 and Warhol, the aim here is again to highlight a known aspect of Picasso s work while attempting to gain new insights into the artist s approach to work and lifestyle post-1945 by focusing strictly and specifically on a few themes and variations on them. Caring for our neighbours 21

Our environment & employee safety According to the guiding principles (Leitbild) of Boehringer Ingelheim, the health and safety of its employees and the protection of the environment has a very high priority, a fact also underlined by our Principles on Safety, Quality and Environmental Protection. Compliance with company-wide global standards is regularly checked in audits a total of 13 in 2006 by Corporate Headquarters. Agreed annual targets support the implementation of our environment health and safety (EHS) policy, which includes the commitment to the principles of Responsible Care, a global initiative of the chemical industry. A corresponding management system ensures not only that legal requirements are satisfied, but also that continuous improvements in EHS are achieved at all production sites. In 2006, our chemical site in Fornovo, Italy, and the pharmaceutical site in Yamagata, Japan, were certified by external institutions according to the international standard ISO 14001. For further details of our EHS management system please visit www.boehringer-ingelheim. com/ehs The following current examples show how we put our policies into practice: that new, and often highly potent, active ingredients with very low exposure limits, can be handled safely without the need for respiratory protection. But technical measures are not the only way of protecting the health of personnel. In fact, a review of our accident statistics shows that the majority of work accidents were not related to activities specific to the chemical or pharmaceutical industry, but that one third of the cases involved slips, trips and falls. Our sites in Germany have addressed this seemingly trivial problem by initiating a large-scale campaign Responsibility for our employees Highly potent substances that represent a benefit to patients at low doses, can pose a health risk to employees in production or development when inhaled as dust. We therefore set exposure limits for all our substances in order to ensure that none of our employees are exposed to excessive concentrations. During the past year, technological solutions implemented at, for example, our sites in Biberach, Germany; Ridgefield, USA; and Kawanishi, Japan, were designed to ensure Work accidents Frequency rate = accidents x 1 million hours / total labour hours Severity rate = lost labour days x 1 million hours / total labour hours 4 3 80 70 60 50 40 2 1 02 03 04 05 06 22 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our caring culture Boehringer Ingelheim geht sicher (Boehringer Ingelheim walks safely) that includes a physical training course. This successful model will also be introduced in other countries. Our business partners We do not just focus on Boehringer Ingelheim personnel. As we have observed that the accident rate among the large number of employees from outside companies at our plants is distinctly higher than for our own employees, we have focused our attention even more closely than hitherto on the safety of this group of workers. A revised global policy specifies the ground rules for ensuring that these companies endanger neither themselves nor others. Accordingly, even before an order is placed, as well as during its execution, we scrutinise the companies to determine if they can satisfy our requirements for safe working. We have also revised our business process for the qualification of suppliers and third party manufacturers and expressed clear requirements related to EHS and social standards. Product responsibility One of the ways in which we fulfil our obligations in respect of product responsibility is through environmental risk assessments for our drugs. Product responsibility in the wider sense also includes the implementation of the Registration, Evaluation and Authorisation of Chemicals (REACH) regulation, a cornerstone of the future EU chemicals policy. Over the past year, we started preparing all our European sites for the implementation of REACH. The objective of the regulation is to enhance the safety of all those involved along the product chain and to protect both consumers and the environment. In future, companies will only be permitted to use or market correspondingly registered products. Minimising environmental impact The importance of reducing carbon dioxide (CO2) emissions in the future was again highlighted at the World Climate Conference in Nairobi in November 2006. Since 2005, Boehringer Ingelheim has managed to improve its own CO2 balance by a quarter, Water Water consumption (in millions of m 3 ) Water consumption index (in %) Energy Energy consumption (in millions of gigajoules) Energy consumption index (in %) 120 100 80 120 100 80 10 8 6 4 2 60 5 4 3 2 1 02 03 04 05 06 02 03 04 05 06 Our environment & employee safety 23

thanks to the use of the wood-fired power station in Ingelheim, Germany. In addition to power generation, energy efficiency is considered in the construction of new buildings. A recent example is the new pharmaceutical development building in Biberach, which opened in 2006 and optimises energy efficiency through heat recovery and other measures. The latest illustration of this approach is provided by a new administration building currently under construction in Ingelheim. The building s energy needs will be met by an environment-friendly geothermal system: the energy will be obtained by means of 32 brinefilled earth probes inserted into 100-metre-deep shafts. Crisis preparedness / incidents Boehringer Ingelheim does everything in its power to avoid incidents. Indeed, no major incidents were reported in 2006. However, should a crisis occur, there are plans in place which allow us to react quickly and appropriately to different incidents. Last year, we established an additional crisis management plan to be prepared in case of pandemics. In this report we can highlight only a proportion of the variety of our EHS activities. We constantly deal with further topics, which are described on our website at www.boehringeringelheim.com/ehs Awards Our site activities yet again received external recognition in 2006: the chemical site in Malgrat was awarded by the Spanish chemical industry association for its successful accident prevention programme. The US pharmaceutical site in Bedford, Ohio, was rated among the top Healthy 50 companies in Ohio. The Animal Health site in St. Joseph, Missouri, USA, received an award for exemplary wastewater treatment. Carbon dioxide (CO) CO2 by energy purchased (in 1,000 tonnes) CO2 by process emissions (in 1,000 tonnes) CO2 emissions index, direct emissions (in %) (without company car fleet) Volatile organic carbon (VOC) VOC emissions, non-halogenated (in tonnes) VOC emissions, halogenated (in tonnes) VOC emissions index (in %) 120 120 100 100 80 80 500 60 1,000 60 400 800 300 600 200 400 100 200 02 03 04 05 0 02 03 04 05 0 24 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our caring culture The pharmaceutical site in Shanghai, China, was presented with an award for its exemplary energy-saving efforts. Facts and figures The graphs on these pages show our performance figures for the last five years. The key parameter for our performance in occupational safety is the accident rate relative to hours worked. As the graph shows, this has remained at the same level as in previous years and is well below the average of about seven accidents/million hours worked for the European chemical industry. Our environmental impacts are shown both as absolute values and relative to production represented in our production index. The calculation of the index was slightly revised in 2006. Our new baseline year is 2000. As additional information, we will show on our website the contributions made by our individual business segments Chemicals, Biopharmaceuticals and Pharmaceuticals Production to the respective indicators. Over the last few years, most indicators have reached a stable level because many previous technical or organisational improvements resulted in an already high performance standard. Many of our ongoing efforts are no longer reflected in our performance data as clearly as during the earlier years. In 2006, we observed a noticeable increase in hazardous waste and a decrease in the recycling rate. This effect can be mainly ascribed to the disposal of the slag from wood-burning in the Ingelheim power plant. While in the past the slag could be reused for filling salt deposits, it is now brought to landfill sites. For a more detailed explanation of the individual graphs, please visit www.boehringeringelheim.com/ehs Wastewater chemical oxygen demand (COD) COD load before treatment (in tonnes) COD load after treatment (in tonnes) COD load (after treatment) index (in %) Disposed waste Domestic waste (in tonnes) Hazardous waste (in tonnes), incl. pharmaceutical waste Disposed waste index (in %) Recycling rate (in %) 80 60 40 20 25,000 100 90 80 70 8,000 6,000 4,000 2,000 20,000 15,000 10,000 5,000 02 03 04 05 0 02 03 04 05 06 Our environment & employee safety 25

Our goals We shall continue to invest in closed systems in order to protect our employees handling highly potent substances. Corresponding modifications in the two pharmaceutical sites in the USA, as well as in Ingelheim, are planned for 2007/08. There is also potential for the reduction of emissions of volatile solvents (VOC) to the air. We are making changes at our chemical site in Spain, where VOCs will be eliminated in future through thermal oxidation rather than by scrubbing with aqueous media. In Ingelheim, too, additional plants are to be connected to the existing incinerator. Our goal for 2008 is to halve our VOC emissions. An additional state-of-the art treatment step will make the process more effective, will increase nitrogen removal by improving the nitrification/ denitrification process, and will also target the specific halogen-containing wastewater which is difficult to treat when using only conventional technology. Energy savings represent another priority issue: the new laboratory and administration building at our production site in Bedford, Ohio, will be constructed in accordance with the Leadership in Energy and Environmental Design (LEED) standards, a recognised rating system for environment-friendly and cost-effective buildings. The goal is to obtain the LEED certification. In order to adapt our wastewater treatment to increasing loads, we started a major investment in our Ingelheim wastewater treatment plant. 26 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Our R & D drive

Targeting tomorrow s therapies The evolution of concepts for cancer treatment into targeted therapies has changed the chances for some cancer patients drastically. New cancer treatment options may help to transform an acute, deadly disease into a chronic one. There is hope that in future more and more patients will at least be able to live with their cancer and survive into old age. Patients and their doctors have many new opportunities and there are some excellent drugs available and even better ones under development, says Professor Aimery de Gramont of the Hôpital Saint-Antoine, Paris, an internationally recognised centre for cancer treatment. In research, change is already taking place, with a movement away from concentrating on tumour types, such as breast, lung or colorectal cancer, towards tumour-specific targets that can be identified and treated with small molecules or monoclonal antibodies in a variety of tumour types. Additionally, the combination of cancer medicines seems to be a key to even better treatment results. Indeed, it looks as if the time for cancer drug development has never been better, as genomics, proteomics and biomedical analysis have prepared the ground for tomorrow s therapies. By focusing on both biopharmaceuticals and small-molecule drugs, Boehringer Ingelheim has embarked on a major drive to discover and develop new cancer drugs. Particularly in the last few years, Boehringer Ingelheim has become a serious player in the area of oncology, with a whole range of interesting molecules, Prof. de Gramont, one of the world s leading experts in oncology, says. As one of the main international cooperation partners for oncology, the Hôpital Saint- Antoine conducts clinical studies in cancer patients for Boehringer Ingelheim s new potential cancer treatments. The substances belong to the group of small molecules which effectively target specific enzymes (kinases) that play an important role in tumour growth. Although oncology is a highly competitive field in which no company has exclusivity for a target, and there are always several companies working on the same target, Boehringer Ingelheim has advanced three unique molecules into phase II clinical trials. BIBF 1120 is a novel triple angiokinase inhibitor. It differentiates from other compounds of this kind, as it works on three tumour growth factors simultaneously. The compound inhibits the development of new blood vessels to the tumour (tumour angiogenesis) and in consequence stops the tumour from growing. continued on page 30

Professor Aimery de Gramont, Hôpital St-Antoine, Paris, France, internationally renowned for his expertise in the field of cancer research.

Boehringer Ingelheim has become a serious player in the area of oncology, with a whole range of interesting molecules, Professor Aimery de Gramont. continued from page 28 BIBW 2992 is a novel dual kinase inhibitor which irreversibly blocks the activity of two growth factor receptors (EGFR and HER 2). Due to its irreversible binding, BIBW 2992 holds promise for activity against receptors that have become resistant to first-generation reversible inhibitors. BI 2536 is a novel inhibitor of the cell cycle of a cancer cell. Polo-like kinase 1 (Plk-1) is a cell cycle switch, a kinase enzyme with an important role for guiding proliferating cells through the cell cycle. BI 2536 inhibits Plk-1 and causes polo-arrest, interrupting cell division, thus causing cancer cell death. The cooperation between Boehringer Ingelheim and the Hôpital Saint-Antoine is aimed at optimising the process of drug development in oncology and thus to improve the speed of clinical development. Boehringer Ingelheim is much newer to oncology than other companies we work with, but the interaction is very meaningful and effective. Decisions can be made quickly and suggestions are taken up very effectively, Prof. de Gramont observes about the cooperation. Boehringer Ingelheim shows strong commitment to research programmes and long-term partnerships. This commitment is beneficial for our work and in the long run beneficial for patients. 30 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our r & d drive One key for three locks Interview with Dr Chooi Lee Oncologist Dr Chooi Lee was involved in the clinical phase I development of one of Boehringer Ingelheim s promising potential cancer treatments, encoded as BIBF 1120, when a research fellow at the Royal Marsden Hospital in London. Dr Lee, you have worked with BIBF 1120, one of the new compounds from Boehringer Ingelheim s research. How would you describe the effect that the molecule actually has? BIBF 1120 limits nutrition provided to cancer cells by inhibiting the development of blood vessels to the tumour (tumour angiogenesis). By inhibiting this process, the tumour s blood supply can be suppressed which stops the tumour from growing. Some studies have shown that the tumour is actually dying in the centre because of starvation due to a lack of nutrition as a result of decreased blood supply to the tumour. How exactly does BIBF 1120 work? BIBF 1120 is a so-called triple angiokinase inhibitor which means that it inhibits receptors that are relevant in angiogenesis and hence in tumour growth. BIBF 1120 inhibits not only one growth factor receptor, but three: the VEGF, FGF and PDGF receptors. The Boehringer Ingelheim compound has therefore a broader range of targets compared to others in this area. What has been investigated in phase I clinical trial? It was a dose escalation phase I study to look at the maximum tolerated dose of the drug to evaluate safety and tolerability. In general, the principle of inhibiting angiogenesis is already known to be effective against cancer, so such a drug would not be the first on the market. What makes this compound BIBF 1120 so special? It is certainly very special that BIBF 1120 is targeting three growth factor receptors at once, instead of just one. The data have shown that BIBF 1120 has a unique and favourable toxicity profile, which is different to the other drugs The formation of new blood vessels (angiogenesis) plays a critical role in tumour growth. Beyond a diameter of about 2 mm tumours are dependent on an adequate blood supply through newly formed vessels. Inhibition of angiogenesis via specific pathways thus represents an important strategy in inhibiting cancer growth and causes the tumour to regress. out there, for example in terms of lower incidents of hypertension and bleeding complications which are common side effects of other antiangiogenic drugs. Do you think that with BIBF 1120 disease progression could actually be stopped? Yes, during Phase I, more than 50 % of the patients, who already had standard treatment for their cancer, and did not have any further treatment options left for their advanced disease, experienced stabilisation of their disease, which is very promising. BIBF 1120 is now in phase II clinical development. Targeting tomorrow s therapies 31

Our R & D strategy Research and development has been the foundation of Boehringer Ingelheim s success and continues to be the major driver of innovative, new medicines. One key element of the strategy is to expand the discovery and development portfolio into new biological entities (NBEs see page 42), derived out of internal research as well as out of in-licensing efforts without neglecting to foster internal new chemical entities (NCE) R&D capabilities. These NBEs are planned to be co-developed with and produced by our Biopharmaceuticals Division. We have therefore continued to build up dedicated resources, predominantly in Vienna and Biberach. Today, we carry out drug discovery in seven major therapeutic areas allocated to four major R&D sites. Our R&D sites maintain strong responsibility and accountability for their therapeutic areas locally and deploy their innovation and flexibility. International scientific reviews and portfolio management ensure a sustainable, competitive and risk-balanced discovery pipeline. To further strengthen our R&D organisation we have implemented international skill centres to improve efficiency and to secure equal access to state-of-the-art technologies and informatics platforms for all sites. Our licensing functions along the value chain are supported by interdisciplinary, therapy-areaspecific advisory and project teams ensuring speed and diligence in objective evaluations, and seamless incorporation of partnered projects. Worldwide, we employ more than 3,300 scientists, technicians and support personnel in preclinical R&D. They are complemented by about 2,300 clinical monitors, statisticians and data managers in clinical development and medical departments. Boehringer Ingelheim recognises in-licensing and partnering as a key component of our drive to deliver novel therapeutics to the market. While our major licensing focus is in our strategic therapeutic areas, we very successfully develop and market products outside these areas as well. 32 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our r & d drive Our R & D sites Biberach and Ingelheim, Germany CNS, respiratory, metabolism, non-clinical development In our largest R&D center in Biberach, more than 1,600 scientists from about 20 nations energise our research and development while nourishing the interdisciplinary scientific exchange as on a research campus. Biberach is the competence centre for several therapeutic areas: central nervous system (CNS), metabolic and respiratory diseases. Furthermore, our Human Pharmacological Center, in operation since 2004, secures an important link to the clinical investigation of compounds. Projects in Biberach benefit from the open and constructive interaction among our scientists, as well as with academia and biotech companies, with whom numerous scientific collaboration agreements have been signed. Since developmental aspects are considered early during drug discovery, the high attrition rate during the process could be reduced. The challenges of target validation and clinical proof, however, remain, but are now actively addressed by dedicated technology-driven expert groups at the Boehringer Ingelheim Global Skill Centers (GSCs). The key to success is never stop striving for more!, comments Dr Michel Pairet, Senior Vice-President Research in Biberach, on the ambitious goals for the upcoming year. We want to see one or two of our compounds achieving clinical proof of concept, and three to four compounds to successfully complete phase I clinical trials. What s more, we plan to bring four or five new high-quality compounds into preclinical development. And more: Boehringer Ingelheim regards it a critical endeavour to fully integrate new biological entities in its project portfolio. Dr Pairet forecasts a busy year of R&D at Biberach: seven new compounds which have been added to the preclinical portfolio last year will now have to be further characterised. In addition, we are looking forward to having the first compounds coming out of collaborative research with academic groups or biotechs. The research teams outstanding efficiency is attributed to two main factors the company s size and the fact that Boehringer Ingelheim is family-owned: Our scientists have the spirit of freedom to work and think in the long term, concentrating on true medical need and compound safety, rather than on glossy presentations to investors. For the future, teams will prepare to enter new therapeutic areas for which there is a high unmet medical need. With the new structure we are well prepared for future tasks, since we allocate development resources on a global basis jointly with our colleagues in Ridgefield. Germany will, furthermore, be the link between research and manufacturing, since we have the late stage chemistry manufacturing and control responsibility for the entire portfolio. Last but not least, the excellent exchange with our colleagues from research and medicine position us well for the challenges of a full portfolio, says Dr Wolfgang Baiker, Senior Vice-President Development in Germany. Development efforts in Germany support the research centres in Biberach and Vienna with all early and late development functions. For increased efficiency, the late chemistry, manufacturing and control, as well as the development of inhalation devices, have been centralised in Germany for compounds stemming from all research sites. Dr Wolfgang Baiker, Senior Vice-President Development, Germany Dr Michel Pairet, Senior Vice-President Research, Germany Our R & D sites 33

Ridgefield, USA Cardiovascular, immunology and inflammation, non-clinical development Research and Development at Boehringer Ingelheim Pharmaceuticals, Inc. was established in 1979 and was built up as a centre for immune & inflammatory diseases. Only a few years ago, in 2003, it also became the R&D competence centre for cardiovascular diseases. In the area of cardiovascular diseases, chronic heart failure, atherosclerosis, hypertension and its sequelae are targeted. In immunology & inflammation, Boehringer Ingelheim s focus is on autoimmune diseases such as rheumatoid arthritis, psoriasis and multiple sclerosis. In the last three years, the Ridgefield site has seen major investments in staff and facilities with the aim of strenghtening the previously mentioned key indication area pipeline. In order to strengthen our early development capabilities, a new physical science building has been erected and is about to be opened. It will provide a state-of-the-art facility for analytical science and chemical development. My most interesting and satisfying experiences have been seeing the fruits of our research tested in patients for the first time, says Paul Anderson, Senior Vice-President Research at the US R&D centre. That is what our work is all about. Dr Anderson outlines that apart from the classical research another focus of the efforts in Ridgefield is the build-up of a pipeline of NBEs (see page 42). Capitalising on the expertise of the Biopharmaceuticals business, the teams will be able to advance innovative NBE projects in areas where biological therapeutics can provide important advances. The confidence in the success is based on solid ground. The distribution of our seven therapeutic areas to specific sites among our four major drug discovery centers allows each site to focus, with a critical mass, on the therapeutic areas under its responsibility, and gives each site the focus and autonomy of a biotech company with the resources and backing of a major international pharmaceutical company, he stresses. There is a positive picture for what is to come: In recent years, we have successfully built a truly globalised development structure which has strengthened our non-clinical development in Ridgefield. Our new physical science building adds an important capability to achieve our goal of supporting research in Ridgefield and Laval, but also adds the needed capacity in development worldwide. Our experience in working closely with research colleagues provides an important advantage and drives the rapid and efficient development of compounds in our therapeutic areas, notes Dr Peter Farina, Senior Vice-President Development at Boehringer Ingelheim, Ridgefield. With the aim of benefitting all of our global research sites, Boehringer Ingelheim has recently established global skill centers (GSCs) to strengthen its position in technology areas of strategic importance. Ridgefield has established the GSC for high throughput cloning and expression and shares responsibility for the alternative lead identification and compound pool optimisation the GSCs with Biberach, Germany. Dr Paul Anderson, Senior Vice-President Research, USA Dr Peter Farina, Senior Vice-President Development, USA 34 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our r & d drive Laval, Canada Virology Boehringer Ingelheim s Research Center in Laval is one of Canada s largest pharmaceutical research sites. Located near Montreal, over 130 scientists and their complementing support staff are Boehringer Ingelheim s experts for discovering potential treatments for chronic and acute viral diseases for which either no vaccine exists or current therapy is lacking or unsatisfactory. The teams in Laval are dedicated to advance therapeutics for diseases caused by the hepatitis C virus and the human immunodeficiency virus (causing AIDS). HIV research in Laval aims to complement Boehringer Ingelheim s portfolio of existing HIV treatments, e. g. viramune (nevirapine, a nonnucleoside reverse transcriptase inhibitor) and aptivus (tipranavir, a protease inhibitor). Further compounds under development will be added to the armentarium of drugs to treat HIV-positive patients, particularly those where prior therapy has failed due to development of a resistance. State-of-the-art technology in the key areas chemistry and biological sciences, such as the nuclear magnetic resonance (NMR) and X-ray technology, as well as computer-aided image analysis, push projects forward. What is most rewarding in my position is to receive the positive response from collaborators regarding our scientists and projects and it s humbling. Universally, I hear our scientists high level of motivation, and the obvious excitement they get from the science that they do is unique, relates Dr Michael Cordingley, Senior Vice- President Research, about the teams in Laval. By capitalising on research with first molecules in hepatitis C in recent years and by implementing even better technology to ferret out bad actors early, the teams will continue to consolidate the strong position in hepatitis C virus protease inhibitor and polymerase inhibitor development in 2007. We will also strengthen our activities within our collaborative programme, for example with the Australian biotech Biota Holdings, for additional complementary targets. The work is far from done in the HCV area. Current treatment options still carry the serious safety and tolerability problems associated with the standard care. Our aspiration therefore is to introduce oral combination therapy which will deliver patients effective and well tolerated oral treatments, rather than inconvenient injectables. The focus in Laval is on discovering antivirals with complementary mechanisms suitable for use together to combat resistance and provide durable efficacy and safety. Overall, we aim for nothing less than providing safe and effective novel oral medicines to improve treatment outcomes for HCV and HIV-infected patients, emphasises Dr Cordingley. The increase in the number of research projects in Laval are being complemented by the extension of the research facility to about double the size. The building is planned to be inaugurated in early 2008. Dr Michael Cordingley, Senior Vice-President Research, Canada Our R & D sites 35

Vienna, Austria Oncology Boehringer Ingelheim s dedicated drug discovery center for innovative cancer medicines is located in Vienna. Oncology was created as a new therapeutic area at Boehringer Ingelheim in response to the substantial unmet medical needs of cancer patients and the tremendous advances in understanding cancer biology, fuelled by the human genome project, with new insights into cancer genes and the biochemical signalling pathways gone awry in malignant cells. Research in Vienna reveals that scientific excellence and the ambition to discover and develop new medicines are not limited by national borders: the more than 200 researchers in Boehringer Ingelheim s laboratories come from more than a dozen countries worldwide. Together with the global development center in Biberach and colleagues in Medical, the discovery teams are committed to new treatment choices for patients (with locally advanced or metastatic cancers). The oncology research campus is part of the Regional Center Vienna, which has business responsibility for Austria and twenty-nine countries in Central and Eastern Europe. From 2000 to 2007, a highly modern, state-of-the-art research infrastructure has been built up at the Regional Center. Only recently, a new biology research building has been opened, which complements the chemistry research building inaugurated in 2002. Within a very short timespan, innovative drug candidates from in-house research both small-molecule chemicals and human monoclonal antibodies have been advanced into development, including three compounds currently in phase II clinical trials. Of the nearly 25 million people diagnosed with malignant cancers worldwide, more than half can be treated today with long-lasting benefit; however, close to seven million cancer deaths per year are simply not acceptable, explains Dr Wolfgang Rettig, Senior Vice-President Research in Vienna. Available treatment options, particularly surgical interventions, are least promising when the cancer has spread to distant organs, and at this stage of the disease the need for more effective, targeted therapies with fewer side effects becomes plainly visible. One in every three women and one in every two men will be diagnosed with a malignant cancer during their lifetimes, and this is a challenge we take very personally, Dr Rettig states. The time for finding better cancer medicines has never been better for Boehringer Ingelheim, since the company can build on a very strong scientific foundation provided by academic research centers worldwide. Nevertheless, the road ahead is long and arduous, Dr Rettig forecasts. Boehringer Ingelheim has entered the field of oncology with the persistence and long-term vision possible for a family-owned group of companies, and the outlook for patients is therefore promising. Already, some cancer types are being treated very effectively with targeted drugs, although not all patients benefit equally. According to Dr Rettig: With many additional drugs in development, this trend will improve, and we will continue to change the face of cancer, turning it into a chronic disease with improved quality of life, one step at a time. Dr Wolfgang Rettig, Senior Vice-President Research, Vienna 36 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our r & d drive Our support centres Kawanishi, Japan Molecular biology, non-clinical development One of Boehringer Ingelheim s centres for molecular cell biology is located in Kawanishi, Japan. Kawanishi is specialised in membrane receptor targets providing dedicated support for drug discovery activities. International development is supported by early pharmaceutical work and analytical sciences. Furthermore, Kawanishi serves as a skill center to characterise how drugs interact with transporter molecules in the body. Milan, Italy Chemical synthesis The Chemistry Research Center Milan, Italy, with about 30 employees, contributes to advancing research at an important stage of the process, namely by providing expertise in synthesis in exploratory projects and lead optimisation projects for Biberach. Research Institute of Molecular Pathology (IMP), Vienna, Austria an independent basic research institute The bridge between our R&D people and academia is reinforced by the strong link to the renowned Research Institute of Molecular Pathology (IMP) in Vienna. IMP scientists are at the forefront of discovery defining fundamental processes of cell division and differentiation in healthy and diseased states. In 2001, collaboration started between the IMP and the Institute of Molecular Biotechnology Austria (IMBA), which added a new dimension to our academic network. Buenos Aires, Argentina Non-clinical development Our support center in Buenos Aires operates in close cooperation with the Ridgefield development site and also provides assistance to production plants in Argentina, Brazil, Colombia and Mexico. From Buenos Aires comes added support on drug formulation and the manufacture of medication for clinical trials. Our R & D sites 37

