Annual Report 2012 Are Understood, Embodied and Put Into Practice by of the Galenica Group and Galenica Ltd

EXCELLENCE IN THE HEALTHCARE MARKET VISUAL CONCEPT

_Galenica is a diversified Group active throughout _Galenica has transformed over the past 17 years the healthcare market which, among other activi- from a former pharmaceutical wholesaler into an ties, develops, manufactures and markets pharma- international healthcare company. To ensure that ceutical products, provides logistical services, runs the Group continues to grow successfully in the pharmacies, offers database services and sets up future, it constantly takes into account changes in networks through its four divisions: Pharma, Logis- economic, technological, social and cultural condi- tics, Retail and HealthCare Information. tions, anticipates trends and rethinks its approach. _In 2012, the Galenica Group employed about 7,300 The technological achievements that have charac- people and generated sales of CHF 3,294.3 million terised Galenica’s activities, the transformations (+3.4%). Profit increased for the 17th year in a row, these have led to within the business sectors and before minority interests to CHF 274.8 million how these are implemented in a way that benefits (+7.5%) and after minority interests to CHF 253.5 the company and its customers are shown in the million (+13.6%). examples in this Annual Report. _Further information is available at _Transformation and further development can only www.galenica.com. be implemented successfully if the vision and goals Annual report 2012 are understood, embodied and put into practice by of the Galenica Group and Galenica Ltd. the employees. In addition, employees, teams and working groups are supported and encouraged by STRATEGY means of targeted measures. The portraits in this report show teams who – representing many others – excelled in the year under review by making a _Since 1995 Galenica has pursued, with great suc- particular contribution to the development of their cess, a strategy that has transformed the former area. pharmaceutical wholesaler into a diversified international healthcare company. Galenica has always sought long-term growth and, at the same time, been careful to distribute risk. Thanks to its well- balanced diversification, the company has not only been able to withstand difficult times, but also to grow during these periods. The Group demonstrated this again clearly in 2012. Galenica will continue to adhere to its vision, pursue its goals per- sistently and tenaciously, and secure the future through targeted investments.

Cover picture

From simple polymer to the SC box _Very little was known about the precise structures of polymeric materials before the end of the 19th century. German chemist Hermann Staudinger is considered to be the father of polymer chemistry. In 1917, he told the Swiss Chemical Society that “highly molecular compounds” were made up of long-chain molecules linked by covalent bonds. Staudinger’s work enabled rapid development in the chemical industry in the area of polymer chemistry. _It is thanks to Staudinger’s discoveries that it was possible to develop the Alloga SC Box. This is tailored precisely to the needs of pharma partners and customers. The high performance materials, which protect products while also guaranteeing that temperatures are fully maintained between 2° and 8°C during transport, are an essential feature. the galenica group – excellence in the healthcare market WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 EXCELLENCE IN THE HEALTHCARE MARKET VISUAL CONCEPT

Cover picture

in million CHF 2012 2011 Galenica Group Net sales 3,294.3 3,187.4 _Pharma 633.3 584.3 _Logistics 2,102.3 2,081.5 _Retail 1,189.2 1,117.9 08 09 10 11 12 08 09 10 11 12 08 09 10 11 12 _HealthCare Information1) 47.1 47.8 _Intersegment net sales (677.6) (644.1) EBITDA 425.7 399.4 Net sales 2012 Net sales 2012 Number of employees 2012 EBITDA in % of net sales 12.9 % 12.5 % by business sector by region EBIT 349.6 327.1 _Pharma 257.1 254.4 _Logistics 30.7 22.8 _Retail 60.3 52.6 _HealthCare Information1) 4.3 2.4 _Other and eliminations (2.8) (5.1) EBIT in % of net sales 10.6% 10.3% Net profit 274.8 255.6 Attributable to: pharma CHF 633.3 million Switzerland CHF 3,555.4 million galenica Ltd. 42 _Shareholders of Galenica Ltd. 253.5 223.1 logistics CHF 2,102.3 million europe CHF 341.4 million pharma 1,850 _Non-controlling interests 21.3 32.5 retail CHF 1,189.2million america CHF 144.9 million logistics 1,096 hci CHF 47.1 million other countries CHF 71.4 million retail 4‚110 Investment in property, plant and equipment and intangible assets 53.5 60.4 (Galenica Group CHF 3,294.3 million) (Galenica Group CHF 3,294.3 million) hci 191 (Galenica Group 7,289) Cash flow from operating activities 291.7 310.7 EBITDA 2012 EBIT 2012 Investments 2012 Cash at 31 December 347.9 338.7 by business sector by business sector by business sector

Employees at 31 December (FTE) 6,089 5,926

Balance sheet total 3,146.7 3,114.2 Shareholders’ equity 1,377.9 1,202.6 Equity ratio 43.8% 38.6% Net borrowings 567.5 708.8 Gearing 41.2 % 58.9% pharma CHF 291.7 million pharma CHF 257.1 million pharma CHF 24.3 million Galenica Ltd. logistics CHF 46.3 million logistics CHF 30.7 million logistics CHF 9.2 million retail CHF 81.0 million retail CHF 60.3 million retail CHF 19.7 million Profit for the year 202.2 57.0 hci CHF 10.7 million hci CHF 4.3 million hci CHF 1.7 million Shareholders’ equity 489.1 345.4 (Galenica Group CHF 425.7 million) (Galenica Group CHF 349.6 million) (Galenica Group CHF 53.5 million) in CHF 2012 2011 Share price performance 1995–2012 _Change in percentages at the end of each quarter Share information in % Nominal value per share at 31 December 0.10 0.10 1’6001,600 2) Number of outstanding shares 6,475,339 6,450,328 1,4001’400 Share price at 31 December 530.50 549.50 1’2001,200 Highest share price for the year 626.00 597.00 1’0001,000 Lowest share price for the year 479.25 390.25 Earnings per share3) 39.14 34.59 800 3) Shareholders’ equity per share 207.80 179.36 600 Gross dividend per share 11.00 4) 9.00 400 Pay-out ratio5) 28.1 % 26.0% Stock exchange capitalisation at 31 December in thousand CHF 3,437,600 3,530,020 200

1) In the operating segment information, HealthCare Information is summarised as “Other” along with other activities of the sector Corporate Finance 0 2) Number of shares after deduction of the number of own, average weighted shares Sept.95Sept.95 DezDec.96.96 DezDec.97.97 DezDec.98.98 Dec.99Dez.99 DezDec.00.00 DezDec.01.01 DezDec.02.02 DezDec.03.03 DezDec.04.04 DezDec.05.05 DezDec.06.06 DezDec.07.07 Dec.08Dez.08 Dec.09Dez.09 Dec.10Dez.10 Dec.11Dez.11 DezDec.12.12 3) Attributable to the shareholders of Galenica Ltd. 4) According to Board of Directors’ proposal to General Meeting on 2 May 2013 Cumulative growth: 1,278%; Average growth rate p.a.: 18%; Total shareholder return p.a.: 20% Galenica 5) Dividend in % of net profit Swiss Performance Index (SPI) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Key figures overview · Galenica annual report 2012 Key figures overview · Galenica annual report 2012 Five-year-comparison Key figures OVERVIEW Net sales EBit Net profit in million CHF in million CHF in million CHF 3,294 3,187 349.6 274.8 3,104 255.6 2,911 322.8 327.1 2,704 230.5 209.5 263.2 264.9 189.2

Employees at 31 December (FTE) 6,089 5,926

AnnuAl RepoRt 2012 FinAnciAl StAtementS 2012

3 _Statement by the Executive Chairman Galenica Group

6 _Foreword by the CEO 92 _Key figures

9 _Vision, values and strategy 93 _Consolidated income statement

13 _Galenica 2012 in brief 94 _Consolidated statement of comprehensive income

95 _Consolidated statement of financial position Reporting 96 _Consolidated statement of cash flows 17 _Pharma 97 _Consolidated statement of changes in equity 27 _Logistics 98 _ Notes to the consolidated financial statements 33 _Retail of the Galenica Group

41 _HealthCare Information 141 _ Report of the statutory auditor on the consolidated financial statements of the Galenica Group 46 _Political environment

50 _Corporate Governance Galenica ltd.

71 _Sustainability 143 _Income statement of Galenica Ltd.

83 _Human Resources 144 _Statement of financial position of Galenica Ltd.

145 _Notes to the financial statements of Galenica Ltd.

150 _ Report of the statutory auditor on the financial statements of Galenica Ltd.

Annex

152 _Glossary

158 _Picture legends teams

Front cover

_Key figures overview

Back cover

_ Addresses of companies of the Galenica Group

_Masthead WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 _1 From private network to World Wide Web _The first network to exchange electronic data was developed for the US Air Force from 1962 and became a reality in 1969. The aim of the predecessor to today’s Internet was to connect the various universities carrying out research for the Department of Defense. _Only 20 years later did Tim Berners-Lee develop the foundations for the World Wide Web at Cern in Geneva (Switzerland). He developed the first web server, the page markup language HTML, the transfer protocol HTTP, the URL and the first browser. _Thanks to Tim Berners-Lee’s development, Sun Store is able, for example, to offer cosmetic products to customers 24 hours a day in their homes via its online shop. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 2_ Galenica annual report 2012 STATEMENT BY THE EXECUTIVE CHAIRMAN Profits up for the 17th consecutive year in 2012 +13.6% after minority interests

Etienne Jornod _“We were again able to drive the Galenica Group forwards in 2012 and increase profits for the 17th consecutive year, this time generating double-digit growth after minority interests. Our task in 2013 is to focus on our defined priorities. These derive from our vision and our will to see Galenica develop and maintain a consistent performance over the long term. This vision is the aim of our journey and is something we should always bear in mind.”

Dear Shareholders, Positive development in all business sectors... Ladies and Gentlemen, _Looking back on operations in the 2012 financial year is also very gratifying: despite the challenging environment, _Another financial year lies behind us, and another record all business sectors continued to grow and to make a has been broken with the 17th consecutive increase in positive contribution to results. consolidated profit. ...and important milestones achieved in strategic _Since the current strategy was launched on 1 September key projects 1995, Galenica has gone from strength to strength, _We made significant progress with all strategic key pro- increasing its stock market capitalisation by more than jects in 2012. 1,200%, its profitability by 1,300% (+CHF 250 million) _Ferinject®: The product performed well in all coun- and its workforce by 650% (up to approximately 7,300 tries, with sales of around CHF 127 million, clearly employees). confirming its potential. _Injectafer®: Due to deficiencies in the manufacturing _Continuity in exceptional performance goes hand-in- facility of our partner in Shirley (USA), the FDA de- hand with continuity in operational management, vision cided to withhold approval. This news came as a bitter and strategic implementation. disappointment. We are confident that we will receive a positive decision in 2013. Operational management _PA21: The positive results of the clinical phase III _The creation of distinct strategic and operational man- study laid the foundation and at the end of 2012 we agement functions with an Executive Chairman and a CEO submitted the first regulatory filing for this new phos- (Chief Executive Officer) is both original and unique, in phate binder. keeping with the financial performance of the Group. It _BG-12: Vifor Pharma’s site in Villars-sur-Glâne is has proven to be a successful move and we have further ready for production of the new drug from Biogen reinforced the collaboration that started in 2009. It is now Idec. clear that a team with complementary knowledge and _Enhancing efficiency: The LoRe project (Logistics- diversity of experience creates added value and increases Retail) is one example of how we can increase effi- efficiency. After 16 years of continuity, we could not sim- ciency and profitability of these business sectors. ply anticipate that such a change of leadership would pro- _Leveraging synergies: The Logistics, Retail and ceed so smoothly. David Ebsworth is the CEO we needed. HealthCare Information business sectors launched a project under the name COAXIAL that will standardise the different IT infrastructures. The goal is to optimise costs and leverage further synergies. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Statement by the Executive Chairman _3 Continuity and long-term growth while retaining _For 2013, our objectives are set against a backdrop of our key values continuity with an eye to long-term development. In order _What we have achieved over the past years is second to to successfully master the next stage of our journey, we none. An important element of our success is our culture. have to concentrate on intermediate objectives. As a re- It is shaped by values such as entrepreneurship and pro- sult, attaining the objectives set and implementing them fessionalism, modesty and lean structures, freedom to act effectively on the ground are a top priority. and a clear focus on implementation. It is a major chal- lenge for us all to uphold these values into the future, living them and developing them further.

_As announced in 2008, we are now in the process of creating an integrated pharma company, with a network of own affiliates in key markets and investing in clinical trials. Up till now, these activities have been financed by Group revenues, Fresenius Medical Care’s contributions and license fee income from the acquisition of Aspreva. Our aim is that, within a few years, the new products and activities will carry the Group on their own.

The “Galenica journey” continues

_Ferinject® expansion _PA21 penetration _Six other projects Well-balanced specialty pharma company _Global iron franchise _Other pharma businesses

_Stock exchange “revolution” Santé Division _Alliance Boots partnering _Fully integrated company _US Venofer® explosion _Pharmacy chain “revolution”

_Specialty Pharma _Aspreva, OM Pharma, Sun Store _Affiliates _Venofer® in the USA _ Vifor Fresenius Medical Care Renal Pharma

_Culture shock _Restructuring _Dispensing doctors _Iron/OTC WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 4_ Statement by the Executive Chairman · Galenica annual report 2012 _For 2013, it is now a matter of: _We are extremely confident that our employees will be _Continuing the expansion of Ferinject® thanks to our able to master the challenges we are facing, and we wish worldwide network of affiliates and partners to thank them for all that they do for our Group. Our thanks _Obtaining registration for Injectafer® in the USA also go to our partners and in particular our shareholders, _Securing initial approval for PA21 and preparing who have placed their faith in us and on whom we are the international launch with our strategic partner relying to successfully negotiate this critical phase. We Fresenius Medical Care promise we will do everything in our power to achieve our _Reinforcing the performance of our OTX and OTC very ambitious targets and realise our vision. products _Further enhancing the success of our logistics activities, which are continuing to create added value with new products and services, and thereby win new cus- Etienne Jornod tomers Executive Chairman _Optimising workflows and the sales network for our Retail business sector

_After 2012, 2013 and 2014 will be key strategic years for the future of our Group, which will also clarify how we will position Galenica going forwards.

_Since the current strategy was launched on 1 September 1995, _It is essential not to allow ourselves to be distracted in the Galenica has passed through various phases. Each phase has short term, but to focus on the priorities and the objectives well-defined objectives, which have to be achieved before enter- defined at each stage. These goals derive from our vision and ing the next one. In this process all businesses, activities and our will to see Galenica develop with a consistent performance projects have a role to play. over the long term. This vision is the aim of our journey, which we should always keep in mind. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Statement by the Executive Chairman _5 FOREWORD BY THE CEO 2012: Delivering on promises

David Ebsworth _“The breadth of performance improvement in 2012 is compelling, showing much promise for the future.”

Dear Shareholders, _Significantly, our iron replacement product Ferinject® Ladies and Gentlemen, has had a particularly successful year, generating pleasing growth in every single market. Thanks to new approvals _In 2012, we pursued our strategy with continued rigour in countries such as New Zealand, Turkey and Brazil and and consistency. We were rewarded by strong financial market launches in Peru and Luxembourg, Ferinject® is results, reaching excellent levels on both the top and the now available to patients in a number of additional coun- bottom line. Galenica grew consolidated net sales by 3.4% tries. As well as launching in new geographies, Ferinject® to CHF 3,294.3 million. Currency effects played a minor use is also growing into different therapeutic areas. It has role in 2012 compared to the previous year, although the been included in a number of new guidelines, including negative impact of the strong Swiss franc continued. Earn- those for the treatment of chronic heart failure and certain ings before interest, taxes, depreciation and amortisation inflammatory gastroenterological diseases. Studies are (EBITDA) were CHF 425.7 million (+6.6%). The operating ongoing to provide further evidence of the benefits of iron result (EBIT) increased by 6.9% to CHF 349.6 million. Con- replacement in various clinical situations. solidated net profit before minority interests increased by 7.5% to CHF 274.8 million and after minority interests by _The Santé division improved its customer offerings and 13.6% to CHF 253.5 million. Over the same period, enlarged its footprint across Switzerland. Growth was Galenica invested CHF 138.9 million (+6.5%) in research achieved organically as well as by selectively seizing ex- and development. Investments in tangible and intangible pansion opportunities. Our activities in Switzerland grew assets totalled CHF 53.5 million (–11.4%). This excellent considerably, particularly given the continuing pressure set of results is also evidence of the smooth management on prices and the general decline in retail sales. This transition. The new roles defined a year ago are working growth is attributable to the further development and ex- very well. tension of customer offerings: in the Logistics business sector, the Alloga coolbox has now been introduced to Another year of strong profit growth almost all customers and the GALecoline® product range _The strong figures are the result of exceptional team- has been expanded; in Retail, the ranges have been har- work. All business sectors – Pharma, Logistics, Retail and monised and own-label brands and the service offerings HealthCare Information – contributed to growth. Each to customers have been expanded; HealthCare Informa- sector was successful as a stand-alone unit in its own area tion has launched a new, more user-friendly generation of of expertise. TriaPharm® software for cash desks in nearly all Amavita pharmacies, implementation of which has also started in the Sun Store pharmacies. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 6_ Foreword by the CEO · Galenica annual report 2012 Staying the course _In 2012, we discussed the evolving dynamics facing phar- _The breadth of performance improvement in 2012 is maceutical companies globally – such as growing pricing compelling, and is the result of a consistently implement- and regulatory pressures, market access challenges and ing our strategy as well as the comprehensive knowledge the complexity of capturing opportunities in emerging of our staff. We rely on a strong entrepreneurial culture markets. Our ability to succeed in the face of all of these and broad, deep expertise in all our business sectors. trends is built on our ability to adapt and implement flex- Going forward, the Group will continue to realise the stra- ible, fast, innovative and cost-effective solutions. We can tegic projects defined a year ago. all be proud of the strides we have made, but there is still more to do. _Specifically, milestones for 2013 include the following: _Vifor Pharma will continue to expand both the geo- _We thank all of our clients and shareholders for their graphic footprint of Ferinject® and awareness of iron support, and our employees for their strong commitment. deficiency and related therapies. Also, we expect We encourage them to continue working together effec- news from the FDA regarding Injectafer®. tively, finding ways to work innovatively and, as always, _Vifor Fresenius Medical Care Renal Pharma will help keeping our patients at the forefront of everything we do. to maximise the significant potential for iron therapies in nephrology. _Preparations for the launch of PA21 in the USA and Europe will be intensified. _Processes are being continuously optimised in the Logistics, Retail and HealthCare Information business David Ebsworth sectors to increase efficiency and improve profitabil- Chief Executive Officer ity. Customer loyalty will be strengthened and expanded through innovation and excellent service.

_In tune with the customer – the motto for 2012 – will ment of our success. At the suggestion of the Comité also guide us in 2013. Only when we know what really des Jeunes, we will therefore continue to apply the 2012 concerns our customers, how they feel and what they motto in 2013. want, can we convince and inspire them with our products and services, and win them over! This is a key ele- WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Foreword by the CEO _7 From bacteria to medication _In 1876, Robert Koch successfully cultivated the anthrax pathogen outside of the body and described its lifecycle. This was the first time that the role of a pathogen in causing a disease had been described in its entirety. He developed the culture plate technique with solid, transparent culture media. Until then, bacteria were either cultivated in meat stock or on slices of potato. Koch solidified the meat stock with gelatine. His colleague Walther Hesse later used agar-agar. The innovation of solid, transparent culture media revolutionised bacteriology. _Vifor Pharma cultivates cultures of inactivated bacteria that cause respiratory and urinary tract infections on an industrial scale. The bacteria are obtained in highly complex production steps of fermentation and purification. They form the basis of Broncho- Vaxom® and Uro-Vaxom®, which stimulate the immune system and boost natural de- fences. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 8_ Galenica annual report 2012 VISION, VALUES AND StrAtEGy Focus on long-term and sustainable development

VISION hIStOry

_The Galenica Group is a diversified healthcare company From pharmaceutical logistics provider to with extensive experience and expertise across the international healthcare company healthcare market. Through its business activities, _Galenica was founded in 1927 by 16 French-speaking Galenica creates long-term value and benefits for custom- pharmacists who came together to create a central pur- ers, patients and partners as well as for its employees and chasing group. In 1938, Galenica laid the foundation for shareholders. its current information management business by developing a scientific documentation service. From 1957 on- wards, Galenica diversified its core business through the targeted acquisition of several companies, such as VALUES Panpharma, a specialist distributor of parapharmaceutical products to pharmacies. Other acquisitions followed in the 1970s, including Vifor and Cooper in 1977, and Labo- _In pursuing its goals, the Galenica Group is guided by the ratorien Hausmann in 1983, with a view to diversifying into following values: hospital supply and non-prescription (OTC) medicines. _Long-term orientation: The Galenica Group focuses _In 1991, Galenica sold its hospital supply business to its activities on ensuring long-term economic sustain- B. Braun (Germany) and decided to refocus its activities ability and is not governed by a short-term profit men- on distribution. tality. _In 1995, in response to the rapid and fundamental _Innovation: Galenica believes long-term success will changes in market conditions, the Group’s management also be created by new pharmaceutical products, developed a new strategy based on a vision of turning strengthening the existing product range, innovative Galenica into a healthcare player who is engaged in the services of the highest quality and continual upgrad- entire value chain in Switzerland. ing of its infrastructure. _Thus in 1996, Galenica expanded its distribution activi- _Focus on success: Galenica is a success-oriented ties to all players in the Swiss market (pharmacists, as Group that aims for high return from its activities. well as dispensing physicians, chemists and hospitals), _Flexibility: Galenica’s Board of Directors and Corpo- set up eHealth companies and, with the creation of Galeni- rate Executive Committee observe market trends, Care in 2000, laid the foundation for its pharmacy chains. weigh opportunities against risks and lay the ground- _In parallel, the Group focused on niches at the industrial work early for a successful future by taking a targeted level, and began to expand internationally with the iron approach. They knowingly accept short-term fluctua- replacement products initially produced by Laboratorien tions in results to generate value over the long term. Hausmann. These were fundamentally redesigned and _Sustainability: For Galenica, economic performance repositioned by the research & development team, and is directly linked to its environmental and social re- became Venofer® and Maltofer®. They were joined by sponsibility. Ferinject®, which was launched at the end of 2007, as well as other projects, notably PA21, a novel iron-based phosphate binder, for which the approval dossier was submitted to the European Medicines Agency (EMA) at the end of 2012, and VIT91, which is currently in the preclinical phase. The acquisition of the Canadian pharmaceutical company Aspreva Pharmaceuticals in 2008 and of OM Pharma in 2009 led to the creation of what is today a globally active, fully integrated specialty pharma company, Vifor Pharma, with a broad range of products and projects. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Vision, values and strategy _9 _Today, the name Galenica stands for an internationally two strategic areas of emphasis active, diversified group that researches, develops, manufactures and markets pharmaceutical products around _The Galenica Group focuses on two strategic areas: the world, and in Switzerland runs pharmacies, provides Specialty Pharma and Swiss HealthCare Services. logistical services and operates databases and networks with information and software tools for all players in the Specialty Pharma public health sector. _The core of Specialty Pharma is the fully integrated specialty pharma group Vifor Pharma. The company researches, develops and produces its own products and markets them worldwide. It also produces and markets StrAtEGy in-licensed pharmaceutical products. _Vifor Pharma has three key business areas: iron deficiency with and without anaemia, infectious diseases/OTX Diversification in the healthcare market products and Consumer Healthcare, with a focus on over- _The Galenica strategy seeks to create long-term growth the-counter (OTC) products. while distributing risk effectively. This allows it to mitigate _Vifor Pharma seeks to leverage its strengths and fully the effects of fluctuations in certain sectors without jeop- exploit the international potential of its products – par- ardising the entire Group. Thanks to its healthy diversifica- ticularly Ferinject® and the new phosphate binder PA21 tion, Galenica is active in many different complementary – to enhance its leading position worldwide. The company areas creating synergies for the benefit of all partners in achieves this through its affiliates in key markets and the healthcare industry. through new and established partnerships with other lead- _The Group strategy is based on two key elements: a con- ing companies. Vifor Pharma is also involved in the re- sistent focus on one particular sector, the healthcare mar- search and development of new products with global ket, and a steady diversification of activities over time to potential. achieve a manageable distribution of risk. Strategic decisions are always focused on the long-term development _Iron deficiency. In many countries, intravenous iron re- of the Group. Galenica strives for market leadership in all placement products are used by nephrologists mainly to its businesses and to be active along the entire value treat patients with chronic kidney disease who are under- chain, thereby gaining the greatest possible knowledge of going dialysis. However, iron deficiency is also a symptom its markets and their specific development. It also seeks of many other diseases. Intravenous iron is used to treat to forge links among the various players in the healthcare patients with iron deficiency in cardiology, in oncology, in industry. gastroenterology, in gynaecology, and for pre- and post-

Strategy of the Galenica Group

Specialty Pharma Swiss healthCare Services International National

Iron Deficiency Infectious Consumer retail Logistics Information Diseases/OtX healthcare WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 10_ Vision, values and strategy · Galenica annual report 2012 operative anaemia. This diversity in patient needs means Swiss healthCare Services that the iron replacement products of Vifor Pharma have _The Group’s second area of strategic focus, Swiss considerable market potential. HealthCare Services, has a unique business model offer- _Raising awareness in the international medical commu- ing integrated services for the Swiss healthcare market. nity for iron deficiency in indications outside dialysis is a The driving force behind this model is the Retail business high priority for Vifor Pharma. The ongoing development sector. It is represented by five pharmacy formats that are of scientific evidence supporting the use of Ferinject® and positioned independently in the market: the Amavita and the evaluation of new opportunities in the treatment of Sun Store pharmacy chains, the Coop Vitality joint iron deficiency in different therapeutic areas are therefore venture, the specialty pharmacy MediService and essential. Galenica is making significant investments in Winconcept, the marketing organisation for independent research, development and commercialisation to achieve pharmacists. The optimisation and further expansion of these goals. the pharmacy network have high priority. Logistics and _At the end of 2010, Galenica and Fresenius Medical Care, information management play important complementary the leading global provider of dialysis products and roles and ensure both the businesses owned by Galenica services, founded Vifor Fresenius Medical Care Renal and those of other players in the market. They have sig- Pharma. With the approval of antitrust authorities in nificant benefits and are important to a well-functioning October 2011, the new company was assigned the global supply chain. Therefore, these activities are being con- marketing rights to Venofer® and Ferinject® in the area of tinuously strengthened accordingly. nephrology as well as all rights to the new phosphate binder PA21. The first drug application was submitted to _Networked with all the players in the Swiss healthcare the European health authorities at the end of 2012. market. Thanks to its activities along the entire value chain, Galenica is able to develop and maintain relation- _Infectious diseases/OTX products. With the acquisition ships with all key elements of the market: pharmacists, of OM Pharma in November 2009, Vifor Pharma gained physicians, druggists, hospitals, patients and consumers unique expertise in the area of immunology and a product as well as suppliers. This provides Galenica with extensive portfolio of infectious diseases and OTX products that knowledge of the market and its development. complemented the existing prescription and over- _The strategic options that the company has developed the-counter businesses of Vifor Pharma. Its flagship prod- in this area in recent years will allow the Galenica Group ucts are Broncho-Vaxom®, Uro-Vaxom®, Doxium® and to offer its services in Switzerland on very advantageous Dicynone®. terms also in the future. Lean structures and rapid implementation of necessary measures also contribute to the _Consumer Healthcare. In Consumer Healthcare Vifor company’s success. Pharma manufactures and markets non-prescription drugs (OTC, over-the-counter products) developed by Alliance Boots Vifor Pharma or sold under licence. Vifor Pharma plays a _Since 1999, the Galenica Group has had a strategic part- leading role in Switzerland, its home market, with key nership with Alliance UniChem Plc, today Alliance Boots. brands such as Algifor®, Triofan®, Perskindol® and This strategic partnership is based on a contract that will Anti-Brumm®. Vifor Pharma continues to make advances remain in force until 2014. in various therapeutic areas, and is building on its core brands. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Vision, values and strategy _11 From battery to electromobility _By experimenting on frogs’ legs, Luigi Galvani discovered muscles contracted when they came into contact with copper and iron – provided that the copper and iron were connected to one another. Luigi Galvani thus unknowingly created a circuit. The salt water in the frogs’ legs acted as an electrolyte. Although Galvani did not recognise these connections, his discovery laid the foundations for the later development of electrochemical cells by Alessandro Volta. _There was still a long road ahead from the invention of the battery by Alessandro Volta to efficient storage for the environmentally friendly propulsion of electric vehicles. Unione Farmaceutica Distribuzione attaches great importance to the use of green technologies and has therefore converted its vehicle fleet for field sales staff to electric vehicles. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 12_ Galenica annual report 2012 Galenica 2012 in brieF

ViSiOn and ValueS Galenica GrOuP

_The Galenica Group is a diversified healthcare company Strategy: focus on two strategic areas with extensive experience and expertise across the health- _Specialty Pharma: The core of Specialty Pharma is the fully inte- care market. Through its business activities, Galenica grated, specialty pharmaceutical group Vifor Pharma, which researches, develops and produces its own and in-licensed pharma- creates long-term value and benefits for customers, ceutical products and markets them worldwide. Vifor Pharma patients and partners, as well as for its employees and concentrates on three key business areas: iron deficiency, infectious shareholders. In pursuing its goals, the Galenica Group diseases/OTX products and Consumer Healthcare, which focuses is guided by the following values: long-term orientation, on over-the-counter (OTC) products. _Swiss Healthcare Services: Swiss HealthCare Services provides innovation, focus on success, flexibility and sustainability. services to the Swiss healthcare market, including a range of pharmacy formats, logistics and information management.

