We Love What We Do 2014 Annual Report 2014 Annual Report Annual 2014

Home , Schindler Group, Straumann, Swiss Performance Index

We love what we do 2014 Annual Report 2014 Annual Report Annual 2014

Straumann Holding AG Peter Merian-Weg 12 4002 Basel Switzerland www.straumann.com

00_00_STR_GB2014_GB_Umschlag_en.indd 1 09.03.2015 16:44:50 About Straumann

Straumann is a global leader in tooth replacement solutions including dental implants, prosthetics and regenerative products. Headquartered in Basel, Switzerland, the Group is present in more than 70 countries through its broad network of distribution subsidiaries and partners.

1 Rebecca Hesse SAP Coordinator

2 Susan-Ann Welzbacher Corporate Safety Officer

3 Julia Hirtle Spend Coordinator

4 Roland Scacchi Administrator

5 Alessandro Annicchiarico IT Support 4 7 1 2 3 5 6 8 9 6 Heather Stanton Web Editor IMPRINT Published by: Institut Straumann AG, Basel

7 Dave Koster Lab Business Development Concept and realization: PETRANIX Corporate and Financial Communications AG, Adliswil/Zurich

8 Raul Perez Talent Management Photography: AMX Studio, Alex Stiebritz, Karlsruhe Consultant on sustainability: sustainserv, Zurich and Boston 9 Sandra Schürmann Events Coordinator Certain design elements by Eclat, Erlenbach/Zurich Print: Neidhart + Schön AG, Zurich Basel, 26 February 2015 We have a global culture with more than 28 nationalities represented at our headquarters alone. The front cover shows a few examples. ©2015, Straumann Holding AG

00_00_STR_GB2014_GB_Umschlag_en.indd 2 09.03.2015 16:45:02 We love what we do 2014 Annual Report

Highly motivated, creative employees, together with innovative products, solutions and commercial approaches are the keys to Straumann’s ambition of being the provider of choice in tooth replacement. The theme photographs in this report all feature products that we introduced or rolled out in 2014 alongside some of the talented people who have been involved in bringing them to customers and patients.

Each picture shows the creative, passionate, humorous side of Straumann, which is combined with serious professionalism when it comes to customer satisfaction and patient well-being – balanced attributes that reflect the purpose statement we introduced in 2014: ‘more than creating smiles, restoring confidence’.

Straumann_2014_English_1 1 09.03.2015 16:50:25 2

PURE 18

Roxolid 8

Regeneratives 62

SLActive 44

Pro Arch 156

Bone Level Tapered 102

Straumann_2014_English_1 2 09.03.2015 16:50:58 3

2014 Annual Report Contents

4 Operational performance (highlights) 7 Share performance (highlights) 12 Letter to shareholders 22 Management commentary 23 Business model & objectives 26 Strategy 30 Products, services, solutions 34 Innovation 38 Markets 48 2014 Business performance – Group 52 2014 Business performance – Regions 66 2014 Business performance – Financials 78 Risk and sustainability report 106 Corporate governance 138 Compensation report 160 Information for investors Screw-Retained 170 Appendix Abutments 181 Imprint 74

Instruments 166

Throughout this Report, pages references preceded by a capital ‘F’ refer to our detailed Financial Report, which is published as a separate volume.

Straumann_2014_English_1 3 09.03.2015 16:51:09 4 Operational performance

Operational performance

KEY FIGURES More on p. 48 ff. (in CHF million)

REVENUE (ORGANIC) GROUP 2014 2013 Change (%) Revenue 710 680 4 Gross profit 559 536 4 % Operating profit (EBIT) 148 1161 28 +6 Net profit 158 101 56 Cash generated from 146 152 (4) operating activities EUROPE ASIA/PACIFIC

Capital expenditure 19 13 49 Free cash flow 128 139 (8) +3% +14 % Value added 114 53 115 economic profit NORTH AMERICA REST OF THE WORLD

1 CHF 124m, excluding exceptionals (restructuring/impairments) +8% +14 %

REVENUE More on p. 48 ff. REVENUES BY More on p. 52 ff. (in CHF million) REGION

5 year CAGR –1% (+3% in I.c.) ¢ Europe 5% ¢ North America 800 ¢ Asia/Pacic 15% ¢ Rest of the World 53% 700

600

500

400 27%

300

200

100

0 2010 2011 2012 2013 2014

¢ ¢ Reported revenue ¢ Currency eﬀect

Straumann_2014_English_1 4 09.03.2015 16:51:09 Operational performance Operational performance 5

OPERATING AND NET PROFIT More on p. 48 ff. (in CHF million)

GROSS MARGIN

180

160

140 % Gross79 profit rises 4% fuelled 120 by strong sales growth

100 EBIT MARGIN 80

40 % 20 EBIT rises21 28% driven by tight 0 cost control 2010 2011 2012 2013 2014

¢ ¢ Operating prot ¢ Excluding exceptionals ¢ ¢ Net prot

PROFITABILITY More on p. 48 ff. Returns on assets, equity and capital employed in % NET PROFIT MARGIN

70 % 22Up from 15% in 2013 60

50 EQUITY RATIO 40

20 % 10 Company64 solidly financed 0 2010 2011 2012 2013 2014

¢ ¢ Return on assets (ROA) ¢ ¢ Return on equity (ROE) ¢ ¢ Return on capital employed (ROCE)

Straumann_2014_English_1 5 09.03.2015 16:51:10 6 Operational performance

CASH FLOW AND INVESTMENTS More on p. 50 ff. (in CHF million) FREE CASH FLOW MARGIN

270

240

210 % Robust cash generation;18 cash/equivalents 180 up CHF 76m to CHF 459m

150

120

0 2010 2011 2012 2013 2014

¢ ¢ Operating cash ow ¢ Acquisitions & participations ¢ ¢ Capital expenditure

EMPLOYEES More on p. 88 ff. INVESTMENT IN PEOPLE

2700

2400

2100 new jobs 1708% increase in headcount as company 1800 invests in selected areas

1500

1200

900

600

300

0 2010 2011 2012 2013 2014

Straumann_2014_English_1 6 09.03.2015 16:51:10 Operational performance Share performance 7

Share performance

SHARE PRICE DEVELOPMENT SHARE INFORMATION More on p. 161 ff. (in %) More on p. 161 ff. (in CHF) 2014 2013 Earnings per share (EPS) 10.15 6.55 180 Ordinary dividend per share 3.751 3.75 160 Payout ratio 37% 58% 140 Share price at year-end 250.75 166.80 120 1 Payable in 2015 subject to shareholder approval 100

0 SHARE PRICE 2010 2011 2012 2013 2014

¢ Straumann ¢ Swiss SMIM price index ¢ MSCI World Healthcare Equipment & Services index (CHF) ¢ MSCI World price index (CHF) % +50Over full year

TOTAL SHAREHOLDER RETURN More on p. 161 ff. (in %) TOTAL SHAREHOLDER RETURN

30 % Driven by sharp53 rise in share price 20 and stable dividend

-10

-20

-30 2010 2011 2012 2013 2014

Straumann_2014_English_1 7 09.03.2015 16:51:14 “I can’t imagine working “If you get an implant anywhere else. from us, it should I'd miss the inspiring family last as long as you do.” atmosphere.” DANIEL GÜNTER DESIGN ENGINEER DORIS HABEDANK SALES REPRESENTATIVE

“What I appreciate is that the company focuses on quality in everything, even compliance.” PETER LEE INTERNATIONAL REGULATORY MANAGER

“Every day a huge amount of energy goes into ensuring the product is reliable and safe.” STÉPHANIE LUCOT GLOVEBOX OPERATOR/ASSEMBLY

Straumann_2014_English_1 8 09.03.2015 16:51:22 9

Talented people Latest technology

“If you get an implant DORIS HABEDANK from us, it should SALES REPRESENTATIVE last as long as you do.” 6 YEARS @ STRAUMANN Years before joining the company, Doris had her sights set DANIEL GÜNTER on Straumann. Why? “Because it’s a global player with a great DESIGN ENGINEER reputation for top innovation and high-end products.” Now she’s dedicated to her busy customers who count on her for the latest information.

PETER LEE INTERNATIONAL REGULATORY MANAGER 7 YEARS @ STRAUMANN “I really like the intercultural exchange,” says Peter, whose job involves constantly navigating through government agencies and a myriad of regulations to bring Straumann products to patients.

STÉPHANIE LUCOT GLOVEBOX OPERATOR/ASSEMBLY 2 YEARS @ STRAUMANN Clinicians and patients count on Stéphanie’s diligence. She knows that her careful packaging work is essential to the safety and performance of the implants – and ultimately to the wellbeing of patients.

DANIEL GÜNTER DESIGN ENGINEER 20 YEARS @ STRAUMANN Daniel thrives on difficult challenges to meet patient needs, like designing the Loxim transfer piece and the SLActive packaging. He says Straumann is the ideal place to work because he uses the latest technology and works with very talented people.

Straumann_2014_English_1 9 09.03.2015 16:51:26

Roxolid Reduced invasiveness 1 opening doors to treatment

1000

] ~80% ~20% 800

~50% 600 Tensile strength [ MPa strength Tensile

400 ASTM Straumann Straumann TiGr42 TiGr4 Roxolid3 cold-worked3 Roxolid shows a 20% higher tensile strength than Straumann cold-worked titanium and a 80% higher strength than standard titanium Grade 4 (TiGr4).

2 Norm ASTM F67 (states min. tensile strength of annealed titanium). 3 Data on le for Straumann cold-worked titanium and Roxolid implants.

ROXOLID FOR ALL Biocompatibility, resistance to corrosion, and strength have made titanium the most widely-used dental implant material. However, its strength has limitations.

Roxolid is a high performance alloy, specifically designed by Strau- mann to offer higher strength than pure titanium with excellent osseointegration capabilities. Since its initial launch at the end of 2009, Roxolid has been introduced in most major markets but only with our 3.3mm diameter implants, which are designed for use in narrow spaces or where limited bone is available.

Clinical experience gained in the meantime has provided the basis for using smaller diameter Roxolid implants to avoid bone augmentation, thus reducing invasiveness1 and making treatment possible for patients with insufficient bone.

In 2014, we made our entire range of implants available in the new material in markets where it is registered, prompting the majority of our customers to upgrade from pure titanium. We expect to see similar responses in Asian and other markets when regulatory clearances are obtained.

1 If guided bone regeneration can be avoided.

Straumann_2014_English_1 10 09.03.2015 16:51:26

4 mm our shortest

SAVING TRAUMA, DISCOMFORT, TIME AND MONEY THE 4 MM ‘SHORT Roxolid also prompted the development of a new 4mm short IMPLANT’ is available in various con- implant – our smallest ever – which was launched in 2014. This figurations and diameters implant is designed to avoid extensive bone augmentation procedures in patients with insufficient vertical bone for conventional implants. Leading clinicians have observed that short implants can lead to fewer complications, less morbidity, lower costs and more predictable outcomes1.

These and other factors make short implants an attractive option, often providing a completely different strategy for implant placement. Like all Roxolid implants they are supplied with our new convenient Loxim™ Transfer Piece. THE LOXIM TRANSFER 1 Hämmerle C: Starget 1/2014. Cochran D: Presentation Straumann Corporate Forum, EAO Dublin 2013. Al-Nawas B, Hämmerle C: Presentations Straumann Corporate PIECE – PERFECTING Forum, ITI World Symposium, Geneva 2014. HANDLING Over the years, Straumann has worked hard to per- fect implant handling, adding convenience with uncompromised precision and reliability.

In contrast to our previous transfer piece, which used a lock nut and required a counter wrench for removal, Loxim detaches In the case of the implant on from the implant quickly the right, there is enough with a simple pull - vertical bone to place a standard making the surgeon’s length without damaging job easier. the nerve below. Not so on the left, where a 4 mm short implant has been used to solve Despite its simplicity, the problem. Loxim requires an excep- tionally high standard of precision to ensure that it holds the implant securely, withstands the very high torque forces during implant insertion, and detaches easily with a gentle pull.

Straumann_2014_English_1 11 09.03.2015 16:51:29 12 Letter to shareholders

Letter to shareholders

Gilbert Achermann (Chairman of the Board) and Marco Gadola (Chief Executive Officer)

DEAR SHAREHOLDER, FINANCIAL PERFORMANCE REVENUE AND PROFITABILITY AHEAD OF 2014 gave us many reasons to celebrate: it marked OUR EXPECTATIONS the 60th anniversary of our company, the 40th Strong implant sales helped us to achieve organic1 anniversary of our entry into implant dentistry and growth of 6%, lifting revenue from CHF 680 million in the 25th anniversary of our US subsidiary. We were 2013 to CHF 710 million in 2014. Having grown faster also able to celebrate good results and further stra- than our global competitors, we increased our market tegic milestones. share to 20% (see p. 38) and underpinned our leading global position. Building on the turnaround achieved in 2013, we grew across all regions and reached our profit targets. We Thirty percent of our growth was generated in Asia/ broadened our innovation process and introduced Pacific, which posted a revenue increase of 14% driven new solutions that enhance the standard of care and by China and Japan. The Rest of the World also grew add value for customers and patients. 14% fuelled by Latin America, while North America grew 8% and Europe 3%. We expanded in high-growth markets and segments, forging partnerships and developing new distribution Tight cost control, on top of benefits from restructur- approaches. We also invested in people and in building in 2013, lifted our profitability as operating profit ing a high performance culture to sustain our success. (EBIT) jumped 28% (19% excluding exceptionals) to The overall progress we made confirms our strategy CHF 148 million. The respective margin expanded 4% and helps us to tackle the current challenges in order points to 21% – ahead of our mid-term target of 20%. to meet your expectations as shareholders. With the addition of a one-time tax benefit, net profit

Straumann_2014_English_1 12 09.03.2015 16:51:33 Letter to shareholders Letter to shareholders 13

rose 56% to CHF 158 million, with the margin reaching differentiated superior material. We also succeeded in 22%. Economic profit, which is a performance indica- winning new customers and increasing volumes. tor for compensation, climbed from CHF 53 million to CHF 114 million. Four other ‘implant’ milestones followed. We launched our shortest ever (4mm) implant – also designed to min- FLEXIBILITY TO INVEST IN GROWTH OPPORTUNITIES imize invasiveness and to make treatment possible for We continued to generate a good level of cash as free patients with insufficient bone for regular implants (see cash flow reached CHF 128 million, yielding a margin p. 11). We perfected our small-diameter PURE ceramic of 18%. With an equity ratio of 64%, the company is implant for patients seeking metal-free solutions (see p. solidly financed and has the capability to pursue fur- 20 f.). We brought our SLActive surface to customers in ther strategic investments and acquisitions – with Japan (see p. 46 f.), and we introduced our new Bone cash of CHF 459 million on hand. Level Tapered (BLT) implant (see p. 104 f.), opening the door for Straumann to compete head to head with other The overall performance and our strategic progress tapered implants, which make up 60% of all implants were reflected in a 50% increase in the share price over sold today. BLT could be a significant opportunity for the full-year period (see p.161 f.). This contributed to a Straumann, not least because Roxolid plus SLActive dis- total shareholder return of 53% – including a stable tinguish it as a ‘new-generation’ tapered implant. dividend of CHF 3.75 per share. MORE COMPETITIVE PROSTHETIC SOLUTIONS STRATEGY IMPLEMENTATION While implants provide the basis of modern tooth The progress we achieved endorses our three strategic replacement systems, the ‘bite’ comes with prosthet- priorities, which did not change, namely: ics. To offer more cost-effective solutions for our lab –to address changed core market dynamics, customers, we introduced a new prosthetic concept, –to target unexploited growth markets, and including our new competitively priced Variobase – to drive a high-performance culture and organization. abutment and a simpler CADCAM workflow called CARES X-stream. The following initiatives exemplify our strategy in action and illustrate how we have created further We also developed Straumann ‘Pro Arch’ to address the value for our stakeholders, especially customers and growing number of fully or partially edentulous patients patients: seeking complete fixed tooth replacement solutions that function immediately – cutting treatment sessions ADDRESSING CHANGED CORE MARKETS and minimizing disruption. Pro Arch is a comprehensive THROUGH INNOVATION solution that includes implants, a new range of angu- We began 2014 with a bold step to upgrade our entire lated abutments (see p. 76 f.), customized bars, bridges implant range to our high-strength material Roxolid and sophisticated frameworks manufactured by our and to offer it together with a new transfer piece for milling centers and by Createch (see p. 159). Our open the same price as the existing titanium range (see p. CADCAM system and Scan & Shape Service now enable 10 f.). Roxolid opens up the possibility of using smaller, almost any dental lab to order custom prosthetics from less invasive implants, which can avoid bone augmen- Straumann. tation – saving trauma, time and cost (p. 10 f.). AN UNPARALLELED RANGE OF REGENERATIVES In parallel, we reduced the price of our basic implant in In April we joined forces with botiss biomaterials, selected markets to compete more effectively against Europe’s second largest supplier of oral tissue regener- lower priced brands and to meet the changed market ation products, enabling us to offer an unparalleled expectations for value ratios. Through successful cam- range of regenerative solutions to support implant paigns in Europe and North America, we succeeded in and periodontal procedures. We have exclusive rights establishing Roxolid as the new premium standard to distribute botiss products in most countries around material for implants, by switching the great majority the world and began the roll-out in initial markets in of our customers from conventional titanium to the October 2014.

Straumann_2014_English_1 13 09.03.2015 16:51:33 14 Letter to shareholders

As regulatory approvals are still pending in the US, we reach and controlling our customer base. We took a have licensed two further products from third parties major step towards these strategic imperatives by tak- to fill the gaps in our regenerative portfolio. We are ing over our distributor’s business and establishing a thus now able to offer customers on both sides of the hybrid model with multiple distributors and our own Atlantic all the components for a complete solution sales, marketing and education teams. from one company. Latin America is another source of growth. In Brazil INNOVATION PROCESS REFINED alone, where Neodent leads the market, an estimated The pace of change in our industry has accelerated and 2.3 million dental implants are placed annually, mak- dental implants are becoming mass products. Conse- ing it the world’s largest market in volume terms quently, the trend in innovation is moving from tech- alongside the US. nological breakthroughs to sales processes, holistic approaches and product refinement (as the aforemen- As the year came to a close, we compiled a blueprint tioned examples show). At Straumann, innovation has for expansion in Latin America. This includes plans for broadened from creating and developing new ideas to creating distribution hubs in Argentina, Columbia and making them commercial successes, which means Mexico to serve the surrounding countries. that our innovations have to be customer and market driven. This is where we benefit from the large ITI net- WINNING SHARE IN THE UNDERPENETRATED US MARKET work (see p. 87) and from having a broad sales team in AND ENTERING THE DENTAL CHAIN SEGMENT direct contact with customers. The world’s largest market in financial terms is the US, but it is still comparatively underpenetrated (see p. In 2014, we continued to invest in research and devel- 40), which is why we have invested over-proportion- opment to support the number and quality of our ally there in recent years. This strategy has made pipeline projects (see p. 35). To gain access to new North America a key growth generator for Straumann. leads, we further developed our web-based innovation platform. This has drawn ideas from around the By the year 2020, 38 million adults in the US will be in world, which have been screened for development need of 1 or 2 complete dentures2. Our collaboration potential (see p. 34). with ClearChoice, a large chain of dental centers which are leaders in full-arch dental restorations, is one of Rigorous scientific testing and clinical documentation several steps we are taking to address this market. continue to be engrained in the Straumann philosophy. ClearChoice performs more implant procedures than At year end more than 150 studies were running – all any other network in the US and we have become to provide customers and patients with the reliability, their preferred supplier. quality and confidence that are Straumann’s trademark. We also continued to invest in training and edu- We have also teamed up with Patterson Dental and cation, to expand the pool of dentists offering implant Spear Education to address the rapid increase in gen- procedures, to enhance the standard of care and to eral practitioners (GPs) placing implants, to improve ensure long-lasting satisfaction. the quality of education and to further enhance the standard of patient care. Patterson is one of the largest TARGETING UNEXPLOITED GROWTH distributors to general practitioners in North America. OPPORTUNITIES EXPANDING OUR REACH IN CHINA AND LATIN AMERICA A key element in this collaboration is Straumann China is one of the most exciting markets for Strau- Smart One, our simple all-in-one implant package, mann and, according to some estimates, is thought to which will be available exclusively through Patterson be growing at more than 20%. Through a successful together with Spear’s Interdisciplinary Implant Cur- distributor partnership, we have established a leading riculum. The partnership will foster the interdisciplin- position, but the market is changing rapidly and we ary relationship between specialists, GPs and labs to need to address the fast-growing private practice sec- improve collaboration in referring patients and in tor more effectively in addition to broadening our coordinating treatment plans. This approach will

Straumann_2014_English_1 14 09.03.2015 16:51:33 Letter to shareholders Letter to shareholders 15

increase implant opportunities for all professionals digital workflow solutions for all major tooth re- by better identifying patient cases that are currently placement indications – from single tooth to full not considered for implant therapy, and enabling bet- dental replacement. Pro Arch (see p. 158 f.) is one ter treatment outcomes. step in this direction.

TAPPING INTO THE GLOBAL VALUE SEGMENT BUILDING A HIGH PERFORMANCE The attractiveness of our business and the economic ORGANIZATION environment have stimulated a sharp increase in local Having resized in 2013, we needed to strengthen our ‘value’ players, who offer implant and prosthetic prod- team in specific areas to support strategic growth ucts at lower prices than the premium segment. Many initiatives, for example in emerging markets and in are ‘copycats’. Few offer the high levels of service, the value segment. As a result, our global workforce training, support, experience, innovation and long- increased by 8%. term assurance that are inherent to the Straumann brand. Nevertheless, the value segment now accounts People are our success. Having adapted to our new for more than a third of the global implant market. structure, we reevaluated and restarted the talent/ career development programs that were interrupted In pursuit of our goal to be the global provider of choice in 2013. We also extended the program devoted to for tooth replacement solutions, we are continuing to selling skills and maintained our apprenticeship and focus on our premium offering but are also building a internship programs. separate portfolio of value brands. To gain access to the fast-growing value segment in Asia, we invested in Despite the pace of change and significant chal- Megagen (Korea) and Biodenta (Taiwan). We are also lenges, our employees have again demonstrated the acquiring approx. 43% of T-Plus (Taiwan), which will Straumann spirit of ‘simply doing more’, helping us open a door to the value segment in China (see p. 27). to outperform, to expand and to deliver an impressive number of innovations to the market. This has To drive the international commercialization of the been rewarded with appropriate compensation portfolio brands, we created the Instradent business bonuses (see Compensation Report). platform, which established sales subsidiaries in Iberia, Italy and the US. Each of them began by dis- OUR CULTURAL JOURNEY tributing the Neodent implant system and have One of our strategic priorities is to build a high per- been working towards launching Medentika pros- formance culture, which we believe starts at the top thetics. In 2015, Neodent will be consolidated in our of the company. In 2014, we embarked on a ‘cultural financial statements. journey’ to foster and promote delegation, empowerment, taking responsibility, risk-taking, challeng- A COMMON TECHNOLOGY PLATFORM ing, and creative thought, which are predominant In order to provide complete solutions we forged sev- behavioral styles in high-performance organizations eral agreements/partnerships which, together with (see p. 88). Following 360° assessments of the lead- fully and partially-owned companies, form a shared ership team, a number of workshops and coaching technology platform that can serve both our premium sessions were conducted. The process will be and Instradent businesses. Botiss and Rodo Medical extended through the organization and progress will (see p. 28), a start-up company with innovative tech- be measured regularly. nology for prosthetic fixtures, were two additions to this platform in 2014. MORE THAN CREATING SMILES, RESTORING CONFIDENCE As a prelude to our cultural journey we examined the Our full implant, prosthetic, CADCAM and regenera- fundamentals of what we do and formulated a new tive range make Straumann a comprehensive one- engaging purpose statement: ‘more than creating stop shop. Moving ahead, we will focus on becoming smiles, restoring confidence’. This embodies the the total solution provider for tooth replacement, Straumann principle of challenging and going through offering conventional, semi-digital and beyond the status quo by simply doing more. It also

Straumann_2014_English_1 15 09.03.2015 16:51:33 16 Letter to shareholders

reflects the passion for reliability, which is our trade- OUTLOOK 2015 mark, and on which our customers and their patients (barring unforeseen circumstances) can count. We are optimistic that we will carry our dynamic momentum forward into 2015 with the aim of achiev- Since our company’s pioneering entry into implant ing excellent organic growth rates in all key regions dentistry 40 years ago, Straumann products have and segments. brought smiles to millions of faces around the world. Today, implant dentistry is a routine procedure and Unfortunately, our achievements and progress in 2014 patients have increasing requirements and expecta- have been overshadowed by more recent events. tions – for example: lasting function and esthetics, minimum discomfort and inconvenience, lower prices, The decision by the Swiss National Bank in January this shorter time to teeth, ‘immediate’ solutions, metal- year to remove the minimum exchange rate for the free options and more. However, the underlying desire Euro caused the Swiss franc to soar abruptly against all is for an improvement in the quality of life, without currencies in which we do business. As 95% of our rev- compromise when it comes to enjoying food and enues are generated abroad, this will have a significant looking good. effect on our revenues and profits in Swiss francs. If the currency exchange rates in general continue at Almost without exception, patients who have received their recent levels, the negative impact on Strau- extensive tooth replacement tell us that the treat- mann’s full-year revenue and EBIT could be as much as ment has literally changed their lives – largely because CHF 75 million and CHF 40 million, respectively. This is of restored self-confidence. This fully reflects our pur- why the stock market reacted quickly, cutting our pose statement and was expressed emphatically by 14 share price – and thus the market capitalization – by patients who received total dental replacements in a roughly a quarter in the space of a few days. single day – free of charge in one of our charitable initiatives in 2014 (see p. 92 ff.). We responded rapidly with measures to reduce our Swiss cost base, which will not affect our ability to We are committed to continuing our focus on sustain- continue growing and will keep us in a position to able development and value creation. This includes meet your expectations as shareholders for 2015. running our operations as efficiently as possible to achieve financial, material and energy savings. It also Without the progress we made in 2014, we would encompasses our charitable support for various dental have been less able to tackle our present and future health initiatives. challenges. The steps we have taken and our strategic focus will enable us to succeed in our fast-changing environment, bringing us closer to our vision of being the partner of choice in tooth replacement and to our aspiration of extending our global leadership to the value segment. Global presence, size, infrastructure, partners and financial capability give us a valuable advantage in this respect.

Key markets in Europe are expected to improve mod- estly but may continue to lag for some time and will doubtless become increasingly competitive. We expect our performance there to be constrained by the weak economy. On the other hand, Asia has improved, while North America and emerging markets like Brazil and China hold much promise, and we are very well positioned to tap their potential.

Straumann_2014_English_1 16 09.03.2015 16:51:34 Letter to shareholders Letter to shareholders 17

We expect the global implant market to improve fur- REFERENCES/FOOTNOTES 1 The term ‘organic’ used throughout this report means excluding ther in 2015 and our own revenue to grow organi- the effects of currency fluctuations and acquired/divested business activities. cally in the mid-single-digit range. Our revenue in 2 Douglass CW, Shih A, Ostry L. Will there be a need for complete dentures in the United States in 2020? J Prosthet Dent. 2002 Jan; Swiss francs will be influenced by the recent 87(1): 5-8. exchange rate turbulence.

We will balance our investments between growth markets and other strategic projects, taking decisive steps to mitigate the consequences of the very strong Swiss franc. These measures include compensation reductions in Switzerland as well as strict hiring and travel restrictions. Collectively, they will help to achieve our 2015 organic EBIT margin target of at least 20%, which is based on the assumption that the exchange rates remain more or less at their February 2015 levels.

We would like to thank all our employees on your behalf for their hard work, engagement and loyalty to Straumann. In particular, we would also like to acknowledge our employees in Switzerland for their solidarity in agreeing to compensation reductions in 2015 to help mitigate the severe currency impact.

And last but not least, we would like to thank you, our shareholders, for your continued support and confidence in our company.

Yours sincerely

GILBERT ACHERMANN MARCO GADOLA Chairman of the Chief Executive Officer Board of Directors

26 February 2015

Straumann_2014_English_1 17 09.03.2015 16:51:34 18

“My job is keeping the team on track.” BRUNO ZBERG SENIOR PROJECT MANAGER “My part is translating the technology into a graphic layout.” STEVEN GRAVINO GRAPHIC DESIGNER

“I love the people, the products and the passion of everyone who works here.” CORINNE STANZEL GLOBAL PRODUCT MANAGER

Straumann_2014_English_1 18 09.03.2015 16:51:41 19

A job that helps to improve lives

BRUNO ZBERG SENIOR PROJECT MANAGER 5.5 YEARS @ STRAUMANN Bruno says that he and Straumann are a good fit. “It’s a Swiss company with a clear strategy and highly educated, skilled, committed people focused on the same goal. I like doing a job that helps people and improves their lives. The satisfying part is seeing the product in the dentist’s hand.”

CORINNE STANZEL GLOBAL PRODUCT MANAGER 3 YEARS @ STRAUMANN “Wherever you see Straumann in advertising, at congresses and trade shows, you see high quality,” says Corinne. She’s especially proud of the Straumann PURE Ceramic, which addresses a real patient need and took nine years of research and development to meet highest quality standards. “That made the launch very emotional.”

STEVEN GRAVINO GRAPHIC DESIGNER 3 YEARS @ STRAUMANN Steven is one of scores of creative people in diverse areas at Strau- mann. His mission is to communicate the whole concept visually. “We create unity worldwide with a consistent identity and it’s a lot of fun.”

Straumann_2014_English_1 19 09.03.2015 16:51:43 20

Straumann PURE Ceramic Implant More than esthetic advantages

Straumann PURE uses a monotype design for reliability

When we show patients a white ceramic implant alongside a grey metal implant and ask which they would prefer, most of them choose the former for its looks. Ceramic materials offer a distinct esthetic advantage to metals in dental applications. Furthermore, ceramic provides a good biocompatible alternative for patients asking for metal-free implants.

Until recently, there were concerns about the mechanical predictability of ceramic materials. Straumann has overcome this hurdle through an innovative manufacturing process and testing procedure (see far right).

Straumann_2014_English_1 20 09.03.2015 16:51:44 21

100% tested

NEW SMALL DIAMETER PERFECTED ZLA SURFACE The Straumann PURE ceramic implant was introduced at the end The esthetic properties are exceptional with a of 2013 after a 7-year development program. Since then we have translucent ivory color – perfected a small-diameter (3.3 mm) version which was launched like natural tooth roots – at the EAO in 2014 and is designed for metal-free treatments in and a specially-developed the esthetic zone at the front of the mouth. ZLA surface to accelerate the healing process

and promote highly pre- Although the requirement for metal-free alternatives is not a dictable bone integration. major driver of today’s market, the availability of ceramic implants with similar performance, flexibility and predictability to their metal predecessors will undoubtedly change implant dentistry. Straumann PURE may be a first step in this direction.

98 % SUCCESS/SURVIVAL, ZERO BREAKAGES1 To ensure the reliability of our ceramic implants we designed a new testing method, which checks mechanical strength through 360 degrees.

Every single Straumann PURE implant undergoes this ‘proof test’ – a level of quality checking that is exceptional in the dental implant industry.

1 Gahlert M, et al. Prospective Open Label Single Arm Study to Evaluate the Performance of Straumann Ceramic Implants Monotype CIM (Zirconium diox- ide) in single tooth gaps in the maxilla and mandible. EAO 2013, Poster 252, Clin. Oral Impl. Res. 24 (Suppl. s9), 2013, p. 123.

PURE confidence based on thorough examination and rigorous testing.

Straumann_2014_English_1 21 09.03.2015 16:51:52 22 Management commentary Business model & objectives

Management commentary Contents

23 Business model & objectives 26 Strategy 30 Products, services, solutions 34 Innovation 38 Markets 48 Business performance – Group 52 Business performance – Regions 66 Business performance – Financials 78 Risk and sustainability report

Straumann_2014_English_1 22 09.03.2015 16:51:52 Management commentary Business model & objectives Management commentary Business model & objectives 23

Business model & objectives

STRAUMANN IN BRIEF more than 70 countries through a broad network of WHO WE ARE AND WHERE WE ARE FROM distribution subsidiaries and partners (see chart on Headquartered in Basel, Switzerland, the Straumann p. 172 for overview of subsidiary and distributor loca- Group is a global leader in tooth replacement. The tions). More than 90% of the business is conducted company was founded in 1954 as a research institute directly through fully-owned subsidiaries. specialized in alloys. Having moved into the field of osteosynthesis in the 1960s, it became a pioneering OUR PURPOSE AND GUIDING PRINCIPLE force in dental implantology, which became its sole Straumann wants to be the provider of choice for den- focus in 1990. Twelve years later it expanded into tal professionals and patients when it comes to tooth oral tissue regeneration and in 2007 it entered the replacement solutions. We aim to achieve this through field of CADCAM tooth restoration in order to pro- innovative products, solutions, and commercial vide full tooth replacement solutions. Institute approaches, and highly motivated, creative employ- Straumann remained a family-owned business until ees. In 2014, we formulated a new engaging vision 1998, when it became a public company, traded on that reflects the Group’s purpose, priorities and strat- the SIX Swiss exchange. egy: More than creating smiles, restoring confidence.

Today Straumann develops, manufactures and sup- This purpose/aspiration is supported by our core plies dental implants, instruments, CADCAM pros- beliefs and longstanding guiding principle of ‘simply thetics and tissue regeneration products for use in doing more’, which apply to our daily operations – in tooth replacement and restoration solutions or to pre- the interest of patients, the dental community and our vent tooth loss (see p. 30 ff.). other stakeholders.

Straumann’s implant components and instruments STRAUMANN’S CORE BELIEFS are manufactured in Switzerland and the US. Its RELIABILITY IS OUR TRADEMARK CADCAM prosthetics are milled centrally in Germany We deliver peace of mind. Our customers and patients and the US, while its production facility for oral tissue trust us for consistent quality and service excellence. regeneration products is located in Sweden. SIMPLICITY IS OUR STRENGTH Straumann offers a wide range of services to dental In an increasingly complex world, we seek solutions practitioners, clinics and laboratories all over the that make life simpler for customers and patients. world. It is recognized as a leading innovator in its field, working in collaboration with leading universi- CUSTOMERS ARE OUR INSPIRATION ties, clinics, and research institutes to further increase We are dedicated to the success of all our customers. the standard of patient care. Through a unique collab- We always seek to understand their perspective and oration with its academic partner the International to deliver what we promise. Team for Implantology ( ITI ), the Group supports research and offers training and education to dental PEOPLE ARE OUR SUCCESS professionals worldwide. Our success depends on skilled, caring, trustworthy and diverse individuals who work as a team and The Group currently employs 2387 people worldwide. share our passion for innovative solutions and ser- Its products, solutions and services are available in vice excellence.

Straumann_2014_English_1 23 09.03.2015 16:51:52 24 Management commentary Business model & objectives

OUR BUSINESS

Oral tissue CADCAM Implants & regeneratives prosthetics abutments, etc.

Regenerative dentistry Restorative dentistry Implant dentistry

STRAUMANN OPEN DIGITAL WORKFLOW

Intra-oral scanning CADCAM Guided surgery

ACHIEVING MORE IS OUR FUTURE education, innovation, quality, support, expertise, We strive relentlessly for better solutions and to cre- clinically proven long-term success, and peace of ate value for our stakeholders. We must always mind. At the same time, the Group seeks to become believe in our ability to achieve more. a global leader in the fast-growing ‘value’ segment.

A GLOBAL PARTNER OF CHOICE In 2012, it began to pursue a multi-brand strategy Straumann is committed to being the premium leading to investments in several important value partner of choice for tooth replacement, offering brands including Neodent, Medentika, MegaGen,

Straumann_2014_English_1 24 09.03.2015 16:51:54 Management commentary Business model & objectives Management commentary Business model & objectives 25

OUR BUSINESS MODEL

STRAUMANN GROUP

PREMIUM OFFERING VALUE OFFERING

COMMON Innovation / R & D TECHNOLOGY Biodenta Education PLATFORM MegaGen Documentation botiss biomaterials Medentika Network Createch Medical Neodent Global reach Dental Wings T-Plus Quality etkon Service Rodo Medical

PRODUCTS & Regeneratives/Implants Prosthetics SOLUTIONS

CUSTOMERS Specialists General dentists Labs

Patients

The Straumann Group is a global leader in tooth replacement. Our core premium business is built on the Straumann Dental Implant system supported by CADCAM prosthetics, digital workflows and oral tissue regeneration products, which together make up a comprehensive solution. Innovation (p. 34), research, development, global reach, guaranteed quality, and service excellence are all inherent to the Straumann brand. So too are clinical evidence, high standards of education and a global network. In these areas, we collaborate with leading institutes, universities and the ITI (p. 87).

We produce most of our products in house (p. 95 f.) and sell them to dental professionals either directly or through distribution partners. Our customers (p. 84 ff.) are specialists, general dentists, and dental labs, which prepare the prosthetic restorations for the dentists. Patients are addressed by general dentists, who often decide on the type of treatment and system, and specialists.

We address the value segment of implant dentistry mainly through the Instradent platform of international brands (p. 27) in which we hold investments. To provide complete solutions, we have entered a number of partnerships/agreements that, together with fully and partially-owned companies, form a shared technology platform that can serve both our premium and Instradent businesses (see p. 28).

T-Plus and Biodenta. In 2014, Straumann created the common technology platform, which features bot- Instradent business platform to drive and manage the iss biomaterials (tissue regeneration), Createch Med- distribution and internationalization of its value ical (CADCAM prosthetics), Dental Wings (digital brands through its own growing network with country dentistry), etkon (CADCAM prosthetics), and Rodo organizations in the USA, Iberia, Germany and Italy. Medical (prosthetic components).

To serve its various businesses and to spur innovative approaches, Straumann has also invested in a

Straumann_2014_English_1 25 09.03.2015 16:51:55 26 Management commentary Strategy

Strategy Driving sustainable growth after a successful turnaround

At the heart of Straumann’s strategy are three key pri- BECOMING THE PARTNER OF CHOICE IN THE orities which provided the strategic focus in 2014 as GLOBAL PREMIUM AND VALUE SEGMENTS we pursued our goal of being the provider of choice in The most prominent example of our efforts to address tooth replacement: the second strategic priority is our progress in penetrat- –Drive a high-performance culture and organization, ing the value segment globally. –Target unexploited growth markets and –Address the changed dynamics of our core markets. As a pioneering innovator in implant dentistry, the premium segment remains our key focus and we are These strategic priorities translate into a number of determined to strengthen our leadership position in it – clearly defined initiatives with clear responsibilities, through continued innovation, documented clinical action plans and deliverables, which are continuously research, differentiated solutions, service excellence, tracked and adjusted as necessary. They also serve as a high standards of training/education, a global network, basis for individual target-setting and performance and a (lifetime) guarantee on original products. assessments. For competitive reasons, details of the various initiatives cannot be disclosed although most In recent years, there has been a marked increase in of them are reflected in the major activities, invest- local and regional ‘value’ players who offer implant and ments, product launches and other achievements fea- prosthetic products at lower prices. Many are copycats. tured in this report. Few offer the high level of service, support, innovation, long-term assurance, etc. that are inherent to the Strau- ENGRAINING HIGH PERFORMANCE mann brand. Nevertheless, the value segment now IN OUR CULTURE accounts for more than a third of the global implant With regard to the first priority, the most remarkable market, reflecting a shift in customer needs towards a achievement is that we have built further on the turn- ‘good enough’ mentality. With this segment growing around achieved in 2013 and delivered substantial rev- faster than premium, it offers a significant business enue and volume growth, with improved profitability. opportunity which we need to capture in order to attain Examples of this strategy in action include efficiency/ our goal of being the global provider of choice. productivity gains in operations (see p. 48 ff.) and improved sales-force effectiveness achieved through a Our strategy has been to build a portfolio of value com- global training/coaching initiative combined with vari- panies that operate as separate brands with their own ous tools to improve efficiency. While these achieve- philosophy, sales force and value proposition. The com- ments confirm that we are addressing the right issues, panies have growing footprints in key markets, making it will take time to achieve a high performance culture them valuable strategic assets for Straumann. Partial and further efforts are needed. A key initiative in this ownership ensures entrepreneurial flexibility and will respect is our ‘cultural journey’, which is explained on enable each company to maintain its own character and p. 88. The recent strong appreciation of the Swiss franc dynamism. It also enables Straumann to treat its inter- has prompted us to sharpen our focus on high perfor- est as a ‘strategic’ or an ‘entrepreneurial’ investment, mance initiatives in order to reduce our cost base fur- depending on the development of the company and ther and thus preserve margins. the market.

