Half Year Report 2016 of the Galenica Group

Half year report 2016 of the Galenica Group

The Galenica Group – excellence in the healthcare market 2 Galenica Group Key figures 1st half year 2016 Net sales1) by Business unit in million CHF

Key figures (unaudited figures) 2,009.3 Galenica Group in million CHF 1.1.–30.6.2016 1.1.–30.6.2015 Change Net sales 2,009.3 1,792.3 +12.1 % EBITDA 290.7 240.3 +21.0 % EBIT 241.3 200.8 +20.2 % Vifor Pharma CHF 550.6 million Net profit 194.6 157.8 +23.3 % Galenica Santé CHF 1,487.1 million – Attributable to shareholders of Galenica Ltd. 158.9 130.8 +21.5 % – Share of minority interests 35.7 27.0 +32.1 % EBIT1) Investment in property, plant and equipment and intangible assets 162.5 188.6 –13.8 % by Business unit in million CHF Investment in R & D 48.9 39.8 +22.7 % Employees at reporting date (FTE) 6,590 6,238 +5.6 % Cash flow from operating activities 167.1 112.5 +48.5 % Equity ratio 54.4 % 52.9 % 241.3 Galenica Group Net debt 325.1 367.8 –11.6 % Gearing 16.3 % 21.3 %

Vifor Pharma CHF 185.2 million Galenica Santé CHF 66.1 million

1) Key figures are reported for each Business unit not taking into account Corporate and eliminations Share price performance in percent

4,000 % Net profit 3,500 % in million CHF 3,000 %

2,500 % 2,000 % 194.6 1,500 % Galenica Group 1,000 %

Swiss Performance Index (SPI) 500 %

0 % Attributable to shareholders 2011 2012 2013 2014 2015 2016 of Galenica Ltd. CHF 158.9 million Share of minority interests CHF 35.7 million

Per 30 June 2016 Share information Number of employees in CHF 30.6.2016 31.12.2015 Galenica Group Share price at reporting date 1,311.00 1,574.00 Stock exchange capitalisation at reporting date in million CHF 8,489.30 10,194.60 Earnings per share 1.1.–30.6.²) 24.53 20.19 Shareholders’ equity per share 30.6.²) 286.92 256.92 8,028 ²) Attributable to the shareholders of Galenica Ltd. Galenica Group

Galenica Ltd. 45 Vifor Pharma 2,011 Galenica Santé 5,972

Galenica half year report 2016 Content Galenica Group 3

Half year report 2016

Galenica Group

2 Key figures

4 Statement by the Executive Chairman

Reporting

6 Vifor Pharma: Foreword by the Vice-CEO

8 Vifor Pharma

10 Galenica Santé: Foreword by the CEO

12 Health & Beauty segment: Products & Brands and Retail

15 Services segment

Consolidated interim financial statements 2016

16 Galenica Group

Galenica half year report 2016 4 Galenica Group Statement by the Executive Chairman

Statement by the Executive Chairman

We want to take full the first half of 2016 alone, while the new advantage of the current partnerships with US companies Relypsa and OPKO Health, as well as Pfizer com- promising momentum pany Hospira, are also set to positively influence future development. Dear Shareholders, Ladies and Gentlemen, Vifor Pharma – a culture that generates added value beyond its products Etienne Jornod In May 2016, we informed you that the These partnerships demonstrate that Vifor Executive Chairman original target date for the division of the Pharma is much more than a pharma prod- Group would be postponed by six to twelve uct company – it stands for a culture that months to 2017. Our decision was based on generates value over and above its prod- extremely positive developments that ma- ucts. Partnerships with large, interna- terialised more quickly than envisaged, and tional, market-leading companies such as with greater benefit. This pleasing situation Fresenius Medical Care, Roche, Pfizer and motivated the Board of Directors to adopt Daiichi Sankyo are a central pillar in its measures that would allow the Group to strategy. take full advantage of this promising mo- To further build on these defining rela- mentum. tionships and optimally exploit positive growth momentum in the future, the Board Vifor Pharma displays its dynamism of Directors has decided to strengthen In recent months, Vifor Pharma has be- Vifor Pharma management with a new, come increasingly dynamic, particularly more experienced CEO. Until this appoint- with regard to Ferinject® (+45.7 %), which ment is made, Vifor Pharma will be led has registered strong growth in all major on an interim basis by Vice-CEO Gianni markets, especially the important US mar- Zampieri, who has played a major role ket (+102.2 %). This performance reinforces within the Galenica Group for 20 years. our strategy of focusing on the core indica- Søren Tulstrup has left the company, and tions of nephrology, cardiology and gastro- the Board of Directors would like to take enterology. In addition, a number of new this opportunity to thank him once again partnerships have been established: fol- for his commitment. We will inform you of lowing its successful launch in the USA in his successor in due course. mid-2015, Mircera® (licensed by Roche) contributed sales of CHF 153.2 million in

Galenica half year report 2016 Statement by the Executive Chairman Galenica Group 5

Galenica Santé maximises its potential – Together with Ferinject® we will have two Galenica Group The pleasing results of Galenica Santé in products in the portfolio with blockbuster the first half of 2016 show how the organ- potential and… Sales and operating result isation is capable of tapping its potential – …with Veltassa® we will gain almost an- In the first half of 2016, the Galenica with the three Business sectors Products other decade of patent protection until Group increased consolidated net sales & Brands, Retail and Services. 2030. by 12.1 % to CHF 2,009.3 million. Newly created in mid-2015, the Products – Thanks to Relypsa’s dedicated US com- Net profit before deduction of minority interests rose by 23.3 % to CHF 194.6 & Brands Business sector has developed mercial organisation, we will gain direct million and net profit after deduction into a fully integrated and established unit. access to the US market, which repre- of minority interests rose by 21.5 % to One initial major success is the agreement sents about 40 % of the worldwide mar- CHF 158.9 million. On a comparable with Pierre Fabre, the second largest der- ket. basis – without accounting components mo-cosmetics laboratory in the world, to – With the combination of the assets and of IAS 19 – net profit before deduction exclusively distribute A-Derma products in products of Vifor Pharma, VFMCRP and of minority interests rose by 23.5 % Switzerland. Relypsa, Vifor Pharma is positioned to to CHF 201.7 million and net profit after deduction of minority interests The Retail pharmacy formats Amavita, become an important player in the US in increased by 21.8 % to CHF 166.0 mil- Sun Store and Coop Vitality are differenti- its core therapeutic areas. lion. ating themselves in the market with new Consolidated earnings before interest, and expanded services. At the same time, The Acquisition of Relypsa concretise taxes, depreciation and amortisation efficiency is being continually enhanced: by the commitment of Galenica Board of Di- (EBITDA) rose by 21.0 % to CHF 290.7 mid-2017, for instance, the two GaleniCare rectors to separate the Group. The tender million and operating result (EBIT) by Management headquarters in St-Sulpice offer at a price of USD 32.00 per share in 20.2 % to CHF 241.3 million. On a comparable basis EBITDA grew by 21.2 % to and Bern are set to be consolidated at a cash was launched in early August, the to- CHF 299.2 million and EBIT by 20.5 % to common site in Bern. tal investments amounts to approximately CHF 249.9 million. Services will be able to strengthen its USD 1.53 billion. We plan to refinance a The accounting components of IAS 19 position in the dispensing doctors seg- portion of the bridge loan through equity only impacted the consolidated earn- ment with the planned acquisition of Phar- proceeds to be raised in conjunction with ings of the Group, not the earnings of mapool, and is already ideally equipped to the envisaged division of the Group in the the Business sectors. handle larger volumes, thanks to expan- course of 2017, either through an IPO of As part of ongoing and new projects sion in Niederbipp and the new, expanded Galenica Santé or through another option investments in research and development amounted as planned to CHF 48.9 Medifilm facilities. such as an equity increase. million (previous year: CHF 39.8 mil- The Galenica Group is currently under- lion). Division of the Galenica Group going the largest transformation process in Investments in tangible and intangible planned for 2017 its history, calling for even more commit- assets including upfront and expected Due to the management change at Vifor ment and a high degree of flexibility from milestone payments of CHF 124.3 mil- Pharma, the planned division of the us all. Our excellent results in the first half lion (previous year: CHF 154.8 million) Galenica Group should be effected by the of 2016 demonstrate the high degree to totalled CHF 162.5 million (previous year: CHF 188.6 million). end of 2017 at the latest. This means that which employees identify with our com- our plans continue to aim for the earlier pany, as well as their tireless commitment end of the originally planned timeframe of to peak performance. They deserve a huge 2017 to end of 2019. thank you! In July 2016, we announced the planned acquisition of the US company Relypsa. Bern, 9 August 2016 This marks a decisive strategic step which strengthen Vifor Pharma and which is just as important as the Aspreva acquisition in 2008 and the creation of VFMCRP in 2010. – Through the acquisition of Relypsa, we Etienne Jornod will acquire the full global rights of Executive Chairman Veltassa®.