Highlights of 2012 _Galenica increased its consolidated net sales by 3.4% to CHF 3,294.3 million in 2012. Profit increased for the 17th year in a row, before minority interests to CHF 274.8 million (+7.5%) and after minority interests to CHF 253.5 million (+13.6%). _The intravenous iron drug Ferinject® enjoyed a year of particularly strong growth, with worldwide sales up 48.4% to CHF 127.1 million. The drug was launched in new regions and therapeutic areas in 2012. In addition, Ferinject® was included in a number of new treatment guidelines, including for chronic heart failure and gastroenterological diseases. _In close cooperation with Fresenius Medical Care, the first registration filing for the new phosphate binder PA21 was submitted to the European regulatory body at the end of 2012. _In Logistics, the Alloga coolbox was introduced with nearly all customers, and the GALecoline® product range was expanded. In Retail, the product lines were harmonised, and there were additional own-brand products and service offerings for customers. Health- Care Information launched a new, user-friendly application from TriaPharm® at practically all Amavita pharmacies and also began introducing the application at the Sun Store pharmacies.

Outlook for 2013 _Specialty Pharma: Vifor Pharma is to launch Ferinject® in further geographical locations and continue promoting awareness of iron deficiency and suitable treatments. In addition, the FDA’s decision regarding the registration of Injectafer® is expected. Preparations for the market launch of PA21 in the USA and Europe will be stepped up. _Swiss Healthcare Services: Processes are being optimised continuously in the Logistics, Retail and HealthCare Information business sectors in order to increase efficiency and profitability. Client loyalty is to be consolidated and further developed by means of innovations and first-class services.

business sectors _Pharma _Logistics _Retail _HealthCare Information Key figures 2012 _Net sales: CHF 3,294.3 million _EBITDA: CHF 425.7 million _EBIT: CHF 349.6 million _Net profit: CHF 274.8 million _ Employees: 7,289 (6,089 full-time equivalents) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Galenica 2012 in brief _13 PHarMa lOGiSTicS

Philosophy and strategy: a fully integrated specialty pharma Philosophy and strategy: tailored solutions group with sustainable growth _The Logistics business sector plays an important role in the _Vifor Pharma is an internationally active specialty pharma company Swiss pharmaceutical supply chain. Galexis, Unione Farmaceutica that researches, develops, produces and markets its own pharma- Distribuzione, Alloga and G-Pharma provide country-wide integrated ceutical products. The company has three main areas of focus: iron healthcare logistics services. They offer proven modular solutions deficiency with and without anaemia, infectious diseases/OTX prod- that support their customers’ success. The strategy centres on ucts and Consumer Healthcare (OTC). strengthening market position and working in close cooperation with all market participants. Our priorities are to maintain a high activity level of availability and systematically leverage synergies. _With its iron replacement products Ferinject®, Venofer® and Maltofer®, Vifor Pharma is a leader in the treatment of iron defi- activity ciency, a widespread ailment around the world. To gain rapid and _As the leading pharmaceutical wholesalers in Switzerland, Galexis direct access to the various international markets, Vifor Pharma and unione Farmaceutica distribuzione ensure within a few hours works through its own sales affiliates as well as with partners. delivery to all healthcare partners throughout the country. The com- _The immuno-stimulant products broncho-Vaxom® and uro-Vaxom® panies supply pharmacies, physicians, drug stores and hospitals supplement the portfolio of Vifor Pharma and offer significant poten- with over 80,000 referenced healthcare products. tial for expansion. _alloga offers pharmaceutical and healthcare companies a broad _consumer Healthcare manufactures and markets over-the-coun- range of specialised logistics services (prewholesale). This allows ter products developed within the Group, as well as products man- customers to concentrate on their core areas of expertise, such as ufactured or sold under licence. Vifor Pharma plays a leading role research and development or marketing. in the area of non-prescription medicines in Switzerland. _G-Pharma handles and coordinates the purchasing, sale, warehousing and distribution of products for third parties and provides Highlights of 2012 its customers with marketing support. _Ferinject®. Thanks to new approvals and launches, patients now have access to Ferinject® in a series of additional countries. Progress Highlights of 2012 has also been made in penetrating new therapeutic areas beyond _New rapid picking lines established at Galexis, have enhanced the dialysis: the therapy has been included in several new treatment company’s ability to centrally ensure on-schedule delivery within a directives, notably those of the European Society of Cardiology. few hours throughout Switzerland. _The PreFer trial provided further evidence of the benefits of iron _Much in demand in the year under review was a specialised Galexis replacement. The study demonstrated in a statistically significant service supporting pharmaceutical partners with supplying drugs and clinically meaningful way that Ferinject® reduces fatigue in for clinical studies. women with iron deficiency without anaemia. _alloga launched the new coolbox with great success. It had been _The pivotal phase III studies for Pa21 have been successfully com- introduced to 85% of customers by the end of 2012. Over 4,000 pleted and the first request for authorisation was filed for Europe at coolboxes are now in circulation. Government offices and business the end of 2012. partners at home and abroad have registered their interest in this _Vifor Fresenius Medical care renal Pharma broadened its foot- as yet unique product. print through partnerships in several countries in Asia and Latin America. Outlook for 2013 _Production of bG-12 (fumarate dimethyl) at the Vifor Pharma site _The priorities remain the same for the Logistics business sector: in Villars-sur-Glâne successfully passed an FDA inspection. Produc- maintaining and, where possible, increasing quality in customer tion of this new multiple sclerosis drug from Biogen Idec offers in- relationships, acquiring new clients looking for a reliable partner teresting growth opportunities. such as Galexis and further optimising processes and storage capacity. In the current tough environment, market leadership can only Outlook for 2013 be achieved through cost leadership. A major role, therefore, is _Vifor Pharma continues to pursue its defined strategy. Supporting played by Group-wide programmes and use of infrastructure, the the approval and launch of injectafer® in the uSa with US partner keywords being energy supply, equipment and IT. Luitpold Pharmaceuticals is a strategic priority. _Other priorities are to obtain marketing authorisation approval for Pa21 and execute the Ferinject® clinical trial programme. _In Infectious Diseases/OTX, strong market growth is expected for the Vaxom products, particularly in Brazil, Mexico and China. _In consumer Healthcare Switzerland, the revised strategy was defined in 2012 and implementation has begun. It is a multi-year effort with initial results expected to be seen in 2013.

companies _Vifor Pharma Ltd., www.viforpharma.com companies _Alloga Ltd., www.alloga.ch _Sales affiliates _G-Pharma AG _OM Pharma SA, www.viforpharma.com _Galexis Ltd., www.galexis.com _Vifor Fresenius Medical Care Renal Pharma Ltd. _ Unione Farmaceutica Distribuzione SA, www.unione.ch.

Key figures 2012 _Net sales: CHF 633.3 million Key figures 2012 _Net sales: CHF 2,102.3 million _EBITDA: CHF 291.7 million _EBITDA: CHF 46.3 million _EBIT: CHF 257.1 million _EBIT: CHF 30.7 million _Employees: 1,850 (1,764 full-time equivalents) _Employees: 1,096 (916 full-time equivalents) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 14_ Galenica 2012 in brief · Galenica annual report 2012 reTail HealTHcare inFOrMaTiOn

Philosophy and strategy: innovation within a strong network Philosophy and strategy: promoting networking _Galenicare is the leading retail structure in the Swiss pharmacy _The management of data, information and knowledge as well as market. It is GaleniCare’s intention to play an active role in shaping network functionalities are increasingly becoming a strategic suc- the future of the deregulated and rapidly changing Swiss pharma- cess factor as service providers in the healthcare sector are under ceutical market. GaleniCare therefore focuses on developing, pro- growing pressure to optimise processes, leverage synergies and moting and managing strong pharmacy networks. With its amavita, realise cost benefits. The businesses of HealthCare Information Sun Store, coop Vitality joint venture and MediService specialty maintain databases and develop management solutions tailored pharmacy formats as well as Winconcept, GaleniCare is one of the specifically to the needs of the networked healthcare market. The most important partners for the various players in the healthcare products encompass both the management of content (documed market. Innovative and attractive services meet rising customer and e-mediat) and iT systems (TriaPharm® and TriaMed®). They demands. meet the needs of customers for IT tools quickly and efficiently and offer them valuable support in their daily activities. The businesses activity play a key role in the eHealth Switzerland strategy through their _Galenica’s pharmacy network is the largest in Switzerland, with extensive expertise in creating and operating databases and devel- 300 stores owned by Galenica and 167 partner pharmacies. The oping management systems for the healthcare sector. network comprises the amavita and Sun Store pharmacies, which are managed directly by GaleniCare, the amavita partner pharma- activity cies, which are integrated under a franchise concept, as well as the _e-mediat is the leading provider of master data systems for the coop Vitality pharmacies, which are operated as a joint venture entire Swiss healthcare market. with Coop. The MediService specialty pharmacy focuses specifi- _documed publishes printed and electronic pharmaceutical infor- cally on in-home care for people with chronic illnesses. The brand mation and provides the groundwork for the new system for regula- name Feelgood’s includes independent pharmacies for which the tory drug information (Arzneimittelinformation Publikationsplatt- company Winconcept offers services such as marketing concepts. form Swissmedic, AIPS). _Hci Solutions maintains databases and develops management Highlights of 2012 solutions which gear in particular towards the needs of the net- _In 2012, Galenicare improved numerous processes, notably in worked healthcare market. TriaPharm® is a total management soft- logistics and central services. The ActivePOS cash register system ware solution designed for pharmacies. TriaMed® software was of TriaPharm® has now been installed in the majority of Amavita developed for physicians and is suitable for both individual and pharmacies and the roll-out has begun in Sun Store pharmacies. networked medical centres and group practices. _Following its rapid growth in recent years, amavita has harmonised its product range. Core product ranges have now largely been Highlights of 2012 defined for the various formats and pharmacy sizes. The reorganised _documed won the European WTO tender from Swissmedic and pharmacies are showing a marked improvement in sales. was thus awarded the contract to develop and run the new regula- _In 2012 Sun Store celebrated its 40th anniversary with events for tory drug information publication system (Arzneimittelinformation employees and business partners. Customers were able to take Publikationsplattform Swissmedic, AIPS), which became opera- advantage of many special offers and competitions during the an- tional as of 1 January 2013. niversary year, including the weekly “Sunny Monday” special promo- _e-mediat largely completed transfer of the “galdat” article direction, which was so successful that it will be continued in 2013. tory into segment-specific INDEX products. The “Clinical Decision _coop Vitality reached a milestone in Granges-Paccot in the canton Support” hospINDEX® module was expanded with additional func- of Fribourg by opening its 50th pharmacy. tions. _MediService also celebrated an anniversary: its 15 years in busi- _Hci Solutions launched a new, more user-friendly generation of ness. At an Anniversary Symposium in Zuchwil, invited guests dis- TriaPharm® software for cashdesks in nearly all Amavita pharma- cussed various topics relating to direct patient care. cies. Following this successful implementation, a start was made on installing the software in Sun Store pharmacies. Sales activities Outlook for 2013 were strengthened at TriaMed®. This software is in the meantime _Optimisation of the pharmacy network with targeted expansion will used by about 1,400 physicians. continue, with good locations being further strengthened and weaker ones consolidated. Outlook for 2013 _Profitable growth remains the priority. Measures that are impor- _In collaboration with the Federal Office of Public Health and the tant to achieving this aim include the sale of supplementary services Zurich Children’s Hospital, documed will progressively integrate the such as netCare and polymedication checks, promotional activities data available from “Kinderdosierungen”, aimed at improving dosage based on specific customer segments, increasing own-brand sales information for children, into the INDEX databases. TriaPharm® will and the continuing development of Pharma Care/Home Care at be introduced in all remaining Sun Store pharmacies in 2013. This MediService. Various projects such as LoRe aim to improve cost will conclude HCI Solutions’ harmonisation of POS software for the efficiency further. Galenica Group’s two largest pharmacy formats. The objective for 2013 is to better harmonise processes across the entire HealthCare Information business sector.

companies and _ GaleniCare Management Ltd., companies _HCI Solutions Ltd., www.hcisolutions.ch pharmacy formats www.galenicare.com _Documed Ltd., www.documed.ch _Amavita pharmacies, www.amavita.ch _e-mediat Ltd., www.e-mediat.ch _Sun Store SA, www.sunstore.ch _MediService Ltd., www.mediservice.ch _Winconcept Ltd., www.winconcept.ch _Coop Vitality AG1), www.coopvitality.ch

Key figures 2012 _Net sales: CHF 1,189.2 million Key figures 2012 _Net sales: CHF 47.1 million _EBITDA: CHF 81.0 million _EBITDA: CHF 10.7 million _EBIT: CHF 60.3 million _EBIT: CHF 4.3 million _Employees: 4,110 (3,200 full-time equivalents) _Employees: 191 (172 full-time equivalents)

1) Consolidated at equity WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Galenica 2012 in brief _15 Transformation in Production _In preparation for a FDA pre-approval inspection, measures to optimise the flow of goods were implemented at Vifor Pharma’s Villars-sur-Glâne production site. The introduction of three-shift operation meant a departure from the normal working rhythm for the production team. Thanks to the commitment and willingness to cooperate of all members of the team, production volumes increased substantially and quality standards with regard to hygiene and documentation were optimised. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 16_ Pharma · Galenica annual report 2012 Pharma Iron franchise growing in new markets and therapeutic areas

David Ebsworth _“The relevance and benefits of iron therapy for patients suffering from iron deficiency, for example due to chronic heart failure or ulcerative colitis, are increasingly being discussed and recognised by health care professionals.”

STraTEGIC PrIOrITIES 2013 Sales and operating result

_Net sales in the Pharma business sector rose by 8.4% to _ Advancing the development of Ferinject® in CHF 633.3 million. Adjusted for currency effects, the international markets increase was 7.9%. Currency effects played therefore a _ Supporting the approval and launch of Injectafer® in minor role in 2012 compared to the previous year, although the USA with US partner Luitpold Pharmaceuticals the negative impact of the strong Swiss franc continued. _ Further developing and expanding the Vaxom _Income from licensing fees for CellCept amounted to products in new markets CHF 90.9 million (previous year: CHF 120.5 million). Invest- _ Preparing for the registration and commercialisation ments in research and development totalled CHF 133.2 of novel phosphate binder PA21 million. They were mainly used for clinical studies with _ Establishing Vifor Fresenius Medical Care Renal Ferinject® in different therapeutic areas, for example in Pharma in all key markets gynaecology and cardiology (chronic heart failure) and _ Continuing to strengthen strategic over-the-counter for studies providing scientific evidence to support the (OTC) brands and solidifying the company’s position as filing of PA21. Consolidated earnings before interest and a top tier consumer healthcare products provider in taxes (EBIT) increased by 1.1% to CHF 257.1 million. Switzerland

Key figures 2012

Net sales EBIT Number of staff

19% 74% 25%

Pharma CHF 633.3 million Pharma CHF 257.1 million Pharma 1,850 (Galenica Group CHF 3,294.3 million) (Galenica Group CHF 349.6 million) (Galenica Group 7,289) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Pharma _17 With sales growth of 48.4% to ChF 127.1 million, Ferinject® passed the ChF 100 million mark for the first time.

Vifor Pharma rx Total net sales rx products

_Strong international growth for Ferinject®. Ferinject® in million CHF 2012 2011 Change in % Intravenous (IV) iron replacement products: surpassed the CHF 100 million mark for the first time in Venofer® 142.7 167.1 –12.8 2012 by a large margin. Global sales growth of 48.4% to Ferinject® 127.1 85.7 +48.4 CHF 127.1 million was based on impressive growth rates Other iron replacement products: 66.0 62.3 +0.4 in all countries. For example, the number of units sold of which, Maltofer® 50.8 53.7 –5.5 (100 mg) increased sharply in France (165%), as well as in Other rx products 70.3 47.8 +48.5 the UK and Ireland (89%), the Netherlands (69%) and Ger- revenues and licence fee income: many (35%). The market launch of the product in Belgium CellCept, other 256.8 232.1 +10.5 was also extremely successful and on a global scale, the number of units sold (100 mg) grew by 55%. Sales growth already been launched in a number of key countries. in the well-established Swiss market was strong at 16.8%, Further launches took place in Austria, Spain, Portugal, clearly demonstrating once again the sustainable poten- Sweden, Finland and Denmark in 2012. tial of Ferinject®. _Stability in other iron replacement products. The other _Venofer® maintains market position. Venofer® achieved iron replacement products generated good results in the sales of CHF 142.7 million in 2012 (–12.8%). Despite a year under review. Sales amounted to CHF 66.0 million negative price development in the USA, the launch of iron (+0.4%). The oral iron replacement product Maltofer® gen- sucrose similars (ISS), pressure on prices in various mar- erated sales of CHF 50.8 million (–5.5%), to a large extent kets, new intravenous original iron replacement products compensating for negative influences in the first six and substitution with Ferinject® in many countries, months in the second half of the year. At the end of 2012, Venofer® was able to maintain its market leading position. Vifor Pharma also signed an exclusive agreement with The new Venofer® vial formulation – which enables sim- China Medical System Holdings Limited for the registra- pler, safer use – was approved in Europe in 2011 and had tion and distribution of Maltofer® and Uro-Vaxom® in China.

Vifor Pharma locations around the world

Headquarters R & D Sales Affiliates Production Sites Hubs

Vifor Pharma Vifor Pharma Vifor Pharma Vifor Pharma Vifor Pharma Switzerland Switzerland Austria Switzerland Argentina Belgium United Kingdom Australia OM Pharma France Canada Switzerland OM Pharma Germany Russia Portugal Italy Singapore Switzerland Netherlands USA Romania Spain Sweden Switzerland United Kingdom OM Pharma Peru Portugal Switzerland WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 18_ Pharma · Galenica annual report 2012 International networking _Hardly any other area of the Galenica Group has been as strongly affected by Galenica’s transformation into an international Group as IT at Vifor Pharma. The Global Information Systems team was heavily involved in the international networking. Under its direction, systems were introduced that operate internationally and can be deployed by users. A single Vifor Pharma domain was launched, and two central data centres established and brought into operation. Various regional offices in different countries had to be connected to the system. A collection of standard operating procedures (SOPs) for computer validation applicable worldwide and an international service desk (central point of contact for all service issues within an organisational structure) were also introduced. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Pharma _19 New European Crohn’s and Colitis Organisation (ECCO) consensus guidelines for ulcerative colitis published in October 2012 feature anaemia as a specific topic for the first time and recommend the use of intravenous iron to treat it.

_Other prescription products. Sales of other Vifor _Iron injections are also beneficial for anaemic patients Pharma prescription products, which are mainly sold in with inflammatory bowel disease (IBD). The European Switzerland and Spain, rose 48.5% to CHF 70.3 million. Crohn’s and Colitis Organisation (ECCO) published new This growth is partly attributable to the acquisition of the consensus guidelines for ulcerative colitis in October 2012 Primary Care business and various in-licensed products featuring anaemia as a specific topic for the first time and from Spanish company Grupo Uriach at the end of 2011. recommending the use of intravenous iron to treat it. Anaemia is said to be “the most common extra-intestinal Tapping the market potential of Ferinject® manifestation of IBD”. in all relevant therapeutic areas _By year end 2012, Ferinject® was registered in 43 coun- _Further evidence for reduction of fatigue. The PREFER tries worldwide and had been launched in 35 markets. trial provided further evidence of the benefits of iron re- Thanks to new marketing approvals in countries such as placement. The study which was successfully completed New Zealand, Turkey and Brazil and market launches in in early 2012 demonstrated, with statistically significant Peru and Luxembourg, Ferinject® is now available to pa- and clinically meaningful results, that Ferinject® reduces tients in a number of additional countries. fatigue in women of childbearing age with iron deficiency _The growth strategy aims to tap the market potential for without anaemia. The PREFER study has been presented Ferinject® in therapeutic areas beyond dialysis. Signifi- and discussed at advisory boards held by Vifor Pharma, cant progress has been made throughout the year in this attended by internationally renowned cardiologists, respect. In spring 2012, the European Society of Cardiol- gynaecologists, obstetricians, gastroenterologists and ogy issued new Guidelines for the Diagnosis and Treat- nephrologists. The results were also presented at ment of Acute and Chronic Heart Failure confirming that congresses in Malaysia, Amsterdam, Rome, Basel and iron therapy with ferric carboxymaltose, the active ingre- Munich. dient in Ferinject®, improved self-reported global assessment by patients with chronic heart failure associated with iron deficiency and may be considered as a treatment for such patients.

Global market for iron products

Overall development Segments 2012 Segments 2012

in Mio.millionCHF CHF 2,142 2,134 10.6% 2,065 1,925 1,749 65.5%

36.2% 35.3% 33.1% 35.1%

32.9% Intravenous: Total CHF 876 million Oral: Total CHF 1,266 million

08 09 10 11 12 Market share Vifor Pharma Other (~1,700 corporations)

(Source: IMS Midas; CHF/MNF, MAT 2012–Q3) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 20_ Pharma · Galenica annual report 2012

11% The PrEFEr trial provided further evidence of the benefits of iron replacement.

New phosphate binder Pa21

_The pivotal phase III studies for PA21, the novel iron- _Hyperphosphataemia is a complication affecting CKD based phosphate binder, have been completed. They patients on dialysis, significantly contributing to their confirmed that PA21 is well tolerated and equally as mortality and morbidity if not controlled. Despite the effective as sevelamer carbonate, currently the standard fact that most dialysis patients receive phosphate bind- therapy. The same level of efficacy was reached with ers, approximately 50% remain uncontrolled, thus, there less than half the number of pills required for sevelamer. is still an unmet medical need to better control phos- The first approval dossier was submitted to the Euro- phate levels. A contributing factor is the lack of binding pean Medicines Agency (EMA) at the end of 2012 as potency of the currently available binders, leading to a planned while the dossiers for Singapore, the USA and high pill burden with 8–12 tablets per day. Switzerland followed by the end of February 2013. _Joint preparations for launch and commercialisation _The development of PA21 in Japan, the second largest are well on track with partner Fresenius Medical Care. dialysis market, is making excellent progress as well, with Japanese partner Kissei Pharmaceuticals Co., Ltd. successfully completing the phase II study.