Straumann_2014_English_1 26 09.03.2015 16:51:55 Management commentary Strategy Management commentary Strategy 27

PORTFOLIO OF INVESTMENTS TO TARGET THE VALUE SEGMENT

Company Specialty Reach Key facts Straumann’s stake

Neodent Offers full dental implant system Market leader in Bra- Founded 1993 49% stake acquired in 2012 (Brazil) and service. zil. Present in major Privately held with options to increase to implant markets Nearly 1000 employees 100% by 2018. through Instradent or distributors.

Medentika Offers broad range of implant Products sold directly Founded 2005 51% acquired in 2013 (Germany) prosthetics for multiple implant in Germany and Offers multi-platform systems. Recently established through distributors prosthetic systems. own implant business. in Europe and the Approx. 40 employees rest of the world.

MegaGen Offers broad range of implant Sold mainly in S. Fast-growing dental USD 20 million convertible (S. Korea) systems, digital solutions, Korea; distributors in implant company. Fills the bond acquired in 2014, to be regenerative tools and products Europe, North Amer- need for a strong partner extended by USD 10 million to support implant procedures. ica and emerging based in Asia. More than in March 2015. Option to markets. 200 employees. convert to shares in 2016.

Biodenta Offers comprehensive solutions Sold mainly in emerg- Founded 2007 CHF 7 million Convertible (Taiwan, Switzer- for dentists and dental laborato- ing markets. Approx. 100 employees bond acquired in 2014. land) ries. Options to convert to shares over 5 years.

T-Plus Offers dental implants and Sold mainly in Tai- Founded 2009. Offers Approx. 43% to be acquired (Taiwan) related prosthetic components. wan. Regulatory opportunity to tap into in 2015; with options to approvals in China, the lower end of the value increase to 90% by 2020. Europe & the US. segment and into the Chi- nese value market. 20 employees

KEY BRANDS BY SEGMENT AND GEOGRAPHY

Europe1 NAM LATAM APAC

Implant systems Implants Neodent Neodent Neodent MegaGen Biodenta Biodenta T-Plus Medentika MegaGen Biodenta MegaGen Prosthetics Neodent Neodent Neodent MegaGen Medentika T-Plus Createch Biodenta Prosthetics for 3rd Abutments Medentika Medentika Biodenta party implants

Precision bars/bridges Createch

1 in selected countries

Straumann_2014_English_1 27 09.03.2015 16:51:55 28 Management commentary Strategy

TECHNOLOGY PLATFORM OF OWN COMPANIES AND PARTNERS

Company Activities Reach Key facts Straumann’s stake

botiss biomaterials Oral tissue regeneratives International Europe’s second largest Secured loan of CHF 3.6 mil- (Germany) supplier. lion; option to obtain up to 30% in 2017

Createch Medical Specializes in high-end CADCAM Sold mainly in Spain, Established 2006; 30% acquired in 2013 with (Spain) bridges, bars and abutments for Germany and other 30 employees options to increase to 100% multiple implant systems. markets in Europe. by 2019.

Dental Wings Dental prosthetics design (CAD) Distributed by Strau- Established 2007; >100 30% acquired in 2011; (Canada) open software and scanners mann and leading employees. Platform to 14% added in 2012 dental companies in develop lab & chairside over 45 countries. hard- & software solutions

etkon Centrally milled CADCAM Global through Established 2000; Fully-owned (Germany) prosthetics. Straumann acquired 2007

Rodo Medical (USA) Prosthetic fixture devices Start-up company Established 2009 12.5% acquired 2014

In 2014, we complemented our stakes in Neodent and strategic approach. In 2014, we took over distribu- Medentika by investing in MegaGen and Biodenta, tion from our former distributor and began imple- which give us a foothold in the fast-growing Asian menting a hybrid model with our own subsidiary, value segment (see previous page). In addition, we are consultative sales force and a network of indepen- in the process of acquiring a stake in T-Plus, opening a dent distributors (see p. 58). door to the value segment in China. CHANGED DYNAMICS OF CORE MARKETS To drive the international commercialization of these A number of initiatives related to our third strategic brands, we created the Instradent business platform priority were completed in 2014. For instance, suc- in 2014. By year end, Instradent had established sub- cessful campaigns in Europe and North America sidiaries and sales teams in Iberia, Italy and the US. enabled us to establish Roxolid as the new premium Each of them began by distributing the Neodent standard material for implants, switching the great implant system, which targets users of competitor majority of our customers in key markets from systems to Straumann. The next step will be for conventional titanium to the differentiated superior these susidiaries to add other brands – for instance material. Medentika. In recent years, tapered-design implants have Penetrating other attractive segments and geogra- become widely established and account for more phies under our Straumann premium brand is also a than 50% of implants sold today. One of our strate- strategic initiative. In 2014 we made inroads into the gic initiatives is to compete in this segment, result- dental chain segment, signing an agreement with ing in the development of a new generation Bone ClearChoice, one of the leading chains of dental clinics Level Tapered implant in Roxolid and with the SLAc- offering dental implants in the US. We began serving tive surface. This has been very well received and ClearChoice clinics in 2015 as a preferred partner. the full market release is underway.

In the dynamic Chinese market, the key priorities are Based on our strategic priorities, we have developed to expand beyond the hospital/university clinic sector solution ‘packages’ for single-tooth replacement and into the private practice segment, where implant den- for fixed edentulous immediacy (see p. 14, 85 and 158 tistry is rapidly gaining popularity, and to penetrate f.) which comprise implants, prosthetic components, the fast-growing value segment. This required a new digital services and treatment concepts.

Straumann_2014_English_1 28 09.03.2015 16:51:56 Management commentary Strategy Management commentary Strategy 29

The single-tooth package is designed for starters in OUTLOOK implantology. Since the general practitioner seg- Recent consolidation in our industry raises the ques- ment is growing significantly – especially in the tion of whether Straumann will have the critical mass US – we have established partnerships with Patter- to retain its leadership position in the field. Based on son Dental (for distribution) and SPEAR (for educa- our good performance, strong global brand and tion) to increase our reach to GPs in a responsible broad portfolio of partnerships, we are confident and low-risk way. that we will. Nevertheless, we continue to evaluate new opportunities for potential acquisitions and Market dynamics in the restorative business pres- partnerships. We also continue to watch our chang- ent a challenge. Price pressure is intense and differ- ing market and environment carefully and may adapt entiation increasingly difficult. In addition, chairside our strategy accordingly. and in-lab digital workflows are gaining importance and compete with our CADCAM centralized milling business model. Apart from this, we have therefore broadened the reach and accessibility of our CAD- CAM franchise through connectivity with 3M’s True Definition Intraoral scanner and 3Shape’s software. We are continuously increasing the functionality of our CARES software and Scan & Shape service.

Another initiative was the launch of our cost effective Variobase abutment, which has enabled us to compete more effectively against copies of our original standard prosthetics.

BECOMING A TOTAL SOLUTION PROVIDER Our progress in 2014 means that we will adjust our third strategic priority to ‘becoming a total-solution provider for tooth replacement’. This will be achieved through offering customers conventional, semi-digital and digital workflow solutions for all major tooth replacement indications – from single tooth to full dental replacement. The launch of Pro Arch (see p. 158 f.) is one step in this direction. The new strategic priority is an extension of our current initiatives and reflects the focus shift from isolated products to indication-based solutions along workflows supported with related services. This approach puts further emphasis on digital workflows in dental practices and labs.

In order to provide complete solutions, we have entered a number of partnerships and agreements, which – together with fully and partially-owned companies – form a shared technology platform, which can serve both our premium and Instradent businesses (see p. 28). Botiss and Rodo Medical were two additions to this platform in 2014.

Straumann_2014_English_1 29 09.03.2015 16:51:56 30 Management commentary Products, services, solutions

Products, services, solutions Meeting treatment needs, adding convenience, reducing costs, saving time, adding value

STRAUMANN PRODUCTS

CADCAM Soft Tissue and prosthetics Membranes Bone Level Implants (Roxolid, Titanium, Ceramic)

Emdogain Bone augmentation Restorative SLA/SLActive materials components surface

Sectional overview of Straumann’s products.

Straumann_2014_English_1 30 09.03.2015 16:51:57 Management commentary Products, services, solutions Management commentary Products, services, solutions 31

SOLUTIONS ARE OUR BUSINESS THE STRAUMANN DENTAL IMPLANT SYSTEM For more than six decades, Straumann has been inno- vating, developing, testing and refining products that address real patient needs and contribute to quality of life. We have also been combining products, technologies, procedures and services into solutions that add convenience, save time, reduce cost and add value.

Straumann offers approximately 2 800 items, which are used by oral surgeons, specialists and general prac- Designed for maximum flexibility with a minimum number titioners as well as dental laboratories in procedures of components, the highly versatile Straumann Dental Implant System covers all indications and preferences – from standard that range from saving compromised teeth, to individ- applications to super-esthetic individualized CADCAM solutions. ual tooth restoration right up to complete dental replacement. We strive to broaden treatment options, increase precision and longevity, minimize discomfort, the gums, at or close to the crest of the jaw bone. and add value and security. In 2014, we introduced a While advantages are claimed for each design, market number of innovations, which are presented on pages research shows that the choice of implant type is 10 f., 20 f., 46 f., 64 f., 76 f., 104 f. and 158 f. driven mainly by user preference. Today, more than a third of the implants we sell are Bone Level. The major- TOOTH REPLACEMENT ity of implants placed worldwide have Bone Level 2014 marked the 40th anniversary of Straumann’s tapered designs, and their popularity is increasing. Dental Implant System. Covering all indications, it com- This is why we have entered the segment with our prises Soft Tissue Level and Bone Level implants with ‘new generation’ BLT, made of Roxolid and finished parallel wall and tapered designs in a variety of lengths with the SLActive surface (see p. 46 f.). and diameters. It also includes a wide range of standard and individualized prosthetic components, RESTORATIVE SOLUTIONS (PROSTHETICS) and all necessary surgical instruments. Straumann While implant dentistry has always been a key area for implants are machined from our exclusive high-perfor- innovation, many advances are being made in pros- mance material Roxolid (see p. 10 f.), or pure titanium, thetics and in digital dentistry. Substitution of stan- or ceramic (see p. 20 f.). To enhance osseointegration dard implant prosthetics with digitally individualized and thus to improve healing, we supply our implants components is an important trend. Customers appre- with SLA, SLActive, or ZLA surface technology. ciate the advantages of high-precision CADCAM solutions, since they offer efficiency gains for clinicians as HERITAGE AND BENCHMARK: THE STRAU- well as time/cost savings, greater comfort and lasting MANN SOFT TISSUE LEVEL IMPLANT satisfaction for patients. Straumann pioneered the Soft Tissue Level Implant, which simplifies soft tissue management and pros- COMPUTER-AIDED RESTORATIVE SOLUTIONS thetic restoration, saving time, discomfort and cost. Computer-aided design/manufacturing (CADCAM) is Lasting reliability might be its greatest benefit: the used to design and fabricate prosthetic crowns, Straumann SLA Soft Tissue Level Implant has been on bridges, onlays and inlays more efficiently than tradi- the market for more than 15 years and is backed by tional methods. The cornerstones of our CADCAM sys- ten-year clinical results showing survival and success tem are its software (CARES Visual) for scanning, rates of 99% and 97% respectively, with zero implant designing and ordering, and our milling centers in Ger- fractures1. High survival rates after 9 years were also many and the US, which manufacture the prosthetic reported in a landmark study published in 2014.2 elements. Our partnership with Dental Wings enables us to offer state-of-the-art in-lab scanners and access BONE LEVEL IMPLANTS to third-party scanners via the Dental Wings Open In contrast to soft tissue level designs, bone level Software (DWOS) platform. In 2014, we added user implants have prosthetic connections that are below access to the 3Shape system.

Straumann_2014_English_1 31 09.03.2015 16:51:58 32 Management commentary Products, services, solutions

Thanks to our open system, users have several data SERVICES input possibilities and the option of producing pros- MORE THAN PRODUCTS thetics through the CARES validated workflow (cov- To complement our products and solutions, and to ered by our guarantee) or through alternative milling support their effective implementation, we offer a processes, if desired. 3 broad spectrum of services. For instance, we assist with networking and arrange experienced mentor- The X-Stream functionality in CARES Visual enables ing, if requested. Service of this kind requires staff customers to design abutments and the correspond- with an extremely high standard of professional ing full-contour crown or coping simultaneously from knowledge, who are able to provide the necessary a single scan instead of two. Milled for excellent fit information and instruction on products. Extensive and consistent quality in a controlled environment at training is therefore an important aspect. We also our etkon facilities, prosthetic parts are then delivered offer initiatives to help clinicians develop practical together, significantly reducing turnaround time and skills, such as practice management and business shipping costs. expansion.

REGENERATIVE SOLUTIONS CLOSER TO CUSTOMERS Straumann regenerative products are designed to We serve and support customers directly through a restore gums, oral bone and periodontal tissues that highly trained sales team, enabling us to provide a support teeth. personalized service with a high level of expertise. Each Straumann sales subsidiary operates a call cen- At the 2014 ITI World Symposium in Geneva, Strau- ter for customers in need of assistance. Callers are mann and Berlin-based botiss biomaterials announced quickly linked to a specialist for product support. a partnership to provide complete oral tissue regeneration solutions to dental professionals worldwide. CARES SCAN & SHAPE Botiss is Europe’s second largest supplier of oral tissue Scan & Shape is one of several services to broaden regeneration products. Its portfolio of clinically proven, the reach and accessibility of our CADCAM franchise. high quality solutions includes membranes for guided It addresses laboratories that wish to order original tissue and bone regeneration, a full range of bovine, Straumann custom abutments but do not have the allogenic and synthetic bone graft materials, as well as requisite scanning capabilities. They simply send us a soft-tissue-graft products. Backed by many years of model or wax-up and we do the scanning, design and clinical experience, botiss products are used in leading manufacturing for them. In addition to quality, preci- clinics across Europe. sion and convenience, they benefit from original parts and our guarantee – without having to invest With botiss, Straumann is able to offer an unparalleled in scanning equipment or software. range of regenerative solutions to support implant and periodontal procedures. This means that custom- EXPANDING TRAINING & EDUCATION ers can obtain everything for a complete solution from Long-term success and patient satisfaction depend one company. The distribution of the respective prod- on education and the experience of the dental pro- ucts began in the fourth quarter 2014, while regula- fessional. Straumann offers a broad educational pro- tory clearances still have to be obtained in the Ameri- gram, including classic implant dentistry, tissue can and Asian markets . regeneration and state-of-the-art digital solutions, covering all proficiency levels and relevant special- OUTLOOK (PRODUCTS) ties. The program is based on the clinical guidance of We continue to work on solutions to improve produc- the International Team for Implantology with most tivity, treatment options and clinical outcomes. In of the teaching provided by ITI specialists and order to provide clinicians with a comprehensive range renowned experts, in collaboration with leading uni- of treatment options for their patients, we aim to versities. Courses are offered around the world, with bring meaningful innovations to the market and to the highest concentration in North America and the make them as widely available as possible. most rapid increase in China, where Straumann is

Straumann_2014_English_1 32 09.03.2015 16:51:58 Management commentary Products, services, solutions Management commentary Products, services, solutions 33

investing significantly in order to build a consulta- information, we will make even greater use of new tive sales force and a local training and education media channels, including e-learning and e-health organization. platforms, doctor finders, etc.

REFERENCES/FOOTNOTES GUARANTEED PEACE OF MIND 1 Buser D et al.: 10-year survival and success rates of 511 titanium implants with a sand-blasted and acid-etched surface: a retrospective Straumann implants are covered by a lifetime guar- study in 303 partially edentulous patients. Clin Implant Dent Relat Res antee (void if our implants are combined with other 2012;14:839–851. 2 Derks J, et al. Dept of Periodontology, Institute of Odontology, manufacturers’ components). Our abutments and Sahlgrenska Academy, University of Gothenberg. 3 Except in the US, where milling has to be performed by a Straumann restorations come with a limited guarantee. milling center.

THE E-SHOPPING EXPERIENCE The traffic on our new web shop is steadily rising, adding value and convenience for customers and offering possibilities for cross-selling and efficiency gains. A substantial part of our business is now generated through orders coming through the e-shop.

THE SOCIAL MEDIA CHANNEL Straumann embraces social media to address customers’ needs for value-added content. More than 70 000 fans have joined our community on Facebook, engaging almost 240 000 times with Straumann content. Social media have changed the way people connect, discover, and share information, leaving room for emotional and interactive communication.

COMPREHENSIVE PATIENT INFORMATION Research suggests that every other patient consults the internet before, after and sometimes even during the consultation. Based on the information found, patients choose a treatment or a dental professional that is tailored to their needs. The Strau- mann Patient Pro marketing solution is a comprehensive platform that provides dental professionals with digital information to educate patients and to promote their practice.

OUTLOOK (SERVICES) We strive to extend service solutions that enhance convenience, leverage efficiency and add value for customers and patients – for instance by helping dentists build their businesses.

Education is the key to driving implant dentistry – both in established and new markets. It is also essential for sustaining high treatment standards and success rates. This is why we will continue to be its strong advocate, together with the ITI and dental faculties all over the world. To broaden access to education and

Straumann_2014_English_1 33 09.03.2015 16:51:58 34 Management commentary Innovation

Innovation Driven by customers – focused on commercial success

STRAUMANN IDEA PORTAL – WHERE THE IDEAS HAVE COME FROM

¢ Straumann employees 6% ¢ North America ¢ Dental professionals ¢ Europe 12% 8% ¢ Other companies ¢ Switzerland ¢ Universities & clinics ¢ Latin America 6% ¢ Other 35% ¢ Other 38%

20% 10%

34% 31%

Straumann’s 60 year story is one of successful in- incremental improvements in products. For us, inno- ventions that have set industry standards and vation goes beyond creating and developing new improved lives – especially in the field of implantol- ideas to making them commercial successes, which ogy. The company was a pioneering force in implant means that our innovation process has to be cus- dentistry and is still a leading innovator in the field. tomer- and market-driven. This was the goal of the Roxolid, SLActive and Straumann PURE are recent process reorganization we implemented in 2013 and examples. In 2014, we continued to invest in refined in 2014, bringing R&D, Operations and Mar- R&D, boosting the number and quality of our pipe- keting closer together to orchestrate research, regu- line projects. latory, production and other activities, such as pre- marketing and launch. INNOVATION PROCESS REFINED The pace of change in our industry has accelerated, ATTRACTING GENIUS AND SCREENING IDEAS so that dental implants are becoming mass prod- To collect as many leads as possible, we further ucts. At the same time, the trend in innovation is developed and publicized our web-based innovation shifting from groundbreaking technological break- platform. This enables customers, researchers, clini- throughs to sales processes, holistic approaches and cians, employees and other stakeholders to submit

Straumann_2014_English_1 34 09.03.2015 16:51:59 Management commentary Innovation Management commentary Innovation 35

A STOCKED INNOVATION PIPELINE

Project Key benefit target Introduction/rollout

Roxolid SLA Higher strength for SLA implant line 2015 Bone Level Tapered High primary stability, surgical flexibility 2015 Ceramic implants High-end esthetic, metal-free implant system 2016 Smaller diameter implants Strong solution for narrow inter-dental spaces 2016 Smart Solution for simple indications & less experienced practitioners 2015 Abutment blanks With Straumann original connection for milling centers 2015 Variobase prosthetics Bars & bridges with CARES X-Stream 2015 Flexible solution for implant-borne chair-side restorations 2015 Pro Arch Solutions for fixed full arch restorations 2015/2016 3M ESPE Lava Plus Efficient and esthetic high translucent zirconia, especially 2015 suitable for full contour restorations New proprietary material Glass ceramic, improved handling 2016 for restorations Integrated workflow Digital immediate tooth replacement 2015/2016 New CARES in-lab scanner State-of-the-art scanning technology 2015 CARES Visual 10 Integration of digital workflows 2015 Emdogain New indications 2015/2016 Osteogain Bone enhancement 2015

Highlights from Straumann’s development pipeline showing changes in 2014. Introduction/rollout dates may be subject to positive clinical results and regulatory clearances, and barring unforeseen circumstances.

ideas in a framework that assures confidentiality RIGOROUS TESTING – TRUSTED PRODUCTS and respects intellectual property. The review pro- Our research activities range from basic laboratory cess ensures that we focus on ideas that have a high investigations through to clinical trials, controlled probability of commercial success and address cus- market releases and post-market surveillance pro- tomer needs, which vary by market and region. In grams. The investigations are conducted by our own 2014, more than 120 ideas were submitted from teams and in collaboration with experts at well- various sources as shown in the chart above. Eleven known facilities worldwide, ensuring that the have been followed up as potential leads. research is state-of-the-art, scientifically sound and of the highest quality. PRODUCT REALIZATION Our comprehensive development program focuses PRECLINICAL RESEARCH – THE SCIENTIFIC on projects that will contribute directly to revenue FOUNDATION and profit. Teams, consisting of marketing, R&D, It is essential that all products destined for patients etc., work in tandem to expedite the process and to are appropriately tested for biocompatibility, stability, ensure the validity of the concepts. These are sum- strength, and to ensure that the properties developed marized in the table above. in the laboratory can be reproduced commercially.

Straumann_2014_English_1 35 09.03.2015 16:51:59 36 Management commentary Innovation

2014 PEER-REVIEWED PUBLICATION HIGHLIGHTS

Authors Study Title Product Journal Conclusion

Quirynen M, Al-Nawas B, Small-diameter titanium Grade IV Roxolid Clin Oral 98.7% implant survival rates after Meijer HJ, Razavi A, and titanium-zirconium implants Implants Res. 3 years in fully edentulous patients Reichert TE, Schimmel M, in edentulous mandibles: three- 2014 Apr 9 Storelli S, Romeo E. year results from a double-blind, randomized controlled trial.

Lambert F, Lecloux G, Less invasive surgical procedures Roxolid J Oral Implantol. Narrow diameter implants seem to Grenade C, Bouhy A, using narrow diameter implants: 2014 Apr 25 be an effective treatment option Lamy M, Rompen E. a prospective study in 20 consec- that prevented GBR (Guided Bone utive patients. Regeneration) in the majority of the present cases

Wennerberg A, Jimbo R, Nanostructures and hydrophilicity SLActive Clin Oral Wettability and presence of Stübinger S, Obrecht M, influence osseointegration: a bio- Implants Res. nanostructures led to strongest Dard M, Berner S. mechanical study in the rabbit tibia. 2014 Sep;25(9) bone response

Erdogan O, Uçar Y, Tatlı U, A clinical prospective study on SLActive Clin Oral 100% implant survival rates after Sert M, Benlidayı ME, alveolar bone augmentation and Implants Res. 12 months in diabetic patients Evlice B. dental implant success in patients 2014 Jul 11 with type 2 diabetes.

van Velzen FJ, Ofec R, 10-year survival rate and the SLA Clin Oral Study with 374 implants demon- Schulten EA, incidence of peri-implant disease Implants Res. strates 99.7% implant survival rate Ten Bruggenkate CM. of 374 titanium dental implants 2014 Nov 5 after 10 years with a SLA surface: a prospective cohort study in 177 fully and partially edentulous patients.

French D, Larjava H, Ofec R. Retrospective cohort study of 4591 SLA Clin Oral High long-term implant survival Straumann implants in private Implants Res. rates from a private practice with practice setting, with up to 10-year 2014 Aug 19 4591 documented implants follow-up. Part 1: multivariate survival analysis.

Derks J, Håkansson J, Effectiveness of implant therapy SLA Clinical Research Implant loss influenced by Wennström JL, Tomasi C, analyzed in a Swedish population: Supplement of brand; Straumann ahead of Larsson M, Berglundh T. early and late implant loss. the Journal of 7 other brands named Dental Research (epub)

Technologies, materials and designs that maintain the In 2014, an impressive body of scientific evidence on necessary characteristics are studied in vivo, which Straumann products was published in peer- often includes evaluating the surgical technique. reviewed journals. Very few implant companies perform clinical studies on this scale. The compelling CLINICAL RESEARCH – BUILDING THE results provide clear reasons why customers should EVIDENCE trust in Straumann products rather than undocu- Straumann’s products and technologies are thor- mented alternatives. oughly evaluated within a defined and streamlined global clinical study program. This may comprise One of the most compelling studies published in single- and multi-center studies, as well as investiga- 2014 was performed by independent investigators, tor-initiated studies. Proposals for the latter are without support from Straumann. Using the carefully screened and may be supported in various national data register of the Swedish Social Insur- ways. Clinical investigation can further include large ance Agency, they gained access to data on 11 311 post-market surveillance or non-interventional stud- implants in 2765 patients. In addition, a clinical eval- ies (NIS), with a range of patients and indications uation was performed on 596 patients 9 years after treated in daily practice conditions. treatment. A key observation was that implant

Straumann_2014_English_1 36 09.03.2015 16:51:59 Management commentary Innovation Management commentary Innovation 37

brand influenced implant loss. The evaluation showed that Straumann significantly outperformed other brands with regard to short-term implant survival. 1

OUTLOOK The driving forces of Straumann’s innovation process are customer needs and commercial success. Rigorous scientific testing provides customers and patients with reliability, quality and peace of mind.

With this in mind we will continue to invest significantly in research and development.

FOOTNOTES 1 Derks, J, et al., Dept. of Periodontology, Institute of Odontology, Sahlgrenska Academy, University of Gothenberg.

Straumann_2014_English_1 37 09.03.2015 16:51:59 38 Management commentary Markets

Markets Competing in a CHF 7 billion market

THE GLOBAL DENTAL IMPLANT MARKET THE GLOBAL DENTAL IMPLANT MARKET BY REGION 1 BY SHARE OF SALES 1

¢ Europe 5 – 10% ¢ Straumann ¢ North America ¢ Nobel Biocare 20% ¢ Asia/Pacic 15 – 20% ¢ Dentsply Implants ¢ Rest of the World 40 – 45% ¢ Biomet 3i ¢ Zimmer Dental ¢ Others 41%

17%

30 – 35%

4% 12% 6%

THE MARKET FOR IMPLANT DENTISTRY innovative products and solutions, broad product The implant dentistry market comprises dental im- ranges, training, education and superior customer ser- plants and abutments 2 along with supporting tools/ vice. Straumann leads the global premium segment instruments, which make up only a small portion. and offers a wide range of implants priced at multiple Based on our internal estimates as well as reports from levels. other companies and independent research, we believe that the market grew at a low to mid-single- digit pace According to global market research 3, dentists choose in 2014 and is valued at over CHF 3 billion. 1 implants based on quality, ease of use, familiarity, and long-term scientific evidence – areas in which As in the prior year, the key growth drivers were North Straumann consistently receives best-in-class ratings. America and the Rest of the World including Latin Although price is not a key driver in the choice of America. The largest region, Europe, which represents implant brand, it has gained importance, driving shifts more than 40% of the global market, continued to con- towards the value and discount segments. tract, but only slightly and to a much lesser extent than in previous years. Asia/Pacific was flat, but this was a Responding to this trend, Straumann entered the considerable improvement from the significant decline non-premium segment by investing in fast-growing in 2013. brands like Neodent in 2012, Medentika and Creat- ech in 2013, MegaGen in 2014 and T-Plus in 2015. MARKET STRUCTURE The Group’s strategy is to penetrate the non-pre- The market is divided into three segments: premium, mium segments of the tooth replacement market value, and discount. Companies in the premium seg- via segregated brands, without compromising its ment are distinguished by their clinical documentation, premium leadership.

Straumann_2014_English_1 38 09.03.2015 16:52:00 Management commentary Markets Management commentary Markets 39

DENTAL IMPLANT MARKET BY SEGMENT THE CROWN AND BRIDGE MARKET (IN VALUE TERMS)

Manual production Premium oﬀering, based on innovative, clinically-proven PREMIUM products and comprehensive 75 80% services at premium price

CADCAM Standard products, often only production VALUE 10 15% 5 10% ~5% regional presence, value price In-lab Centralized Chairside milling milling milling DISCOUNT Look-alike products, very limited R&D, training, education, and service In value terms

Straumann competes in the premium and – with its SLA titanium range – the upper value segments. In the value segment, the Group competes through its Instradent platform.

Five leading multinational manufacturers make up the translucent ceramics, which reduce working time and premium implant segment, which currently accounts offer exceptional esthetics and function. for almost 60% of the global market. The non-premium segment is highly fragmented and comprises The market for CADCAM dentistry comprises pros- several hundred competitors, the majority of which thetic elements (crowns,1 inlays, onlays, bridges) and have only a local or regional focus. Some pursue a low equipment (scanners, milling units etc.). According to price strategy while others offer their customers the latest data, these products collectively generated advanced customer services and education at mid- global revenues of more than CHF 3.5 billion in 2014. 4 price points. Based on available market data and industry sources, we believe that the premium players CADCAM PROSTHETIC ELEMENTS lost approximately 1% of their collective market share CADCAM prosthetics are produced in one of the to the non-premium segment in 2014. following: –A dental practice (chairside milling unit) Successful product launches and marketing initiatives –A dental laboratory by a dental technician, helped Straumann to gain pace and outperform the – An industrial milling center operated by a CADCAM premium segment in 2014 and to extend its lead in manufacturer. the overall implant market. Our share of the global market thus climbed to 20%. 1 In 2014, about 25% 4 of all prosthetic elements (tooth- borne and implant-borne) were produced using THE MARKET FOR RESTORATIVE DENTISTRY CADCAM technology. This is expected to increase Conventional tooth restorations (e.g. crowns and as more dental professionals adopt this technology. bridges) have traditionally been manufactured by Straumann CADCAM prosthetics are designed with hand. Today, the process is increasingly automated, our CARES Visual software (either by labs or through and digitalization now makes it possible to design and our CARES Scan & Shape service) and milled centrally. manufacture prosthetic elements by CADCAM (Com- puter-Aided Design; Computer-Aided Manufacturing), Market research studies 5 confirmed that general den- saving time and increasing accuracy. Further advances tists (GPs) outsource CADCAM manufactured crowns have been made through improved high-performance and bridges, usually to a local lab. About two thirds of

Straumann_2014_English_1 39 09.03.2015 16:52:01 40 Management commentary Markets

THE ORAL TISSUE REGENERATION MARKET DENTAL IMPLANT PENETRATION (IN VALUE TERMS) Implants sold per 10 000 population in 2014 1

200

¢ Europe ¢ North America ¢ Asia/Paci c ~5% ¢ Rest of the World

35-40% 55-60% 100

>60%

<5% 0

¢ ¢ US Tissue regeneration Straumann‘s share UK Italy India Brazil Spain Korea Japan ¢ China

Membranes Russia France Austria Canada Sweden Portugal Australia ¢ Bone graft materials Germany Switzerland Netherlands In value terms

them use models or impressions to order the restora- Lack of reliable market data makes it difficult to quan- tions. In the next few years, general practitioners tify market shares in restorative dentistry. We esti- anticipate that most CADCAM restorations will con- mate that in 2014 our share of the centrally-milled- tinue to be outsourced and that digitally scanned data element segment was less than 5%. will increasingly replace models. THE MARKET FOR REGENERATIVE PRODUCTS CADCAM EQUIPMENT The 2014 market for oral tissue regeneration products CADCAM equipment can be categorized as: (regeneratives) was estimated to be worth more than – Chairside systems, in which scanning, design and CHF 400 million6. As regeneratives are frequently used milling are all performed in the dental practice to support implant procedures, the market exhibited – Full in-lab systems, where scanning, design and mill- similar growth to the implant and prosthetic market. ing are performed by the lab – Central milling, where in-lab scanners are connected The regenerative market can be divided into the fol- to an offsite milling center. lowing segments –Bone graft materials According to our estimates, more than two thirds of all –Membranes CADCAM systems sold are for full in-lab systems or in- –Tissue regeneration products. lab scanners connected to an offsite milling center. In-lab scanning with centralized milling is an attrac- Straumann is active in all three. In the fourth quarter tive solution because it offers laboratories access to of 2014, we began distributing the botiss range of the latest technology without investing in expensive, regeneratives and now offer an unparalleled range of high-maintenance milling equipment. regenerative solutions across all market segments (see p. 64 f.). Straumann is active in the in-lab scanner (and software) segment. We also offer a Scan & Shape service BONE GRAFT MATERIALS to labs that do not have the requisite scanning capa- It is currently estimated that up to one in four implants bility. This also provides access to our milling centers require bone augmentation/graft procedures 7. Four (see p. 32). types of bone graft material are commonly used:

Straumann_2014_English_1 40 09.03.2015 16:52:01 Management commentary Markets Management commentary Markets 41

PROPORTION OF ADULTS IN THE US MISSING ONE TOOTH OR MORE (in % by age group; excluding wisdom teeth) 8

84% 74% 68% 59% 51% 20% 33% 40%

18 – 24 years 25 – 34 years 35 – 44 years 45 – 54 years 55 – 64 years 65 – 74 years 75 + years Average

–Autografts (patient’s own bone) the European markets are still contracting, though – Allografts (human donor bone, e.g. botiss maxgraft, recent trends show the decline has slowed. Con- Straumann Allograft) versely, positive economic signals in Northern and – Xenografts (bone sourced from animals, e.g. botiss Latin American markets favor market growth. cerabone) –Synthetic bone (e.g. Straumann BoneCeramic). The stagnant economic environment proved an opportunity for non-premium manufacturers, who Synthetic bone accounts for more than a quarter of increased their market share in recent years. Noth- the bone graft substitute market. Allografts are ing indicates that the non-premium segment will more commonly used in North America, where they stop growing, validating our strategy to penetrate account for half of the market. Straumann entered the value segment. that market in 2009. Positive trends in the market lead us to believe we MEMBRANES can also expect the premium segment to pick up. As Oral membranes are used in up to 60% of bone aug- a result, the overall market has the potential to mentation procedures9 and act as barriers to pre- achieve high-single digit growth in the mid-to-long vent the growth of soft tissue in the space required term. This positive view is based on the prevalence for bone formation. Straumann has competed in this of tooth loss, the substitution of conventional treat- segment since 2010. ment, and general demographics.

SOFT TISSUE REGENERATION DEMOGRAPHIC TRENDS Between 10 and 15% of the general population in Although caries prophylaxis has reduced tooth loss, developed countries suffer from severe periodonti- in the developed world aging and affluence drive the tis 10, the most common cause of tooth loss. Strau- implant business growth. Tooth loss is a function of mann Emdogain is used to regenerate tissues that age 8 and today more than 18% of the US population anchor the tooth when they have been damaged is over the age of 60. This will rise to 22% by 2020 11. by periodontal disease. Straumann leads this seg- Furthermore, the purchasing power of seniors in ment and our share is more than two-thirds of the developed countries is growing12. There is also sig- global market. nificant growth potential in markets like China, where incomes are increasing and implant rates OUTLOOK are low. FUNDAMENTAL DRIVERS In the absence of reimbursement, our markets – PREVALENCE OF TOOTH LOSS especially the premium segment – are subject to the Prevalence of tooth loss is defined as the proportion of economic environment. A sluggish economy means a population currently suffering from the condition,

Straumann_2014_English_1 41 09.03.2015 16:52:02 42 Management commentary Markets

TOOTH LOSS AND TREATMENT (USA)

ADULT POPULATION

PEOPLE AFFECTED BY TOOTH LOSS (45 – 55%)

ANNUAL TOOTH LOSS CASES SEEKING TREATMENT (5 – 10%)

PEOPLE ACTUALLY TREATED (45 – 55%)

IMPLANT TREATMENT CONVENTIONAL TREATMENT (15 – 20%) (80 – 85%)

The population in the US is aging, resulting in more patients with tooth loss. Patients who have been treated are likely to require maintenance work (probably more so with conventional treatment). Most people lose more than one tooth in life and thus re-enter the treatment path.

which is an indicator of the potential for implant – Implants are increasingly regarded as the state-of-the- dentistry. A study conducted in 2012 in the US 8 illus- art treatment trates how significant that potential is. It revealed – Competence in implant techniques is growing among that: dental professionals, especially general dentists –50 – 60% of the adult population had lost at least one – Market studies foresee increased use of implants in tooth in or prior to 2012 the next 2 – 3 years based on positive responses from –Of those, 45% were fully treated general dentists 5 – Of the untreated portion, 31% or approximately 20 – Training and education activities provided by compa- million US adults were planning to receive treatment nies like Straumann successfully convert dentists to in the next 3 years implants – More than a million people needed a replacement for – Rising awareness among patients is expected to drive an existing restoration (e.g. a tooth-borne bridge). demand for dental implants.

SUBSTITUTION OF CONVENTIONAL CROWNS AND BRIDGES CADCAM DENTISTRY UNCHANGED As the penetration of dental implants is still very low According to US market research, more than 80% of (see chart on p. 40), the substitution of conventional dental laboratories are small- to medium-sized 13. Most tooth replacement treatment (tooth-borne bridges) is large labs own at least one scanner and one milling the most important growth driver for implant den- unit, and a significant proportion intend to invest in tistry because: additional CADCAM equipment. Notwithstanding, – Only 15 – 20% of adults treated for tooth loss re- the CADCAM elements business is the main driver of ceive implants 8 this market.

Straumann_2014_English_1 42 09.03.2015 16:52:02 Management commentary Markets Management commentary Markets 43

While small labs are eager to adopt automated workflows, the high cost means few own CADCAM and milling equipment. We see significant potential in outsourced milling in combination with scan-and- design services (e.g. CARES Scan & Shape) for lab customers without scanning capabilities.

Advanced high performance materials, such as Zerion HT, will also contribute to growth in CADCAM dentistry.