Our expertise in landmark studies Landmark studies are large-scale, randomised, controlled clinical trials for thousands of patients recruited from a great number of sites around the world. Results have a potential to broadly impact on clinical practice. All in all, in the last decade Boehringer Ingelheim conducted or sponsored some 1,400 studies involving approximately 1.2 million patients in 59 countries in all regions of the world. Among these studies, the ontarget / transcend, profess, uplift and re-volution trial programmes are landmark studies. They progressed according to plan in 2006. The ontarget trial programme, the cardiovascular protection study with micardis (telmisartan), our angiotensin II receptor blocker, had recruited over 31,000 patients by 2004, the end of the recruitment interval. Since then, patients have been followed up with regular clinical examinations and are now in the last year of observation. The primary target of the study is to determine if the combination of micardis and the angiotensin-converting enzyme (ACE) inhibitor ramipril is more effective in reducing myocardial infarction, stroke, heart failure and cardiovascular death compared with ramipril alone, and, if micardis 80 mg is at least as effective as ramipril 10 mg daily. Among the secondary endpoints are newly diagnosed congestive heart failure, the need for cardiovascular revascularisation procedure, newly diagnosed diabetes, cognitive decline and dementia. The transcend trial with micardis versus a placebo looks into the same endpoints but is focused on patients who cannot tolerate an ACE inhibitor and may benefit from an angiotensin II receptor blocker instead. Results are expected in 2008. The largest secondary stroke prevention study profess exceeded its recruitment target and has now enrolled 20,333 patients. The primary endpoint of this trial is time to first recurrent stroke. profess compares the efficacy and safety of aggrenox (25 mg ASA/200 mg extended-release dipyridamole) with clopidogrel, and additionally of micardis (telmisartan) with a placebo. First results are expected in 2008. Every single step matters Interview with Dr Salim Yusuf What will the landmark trial ONTARGET mean for patients? The ONTARGET trial programme is set up to investigate the potential benefits of the combination of the angiotensin-ii receptor blocker telmisartan (ed: MICARDIS ) and the ACE inhibitor ramipril in reducing myocardial infarction, stroke, heart failure and cardiovascular death. We also have a parallel study called TRANSCEND where people who can t take ramipril receive either telmisartan or placebo. So between these two trials we will learn whether telmisartan is at least as good as ramipril, and whether the combination is more effective. This is important because ramipril has some side effects and a significant proportion of people can t tolerate it. If telmisartan is as good as ramipril, but is tolerated better, that is a positive finding for patients. The second possibility is that telmisartan when added to ramipril will have more benefit than either drug alone. That would be the most exciting finding if confirmed. 38 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our r & d drive uplift is our 6,000-patient, long-term outcome study with spiriva (tiotropium bromide), a novel once-daily inhaled anticholinergic for the maintenance treatment of chronic obstructive pulmonary disease (COPD). The trial has been set up to prospectively confirm that spiriva has the potential to positively influence the progression of COPD over time. The primary endpoint is the rate of decline in forced expiratory volume during the first second of exhalation (FEV1) over four years in COPD patients. This study is explored to be completed in 2008 as well. re-volution, the clinical trial programme in thrombo-embolic disease, involves more than 27,000 patients and investigates dabigatran etexilate, an orally available thrombin inhibitor for the prevention and treatment of thromboembolic diseases. Studies cover the prevention of deep vein thrombosis following orthopaedic hip or knee replacement surgery, as well as treatment of thromboembolism, secondary prevention of thromboembolism and stroke prevention in atrial fibrillation. The studies are scheduled for completion between 2006 and 2009. Do you think that patients will understand the importance of a prevention treatment, i.e. taking tablets for a condition which does not hurt before infarction or stroke may occur? The people in ONTARGET have all had a heart attack or stroke, coronary disease or diabetes or some complications, or are at high risk of developing these. These are patients who need multiple approaches to prevent cardiovascular disease. Think of it like climbing a staircase: every step matters. One step alone won t do. How is the flood of information in this trial processed? We have more than 700 trial centres in 41 countries. Data comes in on 40 fax lines open to receive data continuously day and night. The data are automatically screened and scanned by an intelligent optical recognition system which enters them into a special software for a first-level data check. Next, our specialists check to see if there are things the computer missed. Some 180 individuals, research assistants, research coordinators, medical officers, statisticians, programmers and administrative staff collaborate here at The Population Health Research Institute at McMaster University to make this an efficient process managing some one and a half to two million pages of data every year. With ONTARGET we will publish a large number of scientific paper and analysis will go on for many years after the first announcements of data in 2008. Salim Yusuf, Professor of Epidemiology and Cardiology at McMaster University in Hamilton, Ontario, Canada, leads the research team for Boehringer Ingelheim s ONTARGET trial programme. Here he discusses the long-term project. Our expertise in landmark studies 39

From mind to man the R & D process It seems almost as impossible as finding a needle in a haystack. From more than one million screened molecules, only one will eventually enter the market as an approved medication. Drug discovery, pre-clinical and clinical development take about 12 years and an average investment of USD 800 million. The development of a drug from mind to market has to successfully pass through the stages described below. Target validation To select targets most likely to be useful for the treatment of a disease, researchers compare each drug target to others based on their association with a specific disease and their ability to regulate biological processes in the body. Tests confirm that interactions with the drug target effect the desired change in the behaviour of the diseased cells. Research Target identification Drugs usually act on cellular proteins, such as enzymes or receptors, known as drug targets, which are believed to be associated with a disease. Scientists use a variety of molecular, genetic or pharmacological techniques to identify a target and learn more about how it influences the disease. Lead identification Laboratory assays are developed that allow a rapid screening of small molecules or proteins. Screening of chemical libraries representing larger or smaller cellections of molecules that with drug-like properties will identify leads, compounds that specifially bind to the desired target. Lead optimisation Improvement of the properties of the identified leads in order to support the selection of those compounds with the greatest potential to be developed into safe and effective medicines. The best lead compounds are studied for their therapeutic effects and how they are absorbed, metabolised and excreted in living organisms. research development basic research (academia) and exploratory research (industry) target identification target validation lead identification lead optimisation pre-clinical development phase I phase II years 1 2 3 4 5 6 7 8

our r & d drive Development Pre-clinical development Profiling of the drug candidate with regard to safety according to regulatory requirements prior to first use in humans is performed. A chemical synthesis is developed and scaled up to provide the necessary drug quantities for further development and testing. The best dosage form for administration to patients and a suitable pharmaceutical formulation are identified. Phase I Clinical trials, normally performed in healthy volunteers, provide results on the absorption, distribution in the human body and excretion of an investigational compound, and on short-term tolerability and safety, in order to determine a preliminary dose range. Boehringer Ingelheim has two Human Pharmacological Centers in operation in Germany (Ingelheim and Biberach). Phase II Efficacy and safety in the target indication is established with up to several hundred patients usually treated for several weeks or a few months. These studies allow the determination of the potential therapeutic dose range. Phase III Phase II results on efficacy and safety are refined and confirmed in larger patient numbers (several thousands) and surveillance of long-term treatment as appropriate for the indication. Registration / life cycle management Regulatory approval After clinical studies, results are submitted to regulatory agencies. Independent experts give their opinion on whether or not the drug product should be approved. Phase IV (life cycle management) The product is further profiled for more general and broader real-life usage, in special patient subgroups and in the context of an even broader concomitant therapeutic environment. These trials may be extremely large (10,000 30,000 patients) and therefore can better identify even rare adverse reactions. registration phase III regulatory approval phase IV (life cycle management) 9 10 11 12 13 14 15

New biological entities (NBE) Boehringer Ingelheim is widely recognised as a world leader in all aspects of biopharmaceutical manufacturing, from early process development to large-scale commercial manufacturing in microbial as well as mammalian expression systems. Combined with our disease expertise, our strategy is to create a comprehensive and proprietary NBE programme, thus addressing unmet medical needs in several indication areas and expanding our proprietary NBE product portfolio beyond actilyse, metalyse, imukin and beromun. To fully exploit our internal synergistic potential, we have established expertise in human antibody drug discovery facilitated by in-licensing key technologies from MorphoSys (phage display) and Medarex (genetically modified mice). We have also strengthened our protein technology infrastructure and allocated dedicated biology resources. Our current NBE discovery programme includes some ten projects, a first step towards a steady stream of innovative NBE therapeutics in our development pipeline. Good progress was achieved during 2006 with several projects across multiple therapeutic areas moving to the lead optimisation and pre-development stages. We are also pursuing a number of biotechnology collaborations to sustain and strengthen future delivery of quality NBEs. With FivePrime Therapeutics we are conducting a high-throughput functional screen of their proprietary library of secreted proteins and receptor ectodomains to identify novel NBE targets for rheumatoid arthritis. We are also currently looking into new alliances on technologies that will help us develop high-quality NBEs as a complement to our successful alliances with Medarex and MorphoSys. One of the fastest drug developers Pharmaceutical companies that develop and launch new products faster than their competitors perform consistently better across a number of dimensions, earn higher revenues, and have lower development costs. These findings were reported in a newly-completed analysis of the period 2000 to 2005 from the Tufts Center for the Study of Drug Development, based in Boston, USA. Boehringer Ingelheim was represented amongst a group of the fastest pharmaceutical companies. All of the fastest companies shortened their development and regulatory cycles by as much as 17 months, compared to average-performing drug developers. They had far less development and regulatory time variability, stopped projects sooner, instead of moving them to ever more complex studies, and were better at setting resource priorities, the survey revealed. We have in the last few years noted an increase in our R&D productivity, as measured by increased output of compounds, better project success rates and a growing R&D portfolio. The Tufts survey addresses speed as yet another productivity parameter. The data further supports the notion that our international R&D strategy is on the right track, says Dr Mikael Dolsten, Executive Vice-President Pharma Research of Boehringer Ingelheim. In view of the very high R&D costs one reckons presently with more than EUR 800 million for the development of a new drug the speed to get valuable drugs to the market is crucial, and may give us another competitive edge over other pharma companies. 42 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our r & d drive Biomarker and pharmacogenetics Realising the importance of biomarkers and pharmacogenetics from early discovery phase to post-launch in delivering more and safer medicines with good and predictable efficacy to patients, this area receives particular attention in Boehringer Ingelheim. Biomarkers give an objective read-out for drug target binding, immediate downstream physiological effects (pharmacodynamic biomarkers), pathological processes (disease biomarkers) or drug-induced side effects (safety biomarkers). This is particularly helpful in early clinical development as a tool to obtain an early indication of drug effectiveness and safety. Biomarkers are typically recorded by clinical chemistry measurements or physiological responses in animal models and patients. Boehringer Ingelheim is increasingly exploring cutting-edge technologies for biomarker assessment, including imaging, expression profiling and proteomics in our discovery and early development projects. In pharmacogenetics the genetic variation between patients is studied in order to explain potential differences in the response to drugs. This area is becoming increasingly important for understanding efficacy and side effects for the individual patient, with a particular focus on polymorphisms (i. e. having multiple alleles of a gene within a population) in the drug target itself, as well as in drug metabolising enzymes and drug transporters. In 2006 Boehringer Ingelheim started to put in place a strong infrastructure to support our clinical development project teams to efficiently use biomarkers and pharmacogenetics. The newly built function includes laboratories for clinical chemistry and pharmacogenetic analyses, and will provide capacity for fully automated long-term storage of several million anonymised DNA samples obtained from patients during clinical development. The new function also includes a state-of-the-art sample logistics infrastructure and data mining and modelling capabilities. New biological entities (NBE) / Biomarker and pharmacogenetics 43

The development of our businesses We have committed ourselves to the goal of serving mankind through research into diseases and the development of new drugs and therapies in the areas of human pharmaceuticals and animal health. Our businesses follow our patient-orientated approach. They are divided into two main business areas: Human Pharmaceuticals, that accounts for 96 % of our business, and Animal Health that accounts for 4 % of our business. Net sales (in EUR million) 2006 2005 Growth in % Human Pharmaceuticals 10,200 9,174 1,026 11 % Prescription Medicines Branded Prescription Medicines Generic Prescription Medicines 8,311 7,654 657 7,247 6,712 535 1,064 942 122 15 % 14 % 23 % Consumer Health Care 1,064 1,052 12 1 % Industrial Customer Pharma Chemicals and Pharmaceuticals Production Biopharmaceuticals 809 306 503 847 299 548-38 7-45 -5 % 2 % -8 % Others 16 28-12 -43 % Animal Health 374 361 13 4 % Total 10,574 9,535 1,039 11 % 44 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Serving patients

Rin Fujima, Kyoto, Japan, suffers from high blood pressure, a serious risk for the brain, heart and kidneys.

I can do so much by exercising and having a healthy life style, but I also need effective medicine to lower my blood pressure, Rin Fujima I wake up refreshed... When I woke up in the morning, I no longer felt refreshed from sleep. I went to my doctor Haruteru Hasuo who found that my blood pressure was far too high. Fortunately, apart from high blood pressure, my checkup revealed no other disorders, such as hyperlipidaemia or diabetes, recalls Rin Fujima, a 60-year-old housewife living near Kyoto. She was prescribed an angiotensin-ii-receptorblocker to control her blood pressure. I now measure my blood pressure before taking my medication every morning. I ve seen great improvement. After taking the medication things got back to normal for her. However, high blood pressure or hypertension is not only an unpleasant condition. It is possibly also the first sign of a serious cardiovascular risk that can be the precursor to stroke and heart attack. Uncontrolled, this 24-hour condition can cause damage to vital organs, such as the heart, kidneys or brain, over the long term. Sharp rises in blood pressure occur in the early hours, coinciding with an increase in life-threatening heart attacks and strokes. We know that more than half of the patients who appear to have well-controlled blood pressure are not effectively protected when their blood pressure is measured over a 24-hour period, notes Professor Toshiro Fujita, chairman of the department of internal medicine at the graduate school of medicine and faculty of medicine, University of Tokyo. There is a need for patients to receive powerful blood pressure lowering treatments that work over the full 24-hour period, he urges. I can do so much by exercising and having a healthy life style, says Rin, but I also need effective medicine to lower my blood pressure. I m convinced that my new treatment and my new way of life now complement each other. And I wake up refreshed like I used to. Cardiovascular disease remains the No. 1 cause of death globally and is responsible for every one in three deaths worldwide an estimated 17 million people a year. It is also a major cause of disability, and contributes significantly to the escalating costs of healthcare. 48 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients Human Pharmaceuticals Branded prescription medicines Boehringer Ingelheim is recognised as an innovative company which discovers, develops and markets new medications. We focus on the therapeutic needs of our ultimate customer, the patient. During 2006, we continued to build and strengthen our clinical development programme by including nearly 40,000 patients in (Good Clinical Practice) clinical trials of phase I to IV. With these new patients included the number of patients actively engaged in clinical trials exceeded 50,000 patients on average every day throughout the year. Currently, our focus is on the following therapeutic areas: respiratory diseases, central nervous system (CNS) diseases, virology, cardiovascular diseases, immunology/inflammation, oncology, metabolic diseases and urology. Respiratory diseases Respiratory diseases have long been a major focus area for Boehringer Ingelheim and we dedicate ample resources to research in this field. Our main objective in pulmonary research is to further improve treatment options for chronic obstructive pulmonary disease (COPD) and asthma. COPD and asthma COPD is currently the fourth most common cause of death, yet up to three-quarters of sufferers in Europe and 45 % in the USA go undiagnosed. This suggests a major unmet need for treatment for this debilitating lung disease. Americas xxxx The major cause of COPD is tobacco smoking. The of which: USA xxxx disease is progressive with an ongoing decline in lung function, which results in increasing breathlessness, reduction in the capacity to exercise, and a subsequent diminishment of quality of life. Top products Branded prescription medicines Net sales 2006 in millions of EUR change spiriva 1,381 +45.2 % micardis 967 +33.6 % flomax 922 +27.8 % combivent 671 +19.6 % mobic 579-31.8 % sifrol 536 +23.4 % viramune 276-4.1 % atrovent 263 +5.4 % aggrenox 225 +30.9 % catapresan 217 +23.7 % Sales of branded prescription medicines by therapeutic area Central nervous system 9.8 % Muscoloskeletal/ rheumatology 7.7 % Gastrointestinal/ metabolic 3.0 % Urology 12.6 % HIV 4.4 % Others 1.9 % Respiratory 37.1 % Cardiovascular 23.5 % Prescription Medicines 49

Boehringer Ingelheim s respiratory portfolio consists of major COPD and asthma products: spiriva (tiotropium bromide), combivent (ipratropium bromide / salbutamol) and atrovent (ipratropium bromide). spiriva is a once-daily inhaled medicine recommended for first-line regular treatment of COPD. It contains an anticholinergic agent which acts on airway constriction, a dominant mechanism in COPD. It opens the narrowed airways of COPD patients for a full 24 hours to help patients to breathe more easily, thereby positively impacting the clinical course of COPD and helping to change the way patients live with their disease. It is the first inhaled treatment to provide significant and sustained improvement in lung function with once-daily dosing. In 2005, spiriva became Boehringer Ingelheim s first blockbuster medicine, that is one with annual turnover exceeding USD 1,000 million. spiriva posted growth in net sales to EUR 1,400 million, or USD 1,700 million, in 2006. spiriva expanded its position as a global medication for COPD. With the successful launch of the product in France in 2006, spiriva, which is globally co-promoted with Pfizer Inc., is now available to patients in most countries of the world. About six million patients affected by COPD worldwide have been treated with spiriva in 2006. This reflects the benefits spiriva provides to COPD patients. On the basis of excellent clinical study results, the European label for spiriva HandiHaler was extended to include the improvement of physispiriva is a novel anticholinergic medicine recommended for first-line regular treatment of COPD. It is the first inhaled treatment to provide significant and sustained improvement in lung function over 24 hours with once-daily dosing. Our clinical studies in respiratory diseases The year 2006 was highlighted by several important successes in the spiriva clinical trial programme. The importance of spiriva for the treatment of COPD was focused on by over 70 publications, including review articles and abstracts. Several publications from primary and secondary data analyses were issued, including the publication of the one-year mistral trial in France in which spiriva demonstrated significant reductions in COPD exacerbations. Important clinical trial data presented in 2006 also demonstrated significant improvements in lung function in patients with milder disease symptoms and those diagnosed with both COPD and asthma. Both patient populations are considered important patient groups who may be under treated with required inhaled anticholinergics. uplift, the global 6,000-patient landmark study with spiriva, is investigating the drug s potential to impact the course of the disease by slowing the decline in pulmonary function, which is one of the devastating consequences of COPD. All parameters of good clinical trial conduct indicate that this study will successfully enter its last full year of follow-up in 2007 and be completed in 2008. 50 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients I feel now like another man I have smoked for 30 years which has left me with chronic obstructive pulmonary disease, says seventy-year-old Frenchman Jacques Luchier, a retired food industry bacteriologist. The first time I met my pulmonary specialist and he told me I had very severe COPD, I was caught completely off guard. I was scared, as you think about death and that you ll end up in a hospital bed with tubes everywhere to keep you alive. COPD causes significant deterioration of lung function resulting in breathlessness, activity limitation and associated disability. Some 600 million people currently live with COPD, and the disease is projected to be the world s third leading cause of death by 2020. Jacques Luchier started treatment with a novel bronchodilator. He also undertakes respiratory rehabilitation which consists of regular supervised exercise, education on COPD and its treatment, breathing techniques, as well as nutritional and psychological support. The respiratory rehabilitation is very hard to cope with at the start. You have to really make an effort, Jacques says. But you get to improve your quality of life by inhaling the bronchodilator. You feel relief, you breathe better, you feel more yourself, you recover your spirits. And he adds: Now I feel like another man. I feel distinctly better. I feel less handicapped. cal exercise capacity and the reduction of exacerbations in COPD. spiriva is now the first COPD drug which incorporates information about exacerbations and exercise in a broad population of COPD patients on its label. of the drug in the lungs is improved and less deposition occurs in the mouth and throat compared to pressurised metered dose inhalers. Attitudes of patients show a high level of satisfaction with this device. spiriva is currently delivered to patients via our HandiHaler device. In future, patients will also be able to benefit from spiriva delivered via Boehringer Ingelheim s respimat Soft Mist Inhaler (SMI), a novel propellant-free, multi-dose, inhaler that generates a slow-moving, long-lasting cloud (the soft mist) with a high fine particle fraction (less than 5.8 μm). As a result, deposition After completion of the pivotal studies for spiriva in our propellant-free respimat SMI we have submitted a registration file in the EU under the decentralised procedure and in addition in several other countries around the world. The completion of the US submission will be one of our key activities for 2007. Prescription Medicines 51

Our R & D for respiratory diseases Our worldwide launch of spiriva (tiotropium) provided a medication to improve COPD therapy and strengthened our leading position in this field. We are striving for further innovations by developing bronchodilators with alternative mechanisms. These new bronchodilators are being formulated in innovative inhalation devices. In addition, Boehringer Ingelheim in 2006 entered into a worldwide collaboration, development and licence agreement with the British company Vectura. The aim of the collaboration is to develop a multi-dose dry powder inhaler as a Boehringer Ingelheim branded device, to deliver a range of proprietary Boehringer Ingelheim respiratory products, mainly for the treatment of COPD and asthma. We currently have numerous bronchodilator programmes in development, six of them in clinical studies. Extending our product portfolio to drugs that target treatment of the underlying inflammation and the tissue remodelling process are further key goals in our COPD research. Inflammation in COPD patients is provoked by an infiltration of the lungs by macrophages and neutrophils. This is only poorly controlled by current, widelyused anti-inflammatory drugs, such as corticosteroids. We are therefore working on alternative anti-inflammatory mechanisms, specifically targeting macrophage and neutrophil-driven inflammation. severe asthma, where mucous plugging is considered the main cause of death. Our research in asthma is aimed at new mechanisms and immunological paradigms that would allow us to replace or reduce the doses of inhaled steroids by providing anti-inflammatory therapy better tolerated by patients. Another goal is to provide a new treatment for specific syndromes with high, unmet medical need, such as severe, steroid-resistant asthma. Diseases of the central nervous system In addition, we aim at preventing or delaying tissue remodelling that is induced by chronic inflammation by targeting lung growth factors. Two first-in-class mechanisms targeting mucous hyperplasia and fibrosis are being tested clinically. Beyond COPD, such new mechanisms have a therapeutic potential in idiopathic pulmonary fibrosis (IPF), a life-threatening disease, and in According to World Health Organization (WHO) predictions, diseases of the central nervous system will constitute an increasing medical need in this century, attributable to an exponential increase of these diseases in patients beyond 65 years of age, combined with an aging population. To date, available therapeutic treatments are still unsatisfactory for the majority of CNS diseases. 52 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients Like a great round of golf When in 2003 I faced my diagnosis of Parkinson s disease, I tried to deal with it with the spirit of a true competitor, says Cherie Zaun, a professional golfer from Glendale, California, USA. Despite at first feeling helpless, I read up on everything about how to live with the disease and set out to battle it. I was still only in my early 50s. Today, I m able to teach and play golf again. Living with Parkinson s is not all that different from doing a great round of golf it takes practice and determination, Cherie explains. She is mother of three and former winner of the Virginia State Amateur Championship, former member of the Duramed Future Tour and one-time head coach for the University of Southern California Women s Golf Team. She is still playing in some West Coast tournaments and qualifiers. For three years she has been taken a dopamine agonist for the treatment of Parkinson s disease. I m exercising, too, finding yoga and golf especially helpful. But I do not want to just focus on my own health, Cherie comments. I ve decided to take an active role in patient education. Together with Boehringer Ingelheim I ve developed patient materials specifically for people who have been recently diagnosed with Parkinson s. And I act as spokeswoman for Planning Your Course, a patient education programme supported by Boehringer Ingelheim and the US National Parkinson s Foundation (NPF). Diseases of the central nervous system (CNS) are one of the most important therapeutic areas for Boehringer Ingelheim. Our product portfolio consists of drugs for the treatment of Parkinson s disease and restless legs syndrome (RLS), as well as for treatment of major depressive disorder (MDD) and diabetic peripheral neuropathic pain (DPNP). Parkinson s disease and restless legs syndrome sifrol / mirapexin / mirapex (pramipexole), a product from Boehringer Ingelheim research, is a dopamine agonist that was first approved in 1997 for the treatment of the signs and symptoms of idiopathic Parkinson s disease (PD), as monotherapy or in combination with levodopa. After a decade of treatment for Parkinson s patients, a new key milestone was achieved with the approval of sifrol / mirapexin / mirapex for the symptomatic treatment of moderate to severe idiopathic restless legs syndrome (RLS) in 2006, both in the European Union and the USA. Pramipexole has significant efficacy on the key symptoms of restless legs syndrome (RLS) and beneficial effects on the symptoms frequently affecting RLS patients, such as daytime sleepiness, mood disturbance, and overall reduced quality of life. Patients often have difficulties in describing their symptoms, with sleep disturbance often being the most frequent reason why people with RLS seek medical advice. We expect that the impressive efficacy of RLS as shown in our clinical trial programme will favourably impact and strengthen the market position of sifrol. sifrol / mirapexin / mirapex continued to show strong growth in 2006 in the Parkinson s disease indication, too. At the end of October 2006, the brand ranked No. 6 among Boehringer Ingelheim s best-selling products, with total net sales of EUR 536 million, up 23 % against the same period in 2005. It is the world s best-selling dopamine agonist, with a market share of more than 22 %. The estimated cumulative worldwide exposure since 1997 is 2.2 million patient years. Prescription Medicines 53

