Annual Report 2005. Value through Innovation. nopq

Annual Report 2005 Value through Innovation nopq

Financial Highlights Boehringer Ingelheim group of companies Amounts in millions of EUR, unless otherwise indicated 2005 2004 Change Net sales 9,535 8,157 17 % by region Europe 33 % 32 % Americas 48 % 48 % Asia, Australasia, Africa 19 % 20 % by business area Human Pharmaceuticals 96 % 96 % Animal Health 4 % 4 % Research and development 1,360 1,232 10 % Personnel costs 2,671 2,443 9 % Average number of employees* 37,406 35,529 5 % Operating income 1,923 1,372 40 % Operating income as % of sales 20.2 % 16.8 % Income after taxes 1,514 908 67 % Income after taxes as % of sales 15.9 % 11.1 % Shareholders equity 4,609 4,363 6 % Return on shareholders equity 34.2 % 23.1 % Cash flow 2,069 1,430 45 % Investments in tangible assets 532 427 25 % Depreciation of tangible assets 439 377 16 % * including the total number of employees in joint ventures included in the consolidation

Contents 2 The Shareholders Perspective 4 Key Aspects of 2005 8 Our Caring Culture 10 Our Commitment 12 For Our Neighbours 14 For Our People 18 For Our Environment 22 Our R&D Drive 26 HIV is Being Played Down 28 Our Strength in R&D + Medicine Business Development Prescription Medicines 40 A New Quality of Treatment, a New Quality of Life 44 Overview Prescription Medicines Consumer Health Care 56 Let s Talk About it 60 Overview Consumer Health Care Biopharmaceuticals and Chemicals 62 Time is Critical 66 Overview Biopharmaceuticals and Chemicals Animal Health 70 Helping the Heart 74 Overview Animal Health 77 Group Management Report Consolidated Financial Statements 2005 90 Overview of the Major Consolidated Companies 92 Consolidated Balance Sheet 93 Consolidated Profit and Loss Statement 94 Cash Flow Statement 95 Statement of Changes in Group Equity 96 Notes to the Consolidated Financial Statements 114 Auditor s Report 116 Glossary Flap Comparison of Balance Sheet/Financial Data 1996 2005

8 22 40 56 62 70 Our Company 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 cancer. Boehringer Ingelheim, which currently has almost 37,500 employees, has 143 affiliated companies spread around the globe. We have research facilities in nine countries and production plants in more than 20. Our pharmaceuticals research and development spending corresponds to about 18 % of net sales in Prescription Medicines. Our headquarters is at Ingelheim, the German town where the company was founded in 1885.

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.

The Shareholders Perspective The importance of family-owned companies in Germany is repeatedly given prominence in the public debate over significant economic policy issues, for instance, regarding the labour market situation or taxation policy. Family-owned companies represent a peculiarity in the German system. Of the 50 largest European companies of this type, more than half come from Germany. The results of investigations lead to the conclusion that such companies are, in terms of both revenues and earnings development, more than competitive compared with companies listed on the stock exchange. Looking into the reasons for this, you find features like long-term orientation combined with higher attention to risk, personal commitment of the owners as well as a strong employee focus. These aspects also apply to Boehringer Ingelheim, which serves as a positive example with its successful business and corporate development. We are frequently described as a company that is different to its competitors. What is meant by that? The criteria which mark us out and form Boehringer Ingelheim s identity are our orientation towards values, such as reliability and predictability, the close alignment with the needs of patients and physicians, the awareness of the importance of our employees, and our long-term thinking and commitment. Our strength is founded on our stability. As a family-owned company, we can transform the parameters mentioned above into a wellbalanced strategic approach along with a marketorientated growth strategy. We are not under pressure from the short-term demands of anonymous investors or the capital market. This does not, however, mean that we do not comply with standards and norms that apply to companies listed on the stock market. In this respect, we share the approach of those companies perceiving themselves as Good Corporate Citizens. Social commitment, openness and transparency are of utmost importance for us. The principle of sustainability applied to the long-term, stable development of the company s value, applied to the selection and targeted promotion and fair treatment of our employees, and applied to environment-friendly and sociallyorientated economies is reflected in our Leitbild, the guiding principles for our corporate behaviour. For us, sustainability is the basis of stability and success. Our company is growing dynamically. Indeed, in the last few years, it has clearly outpaced average growth of the pharmaceutical market. In 2005, the successful development continued once again. Once more we are in the top ranks of the pharmaceutical companies with the strongest growth. We have succeeded in providing new therapeutic options for our patients with a row Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

of innovative medications. Our expectations for 2005 have been achieved or were exceeded in a whole number of areas. On all of these grounds, the Shareholders of Boehringer Ingelheim are very satisfied with the course and results of the business year. Nevertheless, we must not ignore the potential risks the pharmaceutical industry is facing. Developing new, innovative medicines is a protracted and expensive process. Only a few research approaches end up as new medicines and make it to market approval. The healthcare policy environment in most countries, which is afflicted with ever-increasing uncertainties and continuously deteriorating, represents a considerable burden for our industry. For capital expenditure creating new jobs or developing innovative medicines, we win many public plaudits. Sadly, these fine-sounding words are in reality not often followed by corresponding deeds. In spite of such limitations, 2005 was once again a successful business year. The Shareholders and the Board of Managing Directors of Boehringer Ingelheim took or prepared the decisions to achieve the goals we have set in close cooperation and coordination with the Advisory Board. The decisions concerned the company s strategic direction, important business matters or decisions on capital expenditure. In regular joint sessions, the Advisory Board, the Shareholders Committee and the Board of Managing Directors have discussed the short and medium-term development of the company and the necessary decisions entailed. The Shareholders of Boehringer Ingelheim thank all employees, the Board of Managing Directors and the Advisory Board for their successful work and commitment in 2005. The path Boehringer Ingelheim has taken as an independent familyowned company also promises us growth and success for the future. Instead of strengthening the power to innovate for which an appropriate risk premium is a pre-condition, that is to say, reasonable prices and adequate protection of innovations against imitation the precise opposite is happening. Prices are being forced down, reimbursement opportunities restricted and parallel imports encouraged. In our opinion, supporting economic progress in combating disease looks different. When making future investment decisions we will also have to take such aspects into consideration. Dr Heribert Johann Chairman of the Shareholders Committee The Shareholders Perspective

Key Aspects of 2005 position No. 14 worldwide in terms of sales, with a market share of 2 %. We are a research-driven pharmaceutical company that invests about 18 % of net sales of our Prescription Medicines business every year in the research and development of medicinal products. Our goal is to serve mankind through research into different diseases and to create the drugs and therapies to treat them. This principle guides all our business activities. Our success to date and our future prospects are measured by the degree of innovation of our new medicines now available to patients and by the innovative potential of our product pipeline. We are proud that in 2005 four million of patients worldwide affected by chronic obstructive pulmonary disease could benefit from our spiriva and live a better life. For some years now, Boehringer Ingelheim has been one of the fastest-growing companies in the pharmaceutical industry. In 2005 again, we maintained a fast pace of dynamic growth. According to the market analysts IMS, employed by all pharmaceutical companies, we achieved the strongest growth of the top 20 pharmaceutical companies. We also outpaced the average for the pharmaceutical market in all major regions of the world. This takes us to Strong international brands In 2005, our net sales rose by around 17 % to EUR 9.5 billion. Currency effects played a secondary role compared with previous years. Our growth was primarily driven by our prescription medicines products. spiriva, for the treatment of chronic obstructive pulmonary disease, and mobic, for the treatment of arthritis, both passed the blockbuster threshold of more than USD 1 billion annual net sales. micardis, our product for the treatment of hypertension, and sifrol /mirapex, to treat Parkinson s disease, were significant growth drivers too. flomax /alna, our drug for benign prostatic hyperplasia, also contributed to the successful sales development. To measure our development in financial results is one thing. But of ultimate importance for us is the benefit we offer to the millions of patients whom we have supported with our above mentioned drugs and for people infected with HIV. Since it was first introduced in 1996, we have helped a million patients with our drug viramune. And the success of our viramune Donation Programme to prevent the mother-tochild transmission of HIV in developing Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Members of the Board of Managing Directors: Dr Hans-Jürgen Leuchs Dr Andreas Barner Dr Alessandro Banchi Prof. Marbod Muff (from left to right) countries since 2000 encourages us to put even greater emphasis on our efforts to create value for patients and society. The launch of our new HIV drug aptivus in 2005 is thus another step towards fulfilling our commitment to Value through Innovation. Prescription Medicines, by far our largest business area, accounting for 76 % of total net sales, increased its turnover by more than 17 % to total EUR 7.2 billion. The share of our product portfolio which still enjoys patent protection or exclusivity rights rose to 59 %. Our other business areas also achieved significant growth. In Consumer Health Care (CHC), our self-medication business, net sales rose by 8.5 % to almost EUR 1.1 billion. This was mainly attributable to our flagship brands and leading products in the cough & cold and gastrointestinal indications, such as bisolvon, mucosolvan, dulcolax and buscopan. In addition, pharmaton, our well-established international brand for the improvement and maintenance of vitality and well-being, held the second strongest position in our CHC product portfolio. For some years, Boehringer Ingelheim has been one of the world s largest manufacturers of biopharmaceuticals for industrial customers. We also market our own biotech products, metalyse (heart attack) and actilyse (stroke). Our overall biopharmaceuticals business, which grew by 40 % in 2005 to EUR 548 million, is expected to play an increasingly important role in combating many major and developing diseases. Our Animal Health business, which accounts for 4 % of our net sales, has also grown above the market average in recent years. In 2005, sales rose by almost 8 % to EUR 361 million. A key factor for Boehringer Ingelheim s sustained success is our well-distributed presence in all important world markets. Our products are sold in some 150 countries. The USA, again by far the most important market in 2005, generated 36 % of our total net sales. Our US sales grew by 17 % to EUR 3.4 billion. Japan (+8 % to EUR 1.2 billion) and Europe (+19 % to EUR 3.1 billion) also posted excellent development. Europe as a region contributed 33 % of our total net sales. The healthy business development of the past business year led to a 40 % rise in operating income (broadly comparable to EBIT), totalling EUR 1.9 billion and reflecting an operating margin of more than 20 %. Key Aspects of 2005

Our successful business activities go hand in hand with increasing effectiveness in cost management through all areas of the corporation. Cost-effective pharmaceutical manufacture is one of the key factors in attracting new partners for third-party manufacture. Patented drugs or drugs with exclusivity continue to drive our growth. Our product pipeline includes a number of promising substances in major indication areas such as respiratory, cardiovascular and inflammatory diseases, virology, urology and CNS. In addition, good progress was made with development candidates in oncology, metabolism and immunology. Our areas of research are divided across the four main research sites in Germany (Biberach), Austria (Vienna), the USA (Ridgefield) and Canada (Laval), in line with their defined key areas. In addition, our activities and projects are supported by strategic alliances and in-licensing of new technologies. In 2005, we moved various candidates into predevelopment and development with promising prospects for the future. In a continued move to support this strong growth, we took the opportunity to increase our manpower by 5 % to total 37,400 employees in the past year, mainly in the USA, Germany and Spain. Outlook The gratifying development of our business in 2005 reflects the strengths of our company. However, yesterday s successes are today s history and the way ahead is uphill. The pharmapolitical measures in a number of important countries, starting with Germany, pose an increasing barrier to innovation and to patient s access to new and better therapies. Developing medicines is a lengthy, costly and risky process. Short patent lifetimes, frequent regulatory interventions, rigorous price containment measures and fierce competition make it all the more difficult to guarantee the financial basis required for R&D. We once again expect to grow faster than the pharmaceutical market in 2006, although we are unlikely to match the growth rates posted in 2005. mobic, for example, is expected to face competition of the first generic versions in the USA in 2006. However, our product portfolio contains numerous branded medicines with medium to long-term patent protection which still have significant potential for growth. We are also pleased to have a number of interesting drug candidates for various indications in our promising pipeline. All in all, Boehringer Ingelheim is optimistic about the future. Dr Alessandro Banchi Dr Andreas Barner Dr Hans-Jürgen Leuchs Prof. Marbod Muff Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Shareholders Committee Advisory Board Board of Managing Directors Dr Heribert Johann Chairman of the Shareholders Committee Albert Boehringer Christian 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 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 Key Aspects of 2005

Our caring culture The caring culture to which Boehringer Ingelheim has been committed for well over a century embraces a broad range of stakeholders from our patients, our employees and their families through neighbouring communities and society at large to our natural environment. Corporate responsibility as practised by our company takes many forms. Of paramount importance for us are the needs of our patients. It is the quest for innovation and medical breakthrough which drives all our activities. We understand that the importance of our company directly depends on the value of the therapies which we can present to those in need of medical help. And we fully grasp the central role of our employees in all our endeavours. Boehringer Ingelheim has been always regarded as an excellent employer. From the very beginning, it has focused on providing employees with an attractive place to work, a place in which they feel their contribution is fully recognised and properly rewarded. But our sense of responsibility does not stop there. It has always reached out far beyond our factory gates and today addresses many issues of a truly global nature. Boehringer Ingelheim complies with the intention and basic principles of corporate governance and corporate social responsibility as proposed by international organisations, such as the United Nations (UN), the World Health Organization (WHO), the Organisation for Economic Co-operation and Development (OECD) or the European Union (EU). We regard ourselves as a good corporate citizen in all countries in which we operate, or where our products are available. We fully comply with the principles set out in the Global Compact in 1999 under a United Nations initiative. Such principles are already fully integrated into our business activities around the world and guide our strategy, corporate culture and day-to-day operations. Our aim is to provide full transparency concerning our business and corporate conduct within the framework of our annual report and other publications. In order to sustain our corporate responsibility, we depend on our business success, driven by product innovation and the morale of our people. Photo: Young tsunami survivors gather at new school-cum-village hall in Krueng Raya, Indonesia, supported by Boehringer Ingelheim. Our caring culture

Our commitment We have committed ourselves to the goal of serving mankind through research into diseases and the development of new drugs and therapies. In this endeavour the future of the Corporation will depend on its innovative capability. Boehringer Ingelheim strives for medical breakthroughs and invests heavily in research, development and medicine for therapies which fulfil unmet medical needs. In improving access to anti-aids drugs, Boehringer Ingelheim acknowledges its special responsibility as a research-driven pharmaceutical company in the war on the pandemic. It is engaged in wide-ranging initiatives to combat AIDS. The company has increased efforts in HIV/AIDS research, in supplying anti-aids drugs free of charge to treat the transmission of the disease from mother-to-child during birth, or providing them at substantially reduced prices to developing countries for chronical treatment. It has furthermore increased its activities supplying knowledge and training and supporting philanthropic initiatives via its affiliates in areas strongly affected by HIV/AIDS. Since 2000, Boehringer Ingelheim has given free access to single-dose viramune (nevirapine), to be used alone or in combination with other drugs, to prevent mother-to-child transmission of the HI virus during birth. The company currently donates the product to some 140 programmes in around 60 countries in Africa, Asia, Latin America and Eastern Europe. In total some 700,000 mother and child pairs have been treated so far. Boehringer Ingelheim strives to facilitate the access to life-saving nevirapine. Five voluntary licenses to manufacture and market generic nevirapine have been granted to companies in South Africa, Nigeria, Egypt and Kenya. Moreover, as a founding partner of the Accelerating Access Initiative (AAI), Boehringer Ingelheim offers developing countries considerable discounts in order to enable access to viramune. Some 6,000 of Papua New Guinea s 5.3 million inhabitants are infected with HIV and the infection rate is 1,000 per year. Very few infected people go to healthcare centres so the figures are likely to be vastly underestimated. Apart from the viramune Donation Programme, Boehringer Ingelheim in partnership with other pharmaceutical companies, the Catholic Aids Office, the Australasian Society for HIV Medicine (ASHM) and the government of Papua New Guinea (PNG), have designed and implemented a pilot project to train healthcare workers under the auspices of the Collaboration for Health in Papua New Guinea. Unlike other programmes, this model used a multi-disciplinary approach to train teams of healthcare workers rather than doctors only. 10 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Uganda has made strong progress in reducing the prevalence rate of HIV. The key to this success has been public openness, at all levels of society, in addressing the issue. Here, people living with HIV in Uganda demonstrate their support for treatment at the opening of a free AIDS clinic in Masaka, close to where the pandemic is thought to have begun. The teams consisted of physicians, nurses, counsellors, social workers and technicians working in healthcare centres. Topics covered in workshops included basic infection control, infection prevention, record keeping, diagnosis and management of opportunistic infections. The collaboration for Health in PNG is an initiative of a group of pharmaceutical manufacturers committed to the treatment and care of people living with HIV/AIDS. Addressing infrastructure needs As improving access to treatment remains seriously limited in many developing countries due to local structural problems in healthcare, Boehringer Ingelheim has also engaged increasingly in projects to improve education and relevant infrastructure. Among other initiatives was the Student Education Programme in collaboration with the University of Cape Town, South Africa, which provides full financial support from Boehringer Ingelheim for medical students from disadvantaged backgrounds. The Boehringer Ingelheim Lung Institute at the same university has been set up as a centre of excellence to support clinical trial activities in the country with research facilities in infectious and respiratory diseases. In 2005, the Boehringer Ingelheim Training and Facilitation Unit was opened in Botswana. In addition to donation and increasing access to drugs, the company continues to explore ways to partner governments and NGOs to improve healthcare in developing countries. Initiatives the company has already undertaken in South Africa include the Turning the Tide programme of training and education for health professionals in HIV and its management. This has been extended into Swaziland and Botswana and now reaches over 1,000 healthcare workers. In 2005, Boehringer Ingelheim opened discussions with healthcare organisations in Uganda with a view to possibly replicating schemes which have been successful in other parts of Africa. Our commitment 11

For our neighbours We are fundamentally committed to fostering economic and social wellbeing in the countries and communities where we operate. Working together as a corporate entity and as individuals using their own time, 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, research, science, education, healthcare, environmental protection and cultural projects. As 2005 began, the world was becoming aware of the enormous scale of the devastation wreaked by the tsunami that struck Southeast Asia. People from our operation in Indonesia reacted immediately, sending donations of clothes, food, medication and toys to the Aceh region of Sumatra. A crisis team made up of volunteer employees also went to Aceh to see how best to further support the local population. Among the displaced in Aceh were more than 150,000 children, many traumatised by the disaster. The company crisis team therefore decided to fund the construction of a trauma centre, which also serves as a school and village hall in Krueng Raya village. Aksari Ibnu, who co-headed the Boehringer Ingelheim Indonesia tsunami task force, commenting on the school opening in July, said: The smiling faces of young children and the people of Krueng Raya was a huge reward for our team who had all dedicated themselves to this worthwhile project. The company made substantial donations through its international and local organisations to aid agencies involved in the 2005 disasters, the Asian tsunami and the devastating earthquake that hit Kashmir in October. In response to the hurricane Katrina disaster in September, the company s US organisation also funded a free mobile clinic to treat people in New Orleans in addition to making financial and product contributions through MAP International to disaster relief efforts in the USA and elsewhere. Our people taking the initiative Our wide range of charitable activities in the USA heavily involves volunteering by employees. A Day of Caring sponsored by the company, gives employees at our Ridgefield, Connecticut, USA, site the opportunity to volunteer for tasks to help the aged and deprived. In many ways, from decorating homes to reading to children at day care centres. Our US employees also participate in numerous sponsored events to raise funds for good causes. At our Roxane, Ohio, USA, site employees help the Salvation Army buy and distribute Christmas presents for poor families. 12 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Employees at Boehringer Ingelheim Portugal volunteered to build houses for two families in need in Braga in the north of the country in association with the humanitarian organisation Habitat for Humanity. Miguel Moreira, Area Manager for Prescription Medicines in Portugal, an active volunteer, said: I am very proud that the company where I work shares the same concern: helping the ones most in need. In the Philippines, our employees stepped in to help families made homeless when their shanties burned down at Baseco Compound in Tondo. Not only did the employees donate funds to build eight new row houses for the homeless, they also helped with the construction work in their free time. The homes, built in cooperation with an organisation dedicated to eradicating homelessness, were handed over to their new occupants in June. Promoting equal opportunity In Latin America, the company has a long, solid tradition of charitable activities. In Brazil, Boehringer Ingelheim launched a two-year social responsibility programme, Conectar, directed at disabled people to help them prepare for jobs market (many have never been employed). An employment assistance programme in the favelas of São Paulo is another example of how we actively promote fairness and equal opportunity. The company s human resources professionals, voluntarily and in co-operation with those of other organisations, provide youngsters with poor prospects hands-on training and support in employment counselling, identifying ways to move forward and ensuring professional and emotional back-up. In Colombia, we not only contribute to healthcare and schooling for people in our immediate community, but also support two foundations: the Padre Luna Farms, which help battered children and teach agricultural labourers; and Fundafidro, an organisation working with healthrelated issues in deprived neighbourhoods. Despite the extraordinary challenges of the tsunami disaster, Boehringer Ingelheim Indonesia succeeded in October in continuing its established community-awareness programme, giving general medical treatment to hundreds of needy people near the company s Bogor plant as well as fostering educational improvement. In Venezuela, the company gives training to the doctors at the respiratory care centres in Chacao neighbourhood and the Hospital Pérez de León in Caracas. The hospital also receives free medicines and equipment. For our neighbours 13

For our people To achieve our corporate objectives we deploy flexible, mobile, self-confident employees prepared to accept responsibility and capable of thinking and acting globally. Our internal principles guide employee selection and assessment. To attain continuous innovation in all we do, we apply our employees and managers creativity, capability, commitment and willingness to learn and change. The Corporation in this regard delegates responsibilities to employees and acknowledges their success, performance and commitment in meeting agreed goals. Remuneration and classification are based on the task, performance, achievement and competitive comparison. Successfully pursuing our vision, Value through Innovation, calls for the dedication, passion and continuous powers of renewal of our more than 37,000 employees. They are our unique source of strength and inspiration. Our persistent, combined efforts and resulting achievements in pharmaceutical innovation have enabled us to maintain growth and create new jobs. In many countries we have generated a significant volume of employment opportunities, led by the USA, with a total of 1,000 new jobs. The increased employment prospects we offer have been greeted extremely favourably in countries where lowering unemployment is a national challenge. On employment, Boehringer Ingelheim has received numerous accolades. In 2005, we were awarded first price in Arbeitsplätze absolut for being the company which generated the highest number of new jobs in Germany. We also gained considerable public recognition in Germany for continuing to increase the number of apprenticeships which rose from 623 to 698. The relatively large number of apprentices in our extensive vocational programmes has won widespread praise as a powerful encouragement to the labour market. Great place to work We are proud of the attractive working environment that we have created and the status that we enjoy as a preferred employer. Authoritative, independent workplace surveys in many countries have confirmed our position among the top companies in this area so vital to recruiting and maintaining high quality employees (see box on page 17, list of awards). Such positive recognition of our company as a great place to work spurs us on to enhance our distinctive company culture still further. Ever responsive to the changing needs of our employees, we at the same time call for everyone to be personally engaged in improving our working environment at the heart of which are mutual respect, fairness, openness and space for both personal and professional development. 14 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Teamwork is a key element of Boehringer Ingelheim s corporate culture. In Istanbul, our Turkish employees are here celebrating the 2005 launch of Lead & Learn with its implications for improved teamwork. Development opportunities Our aspiration to continuously innovate requires firm commitment from everyone in the company. Ongoing dialogue between our employees and their supervisors is also essential to allow all parties to participate in our achievements and development. And our ability to progress coherently towards realising our vision by developing and leveraging the immense diversity within the company is pivotal to our success. Our annual employee supervisor dialogue (Mitarbeitergespraech MAG) is at the core of our performance and development culture. Engaging and stretching performance objectives are mutually agreed and career aspirations and perspectives for professional development are addressed. Every individual is expected to have a valid and forward-looking development plan to meet the qualification needs of our rapidly changing business and work environment. Career aspirations and prospects are also embedded in our global succession planning process. Here we seek to guarantee a strong pipeline of leadership talent for local and international key positions. Talent reviews linked to the succession planning support the identification and development of leadership talent across the corporation. International assignments are an integrated part of our succession planning process and our business and capability development. Our international assignees represent a large number of our organisations and are uniformly distributed throughout our geographical regions. While the focus groups and purpose of the assignment might differ from strategic positions to development measures or knowledge transfers, these moves serve clearly as a vehicle to enhance cultural understanding and broadening a global mindset. The Boehringer Ingelheim Academy, encompassing a variety of development courses and approaches in numerous countries, is designed to support and strengthen our core values and capabilities. Everyone at the company can access local and international development information on our intranets. The Boehringer Ingelheim Academy offers a wide spectrum of options from vocational subjects to leadership development programmes. 2005 2004 2003 2002 2001 Personnel costs in millions of EUR 2,671 2,443 2,252 2,175 1,916 Personnel costs as % of net sales 28.0 29.9 30.5 28.7 28.6 Number of employees (incl. apprentices) 37,406 35,529 34,221 31,843 27,980 For our people 15