REFERENCES/FOOTNOTES 01 According to 2014 FX rates. Straumann estimates, based on MRG, iData and industry sources; including: Australia, Austria, Belgium, Brazil, Canada, China, Czech Republic, Denmark, France, Germany, Hungary, India, Israel, Italy, Japan, Luxembourg, Mexico, Netherlands, Poland, Romania, Russia, South Korea, Spain, Sweden, Switzerland, Turkey, UK and US. 02 See Glossary. 03 MRG Perception Pulse, 2012; in Canada, China, France, Germany, Italy, Japan, Netherlands, South Korea, Spain, Sweden, Switzerland, UK and US. 04 According to 2014 FX rates. Straumann estimates, based on MRG, iData, Industry Sources and Straumann proprietary study in 2012 conducted by KeyStone Research; including: France, Germany, Italy, Japan, UK and US. CADCAM elements include crowns and bridges only. 05 Exevia, 2014, based on market research data in Germany, Italy, Spain and the US. 06 According to 2014 FX rates. Straumann estimates based on MRG andiData; including: Australia, France, Germany, Italy, Japan, South Korea, Spain, Sweden, Switzerland, UK and US. 07 Straumann estimates based on MRG and iData. 08 Straumann proprietary study based on 5000 US respondents conducted by AFG Research in 2012. 09 iConsult, 2014, based on market research data in Germany and the US. 10 Erik Petersen and Hiroshi Ogawa; Strengthening the Prevention of Periodontal Disease: The WHO Approach, J. Periodontol 2005;76:2187-2193. 11 US Census Bureau, National Population Projections, 2008. 12 US Census Bureau, Population Division, 2012. 13 The Key Group and Straumann estimates, based on US research data, 2014.

Straumann_2014_English_1 43 09.03.2015 16:52:02 “We know every little thing about our product.” FRANK KENK HEAD OF DESIGN ENGINEERING

“When I joined, we designed everything by hand.” ULRICH MUNDWILER DESIGN ENGINEER

Straumann_2014_English_1 44 09.03.2015 16:52:09 45

New ideas become reality

FRANK KENK HEAD OF DESIGN ENGINEERING 10.5 YEARS @ STRAUMANN It’s the people, the atmosphere and the products that have kept Frank at Straumann for more than 10 years. He especially enjoys working with his team and seeing new products become a reality.

ULRICH MUNDWILER DESIGN ENGINEER 35 YEARS @ STRAUMANN (OUR LONGEST SERVING EMPLOYEE) “In the beginning we had a small, independent team who designed everything by hand.” Though Straumann has grown in size and technology, Uli still gets the same thrill when a product is produced, functions well and is accepted by the market. “I’m proud of the way Straumann has grown so big but still retained the quality.”

Straumann_2014_English_1 45 09.03.2015 16:52:13 46

SLActive More than a gold standard

Total stability

Primary stability (old bone) SLActive® SLA®

Secondary

Stability stability (new bone)

01 2 3 4 5 6 78 Healing period in weeks

The optimized osseointegration process with SLActive leads to a higher implant stability in the early stage of healing.

When Straumann’s SLA surface was introduced in 1997, it revo- lutionized implant dentistry, cutting healing times from 12 to 6 weeks while offering improved safety and predictability. The sandblasted, large-grit, acid-etched surface became a ‘gold standard’ in the industry.

As implant dentistry became more common, increasingly difficult cases were treated and practitioners wanted even higher predictability and shorter times to restoration. Straumann responded in 2005 with SLActive. Being hydrophilic it attracts blood and encourages the early adhesion of bone-forming cells. Healing times are reduced to just 3 – 4 weeks resulting in earlier secondary stability and reduced risk of failure. 1,2,3,4

1 Buser D, et al. Enhanced bone apposition to a chemically modified SLA titanium sur face. J Dent Res 2004;83:529-533. 2 Oates TW, et al. Enhanced implant stability with a chemically modified SLA surface: a randomized pilot study. Int J Oral Maxillofac Implants 2007;22:755-760. 3 Schätzle M, et al. Stability change of chemically modified sandblasted/acid-etched titanium palatal implants. A randomized controlled clinical trial. Clin Oral Implants Res 2009;20:489-495. 4 Gottlow J et al. Preclinical data presented at the 23rd Annual meeting of the AO, Boston, and the 17th Annual Scientific Meeting of the EAO, Warsaw.

Straumann_2014_English_1 46 09.03.2015 16:52:14 47

10 000 sold in 36 days

INSTANT SUCCESS IN JAPAN REMARKABLE After several years of regulatory delay, we finally brought HYDROPHILIC PROPERTIES Due to its chemical purity SLActive to Japan in 2014. and surface energy, the SLActive implant has When we launched it on our Tissue Level Implants in March, it remarkable hydrophilic took just 36 working days to sell the first 10 000 units. The recep- (fluid attracting) proper- tion for Bone Level SLActive, which followed in September, was ties. As a consequence, it quickly attracts blood just as enthusiastic, with the result that more than 40% of all and proteins and thus implants sold in Japan in 2014 had the new surface. integrates with bone considerably faster than WORTH THE WAIT our conventional surface technology. The main reason for the long approval process was that regulators required a rigid clinical trial that was time-consuming but well worth the effort. Straumann is the only implant company in Japan with regulatory permission to state ‘early healing/loading’ protocols.

This added to the general excitement among new and existing customers at the launch event, which provided an excellent platform for clinicians in the study to present their results, endorsing SLActive’s claim of early healing. ACTIVITY PRESERVED Both SLA and SLActive have been extensively investigated and are SLActive implants are supplied in a sterile among the most documented and clinically validated surfaces. solution to maintain their surface activity.

All SLActive implants are packed under controlled atmospheric conditions in a ‘glove box’ to maintain their surface activity.

Straumann_2014_English_1 47 09.03.2015 16:52:21 48 Management commentary 2014 Business performance – Group

2014 Business performance Group

NET REVENUE Revenue from the restorative business was sus- In 2014, the Straumann Group posted full-year net retained, as declines in tooth-borne prosthetic ele- venue of CHF 710 million reflecting organic1 growth of ments and in-lab scanners were offset by growth in 6%. Due to the strengthening of the Swiss franc, standard prosthetics, fuelled by the new Variobase reported growth in Swiss francs came to 5%. abutment, customized CADCAM abutments and a new comprehensive range of low-profile abutments The performance was driven by strong growth in China for screw-retained solutions. and Japan, complemented by above-market expansion in North America. Europe achieved an encouraging The Regeneratives business achieved solid single- turnaround, reversing the negative sales trend seen in digit growth, led by Emdogain and Straumann the past two years (see p. 52 ff.). Allograft. Initial revenues came from the botiss range, which Straumann began distributing in most Growth was entirely organic and driven by volume European markets in the fourth quarter. expansion in the core implant business. Increased sales of Roxolid and SLActive were the principal con- OPERATIONS AND FINANCES tributors, supported by a differentiated pricing GROSS MARGIN SUSTAINED AT 79% approach in Europe, the ‘reduced-invasiveness’ cam- Gross profit rose 4% to CHF 559 million, with the paign with Roxolid, and the introduction of SLActive respective margin maintained at 79%. As revenue implants in Japan. and manufacturing costs increased at a similar pace, profitability remained more or less at the prior year’s level. Strong volume expansion and improved use of REVENUE manufacturing capacity compensated for: (in CHF million) –the negative currency impact (CHF 12 million or 30 base points of the gross margin) 5 year CAGR –1% (+3% in I.c.) –investments in manufacturing staff, and –a less favorable product mix, which was due to 800 the increase in third-party products (e.g. Neodent, botiss, etc.). 700

600 OPERATING INCOME GROWS 28%; EBIT MARGIN JUMPS 390 BASE POINTS TO 500 21% 400 Operating expenses ( OPEX ) were reduced thanks to tighter cost control and benefits from cost-reduc- 300 tion measures in prior years. Excluding restructuring 200 charges of CHF 8 million in 2013, operating expenses decreased by CHF 2 million, while the top line grew 100 over 40 million or 6% in local currencies. As a conse- 0 quence, the OPEX intensity decreased by nearly 3% 2010 2011 2012 2013 2014 points to 58% of sales, underlining Straumann’s

¢ ¢ Reported revenue ¢ Currency eﬀect attractive operational gearing.

Straumann_2014_English_1 48 09.03.2015 16:52:21 Management commentary 2014 Business performance – Group Management commentary 2014 Business performance – Group 49

KEY PERFORMANCE FIGURES 2014 2013

Reported Reported Excluding exceptionals1 Revenue (CHF m) 710.3 679.9 Gross profit margin (%) 78.7 78.8 EBITDA margin (%) 24.8 21.8 23.0 EBIT margin (%) 20.9 17.0 18.2 Net profit margin (%) 22.2 14.9 Free cash flow2 margin (%) 18.1 20.5

1 The term ‘exceptionals’ refers to 2013 restructuring charges of CHF 17 million and a pension curtailment gain of CHF 9 million, both related to costreduction initiatives. 2 Defined as net cash from operating activities less capital expenditures plus net proceeds from property, plant and equipment.

Selling (salesforce and related activities) costs, which OPERATING AND NET PROFIT are included under ‘Distribution costs’, remained (in CHF million) steady at CHF 168 million (24% of sales), while admin-

istrative expenses (including Marketing, R & D and 180 headquarters costs) decreased CHF 10 million to CHF 160 244 million (34% of sales). Straumann aims to continue investing around 5% of sales in R&D to maintain the 140 flow of product innovations and to provide clinical 120 documentation to support its products. 100

Improved fixed cost absorption and higher sales lifted 80 earnings before interest, tax, depreciation, amortiza- 60 tion (EBITDA) by CHF 28 million to CHF 176 million, with the corresponding margin expanding 300 base 40 points to nearly 25%. 20

After amortization and depreciation charges of CHF 28 0 2010 2011 2012 2013 2014 million, operating profit amounted to CHF 148 million, compared with last year’s CHF 116 million, or CHF 124 ¢ ¢ Operating prot ¢ Excluding exceptionals ¢ ¢ Net prot million excluding exceptionals. With the respective margin reaching 21%, profitability jumped 390 base points (270 excluding exceptionals), more than compensating CHF 36 million and benefitted from a capitalization of for the negative currency effect of 60 base points. deferred tax assets amounting to CHF 27 million related to Neodent. As a result of this benefit and the generally NET PROFIT BENEFITS FROM ONE-TIME TAX improved profitability, the effective tax rate in 2014 EFFECT RELATED TO NEODENT amounted to just 11% as income taxes amounted to In contrast to the negative CHF 2 million last year, the CHF 20 million. net financial result was a negative CHF 7 million in 2014, which was due to hedging losses and higher interest Taking the abovementioned factors into account, expenses reflecting the timing of the launch of Strau- reported net profit amounted to CHF 158 million, with mann’s CHF-200-million bond (April 2013). the corresponding margin reaching 22%, compared with 15% in the same period last year. Basic earnings per Contributions from the associated partners Neodent, share amounted to CHF 10.15. Stripping out the one- Dental Wings, Medentika and Createch, which are time benefit for Neodent, net profit would have reached accounted for under the ‘equity method’, reached CHF 131 million with a respective margin of 18%.

Straumann_2014_English_1 49 09.03.2015 16:52:22 50 Management commentary 2014 Business performance – Group

CASH GENERATION IMPACTED BY INCREASE CHF 76 million to CHF 459 million at year-end. With net IN WORKING CAPITAL cash standing at CHF 260 million and the equity ratio at Although profitability improved significantly, the 64%, the company is solidly financed. cash generated was negatively affected by a rise in working capital, which was due to an increase in of OUTLOOK 2015 the trade days outstanding (+ 2 days to 51 days), a (barring unforeseen circumstances) rise in inventories in preparation for the full launch Straumann expects the global implant market to show of BLT in spring 2015, and the increase of third-party further improvements in 2015 and its revenue to grow products (e.g. Neodent and Medentika). As a result, organically in the mid-single-digit range. Reported net cash from operating activities amounted to CHF revenues in Swiss francs will be influenced by the re- 146 million compared with CHF 151 million in the cent exchange-rate turbulence. The Group will seek to prior-year period. balance investments between growth markets and other strategic projects, while taking decisive steps to With capital expenditure (CAPEX) rising to CHF 19 miti-gate the consequences of the appreciation of the million, free cash flow amounted to CHF 128 million Swiss franc. These measures include compensation re- and the respective margin was 18%. ductions in Switzerland as well as strict hiring and travel restrictions, and will help Straumann to achieve Cash used for investing activities reached CHF 26 its 2015 EBIT margin target of at least 20% (organic), million, and was used mainly for the aforemen- assuming that exchange rates prevail around their tioned CAPEX expenditures, as well as financial February 2015 levels 2. investments of CHF 32 million in MegaGen, Bio- denta, and other financial assets collectively. In addi- SUMMARY OF MAIN INVESTMENTS tion to dividends of CHF 16 million from Neodent, INVESTMENTS IN GROWTH SEGMENTS there were also proceeds of CHF 21 million from the In pursuit of our strategic goal to become a global leader sale of financial assets. The annual dividend payment in the fast-growing value segment, we continued to of CHF 58 million was the main cash element in cash invest in regional companies that are expanding inter- used in financing. Cash and cash equivalents grew nationally. In 2014, we purchased convertible bonds in Megagen (see p. 27), and Biodenta (see p. 27) for a total of CHF 25 million. In 2015, we will acquire about 43% of CASH FLOW AND INVESTMENTS T-Plus (see p. 27) for approximately USD 7 million. We (in CHF million) may also exercise our option to increase our stake in Neodent to 75%.

270 INVESTMENTS IN HIGH GROWTH REGIONS 240 China is a key expansion market for Straumann. In 2014, 210 we invested more than CHF 9 million to take over distribution activities from our existing distributor and to 180 establish a ‘hybrid’ distribution model with a consulta- 150 tive sales force and a local training and education orga-

120 nization. Further investments are expected, including a variable consideration of up to approximately CHF 18 90 million for the former distributor, depending on the 60 development of the business.

30 INVESTMENTS IN TECHNOLOGY 0 With the aim of gaining leads to attractive technology/ 2010 2011 2012 2013 2014 business opportunities in Asia, we participated in a fund ¢ ¢ Operating cash ow ¢ Acquisitions & participations managed by DM Capital, which is focused exclusively on ¢ ¢ Capital expenditure dental-related investments in China. This investment

Straumann_2014_English_1 50 09.03.2015 16:52:22 Management commentary 2014 Business performance – Group Management commentary 2014 Business performance – Group 51

was CHF 5 million. We also acquired a 12% stake in RODO Medical, Inc., a California-based developer of innovative prosthetic fixture devices, for CHF 2 million.

INVESTMENTS IN PRODUCTION To meet demands of increased volume and new products, we invested in additional manufacturing equipment in Switzerland and the US. To meet the need for a CADCAM service in Japan, we are investing in a new milling center, which will go into operation in 2015. These and other investments in production amounted to more than CHF 9 million in 2014.

INVESTMENTS IN R&D To maintain our innovation pipeline and to support our products with documented evidence, we have invested in the region of 5% of revenue in R&D.

Information on investments in distribution, including selling activities as well as intangible and tangible assets, are presented in the Financial Report.

FOOTNOTES 1 The term ‘organic’ used throughout this report means ‘excluding the effects of currency fluctuations and acquired/divested business activities. 2 At the time the annual report went to press, the EUR was quoted at CHF 1.07 and USD at CHF 0.95.

Straumann_2014_English_1 51 09.03.2015 16:52:22 52 Management commentary 2014 Business performance – Regions

2014 Business performance Regions

Our performance in 2014 was supported by growth regions all posted record levels of revenue. We out- across all regions. Europe, our largest region, achieved paced the market in North America again and achieved an encouraging turnaround, reversing the negative double-digit growth both in Asia/Pacific and the Rest trend seen in the previous two years. Our other three of the World.

REGIONAL SALES PERFORMANCE BY QUARTER

(in CHF million) Q1 Q2 Q3 Q4 Total 2014 Total 2013

Europe 102.5 95.0 80.8 98.1 376.3 368.4 Change in CHF % 4.0 -2.5 1.4 5.7 2.1 -2.6 Growth (organic) in % 4.1 -1.5 2.7 7.6 3.2 -3.2 As a % of Group revenue 53% 54% North America 45.5 46.8 47.7 53.2 193.1 181.7 Change in CHF % 0.5 -1.2 10.7 15.6 6.3 4.6 Growth (organic) in % 5.2 5.4 11.4 9.3 7.8 8.1 As a % of Group revenue 27% 27% Asia/Pacific 22.1 28.8 27.1 28.6 106.7 98.4 Change in CHF % -2.3 7.4 13.7 14.1 8.4 -5.3 Growth (organic) in % 8.3 15.3 17.0 14.5 14.0 4.7 As a % of Group revenue 15% 14% Rest of the World 9.8 8.7 8.6 7.1 34.2 31.4 Change in CHF % 17.4 3.1 0.6 16.9 8.9 2.9 Growth (organic) in % 28.6 9.0 3.0 18.2 14.2 8.4 As a % of Group revenue 5% 5% TOTAL 179.8 179.3 164.3 186.9 710.3 679.9 Change in CHF % 2.9 -0.4 5.8 10.0 4.5 -0.9 Growth (organic) in % 6.0 3.2 7.3 9.4 6.4 1.2

Straumann_2014_English_1 52 09.03.2015 16:52:23 Management commentary 2014 Business performance – Regions Management commentary 2014 Business performance – Regions 53

CHANGE IN REVENUE IN LOCAL CURRENCIES (in %)

-5

-10

-15 2010 2011 2012 2013 2014

¢ Straumann ¢ Other leading implant companies

REGIONAL SALES PERFORMANCE BY YEAR (in CHF million)

737.6 700 27.5 710.3 693.6 686.3 679.9 34.2 32.9 100.5 30.5 31.4 106.7 600 100.7 103.9 98.4

164.7 500 155.6 173.7 181.7 193.1

400

300

200 444.9 404.4 378.1 368.4 376.3

100

0 2010 2011 2012 2013 2014

¢ Europe ¢ North America ¢ Asia/Pacic ¢ Rest of the World

Straumann_2014_English_1 53 09.03.2015 16:52:23 54 Management commentary 2014 Business performance – Regions

Europe

CHALLENGING MARKET CONDITIONS PERSIST In order to offer a complete regenerative range we With the economy still weak in parts of Europe, there entered a strategic partnership with botiss and began was little improvement in demand for elective dental distributing their products in most European markets procedures. Some patients postponed treatment, in the fourth quarter. while others chose cheaper, inferior solutions, fueling competition among dental practices, chains and den- OUTLOOK tal laboratories. As a result, dentists have become The world’s largest dental fair – the biennial Interna- more price sensitive and dental laboratories have tional Dental Show in Cologne – is expected to give invested in equipment to in-source business. a positive impulse to the industry in 2015. Neverthe- less, we do not expect the implant market to deliver Against this backdrop the dental implant market in much more than a modest improvement in 2015, Europe was more or less flat in 2014. In contrast, Strau- due to the fragile economic environment and lack mann achieved 3% growth, which was respectable but of reimbursement. considerably less than in other regions. With the Euro fairly stable, the currency effect was negligible and Owing to the recent devaluation of the Euro, our reve- revenue rose 2% in Swiss francs to CHF 376 million nues will be significantly reduced when converted into (53% of the Group total). Swiss francs. We will continue to defend our leadership position in the premium segment, for example The UK and Sweden achieved the strongest perfor- with the regional launch of our new BLT implant in mances. France, Turkey and Spain also showed good Europe in the second and third quarters. We will also results. This is remarkable in that Spain has faced strengthen our foothold in the value segment through severe economic pressure in recent years and Swe- the launch of Neodent in Italy and the international den has gone through some structural reimburse- expansion of Medentika. ment changes. Germany, our largest European subsidiary, posted modest revenue growth stimulated by a strategic campaign offering implants made from our new Roxolid material (see p. 10 f.) at the same price as their titanium equivalents. This initiative has stimulated volumes and has motivated most customers to upgrade to our high-strength implant material. At the same time we reduced the price of our basic titanium SLA implant to compete more effectively in the value segment.

We introduced a new prosthetic concept with cost effective solutions for our lab customers, including the Variobase abutment and the CARES X-stream workflow. We also added sophisticated high-end full-arch restorations through our partnership with Createch.

Straumann_2014_English_1 54 09.03.2015 16:52:23 Management commentary 2014 Business performance – Regions Management commentary 2014 Business performance – Regions 55

ORGANIC GROWTH REVENUE +3% CHF 376 m

GROWTH IN CHF HIGHLIGHTS – Growth stimulated by free Roxolid+Loxim upgrade – botiss regeneratives range launched – New prosthetic concept, including +2% Variobase & CARES X-Stream workflow

CONTRIBUTION TO GROUP

% 53of total revenue

Straumann_2014_English_1 55 09.03.2015 16:52:24 56 Management commentary 2014 Business performance – Regions

North America

AN ATTRACTIVE GROWTH REGION with Patterson Dental, one of the two largest distribu- Driven by strong US sales, our second largest region tors serving GPs in North America. The cooperation delivered another strong year and contributed more also includes Spear, a leading provider of education in than a third of the Group’s overall growth. Despite a the US. Through an interdisciplinary approach involv- negative currency effect, which reduced growth in ing specialists, GPs and laboratories the aim is to Swiss francs by nearly 2 percentage points, the region improve the referral model and expand the market – delivered record revenues of CHF 193 million, corre- for instance by identifying cases that are not currently sponding to 27% of the Group – five percentage points considered for implant therapy. higher than five years ago. Based on available market data, we continued to outperform the market, endors- OUTLOOK ing our US strategy of investment in marketing and In view of its relatively modest penetration, high sales for several years. esthetic standards, and optimistic economic forecasts, the short and long-term growth outlook for the US is All business franchises contributed to the increase but healthy, making it the most attractive regional market the star performers were Roxolid and SLActive as we for Straumann. In 2015, we expect to benefit from the won new accounts and increased our share-of-wallet full launch of our new-generation BLT implant, which from existing customers. enables us to compete in a segment that accounts for more than 60% of the region’s implant market. This, Additional income came from the controlled release of together with several other product launches and our new Bone Level Tapered implant line (see p. 104 f.), growth initiatives – as well as the positive underlying which began in September and was very well received. market trend – will fuel future sales. Straumann’s first conical implant was key in securing an agreement with the ClearChoice network of clinics, making Straumann a preferred supplier. Our ProArch prosthetic solution (see p. 158 f.) that offers fully and partially edentulous patients a fixed overdenture solution was also important for this agreement.

We complemented our regeneratives range with a xenograft bone augmentation material and a collagen membrane, which are both licensed and enable us to offer a one-stop shop solution for guided bone regeneration (GBR) procedures.

Earlier in the year, we tapped into the value segment in the US by establishing an Instradent subsidiary, which launched the Neodent implant brand with its own direct sales team.

To address the growing role of general practitioners (GPs) in implant dentistry we entered collaboration

Straumann_2014_English_1 56 09.03.2015 16:52:25 Management commentary 2014 Business performance – Regions Management commentary 2014 Business performance – Regions 57

ORGANIC GROWTH+8%

ORGANIC GROWTH REVENUE +8% CHF 193m

GROWTH IN CHF HIGHLIGHTS – Membrane Plus and XenoGraft complement regenerative range – BLT implant enters controlled release – Preferred supplier for ClearChoice; collaboration +6% with Patterson and Spear to address GPs REVENUE CHF 193 M

MARKET positive underlying trend

CONTRIBUTION TO GROUP

% 27of total revenue; 1/3 of overall growth

Straumann_2014_English_1 57 09.03.2015 16:52:26 58 Management commentary 2014 Business performance – Regions

Asia/Pacific

THE MARKET OF THE FUTURE Roxolid and our new BLT implant approved and on the On the back of successive quarterly increases, we market in Asia. achieved full-year growth of 14% in local currencies in Asia/Pacific. Although the region accounts for just We will continue to defend our share in Australia and 15% of the Group’s revenue, it contributed more than our premium niche position in the crowded South 30% of the overall growth. The pronounced currency Korean market. effect cut growth by 6% points, leaving revenue in Swiss francs up 8% at CHF 107 million. National Healthcare Insurance coverage was recently introduced for implants in South Korea and lowered The performance was driven by the dynamic Chinese from 75 to 65 year olds in 2016. However, due to the market and boosted by a double-digit rise in the larg- low price cap, domestic value players are likely to ben- est regional market, Japan. We came closer to our goal efit most and we expect to see a rise in the national of market leadership there thanks to a strengthened penetration rate. management team, local market recovery, and the introduction of SLActive, which finally obtained regulatory approval in 2014.

Our business in China developed very positively. Since 2003, we have operated through a distributor, whose role was important in establishing Straumann as a market leader. Having built up our own subsidiary, we were able to incorporate our distributor’s business in 2014 and to establish a hybrid model using multiple distributors and our own consultative salesforce, marketing, training and education teams. This brings us closer to customers, broadens our geographic reach and enables us to address the private practice sector more effectively, which is expected to outpace the public hospital sector in the years to come.

OUTLOOK One in every five dental implants is sold in the APAC region and, having some of the world’s fastest growing local markets, the region is forecast to be the key driver for growth of the global implant market. Stimu- lated by increasing awareness, training in implantology and favorable demographics, the Japanese and Chinese dental implant markets are expecting robust growth in 2015. Our regional goal is to outperform, as we did in 2014. We will strengthen our prosthetic offering in the region and are working hard to get

Straumann_2014_English_1 58 09.03.2015 16:52:26 Management commentary 2014 Business performance – Regions Management commentary 2014 Business performance – Regions 59

ORGANIC GROWTH REVENUE +14 % CHF 107m

GROWTH IN CHF HIGHLIGHTS – SLActive launched in Japan – Expansion in China with hybrid sales/distribution model +8% – Investments in value segment

CONTRIBUTION TO GROUP

% 15of total revenue; 30% of overall growth

Straumann_2014_English_1 59 09.03.2015 16:52:27 60 Management commentary 2014 Business performance – Regions

Rest of the World

DOUBLE-DIGIT GROWTH IN average disposable income. With our dual-brand FRAGILE ECONOMIES approach, we are very well positioned for future Approximately 5% of Group revenue comes from the growth in the region despite the instability of its region we refer to as the ‘Rest of the World’, most of economies. In 2015, Straumann will consolidate Neo- which is generated in Latin America and the Middle dent in its financial statements. East. Full-year revenue in the region increased 14% in local currencies but only 9% in Swiss francs to reach Sales development in the Middle East is promising for CHF 34 million. The currency impact was due to the 2015, but oil prices are likely to dampen further prog- significant depreciation of the Brazilian real. ress. Our key challenges in that region in 2015 will be: striking the balance between sales opportunities, cash Demand for Straumann products was strong, particu- collection and cushioning the effect of exchange rate larly in Latin America. In Brazil alone an estimated 2.5 movements for our distributors, in addition to intro- million dental implants are placed annually, making it ducing non-premium options. the world’s largest volume market. Despite the fragil- ity of the economy, Brazil continued to be a source of good growth both for Straumann and for Neodent, the local market leader. Elsewhere in Latin America, Mex- ico offers promising growth and posted strong results in 2014.

As the year came to a close, we finalized a blueprint for expansion in Latin America in collaboration with Neo- dent. The strategy for 2015 includes the creation of new distribution hubs in Argentina, Columbia and Mexico. They will serve both the premium and value segments in surrounding countries with the two dis- tinctly separate brands.

The Rest of the World region also generates significant business through distribution partners in the Middle East. Here too, sales developed positively, though quarterly ordering patterns are often erratic. in addition, socio/political upheaval and embargoes impaired consumer spending.

OUTLOOK Many local markets in Latin America are protected by tariffs and other trade barriers, which explains the market domination by local, value players. While the premium segment is attractive, it is small due to the lack of reimbursement and relatively low

Straumann_2014_English_1 60 09.03.2015 16:52:28 Management commentary 2014 Business performance – Regions Management commentary 2014 Business performance – Regions 61

ORGANIC GROWTH REVENUE +14 % CHF 34m

GROWTH IN CHF HIGHLIGHTS – Strong demand in Latin America – Brazil a good source of growth for Straumann and Neodent – Positive but erratic sales development +9% in Middle East

CONTRIBUTION TO GROUP

% of5 total revenue

Straumann_2014_English_1 61 09.03.2015 16:52:29 62

“I appreciate the freedom to develop new ideas and think outside the box.” VALENTIN LEGNER PRODUCT MANAGER “We have the professionalism and opportunities of a big company, but it’s still personal.” REGINA DERRER SUPPLY CHAIN COORDINATOR

“I relish the constant push to be more effective.” SIMON JACOBI PRODUCT MANAGER

Straumann_2014_English_1 62 09.03.2015 16:52:35 63

Passion comes from belief in our products

VALENTIN LEGNER PRODUCT MANAGER 5 YEARS @ STRAUMANN Valentin says there are many days when he drives home feeling good about what he has achieved – not least because he believes in his product. “It’s a very powerful medical device and it really works!”

SIMON JACOBI PRODUCT MANAGER 8 YEARS @ STRAUMANN Simon’s job is never boring. He relishes the fast moving pace and constant push to be more effective. He always has clinicians in mind. “Straumann really cares about their problems and I enjoy selling products that give them peace of mind.”

REGINA DERRER SUPPLY CHAIN COORDINATOR 1 YEAR @ STRAUMANN Regina savors the international atmosphere at Straumann where she uses three languages daily and is now learning a fourth. “This is a friendly, fun, interesting place.”

Straumann_2014_English_1 63 09.03.2015 16:52:39 64

Regeneratives Significantly expanded

Various bone graft materials in the botiss range to support implant procedures.

A SYNERGY OF STRENGTHS It is estimated that up to one in two implant procedures requires guided bone regeneration, which is why we also offer regenerative products. But until now, our range has been limited. This explains why we have teamed up with botiss to offer customers around the world a truly complete portfolio of innovative and scientifically proven regenerative solutions – not just bone augmentation products and membranes but fleeces and biologics for soft tissue regeneration, which together with Emdogain gives us a combined range to suit every indication and preference.

To incorporate the botiss range, we established a temperature- controlled supply chain; included no fewer than 45 products in our ordering and logistics chain, and trained 300 staff on the new products.

Straumann_2014_English_1 64 09.03.2015 16:52:39 65

45 new products Complete portfolio

MINIATURE BLANKETS SAVING TEETH Membranes are essential in bone and tissue regeneration proce- Periodontal disease is the most common cause of dures. When bone augmentation materials like cerabone, maxre- tooth loss1 and continues sorb, or Straumann’s BoneCeramic and Allograft are applied to a to be an important health patients’s defective bone, they are converted into new bone by issue. Treatment involves osteoblasts. Like miniature blankets, membranes are placed over controlling the inflamma- tion and bacteria that the treatment site to prevent soft tissue filling the space that is cause it and then restor- needed for the new bone. Once the bone has formed, the mem- ing the tissues that sup- brane is simply resorbed. port the tooth. Straumann Emdogain promotes the Commonly used membranes are made of collagen. Botiss regeneration of those tissues, helping to save offers several membranes but these are not yet registered in endangered teeth. all markets.

To meet customer needs in North America, where registrations are still pending, we licensed in another membrane, Straumann Membrane Plus, and a bovine-sourced bone augmentation material, Straumann Xenograft.

BLOCKS AND RINGS Highly innovative botiss products: the maxgraft A WINNING COMBINATION bone builder (left) is an allogenic bone-graft Straumann botiss block, which is designed Bone allografts  1  and milled by CADCAM Bone xenografts  1  technology to fit exactly into the bone defect. Synthetic bone grafts  1  Bone blocks  The maxgraft bonering Custom bone blocks  (right) is a pre-fabricated allogenic bone-graft ring, Collagen cones  into which an implant is Fleeces & sponges  inserted. Interestingly, it Membranes  1  allows horizontal and vertical augmentation and Soft-tissue grafts  new bone formation. Biologics  1

With botiss we are now able to offer dentists a wide combination 1 National Health and Nutrition Examination Survey (NHANES) of solutions from a convenient one-stop shop. 1999–2004. The National Institute of Dental and Cranio- 1 Sold under license facial Research, Bethesda (USA).

Straumann_2014_English_1 65 09.03.2015 16:52:42 66 Management commentary 2014 Business performance – Financials

2014 Business performance Financials

67 Consolidated income statement 68 Consolidated statement of financial position 70 Consolidated cash flow statement 72 Five-year overview

Straumann_2014_English_1 66 09.03.2015 16:52:42 Management commentary 2014 Business performance – Financials Management commentary 2014 Business performance – Financials 67

Consolidated income statement

(in CHF 1 000) Notes 2014 2013 Revenue 3 710 270 679 922

Cost of goods sold (151 618) (144 007) Gross profit 558 652 535 915

Other income 21 2 236 2 747 Distribution costs (168 459) (168 507) Administrative expenses (244 112) (254 372) Operating profit 148 317 115 783

Finance income 24 17 016 22 175 Finance expense 24 (24 192) (23 909) Share of result of associates 7 36 281 5 841 Profit before income tax 177 422 119 890

Income tax expense 18 (19 597) (18 689) NET PROFIT 157 825 101 201 Attributable to: Shareholders of the parent company 157 825 101 201

Basic earnings per share (in CHF) 25 10.15 6.55 Diluted earnings per share (in CHF) 25 10.03 6.50

Straumann_2014_English_1 67 09.03.2015 16:52:42 68 Management commentary 2014 Business performance – Financials

Consolidated statement of financial position

ASSETS

(in CHF 1 000) Notes 31 Dec 2014 31 Dec 2013 Property, plant and equipment 4 78 545 83 907 Investment properties 5 4 001 4 335 Intangible assets 6 68 987 72 278 Investments in associates 7 266 589 255 115 Financial assets 8 48 676 14 639 Other receivables 834 1 258 Deferred income tax assets 18 29 948 26 392 Total non-current assets 497 580 457 924

Inventories 9 69 193 62 328 Trade and other receivables 10 128 482 111 390 Financial assets 8 2 995 1 918 Income tax receivables 3 110 2 385 Cash and cash equivalents 11 459 421 383 795 Total current assets 663 201 561 816

TOTAL ASSETS 1 160 781 1 019 740

Straumann_2014_English_1 68 09.03.2015 16:52:42 Management commentary 2014 Business performance – Financials Management commentary 2014 Business performance – Financials 69

EQUITY AND LIABILITIES

(in CHF 1 000) Notes 31 Dec 2014 31 Dec 2013 Share capital 12 1 568 1 568 Retained earnings and reserves 735 268 629 812 Total equity attributable to the shareholders of the parent company 736 836 631 380

Straight bond 13 199 410 199 301 Other liabilities 15 6 954 6 094 Financial liabilities 14 3 587 3 667 Provisions 16 29 913 32 221 Retirement benefit obligations 20 37 492 18 482 Deferred income tax liabilities 18 9 353 9 788 Total non-current liabilities 286 709 269 553

Trade and other payables 17 105 264 103 613 Financial liabilities 14 1 326 24 Income tax payable 18 697 9 100 Provisions 16 11 949 6 070 Total current liabilities 137 236 118 807 Total liabilities 423 945 388 360

TOTAL EQUITY AND LIABILITIES 1 160 781 1 019 740

Straumann_2014_English_1 69 09.03.2015 16:52:42 70 Management commentary 2014 Business performance – Financials

Consolidated cash flow statement

(in CHF 1 000) Notes 2014 2013 Net profit 157 825 101 201 Adjustments for: Taxes charged 18 19 597 18 689 Interest and other financial result 3 425 3 695 Foreign exchange result 1 275 6 144 Fair value adjustments (397) 1 940 Share of result of associates 7 (36 281) (5 841) Depreciation and amortization of: Property, plant and equipment 4; 22 22 801 24 392 Investment properties 5; 22 346 558 Intangible assets 6; 22 4 738 6 807 Impairment of investment properties 5; 22 0 1 787 Impairment reversal of property, plant and equipment 4; 22 0 (883) Change in provisions, retirement benefit obligations and other liabilities 8 264 9 912 Share-based payments expense 19; 23 4 865 3 336 Gain/(loss) on disposal of property, plant and equipment 218 (90) Working capital adjustments: Change in inventories (5 942) (518) Change in trade and other receivables (15 463) (4 835) Change in trade and other payables 4 242 4 292 Interest paid (4 339) (1 519) Interest received 1 008 325 Income tax paid (20 022) (17 902) Net cash from operating activities 146 160 151 490

Straumann_2014_English_1 70 09.03.2015 16:52:43 Management commentary 2014 Business performance – Financials Management commentary 2014 Business performance – Financials 71

(in CHF 1 000) Notes 2014 2013 Purchase of financial assets (31 652) (16 154) Proceeds from sale of financial assets 20 834 0 Purchase of property, plant and equipment (16 876) (10 907) Purchase of intangible assets (1 964) (1 743) Purchase of investments in associates 0 (37 985) Contingent consideration paid (3 961) 0 Disbursement of loans (9 828) (1 200) Dividends received from associates 16 444 5 009 Net proceeds from sale of non-current assets 1 075 393 Net cash used in investing activities (25 928) (62 587)

Issue of a straight bond 13 0 199 230 Dividends paid 26 (58 264) (57 848) Proceeds from finance lease 158 292 Repayment of finance lease 0 (42) Proceeds from exercise of options 11 533 0 Purchase of treasury shares 0 (1 886) Sale of treasury shares 1 582 15 907 Net cash received from/(used in) financing activities (44 991) 155 653

Exchange rate differences on cash held 385 (1 265) Net change in cash and cash equivalents 75 626 243 291 Cash and cash equivalents at 1 January 11 383 795 140 504 CASH AND CASH EQUIVALENTS AT 31 DECEMBER 11 459 421 383 795

Straumann_2014_English_1 71 09.03.2015 16:52:43 72 Management commentary 2014 Business performance – Financials

Five-year overview

OPERATING PERFORMANCE

(in CHF million) 2010 2011 2012 2013 2014 Restated

Net revenue 737.6 693.6 686.3 679.9 710.3 Growth in % 0.2 (6.0) (1.1) (0.9) 4.5 Gross profit 587.0 528.5 531.5 535.9 558.7 Margin in % 79.6 76.2 77.5 78.8 78.7 Operating result before depreciation 211.9 157.4 119.5 148.4 176.2 and amortization (EBITDA) Margin in % 28.7 22.7 17.4 21.8 24.8 Growth in % (2.9) (25.7) (24.1) 24.3 18.7 Operating result before amortization (EBITA) 185.0 131.9 91.5 122.6 153.1 Margin in % 25.1 19.0 13.3 18.0 21.5 Growth in % (1.6) (28.7) (30.6) 33.9 24.9 Operating profit (EBIT) 164.3 79.9 63.1 115.8 148.3 Margin in % 22.3 11.5 9.2 17.0 20.9 Growth in % (0.6) (51.4) (21.1) 83.6 28.1 Net profit 131.1 71.0 37.5 101.2 157.8 Margin in % 17.8 10.2 5.5 14.9 22.2 Growth in % (10.4) (45.9) (47.1) 169.8 56.0 Basic earnings per share (in CHF) 8.37 4.54 2.43 6.55 10.15 Value added/economic profit 88.4 29.7 (7.7) 52.7 113.7 Change in value added (7.6) (58.7) (37.4) 60.4 59.3 Change in value added in % (8.0) (66.4) (125.9) 785.3 109.2 as a % of net revenue 12.0 4.3 (1.1) 7.8 16.0 Number of employees (year-end) 2 361 2 452 2 517 2 217 2 387 Number of employees (average) 2 287 2 415 2 530 2 308 2 355 Sales per employee (average) in CHF 1 000 323 287 271 295 308

Straumann_2014_English_1 72 09.03.2015 16:52:43 Management commentary 2014 Business performance – Financials Management commentary 2014 Business performance – Financials 73

FINANCIAL PERFORMANCE

(in CHF million) 2010 2011 2012 2013 2014 Restated

Cash and cash equivalents 349.6 377.1 140.5 383.8 459.4 Net working capital (net of cash) 74.5 68.8 63.0 57.3 64.9 as a % of revenue 10.1 9.9 9.2 8.4 9.1 Inventories 73.1 67.0 63.6 62.3 69.2 Days of supplies 158 123 152 161 149 Trade receivables 92.3 94.1 91.8 93.2 106.8 Days of sales outstanding 45 48 49 49 51 Balance sheet total 853.9 811.3 776.9 1 019.7 1 160.8 Return on assets in % (ROA) 15.8 8.5 4.7 11.4 14.5 Equity 695.6 671.1 601.7 631.4 736.8 Equity ratio in % 81.5 82.7 77.4 61.9 63.5 Return on equity in % (ROE) 19.7 10.4 5.9 16.4 23.1 Capital employed 337.7 273.1 187.7 162.3 142.9 Return on capital employed in % (ROCE) 46.9 26.2 27.4 66.2 97.2 Cash generated from operating activities 175.8 140.2 114.6 151.5 146.2 as a % of revenue 23.8 20.2 16.7 22.3 20.6 Investments (22.9) (25.9) (286.1) (50.6) (22.8) as a % of revenue 3.1 3.7 41.7 7.4 3.2 thereof capital expenditures (22.1) (19.4) (19.4) (12.6) (18.8) thereof contingent consideration paid (0.7) (0.4) (0.7) (4.0) thereof investments in associates (6.1) (266.0) (38.0) 0 Free cash flow 154.2 121.1 95.2 139.2 128.4 as a % of revenue 20.9 17.5 13.9 20.5 18.1 Dividend (2014: subject to shareholders’ approval) 58.8 58.0 57.9 58.2 58.6 Pay-out ratio in % (excluding exceptionals) 44.8 59.4 75.7 53.3 37.1

Straumann_2014_English_1 73 09.03.2015 16:52:44 74

“It’s exciting to start with an idea, develop it, and see it “Working here has given in the mouth of a patient.” me new perspectives CECILE MARICHAL and made me flexible in DEVELOPMENT ENGINEER my thinking.” KATJA BUSSE CUSTOMER SOLUTIONS MANAGER

“A good manager serves his team and his customers.” JOACHIM AMANN REGIONAL SALES MANAGER

Straumann_2014_English_1 74 09.03.2015 16:52:53 75

Hardworking, competent, international

“Working here has given me new perspectives CECILE MARICHAL and made me flexible in DEVELOPMENT ENGINEER my thinking.” 1 YEAR @ STRAUMANN Every day at Straumann is different for Cecile and she loves the KATJA BUSSE challenge, “I like dealing with highly technical products and preci- CUSTOMER SOLUTIONS MANAGER sion manufacturing alongside nice, hard-working, competent, helpful people in a very international atmosphere.”