Our clinical studies in Parkinson s disease and RLS The continued research interest in sifrol / mirapexin / mirapex is reflected in a comprehensive phase IV clinical trials programme that is underway in both indications, PD and RLS, comprising more than 2,800 patients. It will investigate additional aspects of these diseases in an effort to provide data on the effects of sifrol / mirapexin / mirapex in improving the quality of life in patients with these conditions. A study recently reported (Barone P. et al., J Neurol 253, 601 607 [2006]) highlights the positive effects of sifrol on depressive symptoms in patients with PD which we plan to confirm in further studies. Depression and diabetic peripheral neuropathic pain Major depressive disorder (MDD), a common disorder of complex, often recurring symptoms affecting the mind and body, can be life-threatening and certainly disabling, according to WHO research. The neuropathology of depression is not fully understood, but the two neurotransmitters, serotonin and noradrenalin, seem to play a major role in the development and course of the disease. cymbalta /xeristar (duloxetine hydrochloride) is a potent and balanced dual reuptake inhibitor of both serotonin and noradrenalin that provides rapid, sustained relief of the emotional and painful physical symptoms of depression and Boehringer Ingelheim is directing major efforts into its research and development of drugs for the treatment of diseases of the central nervous system. The most recent indication for which we gained market approval for our medication mirapex /sifrol was RLS. Characterised by a distressing urge to move the legs, RLS is usually associated with uncomfortable or sometimes painful sensations in the legs, with symptoms being worse at night and while at rest. 54 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients gives patients a better chance of getting well and staying well. A recently completed placebocontrolled study with duloxetine showed clear therapeutic effects of the drug on painful body symptoms in patients suffering from depression. This favourable profile of duloxetine can help to address an important aspect of the clinical symptoms of depression. Serotonin and noradrenalin also play a major role in the neuronal modulation of pain signals, suggesting a role for duloxetine. Through its extensive clinical programme, duloxetine has also been successfully developed for the treatment of diabetic peripheral neuropathic pain (DPNP), and in 2006 was launched in Germany, Mexico and Brazil in the DPNP indication. In November 2002, Eli Lilly and Company and Boehringer Ingelheim signed a long-term agreement to jointly develop and commercialise duloxetine. At year-end 2005, cymbalta had been successfully launched in more than 20 copromotion countries worldwide. In Germany, cymbalta has been the most successful antidepressant launch in the country to date. During 2006, cymbalta was launched in 11 additional countries in Europe, Latin America and Asia. Key 2006 milestones include Boehringer Ingelheim s successful launch of xeristar in the co-marketing countries of Italy, Spain and Greece. To support continued medical education concerning these important and potentially debilitating diseases, Boehringer Ingelheim and Lilly hosted a series of educational events to raise awareness and understanding of depression and pain management in Europe, Latin America and Asia. cymbalta and xeristar generated combined revenues of EUR 53 million, more than 100 % growth over 2005. Depression is one of the most frequent psychiatric disorders, but is often undiagnosed or is under-treated. This may be because up to about 70 % of patients later diagnosed with depression cite physical symptoms as the reason they initially visited their primary care physican. New data shows that cymbalta (duloxetine hydrochloride) significantly reduced both painful and emotional symptoms of depression, resulting in an increased likelihood for patients to reach remission. Female hypoactive sexual desire disorder (FHSDD) Hypoactive sexual desire disorder (HSDD), a condition in which patients suffer from their decreased sexual desire, is the most common form of female sexual dysfunction. It is an important and defined medical condition that can be identified and diagnosed. Epidemiological studies indicate that up to one in five women suffer from decreased sexual desire. Over 60 % of the patients are moderately to extremely distressed because of their low desire. Flibanserin, a centrally active compound with a unique mechanism of action, is a novel approach for the treatment of decreased sexual desire in premenopausal women. The medical definition for the condition is hypoactive sexual desire disorder (HSDD) with marked distress and or interpersonal difficulties. Thus focusing on this condition, four phase III studies have been initiated. One of them has already fully recruited more than 1,000 Prescription Medicines 55

patients. High interest to participate in these studies supports our understanding that there is substantial medical need and patient demand. We expect the phase III programme to run until 2008 and provide us with pivotal results for registration. Our R & D in CNS Our research in CNS diseases focuses on novel treatment concepts for the major neurodegenerative disorders, Alzheimer s and Parkinson s disease, both being prominent consequences of the ageing population. Our research efforts to interfere with disease progression in Alzheimer s and Parkinson s disease focus on targets established by pathohistology and genetics. Moreover, we are investigating approaches for reducing treatment-induced motor complications (dyskinaesias), a major medical problem for patients with late stage Parkinson s disease. Our activities in Alzheimer s disease are, for example, aimed at reducing amounts of the amyloid-beta peptide, the major mediator of this fatal disorder, and additionally searching for pro-cognitive therapies beyond acetylcholine restoration in this disease. In order to expand these approaches, we have entered into an exclusive worldwide collaboration and license agreement with the Belgian company Ablynx to discover and develop new therapies for Alzheimer s disease, using Nanobodies, a novel class of therapeutic proteins. An additional focus lies on chronic pain, a condition for which medical attention is sought most frequently, yet satisfactory treatment options are still limited. New molecular targets, such as ion channels and G-protein coupled receptors (GPCRs), which are involved in pain transduction pathways and have been validated in neuropathic and inflammatory pain models, form the basis for our drug discovery efforts in the chronic pain indication. Our drug discovery activities in the indication migraine address a new mechanism of action to interfere with cerebral vasodilatation for which we were the first research group to obtain clinical proof of concept. Virology Antiviral therapies for many serious, life-threatening chronic and acute viral diseases are lacking or are unsatisfactory. New antiviral therapeutics for the treatment of the human immunodeficiency virus type 1 (HIV-1) and the hepatitis C virus (HCV) are therefore in the focus. These two pathogens have each emerged epidemically in recent decades, infecting millions of people globally. HIV/AIDS In 2006, the AIDS pandemic continued to grow. Now about 40 million people are infected with HIV. Boehringer Ingelheim aims at improving HIV/AIDS therapy by providing physicians and patients with innovative antiretroviral (ARV) drugs. aptivus (tipranavir), a non-peptidic protease inhibitor, blocks the viral protease, an enzyme needed to complete HIV replication. In co-administration with low dose ritonavir, aptivus is indicated for combined antiretroviral treatment of HIV infection in highly treatment-experienced (HTE) patients with resistance to multiple protease inhibitors (PI). 56 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients aptivus was launched in the USA in July 2005 and in the EU in November 2005, reaching net sales of EUR 53 million in 2006. viramune (nevirapine), which posted net sales of EUR 276 million in 2006, was the first compound of the class of non-nucleoside reverse transcriptase inhibitors (NNRTI) to be launched in 1996 as a powerful component of combination therapy of HIV-1 with a favourable long-term tolerability. This product is now available in some 100 countries, making it one of the most widely used compounds in chronic HIV-1 therapy worldwide. viramune has also been demonstrated to be beneficial alone as a single oral dose in preventing transmission of HIV-1 from the infected mother to the newborn. A single dose administered to the mother during labour and a single dose to the infant after birth has shown to significantly reduce the HIV transmission rate. This simple and effective treatment, also tested successfully in combination with zidovudine/lamivudine, has particular value in the healthcare setting of developing countries, and as such is recommended by the WHO (see also page 10). For more information, please visit the website www.pmtctdonations.org Our clinical studies and R & D in virology After the worldwide introduction of aptivus, physicians had a powerful therapeutic to treat HIV patients with highly resistant virus. The superiority of aptivus over a group of comparator PI s in our resist trials was the basis for accel- erated, conditional approval in the USA and the EU in 2005. In the meantime, long-term Since the introduction of HAART (highly active antiretroviral therapy) in the late 1990s, mortality due to AIDS has been dramatically reduced in the western world. In these countries HAART normally a combination therapy consisting of three antiretroviral drugs has transformed the life-threatening disease into a chronic illness. Thus the goal of the therapy can be now defined as: prolonging the patient s life, while maintaining the best possible quality of health and life. However, up to now it has not been possible to eradicate the virus from the body. The patient therefore has to undergo a lifelong treatment. Prescription Medicines

maintenance data with controlled observation of up to 96 weeks have become available. The superior efficacy over the ongoing comparator treatment is fully maintained both for aptivus with two other active antiretroviral drugs and aptivus in combination with new drugs as for example the injectable enfurvitide. Both in the USA and in Europe we have submitted long-term follow-up data together with additional phase IV study results and expect traditional approval in the USA in 2007. Our R&D activities in HIV aim at developing new treatment options for all HIV patients, but especially those who have failed prior therapy due to the development of drug resistance. Our research in this area has identified a new NNRTI as a follow-up to our existing HIV treatment viramune. Moreover, our discovery efforts are addressing several novel targets for future HIV therapy. Our hepatitis C virus research is directed toward identifying inhibitors targeting essential viral I just cannot believe it...... I didn t think I would survive the year, says Meike Nörder (right), a 41-year-old former cook from the north German town of Oldenburg. I ve been HIV-positive for 16 years. The debilitating effects of the infection, and long-term multiple resistance to drug treatments, have made normal life impossible for me, but I still keep home for my partner and our teenage son, says Meike about her situation. Over the years, I ve taken a number of different treatment regimens which did not sufficiently control my viral load to an undetectable level and have rendered the virus resistant to many anti-hiv medications. In 2006, she began to take a novel protease inhibitor. Her new HIV treatment in conjunction with other anti-aids drugs brought significant improvement in key virus counts. Within a month, my viral load dropped below the measurable limit for the first time. When I heard this news I was speechless. Naturally, I do experience side effects, including tiredness. But the side effects are all tolerable and bearable, she notes. The rapid recovery of my immune system was a real surprise for me and brought to halt an HIV-specific encephalopathy, unlike in the previous two winters when my immune cell levels were low and made me susceptible to infections. My CD4 T-lymphocyte cell count went from 13 % in February 2006 immediately before the new treatment began to 18 % in May. By September it was up to 24 %. Over the same period my viral load dropped from 32,600 to below 47. Meike says: I ve not only found renewed hope concerning my own health. I m also actively promoting AIDS awareness, visiting schools and other institutions in my region to tell of my own experiences of living with HIV and drug resistance. 58 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients enzymes, such as the HCV serine protease and RNA polymerase. Such new mechanisms offer the potential for new therapies with improved safety and efficacy compared to current treatments of chronic hepatitis C. Our virology drug discovery group in Laval has developed compounds with an alternative mode of action for the treatment of HCV infection. In clinical trials in infected patient volunteers, we established the short-term-efficacy for a new anti- viral principle and have one other compound in clinical phase I. Our ongoing activities in HCV continue to exploit these antiviral targets together with other novel approaches and are complemented by partnering efforts. In 2006, we initiated a collaboration with the Australian company Biota to jointly discover and develop Biota s novel nucleoside analogues designed to treat HCV infections and other diseases. Prescription Medicines 59

Top Story: Actilyse

Børge Madsen, Copenhagen, Denmark. Thanks to rapid treatment he fully recovered from a stroke.

I was fortunate to get the right treatment promptly and efficiently at the local hospital. My recovery came fast. Only three days after being admitted, I was able to leave hospital. Børge Madsen My recovery came fast I was making a cup of coffee in my kitchen on 1 May 2006 when I had a stroke. Luckily, my wife Lis came home a little later with the grandchildren. She found me paralysed and unable to speak. Straight away she called the emergency services and an ambulance quickly transferred me to the local hospital, says Børge Madsen, a 64-year-old retired schoolteacher from Copenhagen. After a neurological examination and an immediate brain scan, he was given a thrombolytic therapy to treat the stroke. An ischaemic stroke occurs when a blood clot blocks a blood vessel in the brain, interrupting blood flow to an area of the brain, killing cells in the immediate vicinity from within minutes to a few hours after the stroke. The time it takes to transport stroke patients to hospital is decisive to their recovery, or even their survival. But the administration of a thrombolytic agent is only the first step. Careful further treatment and therapy in a hospital also has a crucial impact on the health and recovery of the patient. I was fortunate to get the right treatment promptly and efficiently at the local hospital, Børge says. My recovery came fast. By around noon, I felt I was regaining the ability to move my fingers. Later that day, I was able to write. It was fantastic. Only three days after being admitted, I was able to leave hospital. My relatively good health played a significant role, Børge says. I ve been physically active all my life and always played football, most recently with the old boys. And I used to work as a voluntary sports journalist for the local newspaper. Okay, I was a bit overweight and my blood pressure was a little too high. But otherwise I was fit. And I always have been. The doctors also tell me that this has helped me. 62 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients Cardiovascular diseases Despite significant advances in the understanding and treatment of cardiovascular disease, it remains the leading cause of premature death in western societies and is predicted to become the most common cause of premature death worldwide within the next decade. Our product portfolio consists of drugs for the treatment of hypertension, acute myocardial infarction and treatment of acute massive pulmonary embolism, as well as stroke treatment and prevention. Hypertension and cardiovascular protection Hypertension is a major risk factor for cardiovascular morbidity and mortality. The organs at risk are primarily the heart, the main blood vessels, the brain and the kidneys. Furthermore, it is strongly linked to stroke and heart attack as well as other associated clinical conditions. Beyond antihypertensive treatment, the aim of additional cardiovascular protection requires treatment of all identified risk factors and associated clinical conditions accessible by therapeutic approaches and/or changes in lifestyle. With micardis (telmisartan), our angiotensin II receptor blocker (ARB), and micardisplus / micardis hct (telmisartan in a fixed dose combination with the diuretic hydrochlorothiazide), Boehringer Ingelheim offers two innovative options and flexibility for the treatment of essential hypertension. micardis has the longest halflife in the ARB class and a high affinity for the angiotensin-i receptor, providing powerful blood pressure control over 24 hours with a once-daily dosage, including the early morning hours when blood pressure surges. micardis / micardisplus / micardis hct generated net sales of EUR 967 million in 2006, representing growth of 34 %. This made it our second biggest prescription medicine and secured it blockbuster status. Approximately 1 billion people are affected by hypertension worldwide. The prevalence of essential hypertension increases steadily with age. As the population as a whole ages, the prevalence of hypertension will increase even further. Our clinical studies in hypertension and cardiovascular protection The micardis landmark trials in cardiovascular protection, ontarget and transcend, The primary goal of antihypertensive treatment is to reduce the long-term total risk for cardiovascular morbidity and mortality. To achieve this, current evidence suggests that blood pressure values should be targeted as low as possible. micardis offers powerful 24-hour blood pressure control. Despite treatment options, some 80 % of hypertensive patients in the USA and Western Europe remain untreated. Prescription Medicines

continued to perform according to our best expectations with excellent patient retention and no concern from safety review board assessments. For both trials we are setting up all necessary logistics to recruit more than 30,000 cardiovascular high-risk patients within a short time period at the end of 2007 and in early 2008. In parallel to the ongoing ontarget and transcend studies, the protection programme was concluded in hypertension. amadeo was the last in a series of studies involving 6,500 patients in 32 countries. All studies were positive and the protection programme showed a beneficial effect of micardis and micardisplus / micardis hct on renal organ protection in hypertensive patients, also when compared to other established therapies. Acute myocardial infarction Every year, approximately three million people worldwide suffer from acute myocardial infarction (AMI), or heart attack. However, only about 47 % are diagnosed and treated. The most important factor for a successful treatment of AMI is time to treatment. Thrombolytic therapy is established as one of the most successful modern AMI treatment options, in particular in patients in whom percutaneous transluminal coronary angiography (PTCA) cannot be performed within 90 minutes after first medical contact. metalyse (tenecteplase) is the only thrombolytic to be administered as a single bolus for the thrombolytic treatment in AMI for patients, in whom a coronary intervention cannot be performed. With its ease of administration, thrombolysis with metalyse is very well suited for pre-hospital and in-hospital thrombolysis to keep the time from the onset of symptoms to effective treatment as short as possible. actilyse (alteplase) is also indicated for the thrombolytic treatment in AMI as well as in thrombolytic treatment in acute massive pulmonary embolism with haemodynamic instability. actilyse is also approved for the treatment of acute ischaemic stroke. In 2006, both products continued to be leaders in their class and posted combined net sales of EUR 159 million. Stroke treatment and prevention Stroke is one of the leading causes of death and disability in the developed world. The WHO estimates that 5.1 million people die from stroke each year. Almost one in four men and one in five women aged 45 can expect to have a stroke, if they live to their 85th year. A stroke occurs when a blood clot blocks an artery in the brain (ischaemic stroke), or when a blood vessel ruptures (haemorrhagic stroke), interrupting blood flow to an area of the brain. A stroke kills brain cells in the immediate area beginning a few minutes after onset. metalyse is indicated for the treatment of acute mycardial infarction. It is in particular suitable for patients in whom a coronary intervention can not be performed. It can also be administered as a prehospital lysis in the ambulance. Boehringer Ingelheim AnnuA l RepoR t 2006

serving patients I didn t let a stroke stop me I suffered the first stroke in 2003 at a training camp in Tashkent, Uzbekistan. Two more followed in Germany. I was paralysed on one side and I couldn t speak, recounts German national wrestling team trainer Alexander Leipold. The former national, European and world title-holder says with good humour: When fate strikes, it often picks me out. But I wasn t going to let a stroke stop me from leading an active life. After rehab at the Medical Park Bad Rodach and treatment with a medication for reducing the risk of further strokes, Alexander, at 35, resumed his wrestling career in 2003, winning acclaim from leading German sportsmen. In 2005, he won the world masters title for wrestlers over 35 years of age in Teheran, Iran. The same year, he also switched to his current role as trainer. Alexander lives with his wife and two children in the German state of Bavaria. But apart from my sport, I m also keen to help others fight strokes, too, he says. This is the reason why I work as an ambassador for German Stroke Aid. actilyse is the first and only thrombolytic indicated for treatment of acute ischaemic stroke within three hours after symptom onset. Additionally, the company is currently investigating the efficacy of actilyse within the 3 4.5 hour time window through the ecass 3 trial which, if positive, will allow a larger proportion of patients to benefit from treatment. Boehringer Ingelheim is also the sole sponsor of sits-most. This is the largest international stroke registry with the objective of optimising the thrombolytic treatment of acute stroke and providing a benchmarking tool for best practice for treating stroke patients worldwide. The laudable results of the sits-most study, which enrolled 6,483 patients from 285 European centres, have confirmed the safety and efficacy of actilyse for acute stroke treatment as demonstrated in the previous pooled randomised trials. This was published in the Lancet at the beginning of 2007. aggrenox /asasantin retard/(extended released dipyridamole + acetyl salicylic acid (ASA)) is indicated to reduce the risk of secondary stroke in patients who have had a transient ischaemicattack (TIA) or completed ischaemic stroke due to thrombosis. It generated net sales of EUR 225 million in 2006 with a growth of 31 %. The use of aggrenox /asasantin retard as a first-line treatment for secondary stroke prevention is recommended in many international guidelines, such as those issued by the European Stroke Initiative (EUSI), the UK s National Institute of Health and Clinical Excellence (NICE), Prescription Medicines 65

the American College of Chest Physicians (ACCP), as well as the recently issued joint guidelines of the American Heart and Stroke Association (AHA/ ASA). For more information please visit the website: www.stroke-forum.com Our clinical studies in stroke prevention profess, one of Boehringer Ingelheim s landmark studies, has concluded recruitment with 20,300 patients enrolled. It had been designed to confirm the efficacy, and potentially demonstrate the superiority, of aggrenox over clopidogrel prove as well as to the additional protective benefits of our ARB micardis in the prevention of secondary stroke. As profess is proceeding to plan, we foresee final recruitment of patients and availability of results in 2008. The independent esprit study (European/ Australasian Stroke Prevention in Reversible Ischaemia Trial) on prevention of secondary stroke was published in Lancet, 2006; 367: 1665 1673. It found superior efficacy of dipyridamole extended release in combination with ASA versus ASA alone. These results with a 20 % risk reduction for stroke over ASA alone in the ESPRIT study are in line with our own ESPS 2 results and support our expectation in favour of a positive outcome of profess. Treatment and prevention of thrombo-embolic diseases Our presently largest phase III programme is for dabigatran etexilate, an oral direct thrombin inhibitor that we are developing for the prevention and treatment of thrombo-embolic disease. Dabigatran is the frontrunner of all new oral anticoagulants currently being developed, and is being investigated in the primary prevention of Promising new drug for blood clot prevention Therapeutic options for preventing thrombo-embolic diseases remain limited, despite their being among the most common causes of death in the aging societies of the industrialised world. The anticoagulant dabigatran etexilate, a new direct thrombin inhibitor discovered and developed by Boehringer Ingelheim, holds out the promise of a new drug to fulfil the unmet therapeutic need. The most commonly used oral anticoagulant has been warfarin. Dabigatran etexilate specifically and reversibly inhibits thrombin, one of the key enzymes for blood clot formation. It is administered in a fixed dose and has a rapid onset of action, providing a consistent anticoagulation effect without the need for time-consuming coagulation monitoring and dose adjustment. Major indication areas will be stroke prevention in atrial fibrillation, the most common form of cardiac arrhythmia, prevention of deep vein thrombosis (DVT) after hip or knee replacement surgery, acute DVT treatment and secondary prevention of DVT. deep vein thrombosis (DVT) after hip or total knee replacement, the treatment of acute DVT, the secondary prevention of DVT and the long-term prevention of thrombo-embolic events (stroke) in patients with atrial fibrillation. The phase III trial programme has been initiated with a group of studies combined under the umbrella of the re-volution programme. With more than 27,000 patients re-volution is the largest clinical trial programme in thrombo-embolic disease. With studies in all indications successfully implemented, the two indications we advanced most were the post-surgery prevention of DVT and stroke prevention in atrial fibrillation. We have launched a 15,000-patient study (rely ) in atrial 66 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients fibrillation in some 40 countries involving almost 1,000 study centres. By the end of 2006, more than 8,000 patients have been recruited, exceeding our plan by far. discovery in these therapeutic areas places an emphasis on gaining a mechanistic understanding of rheumatoid arthritis, multiple sclerosis and psoriasis disease processes. For the prevention of DVT post-orthopaedic surgery pivotal studies have been completed and the first submission for Europe has been completed. Additional study results will become available during 2007 to complement the dataset for a later US submission file. Our R & D in cardiovascular diseases Continuing research efforts in the thromboembolic area resulted in compounds with alternative anti-thrombotic mechanisms, which also recently entered clinical development where their efficacy-safety profile is being compared to that of direct thrombin inhibitors. We will continue to develop our cardiovascular research platform in the area of atherothrombosis and widen our research to include heart failure. These research programmes are facilitated by the use of in vivo imaging studies and enhanced by external collaborations with academic and biotechnology industry partners. Our cardiovascular research programmes also benefit from close collaboration with scientists working in related therapeutic areas, such as metabolic diseases and immunology and inflammation, in order to increase the opportunities for developing novel therapeutic agents for the fight against cardiovascular disease. Immunologic / inflammatory diseases Despite advances in treatment, there remains a large unmet medical need for safe and efficacious treatments for autoimmune diseases. Our drug Rheumatic arthritis / osteoarthritis Rheumatoid arthritis is an autoimmune disease that affects the body as a whole and may lead to joint destruction. Osteoarthritis is the most commonly diagnosed degenerative disease affecting the joints, especially in elderly people. Signs and symptoms of osteoarthritis can include joint stiffness, often with a sensation of grinding in the affected joint. mobic /mobec (meloxicam) is indicated for the symptomatic treatment of osteoarthritis and rheumatoid arthritis as well as ankylosing spondylitis (Morbus Bechterew). The patent exclusivity period in the USA for the drug ended in July 2006, and the market entry of generics resulted in major sales losses for this product. mobic /mobec generated net sales of EUR 577 million in 2006. Our R & D in immunologic and inflammatory diseases Together with experts in the field, we are gaining greater insights into the biology of autoimmune diseases with a view to identifying novel drug targets. For example, certain cells play a key role in perpetuating the inflammation and resulting tissue destruction observed in the joints of rheumatoid arthritis patients by secreting cytokines and other inflammatory mediators. As a means to identify key pathways operating in these cells, we have established collaborations to screen for modulators which may be drug targets that could form the basis of novel therapies. Current approaches targeting autoimmune disease Prescription Medicines 67

include diverse mechanisms that are being addressed with both small molecules as well as protein-based therapeutics. Our activities in the area of new biological entities (NBEs) have been further strengthened by entering into a collaborative research and licence agreement with the US-based biotech company FivePrime Therapeutics with the goal of discovering novel therapeutic protein products to treat rheumatoid arthritis and other inflammatory diseases. Promising new small molecule therapies are currently being tested in clinical trials to establish their effectiveness for psoriasis and multiple sclerosis. By gaining a mechanistic understanding of immune disease, we can identify those mechanisms that are also relevant for the pathology of other diseases and thus expand the promise of new immunological therapies to additional medical conditions. The combination of our current focus on disease mechanisms, our efforts directed to the identification of novel drug targets and our expansion into protein-based therapeutics is maximising our ability to deliver promising new therapeutic options for patients suffering from autoimmune diseases. Urology In 2006, Boehringer Ingelheim s product portfolio in urologic diseases consisted of drugs to treat benign prostate hyperplasia (BPH) and stress urinary incontinence. Benign prostate hyperplasia Lower urinary tract symptoms (LUTS) suggestive of BPH are the most common urological condition in older men. BPH is characterised by the presence of several urinary symptoms that can be related to bladder emptying (voiding or obstructive symptoms) or filling (storage or irritative symptoms). Typical voiding symptoms are hesitancy, weak stream and intermittency. Typical storage symptoms are increased daytime frequency, nocturia and urgency. Nocturia, i.e. awakening one or more times at night for voiding, reduces the quality of sleep of the patient and has a significant negative impact on how the patient feels the next day in terms of energy level/fatigue, concentration and mood (sometimes the patient may even get depressed) and ultimately his overall well-being and quality of life. The incidence of benign prostate hyperplasia (BPH) increases with age. Symptomatic BPH in general occurs in approximately 25 % of men over 40 and in one of every three men over 65. flomax /alna (tamsulosin), an alpha receptor blocker that has been established as a standard first-line treatment of BPH symptoms, is the most widely prescribed medication for them. Boehringer Ingelheim AnnuA l RepoR t 2006

serving patients Treatment modalities used to relieve bothersome LUTS/BPH are designed to reduce the static and/ or dynamic component of obstruction and to improve the quality of life. Pharmacological therapy with flomax /alna (tamsulosin), an α1-receptor antagonist, is indicated for the treatment of this condition and provides effective and well-tolerated improvement of the symptoms. It relieves obstruction by relaxing smooth muscles in the prostate and urethra improving voiding symptoms. It also improves storage symptoms in which bladder instability plays an important role. After the launch of the 0.4 mg capsule in 1996, Boehringer Ingelheim and its partner Astellas developed a new tablet formulation using the technology ocas (Oral Controlled Absorption System) to further optimise pharmacological therapy for LUTS/BPH. This system provides effective symptom control during daytime and nighttime, a very good tolerability and excellent convenience for the patient (e.g. once-daily dosing without the need of dose adjustment, medication intake independent of meals). Stress urinary incontinence Stress urinary incontinence (SUI) is the involuntary loss of urine on effort or exertion, or on sneezing or coughing. Around 97 % of SUI patients are female, but less than half of the women suffering from this condition seek treatment. yentreve /ariclaim, with the active ingredient of duloxetine, is approved in the EU for the treatment of women with moderate to severe SUI. In 2006, it was jointly commercialised in several European countries and Mexico by Eli Lilly and Company and Boehringer Ingelheim. yentreve / ariclaim generated revenues of EUR 4 million in 2006. Boehringer Ingelheim and Eli Lilly and Company (USA) jointly decided in February 2006 to change the contractual agreements for yentreve / ariclaim. Eli Lilly and Company took over sole worldwide commercialisation rights for the medication for SUI and potential future, related urinary incontinence indications, effective as of 15 January 2007. Oncology flomax /alna, using the ocas technology, has been available since 2005 in Germany, Spain and Switzerland. In 2006, it was launched in Portugal, France, Canada and Greece. The capsule formulation started to lose patent protection in several countries in March 2006. In the USA, patent protection will continue until October 2009. flomax /alna capsules and ocas tablets generated net sales of EUR 922 million, an increase of 28 % over 2005, placing the medication third in Boehringer Ingelheim s Human Pharmaceuticals sales ranking. Every year, more than ten million people find themselves grappling with the medical uncertainties and emotional upheaval of a newly diagnosed cancer. Fortunately, an increasing number of patients benefit from surgery, radiation and pharmacological medicines, with a complete cure possible in about 60 % of cases. If the cancer has spread throughout the body, the hurdles for effective therapies become higher, but even then cure or disease modification with longer survival and better quality of life is possible with innovative, targeted medicines that offer more efficacy and better tolerability to patients. Prescription Medicines 69