A key benefit for many employees is the provision by the company of day care facilities for their children. Here, (left) toddlers enjoy a meal at the kindergarten in Ingelheim, Germany, set up in cooperation with the local community. In the US, construction of the Child Development Center on the Ridgefield, USA, campus is in full swing. We foster good leadership at all levels. Carefully tailored local and international development approaches are applied to help our current and potential leaders to discover ways to create a context in which our people can excel and all of us can continuously enhance our outcomes. Our third consecutive International Management Development Programme, launched in 2005, marked the beginning of 14 months of international, interdisciplinary learning and working for some 100 potentials. The programme involves participants in hands-on work on 14 strategically relevant projects, close professional mentoring and frequent exposure to senior management in various countries. Benefits Our benefits programmes, which vary from country to country, include, amongst others, retirement benefits, health coverage, insurance cover, company restaurants, kindergartens, childcare centres and access to a variety of personal and family support services. Numerous additional initiatives and programmes are available for our employees and their families. These include international clubs, our International Cultural Student Exchange programmes, local internships for family members and summer camps for children. The way we work together From the mid-1990s, our corporate culture has built on our vision Value through Innovation (VTI), which has given direction to all our activities. An annual VTI Day brings our organisations together to celebrate our achievements in line with our vision and encourages and inspires our employees to participate in realising it in practical ways. Value through Innovation has guided and will continue to guide our way of working together. It helps us build on our strength and make the most of our distinctive character, enabling us individually and collectively to achieve great success. In 2005, Lead & Learn was introduced to outline ways in which we can enhance our culture of working together to realise and deliver Value through Innovation. The core principles of Lead & Learn encourage increased questioning and seizing opportunities while fostering a culture of shared leadership and learning. VTI teams that fairly represent the diversity of our employees, together with our line management, have commenced their challenge to explore and realise complementary new ways to support our aspired cultural development throughout the corporation. 16 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Awards 2005 Country Ranking Survey Austria 13 Great Place to Work Belgium 11 Great Place to Work Brazil < 150 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 Brazil < 50 Great Place to Work: The best companies to work for women Denmark 11 Denmark s Best Place to Work Germany 1 Germany s Best Employers (VAA) Germany 15 Germany s Best Employers (Capital) Germany 2 Germany s Best Employers with more than 5,000 employees (Capital) Netherlands non given The 49 Preferred Employers in the Netherlands Mexico 8 Great Place to Work United Kingdom 19 100 Best Companies to Work for (Sunday Times) USA (Roxane) 9 Business First Places to Work in Central Ohio 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. For our people 17

For our environment In all our activities we will protect our employees, the facilities and the environment from harmful influences, conserve natural resources and promote environmental awareness. These tenets, which are firmly established in our guiding principles (Leitbild) and formulated in our Principles on Safety, Quality and Environmental Protection, are put into practice through systematic environmental protection, health and safety (EHS) management. Global standards are defined and enforced wherever they are indicated. Goals are set annually, while our EHS status is checked regularly by Corporate Headquarters. In 2005 alone, this involved twelve audits at various sites. Every plant undertakes to set up a local management system and is free to have this certified or not. For further details of our EHS management please visit www.boehringer-ingelheim.com/ehs. With our declared support for the concepts of the Responsible Care Initiative of the chemical industry, we have undertaken to exceed the minimum legal requirements wherever we consider it appropriate. Consequently, each site draws up its own programme for continuous improvements in the EHS field. examples show that we accept responsibility for our products and attach great value to EHS, not only at our own plants but also at those of our business partners. Climate protection In the wake of disasters, such as those caused by the hurricanes Wilma and Katrina in 2005, the subject of climate protection moved to centrestage in public debate. By converting the power station at our Ingelheim site to burn a renewable source of energy, waste wood, Boehringer Ingelheim has already made an active contribution to improving the carbon dioxide (CO2) balance. Compared with the two Work accidents Frequency rate = accidents x 1 million hours / total labour hours Severity rate = lost labour days x 1 million hours / total labour hours Frequently it is not only our employees and the environment that benefit, but measures taken can also have an economic impact, as illustrated by the example of our wood-fired power station in Ingelheim, Germany, described below. Other 4 3 2 1 80 70 60 50 40 01 02 03 04 05 18 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

The safety checklist for vehicles carrying hazardous materials to and from company sites is longer as that for a passenger aircraft. Here the tyres on a truck are being examined at the Ingelheim site in Germany as part of the comprehensive checks made before it may leave the plant. previous years, the balance has improved by about 60,000 tonnes, or a quarter of the Corporation s total CO2 emissions. A secondary benefit of the conversion has been a major reduction in emissions of sulphur dioxide, a contributor to acid rain. In a move to reduce emissions of gases detrimental to the global climate, in accordance with the Kyoto Protocol, the European Union introduced the Emissions Trading Scheme for CO2 in 2005. Boehringer Ingelheim has joined this scheme. Our heating power station in Ingelheim was issued trading certificates on the basis of the emissions in 2000 2002. Following the switch to wood, a CO2-neutral power source, we can now trade any certificates that we no longer need. This project has allowed us to pursue both ecological and economic goals at the same time. Another example of our responsible approach to climate protection came within the framework of a programme run by the Swiss national energy authorities in 2003. Our Swiss site undertook to reduce CO2 emissions by 10 % by the year 2010 and has already met interim goals. Pharmaceuticals in the environment We are not only responsible for clean production, but also for ensuring our products have minimal impact on the environment. An environmental risk assessment is now required when registering new products. This is prepared on the basis of studies on environmental impact and ecotoxicological effects. We also assess the environmental data for products already on the market and, where necessary, run further voluntary studies to assess the ultimate impact. 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 80 140 120 100 10 8 6 4 2 60 5 4 3 2 1 01 02 03 04 05 01 02 03 04 05 For our environment 19

Assessments to date show that our substances present no risk to man. Business partners Our EHS management system guarantees that all Boehringer Ingelheim sites satisfy set requirements and make constant improvements. However, we also attach great value to ensuring that our business partners likewise meet our expectations in terms of EHS, while satisfying minimum requirements, in order to ensure the continuity of our own business. For this reason, we increasingly check EHS aspects as well as quality during qualification of suppliers and contract manufacturers. Awards In 2005, a number of sites were again awarded prizes by external agencies for their efforts in EHS. For the 6th time running, our site in Colombia won an award for its excellent contribution to long-term development. The local agencies awarded the site in Toride, Japan, a prize for its exemplary efforts in the storage of hazardous goods and fire safety, while the site in Petersburg, Virginia, USA, was given an award for its modern wastewater treatment plant. Our French chemical plant received first place in a countrywide external safety audit conducted to international standards. Incidents Our local and global crisis management allows us to react rapidly to potential incidents. No major incidents occurred in 2005. Our performance The graphs show the EHS performance figures for the last five years. Performance in the field of safety at work is measured by the number of accidents and their rate adjusted for the number of employees. As can be seen from the graph (page 18), the rate of accidents has fallen again since 2004. Our environmental impacts are shown both as absolute values and relative to production represented in our production index. The index represents our overall production in all business areas and is weighted to compensate for differences in environmental impact. Our baseline year is 1995. Since 2005 the figures include the values for the company microparts, Germany, which was acquired in 2004. They do not include SSP Co., Ltd., Japan, which has also not been included in previous years. Over the last few years, most indicators have reached a relative stable level because many prior technical or organisational improvements resulted in a high performance standard. This is Carbon dioxide (CO2) 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 park) Volatile organic carbon (VOC) VOC emissions, non-halogenated (in tonnes) VOC emissions, halogenated (in tonnes) VOC emissions index (in %) 120 100 80 80 60 40 500 400 300 200 100 60 1,000 800 600 400 200 01 02 03 04 05 01 02 03 04 05 20 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

reflected clearly in the respective indices compared with 1995. The production-adjusted amount of pollutants in wastewater produced has been reduced by 60 %, solvent emissions (volatile organic hydrocarbon VOC) have been halved and water consumption lowered by a quarter. Our recycling rate has stabilised at a very high level of about 80 %. Many of our ongoing efforts are therefore no longer reflected as clearly as in earlier years. For a more detailed explanation of the individual graphs, please visit www.boehringer-ingelheim.com/ehs Our goals We are aware that there is further potential for optimisation in terms of solvent emissions (VOC) into 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, Germany, too, additional plants are to be connected to the existing incinerator. Our goal for 2008 is to reduce VOC emissions by at least 50 %. nitrogen removal by improving the nitrification/ denitrification process, and will also target the specific halogen-containing wastewater which can be difficult to treat when using only conventional technology. Our chemical sites in Malgrat, Spain, and Fornovo, Italy, are seeking to have their environmental management systems certified in 2006 in accordance with ISO 14001. This report only mentions some of the activities we engage in to fulfil our responsibilities. Please visit the internet for further details about our product responsibility, the safe handling of highly potent substances in production and other examples of our many safety activities. www.boehringer-ingelheim.com/ehs Our wastewater treatment plants are already performing on a very high level. To maintain and further improve this level and to adapt to increasing loads, we started a major investment in our Ingelheim wastewater treatment plant. An additional state-of-the art treatment step will make the process more effective, will increase 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 20 100 90 80 70 8,000 6,000 4,000 2,000 20,000 15,000 10,000 5,000 01 02 03 04 05 01 02 03 04 05 For our environment 21

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Our R&D drive Holger Pfister has been treated with almost all of the 22 currently available HIV drugs. But my doctors never managed to bring my viral load under the detectable limit, says Holger. The viral load, the number of virus particles in the blood, measures a person s HIV / AIDS status. Owing to the failure to treat Holger s virus effectively, it has become resistant in his body to almost all AIDS medications. Resistance is a very serious HIV issue. In 2003, Holger took part in the resist clinical study for Boehringer Ingelheim s novel protease inhibitor (PI) aptivus (tipranavir). Since then I ve been under the measurable limit for the first time ever, he says. Continuing the treatment, he is in good mental and physical health. Professor Schlomo Staszewski from Frankfurt university, a leading AIDS expert and the first person in Germany to hold a professorship in HIV infections, hails aptivus, launched in the first markets in 2005, as the most efficacious protease inhibitor so far. And it is not just a question of efficacy. Tipranavir is the largest antiretroviral development to date, says Dr Paul Carter, who coordinated the project at Boehringer Ingelheim. This project has clearly shown that our closely integrated development network, which links our R&D centres around the world, together with our well established interactions with clinical investigators, gives us access to all the capabilities necessary to achieve successful and timely development of even the most challenging drugs, he notes. In only five years, tipranavir was taken from a promising candidate to a potent new drug. Tipranavir, in-licensed in phase II development from the former Pharmacia-Upjohn in 2000, is a non-peptidic PI. It works by inhibiting protease, an enzyme needed to complete the HIV replication process. Based on available clinical and in vitro data, tipranavir is active against most strains of HIV-1 that are resistant to commercially available protease inhibitors. Tipranavir does not cure HIV infection/aids or prevent the transmission of HIV to others. What it importantly offers is a treatment that benefits patients with limited therapeutic options. Our R&D drive 23

Since Holger Pfister was diagnosed with human immune deficiency virus (HIV) infection in 1986, he has been fighting AIDS (acquired immune deficiency syndrome). I am one of the few who survived, he says. AIDS drug resistance a big issue Since the initial detection of AIDS in the early 1980s, viral resistance to drugs treating HIV has become a crucial issue. The pharmaceutical industry has thus sought to constantly develop new drugs. To date, a total of over 20 are available. However, the HI virus has proved to be a very dangerous master of metamorphosis, always finding ways to change its genetic pattern and thus ward off the attacks of antiviral drugs. A recent six-year study demonstrated a high prevalence of drug-resistant virus in a European group of patients under treatment for HIV-1 infection. Data from the United Kingdom indicate that the transmission of drug-resistant virus is on the rise, with 47 % of patients resistant to at least one PI. The estimated prevalence of people with drug resistant virus in a recent large-scale study in the United States was 78 % (Richmann et al., 2001). For all of HIV infected, new and potent drugs, like aptivus, are a last resort. The RESIST clinical programme In 2003, the first patients were recruited for the resist pivotal trial programmes. These involved the most clinically advanced population ever studied and included 1,500 patients with highly resistant virus in 270 hospitals in 21 countries. Recruitment was completed in just eight months. The resist programme examined the treatment response of tipranavir boosted with ritonavir versus a comparator group in which patients received one of several marketed ritonavirboosted PIs. The comparator PI was lopinavir, indinavir, saquinavir or amprenavir. In addition, patients received in both arms a personally optimised background regimen of another antiretroviral. The results of the resist studies demonstrated that a statistically significant greater percentage of HIV-positive patients taking tipranavir boosted with ritonavir achieved a treatment response versus the comparator group (40 % compared to 18 %). Furthermore, more than twice the number of patients receiving regimens that contain boosted tipranavir were able to reduce the amount of HIV in their blood to undetectable levels than in the boosted comparator group (viral load <400 virus copies/ml blood: 34 % compared to 15 %). Patients treated with tipranavir boosted with ritonavir also experienced greater increases in the numbers of their CD4+ immune cells than those treated with a ritonavir-boosted comparator PI (34 cells vs. 4). However, as with all PIs, tipranavir boosted with ritonavir was also associated with side-effects, such as diarrhoea, nausea and vomiting as well as increases in liver enzyme and lipid levels. 24 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

The development of effective treatments for viral infections, such as human immunodeficiency virus (HIV), presents a significant scientific challenge. A researcher studies an HIV-infected T lymphocyte cell on-screen. T cells, a type of white blood cell, are important for protecting the immune system against viral infections and are a prime target for the HI virus that causes a reduction in the number of T cells. New data presented at the 10th European AIDS Conference in Dublin demonstrate that through 48 weeks, aptivus provides a convincing and durable benefit, achieving and maintaining a superior treatment response in patients with resistant HIV. A large number of further clinical studies with tipranavir boosted with ritonavir are currently running or planned to start in the near future. Some of these are designed to investigate tipranavir s safety and efficacy in other patient populations such as children, women, patients co-infected with hepatitis B or C and naïve (previously untreated) patients. This range of studies demonstrates Boehringer Ingelheim s continuing commitment to fully understand the profile of aptivus. Our development strength aptivus is not the only AIDS drug to emerge from our development programmes. The now widely-used antiretroviral agent nevirapine (viramune ) is a product of original Boehringer Ingelheim R&D and was the first member of the non-nucleoside reverse transcriptase inhibitor (NNRTI) class of anti-hiv drugs. In many other indication areas there are also new medications discovered and developed in-house by Boehringer Ingelheim, amongst them tiotropium bromide (spiriva ), a treatment for chronic obstructive pulmonary disease (COPD), pramipexole (sifrol /mirapex ) against Parkinson s disease or telmisartan (micardis ) for treating essential hypertension. A key indicator for Boehringer Ingelheim s strength in R&D is the ratio of products still patented or under exclusivity protection to our net sales. It rose to 59 % in 2005. Speed and efficiency are key to successful pharmaceutical development projects, as novel medicines that bring real benefit in terms of health and well-being are taking longer and longer to get to the market. And more time adds further expenditure to the enormous cost of developing modern medications. Our R&D expenditure in 2005 amounted to 18.2 % of our net sales in Prescription Medicines, indicating the extent to which a modern researchdriven pharmaceutical company has to invest in discovering and developing new products, or extending the life and indication coverage of existing drugs in its portfolio. Our R&D drive 25

HIV is being played down An interview with Prof. Schlomo Staszewski Q: Prof. Staszewski, let s start by discussing AIDS in the industrialised world. Hasn t the disease here to a considerable extent already disappeared from public awareness, even though it naturally remains with us? What s your experience with this issue? new infections in European countries. In 2005, they rose by about 10 %, in Germany, even by as much as 20 %. Q: What s the reason? Prof. Staszewski: AIDS, or HIV infection, is the most dangerous epidemic, and the one with the greatest consequences, in the latter part of the 20th century and the beginning of the 21st century. According to the World Health Organization, we have more than 40 million infected people. Some three million died of the disease in 2005. In the same year, an additional five million were infected. Most deaths occur in sub-saharan Africa. AIDS is really a deadly disease there. In our countries nobody needs to die of AIDS any longer. With the appropriate treatment the progression of the disease can be halted and patients can be prevented from developing the manifestations of AIDS. The dilemma with AIDS is, on the one hand, its good treatability, and, on the other hand, that it s the most dangerous infectious disease of our time. The question is how do we deal with it? Prof. Staszewski: HIV is being played down. Awareness of the therapies and their effects on the course of the disease HIV are removed and remote from the real situation. This we have to correct. We must say what kind of disease it is. My criticism of the current trend is also that, content with the possibility of individual therapy, we ve lost sight of the overall epidemic. People no longer regard HIV as a fatal disease. Advertising by the pharmaceutical industry often also contributes considerably to glossing over the disease. It focuses the HIV disease to the industrialised world and shows in its pictures and personal testimonials people who are well. It presents things as though there is no problem at all. Q: A problem in the West is the development of drugresistance. How do we deal with this? Naturally you can gloss over or keep AIDS secret, if you live in the western world, where patients can receive all the available medications. You can conceal the fact that some things in the world are not in order. You can also see that in the number of Prof. Staszewski: Resistance is a common phenomenon. In the event of therapy failure or side-effects, the switch to a tolerable or effective therapy is more difficult. When resistance has occurred, you have to switch therapy to combine those 26 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Thanks to new treatments and innovative drugs, AIDS has become controllable in the developed world. Although it is still a deadly disease, HIV awareness has weakened, leading to increasing infection rates. In Mainz, Germany, with the support of Boehringer Ingelheim, a group of teenage schoolchildren put on a play, Damned positive, which highlights the dangers of an HIV infection. medications to which the virus is still sensitive. Here, the right combination is decisive. If we use an effective medication in the wrong combination, there is a danger that it will be wasted because of resistance developing. viruses that are resistant to aptivus. This, one has to know. Because only then it becomes clear that aptivus must also be used sensibly. When I use it too late, or use it in the wrong combination, I waste the medication. Q: Is aptivus effective because of the very fact that it can also be used for patients who are already resistant to many other medications? Is that its strength? Prof. Staszewski: That s currently the most important indication area for aptivus, as it is effective against viruses that have already become resistant to other protease inhibitors (ed: PI). But there are aptivus has strengths and weaknesses. Basically, it has all the side-effects familiar to protease inhibitors. As dosage-related side-effects occur, it is a good idea to test lower doses in patients whose disease is less advanced than the dose necessary for the patient with PI-resistent virus. This should though at present only occur within a controlled clinical study. Prof. Schlomo Staszewski First holder in Germany of a professorship dedicated to AIDS, established in 2003 at Johann Wolfgang Goethe University, Frankfurt am Main Director of the Out-Patient Clinic for the HIV-infected Patients and the Antiretroviral Research Unit Principal investigator in several international multi-centre studies with new HIV compounds. Current editor of HIV-Medicine Executive Committee Member of the European AIDS Clinical Society (EACS) Our R&D drive 27

Our strength in R & D + Medicine Research and Development has been the foundation of Boehringer Ingelheim s success so far and continues to be the major driver of innovative, new medicines. We recognise the unique opportunities and challenges that medical needs and the health environment present. We have consequently committed ourselves to discovering, profiling and developing new products of high therapeutic value for patients and healthcare systems. New biological entities (NBEs) We are 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 in key therapeutic areas, our strategy is to create a comprehensive NBE programme addressing unmet medical needs in several indication areas, thus expanding our proprietary NBE product portfolio beyond actilyse (first generation t-pa), metalyse (second generation t-pa), imukin (interferon gamma) and beromun (tumour necrosis factor). In order to fully exploit the synergistic potential of our internal capabilities, we have established centralised expertise in human antibody drug discovery at our research site in Vienna, Austria, facilitated by in-licensing of key technologies from MorphoSys (phage display) and Medarex (genetically modified mice). We have also strengthened our protein technology infrastructure across research sites and allocated dedicated biology resources in key therapeutic areas. During 2005, we expanded our NBE discovery programme to include some 10 discovery projects, a first step towards a steady stream of innovative NBE therapeutics feeding our development pipeline. While our key focus is on human monoclonal antibody projects, we are also exploring treatment options for cardiovascular and metabolic diseases with optimised bioactive therapeutic proteins (OBTs). In-licensing promising NBE candidates is an important complement to in-house research activities and to this end we have in-licensed AbGn-168, a humanised monoclonal antibody that induces apoptosis of activated T cells, from AbGenomics Corporation, Taiwan. AbGn-168 holds promise in delivering long-lasting control of T cell mediated diseases, including autoimmune diseases. Drug Discovery and Non-Clinical Development Insight into the workings of diseases at a molecular level is an important prerequisite for identifying promising targets for new drugs. In this context, integrating state-of the-art technologies to enhance the R&D value chain is the key to success in pharmaceutical R&D. Despite significant progress in recent years, unmet medical needs continue to be great and growing due to changes in the environment and people living longer. 28 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Laboratory assistants at our Quality & Compliance Department, Biopharmaceutical Manufacture, Biberach, Germany, undertake visual assessment of biotechnically produced proteins using gel electrophoresis. 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 portfolio. To further strengthen our R&D organisation we have international skill centres to improve efficiency and to secure equal access to state-ofthe-art technologies and informatics platforms for all sites. In Biberach, Germany, our largest R&D centre, we concentrate on diseases of the central nervous system (CNS), metabolic diseases and respiratory diseases. Biberach is supported by our chemistry laboratories in Milan, Italy. Drug discovery in immunology & inflammation and cardiovascular diseases is carried out in Ridgefield, USA. Further fully-fledged drug discovery centres are located in Laval, Canada, carrying out research in virology, and in Vienna, doing research in oncology. In Kawanishi, Japan, we have an additional centre in molecular cell biology, specialised in membrane receptor targets. At these sites, pharmaceutical development is focused on conventional dosage forms, whereas Ingelheim represents our centre of competence for developing all inhalative dosage forms. Boehringer Ingelheim has a particular focus on the development of innovative inhalation devices. handihaler and respimat Soft Mist Inhaler offer us a very competitive platform in inhalation therapy and meet the challenges of drug development in a variety of indications. Added support on drug formulations and manufacturing clinical trial supplies is provided by our sites in Kawanishi and Buenos Aires, Argentina. Our cooperations with biotech and academic groups provide another key string to Boehringer Ingelheim s bow in finding and developing innovative medicines. A good example is the strategic research collaboration initiated between our Biberach and Ridgefield centres and Evotec OAI that enabled us to establish a novel research platform for elucidating innovative receptor-based drugs. This collaboration started on receptor targets involved in CNS diseases but now also addresses targets of potential interest in other therapeutic areas, such as metabolic and immunological diseases. Our non-clinical drug development activities are concentrated in Europe and North America at the sites Biberach and Ingelheim, Germany, and Ridgefield, USA. Biberach and Ridgefield are conducting the full range of non-clinical development work packages including activities for chemistry, manufacturing and control (CMC) as well as relevant pharmacokinetic and safety studies. The bridge between our R&D people and academia is reinforced by the strong link to the renowned Research Institute of Molecular Pathology (IMP) which we fund in Vienna. Our strength in R&D+Medicine 29