Galenica half year report 2016 6 Reporting Vifor Pharma

Business unit Vifor Pharma

Expanding the product USA in addition to Roche’s Mircera® and to portfolio build a leading position in the US EPO market in the medium term. In addition, Vifor Pharma licensed rights Dear Shareholders, from ChemoCentryx, Inc., to commercial- Ladies and Gentlemen, ise CCX168, a Complement 5a Receptor (C5aR) inhibitor ready for phase III develop- Vifor Pharma sustained strong momentum ment for orphan and rare renal diseases, in Gianni Zampieri in the first half year 2016 on its way to Europe, Canada, Mexico, Central and South Vice-CEO Vifor Pharma become a leading global specialty pharma- America and South Korea. CCX168 has the ceutical company. In order to optimally potential to address major unmet medical exploit this drive, the Galenica Board of needs of patients in a number of different Directors decided end of May 2016 to fur- orphan indications, including anti-neutro- Key figures, first half of 2016 ther strengthen the management of Vifor phil cytoplasmic antibody (ANCA)-associ- – Net sales: CHF 550.6 million Pharma by appointing a new CEO. Due to ated vasculitis (AAV). In the area of rare – EBIT: CHF 185.2 million this change, the division of Galenica has diseases, current treatment options are – ROS: 33.6 % been postponed to 2017 when the new often limited and can be associated with – Investments: CHF 145.8 million CEO of Vifor Pharma has been appointed serious, even fatal side effects. In June – Employees: 2,011 and is settled into their role. 2016, ChemoCentryx announced positive (1,935 full-time equivalents) In recent months, we successfully ex- top line results from the phase II study, panded our portfolio of products by con- with the start of phase III development cluding further licensing and commerciali- programme planned by end of the year. sation agreements. Vifor Pharma entered Furthermore, CCX168 has been granted into a licensing contract with Pfizer for orphan drug designation for AAV in the Retacrit™ for the US dialysis market, cur- USA and EU and also received Euro- rently under review by the US Food and pean Medicines Agency (EMA) PRIority Drug Administration (FDA). Once the prod- MEdicines (PRIME) designation for acceler- uct is approved, the arrangement will allow ated assessment. us to exclusively offer a second EPO in the

Galenica half year report 2016 Vifor Pharma Reporting 7

In May 2016, Vifor Fresenius Medical Application (MAA) for Patiromer powder for 1st half year 2016 Care Renal Pharma (VFMCRP), a common oral suspension (US brand name Veltassa®) company of Galenica and Fresenius Medical to the European Medicines Agency (EMA) Net sales Care, entered into a collaboration and for the treatment of hyperkalaemia (ele- in million CHF licensing agreement with OPKO Health vated blood potassium levels). to develop and commercialise modified- Our overall business is performing release calcifediol capsules (“Calcifediol”; strongly and I am confident that Vifor US brand name RAYALDEE®) for the treat- Pharma will develop dynamically in the fu- 550.6 ment of secondary hyperparathyroidism ture. On top of the robust sales perfor- Vifor Pharma (SHPT) in patients with chronic kidney dis- mance, we have made substantial progress ease (CKD) and vitamin D insufficiency. The in preparing the organisation for its future clinical data for calcifediol show promising as a stand-alone business. Let me thank safety and efficacy and we strongly believe all employees of Vifor Pharma and Vifor Galenica Group CHF 2,009.3 million that calcifediol will become a cornerstone Fresenius Medical Care Renal Pharma for therapy to better address key co-morbidity their contribution to making the first half and improve the well-being of chronic kid- year a successful start to 2016. EBIT ney disease patients. In June 2016, the FDA in million CHF approved the new drug application (NDA) Bern, 9 August 2016 for RAYALDEE® and OPKO Health plans to launch the product in the USA in the second half of the year. 185.2 Vifor Pharma is clearly poised for strong Vifor Pharma growth with Ferinject®, a product that com- bines excellent patient outcomes with a differentiated profile. Ferinject® is instru- mental in the success of our iron business, Galenica Group CHF 241.3 million showing strong momentum particularly in Gianni Zampieri the important US market. In the first half Vice-CEO Vifor Pharma year of 2016, global net sales of Ferinject® (US brand name Injectafer®) generated by Per 30 June 2016 Vifor Pharma affiliates and our partners totaled CHF 163.3 million (+45.7 %). Number of employees The rollout of our new phosphate binder Velphoro® in the USA and major European markets continues to strengthen our position in the broader nephrology market. 2,011 Offering the advantage of a substantially Vifor Pharma lower pill burden compared to the current standard treatment of hyperphosphatemia in CKD, Velphoro® saw net sales increase strongly by 53.1 % to CHF 21.9 million. Galenica Group 8,028 These achievements, and the contribution from other business activities, resulted in a total net sales increase for Vifor Pharma of 42.4 % to CHF 550.6 million. Earnings before interest and taxes (EBIT) increased by 28.0 % to CHF 185.2 million. In Europe’s key markets, VFMCRP has been very effective in commercialising some of the best-known nephrology brands from Fresenius Medical Care. VFMCRP has also submitted a Marketing Authorisation