Cell-cycle kinases are cellular proteins that promote the process of cell division. Boehringer Ingelheim s first-inclass investigational compound BI 2536 (light blue) seems to effectively block such a cell-cycle kinase (the polo-like kinase, Plk-1) at its active site, leading to tumour growth inhibition and tumour regression. Our clinical studies in oncology We have embarked on the discovery and development of innovative medicines for some of the most common cancers. Since 2000, research conducted at Boehringer Ingelheim Austria has resulted in promising drug candidates moving into advanced clinical development. We are conducting clinical studies of phase II for compounds interfering with essential drivers of tumour growth: A) aberrant growth signalling through activity of epidermal growth factor receptor (EGFR) and human epidermal growth factor (HER 2), B) supply of oxygen and nutrients to cancer cells by the development of new blood vessels to the tumour (neoangiogenesis), and C) targeting inhibition of the uncontrolled cell division (mitosis). Current phase I / II target indications for our oral compounds in antiangiogenesis and signal transduction, and our intravenous cell-cycle inhibitor, include non-small-cell lung cancer, breast cancer, colorectal cancer, prostate cancer, ovarian cancer, leukaemia and lymphomas. We are confident that the continued good patient accrual into our phase II studies will allow us to establish first proofs of efficacy towards the end of 2007 and that the innovative features of our molecules, once confirmed in phase III trials, will offer improved treatment choices to cancer patients. Our R & D in oncology The sequencing of the human genome and detailed studies of genetic changes in human cancer cells, known as oncogenome signature typing, have accelerated the identification of mutations and the knowledge of the faulty cellular circuitry that underlie the aberrant growth, invasion and metastasis of cancerous tissues in the body. Moreover, they provide important clues to new drug targets and the best match-up of new drugs with the patients whose cancers are most likely to respond to the drugs, a process called biomarker-guided drug development or customised cancer therapy. New further compounds have entered development to strengthen our emerging oncology pipeline and we are continuing our efforts to develop monoclonal antibody-based drug candidates. As part of our strategic collaboration with MorphoSys on human antibodies, we have exercised an option for optimising a therapeutic 70 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients HuCAL antibody directed against a cancer-related target molecule and have acquired an exclusive licence for this project. Metabolic diseases Health authorities and governments have been alarmed by recent epidemiological data suggesting that metabolic diseases, including diabetes mellitus type II, obesity and dyslipidaemia, will grow worldwide by a much greater extent than previously expected. This has been identified as a major health problem, not only for western countries, but also in, for example, South America, India and China. Particularly worrisome is the increasing prevalence of obesity in children together with the onset of type II diabetes in young adults. This disturbing fact leads to the forecast that today s children may have a lower life expectancy than their parents. We are therefore putting great efforts into the metabolic disease field with particular focus on diabetes type II, obesity and dyslipidaemia. Many diabetic patients are overweight or obese and also suffer from dyslipidaemia, features of the metabolic syndrome. Our clinical studies in metabolic diseases We were particularly pleased with promising first clinical results of compounds with two different, but complementary, mechanisms, one that stimulates insulin secretion and another that facilitates the renal excretion of glucose. The first compound with an already established mode of action is entering phase IIb after very encouraging four weeks results in diabetes type II patients. We believe that during later phase III this compound has the potential to develop into a bestin-class drug providing improved efficacy and convenience. The second compound in phase I is a first-in-class, new development, which may offer improved options for treatment of diabetes mellitus. It has already established pharmacodynamic effects of the mode of action and will enter phase II in patients in 2007. With additional preclinical development candidates and follow-up compounds expected to enter the clinic, our metabolic clinical pipeline will grow and gain further attractiveness in the near future. Our R&D in metabolic diseases New therapeutic approaches for the treatment of diabetes type II have the potential of delaying or even inhibiting the progression of the disease. Several research projects even offer the possibility of preventing manifestation of the illness. We have been successful in entering development with several of our research projects with a variety of new mechanisms. In obesity there is a great need for new drugs that are more efficacious than the existing ones while providing a high level of patient safety. Research in that area is directed both at a reduction of appetite and food intake as well as increasing the metabolism of energy carriers. We have established state-of-the-art technologies to carefully profile advanced compounds in vitro and in vivo. We also see opportunities to explore the combination of various mechanisms. Despite efficacious treatment for the lowering of low-density lipoprotein (LDL) cholesterol, 60 70 % of cardiovascular events still cannot be prevented. The role of low levels of high-density lipoprotein (HDL) cholesterol and malfunction of the reverse cholesterol transport are hence areas of increasing research interest. We have started several new research projects to address this therapeutic need. Prescription Medicines 71

Our regions Americas In our Americas region, 2006 saw continued strong development of our product portfolio. Net sales in our Presciption Medicines business reached EUR 4,460 million. The USA remains the main driver of pharmaceutical growth and is the largest contributor to Boehringer Ingelheim s sales and profits. The US market, a highly competitive environment which underwent significant changes in 2006, grew by 8.2 %. Boehringer Ingelheim continued to develop above the market average. micardis, spiriva, flomax and aggrenox were the main growth drivers in the USA and compensated for lost sales of mobic due to the launch of generic competitors in July. For the first time, US citizens above 65 years of age, regardless of income, were given access to prescription drug coverage by Medicare. This new coverage (Medicare Part D) began on 1 January 2006. Boehringer Ingelheim ensured that it was well positioned in the plans to enable a greater number of US citizens access to our portfolio of innovative medicines. In Canada, new regulations on intellectual property came into law. This established eight years of data exclusivity for a molecule from the date of its approval, further protecting the intellectual rights of the research-driven pharmaceutical industry. But 2006 also saw the proposal and implementation of tighter pricing and reimbursement policies mainly affecting the two major provinces Ontario and Quebec. This will further limit patient access to innovative drugs. The economic situation in Latin America stabilised in 2006. Mexico, our largest operating unit in Latin America, developed very positively, with a growth rate of 35 % compared with 2005. The main growth drivers were flomax, micardis, buscopan, combivent and some local key products. Sales of major drugs, such as spiriva and cymbalta, are growing strongly. Our South American operating unit, which combines the management of all Spanish-speaking countries in the region, enjoyed its first full year in 2006. Greater efficiencies are being generated and marketing efforts simplified by combining strategies and resources across the whole regional unit. A cross-country (CN) management structure has been established and regional centres of excellence developed for products in our portfolio. Our Brazilian company celebrated its 50th anniversary in 2006. Development here was seen across our portfolio, with particular success for mirapex / sifrol, the most prescribed drug of its class for Parkinson s disease. mirapex for RLS was launched in September, reinforcing its market position. Main drivers of growth were micardis, mirapex and buscopan. Europe Despite an extremely challenging market environment, our net sales in the Europe region achieved 7 % growth in 2006. Our three main patent-protected products, spiriva, micardis /micardisplus and sifrol /mirapexin, met strong demand, posting double-digit growth rates. New product introductions contributed positively to the growth. xeristar, an innovative antidepressant, was successfully launched in Italy, Greece and Spain. Our new protease inhibitor aptivus is now available in almost all markets. spiriva was successfully launched in France. On the other 72 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients hand, the end of exclusivity in Europe for mobic and alna /pradif /josir affected sales significantly. In Italy and France, we grew faster than the overall market. In the UK, we matched overall market growth, but in Germany we were unable to keep up with the market due to the loss of alna sales to generic competition. In contrast to Western European markets, Eastern Europe showed dynamic economic growth. This was evident in the prescription medicines markets, especially in Russia, where a newly introduced federal programme reimburses essential medicines to selected patients. Across Eastern Europe strong demand for our respiratory products and for mobic enabled us to achieve 27 % growth. The healthcare market, in particular the market for prescription medicines, remains very difficult in most European countries. While demand is increasing due to demographic developments and the use of innovative products with real benefits to patients, most healthcare systems are chronically underfunded. Accordingly, governments throughout Europe are reducing consumption volume by restricting patient access to innovative medicines and demanding lower prices. In 2006, the Italian government, for instance, secured a 10 % cut in retail prices. Newly introduced products, which naturally post aboveaverage growth rates, were even subjected to an additional price reduction. France s Social Security Financing Law and Germany s Economic Optimisation of Pharmaceutical Care Act have also contributed to market stagnation. Price referencing has become common practice across Europe, with price reductions in one country leading to reductions elsewhere, inducing a downward spiral. An increasing number of companies will be forced to refuse such significant price reductions to avoid this vicious circle. The result will be the withdrawal of hitherto reimbursed medicines, less access to drugs and higher financial contributions from patients. Overall, the outlook for the European prescription The USA remained by far the most important market for our drugs. Prescription Medicines (PM) which accounted for 79 % of our net sales had a turnover of more than EUR 8.3 billion to which US sales contributed 46 %. The Europe region achieved 26 % of PM net sales. Americas,0 of which: USA branded 3,174 USA generics 657 Europe,10 of which: Germany 446 Asia, Australasia, Africa 1,9 of which: Japan 849 Net sales Prescription Medicines, excl. licences (in millions of EUR) Prescription Medicines 73

medicines market is far from encouraging and any fresh investment in this region needs to be evaluated with particular care. Asia, Australasia, Africa (AAA) In our AAA region, 2006 was characterised by continued strong growth in local currency terms. Our PM business in the AAA region is heavily dominated by the performance of Japan which contributes more than 59 % to regional sales and earnings. Nippon Boehringer Ingelheim was, for the second year running, the fastest growing business among the leading 20 pharmaceutical companies in Japan. In nearly all the other AAA countries we outpaced the market. Locally achieved sales growth was, however, not fully reflected in euro terms, as most of the region s major currencies weakened against the euro during the reporting period. The Japanese market for prescription products remained sluggish. Net sales of our prescription products increased by 16 % in local currency (by 7 % in euro terms) and by the end of the year our market share reached 1.7 %, despite a governmentimposed price cut in April, averaging 5.6 % for our business. Australia, our second most important AAA market, achieved net sales of EUR 118 million and market share of over 2.3 %. We achieved significant sales and established a respectable market share of 1.5 % in Turkey, making it our third most important country in the AAA region. In South Korea, where we have a joint venture with a local partner, sales growth exceeded 24 %. Here we closely follow ongoing governmental deliberations on positive listing for drug reimbursement. Such deliberations, all being part of cost containment measures and governmental restrictions, feature throughout the region. Price cuts in Taiwan and Indonesia in 2006 caused particular concern in the pharmaceutical industry. In South Africa and neighbouring countries our growth rate has slowed. This development must, however, be seen in conjunction with our decision to grant voluntary licences for viramune in South Africa (and also in Egypt, Nigeria, Kenya) so that generic manufacturers can offer our antiretroviral drug at generic prices. In fact, in order to make viramune more readily available we announced measures to encourage even more generic manufacturers to avail themselves of the opportunity of offering medicines containing the active ingredient nevirapine to the countries of the developing world, including the whole of Africa. In China, the pharmaceutical market is neither transparent nor easy, and is in fact dominated by healthcare reform and generics. Although last year our Chinese business accounted for only 3 % of our PM sales in the AAA region, we remain confident that the huge Chinese market will gradually make a more significant contribution to our worldwide business. In 2006, we completed the formalities to purchase the outstanding 5 % of shares in our joint venture, which will give Boehringer Ingelheim a wholly owned enterprise in China in 2007. Our strong growth in nearly all the AAA countries reflects continuing field force efficiency initiatives and also the robust development of our core products micardis, spiriva and sifrol. Some well-established products, such as buscopan, combivent and mucosolvan also produced an upward sales trend in some countries. 74 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients Generic Prescription Medicines The US generic industry posted revenues in excess of USD 47 billion in 2006 and the market is expected to grow by 6 % annually over the next five years. Drivers of this growth include the aging population, government cost reduction measures, increased generic utilisation, blockbuster patent expirations, and the emergence of biogenerics or copies of biopharmaceuticals (biosimilars). Boehringer Ingelheim s Generic Prescription Medicine (GPM) business in the USA, which consists of Roxane Laboratories and BenVenue Laboratories with its unit Bedford Laboratories, generated net sales of USD 825 million (EUR 657 million), approximately 17 % of overall USA Prescription Medicines sales in 2006. Business Environment The US generic market was shaped by many factors in 2006. There was significant consolidation due to mergers and acquisitions, at the same time as new international competitors emerged from Europe and Asia. This increase in the number of competitors, along with the cost-focused pharmacopolitical environment, is exerting continued pressures on margins. As the size of the generic market continues to grow, there is also increased competition for revenues from brand pharmaceutical companies which show a renewed interest in generics. Additionally, large multinational generic companies, which have grown through merger and acquisition, and companies from India, Eastern Europe and China are playing key roles in this market. Roxane Laboratories Roxane Laboratories focuses on developing manufacturing and marketing a broad line of oral solid and liquid medications and intranasal products. The year 2006 was one of dramatic growth in which the company achieved net sales of USD 328 million (EUR 261 million) compared with USD 242 million (EUR 194 million) in 2005 (+ 35 % in USD terms). Leading this growth was the launch of fluticasone proportionate nasal spray, a generic version of GSK s flonase. Driven by demographic factors, government s assumption of the responsibility for healthcare needs of the uninsured, and efforts to reduce spiraling costs, the US generic pharmaceutical market will continue its rapid growth in the coming years. It is anticipated that in 2007 the market will grow by 15 % to USD 62 billion, versus USD 54 billion in 2006. Boehringer Ingelheim, by virtue of its US Generic Prescription Medicine (GPM) subsidiaries Bedford Laboratories and Roxane Laboratories, is poised to benefit from this growth. By the year 2010, our combined multisource companies are expected to reach USD 1 billion in sales. Generic Prescription Medicines 75

Roxane Boehringer Ingelheim Roxane and Roxane Laboratories are located in Columbus, Ohio, and are subsidiaries of Boehringer Ingelheim Corporation (Ridgefield, Connecticut). These subsidiaries are recognised leaders in researching, manufacturing and packaging brand name and generic medications, including oral liquids, tablets and capsules. Boehringer Ingelheim Roxane (BIRI) is the manufacturing arm of Boehringer Ingelheim Corporation. It functions as a primary site for prescription and multisource pharmaceutical manufacturing in North America. In addition, BIRI is one of Boehringer Ingelheim s two product launch sites. Roxane Laboratories is the research and development and sales and marketing arm of our multi-source business. It offers development services for new products and formulas, oversees the manufacturing process for its customers, and develops analytical test methods for potential new products. Roxane started in 1885 as Columbus Pharmacal, a small, regional pharmaceutical manufacturer. In 1978, it was acquired by Boehringer Ingelheim. Roxane has about 1,000 employees. The sales increased over the past five years by about 13 % per year, totalling EUR 261 million in 2006. Fluticasone is the first Roxane product to exceed the USD 100 million threshold. In 2006, Roxane submitted 16 abbreviated new drug applications (ANDAs) to the US Food & Drug Administration (FDA), received ten tentative approvals (TAs) and launched seven new products. Bedford Laboratories Bedford Laboratories posted net sales of USD 497 million ( EUR 396 million) in 2006, a growth rate of 17 %. Key products for the year included propofol, octreotide, glucagen, paclitaxel, adriamycin, midazolam and polymyxin B. Three new products were launched in 2006, including ciprofloxacin, an anti-infective; lorazepam, an anaesthesia adjunct, and mitoxantrone, an oncology product. With these three new products, Bedford continues to consolidate its position in the generic market and remains one of the largest US suppliers of speciality injectable pharmaceuticals to hospitals and clinics. Bedford currently offers 90 injectable products in 254 different configurations, covering a wide variety of therapeutic classes, mainly in the areas of oncology, cardiology, anaesthesia, anti-infective and antipsychotics. It will continue to file ten to twelve ANDAs each year to create a pipeline of products that will allow it to maintain a leadership position in the generic injectable market. 76 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients Ben Venue a world leader in sterile injectable pharmaceuticals Ben Venue Laboratories (Bedford, Ohio), is part of the Boehringer Ingelheim group of companies and a leading producer of sterile injectable pharmaceutical products. Also the oldest and largest contract manufacturer of sterile injectable products in the USA, it has with an impressive track record. Ben Venue works with some of the largest pharmaceutical and biopharmaceutical companies, along with mid-size and virtual pharmaceutical and biopharmaceutical companies which bring their products for development and manufacturing of clinical and commercial supply. Ben Venue has established a reputation for expertise in lyophilisation, or freeze drying, which remains a primary speciality. Freeze drying (above) extends the shelf life of a product, makes it more stable and allows it to be stored at room temperature. When its latest expansion is completed, Ben Venue will have 27 freeze-driers with 718 square meters of lyophilising chamber space. It offers the ability to support batch sizes from 1 litres to 2,000 litres, from clinical to commercial. Ben Venue markets its own line of generic injectables to hospitals in North America through its Bedford Laboratories division, currently offering 90 drugs with 254 configurations, including oncology, cardiovascular, anaesthesia, antipsychotic and other miscellaneous products to hospitals and alternate care markets. Generic Prescription Medicines 77

Now I know how to keep them under control When I moved from my home town of Pico in La Pampa to study communication science at the University of Buenos Aires in the Argentinian capital, I found the change very hard. Pressure from exams made things even worse, Mara Lovera, a 25-year-old student, explains. Every time I had to take a test I experienced strong discomfort and abdominal pain, which on some occasions forced me to skip exams. Abdominal pain and cramps, a widespread ailment around the world, is more common in women than in men and can affect people still in their teens. The ailment can strike sufferers at any time and is one of the most common causes of absence from work. It can also have significant impact on selfconfidence, social life and day-to-day living. As the discomfort and pain was constantly disrupting my studies, I went my doctor to find out what could be done to help me. He explained that what I had were spasms produced by stress and nerves, Mara says. The doctor recommended an antispasmodic which suppresses and relieves painful muscle spasms. Since the moment I started taking the medication my problem was solved, Mara says. Nowadays, the pain is not so frequent, but every time my stomach starts to hurt, I know how to treat it and keep the spasms under control. New data presented at the international gastroenterology congress, the Digestive Disease Week, Los Angeles, in 2006, showed that the prevalence and severity of abdominal cramping, pain and discomfort have been globally underestimated. A global epidemiological study showed that one in four people around the world suffer from this troublesome and sometimes debilitating ailment. Two- thirds of all sufferers indicated they experience sudden abdominal attacks that begin without warning. On average, more than one-third of these sufferers experience at least one fierce attack every week. Professor Guido N. J. Tytgat, from the Academisch Medisch Centrum of the University of Amsterdam, comments: This ailment is classified as a functional gastrointestinal disorder, which means that the abdomen appears normal, but does not function properly. Despite the painful symptoms associated with this ailment, proactive management and treatment can significantly improve a sufferer s quality of life.

Mara Lovera, Buenos Aires, Argentina, went through hard times because of abdominal pain.

From plant to the pharmacy the buscopan story The buscopan story starts in Ingelheim, Germany, where elite Duboisia plants are grown in greenhouses. These plants are bred to be resistant against nematodes and beetles. The best seeds are harvested and then delivered to the company s plantations in South America and Australia for further on-site selection. Here, the shrubs grow on a large scale. The pharmaceutically important alkaloid scopolamine which is contained in the dried leaves and stalks is isolated and purified. Finally, the active precursor substance scopolamine is converted in a single chemical process into hyoscine butylbromide, the active ingredient of buscopan. Boehringer Ingelheim s buscopan is an effective over-the-counter medicine which offers relief from abdominal pain and discomfort by targeting the source of the problem. It suppresses and relieves painful muscle spasms by travelling directly to the gastrointestinal tract. It does not enter the bloodstream, but acts directly on the muscle contractions from within the digestive tract, causing them to relax, thus relieving the pain and allowing normal functioning. Abdominal cramping, pain and discomfort is a functional gastrointestinal disorder which can be painful, embarrassing and often debilitating. Whilst mild symptoms can be annoying and unpleasant, severe ones can be unbearable. Anyone can suffer from abdominal cramping, pain and discomfort at any time and for any reason. It affects almost a quarter of the general population worldwide, with women being more likely to suffer than men (31 % vs. 22 %). Whilst there is no difference in the prevalence of the ailment between different age groups, the initial onset of symptoms usually occurs between 27 and 31 years of age. The causes are manifold and often difficult to determine. 0 Boehringer Ingelheim AnnuA l RepoR t 2006

serving patients Consumer Health Care Our Consumer Health Care (CHC) business segment achieved net sales of EUR 1.1 billion in 2006 (+1.1 % against the previous year). All regions of the CHC business, except Japan, achieved strong growth supported by positive exchange rate developments. Boehringer Ingelheim is ranked No. 8 worldwide among CHC companies and defended its position in 2006, primarily through launching new line extensions and switching prescription-only medicines to over-the-counter (OTC) products. Our key international brands continued to develop very positively. Development by brand buscopan positioned as the specialist treatment for abdominal cramping, discomfort and pain extended its worldwide No. 1 antispasmodic brand position, according to IMS data. The buscopan franchise produced strong doubledigit growth in 2006. In Argentina, Colombia and Paraguay the most recent buscopan line extension, buscapina fem, was successfully introduced for treatment against menstrual pain. Globally aligned international packaging has now been introduced in all major countries such as Argentina, Brazil, Mexico, Germany and Italy a step towards building a contemporary and compelling global OTC brand. Top products Consumer Health Care Net sales in millions of EUR change dulcolax 122.0 + 6.2 % mucosolvan 108.3 + 18.6 % pharmaton 95.6 + 8.2 % buscopan 71.2 + 19.6 % bisolvon 67.1 + 0.4 % thomapyrin 34.2 + 14.2 % laxoberal 34.0 + 6.9 % antistax 23.2 + 2.7 % dulcolax our leading laxative brand maintained its position as the No. 1 laxative worldwide and is now marketed in over 100 countries. Positive performances were achieved in 2006 in Europe, Asia and the Americas, where our strong category position was reinforced. In order to continually strengthen our brand worldwide, a number of key line and brand extensions are being developed in order to reinforce dulcolax s global position. antistax our brand for the prevention and treatment of chronic leg vein insufficiency succeeded in delivering another year of growth in 2006. Driven by strong double-digit growth in Italy, Belgium and Russia, antistax is well on its way to becoming a leading international player in the treatment of chronic venous insufficiency. With a new brand positioning and worldwide rollout plans in place, antistax is set to continue playing a central role in delivering positive business growth for our CHC business in the coming years. mucoangin our sore throat brand achieved satisfactory growth in the major markets of Germany and Mexico. A new product launch was made in the Netherlands. Consumer Health Care 81

zantac an excellent strategic fit Boehringer Ingelheim s Consumer Health Care (CHC) business made an important strategic move in October 2006 with the acquisition of US rights to the over-thecounter (OTC) brand zantac (ranitidine), an H2 blocker for treating the common disorders heartburn and acid indigestion. Our CHC business ranks as the eighth largest supplier of self-medication products worldwide, and the well-known consumer brand zantac will further strengthen its presence in the key US market, says Hans V. Regenauer, Corporate Senior Vice-President Marketing & Sales of Boehringer Ingelheim s CHC business. The zantac rights, acquired under an agreement between Boehringer Ingelheim Pharmaceuticals, Inc., Johnson & Johnson and Pfizer, add to the US portfolio a strong consumer brand that combines well in terms of retailing and sales and promotion with the flagship brand dulcolax, Boehringer Ingelheim s worldwide leading laxative brand. zantac is an excellent strategic fit that complements our existing OTC franchise and provides us with two leading brands in the two largest gastrointestinal categories acid reducers and laxatives, says J. Martin Carroll, president and CEO of Boehringer Ingelheim s US Corporation. Regions Europe In 2006, the region reported sales growth of more than 5 % compared to the previous year, this in spite of low incidence in coughs and colds and strong negative business impact caused by the delisting activities by the authorities in France. Strong growth was provided by our flagship brands dulcolax and buscopan which together posted a growth of almost 20 % against the previous year. Together with several small countries, Spain, Italy and Russia were prime drivers of the positive development. Americas The year 2006 was again positive for the CHC business in the Americas region, which achieved growth of 10 % against the previous year. All international core brands developed positively. The main growth drivers were the USA, Mexico, Argentina and Venezuela. mucosolvan the world s leading cough expectorant maintained its No. 1 position in 2006 and achieved good growth performances in Russia, Mexico and Brazil. New marketing campaigns were launched in Germany and Russia, as well as in China and France, where mucosolvan was targeted at consumers for the first time. bisolvon the cough remedy strengthened its position as one of the leading brands in the world cough remedies category as a result of new product upgrades and product launches. mucosolvan has proven to be a very reliable, trusted and strong expectorant for the treatment of productive cough. It is one of the leading therapies for cough and is available around the world. Boehringer Ingelheim AnnuA l RepoR t 2006

serving patients Switching reinforces the trend towards self-medication Switching the reclassification of prescription-only medicines to over-the-counter (OTC) products needing no prescription is reinforcing the growing trend towards self-medication. Throughout the developed world the explicit policy adopted by many health authorities in licensing and reclassifying medicines, is that they should be made freely available to patients, unless a case can be made for availability being restricted. Making medicines more widely available at the pharmacy as OTC products provides consumers with the opportunity to buy a wider range of medicinal products. This deregulation of medicines comes against a background of pressure on the drugs bill in many countries. Some governments are already committed to expanding the range of medicines available for self-medication towards longer-term chronic conditions and preventive therapies. zantac, for which Boehringer Ingelheim recently purchased the USA rights, is a great example of a brand which was a prescription blockbuster for many years, but has now successfully switched globally with equal OTC success. In addition, Boehringer Ingelheim s self-medication portfolio also includes other highly successfully switched products, such as the antispasmodic buscopan and mucosolvan, the cough expectorant. On the road for leg vein health Boehringer Ingelheim s antistax camper van is a wellestablished mobile consulting room. It tours Italy to raise public awareness about chronic vein insufficiency. The tour is conducted in cooperation with the scientific institute San Raffaele in Milan under the slogan Benessere delle Gambe (Well-being for legs). In 2006, the van visited 13 cities from Como to Naples, giving access to the public, in order to provide them a free leg-vein check, conducted by a specialist. About 3,000 people, mainly women but also some men, visited the van for a free consultation, to find out if they suffered from chronic venous insufficiency, an ailment which can be associated with heavy, tired, achy and swollen legs. Boehringer Ingelheim s antistax, a natural food supplement can help to maintain leg vein health. It contains the unique extract of red vine leaf, AS195. Asia, Australasia, Africa (AAA) SSP Co. Ltd. the No. 3 OTC company in Japan, whose major shareholder is Nippon Boehringer Ingelheim Co. Ltd. defended its position in a highly competitive market environment. The AAA region, excluding Japan, achieved strong growth of 26 % against the previous year. Our international core brands pharmaton, bisolvon and dulcolax showed overall sales growth of 10 %. Consumer Health Care 83