_The FIND-CKD study in chronic kidney disease (CKD) Injectafer® in the USa finished enrolment in 2012 and the observation period will _The FDA has had an ongoing focus on addressing chal- run into 2013. It examines the benefits of Ferinject® com- lenges within the manufacturing and control of sterile pared to oral iron replacement products for the treatment injectable drugs in the USA. In July 2012, Luitpold received of iron deficiency anaemia in patients with chronic kidney a Complete Response letter from the FDA regarding the disease. New Drug Application (NDA) for Injectafer® (US brand name of Ferinject®). The Complete Response indicated _More data on iron. Recruiting is ongoing and on track that Luitpold must address manufacturing issues in the for two studies in chronic heart failure (EFFECT-HF and plant in Shirley, New York, for the FDA to complete its CONFIRM-HF) and for a study in the second and third review of the application. No further clinical data was trimesters of pregnancy. New additional studies are requested. planned to further expand the geographic availability of _Luitpold is working closely with the FDA to correct the Ferinject® in the Asia Pacific region. manufacturing issues while preparing for the US launch _As part of the effort to expand the label for Ferinject®, of Injectafer®. an update to a special section of the Summary of Product Characteristics (SmPC) was filed in the EU in late 2012. Venofer® maintaining market position The update includes data from 30 Vifor Pharma-spon- _With over 14 million patient years of exposure, Venofer® sored clinical trials in the areas of nephrology, cardiology, is the best-documented intravenous iron product and the gastroenterology, gynaecology, oncology and neurology. gold standard in this drug therapy category. Once these clinical findings have been accepted for inclu- _The new Venofer® vial presentation – offering healthcare sion, healthcare professionals will be able to benefit from professionals simpler and safer application – was ap- this information on the use of Ferinject®. proved in 2011 in Europe and first launched in some key countries. In 2012, it was launched in Austria, Spain, Portugal, Sweden, Finland and Denmark, and remaining markets will be covered throughout 2013 and 2014 to further strengthen the competitive profile of Venofer®. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Pharma _21 The Pa21 authorisation dossier was filed for approval in the USa at the beginning 2013.

_Venofer® and its copies, the iron sucrose similars (ISS), Strong partnerships belong to a new class of drugs called non-biological com- _Vifor Pharma strongly believes partnerships facilitate plex drugs (NBCD), sharing commonalities with biologics. and expedite access to markets. While good progress Regulatory authorities, in particular those in Europe, have was observed in all partnerships, the collaboration with recognised the challenges of applying the generic para- Fresenius Medical Care merits highlighting. Besides digm to NBCDs. This development is positive for Vifor strengthening its activities in Europe and the USA, the Pharma since there are still no authorisation procedures common company Vifor Fresenius Medical Care Renal allowing NBCD copies to demonstrate therapeutic equiv- Pharma has broadened its footprint through partnerships alence. in several countries in Asia and Latin America, and serves _In May 2012, Venofer® was presented at the European more than 250,000 dialysis patients worldwide. This Renal Association – European Dialysis & Transplant Asso- collaboration with the strongest partner in the field of ciation (ERA-EDTA) congress in Paris to further defend its nephrology promotes Vifor Pharma’s products Venofer® leading position in haemodialysis. and Ferinject®, as well as PA21 in the future, in the renal _Good news from the USA was that Luitpold received FDA sector, while allowing Vifor Pharma more time and approval – and three-year exclusivity – for use of Venofer® resources to focus on those therapeutic areas outside of in paediatric patients. This FDA approval now broadens nephrology. the approved uses for Venofer® to include administration _Japanese partner Kissei Pharmaceutical has progressed to children aged two years and older for iron deficiency with the clinical development of PA21 for Japanese pa- anaemia in all stages of chronic kidney disease (CKD). tients, with the phase II dosing range study successfully completed. Going for growth with other iron products _In late 2011, Galenica fully acquired Vifor Uriach Pharma _Vifor Pharma continues to expand all of its brands in the SL, a joint venture with its Spanish partner Grupo Uriach, iron product range. The Maltofer® team participated in along with the Primary Care sector and a range of Grupo congresses and marketing activities, for example at the Uriach’s in-licensed products. The company was renamed world congress for gynaecologists and obstetricians Vifor Pharma España and fully integrated in 2012. The (FIGO) in Rome, which was a joint effort between Vifor integration improves Vifor Pharma’s ability to commercial- Pharma’s specialist medical and marketing teams – for ise Ferinject® and Venofer® as well as the in-licensed Maltofer®, Ferinject® and Venofer® – and the Vaxom products. teams. _A scientific paper by Professor Jorge E. Toblli, demon- Successful inspections strating that “Maltofer® (iron polymaltose complex, IPC) _Regulatory agencies inspected Vifor Pharma sites as part similars are not the same” was published in the Interna- of their periodic surveillance activities, as well as for prod- tional Journal of Clinical Pharmacology and Therapeutics. uct pre-approval. As European Marketing Authorization The results of this study revealed that the IPC similar holder responsible for EU market release, the French unit investigated had different physicochemical properties passed the audit successfully, as did the Clinical depart- compared to Maltofer®, showed altered tolerability and ment, which was audited for Good Clinical Practice absorption, and is therefore likely to result in reduced through the UK site. The Swiss manufacturing sites in efficacy and increased oxidative stress. St. Gallen, Geneva and Villars-sur-Glâne passed successfully Swissmedic inspections. St. Gallen and Villars-sur- Glâne were also successfully inspected by the US Food and Drug Administration (FDA). Significant efforts were made by Quality teams and all other involved departments to demonstrate compliance with applicable rules and regulations. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 22_ Pharma · Galenica annual report 2012 Good progress for Vifor Fresenius medical Care renal Pharma

_The focus in 2012 was on expanding the collaboration Outlook with Fresenius Medical Care as partner in Europe, Latin _After the submission of the PA21 dossier to the Euro- America, Africa and Asia Pacific where they currently pean Medicines Agency (EMA) at the end of 2012 as have active pharmaceutical sales organisations. Efforts planned, the requests for authorisation for Singapore, were made to develop the nephrology business in both the USA and Switzerland followed by the end of February dialysis and especially in pre-dialysis, where Vifor 2013. Fresenius Medical Care Renal Pharma can assure active _The results of FIND-CKD are expected to be announced promotion of the intravenous iron portfolio comprising in 2013. Venofer® and Ferinject®. _The collaboration with Fresenius Medical Care is to be _The company also continues to build its library of data further strengthened. The plan is to expand into more to show that iron sucrose similars (ISS) are not equiva- markets, particularly in Eastern Europe, the Middle East, lent to Venofer®. Latin America and Asia Pacific. _Vifor Fresenius Medical Care Renal Pharma provided _The revised KDIGO anaemia guidelines, with the prom- excellent support for the phase III clinical trials of the inent role they give to intravenous iron, provide excellent novel phosphate binder PA21. In early July 2012, the market opportunities. In parallel, a significant, on-going results of the pivotal phase III clinical study were pub- collaboration with a US-based, not-for-profit research lished. They show that PA21 successfully controls organisation, Arbor Research, is analysing practice pat- hyperphosphataemia in patients with chronic kidney terns in haemodialysis. disease on dialysis using fewer tablets than the current standard therapy. The study met its primary and second- ary endpoints, and forms the basis for global regulatory filings.

Infectious Diseases/OTX _The Vaxoms had a marked presence at congresses in 2012, including ESPID in Thessaloniki, ALAT in Montevideo, _The Infectious Diseases/OTX franchise saw positive net the ERS in Vienna, the EAU in Paris and FIGO in Rome. sales of CHF 119.3 million (+2.3%). Sales of the four leading products in the Infectious Diseases/OTX franchise The strongest Infectious Diseases/OTX products in posted pleasing growth overall, in particular Doxium® terms of net sales (CHF 30.8 million, +17.9%), Uro-Vaxom® (CHF 14.9 million, in million CHF 2012 2011 Change in % +16.7%) and Dicynone® (CHF 18.0 million, +7.5%). Bron- Broncho-Vaxom® 43.3 47.8 –9.4 cho-Vaxom® sales were impacted by destocking in the Doxium® 30.8 25.9 +17.9 first six months but experienced an upward trend in the ® second half (CHF 43.3 million, –9.4%) and show a positive Dicynone 18.0 16.8 +7.5 ® evolution, particularly in Russia, thanks to a new partner. Uro-Vaxom 14.9 12.7 +16.7 _One of the strategic priorities for the year was to further develop the Vaxom products in new markets. Launches and relaunches for the year included: Broncho-Vaxom® in Turkey, a new paediatric liquid formulation for Broncho- Vaxom® in Germany and Uro-Vaxom® in Serbia. However, the main effort focused on increasing brand awareness among the medical community, especially in high potential markets. Successes included published guidelines in Russia and Brazil – two key countries for the product – supporting the use of Uro-Vaxom® in preventing recurrent cystitis. Top-level advisory board or expert meetings took place for both Broncho-Vaxom® and Uro-Vaxom®. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Pharma _23 Vifor Pharma will continue to implement its clearly defined strategy: developing the iron business to its full potential with a continued focus on market and therapeutic area penetration with Ferinject®.

Vifor Pharma Consumer healthcare The strongest Consumer healthcare products (OTC) in terms of net sales _Switzerland with new product launches. Following a in million CHF 2012 2011 Change in % difficult start to the year, business improved in the second Perskindol® 14.3 13.8 +3.6 half, largely thanks to Vifor Pharma’s key markets. Sales Algifor® 10.4 10.0 +3.8 of OTC products in Switzerland amounted to CHF 53.0 Equazen eyeq™ 9.4 9.7 –2.4 million (–3.7%). This downward trend is largely attribut- ® able to optimisation of the product range to exclude Triofan 8.4 7.5 +12.5 ® products that were no longer part of the core business, a Anti-Brumm 5.0 5.4 –8.4 declining market (–0.4%) and the mild winter. _Triofan® showed clear above-market growth. Algifor® gained market share in a stagnating pain relief market. Anti-Brumm® showed positive figures despite a rather weak summer season. _Magnesium® Vital Sport and Magnesium® Vital One, which contain a triple combination of organic magnesium salts that are easily absorbed and utilised by the body in a once-per-day dosage, were launched with great success. _Given the tough market, the strategic approach for Vifor Pharma Consumer Healthcare has been revised. Third- party representation activities are to be increased and investments are being made in intensive education of pharmacists. To this end, the team structure has been simplified and new service and marketing tools have been introduced.

_Increasing toll manufacturing. Third-party manufacturing increased year-on-year by 13.5% to CHF 29.5 million. BG-12 production at the Vifor Pharma site in Villars-sur- Glâne successfully passed an FDA inspection. Production of this new multiple sclerosis drug from Biogen Idec offers interesting growth opportunities.

_International development for Consumer Healthcare products. Vifor Pharma Consumer Healthcare exports grew 4% to CHF 25.4 million. In international markets, Vifor Pharma has reinforced the already good position of Equazen eye q™ in Poland and selected a new partner in Australia. The best-performing product was Perskindol®, which showed double-digit revenue growth in international markets. Otalgan® and Triofan® also recorded considerable growth. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 24_ Pharma · Galenica annual report 2012 Perskindol® posted the best performance with double-digit international sales growth.

Outlook: growth ahead

_Vifor Pharma will continue to implement its clearly defined strategy: developing the iron business to its full potential with a continued focus on market and therapeutic area penetration to accelerate growth for Ferinject®, together with defence of Venofer® in specific therapeutic areas. Geographic expansion and continued capitalisation on growth in pharmerging markets will continue, with new registrations and new launches in both small and large countries. As a result, Ferinject® net sales are expected to grow, overtaking those of Venofer®. _Research and development focus in 2013 will be on working closely with health authorities to obtain market authorisation approval for PA21 and on the execution of the Ferinject® clinical trial programme. _In Infectious Diseases/OTX, strong market growth is expected for the Vaxom products, particularly in Brazil, Mexico and China. _The context will remain similar: 2013 will be marked again by overall pharmaceutical market growth driven by emerging countries, with sluggish development in mature markets in general and Southern European countries in particular. Price erosion and reimbursement restrictions, as well as increased competition, will pose familiar and persistent challenges. Also, complexity of market access is increasing since more national authorities are running Health Technology Assessments on the medical, economic and social implications of drugs and medical devices. _In Consumer Healthcare Switzerland the revised strategy was defined in 2012 and implementation has begun. It will be a multi-year effort with initial results expected to be seen in 2013. _For the mid- and long-term, investments will continue into new drug candidates to manage the iron lifecycle and leverage iron expertise via in-house research with the development of PA21 and the new oral iron compound VIT91, as well as in-licensing of complementary products. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Pharma _25 Expansion into an in-house communications agency _The Galexis Marketing Communications team faced major changes last year. The team was transformed into an internal “agency” – functioning independently of external agencies – as part of change management and in order to save costs. Desktop publishing specialists are now also entrusted with the production of printed publications. Under the Sales Promotion Tools (SPT) project, a media database was also set up, ensuring rapid access to all images, documents and print layouts. The team mastered the increased requirements in terms of cooperation with different departments resulting from the transformation with remarkable spirit. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 26_ Logistics · Galenica annual report 2012 LogISTIcS Efficiency programmes make an impact

Jean-claude clémençon _“In difficult times, business associates put their trust in strong, broadly-based, established partners.”

STRATEgIc PRIoRITIES 2013 Stable sales, rising profitability

_The Logistics business sector posted stable sales; de- _Increasing customer loyalty spite price reductions, sales remained slightly above the _More sustainable use of energy prior-year level at CHF 2,102.3 million (+1.0%). The busi- _Improving existing services and developing new ones ness sector managed to increase its operational perfor- _Improving profitability by optimising processes mance nonetheless. First, individual businesses handled higher volumes thanks to the acquisition of new customers and the expansion of relationships with existing ones. The table “Key figures Wholesale/Prewholesale 2012” shows more details (see page 28). Second, the business sector increased its earnings before interest and taxes (EBIT) by 34.6% to CHF 30.7 million, with return on sales rising from 1.1% to 1.5%. The various programmes to increase efficiency are making an impact. These included the exploitation of initial synergies in transportation and catalogue production.

Key figures 2012

Net sales EBIT Number of staff

64% 9% 15%

Logistics CHF 2,102.3 million Logistics CHF 30.7 million Logistics 1,096 (Galenica Group CHF 3,294.3 million) (Galenica Group CHF 349.6 million) (Galenica Group 7,289) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Logistics _27 The annual customer survey of Alloga, performed for the tenth time by an independent institute, revealed the best results ever achieved.

_In the current environment, constantly optimising ser- _This assertion is confirmed by hard facts. The annual vices and operating successfully in the market are crucial customer survey at Alloga, performed for the tenth time to long-term success. Meanwhile, lower drug prices, man- by an independent institute, revealed the best results ever dated by the authorities and resulting from patent expi- achieved in all three core areas: availability, complete and ries, have become a reality. The weaker euro and parallel timely delivery, and customer service, such as in the case imports are also putting pressure on prices in the non- of special requests or returns. The quality is right and this pharmaceutical range. Border regions, notably those in is acknowledged by the market. Alloga is proud to have Ticino and in the Geneva region, suffered particularly achieved same-day processing: the ability to deliver all badly from consumer tourism, which also affects cosmet- products within 24 hours of ordering. The good results ics and other products in the healthcare market. These from the customer survey spur us on to improve our ser- trends are likely to intensify rather than decline. They are vice quality even further. putting service providers in the Swiss healthcare market under – politically desired – cost pressure. customers reward market performance _Positive performance over the reporting period also demonstrates how, in these difficult times, business associates put their trust in strong, broadly-based, established partners when it comes to drug procurement, logistics and selling activity. This benefits the Logistics business sector and, together with reliable, well-trained employees, contributes to stable, strong customer relationships. Customer acquisition has also developed successfully.

Key figures Wholesale/Prewholesale 2012 Wholesale: Prewholesale: Galexis, Unione Farmaceutica Distribuzione Alloga Storage _Number of prepared boxes > 6,316,000 _Number of delivered order lines > 30,078,000 > 1,792,000 _Number of prepared packages > 109,784,000 > 78,374,000 Distribution _Annual tonnage > 15,000 > 7,000 _Number of postal packages > 81,000 > 560,000 _Number of pallets > 51,700 Structure _Number of items in stock > 43,000 > 14,700 _Number of suppliers/partners > 1,100 > 80 _Number of customers > 8,000 > 30,000 Technology _Degree of automation in Niederbipp > 65% _Degree of automation in Lausanne-Ecublens > 30% _Degree of automation in Barbengo-Lugano > 50% _Degree of automation in Burgdorf > 25% WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 28_ Logistics · Galenica annual report 2012 New rapid picking lines established at galexis are enabling Logistics to ensure on-schedule delivery within a few hours throughout Switzerland.

galexis: efficient and successful _Galexis has also extended its range to include products that generate customer traffic and additional sales, a cur- _Also, because of the new rapid picking lines established rent example being contact lenses. at Galexis, the Logistics business sector is able to ensure _And finally, Galexis imported the Bach Rescue® flower on-schedule delivery within a few hours throughout Swit- remedies in parallel to give its customers a competitive zerland. alternative to offerings of the major distributors. _There was heavy demand in the year under review for the specialised Galexis service that supports pharmaceutical partners in supplying drugs for clinical studies. Unione Farmaceutica Distribuzione: _The new “Kolor” system brings a greater degree of flex- difficult conditions ibility. An acronym for “Kontingentierung und logistische Reservation” (allocation and logistics reservation), Kolor _In the 2012 financial year, the canton of Ticino suffered enables Galexis to offer the market new logistics functions even more from greater cost pressure and consumer tour- such as forward orders. ism than the rest of Switzerland. Unione Farmaceutica Distribuzione (UFD), which focuses on prescription prod- _Better price competitiveness and increased margins ucts, delivered a respectable performance in this ex- for customers with GALecoline®. Galexis promotes its tremely competitive environment. On the cost side, UFD own brands in the case of product lines where branding has implemented comprehensive cost-reduction meas- is not a significant issue. This means it can supply custom- ures and benefits from synergies with Galexis, such as ers with high-quality products, such as nail scissors or joint production of the customer catalogue. pregnancy tests, at a lower cost price, allowing them to increase their margin or compete with major distributors on price.

Niederbipp

Burgdorf

Lausanne- Ecublens

_The Alloga logistics centre in Burgdorf, the Galexis distribution Barbengo-Lugano centres in Lausanne-Ecublens and Niederbipp and the Unione Farmaceutica Distribuzione distribution centre in Barbengo- Lugano allow the Logistics business sector to guarantee the Wholesale supply of drugs throughout Switzerland. Prewholesale WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Logistics _29 The priorities remain the same for the Logistics business sector: maintaining and, where possible, increasing quality in customer relationships.

Alloga: market hot for the coolbox g-Pharma: growing number of own brands

_A hit product of 2012 was Alloga’s coolbox, which trans- _The service provider for trade brands and commercial ports products cooled to between 2° and 8°C. It had been products is gradually expanding its selection of own-brand introduced to 85% of customers by the end of 2012. Over products, which now comprises some 55 products. 4,000 coolboxes are now in circulation. Government offices and business partners at home and abroad have registered their interest in this as yet unique product. outlook: continuous optimisation _The Alloga coolbox is an excellent example of how the Logistics business sector anticipates increasingly strin- _The price battle is not over yet. The full effects of gov- gent, Europe-wide rules on good distribution practice and ernment-mandated price reductions will be felt in 2013 translates them into innovative solutions, with the com- and the following years. The market will therefore con- pany benefiting from an outstanding network of partners tinue to be under pressure. and customers. In a decentralised, highly entrepreneurial _The priorities remain the same for the Logistics business company like Galenica, such ideas from the surrounding sector: maintaining and, where possible, increasing qual- environment fall on fertile ground. ity in its customer service level, acquiring new clients _Upheavals in the pharmacy sector are still in evidence. looking for a reliable partner such as Galenica and further Cost pressures are leading major pharmaceutical com- optimising processes and storage capacity. In the current panies to centralise their locations across Europe and tough environment, market leadership can only be concentrate to an ever greater degree on marketing and achieved through cost leadership. A major role, therefore, distribution. Logistical functions are increasingly being is played by Group-wide programmes and use of infra- outsourced to partners such as Alloga, with outsourcing structure, the keywords being energy supply, equipment contracts frequently put out to tender for a European and IT. scale of operation. Galenica’s international network of business partners and its proximity to customers in Switzerland are invaluable advantages in the tendering process. Alloga currently works for around 80 customers – an ever-increasing number – helping them to optimise their processes.

galenica’s logistics companies

_ Market leader in Swiss healthcare _ Leading pharmaceutical _ Largest Swiss prewholesaler. _ Representation and distribution logistics. wholesaler and the only full-range _ Logistics centre in Burgdorf. of pharmaceutical products. _ Distribution centres in Niederbipp supplier in Ticino. _ Modular, process-managed _ Service provider for trade brands and Lausanne-Ecublens. _ Distribution centre in Barbengo- full-service offering along the and commercial products in the _ Comprehensive product and Lugano with strong regional roots. entire supply chain. healthcare market. service offerings. _ Supplies pharmacies, drug stores, _ Logistics services in partnership _ Marketing and sales services. _ Supplies pharmacies, medical nursing homes and hospitals. with the pharmaceutical and practices, drug stores, nursing healthcare industry. homes and hospitals. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 30_ Logistics · Galenica annual report 2012 Stability in transformation _Even in times of major change, stability can be invaluable. One specific example of this is the Galexis sales team. Despite all the changes, employees kept calm, supported the strategy at all times and continuously nurtured and intensified relationships with customers. The employees in the sales team have been the point of contact for customers for 15 years, and make a considerable contribution to the company’s performance through their continuity and reliability. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Logistics _31 Extending the area of activity _The Home Care team represents an extension of the services offered by MediService. The team advises people suffering from chronic conditions on self-medication. For example, patients learn how to administer an injection or infusion themselves. The offering is highly appreciated by both patients and referring doctors. The growing number of patients using the service confirms the strong demand for it, which therefore offers new growth potential. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 32_ Retail · Galenica annual report 2012 RETaIl Expanding the pharmacy network

Felix Burkhard _“The market remains difficult. It will be dominated by further price cuts that will take full effect over the course of 2013.”

STRaTEGIC PRIORITIES 2013 More sales, higher profitability

_The good results achieved by the Retail business sector _ Creating scope for price reductions by optimising the in the second half of the year reinforced those of the first pharmacy network and business processes half. Sales increased by 6.4% to CHF 1,189.2 million (ex- _ Exploiting synergies for customers in the areas of cluding Coop Vitality), with like-for-like growth of the phar- product ranging, services, purchasing and employee macies accounting for 3.0%, with the remainder being training acquisition-related. A total of 11 new locations were _ Sustainable expansion through internal growth and added to the network of Group-owned pharmacies. Given acquisitions as well as by reinforcing the network with continuing pricing pressure, the general decline in retail Galenica-owned and independent partner pharmacies sales and market development of +0.4%, this is a remark- _ Strengthening customer focus through own-label able performance to which all formats and regions con- brands, optimising the product range and new services tributed. The main reason for volume increases lies in further expansion of the pharmacy formats with the addition of 11 own points of sales (Amavita and Sun Store) and 6 run by independent partners over the course of the year. High-priced medicine sales in MediService’s Pharma Care business unit and a growing volume of prescriptions in the pharmacies also contributed to this strong progression.

Key figures 2012

Net sales EBIT Number of staff

36% 17% 56%

Retail CHF 1,189.2 million Retail CHF 60.3 million Retail 4,110 (Galenica Group CHF 3,294.3 million) (Galenica Group CHF 349.6 million) (Galenica Group 7‚289) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Retail _33 Cost benefits are being created through the optimum selection of order volumes, fewer returns and price labelling on shelves rather than on individual packs.

_Profitability was up in line with this growth. The Retail eHealth offerings to reinforce customer loyalty business sector increased its operating result (EBIT) by 14.6% to CHF 60.3 million, thereby improving return on _The market environment for dispensing prescription sales from 4.7% to 5.1%. This is mainly thanks to intensive medicines has become tougher. While price reductions efforts to optimise the network of pharmacies, as well as resulting from patent expiries and setting fixed prices for in the areas of additional sales, cost efficiency and pro- generics and originator products benefit the healthcare curement. system, they impact on the income of all pharmacies. As long as pharmacist remuneration remains primarily based on price-related margins, it will be difficult to provide ser- GaleniCare takes care of the details vices that can also be charged for. This is why Galenica is investing in developing new services aimed at strengthen- _In 2012, GaleniCare improved numerous processes, ing customer loyalty, and in improving process safety and notably in logistics and central services. The ActivePOS efficiency. One example in the area of eHealth is the pilot cash register system of TriaPharm® has now been in- project with electronic prescription transfer in the Basle stalled in the majority of Amavita pharmacies and the region, with the objective of making processing simpler roll-out has begun in Sun Store pharmacies. A project to and dispensing more accurate. create a comprehensive reporting and analysis system for centralising purchasing, stock, sales and financial data _netCare: on-screen virtual consultations in pharma- was also launched in 2012. cies. Galenica supports the netCare project which was _The LoRe (Logistics Retail) project is another boost for initiated by the pharmacy association pharmaSuisse and efficiency. Cost benefits come from the optimum selec- a health insurer. Supported by telemedicine, the project tion of order volumes, fewer returns and on-shelf price enables pharmacies to collaborate with an online doctor labelling to replace that on individual packages. The pri- to offer patients treatment for certain ailments so that mary aim of this efficiency improvement is to free up phar- they may not need to physically visit the doctor. macy staff, enabling them to spend more time advising customers. The pilot phase of some sub-projects has been completed; these will be implemented in 2013. amavita: simplifying the core product range

_“Frau&Herz” heart health campaign for women: _Amavita’s rapid growth in recent years has created a Amavita, Coop Vitality and Winconcept partner pharma- need for harmonisation, particularly as regards the prod- cies started this joint information campaign in the au- uct range. Core product ranges have now largely been tumn. Its aim is to help women guard against heart attacks defined for the various formats and pharmacy sizes. The and strokes and recognise the specific heart attack reorganised pharmacies are showing a marked improve- symptoms in women. The campaign consisted of a ment in sales. CardioTest® (HerzCheck®) in pharmacies, a separate website “frauundherz.ch” and pharmacy-based special events. _SkinTracer, the app for your skin. The newly launched application allows specialists from the department of dermatology of University Hospital Zurich (USZ) to carry out various skin tests, monitor skin changes, perform medical assessments and give advice. _The app also allows sun protection products from Avène to be ordered via an online shop operated by Amavita.

_Cooperation with the Swiss Parents’ Club (Pro Juven- tute). Amavita is the new club’s exclusive partner for health and beauty, positioning itself as a skilled point of contact for families, the target group.

_Sales of Amavita own brands increasing. In June 2012, Amavita launched its first own-brand beauty products, the “Amavita SENSES” line, which has been very much in demand. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 34_ Retail · Galenica annual report 2012 Change towards simplification _For the Amavita pharmacies, transformation or change also means simplification. With this in mind, the Business Support team took on more tasks for the pharmacies – such as designing shop layouts or taking over reporting – thereby freeing up pharmacy staff so they have more time for core functions such as customer service. In the latest development, the Business Support team launched a hotline in early 2012. This ensures the smooth processing of reports and manages internal processes by means of trace- able tickets, which has reduced processing and response times considerably. Since the hotline was launched, the number of reports has doubled from around 500 to 1,000 per month, indicating a high level of acceptance and satisfaction. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Retail _35 Coop Vitality launched its own brand range in the autumn, initially with nine products for colds and pain relief.