IMP scientists are at the forefront of discovery defining fundamental processes of cell division and differentiation in healthy and diseased states. A collaboration started in 2001 between the IMP and the Institute of Molecular Biotechnology Austria (IMBA) added a new dimension to our academic network. Intensified interactions with IMBA began in 2005 in target identification using model organisms. The more than 3,000 scientists, technicians and support personnel we employ in preclinical R&D is complemented by about 2,100 clinical monitors, statisticians and data managers in clinical development and medical departments. Respiratory diseases Respiratory diseases have long been a major focus area for Boehringer Ingelheim and we dedicate ample resources for research in this field. Our main objective in pulmonary research is to provide still further improved treatment options for chronic obstructive pulmonary disease (COPD) and severe asthma. COPD is currently the fourth most common cause of death, yet up to three quarters of sufferers in Europe go undiagnosed. This suggests a major unmet need for treatment for this debilitating lung disease which often afflicts smokers. Our worldwide launch of tiotropium (spiriva ) provided a medication to improve COPD therapy, strengthening our leading position in the bronchodilator field. This is being build up by developing bronchodilators with alternative mechanisms which additionally offer the opportunity for combination with our anticholinergic compounds. Extending our product portfolio to drugs that target treatment of the underlying inflammation and the tissue remodelling process are the key goals in our COPD research. Inflammation in COPD patients is provoked by an infiltration of the lungs by macrophages and neutrophils. It is only poorly controlled by current, widely-used anti-inflammatory drugs, such as corticosteroids. Our research in asthma is aimed at new mechanisms and immunological paradigms which would allow us to replace or reduce the doses of inhaled steroids by providing antiinflammatory 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. Virology Antiviral therapies for many serious, life-threatening chronic and acute viral diseases are lacking or are unsatisfactory. Our Laval centre focuses on the discovery and development of new antiviral therapeutics for the treatment of the human immunodeficiency virus type 1 (HIV-1) and the hepatitis C virus (HCV). These two devastating pathogens have each emerged epidemically in recent decades, afflicting millions globally. Our HCV research is directed toward identifying inhibitors targeting essential viral 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 clinical studies with an HCV serine protease inhibitor provided the first proof of clinical concept for this class of antiviral agent and we continue to make efforts to exploit this antiviral target together with other novel approaches. Our R&D activities in HIV aim at developing new treatment options, especially for HIV patients who have failed prior therapy due to the development of drug resistance. Our research into the rapidly growing resistance problem has identified a promising new non-nucleoside reverse transcriptase inhibitor (NNRTI) as a follow-up to our existing HIV treatment viramune (nevirapine). Development is proceeding on this compound which may become a treatment alternative for patients who have failed first line NNRTI therapy. 30 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Basic research plays an important role for Boehringer Ingelheim. At the Research Institute of Molecular Pathology (IMP) in Vienna, Austria, where the fundamental principles and mechanisms of living organisms are analysed, about 200 researchers from all over the world investigate new ways forward in science, novel approaches and targets, thereby enriching applied research. The IMP enjoys a worldwide reputation in research in the areas of developmental biology and molecular genetics. In addition, our discovery efforts are addressing several new targets for HIV therapy. Oncology Every year, more than 10 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 medicines, but still there is recurrence of the disease. Thus, there remains a therapeutic gap to be bridged with innovative and improved treatments that enhances the quality of life. The sequencing of the human genome meanwhile promises to accelerate the emergence of new cancer drugs. While not specifically designed for cancer research, no other area of biomedicine has profited more from the Human Genome Project than cancer biology, with deep insights into the fundamentals of how gene mutations and faulty cellular circuitry lie behind the aberrant growth, invasion, and metastasis of cancerous tissues in the body. Armed with such insights, we have embarked on a major drive to discover and develop innovative medicines for some of the most common cancers. Cutting-edge research conducted at Boehringer Ingelheim Austria has resulted in promising drug candidates moving into clinical development. As presented for the first time at the American Association for Cancer Research European Organisation for Research and Treatment of Cancer meeting in Philadelphia in November 2005, three compounds originating from our Vienna oncology research centre have successfully completed phase I studies in various cancer indications. A novel type of triple angiokinase inhibitor, targeting endothelial cell receptors responsible for cancer neo-angiogenesis, has entered phase II of clinical development. A dual kinase inhibitor targeting epidermal growth factor receptor and HER2 kinase, has shown promising results in patients with advanced solid tumours. And further, a first-in-class cell cycle/ polo-like kinase 1 inhibitor was applied in a single dose escalation study to patients with advanced solid malignancies. In addition, we are increasing our efforts in monoclonal antibody based projects for treatment of both solid and haematological neoplasias. Metabolic diseases Health authorities and governments have been alarmed by recent epidemiological data suggesting that metabolic diseases, including obesity, diabetes mellitus type II and dyslipidemia, will grow worldwide by a much greater extent than previously expected. This has been identified as a major health problem not only for industrialised societies 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 parent generation. We are therefore putting great efforts on the metabolic disease field with particular focus on diabetes type II, obesity and dyslipidemia. Our strength in R&D+Medicine 31

When Dr Barry Dickson talks about fruit flies, his eyes light up, as he has been working with Drosophila melanogaster for most of his scientific life. The focus of my research is to understand the nervous system at the level of neural circuits and trying to understand how genes direct the assembly and function of specific circuits. Just as many of today s major therapeutic targets came from studies of Drosophila development in the 70s and 80s, we anticipate that our work will open up new opportunities for the future treatment of neurological disorders, Dr Dickson says. In January 2006, the 43-year old Australian, one of the world s leading developmental neurobiologists, became Scientific Director of the Boehringer Ingelheim-funded Research Institute of Molecular Pathology (IMP) in Vienna. Work by his team at the Institute of Molecular Biotechnology (IMBA) of the Austrian Academy of Sciences showed that a single gene determines the complex mating ritual of Drosophila. This was a front-page story in the New York Times in 2005. 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 were successful in several of our research projects and have achieved promising results in preclinical but also clinical trials. 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. Despite efficacious treatment for the lowering of low-density lipoprotein (LDL) cholesterol, 60 % to 70 % of cardiovascular events still cannot be prohibited. 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 that therapeutic need. Cardiovascular diseases With cardiovascular diseases forecasted to be the most common cause of premature death worldwide within the next decade, according to the World Health Organization (WHO), we committed ourselves to renewed efforts in this therapeutic area by moving our cardiovascular research to Ridgefield in 2003. Boehringer Ingelheim has been at the forefront of research and development in the cardiovascular disease area for decades, establishing its market presence in the treatment of thromboembolic diseases as well as hypertension and consequential diseases. Ongoing research efforts in the thromboembolic area could be successfully completed by advancing a new product into preclinical development. We will continue to develop our cardiovascular research platform in the area of atherothrombosis and widen our research to include heart failure. To address the ever-increasing unmet medical need for treating these cardiovascular diseases, our Ridgefield scientists are already focusing on innovative approaches to identify novel and effective drugs that reach beyond current treatment regimes. These programmes will benefit from close interaction with research scientists in our other drug discovery units. Targeting related human diseases, such as metabolic and immunological/ inflammatory disorders, will undoubtedly increase the opportunities for developing novel, innovative therapeutic agents in the fight against cardiovascular disease. Central nervous system diseases According to WHO predictions, diseases of the central nervous system will constitute an increasing medical need this century, attributable to an exponential increase of these diseases after 32 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Photo: IMP the age of 65 combined with an aging population. To date, available therapeutic treatments are still unsatisfactory for the majority of CNS diseases. Our research in CNS diseases therefore focuses on novel treatment concepts for the major neurodegenerative disorders, Alzheimer s and Parkinson s disease, prominent consequences of the aging population. An additional focus lies on chronic pain, a condition for which medical attention is sought most frequently. 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 vasodilation for which we have obtained clinical proof of concept. Our research efforts to interfere with disease progression in Alzheimer s and Parkinson s disease focus on targets established by pathology and genetics. 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. Moreover, we are investigating approaches for reducing treatment-induced motor complications (dyskinesias), a major medical problem for patients with late stage Parkinson s disease. Immunology & inflammation Autoimmune diseases such as rheumatoid arthritis, multiple sclerosis and psoriasis are serious chronic inflammatory disorders with a large unmet medical need for safer and more efficacious treatments. At our Ridgefield site, our drug discovery efforts aim to regulate the processes involved in lymphocyte trafficking, immune cell signalling and the synthesis of critical inflammatory mediators. Additionally, we aim to deploy our knowledge about the influence of the immune and inflammatory systems on diseases in other therapeutic areas. In that regard, small molecule inhibitors of immunological signalling are being tested for their activities against inflammatory diseases as well as respiratory diseases that have an inflammatory component. Small molecules, able to inhibit inflammatory processes, have also advanced into pre-clinical development and others are currently being evaluated for key decisions. The mechanistic understanding of rheumatoid arthritis has allowed our scientists the identification of new approaches to understanding the biology of the disease that we hope will continue to lead to further innovation in the future. Given the recent success of biologics in autoimmune diseases, such as rheumatoid arthritis and psoriasis, the focus of NBE research has been applied to these diseases. In order to maximise our portfolio, we have in-licensed an antibody from the biotechnology company AbGenomics that targets activated T lymphocytes Our strength in R&D+Medicine 33

sparing the early immune response and therefore shows promise as therapy for autoimmune diseases. Progress has also been made in the identification of antibodies targeting the inflammatory cascade, further building our NBE portfolio. Given the variety of approaches and the focus on the mechanistic understanding of disease pathogenesis, we are confident that our research in immunology and inflammation will result in improved treatment options for patients who suffer from autoimmune diseases. In-licensing and partnering Our alliances range from early stage research to development and marketing or co-promotion collaborations. Complementing our in-house R&D efforts, these tie-ups are a vital component of our search for novel therapeutics which provide new treatment options for patients. Reflecting the growing importance of alliances in the pharmaceutical industry, Boehringer Ingelheim has stepped up its partnering activities in recent years, particularly in early stage collaborations. In its October 2005 issue, Nature Reviews Drug Discovery characterised Boehringer Ingelheim as one of the top ten pharmaceutical deal-makers worldwide. When deal activity was adjusted against ethical sales, we even ranked number one in the analysis. A key example of our partnerships in 2005 was the worldwide exclusive research and license collaboration with the Swedish biotech company Biolipox. Based on a new approach to the inhibition of prostaglandin E2, an important endogenous inflammatory mediator, the aim of the collaboration is to develop a new class of drugs with a novel mechanism of action for the treatment of pain and inflammation. In 2005, we also extended two existing agreements with our partners Evotec and Astex. In addition to a substantial discovery programme to identify and develop therapeutics acting on G-Protein Coupled Receptors (GPCRs), the scope of our collaboration with the German biotech company Evotec now also includes the joint identification of novel ligands to selected Boehringer Ingelheim target proteins. In line with our vision to expand our R&D portfolio of biopharmaceuticals, in particular monoclonal antibodies, partnering in this area was a very important goal in 2005. The biotech companies MorphoSys and Medarex have developed innovative and complementary technologies for the generation of fully human monoclonal antibodies. We have concluded collaborations with both companies enabling our researchers to exploit these technologies in all of our therapeutic areas. The collaboration with MorphoSys was extended and has already resulted in the start of a new antibody project against a novel target molecule involved in cardiovascular diseases. In addition, we have explored collaborations with companies highly specialised in proteomics based identification of biomarkers (Caprion, Canada) and modulation of delivery of bioactive proteins (Syntonix, USA). Furthermore, we have signed an exclusive licensing agreement with the Taiwanese company AbGenomics for the worldwide rights to develop, manufacture and commercialise the human monoclonal antibody AbGn 168, discovered by AbGenomics in cooperation with the National Taiwan University. Due to its innovative mode of action, AbGn 168 has the potential to open up new avenues for the treatment of autoimmune disease, such as psoriasis, rheumatoid arthritis and multiple sclerosis. This agreement represents the first R&D partnership between a Taiwanese biotech company and a multinational pharmaceutical corporation and illustrates our drive to tap new R&D resources in emerging markets. It has also given a significant boost for Taiwan s efforts to build up a biotechnology industry. 34 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Clinical development and registration Both for clinical development and registration 2005 was again very dynamic and resulted in remarkable progress in many areas. Our clinical programmes in clinical phases I to IV added another 32,000 patients newly recruited on top of the large programmes ongoing from last year. More than ever, the contribution from geographic territories outside of Western Europe and North America has supported the progress in our clinical trial activities. Eastern Europe and Southeast Asia benefited most from our strengthened clinical trial platform established in these regions. We will continue to build on our extended reach and are encouraged by the impressive quality delivered in these countries (see table). Boehringer Ingelheim Clinical Trial Statistics During the period from 1996 to 2005, Boehringer Ingelheim conducted or sponsored 1,399 studies with 142 substances in 59 countries from all regions of the world. Study type number of protocols Phase I 344 Phase II 161 Phase III 229 Phase IV 115 PMS studies 183 Consumer health care 61 Other* 73 Co-sponsored studies 233 The studies enrolled approximately 1.2 million patients during this decade, of which 300,000 were in Phase I IV studies and over 700,000 in PMS studies (post-marketing surveillance). The term patient refers here in a wider sense to patients receiving test medication, comparative medications, receiving placebo, marketed medication, or being healthy volunteers. Detailing these numbers by region and clinical phases reveals a broad geographical distribution with emphasis on North America and Western Europe. Region I III IV Other PMS Africa 8,188 2,553 America, North 59,829 28,745 3,676 36,275 America, S & L 5,707 6,660 96 52,019 Asia (Japan) 7,531 1,890 16,924 Asia (other) 4,028 13,972 113 140,692 Australia 4,658 2,903 36 Europe, East 5,705 11,367 296 3,065 Europe, West 105,485 36,254 166,636 482,476 Near East 582 436 Total 201,713 104,780 170,853 731,451 February 2006 The category other includes, for example, compassionate use and methodological studies. Our strength in R&D+Medicine 35

Before new drug candidates can be given to patients in clinical studies to test their efficacy, they are first studied in healthy volunteers, as here at the Human Pharmacology Center at Biberach, Germany. This provides valuable information about the safety profile and tolerability of the substances. Important new registrations were also obtained in 2005. The US Food and Drug Administration (FDA) granted accelerated approval for aptivus in June and European registration under exceptional circumstances was granted in October. Following these approvals, our second HIV drug after viramune has reached the market and adds an important treatment option for heavily pre-treated patients who have developed resistant virus and depend on new drugs with improved resistance profile. spiriva, the once daily maintenance treatment for COPD was approved in France and is now approved in 97 countries. Fast worldwide registration and numerous excellent clinical trial results have facilitated its rapid growth into the leading COPD treatment position. The phase III programme for spiriva administered through the innovative propellant-free soft mist inhaler respimat was successfully completed and registration files are under development. As planned, we submitted sifrol the leading Parkinson s medication simultaneously to the US FDA and the European Medicines Agency (EMEA) for approval in the new indication restless legs syndrome. We expect regulatory review to be completed in 2006. In the USA, mobic was approved for juvenile rheumatoid arthritis. Our successful clinical development in this paediatric indication is an important contribution towards a great medical need and was additionally honoured by an extension of US market exclusivity. cymbalta a brand of duloxetine licensed from Eli Lilly & Company, co-developed in postregistration studies and marketed for the treatment of depression, received registration in Europe for the additional indication diabetic neuropathic pain. Without exception, all of our large-scale clinical outcome studies continued according to plan. The micardis mega-trial ontarget / transcend with 31,000 patients recruited has undergone repeated independent Drug Safety Monitoring Board (DSMB) review and is in its second year after last patient included. With a patient retention rate clearly above that known from similar trials, the likelihood that we will have results available as planned in 2008 is further reinforced. A proof of concept study to investigate a newly identified pharmacologic mechanism of micardis and its metabolic effect in patients with type II diabetes has been completed. Results will be available in early 2006. The excellent and very rapid patient uptake for the long-term factorial secondary stroke prevention study profess comparing aggrenox, micardis and clopidogrel allowed us to 36 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

increase the planned patient number to 18,500 and still expect the last patient to be included in early 2006. uplift, our 6,000-patient long-term outcome study with spiriva, is also in stable follow-up with DSMB review and approval and patients treated up to three years. Results from several well-controlled clinical studies have become available, enhancing its profile spiriva was shown to improve and extend the beneficial effect of pulmonary rehabilitation in patients with moderate to severe COPD. In a comparison of spiriva combined with a long-acting beta agonist (LABA) versus the combination of a LABA and an inhaled steroid, the spiriva -LABA combination resulted in superior lung function improvements. This confirms the international guideline recommendation to first combine long-acting bronchodilators before adding a steroid. spiriva also confirmed its clinical efficacy in a selected Afro- American patient population and demonstrated excellent lung function improvements in a study in patients with mild COPD. Earlier clinical trial results on COPD exacerbation reduction and improvements in exercise performance have been submitted for registration in Europe. The robust clinical data base for sifrol (pramipexole) in the treatment of Parkinson s disease was acknowledged in a review article in the New England Journal of Medicine where pramipexole was recommended as starting treatment of choice in early Parkinson s disease. metalyse, our bolus injection thrombolytic, has been investigated in two exploratory settings: lysis followed by routine primary percutaneous intervention (PCI) after myocardial infarction (assent iv trial) and as rescue intervention during reanimation in cardiac arrest (troica trial). While assent iv has been discontinued because routine combination of lysis and PCI was inferior to PCI alone, troica is continuing and will complete recruitment in 2006. In all our therapeutic areas clinical pipeline projects in phase I to III have been advanced. Three new compounds entered clinical phase I, two in respiratory, one in oncology. Phase I was successfully completed by our oral LFA antagonist with positive ex vivo signals suggestive of immune modulatory effects. We will therefore start phase II proof of concept studies in patients with psoriasis early next year. Already in an expedited phase I study we could establish a clear proof of principle for a new oral anti-diabetic drug when given to type II diabetic patients. Results from extended exposure in diabetic patients will complete the clinical profile and are expected for early 2006. In the important respiratory field, we advanced a new anti-cholinergic compound to clinical phase II in patients with COPD. We expect this compound to provide beneficial effects through increased target selectivity and maintenance of a very reliable 24-hour efficacy. Our strength in R&D+Medicine 37

In addition to the first clinical administration of a new cell cycle inhibitor in patients, our first angiokinase inhibitor has achieved proof of principle in phase I as an anti-cancer drug active in patients suffering from a variety of different cancers. With this encouraging result we could move the first oncology compound from own research to clinical phase II. With NS 2330, a compound licensed from Neurosearch, results of three well-performed proof of concept trials in early and advanced Parkinson s disease and in Alzheimer s disease were disappointing and did not meet our predefined efficacy criteria to justify a phase III development. For flibanserine, a new therapeutic principle to treat hyposexual desire disorder in females, the final phase III development has been agreed with the FDA and several methodology studies in support of the pivotal phase III studies have been performed. The first six months phase III study to be conducted in North America is in final preparation and ready to initiate in QI 2006. The most exciting progress has been made for dabigatran, an orally available thrombin inhibitor for the prevention and treatment of thromboembolic diseases. The programme in the prevention of deep vein thrombosis (DVT) following orthopaedic hip or knee replacement surgery has developed with impressive speed and recruited more than 6,000 patients into controlled phase III trials by the end of the year. We expect all three international trials to close in the second half of 2006. In a large global cooperative approach with leading academic centres we developed the final protocol for re-ly, the pivotal trial in the indication stroke prevention in patients with atrial fibrillation. The protocol for this 15,000 patient warfarin controlled megatrial passed successful authority review and the first patients were randomised in December 2005. The programmes for DVT treatment and longterm prevention are in preparation and scheduled to start mid-2006. Our capability to perform electronic remote data capture in practically every country of the world was strengthened in cooperation with a leading computer technology provider. This enables us to meet the challenges of our growing clinical programmes, deliver quality data in an expedited fashion and extend our clinical trials to geographic regions with new opportunities. 38 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Business Development Our Businesses consist of Human Pharmaceuticals and Animal Health. We focus on the production of innovative drugs and treatments that represent major therapeutic advances. Net sales (in EUR million) 2004 2005 Growth in % Human Pharmaceuticals 7,822 9,174 1,352 17 % Prescription Medicines Branded Prescription Medicines Non-Branded Prescription Medicines 6,183 5,743 440 7,247 6,712 535 1,064 969 95 17 % 17 % 22 % Consumer Health Care 970 1,052 82 8 % Industrial Customer Fine Chemicals and Manufacturing Pharma Biopharmaceuticals 654 262 392 847 299 548 193 37 156 30 % 14 % 40 % Others 15 28 13 87 % Animal Health 335 361 26 8 % Total 8,157 9,535 1,378 17 %