Top Story: Metacam

Alexander (left) and Christopher playing together with Tom, a Fjord gelding which is part of their therapy. The horse had to be treated for colic.

Fatima, a 30-year-old Anglo-Arabian mare, and Miriam who takes care of the horse, still an important member of the team. And the children are happy to work with her. Our friend Tom Alexander and Christopher, both nine years old, are two cheerful, outgoing young boys. They love playing football and computer games. But Fridays are always special for the twins: that is when they go to see Tom. Tom, a 12-year-old Fjord gelding, is their friend. He s so big and blond and soft, says Christopher, his eyes gleaming. Riding and handling the horse, feeding and looking after it, is extremely important for the children s development, as their health has been impaired since birth. For about three years Alexander and Christopher have had regular training once a week at the therapeutic riding centre in Flörsheim-Dalsheim, a town south-west of Frankfurt in Germany. Tom has been part of the team there now for many years and has been specially trained for the job. The rhythmic movement of the horse and the therapeutic exercises during a ride relieve Alexander s spasticity. The elevated position and being able to move without a wheelchair give him an immense feeling of freedom. And Christopher finds the horse has a calming effect, particularly the close physical contact with the animal. Christopher suffers from attention deficit disorder (ADD). The most vital aspect of the therapy is the trust between the horse and client, explains Nora Ringhof, the boys therapeutic riding instructor. The animal becomes an important partner and friend. Building trust, through eye-to-eye contact, for instance, is of decisive importance and is only possible over a long period of time, she says. This kind of therapy normalises muscle tone, helps clients control their upper body and head, improves balance and helps them learn how it feels to move. It is indicated in the case of cerebral movement disorders, regardless of the cause or severity, multiple sclerosis, spina bifida, postural defects, or lowback syndromes. Furthermore, the improvement of social skills forms an important part of riding therapy. When Tom suddenly developed colic one day, he was given immediate relief by administration of metacam, an analgesic and anti-inflammatory drug from Boehringer Ingelheim. Their very long intestine makes horses very prone to colic, a disease that can prove life-threatening. Every year about 10% of all horses across the world suffer from equine colic. Many horses can be helped with drug therapy while others have to undergo intensive surgery in special clinics. Recent research results from the USA show that metacam is highly effective in the treatment of this disease. Ms Ringhof adds: The children are delighted that Tom found help so quickly and that he s ready for them again. 86 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients Animal Health The sound progress of our core business segments in Animal Health, namely swine and small animals, is a key characteristic of the year 2006. On the whole, our global Animal Health business has concluded another successful year with a growth of 4 %. Adjusted for extraordinary and currency effects, the business grew by 8 %. This again compares favourably to the industry s excellent growth of 6 %. Overall, we increased sales to EUR 374 million and have hence continued to strengthen our position in the global market. With a global market share of 3 %, in 2006 we once again ranked among the top ten animal health companies in the world. Regions Growth was relatively balanced across all regions and exceeded our expectations everywhere in 2006. Once again, Europe brought very gratifying news, since all countries developed positively compared to the previous year, showing overall growth of 10 %. The NAFTA region achieved considerable growth over 2005. Our market leadership in the porcine vaccine sector was extended further and, in the first full financial year with our own independent companion animal team, we achieved marked sales growth for several products. We celebrated the 25th anniversary of Boehringer Ingelheim Vetmedica, Inc. in St. Joseph, Missouri, our global research and production site. In Asia, our country organisations, in particular in China, Thailand and South Korea, achieved exceptional growth figures, a result of the stringent focus on pig vaccines in these markets. Japan showed far-reaching progress in increasing profitability and improving the product portfolio. Emerging markets The Animal Health business area extended its global presence in 2006. We commenced marketing our porcine vaccine portfolio through our own organisation in Brazil, one of the world s largest pig markets. In addition, we reorganised our South American activities with a regional sales organisation in September. Our teams now very effectively serve the markets in Argentina, Chile, Paraguay, Uruguay and the Andean Pact countries. By newly establishing a sales organisation in South Africa, we emphasised the geographic expansion of our business activities in sub-saharan Africa. Furthermore, our new subsidiary in Dubai is to supply the demanding Arab markets, especially in the small animal, equine and poultry segments. In Europe too, additional efforts are dedicated to opening up new markets, especially in Eastern Europe. Most recently, all our operations for Austria and Eastern Europe have been bundled and are now conducted from a regional centre in Vienna, which will be fully operational by the first quarter of 2008. In summary, 2006 was dedicated to accessing emerging markets and to introducing and marketing our product portfolio in new regions a strategy we intend to continue to pursue in the future. Animal Health 87

Food-producing animals Swine The global launch of enterisol ileitis was one of the highlights of 2006 in the swine segment. With the market introduction of this innovative vaccine in most European countries, in Brazil, Australia and in New Zealand it grew by 33 %. However, it became evident that many farmers still consider the concept of disease prevention to be a major change of standard practice. The acceptance and implementation at farm level will therefore take longer than anticipated. However, forecast trends indicate that enterisol ileitis will already be our biggest selling pig vaccine in 2007. In July 2006, a survey of participants at the Congress of the International Pig Veterinary Society (IPVS) in Copenhagen confirmed that ileitis is currently seen as the most important subclinical disease in pigs. The unmet therapeutic need is obviously substantial. But substantial too is the economic advantage that the use of enterisol ileitis brings to pig farmers. Our support for US search dogs Over the past decade, we ve found out about the vital role rescue dogs play when properly trained with a skilled firefighter to save lives. This is the human-animal bond at its most profound. Over the years, the canines and their firefighter partners have responded to national and local disasters such as 9/11, Hurricane Katrina and many other regional and state disasters. We thank Boehringer Ingelheim for their belief in our mission and for their support in being part of the search, says Wilma Melville, founder of the National Disaster Search Dog Foundation (NDSDF). The mission of the NDSDF is to produce the most highly trained canine search and rescue teams in the USA. In response to the shortage of such teams, Boehringer Ingelheim Vetmedica is enabling a greater number of search and rescue dogs to be and effectively respond to emerging diseases by supplying medical innovations and economically beneficial solutions to pig producers. Further highlights of 2006 included the marketing authorisation of our new vaccine ingelvac circoflex which was granted approval in the USA in October, and in Canada in November. This highly efficacious vaccine protects against porcine circovirus, PCV-2, currently considered to be one of the greatest unsolved problems in pig production. This insidious disease dramatically weakens the animals immune system, leaving them susceptible to infection. The one-shot vaccine ingelvac circoflex, which was developed in record time, is an antigen that effectively controls this disease in affected herds. Products, such as enterisol ileitis and ingelvac circoflex, have demonstrated that Boehringer Ingelheim Animal Health can rapidly As to the future, we are confident that we will be able to maintain strong growth in the swine segment and aim to become the global No. 1 in pig vaccines in the near future. Fiftyfive scientific publications presented at the 2006 IPVS congress have substantiated our market and opinion-leading position. Cattle The cattle segment also posted significant growth in 2006. Our traditional mastitis products continue to enjoy great popularity in the market due to their outstanding efficacy. 88 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

serving patients located, trained and placed with fire departments under a three-year partnership deal. In return, the NDSDF has given the company exclusive affiliation with a search dog, Lola, a Black Labrador (right) handled by Johnny Subia of the Seaside Fire Department in California. She was selected as the metacam search dog. In metacam, Boehringer Ingelheim offers a medication that benefits canines (and other animals) suffering from osteoarthritis, the most common cause of impaired mobility in dogs. One of a new generation of effective non-steroidal antiinflammatory drugs, it reduces within hours inflammation and relieves pain associated with osteoarthritis, while minimising the side effects seen with less selective substances. Encouraging growth rates for these products, for instance mamyzin and benestermycin, have supported our decision to make additional investments in this segment. In January 2006, we acquired the mastitis product line of Leo Animal Health in the United Kingdom and Ireland. Productivity in the cattle business as in many other Animal Health areas is closely linked to animals well-being. Consequently, efficient treatment of pain and inflammation will increase productivity. With growth of over 10 %, metacam again made strong inroads into this market. In addition, the cattle vaccines business in the USA developed very well in 2006. At the same time, the divestment of our ectoparasite portfolio has further streamlined our product segment in the US and facilitates our global focus on vaccines, mastitis products and pharmaceutical specialties. Companion animals Small animals The positive trend in our business in the small animals segment continues apace. Due to the strong brand awareness, highly efficacious products and successful marketing strategies, we can look back on another record-breaking year in the companion animals segment. In 2006, we focused on the long-term treatment of dogs and cats with osteoarthritis and other painful locomotor diseases. Not only did we make impressive gains in this sector with our top brand metacam, but we also responded to the wishes of veterinarians and dog owners for a new dosage form by launching metacam chewable tablets for short-term postoperative treatment in Europe and Australia. Additional synergy effects were clearly apparent for metacam injectable solution. Animal Health 89

serving patients Our second flagship product for companion animals, vetmedin, a product based on pimobendan, secured further market shares in 2006 in the fiercely competitive small animal market. The outstanding efficacy of this drug in endocardiosis in dogs was recently underlined by a scientific study called Vetscope. By dilating the blood vessels and increasing the contractility of the heart muscle, the animals not only lived much longer than after treatment with angiotensin-converting enzyme (ACE) inhibitors, but also significantly showed fewer symptoms a clear indication of improved quality of life. Thus, it is no surprise that vetmedin more than surpassed our expectations in the reporting year, achieving growth of over 20 %. We plan to increase market penetration even further over the next few years to be able to offer vetmedin across the globe. Horses Our company s global equine business has clearly followed the positive trend of all other business areas. Milestone achievements were the launch of the metacam oral suspension for musculoskeletal diseases in horses in Europe, as well as the market introduction of equitop gonex in Germany, a product available without prescription for regulating and stabilising joint and connective tissue metabolism. Furthermore, the European marketing authorisation for metacam injectable solution for pain relief in equine colic was another landmark accomplishment, providing an essential component for the treatment of gastrointestinal diseases and supplementing buscopan, sedivet and pronutrin. Hence, the ground is prepared for further growth in the equine sector in the future. Research and development For many years, Boehringer Ingelheim Animal Health has been investing a high percentage of its sales in research and development. In 2006, it totalled around 13 % of our net sales. Innovation is the imperative basis of our organic growth strategy. Consequently, we commit ourselves to further substantial investment in our global R&D infrastructure and in a European vaccines research and development centre in the years ahead. We also note with considerable optimism the sound progress in our product pipeline and the high level of expertise in the control of emerging diseases as well as the expertise in developing novel chemical formulations. Through the discovery of new pharmaceutical solutions, molecules or vaccines we can offer added value to veterinarians and animal owners, thus benefiting mankind. 90 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Our Customer Orientation Our customer orientation

How innovations are made The world of biopharmaceutical production has in the last five years grown immensely due to ever-increasing market demand for monoclonal antibodies (MAbs) and other therapeutic proteins. As many antibody-based therapies are applied in high doses for example in oncology there is a need to ensure high production capacity with high yield. Boehringer Ingelheim is meeting this need by continuously improving biopharmaceutical production of therapeutics derived from mammalian cell culture (Biberach, Germany) and bacterial fermentation (Vienna, Austria). For gene therapeutics and DNA products Boehringer Ingelheim s expertise is increasingly in demand too. At our biopharmaceutical site in Vienna we have developed a fusion protein technology which uses the bacteria E. coli to produce efficiently therapeutic proteins. E. coli serves as a bacterial expression system and core of a process which ultimately delivers a therapeutic protein yield that is four times that of current industrial standards. This achievement will further strengthen the company s competitiveness in the area of production of therapeutics of bacterial origin. Due to the creativity and know-how of our teams in process development and manufacturing, Boehringer Ingelheim offers very economic, high-yield processes performed in our modern facilities. In 2000, Boehringer Ingelheim Austria entered the area of plasmid DNA products, an important therapeutic molecular structure which helps to develop gene therapeutics and vaccines. During the last five years, Boehringer Ingelheim has advanced its plasmid DNA product yields from 50 mg/l to 2,000 mg/l a 40-fold yield increase. After the successful validation of the new Vienna plant, Boehringer Ingelheim became the preferred partner for the immediate uptake of late-stage and commercial products to be produced in E. coli and yeast. These include therapeutic proteins, antibody fragments, protein scaffolds and plasmid DNA products. For some years now, Boehringer Ingelheim Pharma in Biberach has had an international reputation as a reliable contract developer and manufacturer of biopharmaceuticals from mammalian cells and, as such, has cultivated a long-standing and synergistic relationship with highly respected companies in the biopharmaceutical arena. Recombinant proteins are manufactured by means of fermentation in bioreactors. Cultivation depends here on optimal conditions for cell growth and production of the drug substance. The organisms used (cell cultures or bacteria) are highly sensitive to any changes such as temperature, ph, oxygen and carbon dioxide saturation, length of the process or excipients used. Biopharmaceutical Process Development in Biberach tests and evaluates at once the different cultivation conditions for mammalian cell cultures (e.g. CHO cells) on a small scale. These tests make it possible to determine the optimal growth conditions for the cells which will later be implemented in the large-scale bioreactors for market production. This important part of development is essential for the economic production of drug substances with high-yield processes. 92 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our customer orientation On a biopharmaceutical compound s way from mind to market there are many hurdles to overcome. The Biberach teams have successfully addressed these challenges and many projects have been advanced into late stages: three new cell culture products in oncology and in respiratory diseases have recently been transferred from the small-scale process development level to the large-scale production level. This is one step further on our way to be able to finally apply for international marketing authorisation. In Biberach, Boehringer Ingelheim has also developed a high expression system (bi-hex) which uses mammalian cell cultures (CHO cells) to obtain a high yield of the therapeutic protein of interest. The bi-hex platform meets demands for shorter development times of a new biological medicine and follows the paradigm do-it-rightthe-first-time to avoid unnecessary costs and delays. The bi-hex system has a four-fold higher yield from mammalian cells than the current industrial standard. Furthermore, Boehringer Ingelheim successfully entered the Japanese oncology business by signing a manufacturing agreement with a major Japanese pharmaceutical company for a monoclonal antibody in the field of oncology. Since most modern biopharmaceutical treatments cannot be taken in tablet form, patients have to inject the medication using a syringe. With prefilled syringes the convenience for patients can be increased usually resulting in a better compliance How innovations are made 93

and treatment success. The worldwide need for such devices is constantly on the increase. Boehringer Ingelheim established a new aseptic filling line for pre-filled syringes in Biberach for this therapeutic need. Our biopharmaceutical activities also support the development of Boehringer Ingelheim s Animal Health product pipeline. The support focuses on R&D activities, such as the evaluation of antimicrobial peptides, for the treatment of chronic bacterial infections that cannot be efficiently controlled by conventional antibiotics, and the investigation of the safety and efficacy of recombinant cytokines for the treatment of certain canine tumours in a new galenic formulation. Confirming our leading position in biopharmaceuticals development and manufacture, we have extended our resources for cell line development services for third parties and have established a global manufacturing network with collaboration partners in manufacturing in Asia, Europe and the USA. Our biopharmaceutical Industrial Customer business is not only growing faster than the market average but is at the same time adding value to research and development activities within the company to ensure a sustained biological product pipeline with the aim of developing innovative therapeutic proteins that ultimately benefit patients. New biotechnology course started October 2006 saw the first 35 students begin a pioneering degree course in pharmaceutical biotechnology at the School of Technology, Biberach, the German town that is home to Boehringer Ingelheim s main biopharmaceuticals site. Studies started only days after the inauguration of a EUR 8.6 million faculty building. This project is of great importance beyond the region for the competitiveness of biopharmaceuticals in Germany, as well as for patients who attach new hopes to this technology for treatment of their diseases. Every third medicine being approved today is of biopharmaceutical origin, Professor Rolf Werner, Senior Vice-President, Corporate Division Biopharmaceuticals, Boehringer Ingelheim, said. The 3.5-year course, which leads to a bachelor s degree, concentrates on biopharmaceutical production processes and is more focused than previous study options serving the industry. Boehringer Ingelheim s Biberach site houses the largest biopharmaceutical production facility in Europe. The new specialised faculty, set up by Boehringer Ingelheim in partnership with the local, regional and federal authorities, as well as commercial partners, represents an important investment in ensuring the future skills base. 94 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our customer orientation Pharmaceuticals Production Our Pharmaceuticals Production Division launches and produces Boehringer Ingelheim s own drugs in a globally coordinated production network. Each site has a distinctive strength focusing on launch or seamless supply. Production sites are competitive centres of business process excellence with distinctive competencies in managing, for example, new technologies and product life cycle. In 2006, major investments, such a that for the respimat, dabigatran or the LogiPack Center in Ingelheim, were made. Ben Venue, Bedford, Ohio, USA, one of the world s largest sterile injectables manufacturers, also invested more than USD 50 million in a new manufacturing facility which will come on line in 2007. For the mid-term, Boehringer Ingelheim plans to invest a total of more than EUR 1.3 billion for new products, mainly in Germany and the USA. Optimising the assets of Boehringer Ingelheim s corporate network will further contribute to increasing efficiency. Pharma Chemicals The sales figures of our worldwide Pharma Chemicals business developed very well. Consolidated sales amounted to EUR 158 million in 2006, clearly exceeding the 2005 level (EUR 140 million). The importance of the US market increased further. The excellent positioning of our large established line products also contributed to the gratifying sales development. The phenylephrine business continued growing at a high level, guaifenesin sales doubled and ketoprofen volumes developed very well, especially in Japan. The development in the new business development area was also favourable. A couple of very promising projects will ensure future growth. Pharmaceuticals Production also offers its capabilities and capacities to our Industrial Customer business. Boehringer Ingelheim produces for key clients, such as Pfizer, Sanofi, GlaxoSmithKline, Novartis, Bristol Myers Squibb, Sankyo, Sagmel and Valeant. Pharmaceuticals Production / Pharma Chemicals 95

Our investments in 2006 As a result of dynamic business growth, global investments in tangible fixed assets at Boehringer Ingelheim increased significantly in 2006. They totalled EUR 596 million, which is an increase of 12 % on the previous year. Major investment projects that began in 2006 included expansion of the chemical production facilities in Petersburg, Virginia, USA, and Fornovo, Italy. With an investment volume totalling more than EUR 170 million, these projects will ensure a long-term supply of active pharmaceutical ingredients (APIs) for pharmaceutical production. An especially important investment project is the expansion of the production facilities of Boehringer Ingelheim microparts at the site in Dortmund, Germany, where production capacity for respimat devices is set to double by 2009 through expansion of the on-site production area and systems. This will be accompanied by an increase in the number of employees in Dortmund from approximately 350 to 500 by 2010. In addition to the opening of a new biology research centre in Vienna, Austria, a new centre for pharmaceutical research and development was inaugurated in Biberach, Germany, in 2006 (right). With an investment of approximately EUR 50 million, this new building provides a modern working environment for around 130 employees for administering and applying new active ingredients. 96 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

our customer orientation Counterfeits a real threat for patients According to World Health Organization (WHO) figures, about 10 % of all pharmaceuticals are counterfeit, are fakes or substandard drugs. People in developing countries are regularly confronted with this problem, also developed countries too are increasingly affected by this kind of criminal activity. The main sources for counterfeit drugs are in Asia and Latin America. Boehringer Ingelheim products were also subject to this criminal activity. Since 2001, when the Corporate reporting system was installed, over 100 cases had been reported from inside or outside the Corporation. There are several reasons for the rise of counterfeit medications: weak regulatory oversight, missing legal framework for prosecution and penalisation, untrained customs and a supply chain which is not sufficiently controlled by inspections and not well protected against penetration of faked products. New distribution channels like the internet are not yet sufficiently controlled either. One company alone cannot solve the problem, says Dr Thomas Zimmer, Head of Corporate Safety, Quality & Environmental Protection. Dr Zimmer represents Boehringer Ingelheim in the European Federation of Pharmaceutical Industries Associations (EFPIA) as the chairman of the anticounterfeiting ad hoc group and as a member of the WHO taskforce IMPACT. The strategy for combating counterfeits in the developed world involves a couple of different approaches: a tamperresistant package, which is combined with a two-dimensional randomised barcode specific to one individual package, and a database to support the authentication process of products as close to the customer as possible, ideally in pharmacies. In the USA, other techniques, such as radio frequency identification (RFID) labels are currently being discussed as too are so-called pedigrees which document each stop a product has made in the supply chain. To specifically address the Latin American market Boehringer Ingelheim founded an internal taskforce intended to collaborate with other companies and local agencies to contribute to respective solutions. But the solution is not only a technical one, Dr Zimmer says. There is in general an over-reliance on technology. Communication with the public is needed. Two-dimensional barcodes are small and can store much more information than older one-dimensional barcodes. They are therefore useful for pharma packages. To give the maximum protection for the patient they should be combined with tamper-resistant closures. It is a fight which requires patience, persistence and sustained effort. This battle can be won, but you can only win it step by step, underlines Dr Zimmer. Investments / Counterfeits 97

98 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Group Management Report 2006