Training and development at all levels _Sun Store also started using the PROGRESS internal training courses in 2012. _Training and development enjoys a particularly high _The “Kuuhli” training camp continues to be a suc- priority in the Retail business sector. The highlights of cess, attracting 105 participants in the year under the 2012 financial year: review. _The CAS-Course „Business Management for phar- _Amavita devised a concept in active selling, which macists“ developed by GaleniCare started off well. involved pharmacists sharing their experiences of The modularly structured course is conducted success strategies. jointly with the university of Basel and lasts two years. _Further information in the Human Resources section (see page 83).

Sun Store: important anniversary Coop Vitality: opening its 50th pharmacy

_The oldest pharmacy chain in Switzerland came into be- _Four new Coop Vitality pharmacies opened their doors ing in Sion in 1972 and had 106 branches as of the end of in the period under review. A milestone was reached 2012. Sun Store celebrated its 40th anniversary in 2012 with the pharmacy in Granges-Paccot in the Canton of with events for employees and business partners. Cus- Fribourg, which became the 50th in the Coop Vitality net- tomers were able to take advantage of many special offers work. By the end of 2012, 51 pharmacies of this format and competitions during the anniversary year, including were in operation. the weekly “Sunny Monday” special promotion, which was _Coop Vitality launched its own brand range in autumn, so successful that it will be continued in 2013. initially with nine products for colds and pain relief. The _Sun Store made special promotions available to its cus- aim is to expand the product range to around 50 products tomers via SUNCARD. This newly introduced app for over the medium term. smartphones also makes shopping on the move easier, as _Coop Vitality conducts regular reviews of its processes. it is possible to order directly from the online shop. In Category Management, service ranges and the indi- _Sun Store donated CHF 40,000 to the “Winds of Hope” vidual product ranges were more clearly defined in the foundation and also contributed to the fund-raising drive period under review. Changes were introduced in test organised by the Divesa and Assura foundations to help pharmacies in the autumn of 2012, with wider implemen- disadvantaged children across the world. A money box tation being planned for the first half of 2013. was devised for this purpose: children can put their own _The new hair mineral analysis at Coop Vitality pharma- savings into the box and thus collect money to help young cies is generating considerable interest. It can alert people in need. customers to possible mineral deficiencies or excessive _Staff were able to move back into the fully renovated levels of heavy metals. Based on the analysis, specially offices at the headquarters in St-Sulpice. trained staff give individual recommendations on diet and nutrition. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 36_ Retail · Galenica annual report 2012 Supporting change through knowledge _The Sun Store Aristea graphics team has been producing printed sales promotion publications for years. Working independently of external agencies, the team can react flexibly and efficiently to orders from the 106 Sun Store pharmacies and perfumeries. It doesn’t matter whether it’s a magazine that is published periodically with a circulation of almost one million copies, or an update to advertising screens in pharmacies. The Aristea team’s extensive experience means that it has comprehensive know-how – knowledge it was happy to pass on to assist the transformation of the Galexis Marketing Communications team (see page 26). WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Retail _37 Factors in this strong development were some high-priced medicines in MediService’s Pharma Care unit.

MediService: special services for _Regulatory controls are also stringent. In the Swiss mar- chronically ill patients ket, market participants are being subjected to more in- tense monitoring of quality assurance in accordance with _The specialty pharmacy for chronically ill patients has new, stricter regulations and standards (Good Distribution expanded its home care (Pharma Care) services in the Practice, guidelines from the Association of Cantonal core therapeutic areas of neurology (multiple sclerosis), Pharmacists, pharmacovigilance). MediService success- autoimmune diseases (rheumatoid arthritis), oncology and fully passed audits conducted by the Regional Medicines haematology. It has also specifically developed services Inspectorate and the cantonal pharmacist in 2012. and care concepts for rare or high-priced medicines. _In September, MediService specialty pharmacy celebrated its 15 years in business with an Anniversary Sym- Winconcept: more than 150 partners posium in Zuchwil. Around 100 invited guests took part in the event and discussed various topics relating to direct _The group of independent pharmacies continues to grow, patient care. This was followed by a guided tour of the with six new pharmacies joining in the year under review. semi-automated pharmaceutical process with its multi- _Winconcept develops management and marketing con- stage pharmaceutical and administrative controls. The cepts for its members. The unit expanded its Category event also included a fundraiser for the Theodora and Management service range in 2012, along with well used, Swiss Aids Care International foundations. proven instruments such as mystery shopping, customer _For big, multinational manufacturers in particular, phar- satisfaction analyses and customer card concepts. macovigilance is increasingly becoming a key issue and is an important element in the formulation of therapy support concepts. MediService has systematically built up this area over many years and satisfies manufacturers’ strict requirements.

GaleniCare pharmacies and shareholdings

31.12.2012 31.12. 2011 Change Amavita pharmacies1) 138 130 +8 Sun Store pharmacies1) 106 106 — Coop Vitality pharmacies2) 51 47 +4 MediService specialty pharmacy1) 1 1 — Majority holdings in other pharmacies1) 2 3 –1 Minority holdings in other pharmacies2) 2 2 — 1) Total own points of sale 300 289 + 11 Fully consolidated 2) Consolidated at equity level

Independent partners of GaleniCare

31.12.2012 31.12. 2011 Change Amavita partnerships 14 14 — Winconcept partner pharmacies 153 147 +6 Total independent partners 167 161 +6 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 38_ Retail · Galenica annual report 2012 Outlook: profitable growth

_The market remains difficult. It will be dominated by further price cuts that will take full effect over the course of 2013. For smaller pharmacies in particular, it will become increasingly difficult to recruit qualified deputies to cover holiday leave, illness and other absences and thus ensure a pharmacy’s operations. _The Retail business sector is meanwhile continuing its moderate expansion and, by the start of January 2013, had acquired 11 new locations. The various initiatives for organic growth are also being continued, examples include: the sale of supplementary services such as netCare and polymedication checks, promotional activities based on specific customer segments, increasing own-brand sales and launches of high-priced products of MediService. _Profitable growth remains the priority. Good locations are being further strengthened and weaker ones consolidated. The LoRe (Logistics Retail) project aims to improve product availability.

The Galenica pharmacy formats

_ Largest pharmacy network _ First pharmacy chain in _ Joint venture between _ Specialty pharmacy for _ Group of autonomous and in Switzerland. Switzerland, owned by Coop and Galenica. care of patients with independent pharmacies. _ Founded and managed Galenica and managed by _ Located in larger Coop chronic illnesses. _ Marketed under the by GaleniCare. GaleniCare since 2009. centres. _ Pharma Care therapy Feelgood’s brand. _ Product focus: prescription _ Product focus: _ Comprehensive range in support service for _ Management and and non-prescription non-prescription the fields of health, in-home care of long-term marketing concepts for medicines and beauty medicines, beauty, prevention and beauty patients, including members focusing products. wellness and health. combined with specialist care and direct on communication and _ Points of sale in attractive _ Larger-than-average retail professional advice and delivery of medications. quality. public locations. space in places with services. _ Strong customer focus high customer traffic such (employee training, as shopping centres. services, own label brands). WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Retail _39 Change to electronic media _The decision by the Federal Administrative Court to lift the obligation to publish all drug information in a printed compendium presented the Documed Marketing & Sales team with new challenges. The associated switch to electronic media had to happen quickly. These changes required an immediate revision of the services offered to the pharma industry. The printed Swiss Drug Compendium (Arzneimittel-Kompendium der Schweiz®) became the electronic platform “compendium.ch”. The new version of compendiumPORTAL went live at the beginning of 2013, for simplified entry, management and publication of drug information by the marketing authorisation holder. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 40_ HealthCare Information · Galenica annual report 2012 HEalTHCarE INformaTIoN Successful switchover to new drug information system of Swissmedic (AIPS)

Ulrich Schaefer _“HealthCare Information’s services target the core of the eHealth Switzerland strategy. The HealthCare Information companies are the leading Swiss information providers in the healthcare market.”

STraTEgIC prIorITIES 2013 Sales down, earnings up

_As anticipated, the HealthCare Information business _ Developing pioneering eHealth solutions for the sector reported a decline in sales in 2012, which was due Swiss healthcare market to the Federal Administrative Court’s decision to shelve _ Adapting database technologies for use with the requirement for compulsory documentation with new media Documed. Due to the new regulations governing publica- _ Exploiting synergies in important HealthCare tion of drug information, the Swiss Drug Compendium Information software components (Arzneimittel-Kompendium der Schweiz®) saw a decline in sales, as expected. This was offset almost in full by further roll-outs of TriaPharm®. The HealthCare Informa- tion business sector generated sales of CHF 47.1 million (–1.3%). Conversely, earnings before interest and taxes (EBIT) rose by 79.9% to CHF 4.3 million due to process optimisation, increased sales of INDEX products and the further roll-outs of TriaPharm®.

Key figures 2012

Net sales EBIT Number of staff

1% 1% 3%

HCI CHF 47.1 million HCI CHF 4.3 million HCI 191 (Galenica Group CHF 3,294.3 million) (Galenica Group CHF 349.6 million) (Galenica Group 7,289) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · HealthCare Information _41 Triamed®: additional benefits from digital patient files

_While the software industry for medical practice solu- undoubted leader in the medical documentation soft- tions has been offering digital documentation modules ware sector, including solutions for group and joint prac- (patient file management) on the Swiss market for at tices and medical centres. TriaMed® is acknowledged by least ten years, demand is growing relatively slowly. Less experts as the market leader in both electronic patient than 20% of physicians in private practice currently keep files and the implementation of major practice projects. their practice records in digital form. TriaMed® is the

HealthCare Information: services support the _Substantial contribution to patient safety. HealthCare eHealth Switzerland strategy Information’s services target the core of the eHealth Swit- zerland strategy. The HealthCare Information companies _The Swiss federal and cantonal governments have de- are among the leading Swiss information providers in the fined clear objectives for the healthcare system with the healthcare market. The information supplied and required eHealth Switzerland strategy, which envisages the intro- by various stakeholders in a range of formats is processed, duction of electronic patient files across the whole coun- made compatible and compiled on an IT hub and thus try by 2015. A health portal with quality-assured online made available for use on a variety of different platforms, information should also be in place by that date. Progress covering thousands of medicines and many other prod- is being made in both areas, but there are doubts in the ucts employed in healthcare. The key word is interoper- case of electronic patient files in particular as to whether ability. HealthCare Information is familiar with the tech- the project can be implemented by the target date of 2015 nological interfaces and is able to transport information due to hesitation on the part of most practicing physicians between A and B securely and reliably. The services of- to work with these new solutions. fered by HealthCare Information can thus give healthcare

HCI Solutions: Information hub for commercial and scientific data on medicines

Identa by Documed

_Additional information such as _Online publication of drug _Record of changes available daily reimbursement eligibility and links information _Labelling of drugs requiring cold to further offerings storage _Distribution of wholesaler-specific information (terms and conditions, return regulations, prices) _Networking of users and providers: _Integrated distribution with more practice-based physicians, than 115 system providers pharmacists, drug stores, hospitals, throughout Switzerland and in all nursing homes, health insurers, language regions _Efficient provision of correct wholesalers information to benefit patients WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 42_ HealthCare Information · Galenica annual report 2012 Hospitals are at the forefront of shaping the development of eHealth.

Safer hospital prescriptions thanks to hospINDEX®

_hospINDEX® supports the decision-making process in and shows the relevant section of summary of product medical prescriptions by allowing software systems to characteristics. When the patient is a child, the recom- selectively display information and warnings relating to mended dosage from the “Kinderdosierungen” (child the patient via the “Clinical Decision Support” module. dosage) database is shown. Medical prescriptions may Should a physician prescribe a dose that exceeds the also trigger specific instructions to care workers, phar- recommended maximum, the system flags a warning macists and hospitals’ invoicing departments.

professionals round-the-clock access to the products and e-mediat and Documed: new information products important information they need. This IT solution makes for service providers and industry a significant contribution to preventing misuse as well as misinterpretation when dispensing medicines and contrib- _In the early summer, Documed won the European WTO utes substantially to patient safety. (World Trade Organization) tender from Swissmedic and was consequently awarded the contract to develop _Dynamism in hospitals. Hospitals are at the forefront and run a new system for regulatory drug information of shaping eHealth’s development. Following the introduc- (Arz neimittelinformation Publikationsplattform Swiss- tion of flat-rate payments in 2012, hospitals are installing medic, AIPS). HCI Solutions and Documed took on the new IT solutions for processes such as the administration responsibility of ensuring that this reference database of medication, thereby increasing drug safety and also was operational as of 1 January 2013. simplifying the administration of individual doses during _Only the information required by law is published in AIPS hospital stays. While many general practitioners are only (in accordance with the mandate from Swissmedic). This slowly adapting to the electronic age, it can be assumed is a fraction of the master data and data fields prepared that they will eventually adapt, albeit at their own pace. A by Documed and e-mediat. AIPS is not modular and does contributory factor here is the trend towards joint prac- not support the software in other publications of INDEX tices, where physicians are able to work significantly more products. Documed and e-mediat therefore offer data efficiently by using electronic patient files. links and products that are supplementary to all legal _The HealthCare Information business sector also par- publication requirements. Data preparation is invoiced ticipates directly in pilot projects for the eHealth Switzer- according to cost. land strategy, one of these being the installation of various _The Competition Commission (COMCO) launched an in- TriaPharm® and TriaMed® applications in the Basle region vestigation against HCI Solutions, Documed and e-mediat since the spring of 2012. Integrating online compendia regarding the commercialisation of electronic drug infor- and components in a more user-friendly way means that mation in December 2012. Although these companies physicians and pharmacists will adopt the new eHealth have a strong market position, Galenica will do everything solutions more rapidly. in its power to clarify that there is no misuse of this position. _www.compendium.ch will offer specialists and the public free-of-charge access to verified basic information regarding registered products, linked to extensive scientific and commercial content in German and French. The extent of information on offer will therefore far exceed summary of product characteristics, not least because of references to additional specialist data sets such as www.kinderdosierungen.ch. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · HealthCare Information _43 The objective for 2013 is to better harmonise processes across the entire HealthCare Information business sector.

_A free app is available for use on iPhone, iPad and iPod outlook: process optimisation touch, while an optimised version for mobile devices is available for all other smartphones and tablets. The _The objective for 2013 is to better harmonise processes compendium.ch platform offers the pharmaceutical indus- across the entire HealthCare Information business sector, try simple and efficient access to safety information with particularly between the Content and Process units. To additional communication offerings designed specifically this end, a synergy project to raise efficiency and effec- for physicians and pharmacists, thus ultimately benefiting tiveness will run throughout the 2013 financial year. patients. _e-mediat largely completed data transfer of the “galdat” _e-mediat and Documed. In collaboration with the article directory into segment-specific INDEX products. Federal Office of Public Health and the Zurich Children’s The “Clinical Decision Support” module of hospINDEX® Hospital, Documed will progressively integrate data avail- was expanded to cover additional functions, including able from “Kinderdosierungen”, aimed at improving dos- allergies, dosage control and adjustments for renal and age information for children, into the INDEX databases. liver failure, and contraindications during pregnancy and Paediatric dosage information is relatively limited for breastfeeding. many medications. The platform set up by e-mediat will also give paediatricians in private practice access to the current dosage information collated by the Zurich Chil- Wider use of Triapharm® and Triamed® dren’s Hospital.

_In 2012, HCI Solutions launched a new, more user- _TriaPharm® and TriaMed®. TriaPharm® will be intro- friendly generation of TriaPharm® software for cashdesks duced in all Sun Store pharmacies in 2013. This will con- in nearly all Amavita pharmacies. Following this success- clude HCI Solutions’ harmonisation of POS software for ful implementation, a start was made on installing the the Galenica Group’s two largest pharmacy formats. The software in Sun Store pharmacies. The new software al- range also includes solutions for pharmacy chains and lows for the differing application requirements of Amavita groups, such as a price administration platform. and Sun Store pharmacies. At the same time, HealthCare _TriaMed® is to expand its leading role in the field of prac- Information is exploiting synergies, thus raising efficiency tice software for group practices. and profitability. _TriaMed® gives all physicians involved in a patient’s treatment access to that patient’s medical history. Sales activities were strengthened in this area. The system is particularly suitable for joint practices, doctors’ networks, medical centres and HMOs (health maintenance organisations, health centres), because it is able to cope with the strict security regulations regarding data protection. This software is in the meantime used by about 1,400 physicians.

galenica’s HealthCare Information companies

_HCI Solutions maintains databases and _e-mediat specialises in establishing and operat- _Documed, an intermediary between the develops management solutions tailored specifi- ing databases for the Swiss healthcare pharmaceutical industry and healthcare special- cally to the needs of the networked healthcare industry. The company’s extensive experience in ists, publishes printed and electronic information market. Triapharm® is a total management soft- data distribution and processing in the health- on pharmaceutical products, and provides ware solution for pharmacies. Triamed® was care market makes e-mediat the leading provider the groundwork for the new system for regulatory developed for physicians and is suitable for both of master data systems in the health market. drug information (Arzneimittelinformation individual and networked medical centres and Publikationsplattform Swissmedic, AIPS). group practices. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 44_ HealthCare Information · Galenica annual report 2012 from “house blend” to brand-name products _Although the history of some brands, particularly in the beer segment, can be traced back over several hundred years, the true history of the development of brand-name products began some 300 years ago. Faber-Castell was one of the first to systematically develop mass-produced goods as branded products and advertise them. _Like many retailers, in the 18th and 19th centuries, pharmacies were still proud to receive their products without labelling from manufacturers and intermediaries, and create a “house blend” from these themselves. At Amavita, “house blends” were developed specifically and marketed under the SENSES own brand, for example. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · HealthCare Information _45 Political environment Cost pressure presents considerable challenges for healthcare systems

the Swiss healthcare system evolution of healthcare costs and health _At the beginning of 2012, the newly-elected Federal insurance premiums Councillor Alain Berset took over as Head of the Federal _The premiums for compulsory health insurance premi- Department of Home Affairs (FDHA), which incorporates ums are set to rise by an average of 1.5% in 2013. Over the Federal Office of Public Health (FOPH). In this capac- the past few years, cost increases in the in-patient hospi- ity he has already instigated a number of key initiatives. tal care sector have been lower than average, unlike outpatient costs. The Federal Council is therefore said to Pressure on distribution channels support strategic management of new medical practice _In addition to the indirect impact of price reductions on registrations. The media have voiced speculation that margins, various players are demanding further reduc- many health insurance providers will try to keep premium tions in the distribution margin itself. The Price Supervisor increases low over the next few years in view of the initia- is calling for a further basic reduction, while the associa- tive – put forward in the spring – for a single health insur- tion of Swiss health insurers has called for the government ance scheme. to set ex-factory prices and for distribution margins to be negotiated among market players according to channel revision of the Swiss law on therapeutic Products: specifics. Apart from the massive risks to supply reliabil- initiation of supplementary phase ity posed by a solution of this type, both demands can be _The draft bill and dispatch on the Ordinary Revision to considered as unconstructive if the price-related distribu- the Swiss Law on Therapeutic Products (HMG) was sub- tion margin does not cover adequate compensation for mitted to Parliament at the end of 2012. The proposal is distribution services. to simplify the approval process for and the dispensing of “traditional” non-prescription medicines. Self-medication no to managed care should also be simplified, as proposed by Parliament, and _The managed care bill was overwhelmingly rejected by the role of pharmacies in dispensing certain non-prescrip- Swiss voters in June 2012. The bill aimed to strengthen tion medicines should be strengthened. The Federal Coun- doctors’ networks and provide an incentive for people to cil additionally intends to deploy more resources to en- subscribe to a managed care model. Willingness to accept hance market surveillance and to enforce the prohibition radical reform is obviously low among the Swiss popula- on material benefits. tion, especially when it entails restricted freedom of choice. The referendum result will have little impact on Progress on eHealth existing integrated networks, and important non-contro- _In September 2012, the National Council approved some versial parts of the rejected bill (risk off-setting, a important elements of the motion “Incentives and stand- strengthened role for family doctors) will be pursued ards for the electronic patient dossier”. The introduction separately. of electronic patient dossiers is intended to improve quality of care, increase patient safety and enhance efficiency thanks to better coordination. The electronic patient dossier is part of Switzerland’s eHealth strategy.

international developments: broader patient access versus cost containment _There are currently two evolving trends shaping healthcare systems: policies towards broader patient access and cost containment. Interventions across Europe, which are mainly austerity driven, focus on price cuts, reimbursement de-listings and increased patient co-payment. In France and Sweden new drug reimbursement systems and policies are being developed and evaluated. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 46_ Political environment · Galenica annual report 2012 europe: austerity-accelerated cost containment USa: expanding coverage of medicaid _While Germany progresses with the implementation _In 2012, following the Supreme Court ruling on the con- of the law for restructuring the pharmaceutical market stitutionality of the Affordable Care Act (ACA), the Obama (AMNOG, Arzneimittelmarkt-Neuordnungsgesetz), the administration issued a series of guidelines to state offi- industry is going through a difficult time with the new drug cials outlining the steps for expanding Medicaid coverage evaluation system. Under these conditions, a number of in the interests of broader healthcare access. This repre- leading pharmaceutical companies have decided not to sents a most forceful move to push states to adopt Med- launch new products. Crisis-driven healthcare reforms icaid expansion in view of the Supreme Court decision, continue to put Greece and Italy in the spotlight, while even though several key states continue to oppose the Italy has made significant budget cuts and introduced a ACA provisions. It is anticipated that there will be a sub- review of public spending. In Spain, despite a very effi- stantial impact on healthcare budgets in 2013, including cient healthcare system, austerity measures have led to automatic cuts in Medicare services. The US government price cuts, patient co-payment and further incentives to is facing a conundrum, with the terms of the Budget Con- use generics. France is undergoing a complete re-defini- trol Act of 2011 scheduled to go into effect during 2013. tion of its healthcare decision-making process and drug In addition, new policies defined during 2011 towards cost evaluation procedure, and is also moving towards a sys- bundling of healthcare products and services were imple- tem that rewards improved cost-efficiency. This could be mented during 2012; these may have a positive effect on positive for drug therapies offered by Vifor Pharma, such volumes sold, but will also generate additional price pres- as Ferinject®, due to its evidence-based contribution to sure on Vifor Pharma’s drug therapies, used mainly in di- improved patient outcomes and proven cost-efficiency. alysis centres. _In Central and Eastern Europe, more details have been unveiled in connection with the new international reference-pricing rules in Slovakia, and the Czech Republic has announced its intention to apply healthcare economics tools. Russia has made several announcements relating to the reimbursement of medicines, procurement of drugs by international non-proprietary names, clinical trial rules and the registration of medicines to allow broader access.

Breakdown of healthcare costs in an international comparison

As % of total healthcare costs 2009 100

20 Medicines Out-patient treatment _At over 46%, in-patient treatment makes up the majority of Swit- 0 In-patient treatment zerland’s healthcare costs. Out-patient treatment accounts for 29% FL OECD US SE AT DE FR BE JP CH of total expenditure and around 10% is spent on drugs, a lower Source: OECD Health Data 2011. percentage than in other countries in the comparison. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Political environment _47 Broader access to drug therapies in latin america… _The region is driven by new policy developments in Brazil which foresee broader access to all medical treatments, resulting in many alternatives for access. Over 1,700 insurance companies offer their services to the middle-class population, which is rapidly approaching 60 million people. Brazil’s new health technology assessment body is effectively contributing to improving and widening access to reimbursed medicines.

…as well as in asia Pacific and turkey _China’s economic growth rate is slowing and healthcare budget allocation remains low, despite efforts for broader access. In countries such as Mexico, Korea, Turkey and Indonesia, long access cycles are being maintained, growth is strong and policies are in place to broaden market access, but prices are under significant pressure.

international comparison of spending on medicines

Share of healthcare costs (in USD, at purchase power parity) 2009 1’0001,000 956

800

640 628 600 572 537 521 473 466

400 381 319

200

0 _At USD 521, Switzerland spends less on medicines per capita than, US IT ATDEFR CH NL SE UK DK for example, other comparable countries, such as Germany (USD 628) Source: OECD Health Data 2011. or the USA (USD 956). WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 48_ Political environment · Galenica annual report 2012 From transporting books to the compendium app _Abdul Kassem Ismael, Grand Vizier of Persia in the 10th century, took his library with him wherever he went. The 117,000 volumes were carried by 400 camels that were trained to walk in alphabetical order. Following the changes in information technology over the last 50 years, today, the Grand Vizier could access his books easily online. _In the HealthCare Information business sector, information technology is deployed effectively for Galenica and to the benefit of its customers. The former two-volume Swiss Drug Compendium has been electronically processed and an online, up-to-date version is available for users to access from wherever they are, 24 hours a day, for PCs, tablet computers and smartphones. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 _49 Corporate GovernanCe

Content Galenica is committed to the principles of Corporate Governance. the Group’s regulations for good govern- 50 _Group structure and shareholders ance are set out in its articles of incorporation, bylaws 51 _Structure of the share capital and the job descriptions of the various committees. 52 _The Board of Directors Galenica meets the requirements stated in the Direc- 57 _Management tive of the SIX Swiss exchange on Information relat- 59 _Compensation, profit sharing and loans ing to Corporate Governance and follows the recom- 63 _Shareholders’ rights to participate mendations of the Swiss Code of Best practice for 64 _Annual General Meeting Corporate Governance of economiesuisse. 65 _Change of control and protective measures 65 _Combatting corruption 65 _ Information and monitoring tools of the Board of Directors with respect to management GroUp StrUCtUre anD SHareHoLDerS 66 _Auditors 67 _Brand management 68 _Information policy Structure of the Group _Galenica Ltd., headquartered at Untermattweg 8, CH-3027 Bern, Switzerland, is a corporation under Swiss law. As a holding company, Galenica Ltd. owns all the companies in the Galenica Group directly or indirectly. The Group’s structure and the consolidated subsidiaries and associates are shown on pages 51, 139 and 140 respectively. The addresses are listed on the cover. _The shares of Galenica Ltd. are quoted on the SIX Swiss Exchange, but no single company within the Group is quoted and there are no cross shareholdings between companies within the Group or with other publicly listed companies.