JOACHIM AMANN REGIONAL SALES MANAGER 6 YEARS @ STRAUMANN Joachim’s favorite role is managing people, and he does it with a unique philosophy: “A good manager is a servant to his team.” He also serves his customers with the same commitment, “I really like to be close to my customers. Websites and bro- chures can’t substitute for the personal contact.”

KATJA BUSSE CUSTOMER SOLUTIONS MANAGER 4 YEARS @ STRAUMANN Katja’s 10 years’ experience in the dental industry has been put to good use at Straumann directing project commercialization from concept to presentation. She appreciates the international environment and the regional diversity. One of her roles is to bring dental experts together for brainstorming sessions and discuss their input with product management and the development team.

Straumann_2014_English_1 75 09.03.2015 16:52:57 76

Implant treatment saves costs and improves quality of life

For patients with full dentures, implant-borne solutions are usually associated with higher initial costs than traditional non-fixed dentures. In July 2013 however, the International Journal of Oral & Maxillofacial Implants published a lead article reviewing 14 studies that were published between 2000 and 2010 1. The authors concluded that – compared with traditional treatments – dental implants were generally cost-saving or cost-effective for single- tooth replacement. They represented a cost-effective option for the replacement of multiple teeth over the long term and led to better improvements in oral-health-related quality of life.

Additionally, patient acceptance, satisfaction, and willingness to pay for dental implants were high, particularly in elderly edentulous patients. A trend toward improved overall oral-health-related quality of life and decreased healthcare costs was also reported.

1 Vogel R, Smith-Palmer J, Valentine W. Evaluating the Health Economic Implications and Cost-Effectiveness of Dental Implants: A Literature Review. Int J Oral Maxillofac Implants 2013;28:343–356. doi: 10.11607/jomi.2921.

Hydropulser testing at Straumann in Basel

Straumann_2014_English_1 76 09.03.2015 16:53:03 77

280 million bites simulated in tests

17/30° ANGULATION FOR INCREASED FLEXIBILITY Included in the screw- retained abutment range SCREW-RETAINED IMPLANT ABUTMENTS are new angulated Straumann makes a broad range of standard implant abutments designs to connect with, which connect the implant to the prosthetic tooth or denture. In and to provide increased mechanical stability to, 2014, we launched a new portfolio of screw-retained abutments steep-angled implants. to address the challenging needs of edentulous patients who want reliable, esthetic, full-arch dentures that are fixed rather Launched early in 2014, than removable. the abutments are available with 17- and 30-degree angulations for Designed to achieve excellent esthetic and functional results, our challenging situations new screw-retained full-arch restorations cater for individual where the posterior clinical situations, including cases where tilted implants are inev- implant has to be tilted. itable. The portfolio also allows for immediate positioning of a They can be used both in single- and multiple-tooth temporary dental prosthesis. restorations, including full-arch edentulous indi- During the development program, the abutments were subjected cations. For the latter, we to more than 5000 hours of rigorous hydropulser tests, represent- now also offer custom- milled frameworks that ing no fewer than 280 million human biting cycles. can be embedded in fixed full-arch prostheses.

One of our new angled abutments connecting a tilted BLT implant to a model prosthetic construcition.

Straumann_2014_English_1 77 09.03.2015 16:53:06 78 Management commentary Risk and sustainability report

Risk and sustainability report

79 Risk management 84 Customers 87 Straumann and the ITI 88 Employees 92 Communities 95 Global production & logistics 97 Environment

Straumann_2014_English_1 78 09.03.2015 16:53:06 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 79

Risk Management A holistic, disciplined and deliberate approach

We are committed to implementing appropriate con- RESPONSIBILITIES trols, processes and strategies to identify, assess and Risk monitoring and control are management objec- manage risks associated with our activities in order to tives. The assessment process analyzes the implica- prevent or minimize the impact of unexpected events tions and potential impact of external and internal on our business or on our ability to create value. The factors on the achievement of the Group’s objectives, management of opportunities and risks at Straumann and provides a basis for managing them. Risks are cat- is an integral part of the Group-wide corporate gover- egorized as ‘strategic’, ‘operational’, ‘financial and nance system. Through our integrated reporting, we reporting’ or ‘legal and compliance’. aim to highlight the interaction between financial, ecological and social factors and underscore their This matches the approach of the COSO (Committee impact on the long-term success of our company. of Sponsoring Organizations of the Treadway Commis- sion), whose integrated internal control framework is The objective is to apply a globally standardized pro- one of the most widely used. For identified risks that cess for identifying at an early stage and foresightedly arise from accounting and financial reporting, relevant managing possible risks to the achievement of the control measures are defined throughout Straumann’s company’s objectives. Risks are identified as possible Internal Control System (ICS) framework. Various tools developments within or outside the company that and aids are used to assess and manage risks. For could jeopardize its sustained growth. Risk-relevant instance, foreign exchange risks are managed with an information is compiled once a year and ad hoc if nec- SAP treasury tool, while external consultants are used essary. The documentation contains a description of on a regular basis to assess insurance coverage risks. the risk, an assessment of the extent of possible damage, the probability of occurrence, and a list of mea- RISK REPORTING sures to monitor and counteract the risk. A comprehensive corporate assessment report is produced annually and serves as a working document for This approach generally takes into account all relevant the coming year. It includes key risks that are critical types of risks, such as operational, strategic, and com- for Straumann’s business. A specific scenario is devel- pliance-related or market risks, as well as internal and oped for each risk topic, including existing and new external factors. At Straumann the Chief Financial measures/controls. The risks are ranked and priori- Officer is also the Chief Risk Officer (CRO) and is thus tized. Action plans are defined, and the implementa- responsible for risk management. We believe that risk tion of measures to reduce risk is monitored. The sig- assessment and management must be embedded in a nificance of a risk scenario is estimated in terms of comprehensive internal control framework, and we EBIT cumulated over three years. Certain risks are address it through a holistic, disciplined and deliberate assessed according to qualitative criteria, e.g. risks to approach. For more information see Group notes 29 (p. the Group’s reputation. The reporting of key risks is F56 ff.) and 32 (p. F64 f.), and Holding note 6 (p. F78). based on fixed value limits. The report is prepared by Internal Audit and the CRO, and is discussed with the Executive Management Board. The Audit Committee assesses and discusses risks on the basis of the report

Straumann_2014_English_1 79 09.03.2015 16:53:07 80 Management commentary Risk and sustainability report

in consultation with the CRO and/or relevant members lishing production centers for key products on both of Senior Management regularly. Key findings are pre- sides of the Atlantic (see p. 95 f.). sented to the Board. Pressing risks that emerge very rapidly are discussed by the Board at short notice. With regard to suppliers, we pursue a ‘second source’ strategy, which offers a high degree of independence RISK ASSESSMENT from single suppliers. We also keep more than one STRATEGIC RISK year’s stock of titanium, the key material for our MARKET ENVIRONMENT implant system. Straumann is active in specialty segments of the dental industry. Based on the aging population, the PRODUCT RISK AND TREATMENT OUTCOME increasing number of professionals trained, and We seek to minimize product risks by going well increasing awareness, there are no discernible reasons beyond the minimum statutory requirements and why these segments should not continue to offer conducting thorough, large-scale trials, under real-life attractive growth prospects in the long term (see p. 38 conditions, followed by controlled, selective introduc- ff.). However, the current economic uncertainties and tions and long-term product surveillance, wherever the increasing trend to consolidate in the dental mar- appropriate. We also offer a comprehensive range of ket might continue for some time and dampen the education courses at all levels in all countries where prospects of market growth. Straumann has defined our products are sold. its strategic priorities for 2015 as: driving a high performance culture and organization, targeting unex- FINANCIAL RISK (see also p. F56 ff.) ploited growth markets, and become a total solution EXCHANGE RATE RISK provider for tooth replacement (see p. 26 ff.). As the majority of our business is international and because we prepare our financial statements in Swiss One challenge facing Straumann is the need to expand francs, fluctuations in exchange rates affect both the our market reach and grow our organization in order Group’s operating results and the reported values of to realize significant market potential. Our future rev- its assets, liabilities, revenue and expenses. enues depend on our ability to defend and increase our business with existing customers, to enlarge our Straumann’s Corporate Treasury is responsible for customer base, to develop innovative solutions that managing the risks created by currency fluctuations meet customers’ needs and to bring them to market in within the Group, following the scope of the policy a timely manner. New market entrants and price pres- approved by the Executive Management Board and sure from discounters pose a threat to established the Audit Committee of the Board of Directors. companies like ours. We conduct analyses of competitors based on our own and external market intelli- The Group is exposed to transactional and translation gence to counteract such risks. Furthermore, we are risks. Hedging decisions are taken by Corporate Trea- expanding our footprint into other segments through sury with subsidiaries being co-responsible for identi- alliances, partnerships and acquisitions. fying currency exposures and informing headquarters.

OPERATIONAL RISK The key objective is to limit the foreign currency trans- LEGAL AND INTELLECTUAL PROPERTY RISKS actional exposure of the Group. Transactional risk We operate in a competitive market, in which intellec- arises when the currency structure of Straumann’s tual property rights are of significant importance. We costs and liabilities deviates to some extent from the therefore actively pursue a strategy of protecting our currency structure of the sales proceeds and assets, as intellectual property, patents and trademarks. At the well as from imbalances in the payment streams time of writing, Straumann was not directly involved in between the various currencies. Straumann hedges litigation that is considered to be material. these risks on a selective basis by means of options, spot transactions and forward transactions. The limi- MANUFACTURING AND SUPPLIER RISK tation and management of the translation exposure is Straumann has spread its manufacturing risk by estab- a secondary priority.

Straumann_2014_English_1 80 09.03.2015 16:53:07 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 81

SALES AND COST BASE (CURRENCIES)

¢ CHF 11% ¢ CHF 13% ¢ EUR ¢ EUR 21% ¢ USD / CAD / AUD ¢ USD / CAD / AUD ¢ Other ¢ Other 45% 39%

22%

29%

20%

These distribution charts represent the total net revenues (left) and the total cost of goods sold, distribution and administrative expenses (right) in the various currencies. All numbers are rounded approximations.

The major foreign currencies in Straumann’s business issuer risk on marketable securities, settlement risk are the euro, the US dollar, the Swedish krona, the Chi- on derivative and money-market contracts, and nese renminbi and the Japanese yen. Straumann credit risk on cash and time deposits. Exposure to invoices its subsidiaries in local currencies and its dis- these is closely monitored and kept within predeter- tributors mainly in Swiss francs. Exchange rate fluctu- mined parameters. ations have an impact on the company’s assets and earnings, which are reported in Swiss francs. At the Further information on financial risk management is end of 2014, the Group’s gross transactional booked provided in note 29 on financial risk management exposure to its most important currency, the euro, objectives and policies (see p. F56 ff.), in note 30 on was approximately 22%, while the euro accounted for financial instruments, and in the section on derivative 39% of Group sales. The US dollar, the Canadian dollar, financial instruments and hedging onp. F60 ff. of the the Australian dollar, and the British pound collec- Group’s consolidated financial statements. tively made up approximately 43%. Gross transactional booked exposure in Asian currencies, including INSURANCE POLICIES the yen, the Chinese renminbi, and the Korean won, Straumann covers its inherent key business risks in the amounted to around 16%. The charts above illustrate same way that it covers product or employer liability our sales and cost base in the different currencies. risks and property loss, i.e. through corresponding insurance policies held with reputable companies. In general, the target is to concentrate the currency risk mainly in Switzerland at the Swiss Group compa- PENSION LIABILITY RISKS nies. Subsidiaries abroad are usually invoiced by the The Group offers its staff competitive pensions. The Swiss companies in the local currency of the subsidiar- pension funds are managed locally and invested by ies. Each subsidiary invoices its local third-party cus- independent financial institutions. The investment tomers in the local currency. strategy is determined by the Pension Fund Board and is executed by the financial institution. Neither Strau- Credit risks arise from the possibility that customers mann nor the trustees are allowed to influence the may not be able to settle obligations as agreed. specific investment decisions. The pension funds pub- There are no significant concentrations of credit risk lish regular reports for all members. The Swiss pension within the Group. Counterparty risk encompasses fund represents the largest pension plan of the Group.

Straumann_2014_English_1 81 09.03.2015 16:53:07 82 Management commentary Risk and sustainability report

CURRENCY CHART (DOLLAR, EURO, YEN, REAL)

CHF

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2 2010 2011 2012 2013 2014

¢ USD / CHF ¢ EUR / CHF ¢ JPY / CHF ¢ BRL / CHF

FINANCIAL REPORTING RISK Like other leading manufacturers, Straumann is ex- Straumann’s Internal Audit acts as an ‘independent’ posed to the risk of damaged public perception of and ‘objective’ assurance and consulting body, which dental implants by third parties, which might be the reports directly to the CFO and the Audit Committee. result of poor implant placement, competitor’s infe- Internal Audit does not confine itself to financial rior implant quality, or unethical business practices. audits, but also monitors compliance with external and internal policies and guidelines. Acting in a con- Many Straumann country organizations are mem- sulting role, one of its main tasks is to assess internal bers of associations of manufacturers of medical/ processes and controls, propose improvements, and dental products, such as FASMED in Switzerland, assist in their implementation. The objective is to safe- Comident in France or Fenin in Spain. These associa- guard the Group’s tangible and intangible assets and tions are dedicated to the advancement of medical to evaluate the effectiveness of its risk management technology and its safe and effective use. and governance processes. REGULATORY COMPLIANCE COMPLIANCE RISK Companies in the medical device industry face LEGAL COMPLIANCE growing scrutiny from regulators around the world It is essential for Straumann to ensure that the com- and increasing requirements for documentation – pany in general and the individual employees conduct both for new and established products. Because business in a legal, ethical and responsible manner. To Straumann already has substantial clinical data and this end, we implemented a Code of Conduct in 2006. research capabilities, and has initiated a compliance All employees are invited to report any breach of this program in its clinical department aimed at continu- internal policy to the Compliance Officer by e-mail or ous improvement, this is not perceived as a risk. telephone. Infringements of the Code are tracked and appropriate measures taken against non-compliance. In Europe, the Medical Device Directive is under review and the anticipated outcomes include We monitor laws and revisions and adapt our internal greater surveillance, involvement of competent processes to cover new legal requirements, such as the authorities for higher-class products, longer ap- ‘Sunshine’ legislation in the United States and France. proval times, access to technical documentation,

Straumann_2014_English_1 82 09.03.2015 16:53:08 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 83

ISO CERTIFICATION AND AUDITS PERFORMED IN 2014

Standard Certification of Institut Straumann Biora AB Straumann Etkon GmbH Straumann AG Villeret SA (Malmö) Manufacturing Inc (Markkleeberg) (Basel, Gräfelfing) (Villeret) (Andover) ISO 9001 Quality Yes No No No No management system

ISO 13485 Medical device Yes Yes Yes Yes Yes quality management system

ISO 14001 Environmental No Yes Yes Yes No management system

tests on products, and unannounced audits. We Focused quality objectives, supported by key quality expect this will lead to a reduction in the number of performance indicators and comprehensive internal as Notified Bodies and an increase in their control. We well as supplier-related quality audit programs, as- have taken the initiative to conduct unannounced sured our status of substantial compliance and helped internal audits to ensure the readiness of all our cer- to identify opportunities for improvement. To stream- tified sites. line processes throughout the organization, we run a continuing education program. In 2014, we took part in the FDA experiential learning program on digital workflows and presented our Stringent policies drive every step of product design, Variobase abutment to the FDA dental branch, manufacturing and sales/marketing across our busi- together with its integration and controls in our nesses. Our audit program ensures compliance with CADCAM solution. This proactive workshop is policies and procedures deployed at each manufactur- designed to help FDA reviewers to understand the ing site. Many of our facilities are certified to meet product solution and workflow for the next 510(k). International Organization for Standardization (ISO) requirements for quality management (see table above). In Asia/Pacific and the Rest of the World, regulatory authorities continue to inspect manufacturers in for- In 2014, we passed all Notified Body audits, which are eign countries. Straumann is prepared for this and required to maintain the certification status of the has built up experienced teams of regulatory and Quality and Environmental Management Systems at compliance specialists in Basel, the US, China and our manufacturing and design/development sites. Japan. Recent registration successes in China and Japan demonstrate our ability to meet requirements Two of our manufacturing sites were inspected by the as well as the safety and efficiency of our products. US FDA in 2014: our regeneratives manufacturing site in Malmö and our implant manufacturing facility in Stricter requirements and regulations are also Andover. No observation was identified at either expected elsewhere in smaller markets, which will inspection. In addition, the Canadian Health Authority increase the need for enhanced compliance and safe inspected our sales subsidiary in December with no and efficient products. major observation identified.

QUALITY COMPLIANCE Overall, there were no critical issues with any authori- To avoid the risks associated with regulatory compli- ties related to the status of the Quality and Environ- ance for Medical Devices, we have a qualified team mental Management Systems at any of our manufac- of specialists in regulatory and quality issues. turing sites.

Straumann_2014_English_1 83 09.03.2015 16:53:09 84 Management commentary Risk and sustainability report

Customers Challenging, serving and learning from an evolving customer base

STRAUMANN’S CUSTOMERS BY SEGMENT STRAUMANN’S CUSTOMERS BY REGION

¢ General practitioners 15% ¢ Europe ¢ Dental technicians/ ¢ North America 16% laboratories ¢ Asia/Paci c ¢ Specialists & Rest of the World

67% 49%

18%

35%

TWO DISTINCT TRENDS sales and marketing professionals, most of whom are Over the past years we have seen two shifts in our highly-trained sales representatives or service staff. In global customer base, which includes general dentists, 2014, we continued the roll-out of an internal sales specialists (e.g. oral surgeons, periodontists, prosth- training program globally to enhance the effective- odontists) and dental technicians/laboratories, in ness of our sales representatives in identifying and more than 70 countries. The shifts are due partly to managing customer needs and thus helping custom- changes in the market – for instance the increasing ers to improve their businesses. The personal direct involvement of general practitioners (GPs) in implant sales approach adds value for customers and, together dentistry, and the consolidation of dental labs – and with our hotline service, is an intrinsic part of our pre- partly to strategic initiatives we have driven – for mium business model. example to attract more dentists to implantology and to offer centralized prosthetic milling services. The ONLINE FOR CONVENIENCE AND EFFICIENCY geographical shifts reflect our strategy to expand We also offer the convenience of online services, and in the US and in emerging markets like China and have extended our new e-shop to a number of mar- Latin America. kets in 2014. A key advantage is to increase efficiency, freeing up staff capacity to win new business. Another SERVING CUSTOMERS DIRECTLY ‘self-service’ online project is underway to offer elec- We serve approximately 100 000 customers with the tronic invoicing – which will save costs and add trans- Straumann brand directly through more than 1 100 parency. Like our Scan & Shape customer portal and

Straumann_2014_English_1 84 09.03.2015 16:53:09 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 85

other online facilities, this will add flexibility and convenience for customers.

A RESPONSIBLE APPROACH TO GROWTH Current market research 1 indicates that, in the near future, more implants will be placed collectively by GPs than by specialists. At the same time, a recent study in the US reported a failure rate of almost 19% for implants placed in general practices 2. As a responsible manufacturer, we cannot ignore these developments and have begun a collaboration in North America with Patterson, one of the region’s Image from our fresh branding campaign designed to appeal to a largest dental distributors, and Spear Education new, young generation of dentists. to improve implant treatment outcomes in general practice. participants. It supports budding professionals on their career path – from studies, through residencies For GPs choosing to place implants, comprehensive and work as clinic staff, to setting up their own prac- education will be provided by Spear through an tices. In 2014, we launched a dedicated YPP online interdisciplinary curriculum developed and taught portal and implemented a fresh new branding cam- by specialists. GPs may only participate with the paign (see picture above). supportive presence of a surgical specialist during and after the curriculum. INFORMING PATIENTS In addition to education, patient awareness is an To reach GPs beyond our surgical referral network, important driver of implant dentistry. Although Patterson will distribute Straumann Smart One, our patients are not our direct customers, we are all-in-one package specifically designed to simplify strongly committed to their health, satisfaction and component-choice and to help GPs perform straight- wellbeing. Research suggests that one in every two forward indications. In North America, Straumann patients consults the internet before, during and Smart One will be available exclusively through Pat- after consulting a dentist. Treatment and dentist terson together with the Spear curriculum. At the choices are often based on the information found. same time, our academic partner, the ITI (see p. 87) will continue to provide evidence-based implant Patients need general information about implant education through a variety of channels, including dentistry and specific information about their treat- the recently launched ITI Online Academy. ment options. We address the former through various channels, mainly online, while the latter is A FRESH APPEAL FOR YOUNG DENTISTS addressed by dental professionals, who draw on The sustainability of our business in the mid to long tools we provide. In 2104, we developed ‘Straumann term depends on our ability to attract young profes- Patient Pro’, a comprehensive package to support sionals to implant dentistry. Perception-pulse stud- patient marketing activities by dentists. It includes ies have revealed that their most common expecta- images, video animations and attractive content for tion from companies like Straumann is for help in dentists’ websites and social media channels. It also building up their business and establishing a reputa- features a new ‘doctor finder’ tool. tion as a specialist. We continued to take a structured approach to this group through dedicated pro- SAFEGUARDING COMPLIANCE IN THE INTER- grams in 2014, including our Young Professional EST OF PATIENTS Program (YPP) in ten countries. Our Global Sales Compliance Program has been in place since 2009 and is one of several safeguards to The YPP has now been running in Germany for more ensure compliance with regulations relating to the than two years and has reached more than 3 000 sale of our products and services. In 2014, there

Straumann_2014_English_1 85 09.03.2015 16:53:15 86 Management commentary Risk and sustainability report

were no reported incidents of non-compliance with any applicable laws or regulations regarding the marketing or sales of our products. Further supporting our commitment to the patients’ interest, much of the scientific information used to endorse our products is peer-reviewed, and we have robust processes and guidelines in place to check that our marketing materials are ethical and accurate.

OUTLOOK In 2015 our customer base will broaden to include the dental chain segment, as we begin to serve the ClearChoice network in the US (see p. 56), and the private clinic segment in China (see p. 57).

While we continue to develop customer-driven solutions and services for premium customers, our Instra- dent platform will expand internationally to address price-sensitive customers with a different value proposition. To optimize this approach we will continue to segment and target customers specifically.

REFERENCES/FOOTNOTES 1 iData Research 2011. 2 Da Silva JD et al, JADA 2014;145(7):704-713. Of 920 implants placed in 87 general practices for which data were available, 7% were classified as failures. When excessive bone loss was included, 18.7% were classified as failures.

Straumann_2014_English_1 86 09.03.2015 16:53:15 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 87

Straumann and the ITI A unique partnership that benefits patients around the world

The International Team for Implantology (ITI) is the to expand with leading-edge content. Offering 24/7 largest international academic organization in implant worldwide access, this platform caters for individual dentistry and related tissue regeneration. It is a driving learning preferences and the ever-growing demand for force in education and the dissemination of knowl- reliable educational material on implant dentistry. edge in the field, focusing on the development of well- documented treatment guidelines backed by exten- Despite its many advantages, a virtual environment sive clinical testing, and the compilation of long-term cannot replace physical interaction and networking. results. More than 16 000 Fellows and Members all This is why the ITI continues to provide its Members over the world participate in ITI activities, which are and Fellows with numerous opportunities to meet designed to promote networking and exchange. personally and to share experience and expertise, for example at Section meetings, Education Weeks and at For more than 30 years, Straumann has enjoyed a close more than 600 Study Clubs around the world. relationship with the ITI, which has developed over time and adapted to change in the field. In January Supporting research is central to the ITI’s principles. In 2014, the two organizations formally defined a frame- 2014, 24 research grants were awarded worldwide to work for their cooperation, which is summarized in individuals in and outside the ITI membership. ITI- three guiding statements: funded research has resulted in more than 90 peer –Straumann provides funding, expertise and support reviewed publications 2006, 18 of which were pub- to the ITI lished in 2014. The ITI also supports continuing educa- –The ITI takes its decisions autonomously tion for young practitioners through 20 annual Schol- –The decisions of the ITI are made in the mutual in- arships at ITI Scholarship Centers. terests of both parties. OUTLOOK This sets the direction and parameters of the partner- Among other highlights in 2015, the ITI will organize ship for the coming years. ten national congresses and seven ITI Education Weeks around the world. Expanding the ITI Online ADDRESSING THE GROWING DEMAND Academy with additional content and ensuring that FOR EDUCATION existing material is up to date is an ongoing priority. 2014 was an important year for the ITI. The successful At the same time, work will also continue on Vol- ITI World Symposium in Geneva in April drew more umes 9 and 10 of the highly regarded ITI Treatment than 4 200 participants from 84 countries. Guide series.

Another major highlight was the launch of the ITI’s new e-learning platform, the ITI Online Academy, in October. Geared to individual user needs, the Academy offers a comprehensive, evidence-based curriculum for dental practitioners at every level of skill and experience. Designed and built by the ITI, it continues

Straumann_2014_English_1 87 09.03.2015 16:53:15 88 Management commentary Risk and sustainability report

Employees Creating a high performance organization

Having reduced personnel-related costs through than structural. Cultural change is a strategic priority resizing and restructuring in 2013, we needed to (see p. 26), which we believe has to start at the top of strengthen our staff in specific areas to support stra- the company. Assisted by external specialists, we mea- tegic growth initiatives, e.g. in emerging markets like sured the company culture based on 12 behavior China and Latin America, in the value segment and in styles that are found in all organizations. By Septem- Sales in North America. As a result, our global team ber, approximately 500 employees representing 20% increased slightly above our forecasts by 170 in 2014 of our staff had completed a structured, anonymous to 2 387, of which 403 were at headquarters. survey assessing the company’s leaders and their business areas. OUR CULTURAL JOURNEY The organizational structure we implemented in 2013 The results were communicated internally and com- is designed for simplicity, customer focus, agility and pared with the aspired ideal picture sketched by top accountability. Only fine tuning was needed in 2014, management at the outset (see right). The next step underlining the fact that our major challenge in creat- was to conduct team workshops to understand chal- ing a high performance organization is cultural rather lenges and aspirations and to determine individual

ADAPTING OUR COMPANY CULTURE

CONSTRUC CONSTRUC TIVE TIVE ST ST YL YL ES ES

S S E E L L

Y Y

T T

S S

E E

V V

I I

S S

N N

E E

F F

E E D

D S S /

/ E E E

E L L V V

I I Y Y

S T T

S S S

E E

R R E E

G IV IV

G S S

A A N EN E EF EF D D E/ E/ SIV SIV PAS PAS

CURRENT IDEAL

In 2014 we embarked on a cultural ‘journey’ to foster and promote delegation, empowerment, responsibility, risk-taking, challenging and creative thought, which are predominant behavioral styles in high-performance organizations. The charts map our behavioral styles at the outset (left) and the ideal we want to achieve (right).

Straumann_2014_English_1 88 09.03.2015 16:53:16 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 89

EMPLOYEES BY REGION EMPLOYMENT

¢ Switzerland 4% (4%) ¢ Full time 7% 32% (32%) ¢ Rest of Europe 9% (9%) ¢ Part time ¢ North America ¢ Asia/Pacic ¢ Rest of the World

21% (22%) 93%

Numbers in brackets 33% (35%) refer to 2013.

EMPLOYEES LEADERSHIP

2010 2361 2011 2452 2012 2517

2013 2217

2014 24% 76% 2387 MANAGERS GENERAL STAFF

GENDER AGE

70% Cultural change Cultural change is a strategic 18% priority which we believe has 12% to start at the top. 43% 57% <30 30–50 >50

Straumann_2014_English_1 89 09.03.2015 16:53:17 90 Management commentary Risk and sustainability report

HUMAN RESOURCES KEY FIGURES

Parameter Unit 2014 2013 2012

Staff size Employees Total headcounts 2 387 2 217 2 517 Full-time equivalents 2 330 2 164 2 457 Employment type Part-time employees % of headcount 7 7 7 Gender diversity Women in general staff (excl. Mgmt) % 48 47 47 Women in SMD pool1 % 24 24 18 Women in management % 29 31 31 Training and education Investment in staff learning2 CHF million 1.7 1.5 2 Average annual training & learning Days/employee 3 3 4 Fluctuation and absence Staff fluctuation % 13 22 12 Absence rate due to sickness3 % 3 3 3 Absence rate due to % 0 0 0 workplace accidents3 Work-related fatalities Number 0 0 0 Employee protection Reported cases of discrimination Number 0 0 0

1 Strategic Management Development group. 2 Only direct expenses for internal and external training activities are counted here. Salaries paid to employees while in training are additional and are not included. 3 Switzerland only. Proportion of absence time compared to target working hours.

STAFF STRUCTURE BY CATEGORY AND AGE GROUP (%)

Age <30 30 – 50 >50 Unit 2014

General staff (excl. Mgmt) 11.25 51.70 12.86 % of headcount 75.83 Management 0.25 18.52 5.40 % of headcount 24.17 TOTAL 11.52 70.21 18.27 100

and team actions to effect the cultural change. The increasingly uses focus-groups and ‘town-hall’ meet- process will be extended through the organization ings. In 2014, 17 general staff meetings were held with and progress measured in follow-up surveys. the CEO in nine countries, in addition to 24 informal small group sessions, in which staff are able to put ENGAGEMENT concerns personally to the CEO and other members of Despite the pace of change and the challenging key the Executive Management. initiatives in 2014, our staff again demonstrated the Straumann spirit of ‘simply doing more’, helping us to Apart from these channels and the aforementioned outperform, to expand and to deliver an impressive surveys, all leavers are requested to complete ques- number of innovations to market. tionnaires. These indicate that development and work- life balance are also important drivers of engagement. Competitive salaries, benefits and incentives are significant engagement drivers and are discussed in our DEVELOPING SKILLS, ENHANCING LEADERSHIP Compensation Report (see p. 138 ff.). To gain direct Training and development are essential to meet the feedback on staff engagement, top management requirements for an international company in the

Straumann_2014_English_1 90 09.03.2015 16:53:17 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 91

medical device industry, and to attract and retain Our onboarding training for new employees focuses staff. In addition to introductory product and techni- on corporate alignment including our Code of Con- cal training, we offered refresher updates for staff duct, which protects employees from discrimination who have been with the company for some time. (unequal treatment based on gender, race, religion, We also extended the program devoted to selling or sexual orientation). No cases of discrimination skills, which begun in 2013, and we maintained our were reported in 2014. Health/safety training and apprenticeship and internship programs. Our Corpo- awareness are given due importance at Straumann, rate Graduate Program was refined and includes and no workplace fatalities or serious accidents members of the Executive Management in the were reported. selection process. RESPONSIBILITY AND ETHICAL BEHAVIOR STRATEGIC MANAGEMENT DEVELOPMENT Our Code of Conduct also defines our expectations for (SMD) ethical behavior in all our business activities. Being an We extended our SMD process for senior manage- integral part of our employment contracts, it prohibits ment, staff in key positions, and future leaders. This any form of human rights violation, bribery, corrup- reviews leadership, performance, behavior, and career tion, unfair competition, misleading marketing, etc. potential as a basis for development, deployment, Employees are obligated to report any violation, sus- and succession planning. Our other staff development pected violation or misconduct. In 2014, no violations programs were re-evaluated and tailored as follows: of the Code of Conduct were reported.

GLOBAL DEVELOPMENT PROGRAM (GDP) We also expect ethical practices in our supply chain, as We replaced our International Talents Program with presented in our ‘Code of Conduct for Suppliers,’ the new GDP, which identifies and develops future which refers to working conditions, human rights pro- leaders with a view to filling our succession pipeline tection, business ethics, legal compliance, and envi- globally. The 18-month program is for members of ronmental protection. general staff to middle management who have leadership aspirations and potential. It includes interna- OUTLOOK tional assignments, assessments and mentoring by We expect our existing workforce in business-critical top management. Nine participants joined the pro- areas to grow in 2015 linked to revenue growth, as we gram in 2014. We plan to introduce a Local Develop- pursue our strategy to exploit growth opportunities in ment Program for employees who have potential but emerging markets and attractive segments. are less able to relocate internationally. We will continue to refine and expand our staff devel- PROFESSIONAL CAREER PATH (PCP) opment programs, but the key priority in 2015 will be Prompted by our 2010 staff survey and further analy- driving behavioral and mindset changes to produce a sis, we developed a model that provides career oppor- high performance culture. tunities outside line-management by enabling individuals to progress through four clearly defined, benchmarked stages to the level of ‘Expert’. Having piloted the PCP in 2014, we plan to expand it to Research & Development, Information Technology and Operations in 2015.

DIVERSITY AND EMPLOYEE PROTECTION A diverse team adds value and supports our ability to serve an increasingly diverse customer base. We monitor diversity with regard to age, gender, origin and educational background. Gender diversity is strong overall, with 43% female employees.

Straumann_2014_English_1 91 09.03.2015 16:53:17 92 Management commentary Risk and sustainability report

Communities Enhancing well-being and quality of life

The ‘One day a smile’ charitable project attracted broad media attention in France. All patients were treated at no cost and the implants for the treatments were provided by Straumann.

MORE THAN CARING – ADDING VALUE FOR Sponsoring Committee, which reports periodically to STAKEHOLDERS the Executive Management. Our biggest contribution to the community is enhanced well-being and quality of life through safe, CONTINUED SUPPORT FOR THE effective, lasting solutions that restore not only dental UNDERPRIVILEGED function and esthetics, but also smiles and confidence. 2014 was similar to previous years in terms of sponsor- This is especially true in fully edentulous patients, ing activities. We evaluated some 50 requests, of whose lives change significantly when their teeth are which we supported ten. In each case clear goals were replaced. We take pride in the fact that every year set and achieved. An overview is presented opposite. more than a million people around the world are treated with, and helped by, a Straumann solution. We try to ensure that there is continuity and sustainability in the projects we support, and our engage- At the same time, we have to acknowledge that mil- ment spans several years in most cases. Our donations lions of people around the world do not have access to these and other projects totaled approximately even to basic dental care, let alone tooth replacement. CHF 250 000. Two new projects were the ‘One day a This is why we support charitable initiatives to make smile’ initiative in France and support for the Albert dental treatment and education about oral hygiene Schweitzer Hospital in Gabun through Secours Den- available to the underprivileged. Like most of our taire International. sponsoring activities, these are connected to our field of business – since this is where we can make a mean- ‘ONE DAY A SMILE’ ingful difference. The ‘One Day a Smile’ event at the Afopi campus north of Paris provided total tooth replacement free of Straumann is politically neutral in all its sponsoring charge to 14 patients who had severely compromised activities. We refrain from making statements on pub- dentition and were unable to afford treatment. lic policy and from political lobbying, and we do not Remarkably, the treatment was completed in a single sponsor politicians or political parties. Sponsoring day, including extraction of their remaining teeth, requests and initiatives are evaluated according to the placement of 14 – 16 implants and two full-arch clearly defined principles and policies by our Corporate fixed dentures.

Straumann_2014_English_1 92 09.03.2015 16:53:23 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 93

MAIN INITIATIVES AND PROJECTS SPONSORED BY STRAUMANN IN 2014

REGION LEAD PARTNER OBJECTIVE 1 STATUS/RESULTS

Alaska Academy of Prosthodontics Dental outreach project to elderly 2014 project completed; patients Foundation patients, supported since 2005 fitted with dentures and dental implants Bali Bali Children Foundation Dental care for children, Dental Clinic built and supported since 2012 inaugurated; ongoing dental treatments for children Cambodia ‘Hope for All’ Clinic Scholarships and clinic, Ongoing; three dental supported since 2007 students fully supported Bonn University students Support for ‘Cambodia World 2014 project completed Family’ project Chile Connecticut University team Dental outreach project, 2014 project completed supported since 2008 Cook Islands Hannover University students Clinical traineeships 2014 project completed France Afopi Dental Campus ‘One-day-a-smile’ dental charity for 182 implants with corresponding treatment of 14 needy patients abutments and instruments donated Gabun Secours Dentaire Support for Albert-Schweitzer- Ongoing International Hospital dental clinic in Lambaréné Haiti Dental International Aid Net- Clinic fittings, health center Generator donated for the newly-built working Organization (DIANO) development health center in Ouanamintheg Nicaragua Sonrisa foundation Free dental care for orphaned Ongoing project children; dental student scholarship North America National Foundation for Financial, treatment and PR, Ongoing project Ectodermal Dysplasia supported since 2004 UK Bridge 2 Aid/CLAPA Fund-raising bicycle ride, >GBP 25 000 raised organized by Straumann UK Other Straumann AID Free products for Ongoing underprivileged individuals

1 In each case clear prerequisites and goals were set.

This project was made possible by the clinic and 60 necessary to work with portable equipment. We are dental professionals who freely offered their services. grateful to our dental partners – many of whom are Straumann donated state-of-the-art materials, like our volunteers – for their devotion and for ensuring that new fast healing Bone Level Tapered implant and the funds are used efficiently. angled abutments. The market value of the materials exceeded CHF 125 000. The cases are all documented MORE THAN A DECADE OF COMMITMENT TO and the patients tracked. ECTODERMAL DYSPLASIA PATIENTS We continued our longstanding commitment to help- STRAUMANN AID ing people affected by ectodermal dysplasia (ED). Straumann AID (Access to Implant Dentistry), which Sufferers typically have severely malformed or missing was set up in 2007, is another global initiative to help teeth from infancy, and their dental treatment is rarely underprivileged patients who are in need of implant covered by insurance. Straumann provides free im- treatment but cannot afford it. It relies on collabora- plants and prosthetics as well as financial support to tion with dentists from the ITI network, who provide the National Foundation for Ectodermal Dysplasia the treatment without charge, while Straumann (NFED), a US-based non-profit organization that helps makes the respective product donations. patients and their families around the world.