Group Management Report Business and operating environment tax increase, from 16 % to 19 %, announced for 2007, led to extensive purchases of durable consumer goods being brought forward. Overview The world economy in 2006 maintained the positive development of the previous year. Economic growth was broadly based. The primary contributors to this were the economies of East Asia, the United States and the euro zone too, which in 2006 showed a strong increase in its real gross domestic product (GDP). In Germany too economic development in 2006 was favourable. With a growth rate of 2.7 %, real GDP was higher than it had been since 2000. In contrast to the previous years, domestic demand, alongside continued, strong exports, also contributed decisively to this gratifying development. In particular, the sales The pleasing development in 2006 also extended to the labour market. The number of unemployed fell distinctly and the number of people in employment rose further. The favourable economic development can, however, only to a very limited extent be applied to the research-driven pharmaceutical industry. The growth rate for the world pharmaceutical industry, discounting currency effects, slowed again in 2006 already the third year in succession. The reasons for this development are various. In first place is certainly the fact that a number of important products from leading pharmaceutical Net sales by businesses 2006 (in millions of EUR) Net sales by region 2006 Net (in millions sales by of region EUR) 2006 (in millions of EUR) Prescription Medicines 7,247 Consumer Health Care 1,052 8,311 1,064 Americas Americas 4,559 4,559 5,388 5,388 Biopharmaceuticals 548 Pharma Chemicals and Pharmaceuticals Production 299 Animal Health 361 05 06 503 306 374 Asia, Australasia, Asia, Australasia, Africa Africa 1,859 1,859 Europe Europe 3,117 3,295 3,117 3,295 05 06 05 06 1,891 1,891 Total Total 9,535 9,535 10,574 10,574 100 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

companies lost their patent protection. Due to the subsequent generic competition, these products were sold at substantially lower prices. On the other hand, it is becoming increasingly difficult to close the sales gaps caused by expiring patent protection with new products. The number of new registrations still trails behind the high points of previous years. Nor was Boehringer Ingelheim able to avoid the worldwide trend of declining growth rates in the industry. Following turnover growth, according to the healthcare information provider IMS Health, of 24 % in 2005, discounting currency effects, primarily borne by innovative launches (spiriva and micardis ) and extraordinary effects (mobic ), growth of only 8.4 % was achieved in 2006. However, as in the last seven years, this exceeded overall market growth (6.1 % in 2006). A significant cause of the slowed growth at Boehringer Ingelheim is that our antirheumatic mobic, as expected, faced generic competition in the USA from summer 2006 and compared to 2005 experienced a decline in turnover of EUR 250 million. Net sales (in millions of EUR) 2006 2005 Change Prescription Medicines 8,311 7,247 +15 % Consumer Health Care 1,064 1,052 +1 % Biopharmaceuticals 503 548-8 % Pharma Chemicals and and Pharmaceuticals Production 306 299 +2 % Animal Health 374 361 +4 % Borne by growth in all three regions, group net sales were increased by 10.9 % to almost EUR 10.6 billion. The favourable development of the business in the last few years (2005: +17 %, 2004: +10.5 %) has thus continued. As in 2005, exchange rate developments in 2006 had no decisive impact on turnover growth. The Japanese yen only lost some 6% of its value compared with the previous period, which only had an effect of less than -1 % on group net sales. Boehringer Ingelheim s most important sales segment is the Prescription Medicines (PM) business that again in 2006 developed very favourably, with an increase of 15 %. Boehringer Ingelheim s growth in 2006 was again borne by all three regions, each of which surpassed its respective market growth. This testifies to the international orientation and strength of our group. The strongest growth was achieved in the Asia, Australasia, Africa (AAA) region, with 15 % at constant exchange rates according to IMS Health. In the Americas region turnover growth was 9 %, discounting currency effects. In Europe we posted market growth of 4.6 % at comparable exchange rates. Net sales by region (in millions of EUR) 2006 2005 Americas 5,388 4,559 Europe 3,295 3,117 Asia, Australasia, Africa 1,891 1,859 Group Management Report 101

In our Animal Health business, with growth of 10 %, we further reinforced our No. 10 position internationally and thereby secured a market share of 3 % in this highly competitive market. We considered growth of 1 % for our Consumer Health Care (CHC) as unsatisfactory. The main reason lies in the restrained development of our business in Japan, which, in addition, suffered from the marked depreciation of the Japanese yen. We expect the acquisition at the end of 2006 of the medication zantac in the USA to give us strong growth in CHC business in this market in 2007. We anticipated the 8 % decline in turnover in the Biopharmaceuticals segment, as the previous period had been positively affected by certain extraordinary factors (2005 growth in this segment amounted to 40 %). In the business area PM we further extended the market position of our main sales generators spiriva, flomax and micardis. In these products Boehringer Ingelheim now has three medications with sales volumes exceeding USD 1 billion. spiriva, one of the most prescribed medications for the treatment of chronic obstructive pulmonary disease (COPD), achieved the strongest growth with a 45 % increase on the previous year. micardis, a medication for the treatment of hypertension, achieved growth of 34 %, which underlines the strength of this medication in this highly contested market segment. micardis has thereby met our expectations and we assume that it has further growth potential that can gain additional momentum on publication of the results of the ontarget study in 2008. flomax /alna, a medication for the treatment of benign prostatic hyperplasia (BPH), achieved sales growth of 28 %. This growth is primarily attributable to its market success in the USA, where it holds a market share of around 57 %. We expect another important turnover driver from the 2006 market approval for sifrol /mirapex in the indication restless legs syndrome (RLS) in both Europe and the USA. The generic competition for our mobic in the USA had been anticipated, but some months later than it actually happened. For the first time, the US Food and Drug Administration (FDA) granted market approval to 14 applicants simultaneously, which immediately after they entered the market led to a dramatic decline in prices. As in previous periods, the positive influence of our concepts Value through Innovation (VTI) and Lead & Learn was of importance in 2006. Both have continued to play a decisively formative role in our corporate culture and are a significant basis for successful cooperation at Boehringer Ingelheim. With a series of projects we have ensured that these principles will continue to be translated into reality so that we can thereby also successfully meet the challenges of the future. 102 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

To summarise, we see the success of 2006 once again as confirmation of our business efforts. In the business areas Research and Development, Production, Marketing and Sales we regard ourselves as well-equipped and look to the future with confidence. The most important figures for earnings for 2006 are as follows: (in millions of EUR) 2006 2005 Change Net sales 10,574 9,535 +10.9 % Operating income 2,140 1,923 +11.3 % Return on net sales (as %) 20.2 20.2 Research and Development Boehringer Ingelheim has firmly anchored in its guiding principles (Leitbild) the mission of helping people suffering from diseases by researching innovative medicines. Against this background, the worldwide deployment of resources in research and development are of prime importance. In the reporting period, Boehringer Ingelheim spent EUR 1,574 million in this business area, thereby increasing our R&D expenditure by 15.7 % against the previous period and again investing 14.9 % of our net sales in our own R&D activities. In our Human Pharmaceuticals business, R&D expenditure as a share of net sales was 15.0 % (2005: 14.4 %). We have distributed our global research activities to our sites in Germany, the USA, Austria and Canada. In addition to each site s focussing on certain fields of research, numerous international project teams ensure that necessary know-how concerning successful project management is available. Boehringer Ingelheim has concentrated its R&D on seven therapeutic areas: respiratory diseases virology oncology metabolic diseases cardiovascular diseases central nervous system diseases immunology and inflammation Research and development 2006 2005 2004 2003 2002 Total expenditure (in millions of EUR) 1,574 1,360 1,232 1,176 1,304 as % of net sales 14.9 14.3 15.1 15.9 17.2 Human Pharma. expend. (in millions of EUR) 1,527 1,318 1,195 1,140 1,264 as % of HP net sales 15.0 14.4 15.3 16.1 17.4 Average number of employees 6,003 5,678 5,471 5,362 5,205 Investments in tangible assets (in millions of EUR; without investments in infrastructure) 125 116 97 93 97 Group Management Report 103

Our medications spiriva, combivent and atrovent have for many years given us a leading position in the treatment of COPD. spiriva, our first blockbuster medication, is one of the medicines that is most often prescribed for this indication. The product, co-promoted with Pfizer, Inc., was also launched in France in 2006 and is now available in most countries. We assume that the clinical study uplift, the outcome of which we expect in 2008, will further reaffirm the medicinal efficacy of spiriva with additional favourable results. In the therapeutic area of central nervous system diseases we have in the dopamine agonist sifrol /mirapex (pramipexole) a successful medication for the treatment of Parkinson s disease. In 2006, pramipexole was also given market approval by the EU and the FDA for the treatment of RLS. Together with Lilly, Boehringer Ingelheim has developed the antidepressant cymbalta that has already been introduced in more than 20 countries. In Germany cymbalta has developed into the most successful introduction of an antidepressant. In the area of virology Boehringer Ingelheim has had for years, with the medication viramune, a successful drug in the non-nucleoside reverse transcriptase inhibitor (NNRTI) class. The introduction of aptivus in 2005 complemented our portfolio of treatments for the immune deficiency disease AIDS. A further focus in virological research is in the area of the hepatitis C virus. of our therapy area cardiovascular diseases. We assume that the presentation of the results of the large-scale studies ontarget and transcend (together including more than 30,000 patients) at the beginning of 2008 will show that the spectrum for using micardis can be further widened substantially. The clinical study profess, with over 20,000 patients, to demonstrate the efficacy of aggrenox in secondary stroke prevention, will be concluded in 2008. Here too we expect an outcome that promises success. In dabigatran we have a highly promising substance in clinical phase III in the therapeutic area cardiovascular diseases for the prevention and treatment of thrombo-embolic diseases. In the urology area Boehringer Ingelheim markets flomax /alna, a medication in-licensed from Astellas, for the treatment of benign prostate hyperplasia (BPH). In the areas oncology and metabolic diseases, newer research areas for Boehringer Ingelheim, we have some interesting development products in clinical phase II. Our own previously mentioned research efforts are complemented by strategic alliances and in-licensing. Here we can note our exemplary cooperation with Ablynx for researching and developing new forms of therapy for Alzheimer s disease based on Nanobodies developed by Ablynx. With growth of more than 30 % in 2006, micardis (angiotensin II receptor blocker) is one of the fastest growing Boehringer Ingelheim products. The medication has developed highly successfully since launch and is a cornerstone With several compounds in clinical phases II and III, and a number of substances in the pre-clinical phase, we will be able to ensure the flow of new products. 104 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Production Production sites belonging to the Boehringer Ingelheim group of companies produce the company s own pharmaceutical products within the framework of a global network. Catchphrases like Business Process Excellence and Customer Relation Excellence characterise the management culture at these sites. Compliance and optimisation are among the main focus areas when new products or technologies are implemented. Significant investments in 2006 were at the site at Cleveland, Ohio, USA to expand our production capacity (> EUR 50 million) and in our LogiPack-Center (packaging facility) at the site in Ingelheim, Germany. With an investment volume of more than EUR 250 million in our production plants over the next few years we will establish the basis to be able to meet future demands on capacity and fulfil the ever-growing regulatory requirements of the authorities. In the area of chemical production we will in the next few years invest a total of over EUR 150 million at the sites Petersburg, Virginia, USA and Fornovo, Italy. With these plants and the existing capacity at Ingelheim and Malgrat, Spain we will guarantee active substance supply for our pharmaceutical products, and with a view to our planned launches, on a lasting basis. At both of our biopharmaceutical production sites, Biberach, Germany and Vienna, Austria, capacity was expanded markedly over the past few years. We consider ourselves very wellequipped for the next few years, underpinned by continued strong demand for biotechnological capacity in which Boehringer Ingelheim is established and recognised as a leading manufacturer. Environmental and employee protection The safety of employees and protection of the environment play a central role for Boehringer Ingelheim at all of our sites. This high priority is also expressed by the fact that this aspect is written down in our Leitbild. Our aim is to avoid damaging impact on the environment and to conserve natural resources in conducting our activities. For us, it goes without saying that we respect and adhere to the legal requirements in the respective countries. Indeed, we also go beyond the legally defined demands, where we regard it as purposeful. Our established processes in the field of environmental, health and safety (EH&S) are the foundation for the successful implementation of the basic principles of environmental policy. Here our objective is to scrutinise our existing procedures in a continuous process of improvement constantly in search of improvement potential. We ensure consistent groupwide adherence to these standards through environmental audits at our sites (2006: 13 environmental audits). Within the framework of our participation in Responsible Care, the global initiative of the chemical industry, we have also committed ourselves to its basic principles. The certification of our sites at Fornovo, Italy and Yamagata, Japan, by external inspectors in accordance with ISO 14001 confirmed our high internal standards. In this we also see an incentive to build on our excellent position in these areas. Group Management Report 105

Employee reporting The sustained, positive development of our business has led to a further expansion of the number of our employees. Averaged over the year, Boehringer Ingelheim in 2006 employed 38,428 people. This corresponds to growth of 3 %, following 5 % growth in 2005. In the reporting year, we, through a series of programmes and events, intensified and established as a central element of our working culture, the Lead & Learn concept that has been implemented since 2005. In this we see a significant basis to further create Value through Innovation in order to face the challenges ahead. In addition, an important part of our human resources work is our commitment to education. In the reporting period, we offered apprenticeships to 667 young people in Germany, thereby raising the previous year s level once again. In the years before, we had already at the Biberach and Ingelheim sites taken account of the social challenge of creating a better work-life balance and, in cooperation with the local communities, promoted and supported the establishment of day-care centres for children. In 2006, a childcare centre with 130 places was also built at our site at Ridgefield, Connecticut, USA. An important goal of our human resources work is to recruit and retain the best people on a lasting basis. Boehringer Ingelheim offers talented employees various paths to personal and leadership development in order to develop further their abilities. We are convinced that our remuneration schemes also put us in a very good, competitive position. Our system of financial rewards provides, in addition to a basic marketorientated salary, for a variable salary element that essentially follows company success and the achievement of personal targets. Alongside this, our extensive social contributions play an important role in the overall remuneration concept. As in previous years, Boehringer Ingelheim in 2006 again received recognition in many countries in conjunction with opinion polls to find the best employers. Part of our fundamental beliefs is not to rest on our laurels. In 2007, we will conduct a group-wide opinion survey among our employees. From the results of this survey we will access further improvement potential. Social responsibility Boehringer Ingelheim has for more than 100 years taken care of its social responsibility in a very extensive and highly attentive manner. Our understanding is that our responsibility applies to our patients, our employees and their families as well as the communities and countries in which we operate (Good Corporate Citizenship). Boehringer Ingelheim orientates itself after the basic principles of corporate governance and corporate social responsibility, as proposed by various international organisations (United Nations, World Health Organization, Organisation for Economic Cooperation and Development and the EU). These principles are employed in our strategic deliberations, our corporate culture and our daily business. 106 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

In the area of HIV/AIDS therapy, we have for years considered it our duty to undertake the special social task of making our medication viramune available to patients who would otherwise receive an inadequate supply of medicine. Through our donation programme we support activities that clearly reduce the risk of transmission of HIV from mother to child during birth using an antiretroviral therapy. For this purpose we make our AIDS medication viramune available free of charge. In 2006, we in addition reduced the price for viramune for some developing countries and within the framework of the Accelerating Access Initiative (AAI) programme we offer these countries considerable price reductions. Furthermore, we have in the meantime granted seven manufacturing licences that allow generic production in the developing countries concerned. At the same time in 2006, we sought through numerous clinical studies with aptivus and viramune to gain further insights into the treatment and therapy of AIDS. Another given for our social responsibility as a company is, where possible, to encourage and support the voluntary commitment of our employees. Many of our employees engage voluntarily in their free time in social projects and make a decisive contribution where help is called for. Results from operations, financial position and net assets Results from operations Independent market data show that Boehringer Ingelheim again grew faster than the overall market in 2006. We thereby gained market share for the seventh consecutive year. This success was all the more remarkable, as Boehringer Ingelheim achieved this growth essentially with its own resources, i.e. with products from its own research. According to current market data, Boehringer Ingelheim ranks 15 th among the world s largest pharmaceutical companies, with a market share of 2 %. Boehringer Ingelheim increased its net sales by 10.9 % in 2006 to EUR 10,574 million. Exchange rate movements, compared to the previous period 2005, had a slightly negative impact (-1 %) on this development. When analysing our growth, it must be noted that changes in the consolidation were negligible. The acquisition of the product zantac in the USA took place at the end of 2006 and has not yet affected our turnover development. Boehringer Ingelheim is divided into the businesses Human Pharmaceuticals and Animal Components of growth in net sales (as %) 2006 2005 2004 2003 2002 Price/quantity/new introductions 12.1 17.4 16.1 7.8 10.1 Acquisition and sale of businesses 0.3 0.5 0.5 0.2 7.1 Currency effect 0.9 0 5.1 10.2 4.0 Group Management Report 107

Health. The Human Pharmaceuticals business encompasses the segments PM, CHC as well as Industrial Customers. In 2006, this business achieved net sales of EUR 10,200 million, corresponding to growth of 11 %. The Human Pharmaceuticals business thereby accounted for 96 % of group net sales. Prescription Medicines PM is by far the most important segment in our Human Pharmaceuticals business. In 2006, net sales of EUR 8,311 million were achieved, corresponding to growth of 14.7 % compared to the previous year (2005: EUR 7,247 million). The significance of this segment is evident in that it accounts for 81 % of our Human Pharmaceuticals business. This gratifying development was borne by our strategic products which all showed marked growth: Net sales (in millions of EUR) 2006 2005 Growth spiriva 1,381 951 45 % micardis 967 724 34 % aggrenox 225 172 31 % flomax sifrol /mirapex 922 536 721 434 spiriva continued to develop favourably and 28 % 23 % is our fastest growing product. For the products micardis and aggrenox we also expect further growth in the next few years, supported by the outcomes of clinical studies. In 2006, our medication sifrol /mirapex was granted market approval in the indication RLS, so we can also expect further growth from the extended spectrum of use in 2007. Due to the loss of exclusivity for mobic in the USA in 2006, we had, as already mentioned, to take a drop in net sales of this product exceeding EUR 250 million which will be even greater in the 2007 period. The overwhelmingly strongest region in the PM segment is the Americas, with a 54 % share of group net sales. With only a very modest foreign exchange influence, growth of 8.9 % was achieved, discounting currency effects. Growth of 8.5 % in the pharmaceutical market was thereby surpassed once again. Net sales for the region amounted to EUR 4.5 billion. As a single market, the USA was the largest and most important country for Boehringer Ingelheim, with an 86 % share of net sales. In the US market the products spiriva, micardis and flomax showed very gratifying development, all achieving double-digit growth. In the Europe region a net sales volume of EUR 2,180 million was achieved, giving the region a share of 26 % in this segment. Market growth of 3.9 % in the region was exceeded slightly. The country in this region with the biggest turnover was Germany, which contributed EUR 446 million to total net sales. This represented a 2 % decline in net sales in our home market compared to the previous period. Our businesses in Eastern Europe showed very pleasing development, with many countries achieving double-digit growth. Exchange rate movements, particularly that of the Japanese yen, had a negative impact on net sales development in the AAA region. At constant exchange rates, we grew 15 %, markedly above the overall market that had a growth rate of 108 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

only 2 %. The region s overall net sales reached EUR 1,379 million, with Japan in the leading position with a 62 % share of net sales. In 2006, Japan s total net sales in PM amounted to EUR 849 million. Consumer Health Care In the business segment CHC we increased our net sales to EUR 1,064 million, a rise of 3 % compared to the previous year, discounting currency effects. We continue to pursue our strategic orientation with a focus on defined key brands. In 2006, we distinctly strengthened our presence on the over-the-counter (OTC) market in the USA by acquiring the product zantac. Together with our product dulcolax we now have a strong position there in the gastrointestinal medications segment. The most important product groups in this segment in 2006 were: Net sales (in millions of EUR) 2006 2005 Growth dulcolax 122 115 6 % mucosolvan 108 91 19 % pharmaton 96 88 9 % buscopan 71 59 20 % Business development was very different from region to region. While the Americas (+ 10 %) and Europe (+ 5 %) marked increases in net sales, turnover in the AAA region (- 9 %) declined. The reason for the weak development in the AAA region was the depreciation of the Japanese yen against the euro. Industrial Customers In our Industrial Customers business we have brought together the third party business of Pharmaceuticals Production, the Pharma Chemicals area and our contract manufacturing of Biopharmaceuticals. Total net sales for these three business areas in 2006 amounted to EUR 809 million, thereby falling below the figure for the previous year. It must be noted that the 2005 figures contained favourable, one-off effects in Biopharmaceuticals. Contract manufacture of biotechnologically produced medications takes the most important place. Animal Health In the global markets in animal health products, Boehringer Ingelheim is in No. 10 position, with a market share of 3 %. Compared to the previous year, net sales were increased in 2006 by 4 %, despite the sale in 2005 of some non-strategic product groups. On the basis of comparable underlying business, growth in 2006 was 8 % in local currency terms. Net sales amounted to EUR 374 million. Worldwide growth was achieved by the following product groups in particular: Net sales (in millions of EUR) 2006 2005 Growth enterisol ileitis 22 17 29 % vetmedin 19 16 19 % metacam 75 68 10 % Group Management Report 109

From a regional point of view, Europe showed marked growth. With an increase of 10 %, net sales reached a volume of EUR 179 million. Development in the other two regions showed a slight decline. In the Americas region this was attributable to the sale of certain product groups, while in AAA the currency effect of the Japanese yen had a negative impact. Expenditure and income Total operating costs were 5.5 % higher than in 2005 and reached EUR 8,848 million. In 2005, they amounted to EUR 8,388 million. Personnel costs rose by 6 % in 2006 to EUR 2,836 million, which reflects an increase in the average headcount by 1,022 employees. Depreciations remained at the 2005 level at EUR 530 million. Other operating expenses rose by EUR 425 million (+ 12 %). Overall, operating income increased by EUR 217 million compared to 2005 and now amounts to EUR 2,140 million. The return on net sales was maintained at the 2005 level of 20 %. The financial income in the reporting period amounted to EUR 102 million and was significantly affected by the sale of a number of financial assets. Borne by increase in income from operations, income before taxes rose to EUR 2,243 million and was thereby EUR 355 million, or 19 %, distinctly higher than in 2005. Tax expenses amounted to EUR 514 million, corresponding to a tax ratio of 23 % (2005: 20 %). Here, it must be taken into consideration that due to regulations of the German commercial code, personal taxes on group activities levied on the shareholders may not be shown as tax expenses. These are presented as withdrawals from accumulated group equity. Taking this extraordinary effect into consideration, the actual tax ratio is markedly higher than the value shown in the profit and loss statement. To sum up, net income rose to EUR 1,722 million. This signifies a EUR 231 million increase compared to 2005. Financial position Boehringer Ingelheim s financial management instruments and methods are aligned with international standards for a modern industrial company. The goal of the financial management is to support the business strategy of our company by providing or investing financial assets, taking account of the foreign exchange risk. As a result of Boehringer Ingelheim s international orientation, exchange rate fluctuations have a considerable impact on the measure of the company s success. Here, the exchange rate development of the US dollar represents the highest single risk. Within the framework of group-wide financial reporting, foreign exchange risk is regularly investigated and analysed. To secure against this risk, particularly from goods and services, derivative financial instruments are employed. The manner and extent of these measures are regulated by the relevant group guideline. Boehringer Ingelheim s good economic development in 2006 is also reflected in the development 110 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

of the cash flow, which rose by EUR 248 million compared to 2005 to EUR 2,317 million (+ 12 %). The cash flow from operating activities is EUR 1,500 million, clearly exceeding funds used for investment activities. In 2006, we increased our investment efforts again (+ EUR 64 million) and entered an investment volume of EUR 596 million in tangible assets. There was an addition of EUR 451 million to the intangible assets, essentially due to the acquisition of the product zantac in the USA. Securities and liquid funds stood at EUR 3,934 million at year-end. To summarise, it can be noted that, because of existing liquidity, the given capital structure and the available funding potential, the financial preconditions for successfully realising our strategy remain in place. In Germany the new galenics building in Biberach and the new packaging facility (LogiPack-Center) in Ingelheim were completed. Furthermore, a number of new investment projects were started in Germany. Particularly noteworthy are the expansion of our production plants at the Dortmund site (BI microparts), the new chemical laboratory and a new works canteen in Ingelheim. In Biberach additional investments in the biotechnical active ingredient production facilities were started. In Italy we laid the foundation stone for a new chemical synthesis facility at the Fornovo site. In addition, we have commenced activities for building a new synthesis plant in Petersburg, Virginia, USA. It was also decided to expand production capacity at the Ben Venue site in Cleveland, Ohio. In the USA construction was also started at the site at Ridgefield, Connecticut on a laboratory building in order to increase our research capacity. Net assets Total assets in 2006 stood at EUR 11,845 million, the same level as in the previous year. Tangible and intangible assets are covered by Boehringer Ingelheim s total equity. By actively managing the days of sales outstanding of our receivables, we achieved an increase of the receivables, discounting currency effects, that was disproportionately small relative to the expansion of our business. Due to the transfer of liquid funds into the financial assets, liquid assets declined, compared to the previous year, to EUR 866 million (2005: EUR 1,167 million). Group equity increased compared to the previous year to EUR 5,363 million (2005: EUR 4,825 million) because of the favourable business development. Long-term disposable capital (equity, pension provisions and long-term liabilities) amounted to EUR 7,450 million, corresponding to 63 % of the balance sheet total. This year again, this item covers all the intangible and tangible assets, inventories and liabilities as well as almost half the liquid assets. The balance sheet and the related balance sheet ratios round off the altogether favourable picture that the earnings and financial position have already drawn. The combined evaluation of the net assets, financial position and results of operations shows that Boehringer Ingelheim is a soundly financed and profitable company. In 2006, we created a firm basis for our further business development. Group Management Report 111