Shareholders _On 31 December 2012, Galenica had 9,609 shareholders, three of which were major shareholders holding more than 3% of the nominal shares: _Alliance Boots Investments 2 Limited, Weybridge Lon- don (UK), with 1,656,172 registered shares with a par value of CHF 0.10 each. These shares are registered in accordance with the articles of incorporation as follows: _ 1,300,000 registered shares with a par value of CHF 0.10 each with voting rights (20%); _ 356,172 registered shares with a par value of CHF 0.10 each without voting rights.

_Alecta pensionsförsäkring, ömsesidigt, Stockholm (Sweden), with 210,000 registered shares with a par value of CHF 0.10 each, and WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 50_ Corporate Governance · Galenica annual report 2012 _Patinex AG, Wilen (Switzerland), (beneficial owners: _Galenica shares (securities no. 1553646) are listed on Martin and Rosmarie Ebner) with 253,335 registered the SIX Swiss Exchange. As of 31 December 2012, shares with a par value of CHF 0.10 each and five call 6,479,925 registered shares were outstanding (not includ- options over 324,990 shares in total. ing treasury shares). The market capitalisation amounted to CHF 3,437,600,212. _No other shareholder has reached the 3% threshold of nominal shares. authorised capital _According to Article 3a of the articles of incorporation, the Board of Directors is authorised to increase the share capital of CHF 650,000 by a maximum of CHF 65,000 at StrUCtUre oF tHe SHare CapItaL any time up to and including 8 May 2014 by issuing no more than 650,000 fully paid registered shares.

Share capital Conditional capital _On 31 December 2012, Galenica had fully paid share _Galenica has no conditional capital. capital of CHF 650,000, divided into 6,500,000 publicly listed registered shares with a par value of CHF 0.10 each.

Structure of the Galenica Group

pharma Santé

pharma Logistics retail HealthCare Information

Pharma companies Prewholesale Management company Management company

Wholesale Pharmacy formats Content

Services Services Process Division Business sectors Situation: January 2013 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _51 Changes in the capital _For the purpose of grandfather rights, the articles of _The share capital has remained unchanged since the incorporation allow the pension funds of the companies capital repayment approved by shareholders at the Annual in the Galenica Group to be recorded as shareholders with General Meeting on 19 May 2005. This par value repay- voting rights in an amount not exceeding 10% of all shares ment, which amounted to CHF 3.90 per share, reduced with voting rights. the share capital from the original amount of CHF 26.0 million to the current total of CHF 650,000. Further infor- registration of nominees mation about changes in the share capital, reserves and _A nominee may be registered with voting rights up to a distributable profit over the past three years can be found limit of 2% of the share capital entered in the commercial on page 146. Please see past Annual Reports for informa- register. Shares in excess of this limit can only be regis- tion about prior years. tered if the nominee in question discloses the name, address and number of shares of the person for whose participation certificates account the nominee holds 0.5% or more of the share _Galenica has no participation certificates. capital entered in the commercial register. In financial year 2012, there were signed agreements of this nature Dividend certificates between Galenica and two shareholders. _Galenica has not issued any dividend certificates. Convertible bonds and options registration of shareholders and limitations upon _Galenica has no outstanding convertible bonds, nor has transferability it issued any traded options. _Any application for registration of shareholders in the shareholders’ register may be refused by the Board of Directors within 20 days. The Board shall refuse to recognise a share purchaser as a shareholder or beneficiary tHe BoarD oF DIreCtorS with voting rights for any shares which, when added to shares already registered as voting shares in the purchaser’s name, would give the purchaser more than 5% of all _The duties of the Board of Directors of Galenica Ltd. are shares carrying voting rights. based on the Swiss Code of Obligations, the company’s _Legal entities and partnerships, other groups of persons articles of incorporation and its bylaws. or joint owners who are interrelated through capital own- _In selecting the Board of Directors, care is taken to en- ership, voting rights, common management or are other- sure that each area of the Galenica Group’s activities is wise linked, as well as individuals or legal entities or part- represented by at least one member, if possible, and that nerships that act in concert to circumvent this provision, the necessary specialised expertise is also available. The shall be treated as one single entity. Board of Directors commissions a review of its functional _The Board of Directors may refuse registration in the effectiveness generally once a year. shareholders’ register if purchasers do not declare explic- _With the exception of the two members referred to be- itly, upon request, that they have acquired the shares in low, none of the members of Galenica’s Board of Directors their own name and for their own account. The Board of were actively involved in the operations of Galenica or any Directors is also authorised, after hearing the individuals of the companies in the Group in the year under review or concerned, to cancel any entries in the shareholders’ reg- at any time during the previous three years. This was, ister that were obtained on the basis of incorrect informa- however, the case for Executive Chairman Etienne Jornod, tion. who was additionally CEO until the end of 2011, and Fritz _The articles of incorporation allow the Board of Directors Hirsbrunner, who was also the Group’s Deputy CEO and to approve exceptions to the foregoing registration restric- CFO until the end of 2011 and currently still holds a man- tions in order to permit the participation of strategic part- date as Head of Investor Relations. ners of Galenica Ltd., in an amount not exceeding 20% of _The Board of Directors has selected a Deputy Chairman, the share capital entered in the commercial register. The in the person of This E. Schneider as of 1 January 2013. Board has already exercised this right in connection with _Disclosure of potential conflicts of interest: No member its strategic partner Alliance Boots Investments 2 Limited, of Galenica’s Board of Directors has any significant relations which belongs to the Alliance Boots Group. with Galenica or any of its subsidiaries. Stefano Pessina represents Alliance Boots Investments 2 Limited (Alliance Boots Group), which is Galenica’s largest shareholder. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 52_ Corporate Governance · Galenica annual report 2012 election and term of office umentation they need to prepare for items on the agenda _The Board of Directors is elected by the Annual General in good time, normally at least ten days before the meet- Meeting. The Board consists of a minimum of five and a ing in question. maximum of twelve members, and the term of office of _In 2012, the Board of Directors held seven meetings. In each member is usually three years. Members may be addition to meetings and the associated flow of informa- re-elected, and terms of office are staggered. The articles tion (documentation on individual agenda items, reports), of incorporation do not stipulate a limit regarding terms the Board of Directors is also informed on a very regular of office. Elections are held separately for each Board basis on the Group’s activities and challenges as well as member being elected, at which time the term of office is the current state and general development of the business also determined. The Board of Directors is of the opinion sectors. Furthermore, the Board of Directors is often that the three-year term of office is advantageous for the consulted in its role as advisory body. The Corporate company from the standpoint of Board members’ familiar- Executive Committee usually participates in at least part ity with the company, commitment and independence. of every meeting, to report on ongoing business and to review the documentation in light of decisions to be taken. Internal organisation External advisors are consulted as needed on individual _The Board of Directors has the duties assigned to it by matters. law (Art.716a of the Swiss Code of Obligations) and by _As part of its risk management, the Board of Directors Art.16 of the articles of incorporation. of Galenica Ltd. receives an overview of the most impor- _Decisions are made by the entire Board of Directors. The tant risks from the Corporate Executive Committee when Board may assign the preparation and implementation of circumstances require it, but at least once a year. The its decisions or the supervision of certain businesses to Board evaluates the overview, adding information as individual members or to committees (Art.19 of the arti- needed, and where required takes decisions on any pre- cles of incorporation). ventive measures necessary, which will then be imple- _The main duties of the Board of Directors under the Swiss mented Group-wide as part of the risk management Code of Obligations and the articles of incorporation, of process. Further information on this topic can be found which they cannot be deprived nor can they delegate, are on pages 65 and following as well as on page 149. the following: _the overall management of the company and the is- Committees suing of necessary directives; _The Board of Directors has three standing committees. _the determination of the organisational structure; Each committee has a written job description that defines _the organisation of the accounting system, financial its duties and responsibilities. The Chairman and mem- planning and financial controlling; bers of the Board committees are elected by the entire _the appointment and dismissal of the persons en- Board of Directors and meet as often as business requires. trusted with the management and representation of They draw up their own agendas and keep minutes of the company; meetings. Except for the Compensation and Nomination _the ultimate supervision of the persons entrusted Committee, the committees have no decision-making with the management of the company, specifically authority of their own. Decisions are always made by the with regard to their compliance with the law, the arti- entire Board of Directors. The committees review and give cles of incorporation, regulations and directives; recommendations on all businesses over which the Board _the preparation of the Annual Report, preparations for of Directors has decision-making authority. the Annual General Meeting and implementation of its resolutions; Financial Committee _notification to the judge if liabilities exceed assets. _Members: This E. Schneider (Chairman), _The Board of Directors may pass binding resolutions for Etienne Jornod, Fritz Hirsbrunner the company with respect to all matters that are not ex- _Duties and responsibilities: pressly reserved for the authority of the Annual General _assess the financial structure, the development of Meeting either by law or the articles of incorporation. investments and acquisitions, and the influence of _The agendas for Board meetings are drawn up by the currency fluctuations and measures to be taken; Executive Chairman of the Board. Any member of the _monitor the Group’s financial situation and financial Board may propose, in writing, items to be included on the controls; agenda. The members of the Board shall receive the doc- _receive regular information from the Corporate Executive Committee concerning major changes that could affect the Group’s financial situation. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _53 _In the year under review, the Financial Committee fo- _define internal and external audit programmes; cused on its usual tasks in accordance with its written job _at least once a year analyse, the scope of internal description, in addition to the following topics: audits, the auditing projects and processes affected, _Treasury policy: Due to the Galenica Group’s strong the results of internal audits and the implementation growth and the changed circumstances in the finan- of recommendations by the Corporate Executive cial markets, which led to a significantly higher degree Committee; of complexity, the former treasury policy regulations _review with the external auditors the Group’s compli- were completely revised. The new regulations were ance with accounting policies and standards; reviewed and submitted for approval to the Corporate _assess the organisation of risk management pro- Executive Committee. cesses; _Long-term tax planning: As a result of the changing _review, together with the external auditors, the risks tax conditions, the Financial Committee evaluated the that could affect the Group’s result and the measures long-term tax planning proposal and recommended planned for reducing those risks. its adoption. _The Audit Committee held detailed discussions in spring _The Financial Committee evaluated various acquisition 2012 on Ernst &Young’s comprehensive audit report and investment projects during the financial year and pre- for the 2011 period and proposed to the entire Board of pared them for approval. The Retail business sector con- Directors that the annual accounts be submitted to the tinued to systematically pursue its expansion strategy, Annual General Meeting for its approval. focusing on expanding its existing locations and streamlin- _It noted the existence of an internal control system ing the network of sales outlets. based on Art. 728a of the Swiss Code of Obligations and _Given the continued volatility in the currency markets, that there are no material weaknesses or discrepancies. the Financial Committee reviewed the related risks and Ernst&Young informed the Audit Committee about future possible strategies to hedge against currency effects at developments in accounting and possible changes in this regular intervals. area. Potential effects of the euro crisis and the situation _The Financial Committee held three meetings during the in Greece were discussed at the spring meeting. year under review and provided individual comments by _The Committee discussed the plans for the topics and phone. focus of the 2012 internal audit with the Corporate Ex- ecutive Committee with regard to 2013 and 2014 and ap- _Audit Committee proved them. _Members: Hans Peter Frick (Chairman), _Internal audit reports were discussed at the autumn This E. Schneider, Daniela Bosshardt-Hengartner meetings, particularly with regard to compliance with in- _Duties and responsibilities: ternal guidelines and conformity with the VAT rules. _verify compliance with internal and external regula- _The assigned tasks were dealt with in three meetings, tions by carrying out random checks; which are normally also attended by the Executive Chair- _review, evaluate and submit its nomination for exter- man of the Board of Directors, the CEO the CFO and other nal auditor to the Board of Directors for the Annual members of the Corporate Executive Committee as re- General Meeting; quired, each in an advisory capacity.

Members of the Board of Directors and the Board Committees

Compensation and Board member since Elected until Financial Committee Audit Committee1) Nomination Committee Etienne Jornod 1996 2014 Member Daniela Bosshardt-Hengartner 2008 2015 Member Kurt W. Briner 2004 2013 Chairman Michel Burnier 2010 2013 Member Hans Peter Frick 2010 2013 Chairman Fritz Hirsbrunner 2012 2015 Member Stefano Pessina 2000 2015 This E. Schneider 2004 2013 Chairman Member Member Number of meetings 2012 3 3 5 1) From January 2013 Audit and Risk Committee WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 54_ Corporate Governance · Galenica annual report 2012 the Board of Directors 2012 _Upper row from the left: This E. Schneider, Fritz Hirsbrunner, Michel Burnier, Hans Peter Frick _Lower row from the left: Stefano Pessina, Daniela Bosshardt-Hengartner, Kurt W. Briner, Etienne Jornod

Members of the Board of Directors prof. Dr. Michel Burnier since 2010, elected until 2013 etienne Jornod, executive Chairman of the Board of Directors, _Born 1953, Swiss citizen since 1996, elected until 2014 _Swiss-registered Doctor of Internal Medicine and Nephrology _Born 1953, Swiss citizen _University Lecturer, University of Lausanne _ Lic.oec., HEC University of Lausanne/Senior Executive _ Formerly a member of the Medicines Committee of the Swiss Program, Stanford University (USA) Association of Pharmacists (until 2001), the Board of _ Joined the Group in 1975 as a Junior Product Manager; Swissmedic (2002–2010) and the Board of Directors of left the Group in 1978; returned in 1981 (after obtaining a Speedel Holding Ltd. (2007–2009) university degree) as an assistant to the Corporate Executive _ Member of the following organisations: Swiss Society of Committee; joined the Corporate Executive Committee in Nephrology (President), Scientific Council of the European 1989; Chairman of the Board of Directors and CEO of Society of Hypertension (Treasurer) and Swiss Society of Galenica from 1996 to 2011; Executive Chairman since 2012 Hypertension (President) _ Member of the Board of Directors of Alliance Boots, London, and Vaudoise Assurances, Lausanne, Dr. Hans peter Frick since 2010, elected until 2013 Daniela Bosshardt-Hengartner _Born 1946, Swiss citizen since 2008, elected until 2015 _ Doctor of Law, LL.M., University of Zurich, postgraduate _Born in 1972, Swiss citizen University of Alberta, Edmonton, Canada, studies in business _ Pharmacist, Federal Diploma in Pharmacy, Federal Institute management at the International Management Institute (IMI), of Technology, Zurich Geneva _ Financial analyst at Bank am Bellevue (1998–2002) and _ Legal counsel at Hewlett Packard, EMEA in Geneva M2 Capital (2003–2004) (1975–1987) _ Management consultant in the pharmaceutical, medical _ Chief Executive of the Association of International Bond technology and biotechnology sectors since 2004 Dealers (AIBD) in Zurich and London (1987–1989) _ Member of the Board of Directors of Nobel Biocare _ Joined Nestlé in 1990, General Counsel of the Nestlé Group Management AG, Zurich (1992–2011) _Member of the Advisory Board of Mentor Group, Boston Kurt W. Briner _ Honorary member of the Board of Directors of CPR, since 2004, elected until 2013 International Institute for Conflict Prevention & Resolution, _Born 1944, Swiss citizen New York _School of Commerce Basle/Lausanne _Formerly CEO of Sanofi Pharma (1988–1998) WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _55 Fritz Hirsbrunner This E. Schneider since 2012, elected until 2015 since 2004, elected until 2013 _Born 1949, Swiss citizen _Born 1952, Swiss citizen _Lic.oec., HEC University of Lausanne/Senior Executive _Lic.oec. HSG, University of St. Gallen/Graduate School of Program, IMD, Lausanne Business, Stanford University (USA) _1972–1977 Controller at Ciba-Geigy _Previously held various managerial positions in Europe and in _Joined the Galenica Group in 1977 as assistant to the USA, at SAFAA (1991–1993), Valora (1994–1997) and the Corporate Executive Committee, member of Selecta Group (1997–2002); became CEO of Forbo the Corporate Executive Committee from 1992 to 2011, International AG, Baar, Switzerland in 2004 Deputy CEO and CFO, Head of Investor Relations since 2012 _Member of the Board of Directors of Forbo Holding AG, Baar, _Member of the Board of Directors of Berlac AG, Sissach, (Delegate of the Board of Directors); Rieter Holding AG, and IVF Hartmann Holding AG, Neuhausen Winterthur (Vice-Chairman of the Board of Directors); _Member of the Board of Trustees of IST Investmentstiftung Antoneum Holding AG, Winterthur (member of the Board of für Personalvorsorge, Zurich Directors)

Stefano Pessina since 2000, elected until 2015 _Born 1941, Monégasque citizen _Nuclear engineering degree, Milan Polytechnic _Former management consultant, active in various pharmaceutical distribution companies since 1976; became Deputy Chairman in 1997, and CEO between 2001 and 2006 of Alliance UniChem Plc, Weybridge (UK); from 2007, Executive Chairman of Alliance Boots, London; member of the Board of Directors of Walgreens (USA) since 2012

_To better meet increasing demands in the area of risk _The remuneration of members of the Board of Directors management, the scope of the Audit Committee is re- was discussed and submitted to the Board of Directors defined as of 2013 and it will now be called the Audit and for its approval. Risk Committee. _Corporate governance questions were discussed in connection with the Minder initiative in the middle of the year. _Compensation and Nomination Committee _In October 2012, the Committee agreed unanimously _Members: Kurt W. Briner (Chairman), Michel Burnier, that Etienne Jornod be put forward by the Board of Direc- This E. Schneider tors of the NZZ Media Group as the new Chairman of AG _Duties and responsibilities: für die Neue Zürcher Zeitung at its Annual General Meet- _propose a compensation strategy for the Corporate ing in April 2013 and that he become a member of the Executive Committee to the Board of Directors; Advisory Board of Debiopharm. _propose to the Board of Directors the salaries and _The Committee discussed questions relating to the Cor- compensation for the members of the Board of Direc- porate Executive Committee’s succession planning and tors and the Committee; defined the ideal profile for future candidates for the _decide on the compensation for the Corporate Ex- Board of Directors of Galenica Ltd. ecutive Committee and the CEO and report on this _In November, the Committee discussed an external decision to the Board of Directors; benchmarking of the salaries of predefined Galenica _propose nominations for positions on Galenica Ltd.’s Group functions. Board of Directors and on the boards of Group com- _The provisional salaries for members of the Corporate panies. Executive Committee for 2013 were discussed and ap- _At the first meeting the final salaries for members of the proved in principle. Corporate Executive Committee for 2011 were approved. _The organisation of the Board of Directors was discussed The Committee was satisfied that the variable pay system and it was unanimously agreed that a proposal be put to was functioning well and that it had been adjusted up- the Board of Directors to appoint a Deputy Chairman of wards and downwards in line with business performance. the Board of Directors from 1 January 2013 and that This E. Schneider be appointed to this position. _The Compensation and Nomination Committee held five meetings in 2012. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 56_ Corporate Governance · Galenica annual report 2012 ManaGeMent Corporate Executive Committee and works closely with the Executive Chairman on the most important decisions. The CEO reports directly to the Executive Chairman, with _The Board of Directors has delegated the management whom he prepares the information for the meetings of the of the company in accordance with the bylaws. Etienne Board of Directors. At these meetings, the CEO, and on Jornod serves as Executive Chairman of the Board of Di- some occasions other members of the Corporate Execu- rectors and has clearly defined operational duties. More tive Committee, inform the Board of Directors and submit precise details of his duties are set out later in this sec- strategic, HR-related and financial business to the Board tion. The CEO, David Ebsworth, assumes operational man- for consultation and decision-making. agement of the Group, as head of the Corporate Executive Committee. The Board of Directors maintains close con- Corporate executive Committee tact with David Ebsworth and the members of the Corpo- _The instructions and resolutions of the Board of Direc- rate Executive Committee and invites them, or sometimes tors are implemented by the Corporate Executive Com- the CEO on his own, to attend its meetings when relevant mittee under the leadership of the CEO. The Board sets items are to be discussed. At each meeting, the members appropriate objectives for the CEO and the Corporate of the Corporate Executive Committee are also invited to Executive Committee, agrees targets for the budget and report on their respective business sectors and to discuss continually monitors compliance with these targets. Mon- important business matters with the Board. Other mem- itoring is based on monthly reports to the Board, which bers of senior or executive management of companies include relevant figures and reporting on important events within the Group are also regularly invited to report on and developments, and on the planning cycle. In the first their activities or present their projects. quarter, the results for the previous year are compared with the budget for that year. In the second quarter, the Duties of the executive Chairman current financial year is evaluated by means of a “Last of the Board of Directors Estimate 1”, and a medium-term plan for the next three _As Executive Chairman, Etienne Jornod is responsible for years is drawn up. In the third quarter, the results for the leading the Board of Directors, the ongoing strategic de- first half-year are prepared and reviewed, and in the fourth velopment of the Group, alliances and acquisitions, the quarter the expected annual result “Last Estimate 2” is positioning of the Group, communications and stake- determined and the budget for the following year agreed. holder relations. In particular, he carries out his executive role in important strategic boards of the Galenica Group, Management contracts such as Chairman of the Board of Directors of Vifor _No management contracts exist as specified under point Fresenius Medical Care Renal Pharma, member of the 4.3 of the SIX Swiss Exchange Directive on Information Board of Directors of Coop Vitality, as well as member of Relating to Corporate Governance. the Board of Directors of Alliance Boots, which has had a strategic partnership with the Galenica Group since 1999. _The Executive Chairman is also closely involved in the implementation of the most important strategic projects. In addition, he has overall responsibility for the Group’s corporate culture, a competitive factor that is becoming increasingly important in the labour market. Likewise, he helps shape the HR policy and communications of the Galenica Group. The Swiss heritage of the Galenica Group should be preserved as a competitive advantage and continue to be developed. Approximately 6,300 of around 7,300 Galenica employees are based in Switzerland.

Duties of the Ceo _Since 1 January 2012, David Ebsworth, as CEO, has been responsible for the operational management of all of the Group’s business sectors, for preparing budgets and ensuring they are met as well as for developing relationships with customers, suppliers and authorities. He leads the WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _57 organisation of Group Management

Duties of the executive Chairman executive Chairman General Secretary of the Board of Directors Etienne Jornod Monika Matti _Leading the Board of Directors _ Ongoing strategic development of the Group _Supporting alliances and acquisitions Investor relations Fritz Hirsbrunner _Positioning of the Group re. communications _Maintaining relationships with partners Corp.Communications _Overall responsibility for the corporate Christina Hertig culture (HR policy, communications) _Involvement in implementing key strategic Internal audit projects _Member of the Group’s strategic Boards of Directors

Duties of the Ceo Ceo _Operational management of the Group David Ebsworth* _ Leading the Corporate Executive Committee _Budget realisation and control _Developing relationships with customers, suppliers and authorities _Supporting the Executive Chairman of the Board of Directors in preparing Human resources Legal strategic, HR-related and financial business Jörg Kneubühler* Rolf Henzi for consultation and decision-making

Corporate Finance pharma retail Logistics / Jörg Kneubühler* David Ebsworth* Felix Burkhard* HealthCare Information Jean-Claude Clémençon*

pharma Gianni Zampieri* Deputy CEO Pharma * = Members of the Corporate Executive Committee

the Corporate executive Committee 2012 _From the left: Jörg Kneubühler, Jean-Claude Clémençon, David Ebsworth, Gianni Zampieri, Felix Burkhard WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 58_ Corporate Governance · Galenica annual report 2012 Members of the Corporate executive Committee Dr. Jörg Kneubühler, CFo and Head of Human resources _Born 1960, Swiss citizen Felix Burkhard, Head of retail business sector _Dr.rer.pol., University of Bern _ Born 1966, Swiss citizen _ Held various positions in finance at the Swatch Group before _ Lic.oec., University of St. Gallen (HSG), joining Galenica and Swiss certified accountant _ Joined the Group in 2002 as Head of Finance and _ Financial Auditor at Revisuisse PriceWaterhouse, Bern, Administration at Vifor Pharma; Head of Controlling for the and Head of Finance and Controlling at Amidro, Biel-Bienne, Galenica Group as of 2006; Head of Corporate Finance and before joining the Group Controlling for the Galenica Group and member of the _ Joined the Group in 1996 as Corporate Controller, Corporate Executive Committee since 2009; CFO and Deputy Head of Retail from 2000; in addition, Head of the Head of Human Resources since 2012 Amavita pharmacy chain from 2008; Head of Retail and member of the Corporate Executive Committee since 2010 Dr. Gianni Zampieri, Head of pharma operations _Born 1956, Swiss citizen Jean-Claude Clémençon, Head of Logistics business sector _ Dr.sc.nat., NDS BWI, Federal Institute of Technology, Zurich/ and responsible for HealthCare Information Senior Executive Program, Stanford University (USA) _Born 1962, Swiss citizen _ Held positions at Roche and Novartis (Strategic Planning) _Degree in Logistics, sfb Technical College, Zurich before joining the Group _Program for Executive Development (PED), IMD, Lausanne _ Joined the Group in 1996; became CEO of Vifor (International) _ Before joining the Group he was Head of Manufacturing at in 1997; member of the Corporate Executive Committee Rheintub AG, Rheinsulz, and CEO of Raintec GmbH, Dogern since 2002; Head of the Pharma Division of the Galenica (Germany) Group from 2004–2008; Head of Industrial Operations at _ Joined the Group in 1995 as Operations Manager Galexis Vifor Pharma from 2008–2012; CEO of OM Pharma since Zurich; Head of Schönbühl Distribution Centre from 1999; 2009; Deputy CEO of Vifor Pharma since 2011; Head of Head of Galexis from 2002; Head of Logistics since 2005; Pharma Operations since 2012 Head of HealthCare Information and member of the Corporate Executive Committee since 2010 _Karin priarollo joined the Galenica Group as Head of Human Re- _Member of the Board of Helvecura cooperative society, Bern sources and as a member of the Corporate Executive Committee on 1 May 2012. She stepped down from her functions and left the Dr. David r. ebsworth, Ceo of Galenica Group and company on 9 November 2012. Head of the pharma Division, Ceo of vifor pharma _Born 1954, British citizen _ BSc in Chemistry and German, PhD in Comparative Industrial Relations, University of Surrey (England) _ Worked from 1980 as a Product Manager at Pfizer, Germany; held various management positions at Bayer AG in Germany, Canada and the USA between 1983 and 2001; became CEO of Oxford Glycosciences UK Ltd. in 2002; then from 2003 held positions as a consultant while being a member of or chairing the Board of Directors of several companies in Germany, England and Eastern Europe _ Joined the Galenica Group in 2009 as a member of the Corporate Executive Committee; Head of the Pharma Division and CEO of Vifor Pharma; CEO of Galenica Group since 2012