OUTREACH IN DEVELOPING REGIONS We strive for sustainability in all the charitable proj- Elsewhere, we continued to support basic dental care ects we support, which is reflected in our long-stand- initiatives mostly in developing regions. Often it is ing relationships and commitments (see table above).

Straumann_2014_English_1 93 09.03.2015 16:53:23 94 Management commentary Risk and sustainability report

SUPPORT FOR YOUNG DENTISTS We continued to sponsor four young dental students in Cambodia and Nicaragua, who are connected with Straumann-supported charitable projects that we support. Our hope is that these students will help address the huge local need and sustain the respective projects.

NEW AWARD FOR YOUNG PROFESSIONALS Apart from this, we created a new annual award together with botiss biomaterials, our partner in oral tissue regeneration, to foster and encourage the development of young dental professionals in the field of periodontal care/dentistry. Entitled ‘The Straumann/ botiss biomaterials Young Periodontal Professional of the Year’, the award is worth more than 5000 Euros.

All the abovementioned projects focus on dentistry and thus promote Straumann’s reputation among relevant stakeholders as a caring, responsible corporate citizen. This supports our business and thus adds value for our shareholders.

OUTLOOK In 2015, together with our partner Createch we will donate the final restorations for the patients treated in the One Day a Smile event. We also plan to sponsor a similar charitable initiative in China.

Beyond that, we plan to continue our support for charitable activities in the dental field, focusing on initiatives/projects that provide access to dental treatment for needy people and on dental education programs. These kinds of involvement are meaningful to our stakeholders.

Straumann_2014_English_1 94 09.03.2015 16:53:23 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 95

Global production & logistics New product launches, technologies and efficiency gains

FIFTH CONSECUTIVE YEAR OF EFFICIENCY IMPROVEMENTS In recent years we have made significant successive efficiency improvements in Production and Logistics despite the unpredictability of our changing environment. 2014 was outstanding because, for the fifth consecutive year, we exceeded our ambitious cost- improvement targets and further expanded the gross margin. This was achieved through new technologies and multiple efficiency initiatives, which more than offset cost increases of high-tech innovations.

INNOVATION TO MANUFACTURE We manufacture more than eleven million items in Villeret and INNOVATIONS Andover each year. Implants go through almost 30 production steps, of which more than half are quality checks. One of our major challenges was to support the con- version of our entire implant range from titanium to Roxolid combined with the new Loxim transfer piece. STRONG VOLUME GROWTH COVERED In addition, we launched a new 4mm implant, WITHOUT STAFF INCREASES the shortest of its kind on the market, as well as a Strong demand for new and existing products led to a small-diameter version of our PURE ceramic implant double-digit rise in volumes, which we were able to launched in 2013 (see p. 20). The latter requires inno- cover with our existing staff – plus a few additions – vative processes for machining, surface treatment and thanks to efficiency/productivity gains and invest- fracture-resistance testing of each implant. ments in new technology, including the very latest milling and lathe machinery to produce sophisticated As the year progressed, we began building up produc- designs, automated quality inspection systems and tion for our new Bone Level Tapered implant range robotic transfer systems. (see p. 104), which entered a controlled market release in the fourth quarter. This has been a large undertak- With regard to capacity utilization, we struck an opti- ing, not least because the new range requires a host of mal balance between our implant production facilities new instruments. Apart from this, we launched an in Villeret and Andover. Both operated throughout the extensive portfolio of angled abutments. year at 95% capacity.

In CADCAM prosthetics, we developed new design For maximum flexibility to meet changing market software and a number of new products including requirements, we completed our largest ever technol- constructions for screw-retained bars and bridges and ogy transfer from Villeret to Andover, including docu- crowns made of various materials. mentation and regulatory supervision.

Straumann_2014_English_1 95 09.03.2015 16:53:27 96 Management commentary Risk and sustainability report

STRAUMANN’S PRODUCTION SITES

LOCATION PRODUCTS STAFF OUTPUT (UNITS/ MARKETS CERTIFICATION COMPONENTS)

Villeret, Implant systems 350 7.5 million Global ISO, FDA, Anvisa, MHLW Switzerland Andover, USA Implant systems 110 3.9 million Global ISO, FDA, Anvisa, MHLW Markkleeberg, CADCAM 60 400 000 Europe ISO Germany prosthetics Arlington, USA CADCAM 16 85 000 USA FDA prosthetics Malmö, Sweden Regeneratives 26 160 000 Global ISO, FDA, Anvisa, MHLW

QUALITY SYSTEM ENDORSED OUTLOOK Our training program in Lean Six Sigma skills has had a Superior quality and outstanding service will always significant part in achieving our efficiency and produc- be the central goal for Production and Logistics. To this tivity goals. Production costs were reduced thanks to end, we will continue our Lean Six Sigma program. the insourcing of packaging, laser marking and paper- less (electronic) instructions for use. We further sim- In 2015, our focus will be on launching the Bone Level plified the packaging process by harmonizing packs for Tapered implant, the botiss rollout and the introduc- implants and prosthetics and by integrating new sup- tion of additional CADCAM products. We are pliers in the system. expanding our Arlington factory significantly and optimizing workflows to meet demand for screw- Once again the quality management system for pro- retained bars and bridges as well as our ‘Scan & duction was subjected to various external audits, Shapes’ Service. In Villeret, one of our main initiatives including FDA, and passed with flying colors. is to complete the transition to a completely paper- less production process. Our Malmö site in Sweden, which specializes in the production of regenerative products, passed an FDA Our new CADCAM production facility in Tokyo is due audit with no objections, as did our Andover and to become operational in late 2015 and will have an Instradent sites (Neodent distribution) in the USA. important part in strengthening the Straumann brand as the full solution provider and partner of choice in LOGISTICS MANAGING UNPRECEDENTED tooth replacement. PROLIFERATION Not only did our logistics team have to cope with the significant volume increases, portfolio changes and more than 100 new launches worldwide, it had to manage the addition of nearly 500 items. On top of this proliferation, the entire Neodent, Medentika and botiss ranges were integrated, more than doubling the number of items in our range. Our warehouse team also tackled a large project for ClearChoice in the US, which involved installing RFID technology to transmit customer requirements, automatically enabling rapid replenishment of stocks.

Straumann_2014_English_1 96 09.03.2015 16:53:27 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 97

Environment Striving to reduce our impact as production grows

We rigorously monitor the items we produce and the end of the reporting year: Villeret (Switzerland), the processes we use to manufacture them, in line Markkleeberg (Germany), Malmö (Sweden), Andover with stringent regulations for medical device manu- and Arlington (USA); and for our Group headquar- facturers. Adherence to strict quality-control proto- ters in Basel. The report does not include our former cols for identity, purity and content testing of raw laser scanner production facility in Gräfelfing, Ger- materials ensures that our products function safely many, which was transferred to Dental Wings dur- and effectively. Full documentation of all manufac- ing the year under review.1 turing processes provides traceability. We monitor and report environmental data focused Company-wide, our managers are committed to on key aspects of our operations (see highlights on process improvements with positive environmental overleaf and comprehensive performance figures impact. The staff is charged with environmental on p. 100). Our principal product is dental implants, responsibility in all of their daily duties, in line with which are produced from rods of titanium or tita- the ISO 14001 certification guidelines and the Strau- nium-zirconium alloy on computerized CNC lathes. mann Code of Conduct. In the machining process, cutting oil is used as a cooling agent, followed by sand-blasting, acid etch- Our products include titanium and ceramic dental ing, cleaning, packaging, and sterilization. implants, oral tissue regeneration products, and prosthetic elements made of ceramic, metal, or TITANIUM AND OTHER RAW MATERIALS polymer. Apart from production and research activi- In 2014, demand for existing products and the ties, our environmental impact is low compared launch of several new products led to increased pro- with most manufacturing companies. We do not duction volumes. The capacity increase was covered manufacture dental filling materials or surgical through four new production machines in Villeret equipment, and so do not use significant amounts and overtime work by our staff. Despite the increase of metals such as mercury, lead, or manganese, in volumes produced, there was no corresponding which are typically used in the dental manufactur- increase in titanium use. ing industry. Sales of bone level implants have grown at the ENVIRONMENTAL REPORTING AND expense of their tissue level counterparts. In produc- PERFORMANCE tion, the profile of the bone level design more closely Our environmental performance report is based on matches that of the metal rods from which they are available data for all production sites in operation at milled, allowing us to work with narrower rods and

Straumann_2014_English_1 97 09.03.2015 16:53:27 98 Management commentary Risk and sustainability report

TITANIUM RECYCLING (tons) The profile of our Bone Level implants closely matches that of the metal rods from which they are milled, allowing us to use less titanium per part.

HEATING ENERGY CO2 EMISSIONS PER CAPITA (GWh) (tons) 2013 8.6

2013 2013 2014 4.8 4.7 2.6 2014 2014 10.6 2.5

+19 % -3 % -5 %

REFUSE PAPER CONSUMPTION WATER (tons) PER CAPITA (m3) (1000 sheets)

2013 153.6

2013 2014 2013 151.3 4289 30 597

-1.5 % 2014 2014 29 975 We are working on a project 3979 to make the production process paper-free. -7 % -2 %

Straumann_2014_English_1 98 09.03.2015 16:53:28 Management commentary Risk and sustainability report Management commentary Risk and sustainability report 99

thus use less titanium per part. Additionally, trim- WATER AND WASTE ming at the end of the process yields more titanium Water consumption dropped slightly despite growth for recycling. Straumann’s PURE ceramic implants are in production. Generation of untreated wastewater, made of yttrium stabilized zirconium oxide but as containing low concentrations of cleaning deter- these have just been launched and their main appeal gents, solvents, acid, and oil, remained more or less is for niche indications, the material consumption constant. It is collected in tanks and disposed of by was only moderate in 2014. Smaller quantities of the authorized specialist contractors, and the amount raw materials cobalt chrome, yttrium stabilized zir- depends on maintenance activities at our water conium oxide, and polymethylmethacrylate (PMMA) treatment plant in Villeret. are used in the production of crown and bridge solutions. Decreases in cobalt chrome and PMMA use The amount of hydroxide sludge, a by-product of and an increase in zirconia use reflect shifts in rela- wastewater treatment that varies depending on the tive demand between these different products. quantity and composition of the water treated, stayed roughly constant. The increase in diverse OPERATING MATERIALS contaminated materials, which include oil-contami- The use of oils and cleaning solvents increased nated rags, filters, and other debris, and some elec- somewhat, corresponding to the rise in volumes tronic scrap, can be attributed to production growth, produced. Likewise, recycled acid from the anodizing while use of solvents remained constant despite of implant parts, an electrolytic process that boosts this growth. resistance to corrosion and wear, also increased. Overall refuse output dropped slightly. Significant Despite volume expansion and the related docu- decreases in refuse generation at our Group head- mentation requirements, leaner processes allowed quarters in Basel offset some increases at production us to decrease total and per-capita paper use. sites. This was partly due to the restructuring in 2013, which involved headcount reductions and depart- ENERGY USE AND GREENHOUSE mental relocations. GAS EMISSIONS The increase in electricity use was significantly OUTLOOK below our volume increase in production, and per- Environmental considerations have become a funda- capita electricity use was reduced. This was partly mental part of our business, and we are continually because of the addition of people to cover insourced improving our processes. At our headquarters in activities, e.g. increased demand for Roxolid and our Basel, we are assessing the feasibility of optimizing Loxim transfer piece. Together with changes in cli- our heating and cooling system. The proposed modi- matic conditions, which reduced heating energy fication is to feed weather forecast data into our

requirements, this allowed us to reduce overall CO2 building control systems. This would allow us to emissions despite our production growth. quickly adjust heating and cooling to outside temperature shifts and save energy. In Villeret, we are work-

The CO2 emissions we monitor are generated by ing on a project to make the production process electricity consumption and heating, and are differ- paper-free by 2016, which should significantly reduce entiated in this report by direct (Scope 1) emissions paper consumption. from sources like the burning of natural gas, and indi- FOOTNOTES rect (Scope 2) emissions from sources like electricity 1 For consistency, the partial-year environmental data for the Gräfelfing site has been excluded from the 2014 report and the 2013 numbers and district heat. Minimal impact business activities, have been recalculated in line with best practice for international envi- or those for which meaningful data are not available, ronmental accounting standards like the Greenhouse Gas Protocol. Our other facilities, which focus on sales and distribution and are are not included in our carbon reporting. These would generally smaller, are likewise not included because of minor impact and lack of meaningful data. include emissions from the transport of our products (which are small and light), sales representative travel, and employee commuting.

Straumann_2014_English_1 99 09.03.2015 16:53:28 100 Management commentary Risk and sustainability report

ENVIRONMENTAL KEY PERFORMANCE FIGURES

Performance indicator Unit 2014 2013

Product raw Titanium Consumption kg 14 657 14 602 materials Recycled (consumption kg 10 634 8 562 minus product) Cobalt chrome Consumption kg 2594 3 039 Recycled kg 2 095 2 200 Zirconia Consumption kg 1 733 1 461 Polymethyl methacrylate Consumption kg 19 28 Operating Various oils Consumption kg 46 634 42 613 materials Recycled kg 31 688 34 569 Cleaning solvents Consumption kg 34 656 31 436 Recycled kg 19 495 18 250 Acids Recycled kg 45 571 39 341 Paper Consumption sheets 4 488 000 4 653 500 Consumption per capita1 sheets/ 3 979 4 289 employee

Energy Electricity Consumption kWh 16 690 808 16 253 169 Consumption per capita1 kWh/employee 14 797 14 980 Heating2 Total heating energy kWh 4 681 928 4 836 548 – Fossil fuel kWh 3 874 493 3 843 748 – District heat kWh 807 435 992 800 Total heating energy kWh/employee 4 151 4 458 per capita1

3 Emissions CO2 emissions Total emissions tons 2 821 2 863 – Direct (Scope 1, tons 767 761 excluding vehicle fuel)

– Indirect (Scope 2) tons 2 054 2 101 Total emissions energy tons/employee 2.50 2.64 per capita1

Water Water Consumption m3 29 975 30 597 Consumption per capita1 m3/employee 27 28 Untreated waste water Disposal kg 11 690 11 834 Waste Diverse waste Hydroxide sludge kg 13 543 13 402 Contaminated material kg 13 841 12 595 Solvents kg 3 217 3 217 Refuse Total kg 151 367 153 616 Per capita1 kg/employee 134 142

1 Per capita figures refer to employees at the relevant reporting sites only. 2 To avoid double counting, heating energy data do not include electricity used for a small part of heating at Andover, or to operate the geothermal heat pump in Leipzig – these are included in the electricity data. 3 Scope 1 covers CO2 emissions directly emitted by sources owned or controlled by Straumann such as heating boilers, while Scope 2 comprises emissions generated in the production of the electricity, heat or steam that we consume.

Straumann_2014_English_1 100 09.03.2015 16:53:29 Management commentary Risk and sustainability report 101

Straumann_2014_English_1 101 09.03.2015 16:53:29 “Helping people get their teeth back and enjoy life again gives me great “Developing BLT has been satisfaction.” like watching your baby JÖRG SCHAUB come to life and grow up.” DESIGN ENGINEER STEFFEN KÜHNE SENIOR DEVELOPMENT ENGINEER

“I have the opportunity to express my creativity and the freedom to stay on the cutting edge of surgery.” PROF. MICHEL DARD HEAD SURGICAL & CLINICAL SCIENCE

Straumann_2014_English_1 102 09.03.2015 16:53:37 103

Sophisticated skills and compassion “Helping people get their teeth back and enjoy life again gives me great STEFFEN KÜHNE satisfaction.” SENIOR DEVELOPMENT ENGINEER JÖRG SCHAUB 8 YEARS @ STRAUMANN DESIGN ENGINEER Steffen once designed high tech axles for cars. Now he’s passionate about improving people’s lives with devices he painstakingly guides from idea to prototype. “My job puts me in the middle of everything: design, development, verification, testing and lets me orchestrate all the technologies involved.”

PROF. MICHEL DARD HEAD SURGICAL & CLINICAL SCIENCE DEPARTMENT; PROFESSOR, NYU AND COLUMBIA UNIVERSITY 11 YEARS @ STRAUMANN “We offer highly sophisticated treatments and lots of support to clinicians.” Besides being a surgeon and professor, Michel is a global ambassador for Straumann. He built up a unique peer-to- peer partnership for oral surgeons and clinicians, which promotes professional mentoring and advances surgical techniques.

JÖRG SCHAUB DESIGN ENGINEER 10 YEARS @ STRAUMANN Jörg is enthusiastic about creating solutions from scratch. “I like creating and testing prototypes.” What motivates him is helping people. When his father needed an implant, Jörg said it had to be Straumann, “the design literally came from my fingers.”

Straumann_2014_English_1 103 09.03.2015 16:53:42 104

Bone Level Tapered Implant A new generation

Implants with tapered/conical designs now make up nearly 60% of the global implant market and their popularity is expected to increase. One reason for this is that they provide good immediate stability when they are inserted, which makes them popular for accelerated tooth replacement procedures that are intended to cause less disruption to patients.

In addition, tapered designs are suitable for placement in tooth extraction sockets – reducing the need for bone augmentation – and in situations where it is difficult to achieve primary stability e.g. in low density bone. They also help surgeons in other challenging situations.

The growing body of clinical evidence supporting immediate loading procedures with these designs, as well as the attractive market, have prompted Straumann to enter the field with a differentiated new-generation product made of Roxolid with the SLActive surface, which offer high strength and fast healing.

ANTICIPATED GROWTH OF THE TAPERED IMPLANT SEGMENT

0 2012 2013 2014 2015 2016 2017 2018 2019 2020

¢ Europe ¢ North America ¢ Latin America ¢ Asia/Paci c

Source: Millenium Research Group, 2014

Straumann_2014_English_1 104 09.03.2015 16:53:42 105

60% of implants are tapered/conical

SHORTENING TIME TO TEETH GAME-CHANGING Our new Bone Level Tapered (BLT) implant began a controlled SOLUTIONS The BLT implant is the cor- market release in September and had sold approximately 13 500 nerstone of our Pro Arch implants by year end. It will become generally available in 2015, solution, which includes except in certain Asian and Latin American markets, where regu- prosthetics and digital latory approvals are still pending. workflows (see p. 158 f.).

The BLT is designed for enhanced primary and secondary stability, convenience and a shortened time to teeth. It is suitable for single and multiple tooth replacements and can be used to address the challenging needs of edentulous patients who want fast, reliable, esthetic, full dentures that are fixed, rather than removable. We offer it in a range of sizes, with surgical instruments (see p. 168 f.) and two options of material and surface.

CLEARCHOICE CHOOSES STRAUMANN BLT and Pro Arch were instrumental in the decision by ClearChoice to choose Straumann as a preferred supplier.

ClearChoice is a large North American chain of dental centers, which are leaders in full-arch dental Bone Control Design restorations. ClearChoice allows optimized crestal performs more implant bone preservation and procedures than any other soft tissue stability. CrossFit connection network in the US. makes handling easier and provides Roxolid confidence for compo- is a unique material nent positioning. with excellent mechanical properties. SLActive surface Apically tapered allows fast and implant body design predictable allows underprepara- osseointegration. tion and supports a high primary stability in soft bone.

Straumann_2014_English_1 105 09.03.2015 16:53:49 106 Corporate Governance

Corporate governance Contents

107 Principles 107 Group structure 110 Shareholders 111 Shareholders’ participation 113 Board of Directors 126 Executive Management Board 127 Management contracts 127 Internal management development 127 Compensation, shareholdings and loans 127 Auditors 127 Information policy

Straumann_2014_English_1 106 09.03.2015 16:53:49 Corporate Governance Corporate governance 107

PRINCIPLES The following changes occurred in 2014: On 1 Decem- The principles and rules of Straumann’s corporate gov- ber Dr Peter Hackel rejoined Straumann and took ernance are laid down in the Articles of Association 1, over as Chief Financial Officer. He succeeds Thomas the organizational regulations, the code of conduct, Dressendörfer, who stepped down as CFO on 1 Decem- and the charters of the Board Committees. These prin- ber 2014 and as an EMB member on 1 January 2015. ciples and rules are the basis of our corporate gover- Thomas Dressendörfer will continue with Straumann nance disclosures, which comply with the Directive on in an advisory capacity until mid 2015. The Executive Information relating to corporate governance pub- Vice President of Instradent Management & Strategic lished by the SIX Swiss Exchange, where Straumann’s Alliances, Dr Sandro Matter, left Straumann in Decem- shares have been traded since the company’s initial ber 2014. Marco Gadola has taken over his responsibil- public offering in 1998. ities until a successor will be appointed.

In 2014, Straumann adopted several changes to its LEGAL STRUCTURE Articles of Association to reflect the provisions of the LISTED COMPANIES Swiss ordinance against excessive compensation Straumann Holding AG is listed in the main segment (OaEC) (see p. 148 for details). of the Swiss stock exchange. No other company controlled by Straumann Holding AG is listed on a The Articles of Association of Straumann Holding AG stock exchange. do not contain provisions for opting out or opting up. There are no change-of-control clauses included in agreements and schemes benefiting members of the Name Straumann Holding AG Board of Directors or the Executive Management Domicile Peter Merian-Weg 12, 4052 Basel, Switzerland Board or other management staff. Treasury shares 0.4% of total Market capitalization CHF 3.9 billion1 GROUP STRUCTURE Listed on SIX Swiss Exchange Straumann Holding AG is a listed stock corporation Security ID 0 01228 007 incorporated under the laws of Switzerland and domi- ciled and registered in Basel. Information about the ISIN CH 0012 280 076 company’s shares, which are traded on the main seg- Ticker symbol STMN ment of the SIX Swiss Exchange under the symbol 1 On 31 December 2014 STMN, is provided on p. 161 f.

Straumann Holding AG is the ultimate parent com- NON-LISTED GROUP COMPANIES pany of the Straumann Group (referred to collectively The Straumann Group is managed through its Head- as ‘the Group’), which is headquartered in Basel and quarters in Basel. It comprises a total of 35 wholly includes a total of 35 wholly owned subsidiaries (see owned subsidiaries. As laid down in the organizational chart overleaf), and 6 companies in which non-con- regulations, the respective Regional Sales Head, the trolling interests are held (see table on p. 109). CFO and the General Counsel represent Straumann Holding AG on the boards of these subsidiaries. The OPERATIONAL STRUCTURE major subsidiaries of Straumann Holding AG are pre- The Board has delegated the executive management sented on the overleaf and in note 34 to the Financial of the Group to the Chief Executive Officer (CEO) and Statements on p. F66 of the Financial Report. the other members of the Executive Management Board (EMB). Each member of the EMB is appointed Straumann’s premium products and services are and discharged by the Board. On 31 December 2014, sold through Institut Straumann AG, multiple wholly the EMB comprised nine members, including the owned distribution subsidiaries and through third outgoing CFO, under the leadership of the CEO, party distributors (see chart on p. 172 for overview Marco Gadola. of subsidiary and distributor locations).

Straumann_2014_English_1 107 09.03.2015 16:53:49 108 Corporate governance

Principal Group Companies Ownership & share capital

STRAUMANN HOLDING AG Basel, Switzerland CHF 1 567 655

INSTITUT STRAUMANN AG STRAUMANN AB STRAUMANN Basel, Switzerland Mölndal, Sweden MANUFACTURING, INC CHF 100 000 SEK 100 000 Andover, USA USD 1 STRAUMANN ITALIA SRL BIORA AB Milan, Italy Malmö, Sweden STRAUMANN USA, LLC EUR 270 000 SEK 950 152 Andover, USA USD 1 INSTRADENT ITALIA SRL STRAUMANN AS Milan, Italy Oslo, Norway STRAUMANN CANADA LTD EUR 10 000 NOK 1 000 000 Burlington, Canada CAD 100 000 INSTRADENT AG STRAUMANN DANMARK APS Basel, Switzerland Brøndby, Denmark STRAUMANN MEXICO SA DE CV CHF 100 000 DKK 125 000 Mexico DF, Mexico MXN 2 892 615 INSTRADENT USA, INC STRAUMANN OY Andover, USA Helsinki, Finland MANOHAY ARGENTINA SA USD 1 EUR 32 000 Buenos Aires, Argentina ARS 100 000 STRAUMANN VILLERET SA STRAUMANN SARL Villeret, Switzerland Marne-la-Vallée, France STRAUMANN BRASIL LTDA CHF 9 000 000 EUR 192 000 São Paulo, Brazil BRL 3 405 612 STRAUMANN HOLDING MANOHAY DENTAL SA DEUTSCHLAND GMBH Madrid, Spain STRAUMANN SINGAPORE PTE LTD Freiburg, Germany EUR 60 101 Singapore, Singapore EUR 25 000 SGD 1 INSTRADENT IBERIA SL STRAUMANN GMBH STRAUMANN PTY LTD Madrid, Spain Freiburg, Germany Victoria, Australia EUR 3 000 EUR 200 000 AUD 100 STRAUMANN LTD INSTRADENT Crawley, UK STRAUMANN JAPAN KK DEUTSCHLAND GMBH Tokyo, Japan Hügelsheim, Germany GBP 300 000 JPY 10 000 000 EUR 25 000 STRAUMANN BV Ijsselstein, Netherlands STRAUMANN DENTAL KOREA INC ETKON GMBH Seoul, Republic of Korea Gräfelfing, Germany EUR 18 151 KRW 2 300 000 000 EUR 326 000 STRAUMANN SA/NV Zaventem, Belgium STRAUMANN (BEIJING) MEDICAL STRAUMANN GMBH DEVICE TRADING CO LTD EUR 2 081 620 Vienna, Austria Beijing, China EUR 40 000 RMB 40 000 000

STRAUMANN SRO STRAUMANN DENTAL INDIA Prague, Czech Republic PVT LTD CZK 200 000 Gurgaon, India INR 6 000 000 At 31 December 2014 Values indicate share capital in each case

Straumann_2014_English_1 108 09.03.2015 16:53:49 Corporate governance Corporate governance 109

To complement its premium business, Straumann a share purchase option could provide the Group with has established an international business platform of a majority stake in MegaGen by 2016. ‘value’ brand companies (see p. 27 for details on Strau- mann’s investments). The platform operates under the In the second quarter, Straumann obtained a condi- name Instradent. By year end, Instradent had estab- tional call option to acquire shares of botiss medical lished entities in the US, Germany, Italy, and Spain. AG which, if exercised, could lead to a stake in the Ger- man company of up to 30% in 2017. On 31 December 2014, Straumann Holding AG directly or indirectly held 100% of the capital and voting rights In the third quarter, Straumann acquired a 12% stake in all consolidated Group companies. In addition, in RODO Medical, Inc. a California-based, privately- Straumann Holding AG directly or indirectly held capi- held developer of dental prosthetic fixture devices. In tal rights in the companies listed in the table below. the fourth quarter, Instradent AG entered an agreement to acquire approximately 43% of T-plus Implant PARTICIPATIONS IN OTHER COMPANIES Tech. Co. Ltd., a leading dental implant company in With the aim of gaining leads to attractive technology/ Taiwan, in Spring 2015. Instradent has an option to business opportunities in Asia, the Group participated increase its holdings to 90% by 2020. in a fund, managed by DM Capital, which is devoted solely to investments in dental-related opportunities in At 31 December 2014, Straumann held 30% of Creat- public and private companies in China. ech Medical in Spain, a specialist in quality CADCAM prosthetics, 44% of Dental Wings Inc., a specialist in In the first quarter, the Group invested in convertible dental software and 3-D scanners for dental applica- bonds in Biodenta Corporation, a provider of compre- tions in Canada, 49% of JJGC Indústria e Comércio de hensive solutions for dentists and dental laboratories, Materiais Dentários S.A (Neodent), the leading dental focused on emerging markets with operations in Tai- implant company in Brazil, and 51% of Medentika wan and Switzerland, and in MegaGen Implant Co. GmbH and Medentika Implant GmbH, providers of Ltd, one of Korea’s fastest-growing dental implant dental implants and prosthetics in Germany. All of companies with activities in key global markets. these are non-controlling stakes. The investment in Biodenta – if converted – could provide Straumann with a stake of approximately 12% The Straumann Group has no other significant share- until 2019. The investment in MegaGen together with holdings of more than 10%.

STRAUMANN’S PARTICIPATION AND REPRESENTATION IN OTHER COMPANIES

Non-consolidated company Location Activities Capital rights Straumann held representation Createch Medical SL Mendaro CADCAM prosthetics for 30% 1 Board seat (Spain) multiple implant systems (Guillaume Daniellot)

Dental Wings Inc Montreal Dental prosthetics design 44% 2 Board seats (Canada) (CAD), software and scanners (Marco Gadola, Frank Hemm)

JJGC Indústria e Comércio de Curitiba Design, development, and 49% 2 Board seats Materiais Dentários S.A. (Brazil) manufacture of dental implants and (Marco Gadola, Peter Hackel) (Neodent) related prosthetic components Medentika GmbH Hügelsheim Implant prosthetics & 51% At general meeting, but not Medentika Implant GmbH (Germany) dental implants controlling interest

Open Digital Dentistry AG Zug Dental prosthetics design, 44% n/a (in liquidation; assets and activi- (Switzerland) software marketing ties transferred to Dental Wings) RODO Medical, Inc. San Jose Prosthetics 12% 1 Board seat (USA) (Andy Molnar)

Straumann_2014_English_1 109 09.03.2015 16:53:50 110 Corporate governance

SHAREHOLDINGS ON 31 DECEMBER 2014 SHAREHOLDINGS ON 31 DECEMBER 2014 (BY SEGMENT) (BY GEOGRAPHY)

¢ Major shareholders ¢ Switzerland (private) ¢ Asia ¢ Major shareholder 21.8% ¢ Europe 21.8% (institutional) 37.3% ¢ USA 53.2% ¢ Institutional ¢ Rest of the World shareholders ¢ Non-registered & ¢ Private individuals undisclosed 0.1% ¢ Non-registered & 2.2% undisclosed 8.3% 9.1%

10.5% 13.6% 22.1%

CROSS SHAREHOLDINGS LIMITATIONS ON THE TRANSFERABILITY OF Straumann does not have, and has not entered into, SHARES AND NOMINEE REGISTRATIONS any cross-shareholdings with other companies relat- Purchasers of shares are entered in the share register ing to equity or voting rights. as shareholders with voting rights if they expressly declare that they have acquired the registered shares SHARE CAPITAL AND OTHER FINANCIAL in their own name and for their own account. If a INSTRUMENTS purchaser is not willing to make such a declaration, There have been no changes in Straumann’s share cap- he/she is registered as a shareholder without voting ital in the past three years. On 31 December 2014, the rights. Proof of acquisition of title in the shares is a share capital was composed of 15 676 549 registered prerequisite for entry in the share register. shares – fully paid in, each with a nominal value of CHF 0.10 – and conditional capital of CHF 32 345.10, Straumann has no other categories of shares than reg- divided into 323 451 registered shares with a nominal istered shares. There are no restrictions on the trans- value of CHF 0.10. Straumann Holding AG did not have ferability of Straumann Holding’s shares. any authorized share capital. Nominees approved by the Board of Directors are The conditional share capital was approved for an recorded in the share register as shareholders with unlimited period at an extraordinary General Meet- voting rights. Nominees who have not been approved ing in 1998 for use in equity participation plans for by the Board of Directors may be refused recognition employees and management (see Compensation as shareholders if they do not disclose the beneficiary. Report for details). In such cases, the nominees will be recorded in the share register as shareholders without voting rights. Straumann has not issued any financial instruments At 31 December 2014, no nominee had applied/asked (participation certificates, dividend-right certificates, for registration and voting rights. warrants, options or other securities granting rights to Straumann shares) other than the options/warrants SHAREHOLDERS and Performance Share Units granted to certain SIGNIFICANT SHAREHOLDERS employees as a component of compensation (see In 2014, Straumann was notified of three transactions Compensation Report 138 ff.) and the CHF-200-million according to Art. 20 SESTA: domestic straight bond launched in 2013 and due on – In May, Parvus Asset Management (UK) LLP, an inde- 30 April 2020. pendent investment management firm based in

Straumann_2014_English_1 110 09.03.2015 16:53:50 Corporate governance Corporate governance 111

London, United Kingdom, reported a sale of shares General Meeting and must set forth the agenda items that caused its shareholding to fall below 10%. and the proposals of the shareholder(s). – In July, Sprucegrove Investment Management (based in Toronto, Canada) reported the sale of shares that REGISTRATIONS IN THE SHARE REGISTER reduced its holding to less than 3%. Sprucegrove is There are no statutory rules concerning deadlines for therefore no longer reported as a significant share- entry in the share register. However, for organizational holder of Straumann. reasons, the share register will be closed several days – In December, Parvus reported an internal restructur- before the General Meeting. For the 2015 General ing which resulted in Parvus Asset Management (UK) Meeting, new entries in the share register cannot be LLP transferring its entire investment management made after 30 March 2015. Shareholders who sell their business – including its stake in Straumann – to Par- shares prior to the General Meeting are no longer enti- vus Asset Management Europe Limited. tled to vote.

Details of the transactions are published on the SIX Straumann’s share register, in which the owners Swiss Exchange online reporting platform 2. and usufructuaries of registered shares, including names and addresses, are recorded, is maintained On 31 December 2014, the major shareholders were and administered on behalf of the Company by as listed in the table overleaf. Nimbus AG 3.

SHAREHOLDERS’ PARTICIPATION Only persons recorded in the share register as share- CONVOCATION OF GENERAL MEETINGS, holders or usufructuaries are acknowledged as such AGENDA PROPOSALS by the Company. The transfer of registered shares The Shareholders’ General Meeting is convened by the requires the authorization of the Board of Directors, Board of Directors within six months of the end of the which delegated this power to Nimbus AG. Authoriza- business year. In 2015, the Shareholders’ General tions will be granted after the purchaser has provided Meeting will take place on 10 April at the Basel Con- their name, nationality, and address and declared that gress Center. Shareholders individually or jointly rep- the shares were acquired in its own name and for its resenting at least 10% of the share capital may own account. Persons who have voting rights but no request an extraordinary General Meeting. The re- title to shares as a consequence of legal provisions (e.g. quest must be made to the Board of Directors in writ- legal representatives of minors) will be referenced in ing, stating the agenda items and motions. the share register upon request.

Invitations to the General Meeting are issued in writ- Registered shareholders must inform the company of ing and are delivered via ordinary mail to the address any change of address. If they fail to do so, all notices recorded in the share register at least 20 days before will be deemed to be legally valid if sent to the address the date of the General Meeting and are published on recorded in the share register. The Company may, after the company’s website (www.straumann.com). If hearing the parties concerned, delete entries in the shareholders agree to electronic delivery of notices, register if these are based on false information. the invitation will also be sent by e-mail. VOTING RIGHTS AND REPRESENTATION All agenda items and proposals by the Board of Direc- RESTRICTIONS tors and by shareholders who have requested the Each share duly entered in Straumann’s share register General Meeting must be announced in the notice as being held in the shareholder’s own name and for convening the General Meeting. the shareholder’s own account entitles the shareholder to one vote. On 31 December 2014, 78.2% of Shareholders who individually or jointly represent the issued capital was registered in the share register. shares with a par value of at least CHF 15 000 may All shares have the same entitlements to dividends. request that an item be included in the agenda. The There are no preferential rights granted to any share- request shall be in writing at least 45 days before the holders or shares.