Galenica half year report 2016 8 Reporting Vifor Pharma

Strong momentum Market sales of Ferinject®/Injectafer® Mircera® – strong take up are developing very well accordingly. For In the first half year 2016, the distribution Net sales and operating result the full year 2016, IMS projected data sug- agreement with Roche for Mircera® gener- Vifor Pharma demonstrated strong mo- gest total global market sales in the range ated sales of CHF 153.2 million (+242.9 %). mentum in the first half year 2016. Total net of CHF 500 to 550 million. sales increased to CHF 550.6 million, up Ferinject® has been successfully Velphoro® – becoming a global brand 42.4 % from the previous year. Adjusted launched in Saudi Arabia, a market with In the reporting period, Vifor Pharma re- for currency effects, the increase was significant potential. New registrations corded net sales of CHF 21.9 million for 40.8 %. The distribution agreement with were granted in various countries and the phosphate binder Velphoro®, with pos- Roche for Mircera® contributed substantial markets, for example Hong Kong. To date, itive sales development continuing in the sales of CHF 153.2 million (+242.9 %). In- Ferinject® is approved in 73 countries and USA. By end of June 2016, Velphoro® was come from licensing fees for CellCept has been launched in 68. In addition to ge- available in 21 countries and registered in totalled CHF 44.3 million compared to ographic expansion, Vifor Pharma suc- 37. Recently, Velphoro® was launched in CHF 44.5 million in the first half year 2015. ceeded in strengthening its iron franchise, Greece, Cyprus, Czech Republic, France, Earnings before interest and taxes (EBIT) particularly in cardiology, gastroenterology Norway and Spain. Next launches are rose by 28.0 % to CHF 185.2 million. In- and nephrology. The 2016 European Soci- planned in Israel and Russia. vestment in research and development ety of Cardiology Guidelines for the diag- Retrospective analysis of Fresenius totaled CHF 43.8 million (previous half nosis and treatment of acute and chronic Medical Care databases supporting the year: CHF 35.5 million). heart failure, published in May 2016, for the Velphoro® launch around the world demon- first time strongly recommends Ferinject® strates a significant increase in the number Ferinject® continues strong growth for the treatment of iron deficiency in of patients within target range of phospho- Global net sales of the leading iron product patients with systolic heart failure. Further- rus levels in the blood after switching from Ferinject®/Injectafer® were up by 45.7 %, more, the guidelines confirm that iron other phosphate binders to Velphoro®; its reaching CHF 163.3 million in the first six deficiency is an important co-morbidity lower pill burden effectively increases com- months 2016. These results comprise own and recommend screening and diagnosis pliance. sales by Vifor Pharma affiliates and sales of iron deficiency in all patients newly diag- by partners, with Vifor Pharma receiving a nosed with systolic heart failure. The guide- share of partner sales. lines reinforce the wealth of evidence In the USA, 101.3 % more units were sold showing Ferinject® can significantly im- in the first six months of 2016 on a year- prove heart failure symptoms, exercise to-year basis. The US partner Luitpold capacity and quality of life for these Pharmaceuticals, Inc., achieved sales in the patients, and that it has the potential to USA of USD 95.8 million in the first half reduce hospitalisation. year 2016, resulting in net sales of CHF 32.2 million for Vifor Pharma. The strong growth experienced to date is the result of multiple initiatives by Luitpold to increase physician awareness of the importance of recognis- Net sales Rx products ing and treating iron deficiency anaemia. in million CHF 30.6.2016 30.6.2015 Change in % The number of units sold (100 mg) in- Intravenous (i. v.) iron replacement products creased worldwide by 61 %. Growth was Ferinject® and Injectafer® 163.3 112.1 +45.7 particularly strong in Italy (+90 %), Australia of which Injectafer® USA 32.2 15.9 +102.2 (+50 %) and Spain (+45 %); all big European Venofer® 62.0 54.1 +14.6 markets achieved double digit growth Other iron replacement products 34.1 32.5 +5.0 ® rates. In Switzerland, the number of 100 mg of which Maltofer 29.4 26.8 +9.7 units of Ferinject® grew by 11 %. Erythropoietin (ESA/EPO) Mircera® 153.2 44.7 +242.9 Phosphate binder Velphoro® 21.9 14.3 +53.1 Other Rx products 41.4 36.5 +13.5 Revenues and licence fee income CellCept 44.3 44.5 –0.6

Galenica half year report 2016 Vifor Pharma Reporting 9

Venofer® – good performance In May 2016, VFMCRP and OPKO Health Toll manufacturing in the USA entered into a collaboration and licens- Net sales in the third-party manufacturing In the first half year 2016, Venofer® gener- ing agreement for the development and business decreased by 10.2 % to CHF 26.2 ated net sales of CHF 62.0 million (+14.6 %), commercialisation of modified-release cal- million, mainly due to a weaker demand of surpassing the previous year’s level. cifediol capsules (“Calcifediol”; US brand a key biotech client. Venofer® showed a good performance name RAYALDEE®) for the treatment of mainly in the US nephrology market. VFM- secondary hyperparathyroidism (SHPT) in Outlook CRP is collaborating with Kidney Research patients with chronic kidney disease (CKD) Priority remains to further strengthen the UK (KRUK) in support of “PIVOTAL”, the and vitamin D insufficiency. Both parties company’s leading position in the iron defi- largest prospective clinical trial to investi- will jointly develop and commercialise ciency market. The continued expansion of gate optimised iron deficiency treatment in Calcifediol as a cornerstone therapy to Ferinject® in existing markets, in particular haemodialysis patients. The company is better address key co-morbidity and im- the USA, is built on the foundation of hae- also working with KDIGO, the global Guide- prove the well-being of CKD patients. matology infusion clinics and usage within line organisation for kidney disease, to ed- In June 2016, the FDA approved the new the gastroenterology segment. Ferinject ® ucate healthcare professionals about the drug application (NDA) for RAYALDEE® and growth is expected to be boosted by latest treatment guidelines. OPKO Health plans to launch the product launches in additional countries in the in the USA in the second half of the year. second half of 2016. Maltofer® – steady growth Vifor Pharma will fully support the com- Net sales of other iron products resulted in Infectious Diseases/OTX – mon company VFMCRP in expanding its CHF 34.1 million (+5.0 %). Of these, the oral supporting actions to overcome position as leading player in nephrology. iron product Maltofer® reported net sales antibiotic resistance Core activities include the successful of CHF 29.4 million (+9.7 %). Net sales of Net sales in the Infectious Diseases/OTX continuation of the Velphoro® launch other prescription medicines, which are franchise fell in the first six months of 2016 programme and pre-launch activities for primarily marketed in Switzerland and to CHF 48.0 million (–18.1 %) due to regu- Patiromer. Spain, amounted to CHF 41.4 million latory-related delivery delays and the eco- The formal division of the Galenica (+13.5 %). nomic situation in South America. Tackling Group has been postponed to 2017 when infectious diseases remains a growing the new CEO of Vifor Pharma has been ap- Expanding portfolio of Vifor Fresenius concern in light of the continued rise of pointed and is settled into their role. In the Medical Care Renal Pharma (VFMCRP) antimicrobial resistance. In this context, meantime, internal projects are advancing VFMCRP had a major presence at the both Broncho-Vaxom® and Uro-Vaxom® at full speed to prepare Vifor Pharma for its ERA-EDTA congress – the most important can play an important role by helping pa- future as an independent pharmaceutical nephrology congress in Europe, which took tients to prevent recurrent infections and company. place in Vienna, Austria, in May 2016. therefore reduce their intake of antibiotics. In 2015, VFMCRP entered into a partner- ship with Relypsa and obtained an exclusive marketing right for Patiromer (US brand name Veltassa®) in worldwide terri- tories outside of the United States and Net sales Infectious Diseases/OTX products Japan. VFMCRP also collaborates with in million CHF 30.6.2016 30.6.2015 Change in % Relypsa on the ongoing development of Broncho-Vaxom® 18.9 23.2 –18.6 Patiromer. In April 2016, VFMCRP submit- ® ted a Marketing Authorisation Application Doxium 9.8 13.5 –28.0 ® (MAA) for Patiromer powder for oral Uro-Vaxom 7.5 7.7 –3.4 suspension to the European Medicines Dicynone® 6.9 9.1 –24.0 Agency (EMA) for the treatment of hyperkalaemia (elevated blood potassium levels). In October 2015, the US FDA approved Veltassa® for the treatment of hyperkalaemia.