CoMpenSatIon, proFIt-SHarInG anD LoanS number of shares, which is specified in company regulations, at a reduced price (more information on pages 104, 135 and 136). Basis for evaluation Key compensation principles Salary policy and long-term Group strategy _Employee compensation generally consists of a fixed (stakeholder value) basic salary, which depends on the employee’s position _Now that the Board of Directors has defined a sustain- level and, for members of the Corporate Executive Com- able, long-term development policy, compensation is in mittee and senior management, a bonus. The bonus sys- line with the strategic aims defined by the Board of Direc- tem allows members of the Corporate Executive Commit- tors. It also takes into account the fact that under certain tee to participate in the profits of the Group and senior conditions economic success may only be achieved over management to participate in the profits both of the Group the long term. Since other parameters of the Group’s long- and of the business sector. The attainment of personal term development strategy are also taken into account, targets is also rewarded. Members of the Corporate short-term profits do not have a corresponding effect on Executive Committee and certain members of senior man- compensation. The company therefore does not pay any agement also receive additional long-term remuneration. compensation in the form of traded options. Members of _The purpose of the bonus system is to ensure that mem- the Corporate Executive Committee and members of sen- bers of senior management and management act and ior management all share in the Group’s profit in the form make decisions in such a way as to support the achieve- of shares. Independent of their compensation and under ment of targets at all levels and thereby contribute to the terms of the share acquisition plan for employees, sustained positive results for the Group as a whole, as well every year employees are entitled to acquire a certain as the business sector and company to which they belong. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _59 This serves to harmonise the interests of shareholders responsibilities with those of management and the Group. Through share participation, identification with the company is further _The compensation strategy and the related remuneration enhanced. Finally, members of the Corporate Executive system for the members of the Board of Directors, the Committee, senior management and management receive Corporate Executive Committee and senior management contributions to pension funds and other compensation, (including the principles of equity compensation plans) such as car allowances. are decided by the Board of Directors based on a proposal _In addition to the attainment of personal targets, both from the Compensation and Nomination Committee. bonuses and long-term remuneration depend on the _The salaries of members of the Board of Directors, which achievement of the defined value growth and on the may be paid in the form of shares, are decided by the changes in the share price. The Galenica Economic Profit Board of Directors based on a proposal from the Compen- (GEP) is a measure designed to reflect the principles of sation and Nomination Committee. value-based management derived from an economic- _The Compensation and Nomination Committee is re- value-added (EVA) approach and is based on the under- sponsible for deciding on compensation and participation standing that in the interests of shareholders and other in equity compensation plans by members of the Corpo- important stakeholder groups the Galenica Group will rate Executive Committee including the CEO. It informs strive to achieve a long-term investment return which ex- the Board of Directors at least once a year of its decisions ceeds the weighted average cost of capital. Poor perfor- and the progress of the compensation process. Compen- mance inevitably has a negative impact on the total remu- sation and participation in equity compensation plans by neration. However, the compensation system does not members of the Board of Directors, the Corporate Execu- include any particular malus provisions. tive Committee and senior management are determined _The weighting of the individual compensation compo- at the beginning of the reporting year by the committees nents depends on an employee’s position level. Criteria responsible. such as budget responsibility and the number of subordi- _The bonuses of members of senior management are de- nates are also important. The greater the employee’s termined by the Corporate Executive Committee based direct influence on these factors, the higher the weighting on the performance appraisal by the direct line manager, of the variable component of compensation. When defin- which is then passed on via the relevant senior manage- ing the weighting, setting targets and measuring their ment body to the Corporate Executive Committee. For achievement, the responsible body is always permitted a members of the Corporate Executive Committee, the degree of discretion in the application of the criteria men- Compensation and Nomination Committee is responsible tioned in this report, even where this is not specifically for determining the target bonus and for the evaluation of mentioned in individual cases. individual target attainment. _Variable compensation arising from the bonus and from _Members of the Corporate Executive Committee and the long-term incentive plan paid out to eligible members certain members of senior management participate in the of senior management and the Corporate Executive Com- LTI programme. Eligibility for the LTI programme is deter- mittee amounts to between 0% and 200% of the fixed mined by the Compensation and Nomination Committee salary component. However, the annual bonus and vari- for members of the Corporate Executive Committee, and able long-term incentives represent two independent ele- by the Corporate Executive Committee for members of ments and are calculated and weighted separately. senior management. _To a lesser degree, but in accordance with the consid- _For members of the Corporate Executive Committee, the erations above, members of management are also paid a weighting of the individual components of the target which performance-related bonus, while employees receive a determine the bonus are defined by the Compensation bonus based on the performance of the company. and Nomination Committee. Measurement of targets consists of both financial and qualitative elements (for example, the launch of a particular product or implementation of a particular process). _For the “Group” and “business sector” financial components a target for the increase in the GEP of the Group or the business sector is set. The relevant targets are set by the Corporate Executive Committee for the members of senior management and by the Compensation and Nomi- nation Committee for the members of the Corporate Ex- ecutive Committee. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 60_ Corporate Governance · Galenica annual report 2012 _The Board of Directors is informed of the setting and payment of bonus weighting of the targets once a year. _The payment of the bonus is made in the year following _External consultants were hired as needed to assist in the publication of the full-year results. Members of the developing the compensation strategy that forms the Corporate Executive Committee and senior management foundation of the remuneration system. A benchmark must draw 32% of the bonus in registered shares of study on the remuneration of members of the Corporate Galenica Ltd.; the rest is paid out in cash. For some mem- Executive Committee and certain other functions was car- bers of senior management the share portion is lower and ried out by Kienbaum in 2012. No other contracts with the cash portion of the bonus is higher. The shares are external suppliers were issued in the reporting period. blocked for five years, during which time they cannot be sold, so a discount is granted on the issue price. _The issue price for the registered shares is as follows: Bonus _for members of senior management, the average stock market price of the month prior to the press Bonus calculation conference held to present the financial statements, _At the beginning of the calculation period a figure is less a 25% discount; the shares are issued in the defined which will be paid out as a bonus if the targets month following the press conference; (100%) for all components are reached. This amount is _for members of the Corporate Executive Committee, called the target bonus. The target bonus is normally set the average stock market price for the month of Janu- individually on an annual basis as an absolute amount ary in the year in which the bonus is paid, less a 25% together with the relevant fixed salary for the next year. discount. _The proportionate maximum bonus, based on the financial components for the achievement of Group and business sector targets, amounts to 220% of the target bonus variable long-term incentives and the proportionate maximum bonus for the individual components can rise to a maximum of 150% of the target _The Long-Term Incentive programme (LTI), the third com- bonus. Based on the weighting of the components, the pensation component, is designed to motivate eligible total bonus is subject to an upper limit of 200% of the managers to ensure that their actions and decisions sup- target bonus. port the achievement of the medium and long-term value- _Once the annual results have been published, the GEP based targets across all levels. With this instrument attainment level for the financial components “Group” and Galenica also seeks to harmonise the interests of manage- “business sector” can be calculated as a percentage. The ment and the Group with the interests of shareholders, extent to which the individual targets which were laid and to achieve positive results over the long term. In ad- down in both quantitative and qualitative form at the dition, the LTI programme aims to further strengthen com- beginning of the assessment period have been attained mitment to Galenica and identification with the company. is assessed by the line manager and expressed as a per- _Members of the Corporate Executive Committee and centage. The line manager then submits a proposal to the certain members of senior management participate in the business sector management. The final approval of the LTI programme. Eligibility and extent of participation in bonus that is paid out, which may contain an individual the LTI programme is decided by the Compensation and supplement within the above-mentioned parameters for Nomination Committee for members of the Corporate exceptional performance over the previous year, is the Executive Committee, and by the Corporate Executive responsibility of the Corporate Executive Committee for Committee for members of senior management. members of senior management and of the Compensation _The LTI programme is based on performance units. Per- and Nomination Committee for the members of the Cor- formance units include a commitment that upon achieving porate Executive Committee. defined long-term performance targets, a certain number _Additional information on the subject of share-based of Galenica shares will be allocated to eligible partici- payment can be found in the Notes to the consolidated pants. Performance units are virtual; no real units are is- financial statements on pages 104, 135 and 136. sued. The number of performance units allocated depends on the defined percentage of the basic annual salary as well as the effective share price at the time of allocation. The factors affecting the value of the performance units are the operating performance of the Galenica Group and the price performance of Galenica shares on the stock WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _61 market. The bonus curve (0% of the number of perfor- fee for every meeting of the full Board of Directors and of mance units allocated) starts with the Galenica Economic the committees. These may be drawn fully or in part in Profit (GEP) at the time of the allocation of the perfor- registered shares of Galenica (blocked for five years). mance units as the benchmark and is measured in terms of the subsequent performance of GEP over time. If the bonus curve reaches the growth in value defined for the annual compensation for 2012 three-year period, the relevant number of Galenica shares are allocated, to which no blocking periods apply. The plan Board of Directors is limited to a maximum target attainment of 200%. An LTI _The compensation for the members of the Board of plan always runs for a period of three years. At the begin- Directors for 2012 is shown in the Notes to the financial ning of each financial year, a new LTI plan with a new statements of Galenica Ltd. (page 147). three-year target and assessment period is issued. The _On 31 December 2012, the members of the Board of third three-year period became due for payment at the Directors together held 68‚914 shares (for details see ta- end of 2012. The following parameters were used for the bles below and page 147). This includes, within the frame- calculation: work of the specific compensation system set out below, _defined share of the basic salary per participant; 40,000 shares belonging to the Executive Chairman. share price at allotment: CHF 395.30; average share These shares are blocked until 31 March 2017. price 4th quarter 2012: CHF 538.67; target achievement: approximately 105.6%. Members of the Corporate executive Committee _The compensation for the members of the Corporate Compensation for members of the Executive Committee is shown in the Notes to the finan- Board of Directors cial statements of Galenica Ltd. (page 148). After a period _The members of the Board of Directors, excluding the of five years, each member of the Corporate Executive Executive Chairman, who was remunerated separately for Committee is required to hold shares in the company the financial year 2012 in accordance with the compensa- equal in value to at least 75% of his or her annual salary. tion system set out below, receive annual remuneration The shares held by the members of the Corporate Execu- for their work as defined by specific regulations. This re- tive Committee on 31 December 2012 are shown in the muneration comprises a fixed salary and an attendance tables below and on page 149.

Shares held by the Board of Directors and the Corporate executive Committee

Shares held as Individual share retention plan for the Corporate Executive of 31.12. 2012 Committee shares held by Galenica Ltd. until expiry date Expiry date Board of Directors Etienne Jornod, Executive Chairman 47,261 — 2012 Daniela Bosshardt-Hengartner 1,265 — — Kurt W. Briner 2,496 — — Michel Burnier 284 — — Hans Peter Frick 534 — — Fritz Hirsbrunner 13,032 — — Stefano Pessina 1,315 — — This E. Schneider 2,727 — —

Corporate executive Committee Felix Burkhard 1,312 375 20121) Jean-Claude Clémençon 881 — — David Ebsworth 1,268 — — Jörg Kneubühler 1,814 500 20121) Gianni Zampieri 5,040 1,250 20121)

_ The individual share retention plan has come to an end and the shares were attributed on 31 December 2012 respectively in January 2013. There is no other individual share retention plan pending. 1) Shares attributed in January 2013 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 62_ Corporate Governance · Galenica annual report 2012 options SHareHoLDerS’ rIGHtS to partICIpate _Neither the members of the Board of Directors nor the members of the Corporate Executive Committee hold tradable options. The Group did not make any loans to _The Annual General Meeting is held each year within six Board members or to members of the Corporate Executive months of the close of the financial year. Extraordinary Committee during the year under review. General Meetings are called as often as necessary by a decision of the Annual General Meeting or Board of Direc- Severance packages tors, at the request of the auditors or at the written re- _No severance packages or other additional compensa- quest of shareholders representing in aggregate not less tion of any kind were paid out in 2012 to current or former than 7% of the share capital entered in the commercial members of the Board of Directors or the Corporate register. Executive Committee. _Each share registered in the shareholders’ register as carrying voting rights entitles the holder to one vote at the Compensation trend Annual General Meeting. Shareholders are also entitled _Thanks to good achievement of targets and improved to dividends and have the other rights pursuant to the results, the individual compensation of members of the Swiss Code of Obligations. Board of Directors is higher than in the prior year. How- ever, the published figures are not comparable with those voting restrictions and proxy voting from 2012 due to the change in the composition of the _The Board of Directors may refuse to recognise a share Board of Directors. purchaser as a shareholder or beneficiary with voting rights for any shares which, when added to shares already Compensation of registered as voting shares in the purchaser’s name, the executive Chairman of the Board of Directors would give the purchaser more than 5% of all shares car- _The share-based compensation system described below rying voting rights. See page 52 for further details. demonstrates how closely Etienne Jornod identifies with _A shareholder may be represented at the Annual General shareholders and is evidence of his confidence in the Meeting on the basis of a written power of attorney but strategy and management of the Group. It was also the only by another shareholder, the official company repre- subject of an advisory vote on the remuneration report at sentative, the independent proxy or a depositary proxy. the Annual General Meeting held on 3 May 2012. _On 1 January 2012, Etienne Jornod received for his duties procedure and conditions for lifting restrictions as Executive Chairman for the period from 1 January 2012 on voting rights to 31 December 2016 a one-off remuneration in the form _For voting restrictions to be lifted, shareholders who of 40,000 Galenica registered shares, which will be together represent not less than 0.5% of the share capital blocked over the entire term of the contract until 31 March entered in the commercial register must request in writing 2017. To compensate for the lack of periodic compensa- that such an item be included on the agenda no later than tion over the five-year period (salary, bonuses, shares, 40 days before the Annual General Meeting. The Annual options, etc.), the Executive Chairman received these General Meeting must indicate its approval based on a shares at the market price of the date of conclusion of the quorum, as defined by the articles of incorporation, of at contract (CHF 528.00) as well as an amount of CHF 150,000 least two-thirds of the votes represented and an absolute per year, which will be used to pay employee pension majority of the share par values represented. contributions. The value of the shares corresponds to an annual taxable income of an average of about CHF 3.4 million. The shares will be blocked for the term of the agreement and consequently cannot be sold before the expiry of the contract. The employment contract contains detailed provisions which stipulate, should the contract be terminated before the end of the period, how many shares Etienne Jornod is entitled to, pro rata temporis, at such a date and at what price. This depends, normally, in particular on whether the employee or the employer have called for a premature termination. No indemnity for leave was agreed. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _63 Quorums under the articles of incorporation annUaL GeneraL MeetInG _In addition to the cases cited in Art. 704 of the Swiss Code of Obligations, approval by at least two-thirds of the votes represented and the absolute majority of the share annual General Meeting of 3 May 2012 par values represented is required in the following cases: _Apart from the standard agenda items the Annual Gen- _Art.15c) of the articles of incorporation: a change in eral Meeting re-elected Daniela Bosshardt-Hengartner the provisions relating to restrictions on the transfer and Stefano Pessina for a further three-year period of of registered shares; office. Fritz Hirsbrunner was elected to the Board of _Art.15d) of the articles of incorporation: conversion Directors for a three-year period. Paul Fasel, latterly Dep- of registered shares into bearer shares and vice versa. uty Chairman and Lead Director, decided not to stand for re-election. The Annual General Meeting also thanked him Convening of the annual General Meeting for his significant contribution to the Galenica Group. _The articles of incorporation do not differ from legal There was another advisory vote on the remuneration regulations with regard to the convening of the Annual report, and shareholders voted in favour of the motion to General Meeting and the setting of the agenda. The Annual amend the articles of incorporation for the renewal of the General Meeting is convened by the Board of Directors at authorisation to issue authorised capital. least 20 days before the date of the meeting. The shareholders are invited to attend by a notice placed in official annual General Meeting of 2 May 2013 publications. The meeting may also be convened by send- _The Board of Directors proposes the re-election of Kurt ing a letter to all the registered shareholders at the ad- W. Briner for a further one-year period of office and Michel dresses entered in the shareholders’ register. The notice Burnier, Hans Peter Frick and This E. Schneider for a fur- of a meeting shall state the items on the agenda, the pro- ther three-year period of office to the Annual General posals of the Board of Directors and the requests of any meeting. In addition, the election of a new Board member, shareholders who have called for a General Meeting to be namely Sylvie Grégoire, resident in Paris, for a term of convened or for a particular item to be included on the office of three years, is proposed to the Annual General agenda. Meeting. Furthermore, another advisory vote on the remuneration report is scheduled. Following approval of the Inclusion of items on the agenda annual report and financial statements, it is proposed that _Shareholders who together represent not less than 0.5% the available earnings be appropriated as follows: of the share capital entered in the commercial register may request that an item be included on the agenda. They appropriation of available earnings for the year ending 31 December must submit such requests in writing no later than 40 days Proposal of the Board of Directors before the scheduled date of the meeting. in CHF 2012 2011 Balance brought forward 208,436 1,686,255 Shareholders’ register Profit for the year 202,235,119 57,022,181 _The shareholders’ register is closed ten days before the available earnings 202,443,555 58,708,436 Annual General Meeting. No new shareholders are registered until the conclusion of this Annual General Meeting. appropriation of available earnings Transfer to free reserve (130,000,000) — Dividend per share CHF 11.00 (2011: CHF 9.00) (71,500,000) (58,500,000) Balance to be carried forward 943,555 208,436 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 64_ Corporate Governance · Galenica annual report 2012 CHanGe oF ControL anD proteCtIve MeaSUreS InForMatIon anD MonItorInG tooLS oF tHe BoarD oF DIreCtorS WItH reSpeCt to ManaGeMent _The obligation to make a public offer pursuant to Art.22 of the Stock Exchange Act (Federal Act on Stock Ex- changes and Securities Trading) has not been changed in risk management process the articles of incorporation. The employment contracts of the members of the Corporate Executive Committee _Galenica has a risk management process in place which and the members of senior management also contain no enables the Board of Directors to fulfil its statutory man- provisions to this effect. date and which also helps the Corporate Executive Com- mittee as well as the relevant management of Group companies to identify potential risks in a timely manner and take the preventive measures necessary. The goal of this CoMBattInG CorrUptIon process is to identify and assess significant risks at all management levels and to manage them while making conscious use of the opportunities the process provides. _Galenica attaches considerable value to doing business _As part of Group-wide “Galenica Risk Management in a manner that is ethically correct and in accordance (GRM)”, the companies in the Group conduct a risk as- with the legal requirements in place. It is committed to sessment at least once a year. This standardised process complying with legal and ethical standards. This must be is based on a risk grid in which the most important stra- reflected in every aspect of staff conduct. Galenica en- tegic and operational risks and their possible financial forces a zero-tolerance approach to corruption and brib- effects are identified in line with pre-defined criteria and ery on the part of employees, partners, suppliers or rep- then evaluated in accordance with the probability of their resentatives of third parties. Many countries have occurrence and their effect. These risks are entered into legislation which stipulates that bribing public officials is a risk matrix for each business sector and, depending on an offence. Violations of these provisions or other laws the extent, also incorporated into the Group risk matrix. prohibiting unfair competition may result in criminal or _The Board of Directors of Galenica Ltd. receives an over- civil proceedings against Galenica as well as the employ- view of the most important risks from the Corporate Ex- ees responsible. ecutive Committee when circumstances require it, but at _In order to ensure that rules and regulations are com- least once a year. The Board evaluates the overview, add- plied with, Galenica has developed an anti-bribery and ing information as needed, and where required takes deci- corruption check. This check is used each time a new sions on any preventive measures necessary, which will business relationship is established with third parties and then be implemented Group-wide as part of the risk man- is being introduced gradually and on the basis of specific agement process. priority criteria. Definition of risk _Galenica defines risk as the possibility that an event or an action will lead to immediate financial loss or other negative consequences.

objectives _Galenica Risk Management (GRM) defines three basic objectives: _Creating a framework for effective risk management within the Galenica Group that will be embedded in existing management and planning processes and will therefore effectively strengthen risk awareness at all management levels. _Creating and guaranteeing a lean and pragmatic risk management system that will effectively protect the business sectors and their profit-earning ability. _A credible presentation to stakeholders that Galenica is managing its risks effectively. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _65 Monitoring and management Internal audit _Risk management at the level of the Galenica Group re- _Internal Audit carries out audits of operational and stra- cords strategic risks that could have significant conse- tegic risk management and the internal control system in quences at Group level or at least at business sector level. accordance with the audit plan determined by the Audit Operational risk management is specifically defined and Committee. It carries out reviews, analyses and interviews managed by the individual Group operating companies, across the Group and helps the business sectors to meet although it is recognised that events in individual compa- their targets by ensuring an independent assessment of nies can clearly have an influence on the strategic risks the effectiveness of the internal control processes. Inter- of the Group. Risks are managed at the appropriate level nal Audit produces reports on its audits and reports by the management hierarchy that is best suited for this directly to the Audit Committee in writing regularly. The purpose. This ensures that action will be taken in an ef- activities of Internal Audit are conducted through con- ficient manner and that experience will be broadly rein- tracts issued to external service providers. forced within the Galenica Group. _The systematic overview of the key risks enables the Board of Galenica to coordinate with the chosen strategy, prioritise risk, allocate resources and specify any action aUDItorS required. The Galenica Board of Directors receives an overview of risk assessment when circumstances require it, but at least once a year. _Ernst&Young Ltd., Bern, Switzerland, have been the _The Corporate Executive Committee as well as other Group’s auditors since 1992. Thomas Nösberger, Dr.rer. management figures holding responsibility at the compa- pol., CPA, a partner at Ernst&Young, took charge of the nies of the Group are familiar with the risks of the Group, audit in 2008. their business sector or their Group company. They suc- _The fees paid to the Group’s auditors Ernst&Young in cessfully implement any measures decided upon and are 2012 for their audit of Galenica and companies within the responsible for the efficient operation of the risk manage- Galenica Group totalled approximately CHF 1,196,000. ment process. They also draw attention, however, to new _The fees paid to Ernst&Young and their close collabora- risks which have become apparent or to any other change tors for other services rendered to Galenica and its sub- in the risk situation and, in addition to implementing meas- sidiaries in the period under review amounted to about ures to prevent or minimise such elements, ensure that CHF 370,000. They break down as follows: these are incorporated into the risk management process. _Additional advice in audit matters CHF 108,000; _Additional information about the management of finan- _Tax and legal advice CHF 141,000; cial risks can be found in the Notes to the consolidated _Transaction support incl. due diligence CHF 121,000. financial statements on pages 106 and 107. _In 2012, Thomas Nösberger attended two meetings of the Audit Committee. Moreover, the auditors presented Internal control system their report at the meeting of the Board of Directors on _As part of its risk management system Galenica also 9 March 2012. operates an internal control system (ICS) to provide reli- _The auditors are regularly informed of new projects able internal and external financial reporting and to pre- by the Board of Directors. The auditors’ activities are vent false information and errors about business transac- reviewed at least once a year by the Audit Committee. The tions. The internal control system provides the necessary criteria that are of particular importance in these reviews processes and controls to ensure that risks relating to are: competence in reporting, understanding of the the quality of the company’s financial reporting can be complex structure of the Group, the quality of reporting, detected and managed in a timely manner. A thorough compliance with deadlines, independence and costs. The review of the existence of the processes and controls of involvement of the auditors in the financial elements of Galenica’s internal control system is carried out annually due diligence reviews for acquisitions and the related legal by the external auditors at the time of the interim audit. advice improves the efficiency of the process. The results of these reviews are reported to the Audit Committee and appropriate measures are taken by management to continually improve the company’s processes with regard to bookkeeping, accounting and financial reporting. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 66_ Corporate Governance · Galenica annual report 2012 BranD ManaGeMent the Group’s brands

_Organisational basis: The Galenica Group is structured philosophy and implementation over two divisions, Pharma and Health, which are broken down into four business sectors: Pharma, Logistics, Retail _Excellence in the healthcare market. Galenica seeks to and HealthCare Information. The Group companies are be recognised as a reliable, dynamic and efficient Group assigned to these business sectors on the basis of their within the healthcare market which creates value for all core activities. The Galenica brand is supported at all lev- stakeholder groups with high-quality products and ser- els by the descriptor (the support line) used with the logo. vices. This is why Galenica also invests its energies in At Group level, it is the broad basis of excellence that is looking after its brands. Galenica stands for quality and communicated; at company level, it is the fact that the professionalism, for credibility and transparency, for reli- company is part of the Galenica Group that is signalled. ability and continuity. There is a clear focus on excellence _The majority of companies in which Galenica has more in our support line “Galenica – Excellence in the health- than a 50% holding follow this strategy and use the com- care market”. Group Corporate Communications, in par- mon corporate design. New companies are integrated ticular, is responsible for implementing Galenica’s brand progressively in line with a clearly defined process. Im- communication. portant strategic marketing considerations are taken into account when dealing with well-established and well- _Corporate identity. Galenica is a broad-based Group known brands. which manages well-established company, product and _A current example of such progressive integration is service brands in the healthcare market. Products and Vifor Uriach Pharma. Galenica fully acquired this former services under the Galenica brand guarantee a high level joint venture with Spanish partner Grupo Uriach at the end of quality. The communication philosophy “as centralised of 2011, and also took over Grupo Uriach’s Primary Care as necessary and as decentralised as possible” is also business (dealing with medical practices). The name of the reflected in brand management. Part of this means giving company was changed to Vifor Pharma España and it was the individual companies under the Galenica umbrella fully integrated in 2012, both operationally and in terms scope to address target groups in the best way possible of corporate design. for the market segment and product involved. This is why _Basic guidelines on corporate design are summarised in Galenica’s companies operate under their own names in two handbooks for staff and external partners and include the market. At the same time, over and above this diver- all areas of application, such as corporate stationery, sity, the Galenica Group seeks in particular to express printed products, company signs, website design and gifts clearly the shared identity of the companies comprising for customers. The handbooks are available in printed and the Group. A consistent identity is vital, therefore; it is electronic form. In addition, internal training sessions on reflected in the uniformly defined corporate identity and how to use the Galenica corporate design take place corporate design. Presenting a uniform corporate design regularly for new employees; the sessions are also open across all Group companies supports the consistent to established employees interested in refreshing or deep- positioning of the Group and its companies. ening their knowledge.