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Human Pharmaceuticals A new quality of treatment, a new quality of life I long to run, but I actually make it a rule to go for a brisk walk around a park twice a week since starting to take spiriva in December 2004, says Hiroshi Aida, a 76-year-old man from Tokyo, who used to run out of breath even on the gentlest slope due to chronic obstructive pulmonary disease (COPD). Today, I can walk the 1,800-metre course twice without strain and my finishing time is quicker every time. The drug works like a charm. Mr Aida now has a dream of walking from Tokyo to Kyoto, about 510 kilometres, before his 100th birthday. Recently, he successfully completed a 10-kilometre walk. 41

spiriva has obviously improved Mr Aida s quality of life, comments Mr Aida s family doctor, Dr Kozui Kida, Professor and Director of the Respiratory Care Clinic, Nippon Medical School. Six million people are estimated to suffer from COPD in Japan alone, but only some 20,000 are currently receiving treatment for the condition. This mismatch is not just a Japanese issue. COPD stays undiagnosed in many cases, says Professor Bart Celli, Head of Pulmonary and Critical Care Medicine, St Elizabeth s Medical Center, Boston. This is presenting a very serious problem. Millions of people around the globe suffer from COPD which the World Health Organization expects to be the third most common cause of death worldwide by 2020. This debilitating lung condition makes it increasingly difficult to breathe. For many patients even walking or performing simple daily tasks is difficult. It can affect both men and women from their early 40s. Around 80 % of cases are attributed to smoking tobacco. In fact, smokers are 10 times more likely to die of COPD than non-smokers. Another cause of COPD is exposure to indoor or outdoor pollutants. Workers exposed to toxic chemicals and pollutants have increased odds of developing COPD. A recent study found that some 20 % of COPD was attributed in part to work-related exposure. spiriva has obviously improved Mr Aida s quality of life. spiriva (tiotropium bromide), discovered, developed and manufactured by Boehringer Ingelheim has further strengthened the company s position as a world leader in COPD treatment. The novel, once daily inhaled medication is recommended for the first line maintenance treatment of COPD. The disease is characterised by chronic airflow 42 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

limitation, shortness of breath (dyspnoe), cough, wheezing and increased sputum production. spiriva helps to relax narrowed muscles in the airways inside the lungs or prevent them from narrowing (and to release trapped air), enabling sufferers to exhale more easily. spiriva is already the world s most prescribed drug for COPD. The highly favourable reception it has had since its initial launch in mid-2002 secured it blockbuster status (a pharmaceutical brand with annual sales exceeding USD 1 billion) as expected, in 2005, with net sales of 951 million. It is co-promoted with the US pharmaceutical company, Pfizer Inc. Following the launch in Japan, the world s second largest pharmaceutical market, and in China in 2005, the medication is now available in almost all important markets. Kim Jong-Hyun, a South Korean farmer and former heavy smoker, now in his early 60s, recalls his situation when, after suffering from cold symptoms, heavy sputum and difficulties in breathing for months, he decided to visit the general hospital in Seoul. When I was working, walking and even doing minor things, I had difficulties in breathing. I thought that I could not ignore the symptoms any longer. Mr Kim feared his life was slowly coming to an end after he was told that he had COPD. Revolutionising drug delivery Boehringer Ingelheim is revolutionising inhaler therapy with the respimat Soft Mist Inhaler (SMI), a unique inhaler device successfully launched in 2004 with berodual, a drug for treating asthma and chronic obstructive pulmonary diseases (COPD). As a world leader in the treatment of COPD, we are committed to developing the respimat SMI as the gold standard for the administration of respiratory inhalation medications, says Allan Hillgrove, head of Boehringer Ingelheim s Respiratory Marketing. After the acquisition of the Dortmund (Germany) based microparts GmbH, a leading company in micro-system technology, Boehringer Ingelheim is currently developing several substances for use with respimat. Boehringer Ingelheim microparts will meanwhile be built up as an international centre of excellence for inhaler technology. For more information on respimat please visit www.respimat.com Initial medication failed to restore any normality to his life, but on switching to spiriva in early 2005 he got much better. Now I can work on the farm and take care of my cows. I feel like I have a second new life when walking in the sunshine. Real improvement has also been confirmed in clinical studies, such as the tiphon* study, presented to the American Thoracic Society in 2005. Dr André-Bernard Tonnel, Service de Pneumologie et Immuno-Allergologie, Centre Hospitalier Regional et Universitaire de Lille and the study s lead investigator, said: The tiphon study results are encouraging because they show that treatment with spiriva can result in clinically significant and sustained improvements in health related quality of life for patients with COPD. n Fifteen times finer than human hair, the micro-channels (5 μm) inside the respimat Soft Mist Inhaler are responsible for the highly effective distribution in the human lung of the mist containing respiratory medication. The inhalers are manufactured in Dortmund, Germany, by microparts, a Boehringer Ingelheim subsidiary. Human Pharmaceuticals 43

Prescription Medicines Boehringer Ingelheim s product range is mainly focused on human pharmaceuticals, which contribute the largest share of the turnover of our group of companies, accounting for 96 % of net sales in 2005. Human Pharmaceuticals covers the following business segments: Branded Prescription Medicines (BPM), Generic Prescription Medicines (GPM), Consumer Health Care (CHC) and Industrial Customers, which is sub-divided into Biopharmaceuticals, Chemicals and Manufacturing Pharma. Our Human Pharmaceuticals business developed very dynamically in 2005. World sales rose by 17 % compared with the previous year to EUR 9.2 billion, primarily due to our innovative patented medications. The successful growth reinforces our approach of continuing intensive research into new drugs that offer relief and improvement for patients. Branded Prescription Medicines (BPM) BPM, which accounts for almost 70 % of our sales, expanded markedly in 2005, with worldwide sales rising by 17 % to EUR 6.7 billion. Sales growth was mainly driven by the growth of our more recent drugs micardis, spiriva and sifrol /mirapex but more mature products, such as aggrenox and mobic, continued to contribute to the excellent development too. Meanwhile, the launch of new products aptivus and cymbalta /xeristar contributed to the further rejuvenation of our product portfolio. Therapeutic areas Respiratory diseases Chronic obstructive pulmonary disease (COPD), a chronic progressive respiratory disease characterised by chronic airflow limitation, shortness of breath, cough, wheezing and increased sputum production, can restrict a patient s ability to perform normal daily activities. It is the fourth leading cause of death in the world. spiriva (tiotropium bromide), a novel once daily inhaled medication recommended for first line maintenance treatment of COPD, works by targeting a dominant reversible mechanism of Top 10 products Branded Prescription Medicines Sales Branded Prescription Medicines by Therapeutic Area Net sales 2005 in millions of EUR change 1. spiriva 951 +81.2 % 2. mobic 848 +26.1 % 3. micardis 724 +27.3 % 4. flomax 721 2.0 % 5. combivent 561 +9.8 % 6. sifrol 434 +52.2 % 7. viramune 288 +2.0 % 8. atrovent 248 +0.7 % 9. catapresan 176 2.1 % 10. aggrenox 172 +17.8 % Central Nervous System 9.3 % Muscoloskeletal/ Rheumatology 13.0 % Gastrointestinal/ Metabolic 3.4 % HIV 4.6 % Urology 11.4 % Others 1.6 % Cardiovascular 21.9 % Respiratory 34.8 % 44 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

COPD cholinergic constriction. It helps patients breathe more easily by opening narrowed airways and helping to keep them open for 24 hours. spiriva, globally co-promoted with Pfizer Inc, is now available to patients in most of the world. In France the launch is planned in 2006. The benefits which spiriva provides to patients are reflected in sales of EUR 951 million in 2005 and market shares of 20 % or even more on a country basis. It has achieved blockbuster status. More importantly, spiriva is now the world s No. 1 prescribed product for COPD. The spiriva clinical trials programme has recruited over 25,000 patients so far. The drug has demonstrated significant and sustained bronchodilation (opening of the airways) and reduction in markers of air trapping. It has also demonstrated superior and sustained improvements in lung function (FEV1) over atrovent (ipratropium bromide) Inhalation Aerosol, which were maintained over one year. Further, it has demonstrated superior improvement in key lung function parameters over salmeterol. In addition, in placebo-controlled studies, patients treated with spiriva required fewer doses of rescue medications, had fewer exacerbations and COPD-related hospitalisations. In another part of the clinical trial programme the influence of spiriva on the exercise endurance has been studied. It improved the capability of patients to exercise in a consistent way in 6-24 week studies and showed a reduction in hospitalisation as well as an improved quality of life. spiriva, currently delivered to patients via our HandiHaler device, will be used in the future with respimat Soft Mist Inhaler (SMI). This propellant-free, new generation inhaler, which generates a slow-moving, long-lasting cloud with a high fine particle fraction, represents a major step forward in inhalation therapy. The soft mist travels more slowly and lasts longer than aerosol clouds from pressurised metered dose inhalers (pmdis). Scintigraphic studies have shown that these properties increase drug deposition in the lungs where desired and reduce unwanted deposition in the mouth and throat compared to pmdis. It is important that patients feel comfortable with inhalers as this may influence adherence to treatment. Patients with obstructive lung diseases prefer respimat SMI to pmdis, expressing a high level of satisfaction. Cardiovascular diseases Hypertension (high blood pressure) is a serious cardiovascular risk, linked to stroke and heart attack as well as other conditions. It is vitally important that therapy controls this high blood pressure, but, despite available treatment options, hypertension is still not well controlled. An estimated 45 73 % of hypertensive patients in the USA remain uncontrolled. This is of particular concern as hypertension increases the risk of cardiovascular events and reducing blood pressure may prevent cardiovascular mortality and morbidity. Among patients with stage 1 hypertension, a reduction of 12 mmhg in systolic blood pressure for 10 years prevents one death for every 12 treated patients with diabetes or cardiovascular diseases. Even small reductions of 3 to 5 mmhg produce significant reductions in stroke or heart failure (Source: American Journal of Medicines, 2005, 118: 695-705). With micardis (telmisartan), our angiotensin II receptor blocker (ARB), and micardisplus (telmisartan in a fixed-dose combination with the diuretic hydrochlorothiazide), Boehringer Ingelheim offers two innovative options and flexibility for the treatment of essential hypertension. Prescription Medicines 45

Protection around the clock In treating hypertension, the early morning hours are critical, as blood pressure is known to surge at that time. This surge corresponds to a sharp increase in the risk of having a heart attack or stroke. Studies have shown an estimated 40 % more people suffer a heart attack and 50 % more people suffer a stroke between 6 a.m. and 12 noon, says Professor Bryan Williams, University of Leicester and lead investigator of the prisma studies. micardis (telmisartan), Boehringer Ingelheim s successful, highly efficacious drug for treating essential hypertension, offers 24-hour blood pressure control, and also provides superior blood pressure lowering compared to ramipril in the early hours. It is being evaluated for its potential to protect end-organs, such as the kidneys or the brain, as well as the potential to delay the onset of diabetes II in patients with increased risk, in the ontarget trial. Systolic blood pressure (in mmhg) in relation to time (wakening hours) (0 = wake-up time) micardis has the longest half-life in the ARB class, providing effective blood pressure control over 24 hours with a once daily dosage, including the early morning hours when blood pressure surges. At this critical time of day, it delivers powerful blood pressure reductions. micardis /micardisplus posted net sales of EUR 724 million in 2005, representing growth of 27 % and making it our third biggest BPM product. Having grown above the market average for antihypertensives (34 %), its global market share improved to 7.6 %. In the protection programme of clinical trials with micardis, five trials versus main competitors have provided new important clinical data for micardis and micardisplus in hypertension, showing clear clinical superiority over ramipril, losartan, valsartan, and amlodipine + HCTZ. The detail study, published in the New England Journal of Medicine in November 2004 in diabetic nephropathy has put micardis in the map of nephro-protection. The trendy study reported in major congresses in 2005 supported the nephroprotective benefits of micardis and three additional renal trials will consolidate the profile of the brand in this area in 2006. 160 150 140 130-4 -2 0 2 4 6 8 10 12 14 16 18 hours The landmark trials ontarget (in patients of high cardiovascular risk, with 31,700 randomised patients) and profess (in patients with previous stroke with 15,000 patients already recruited), aiming to prove the cardio and cerebro-vascular protection properties of micardis, are proceeding on schedule. Results of these trials are expected in 2008. The good acceptance of the product in 2005 provide an excellent platform to put micardis on track to become another blockbuster. For additional information please visit our websites at www.micardis.com / www.ontarget-micardis.com Every year, approximately three million people worldwide suffer from acute myocardial infarction (AMI), or heart attack. However, only about 47 % are diagnosed and treated. About 53 % are 46 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

either not recognised or are beyond treatment. The most important factor for a successful treatment of AMI is time to treatment. Thrombolytic therapy, established as one of the most successful modern AMI treatment options, is easy to apply, available in all hospitals and considered safe in view of the serious nature of the disease. actilyse (alteplase), is indicated for the thrombolytic treatment in AMI as well as in thrombolytic treatment in acute massive pulmonary embolism with haemodynamic instability. It has also a conditional license for the treatment of acute ischemic stroke (see below). metalyse (tenecteplase), the only thrombolytic to be administered as single shot injection, is also registered for the thrombolytic treatment in AMI for patients, in whom a coronary intervention cannot be performed within 90 minutes of onset. With its ease of administration, metalyse is very well-suited for pre-hospital and in-hospital thrombolysis to keep the time from onset of symptoms to effective treatment as short as possible. The Stroke Lysis Box from Boehringer Ingelheim enables hospital emergency departments to provide rapid clot-busting treatment. Both products continued to be leaders in their class and posted combined net sales of EUR 151 million, giving a 57.7 % market share in this combined class of fibrinolytics. Telemedicine helps stroke victims Acute ischaemic stroke is caused by blood clots in the brain and requires urgent specialist attention. However, only 30 % of acute stroke patients reach hospital within the first three hours. Particularly those in rural areas do not always have access to specialist care. New technologies can link rural hospitals with specialist centres. Remote patient interviewing, data transmission and videoconferencing are available 24 hours a day to all hospitals linked in the network. The benefit to the patients is twofold: they now have access to this modern treatment and the treatment is started by very experienced people. This allows a greater proportion of acute stroke patients to be assessed for thrombolysis with Boehringer Ingelheim s actilyse (alteplase), the only medication available for the treatment of acute stroke. Photo: Lennart Nilsson Prescription Medicines 47

Stroke treatment and prevention Stroke is the third leading cause of death and the most important reason for medical disability. In industrialised countries some five people in every 1,000, and three in every 100 people aged 65 years and above, suffer a stroke. A stroke occurs when a blood clot blocks a vessel or 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 within a few minutes or a few hours. actilyse is the first and only treatment indicated for acute ischaemic stroke within three hours after onset of symptoms. With sits most and sits istr, Boehringer Ingelheim is sole sponsor of the largest international stroke registry, providing stroke experts worldwide with a valuable tool for documenting and monitoring stroke patients. For more information please visit the website: www.stroke-forum.com Diseases of the central nervous system (CNS) Parkinson s disease affects approximately 1 % of people over 60, but Parkinson s can also afflict people much younger. It is caused by a slow, gradual loss of specific cells in the brain that produce a chemical called dopamine which is ultimately necessary for normal muscle function. The disease is characterised by three main symptoms: slowness of motion, stiffness and shaking of arms, legs or head. Pramipexole, a dopamine agonist, is indicated for the symptomatic treatment of Parkinson s disease, alone or in combination, throughout all stages of the disease. aggrenox / asasantin / asasantin retard (dipyridamole/asa) is indicated to reduce the risk of secondary stroke in patients who have had transient ischaemia of the brain or completed ischaemic stroke due to thrombosis. It posted net sales of EUR 172 million in 2005, with growth of 18 %. With profess, the world s largest trial in secondary stroke prevention, Boehringer Ingelheim is aiming to prove that aggrenox is superior to clopidogrel. The trial, conducted since 2002, will involve 18,500 patients in 32 countries. The outcome is expected in 2008. The compound is internationally marketed as mirapex, mirapexin, sifrol or pexola. mirapex /sifrol continued to show strong growth in 2005, in part due to the launch in Japan. At the end of 2005, it ranked No. 6 among our bestselling products, with total net sales of EUR 430 million, up 52 % against 2004. It is the world s best-selling brand for Parkinson s disease, with a market share of more than 20 %. The clinical development of mirapex /sifrol has been completed for restless legs syndrome (RLS), a sensorimotor disorder characterised by a distressing urge to move the legs and sometimes other parts of the body. It is usually accompanied by a marked sense of discomfort or pain in affected body parts. A comprehensive clinical development programme with more than 1,000 patients in the USA and six European countries, completed in 48 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

2005, showed significant improvements in RLS symptoms, rapid onset of action and an excellent tolerability profile. Regulatory dossiers for the approval of mirapex /sifrol for RLS were filed in 2005 in the USA and the EU. Stilling restless legs The feeling is very irritating and I cannot sit still. It is frustrating because I can feel the bubbles, but I cannot make them disappear. The only way I can stop this feeling in my legs is to move them and to walk, says Katrin Scherman from Sweden, who spent 25 years of her life enduring the symptoms of RLS before seeking treatment. Restless legs syndrome (RLS) is a neurological disorder characterised by an uncontrollable urge to move the legs, usually accompanied by unpleasant and sometimes painful sensations which worsen at night. Social activities, including travelling, can also be severely affected by RLS, as sufferers can find sitting still very painful or difficult, especially in the evening. Recent clinical studies showed that pramipexole, with its fastacting effect on a broad range of RLS symptoms, cannot only provide rapid relief from RLS symptoms, but also suggest significant sustained efficacy. Pramipexole, a compound from Boehringer Ingelheim research, was first approved in 1997 and is available in major countries worldwide under the trade names sifrol, mirapex and mirapexin for the symptomatic treatment of idiopathic Parkinson s disease. Boehringer Ingelheim anticipates approval in 2006 in Europe and the USA for the treatment of RLS. Major depressive disorder (MDD), a common disorder of complex, often recurring symptoms affecting mind and body, can be life-threatening and certainly disabling, according to World Health Organization (WHO) research. The neuropathology of depression is not fully understood but the two neurotransmitters serotonin and norepinephrine seem to play a major role in the development and course of the disease. In November 2002, Eli Lilly and Company and Boehringer Ingelheim signed a long-term agreement to jointly develop and commercialise duloxetine hydrochloride. Duloxetine for MDD and diabetic peripheral neuropathic pain (DPNP) is internationally marketed under the brand names cymbalta and for Boehringer Ingelheim in Greece, Italy and Spain as xeristar. cymbalta /xeristar is a potent and balanced dual reuptake inhibitor of both serotonin and norepinephrine that provides rapid, sustained relief of the emotional and painful physical symptoms of depression and gives patients a better chance of getting well and staying well. In 2005, major milestones were achieved with marketing authorisation for MDD in the EU and other parts of the world. cymbalta had been launched in 20 countries by December 2005. Prescription Medicines 49

Serotonin and norepinephrine also play a major role in the neuronal modulation of pain signals. cymbalta /xeristar has been successfully developed for the treatment of DPNP, which occurs in approximately 30 % of patients suffering from diabetes mellitus. Symptoms of DPNP include lancinating pain, paraesthesia and dysaesthesia as well as pain produced by a normally non-painful stimulus. By effectively de-amplifying the pain signalling, duloxetine offers a new approach in the treatment of DPNP patients. results in wake-up several times at night with urgent need to urinate (nocturia), one of the most bothersome symptoms of BPH. Stress urinary incontinence Stress urinary incontinence (SUI) is the involuntary loss of urine with an increase in abdominal pressure caused by a physical activity such as coughing, laughing, sneezing, lifting or exercising. Around 97 % of SUI patients are female, but less than half of the women suffering from this condition seek treatment. Urologic diseases Benign prostate hyperplasia (BPH), a common disease that occurs in about 25 % of men aged 40 years or over and in more than 30 % of men over 50, results in lower urinary tract symptoms (LUTS) related to obstructions of the urethra and gradual loss of bladder function. These symptoms, such as frequent need to urinate (particularly at night), urgency, leaking, or dribbling, disrupt the activity and sleep patterns of sufferers, drastically affecting their quality of life. alna /flomax (tamsulosin), an alpha receptor antagonist, is indicated for the treatment of functional symptoms of BPH, significantly improving symptoms and quality of life. The product was inlicensed in and jointly developed together with Astellas Pharma and is marketed under a license from Astellas Pharma. It achieved net sales of EUR 721 million in 2005 and maintained its market leadership in the USA, where a co-promotion collaboration with Astellas Pharma started in 2004. In 2005, a new formulation of alna /flomax using the ocas (Oral Controlled Absorption System) technology, was launched in several European countries. This allows a smoother 24-hour drug release with reduced plasma peaks independent of food intake, resulting in an even better safety profile and favourable In November 2002, Eli Lilly and Company and Boehringer Ingelheim signed a long-term agreement to jointly develop and commercialise yentreve /ariclaim (duloxetine) for treating SUI. This partnership covers most countries worldwide. In mid-august 2004, EU approval was received for yentreve /ariclaim for the treatment of women with moderate to severe SUI. In 2005, yentreve /ariclaim was launched in Greece and Italy (by Boehringer Ingelheim as ariclaim ) and in Mexico. Virologic diseases Boehringer Ingelheim aims to improve HIV/AIDS therapy by providing physicians and patients with innovative antiretroviral drugs. For more information, please visit the website: www.boehringer-ingelheim.com/hiv aptivus (tipranavir), a non-peptidic protease inhibitor, works by blocking the viral protease, an enzyme needed to complete HIV replication. Due to its unique chemical structure, aptivus preserves activity against viruses which have lost susceptibility to other treatment options a significant advantage compared to other commercially available protease inhibitors (PI). When co-administered with low dose ritonavir, it is indicated for combined antiretroviral treatment of HIV infection in highly treatment experienced (HTE) patients. 50 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Teamwork sets benchmark aptivus, which complements viramune in our HIV portfolio, was launched in the USA in July 2005 and in the EU in November 2005. viramune (nevirapine) was the first compound of the new class of non-nucleoside reverse transcriptase inhibitors (NNRTI) to be launched in 1996 as a powerful component of combination therapy for HIV-1. This product is now available in about 100 countries which makes it one of the most widely used compounds in chronic HIV-1 therapy worldwide. viramune has also been demonstrated to be beneficial to prevent transmission from the HIV-1 infected mother to her infant. A single dose 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. viramune posted sales of EUR 288 million in 2005. It took only 168 hours after market approval by the US regulatory authority, the Food and Drug Administration (FDA), for the first packages of Boehringer Ingelheim s novel anti-aids-drug aptivus (tipranavir) to leave the warehouse for US distribution. Due to the long manufacturing processes, the wheels of our supply chain began turning well before approval starting with chemical production of the active ingredient tipranavir and pharmaceutical production. These two different manufacturing steps were conducted on two continents at Boehringer Ingelheim s company site in Ingelheim, Germany and a third party site Cardinal Health, USA. After the FDA had endorsed and released all detailed drug-related information, the company was on the home straight. Printing the packages and leaflets, packaging, shipment and distribution under refrigerated conditions: the cogs coordinated by Boehringer Ingelheim s packaging site Roxane (Columbus, Ohio, USA) meshed perfectly. Even with another step added release testing and distribution via our product release site in Ingelheim aptivus was available to patients in Germany and the United Kingdom within a few days after the subsequent approval in Europe in October was granted. Early involvement of Operations during the development process was a key success factor. Numerous challenges arose which called for close communication between the company s Research & Development and Operations divisions as well as with the external US manufacturing partner to develop the appropriate chemical and pharmaceutical processes. Seamless cooperation between multi-faceted teams across the Boehringer Ingelheim development and supply chain, and beyond, played a key role in the successful initial launch of aptivus, Operations teamleader Joerg Hefer said. A new benchmark has been set. Prescription Medicines 51

Rheumatologic diseases Osteoarthritis is the most commonly diagnosed degenerative joint disease affecting the joints, especially in elderly people. Signs and symptoms of osteoarthritis might include joint stiffness and discomfort often with a sensation of a grinding in the affected joint. Rheumatoid arthritis, an autoimmune disease that affects the body as a whole, may also lead to joint destruction. mobic /mobec (meloxicam) is indicated for the symptomatic treatment of osteoarthritis and rheumatoid arthritis as well as ankylosing spondylitis (Morbus Bechterew). The drug which became our second blockbuster drug in 2005, posted net sales of EUR 848 million, with a market share of 14.9 % in the IMS anti-rheumatic market. The debate about cost containment, rebates and reimbursement payments ( Medicare and Medicaid ) continuously put pressure on prices and may render patient access to innovative products more difficult. But the ongoing healthcare reform initiative ( Medicare Drug Benefit ) will provide access to health services for additional patients. The impact of this initiative on pharmaceutical sales volumes and price levels will be seen over the the next years. spiriva was our biggest growth driver in the region, achieving net sales of EUR 379 million, up 120 % from the previous year. Additional growth drivers in 2005 were mobic, combivent and sifrol. In 2005, Boehringer Ingelheim continued to increase its field force in the USA and a customer relationship management (CRM) programme was successfully implemented. An additional phase of increased focus on the specific needs of physicians and their need for individual information will continue to improve the service level during the coming years. Economic Regions Americas The economic environment in the Americas Region developed favourably during 2005. The region posted sales of EUR 3.7 billion with a growth rate of 17 %, representing a 51 % share of Boehringer Ingelheim s Prescription Medicines business. The USA achieved net sales of EUR 3.1 billion, corresponding to 18 % growth. The USA remains the worldwide motor for economic growth in the innovative pharmaceutical industry. A highly competitive environment with free market price development and rapid market acceptance for innovations, it offers patients quick comprehensive access to improved treatments. The USA will remain the most important market for Boehringer Ingelheim s innovative pharmaceuticals for the foreseeable future. In Latin America, economic growth slowed in 2005 to a more sustainable level compared to the sharp increase in 2004. Inflation in the region stabilised, but remains volatile, with highly fluctuating commodity prices. The currencies of the main countries stabilised against the Euro. Some, like the Brazilian real, even strengthened. The total pharmaceutical market, including branded and generic products, continued to grow, with Mexico up 12.0 %, Brazil up 14.6 % and Argentina 12.2 %. However, a stable and dependable development of our BPM business in this region is still hampered by the lack of binding patent laws, except in Brazil and Mexico. Total net sales of our BPM business in Latin America amounted to EUR 200 million in 2005, an increase of 26 % against the previous year. Growth drivers were mobic, micardis and selected local products. Currency revaluations 52 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