Galenica half year report 2016 10 Reporting Galenica Santé

Business unit Galenica Santé

Galenica Santé – The sales growth is all the more pleasing joined-up cooperation given that this year’s flu epidemic was milder than in the previous year, leading to lower sales of flu medicines. The shortfall Dear Shareholders, was more than made up for thanks to Ladies and Gentlemen, customer acquisitions, pharmacy network expansion and sales growth in high-priced Galenica Santé leveraged its potential in medicines. However, as regards medicine Jörg Kneubühler the first half of 2016, thus highlighting its prices, it should be noted that margins in CEO Galenica Santé ambition to be the first choice in Switzer- the Retail and Services Business sectors land for health, beauty and wellbeing. In are very low due to government measures. order to claim a leading role in the Swiss We aim to make our sales and earnings market, we all need to pull together. Pres- more broadly based and to continually Key figures, first half of 2016 sure on drug prices, along with consumer improve our agility. Our customers expect – Net sales: CHF 1,487.1 million tourism driven by exchange rates, meant to receive prompt care and to be able to – EBIT: CHF 66.1 million that we continued to face challenges in re- count on flexible, individual solutions. In – ROS: 4.4 % cent months. And as the figures for the first addition, we want to impress them with – Investments: CHF 16.7 million half of 2016 attest, we were able to meet attractive products and support them – Employees: 5,972 these challenges successfully. Galenica actively with new services. The Retail Busi- (4,614 full-time equivalents) Santé grew its net sales on a comparable ness sector’s pharmacies are therefore basis by 3.7 % to CHF 1,487.1 million and continually expanding their offering to increased its operating result (EBIT) by patients and clients with new health and 3.7 % to CHF 66.1 million. preventive checks. This also includes a comprehensive product range with strong own brands such as Algifor®, Anti-Brumm®, Perskindol® and Triofan®, a portfolio that is complemented by exclusive partner brands. One recent example of such expansion is the agreement signed in mid-2016 with the world’s second largest dermocos-

Galenica half year report 2016 Galenica Santé Reporting 11

metics laboratory Pierre Fabre for the ex- We will be guided by our values as we 1st half year 2016 clusive distribution of A-Derma products in move forward in future. Our activities will Switzerland. be driven by our passion. We will earn the Net sales Galenica Santé has the largest network trust of our customers and partners in million CHF of pharmacies in Switzerland. The compa- through credibility and competence in our nies in the Services segment ensure rapid, day-to-day business – and, just as impor- secure distribution to around 500 loca- tantly, by showing respect towards all our tions, and the recently completed expan- employees and partners. Because we know 1,487.1 sion of the logistics centre in Niederbipp that we can only be stronger if we all pull Galenica Santé ensures reliable processing of high volumes together. I would like to thank all employ- for the long-term. Quality and innovation ees who contributed to the successful start are the top priorities, so that Services can in the first half of 2016. offer market participants a single source of Galenica Group CHF 2,009.3 million integrated solutions. This will be helped by Bern, 9 August 2016 the planned acquisition of Pharmapool, a wholesaler supplying medical practices. EBIT Agility is also key within the company. in million CHF Better interaction between the internal areas and closer coordination of Galenica Santé processes enable us to become Jörg Kneubühler more efficient and keep costs under con- CEO Galenica Santé 66.1 trol. Therefore, for instance, the process is Galenica Santé under way to merge the Retail Business sector’s two headquarters in St-Sulpice and Bern into a common site in Bern. Galenica Group CHF 241.3 million Galenica Santé – your reliable health services provider In light of the decision to develop Galenica Santé into an independent, listed health- Per 30 June 2016 care company, we reorganised our structure in autumn 2015. The Products & Brands Number of employees and Retail Business sectors were brought together within the Health & Beauty segment, while all logistics and IT services were assigned to the Services segment. 5,972 The new structure allows us to work Galenica Santé together in a more joined-up way, while focusing on our core activities. Initial expe- riences show that these improvements enable us not only to increase knowledge Galenica Group 8,028 transfer but also to react more dynamically to market developments. In order to meet our ambitious growth targets, we will also make acquisitions and expand our offering. All in all, this is a challenging task, as the healthcare market will be subjected to further price cuts that will continue to affect us.

Galenica half year report 2016 12 Reporting Galenica Santé, Health & Beauty

Segment Health & Beauty

Net sales and operating result At the beginning of 2016, the Products 1st half year 2016 In the first half of 2016, the Health & Beauty & Brands Business sector launched the new segment increased net sales on a compa- analgesic Algifor® Liquid caps 400. In the Net sales rable basis by 5.4 % to CHF 709.2 million. middle of the year, an agreement for the in million CHF The operating result (EBIT) improved by exclusive distribution of A-Derma products 7.5 % to CHF 47.5 million. Return on sales in Switzerland was signed with the world’s (ROS) grew year-on-year to reach 6.7 %. second-largest dermo-cosmetics labora- Investments in the first half of 2016 were tory Pierre Fabre. Distribution agreements 709.2 CHF 6.5 million. signed with Procter & Gamble in 2015 also Health & Beauty led to pleasing sales figures in the first half The first choice for health, of 2016. beauty and wellbeing In the Retail Business sector, the net- With the largest pharmacy network in work of pharmacies significantly expanded Galenica Santé CHF 1,487.1 million Switzerland, Galenica Santé has a unique with the addition of ten locations. Further platform for the sale of leading brands, own synergies will be realised with the merger brands and partner products. The Health & of the two GaleniCare Management head- EBIT Beauty segment is organised into the two quarters into the Bern site, which is cur- in million CHF Business sectors Products & Brands and rently under way. The GlutenCheck was Retail. Galenica Santé is the leader in the offered for the first time and met with a Swiss healthcare market with its products strong response from pharmacy custom- for combating pain, coughs, colds and res- ers. The digital offering was further ex- 47.5 piratory diseases. It is further strengthen- panded, with customers of Coop Vitality Health & Beauty ing and extending this position with new now able to order and buy products on the products, while also stepping up its pres- “Siroop” shopping platform. ence in the cosmetics and beauty market areas with attractive products and services. Galenica Santé CHF 66.1 million

Per 30 June 2016

Number of employees

4,497 Health & Beauty

Galenica Santé 5,972

Galenica half year report 2016 Galenica Santé, Health & Beauty, Products & Brands Reporting 13

Products & Brands Expanding the portfolio into Business sector new categories The strategy of the Products & Brands Busi- ness sector is to further strengthen its cur- Building a unique customer experience rent leading position in pain, coughs, colds The Products & Brands Business sector had and respiratory diseases, and better ex- a good start to the year 2016. In a market ploit new areas such as cosmetics and under volume pressure, on a comparable beauty. In the period under review, the basis, total net sales summed up to Products & Brands Business sector made CHF 47.9 million in the first semester 2016, progress in implementing this strategy. up 7.2 % from the previous year. In Switzer- Effective in mid-2016, it signed an agree- land, Vifor Consumer Health showed a ment with Pierre Fabre, the second largest solid performance: net sales totalled dermo-cosmetics laboratory worldwide. CHF 33.5 million, an increase of 10.6 %. Galenica Santé has taken over the exclu- Volume growth was spurred by some of the sive distribution in Switzerland for the Business sector’s long-standing over-the- A-Derma product range which is based counter (OTC) products doing particularly on the unique active ingredient called well, for example the analgesic Algifor® Rhealba® Oat. A-Derma is the first der- acting against headaches and pain. A new mo-cosmetics brand with a natural, plant- galenic formula, the Algifor® Liquid caps based active ingredient that soothes and 400, was launched early in 2016, and it protects irritated and delicate skin. The was received very well by the market. Also, agreement with Pierre Fabre is a first step the distribution agreements signed in the in building a stronger franchise in the Swiss course of 2015 for Procter & Gamble brands skin care market. The distribution agree- such as Clearblue® and OralB® were paying ment is being reinforced by various market- off. ing activities as well as staff training in the The other activities and products of pharmacies of Amavita, Sun Store and Products & Brands showed solid perfor- Coop Vitality. To offer good products is only mance too. Export revenues, mainly driven one part of the equation – to provide a by Anti-Brumm® and Perskindol® reached unique, differentiated customer experi- CHF 10.9 million (+22.7 %). ence the other.