Straumann_2014_English_1 111 09.03.2015 16:53:51 112 Corporate governance

NUMBER OF SHAREHOLDERS SHARES 31 Dec 2014 31 Dec 2013 1 – 100 5097 5756 101 – 1000 2428 2946 1 001 – 10 000 238 238 10 001 – 100 000 55 44 100 001 – 1 000 000 7 8 1 000 001 and more 3 3 TOTAL 7828 8995

SHAREHOLDERS BY CATEGORY (in %) 31 Dec 2014 31 Dec 2013

Major private shareholders 37.3 37.6 Major institutional shareholders 22.1 28.9 Other institutional shareholders 10.5 16.8 Private individuals 8.3 9.5 Non-registered and undisclosed shareholders 21.8 7.2

MAJOR SHAREHOLDERS (in %) 31 Dec 20141 31 Dec 2013

Dr h.c. Thomas Straumann (Vice Chairman of the Board) 17.3 17.3 GIC Private Ltd 13.6 13.7 Dr h.c. Rudolf Maag 12.2 12.2 Parvus Asset Management Europe Ltd2 8.5 10.8 Simone Maag de Moura Cunha 4.4 4.7 Gabriella Straumann 3.3 3.4 Sprucegrove Investment Management2,3 n/a 4.4 TOTAL 59.3 66.5

1 Or at last reported date if shareholdings are not registered in the share register 2 Not registered in Straumann’s share register 3 Dropped below the 3% threshold in July 2014

CAPITAL STRUCTURE (in CHF 1 000) 31 Dec 2014 31 Dec 2013

Equity 736 836 631 380 Reserves (122 132) (126 314) Retained earnings 857 400 756 126 Ordinary share capital 1 568 1 568 (fully paid in) (fully paid in)

Conditional share capital 32 32 Authorized share capital 0 0 Number of registered shares 15 676 549 15 676 549 Nominal value per share (in CHF) 0.10 0.10 Registration restrictions None None Voting restrictions or privileges None None Opting-out, opting-up None None

Straumann_2014_English_1 112 09.03.2015 16:53:51 Corporate governance Corporate governance 113

All shareholders may be represented at the General Swiss ordinance against excessive compensation Meeting by a proxy. Proxies and directives issued to (OaEC), which came into effect on 1 January 2014. The the independent voting representative may either be Directors were discharged for their activities in 2013 given in writing or online via the Nimbus Shareholder and those running for re-election were re-elected as Application ShApp (https://shapp.ch). Other voting Board members for a further one-year term. Gilbert representatives must have a proxy signed by hand by Achermann was elected as Chairman and Ulrich the shareholder. Looser, Dr Beat Lüthi and Stefan Meister to the Com- pensation Committee, all for a term of one year. The independent voting representative is elected by Neovius Schlager & Partner in Basel was appointed for the General Meeting for a term of office until the end a term of one year as the independent voting repre- of the next annual general meeting. The independent sentative and Ernst & Young AG as auditors. voting representative may be re-elected. In case of vacancy, the Board of Directors shall designate one for The total compensation of the Board of Directors for the next General Meeting. the next term of office, and the fixed compensation of the EMB from 1 April 2014 to 31 March 2015 as well as QUORUMS their variable long-term compensation components The General Meeting adopts its resolutions and holds for the current business year were approved by the its ballots by a majority of votes cast. Abstentions and annual general meeting for the first time. invalid ballots are not taken into account. The legal provisions (in particular section 704 of the Swiss Code The agenda, the minutes (including the voting results) of Obligations) that stipulate a different majority are and a media release summary of the meeting are pub- reserved. Votes on resolutions and elections are held lished in the Investor Relations section of the compa- electronically. In case of technical difficulties, the ny’s website 4. chairman may order an open or written ballot. Like- wise, the chairman may repeat a ballot if he considers BOARD OF DIRECTORS that the outcome is doubtful. In such a case, the pre- The members of the Board of Directors, the Chairman ceding ballot is not considered. The General Meeting of the Board and the members of the Compensation may only approve the annual financial statements and Committee (which shall at least be 3) are all elected resolve on the appropriation of the balance sheet individually by the Shareholders’ General Meeting for profit if the Auditors’ report is available and the a term of one year. Re-election is permitted until the Auditors are present. The presence of the Auditors age of 70. can be dispensed of by unanimous resolution of all shares represented. If the position of Chairman of the Board or a position in the Compensation Committee falls vacant, the 2014 GENERAL MEETING Board of Directors appoints a replacement from The 2014 annual general meeting took place on 11 among its own members for the remaining term of April 2014, and was attended by 366 shareholders, office. who, together with proxies, represented 79.7% of the total share capital. For the first time, the shareholders At the Shareholder’s General Meeting in April 2014, were able to provide voting instructions online to the all of the Directors standing for re-election – Gilbert independent proxy. Achermann, Dr h.c. Thomas Straumann, Dr Sebastian Burckhardt, Roland Hess, Ulrich Looser, Dr Beat Lüthi The meeting approved the annual report, financial and Stefan Meister – were re-elected for a further statements and consolidated financial statements for one-year term. Having served on the Board since the 2013 business year and gave consent to the 2013 2001, Dominik Ellenrieder decided not to stand for re- compensation report in a consultative vote. It further election. Gilbert Achermann was elected as Chairman approved the appropriation of the available earnings of the Board and Stefan Meister, Beat Lühti and Ulrich in 2013 and the revision of the Company’s Articles of Looser were elected as members of the Compensa- Association to account for changes required by the tion Committee. The Board appointed Dr h.c. Thomas

Straumann_2014_English_1 113 09.03.2015 16:53:51 114 Corporate governance

Straumann as its Vice Chairman and Roland Hess, – Mandates in associations, organizations, and legal Sebastian Burckhardt and Ulrich Looser as members of entities with a public or charitable purpose, and in the Audit Committee. foundations, trusts, and employee pension funds, provided that no member of the Board of Directors The Board of Directors of Straumann Holding AG com- may perform more than ten such mandates. prised seven non-executive members. No Director has been a member of the company’s Executive Manage- Mandates in several legal entities under common con- ment during the past three years except for Gilbert trol or under the same economic authority shall be Achermann, who took over the additional role of CEO deemed one mandate. for an interim period of four months in 2013. OPERATING PRINCIPLES OF THE BOARD The Directors are all Swiss citizens. The average age of OF DIRECTORS the Members of the Board at year-end was close to 55. The Board of Directors meets for one-day meetings at least four times a year and as often as business re- BUSINESS CONNECTIONS AND quires. In 2014, the Board held six meetings and one POLITICAL/OFFICIAL FUNCTIONS telephone conference. None of the Directors had any significant business connections with Straumann Holding AG or any of Members of the EMB generally participate in Board its subsidiaries in 2014. meetings. Dr Andreas Meier, General Counsel of the Group, acts as a Secretary to the Board of Directors. Unless stated in the individual CVs (see p. 116 f. & 121 ff.), none of the Directors: The Board of Directors consults external experts – Performed any activities in governing or supervi- where necessary when discussing specific topics. sory bodies of significant foreign or domestic organizations, institutions or foundations under private The Board of Directors is responsible for the strategic or public law; management of the company, the supervision of the – Held any permanent management or consultancy EMB and the financial control. It reviews the compa- position for significant domestic or foreign interest ny’s objectives and identifies opportunities and risks. groups; In addition, it decides on the appointment and/or dis- –Held any official function or political post. missal of members of the EMB. The Board of Directors also provides a mentoring service to the Executive PERMITTED MANDATES OUTSIDE STRAUMANN Management. This aims to provide executives with an (PURSUENT TO ART. 12 OAEC) experienced sparring partner/coach and a sounding Art. 4.4 of Straumann’s Articles of Association states board for testing ideas and seeking qualified indepen- that no member of the Board of Directors may per- dent opinions. form more than 15 additional mandates (i.e. mandates in the highest-level governing body of a legal The Board of Directors has the following specific tasks entity required to be registered in the Commercial and duties: Register or in a corresponding foreign register) in – To approve the Group’s vision, mission, values and commercial enterprises, of which no more than five strategy may be in listed companies. – To determine the principal organization and processes of the Group The following are exempt from the foregoing restric- – To approve the strategic plan, the financial medium- tions: term plan and the annual budget of the Group – Mandates in enterprises that are controlled by the – To approve the semi-annual financial statements Company; – To approve the annual report, the compensation re- – Mandates in enterprises that are performed at the port and the annual financial statements and submit instruction of the Company; and these to the annual general meeting

Straumann_2014_English_1 114 09.03.2015 16:53:52 Corporate governance Corporate governance 115

Board of Directors

GILBERT ACHERMANN CHAIRMAN Swiss, 1964 Board member since 2009

DR H.C. THOMAS STRAUMANN VICE CHAIRMAN Swiss, 1963 Board member since 1990

COMPENSATION AUDIT COMMITTEE COMMITTEE

DR SEBASTIAN BURCKHARDT Swiss, 1954 Board member since 2002

ROLAND HESS Swiss, 1951 Chair Board member since 2010

ULRICH LOOSER Swiss, 1957 Board member since 2010

DR BEAT LÜTHI Swiss, 1962 Board member since 2010

STEFAN MEISTER Swiss, 1965 Chair Board member since 2010

Straumann_2014_English_1 115 09.03.2015 16:53:52 116 Corporate governance

STRAUMANN BOARD OF DIRECTORS – MATERIAL MEMBERSHIPS IN OTHER BOARDS

Member Commercial enterprise Charity/other Location Function

Gilbert Achermann Julius Bär Gruppe AG/ CH Board member Bank Julius Bär & Co. AG Siegfried Holding AG (until April 2014) CH Chairman Vitra Holding AG/Vitrashop Holding AG CH Chairman & and group companies Co-CEO International Team CH Board member for Implantology Thomas Straumann Centervision AG CH Chairman CSI-BHE AG CH Chairman Grand Hotel Les Trois Rois CH Board member Medartis Holding AG and CH Chairman Medartis group companies International Bone Research CH Board member Association Sebastian Burckhardt Amsler Tex AG CH Board member Applied Chemicals International AG and CH Board member ACI Group companies Dolder AG CH Chairman Foot Locker Switzerland Ltd. CH Board member Le Grand Bellevue SA CH Board member Immobiliengesellschaft zum Rheinfels AG CH Chairman persona service AG and persona CH Board member service group companies Qgel SA CH Board member Fondation Bénina CH Member, Board of trustees Gehörlosen- und Sprachheilschule CH Vice Chairman, Riehen / GSR Wieland Stiftung / Board of trustees Stiftung Autismuszentrum Misrock-Stiftung CH Member of the Board of trustees Roland Hess Societe Civile Immobilière Solivie F Board member

Straumann_2014_English_1 116 09.03.2015 16:53:52 Corporate governance Corporate governance 117

Member Commercial enterprise Charity/other Location Function

Ulrich Looser Bachofen Holding AG CH Chairman BLR & Partners AG and BLR CH Board member group companies Econis AG CH Chairman Kardex AG CH Board member Spross Entsorgungs Holding AG CH Board member and Spross group companies Stellba AG CH Board member Economiesuisse CH Board member Schweizerische Studienstiftung CH Board member Swiss American Chamber of Com- CH Chapter Chairman merce: ‘Doing Business in the US’ Swiss National Fund CH Member, Board of trustees University Hospital Balgrist, Zürich CH Member, Board of trustees University of Zürich CH Board member Beat Lüthi APACO AG CH Board member CTC Analytics AG CH CEO & Board member INFICON Holding AG CH Chairman American Chamber of Commerce CH Panel member Industrieverband Laufen- CH Board member Thierstein-Dorneck-Birseck Stiftung Behindertenwerk CH Member, St. Jakob Board of trustees Stefan Meister Ares Allergy Holdings Inc USA Board member Campus Biotech Sarl CH Board member Esaote SpA I Board member Euromedic International Group BV NL Supervisory director Northill Capital Holdings Limited GBJ Chairman Stallergenes SA F Board member Waypoint Group Holdings Limited GBJ Board member American Chamber of Commerce CH Panel member Center for Leadership & Values on CH Council member Society, University of St. Gallen

Straumann_2014_English_1 117 09.03.2015 16:53:53 118 Corporate governance

– To prepare and approve the agenda of the annual remaining term of office. The members of the Audit general meeting and to implement its resolutions Committee are appointed by the Board of Directors. – To appoint and dismiss the CEO and the members of Both Committees constitute themselves and appoint the EMB their chairman from among their members. – To decide on the proposal of the Compensation Committee regarding the compensation payable to The Board of Directors may establish further commit- its Board members, the CEO and the EMB tees or appoint individual members for specific tasks. – To supervise the EMB and approve important transactions. AUDIT COMMITTEE Members: Roland Hess (Chair), Sebastian Burckhardt The Board of Directors has a quorum if a majority of and Ulrich Looser members is present. Valid resolutions require a majority of the votes cast. In the event of a tie, the chairman The Committee’s main tasks are to: of the meeting has the decisive vote. – Assess the management of financial and other risks and the compliance with risk-related procedures and COMMITTEES OF THE BOARD OF DIRECTORS other relevant standards, The Board of Directors has an Audit Committee and a – Oversee the performance of the external auditors, Compensation Committee, each consisting of not assess the fees paid, and assure their independence, fewer than three Board members with relevant back- – Oversee the activities of the internal audit function, ground and experience. The Strategy Committee was – Review and discuss the financial statements with the dissolved in April 2014 and its duties were transferred CFO and with the external auditors and approve the either to the Audit Committee or to the full Board. quarterly statements for the first and third quarter of each financial year, As of 2014, the members of the Compensation Com- – Review and assess processes and assumptions used mittee are elected by the General Meeting for a term for the financial planning and forecasts cycles, and of one year. In the event of a vacancy in the Compen- – Review the funding, investing and management of sation Committee, the Board of Directors appoints the liquid assets and propose profit distribution to the replacement from among its own members for the Board of Directors.

TIME (DAYS) SPENT BY DIRECTORS AT BOARD/COMMITTEE MEETINGS AND ON COMPANY RELATED MATTERS

2014 MEETINGS Achermann Straumann Hess Looser Lüthi Meister Burckhardt Ellenrieder1

Board2 7 7 6 7 7 6 7 1

Audit Committee 5 - 5 4 - - 5 1 Compensation 6 - - 6 6 6 - - Committee2

Strategy 1 1 1 1 - - - 1 Committee3

Other 4 61 41 17 8 9 9 17 n/a TOTAL DAYS 2014 80 49 29 26 22 21 29 3

1 Board member until 2014 AGM 2 incl. 1 telephone conference 3 Dissolved as of April 2014 4 Meeting preparation & follow-up/conference calls/minutes/bilateral meetings, product training, etc.

Straumann_2014_English_1 118 09.03.2015 16:53:53 Corporate governance Corporate governance 119

COMPENSATION COMMITTEE Customer Marketing, Marketing Communication, Train- Members: Stefan Meister (Chair), Ulrich Looser, ing and Education Management. The Head of Instra- Dr Beat Lüthi dent Management is responsible for the management and the international expansion of Straumann’s value The Committee’s main tasks are to: brand platform. The Head of Research, Development – Prepare the compensation report and submit it to the & Operations is responsible for Corporate Logistics, Board of Directors for approval and submission to the Corporate Quality Management & Regulatory Affairs, annual general meeting, Direct Spend Management, Digital R & D Services, – Review the compensation principles for any compen- Global Operations, Group Research & Development sation paid to the Board of Directors, the CEO and Operations-related Business Excellence, and Group the EMB and submit them to the Board of Directors Technical Services. for approval, – Prepare proposals concerning the compensation of The Board of Directors has not delegated any man- the Board of Directors, the CEO and the EMB and sub- agement tasks to companies or persons outside mit them to the Board of Directors for approval and the Group. submission to the annual general meeting, – Establish the targets and target amounts of the INFORMATION AND CONTROL MECHANISMS short- and long-term performance-based compensa- FOR THE BOARD OF DIRECTORS AND THE tion components and determine the amount payable EXECUTIVE MANAGEMENT under the scheme, MANAGEMENT INFORMATION SYSTEM – Discuss the CEO’s proposals for appointments to the The Group’s Management Information System encom- EMB with the CEO and submit them to the Board of passes management, business and financial reporting. Directors for approval, The information is provided to the Executive Man- – Assess candidates for the CEO role and submit a pro- agement Board once a month and to the Board of posal to the Board of Directors for approval, Directors as a monthly summary and in detail on a – Prepare agreements concerning payments to a new quarterly basis. CEO or EMB member according to Article 4.3 – Arti- cles of Association and submit them to the Board of Straumann has built up a state-of-the-art SAP enter- Directors for approval, and prise resource planning system, which now covers 97% – Review the composition of the Board of Directors and of all business transactions of the Group’s fully consol- make proposals in view of a regular ongoing renewal idated entities. The system links all major subsidiary of the Board of Directors, taking into consideration companies and production sites directly with Group the representation of major shareholders, balanced headquarters. This greatly reduces the potential for skills, experience and diversity. error or fraud, and it enables the Executive and Senior Management to monitor local processes and related ASSIGNMENT OF RESPONSIBILITIES TO THE figures directly, in detail and in real time. EXECUTIVE MANAGEMENT BOARD The Board of Directors has delegated responsibility for INTERNAL CONTROL SYSTEM (ICS) the operational management and sustainable devel- The Group’s Internal Control System is a key instru- opment of the company to the CEO and the EMB. The ment for designing business processes, measuring CEO is responsible for the overall management of the progress towards financial goals and addressing Straumann Group and its operations. The CFO is re- potential financial issues before they occur. It also sup- sponsible for finance and information technology. The ports the design of business processes in order to Heads of the Sales regions are responsible for the achieve the desired level of control in terms of effi- sales, local marketing activities and performance ciency and effectiveness. of the various country organizations as well as third party distributors, if any, in their respective The company’s approach is to ensure that internal con- regions. The Head of Customer Solutions & Educa- trols are accurate, timely, robust, and receive appro- tion is responsible for Product Management, priate management attention in each respect.

Straumann_2014_English_1 119 09.03.2015 16:53:53 ROLAND HESS DR BEAT LÜTHI ULRICH LOOSER STEFAN MEISTER

Straumann_2014_English_1 120 09.03.2015 16:54:00 121 121

Board of Directors

(From left to right)

ROLAND HESS From 2008 until 2012, Roland Hess served as senior advisor to the Executive Committee of the Board of Schindler Holding AG, Ebikon, and held positions on several Boards of Directors for companies within the Schindler Group. He joined Schindler in 1984 and rose through positions of increasing responsibility in controlling, finance and regional management to become President of the Elevator and Escalator Division. From 1971 to 1984, he worked for Nestlé, initially in accounting, then as an international auditor, and finally as Chief Financial Officer of a Group company.

His career includes several years in North and Latin America, in addition to assignments in Europe. He holds a degree in business administration from Lucerne Business School and studied at Har- vard Business School near Boston.

Roland Hess has been a member of the Board of Directors of Straumann since 2010.

He has a long and distinguished track record in larger companies in more mature industries, combined with in-depth regional and functional experience. In addition, he complements the Board with expertise in compliance, risk management and standardized global procedures.

DR BEAT LÜTHI Beat Lüthi is CEO and co-owner of CTC Analytics AG, Zwingen, a globally active medium-sized Swiss company in the field of chro- matography automation. After obtaining his PhD in Engineering from the Swiss Federal Institute of Technology (ETH), Zurich, he began his career with Zellweger Uster AG, a leading manufacturer of quality control equipment in textile production. In 1990, he moved to Mettler-Toledo International Inc and rose to the position of General Manager of the Swiss affiliate. In 1994, he completed an executive program at INSEAD and subsequently joined the Feintool Group in 1998. During his four-year tenure as CEO, the company went public and doubled in size. In 2003, he returned to Mettler-Toledo as CEO of the Laboratory Division. At the end of

Straumann_2014_English_1 121 09.03.2015 16:54:03 122

2007, he joined CTC Analytics to lead and further develop the company as an entrepreneur.

Beat Lüthi has been a member of the Board of Directors of Strau- mann since 2010.

Beat Lüthi combines entrepreneurship and corporate experience in different industries, which make him a valuable contributor to strategic and operational matters. His scientific background together with his experience as a CEO and Board member in various industrial businesses are of further benefit to the Strau- mann Board.

ULRICH LOOSER Ulrich Looser is a partner of BLR & Partners AG. From 2001 to 2009, he was with Accenture Ltd, where he became Chairman of its Swiss affiliate (2005) and Managing Director of the Products Business in Austria, Switzerland and Germany. Earlier, he spent six years as a partner at McKinsey & Company Ltd. Mr Looser graduated in physics at the Swiss Federal Institute of Technology (ETH), Zurich, and in economics at the University of St. Gallen.

Ulrich Looser has been a member of the Board of Directors of Straumann since 2010.

His expertise in strategy, project and human capital management is of great value to the Straumann Board. He also adds in-depth consultancy and business development experience.

STEFAN MEISTER Stefan Meister holds a degree in economics from Basel University. He started his career at Sandoz Pharma in 1991. From 1995 to 2009, he worked for Celesio AG, a leading pharmaceutical distribution and services company. From 1999, he was a member of the Celesio Management Board, where his responsibilities included finance and controlling, IT, human resources, and the pharmacy business. In 2010, he joined the Management Board of Franz Han- iel & Cie GmbH, a family-owned, international group of companies holding – amongst others – a major stake in Metro AG and a majority stake in Celesio. At Haniel, he was responsible for the operating businesses CWS-boco and ELG as well as Group Finance, IT and Corporate Responsibility.

In September 2011, he took office as a member of the Board and Group Chief Operating Officer of Waypoint Capital in Geneva, the holding company for the Bertarelli Family Investments. With his thorough understanding of portfolio businesses and macro-level

Straumann_2014_English_1 122 09.03.2015 16:54:03 123

strategic leadership, he assumes operating leadership and drives the strategic development of the Bertarelli Family Investments in close cooperation with the Board and its Chairman.

Stefan Meister has been a member of the Board of Directors of Straumann since 2010.

He complements the Board with in-depth knowledge in the Life Sciences sector and from industries with comparable business models/challenges to those of Straumann. He also has a wealth of experience in corporate governance, mergers and acquisitions, finance and human resources management.

DR SEBASTIAN BURCKHARDT Sebastian Burckhardt began his studies in the fields of economics and law and obtained his doctorate law degree at the University of Basel. He is a lawyer admitted to the Bar of Switzerland and a civil law notary in Basel. He was admitted to the New York Bar following studies at New York University School of Law. He is a partner at the Vischer AG law firm in Basel.

Sebastian Burckhardt has been a member of the Board of Direc- tors of Straumann since 2002.

Straumann’s Board of Directors benefits from Dr Burckhardt’s expertise as an independent lawyer. He is a specialist in corporate and commercial law and in mergers, acquisitions, joint ventures, licensing, distribution and technology agreements. His knowledge extends well beyond legal matters and includes many years’ experience on corporate boards.

DR H.C. THOMAS STRAUMANN Thomas Straumann’s skills in precision engineering were complemented by his studies at the Basel Management School and the Management and Commercial School of Baselland. In 1990, he was responsible for restructuring Institut Straumann AG and was CEO and Chairman of the Board of Directors until 1994. He was Chairman of the Board of Straumann Holding AG until 2002. In 2004, he was awarded an honorary doctorate by the University of Basel, Switzerland.

Thomas Straumann has been a Member of the Board of Directors of Straumann since 1990.

Thomas Straumann is the principal shareholder of Straumann Holding AG. He complements the Board with his understanding of the dental and medical device industries through personal

Straumann_2014_English_1 123 09.03.2015 16:54:03 124

management experience and various shareholdings. Having built up several companies, in which he is still involved, he is a true entrepreneur and has a diverse portfolio of interests, including not-for-profit activities.

GILBERT ACHERMANN Gilbert Achermann has been a Member of the Board of Directors at Straumann since 2009 and was appointed Chairman in 2010. He joined Straumann in 1998 as Chief Financial Officer and was Chief Executive Officer from 2002 until 2010. Formerly, he served for more than ten years at UBS, where he worked in Corporate Finance in different locations. Gilbert Achermann holds an executive masters’ degree from IMD in Lausanne and a bachelor’s degree from the HWV business school in St. Gallen.

Gilbert Achermann has been a main contributor to the Company’s past success. He stands for continuity, stability and credibility among the various stakeholders. The Board benefits from his extensive knowledge of the industry, his broad functional, regional and managerial expertise, and the experience he gains from directorships in other industries.

Straumann_2014_English_1 124 09.03.2015 16:54:08 125

DR SEBASTIAN BURCKHARDT DR H.C. THOMAS STRAUMANN GILBERT ACHERMANN

Straumann_2014_English_1 125 09.03.2015 16:54:15 126 Corporate governance

To achieve this, dedicated control templates are used supervision of risk management and uses the Internal for each business process to address major risks. The Audit function to this end. The Board has delegated templates are continuously improved and are being the task of risk management to the Chief Risk Officer extended to include supporting process flows. (CRO), who is also the CFO. Through its Audit Commit- tee, the Board assesses and discusses risks on a regular In addition, each entity (sales affiliate, production site basis in consultation with the CRO and/or the relevant or global function) has a designated, trained person or members of senior management (see ‘Risk Manage- team that is ultimately accountable for the assessment’ on p.79 ff.). ment undertaken and the decisions arising from it. Clear benefits of the Internal Control System include EXECUTIVE MANAGEMENT BOARD enhanced segregation of duties, increased control con- The CEO and, under his direction, the other EMB sciousness and higher awareness of potential risks and members are responsible for the Group’s overall busi- their consequences. ness and affairs, and day-to-day management. The EMB is also responsible for implementation of strate- The ICS program is coordinated by Corporate Internal gic deci-sions and stakeholder management. The CEO Audit, which meets with the external auditors on a reports to the Board regularly, and whenever extraor- regular basis to discuss the status of internal control dinary circumstances so require, in the course of the issues and the status of remediation of control defi- Group’s business. For changes in the EMB in 2014 ciencies. Internal controls are evaluated annually by please see p. 107. the external auditors and by Internal Audit according to an agreed program. SUPERVISORY/CONSULTING/POLITICAL FUNCTIONS INTERNAL AUDIT In addition to the board memberships and representa- Corporate Internal Audit at Straumann is an ‘indepen- tions mentioned in the biographies (see p. 131 ff.), dent’ and ‘objective’ assurance and consulting body, Marco Gadola is a member of the Board of Directors reporting directly to the CFO and to the Audit Commit- and Board of trustees of the independent academic tee of the Board of Directors. network International Team for Implantology (ITI). Under a collaboration agreement, Straumann sup- The main task of Corporate Internal Audit is to evalu- ports the ITI with payments (see note 28 of the ate the effectiveness of the Group’s governance and Audited Consolidated Financial Statements on p. 54 f. risk management processes, to review and assess for details of payments in 2014). Alexander Ochsner is internal controls, to monitor compliance with external an advisor of the Essence & DM Dental Industry and internal policies and procedures, and to ensure the Investment Partnership, a private-equity fund ad- economical and efficient use of the company’s dressing the dental sector in China. resources. In this role, Corporate Internal Audit promotes the exchange of best practices within the Other than these, no member of the EMB: Straumann Group, proposes improvements, and moni- – performed any activities in governing or supervisory tors their implementation. In addition, Corporate bodies of significant foreign or domestic organiza- Internal Audit pursues the development of the Group’s tions, institutions or foundations under private or Internal Control System, which was established public law, in 2008. – held any permanent management or consultancy function for significant domestic or foreign interest In 2014, Corporate Internal Audit performed eight groups, audits at global and local levels, according to the audit –held any official function or political post. program approved by the Audit Committee of the Board of Directors. PERMITTED MANDATES OUTSIDE STRAUMANN (PURSUENT TO ART. 12 OAEC) CORPORATE RISK MANAGEMENT Art. 4.4 of Straumann’s Articles of Association states The Board of Directors is responsible for the overall that no member of the EMB may perform more than

Straumann_2014_English_1 126 09.03.2015 16:54:15 Corporate governance Corporate governance 127

five mandates (i.e. mandates in the highest level gov- PricewaterhouseCoopers had served for nine consecu- erning body of a legal entity required to be registered tive years as the Group’s auditor. The auditor in charge in the Commercial Register or in a corresponding for- is Daniel Zaugg, Swiss Certified Public Accountant, eign register) in commercial enterprises, of which no who took over the mandate in 2014. more than one may be in a listed company. The Board of Directors supervises the external audi- The following are exempt from the foregoing restric- tors through the Audit Committee, which met five tions: times in 2014. The external auditors participated in – Mandates in enterprises that control the Company or three of these meetings, discussing the reports on the are controlled by the same; 2013 Audit Plan and the half-year review. Further – Mandates in enterprises that are performed at the details on the instruments which assist the Board of instruction of the Company; and Directors in obtaining information on the activities of – Mandates in associations, organizations, and legal the external auditors can be found on p. 119 ff. entities with a public or charitable purpose, and in foundations, trusts, and employee pension funds. No member of the Executive Management may perform The worldwide fees paid to the auditors 1 were as more than three such mandates. follows:

Mandates in several legal entities under common con- (in CHF 1 000) 31 Dec 2014 31 Dec 2013 trol or under the same economic authority shall be Total audit fees 839 974 deemed one mandate. Tax consultancy 0 1 093 Legal 0 0 MANAGEMENT CONTRACTS Transaction services 336 0 The Board of Directors and the EMB have not dele- Other services 0 30 gated any managerial powers to persons or companies Total non-audit fees 336 1 123 outside the Group. TOTAL 1 175 2 097

INTERNAL MANAGEMENT DEVELOPMENT 1 PWC until April 2014; EY from April 2014 Straumann continued the Strategic Management Development System (SMD) program initiated in 2008 INFORMATION POLICY to attract, develop and deploy key talent. The Group’s Straumann is committed to a policy of open, transpar- goal is to fill at least 50% of key management positions ent and continuous information. In accordance with the with internal candidates and this goal was again met rules of the SIX Swiss Exchange, Straumann publishes in 2014. detailed sales figures on a quarterly basis as well as annual and half-yearly reports. Detailed information is COMPENSATION, SHAREHOLDINGS provided at the Shareholders’ General Meeting. A sum- AND LOANS mary of the meeting and the minutes are published on The compensation and equity holdings as well as the the company’s website. The summary is also distributed basic principles and elements of the programs deter- in the form of a media release. Where necessary or mining them for the members of the Board of Direc- appropriate, the company also publishes additional tors and the EMB and their related parties are dis- information on significant events. The CEO, CFO, the closed in the Compensation Report on p. 138 ff and Head of Investor Relations and the Head of Corporate also in the audited financial statements on p. F 76 f. Communication & Public Affairs are responsible for communication with investors and representatives of AUDITORS the financial community, media and other stakeholders. The Shareholders’ General Meeting elects and In addition to personal contacts, discussions, and pre- appoints the Group’s external auditors on an annual sentations in Europe and North America, Straumann basis. In April 2014, Ernst & Young AG (EY), Basel, was held four quarterly financial results conferences for elected as new auditor of Straumann Holding AG after the media and analysts in 2014, two of which were

Straumann_2014_English_1 127 09.03.2015 16:54:16 128 Corporate Governancegovernance

Executive Management Board

CEO SALES SALES NORTH AMERICA WESTERN EUROPE

MARCO GADOLA ANDY MOLNAR GUILLAUME DANIELLOT

CFO CUSTOMER SOLUTIONS AND EDUCATION

DR PETER HACKEL FRANK HEMM

Straumann_2014_English_1 128 09.03.2015 16:54:16 Corporate Governancegovernance Corporate governance 129

SALES SALES SALES CENTRAL EUROPE ASIA/PACIFIC LATIN AMERICA

WOLFGANG BECKER DR ALEXANDER OCHSNER MARCO GADOLA

RESEARCH, DEVELOPMENT & INSTRADENT MANAGEMENT CORPORATE SERVICES OPERATIONS

DR GERHARD BAUER MARCO GADOLA A.I. MARCO GADOLA

Straumann_2014_English_1 129 09.03.2015 16:54:16 130

FRANK HEMM DR ALEXANDER OCHSNER ANDY MOLNAR GUILLAUME DANIELLOT

Straumann_2014_English_1 130 09.03.2015 16:54:23 131

Executive Management Board

(From left to right)

FRANK HEMM Frank Hemm holds a Master’s degree in Economics from the University of St. Gallen and a Master’s in Business Administration from Kellogg Graduate School of Management in the USA. His business career began in management consulting with Andersen Consulting and McKinsey, focusing on business process re-engineering and strategic management consulting.

He joined Straumann in 2004 and was initially responsible for Corporate Business Development & Licensing. He was appointed Head of Sales, Western Europe in 2007 and became a member of the Corporate Man- agement Group. A year later, he was given responsibility for the Asia/ Pacific Region as Head of Sales based in Singapore, where he established and built up Straumann’s regional headquarters. In addition to leading the integration and turnaround of the acquired distributors in Japan and Korea, he also expanded Straumann’s presence in China.

In 2012, Mr Hemm was appointed to the Executive Management Board as Head of EMEA and LATAM, and he moved into his current role in 2013.

DR ALEXANDER OCHSNER Alexander Ochsner is a seasoned executive with extensive international experience in the medical device industry, having spent more than a decade in senior managerial roles at the top of the dental implant industry in regional leadership positions.

Before moving to the dental industry, he held managerial positions in marketing/sales at Medtronic and Medela, where he gained experience of the medical device market in the Far East as Area Sales Manager & Executive Director of the Japanese subsidiary. From 2002 to 2008, he worked for Zimmer Dental, where he was Vice President Europe & Asia/ Pacific and a member of the Divisional Executive Team.

Alexander Ochsner joined Straumann in September 2012 from Nobel Biocare, where he was Senior Vice President & General Manager EMEA and member of the Executive Committee.

Dr Ochsner gained his PhD at the Swiss Federal Institute of Technology (ETH) in Zurich, where he also attained an MSc in natural sciences. He has held his current position since 2012.

Straumann_2014_English_1 131 09.03.2015 16:54:25 132

ANDY MOLNAR Andy Molnar has a proven track record in the dental and healthcare industries, having held senior managerial roles in global business sales and country management.

Under his leadership as General Manager of Straumann UK from 2006 – 2009, the company rose to national market leadership in implant dentistry. In 2009, Mr Molnar moved to Group headquarters as Senior Vice President Global Regenerative Sales and member of the Corporate Management Group.

He joined Straumann in 2005 from SIDHIL, a UK medical equipment company, where he was Sales and Marketing Director. However, the bulk of his career – 11 years – was spent in sales and management roles at GlaxoSmithKline Pharmaceuticals.

Andy Molnar holds a Bachelor of Science degree in Physiology and Biochemistry from Reading University and an MBA from Bradford University. He has been in his current role since 2012.

GUILLAUME DANIELLOT Having obtained a Bachelor’s degree in Physics from the University of Dijon and a Master’s degree in Marketing from ESCEM in Tours, Guillaume Daniellot completed his studies with a Master’s in Busi- ness Administration at the ESC European School of Management in Paris.

His professional career began in hospital product management – initially at Coloplast and then at B. Braun, as an international business- unit manager. He switched to the dental industry in 2001, joining Dentsply France, where he became Sales & Marketing Director.

Mr Daniellot joined Straumann in 2007 as Managing Director of Straumann France. Two years later, he transferred to Group Head- quarters to become Head of Global Sales Digital Dentistry. Shortly afterwards he took over responsibility for Straumann’s Prosthetic Laboratory Business Group, including global management of sales, marketing, product development, training and education. In both these roles he was a member of the Corporate Management Group. He was appointed to his current position in 2013.

WOLFGANG BECKER Wolfgang Becker holds a number of business school diplomas including that of the St. Gallen Management Center. He began his professional career at Straumann in 1986 and held a series of managerial positions of increasing responsibility in the company’s German subsidiary, becoming Head of Human Resources in 1991, Head of

Straumann_2014_English_1 132 09.03.2015 16:54:26 133

Marketing in 2000, and General Manager of Straumann Germany in 2001. He served on Straumann’s Executive Committee as Head of Sales Europe from 2005 to 2006. Since then, he has been responsible for Straumann’s business in Central and Eastern Europe, and headed the Group’s distributor business from 2007 to 2008.

Wolfgang Becker rejoined the Group’s Executive Management Board in his current role in 2013.

DR GERHARD BAUER Gerhard Bauer is a seasoned executive with a broad international background in Global Operations. He has spent more than 30 years in the pharmaceutical and medical device industry in various leadership positions, where he has acquired considerable experience in both pharmaceutical products and medical devices.

Prior to joining Straumann in 2010, Dr Bauer held managerial positions at Nextpharma, a specialist company in the biotech industry, and Bausch & Lomb, a global leader in eye-care products. From 1992 to 2008, his career at Bausch & Lomb was distinguished by increasing responsibility and, in 2006, he was appointed Head of Global Operations & Engineering and Member of the Executive Team. From 1984 to 1992, he worked for Ciba Vision, a subsidiary of Novartis. He began his career in production at GlaxoSmithKline in 1983.

Dr Bauer received his PhD from the Institute of Pharmaceutics at the Ludwig-Maximilians-University in Munich where he also obtained his MSc in Pharmaceutics. Additionally, he received an advanced degree in Pharmaceutical Technology from the Bavarian Chamber of Pharmacists.

DR PETER HACKEL Peter Hackel rejoined Straumann in 2014, after a 3-year spell at Oerlikon Industrial Group, where he was CFO of the global segment Oerlikon Drive Systems. He first joined Straumann in 2004 in a Proj- ect Management and Business Development role and rose to become Head of Group Controlling and Member of the Corporate Man- agement Group. Prior to Straumann, he spent three years at Geistlich Biomaterials, as Director of Marketing & Sales Orthopaedics, and two years at McKinsey & Company as a Consultant.

Peter Hackel offers a valuable combination of financial and business expertise together with an analytical scientific background. He obtained both his Master’s degree and PhD in Biochemistry and Molecular Biology from the Swiss Federal Institute of Technology (ETH) in Zurich and complemented his education with studies in Business Administration at the University of Hagen in Germany.

Straumann_2014_English_1 133 09.03.2015 16:54:26 134

THOMAS DRESSENDÖRFER Thomas Dressendörfer has a wide cultural background and broad international professional experience. Having obtained a Master’s in Business Administration and Economics from the University of Erlan- gen-Nuremberg, his career in finance has taken him through the healthcare and consumer products industries, as well as the personnel services, market intelligence, and mechanical engineering sectors in various countries. He rose through various senior positions including the role of CFO of major business units/regions in international companies such as Randstad, The Nielsen Company, Procter&Gamble, and Baumüller.

Thomas Dressendörfer was Chief Financial Officer and a member of the Executive Committee at Uster Technologies Ltd for three years prior to joining Straumann in November 2011. He was Chief Financial Officer from the beginning of 2012 to November 2014, when he has taken on an Executive advisory role until he leaves the company in mid 2015.

MARCO GADOLA Marco Gadola has a strong executive track record in a broad range of global businesses. He rejoined Straumann in 2013 as CEO, having previously served as Chief Financial Officer and Executive Vice President Operations from 2006 to 2008, when he left to pursue a career development opportunity at Panalpina, a world leader in supply chain management. Having started as Panalpina’s Chief Financial Officer, he became Regional CEO Asia/Pacific in 2012, with overall responsibility for the regional business.

Prior to his first spell at Straumann, he spent five years at Hero, the Swiss-based international food group, where he was also CFO and responsible for IT and operations. Previously, he spent nine years at the international construction tool manufacturer Hilti, where he held a number of senior commercial/sales and finance-related positions in various countries. Before that, he worked for Sandoz Interna- tional Ltd, as Audit Manager, and for Swiss Bank Corporation, Basel, in Corporate Finance.

Mr Gadola graduated from Basel University in business administration and economics. He also completed various programs at the London School of Economics and at IMD in Lausanne.

Marco Gadola has served on the Board of Directors of Calida, the Swiss textiles group, since 2011.

Straumann_2014_English_1 134 09.03.2015 16:54:29 WOLFGANG BECKER DR GERHARD BAUER DR PETER HACKEL THOMAS DRESSENDÖRFER MARCO GADOLA

Straumann_2014_English_1 135 09.03.2015 16:54:35 136 Corporate governance

teleconferences. The average participation at each Head of Investor Relations: event was more than 50 attendants on-site plus [email protected] another 50 remote by conference call. The conferences Tel. +41 61 965 11 11 were transmitted live via audio webcast and/or traditional conference call. In addition, Straumann’s top Head of Corporate Communication: management attended two sector-specific and four [email protected] general equity conferences. Research analysts from Tel. +41 61 965 11 11 19 banks/national institutions cover developments at the Straumann Group and are listed on p. 164 of this CALENDAR report as well as on the ‘Investors’ section of the Strau- Straumann’s calendar of planned reporting dates and mann corporate website. investor relations events in 2015 can be found on p. 163 and is also published and updated on the com- Apart from this, Straumann frequently publishes pany’s website. media releases and briefing documents, which are REFERENCES / FOOTNOTES archived and available from the company’s website 1 www.straumann.com/articles 2 www.six-swiss-exchange.com/news/notifications/major_ (www.straumann.com). The company offers a media shareholders_en.html release subscription service via its website and takes 3 Nimbus AG, Ziegelbrückstrasse 82, P.O. Box, CH-8866 Ziegelbrücke, Switzerland care to ensure that investor-relevant media releases 4 www.straumann.com > ‘Investors’ > ‘Corporate Governance’ > ‘Annual General Meeting’ are circulated broadly and in a timely manner according to the rules of the SIX Swiss Exchange and with due regard for the principles of fair disclosure. The company does not update its releases, reports and presentations, which means that the information they contain is only valid at the time of publication. Straumann advises against relying on past publications for current information.

ANNUAL REPORT & COMPENSATION REPORT Straumann’s Annual Report is a key instrument for communicating with various stakeholder groups. It is published in English (with a summary in German) in hard copy (with the Financial Report as separate print) and electronically on the company’s website. The Group also issues a Compensation Report as part of the Annual Report. The Annual Report can be downloaded from the company’s website. The printed version of the full Annual Report can be ordered from: [email protected].