The USA remained the by far most important market for our drugs. Americas 3,670 Europe 2,037 of which: USA branded 2,592 USA non-branded 535 of which: Germany 455 Asia, Australasia, Africa 1,312 of which: Japan 801 Prescription Medicines (which accounted for 76 % of our net sales) had a turnover of more than EUR 7.2 billion to which US sales contributed 43 %. The Europe Region achieved 28 % of PM net sales. Sales Prescription Medicines 2005, excluding licenses (in millions of EUR) also contributed positively. spiriva and the recently launched product cymbalta performed strongly and continued to gain market share. In Latin America, we implemented a new regional business concept by implementing a regional operative unit located in Argentina. Europe Our business developed highly satisfactorily in Europe in 2005. With a growth rate of 15 % and net sales of EUR 2 billion, we grew about twice as fast as the market. Our market share increased to 2 %, ranking us as No. 12 in the European pharmaceutical market. This success is based on the good acceptance of our innovative products by physicians and patients. However, the pharma-political environment in Europe remained challenging during 2005 and patient access to new innovative medicines was often delayed. In addition, cost containment measures in national healthcare systems mainly target pharmaceutical spending with mandatory rebates, repayments and parallel trade. The main growth driver in 2005 is spiriva. Net sales reached EUR 459 million, an increase of 54 % over 2004. spiriva developed very positively in all major markets, reaching market shares of 10 15 % and even up to 20 %. micardis / micardisplus became our second leading product in Europe, growing with net sales of EUR 191 million. Newly published data on its benefits, not only in hypertension but specifically new benefits for nephroprotection in hypertensive diabetic patients, is expected to support further growth. sifrol, our leading Parkinson s medicine, more than doubled its turnover to EUR 183 million. Currently it is under registration for RLS. Three important new introductions to the European market came in 2005. cymbalta for MDD. alna ocas, a tablet version of our market-leading BPH product and aptivus, our HIV treatment. With the exception of France, all major European markets gained considerable growth momentum in 2005. After a difficult year 2004, our German business developed quite satisfactorily due to the new introductions of cymbalta, aptivus and alna ocas as well as the high market acceptance of spiriva, micardis and sifrol. Dynamic growth was achieved in Central and Eastern Europe, especially in Russia. Double-digit growth rates were recorded in Italy, Spain and the United Kingdom. Prescription Medicines 53

Asia, Australasia, Africa In all major markets in our Asia, Australasia, Africa (AAA) Region Japan, Australia, Turkey and South Korea we experienced strong growth. This is particularly remarkable considering the business environment of our industry in the region was in 2005 determined by a continuation of cost containment initiatives and governmental restrictions. The development in AAA must therefore be considered against a background of mandatory price reductions, governmental prescription recommendations, such as positive lists, and, in almost every country, strong encouragement of generic prescribing. In Japan, Nippon Boehringer Ingelheim had the fastest growing business among the leading 25 pharmaceutical companies. Net sales grew by 12 % to EUR 800 million, driven in particular by micardis, due to a continuation of our highly successful cooperation with Astellas. micardis, now our leading product in Japan, achieved a market share of 10.6 % within two years of launch. Although sifrol and spiriva also contributed to the excellent development in Japan, much of the Nippon Boehringer Ingelheim s sales growth can be explained by a range of field force efficiency improvements in 2005. In Australia, above-market performance achieved in the last few years continued in 2005, with net sales growing by 25 % to EUR 120 million, the main contribution coming from spiriva. The situation in Turkey was similar. Our sales, driven by spiriva, flomax and micardis, achieved a growth of 54 % to achieve net sales of EUR 80 million. South Africa, AAA s sixth largest country, also showed positive development. Here, however, the largest sales contribution came from viramune. Our company in China celebrated its tenth anniversary. Net sales reached more than EUR 40 million. In India, besides our licensing agreement with Cadila Healthcare Ltd., we have started our own subsidiary. In the region Near East / Middle East, we implemented a new regional business concept at the end of 2005 by creating a regional operative unit located in Dubai. Generic Prescription Medicines (GPM) In the USA, Boehringer Ingelheim Corporation s GPM business consists of its subsidiaries Ben Venue Laboratories with its separate division Bedford Laboratories, based in Columbus, Ohio. Bedford Laboratories is dedicated to the marketing of a select line of liquid and lyophilised sterile injectables from Ben Venue. Roxane Laboratories and Bedford Laboratories, generated 6 % of Boehringer Ingelheim s sales. With respect to generic drugs, the US pharmaceutical market is currently in a change process. It is expected that demand for pharmaceuticals and generics in particular, will continue to increase due to pressure to reduce healthcare costs, the aging population, and the 2006 Medicare Prescription Drug Benefit. However, as the size of the generic market increases, there is increased competition for revenues coming from traditional brand pharmaceutical companies with a renewed interest in generics, from extremely large multinational generic companies that have grown through merger and acquisition, and from Indian, Eastern European, and very soon Chinese companies. 54 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

As the size of the market increases, competition is putting downward pressure on prices and margins. Many companies are moving, or looking to move manufacturing off-shore. Roxane Roxane Laboratories focuses on developing, manufacturing and packaging more than 400 medications, including oral liquids, tablets, and capsules. The business posted sales of EUR 194 million (USD 241 million), representing an increase of 14 %. Roxane launched nine new generic drugs in 2005, including the antibiotic clarithromyin and almost 20 new abbreviated new drug applications (ANDAs) were filed. Bedford Laboratories Bedford posted net sales of EUR 341 million (USD 424 million), a growth rate of 26 %. Key products for 2005 included propofol, octreotide, GlucaGen, paclitaxel and Adriamycin. High value injectables Over the past 12 years, Bedford Laboratories has focused its efforts on improving and advancing high-quality products that offer value to its customers. It is renowned for select specialty injectables, many not available from any other source. Bedford currently offers 84 injectable products in 229 different configurations, covering a wide variety of therapeutic classes, mainly in the areas of oncology, cardiology, anaesthesia and antipsychotics. In 2005, Bedford launched six new products, including propofol, an anaesthesia product, and octreotide, an oncology adjunct. Propofol entered the US market as one of two generics. Octreotide entered the US market as the sole generic with 180 days exclusivity. These two products accounted for USD 94 million sales. With these six new products, Bedford has solidified its position in the generic market and remains one of the largest US suppliers of speciality injectable pharmaceuticals to hospitals and clinics. Bedford s recent partnership with an intravenous (IV) bag manufacturer will provide Bedford s customers with a wider variety of drug deliver choices. Bedford will also continue to file 10 to 12 ANDAs each year to create a pipeline of products that will allow us to maintain a leadership position. Prescription Medicines 55

Consumer Health Care Let s talk about it Constipation is a widespread and sensitive disorder. Many sufferers often feel guilty and responsible for their symptoms, believing that their lifestyle is to blame, according to the gastroenterologist Professor Stefan A. Müller-Lissner of Park- Klinik Weissensee, Humboldt University, Berlin. 56

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A review that he led on constipation, published in the American Journal of Gastroenterology (AJG) in 2005, provided sufferers and healthcare professionals with strong, legitimate grounds to remove such feelings of guilt. Boehringer Ingelheim s long-standing contribution to relieving this common, very uncomfortable condition is dulcolax, the world s leading laxative brand. The independent paper, Myths and Misconceptions About Chronic Constipation, which appeared in the AJG, concluded that many aspects of constipation, including the use of laxatives, are based on traditional views and misunderstandings. It clarified many wrongly held beliefs and showed that often they are not based on hard fact or medical evidence. While diet and lifestyle should not be assumed to be the main cause of constipation, it is advisable to remain healthy overall by eating a balanced diet, drinking enough water and taking regular exercise. As a proven, safe and effective laxative, dulcolax can be taken as a first-line treatment to help restart the natural rhythm. Our communication initiatives The review in AJG prompted Boehringer Ingelheim to launch a major campaign in 24 countries to communicate its key findings in order to contribute to a better understanding of constipation and laxatives role in treatment options. The scientists too had a good opportunity to make their findings known. Professor Carmelo Scarpignato, University of Parma, Italy, co-author of the AJG paper called the health education campaign a great success. The international dulcolax website, locally implemented, underlines the global presence of the brand. The review s key findings were that diet and lifestyle should not be assumed to be the main cause of constipation. For some, a fibre-rich diet may be helpful, however, in many people with more severe constipation, fibre intake can make symptoms even worse. Increased fluid intake will not provide significant relief from constipation, except if you are dehydrated. Further findings relate to the use of laxatives that have wrongly been associated with a number of unsubstantiated claims. The review found, for instance, that there is no evidence that laxative use might cause damage to the colon and that it is uncommon for most laxative users to develop a level of tolerance. Significantly, new constipation treatment guidelines for pharmacy staff were, for instance, published in the United Kingdom after the review in the AJG with the endorsement of the College of Pharmacy Practice, which followed the recommendations in the paper. Boehringer Ingelheim s commitment to raising disease and treatment awareness was also evident in the USA where the dulcolax Guide for Healthy Living, a national educational programme, was launched by the Hispanic talk show host Cristina Saralegui in 2004. Constipation sufferers need to listen to their bodies and take action by becoming aware of the things they are doing and not doing to alleviate symptoms, she said. n 58 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Gentle and effective dulcolax forms a key part of Boehringer Ingelheim s self-medication heritage. On the market for over 50 years, dulcolax is available as sugar-coated tablets and suppositories containing the active ingredient bisacodyl as well as pearls and drops containing the active ingredient sodium picosulphate. A unique comfort coating prevents the tablet from being dissolved until it reaches the colon, where its active ingredient is released exactly in the right place. Today, this gentle and effective laxative is marketed in over 90 countries, both on prescription and over-the-counter (OTC). It is recognised as the top selling contact laxative (influence on the motility of the colon by direct contact with the colon wall). And the new thinking about constipation has had a real impact. Shailesh Amin, a retail pharmacist in the UK, noted: I have already made a monumental shift in prescribing advice and sale for constipation products. Out goes lactulose and fibre and in come the contact laxatives. For more information visit www.dulcolax.com Consumer Health Care 59

Consumer Health Care Our Consumer Health Care (CHC) segment achieved net sales of EUR 1.1 billion in 2005 (+8,5 % against the previous year). Both our Americas and Europe Regions achieved strong double-digit growth. Boehringer Ingelheim is ranked No. 8 worldwide among CHC companies and in 2005 enhanced its position primarily through line-extensions and switching prescription-only medicines to over-the-counter (OTC) products. Our key international brands continued to develop positively. Development by brand buscopan a medication against abdominal discomfort and cramping is the worldwide No. 1 antispasmodic brand, according to IMS data. The buscopan franchise produced strong doubledigit growth in 2005, mainly due to successful switches in Mexico, Brazil, Argentina, Colombia and Venezuela. The product is now marketed in more than 100 countries. The development of a validated international brand platform was started in 2005 and is expected to be implemented from 2006, helping to capitalise on the brand s strong medical heritage and build a robust OTC umbrella as a basis for future line-extensions. Sales Consumer Health Care in millions of EUR 1,000 800 600 400 dulcolax our leading laxative brand successfully marketed in more than 100 countries, maintained its No. 1 market position in 2005. In the Americas it continues to reinforce its strong category position. Good performances were achieved in Europe and Asia, with dulcolax holding a strong lead position in important markets, such as Germany and South Korea. Plans to strengthen this brand into a worldwide OTC laxative leader over the forthcoming years is a key focus of our strategic development. antistax our brand for the prevention and treatment of chronic leg vein weakness succeeded in further accelerating growth in 2005, with Italy, Belgium and Germany the main contributors to this positive performance. In Germany, antistax extended its leadership in the leg vein Top 10 products Consumer Health Care Net sales in millions of EUR change 1. dulcolax 114.8 +18.8 % 2. mucosolvan 91.3 +226.6 % 3. geriatric pharmaton 88.4 +4.5 % 4. bisolvon 66.9 +8.4 % 5. buscopan 59.5 +38.2 % 6. laxoberal 31.8 +126.6 % 7. thomapyrin 30.0 15.3 % 8. anador 25.3 +13.0 % 9. antistax 22.6 +2.5 % 10. frubienzym 18.6 12.1 % others 549.2 21.1 % 200 964 970 1,052 For information about indications, see our Glossary on pages 116 118. 03 04 05 60 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

health market. With sales of almost 30 % in the market, Italy made a very substantial contribution to the performance of antistax in 2005. mucoangin our sore throat brand achieved satisfactory growth in the major markets Germany and Mexico. New product launches were made in Denmark and Sweden. mucosolvan the world s leading cough expectorant strengthened its position with good growth of 14 %, compared with 2004. New marketing campaigns were initiated in Mexico, Brazil and Germany during the year. 2006. This will help capitalise on the strong brand image/market position that pharmaton commands in many markets. pharmaton kiddi (children s supplement) produced strong growth in Mexico in 2005, boosted by the launch of galenic line extensions in late 2004. Development by region Europe In 2005, the region reported sales growth as of 14 % compared to the previous year, as a result of a favourable seasonal demand for cough & cold brands combined with several line extension launches, switches and healthy, above-market growth. Activities in 2005 were intensively focused on our international brands. Germany, Spain, Italy and Russia, our major markets in Europe, were the prime drivers of the positive development. bisolvon the cough remedy consolidated its position as one of the leading brands in the world OTC expectorant market. In 2005, it successfully sustained its strong position in many markets, particularly in South America and Europe, achieving double-digit growth. pharmaton our umbrella brand for the improvement and maintenance of vitality and well-being performed well in 2005, with strong growth in the key markets in Latin America Mexico, Brazil and Argentina. IMS figures put pharmaton as world No. 2 in its category. Americas The year 2005 was a very positive one for the CHC business in the Americas Region, which achieved growth of 19 % against previous year. The main growth driver was Mexico. Asia, Australasia, Africa (AAA) SSP Co. Ltd. the No. 3 OTC company in Japan, whose major shareholder is Nippon Boehringer Ingelheim Co. Ltd. strengthened its position in a highly competitive market environment. The AAA Region, excluding Japan, achieved strong growth of +16 % against the previous year. Our international core brands pharmaton, bisolvon and dulcolax showed overall sales growth of 86 %. In 2005, development of a validated international brand platform was started, with implementation expected to start in Consumer Health Care 61

Margareta Ebelt collapsed in her bathroom, struck down by a severe heart attack. Walking her dog, she had felt a twinge in her chest but had not taken any notice. Fortunately, her husband alerted the emergency services immediately. Otherwise, the incident could have been fatal. Margareta lives to tell her story, thanks to right in time treatment with Boehringer Ingelheim s metalyse. Time is extremely critical when suffering a heart attack. In the ideal scenario, treatment can begin aboard the ambulance or as in Margareta s case in the patient s home. The probability of patients recovering fully then rises to around 70 %. Biopharmaceuticals Time 62

is critical 63

I did not want to become one of those helpless folk, Margareta Ebelt says. And she certainly is not. As before, Margareta is now managing the accounts of the company she and her husband own in Dueren, Germany. Besides the human suffering, cardiovascular diseases have a major financial and social impact. Many people who survive a stroke or a heart attack need long-term care. It is estimated that stroke accounts for 4 6 % of healthcare budgets, excluding the costs of social services and care. metalyse (tenecteplase) is the first and only clot-dissolving medication administered as a five-second injection. This biopharmaceutical, manufactured and marketed by Boehringer Ingelheim, is today considered the first line treatment for heart attack (acute myocardial infarction). Early leadership in biotechnology In the rapidly expanding field of biopharmaceuticals Boehringer Ingelheim is one of the world s leading players, building on a wealth of expertise that the company has generated since 1885. The company began using bacteria for the production of lactic acid in commercial quantities as early as 1895. This was the world s first successful use of micro-organisms for large-scale product manufacturing. In 1933, the company successfully developed a process for manufacturing citric acid through the fermentation of fungi. Our competence in fermentation processes provided valuable support in the 1970s for the manufacture of numerous new antibiotics, including amiclenomycin, epidermin and gunacin, lead substances for chemically optimizing medications. After first extracting alkaloids from plants in 1905, Boehringer Ingelheim increased production considerably from the 1960s onwards. This led to the commercial introduction of products, such as morphine and codeine, and later, atropine, theobromine and ergot alkaloids all clinically important agents. Drugs for the 21st century In biopharmaceuticals the active substances are extracted from natural materials, from cells or plants, and not through chemical synthesis. It is widely accepted today that a wide range of diseases, such as diabetes, autoimmune diseases or cancer, are better treated with medicines produced using biotechnology. Reflecting this, the importance of biotechnology has grown significantly since 1990, when not even 1 % of all drugs were produced biologically. Now they account for 8 % and are on a rising trend. It is estimated that by 2018 half of all pharmaceutical turnover will be generated by biopharmaceutical medicines. For newly launched medicines, the figure is already as high as 35 %. For Boehringer Ingelheim the modern era of biotechnology began 64 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

at the end of the 1970s with the manufacture of therapeutically active proteins by genetic engineering. Again, the company was among the pioneers. Our output included interferon beta, interferon omega, Namalwa interferon, interferon alpha, interferon gamma and manganese superoxide dismutase. Successful cooperations Our technical lead in biopharmaceutical manufacture and competence across the whole development and production chain led in the early 1980s to the highly successful cooperation with the California-based Genentech Inc. This resulted in the development of drugs such as actilyse (rt-pa), metalyse (TNK-tPA), imukin (interferon gamma) and beromun (tumour necrosis factor alpha). The company has maintained its early technological lead to the present day. At the Biberach site, the company has the world s second largest plant for manufacturing biopharmaceuticals. Its 12 fermenters each have a capacity of 15,000 litres. Mammalian cell cultures are here turned into highly efficacious drugs, such as metalyse or actilyse, a medication indicated against stroke. To maintain our strong performance in microbial production of biopharmaceuticals a new plant was inaugurated in April 2005 at our site in Vienna, Austria. In addition, we provide know-how to our commercial partners, companies such as Amgen, Pfizer or Schering, for which we do contract manufacturing. n Biopharmaceuticals 65

Biopharmaceuticals and Chemicals Our Biopharmaceuticals division is a leader in time-to-market development for efficient and robust large-scale production of high quality biopharmaceuticals. Its major sites in Vienna, Austria, and Biberach, Germany, have both established a strong track record in development and regulatory approval during the last 25 years. In our Industrial Customer business for global marketing and sales of third parties, we provide the entire biopharmaceutical process chain with our own intellectual property from cell-line development, fermentation, downstream processing, formulation as well as fill and finish in state-of-the-art application systems, including global registration and marketing support for biopharmaceuticals. Biopharmaceuticals Ground-breaking for a brighter future The year 2005 represents the most successful business year so far for Biopharmaceuticals. To maintain our strong performance in microbial production of biopharmaceuticals a new plant was inaugurated in April 2005 at our site in Vienna, where the capacity is now doubled with an investment of EUR 80 million, raising total capacity of 12,300 litres fermentation volume in three parallel operating facilities and created 200 new highly qualified jobs. In order to further accommodate our high-yield fermentation processes for mammalian cell cultures, additional investments are being made at the Biberach site, groundbreaking for competitive manufacturing costs. To address patient convenience, an investment into an aseptic filling line for pre-filled syringes has been given the go-ahead. This should strengthen our leading position in the development of application systems for therapeutic proteins and in future for gene therapeutics too. The full operation of our new facility for cell culture-derived products in Biberach, high-yield processes, extraordinary success rates and our demanding long-term contracts contributed to a sales increase of more than 40 % to EUR 548 million. Our investment in a brighter future was fully materialised, due to very substantial synergies with existing onsite plants in Vienna and Biberach and skilled, highly-experienced employees. 66 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Moreover, for Boehringer Ingelheim s own biopharmaceutical products actilyse, metalyse, beromun and imukin sales amounted to EUR 163 million. metalyse gained significant market share over actilyse, indicating that second generation products with improved efficacy pay off in the market. Cost of goods is a key issue in a competitive environment. For our gene therapy production line at our microbial plant in Vienna improvements in expression yields up to 1.2 g pdna/litre were obtained through culture media development and optimised feeding strategies. Our proprietary microbial expression system for the production of therapeutic proteins was also advanced significantly during 2005 to 12 g protein-inclusion bodies/litre fermentation volume and 80 % yield in the following refolding step. Comparable with our franchise in manufacturing gene therapeutics, an economic manufacturing process for protein scaffolds has been established. It is believed that protein scaffolds will be a second wave of immuno-therapeutics with certain advantages over monoclonal antibodies such as brain penetration, suitability for specific intracellular targets and estimated lower treatment cost. We are already prepared to take up such processes in our Industrial Customer business and for inlicensing for our own R&D pipeline. One of our partners in this field is Avidia. Short half-life and parental application of biopharmaceuticals can be compensated, for example, by pegylation of the protein therapeutic. Expertise in this technology led in 2005 to new business. For mammalian cell cultures, a monoclonal antibody titer of more than 4g/litre has been reached successfully in process development. Major investments in increased capacity combined with achievements in process sciences and manufacturing, together with improved business processes, provide potential for improved profitability in manufacturing and strengthen Biopharmaceuticals competitiveness on the world market. The year 2005 marked the 10th anniversary of our mammalian cell culture multi-product US Food and Drug Administration (FDA) license. During the FDA s 2005 biannual inspection, all of our facilities and products were certified. In the new cell culture facility with 6 x 15,000 litre capacity a Biopharmaceuticals and Chemicals 67

second manufacturing process has been successfully implemented. The facility was also licensed as a multi-product facility by the FDA in 2005, just one year after initial licensing as a monoproduct facility. Our new biological entity (NBE) pipeline strategy has been implemented to fuel Boehringer Ingelheim s R&D pipeline with biopharmaceuticals. In this context, a monoclonal antibody for the treatment of psoriasis was in-licensed from AbGenomics. A research collaboration for natriuretic peptide receptor fusion proteins with Syntonix has been commenced. Medarex and MorphoSys technologies have been licensed in 2005. All these efforts are designed to create added value for Boehringer Ingelheim s NBE development. Chemicals Chemical Production In recent years, our production network Chemicals has been developed into a globally-orientated organisation, developing and producing active pharmaceutical ingredients (APIs) for Boehringer Ingelheim. By focusing our chemical sites Germany, France, Italy, Spain and the USA on specific predefined roles within the network, flexible and highly competitive production of active pharmaceutical ingredients (APIs) has been secured for captive use and industrial customers. In 2005, the launch of aptivus was supported by API production at the launch site Ingelheim, Germany. To satisfy constantly growing demand for micardis, the Petersburg, Virginia, USA, site commenced production of telmisartan. In addition, the Malgrat, Spain, site hosted an international workshop, where members of the Telmisartan Expert Teams from Ingelheim, Petersburg and Malgrat met to establish best practices at all sites through an intensive exchange of experiences and accessing opportunities for continuous improvement. Investments Worldwide investments in property, plant and equipment accelerated at Boehringer Ingelheim in 2005. They increased by about 25 % compared to 2004 to EUR 532 million. These investments mirror our dynamic business growth, says Dr Hans-Jürgen Leuchs, Board Member responsible for Operations. The most important project completed in 2005 was the new biopharmaceutical production plant in Vienna, Austria (inauguration in Vienna 2005, picture on the right), an investment of some EUR 80 million, which will also create 200 new jobs. The company is strongly expanding its biopharmaceutical investments in order to maintain its leading edge in this field. EUR 70 million will be invested to modernise (de-bottleneck) one of the high capacity biopharmaceutical plants in Biberach, Germany. Further investment projects in 2005 were the starts of a new logistics centre in Ingelheim, and a physical science building in Ridgefield, Connecticut, USA. The expansion of the chemical production plant in Petersburg, Virginia, USA is ongoing, and also the expansion of the production lines at our companies Roxane Laboratories, Inc., Columbus, Ohio/USA, and Ben Venue Laboratories, Bedford, Ohio. 68 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Pioneering college course in biotechnology In a unique educational venture Boehringer Ingelheim is participating in a pioneering public-private partnership in Biberach, Germany, to create a college course in pharmaceutical biotechnology. The groundbreaking ceremony for the technical college building that will house the course took place in June 2005. The first group of 35 students is scheduled to start the bachelor of science course in the winter semester 2006-7, but ultimately the number of students will total 200. Prof. Rolf Werner, head of the division Biopharmaceuticals at Boehringer Ingelheim, described the venture as an investment in the future for the Baden-Wuertemberg region, for Germany and for Boehringer Ingelheim. Biberach is the main site of the company s biopharmaceutical activities. The partners in the project are the local, regional and federal authorities, a local bank and the biotechnology company Rentschler. The degree course will cover everything from the basic science and analytical techniques in biopharmaceuticals through process development and plant technology to business economics and medical law. Fine Chemicals The sales figures of our worldwide Fine Chemicals business developed very well. Despite difficult market conditions, arising, for example, from Indian competition surplus capacities, they attained the same level as in 2004. Consolidated sales amounted to EUR 140 million in 2005, just matching the 2004 level, irrespective of the substantial loss of a custom synthesis product. The importance of the US market increased further. A highlight of 2005 was the performance of phenylephrine. Volumes doubled due to sales restrictions on an alternative API in the USA. Controlled substances also showed gratifying growth in the USA. Sales from new business development projects performed very well, too. Biopharmaceuticals and Chemicals 69