Galenica half year report 2016 14 Reporting Galenica Santé, Health & Beauty, Retail

Retail Business sector The health check service offering was Winconcept, the service offering for in- once again expanded, with the newly added dependent pharmacies, found other new Significant reinforcement GlutenCheck. With around 1,700 tests, partners in French-speaking Switzerland. of the pharmacy network there was a high level of participation in the Demand for the Process-one quality assur- Sales growth in the Retail Business sector bowel cancer screening campaign launched ance service remained high in the first half was mainly based on the acquisition of new by pharmaSuisse. In addition, thanks to of the year, with 17 new participants under- customers and an increase in high-priced attractive promotions, Coop Vitality won going training on the platform. Winconcept medicines. The addition of ten new loca- additional market share in the areas of nat- celebrates its 15th anniversary this year tions significantly reinforced the pharmacy ural remedies and dermo-cosmetics, and and is thanking its customers with various network. The flu season at the beginning of expanded its online services with product anniversary activities, including a customer 2016, milder than the previous year’s, af- launches on the new shopping platform event in the Bern region at the beginning of fected a remarkably high proportion of chil- “Siroop”. October 2016. dren and young people, whose symptoms MediService specialists expanded the were largely treated with bed rest and rel- home care offering for multiple sclerosis atively fewer medicines, hence, lower sales patients. At the same time, a number of of medicines than in the previous year. The new cooperation agreements were entered exchange rate continued to present a chal- into for complex therapies in specialty lenge; consequent consumer tourism in pharma. neighbouring countries and pressure on prices from retailers remained as high as before. The 3 % decline in sales at shopping Own pharmacies and shareholdings centres also affected sales figures in the 30.6.2016 31.12.2015 Change pharmacies’ health and wellbeing segment. Amavita pharmacies1) 149 145 +4 Year-on-year, the Retail Business sec- Sun Store pharmacies1) 101 102 –1 tor’s net sales increased by 3.6 % to Coop Vitality pharmacies2) 68 64 +4 CHF 662.5 million in the first half of 2016. MediService specialty pharmacy1) 1 1 — 1) Lean and efficient processes Majority holdings in other pharmacies 7 4 +3 2) for a customer-focused service Minority holdings in other pharmacies 2 2 — All processes of the pharmacy formats Total own points of sale 328 318 +10 Amavita, Sun Store and Coop Vitality will 1) Fully consolidated 2) Consolidated at equity level be simplified and harmonised with the aim of making processing as efficient and lean as possible. Likewise, the planned merger Independent partners of the two headquarters in St-Sulpice and 30.6.2016 31.12.2015 Change Bern into the Bern site by mid-2017 will Amavita partnerships 10 12 –2 enable resources to be pooled. Efficiency Winconcept partner pharmacies 158 161 –3 is also an aim in communication: with the –5 introduction of SharePoint, an effective Total independent partners 168 173 communication platform is being made available to all departments and the pharmacy network.

Galenica half year report 2016 Galenica Santé, Services Reporting 15

Segment Services

Net sales and operating result Business with webshops is also growing. 1st half year 2016 The Services segment sustained momen- Unione Farmaceutica Distribuzione covers tum in the first half of 2016, making pro- the needs of pharmacies and other busi- Net sales gress in both volumes and efficiency. Net ness partners throughout Switzerland with in million CHF sales increased by 3.3 % to CHF 1,148.4 tailored solutions. IT and logistics are million and operating result (EBIT) by 6.6 % seamlessly linked, from the customer order to CHF 20.6 million. Return on sales (ROS) in the webshop to mailing. amounted to 1.8 %. A milder flu season than As a further development of their suc- 1,148.4 last year was more than offset by gaining cessful cool box, in the first half of 2016 the Services new customers and continuing range expan- prewholesale company Alloga launched the sion. Increasing regulation, such as the now new room temperature box (15–25 °C) for binding EU Guidelines for Good Distribution parcel shipments. Due to its relatively high Practice of Medicinal Products for Human weight and rather low filling volume, the Galenica Santé CHF 1,487.1 million Use, demands comprehensive solutions, room temperature box is used for specific which the Services segment is well- shipments rather than bulk transport. equipped to provide. Investments in the first Medifilm continues to grow throughout EBIT six months 2016 amounted to CHF 10.4 Switzerland. The pioneer in blister packag- in million CHF million (2015: CHF 13.2 million) and were ing of drugs for individual patients now largely dedicated to expansion of the regularly supplies more than 6,000 pa- Niederbipp distribution centre. tients. Responding to the need for further increased capacity, the move to new prem- 20.6 ises is scheduled for the start of 2017. Services Services Business sector HCI Solutions has achieved a high level of process quality for minimal cost with Capacity, mobility, vitality direct invoicing to health insurers at In the first half of 2016, the full-range pharmacies working with TriaPharm®. As Galenica Santé CHF 66.1 million pharma wholesaler Galexis was notably an example of specific implementation successful in taking over and further devel- of interprofessional cooperation, digital oping distribution for more suppliers in the vaccination records have been integrated Swiss healthcare market. In parallel with into the TriaMed® and TriaPharm® systems. Per 30 June 2016 completion of Niederbipp expansion, pilot A larger, more efficient distribution cen- projects were launched with several cos- tre in Niederbipp combined with new prem- Number of employees metics manufacturers to take over their ises for Medifilm ensure that Services is logistics. The expanded facility is progres- optimally equipped for the future. Added to sively becoming fully operational over the this is a more modern, more efficient IT course of summer 2016. infrastructure. Here, the replacement of In May 2016, Galenica presented a take- the existing Alloga and Galexis enterprise 1,475 over bid to the shareholders of the physi- resource planning (ERP) system is proceed- Services cian wholesaler Pharmapool. This rein- ing according to plan. The stage has been forcement of the logistics business should set for a further improvement in volumes complement and strengthen Galexis, par- and efficiency. ticularly in the area of self-dispensing phy- Galenica Santé 5,972 sicians. Subject to approval from shareholders and competition authorities, the transaction should be finalised by the end of 2016.

Galenica half year report 2016 16 Galenica Group Consolidated interim financial statements 2016 of the Galenica Group Consolidated interim financial statements 2016

Galenica half year report 2016 Consolidated interim financial statements 2016 of the Galenica Group 17

Consolidated interim financial statements 2016

18 Consolidated statement of income 19 Consolidated statement of comprehensive income

20 Consolidated statement of financial position 21 Consolidated statement of cash flows 22 Consolidated statement of changes in equity 23 Notes to the consolidated interim financial statements of the Galenica Group

23 1. Accounting principles 25 2. Operating segment information 29 3. Business combinations 29 4. Financial assets and financial liabilities measured at fair value 29 5. Significant events 29 6. Contingent liabilities and commitments 30 7. Subsequent events

Galenica half year report 2016 18 Consolidated statement of income

Consolidated statement of income

in thousand CHF 1.1.–30.6.2016 1.1.–30.6.2015 Net sales 2,009,269 1,792,311 Other income 81,227 71,847 Operating income 2,090,496 1,864,158

Cost of goods and materials (1,223,635) (1,114,938) Personnel costs (347,491) (318,865) Other operating costs (228,690) (190,047) Depreciation and amortisation (49,354) (39,551) Operating costs (1,849,170) (1,663,401)

Earnings before interest and taxes (EBIT) 241,326 200,757

Financial income 2,127 5,269 Financial expenses (14,911) (22,423) Income from associates and joint ventures 1,958 2,173 Earnings before taxes (EBT) 230,500 185,776

Income tax (35,904) (27,935)

Net profit 194,596 157,841

Attributable to: – Shareholders of Galenica Ltd. 158,892 130,811 – Non-controlling interests 35,704 27,030

in CHF Earnings per share 24.53 20.19 Diluted earnings per share 24.49 20.17 Unaudited figures

Galenica half year report 2016 Consolidated statement of comprehensive income 19

Consolidated statement of comprehensive income

in thousand CHF 1.1.–30.6.2016 1.1.–30.6.2015 Net profit 194,596 157,841

Hedge transactions – change in fair value 681 (781) – realised in profit or loss 1,197 2,045 Financial assets available for sale – change in fair value 6,345 2,718 – realised in profit or loss — — Translation differences (8,425) (35,322) Income tax (1,358) — Items that may be reclassified subsequently to profit or loss (1,560) (31,340)