Report on post-balance sheet date events Since the end of the financial year 2006, we have not become aware of any events that are of material significance to the group of companies, or could lead to a reappraisal of its asset, financial or earnings position. Within the framework of the audit plan approved by the Board of Managing Directors, internal auditing conducted routine and extraordinary audits worldwide during the reporting year. The focus was the efficiency of structures and processes, securing assets, adherence to legal requirements and guidelines, the functionality of systems and the effectiveness of internal controls. Risk report The Boehringer Ingelheim group s risk management system has proved effective over recent years and the concept was unchanged in the reported period. With the participation of the country organisations, and the inclusion of various function holders, business-specific risks are systematically reported and monitored. Our strategy and planning processes, which focus over several years, also form a significant element of our active risk management. Hereby, we ensure that all risks known to us are reported, thoroughly analysed and evaluated. Following the appropriate classification, counter-measures are commenced and their implementation consistently monitored. Currency and interest rate risks, which arise because of our group s international business relationships, are constantly examined and limited by appropriate hedging strategies. From the portfolio of receivables and liabilities on trade accounts no risk arose for the Boehringer Ingelheim group which exceeds the industry norm. This equally applies to the default risks that are mainly secured against economic and political uncertainties. Risks in the area of environmental health and safety are minimised preventively by adherence to our own very high safety standards. For possible incidents appropriate emergency plans are in place that are regularly tested and trained. Furthermore, Boehringer Ingelheim has risk-adjusted insurance coverage. In addition to the general business risks associated with the industry, we are not currently aware of any risks that substantially threaten the further development of Boehringer Ingelheim s business. 112 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Report on expected developments The good results of the financial year 2006 confirmed our internal planning parameters. Our businesses and functions have, within the framework of our planning processes, in the reporting period adapted their multi-year planning on the basis of current development. The insights gained from this essentially confirm our strategic parameters and targets. For our key brands spiriva, micardis, flomax and sifrol we foresee further growth potential in 2007. For spiriva and micardis we expect positive outcomes in the next two years from various clinical studies, such as uplift (spiriva ) and ontarget and transcend (both micardis ). For the product flomax we anticipate further market growth in the relevant indication, especially in the important US market, from which our product will benefit. The market approval received from the European authorities and the FDA in 2006 for our product sifrol in the indication RLS will further reinforce the development of this product. We expect the results in 2008 of the profess study on micardis and aggrenox, a medication to prevent the risk of secondary stroke. The spiriva respimat Soft Mist Inhaler (SMI) was filed for registration with the European authorities in 2006. For 2007, it is planned to put together the documentation for filing with the US authorities. Studies confirm that the SMI is preferred by our patients compared to other dosage forms. This gas propellant-free mist generation achieves improved uptake of the active ingredient via the lungs. At the beginning of 2006, we began re-volution, the largest clinical study programme to date in thrombo-embolic diseases, in which 27,000 patients worldwide will take part. It will investigate dabigatran, a novel, orally available thrombin inhibitor researched and developed by Boehringer Ingelheim for the prevention and treatment of thrombo-embolic conditions. Other important development projects are in phases II and III. For flibanserin a number of phase III studies were commenced in 2006. Flibanserin is a novel treatment approach for the treatment of hypoactive sexual desire disorder (HSDD). In the oncology area, one of our newer fields of research, we have developed some promising approaches in cancer therapy. Several clinical phase II studies were initiated in 2006. We expect their outcomes in 2007. Group Management Report 113

For the financial year 2007, we assume turnover growth in single figures. One reason for this is the loss of exclusivity for our product mobic in the USA in 2006. For this product alone we estimate that we will have a decline in net sales of more than EUR 350 million in 2007. The fact that we, in spite of everything, expect growth in net sales exceeding 5 %, is testimony to the strength and balance of our portfolio. On the basis of current planning, we expect net sales of more than EUR 11 billion in 2007. For 2008, we plan to exceed the EUR 12 billion mark for the first time. innovative research long term and thereby be able to guarantee the necessary flow of new products in the future. Although further concentration occurred in the pharmaceutical industry in 2006, especially in the German market, our declared goal remains to manage Boehringer Ingelheim long term as an independent, family-owned company. Our endeavour in this context is to achieve aboveaverage growth in the market that will deliver a corresponding increase in the value of the company. To this end, we will also continue to keep a close eye on the profitability of our group. With approximately EUR 700 million we will again increase our investment expenditure in 2007 compared to the previous year. Our investments will be concentrated in the areas of production and research. Major projects in the chemicals area to ensure that we can meet future active ingredient demand were approved with a total investment volume of more than EUR 160 million. In the research area projects for modernising and expanding our capacity at our German and US sites have been decided. With these investments we will establish the necessary preconditions to also be able to conduct With the success of the year 2006 we were able to link up with the very good figures of the previous year and further improve our turnover and net income. This confirms our strategic orientation and gives us confidence that we can reach our demanding goals in the future too. We will continue to take every measure in order for Boehringer Ingelheim to be able to successfully develop further. We consider this a duty towards all stakeholders, primarily towards all patients for whom we wish to make effective and safe medicines available in the future. 114 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 6

Consolidated Financial Statements 2006

Overview of the major consolidated companies C. H. Boehringer Sohn* Boehringer Ingelheim GmbH Boehringer Ingelheim Boehringer Ingelheim Europe GmbH International GmbH Germany Finland Austria Argentina Boehringer Ingelheim Pharma GmbH & Co. KG, Ingelheim Boehringer Ingelheim Vetmedica GmbH, Ingelheim Boehringer Ingelheim Finland Ky, Espoo Norway Boehringer Ingelheim Norway KS, Asker Forschungsinstitut für Molekulare Pathologie Gesellschaft mbh, Vienna Belgium SCS Boehringer Ingelheim Comm. V., Brussels China Boehringer Ingelheim International Trading (Shanghai) Co. Ltd., Shanghai Boehringer Ingelheim Shanghai Pharmaceuticals Co. Ltd., Shanghai Philippines Boehringer Ingelheim S.A., Buenos Aires Australia Boehringer Ingelheim Pty. Ltd., North Ryde Austria Boehringer Ingelheim Austria GmbH, Vienna Boehringer Ingelheim Pharma Ges.m.b.H., Vienna Brazil Boehringer Ingelheim do Brasil Quimica e Farmaceutica Ltda., São Paulo Boehringer Ingelheim (Phil.) Inc., Manila Solana Agro Pecuaria Ltda., Arapongas South Korea Canada Boehringer Ingelheim Korea Ltd., Seoul (50 %) Boehringer Ingelheim (Canada) Ltd., Burlington Boehringer Ingelheim Vetmedica Korea Ltd., Seoul Chile Boehringer Ingelheim Ltda., Santiago de Chile Colombia Boehringer Ingelheim S.A., Bogotá Czech Republic Boehringer Ingelheim s.r.o., Prague Denmark Distribution Boehringer Ingelheim Danmark A/S, Copenhagen Production Ecuador Research Boehringer Ingelheim del Ecuador Cia. Ltda., Quito *sole general partner: Boehringer AG 116 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

C. H. Boehringer Sohn Grundstücksverwaltung GmbH & Co. KG Boehringer Ingelheim Auslandsbeteiligungs GmbH France Boehringer Ingelheim France S.A.S., Paris Labso Chimie Fine S.A.R.L., Blanquefort Greece Boehringer Ingelheim Ellas AE, Athens Indonesia PT Boehringer Ingelheim Indonesia, Jakarta Italy Boehringer Ingelheim Italia S.p.A., Reggello Bidachem S.p.A., Fornovo S. Giovanni Istituto De Angeli srl, Reggello Japan Nippon Boehringer Ingelheim Co. Ltd., Kawanishi SSP Co. Ltd., Tokio (57 %) Boehringer Ingelheim Vetmedica Japan Co. Ltd., Kawanishi Boehringer Ingelheim Seiyaku Co., Ltd., Yamagata Netherlands Boehringer Ingelheim B. V., Alkmaar Poland Boehringer Ingelheim Sp.zo.o., Warsaw Portugal Boehringer Ingelheim Lda., Lisbon South Africa Boehringer Ingelheim (Pty.) Ltd., Randburg Ingelheim Pharmaceuticals (Pty.) Ltd., Randburg Spain Boehringer Ingelheim España S.A., Barcelona Boehringer Ingelheim S.A., Barcelona Europharma S.A., Barcelona Laboratorios Fher S.A., Barcelona Sweden Boehringer Ingelheim AB, Stockholm Switzerland Boehringer Ingelheim (Schweiz) GmbH, Basel Pharmaton S.A., Lugano Taiwan Boehringer Ingelheim Taiwan Ltd., Taipei Thailand Boehringer Ingelheim (Thai) Ltd., Bangkok Turkey Boehringer Ingelheim Ilac Ticaret A.S., Istanbul United Kingdom Boehringer Ingelheim Ltd., Bracknell Venezuela Boehringer Ingelheim C.A., Caracas Pharma Investment Ltd., Burlington, Canada USA Boehringer Ingelheim Corp., Ridgefield, Connecticut Boehringer Ingelheim Pharmaceuticals, Inc., Ridgefield, Connecticut Ben Venue Laboratories, Inc., Bedford, Ohio Roxane Laboratories, Inc., Columbus, Ohio Boehringer Ingelheim Vetmedica, Inc., St. Joseph, Missouri Boehringer Ingelheim Roxane, Inc., Columbus, Ohio Boehringer Ingelheim Chemicals, Inc., Petersburg, Virginia Boehringer Ingelheim Investment Ltd., Burlington, Canada Mexico Boehringer Ingelheim Promeco S.A. de C.V., Mexico City Boehringer Ingelheim Vetmedica S.A. de C.V., Guadalajara Unilfarma Lda., Lisbon Overview of the major consolidated companies 117

C. H. Boehringer Sohn, Ingelheim Consolidated balance sheet Assets (in millions of EUR) Notes 1) 31.12.2006 31.12.2005 Intangible assets (3.1) 554 233 Tangible assets (3.2) 2,886 2,900 Financial assets (3.3) 3,043 3,396 Fixed assets 6,483 6,529 Inventories (3.4) 1,280 1,229 Accounts receivable (3.5) 2,333 2,143 Securities 79 80 Cash and cash equivalents 866 1,167 Current assets 4,558 4,619 Deferred taxes 746 821 Deferred charges and prepaid expenses 58 49 Total assets 11,845 12,018 Liabilities and equity (in millions of EUR) Notes 1) 31.12.2006 31.12.2005 Shareholders capital 178 178 Group reserves 3,415 3,001 Balance sheet currency conversion difference -140-61 Net income 1,722 1,491 Equity 5,175 4,609 Minority interests 188 216 Group equity 5,363 4,825 Provisions (3.6) 4,459 4,754 Accounts payable (3.7) 1,774 2,174 Liabilities 6,233 6,928 Deferred taxes 182 204 Deferred charges 67 61 Total liabilities and equity 11,845 12,018 1) For explanation, see relevant section in the Notes to the Consolidated Financial Statements. 118 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

C. H. Boehringer Sohn, Ingelheim Consolidated profit and loss statement (in millions of EUR) Notes 1) 2006 2005 Net sales (4.1) 10,574 9,535 Changes in inventories 40 175 Other internal work performed and capitalised 4 3 Other operating income 370 598 Total revenues 10,988 10,311 Material costs (4.2) -1,484-1,613 Personnel costs (4.3) -2,836-2,671 Amortisation of intangible and depreciation of tangible assets (4.4) -530-531 Other operating expenses (4.5) -3,998-3,573 Operating income 2,140 1,923 Financial income (4.6) 102-35 Holding income (4.7) 1 0 Income before taxes 2,243 1,888 Taxes 2) (4.8) -514-374 Income after taxes 1,729 1,514 Third-party share -7-23 Net income (4.9) 1,722 1,491 1) For explanation, see relevant section in the Notes to the Consolidated Financial Statements. 2) Due to legal requirements the disclosure of the shareholders personal taxes arising from consolidated business activities as tax expenses is not allowed. These taxes are shown as withdrawals from the accrued group capital. Consolidated balance sheet / Consolidated profit and loss statement 119

C. H. Boehringer Sohn, Ingelheim Cash flow statement (in millions of EUR) 2006 2005 Income after taxes 1,729 1,514 Write-downs/write-ups on fixed assets 1) 527 529 Change in provisions for pensions 61 26 Cash flow 2,317 2,069 Change in other provisions -184 561 Other non-cash income and expenses -5 43 Gain on disposals of fixed assets -30-4 Increase of inventories -99-90 Increase of accounts receivable and other assets not related to investing or financing activities -302-385 Decrease/increase of trade accounts payable and other liabilities not related to investing or financing activities -197 196 Cash flow from operating activities 1,500 2,390 Investments in intangible assets -451-57 Investments in property, plant and equipment -596-532 Investments in non-current financial assets 1) -11-6 Proceeds from disposals of intangible assets 2 2 Proceeds from disposals of property, plant and equipment 92 43 Proceeds from disposals of non-current financial assets 1) 13 21 Cash flow from investing activities 951 529 Cash payments to shareholders and minority shareholders -1,088-1,360 Cash proceeds from borrowings/repayments of loans -96 26 Cash flow from financing activities 1,184 1,334 Change in liquid funds from cash relevant transactions -635 527 Changes in liquid funds due to changes in scope of consolidation 0 0 Changes in liquid funds due to exchange rate movements -16 43 Securities and liquid funds 2) as of 1. 1. 4,585 4,015 Securities and liquid funds 2) as of 31. 12. 3,934 4,585 1) excl. fixed-asset securities 2) liquid funds, securities within fixed and current assets (+) = source of funds, ( ) = use of funds 120 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

C. H. Boehringer Sohn, Ingelheim Statement of changes in group equity (in millions of EUR) Shareholders capital 1) Accrued group capital thereof currency effects Group Equity Equity Minority interests thereof currency effects Balance as of 31. 12. 2004 178 4,185 168 4,363 193 29 4,556 Contributions 0 0 0 0 0 0 0 Withdrawals 0 1,352 0 1,352 0 0 1,352 Net income 0 1,491 0 1,491 23 0 1,514 Change of scope of consolidation 0 0 0 0 7 0 7 Other changes 0 107 107 107 7 2 100 Balance as of 31. 12. 2005 178 4,431 61 4,609 216 27 4,825 Contributions 0 0 0 0 0 0 0 Withdrawals 0-1,077 0-1,077 0 0-1,077 Net income 0 1,722 0 1,722 7 0 1,729 Change of scope of consolidation 0 0 0 0 0 0 0 Other changes 0-79 -79-79 -35-24 -114 Balance as of 31. 12. 2006 178 4,997-140 5,175 188-51 5,363 Group equity 1) The shareholders capital consists of the equity of C. H. Boehringer Sohn and C. H. Boehringer Sohn Grundstücksverwaltung GmbH & Co. KG. It consists only of capital of the limited partners. The shareholders personal taxes arising from consolidated business activities are shown as withdrawals from the accrued group capital. Cash flow statement / Statement of changes in group equity 121

C. H. Boehringer Sohn, Ingelheim Notes to the consolidated financial statements 2006 1 Principles and methods 1.1 General principles The consolidated financial statements of Boehringer Ingelheim for the fiscal year 2006 have been prepared pursuant to section 264a German Commercial Code (HGB) by applying the group accounting regulations of section 290 to 314 HGB. In accordance with section 297, paragraph 1 HGB, the consolidated financial statements are composed of the consolidated balance sheet, the consolidated profit and loss statement, notes to the consolidated financial statements, the consolidated cash flow statement and the statement on changes in equity. 1.2 Companies included in the consolidation The ultimate parent of Boehringer Ingelheim is C. H. Boehringer Sohn. Boehringer AG is the sole unlimited managing partner of this company. Besides C. H. Boehringer Sohn there is C. H. Boehringer Sohn Grundstücksverwaltung GmbH & Co. KG whose unlimited partner is under the unified management of C. H. Boehringer Sohn. The Boehringer Ingelheim Group of companies consists of 137 affiliated companies in and outside Germany. In addition to C. H. Boehringer Sohn and C. H. Boehringer Sohn Grundstücksverwaltung GmbH & Co. KG, a further 104 companies in which C. H. Boehringer Sohn holds directly or indirectly the majority of voting shares are included in the consolidated financial statements. 29 companies were not consolidated in the reporting year, as the net assets, financial position and results of operations of these companies were insignificant to Boehringer Ingelheim. Combined they represent less than 1 % of the Group s net sales, equity and net profit. A further two companies are subject to bylaws containing enduring restrictions. Compared to the previous year, the total number of affiliated companies was reduced by six: five companies were closed down, a further three companies were dissolved due to mergers and two companies were established A separate statement of interests held by Boehringer Ingelheim will be submitted to the authority operating the German Federal Gazette in order to place it in the Register of Companies. 122 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

The following subsidiaries were exempted from the reporting and disclosure obligations in accordance with section 264, paragraph 4 HGB in conjunction with section 264, paragraph 3 HGB: Boehringer Ingelheim GmbH, Ingelheim Boehringer Ingelheim International GmbH, Ingelheim Dr. Karl Thomae GmbH, Biberach Boehringer Ingelheim Europe GmbH, Ingelheim Boehringer Ingelheim Vetmedica GmbH, Ingelheim Boehringer Ingelheim Secura Versicherungsvermittlungs GmbH, Ingelheim Boehringer Ingelheim Grundstücks-GmbH, Ingelheim Boehringer Ingelheim Finanzierungs GmbH, Ingelheim Exempted from reporting and disclose obligations of annual financial statements according to HGB regulations for joint stock companies under section 264b HGB are: C. H. Boehringer Sohn, Ingelheim C. H. Boehringer Sohn Grundstücksverwaltung GmbH & Co. KG, Ingelheim Boehringer Ingelheim Pharma GmbH & Co. KG, Ingelheim 1.3 Consolidation methods For inventories, accounts receivable and payable, and the income and expense items, business transactions between the companies consolidated were eliminated as part of the debt consolidation, according to section 303 HGB, the elimination of inter-company profits according to section 304 HGB, and the income and expense consolidation according to section 305 HGB. The purchase method of accounting was used for the capital consolidation of those subsidiaries that were included for the first time in the consolidated financial statements. First-time consolidation takes place at the time of the respective company becoming a subsidiary. The goodwill of two major companies wholly acquired in 1997 was amortized according to plan over 10 years (last portion in 2006). Credit balances from capital consolidation primarily represent retained earnings during group membership; they therefore have the characteristics of equity and are included in group reserves. Notes to the consolidated financial statements 2006 123

1.4 Currency conversions The financial statements prepared in foreign currencies were translated into euros, the functional currency of the group parent company, C. H. Boehringer Sohn, according to the year-end method. All assets and liabilities have been converted at the year-end rate. The profit and loss statement and, consequently, net income, were converted at the average annual rate for the reporting year. Translation differences due to the conversion of foreign currencies are shown as a balancing item in the equity without impact on income. The functional currency of subsidiaries is the respective local currency. Annual financial statements in high inflation countries are in principle drawn up in accordance with German Accounting Standard 14 (GAS 14); in the financial year 2006, no group company was affected by the high inflation accounting. All positions in individual financial statements drawn up in prior years in hard currencies (in US dollars or euros), were translated into the new functional currency on 1 January 2006 at the respective spot rate. The most important currencies for Boehringer Ingelheim reflect the following changes in the reporting year (base 1 euro): year-end rate average annual rate 31.12.2006 31.12.2005 2006 2005 US dollar 1.32 1.18 1.26 1.24 Japanese yen 156.93 139.90 146.06 136.87 Pound sterling 0.67 0.69 0.68 0.68 Canadian dollar 1.53 1.37 1.42 1.51 124 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

2 Accounting and evaluation methods 2.1 Fixed assets Intangible and tangible assets are shown at purchase or manufacturing cost, net of regular straightline depreciation, according to the technical and economic situation. The following periods of use were applied: Buildings Technical facilities and machinery Other facilities, operating and business equipment 20 years 10 years 3 to 10 years Diverging from the declining-balance method of depreciation applied in the individual financial statements of C. H. Boehringer Sohn the straight-line method of depreciation is used in the consolidated financial statements for the purpose of uniformity in group-wide measurement. Anticipated long-term losses in the value of investments were accounted for by unscheduled write-offs. Cost of direct material and production as well as appropriate portions of material and production overheads were taken into consideration for the determination of manufacturing costs. Fully amortised goodwill that is more than five years old, or is materially insignificant, is shown under disposals. All capitalised intangible assets have a limited useful life. The financial assets were valued at the lower of either purchase cost, present value or fair market value. 2.2 Current assets Inventories are valued at purchase or manufacturing cost using the weighted average cost flow method as the group-wide uniform method of measurement, whereas C. H. Boehringer Sohn applies the LIFO Method in its individual financial statements. Appropriate portions of material and production overheads were taken into consideration for the determination of the manufacturing costs. Necessary reductions were made for inventory risks. Accounts receivable were stated at their nominal value net of any individual valuation allowances required. The general credit risk was covered by a general valuation allowance for bad debt. Other assets were stated at the lower of either purchase cost or fair market value. Foreign currency items were recorded at the year-end rate of exchange. Notes to the consolidated financial statements 2006 125

2.3 Group reserves Group reserves include the retained earnings of the consolidated subsidiaries from prior years, consolidation entries that affect earnings and credit balances arising from capital consolidation, where they respectively relate to prior years. 2.4 Provisions The provisions include amounts necessary to cover any perceptible obligations and risks, including provisions for contingent losses from pending contracts. The valuation is made on the basis of reasonable commercial judgement. Provisions with an implied interest are shown on a discounted basis (e. g. certain personnel provisions). 2.5 Liabilities Liabilities are shown in the balance sheet at the repayable amount. Liabilities in foreign currencies were recorded at the year-end rate of exchange. 2.6 Deferred taxes The deferred tax assets and liabilities represent the tax deferral in accordance with section 274 and 306 HGB, which arise because of temporary differences between the tax balance sheets of the individual companies and the consolidated balance sheet (including differences arising from adjustments for conformity in group-wide reporting and evaluation as well as consolidation measures). Quasi-permanent differences between the consolidated balance sheet and the tax balance sheet are treated as temporary differences in accordance with German Accounting Standard 10 (GAS 10). Deferred tax assets and liabilities are offset in accordance with GAS 10. In the individual balance sheets (i.e. the financial statements II) the consolidated companies made use of their option to capitalise assets to the amount of probable tax relief in the following years in accordance with section 274, paragraph 2 HGB. The calculation of deferred taxes is based on the tax rates that are expected to be valid at the time of their realisation. The capitalisation of deferred tax assets on tax loss carry-forwards is carried out if it is sufficiently probable that the tax benefits can be realised. 126 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

3 Notes to the consolidated balance sheet 3.1 Intangible assets (in millions of EUR) Concessions/ Similar rights Goodwill Advance payments Total Procurement/manufacturing costs Balance as of 1. 1. 2005 526 816 3 1,345 Currency conversion difference 11 3 0 14 Additions due to first consolidation 0 0 0 0 Additions 50 0 7 57 Disposals -18-13 0-31 Reclassifications 4 0-4 0 Balance as of 31. 12. 2005 573 806 6 1,385 Currency conversion difference -30 0 0-30 Additions due to first consolidation 0 0 0 0 Additions 443 0 8 451 Disposals -18 0 0-18 Reclassifications 7 0-3 4 Balance as of 31. 12. 2006 975 806 11 1,792 Accumulated depreciations Balance as of 1. 1. 2005 357 721 0 1,078 Currency conversion difference 9 2 0 11 Additions due to first consolidation 0 0 0 0 Additions 44 48 0 92 Write-ups 0 0 0 0 Disposals -16-13 0-29 Reclassifications 0 0 0 0 Balance as of 31. 12. 2005 394 758 0 1,152 Currency conversion difference -10 0 0-10 Additions due to first consolidation 0 0 0 0 Additions 63 48 0 111 Write-ups 0 0 0 0 Disposals -15 0 0-15 Reclassifications 0 0 0 0 Balance as of 31. 12. 2006 432 806 0 1,238 Book value as of 31. 12. 2005 179 48 6 233 Book value as of 31. 12. 2006 543 0 11 554 Notes to the consolidated financial statements 2006 127

3.2 Tangible assets (in millions of EUR) Land and buildings Technical facilities and machines Other facilities/ operating equipment Advance payments/ construction in progress Total Procurement/manufacturing costs Balance as of 1. 1. 2005 2,022 1,982 1,312 270 5,586 Currency conversion difference 96 82 61 15 254 Additions due to first consolidation 3 2 2 0 7 Additions 37 77 140 278 532 Disposals -31-42 -89-8 -170 Reclassifications 56 98 49-203 0 Balance as of 31. 12. 2005 2,183 2,199 1,475 352 6,209 Currency conversion difference -115-81 -56-17 -269 Additions due to first consolidation 0 0 0 0 0 Additions 54 70 164 308 596 Disposals -78-57 -82-2 -219 Reclassifications 66 107 89-266 -4 Balance as of 31. 12. 2006 2,110 2,238 1,590 375 6,313 Accumulated depreciations Balance as of 1. 1. 2005 933 1,030 911 0 2,874 Currency conversion difference 42 43 40 0 125 Additions due to first consolidation 2 1 2 0 5 Additions 125 163 151 0 439 Write-ups 0-2 0 0-2 Disposals -13-37 -82 0-132 Reclassifications 0 0 0 0 0 Balance as of 31. 12. 2005 1,089 1,198 1,022 0 3,309 Currency conversion difference -58-45 -38 0-141 Additions due to first consolidation 0 0 0 0 0 Additions 83 172 164 0 419 Write-ups -1-1 -1 0-3 Disposals -36-48 -73 0-157 Reclassifications -1 1 0 0 0 Balance as of 31. 12. 2006 1,076 1,277 1,074 0 3,427 Book value as of 31. 12. 2005 1,094 1,001 453 352 2,900 Book value as of 31. 12. 2006 1,034 961 516 375 2,886 128 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

3.3 Financial assets (in millions of EUR) Investments in affilated companies Loans to affiliated companies Investments in related companies Loans to related companies Investment securities Other loans Total Procurement/manufacturing costs Balance as of 1. 1. 2005 21 8 10 6 2,686 41 2,772 Currency conversion difference 0 0 0 0 3 0 3 Additions due to first consolidation 0 0 0 0 0 0 0 Additions 0 1 0 0 674 5 680 Disposals -1 0 0 0-7 -21-29 Reclassifications 0 0 0 0 0 0 0 Balance as of 31. 12. 2005 20 9 10 6 3,356 25 3,426 Currency conversion difference -2-1 -1 0-9 0-13 Additions due to first consolidation 0 0 0 0 0 0 0 Additions 0 0 7 0 603 4 614 Disposals 0 0-6 0-911 -6-923 Reclassifications 0 0 0 0 0 0 0 Balance as of 31. 12. 2006 18 8 10 6 3,039 23 3,104 Accumulated depreciations Balance as of 1. 1. 2005 3 0 3 3 4 3 16 Currency conversion difference 0 0 0 0 0 0 0 Additions due to first consolidation 0 0 0 0 0 0 0 Additions 0 0 0 0 14 0 14 Write-ups 0 0 0 0 0 0 0 Disposals 0 0 0 0 0 0 0 Reclassifications 0 0 0 0 0 0 0 Balance as of 31. 12. 2005 3 0 3 3 18 3 30 Currency conversion difference 0 0-1 0 0 0-1 Additions due to first consolidation 0 0 0 0 0 0 0 Additions 0 0 0 0 38 0 38 Write-ups 0 0 0 0-1 0-1 Disposals 0 0 0 0-5 0-5 Reclassifications 0 0 0 0 0 0 0 Balance as of 31. 12. 2006 3 0 2 3 50 3 61 Book value as of 31. 12. 2005 17 9 7 3 3,338 22 3,396 Book value as of 31. 12. 2006 15 8 8 3 2,989 20 3,043 As in the previous year, the item other loans includes no loans to the shareholders. Notes to the consolidated financial statements 2006 129