Animal Health Helping the 70

heart When her Labrador Buster fell ill, he could no longer play with little Anna Kingston. Our dog was frail and apathetic, says Anna s mother, Liz. Buster was unresponsive, weak and lacked his usual spirit. Like the one in ten dogs with heart disease, he was suffering from what the experts call dilated cardiomyopathy (DCM) which produces changes in the heart, reducing its capacity, leading to congestive heart failure. This at first causes breathing difficulties and exhaustion, later leading to premature death. 71

Fortunately for Buster and the Kingston family, vetmedin, a breakthrough treatment developed by Boehringer Ingelheim for treating heart failure in dogs, was available. Buster has been part of the Kingston family for the past five years. He won our hearts in an instant and bonded particularly strongly with our little daughter Anna, says Liz Kingston. They would tumble around all the time, playing with a ball or exploring their surroundings. In winter, we suddenly noticed that Buster at night paced to and fro nervously. His breathing was difficult and he developed a cough. At first we thought it was just a cold, but Buster would lay on his blanket all day and not even want to go for walkies. The family finally turned to their veterinarian, Dr Henry Norfolk, who diagnosed that Buster had DCM, a disorder which, if untreated, means an average life expectancy for the dog of only a few weeks or months. This news hit us very hard, but thankfully Dr Norfolk knew that vetmedin (pimobendan) has been shown to be a highly effective medication for this condition, Liz Kingston recalls. After hearing about the favourable results of various studies involving the treatment, the family had renewed hope for their much-loved pet. Their hope was fulfilled when, shortly after treatment began, Buster was much better and almost back to his old playful self. That was over a year ago and Buster is still going strong. We ve been so thankful for every extra day that we ve had with Buster, Liz concludes. 72 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

According to the American Veterinary Medical Association (AVMA), canine heart disease is one of the leading causes of death in pet dogs. Of the 10 % of dogs which develop congestive heart failure, DCM is the second most frequent cause. Studies prove efficacy Veterinarians have increasingly recognised vetmedin as a first-line treatment for canine congestive heart failure due to both DCM and mitral valve disease (MVD). vetmedin differs from previous treatments by helping the heart pump more easily and efficiently, often bringing dramatic clinical improvement within days of initiating treatment. In contrast to other commonly used heart drugs that only attack the disorder with a single mode of action, vetmedin combines two favourable actions. It dilates the blood vessels, thereby reducing the effort the heart has to make to circulate blood. At the same time, vetmedin works to increase contractility by helping the heart to pump more strongly and more efficiently. The first of a new class of compounds, this inodilator s unique dual action, makes it an optimum treatment for MVD and DCM, the two most common forms of heart disease in dogs. Clinical studies have independently confirmed the significant superiority of vetmedin. Boehringer Ingelheim aims with the long-term study quest (QUality of Life and Extension of Survival Time), initiated two years ago, to further research the important parameters of quality of life and life expectancy. Based on this study, one of the world s largest independent studies in companion animal veterinary medicine, a new benchmark will be set for treating heart failure in dogs. n Beneficial alliance Boehringer Ingelheim Animal Health cares for pet animals, for a longer and happier life together. This is one of the cornerstones of our mission. Boehringer Ingelheim has for the past half century cared for the benefit of animals and people, discovering and developing a wide range of novel, practical treatments for cats and dogs. The company is dedicated to fostering a beneficial alliance between man and animals by uniting research expertise and human pharmaceutical excellence. Our pets are living longer, healthier and happier lives through improved nutrition and healthcare. This has created a real demand for effective and safe treatments for chronic and geriatric conditions, such as heart disease, osteoarthritis and cancer. vetmedin helps the heart to pump more strongly and more efficiently. Animal Health 73

Animal Health Our Animal Health division celebrated its 50th anniversary in 2005. While this makes Boehringer Ingelheim one of the long-established companies in this industry, it stands out as one of the most innovative and dynamic. The anniversary year saw generally very satisfactory business development. Sales rose by 8 % to around EUR 360 million in local currency. Our focus in 2005 continued to be on the core segments livestock vaccines and chronic diseases in companion animals and on optimisation of organisational and marketing structures. This further consolidated our position among the top 10 leading animal health companies in the world, giving us a global market share of 3 %. Regional differences Growth in 2005 varied greatly from one region to another. Once again, Europe, the growth engine behind the Animal Health division, posted excellent business development in the market with an 7 % increase in sales. The NAFTA region posted sound growth of 9 %, but the year was marked by special factors, such as the sale of the antibiotic denagard to Novartis. Asia also had a successful year. Sales in China and Thailand more than doubled, while the registration of ingelvac prrs in these countries paved the way for continued strong growth. In Japan, the restructuring process, aimed at streamlining the product portfolio and concentrating on our core segments, is practically complete. The launch of our porcine vaccine range in Latin America and Eastern Europe is currently being prepared. Food-producing animals Swine The key event in the swine segment in 2005 was the pan-european launch in Barcelona in October 2005 of enterisol ileitis, the first and only vaccine in the world for the widespread disease ileitis that is associated with diarrhoea. Our experience in practice to date has been extraordinarily positive. In the USA, every third pig was vaccinated against ileitis in 2005, while control of the disease was established as an essential element of professional healthcare management of pigs. In Germany, some producers associations have already declared the use of the oral vaccine to be mandatory, only one year after launch. enterisol ileitis is thus well on the way to becoming another of Animal Health s top products. It is noteworthy that we received marketing authorisation for enterisol ileitis in Australia. Not only is this the first Boehringer Ingelheim vaccine to be introduced in Australia, but it is also the first imported modified live vaccine to be given marketing authorisation there. Our flagship product ingelvac prrs showed extraordinary development, particularly in South Korea where sales doubled. Our best-selling vaccine is now also available in China, the largest swine market in the world, allowing us to consolidate further our No. 1 position there among the international suppliers of porcine vaccines. ingelvac m. hyo also posted strong growth. This enabled our young company in Thailand to become market leader in this indication in a very short time. Excellent results were also achieved in France where ingelvac m. hyo improved by 36 % in a flat market, thus securing a market share of 31 %. On the whole, 2005 saw excellent progress with our porcine vaccines, one of our core target segments, putting us well on the way to becoming global market leader. 74 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Cattle There were two highly gratifying developments in the cattle segment. First, the food-producing animal industry is becoming increasingly aware that healthy animals also produce healthy meat and higher milk yields. More and more farmers therefore attach value to effective treatment of their animals pain and inflammation, thus helping our metacam progress towards becoming the gold standard in this area. The drug continued its double-digit growth in the cattle segment in 2005. Half a century keeping animals healthy Boehringer Ingelheim has been committed to maintaining and improving the health of companion and farm animals since the mid-1950s. The following milestones show the launch years for key veterinary medicines from our own research and development. Secondly, our mastitis products not only maintained their excellent market position in 2005, but were also able to step up market penetration in the developing markets, a positive trend that is likely to be consolidated further. An international congress in Maastricht provided impressive evidence of the excellent efficacy of our classical product mamyzin in subclinical mastitis. The vaccine portfolio continues to represent one of the strongholds of our cattle business in the NAFTA region. Companion animals Small animals The small animals segment can look back on a highly successful year. With consistent growth of our existing products we confirmed our leading market position in many key countries. The extraordinary performance of vetmedin is particularly promising, with worldwide growth of 24 %. This drug secured first or second position on all the leading markets in Europe. The outstanding growth rates in Canada (82 %) and France (27 %) give us every reason to be extremely optimistic about the next few years when the product will be registered in other key markets. 1955 pecusanol (lindane) a treatment for ectoparasitic infestation of all types of animals 1956 lobelin (lobelin HCl) a treatment for airway diseases in horses, especially used as a stimulant for newborn foals, based on the active principle of lobelia inflata (Indian tobacco plant) 1964 voren (dexamethasone-21-isonicotinate) a longacting catabolic steroid used to treat metabolic disorders, inflammation and allergic reactions in cattle, swine, horses, dogs, and cats 1966 buscopan compositum (N-butyl scopolamonium bromide + metamizole) a spasmolytic and pain inhibitor for treating colic in horses, based on active substance from the Duboisia (Corkwood) plant 1967 bisolvon (bromhexine) a mucolytic for treating respiratory disease in cattle, swine and small animals where mucus is a complicating factor 1980 ventipulmin (clenbuterol HCl) an equine respiratory treatment that relieves the breathing difficulty of horses with conditions characterised by reversible bronchospasm, or mucus accumulation, including heaves or chronic obstructive pulmonary disease (COPD) 1989 ingelvac aujeszky mlv (Bartha strain K-61) the first of the ingelvac series of products to immunize swine against a range of viral infections continued on next page Animal Health 75

continued from page before 1995 ingelvac prrs mlv (Porcine respiratory & reproductive syndrom virus, modified live virus) 1998 metacam (meloxicam) initially launched for dogs, this treatment is now licensed for alleviating pain and reducing inflammation in many indications in dogs, cats, horses, cattle and pigs 1999 vetmedin (pimobendan) a treatment for congestive heart failure in dogs 2001 (US) enterisol ileitis (Lawsonia intracellularis a virulent live culture) first vaccine against Lawsonia intracellularis worldwide 2002 (EU) ingelvac m. hyo (Mycoplasma hyopneumoniae bacterin) novel technique allows a one shot only vaccination metacam also achieved a strong increase in sales which highlights the excellent performance once again in 2005. With double-digit global growth rates, we effectively maintained our position in Europe, Canada, and Australia, in spite of fierce competition. The new small animals team in the USA achieved striking success, advancing in record time to take 3rd position in the market. Horses We once again maintained our strong position in the horse segment in the European and American markets. With the introduction of the intravenous solution for injection, metacam horse, in Europe, we extended our portfolio with a frequently demanded product. At the same time, two launches in the USA, the world s largest equine market, provided further impetus for growth: buscopan, the classical treatment for equine colic, and sedivet, a drug used to sedate animals. Business with our non-prescription products canosan, seraquin and viatop, a new product for skin disorders, showed a gratifying trend throughout the entire companion animals segment. Research and development True to our company vision Value through Innovation, we invested around 12 % of our Animal Health sales in research and development in 2005, a high percentage for the international industry. The focus was primarily on the development of new pharmaceutical solutions for small animals and preventive measures for the large animals sector. These efforts have culminated in several interesting projects in the current pipeline and good progress in the development of innovative pharmaceutical molecules and vaccines. 76 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Group Management Report

Group Management Report Business and operating environment Overview The development of the world economy in 2005, compared with the previous year, was characterised by a marked increase in raw material prices. At the same time, generally low capital market interest rates, a rather expansion-orientated monetary policy and the corporate earnings position had an overall positive influence on the economic cycle. remains very difficult due to high unemployment and stagnating domestic demand. Stimulation for the German economy came substantially from exports. Global conditions for research-driven pharmaceutical companies did not improve last year. Regulatory interventions are no positive signal for the development of innovative medicines. Despite these trends, Boehringer Ingelheim will continue to do its best in researching new, innovative pharmaceuticals for the benefit of patients. Regionally, the USA and China were the growth centres of the world economy. The Japanese economic situation also developed favourably and it is to be hoped that the stagnation phase is now overcome for good. The development of the economic cycle in Europe was rather restrained. In Germany in particular the economic situation The world pharmaceutical market grew by 6.3 % in the financial year 2005, discounting currency effects. With an increase of 23.9 % in this period, Boehringer Ingelheim clearly exceeded average market growth. It is noteworthy that Boehringer Ingelheim outpaced the pharmaceutical market in every region, reflecting the global orientation Net Net sales sales by businesses by 2005 2005 (in millions (in millions of EUR) of EUR) Net Net sales sales by region by region 2005 2005 (in millions (in millions of EUR) of EUR) Prescription Medicines Medicines 6,183 6,183 7,247 7,247 Americas Americas 3,905 3,905 4,559 4,559 Consumer Consumer Health Health Care Care 970 970 1,052 1,052 Biopharmaceuticals 392 392 548 548 Fine Fine Chemicals Chemicals and and Manufacturing Pharma Pharma 262 262 299 299 Animal Animal Health Health 335 335 361 361 04 05 04 05 Total Total 8,157 8,157 9,535 9,535 Europe Europe 2,622 2,622 3,117 3,117 Asia, Asia, Australasia, Africa Africa 1,630 1,630 1,859 1,859 04 05 04 05 Total Total 8,157 8,157 9,535 9,535 78 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

and strength of the group. The greatest stimulus for growth in 2005 came once again from America, the most important market for research-driven pharmaceutical manufacturers. Here, we gained additional benefit from the positive commercial development of our product mobic. Boehringer Ingelheim s growth on the pharmaceuticals market consequently led to a marked increase in group turnover. In 2005, Boehringer Ingelheim generated net sales of EUR 9.5 billion, corresponding to an increase of 17 %. The positive development of business in 2004 was thereby continued further. A comparative analysis of the business results for the years 2004 and 2005 can virtually ignore the influence of foreign exchange, as this only accounts for a factor of < 0.1%. The business segment Prescription Medicines (PM) was responsible for the largest share of the success achieved in the past financial year. In addition, our other segments also developed very satisfactorily: Net sales (in millions of EUR) 2005 2004 Change Prescription Medicines 7,247 6,183 +17 % Consumer Health Care 1,052 970 +9 % Biopharmaceuticals 548 392 +40 % Animal Health 361 335 +8 % The development of net sales in the segments Consumer Health Care (CHC) and Animal Health is noteworthy, as both businesses had to maintain their position in a very difficult market environment. The outstanding business development of Biopharmaceuticals was the main growth driver of our Industrial Customer business and maintained the growth rates of the previous year. For the business segment Prescription Medicines, the market launch of aptivus, a protease inhibitor for the treatment of immunodeficiency disease HIV, was remarkable in two senses. First, the medication was developed to market maturity in a very short time. Secondly, only seven days after approval by the US Food and Drug Administration (FDA) in June 2005, aptivus was already commercially available. Thus, patients have access to a new, highly efficacious therapy option for the treatment of HIV disease. In November, the product was launched in Germany and the United Kingdom. The very positive uptake of already established, innovative pharmaceutical products in our markets also contributed to the success in 2005. spiriva is already the most commonly prescribed product for the treatment of chronic obstructive pulmonary disease (COPD). The launch of spiriva in Japan in December 2004 made it possible for the first time for patients to be treated with this innovative medication in almost all important pharmaceutical markets. The cooperation with Pfizer Inc. on marketing the product has proved its worth. Sales of micardis, a treatment for hypertension, have also shown very gratifying development. Clinical studies which were concluded in 2005 have confirmed our high expectations concerning the efficacy of micardis. Despite intensive competition in this market segment, we still anticipate further growth potential for this product. Our business success in previous years was also founded on the vision Value through Innovation (VTI) embedded in our corporate culture. With the introduction in 2005 of the initiative Lead & Learn we have given the VTI concept fresh stimulus. We thereby ensure that the VTI principles will also be secured in the company in future and continue to be translated into reality. To sum up, 2005 was for Boehringer Ingelheim a highly successful year in which we laid solid foundations for the further development of the group of companies. Group Management Report 79

The most important key figures for earnings are as follows: (in millions of EUR) 2005 2004 Change Net sales 9,535 8,157 +17 % Operating income 1,923 1,372 +40 % Return on net sales (as %) 20.2 16.8 Research and Development Boehringer Ingelheim sees its objective as developing new medicines and therapies, thereby helping the sick. This strategic orientation is shown in both actual projects and initiatives and in the worldwide expenditure on research and development. In the financial year 2005, Boehringer Ingelheim invested EUR 1,360 million in R&D. R&D expenditure as percentage of net sales amounted to 14.3 % in 2005 (2004: 15.1 %). The focus of our R&D activities is Prescription Medicines. In this segment, the R&D expenditure as a share of net sales stood at 18.2 % in 2005 (2004: 19.3 %). Boehringer Ingelheim supports this focus with its own research that is concentrated on the following therapeutic areas: respiratory diseases virology oncology metabolic diseases cardiovascular diseases central nervous system diseases immunology and inflammation These areas of research are divided according to their defined focus between four main research sites in Germany, the USA, Austria and Canada. In the area of respiratory diseases, 2005 saw the successful launch of spiriva in Japan. Further studies have long confirmed the efficacy of this medication. Research in the disease COPD is being consistently continued. A focus of research in virology is a new nonnucleoside reverse transcriptase inhibitor (NNRTI) which can be applied particularly when resistance to hitherto used therapeutic regimes occurs. In addition, this concerns the consistent further development of the class of drugs to which the successfully launched viramune belongs. In oncology, new active ingredients have been discovered which promise new therapeutic approaches and opportunities to cure various types of tumour. These are currently in phase I of clinical development. The first results were presented to the scientific community in the USA in late autumn last year. In metabolic diseases, new therapeutic approaches to treating diabetes mellitus type II are in the foreground, especially in conjunction with associated secondary diseases. Some projects show promising therapeutic approaches and are at present in the pre-clinical or clinical phases. Studies in the area of central nervous system diseases have confirmed that mirapex /sifrol can be used to treat restless legs syndrome. In addition to its efficacy, its good tolerability in particular was confirmed. Applications for market approval for this indication were submitted in the USA and Europe in 2005. Research and development 2005 2004 2003 2002 2001 Expenditure (in millions of EUR) 1,360 1,232 1,176 1,304 1,019 as % of net sales 14.3 15.1 15.9 17.2 15.2 Human Pharma. expend. (in millions of EUR) 1,318 1,195 1,140 1,264 984 as % of net sales of HP 14.4 15.3 16.1 17.4 15.4 Average number of employees 5,678 5,471 5,362 5,205 4,828 Investments in tangible assets (in millions of EUR) 116 97 93 97 99 80 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

cymbalta, the anti-depressive in-licensed from Eli Lilly & Co., received in the meantime approval as a treatment in 20 countries, thereby reinforcing our therapy area central nervous system. On top of our own research efforts, our activities and projects are complemented by strategic alliances and in-licensing technologies. In the past financial year, technologies were, for example, in-licensed from MorphoSys and Medarex that should support our research activities in the field of biotechnologically manufactured pharmaceuticals. This also applies for a monoclonal antibody in-licensed from AbGenomics. From today s perspective, Boehringer Ingelheim s R&D pipeline provides a very good foundation to support and enable the further development of our company on a lasting basis. Production Boehringer Ingelheim s production activities are divided into three areas: chemical production (five sites worldwide): this encompasses both the manufacture of active ingredients for our own pharmaceutical production and chemical active ingredients for customers outside the Boehringer Ingelheim group. pharmaceutical production (19 sites worldwide): pharmaceutical production concentrates on manufacturing finished products. Production is structured in technological centres of competence, which operate in a production alliance. biopharmaceutical production (two sites in Europe): as for chemicals, biopharmaceuticals are produced for both Boehringer Ingelheim medications and for third parties. Environmental reporting According to the guiding principles (Leitbild) of Boehringer Ingelheim, the preservation and protection of the environment has a very high priority. This derives ultimately from our claim to help people with our products. This helping stance is only credible if Boehringer Ingelheim takes an active part in preserving the environment. It goes without saying that Boehringer Ingelheim respects and observes each country s legal regulations. Beyond that it is our aim to exceed the environmental requirements where we consider this purposeful and necessary. Our established processes in the field of Environmental, Health & Safety (EHS) form the foundation for successful implementation of the fundamental principles of environmental policy. Thus we carried out environmental audits at 11 different sites in 2005. The purpose was to see whether the environmental guidelines we have set out were being observed. In 2005, Boehringer Ingelheim was also awarded various prizes in the EHS field. The award received by the chemical site Petersburg,Virginia, USA, hailed its new wastewater plant as exemplary. Employee reporting The favourable business development of the past year is also expressed in the marked increase in the number of employees. Averaged over the year, 37,406 people were employed at Boehringer Ingelheim, corresponding to an increase of 5 % against the previous year. In Germany, we received first prize for the highest number of new people hired in 2005 in our reference group. We are particularly proud that in 2005 we clearly increased our offer of apprenticeships at our German subsidiaries compared to 2004. An essential goal for our human resources work is to hire the best employees and retain them long-term. Various personnel and leadership development paths are available in order to consistently develop further the talents of our employees. Group Management Report 81