Remeasurements of the net defined benefit liability/(asset) (76,502) (61,733) Income tax from remeasurements of the net defined benefit liability/(asset) 16,830 13,581 Share of other comprehensive income from joint ventures (383) — Items that will not be reclassified to profit or loss (60,055) (48,152)

Other comprehensive income (61,615) (79,492)

Comprehensive income 132,981 78,349

Attributable to: – Shareholders of Galenica Ltd. 97,180 51,320 – Non-controlling interests 35,801 27,029 Unaudited figures

Galenica half year report 2016 20 Consolidated statement of financial position

Consolidated statement of financial position

Assets

in thousand CHF 30.6.2016 31.12.2015 Cash and cash equivalents 195,208 422,196 Trade and other receivables 693,403 581,418 Tax receivables 2,163 634 Inventories 365,286 383,807 Prepaid expenses and accrued income 36,713 33,661 Current assets 35 % 1,292,773 39 % 1,421,716

Property, plant and equipment 454,175 450,202 Investment properties 34,021 34,722 Intangible assets 1,714,007 1,601,416 Investments in associates and joint ventures 38,726 40,736 Financial assets 81,772 64,971 Deferred tax assets 44,156 26,233 Non-current assets 65 % 2,366,857 61 % 2,218,280

Assets 100 % 3,659,630 100 % 3,639,996

Liabilities and shareholders’ equity

in thousand CHF 30.6.2016 31.12.2015 Financial liabilities 93,894 144,892 Trade and other payables 410,222 444,302 Tax payables 56,440 47,728 Accrued expenses and deferred income 163,227 164,723 Provisions 2,544 2,257 Current liabilities 20 % 726,327 22 % 803,902

Financial liabilities 663,365 668,799 Deferred tax liabilities 88,755 86,420 Employee benefit liabilities 186,073 100,559 Provisions 4,156 4,154 Non-current liabilities 26 % 942,349 24 % 859,932

Share capital 650 650 Reserves 1,857,552 1,878,443 Equity attributable to shareholders of Galenica Ltd. 1,858,202 1,879,093 Non-controlling interests 132,752 97,069 Shareholders’ equity 54 % 1,990,954 54 % 1,976,162

Liabilities and shareholders’ equity 100 % 3,659,630 100 % 3,639,996 2016 figures are unaudited

Galenica half year report 2016 Consolidated statement of cash flows 21

Consolidated statement of cash flows

in thousand CHF 1.1.–30.6.2016 1.1.–30.6.2015 Net profit 194,596 157,841 Income tax 35,904 27,935 Depreciation and amortisation of property, plant and equipment, investment properties and intangible assets 49,354 39,551 (Gain)/loss on disposal of non-current assets (124) 45 Increase/(decrease) in provisions and employee benefit assets and liabilities 8,932 6,882 Net financial result 12,784 17,155 Income from associates and joint ventures (1,958) (2,173) Other non-cash items 8,546 5,517 Change in trade and other receivables (111,879) (110,822) Change in inventories 19,532 7,599 Change in trade and other payables (3,476) (23,112) Change in other net current assets (12,343) 17,300 Interest received 373 856 Interest paid (6,050) (7,036) Other financial receipts/(financial payments) (2,512) (5,625) Dividends received 4,116 4,900 Income tax paid (28,674) (24,358) Cash flow from operating activities 167,121 112,455

Investments in property, plant and equipment and investment properties (33,525) (26,842) Investments in intangible assets (158,880) (3,376) Investments in associates and joint ventures (531) (1,973) Investments in financial assets and securities (12,422) (5,082) Proceeds from property, plant and equipment and intangible assets 365 512 Proceeds from financial assets and securities 368 37,062 Purchase of subsidiaries (net cash flow) (12,262) (3,259) Cash flow from investing activities (216,887) (2,958)

Dividends paid (116,531) (102,406) Purchase of treasury shares (13,953) (6,637) Sale of treasury shares 4,761 2,500 Proceeds from financial liabilities 16,240 7,009 Repayment of financial liabilities (67,333) (78,154) Purchase of non-controlling interests (67) — Cash flow from financing activities (176,883) (177,688)

Effects of exchange rate changes on cash and cash equivalents (339) (746) Increase/(decrease) in cash and cash equivalents (226,988) (68,937)

Cash and cash equivalents as at 1 January 422,196 238,526 Cash and cash equivalents as at 30 June 195,208 169,589 Unaudited figures

Galenica half year report 2016 22 Consolidated statement of changes in equity

Consolidated statement of changes in equity

Equity Fluctuation in Accumulated attributable to Non- Share Treasury value of financial Retained translation shareholders controlling in thousand CHF capital shares instruments earnings differences of Galenica Ltd. interests Equity Balance as at 31 December 2014 650 (16,968) (5,234) 1,827,827 (93,924) 1,712,351 38,143 1,750,494 Net profit 130,811 130,811 27,030 157,841 Other comprehensive income 3,982 (48,152) (35,321) (79,491) (1) (79,492) Comprehensive income 3,982 82,659 (35,321) 51,320 27,029 78,349 Dividends (97,213) (97,213) (5,220) (102,433) Transactions on treasury shares 287 (7,753) (7,466) (7,466) Share-based payments 5,634 5,634 5,634 Balance as at 30 June 2015 650 (16,681) (1,252) 1,811,154 (129,245) 1,664,626 59,952 1,724,578

Balance as at 31 December 2015 650 (21,944) (1,301) 2,025,742 (124,054) 1,879,093 97,069 1,976,162 Net profit 158,892 158,892 35,704 194,596 Other comprehensive income 6,865 (60,055) (8,522) (61,712) 97 (61,615) Comprehensive income 6,865 98,837 (8,522) 97,180 35,801 132,981 Dividends (116,569) (116,569) (116,569) Transactions on treasury shares (4,842) (5,423) (10,265) (10,265) Share-based payments 8,712 8,712 8,712 Change in non-controlling interests 51 51 (118) (67) Balance as at 30 June 2016 650 (26,786) 5,564 2,011,350 (132,576) 1,858,202 132,752 1,990,954 Unaudited figures

On 28 April 2016, the Annual General Meeting of Galenica Ltd. approved a dividend payment of CHF 117.0 million, corresponding to CHF 18.00 per registered share, for the financial year 2015 (previous year: CHF 97.5 million, CHF 15.00 per registered share). The dividend was paid to the shareholders on 6 May 2016.

Galenica half year report 2016 Notes to the consolidated interim financial statements of the Galenica Group 23

Notes to the consolidated interim financial statements of the Galenica Group

1. Accounting principles

General information

Galenica is a diversified Group operating in the healthcare market. Its activities include the development, manu facture and distribution of pharmaceutical products. In addition, Galenica runs pharmacies, provides logistical and database services and sets up networks. The parent company is Galenica Ltd., a Swiss company limited by shares with its head office in Bern. The registered office is at Untermattweg 8, 3027 Bern, Switzerland. Shares in Galenica Ltd. are traded on the SIX Swiss E xchange under securities no. 1553646 (ISIN CH0015536466). The Board of Directors released the consolidated interim financial statements 2016 for publication on 8 August 2016.

Basis of preparation

The unaudited consolidated interim financial statements are based on the financial statements of the individual companies of Galenica as at 30 June 2016, prepared in accordance with uniform principles. Except for the amend ments to International Financial Reporting Standards (IFRS) detailed below, the consolidated interim financial statements have been prepared using the same accounting principles as the annual financial statements for the year ending 31 December 2015 and comply with IAS 34 – Interim Financial Reporting. The consolidated interim financial statements should be read in conjunction with the consolidated financial statements for the year ending 31 December 2015 as they update previously published information. More detailed information about the account ing policies are given in the notes to the consolidated financial statements for 2015.