3.4 Inventories (in millions of EUR) 31.12.2006 31.12.2005 Raw materials and supplies 224 225 Unfinished products 549 537 Finished products and goods for resale 201 460 Advance payments to suppliers 6 7 1,280 1,229 3.5 Accounts receivable Residual term Residual term 31.12.2005 (in millions of EUR) 31.12.2006 over 1 year over 1 year Trade accounts receivable 1,937 2 1,854 71 Receivables from affiliated companies 7 0 2 0 Receivables from related companies 6 0 5 0 Other assets 383 19 282 12 2,333 21 2,143 83 The item other assets contains receivables from the shareholders amounting to EUR 64 million (2005: EUR 0 million). 3.6 Provisions (in millions of EUR) 31.12.2006 31.12.2005 Pension provisions 2,062 2,035 Tax provisions 382 548 Other provisions 2,015 2,171 4,459 4,754 130 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

Pension provisions Boehringer Ingelheim s pension schemes are based on various defined contribution plans as well as defined benefit plans. Pension obligations arising from direct or indirect defined benefit plans are determined on the basis of the projected unit credit method, taking future salary and pension increases into consideration. The actuarial calculation of the pension obligation from defined benefit plans is based on countryspecific biometric data (e. g. in Germany the generation tables issued in 2005 by Professor Klaus Heubeck) and actuarial assumptions. The main countries applied the following parameters: Germany USA Japan Parameter (in %) 2006 2005 2006 2005 2006 2005 Discount rate 4.5 4.1 5.8 5.5 1.5 1.5 Expected return on plan assets 6.0 6.0 8.0 8.0 2.2-3.0 2.2 3.0 Salary increase 3.5 2.5 5.5 5.5 2.4-3.0 2.4 4.7 Pension increase 1.7 1.7 3.0 3.0 0.0 0.0 At the balance sheet date, the present value of the expected pension obligation was netted with the fair value of the respective pension plan assets (funded status). Based on this, pension provisions are determined by deducting unrealised transition amounts as well as unrealised actuarial gains and losses from the funded status. Based on the corridor approach, unrealised gains and losses are amortised over the expected average service periods of the respective active employees. At balance sheet date, pension commitments (including total unrealised transition amounts and actuarial gains and losses) of EUR 498 million (2005: EUR 698 million) were not recognised as part of pension provisions. In conjunction with defined contribution plans, group companies paid contributions to state or private insurers on the basis of legal or contractual regulations. On payment of the contributions the companies no longer have any performance obligations. Contributions are recognised as personnel costs. Notes to the consolidated financial statements 2006 131

3.7 Accounts payable Residual term Residual term Residual term Residual term (in millions of EUR) less than 1 year 1 5 years over 5 years 31.12.2006 31.12.2005 less than 1 year Bank loans 225 116 25 366 480 216 Other accounts payable 1,280 128 1,408 1,694 1,549 of which: Trade accounts payable 696 696 775 775 Advance payments 56 56 45 45 Notes payable 7 7 14 14 Accounts payable to affiliated companies 9 9 8 8 Accounts payable to related companies 1 1 1 1 Other liabilities (*) 511 128 639 851 706 (*) of which: 1,505 244 25 1,774 2,174 1,765 taxes 68 24 social security contributions 13 22 There were no liabilities secured by mortgages or similar rights on the balance sheet date consistent with the previous year. At year-end, there were no liabilities due to shareholders (2005: EUR 215 million). Payments received from the Asset-Backed-Security partners in conjunction with the ABS transaction are shown as short-term loans under other liabilities until the underlying accounts receivable are paid off. 132 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

4 Notes to the consolidated profit and loss statement The consolidated profit and loss statement is presented in line with the total cost method. 4.1 Net sales by business and business segment (in millions of EUR) 2006 2005 Human Pharmaceuticals 10,200 9,174 of which: Prescription Medicines 8,311 7,247 Consumer Health Care 1,064 1,052 Industrial Customer 809 847 Other sales 16 28 Animal Health 374 361 10,574 9,535 by geographic region (in millions of EUR) 2006 2005 Europe 3,295 3,177 of which: Germany 822 816 Americas 5,388 4,559 of which: USA/Canada/Mexico 5,039 4,219 Asia/Australasia/Africa 1,891 1,859 of which: Japan 1,227 1,232 10,574 9,535 4.2 Material costs (in millions of EUR) 2006 2005 Costs of raw material, supplies and goods for resale 1,219 1,351 Expenditure on services 265 262 1,484 1,613 4.3 Personnel costs (in millions of EUR) 2006 2005 Salaries and wages 2,217 2,087 Social benefits and retirement benefits 619 584 of which: retirement benefits 231 155 2,836 2,671 The interest component with respect to the increase in pensions and similar obligations is included in financial income rather than in personnel costs and is, therefore, not included in the operating result of the company. Notes to the consolidated financial statements 2006 133

Average headcount 2006 2005 Production 12,380 12,044 Administration 4,972 4,742 Marketing and Sales 14,368 14,257 Research and Development 6,003 5,678 Apprentices 705 685 38,428 37,406 4.4 Amortisation of intangible and depreciation of tangible assets The amortisation of intangible assets and depreciation of tangible assets includes unscheduled write-offs of EUR 21 million (2005: EUR 2 million). 4.5 Other operating expenses Other operating expenses include third-party services in research, development, medicine, and marketing, further administration costs, fees, contributions, non-income-related taxes, commissions, rents, freight costs, and expenses for third-party repairs as well as expenses incurred by restructuring measures. 4.6 Financial income (in millions of EUR) 2006 2005 Interest expense relating to pensions and similar obligations -100-108 Other interest expense and similar expenditure -53-70 Interest expense and similar expenditure -153-178 Amortisation of other financial assets and short-term investments -38-14 Income from other investment securities and from long-term loans 226 110 Other interest income and similar proceeds 67 47 102-35 134 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

4.7 Holding income (in millions of EUR) 2006 2005 Gains from the sale of investments 1 0 4.8 Taxes (in millions of EUR) 2006 2005 Income taxes 501 504 Deferred taxes 13-154 Other taxes 24 514 374 As of the reporting year, other taxes are treated as operating expenses and have correspondingly reduced operating income. By concluding profit transfer agreements, significant German corporations have since 1 January 2004 belonged to the trade and corporate taxation group of integrated companies of the parent company C. H. Boehringer Sohn. As income tax levied on taxable income allocated to the shareholders of C. H. Boehringer Sohn may not be shown in the consolidated profit and loss statement, only the trade tax of the relevant companies is shown as a tax expense. In the effective tax-rate reconciliation the expected tax expense for Boehringer Ingelheim is calculated on the profit tax rate for corporations (corporate tax, solidarity levy and trade tax). As in the profit and loss statement tax expenses related to the income tax for partnerships and integrated companies of C. H. Boehringer Sohn are limited to showing trade tax, the expected tax expense in the effective tax-rate reconciliation is in this respect adjusted for fictive current and deferred corporate tax expenses in order to link to the profit tax expense shown in the profit and loss statement. This elimination of fictive corporate tax (including the solidarity levy) is shown in the items Fictive Corporation. Notes to the consolidated financial statements 2006 135

The expected tax expense derived by using a fictive tax rate of 37.1 % (average tax rate for a German corporation at a municipal trade tax levy rate of 340 %; 2005: 360 %) can be related to the actual tax expense as follows: (in millions of EUR) 2006 2005 Income before taxes minus other taxes 2,243 1,864 Expected tax expense (current and deferred) 832 37.1 % 701 37.6 % Decrease/increase in expected tax expense by Fictive Corporation current taxes -284-12.7 % -378-20.3 % Fictive Corporation deferred taxes -25-1.1 % 49 2.6 % Local tax rate divergences -28-1.2 % -34-1.8 % Non-taxable income -26-1.2 % -6-0.3 % Non-tax-deductible expenses 59 2.6 % 34 1.8 % Taxes related to prior periods -10-0.4 % -35-1.9 % Amortisation of goodwill 18 0.8 % 18 1.0 % Changes in applicable tax rates -5-0.2 % 7 0.4 % Withholding taxes not subject to tax credits 5 0.2 % 20 1.1 % Tax credits for research activities -39-1.7 % -19-1.0 % Other effects 17 0.7 % -7-0.4 % Actual tax expense (current and deferred) 514 22.9 % 350 18.8 % The deferred taxes can be attributed to the following balance sheet items: 31.12.2006 31.12.2005 (in millions of EUR) Assets Liabilities Assets Liabilities Intangible assets 9 2 7 2 Tangible assets 32 122 32 132 Financial assets 13 17 15 24 Inventories 116 14 104 19 Receivables 21 9 38 9 Provisions 511 16 600 16 Liabilities 17 2 14 2 Tax loss carryforwards and tax credits 27 0 11 0 746 182 821 204 136 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

Other mandatory disclosures according to GAS 10.39: (in millions of EUR) 2006 2005 Deferred tax expense from changes in law -5 7 Deferred tax expense relating to the write-off of deferred tax assets in fiscal year 5 5 The absence of changes in accounting and evaluation methods results, as in the previous year, in no deferred tax income. The valuation allowances relating to deferred tax assets amount to EUR 10 million. Unused tax loss carryforwards, on which no deferred tax assets are recognized in the balance sheet, amount to EUR 29 million at year-end, EUR 24 million of which expire in five years and EUR 5 million expire in 10 years at the latest. 4.9 Net income Net income for the year 2006 includes operating income unrelated to the accounting period (mainly the release of other provisions) amounting to EUR 136 million (2005: EUR 81 million). Operating expenditure unrelated to the accounting period amounted to EUR 17 million (2005: EUR 27 million). Notes to the consolidated financial statements 2006 137

5 Notes to the cash flow statement The cash flow statement shows how the total liquid funds (liquid assets and securities in fixed and current assets) of the Boehringer Ingelheim Group have changed during the reporting year through inflow and outflow of cash and cash equivalents. In accordance with German Accounting Standard No. 2 (GAS 2), Cash Flow Statements, cash flows are classified by operating, investing or financing activities. Changes reported by consolidated companies are converted at the average annual rate. Liquid funds are converted, as shown in the balance sheet, according to the year-end rate method. The influence of exchange rate changes on liquid funds is provided separately. 6 Other information 6.1 Derivative financial instruments Boehringer Ingelheim is, due to its extensive international structure, highly dependent on the development of the major world currencies and interest rates. In order to hedge against the risks, particularly those inherent in supplies and services and financial funding, use is generally made of foreign exchange forward contracts in the case of currency risks. Regarding interest rate risks, use is made of interest rate swaps and interest rate options. The use of derivative financial instruments and the organisational procedure are laid down in internal guidelines. Trade, processing, documentation, and control are kept strictly separate. The risk positions are recorded, analyzed and assessed regularly in a special consolidated financial report. The items are periodically re-evaluated and monitored. Derivative financial instruments are only agreed on with banks of sound financial standing. As of 31 December 2006, the nominal value of all foreign currency and interest rate hedging transactions amounted to EUR 2,506 million (2005: 3,618 million). The corresponding market values amounted to EUR +103 million (2005: EUR -63 million). 138 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

Derivative financial instruments at year-end were as follows: Nominal value Market value (in millions of EUR) 31.12.2006 31.12.2005 31.12.2006 31.12.2005 Foreign exchange forward contracts 2,448 3,355 103 62 Interest instruments 58 263 0 1 The nominal value is the sum of all purchases and sales. The market value is calculated on the basis of quoted prices or derived values for derivative instruments. 6.2 Contingent liabilities to the benefit of third parties (in millions of EUR) 31.12.2006 31.12.2005 Liabilities from guarantees, guarantees for bills and cheques, warranties and provisions of collateral for third-party liabilities 12 176 6.3 Other financial obligations (in millions of EUR) 31.12.2006 31.12.2005 To third parties 967 741 At year-end, other financial obligations included capital investments of EUR 665 million (2005: EUR 552 million). Furthermore, EUR 195 million (2005: EUR 182 million) from renting and leasing contracts are included, of which EUR 82 million concern long-term rent contracts with subsidiaries not included in the consolidation. 6.4 Research and development expenses (in millions of EUR) 2006 2005 Expenditures for Research and Development 1,574 1,360 Notes to the consolidated financial statements 2006 139

Auditor s Report We have audited the consolidated financial statements prepared by the C. H. Boehringer Sohn, Ingelheim comprising the balance sheet, the income statement, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements together with the group management report for the business year from 1 January to 31 December 2006. The preparation of the consolidated financial statements and the group management report in accordance with German commercial law is the responsibility of the Management Board of the Managing Corporate Partnership- AG. Our responsibility is to express an opinion on the consolidated financial statements and the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with 317 HGB (German Commercial Code) and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with (German) principles of proper accounting and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of the companies included in consolidation, the determination of the companies to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Management Board of the Managing Corporate Partnership-AG, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. 140 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 6

With the following exception, our audit has not led to any reservations: Contrary to 314 paragraph 1 number 6 HGB compensation of the members and the former members of the board of managing directors have not been disclosed. In our opinion based on the findings of our audit, the consolidated financial statements with the exception mentioned comply with the legal requirements. The consolidated financial statements give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with German principles of proper accounting. The group management report is consistent with consolidated financial statements that comply with the legal requirements and as a whole provides a suitable view of the Group s position and suitably presents the opportunities and risks of future development. Frankfurt am Main, 16 February 2007 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (E.-W. Frings) Wirtschaftsprüfer (German Certified Public Accountant) (P. Marshall) Wirtschaftsprüfer (German Certified Public Accountant) Auditor s Report 141

Glossary Human Pharmaceuticals Product name Active ingredient Indication actilyse alteplase Fibrinolytic treatment of acute myocardial infarction, acute massive pulmonary embolism and ischaemic stroke. aggrenox asasantin persantin persantine persantina ASA / dipyridamole extended release Prevention of stroke following a first stroke or for transient ischaemic attacks. As above and adjunct to coumarin anti-coagulants in the prevention of postoperative thromboembolic complications of cardiac valve replacement. alesion flurinol talerc epinastine Antiallergic agent antistax quantified red wine leaf extract AS195 Prevention and treatment of symptoms of chronic venous insufficiency; varicosis veins, leg edema, painful swollen legs, tickling itching legs, tired and heavy legs. 142 Boehringer Ingelheim AnnuA l RepoR t 2006

Product name Active ingredient Indication aptivus tipranavir Available as capsules for adults used co-administered with 200 mg of ritonavir, is indicated for combination antiretroviral treatment of HIV-1-infected adult patients with evidence of viral replication, who are highly treatment-experienced or have HIV-1 strains resistant to multiple protease inhibitors. atrovent ipratropium bromide Bronchodilator for maintenance treatment of bronchospasm associated with chronic obstructive pulmonary disease, including chronic bronchitis, emphysema and asthma. berotec dosberotec fenoterol a) Symptomatic treatment of acute asthma attacks b) Prophylaxis of exercise induced asthma c) Symptomatic treatment of bronchial asthma and other conditions with reversible airway narrowing e.g. chronic obstructive bronchitis. Concomitant anti-inflammatory therapy should be considered for patients with bronchial asthma and steroid responsive chronic obstructive pulmonary disease (COPD). bisolvon bromhexine Mucolytic for the treatment of acute and chronic bronchopulmonary diseases associated with impaired formation and transport of mucus. Glossary 143

Product name Active ingredient Indication buscopan buscapina butylscopolamine Treatment of abdominal discomfort and pain associated with intestinal cramps. catapresan catapres catapressan atensina clonidine All forms of high blood pressure, unless caused by phaeochromocytoma. combivent ipratropium bromide / salbutamol Treatment of bronchospasms associated with reversible obstructive airway diseases in patients requiring more than one bronchodilator. cymbalta xeristar duloxetine Major depressive disorder (MDD), diabetic peripheral neuropathic pain (DPNP) 144 Boehringer Ingelheim AnnuA l RepoR t 2006

Product name Active ingredient Indication dulcolax bisacodyl (tablets, suppositories), sodium picosulphate (drops, pearls) Laxative for use in patients suffering from constipation. In preparation for diagnostic procedures, in pre- and postoperative treatment and in conditions, which require defecation to be facilitated. duovent bronchodual berodual fenoterol / ipratropium bromide For prevention and treatment of symptoms in chronic obstructive airway disorders with reversible bronchospasm such as bronchial asthma and especially chronic bronchitis with or without emphysema. flomax alna josir pradif secotex urolosin tamsulosin Lower urinary tract symptoms (LUTS) associated with benign prostatic hyperplasia (BPH). flomax cr alna ocas pradif t urolosin ocas tamsulosin, orally controlled absorption system Lower urinary tract symptoms (LUTS) associated with benign prostatic hyperplasia (BPH). Glossary 145

Product name Active ingredient Indication inflammide budesonide Chronic control of symptoms and signs of bronchial asthma. laxoberal laxoberon dulcolax pico sodium picosulphate (drops, pearls, tablets) Laxative for use in cases of constipation and in conditions which require defecation to be facilitated. lendormin lendorm lindormin sintonal brotizolam Short-term treatment of disorders of initiating and maintaining sleep. metalyse tenecteplase Fibrinolytic treatment of acute myocardial infarction. 146 Boehringer Ingelheim AnnuA l RepoR t 2006

Product name Active ingredient Indication mexitil mexitilen mexiletine Serious symptomatic ventricular tachycardic heart rhythm disturbances. micardis micardisplus micardis plus micardis hct co-micardis telmisartan telmisartan / hydrochlorothiazide Treatment of essential hypertension. mobic mobec movalis movatec meloxicam Symptomatic treatment of rheumatic diseases. motens caldine tens midotens lacidipine Treatment of essential hypertension. Glossary 147

Product name Active ingredient Indication mucoangin frubizin akut ambroxol (lozenges) Pain relief in acute sore throat. mucosolvan motosol mucosan surbronc vaksan ambroxol Mucolytic treatment of acute and chronic bronchopulmonary diseases associated with impaired formation and transport of mucus. pharmaton pharmaton capsules geriavit pharmaton pharmaton caplets standardized ginseng extract G115, vitamins, minerals, trace elements To improve physical and mental performance and well-being. sifrol mirapex mirapexin pramipexole Symptomatic treatment of idiophathic Parkinson s disease, symptomatic treatment of idiophathic Restless Legs Syndrome. 148 Boehringer Ingelheim AnnuA l RepoR t 2006

Product name Active ingredient Indication silomat clobutinol Symptomatic treatment of irritable, non-productive cough. spiriva tiotropium bromide Maintenance treatment of patients with COPD (chronic obstructive pulmonary disease, including chronic bronchitis and emphysema), the maintenance treatment of associated dyspnoea and for prevention of exacerbations. thomapyrin ASA, paracetamol, coffeine Mild to moderate pain. viramune nevirapine Available as tablets for adults and suspension for children for the combination therapy of HIV infection and for the prevention of mother-to-child transmission of HIV. Glossary 149

Animal Health Product name Active ingredient Indication enterisol ileitis attenuated live vaccine (Lawsonia intracellularis) For active immunisation of pigs to reduce intestinal lesions caused by Lawsonia intracellularis infection and to reduce growth variability and loss of weight gain associated with the disease. express attenuated live vaccine (IBRV, BVDV, PI3V, BRSV) For prevention of reproductive and respiratory diseases in cattle. ingelvac circoflex recombinant vaccine (Porcine Circovirus Type 2, PCV 2) For the active immunisation of swine against porcine circovirus type 2. ingelvac m.hyo inactivated vaccine (Mycoplasma hyopneumoniae) For the active immunisation of swine to reduce lung lesions following infection with Mycoplasma hyopneumoniae. 150 Boehringer Ingelheim AnnuA l RepoR t 2006

Product name Active ingredient Indication ingelvac prrs mlv attenuated live vaccine (PRRS virus) For the active immunisation of clinically healthy swine against the respiratory and reproductive form of PRRS virus infection (porcine reproductive respiratory syndrome). mamyzin penethamate hydroiodide For the treatment of mastitis caused by Gram-positive pathogens. metacam meloxicam Dog, horse: alleviation of pain and inflammation associated with acute or chronic musculo-skeletal disorders Cat, dog: reduction of postoperative pain Cattle: respiratory infection, diarrhoea, mastitis Swine: non-infectious locomoter disorders, mastitis-metritis-agalactia-syndrome, Horse: for the alleviation of pain in the event of colic. ventipulmin clenbuterol Bronchodilator for the treatment of acute and chronic obstructive airway disease in horses. vetmedin pimobendan For the treatment of congestive heart failure in dogs. Glossary 151

If you have any queries or comments, please contact us: Boehringer Ingelheim GmbH Binger Strasse 173 55216 Ingelheim Germany Telephone + 49 / 6132 / 77-0 Fax + 49 / 6132 / 77-3000 Contacts CD Communications Telephone + 49 / 6132 / 77-2012 Fax + 49 / 6132 / 77-6601 Internet www.boehringer-ingelheim.com Issued by Boehringer Ingelheim GmbH Design and layout Neufrankfurt Corporate Design GmbH, Offenbach am Main info@neufrankfurt.net Printed by Süddeutsche Verlagsgesellschaft, Ulm Copyright Boehringer Ingelheim GmbH, 2007 All rights reserved. No part of this Annual Report 2006 may be reproduced or transmitted in any form or by any means, electronic or photocopy, without permission in writing from Boehringer Ingelheim GmbH. Figures from third parties used in the annual report are based on data available at the time the financial statement was drawn up.

Comparison of Balance Sheets/ Financial Data 1997 2006 (in millions of EUR) Assets (as of 31.12.) 1997 1998 1999 * 2000 2001 2002 2003 2004 2005 2006 Intangible assets 508 452 400 344 322 302 242 267 233 554 Tangible assets 1,612 1,739 1,992 2,217 2,467 2,840 2,767 2,712 2,900 2,886 Financial assets 757 731 849 1,135 1,008 1,689 2,462 2,756 3,396 3,043 Fixed assets 2,877 2,922 3,241 3,696 3,797 4,831 5,471 5,735 6,529 6,483 Inventories 794 806 944 1,021 1,014 971 1,000 1,085 1,229 1,280 Accounts receivable (incl. deferred charges and deferred taxes) 1,211 1,255 1,870 1,938 2,314 2,360 2,537 2,477 3,013 3,137 Cash and cash equivalents (incl. securities) 134 299 459 477 1,002 1,055 1,134 1,333 1,247 945 Current assets 2,139 2,360 3,273 3,436 4,330 4,386 4,671 4,895 5,489 5,362 Total assets 5,016 5,282 6,514 7,132 8,127 9,217 10,142 10,630 12,018 11,845 Liabilities and equity (as of 31.12.) 1997 1998 1999 * 2000 2001 2002 2003 2004 2005 2006 Shareholders capital 399 441 332 211 200 178 178 178 178 178 Reserves (incl. currency conversion difference) 1,461 1,651 1,982 2,362 2,753 2,818 3,139 3,297 2,940 3,275 Net income 212 229 320 379 401 537 529 888 1,491 1,722 Total equity 2,072 2,321 2,634 2,952 3,354 3,533 3,846 4,363 4,609 5,175 Minority interests 0 0 0 0 1 203 188 193 216 188 Group equity 2,072 2,321 2,634 2,952 3,355 3,736 4,034 4,556 4,825 5,363 Provisions (incl. deferred taxes) 1,982 2,012 2,631 2,932 3,150 3,568 3,963 4,172 4,958 4,641 Liabilities (incl. deferred charges) 962 949 1,249 1,248 1,622 1,913 2,145 1,902 2,235 1,841 Total liabilities 2,944 2,961 3,880 4,180 4,772 5,481 6,108 6,074 7,193 6,482 Total liabilities and equity 5,016 5,282 6,514 7,132 8,127 9,217 10,142 10,630 12,018 11,845 Summary of selected financial data 1997 1998 1999 * 2000 2001 2002 2003 2004 2005 2006 Net sales 4,201 4,474 5,086 6,188 6,694 7,580 7,382 8,157 9,535 10,574 Operating income 350 336 655 800 980 1,082 901 1,372 1,923 2,140 Operating income as % of sales 8.3 7.5 12.9 12.9 14.6 14.3 12.2 16.8 20.2 20.2 Income after taxes 212 229 320 379 401 551 537 908 1,514 1,729 Income after taxes as % of sales 5.0 5.1 6.3 6.1 6.0 7.3 7.3 11.1 15.9 16.4 Return on equity (in %) 11.4 11.0 13.8 14.4 13.6 16.0 15.0 23.1 34.2 37.4 Own capital resources (in %) 41.3 43.9 40.4 41.4 41.3 38.3 37.9 41.0 38.4 43.7 Cash flow 561 595 737 791 1,117 1,049 1,059 1,430 2,069 2,317 Financial funds 722 858 1,055 1,094 1,645 2,645 3,516 4,015 4,585 3,934 Personnel expenditure 1,270 1,409 1,527 1,749 1,916 2,175 2,252 2,443 2,671 2,836 Personnel expenditure as % of sales 30.2 31.5 30.0 28.3 28.6 28.7 30.5 29.9 28.0 26.8 Average numbers of employees 24,860 25,927 26,448 27,325 27,980 31,843 34,221 35,529 37,406 38,428 Research and development costs 771 812 826 968 1,019 1,304 1,176 1,232 1,360 1,574 R&D as % of sales 18.4 18.1 16.2 15.6 15.2 17.2 15.9 15.1 14.3 14.9 Investments in tangible assets 455 421 377 497 548 634 516 427 532 596 Depreciation of tangible assets 189 211 256 288 305 340 354 377 439 419 *As of the comparative financial statement 1999, accounting and evaluation methods were brought closer into line with International Accounting Standards (IAS), particularly with regard to deferred taxes and provisions for pensions.

www.boehringer-ingelheim.com