MEDIA USED FOR REPORTING PURPOSES The Company’s website is www.straumann.com. The Company’s journal of record is the ‘Schweizerisches Handelsamtsblatt’ (‘SHAB’ – Swiss Official Gazette of Commerce). Further information requests should be addressed to:

08_00_STR_AR2014_Corporate_Governance_6_en.indd 136 09.03.2015 17:43:05 Corporate governance 137

08_00_STR_AR2014_Corporate_Governance_6_en.indd 137 09.03.2015 17:41:28 138 Compensation report

Compensation report Contents

139 Foreword 140 Introduction 140 Reporting standards 140 Responsibility for compensation 141 Compensation principles 141 Total compensation and compensation elements 148 Regulations relating to compensation 150 Approval of compensation 154 Report of the statutory auditor

Straumann_2014_English_1 138 09.03.2015 16:54:36 Compensation report Compensation report 139

FOREWORD granted. Furthermore, there were no increases in the FOCUS OF THE COMPENSATION salary or compensation of the CEO. COMMITTEE IN 2014 The Compensation Committee met five times in 2014 With regard to 2014 performance, Straumann and covered the topics in the schedule on page 141, increased its turnover organically by 6% while the focussing on the review of the company’s compensa- global market increased in the low to mid single-digit tion principles and ensuring their continued appropri- range (see p. 48). The Group thus attained its goal of ateness. These principles are anchored in our belief growing at least in line with the market. Having reor- that a compensation system based on value creation ganized significantly in 2013, a major financial target drives and encourages sustainable performance, fos- was to restore profitability. With an EBIT margin of ters entrepreneurship and creates an environment 21% in 2014, this target was achieved mainly as a that supports loyalty – thus combining the interests of result of top-line growth coupled with efficiency gains shareholders, management and employees. In addi- and cost reductions. In addition, progress was made tion, the Compensation Committee closely followed with regard to each of the key strategic priorities. The initiatives concerning talent management, succession relevant milestones for the Group’s key initiatives planning and Straumann’s ‘Cultural Journey’ to were thus met and the objective for Economic Profit become a high performance organization (p. 88). was exceeded.

MEASURES TO MITIGATE THE With respect to the long-term incentive plan, the tar- CURRENCY IMPACT get of Total Shareholder Return of 10% per annum Due to the sharp appreciation of the Swiss Franc over a 3-year period (TSR) was once again exceeded. against most other currencies, Straumann has taken a number of measures to reduce its cost base in order to LOOKING AHEAD protect its business and jobs going forward. These In 2015, the Compensation Committee will review the were communicated at the beginning of February compensation system regularly and will continue its 2015 and include proposed reductions in the overall efforts to ensure that Straumann maintains its com- compensation for employees based in Switzerland. petitiveness as an employer. We shall also closely The reductions range from approximately 5–26%, monitor the effect of the aforementioned measures to depending on the level of seniority. In the case of the mitigate the currency impact. CEO, the overall reduction is 35%. The Board of Direc- tors has agreed to a 28% reduction of their compensa- We would like to thank the shareholders and the Board tion compared with budget. for their confidence and the management team for its constructive approach to the intense dialogue in 2014 The proposed changes are precautionary measures and 2015. and in some cases are still subject to the formal agreement of the respective employees.

The Compensation Committee has been closely Stefan Meister involved in compiling these measures, which reflect Chairman of the Compensation Committee Straumann’s principle of addressing challenges in an entrepreneurial and forward-looking manner.

PERFORMANCE APPRAISAL 2014 AND IMPACT ON COMPENSATION Having adapted our compensation system in recent years to keep in line with best-practice benchmarks in our industry, no significant changes were made in 2014. In addition, given the market environment and cost pressures, no general salary increases were

Straumann_2014_English_1 139 09.03.2015 16:54:36 140 Compensation report

INTRODUCTION other related criteria. The Compensation Committee This report provides an overview of Straumann’s com- reports to the Board of Directors on compensation pensation principles and practices. It provides infor- practices as well as on remuneration of the Executive mation on the remuneration of the general staff, man- Management Board at least once a year and proposes agement, Executives and the Board of Directors in changes when necessary. Further information on the 2014. It explains the equity participation programs duties of the Compensation Committee can be found and discloses the equity participations of Directors on p. 119 in the section on Corporate Governance. and Executives in the company.

Straumann’s present compensation system has been Recipient Compensation Compensation in place since 2011, when the respective committee recommended by decided by of the Board of Directors conducted a comprehensive Chairman of the Compensation 2014 AGM approved review of the company’s overall approach to reward- Board Committee/Board of total compensation for ing employees, including remuneration of the Board. Directors BoD for period between the 2014 and The system was published in our 2011, 2012 and Board Compensation 2015 AGMs 2013 Compensation Reports, which were approved in Members Committee/Board of Directors consultative votes by the Shareholder’s Annual Gen- CEO Chairman of the 2014 AGM approved eral Meeting. Board/Compensation - Total fixed compensa- Committee/Board of tion for Executive Man- Directors agement Board The compensation system is built on principles de- 01.04.14–31.03.15 Executive CEO - Max LTI for Executive signed to: Management Management Board – Align the interests of the leadership team and em- business year 2014 ployees with those of our shareholders 2015 AGM to approve: – Support our attractiveness as a global employer, help- - STI payout for Ex- ing us to recruit and retain an engaged workforce ecutive Management Board for the 2014 –Reward individuals according to clear targets business year – Encourage entrepreneurism, above-market perfor- Senior Executive CEO mance, accountability and value creation. Management Management Board

Management Line Management Executive In 2014, we reviewed our system against industry and staff Management Board benchmarks and believe that it is balanced and in line with current best practices.

REPORTING STANDARDS At the 2015 AGM, the shareholders will be asked This report is in line with the Swiss Code of Best Prac- to approve: tice for Corporate Governance, the IFRS accounting – The short-term incentive (STI) for the 2014 business standards and Swiss law. The remuneration paid to year for the executive management Directors and Executives is presented in the audited – The total compensation of the Board of Directors for table on p. 152. the period between the AGM’s in 2015 and 2016 – The total fixed compensation of the executive man- RESPONSIBILITY FOR COMPENSATION agement for 1 April 2015–31 March 2016. The Board of Directors nominates the members of the Compensation Committee for election by the In 2014, the Committee met five times with all its AGM. Straumann’s Compensation Committee is members present, and the Chairman of the Board and entrusted with the design of the compensation sys- CEO participated in all meetings except for discussions tem that applies to the Directors and the executive concerning the evaluation and determination of their management. It reviews the compensation principles own compensation. The calendar and general agenda and programs annually and benchmarks the remu- of the Compensation Committee is presented in the neration paid by the company against market and table on p. 118.

Straumann_2014_English_1 140 09.03.2015 16:54:37 Compensation report Compensation report 141

TOPICS AND SCHEDULE OF THE COMPENSATION COMMITTEE MEETINGS

Month Topic

January Review prior year performance and target setting for CEO and Executive Management Board; determination of overall target framework (Economic Profit, financial targets, budget)

February Leadership development; review compensation/approve the Compensation Report; prepare for AGM; review human resources policies and Compensation Committee charter

April AGM follow-up (Corporate Governance, improvements etc.) September Review Compensation Report timetable; review impact of new regulations; set agenda and calendar; review composition and compensation of the Board of Directors; review remuneration system; review and benchmark CEO and EMB compensation; review draft Compensation Report; pension fund update

COMPENSATION PRINCIPLES COMPREHENSIVE BENCHMARKING The compensation principles outlined below are valid Straumann’s policy is to pay employees, executives and for all Straumann employees including members of Directors a base compensation that is close to the the Executive Management Board but not members median of comparable medical device companies in the of the Board of Directors unless stated. respective local market. The variable pay is set with the potential to move overall compensation toward the VALUE CREATION DRIVES COMPENSATION upper quartile for outstanding performance. We believe that a compensation system based on value creation encourages sustainable performance, Benchmark reviews for the Executive Management are loyalty and entrepreneurship and is thus in the inter- conducted by external, independent specialists and ests of management, employees and shareholders. include market analyses by industry specialists. Bespoke We are committed to compensating our staff, man- benchmarks include a peer group of comparable compa- agement and Directors in a way that is competitive nies in various industries selected according to the fol- and rewards sustainable long-term performance as lowing criteria: well as current successes. – Comparable scope and business complexity – Comparable geographic footprint It is Straumann’s view that the company’s success –Companies with whom we compete for talent. depends largely on the quality and engagement of its employees. A modern compensation system is an ETHICAL, FAIR STANDARDS important instrument for attracting, retaining and We are committed to fair and equal treatment of all our motivating talented people. Straumann’s compensa- employees and seek to be in full compliance with Inter- tion system takes these factors into account in that it: national Labor Standards. Compensation is not influ- – Offers competitive salaries enced by gender. Local minimum wage regulations have – Fosters a high-performance culture that differenti- no bearing on our compensation policy, as our compen- ates and rewards above-average individual perfor- sation clearly surpasses them. mance, both in the short and long term – Links variable long-term compensation to value gen- TOTAL COMPENSATION AND COMPENSATION erated by the company over the long term based on ELEMENTS shareholder expectations Overall, Straumann spent CHF 287 million on compen- – Is benchmarked with other companies in the sation, benefits and social costs in 2014, correspond- industry ing to an average of CHF 120 000 per employee. – Provides employees with benefits based on good practices and regulations in local markets, and In 2014, the compensation of employees and manag- – Is periodically reviewed by the Compensation Com- ers comprised fixed as well as short- and long-term mittee. variable components, the mix of which was defined by

Straumann_2014_English_1 141 09.03.2015 16:54:37 142 Compensation report

COMPENSATION MIX

Short term Long term

Executive management

FIXED VARIABLE Strategic impact Senior management Responsibility Skills Management Role Location

General staff Base salary Cash PSUs Pension bonus Benefits

DRIVERS Local practices & Company Share price regulations function performance Individual performances

Competitiveness Performance Value creation, talent retention

PAY MIX CORRIDOR (AT-TARGET ACHIEVEMENT) TOTAL COMPENSATION AVERAGE PER EMPLOYEE

35–45% 30–35% 30–35% 120000 1 Executive Management 105000 90000 60–75% 15–25% 10–15% 75000 Senior Management 60000

75–90% 10–25% 45000 Other Management 30000 15000 90–100% 0–10% 0 General Staﬀ 2011 2012 2013 2014

¢ Base salary ¢ Short-term incentive ¢ Long-term incentive

1 At target, the variable compensation (incl. STI and LTI) for the CEO will amount to 190% of base salary and in average to 104% of base salary for the remaining EMB members.

role, profile, location and strategic impact. For Senior element, emphasizing long-term, sustainable deci- Management, greater emphasis is placed on the long- sion-making and staff retention. term variable component, in line with our strategic goal of promoting ownership. FIXED COMPONENTS The compensation mix for executive and senior man- In 2014, the fixed compensation elements included agement included a long-term variable remuneration the following components:

Straumann_2014_English_1 142 09.03.2015 16:54:38 Compensation report Compensation report 143

SUMMARY OF OVERALL COMPENSATION

ELEMENTS OF TOTAL REMUNERATION

Element Type Description

Base salary Fixed cash Fixed remuneration, determined by scope and complexity of the role

Generally paid within an 80–120 percent range of relevant market median

Variable pay Short-term incentives Performance cash For executives, senior managers and a broader group of (STI – one year) employees, paid annually

Target achievement extends from 0–200%.

Performance measured against business results and accomplishment of individual and financial targets

Awards driven by both business and individual performance

Long-term incentives Performance Share For a defined group of executives and senior managers. (LTI – three years) Units (PSUs) Target achievement extends from 0–200%.

The grants made prior to 31.12.2011 vest in three installments (after 1, 2 and 3 years) and vesting is determined based on the Group’s total shareholder return (TSR) and return on shareholders’ equity (ROE) achievements over three calendar years prior to vesting.

Since 01.01.2012, PSUs with a 3-year vesting period are granted and shares are allocated based on a total shareholder return of 10% p.a. over a 3-year period; see p. 146.

Employee benefits Fixed benefits Employee benefits are provided in line with local market practices

Pension plans are being de-risked in line with Group guidelines Benefits are positioned towards relevant market median

– Base Salary increased responsibility. For 2015, the Board of Directors – Pension plans (depending on local practices and foresees increases that are linked to structural adjust- regulations) ments only. In countries with high inflation, the local – Other benefits (depending on local practices and management teams may grant general merit increases. regulations). These approaches will be implemented carefully and with due regard to local developments as well as our BASE SALARY ambition to remain a competitive employer. Straumann employees receive a fixed salary based on: –Job profile PENSION PLANS – Experience and skills Internal analyses carried out in recent years showed – External comparisons that Straumann and its subsidiaries fulfill and, in some –Place of work and local regulations respects, exceed local legal requirements. In most cases, – Strategic importance of the position. pension obligations are fully funded. Where this is not the case, liabilities are reported in the Annual Report fol- SALARY PROGRESSION 2014-2015 lowing actuarial rules. As explained, there were no general salary increases in 2014. Where necessary, salaries were adjusted to bench- Further information on pension plans is provided in marks and for staff who took on new roles and/or note 20 to the audited consolidated financial state-

Straumann_2014_English_1 143 09.03.2015 16:54:38 144 Compensation report

ments on p. F48 ff. Information on pension fund OTHER BENEFITS risks is also provided in the Risk Analysis on p. 81. Straumann’s benefit programs are an integral part of the total compensation and are designed to enable the SWITZERLAND company to compete for and retain employees and Straumann administers two defined contribution managers and retain them. Benefits are structured to pension plans in Switzerland, which together make support our overall business strategy and are aligned up the occupational benefits at Straumann. The with local practices and legislation. Examples of bene- basic insurance plan offers protection against the fits include season tickets for public transport, lunch financial consequences of old age, death and dis- vouchers, the use of company cars, mobile phones, ability to all employees of Institut Straumann AG concessions on Straumann products, etc. and Straumann Villeret SA. There is additional sup- plementary insurance for selected management EMPLOYEE SHARE PARTICIPATION PLAN whose proportion of variable compensation is high. Employees in Switzerland have the opportunity to pur- Straumann employees in Switzerland and the chase Straumann shares for 75% of the average share Chairman of the Board of Directors are eligible for price over a period of seven trading days beginning on this pension scheme. the ex-dividend day (see table on p. 143).

EUROPE This plan allows employees to buy a minimum of 10 In other European countries, Straumann offers and a maximum of 100 to 1000 shares, depending on retirement insurance according to local practices. hierarchical level. The shares are subject to a two-year According to IFRS accounting standards, the major- vesting period. They are dividend-bearing from the day ity of European pension plans are considered of purchase. ‘funded’ or ‘unfunded’ defined contribution plans.

USA EMPLOYEE SHARE PLANS A 401k retirement plan is provided to all Straumann Employees Shares Discount End of lock-up employees in the USA over 21 years of age to enable participating issued share period them to save for retirement. The 401k plan is a price at issue defined contribution plan whereby (a) the employee 2014 107 11 495 CHF 138 April 2016 has the option of making deferral elections from 2013 44 2 405 CHF 88 April 2015 his/her pay on a pre-tax basis and (b) Straumann 2012 138 16 564 CHF 109 April 2014 USA may make matching contributions should the employee elect to make deferral elections. The plan is a tax-qualified plan under the Employee Retire- The Employee Share Participation Plan was not offered ment Income Security Act (ERISA). to the Executive and Senior Management in 2013 as one of the cost reduction measures to mitigate redun- In addition to the 401k, Straumann USA has a Sup- dancies. It was however reinstated in 2014. plemental Executive Retirement Plan (SERP) for a select management group. The purpose of this The shares required for these plans were held by the plan is to provide eligible employees with defined Group as Treasury shares. employer contributions and the opportunity to elect to defer receipt of certain compensation that The members of the Board of Directors are not eligible would otherwise be payable to them in cash. The for this program. plan is intended to be a non-qualified, unfunded, deferred compensation arrangement for purposes VARIABLE COMPONENTS of Title I of ERISA and is intended to comply with In 2014, the variable compensation components Section 409A of the Internal Revenue Code. included one or more of the following: According to IFRS, SERP is treated as a defined con- – Performance-related short-term incentives tribution plan. – Long-term incentives (Performance Share Plan)

Straumann_2014_English_1 144 09.03.2015 16:54:38 Compensation report Compensation report 145

VALUE-BASED MANAGEMENT – 2014 ECONOMIC PROFIT (VALUE ADDED)

NET REVENUE TAXES CHF 710m CHF (20)m

COGS EBIT NOPAT CHF (152)m CHF 148m CHF 162m

OPEX FINANCIAL RESULT CHF (413)m CHF 33m ECONOMIC PROFIT CHF 114m

CASH CHF 120m COST OF CAPITAL (WACC) 8% NET WORKING CAPITAL CAPITAL CHARGE CHF 65m CHF (48)m CAPITAL CHF 605m NON-CURRENT ASSETS CHF 420m

Chart showing the various components of economoc profit (value added) in 2014. NOPAT = net operating profit after taxes; COGS = cost of goods sold; OPEX = operating expenses; EBIT = earnings before interest and taxes.

SHORT-TERM INCENTIVE (STI) The main advantage of the economic profit concept is The short-term incentive scheme (see table on page 146) that it goes beyond revenue growth and profitability is tied directly to profit generated by the Group and to increase and takes into account the resources used to individual performance. For some areas, additional spe- achieve these increases and the resulting additional cific financial and/or individual targets are defined. capital costs. Economic profit is thus calculated by deducting a capital charge from the net operating Hence, the payout is based on a combination of the profit after tax (NOPAT). The Board of Directors may following: exclude extraordinary elements from the calculation – Company performance of the EP. – Specific financial target achievement – Individual performance The capital charge represents the cost of capital calculated on the basis of an average equity return expected COMPANY PERFORMANCE by investors. This scheme (see illustration above) has Economic profit (EP) has been one of the key perfor- been used to calculate Straumann’s economic profit, mance indicators in Straumann’s short-term incentive which builds the basis for our bonus calculation model scheme. The Board of Directors in consultation with in 2014. executive management has set the absolute target for EP in Swiss francs annually, prior to the respective per- Owing to the volatility and uncertainty caused by the formance cycle, based on medium-term business plans recent currency developments, the Board of Directors and the defined budget for the year of performance. has considered it necessary to change the major per- The economic profit pay-out-range has been between formance indicator for short-term incentives for 2015 0 and 200%. from economic profit (EP) target to an operating-profit

Straumann_2014_English_1 145 09.03.2015 16:54:38 146 Compensation report

SHORT-TERM INCENTIVE TARGET WEIGHTING WEIGHTING OF PERFORMANCE CRITERIA The weighting of the different targets depends on the Management Level Company Financial Individual role and responsibilities of the individual (see table on Chief Executive Officer 80% 20% left). Overall, there is a stronger focus on individual Executive Vice President 40–80% 0–40% 20–50% targets as determined by management, in order to Senior Vice President 20–40% 0–60% 20–60% encourage and reward above-average individual per- Vice President 20–40% 0–60% 20–60% formance appropriately. Management (Director, 20–30% 0–60% 20–70% Senior Manager, Manager) MEASUREMENT OF ACHIEVEMENT Staff 0–20% 0% 80–100% COMPANY PERFORMANCE AND FINANCIAL TARGETS The measurement scale for the achievement of finan- This table shows the weighting of the different types of performance measures according to the level of the employee and cial targets (company performance and financial tar- depending on the organizational unit the employee is working in. gets) extends from 0% to a maximum of 200% and is based on a line joining three points as explained in the illustration (see table on left).

target. This is because EBIT is currently considered INDIVIDUAL TARGETS externally to be the key performance measure and For individual target achievement, the assessment thus the main driver of the company’s valuation. scale extends from 0% to 150%. It is based on descrip- When the situation stabilizes, we will revert to EP. tors with corresponding percentage ranges: – Exceeds expectations SPECIFIC FINANCIAL TARGETS – Meets expectations Specific financial targets are used for the following – Partially meets expectations organizational units: Sales Regions, Customer Solu- tions & Education, Instradent Management, and LONG-TERM INCENTIVES (LTI) Research, Development & Operations. The targets The long-term incentive plan is offered to executive are derived from annual budgets and are set by the and senior management and other key employees CEO together with the member of the Executive depending on role, responsibility, location, strategic Management Board responsible for the organiza- impact and market practice. Participation in the long- tional unit. In 2014 for example the achievement of term incentive plan is determined by the Board of improvements to ‘contribution margin’ and to ‘stra- Directors, who are not eligible for this program. tegic key sales initiatives’ were set as specific financial targets for the Sales Regions whilst ‘improve- PERFORMANCE SHARE PLAN ments to cost of goods sold’ was defined as Straumann’s Performance Share Plan (PSP) was intro- a specific financial target for Research, Develop- duced in 2012 and is designed to: ment & Operations. – Offer an attractive variable compensation element related to total shareholder return (TSR) INDIVIDUAL PERFORMANCE –Increase shareholdings of key employees, and Individual performance is measured by the achieve- – Align participants’ interests with those of the ment of targets established with the line manager at shareholders. the beginning of the year in the performance management process. These may involve a combination GRANT of specific project targets, competency or skills devel- Participants in the plan are granted Performance opment and specific contribution to team or organi- Share Units (PSUs), entitling them to receive shares zational unit targets. A global performance manage- after a three-year vesting period. PSUs are granted ment system supervised by Human Resources once a year after the AGM of the shareholders. No ensures that the objectives are defined in line with cash investment is required from the participants. The the company’s strategic goals and their achievement number of PSUs granted is equal to the participant’s is assessed continuously during the year. long-term incentive value divided by the fair value of

Straumann_2014_English_1 146 09.03.2015 16:54:39 Compensation report Compensation report 147

SHORT-TERM INCENTIVE TARGET SHARE ALLOCATION BASED ON ACHIEVEMENT (STI) PERFORMANCE SHARE UNITS AND TOTAL SHAREHOLDER RETURN

200 B 250

200

150

100 MIDPOINT

100 Achievement (%) Achievement Achievement (%) Achievement

A 0 0 -10 -5 0 5 10 15 20 25 30 Target (for example in CHF) Total shareholder return p.a. (%)

ln the short-term incentive model, the scale for financial target The compensation model awards shares according to the number achievement extends from 0% to a maximum of 200% and is of PSUs allocated and the total shareholder return achieved per based on a line joining three points: 0% (point A), 100% annum over a three-year vesting period. At the end of the perfor- (midpoint) and 200% (point B). The difference on the horizontal mance period, no shares will be allocated for a TSR of 0% p.a. or axis between the midpoint and point B must be equal to, or less; one share will be granted per vested PSU if the TSR is +10% greater than, the difference between the midpoint and point A. p.a. and two shares per vested PSU for a TSR of +20% p.a. or more The actual target achievement is measured by way of linear (capped at 200%). For a TSR between 0% and 10% p.a. or between interpolation. 10% and 20% p.a., the number of shares allocated per vested PSU is calculated on a linear basis.

one PSU at the grant date. The long-term incentive TOTAL SHAREHOLDER RETURN target value is a percentage of the total target com- Total shareholder return is the profit (or loss) realized pensation, which is determined in accordance with the by an investment at the end of a year or specific participant’s role in the organization. period. It includes capital gains or losses from changes in the share price as well as gross dividends. ALLOCATION OF SHARES At the end of the performance period, the PSUs are PSU FAIR VALUE irrevocably vested and converted into shares. They are The fair value of the PSUs granted has been deter- forfeited if the individual leaves the company before mined using a Monte Carlo simulation algorithm. The they vest. valuation was performed by independent specialists applying the following significant inputs into the The number of shares allocated per PSU depends on model: grant date, vesting date, average reference the achievement of an absolute total shareholder price, performance target including ‘cap’ and ‘floor’, return (TSR) target, which is determined by the Board share price at issue, risk-free interest rate, volatility, of Directors and is currently set at 10% per annum for and expected dividend rate. the 3-year performance period. Performance against the TSR target is calculated using the average of the OPTION PLAN (UNTIL 2011) closing prices of the underlying share over the period Until 2011, tradable options (non-tradable for partici- of seven trading days starting on the ex-dividend date pants outside Switzerland) with a term of six years in the year of grant and in the year of vesting. The and a two-year vesting period were allocated. achievement factor is capped at 200%. The exercise price was equal to the share price on

Straumann_2014_English_1 147 09.03.2015 16:54:39 148 Compensation report

PERFORMANCE SHARE UNIT FAIR VALUE 31 December/1 January. The value of the options was determined at grant date and is expensed as a person- 2014 2013 nel expense from service commencement to the end of Grant date 25.04.2014 17.04.2013 the vesting period. The fair value of the options granted Vesting date 25.04.2017 15.04.2016 has been determined using the Black-Scholes valuation Share price at grant 184.00x CHF 114.00 model. The calculation of the option value was per- Risk-free interest rate 0.14% 0.15% formed by independent specialists. Since 2012, no fur- Expected volatility 31.81% 31.28% ther option allocations were made. Expected dividend yield1 0% 0% Estimated fair value CHF 152.33 CHF 88.24 REGULATIONS RELATING TO COMPENSATION At the 2014 AGM, the shareholders approved changes to 1 Assuming immediate reinvestment of dividend payment the Articles of Association (AoA) required to implement the Swiss Ordinance regarding Excessive Compensation OUTSTANDING PERFORMANCE SHARE UNITS (OaEC). These changes are fully reflected in Straumann’s compensation schemes for the Executive Management 2014 2013 and Board of Directors. As of 1 January 79 138 32 894 Granted PSUs 30 063 64 977 The full text of the AoA is available on our website: Exercised 0 0 www.straumann.com/articles. Forfeited PSUs1 (9 391) (18 733) Expired PSUs 0 0 AGREEMENTS WITH DIRECTORS AS OF 31 DECEMBER 99 810 79 138 AND EXECUTIVES

Agreements with members of the Board of Directors 1 Eligible participants who left Straumann voluntarily or as part of the 2013 reorganization forfeited their PSU regarding their compensation, and with members of the allocations for 2012 and 2013. EMB regarding their employment may be temporary or permanent. Temporary agreements have a maximum term of one year, with the possibility of renewal, while NUMBER OF OPTIONS OUTSTANDING UNDER permanent agreements have a notice period of no more THE STOCK OPTION PLAN than 12 months. Non-compete clauses are permissible. Compensation may be paid as indemnity for non-com- 2014 2013 2012 pete clauses. In such cases, the compensation must not As of 1 January 199 470 260 676 325 000 exceed the last annual total compensation paid to the Granted options 0 0 0 individual and may not be paid for more than one year Exercised options (62 796) 0 0 (see Art. 4.5 AoA). Forfeited options 0 (12 497) (15 832) Expired options (4 972) (48 709) (48 492) In 2014 no compensation was paid to related parties of As of 31 December 131 702 199 470 260 676 members of the Executive Management and members Options available 136 647 156 057 152 520 of the Board of Directors. for exercise REMUNERATION OF THE EXECUTIVE MANAGEMENT BOARD

Options expiring Options available The principles for the compensation of the Executive at year-end for exercise Management specify both a fixed cash component,

2014 4 972 131 702 which includes basic salary and other fixed compensation items, and a variable component (see Art. 2015 48 607 131 702 4.2 AoA). The latter includes a short-term incentive 2016 48 856 83 095 based on the achievement of corporate performance 2017 34 239 34 239 targets, and/or financial targets, and/or individual TOTAL 136 674 targets, and a variable share-based long-term incentive,

Straumann_2014_English_1 148 09.03.2015 16:54:40 Compensation report Compensation report 149

which is based on the achievement of performance tar- The table on page 152 shows the remuneration paid to gets over a period of three years. the Executive Management in 2014 in accordance with the OaEC. The compensation of each member of the Executive Management Board is determined according to role and COMPENSATION PAID TO FORMER MEMBERS OF THE responsibilities and is based on external benchmarks. EXECUTIVE MANAGEMENT Each member receives a base salary and is included in In 2014, no payments to former members of the Execu- the short-term incentive plans, as described earlier. The tive Management were made. compensation packages of the existing members of the Executive Management Board remained more or less LOANS TO EXECUTIVE MANAGEMENT unchanged in 2014. The articles of association do not allow for loans, advances or credits to any member of the Executive If there are changes in the Executive Management sub- Management Board or related parties. sequent to the AGM, the following applies: The total compensation at target of a new CEO shall not exceed SHAREHOLDINGS OF THE EXECUTIVE MANAGEMENT BOARD 140% of the compensation paid to the departing CEO. The shareholdings in Straumann shares and stock The compensation of any other incoming member of the options of the members of the Executive Management EMB shall not exceed 140% of the average compensa- Board who held office at the end of 2014 are shown in tion paid to Executive Management members (excluding the table on p. F176. the CEO). In addition, and as defined in the Articles of Association, incoming Executive Management members REMUNERATION OF THE BOARD OF DIRECTORS may receive compensation to offset any losses of valu- According to the revised Articles of Association, the able rights associated with giving up their prior activi- compensation of the Board of Directors must be ties. The amount of this compensation may not exceed approved by the AGM and consists of a fixed com- CHF 1 000 000 for a CEO or CHF 500 000 for other mem- pensation component only, which is paid in cash bers (see Art. 4.3 AoA). For 2014, Straumann paid an and/or shares (Art. 4.1 AoA). The Board of Directors amount of CHF 428 000 to the new Group CFO Peter establishes the compensation payable to its mem- Hackel for long term incentive components forfeited bers within the limits approved by the AGM. due to resignation from his previous employment. The 2014 AGM approved a maximum total compen- As total compensation for the EMB the 2014 AGM pro- sation for the Board of Directors for the term of spectively approved a fixed compensation of CHF 4.7m office ending at the 2015 AGM of CHF 2.9m, of which for the collective Executive Management (as composed CHF 1.2m was paid in cash and the remainder was in April 2014) for the year ending 31 December 2014, and paid by way of allocation of 6400 shares, which a maximum variable long-term compensation (LTI) of were granted shortly after the AGM for the relevant CHF 2.5m. The variable short-term compensation (STI) service period and are blocked for two years. The for the year ending on 31 December 2014 will be submit- value of shares is calculated using the average clos- ted for approval by the shareholders at the 2015 AGM. ing price of the shares over the seven trading days following the Annual General Meeting. In addition Subsequent to the AGM, Dr Peter Hackel rejoined to shares allocated as part of remuneration, each Straumann and took over as Chief Financial Officer member of the Board of Directors is required to hold on 1 December 2014. He succeeded Thomas at least a further 2000 Straumann shares, demon- Dressendörfer, who will continue in an advisory strating engagement with the company. This capacity until June 2015. Dr Sandro Matter, Execu- approach is in line with best practices. tive Vice President of Instradent Management & Strategic Alliances, left Straumann in December Irrespective of role, all Directors are entitled to reim- 2014. Marco Gadola took over his responsibilities bursement from the company for their reasonable on an interim basis until the appointment of a expenses for travel to and from Board meetings, or successor. on behalf of the Board, and other expenses incident

Straumann_2014_English_1 149 09.03.2015 16:54:40 150 Compensation report

SUMMARY OF ALL VALID WARRANTS ISSUED IN THE STRAUMANN STOCK OPTION PLAN

Name/symbol Year Security Market maker Type/ratio Number Strike price Expiry ID number

STMMA1 2009 10848946 Credit Suisse American 2 016 450 292.50 12.2015 Wt 12.15 (STMN15) Derivatives 50:1 STRAUM15 OPT1 2009 4000210 Not traded American 9 578 292.50 12.2015 ESOP (USA) 1:1 STRAUM15 OPT1 2009 4000210 Not traded American 1 750 292.50 12.2015 ESOP (other countries) 1:1 STMNCC1 2010 12217893 Credit Suisse American 2 278 450 214.00 12.2016 Wt 12.16 (STMN16) Derivatives 50:1 STRAUM16 OPT1 2010 4000211 Not traded American 5 812 214.00 12.2016 ESOP (USA) 1:1 STRAUM16 OPT1 2010 4000211 Not traded American 1 750 214.00 12.2016 ESOP (other countries) 1:1 STMNCS1 2011 14630069 Credit Suisse American 2 226 400 162.10 12.2017 Wt 12.17 (STMN17) Derivatives 50:1 STRAUM17 OPT1 2011 4000212 Not traded American 2 105 162.10 12.2017 ESOP (USA) 1:1 STRAUM17 OPT1 2011 4000212 Not traded American 750 162.10 12.2017 ESOP (other countries) 1:1 TOTAL VALID 6 543 045 WARRANTS ISSUED

1 Traded on the SIX Swiss Exchange.

VALUE DEVELOPMENT OF OPTIONS

Name/symbol Grant Vesting Value at grant Value at vesting Value 31.12.14

STMMA1 Wt 12.15 (STMN15) 2009 2011 77.00 6.00 10.00 STMNCC1 Wt 12.16 (STMN16) 2010 2012 53.50 3.00 48.00 STMNCS1 Wt 12.17 (STMN17) 2011 2013 38.00 32.00 89.50

1 Traded on the SIX Swiss Exchange.

thereto, in accordance with the expense regulations None of the Board members received any remunera- for Members of the Board of Directors of Straumann tion from the Straumann Group other than that dis- Holding AG. closed in this report.

At the AGM in April 2014, Dominik Ellenrieder stepped COMPENSATION PAID TO FORMER DIRECTORS down from the Board, reducing the number of Direc- In 2014, no payments to former members of the Board tors to seven. At the same time, the number of Com- or related parties were made. mittees of the Board was reduced from three to two (see p. 118). LOANS TO MEMBERS OF THE BOARD OF DIRECTORS The articles of association do not allow for loans, The remuneration of the Board of Directors is laid out advances or credits to any member of the Board of in the tables on p. 152 f. in accordance with Swiss law Directors or related parties. Thus, no such payments and is in line with current market practices. were made in 2014.

Straumann_2014_English_1 150 09.03.2015 16:54:40 Compensation report Compensation report 151

APPROVAL OF COMPENSATION The AGM prospectively approves the maximum compensation payable to the Board of Directors for the term of office ending at the next AGM. Likewise, the AGM approves the maximum fixed compensation of the Executive Management prospectively for the period commencing on 1 April and ending on 31 March of the consecutive calendar year. The variable short- term components of the Executive Management’s compensation are approved retroactively for the business year preceding the AGM (see art. 3.1.9 AoA and table on p. 152).

The compensation of the individual members of the Board and the Executive Management is decided by the Board of Directors on recommendation of the Compensation Committee and within the limits set by the AGM. The relevant criteria are explained on p. 148 f., and the compensation awarded to the Board of Directors and the Executive Management is disclosed on p. 152 f.

For 2015, a maximum collective STI of CHF 4.1m (excluding social costs and other compensation) is budgeted for the Executive Management Board if all relevant targets are achieved to the defined maximum (subject to approval at the 2016 AGM). In addition, the Board of Directors will submit a maximum fixed compensation for the executive management of CHF 5.0m to the AGM. In each case, these figures apply to the Executive Management Board composition as of 1 January 2015.

None of the Executive Management Board received any compensation from the Straumann Group other than that disclosed in this report.

This Compensation Report provides comprehensive transparency with regard to the company’s general compensation principles and in particular to the remuneration of the Executive Management Board and the Board of Directors.

Straumann_2014_English_1 151 09.03.2015 16:54:41 152 Compensation report

2014 (AUDITED TABLE) Fixed Other Total (in CHF 1 000) compensation compensation compensation

BOARD OF DIRECTORS Gilbert Achermann (Chairman) 721 179 900 Dr h.c. Thomas Straumann (Vice Chairman) 360 27 387 Dr Sebastian Burckhardt 251 20 271 Roland Hess (Chairman Audit Committee) 305 23 328 Ulrich Looser (Chairman Strategy Committee1) 264 21 285 Dr Beat Lüthi 251 20 271 Stefan Meister (Chairman HR Committee) 305 23 328

Former member Dominik Ellenrieder1 53 13 66 Total 2 510 326 2 836

Fixed Performance Performance Other Total (in CHF 1 000) compensation bonus share units compensation compensation EXECUTIVE MANAGEMENT BOARD Marco Gadola (President & CEO) 750 1 209 780 260 2 999 Other members (8 until 30 Nov 2014, thereafter 9)2 2 415 2 224 1 046 1 431 7 116 Former member 440 305 97 172 1 014 Total 3 605 3 738 1 923 1 863 11 129

TOTAL 6 115 3 738 1 923 2 189 13 965

1 Until 31 March 2014 2 Includes an amount of kCHF 428 to the new Group CFO Peter Hackel for long term incentive components forfeited due to resignation from his previous employment.

COMPENSATION APPROVED AT THE 2014 AGM

(in CHF million) Maximum approved1 Amount dispensed2

BOARD OF DIRECTORS Total compensation 2.9 2.77 EXECUTIVE MANAGEMENT BOARD Fixed compensation 4.7 4.4953 Other compensation according to Art. 4.3 AoA 0.5 0.4284 Long Term Incentive (grant 2014) 2.5 1.9235 Short Term Incentive 4.2826

1 Based on the configurations of the Board of Directors and the Executive Management Board at the time of the 2014 AGM (including social costs). 2 Does include other compensation elements (e.g. social costs). 3 Including compensation paid to the new CFO for December. 4 Compensation paid to the new CFO for remuneration forfeited due to resignation from previous employment. 5 Excluding social costs as PSU’s have not yet vested. 6 Payout subject to approval by the 2015 AGM (including social costs).

Straumann_2014_English_1 152 09.03.2015 16:54:41 Compensation report Compensation report 153

2013 (AUDITED TABLE) Fixed Other Total (in CHF 1 000) compensation compensation compensation

BOARD OF DIRECTORS Gilbert Achermann (Chairman) 863 147 1 010 Dr h.c. Thomas Straumann (Vice Chairman) 399 23 422 Dr Sebastian Burckhardt 264 15 279 Dominik Ellenrieder 264 15 279 Roland Hess (Chairman Audit Committee) 318 18 336 Ulrich Looser (Chairman Strategy Committee) 318 18 336 Dr Beat Lüthi 264 15 279 Stefan Meister (Chairman HR Committee) 318 18 336 Total 3 008 269 3 277

Fixed Performance Performance Other Total (in CHF 1 000) compensation bonus share units compensation compensation EXECUTIVE MANAGEMENT BOARD Marco Gadola (President & CEO) (since 1 March 2013) 627 986 780 775 3 168 Other members (6 until 31 May 2013, thereafter 8)1 2 720 2 302 1 478 907 7 407 Former members 891 431 0 238 1 560 Total 4 238 3 7192 258 1 920 12 135

TOTAL 7 246 3 7192 2582 189 15 412

1 Includes CHF 347 000 for Gilbert Achermann in his function as CEO ad interim for the period 1 January to 31 March 2013.

Straumann_2014_English_1 153 09.03.2015 16:54:41 154 Compensation report

Report of the statutory auditor on the remuneration report of Straumann Holding AG, Basel

To the General Meeting of Straumann Holding AG, Basel

Basel, 13 February 2015

REPORT OF THE STATUTORY AUDITOR ON THE includes evaluating the reasonableness of the meth- REMUNERATION REPORT ods applied to value components of remuneration, as We have audited the remuneration report dated well as assessing the overall presentation of the remu- 13 February 2015, which comprise the tables marked neration report. as audited on page 152 and 153, of Straumann Hold- ing AG for the year ended 31 December 2014. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our RESPONSIBILITY OF THE BOARD OF DIRECTORS opinion. The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration OPINION report in accordance with Swiss law and the Ordinance In our opinion, the remuneration report for the year against Excessive Compensation in Stock Exchange ended 31 December 2014 of Straumann Holding AG Listed Companies (Ordinance). The Board of Directors complies with Swiss law and articles 14 – 16 of the is also responsible for designing the remuneration sys- Ordinance. tem and defining individual remuneration packages. Ernst & Young Ltd AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to Daniel Zaugg Daniel Maiwald obtain reasonable assurance about whether the remu- Licensed audit expert Licensed audit expert neration report complies with Swiss law and articles (Auditor in charge) 14 – 16 of the Ordinance.