_Protection of the Group’s brands. Galenica systematically fosters and protects its company brands in all countries where it is active and guarantees a high standard of quality. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _67 product and service brands _Periodic publications. Once a year, Galenica publishes an annual report and a half-year report. The sales figures _Galenica’s company brands are supplemented by the for the previous year are announced each year in a press product and service brands of the companies within the release in January. In addition, the Group publishes a Group, focused on the customers of the individual busi- newsletter, Galenica NEWS, which appears periodically ness sectors. For example, the products of the Pharma and provides interested stakeholders with information business sector, the services of the Logistics business about strategic considerations, specific events and ac- sector, the offering of the pharmacy formats Amavita, tivities as well as news about products and services. Sun Store and MediService in the Retail business sector, _Upon request, shareholders receive all periodic publica- as well as the database and software products in informa- tions sent to them by post. The invitation to the Annual tion management. The presentation of these products and General Meeting is also sent to shareholders by post, and services is tailored to markets and customers specific to is also published in the Schweizerisches Handelsamts- individual companies and, therefore, differs from the blatt. Group corporate design. The corporate design and the accompanying communication and marketing measures _Internet. All Galenica’s publications, all media releases are defined and implemented by the relevant company. and other supplementary information about the Group can Special events and activities organised in conjunction with be found at www.galenica.com. the branding of products and services along with customer surveys during the year under review can be found Contact persons and important publication dates in the sections for the business sectors of the Galenica _For shareholders Group starting from page 17. _For shareholders in relation to corporate governance: Etienne Jornod, Executive Chairman of the Board of _Protection of product and service brands. Product and Directors, Phone +41 58 852 81 11 service brands are systematically fostered and protected E-mail [email protected] by the individual companies in the countries where they are marketed. _For investors _Fritz Hirsbrunner, Head of Investor Relations Phone +41 58 852 85 29 E-mail [email protected] InForMatIon poLICY _For the media _Christina Hertig, Head of Corporate Communications _Galenica and its companies operate an active and trans- Phone +41 58 852 85 17 parent information policy towards all their stakeholder E-mail [email protected] groups. Consistency and credibility are two fundamental principles that are reflected in factual, comprehensive and _Agenda 2013/2014 objective communication. _Annual General Meeting: 2 May 2013 _Half-year report 2013: 13 August 2013 _Ad hoc publicity. Important and price-relevant events _Sales figures 2013: January 2014 are communicated in a timely manner via electronic media and in accordance with the Directive of the SIX Swiss Exchange. Any employees affected are informed first, as long as the specific situation makes this possible and it is allowed by law. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 68_ Corporate Governance · Galenica annual report 2012 MaIn BranDS oF tHe GaLenICa GroUp

Umbrella brand

Brands of the Galenica Group’ companies pHarMa LoGIStICS retaIL HeaLtHCare InForMatIon

Pharmacy formats

product and service brands

Iron replacement products Services Services Content

Identa by Documed

OTX products

OTC products

Process WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Corporate Governance _69 From the discovery of electrons to mass spectrometry _The history of mass spectrometry began with Sir J.J. Thomson at the Cavendish Labo- ratory at Cambridge University (UK). He discovered the electron in 1897 while studying electrical gas discharges. At the start of the 20th century, he built the first mass spec- trograph to determine the mass-to-charge ratios of ions. _Thanks to the discoveries of Sir J.J. Thomson, mass spectrometry can be used in a targeted way in the pharma field for fundamental research and quality assurance. The high quality of analysis of mass spectrometry provides valuable data for more efficient product development and also supplies proof of quality for product registration. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 70_ Galenica annual report 2012 SUSTAINABILITY Group-wide energy and CO2 strategy to address challenges in the area of energy supply

Content INTrodUCTIoN

71 _Introduction 71 _Expansion of system limits _In 2012, for the first time, Galenica did not increase its 71 _ Information on sustainability management energy consumption; we were able to stabilise figures at on Internet around the same level as the previous year, despite the 71 _Sustainability Report fact that the company continued to grow. As last year, a separate efficiency table will be published, giving a pre- 72 _Management cise comparison of resources consumed with value added 72 _Goals and number of employees. This supplement will be posted 72 _ Sustainability Committee on the Galenica internet site (www.galenica.com) in the 72 _Code of Conduct first quarter of 2013 and forms an integral part of the 72 _Objectives for 2012 Sustainability Report. Despite this important step in the 73 _ Objectives for 2013 right direction, Galenica is aware of the challenges ahead in the area of energy supply and the global climate. We

73 _Reporting therefore started to develop a Group-wide energy and CO2 73 _System limits and data collection strategy in 2012, which will guide activities in this area in the future. 74 _Continous improvement _Expansion of system limits. The system limits for re- 75 _Environmental responsibility porting have again been expanded in this year’s report. 75 _ Energy consumption Data from the HealthCare Information business sector are 75 _ Emission of greenhouse gases and now available for the first time, meaning that this section air pollutants now covers the environmental impacts of all areas of the 78 _Resource efficiency company. 79 _Waste and recycling 79 _Water consumption _Information on sustainability management 80 _Loss events, compliance and new regulations on Internet. A further innovation is also shown on our website www.galenica.com: general information on sus- 80 _Social responsibility tainability management within the Galenica Group is now 80 _Human resources outlined under the heading “Sustainability”. As previously, 80 _Social commitment for those in need more detailed information on targets and focuses, measures and results in the year under review can be found in this somewhat shorter and therefore clearer section.

_Sustainability Report. The current Sustainability Report and the 2012 Annual Report were reviewed and approved by the Board of Directors of Galenica Ltd. at its meeting on 14 February 2013. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Sustainability _71 MANAgeMeNT Code of Conduct _The Code of Conduct of the Galenica Group, which was drawn up in 2007 and applies to all employees, defines its goals ethical rules and standards. It is integrated into the em- _Galenica is committed to the highest quality and focuses ployee handbook and must be signed by all employees on success over the long term. At the heart of this com- upon joining the company. As well as signing the Code, mitment are the three key sustainability goals of the employees who are particularly exposed to such issues Galenica Group, which are supported by the Corporate are given regular training. In the fourth quarter of 2012, Executive Committee and form an essential part of the employees were able to self-test their understanding of Group’s corporate culture: key issues in the Code of Conduct using a computer-based _Continually increase stakeholder value through sus- self-learning tool. By the end of the first quarter of 2013, tainable practices; around 1,000 employees will have taken this test. _Encourage staff to act in a responsible and enterpris- ing way; objectives for 2012 _Increase the efficiency of resource management, _Based on the sustainability goals, targets for 2012 in particularly in energy use. individual business sectors again centred on efficient use of resources in buildings and production processes as well Sustainability Committee as on continuing to raise awareness among employees. In _The Galenica Group has formalised its commitment in the Pharma business sector, the year under review was the area of environmental responsibility with the creation marked by process harmonisation in the area of health, of the Sustainability Committee. This is composed of one safety and the environment (HSE), associated with manager each from the Logistics and Retail business sec- prep arations for Pharma-wide ISO 14001 certification. tors, three representatives from the Vifor Pharma produc- In Logistics, prevention of unnecessary inventory flows tion sites and the Head of Group Legal Services, who (optimisation of returns and of disposal of goods) and chairs the Committee. The Committee met twice in the promotion of the coolbox to transport specialist medi- year under review to foster the exchange of experience in cations at temperatures of 2°–8°C (developed with a resource efficiency. It also discussed a draft supplier code well-known industrial partner) were pivotal. Retail again of conduct for the Pharma business sector. This will be targeted raising awareness for energy consumption and sent to all suppliers in 2013 and will subsequently be for an ecological footprint among its employees, this year integrated into contracts. The Green Code of Conduct through an ideas competition. developed by Galexis and adopted by Alloga was also refined and developed into Group-wide guidelines. These are scheduled to come into effect for Galenica employees from spring 2013.

Scientiﬁc community

Local community

Customers Partners

Galenica Shareholders

NGOs Authorities Staﬀ

Suppliers Media Associations _The diagram shows the relevant stakeholder groups and the type of interaction with Galenica. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 72_ Sustainability · Galenica annual report 2012 objectives for 2013 _Additional figures on eco-efficiency will be published on _The Pharma business sector plan for 2013 includes the website www.galenica.com (Sustainability Reports) ISO14001 certification for St.Gallen, further efficiency towards the end of the first quarter of 2013. These show improvements in buildings and processes, and continued the ratio of resource consumption to value added and to awareness raising among employees. In Logistics, Alloga the number of employees, based on definitive figures. This will tackle the development of a box for transportation at supplement is an integral part of the Sustainability Report. room temperature (see Continuous improvement) in 2013. As owner of the property at Untermattweg 8 in Bern, the _Consumption data. Consumption data for the Pharma Galenica Group’s headquarters, Galexis is planning the business sector cover the Vifor Pharma production sites first stage of complete building refurbishment between in Switzerland and Portugal. The consumption data for 2013 and 2015. Progressive introduction of batch manage- the Logistics business sector include data from the sub- ment is also planned; this will enable optimum warehouse sidiaries Alloga, Galexis and G-Pharma, comprising the management, further minimising returns and disposals energy consumption data of the Burgdorf, Niederbipp and through continuous monitoring of expiry dates. The Retail Lausanne-Ecublens sites, as well as diesel consumption business sector will again focus on its two most effective of its own vehicles and that of drivers for third-party sup- starting points in 2013: raising awareness among employ- pliers as the greatest source of indirect consumption. ees and on-going refurbishment of pharmacy locations. Waste volumes, type of waste generated and disposal

At Group level, it is planned to adopt the energy and CO2 methods were also recorded for both business sectors. strategy currently being drawn up. _Consumption figures (electricity and heat) for Retail must be calculated, as pharmacy locations are generally leased. Energy costs per location are therefore shown rather than actual energy consumption. The energy con- rePorTINg sumption of and energy sources used by the Amavita and Sun Store pharmacies have been calculated based on energy costs in 2011. Specifically, the electricity and heat _The Galenica Group informs its stakeholders annually consumption were calculated in detail for 24 reference about its sustainability plans and activities. This is done stores (12 each of Amavita and Sun Store pharmacies). by means of the Annual Report in March (Sustainability These figures are then extrapolated over the entire busi- and Human Resources sections). ness sector applying total energy costs and statistically determined factors to the buildings depending on the type System limits and data collection of heating and energy source in Switzerland. _For the first time, this Sustainability Report covers all _Consumption data (electricity, heating and waste) are four business sectors – Pharma, Logistics, Retail and also estimated for the HealthCare Information business HealthCare Information – at the quantitative level. The sector. The known energy consumption of one site has performance of Galenica with respect to employees in all been extrapolated over the entire business sector (four business areas is covered in the corresponding section sites) based on the number of employees. As HealthCare (from page 83). Information is a service company that operates only in _Environmental reporting generally covers the preceding leased offices and has no significant fluctuations in pro- five years. Given the continuous optimisation of the envi- duction, this approach seems appropriate. HealthCare ronmental indicator system and gradual expansion of sys- Information accounts for approximately 1% of Galenica’s tem limits (due to the primarily inorganic growth of the environmental footprint. To ensure comparability, the fig- company), data are comparable only to a limited extent ures for 2008–2011 have been calculated retrospectively from year to year. Environmental data published for 2012 and included in the statistics. are projections, extrapolated over the full year from data _The calculated CO2 emissions data include both direct collected over the first three quarters. For organisational and indirect sources in the business sectors mentioned reasons, definitive figures for 2012, with which a full above. According to the Greenhouse Gas Protocol1), direct comparison can be made, will be published in the Annual sources of emissions include pharmaceutical production, Report 2013. for example, the burning of gas to generate process heat;

1) Internationally recognised guidance on recording and calculating corporate greenhouse gas emissions. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Sustainability _73 the production of heat for buildings; and transportation _Galexis process optimisations in 2012 related to product using the company’s own vehicles (= scope1). The largest returns and disposal of goods. In short, this means fewer

indirect sources of CO2 emissions included in the indicator unnecessary or uncoordinated returns, lower transport system are electricity generation (= scope2, Swiss power costs and thus lower energy and time requirements. The mix) and transport by third-party suppliers (= scope3). LoRe (Logistics-Retail) project launched in 2011 in collaboration with our own pharmacies is along the same lines. This was continued in 2012 and generated numerous efficiency gains in the area of inventory flow. CoNTINUoUS IMProVeMeNT _Potential synergies between the transport services offered by Alloga and Galexis have been examined in detail over the past two years. The two transport service provid- _Because Galenica has grown steadily over the past sev- ers share some customers, offering the possibility of joint eral years, continuous improvement is essential. Only delivery runs. Realisation of this potential began in the through concerted efforts to improve quality and effi- final quarter of 2012. The launch of combined runs is ciency can Galenica grow sustainably and achieve its planned in 2013, and will result in better utilisation of the three sustainability goals. The information below outlines Galexis runs. some of the activities which demonstrate that Galenica is _An ideas competition was held in the Retail business not content to settle for the status quo. sector in the year under review. Employees were asked to _The Pharma business sector made preparations for pro- submit ideas and solutions as to where and how sustain- curement of HSE (health, safety and the environment) ability could be further taken into account in the dense software in 2012. In future, this system will systematically pharmacy network. Suggestions submitted by employees record and process risks to health and safety as well as are currently being evaluated, and those ideas and solu- potential environmental damage. Introduction of the soft- tions chosen will, among other things, be the subject of a ware is scheduled to take place during 2013. biannual awareness campaign. _Following the successful launch of the coolbox, in which _As part of the ongoing COAXIAL project, all servers (ex- medications can be transported at temperatures of cluding pharmacies) in the Health Division were central- 2°–8°C and which is now used by 80% of relevant industry ised in Galexis at the Niederbipp site from autumn 2012. partners (the remaining 20% have their own solution), This means better utilisation of existing resources and Alloga is planning to develop a room temperature box in lower cooling requirements, resulting in lower electricity collaboration with an external partner. This should im- consumption. prove transport safety for medications that must be stored at room temperature with minimal temperature fluctuations, thus further improving patient safety.

energy consumption 2008–2012 energy mix 2008–2012

MWh % 100 80,00080’000

70,00070’000 80 60,00060’000

50,00050’000 60

40,00040’000 Diesel: third-party 40 30,00030’000 drivers Diesel: own fleet 20,00020’000 Gas 20 Electricity 10,00010’000 District heating 0 0 0 Heating oil HeatingHeizöl oil District Fernwärme heating ElectricityStrom Gas Diesel: Diesel: Total 08 09 10 11 12 eigeneown fleet Flotte third-partyDrittfahrer drivers 2008 2009 2010 2011 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 74_ Sustainability · Galenica annual report 2012 eNVIroNMeNTAL reSPoNSIBILITY _Fuel consumption. In 2012, the share of fossil fuels (heating oil and gas) in the Group’s total energy consumption was at approximately the same level as that of 2008. _As a diversified healthcare company, Galenica is ex- Consumption of heating oil has fallen 6% to 17% since posed to many environmental issues. The production of 2008. Natural gas consumption has fallen 3% to 15%. active ingredients and provision of services require both Absolute consumption fell 1% year-on-year and is now renewable and non-renewable resources, in particular 24,776 MWh. Galenica remains committed to reducing its fossil fuels. These processes generate gaseous, liquid dependency on oil by making greater use of renewable and solid waste products as well as greenhouse gases. energies, natural gas and heat recovery/district heating Galenica is aware of the challenges ahead in the area of (share of district heating in the energy mix: approximately energy supply and the global climate and therefore started 2%). It is also continually enhancing energy efficiency to devise a Group-wide energy and CO2 strategy in 2012. through planned remediation measures. Utilising heat This part of the report provides an overview of Galenica’s from the waste incineration plant in Fribourg, Vifor Pharma environmental impact, including a comprehensive and Villars-sur-Glâne now uses almost no heating oil. transparent description of resource consumption with an overview of measures designed to increase resource ef- _Vehicle fuel consumption. Fuel for vehicles accounted ficiency, particularly in energy use. for 22% of energy used in 2012. Most of this was consumed in the Logistics business sector by company vehi- energy consumption cles and those of third-party suppliers. Vehicle fuel con- _The Galenica Group’s total energy consumption remained sumption fell slightly by 1% year-on-year to 17,098 MWh. at around the same level year-on-year (77,529 MWh) in the Consumption by the company’s own vehicles in 2012 period under review. This result should be compared to decreased by 5% compared with the prior year. Fuel con- approximately 2% growth in production (end products) in sumption data from third-party suppliers was first col- the Pharma business sector which accounts for 45% of the lected in 2010, so comparison with the prior period is not Group’s total energy consumption. Since 2008, the Group’s possible. energy consumption has increased by 28%. _Power consumption. Electricity is by far the most important energy source for Galenica, accounting for 42% of total energy consumption. Over the last five years, this share has remained relatively stable. Electricity consumption in the period under review was 32,603 MWh, an increase of 1% versus the previous year. This is primarily due to increased production in the Pharma business sector.

emission of greenhouse gases and air pollutants energy consumption 2012 by business sector _CO2 emissions from the use of energy are calculated using internationally recognised emission measures. In

2012, Galenica Group’s CO2 emissions amounted to 15,786 tonnes, approximately the same level as the previous year. Emissions were up 22% compared to 2008. In Pharma 45% the period under review, burning fossil fuels generated Logistics 32% 37% of the Group’s emissions. Electricity use generated Retail 22% HCI 1% 34% of emissions, while the remaining 29% came from transport (the Group’s own vehicles and those of third- party suppliers). WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Sustainability _75 _Power consumption. Although not evident at first ard, the stricter it is; Euro 5 is currently the strictest. It glance, domestic energy production caused considerable has been in force since 2009 for all new cars on the road

CO2 emissions, despite the large proportion of hydroelec- and is likely to be replaced by Euro 6 in 2014. 10% of the tric power used. To lower indirect CO2 emissions, the Euro 5-compliant vehicles also meet the demanding vol- Geneva and Villars-sur-Glâne sites decided to use elec- untary EEV (Enhanced Environmentally-friendly Vehicle) tricity from hydroelectric power plants only as of 2013. As exhaust emission standard. When purchasing passenger

this electricity product generates lower CO2 emissions per cars owned by Galexis, Galenica generally tries to improve kilowatt hour than the average Swiss electricity mix, this fuel use by opting for vehicles with smaller, more efficient

will also reduce the CO2 emissions of the Galenica Group. engines. _The Lisbon site is going one step further: the construc- _The vehicles used by third-party suppliers of Alloga and tion of a photovoltaic system on company premises, which Galexis all comply with the Euro 5 emission standard should one day supply 170,000 kWh electricity per year, as these providers are contractually obliged to use only is planned in the near future. The site also plans to use vehicles that meet this high standard.

solar power to provide hot water. The Swiss Logistics and _Internal transport (CO2 emissions) for the Pharma busi- Pharma sites are also looking into the possibility of pho- ness sector will be accounted for from 2013. Data have tovoltaic electricity generation. been collected in 2012.

_Transport. When purchasing new vehicles in future, _Volatile Organic Compounds. Switzerland has had a tax Galexis will continue to introduce only vehicles with the on VOCs (volatile organic compounds) for several years to latest emission control technologies. A fleet of 107 vans help meet the country’s goal of reducing VOC emissions. weighing up to 3.5 tonnes was used for customer deliver- Galenica has been collecting emission data on VOCs sys- ies in the period under review. These vehicles are gener- tematically since 2007. The figures reported here concern ally replaced every six years. For the first time, 19 vehicles VOCs that are emitted into the atmosphere during produc- equipped with air conditioning systems in the loading tion. These are subject to a tax. In the period under review, space have been used. Some 40% of vehicles met the the company paid tax on 27 tonnes of VOCs, an increase Euro 4 emission standard, while 60% were in compliance of 12% over the prior year. This was due partly to increased with Euro 5. The Euro emission standards aim to lower production in the Pharma business sector and partly to vehicle pollution by setting emission limits for carbon the reintegration of a production line during the period

monoxide (CO), nitrogen oxides (NOx), hydrocarbons under review. (CxHx) and particles. The higher the number of the stand-

Carbon dioxide emissions 2008–2012

TonnesTonnen 18,00018’000

16,00016’000

14,00014’000

12,00012’000

10,00010’000

8’0008,000

6’0006,000

4’0004,000

2’0002,000

0 2008 2009 2010 2011 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 76_ Sustainability · Galenica annual report 2012 environmental performance indicators

GRI1) Unit 2012 2011 Indicator direct energy consumption categorised by primary energy sources Indicator 3 GJ 150,747 152,514 _Heating oil GJ 47,508 48,448 _Gas GJ 41,685 41,973 _Diesel: own fleet GJ 26,504 27,965 _Diesel: third-party drivers GJ 35,050 34,128

Indirect energy consumption categorised by primary energy sources Indicator 4 GJ 124,127 122,815 _District heating GJ 6,755 6,970 _Electricity GJ 117,372 115,846 energy saved by environmentally-conscious use and enhanced Indicator 5 efficiency _Process optimisation see p. 74 — _Exchange and retrofitting of plants and installations see p. 75 — _Changes in employee behaviour see p. 75 —

Initiatives to decrease indirect energy consumption Indicator 7 see p. 76 — Total water consumption Indicator 8 m3 195,121 202,070 Total direct and indirect greenhouse gas emissions by weight Indicator 16 t 15,786 15,828 _Direct CO2 emissions (fuels and combustibles, Scope 1) t 10,461 10,582 _Indirect CO2 emissions (electricity, Scope 2) t 5,325 5,247 Initiatives to reduce greenhouse gas emissions and results achieved Indicator 18 see p. 76 — other significant atmospheric emissions, by weight Indicator 20 _VOC kg 27,136 24,125

Total waste weight by type and disposal method Indicator 22 By type: _Non-hazardous waste t 1,673 1,729 _Hazardous waste t 478 338 By disposal method: _Incineration t 525 517 _Hazardous waste incineration t 478 338 _Recycling t 1,148 1,212

Total number and volume of significant spills Indicator 23 Number — 1 t — 3

Initiatives to minimise the environmental impact of products and services and the extent of their impact Indicator 26 see p. 74 — Monetary value of significant fines and total number of non-monetary penalties due to violation of environmental regulations Indicator 28 CHF — — environmental impacts of transporting goods Indicator 29 _Energy consumption (diesel) GJ 61,554 62,093 t 4,531 4,571 _Greenhouse gas emissions (CO2) _Waste (packaging materials) t 1,093 1,152

1) GRI: Global Reporting Initiative, guidelines 3.1 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Sustainability _77 resource efficiency consumption, but also transport costs incurred in sending _Galenica strives to continuously improve energy effi- the invoices. Digital salary statements will also be intro- ciency while reducing greenhouse gas emissions. duced throughout the Logistics business sector in 2013, further reducing paper consumption and indirect trans- _“Ambition Négawatt” project. OM Pharma entered into port costs. a partnership with Services Industriels de Genève (SIG, the local energy and water supplier) at the Geneva site in _Not forgetting small improvements. Alongside the large 2012. This partnership was concluded within the scope of innovations described above, numerous small improve- the “Ambition Négawatt” programme, which aims to sup- ments were again achieved within the environmental port large consumers in the Geneva region to reduce their management process. At the St. Gallen site, for example,

CO2 emissions and switch energy supply to renewable excess heat from the condensate network (pipes returning sources. This partnership has proven extremely useful for hot distilled water to the steam generators) is no longer OM Pharma, as the Geneva site has committed to a target released into the atmosphere, but fed into the heating agreement with the Energy Agency for Industry (EnAW) to network. In addition, four driver training sessions were reduce CO2 emissions by 6% between 2011 and 2014. In held at Galexis, which included a focus on learning to drive return, OM Pharma will be reimbursed the CO2 tax levied in as environmentally-friendly and energy-saving a man- on fuels used at the Geneva site. One measure has already ner as possible (eco-drive). been implemented: the majority of desktop computers have been replaced with “thin clients”. These require less _Retail: potential savings, particularly in electricity con- electricity as they represent only one user interface. All sumption. In the Retail business sector, the influence of data is processed via a central server, to which all con- Galenica on the choice of energy source for heating and nected thin clients have access at the same time. The electricity is very limited, as pharmacy locations are gen- creation of an in-house green team is also planned in erally leased. There is the possibility of influencing elec- 2013–2014, as well as a training unit on the subject of tricity consumption, and the focus is therefore on consist- energy efficiency for all staff. ently implementing energy-saving lighting and installing motion sensors when refurbishing pharmacies. In addi- _Digital receipt of invoices. Galexis introduced digital tion, promotional flyers aim to raise employee awareness receipt of invoices in 2012. More than 20,000 invoices of highlighted sustainability issues, making a strong ap- (some 20% of all goods invoices) will be received and pro- peal to individual responsibility. In this way, key issues get cessed digitally in 2013. This will not only reduce paper to be addressed for the entire business sector with the

VoC emissions 2008–2012

kg 30’00030,000

25,00025’000

20’00020,000

15,00015’000

10’00010,000

5,0005’000

2008 2009 2010 2011 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 78_ Sustainability · Galenica annual report 2012 involvement of employees. However, in order to comply _In addition to waste that is destroyed, a number of with legal temperature requirements, pharmacies must recyclable waste streams are generated. In 2012, this have air conditioning systems installed, which can result amounted to 1,148 tonnes across the Group, almost 90% in increased electricity consumption. Seven Amavita and of which was again paper and cardboard. The volume of three Sun Store pharmacies were refurbished in 2012, recyclable materials decreased by 5% compared with the corresponding to 5% and 3% of all locations, respectively. previous year (1,212 tonnes in 2011). The total volume of waste (non-hazardous, hazardous and recyclable) in the Waste and recycling year under review was 2,151 tonnes, 53% of which was _In 2012, Galenica generated 525 tonnes of non-hazard- recycled. The recycling rate has therefore risen by 6% ous waste and 478 tonnes of hazardous waste which, since 2008 (47%). In order to optimise the waste and re- consisted primarily of returned outdated medicines. cycling concept, Alloga and Galexis collaborate with the Waste volume increased by 17% compared with the previ- company “Abfallbörse” (Waste Exchange) in order to con- ous year, due primarily to the sharp increase in volume of centrate current volumes of residual waste, making them hazardous waste. This increase is attributable in part to as suitable as possible for recycling. Due to the resulting production increases at Vifor Pharma locations, as well as simplified procedures, this collaboration is due to con- to the Galenica Group’s overall growth. Waste disposal tinue in future and be further reinforced, as necessary. volumes in the Logistics business sector vary greatly from year to year, as they depend on the volumes which pharma Water consumption partners wish to dispose of. _Galenica consumed 195,121 m3 of water in the year under review. On a Group-wide basis, water consumption was around 3% lower than the previous year and around 9% lower than in 2008. The Pharma business sector accounts for approximately 95% of the Group’s overall water consumption. One reason for the reduction in water consumption is a technical improvement. The new water purification system that became operational last year at the Villars-sur-Glâne site (Fribourg) now produces purified water only as needed, rather than constantly.