Social responsibility Boehringer Ingelheim takes an active part in the overall social responsibility with great care and considerable enthusiasm. For example, since the year 2000, programmes have been supported that substantially reduce the transmission of HIV from mother to child during birth through antiretroviral therapy. The viramune necessary for this purpose is made available free of charge by Boehringer Ingelheim. In calendar year 2005, Boehringer Ingelheim supported about 140 programmes in around 60 countries. In addition, Boehringer Ingelheim fosters the development of healthcare systems in defined countries. In Botswana, for instance, a training unit was opened to promote medical education. Our overall social responsibility is expressed in additional international initiatives. For example, we gave rapid and unbureaucratic support with money and materials to the victims of the natural catastrophes in Southeast Asia and Pakistan. In this context, it is important to point out that, in addition to the engagement of our company, many of our employees voluntarily use their free time to involve themselves in social projects. For this, we would like to express our heartfelt thanks to all our employees. Actively helping people is for us an expression of an attitude that reflects the way Boehringer Ingelheim perceives itself and which we support as much as possible. Results from operations, financial position and net assets Results from operations Based on currently available market data, Boehringer Ingelheim was last year the fastestgrowing pharmaceutical company in the world within its benchmark group. Our company is now ranked No.14 among the largest pharmaceutical companies, with a worldwide market share of 2 %. Boehringer Ingelheim s net sales increased by 17 % in 2005 to EUR 9,535 million. This gratifying development reflects the favourable market uptake of the pharmaceuticals, which we produce and sell. The currency effect of EUR 3.3 million only had insignificant influence when the financial years 2004 and 2005 are compared. The full consolidation of our South Korean subsidiary since 2005 has a one-off effect of EUR 18 million on net sales. Comparing growth rates in 2005 and 2004, an additional extraordinary effect due to the product sifrol has to be considered. Except for the USA, exclusive worldwide marketing rights were returned to Boehringer Ingelheim by Pfizer Inc. on 15 October 2004. Boehringer Ingelheim s activities are concentrated on the two businesses Human Pharmaceuticals and Animal Health. Net sales in Human Pharmaceuticals, with activities grouped under the segments Prescription Medicines, Consumer Health Care and Industrial Customer, amounted to EUR 9,174 million in 2005 (+17 %). This corresponds to 96% of total group net sales. Prescription Medicines (PM) Within the Human Pharmaceuticals business, PM accounts for 79 % of net sales, forming the centrepiece of our activities. In 2005, we achieved net sales of EUR 7,247 million in this segment (2004: EUR 6,183 million). A currency effect of EUR 6 million must be taken into account when analysing the figures. From a worldwide business development perspective, the following products were the strongest growth drivers: Net sales (in millions of EUR) 2005 2004 Growth spiriva 951 525 +81 % sifrol /mirapex 434 285 +52 % micardis 724 568 +27 % mobic 848 672 +26 % 82 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Components of growth in net sales (as %) 2005 2004 2003 2002 2001 Price/quantity/new introductions 17.4 16.1 7.8 10.1 8.9 Acquisition and sale of businesses 0.5 0.5 0.2 7.1 0.7 Currency effect 0 5.1 10.2 4.0 0.0 spiriva, our new medication for the treatment of COPD, has developed very satisfactorily. Net sales for cymbalta, the product in-licensed from Eli Lilly & Co. and launched in 2004, performed as expected. The positive uptake by patients and the market of aptivus, a protease inhibitor for the treatment of the immunodeficiency disease HIV, will also strengthen the development of our innovative product portfolio in the coming financial year. In addition, products that are already established on the market will support the business development in the future. Analysing the regions in which we operate around the world, it can be observed that Boehringer Ingelheim has clearly grown more strongly than the respective regional pharmaceutical markets. The Americas Region, with a share of 51 %, contributes the largest part of net sales in PM. Compared to the previous year, growth of 17% was achieved here, corresponding to net sales of EUR 3,670 million. The USA, with its 85 % share of net sales, is the largest and thereby the most important country for Boehringer Ingelheim in this region. Our products spiriva and mobic in particular were responsible for the positive US business development, increasing net sales by EUR 345 million (+58 %) compared to the previous year. The Europe Region s share of net sales in this market segment stands, with a volume of EUR 2,037 million, at 28 %. It contributed to the success in 2005 with a 15 % increase in net sales compared to the previous year. With net sales growth of over 22 %, business development in Germany was very gratifying compared to the previous year. Growth in our home country was mainly achieved with our innovative medications spiriva, sifrol, micardis and cymbalta. In addition, there was the launch in Germany of the product alna ocas, which allows benign prostatic hyperplasia (BPH) to be treated with a single dose per day. Despite increasing regulatory restrictions too, the Asia, Australasia, Africa (AAA) Region achieved double-digit growth in net sales, contributing to group success with net sales of EUR 1,312 million. With its 61 % share, Japan is for us the largest market in this region. In 2005, our Japanese subsidiary attained net sales growth of 12 % to EUR 801 million in this market, largely attributable to the highly favourable development of micardis. The Australian market also performed above average, with a EUR 24 million, or 25 %, increase in growth. Overall, we achieved net sales of EUR 120 million in this market. In India, we have started to build up our own subsidiary. Foreign exchange development EUR 1 in USD (average exchange rates) EUR 1 in YEN (average exchange rates) 1.30 1.25 1.20 1.15 1.10 1.05 1.00 0.95 0.90 01 02 03 04 05 150 140 130 120 110 Group Management Report 83

Consumer Health Care (CHC) In the business segment CHC we raised our net sales by 9 % to EUR 1,052 million (discounting currency effects: EUR 1,056 million). Consistent orientation towards core brands defined in our strategy continues. Non-prescription products, whose patent protection has expired, will be integrated into existing product lines, and, wherever possible and purposeful, an umbrella brand strategy will be built up. Worldwide growth was achieved by the following product groups in particular: Net sales (in millions of EUR) 2005 2004 Growth mucosolvan 91 40 +228 % buscopan 59 43 +37 % dulcolax 115 97 +19 % pharmaton 88 85 +4 % The distinct increase in net sales for mucosolvan resulted, on the one hand, from a major cold outbreak at the beginning of 2005, and on the other hand, from product group switches in some countries from prescriptiononly pharmaceuticals to the CHC business segment. buscopan, as a result of product switches in certain countries in the Americas Region, also benefited from this special effect, which explains part of the double-digit growth in net sales. Based on available market data, the buscopan brand has secured No. 1 position worldwide in antispasmodics. Business development differed greatly from region to region. While in the Americas (+19 %) and Europe (+14 %) marked net sales increases were achieved, net sales in AAA fell slightly (-1.8 %). This was because we were able to maintain, but not expand, our market share in a very difficult business environment in Japan. Overall, in the financial year 2005, we achieved the following net sales figures for each region: Americas EUR 222 million, Europe EUR 436 million and AAA EUR 394 million. Industrial Customer The third party business in pharmaceutical production and the fine chemicals area broadly matched the previous year s level with net sales of EUR 298 million. Alongside the important role that Biopharmaceuticals has in developing and manufacturing medications for the Boehringer Ingelheim group, last year it was highly successful with regard to producing biopharmaceuticals for other pharmaceutical companies. Net sales of biotechnologically produced medications for third parties rose from EUR 392 million to EUR 548 million, corresponding to growth of 40 %. Increased customer demand indicates the market success of the products our group manufactures for third parties. The commissioning of our new production facility in Vienna, Austria, and the marked improvement in productivity of the existing production plant in Biberach, Germany, enabled us to fulfil market demand. Routine inspections carried out by the FDA last year resulted in certification of our production facilities and processes by the auditors. Animal Health Compared to the previous year, the Animal Health business developed very positively in an intensely competitive market, with net sales growth of 8 %. Total net sales in the last financial year amounted to EUR 361 million (discounting currency effects EUR 360 million). 84 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Worldwide growth was achieved by the following product groups in particular: Net sales (in millions of EUR) 2005 2004 Growth vetmedin 16 13 +23 % ventipulmin 13 11 +18 % metacam 68 58 +17 % ingelvac m. hyo 21 18 +17 % enterisol ileitis was successfully launched in Europe in October 2005. This is an oral vaccine for preventing the bacterium Lawsonia intracellularis. This bacterium triggers inflammation in the gut of domestic pigs that hitherto could only be treated with an antibiotic therapy. Some producer associations in Germany have already made vaccination mandatory for their members farms. metacam has developed favourably for all types of animal. vetmedin, a pharmaceutical for the treatment of degenerative heart failure in dogs, has exceeded our commercial expectations. Business developed very well in all three Regions. Europe, with a 45 % share of net sales, is just ahead of the Americas Region (42 %). In the Americas, extraordinary effects have to be taken into account. For example, the sale of the antibiotic denagard to Novartis in the NAFTA region produced a fall in net sales, which had a correspondingly negative impact on the business. The 8 % growth in net sales achieved in 2005 must therefore be regarded as all the more gratifying. In the AAA Region net sales growth of 7 % also contributed to the success of the Animal Health business. Expenditure and income Total operating costs of EUR 8,388 million were 14 % above the previous year (EUR 7,362 million). Material costs (EUR 1,613 million) by comparison increased above average, with growth of 25 %, mainly due to changes in the product mix. The increase in the average headcount led to a 9 % rise in personnel costs to EUR 2,671 million. Again, in 2005, Boehringer Ingelheim made further efforts to secure the future of the group of companies through appropriate investments. Taking into account the newly initiated projects in 2005, depreciations increased by EUR 60 million to EUR 531 million, corresponding to an increase of 13 %. Other operating expenses rose by EUR 414 million (13 %). The amount of EUR 3,573 million includes expenditures arising from the termination of a sales cooperation with Abbott. Overall, this produces a EUR 551 million higher operating income of EUR 1,923 million, that aptly records the success of the past financial year. The Boehringer Ingelheim group s return on net sales rose distinctly from 16.8 % to 20.2 %. The financial income diminished by EUR 20 million to EUR -35 million compared to the previous year. The reasons for this decline were mainly losses on transactions in foreign exchange derivatives. Holding income, with a contribution EUR 0 million, was EUR 2 million lower than the previous year. In the past financial year, the extraordinary effect arising from the disposal of a holding was not repeated. Taking into account the individual income components, income before taxes was EUR 1,888 million, a significant increase of EUR 529 million or 39 % above the previous year. Tax expenses amounted to EUR 374 million, corresponding to a tax ratio of 20 % (2004: 33 %). Here, it must be taken into consideration that, due to regulations in 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 effect into consideration, the actual tax ratio is markedly higher than the value shown in the profit and loss statement. Group Management Report 85

The clear decline in the tax ratio compared to financial year 2004 is a result of the restructuring of inter-company relationships at group level. This has full effect for the first time in 2005. In 2004, the tax ratio was negatively impacted by a one-off extraordinary effect amounting to EUR 121 million which arose from changes to the tax tariff applied in the calculation of deferred taxes. Taking into account the described tax effects, net income rose from EUR 888 million to EUR 1,491 million. Financial position Boehringer Ingelheim s financial management is in its instruments and methods aligned with the 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 which arises from our international business relations. For the financial year 2005, Boehringer Ingelheim s very good economic development is also reflected in its further improved financial position compared to the previous year. The cash flow in 2005 amounted to EUR 2,069 million, corresponding to 45 % growth compared to the previous year. The cash flow from operating activities rose to EUR 2,390 million and is thereby markedly higher than funds used for investment activities in the past year. Financial activities yielded an outflow of EUR 1,334 million from changes in equity as well as credits raised with financial institutions. Securities and liquid funds increased by 14 % to EUR 4,585 million. The complete presentation of the cash flow calculation is to be found in the financial section of the annual report. To summarise, it can be noted that, because of the existing liquidity, the given capital structure and the available funding potential, the financial preconditions for successfully realising our strategy remain in place. The goals we set within our financial strategy have been fulfilled. Investments are necessary and important for securing our future development. We have therefore increased our investment activity in 2005 to EUR 532 million (2004: EUR 427 million), which registered as a distinct increase in our tangible assets. The bulk of the investments were made in implementing new technologies, expanding our capacity and rationalisation projects. At our German research site in Biberach the new galenics building was commissioned. Furthermore, funds were released for a packaging centre (LogiPack Center) and a new works canteen at the Ingelheim site. In future, products manufactured in Germany will receive their final finishing in our LogiPack Center. The canteen s capacity will be in line with the markedly increased number of employees in recent years and the expected increase. In the USA, we have also commenced important investment projects. Good examples are the expansion of production facilities at our subsidiary Ben Venue Laboratories in Bedford, Ohio, and additional research capacity at Ridgefield, Connecticut. Net assets Total assets rose by 13 % in 2005 to EUR 12,018 million. The long-term, secured assets are covered by Boehringer Ingelheim s total equity. By actively managing our receivables, and discounting currency effects, we achieved a development that was disproportionately small relative to the expansion of our business. 86 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Liquid assets declined by 12 % compared to the previous year to EUR 1,167 million due to the transfer of liquid funds into the financial assets. Group equity increased to EUR 4,825 million (2004: EUR 4,556 million) because of the favourable business development compared to the previous year. Long-term disposable capital rose by EUR 281 million compared to the previous year to stand at EUR 7,052 million, corresponding to 59 % of the balance sheet total. This year again, this item covers all intangible and tangible assets, inventories and liabilities as well as nearly half of 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 2005, we created a firm basis for our further business development. Report on post-balance sheet date events Since the end of the financial year 2005, we are not 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. Risk report The risk management system of the Boehringer Ingelheim group has proved effective and the concept was unchanged in the financial year 2005. Business-specific risks are reported and systematically monitored. Our strategy and planning processes also form a significant element in our active risk management. Hereby, we ensure that all risks known to us are thoroughly analysed. Following the appropriate classification, counter-measures from the risk management system are commenced and their implementation consistently monitored. 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. Currency and interest rate risks, which arise because of our group s international business relationships, are constantly examined and limited by appropriate hedging strategies. Risks in the area of Environmental Health & Safety (EHS) 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 case damage occurs, despite the high safety standards. 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. Group Management Report 87

Report on expected developments In the financial year 2005, we updated our strategy according to our defined planning processes. The newly defined milestones and targets of our reworked strategy make us all the more determined to consistently continue to pursue the course we have chosen and build on our strengths. We will make every effort to launch our new pharmaceuticals aptivus, cymbalta and spiriva in additional markets. For sifrol we expect registration for the new indication restless legs syndrome. The spiriva respimat Soft Mist Inhaler (SMI) will also be submitted for registration. Studies show that the spiriva respimat SMI is preferred by our patients compared to other dosage forms. It is free of gas propellant and furthermore allows improved uptake of the active ingredient via the lungs. alna ocas was successfully launched in three European countries last year. This involves a retard tablet of the already launched active ingredient tamsulosin, in-licensed from Astellas Pharma. The launch of this dosage form is planned for additional European markets. Important studies are entering their decisive phases and we are confident that they will bring positive results for our company. Noteworthy, for example, are the uplift (spiriva ) und ontarget (micardis ) studies. At the beginning of 2006, we initiated the biggest-ever clinical study programme for thrombo-embolic diseases. In the study programme re-volution, 27,000 patients worldwide are expected to take part. The study will investigate Dabigatran (rendix ) the novel, orally available thrombin inhibitor researched and developed by Boehringer Ingelheim for the prevention and treatment of thrombo-embolic conditions. For the financial year 2006, we assume that the vigorous growth rates of 2005 will not be maintained. One reason for this is the anticipated stronger generic competition for mobic that will affect our business development during the first half of the year in some European countries. The USA will feel the effect in the second half of the current year. Based on present planning, we expect net sales in 2006 of around EUR 10 billion and predict that Boehringer Ingelheim s business development will again exceed that of the world pharmaceutical market. In the financial year 2006, we plan to invest EUR 660 million in fixed assets. The focus for this expenditure will be in the areas of production and research. We want to ensure that our production can deliver an optimal response to the demands of new products, at the same time exploiting opportunities to rationalise. Adequately equipping research will also make a significant contribution in 2006 to building potential for future success. It is our declared goal to manage Boehringer Ingelheim long-term as an independent familyowned company. Our endeavour in this context is to achieve above-average 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. This is for no other reason than our being highly aware of the risks concerning the success rate for our research pipeline and that sustainable financing of the required research projects can only be ensured in this way. For reaching this demanding goal, we have in the financial year 2005 created a very good basis. We will also continue to use every means to enable Boehringer Ingelheim to achieve its ambitious goals and develop successfully further as a company. We consider this a duty towards all stakeholders, especially towards all patients for whom we also want to provide efficacious and safe medicines in the future as well. 88 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Consolidated Financial Statements 2005

Overview of the major consolidated companies C. H. Boehringer Sohn* Boehringer Ingelheim GmbH Boehringer Ingelheim Deutschland GmbH Boehringer Ingelheim International GmbH Germany Boehringer Ingelheim Pharma GmbH & Co. KG, Ingelheim Boehringer Ingelheim Vetmedica GmbH, Ingelheim Finland Boehringer Ingelheim Finland Ky, Espoo Norway Boehringer Ingelheim Norway KS, Asker Austria Forschungsinstitut für Molekulare Pathologie Gesellschaft mbh, Vienna Belgium Boehringer Ingelheim Coordination Centre S.C.S., Brussels China Boehringer Ingelheim International Trading (Shanghai) Co. Ltd., Shanghai Boehringer Ingelheim Shanghai Pharmaceuticals Co. Ltd., Shanghai Philippines Boehringer Ingelheim (Phil.) Inc., Manila South Korea Boehringer Ingelheim Korea Ltd., Seoul (50 %) Boehringer Ingelheim Vetmedica Korea Ltd., Seoul Distribution Production Research *sole general partner: Boehringer AG 90 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

C. H. Boehringer Sohn Grundstücksverwaltung GmbH & Co. KG Boehringer Ingelheim Auslandsbeteiligungs GmbH Pharma Investment Ltd., Burlington, Canada Argentina France South Africa Mexico Boehringer Ingelheim S.A., Buenos Aires Boehringer Ingelheim France S.A.S., Paris Boehringer Ingelheim (Pty.) Ltd., Randburg Boehringer Ingelheim Promeco S.A. de C.V., Mexico City Australia Boehringer Ingelheim Pty. Ltd., North Ryde Labso Chimie Fine S.A.R.L., Blanquefort Greece Ingelheim Pharmaceuticals (Pty.) Ltd., Randburg Spain Boehringer Ingelheim Vetmedica S.A. de C.V., Guadalajara USA Austria Boehringer Ingelheim Austria GmbH, Vienna Boehringer Ingelheim Pharma Ges.m.b.H., Vienna Belgium N.V. Boehringer Ingelheim S.A., Brussels Brazil Boehringer Ingelheim do Brasil Quimica e Farmaceutica Ltda., São Paulo Solana Agro Pecuaria Ltda., Arapongas Canada Boehringer Ingelheim (Canada) Ltd., Burlington Chile Boehringer Ingelheim Ltda., Santiago de Chile Colombia Boehringer Ingelheim S.A., Bogotá Czech Republic Boehringer Ingelheim s.r.o., Prague Denmark Boehringer Ingelheim Danmark A/S, Copenhagen Ecuador Boehringer Ingelheim del Ecuador Cia. Ltda., Quito 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 Unilfarma Lda., Lisbon 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 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 Consolidated Financial Statements 2005 91

C. H. Boehringer Sohn, Ingelheim Consolidated balance sheet Assets (in millions of EUR) Notes 1) 31.12.2005 31.12.2004 Intangible assets (3.1) 233 267 Tangible assets (3.2) 2,900 2,712 Financial assets (3.3) 3,396 2,756 Fixed assets 6,529 5,735 Inventories (3.4) 1,229 1,085 Accounts receivable (3.5) 2,143 1,814 Securities 80 1 Cash and cash equivalents 1,167 1,332 Current assets 4,619 4,232 Deferred taxes 821 619 Deferred charges and prepaid expenses 49 44 Total assets 12,018 10,630 Liabilities and equity (in millions of EUR) Notes 1) 31.12.2005 31.12.2004 Shareholders capital 178 178 Group reserves 3,001 3,465 Balance sheet currency conversion difference 61 168 Net income 1,491 888 Equity 4,609 4,363 Minority interests 216 193 Group equity 4,825 4,556 Provisions (3.6) 4,754 3,979 Accounts payable (3.7) 2,174 1,886 Liabilities 6,928 5,865 Deferred taxes 204 193 Deferred charges 61 16 Total liabilities and equity 12,018 10,630 1) For explanation, see relevant section in the Notes to the Consolidated Financial Statements. 92 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

C. H. Boehringer Sohn, Ingelheim Consolidated profit and loss statement (in millions of EUR) Notes 1) 2005 2004 Net sales (4.1) 9,535 8,157 Changes in inventories 175 91 Other internal work performed and capitalised 3 3 Other operating income 598 483 Total revenues 10,311 8,734 Material costs (4.2) 1,613 1,289 Personnel costs (4.3) 2,671 2,443 Amortisation of intangible and depreciation of tangible assets (4.4) 531 471 Other operating expenses (4.5) 3,573 3,159 Operating income 1,923 1,372 Financial income (4.6) 35 15 Holding income (4.7) 0 2 Income before taxes 1,888 1,359 Taxes 2) (4.8) 374 451 Income after taxes 1,514 908 Third-party share 23 20 Net income (4.9) 1,491 888 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 withdrawels from the accrued group capital. Consolidated Financial Statements 2005 93

C. H. Boehringer Sohn, Ingelheim Cash flow statement (in millions of EUR) 2005 2004 Income after taxes 1,514 908 Write-downs/write-ups on fixed assets 1) 529 467 Change in provisions for pensions 26 55 Cash flow 2,069 1,430 Change in other provisions 561 256 Other non-cash income and expenses 43 17 Gain/loss on disposals of fixed assets 4 3 Increase of inventories 90 110 Increase of accounts receivable and other assets not related to investing or financing activities 385 20 Increase/decrease of trade accounts payable and other liabilities not related to investing or financing activities 196 123 Cash flow from operating activities 2,390 1,419 Investments in intangible assets 57 115 Investments in property, plant and equipment 532 450 Investments in non-current financial assets 1) 6 11 Proceeds from disposals of intangible assets 2 0 Proceeds from disposals of property, plant and equipment 43 50 Proceeds from disposals of non-current financial assets 1) 21 16 Cash flow from investing activities 529 510 Cash payments to shareholders and minority shareholders 1,360 295 Cash proceeds from borrowings/repayments of loans 26 59 Cash flow from financing activities 1,334 354 Change in liquid funds from cash relevant transactions 527 555 Changes in liquid funds due to changes in scope of consolidation 0 0 Changes in liquid funds due to exchange rate movements 43 56 Securities and liquid funds 2) as of 1. 1. 4,015 3,516 Securities and liquid funds 2) as of 31. 12. 4,585 4,015 1) excl. fixed-asset securities 2) liquid funds, securities within fixed and current assets (+) = source of funds, ( ) = use of funds 94 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

C. H. Boehringer Sohn, Ingelheim Statement of changes in group equity (in millions of EUR) Shareholders capital 1) Accrued group capital of which currency effects Group Equity Equity Minority interests of which currency effects Balance as of 31. 12. 2003 178 3,668 84 3,846 188 22 4,034 Contributions 0 0 0 0 0 0 0 Withdrawals 0 286 0 286 0 0 286 Net income 0 888 0 888 20 0 908 Change of scope of consolidation 0 0 0 0 4 0 4 Other changes 0 85 84 85 11 7 96 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 Group equity 1) The shareholders capital consists of the equity of C. H. Boehringer Sohn and C. H. Boehringer Sohn Grundstücksverwaltung GmbH & Co. KG. The balance as of 31.12. 2005 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. Consolidated Financial Statements 2005 95

C. H. Boehringer Sohn, Ingelheim Notes to the consolidated financial statements 2005 1 Principles and methods 1.1 General principles The consolidated financial statements of Boehringer Ingelheim for the fiscal year 2005 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 statement, 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. boehringer ingelheim consists of 143 affiliated companies in and outside Germany. In addition to c. h. boehringer sohn and c. h. boehringer sohn grundstücksverwaltung GmbH & Co. KG, a further 109 companies in which c. h. boehringer sohn holds directly or indirectly the majority of voting shares are included in the consolidated financial statements. One company, hitherto included on a proportional consolidation basis, has since fiscal 2005 been wholly consolidated. 30 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 one. In the past year, three companies established, two companies were sold and a further two companies were dissolved due to mergers. Two existing subsidiaries hitherto not included due to insignificance were taken up in the consolidation. In this context, one company was no longer consolidated as it was below the materiality threshold. A separate statement of interests held by Boehringer Ingelheim will be filed with the Register of Companies of the District Court in Mainz. 96 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

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 Deutschland 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 is being amortised according to plan over 10 years. 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. Negative goodwill arising from the first-time consolidation of a subsidiary was further amortised in the fiscal year in accordance with section 309, paragraph 2, clause 1 HGB to the amount of the share of the losses (EUR 0.6 million). Consolidated Financial Statements 2005 97