Estimation uncertainty and assumptions

The preparation of the Group’s consolidated interim financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense, and the disclosure of contingent liabilities as at the reporting date. Although these estimates and assumptions are made on the basis of all available information, the actual results may differ. Any adjustments resulting from changes in estimates and assumptions are made during the reporting period in which the original estimates and assumptions changed.

Seasonal influences on operations Sales in the business sectors in which Galenica operates are not significantly influenced by seasonal or cyclical fluctuations during the financial year.

Income tax Current income tax is based on an estimate of the expected income tax rate for the full year.

Galenica half year report 2016 24 Notes to the consolidated interim financial statements of the Galenica Group

Amendments to IFRS

As at 1 January 2016 Galenica adopted the following amended International Financial Reporting Standards.

– IFRS 11 – Accounting for Acquisitions of Interest in Joint Operations – IAS 1 – Disclosure Initiative – IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and Amortisation – Annual Improvements 2012–2014 Cycle

These changes have no or no material impact on the financial position, financial performance and cash flows of Galenica nor on disclosures in these consolidated interim financial statements.

Scope of Consolidation

The consolidated interim financial statements of Galenica comprise those of Galenica Ltd. and all its subsidiaries, including associate companies and joint ventures. Subsidiaries, associates and joint ventures acquired during the reporting period are included in the consolidated interim financial statements as at the date when control, significant influence or joint control was obtained. Com panies sold during the reporting period are included up to the date when control, significant influence or joint control was lost. Details of changes in the scope of consolidation in the reporting period are included in note 3, Business com binations.

Group currency and translation of foreign currencies

Galenica’s consolidated interim financial statements are prepared in Swiss francs (CHF) and, unless otherwise indicated, figures are rounded to the nearest CHF 1,000. The table below shows the exchange rates against the Swiss franc of the main currencies of relevance for the consolidated interim financial statements:

Period -end rates Average rates Exchange rates 30.6.2016 31.12.2015 1.1.–30.6.2016 1.1.–30.6.2015 1 EUR 1.08 1.09 1.10 1.07 1 GBP 1.29 1.48 1.43 1.45 1 USD 0.98 1.00 0.99 0.95 1 CAD 0.75 0.72 0.74 0.78

Galenica half year report 2016 Notes to the consolidated interim financial statements of the Galenica Group 25

2. Operating segment information

Products and services of business units first half of 2016 in thousand CHF Vifor Pharma Galenica Santé Corporate Eliminations Group Net sales 550,626 1,487,066 — (28,423) 2,009,269 Other income 60,875 24,715 15,196 (19,559) 81,227 Intersegmental sales and income (29,027) (4,558) (14,397) 47,982 — Third party operating income 582,474 1,507,223 799 — 2,090,496 Depreciation and amortisation (28,551) (20,777) (26) — (49,354) Earnings before interest and taxes (EBIT) 185,150 66,129 (929) (9,024) 241,326 Interest income 380 Interest expense (11,312) Other financial result (net) (1,852) Income from associates and joint ventures — 1,958 — — 1,958 Earnings before taxes (EBT) 230,500 Income tax (35,904) Net profit 194,596

Assets 1,925,816 1,800,152 1,852,975 (1,919,313)1) 3,659,630 Investments in associates and joint ventures — 38,726 — — 38,726 Liabilities 1,041,692 1,476,239 923,061 (1,772,316) 2) 1,668,676

Investments in property, plant and equipment and investment properties 18,501 15,024 15 — 33,540 Investments in intangible assets 127,2733) 1,701 25 — 128,999

Employees as at 30 June (FTE) 1,935 4,614 41 — 6,590 1) Of which elimination of intercompany positions CHF –1,957.9 million and other unallocated amounts CHF 38.6 million 2) Of which elimination of intercompany positions CHF –1,957.9 million and other unallocated amounts CHF 185.6 million 3) Including upfront payments of CHF 124.3 million from the licensing agreements with OPKO Health (RAYALDEE®) of CHF 48.6 million and ChemoCentryx (CCX168) of CHF 75.7 million (see pages 29 and 30, note 5)

Galenica half year report 2016 26 Notes to the consolidated interim financial statements of the Galenica Group

Products and services of Galenica Santé business segments first half of 2016

in thousand CHF Health & Beauty Services Eliminations Galenica Santé Net sales 709,246 1,148,439 (370,619) 1,487,066 Other income 50,580 6,388 (32,253) 24,715 Intersegmental sales and income (67,292) (335,712) 403,004 — Sales and income from other business units (2,952) (1,606) — (4,558) Third party operating income 689,582 817,509 132 1,507,223 Depreciation and amortisation (11,424) (9,789) 436 (20,777) Earnings before interest and taxes (EBIT) 47,523 20,625 (2,019) 66,129 Income from associates and joint ventures 1,958 — — 1,958

Assets 1,101,485 789,616 (90,949)1) 1,800,152 Investments in associates and joint ventures 38,726 — — 38,726 Liabilities 1,045,140 513,684 (82,585)2) 1,476,239

Investments in property, plant and equipment and investment properties 5,940 9,224 (140) 15,024 Investments in intangible assets 548 1,212 (59) 1,701

Employees as at 30 June (FTE) 3,406 1,208 — 4,614 1) Of which elimination of intercompany positions CHF –80.4 million and other unallocated amounts CHF –10.6 million 2) Of which elimination of intercompany positions CHF –80.4 million and other unallocated amounts CHF –2.2 million

Geographic areas first half of 2016

in thousand CHF Switzerland Europe America Other countries Group Net sales 1,519,696 169,347 265,783 54,443 2,009,269 Other income 71,548 9,016 331 332 81,227 Third party operating income 1,591,244 178,363 266,114 54,775 2,090,496

Non-current assets1) 1,944,020 102,881 193,959 69 2,240,929 1) Without financial assets, deferred tax assets and employee benefit assets

Galenica half year report 2016 Notes to the consolidated interim financial statements of the Galenica Group 27

Products and services of business units first half of 2015 in thousand CHF Vifor Pharma Galenica Santé Corporate Eliminations Group Net sales 386,744 1,433,342 — (27,775) 1,792,311 Other income 49,155 27,190 13,355 (17,853) 71,847 Intersegmental sales and income (30,240) (2,347) (13,041) 45,628 — Third party operating income 405,659 1,458,185 314 — 1,864,158 Depreciation and amortisation (19,054) (20,409) (88) — (39,551) Earnings before interest and taxes (EBIT) 144,690 63,768 (1,497) (6,204) 200,757 Interest income 891 Interest expense (10,198) Other financial result (net) (7,847) Income from associates and joint ventures — 2,173 — — 2,173 Earnings before taxes (EBT) 185,776 Income tax (27,935) Net profit 157,841

Assets1) 1,914,542 1,712,619 1,939,267 (1,926,432)2) 3,639,996 Investments in associates and joint ventures1) — 40,736 — — 40,736 Liabilities1) 1,080,376 1,382,101 1,047,806 (1,846,449)3) 1,663,834

Investments in property, plant and equipment and investment properties 9,857 16,969 25 — 26,851 Investments in intangible assets 159,172 4) 2,561 26 — 161,759

Employees as at 30 June (FTE) 1,692 4,506 40 — 6,238 1) Figures as at 31 December 2015 2) Of which elimination of intercompany positions CHF –1,946.6 million and other unallocated amounts CHF 20.2 million 3) Of which elimination of intercompany positions CHF –1,946.6 million and other unallocated amounts CHF 100.2 million 4) Including upfront and milestone payments of CHF 158.4 million from the license agreement with Roche (Mircera®)

Galenica half year report 2016 28 Notes to the consolidated interim financial statements of the Galenica Group