An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14 – 16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also

Straumann_2014_English_1 154 09.03.2015 16:54:42 Compensation report 155

Straumann_2014_English_1 155 09.03.2015 16:54:42 156

“I love working directly with customers.” “This technology MARISA FADDA MEDICAL PRODUCT ADVISOR fascinates me.” GÜLAY DEMIRTAS TECHNICAL SUPPORT

“We don’t settle for good enough – it has to be the best.” ALBIN GYGLI GLOBAL PRODUCT MANAGER

Straumann_2014_English_1 156 09.03.2015 16:54:49 157

Willing to help with a ‘can do’ attitude

“This technology MARISA FADDA fascinates me.” MEDICAL PRODUCT ADVISOR GÜLAY DEMIRTAS 3 YEARS @ STRAUMANN TECHNICAL SUPPORT Marisa is one of Straumann’s highly trained specialists who advise customers on practical issues. “I enjoy the challenge of solving problems and anticipating their needs. I am always inspired by the willingness to help and ‘can-do’ attitude at Straumann.”

ALBIN GYGLI GLOBAL PRODUCT MANAGER 4.5 YEARS @ STRAUMANN For many years Albin’s goal was to work for Straumann. “Every dental technician looks up to Straumann for their Swiss precision, innovation and quality standards.” His favorite part of the job is bringing new products to market and fine-tuning them for specific countries.

GÜLAY DEMIRTAS TECHNICAL SUPPORT 2.5 YEARS @ STRAUMANN Gülay is really engaged in her work, and she finds the technology fascinating. She enjoys working together as a team on solutions and the positive feedback that comes from customers. “It’s important for customers to have someone who understands their problems and perspective and offers authentic support.”

Straumann_2014_English_1 157 09.03.2015 16:54:52 158

Straumann Pro Arch The edentulous solution

Until fairly recently, people suffering from the debilitating handi- cap of severely damaged, ‘hopeless’ dentition had little alternative than to have their remaining compromised teeth removed and to wear plastic dentures held in place by suction or adhesive. The functional limitations, loss of self-confidence and wellbeing associated with unanchored dentures are well known and well documented. 1,2,3

The introduction of dental implants to anchor removable dentures made a tremendous difference both in terms of health and quality of life. Although these removable solutions are proven and popular, for many patients they are still ‘artificial’ dentures. The advent of full-arch bridges fixed to implants has changed this radically.

Another development is the acceleration of treatment times, such that patients have higher expectations for tooth replacement solutions that are quick, provide immediate function and cause minimal disruption to their daily lives.

1 Awad MA, Rashid F, Feine JS; Overdenture Effectiveness Study Team Consortium. The effect of mandibular 2-implant overdentures on oral health-related quality of life: an international multicentre study. Clin Oral Implants Res. 2014 Jan;25(1):46-51. doi: 10.1111/clr.12205. Epub 2013 Jun 4. PubMed PMID: 23735197. 2 Jabbour Z, et al. Is oral health-related quality of life stable following rehabilitation with mandibular two-implant overdentures? Clin Oral Implants Res. 2012 Oct;23(10):1205-9. doi: 10.1111/j.1600-0501.2011.02289.x. Epub 2011 Aug 15. PubMed PMID: 22092512. 3 Awad MA, et al. Implant overdentures and nutrition: a randomized controlled trial. J Dent Res. 2012; Jan;91(1):39-46. doi: 10.1177/0022034511423396. Epub 2011 Sep 27. PubMed PMID:21951464.

Straumann_2014_English_1 158 09.03.2015 16:54:55 159

38 million in the US will need full dentures by 2020 4

A COMBINATION OF SCIENTIFICALLY PROVEN IMPLANT BROAD ACCESS TO AND PROSTHETIC TECHNOLOGY CADCAM Through our open CAD- Straumann Pro Arch is a comprehensive solution that includes a CAM system and CARES broad range of implants, and abutments as well as CADCAM Scan & Shape Service, frameworks, bars, bridges and other components that enable almost any dental lab can clinicians and dental technicians to provide accelerated fixed full- offer Straumann customized bars to complete the arch tooth replacements. Pro Arch solution.

Our proven implant system with outstanding osseointegration and healing properties includes the new-generation Bone Level Tapered implant (see p. 104 f.), offering high stability for immediate or early loading. With our SLActive surface implant healing time is reduced (see p. 46 f.) and final stability is achieved faster than with the conventional SLA surface.

Pro Arch is only available through Straumann and will be launched in North America and most European countries in Spring 2015, with other markets to follow. PROSTHETICS ADD THE BITE 4 Douglass CW, Shih A, Ostry L. Will there be a need for complete dentures i theUnited The implant provides the States in 2020? J Prosthet Dent. 2002 Jan;87(1):5-8 foundation, but the bite comes with the prosthetics, which are equally important. The Pro Arch system includes a selection of new sleek abutments (see p. 77), which offer a wide range of prosthetic options. In addition, Straumann now offers custom-milled bar and bridge options right up to a full-arch (see picture on p. 156) – to carry the final restoration.

Straumann Pro Arch solution for full-arch tooth replacement.

Straumann_2014_English_1 159 09.03.2015 16:55:17 160 Information for investors

Information for investors Contents

161 Share performance 163 Calendar 164 Research coverage 164 Contacts 165 Publications

Straumann_2014_English_1 160 09.03.2015 16:55:17 Information for investors Information for investors Share performance 161

Share performance

Through 2014, the stock market was characterized by The Swiss mid-cap index SMIM closed the year 10% up. the global expansionary monetary policy, significant The MSCI World climbed 17% and the MSCI World price corrections in commodity prices, a continued Healthcare Equipment & Supplies, the sector index 161 Share performance weak economy in Europe, various geopolitical crises that is representative for Straumann, grew 36% (all 163 Calendar (above all the Crimean conflict), major IPOs and measured in CHF). numerous company mergers, all of which affected the 164 Research coverage healthcare sector disproportionately. Straumann’s share price rose 50% (2013: 48%), outper- 164 Contacts forming both the general market and the sector index. 165 Publications The European equity markets were particularly The increase reflected fundamental margin improve- affected by Mario Draghi and his European Central ments, increased sales momentum in all regions, and Bank (ECB) Executive Board in 2014. The expansionary the strategic reorientation, which improved investor monetary policy in the eurozone and generally low sentiment considerably. Including the dividend of interest yields helped various leading equity indices to CHF 3.75 per share, total shareholder return amounted achieve a positive balance. to as much as 53% or CHF 88.

Towards the end of the year, stock markets received The average daily closing price of the share ranged another significant boost, when the ECB decided to between CHF 166 and CHF 255, with the year-end clos- purchase controversial bonds in the peripheral coun- ing price at CHF 251. On average 33 070 shares were tries in 2015 and to reduce the key interest rate to a traded daily, which was a good level in view of the record low. market capitalization of CHF 3.9 billion (December 2014), and the constrained free float (63%) .

SHARE PRICE DATA

(in CHF) 2014 2013

Value Date Value Date

First trading day 165.60 03.01.14 114.10 3.1. Lowest1 165.60 03.01.14 111.70 16.1. Highest1 255.00 08.12.14 180.60 31.10. Last trading day 250.75 30.12.14 166.80 30.12. Average 207.54 144.00 Tax value 250.75 166.80 Total shareholder return, gross of tax 52.6% 52.3% Share price performance 50.3% 48.9% Market capitalization at year end (CHF million) 3 915 2 591

1 Value reflects closing price

Straumann_2014_English_1 161 09.03.2015 16:55:17 162 Information for investors Share performance

SHARE PRICE DEVELOPMENT

Price 1 2 3 4 4 5 6 7 8 Shares in CHF (thousands)

280 360

260 320

240 280

220 240

200 200

180 160

160 120

140 80

120 40

100 0 J FMAM JJAS OND

¢ STMN share price ¢ SMIM index ¢ Volumes trades

1 25 Feb FY 2013 shows significant 4 26 Aug H1 2014: solid revenue growth 7 23 Oct Q3 sales of +7% indicates topline profitability improvements and sharp rise in profitability acceleration

2 23 Apr Collabo ration with botiss 5 29 Aug Partnership with ClearChoice in 8 15 Dec STMN re-enters the SMIM index announced the US announced

3 30 Apr Q1 2014: Promising start into 6 22 Sep Straumann temporarily drops the year out of the SMIM index

HGHEST/LOWEST VALUES STOCK EXCHANGE INFORMATION (in CHF)

Listing SIX Swiss Exchange (STMN) 350 Bloomberg STMN SW 300 Reuters STMN.S 250 Investdata STMN 200 Ex date 14 April 2015 150 Payment date 16 April 2015 100 Security ID 001 228 007 50 ISIN CH 0012 280 076 0 2010 2011 2012 2013 2014

At last day of trading

Straumann_2014_English_1 162 09.03.2015 16:55:18 Information for investors Share performance Information for investors Calendar 163

Calendar Reporting dates & key events

KEY DATES IN 2015 SELECTED DENTAL MEETINGS IN 2015 27 February 2014 full-year results 5–7 March Pacific Dental Conference (Vancouver, Canada) 10 April Annual General Meeting 10–14 March 36th International Dental Show IDS 14 April Dividend ex-date (Cologne, Germany) 30 April Q1 sales 12–14 March Academy of Osseointegration AO 20 August Q2 sales and H1 results 30th Annual Meeting (San Francisco, USA) 29 October Q3 and 9M sales 17–18 April ITI Kongress Deutschland (Dresden, Germany) 7–9 May Ontario Dental Association PLANNED INVESTOR RELATIONS EVENTS Annual Spring Meeting AND CONFERENCES IN 2015 (Toronto, Canada) Members of Straumann’s Executive Management and/ 9 May ITI Congress Switzerland (Berne, Switzerland) or Investor Relations team plan to take part in the fol- 9–10 May ITI Congress Japan lowing events (subject to availability). (Tokyo, Japan) 22–26 May Journees Dentaires Internationales du Québec ROADSHOWS & CONFERENCES (Montreal, Canada) 3–6 June Europerio 8 15 January Helvea Baader Conference, Bad Ragaz (London, UK) 5 March Investor Meetings, London 15–18 July 13º Congresso Internacional de Odontologia 6 March Investor Meetings, Paris (Rio de Janeiro, Brazil) 12 March IDS Investor Breakfast, Cologne 7–9 August Hong Kong International Dental Expo And Symposium 17 March Investor Meetings, Toronto (Hong Kong) 18 March Investor Meetings, Chicago 21–25 September 45th Annual Meeting of the Japanese 19 March Investor Meetings, New York Society of Oral Implantology (Okayama, Japan) 27 March Kepler Cheuvreux Swiss Seminar, Zurich 22–25 September FDI Annual World Dental Congress 17 April Investor Meetings, Madrid (Bangkok, Thailand) 15/16 June Investor Meetings, London 24–26 September 24th Annual Scientific Meeting of the 18 June Credit Suisse China Day, Zurich European Association for Osseointegration (Stockholm, Sweden) 17 July Investor Meetings, Milan 4–5 December botiss biomaterials: Bone & Tissue Days 1 September Investor Meetings, Edinburgh & Chicago (Salzburg, Austria) 2 September Investor Meetings, London & New York 3 September Investor Meetings, Boston 9 September ZKB Breakfast, Zurich SGKB Conference, St. Gallen 23 September Investor Meetings, Copenhagen 24 September Investor Meetings, Stockholm 3 November Investor Meetings, Munich 4 November Investor Meetings, Vienna

If you are interested in meeting Straumann’s top management at one of the meetings, please contact [email protected].

Straumann_2014_English_1 163 09.03.2015 16:55:18 164 Information for investors Research coverage | Contacts

Research Contacts coverage

BANK S BELLEVUE HSBC TRINKHAUS & GROUP HEADQUARTERS Daniel Jelovcan BURKHARDT STRAUMANN HOLDING AG Tel. +41 44 267 72 30 Hendrik Lofruthe Peter Merian-Weg 12, 4002 Basel Tel. +49 211 910 2373 Tel. +41 61 965 11 11 BANK OF AMERICA Fax +41 61 965 11 01 MERRILL LYNCH JEFFERIES Ed Ridley-Day Martin Brunninger INVESTOR RELATIONS Tel. +44 207 995 4585 Tel. +44 207 029 8704 Fabian Hildbrand Tel. +41 61 965 13 27 Rahel Schafroth Tel. +41 61 965 16 78 BANK VONTOBEL KEPLER CHEVREUX [email protected] Carla Bänziger Maja Pataki Tel. +41 58 283 70 21 Tel. +41 43 333 66 23 MEDIA RELATIONS Mark Hill Tel. +41 61 965 13 21 BARCLAYS CAPITAL MAINFIRST BANK Thomas Konrad Tel. +41 61 965 15 46 Alex Kleban Markus Wieprecht/ [email protected] Tel. +44 203 555 21 55 Richard Latz Tel. +49 69 788 08 221 GENERAL INQUIRIES BERENBERG BANK Corporate Communication Thomas Jones MORGAN STANLEY Tel. +41 61 965 11 11 Tel. +44 203 207 7877 Michael Jüngling Fax +41 61 965 11 03 Tel. +44 207 425 5975 COMMERZBANK AG Oliver Metzger NORTHCOAST Tel. +49 69 136 81573 RESEARCH Ed Snyder CREDIT SUISSE Tel. +1 216 468 6903 Christoph Gretler Tel. +41 44 333 79 44 SANFORD C. BERNSTEIN DEUTSCHE BANK Lisa Clive Yi-Dan Wang Tel. +44 207 170 5052 Tel. +44 207 545 9999 UBS EXANE BNP PARIBAS Ian Douglas-Pennant Julien Dormois Tel. +44 207 568 77 63 Tel. +33 1 44 95 69 49 ZKB GOLDMAN SACHS Sibylle Bischofberger Veronika Dubajova +41 44 292 37 34 Tel. +44 207 774 1901

Straumann_2014_English_1 164 09.03.2015 16:55:19 Information for investors Research coverage | Contacts Information for investors Publications 165

Publications Media releases

The Straumann Annual Report is published in February 13 August Straumann invests in RODO Medical and presented at the analysts’ and media conferences. 20 August Neodent USA contests Nobel Biocare’s alle- It is also available online at www.straumann.com. The gations of patent infringement in the USA half-year interim report is published in the form of a 26 August Straumann reports solid revenue growth and sharp rise in profitability media release in August. Other media releases include 29 August Straumann to provide ClearChoice affiliated the quarterly sales reports published in April for the network with a broad range of dental first quarter and in October for the third quarter. implants, including the new Roxolid SLActive Bone Level Tapered implant 18 September New award to promote young professionals Where necessary or appropriate, Straumann also pub- working in the field of periodontology lishes additional information on significant events. 26 September Instradent announces launch of Neodent and Medentika products in Italy Press releases and presentations can be downloaded Neodent USA files counterclaims against Nobel Biocare from the Straumann homepage at www.straumann. 1 October Neodent Spain and Neodent Portugal join com. Please see Information Policy on p. 127. forces as Instradent 23 October Solid nine-month growth with acceleration in Q3 2014 MEDIA RELEASES 28 October Straumann USA and Patterson Dental team up to bring a new standard of care to implant 25 February Straumann lifts profitability significantly placement in general practice and posts 4% organic growth in Q4, bringing full-year revenue to CHF 680 million 24 November Instradent strengthens foothold in emerging Asian markets 25 February Neodent USA announces it’s launch into North America at The Academy of Osseointe- 23 December Independent landmark study shows signifi- gration on March 6-9 in Seattle cantly lower failure rate with Straumann dental implants 26 February Neodent announces launch in the United States 31 March Straumann invests in MegaGen to drive expansion in value implant segment in Asia/ Pacific 2015 MEDIA RELEASES 11 April Straumann AGM: Shareholders approve all 3 February Straumann announces cost-saving measures Board proposals to mitigate currency impact 15 April CADCAM customized abutments with Strau- 19 February Straumann’s staff agrees to proposed com- mann original implant connections now pensation reductions to mitigate currency available to 3Shape users impact 23 April Straumann and botiss team up to provide complete dental regeneration solutions worldwide 24 April Straumann and 3M True Definition scanner provide easy-to-use, all-digital process for implant- and tooth-borne restorations 30 April Promising start to 2014 with 6% growth (l.c.) and first-quarter revenue of CHF 180 million 18 June Neodent implant library now available in coDiagnostiX Guided Surgery planning software from Dental Wings 1 July Mark Bartold receives the 2014 IADR/Strau- mann Award in Regenerative Periodontal Medicine

Straumann_2014_English_1 165 09.03.2015 16:55:19 166

“When I say I work at Straumann everyone is impressed. It has a great reputation.” SIMON BODMER “I like my job because I like PRECISION MECHANIC APPRENTICE being precise.” STEFANIE BARTH TESTING LAB ASSISTANT

Straumann_2014_English_1 166 09.03.2015 16:55:25 167

60 years’ experience you can see under the microscope

STEFANIE BARTH TESTING LAB ASSISTANT 2 YEARS @ STRAUMANN Every bar of raw titanium has to undergo microscopic inspection and the watchful eye of quality controllers like Stefanie. The finished implants and abutments are sampled and scrutinized again and they don’t go out without the tester’s seal of approval. Stefanie says, “Under the microscope you can see the 60 years’ experience.”

SIMON BODMER PRECISION MECHANIC APPRENTICE 4 YEARS @ STRAUMANN “The mechanical development lab is like a family,” says Simon. “They are a close-knit team of perfectionists who measure and test, and test again. At the end of the day I see and touch what I’ve made, and take pride in it.”

Straumann_2014_English_1 167 09.03.2015 16:55:28 168

Dental instruments Simplifying procedures

Straumann instrument cassette

Each year, we make more than 300 000 surgical tools which are an extremely important part of our implant system. Designed for optimum cutting performance, our drills have three precise cutting surfaces to avoid heat that would damage the surrounding bone. They also have depth markings and sophisticated colour coding for convenience and safety.

Many dentists prefer our range of single-use disposable drills, which avoid cleaning, sterilizing and sorting – saving time and costs. For our main product range, this option has been available since 2007.

Straumann_2014_English_1 168 09.03.2015 16:55:29 169

300 000 tools per year

INSTRUMENT COMPLEXITY REDUCED COLOR-CODED Simplicity, reliability and quality are the cornerstones of the prod- The system is advanced, yet simple and efficient to uct philosophy in developing surgical protocols and instruments. use. Customers plan for surgery, decide on the We offer straightforward surgical protocols together with a com- implant to be placed and prehensive portfolio of highly functional and easy-to-use instru- then simply follow the color-coded roadmap of ments to help our customers tackle even the most challenging the protocol. All in all, it is clinical cases effectively. ergonomic, logical and straightforward. We aim to reduce instrument complexity and allow practitioners to focus on the most important aspect of treatment – the patient. That is why, at the heart of the Straumann Dental Implant Sys- tem, there is one instrument kit for the entire range of implant types and indications.

We want our customers to be able to focus instinctively on those aspects of surgery that really matter.

IN-DEPTH ACCURACY Depth gauges and markings are used to ensure precise drilling.

High precision screw drivers, torque wrench, drill and depth guage.

Straumann_2014_English_1 169 09.03.2015 16:55:38 170 Appendix

Appendix Contents

171 Global presence 175 Glossary 179 Global Reporting Initiative 180 Points to note 181 Imprint

Straumann_2014_English_1 170 09.03.2015 16:55:39 Appendix Appendix Global presence 171

Global presence Straumann around the world

AUSTRALIA & NEW ZEALAND CANADA Straumann Australia P/L Straumann Canada Ltd 7 Gateway Court Suite 100 171 Global presence Port Melbourne, 3115 Harvester Road 175 Glossary Victoria 3207 Burlington, Ontario L7N 3N8 Tel.+61 800 660 330 Tel. +1 905 319 2900 179 Global Reporting Initiative Tel.+61 3 9261 1300 Fax +1 905 319 2911 180 Points to note Fax.+61 3 9646 7232 [email protected] 181 Imprint [email protected] CHINA AUSTRIA Straumann (Beijing) Medical Device Trading Co., Ltd. Straumann GmbH B303, 3/F, Tower B, Jia Ming Centre Florido Tower No.27 Dong San Huan Bei Lu Floridsdorfer Hauptstrasse 1 Chaoyang District 1210 Vienna Beijing 100020, Tel. +43 1 29 40 660 P.R.China Fax +43 1 29 40 666 Phone:+86 (10) 5775 6555 [email protected] Fax:+86 (10) 5775 6556 [email protected] BELGIUM Straumann SA/NV CZECH REPUBLIC Belgicastraat 3, box 3 Straumann sro 1930 Zaventem Na Žertvách 2196/34 Tel. +32 2 790 10 00 18000 Prague 8 Fax +32 2 790 10 20 Tel. +420 284 09 4650 [email protected] [email protected]

BRAZIL DENMARK Straumann Brasil Ltda Straumann Danmark ApS Rua Funchal, 263 – 12°andar Nygårds Plads 21, 1 Vila Olímpia 2605 Brøndby 04551-060 São Paulo Tel. +45 46 16 06 66 Tel. +55 11 3058 6888 Fax +45 43 61 25 81 Fax +55 11 3058 6899 [email protected] [email protected]

Straumann_2014_English_1 171 09.03.2015 16:55:39 172 Appendix Global presence

Straumann locations Straumann’s products and services are available Production facilities in more than 70 countries through our subsidiaries Distributors and a broad network of distributors. Instradent

FINLAND Etkon GmbH Straumann Oy Koburger Strasse 45 Fredrikinkatu 48 A 7 krs. 04416 Markkleeberg 00100 Helsinki Tel. +49 341 350 354 0 Tel. +358 9 694 28 77 Fax +49 341 350 354 59 Fax +358 9 694 06 95 [email protected] Etkon GmbH Lochhamer Schlag 6 FRANCE 82166 Gräfelfing Straumann SARL Tel. +49 89 309 07 50 3, rue de la Galmy-Chessy Fax +49 89 309 07 51 19 77701 Marne-la-Vallée Cedex 4 Instradent Deutschland GmbH Tel. +33 1 64 17 30 00 Hammweg 8 Fax +33 1 64 17 30 10 76549 Hügelsheim [email protected] Tel. +49 7229 69912-0 Fax +49 7229 69912-20 GERMANY [email protected] Straumann GmbH Jechtinger Strasse 9 HUNGARY (BRANCH) 79111 Freiburg Straumann GmbH Magyarországi Fióktelepe Tel. +49 761 450 10 M3 Business Center Fax +49 761 450 11 49 Hungária körút 179-187. [email protected] 1146 Budapest Tel. +36 1 787 10 95 Fax +36 1 787 10 96 [email protected]

Straumann_2014_English_1 172 09.03.2015 16:55:40 Appendix Global presence Appendix Global presence 173

ITALY NORWAY Straumann Italia srl Straumann AS Viale Bodio 37a Nedre Vollgate 3 20158 Milan P.O. Box 1751 Vika Tel. +39 02 3932 831 0122 Oslo Fax +39 02 3932 8365 Tel. +47 23 35 44 88 [email protected] Fax +47 23 35 44 80 [email protected] Instradent Italia srl. Bodio Center PORTUGAL (BRANCH) Viale Luigi Bodio, 37/A - Palazzo 4 Straumann SA 20158 Milano Manohay Dental SA Tel. +39 800 975 895 Lagoas Park, Edificio 11 FAX +39 02 84 20 23 60 Piso 3 [email protected] 2740-244 Porto Salvo Tel. +351 214 229 170 JAPAN Fax +351 214 212 144 Straumann Japan KK [email protected] Mita Bellju Building, 6F 5-36-7, Shiba Instradent Iberia S.L., Sucursal em Portugal Minato-ku, Tokyo 108-9914 Lagoas Park, Edificio 11, Piso 3 Tel. +81 3 6568 1188 2740-244 Porto Salvo Fax +81 3 6568 4945 Tel. +351 22 834 44 00 [email protected] Fax +351 21 013 44 05 [email protected] MEXICO Straumann México SA de CV SINGAPORE Rubén Darío #281 Straumann Singapore Pte Ltd int. 1702 Piso 17 1 Maritime Square Col. Bosque de Chapultepec #09-04 Harbour Front Centre 11580 México DF. Singapore 099253 Tel. +52 55 5282 6262 Tel. +65 6376 2023 Fax +52 55 5282 6289 Fax +65 6376 2339 [email protected] SOUTH KOREA NETHERLANDS Straumann Dental Straumann BV Korea Inc. Einsteinweg 15 1005 Korea Trade Tower 3404 LE IJsselstein Samseong 1-dong Tel. +31 30 604 66 11 Gangnam-gu Fax +31 30 604 67 28 Seoul 135-729 [email protected] Tel. +822 2149 3800~4 Fax +822 2149 3810 [email protected]

Straumann_2014_English_1 173 09.03.2015 16:55:40 174 Appendix Global presence

SPAIN UNITED KINGDOM Manohay Dental SA Straumann Ltd Edificio Arroyo - A 3 Pegasus Place Avda. de Bruselas, 38 - Planta 1 Gatwick Road 28108 Alcobendas-Madrid Crawley Tel. +34 916 308 214 West Sussex Fax +34 916 301 819 RH10 9AY [email protected] Tel. +44 1293 651230 Fax +44 1293 651239 Instradent Iberia S.L. [email protected] Avda. de Bruselas, 38 - Planta 1 Edificio Arroyo - A USA 28108 Alcobendas-Madrid Straumann USA, LLC & Tel. +34 91 662 3435 Straumann Manufacturing, Inc. Fax +34 91 662 4869 60 Minuteman Road [email protected] Andover, MA 01810 Tel. +1 978 747 2500 SWEDEN Fax +1 978 747 2490 Straumann AB [email protected] Krokslätts Fabriker 45 431 37 Mölndal Straumann Manufacturing, Inc. Tel. +46 31 708 75 00 113th Street 916A Fax +46 31 708 75 29 Arlington, TX 76011 [email protected] Tel. +1 817 701 11 81 Fax: +1 817 701 12 36 Biora AB Per Albin Hanssons vaeg 41 Instradent USA, Inc. Medeon Science Park 60 Minuteman Road 20512 Malmö Andover, MA 01810 Tel. +46 40 32 13 33 Tel. +1 855 412 8883 Fax +46 40 32 13 55 Fax +1 855 412 8884 [email protected] SWITZERLAND Institut Straumann AG Peter Merian-Weg 12 4002 Basel Tel. +41 61 965 11 11 Fax +41 61 965 11 01 [email protected]

Straumann Villeret SA Champs du Clos 2 Case postale 32 2613 Villeret BE Tel. +41 32 942 87 87 Fax +41 32 942 87 88

Straumann_2014_English_1 174 09.03.2015 16:55:41 Appendix Global presence Appendix Glossary 175

Glossary

DENTAL/MEDICAL TERMS DENTAL TECHNICIAN Dental professional who manufactures crowns, bridges, ABUTMENT dentures and other dental prosthetics according to the A component that connects the implant to the pros- dentist’s specifications. thesis and protrudes into the oral cavity. DWOS ASTM Dental Wings Open Software is an open software plat- ASTM International is an international standards organi- form that allows prosthetics to be designed using data zation that develops and publishes voluntary consensus from multiple sources. technical standards for a wide range of materials, products, systems, and services. EDENTULOUS Having no teeth (can refer to upper and/or lower jaw). BONECERAMIC Straumann’s fully synthetic bone substitute for bone EMDOGAIN augmentation procedures. An extract of enamel matrix proteins which are involved in the development of cementum, periodontal ligament BONE LEVEL IMPLANT and bone. Implant which connects with the abutment at bone crest level. GUIDED SURGERY Surgery in which 3D imaging technologies are used to BONE LEVEL TAPERED (BLT) IMPLANT plan the position, depth and angle of an implant. Bone level implant with tapered profile which provides excellent primary stability. HYDROPHILIC Readily absorbing or attracting water, or having chemi- BRIDGE cal groups that interact with water. An appliance used to bridge the gap left by missing teeth by using one or more false teeth fixed to crowns INTRA-ORAL SCANNING anchored on tooth stumps or implants. Digital scanning to create a 3D image of the patient’s teeth that replaces the conventional process of impres- CADCAM sion-taking followed by model casting. Computer-aided design/computer-aided manufacturing: A computer system is used both for designing a ITI product and for controlling manufacturing processes. International Team for Implantology.

CARES LOXIM CARES is a brand that Staumann uses for its digital pros- A transfer piece temporarily attached to the implant thetic services, including CADCAM, software, function- during placement which then detaches quickly and ality, scanning technology etc. easily without disturbing the implant position.

CROWN A tooth-shaped cap attached to a tooth stump or implant abutment.

Straumann_2014_English_1 175 09.03.2015 16:55:41 176 Appendix Glossary

MEMBRANE PRO ARCH A barrier used in guided bone regeneration to pre- A comprehensive restoration system for the entire vent tissue from occupying space into which new jaw comprised of implants, abutments, and pros- bone should form, and to stabilize bone augmenta- thetic components. tion materials. PROSTHODONTIST NARROW NECK IMPLANT A dental professional who carries out prosthetic restora- Small diameter implant for limited interdental spaces tions on natural teeth and implants. or narrow bone ridges. RCT NIS Randomized controlled trial. Non-interventional study, designed to evaluate products in everyday clinical settings, where the clinician REFERRAL MARKET can use the product as deemed suitable, within treat- A market characterized by a relatively large number ment guidelines. of specialists and in which general dentists tend to refer patients to specialists for procedures like ONE-STAGE PROCEDURE implant placement. Surgical procedure whereby the implant is placed but not covered by the gum tissue during healing, eliminat- RESTORATIVE DENTISTRY ing the necessity of a second surgical procedure to Branch of dentistry concerned with the replacement or expose the implant. reconstruction of teeth.

OSSEOINTEGRATION ROXOLID The biological process of bone integrating with the Straumann’s proprietary alloy of titanium and zirco- implant. nium, which combines high tensile and fatigue strengths with excellent osseointegration. PERI-IMPLANTITIS Inflammatory tissue pathology and/or progressive bone SCAN & SHAPE loss at implant site, resulting from plaque accumulation A Straumann CARES brand service, by which dental and bacterial infiltration around dental implants. technicians generate CADCAM-based, customized abutments from a model or wax-up. PERIODONTICS Branch of dentistry concerned with the care and treat- SCREW-RETAINED BARS AND BRIDGES ment of the supporting tissues of the teeth from the Bridges are devices used to ‘bridge’ a toothless gap gingiva to the adjacent alveolar bone and ligament. and are fixed with screws to two or more dental implants; bars are commonly used to support partial PERIODONTIST or full dentures. Dental professional specialized in the tissue and bone surrounding the teeth and in treating the diseases that SLA affect them. SLA refers to a second-generation implant surface technology, introduced by Straumann in 1997. PERIODONTITIS Progressive disease of the periodontal tissues, re- SLACTIVE sulting in the gradual loss of the tooth and support- Straumann’s third-generation implant surface technol- ing structures. ogy. By virtue of its hydrophilic properties, healing time is cut in half.

Straumann_2014_English_1 176 09.03.2015 16:55:41 Appendix Glossary Appendix Glossary 177

SOFT TISSUE LEVEL IMPLANT FINANCIAL & LEGAL TERMS Implant where the connection between the implant and the abutment is placed at the level of the gums, so AMORTIZATION that the soft tissue surrounds the polished collar of Systematic allocation of the depreciable amount of an the implant. intangible asset over its useful life.

TITANIUM AGM Metallic element isolated from minerals as an iron- Annual general meeting of the shareholders. gray powder; used in many dental and orthopedic applications. AOA Articles of Association. TWO-STAGE PROCEDURE Surgical procedure whereby the implant is inserted and CAGR a healing cap placed, which is then covered by the gum Compound Annual Growth Rate. tissue during healing phase. A second surgical procedure is performed later, in which the healing cap is removed DEPRECIATION and an abutment and provisional prosthesis is placed. Systematic allocation of the depreciable amount of a tangible asset. X-STREAM Solution-driven function within the CARES Visual DOS-DAYS OF SUPPLIES software, providing a one-step, single-tooth implant- Inventory level at the end of a quarter divided by cost of based prosthetic restoration process which signifi- goods sold for a given quarter, times 90. An indicator cantly reduces turnaround time and shipment cost. that helps to determine how long it takes to turn the inventory into actual sales. ZIRCONIA

ZrO2 – the white oxide of zirconium used for its infus- DSO-DAYS OF SALES OUTSTANDING ibility and luminosity in dental implants, prosthetics, Trade receivables divided by revenue for a given quarter, enamels and glazes. times 90. A measure of the average number of days that it takes to collect revenue after a sale has been made. ZIRCONIUM A grayish-white ductile metallic element obtained from EARNINGS PER SHARE (EPS) zircon and used in ceramic and refractory compounds as Net profit divided by the number of shares. an alloying agent. EBIT ZLA Earnings before interest and taxes; also referred to here The ZLA surface of Straumann’s ceramic implant fea- as operating profit. tures a topography characterized by macro- and micro- roughness, similar to the SLA surface, to enhance cell EBITDA attachment and osseointegration. Earnings before interest, taxes, depreciation and amortization.

ECONOMIC PROFIT (EP) See compensation report (p. 145).

EQUITY RATIO Shareholder equity divided by total assets in %.

ERP Enterprise resource planning.

Straumann_2014_English_1 177 09.03.2015 16:55:41 178 Appendix Glossary

FREE CASH FLOW ROCE Net cash from operating activities less capital ex- Return on capital employed; earnings before interest penditures plus net proceeds from property, plant and taxes divided by average capital employed in %. and equipment. ROE FREE CASH FLOW MARGIN Return on equity; net profit divided by average equity Free cash flow divided by Group net revenue in %. in %.

FREE CASH FLOW YIELD SALES Free cash flow per share divided by the stock price of the See ‘sale of goods’ on p. F21. company. TOTAL SHAREHOLDER RETURN (TSR) GOODWILL Profit or loss realized by an investment. TSR includes Future economic benefits arising from assets that are capital gains/losses from increases/decreases in stock not capable of being individually identified and sepa- price as well as received gross dividends. rately recognized. WACC IFRS Weighted average cost of capital. International Financial Reporting Standards. WRITE-DOWN IMPAIRMENT LOSS See ‘impairment loss’. The amount by which the carrying amount of an asset or a cash-generating unit exceeds its recoverable value.

NET PROFIT MARGIN Net profit divided by Group net revenue in %.

OPEX Operating expenses, also called non-manufacturing expenses, including distribution costs, marketing, research & development, as well as general administrative expenses.

ORGANIC GROWTH Growth excluding the effect from business combination and currency effects.

PAY-OUT RATIO Dividend paid divided by net profit over the same period in %.

REVENUES Sales, see p. F21.

ROA Return on assets; net profit divided by average assets in %.

Straumann_2014_English_1 178 09.03.2015 16:55:42 Appendix Glossary Appendix Global Reporting Initiative 179

Global Reporting Initiative GRI Sustainability Reporting

Straumann believes that sustainability is an integral To focus our sustainability reporting on the most per- part of business success, and that it is important to tinent issues for Straumann and its stakeholders, we integrate sustainability topics in our annual reporting have determined relevant reporting topics regarding because they provide the context to what we have or economic, environmental, labor, human rights, soci- have not been able to achieve. ety, and product responsibility issues based on the Guidance for Defining Report Content published by To achieve high transparency for our shareholders and GRI. An online ‘Addendum GRI-Sustainability Report- other stakeholders including customers, employees, ing’ to this report helps readers locate specific perfor- and members of the communities in which we oper- mance and management approach information on ate, we have based our sustainability report on the those issues. Together with this Addendum, the guidelines provided by the Global Reporting Initiative Straumann Annual Report 2014 fulfills the require- (GRI) for the ninth consecutive year. The GRI is a non- ments of the GRI-G3 reporting guidelines at Applica- profit, multi-stakeholder organization that strives to tion Level B. This was reviewed and confirmed by GRI provide companies with a systematic basis for disclo- on 2 March 2015. sure regarding sustainability performance. The aim is to give stakeholders a framework that facilitates com- The ‘Addendum GRI-Sustainability Reporting’ to the parison and clear disclosure of information. Straumann Annual Report 2014 can be found at www.straumann.com/GRI2014.

Straumann_2014_English_1 179 09.03.2015 16:55:42 180 Appendix Points to note

Points to note

FINANCIAL REPORT STRAUMANN TRADEMARKS & BRANDS Straumann’s detailed financial report is published in The following trademarks or brands are registered English as a separate volume. It can be viewed or trademarks and/or used by Straumann Holding AG downloaded through our website: and/or its affiliated companies: Biora®, BoneCeramic™, http://annualreport.straumann.com Bone Control Design™, CARES®, coron®, conaviX™, Consistent Emergence Profiles™, CrossFit®, Eliminate Printed copies can be ordered from: the Dip®, Emdogain®, etkon®, Instradent™, ITI®, Corporate Communication or Investor Relations MembraGel®, More than implants™, Naturally attrac- Institut Straumann AG tive™, n!ce™, Osteogain™, polycon®, PrefGel®, Roxolid®, Peter Merian-Weg 12 SLA®, SLActive®, SLBioActive™, Straumann®, synOcta®, CH - 4002 Basel templiX™, The surface with success built in®, TiBrush®, Tel. + 41 61 965 11 11 ticon®, Variobase®, VivOss™, X-Stream™, Young Profes- E-mail:[email protected] or sionals™, Zerion®, ZLA®, ZLActive®. investor.relations @ straumann.com OTHER TRADEMARKS FORWARD-LOOKING STATEMENTS 3M, ESPE and Lava™ are registered trademarks of 3M This report contains forward-looking statements that Company, USA, or 3M Deutschland GmbH (used reflect the current views of management. Such state- under license in Canada). Botiss, botiss bone builder, ments are subject to known and unknown risks, uncer- mucoderm, collafleece, collacone, grafter, maxgraft tainties and other factors that may cause actual and maxresorb are registered trademarks of botiss results, performance or achievements of the Strau- medical AG, Germany, or its affiliates. DWOS is a reg- mann Group to differ materially from those expressed istered trademark of Dental Wings Inc., Canada. MSCI or implied in this release. Straumann is providing the and the names of all MSCI indexes and products are information in this report as of this date and does not trademarks and service marks of MSCI Inc., USA, and/ undertake any obligation to update any statements or its subsidiaries. Swiss Performance Index (SPI)®, contained in it as a result of new information, future Swiss Market Index (SMI)® and SMI Mid (SMIM)® are events or otherwise. registered trademarks of SIX Swiss Exchange AG, Switzerland. PRODUCT AVAILABILITY The availability and indications of the products mentioned and/or illustrated in this report may vary according to country.

Straumann_2014_English_1 180 09.03.2015 16:55:42 About Straumann

1 Rebecca Hesse SAP Coordinator

2 Susan-Ann Welzbacher Corporate Safety Officer

3 Julia Hirtle Spend Coordinator

4 Roland Scacchi Administrator

5 Alessandro Annicchiarico IT Support 4 7 1 2 3 5 6 8 9 6 Heather Stanton Web Editor IMPRINT Published by: Institut Straumann AG, Basel

7 Dave Koster Lab Business Development Concept and realization: PETRANIX Corporate and Financial Communications AG, Adliswil/Zurich

00_00_STR_GB2014_GB_Umschlag_en.indd 2 09.03.2015 16:45:02 We love what we do 2014 Annual Report 2014 Annual Report Annual 2014

Straumann Holding AG Peter Merian-Weg 12 4002 Basel Switzerland www.straumann.com

00_00_STR_GB2014_GB_Umschlag_en.indd 1 09.03.2015 16:44:50