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. Inflation effects in high inflation countries were eliminated by separate hard currency financial statements (in US dollars or euros) drawn up by the respective local subsidiaries. The most important currencies for Boehringer Ingelheim reflect the following changes in the reporting year (base 1 euro): year-end rate average annual rate 31.12.2005 31.12.2004 2005 2004 US dollar 1.18 1.36 1.24 1.24 Japanese yen 138.90 139.83 136.87 134.40 Pound sterling 0.69 0.71 0.68 0.68 Canadian dollar 1.37 1.64 1.51 1.61 98 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

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 writeoffs. 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 or fair market value. 2.2 Current assets Inventories were valued at purchase or manufacturing cost using the weighted average cost flow method as the group-wide uniform method of measurement, whereas for tax purposes, 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. 2.3 Group reserves Group reserves include the retained earnings of the consolidated subsidiaries from prior years, consolidation entries that affect earnings, where they relate to prior years, and credit balances arising from capital consolidation. Consolidated Financial Statements 2005 99

2.4 Provisions The provisions include required amounts to cover any perceptible obligations and risks, including provisions for contingent losses from pending contracts. The valuation is made at the amount that is necessary on the basis of reasonable commercial judgement. Provisions with an implied interest were 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 savings 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 carryforwards is carried out if it is sufficiently probable that the tax benefits can be realised. 100 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

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. 2004 432 807 3 1,242 Currency conversion difference 6 1 0 7 Additions due to first consolidation 5 0 0 5 Additions 98 10 3 111 Disposals 9 0 0 9 Reclassifications 6 0 3 3 Balance as of 31. 12. 2004 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 Accumulated depreciations Balance as of 1. 1. 2004 336 664 0 1,000 Currency conversion difference 6 1 0 7 Additions due to first consolidation 1 0 0 1 Additions 36 58 0 94 Value adjustments 0 0 0 0 Disposals 9 0 0 9 Reclassifications 1 0 0 1 Balance as of 31. 12. 2004 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 Value adjustments 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 Book value as of 31. 12. 2004 169 95 3 267 Book value as of 31. 12. 2005 179 48 6 233 Consolidated Financial Statements 2005 101

3.2 Tangible assets (in millions of EUR) Property and plants Technical facilities and machines Other facilities/ operating equipment Advance payments/ construction in progress Total Procurement/manufacturing costs Balance as of 1. 1. 2004 2,055 1,900 1,113 383 5,451 Currency conversion difference 60 47 30 7 144 Additions due to first consolidation 1 21 11 4 37 Additions 30 59 134 204 427 Disposals 45 53 79 5 182 Reclassifications 41 102 163 309 3 Balance as of 31. 12. 2004 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 Accumulated depreciations Balance as of 1. 1. 2004 890 942 852 0 2,684 Currency conversion difference 25 24 20 0 69 Additions due to first consolidation 0 7 7 0 14 Additions 81 151 145 0 377 Value adjustments 0 0 4 0 4 Disposals 12 48 69 0 129 Reclassifications 1 2 0 0 1 Balance as of 31. 12. 2004 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 Value adjustments 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 Book value as of 31. 12. 2004 1,089 952 401 270 2,712 Book value as of 31. 12. 2005 1,094 1,001 453 352 2,900 102 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

3.3 Financial assets (in millions of EUR) Investments in affilated companies Loans to affiliated companies Related companies Loans to related companies Investment securities Other loans Total Procurement/manufacturing costs Balance as of 1. 1. 2004 21 6 10 6 2,391 49 2,483 Currency conversion difference 1 0 0 0 2 0 3 Additions due to first consolidation 0 0 0 0 0 0 0 Additions 1 2 0 0 679 8 690 Disposals 0 0 0 0 382 16 398 Reclassifications 0 0 0 0 0 0 0 Balance as of 31. 12. 2004 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 Accumulated depreciations Balance as of 1. 1. 2004 3 0 3 3 9 3 21 Currency conversion difference 0 0 0 0 1 0 1 Additions due to first consolidation 0 0 0 0 0 0 0 Additions 0 0 0 0 0 0 0 Value adjustments 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. 2004 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 Value adjustments 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 Book value as of 31. 12. 2004 18 8 7 3 2,682 38 2,756 Book value as of 31. 12. 2005 17 9 7 3 3,338 22 3,396 The item other loans includes no loans to the shareholders (2004: EUR 12 million). Consolidated Financial Statements 2005 103

3.4 Inventories (in millions of EUR) 31.12.2005 31.12.2004 Raw materials and supplies 225 217 Unfinished products 537 444 Finished products and goods for resale 460 416 Advance payments to suppliers 7 8 1,229 1,085 3.5 Accounts receivable Residual term Residual term 31.12.2004 (in millions of EUR) 31.12.2005 over 1 year over 1 year Trade accounts receivable 1,854 71 1,543 6 Receivables from affiliated companies 2 0 4 0 Receivables from related companies 5 0 6 0 Other assets 282 12 261 11 2,143 83 1,814 17 The item other assets contains no receivables from the shareholders (2004: EUR 2 million). 3.6 Provisions (in millions of EUR) 31.12.2005 31.12.2004 Pension provisions 2,035 1,983 Tax provisions 548 380 Other provisions 2,171 1,616 4,754 3,979 104 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

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 (in Germany the generation tables issued in 2005 by Professor Klaus Heubeck were used) and actuarial assumptions. The main countries applied the following parameters: Germany USA Japan Parameter (in %) 2005 2004 2005 2004 2005 2004 Discount rate 4.1 5.0 5.5 5.75 1.5 1.5 Expected return on assets 6.0 6.0 8.0 8.5 2.2 3.0 3.0 Salary increase 2.5 3.0 5.5 5.5 2.4 4.7 3.9 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 (funding status). Based on this, pension provisions are determined by deducting unrealised transition amounts as well as unrealised actuarial gains and losses from the funding 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 698 million (2004: EUR 343 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 upon payment. Consolidated Financial Statements 2005 105

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 31.12.2005 31.12.2004 less than 1 year Bank loans 216 221 43 480 441 190 Other accounts payable 1,549 145 1,694 1,445 1,271 of which: Trade accounts payable 775 775 516 516 Advance payments 45 45 66 66 Notes payable 14 14 17 17 Accounts payable to affiliated companies 8 8 7 7 Accounts payable to related companies 1 1 6 6 Other liabilities (*) 706 145 851 833 659 1,765 221 188 2,174 1,886 1,461 (*) of which: taxes 24 35 social security contributions 22 17 There were no liabilities secured by mortgages or similar rights on the balance sheet date consistent with the previous year. Liabilities due to shareholders amounted to EUR 215 million (2004: EUR 190 million) at year-end. These were disclosed under other liabilities. They stem from the shareholders personal taxes arising from consolidated business activities. Payments received from the ABS partners in conjunction with the ABS transaction are shown as short-term loans under other liabilities until the underlying accounts receivable are paid off. 106 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

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) 2005 2004 Human Pharmaceuticals 9,174 7,822 of which: Prescription Medicines 7,247 6,183 Consumer Health Care 1,052 970 Industrial Customer 847 654 Other sales 28 15 Animal Health 361 335 9,535 8,157 by geographic region (in millions of EUR) 2005 2004 Europe 3,117 2,622 of which: Germany 816 656 Americas 4,559 3,905 of which: USA/Canada/Mexico 4,219 3,625 Asia, Australasia, Africa 1,859 1,630 of which: Japan 1,232 1,142 9,535 8,157 4.2 Material costs (in millions of EUR) 2005 2004 Costs of raw material, supplies and goods for resale 1,351 1,076 Expenditure on services 262 213 1,613 1,289 4.3 Personnel costs (in millions of EUR) 2005 2004 Salaries and wages 2,087 1,913 Social benefits and retirement benefits 584 530 of which: retirement benefits 155 154 2,671 2,443 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. Consolidated Financial Statements 2005 107

Average headcount 2005 2004 Production 12,044 10,614 Administration 4,742 5,670 Marketing and Sales 14,257 13,151 Research and Development 5,678 5,471 Apprentices 685 623 37,406 35,529 This includes: Average number of employees in joint ventures, proportionately consolidated 0 245 Regarding 2005, transfers from administration to production caused by changes in organisational structure have to be considered. 4.4 Amortisation of intangible and depreciation of tangible assets The amortisation of intangible assets and depreciation of tangible assets includes unscheduled writeoffs of EUR 2 million (2004: EUR 1 million). 4.5 Other operating expenses Other operating expenses include third-party services in research, development, medicine, and marketing, in addition to administration costs, fees, contributions, 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) 2005 2004 Interest expense relating to pensions and similar obligations 108 111 Other interest expense and similar expenditure 70 49 Interest expense and similar expenditure 178 160 Amortisation of other financial assets and short-term investments 14 4 Income from other investment securities and from long-term loans 110 103 Other interest income and similar proceeds 47 46 35 15 108 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

4.7 Holding income (in millions of EUR) 2005 2004 Gains from the sale of investments 0 2 4.8 Taxes (in millions of EUR) 2005 2004 Income taxes 504 360 Deferred taxes 154 72 Other taxes 24 19 374 451 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 operating income of 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. As a consequence of the conclusion of profit transfer agreements in the previous year, the deferred taxes of these corporations as of 31 December 2004 were no longer calculated at a profit tax rate of 37.6 % but at a trade tax rate of around 15 %. In 2004, this change led to a one-off deferred tax expense of EUR 121 million. In the effective tax-rate reconciliation an expected tax expense for Boehringer Ingelheim is calculated on a 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. Consolidated Financial Statements 2005 109

The expected tax expense derived by using a fictive tax rate of 37.6 % (average tax rate for a German corporation at a municipal trade tax levy rate of 360 %) can be related to the actual tax expense as follows: (in millions of EUR) 2005 2004 Income before taxes minus other taxes 1,864 1,340 Expected tax expense (current and deferred) 701 37.6 % 504 37.6 % Decrease/increase in expected tax by Fictive Corporation current taxes 378 20.3 % 191 14.3 % Fictive Corporation deferred taxes 49 2.6 % 18 1.3 % One-off effect of profit transfer agreements 0 0.0 % 121 9.0 % Local tax rate divergences 34 1.8 % 41 3.1 % Non-taxable income 6 0.3 % 6 0.4 % Non-tax-deductible expense 34 1.8 % 36 2.7 % Taxes related to prior periods 35 1.9 % 19 1.4 % Amortisation of goodwill 18 1.0 % 21 1.6 % Changes in applicable tax rates 7 0.4 % 9 0.7 % Withholding taxes not subject to tax credits 20 1.1 % 18 1.3 % Tax credits for research activities 19 1.0 % 36 2.7 % Other effects 7 0.4 % 2 0.1 % Actual tax expense (current and deferred) 350 18.8 % 432 32.2 % The deferred taxes can be attributed to the following balance sheet items: 31.12.2005 31.12.2004 (in millions of EUR) Assets Liabilities Assets Liabilities Intangible assets 7 2 7 1 Tangible assets 32 132 18 125 Financial assets 15 24 16 23 Inventories 104 19 88 21 Receivables 38 9 22 7 Provisions 600 16 448 9 Liabilities 14 2 15 7 Tax loss carryforwards and tax credits 11 0 5 0 821 204 619 193 110 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

Other mandatory disclosures according to GAS 10.39: (in millions of EUR) 2005 2004 Deferred tax expense from changes in law 0 4 Deferred tax expense relating to the write-off of deferred tax assets in fiscal year 5 0 The absence of changes in accounting and evaluation methods results, as in the previous year, in no deferred tax income. Potential corporate tax reductions in accordance with section 37, paragraph 2 corporation tax law (KStG) amount to EUR 22 million. The valuation allowances relating to deferred tax assets amount to EUR 19 million. Unused tax loss carryforwards, on which no deferred tax assets are recognised in the balance sheet, amount to EUR 51 million at year-end, EUR 30 million of which can be carried forward without time limits. The remainder expire after five years (EUR 11 million) and 10 years (EUR 10 million) respectively. 4.9 Net income Net income for the year 2005 includes operating income unrelated to the accounting period (mainly the release of other provisions) amounting to EUR 81 million (2004: EUR 92 million). Operating expenditure unrelated to the accounting period (mainly increase of other provisions) amounted to EUR 27 million (2004: EUR 47 million). Consolidated Financial Statements 2005 111

5 Notes to the cash flow statement The cash flow statement shows how the total securities and 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. Securities and liquid funds are converted, as shown in the balance sheet, according to the year-end rate method. The influence of exchange rate changes on securities and liquid assets 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 risk positions are recorded, analysed and assessed regularly in a special consolidated financial report. 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 items are periodically re-evaluated and monitored. Derivative financial instruments are only agreed on with banks of sound financial standing. As of 31 December 2005, the nominal value of all foreign currency and interest rate hedging transactions amounted to EUR 3,618 million (2004: 2,179 million). The corresponding market values amounted to EUR -63 million (2004: EUR 85 million). 112 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

Derivative financial instruments at year-end were as follows: Nominal value Market value (in millions of EUR) 31.12.2005 31.12.2004 31.12.2005 31.12.2004 Foreign exchange forward contracts 3,355 1,906 62 86 Interest instruments 263 273 1 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) 31.12.2005 31.12.2004 Liabilities from guarantees, guarantees for bills and cheques, warranties and provisions of collateral for third-party liabilities 176 154 6.3 Other financial obligations (in millions of EUR) 31.12.2005 31.12.2004 To third parties 741 752 At year-end, other financial obligations included capital investments of EUR 552 million (2004: EUR 593 million). Furthermore EUR 182 million (2004: EUR 146 million) from renting and leasing contracts are included, of which EUR 87 million concern long-term rent contracts with subsidiaries not included in the consolidation. 6.4 Research and development expenses (in millions of EUR) 2005 2004 Expenditures for Research and Development 1,360 1,232 Consolidated Financial Statements 2005 113

Auditor s Report We have audited the consolidated financial statements prepared by C. H. Boehringer Sohn, Ingelheim comprising the balance sheet, the income statement, the statement of changes in equity, the 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 2005. The preparation of the consolidated financial statements and the group management report in accordance with German commercial law are 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 annual financial statements in accordance with section 317 HGB and the generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer in Deutschland (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 Company and evaluations of 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. 114 Boehringer Ingelheim a n n u a l r e p o r t 2 0 0 5

With the following exception, our audit has not led to any reservations: contrary to section 314 paragraph 1 number 6 HGB compensation of the members and 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 the consolidated financial statements 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, 15 February 2006 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (E.-W. Frings) Wirtschaftsprüfer (German Certified Public Accountant) (P. Marshall) Wirtschaftsprüfer (German Certified Public Accountant) Consolidated Financial Statements 2005 115

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 alesion flurinol talerc ASA / dipyridamole extended release epinastine Prevention of stroke following a first stroke or for transient ischaemic attacks As above and adjunct to coumarin anticoagulants in the prevention of postoperative thromboembolic complications of cardiac valve replacement Antiallergic agent antistax standardized red wine leaf extract AS195 Prevention and treatment of symptoms of chronic venous insufficiency such as painful swollen, heavy or tired legs aptivus tipranavir Available as capsules for adults used coadministered 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 buscopan buscapina butylscopolamine Treatment of abdominal discomfort and pain due to intestinal cramps catapresan catapres catapressan atensina clonidine All forms of high blood pressure, unless caused by phaeochromocytoma 116 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Product name Active ingredient Indication combivent ipratropium bromide/ salbutamol Treatment of bronchospasms associated with reversible obstructive airways diseases in patients requiring more than one bronchodilator cymbalta xeristar duloxetine Major depressive disorder (MDD), Diabetic peripheral neuropathic pain (DPNP) dulcolax duovent bronchodual berodual flomax alna josir pradif secotex urolosin flomax cr alna ocas pradif t urolosin ocas bisacodyl (tablets, suppositories), sodium picosulphate (drops, pearls, tablets) fenoterol / ipratropium bromide tamsulosin hydrochloride tamsulosin hydrochloride, Oral Controlled Absorption System Laxative for the treatment of constipation Prevention and treatment of symptoms in asthmic and chronic obstructive pulmonary disease (COPD) patients with reversible bronchospasm Lower urinary tract symptoms (LUTS) associated with benign prostatic hyperplasia (BPH) Lower urinary tract symptoms (LUTS) associated with benign prostatic hyperplasia (BPH) inflammide budesonide Bronchial asthma laxoberal sodium picosulphate (drops, pearls and tablets) Laxative for the treatment of constipation lendormin lendorm lindormin sintonal brotizolam Short-term treatment of disorders of initiating and maintaining sleep metalyse tenecteplase Fibrinolytic treatment of acute myocardial infarction mexitil mexitilen mexiletine Serious symptomatic ventricular tachycardic heart rhythm disturbances micardis micardisplus micardis hct co-micardis telmisartan telmisartan / hydrochlorothiazide Treatment of essential hypertension Glossary 117

Product name Active ingredient Indication mobic mobec movalis movatec motens caldine tens midotens meloxicam lacidipine Symptomatic treatment of rheumatic diseases Treatment of essential hypertension mucoangin ambroxol hydrochloride Pain relief in acute sore throat mucosolvan motosol mucosan surbronc pharmaton pharmaton capsules geriavit pharmaton pharmaton caplets ambroxol standardized ginseng extract G115, vitamins, minerals, trace elements Mucolytic treatment of acute and chronic bronchopulmonary diseases associated with impaired formation and transport of mucus To improve physical and mental performance and well-being sifrol pramipexole Symptomatic treatment of idiophathic Parkinson s disease silomat clobutinol hydrochloride Symptomatic treatment of irritable, non-productive cough spiriva tiotropium bromide Maintenance treatment of patients with COPD (including chronic bronchitis and emphysema), the maintenance treatment of associated dyspnoea and for prevention of exacerbations thomapyrin ASA, paracetamol, caffeine 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 yentreve ariclaim duloxetine Moderate to severe stress urinary incontinence (SUI) in women 118 Boehringer Ingelheim A n n u a l R e p o r t 2 0 0 5

Animal Health Product name Active ingredient Indication buscopan compositum N-butyl scopolamonium bromide + metamizole Spasmolitic and pain inhibitor for the treatment of colic (horse and cattle) enterisol ileitis express attenuated life vaccine (Lawsonia intracellularis) lyophilised attenuated life vaccine (IBRV, BVDV, PI3V, BRSV) 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 For prevention of reproductive and respiratory diseases in cattle ingelvac m.hyo inactivated Mycoplasma hyopneumoniae For the active immunization of swine from three weeks of age to reduce lung lesions following infection with Mycoplasma hyopneumoniae ingelvac prrs mlv mamyzin modified live PRRS virus, grown in a permanent cell line freeze-dried penethamate hydroiodide For the active immunization of clinically healthy swine against the respiratory and reproductive form of PRRS virus infection (porcine reproductive respiratory syndrome) For the treatment of mastitis caused by Gram-positive pathogens metacam meloxicam Dog, horse: alleviation of pain and inflammation associated with acute or chronic musculoskeletal disorders Cat, dog: reduction of postoperative pain Cattle: respiratory infection, diarrhoea, acute mastitis Swine: non-infectious locomoter disorders, mastitis-metritis-agalactic-syndrome 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 voren dexamethasone-21- isonicotinate For the treatment of metabolic disorders, inflammation and allergic reactions in cattle, swine, horses, dogs and cats Glossary 119

Corporate Head Office 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 Photos on title page Jens Wunderlich, Lennart Nilsson Printed by Süddeutsche Verlagsgesellschaft, Ulm Copyright Boehringer Ingelheim GmbH, 2006 All rights reserved. No part of this Annual Report 2005 may be reproduced or transmitted in any form or by any means, electronic or photocopy, without permission in writing from Boehringer Ingelheim GmbH.

Comparison of Balance Sheets/ Financial Data 1996 2005 (in millions of EUR) Assets (as of 31.12.) 1996 1997 1998 1999 * 2000 2001 2002 2003 2004 2005 Intangible assets 89 508 452 400 344 322 302 242 267 233 Tangible assets 1,342 1,612 1,739 1,992 2,217 2,467 2,840 2,767 2,712 2,900 Financial assets 1,007 757 731 849 1,135 1,008 1,689 2,462 2,756 3,396 Fixed assets 2,438 2,877 2,922 3,241 3,696 3,797 4,831 5,471 5,735 6,529 Inventories 627 794 806 944 1,021 1,014 971 1,000 1,085 1,229 Accounts receivable (incl. deferred charges) 1,057 1,211 1,255 1,870 1,938 2,314 2,360 2,537 2,477 3,013 Cash and cash equivalents (incl. securities) 156 134 299 459 477 1,002 1,055 1,134 1,333 1,247 Current assets 1,840 2,139 2,360 3,273 3,436 4,330 4,386 4,671 4,895 5,489 Total assets 4,278 5,016 5,282 6,514 7,132 8,127 9,217 10,142 10,630 12,018 Liabilities and equity (as of 31.12.) 1996 1997 1998 1999 * 2000 2001 2002 2003 2004 2005 Shareholders capital 383 399 441 332 211 200 178 178 178 178 Reserves (incl. currency conversion difference) 1,307 1,461 1,651 1,982 2,362 2,753 2,818 3,139 3,297 2,940 Net income 167 212 229 320 379 401 537 529 888 1,491 Total equity 1,857 2,072 2,321 2,634 2,952 3,354 3,533 3,846 4,363 4,609 Minority interests 0 0 0 0 0 1 203 188 193 216 Group equity 1,857 2,072 2,321 2,634 2,952 3,355 3,736 4,034 4,556 4,825 Provisions (incl. deferred taxes) 1,841 1,982 2,012 2,631 2,932 3,150 3,568 3,963 4,172 4,958 Liabilities (incl. deferred charges) 580 962 949 1,249 1,248 1,622 1,913 2,145 1,902 2,235 Total liabilities 2,421 2,944 2,961 3,880 4,180 4,772 5,481 6,108 6,074 7,193 Total liabilities and equity 4,278 5,016 5,282 6,514 7,132 8,127 9,217 10,142 10,630 12,018 Summary of selected financial data 1996 1997 1998 1999 * 2000 2001 2002 2003 2004 2005 Sales 3,623 4,201 4,474 5,086 6,188 6,694 7,580 7,382 8,157 9,535 Operating income 333 350 336 655 800 980 1,082 901 1,372 1,923 Operating income as % of sales 9.2 8.3 7.5 12.9 12.9 14.6 14.3 12.2 16.8 20.2 Income after taxes 167 212 229 320 379 401 551 537 908 1,514 Income after taxes as % of sales 4.6 5.0 5.1 6.3 6.1 6.0 7.3 7.3 11.1 15.9 Return on equity (in %) 9.8 11.4 11.0 13.8 14.4 13.6 16.0 15.0 23.1 34.2 Own capital resources (in %) 43.4 41.3 43.9 40.4 41.4 41.3 38.3 37.9 41.0 38.4 Cash flow 426 561 595 737 791 1,117 1,049 1,059 1,430 2,069 Financial funds 966 722 858 1,055 1,094 1,645 2,645 3,516 4,015 4,585 Personnel expenditure 1,153 1,270 1,409 1,527 1,749 1,916 2,175 2,252 2,443 2,671 Personnel expenditure as % of sales 31.8 30.2 31.5 30.0 28.3 28.6 28.7 30.5 29.9 28.0 Average numbers of employees 24,074 24,860 25,927 26,448 27,325 27,980 31,843 34,221 35,529 37,406 Research and development costs 626 771 812 826 968 1,019 1,304 1,176 1,232 1,360 R&D as % of sales 17.3 18.4 18.1 16.2 15.6 15.2 17.2 15.9 15.1 14.3 Investments in tangible assets 346 455 421 377 497 548 634 516 427 532 Depreciation of tangible assets 169 189 211 256 288 305 340 354 377 439 *As of the comparative financial statement 1999, accounting and evaluation methods were brought closer into line with International Accounting Standards (IAS), in particularly with regard to deferred taxes and provisions for pensions.

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