Products and services of Galenica Santé business segments first half of 2015

in thousand CHF Health & Beauty Services Eliminations Galenica Santé Net sales 672,866 1,111,760 (351,284) 1,433,342 Other income 49,748 6,445 (29,003) 27,190 Intersegmental sales and income (49,004) (331,820) 380,824 — Sales and income from other business units (627) (1,720) — (2,347) Third party operating income 672,983 784,665 537 1,458,185 Depreciation and amortisation (11,585) (9,500) 676 (20,409) Earnings before interest and taxes (EBIT) 44,187 19,349 232 63,768 Income from associates and joint ventures 2,173 — — 2,173

Assets1) 1,055,662 715,711 (58,754)2) 1,712,619 Investments in associates and joint ventures1) 40,736 — — 40,736 Liabilities1) 1,016,807 417,321 (52,027)3) 1,382,101

Investments in property, plant and equipment and investment properties 5,600 11,555 (186) 16,969 Investments in intangible assets 1,119 1,629 (187) 2,561

Employees as at 30 June (FTE) 3,323 1,183 — 4,506 1) Figures as at 31 December 2015 2) Of which elimination of intercompany positions CHF –50.2 million and other unallocated amounts CHF –8.6 million 3) Of which elimination of intercompany positions CHF –50.2 million and other unallocated amounts CHF –1.8 million

The segment information disclosed in the interim financial statements 2015 has been restated to reflect the new management structure implemented in the 2nd half of 2015.

Geographic areas first half of 2015

in thousand CHF Switzerland Europe America Other countries Group Net sales 1,466,099 148,415 137,338 40,459 1,792,311 Other income 68,611 2,646 322 268 71,847 Third party operating income 1,534,710 151,061 137,660 40,727 1,864,158

Non-current assets1) 1,822,956 114,155 189,902 63 2,127,076 1) Without financial assets, deferred tax assets and employee benefit assets. Figures as at 31 December 2015

Galenica half year report 2016 Notes to the consolidated interim financial statements of the Galenica Group 29

3. Business combinations

In the first half of 2016, the scope of consolidation has changed as a result of the following transaction:

Galenica Santé business unit Health & Beauty segment Acquisition of pharmacies. GaleniCare Holding and Sun Store acquired 100 % of the interests in pharmacies in various locations in Switzerland. Upon acquisition, most of these pharmacies were merged with GaleniCare Ltd. and Sun Store Ltd. respectively. The purchase consideration amounting to CHF 11.0 million was fully settled in cash. The purchased goodwill of CHF 9.3 million was allocated to the cash generating unit Retail and corresponds to the added value of the pharmacies based on their locations. Transaction costs of CHF 0.02 million were recognised in other operating costs.

4. Financial assets and financial liabilities measured at fair value

The financial instruments of Galenica, measured at fair value at the reporting date, are shown in the tables below. The fair value of financial assets and financial liabilities measured have not changed materially compared to the previous-year financial statements. The valuation method applied has not changed either.

Financial assets measured at fair value in thousand CHF 30.6.2016 Level 1 Level 2 Level 3 Derivative financial instruments 809 — 809 — Securities available for sale 55,774 14,667 — 41,107

Financial liabilities measured at fair value in thousand CHF 30.6.2016 Level 1 Level 2 Level 3 Derivative financial instruments 29,261 — 29,261 — Contingent consideration liabilities from business combinations 19,094 — — 19,094

5. Significant events

Exclusive development and license agreement with OPKO Health In May 2016, Vifor Fresenius Medical Care Renal Pharma Ltd. (VFMCRP) and OPKO Health, Inc. entered into an exclusive agreement for the development and commercialisation of OPKO’s drug RAYALDEE® in Europe, Canada, Mexico, Australia, South Korea and certain other international markets for the treatment of secondary hyperpar athyroidism (SHPT) in patients with chronic kidney disease (CKD) and vitamin D insufficiency. In addition, OPKO has granted VFMCRP an option to acquire rights to the US market for treatment of dialysis patients. Under the terms of the agreement, OPKO received an upfront cash payment of CHF 48.6 million (USD 50.0 million) which has been capitalised at the signing date. The arrangement may require VFMCRP to make certain milestone or other similar payments upon the achievement of agreed objectives or performance targets of max imum USD 232 million. These potential future payments are contingent on regulatory approvals and have not been capitalised at the reporting date.

Galenica half year report 2016 30 Notes to the consolidated interim financial statements of the Galenica Group

Exclusive collaboration and license agreement with ChemoCentryx In May 2016, Vifor Pharma and ChemoCentryx, Inc. entered into an exclusive agreement for the development and commercialisation of ChemoCentryx’s orally-administered Complement 5a Receptor (C5aR) inhibitor CCX168 for orphan and rare renal diseases in Europe, Canada, Mexico, Central and South America, South Korea and Africa. Under the terms of the agreement, Vifor Pharma paid CHF 82.5 million (USD 85.0 million), of which an equity investment in ChemoCentryx was recorded at fair value and the amount attributable to the license agreement was recorded as intangible assets. The arrangement may require Vifor Pharma to make certain milestone or other similar payments upon the achievement of agreed objectives or performance targets of maximum USD 510 million. These potential future payments are contingent on regulatory approvals of CCX168 and have not been capitalised at the reporting date.

6. Contingent liabilities and commitments

Galenica has signed purchase agreements to acquire pharmacies in the next few years. The unrecognised com mitments are expected to involve payments of CHF 20.5 million at the most. The purchase rights have an estimated volume of CHF 20.9 million. These purchase rights or obligations fall due between 2017 and 2020. Galenica has entered into strategic arrangements with various companies in order to gain access to potential new products. Potential future payments may become due to certain collaboration partners achieving certain milestones defined in the collaboration agreements. The maximum amount of unrecogised potential future com mitments for such payments is USD 977 million. There were no changes to ongoing administrative and legal proceedings in the first half of 2016. Galenica re mains confident that the outcome of these proceedings will not have a significant impact on the consolidated financial statements.

7. Subsequent events

The following business combination occurred between 30 June 2016 and the date the consolidated interim finan cial statements were issued.

Galenica Santé business unit Health & Beauty segment Acquisition of pharmacies. GaleniCare Holding acquired 100 % of the interests in pharmacies in various locations in Switzerland. The net assets of these acquisitions will be consolidated for financial year 2016 from the date control was obtained. The purchase consideration was CHF 21.7 million, the fair value of the provisional net assets resulting from these additions was estimated at CHF 6.9 million on the acquisition date. Since the transactions were concluded shortly before the consolidated interim financial statements were issued, it was not possible to disclose the additional information required by IFRS.

There were no further significant events after the reporting date.

Galenica half year report 2016 Impressum

Published by Galenica Ltd. Corporate Communications Untermattweg 8 CH-3027 Bern Phone +41 58 852 81 11 Fax +41 58 852 81 12 [email protected] www.galenica.com

Overall responsibility Corporate Communications and Corporate Finance Division

With the support of Text: IRF Communications, Zurich Translation: CLS Communication AG, Basel Publishing system: EditorBox, Stämpfli Ltd., Bern

Concept and Layout Werbelinie AG, Bern and Thun

Lithographs Lithwork Phoenix AG, Niederwangen

Pictures Jean-Jacques Ruchti, Schönenwerd

The half year report 2016 is also available in French and German and can be downloaded as a PDF at www.galenica.com.

Galenica half year report 2016 Galenica Ltd. Untermattweg 8 · P.O. Box · CH-3001 Bern Phone +41 58 852 81 11 · Fax +41 58 852 81 12 [email protected] · www.galenica.com

Contact Person for Shareholders: Andreas Walde, General Secretary, [email protected] Contact Person for Investor Relations: Julien Vignot, Head Investor Relations, [email protected] Contact Person for Media: Christina Hertig, Head Corporate Communications, [email protected]