Waste 2008–2012 recycling 2008–2012

TonnenTonnes TonnesTonnen 1,2001’200 1,4001’400

1,200 1,0001’000 1’200

1,0001’000 800

800 600 600 400 400

200 200

0 0 Non-hazardousAbfall SonderabfallHazardous TotalTotal PapierPaper CardboardKarton KunststoﬀPlastic WoodHolz DiscardedAltmetall Total waste waste Metal 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Sustainability _79 Loss events, compliance and new regulations Social commitment for those in need _No new regulations for hazardous waste management in _As a leading player in the Swiss healthcare market, industry and commerce were enacted in 2012. Galenica Galenica is committed at all levels to the welfare of once again operated in compliance with the law in 2012. patients. The company is also involved in helping people No fines were imposed for failing to comply with statutory in need in other countries: environmental regulations. _Swiss Aids Care International. The Galenica Group has supported this foundation with regular donations since 2005. One in seven people in Zimbabwe is infected with SoCIAL reSPoNSIBILITY HIV, and some 80,000 people die of the immune disorder every year. Since 2003, Swiss Aids Care International has been operating a clinic for AIDS patients in Harare, Human resources Zimbabwe, under the direction of Professor Ruedi Lüthy. _Employees and their specialist knowledge play a key role The outpatient HIV clinic, which has a laboratory, phar- in the development, production, distribution and sale of macy, training centre and its own kindergarten, provides pharmaceuticals. It is only thanks to their commitment, free, comprehensive medical and psychosocial treatment motivation and willingness to achieve above-average perfor HIV-positive children and adults. Specially trained formance that the Galenica Group is able to maintain its local nurses care for the patients under the supervision leading position in the healthcare market. To ensure that of two physicians. The organisation is funded by donations this continues, in the year under review Galenica once from private individuals, governmental organisations, again invested in training on its corporate values, in the foundations and NGOs. technical and management development of employees, _Galenica not only supports the Swiss Aids Care Interna- and in efforts to improve or maintain employees’ health. tional foundation in financial form, but also through spe- _Due to the essential role employees play, a separate cial campaigns. As the subject of its 2012 Christmas card, section of the annual report is dedicated to human re- Galenica chose a drawing from the 2011 Amavita cam- sources (see page 83). paign “Children helping children”. Galenica also made a substantial Christmas donation to the foundation.

Water consumption 2008–2012

m3 220,000220’000 200,000200’000 180,000180’000

160’000160,000 140’000140,000 120’000120,000 100’000100,000 80’00080,000 60’00060,000 40’00040,000 20’00020,000 0

2008 2009 2010 2011 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 80_ Sustainability · Galenica annual report 2012 _In June 2012, Amavita sent 500 lab coats to the New- _Agua Viva. Since 2009, Galenica has been providing lands Clinic, for use by the nurses and laboratory staff. financial support to “Agua Viva, the small aid organisation _Individual Amavita pharmacies were also active: the for children”, an association operating in eastern Brazil. Sunnemärit pharmacy in Adliswil ran a wheel of fortune This association helps children in need and arranges spon- at the “Albisstrassenfest” street festival in June 2012. sorship for children from the deprived areas of the cities More than 400 visitors tried their luck, raising CHF 2,000 of Olinda and Paulista. The contributions not only help for the foundation. provide children with basic nutrition but also go into a fund _A jubilee symposium was held in September 2012 to that is used to finance medical treatment and medication. celebrate the 15th anniversary of MediService. Participants In Olinda, the association offers an information and con- and employees could have a portrait photo taken of them- tact point for all sponsored children and their relatives via selves and these were made into large posters. Each photo the “Oficina Agua Viva”. Here, the children receive food earned CHF 20 for the foundation. Speakers at the sym- and are given the opportunity to attend daily lessons. posium waived their fees and guests were also able to Agua Viva also organises vocational and part-time courses make donations to the foundation. Galenica doubled the as well as traineeships for children and adolescents from amount raised, resulting in a total of CHF 15,500, half of socially disadvantaged backgrounds and offers, via the which was donated to Swiss Aids Care International with Oficina, a contact point for the region’s needy. the other half going to the Swiss Theodora foundation (hospital clowns aiming to relieve the suffering of children in hospitals and specialist institutions with fun and laughter).

_Winds of Hope. To mark the 40th anniversary of Sun Store, Bertrand Piccard and his “Winds of Hope” foundation were presented with a cheque worth CHF 40,000 at the opening of the renovated Sun Store head office in St-Sulpice. The foundation aims to combat the disease Noma. Patients suffer from rapid tissue decay, which begins in the mouth, spreading quickly and permanently disfiguring the face. Noma is particularly common in Africa, and mainly affects children between the ages of two and six years. The disease is caused by malnutrition and poor hygiene.

_For you For me. Sun Store also supported the “For you For me” fundraising campaign by the Divesa and Assura foundations, which aims to help disadvantaged children worldwide. This campaign will run for a period of three years. A money box was devised for this purpose, containing three paying-in slips. The customer can then use these to support the charitable project of their choice each year (Nouvelle Planète, Solidarmed, Terre des Hommes and Stiftung Kinderdorf Pestalozzi). Each money box costs CHF 5, with the full amount donated to the organisation. These money boxes are available in all Sun Store pharmacies. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Sustainability _81 From the Great Pyramid of Kheops to the modern data centre _The Great Pyramid of Kheops was built in just 20 years, and comprises some 2,300,000 blocks, each weighing an average of 2.5 tonnes. This equates to an average construction speed of 13 blocks per hour, or one block approximately every 4.5 minutes. Natu- rally, this work required a logistical and mathematical “tour de force” to manage at least 20,000 workers carrying out their tasks at the same time. _Thanks to rapid transformation in the area of information technology, it is now possible to perform mathematical and logistical feats that the Egyptians would not have dared to even dream about. In the santé division, a project was launched under the name COAXIAL to merge the various IT infrastructures into a single data centre, and a mathematical and logistical masterpiece. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 82_ Human Resources · Galenica annual report 2012 HUMAN RESOURCES Communicating values creates a sense of identification

Content INTRODUCTION

83 _Introduction 84 _Investing in the future _Performance through diversity. The Galenica Group 86 _Strengthening the sense of solidarity employed 7,289 people at the end of 2012, 238 more than 86 _For our employees in the previous year. Galenica considers its employees 87 _Employee profit-sharing programme essential. Some 80 different nationalities work at the 87 _Employee benefit plans Galenica Group. Many employees are the face of the com- 88 _Works Committee and Staff Committees pany to customers. Human Resources processes therefore aim to ensure new staff are integrated quickly and gain a rapid understanding of the Galenica culture. Initiative and enterprise are two core values required of and encouraged among employees. _These values are particularly important for a dynamic, versatile group like Galenica as they create a sense of identity. A clear strategy and vision are also important as they facilitate integration into a company. The corporate culture should also be able to survive in a changing market environment. _Galenica’s Human Resources Management aims to have clearly defined processes and structures with solutions that are as consistent as possible. Differences between the individual business sectors are part of the decentralised business model.

_Overall employee development concept. Galenica has a range of management tools to support employees, particularly members of senior management and management, to ensure that they align their decisions and activities with the principles of value creation (value-based management). One such element is the overall corporate management development (CMD) concept, which comprises events (EVE), special staff training (SAM) and management training (FAB). In 2012, around 600 employees participated in various seminars as part of the CMD programme.

_Events. EVE is a platform for communicating strategic objectives. In 2012, the EVE_1 event took place on the evening before the full-year results media conference, to inform senior managers of the highlights and results of the previous year. The EVE_2 event was aimed at members of senior management, management of Swiss locations and all pharmacy managers. The theme of the event was the 2012 motto “In tune with the customer”. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Human Resources _83 _Special staff training. New employees are given an whom was allocated a mentor. These mentors assist and induction day (SAM_1) during which the development, advise their mentee above and beyond the formal pro- the strategy and the companies of the Galenica Group are gramme, and support them in their further development. presented in order to facilitate a rapid understanding of Mentees are employees from any level of the Galenica the Galenica culture. Further SAM seminars are offered Group who have considerable potential. The goal of the on specialist topics and methodology. programme is to make optimum use of the wealth of experience within the Group to further develop talented staff _Management training. The FAB_1 management training and to promote cross-business sector exchange. offers modular training in three areas: self-management and management tools, managing people and communi- _Employee satisfaction. The Galenica Group conducts cation skills, and leading and developing teams. FAB_2 the OPINIO employee survey every three years to obtain focuses on performance and health, and FAB_3 concen- regular, structured feedback from its employees. The next trates on corporate management and change manage- survey at Group level is scheduled for 2014. It will evaluate ment. These advanced training courses are aimed at mem- the concerns and wishes of employees. In addition, in bers of senior management and are offered in collaboration 2012, Pharma and HealthCare Information conducted an with external partners. employee survey with a high response rate in both business sectors. At Vifor Pharma 94% of the employees participated (see box) and at HealthCare Information 82%. Both surveys showed that the overall satisfaction has INVESTING IN THE FUTURE improved.

_Innovative recruitment methods. The Vifor Pharma _Fostering talent. As a progressive employer, the Galenica Global Sourcing Recruitment team has successfully initi- Group offers its staff a wide range of benefits, for exam- ated the use of social media tools alongside proven recruit- ple, structured training and development, which are gen- ment methods to expand the Galenica talent pool. erally only found in large corporations. In 2012, Galenica invested CHF 4.2 million in employee training. The talent _Training apprentices. Galenica is deeply committed to development programme, which was launched three years apprentice training. In 2012, the entire Group had 750 ago, is one specific aspect that continued to prove popu- apprentices in training, and 213 completed their appren- lar in the year under review. The two-year programme ticeships, many passing with flying colours; 11 appren- started with some 30 participants or mentees, each of tices achieved a mark of 5.5 or higher.

Corporate Management Development Concept

CMD Corporate Management Development

EVE SAM FAB events special staﬀ training management training

_EVE_1 for MDI _special training _management training _EVE_2 for MDI/MKA for employees for MDI/MKA _CMD includes all activities offered throughout _lunchtime seminars the Galenica Group for the further development for employees of staff and management. MDI = Member of Senior Management MKA = Member of Management WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 84_ Human Resources · Galenica annual report 2012 _Information channels. The intranet is available as an information channels include the employee magazine internal information tool for Galenica employees. It has a SPOT, which updates Galenica employees on company cross-business sector design, enabling employees to ac- developments twice a year, and letters to employees as cess information from all business sectors. A new version required. Information events for employees are held in of the intranet with a new structure and greater user- each business sector, while current information is com- friendliness will be launched in autumn 2013. Additional municated by intranet, e-mail and on notice boards.

Opinio employee survey Vifor Pharma: outstanding response with increasing satisfaction

_In 2008, Vifor Pharma conducted itsown employee sur- from 58% to 64%. This is despite careful and prudent vey for the first time and has followed up with a new budgetary management and a drive for increased effi- survey every two years (2010 and 2012). The surveys ciency. This reflects well in light of the significant in- help the management understand the levels of satis- crease in the employee numbers outside of Switzerland, faction and commitment amongst the employees in the as Vifor Pharma continues to develop the sales and mar- rapidly evolving and growing company. Over time the keting operations around the world. survey has grown, not only in size (employees in 2008: 784, 2010: 895 and 2012: 1,736), but mainly also in re- _A detailed analysis highlighted three special areas for sponse rate (2008: 62%, 2010: 85% and 2012: 94%). An attention: a better understanding of the company’s strat- amazing number of 1,626 surveys were completed and egy, focus on employee development and work-life bal- returned, a massive increase since the original. The sur- ance. Measures have already been taken to address vey itself continues to reflect the business, being now these issues. Beside these points, most issues raised available in five languages including Spanish and Portu- were focused on site-specific or functional concerns. guese, as well as the original three of German, French One hundred specific reports for the departments were and English. produced in this regard. Plans for functions and key sites have been developed by the responsible managers with _In 2012, the response rate was impressive, showing the the aid of employee feedback. These plans will be re- continuing relevance of the survey for the increasingly viewed on a regular basis during 2013 to ensure that global employee base. Overall commitment, engage- Vifor Pharma continues to be an employer of choice in ment and satisfaction levels have all increased, with a the years to come. marked increase in those “genuinely satisfied” going up

Number of employees worldwide

2012 2011 Switzerland 6,558 6,358 Europe 620 572 South America 59 67 North America 37 40 Asia 15 14 Total 7,289 7,051 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Human Resources _85 STRENGTHENING THE SENSE OF SOLIDARITY FOR OUR EMPLOYEES

_Comité des Jeunes. Galenica promotes exchange within _Health. Anyone active in this market must also give per- the Group. The Comité des Jeunes is made up of around sonal attention to health. Galenica promotes health 30 young staff members from the various companies in through prevention campaigns, information sessions and the Galenica Group. It acts as a type of internal think tank specific fitness offers. In line with the directives of the that helps promote and develop the next generation of Federal Coordination Commission for Occupational Safety managers and specialists. The members also contribute (FCOS), the company has put in place the required meas- to developing a corporate culture that demonstrates a ures to protect staff health and maintain safety in the strong commitment to ethics. One of this Committee’s workplace. tasks is to submit a proposal to the Corporate Executive Committee for the annual Galenica Group motto and to _makora health check-up. Galenica has selected a new, develop a plan for how it will be put into practice. holistic approach with regard to prevention. The project, led by the company makora AG, is based on survey _In tune with the customer. The motto for 2012 was “In findings which show the relevant priorities in the area tune with the customer”. It aimed to promote customer of health. Members of senior management, members of focus and the sales culture at Galenica. Two workshops management and pharmacy directors from Switzerland were held in the year under review, one at Alloga in Burg- had the opportunity to participate in the health check-up. dorf and one at Galenica in Bern, which were led by the The response rate of 60% was pleasing. According Executive Chairman. The CEO also participated in one to these findings, “work-life balance” is a priority for workshop. Galenica employees.

_Annual motto 2013. The motto for the year under review, _Illnesses. Employees were again able to take advantage “In tune with the customer”, will also guide the Galenica of Galenica Care Management in the year under review. Group in 2013. The objective is to get to know the needs Employees who are ill or at-risk are given support before of customers even better, in order to win them over to and they have to be put on sick leave. The ultimate aim is as inspire them with Galenica’s products and services. rapid a return to work as possible after an illness or acci-

Headcount trends 2008–2012 Number of employees in 2012 Number of women and men in 2012

7,289 by business sectors 7,051 6,634 6,378

4,239

Galenica Ltd. 42 (25 women, 17 men) Women 5,248 (72%) Pharma 1,850 (962 women, 888 men) Men 2,041 (28%) Logistics 1,096 (504 women, 592 men) Retail 4,110 (3,617 women, 493 men) HCI 191 (86 women, 105 men) 08 09 10 11 12 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 86_ Human Resources · Galenica annual report 2012 dent. The number of illness-related absences fell in the _Every year employees of Galenica in Switzerland have last statistically available year of 2011: 828 illness-related the opportunity to purchase a maximum of ten registered absences were reported. shares at a discounted price. These shares cannot be sold for three years after the date of purchase. In 2012, 17% _Accidents. Based on data from Suva and private insur- of eligible employees participated in the share purchase ers, Galenicaʼs accident statistics show a slight decline in programme. the number of industrial accidents. 108 accidents were _All employees worldwide were again paid a profit-sharing reported in 2011. bonus in 2012. The bonus is calculated based on the Group result compared to the previous year.

EMPLOYEE PROFIT-SHARING PROGRAMME EMPLOYEE BENEFIT PLANS

_The profit-sharing bonus forms part of the annual bonus for members of management. This is dependent on quan- _Galenica has a number of employee benefit plans based titative and qualitative targets. on local conditions and legal stipulations in the corre- _The share-based remuneration programme (LTI, see also sponding countries. These plans and foundations are le- page 61 and 62 in the Corporate Governance section) for gally and financially independent of Galenica. members of the Corporate Executive Committee and certain members of senior management focuses on long- _Employee benefit plans according to Swiss BVG. The term performance; remuneration is withheld for a period vast majority of Galenica employees are insured in Swit- of three years. zerland through pension funds. These pension funds cover

Headcount trends

Of which part-time Number of employees employees <90% Full-time positions 2012 2011 2012 2011 2012 2011 Galenica Ltd. 42 40 10 9 37 36 Pharma 1,850 1,787 162 151 1,764 1,691 Logistics 1,096 1,057 294 283 916 901 Retail 4,110 3,959 1,698 1,587 3,200 3,107 HealthCare Information 191 208 40 40 172 191 Total 7,289 7,051 2,204 2,070 6,089 5,926 Total employees in % 30.2 29.4

Number of managerial staff Total number of managerial staff Of which women Of which men 2012 2011 2012 2011 2012 2011 Galenica Ltd. 27 26 12 10 15 16 Pharma 504 372 196 141 308 231 Logistics 90 84 28 25 62 59 Retail 342 328 227 214 115 114 HealthCare Information 43 28 13 10 30 18 Total 1,006 838 476 400 530 438 Total employees in % 13.8 11.9 6.5 5.7 7.3 6.2 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Human Resources _87 the risks of the economic consequences of ageing, disabil- WORKS COMMITTEE AND STAFF COMMITTEES ity and death according to the specifications of the Swiss Federal Occupational Retirement, Survivors and Disability Pension Plans Act (BVG). _In the year under review, representatives of the Galenica Group Corporate Executive Committee and HR manage- _Defined contribution plan principle. These pension ment met twice with the Works Committee, representing funds are managed according to the defined contribution all employees of the Galenica Group, to discuss issues plan principle. They are generally funded by contributions that go beyond matters addressed by staff committees in from the employee and the employer. The contributions the individual business sectors which meet several times made by employer and employee are accrued into indi- a year. vidual savings capital for each employee. The savings capital is usually paid out or converted into a pension on reaching statutory retirement age or transferred as vested benefits on termination of employment.

_Accounting. The financial statements of pension funds provide a true and fair view of the financial position, the results of operations and cash flow. _The accounting and valuation principles of the Swiss pension funds correspond to the Ordinance on Occupational Retirement, Survivors and Disability Pension Plans (BVV2) and the Swiss GAAP FER accounting and reporting recommendations. Assets and liabilities are recognised on the basis of the financial situation of the pension fund as of the balance sheet date only. No separate actuarial calculations are therefore required for the Swiss pension plans.

_Defined benefit plan principle in Galenica’s consolidated financial statements. The recording and assessment of benefit obligations in accordance with Interna- tional Financial Reporting Standards (IFRS) is compulsory under the defined benefit plan. In addition to recording current benefits to employees, benefit obligations following the end of employment are also calculated by actuar- ies. These actuarial calculations generally result in a lower coverage ratio. According to the provisions under BVG, an obligation to make additional contributions or take remediation measures only arises if the coverage ratio falls below 100% (for more details see pages 104, 124 and 125). WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 88_ Human Resources · Galenica annual report 2012 From the visible light spectrum to balanced mineral supply _Linus Pauling formulated the central idea of orthomolecular medicine in 1966: dis- turbed body functions should be regulated and the balance of the body restored by means of well-tolerated substances, known as nutrients. Analysis of samples from the body, for example hair, show whether there are any deficiencies, and if so, in which substances. Because imbalances can initially cause imperceptible damage in almost every cell in the body, it is worthwhile treating seemingly harmless deficiencies early on. _Coop Vitality offers its customers hair mineral analysis to test for excesses or deficiencies in trace elements and minerals. Based on the test results, the body can be given a targeted supply of vital substances it is lacking, and balance can be restored. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 _89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 From daguerreotypes to online consultations 47 48 _Louis Jacques Mandé Daguerre turned his talent at drawing into a career as a scene 49 painter. With the help of the camera obscura, Daguerre projected images onto a large 50 screen and copied them. In 1829, he discovered the first marketable photographic 51 process, the daguerreotype process, by chance. This discovery led to more rapid ad- 52 vances in photography. 53 _Modern digital processing of still and moving images is also based on Daguerre’s 54 discoveries. It is only thanks to digital image processing that a doctor can provide an 55 56 online diagnosis directly in a pharmacy under the netCare project. netCare marks a 57 further milestone in the development of pharmacies: from selling medicines to being 58 the focal point in the healthcare system. 59 60 61 90_ Galenica annual report 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Consolidated FinanCial statements 2012 oF the galeniCa group

92 _Key figures 98 _ Notes to the consolidated financial statements of the Galenica Group 93 _Consolidated income statement 98 _1. Accounting principles 99 _2. Summary of significant accounting policies 94 _Consolidated statement of comprehensive income 106 _ 3. Financial risk management 107 _4. Estimation uncertainty and assumptions 95 _Consolidated statement of financial position 107 _5. Operating segment information 111 _ 6. Business combinations, purchase and 96 _Consolidated statement of cash flows sale of non-controlling interests 113 _7. Net sales 97 _Consolidated statement of changes in equity 113 _8. Other revenue 113 _9. Personnel costs 113 _10. Other operating costs 113 _11. Financial result 114 _12. Earnings per share 114 _13. Securities 114 _14. Receivables 115 _15. Income taxes 117 _16. Inventories 118 _17. Property, plant and equipment and investment properties 119 _18. Intangible assets 121 _ 19. Investments in associates 121 _20. Financial assets 121 _21. Current financial liabilities 122 _22. Other liabilities 122 _23. Non-current financial liabilities 123 _24. Provisions 124 _25. Employee benefit plans 126 _26. Share capital and number of shares 126 _ 27. Changes in consolidated shareholders’ equity 127 _28. Financial instruments 135 _29. Share-based payments 136 _30. Related party transactions 137 _ 31. Leasing receivables and liabilities 137 _32. Contingent liabilities 138 _ 33. Assets assigned to secure own liabilities 138 _34. Events after the reporting period 139 _35. Investments

141 _ Report of the statutory auditor on the consolidated financial statements of the Galenica Group

Galenica financial statements 2012 _91 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Key Figures

1 in million CHF 2012 2011 2 galenica group 3 4 net sales 3,294.3 3,187.4 _Pharma 633.3 584.3 5 _Logistics 2,102.3 2,081.5 6 _Retail 1,189.2 1,117.9 7 _HealthCare Information1) 47.1 47.8 8 _Net sales to other segments (677.6) (644.1) 9 eBitda 425.7 399.4 10 EBITDA in % of net sales 12.9% 12.5% 11 12 earnings before interest and taxes (eBit) 349.6 327.1 _Pharma 257.1 254.4 13 _Logistics 30.7 22.8 14 _Retail 60.3 52.6 15 _HealthCare Information1) 4.3 2.4 16 _Other and eliminations (2.8) (5.1) 17 EBIT in % of net sales 10.6% 10.3% 18 net profit 274.8 255.6 19 Attributable to: 20 _Shareholders of Galenica Ltd. 253.5 223.1 21 _Non-controlling interests 21.3 32.5 22 23 Investment in property, plant and equipment and intagible assets 53.5 60.4 24 25 Cash flow from operating activities 291.7 310.7 26 27 Cash at balance sheet date 347.9 338.7 28 29 Employees at balance sheet date (FTE) 6,089 5,926 30 31 Balance sheet total 3,146.7 3,114.2 32 Shareholders’ equity 1,377.9 1,202.6 33 Equity ratio 43.8% 38.6% 34 35 Net borrowings 567.5 708.8 36 Gearing 41.2 % 58.9% 37 38 in CHF 2012 2011 39 share information 40 Nominal value per share at balance sheet date 0.10 0.10 41 42 Number of outstanding shares2) 6,475,339 6,450,328 43 Share price at balance sheet date 530.50 549.50 44 Highest share price for the year 626.00 597.00 45 Lowest share price for the year 479.25 390.25 46 Earnings per share3) 39.14 34.59 47 3) 48 Shareholders’ equity per share 207.80 179.36 49 Gross dividend per share 11.00 4) 9.00 50 Pay-out ratio5) 28.1 % 26.0% 51 Stock exchange capitalisation at balance sheet date in thousand CHF 3,437,600 3,530,020 52 1) In the operating segment information HealthCare Information sector is summarised as “Other” along with the other activities of the Division Corporate Finance 53 2) Number of shares minus weighted average number of treasury shares 54 3) Attributable to the shareholders of Galenica Ltd 4) According to Board of Directors’ proposal to Annual General Meeting on 2 May 2013 55 5) Dividend in % of net profit 56 57 58 59 60 61 92_ Key figures · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Consolidated inCome statement

in thousand CHF Notes 2012 2011 revenue Net sales 7 3,294,341 3,187,384 Other revenue 8 313,677 293,222 total revenue 3,608,018 3,480,606 operating costs Cost of goods sold (2,141,624) (2,112,545) Personnel costs 9, 25 (594,005) (564,823) Other operating costs 10 (446,730) (403,829) Depreciation and amortisation 17, 18 (76,053) (72,284) total operating costs (3,258,412) (3,153,481) earnings before interest and taxes (eBit) 349,606 327,125

Financial income 11 8,886 8,656 Financial expenses 11 (39,891) (44,744) Income from associates 19 2,567 8,362 earnings before taxes (eBt) 321,168 299,399

Income tax 15 (46,361) (43,767) net profit 274,807 255,632

Attributable to: _Shareholders of Galenica Ltd. 253,464 223,118 _Non-controlling interests 21,343 32,514 in CHF Earnings per share 12 39.14 34.59 Diluted earnings per share 12 39.04 34.40

Galenica financial statements 2012 · Consolidated income statement _93 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Consolidated statement oF Comprehensive inCome

1 in thousand CHF 2012 2011 2 net profit 274,807 255,632 3 4 other comprehensive income 5 Hedge transactions 6 _change in fair value 4,805 3,165 7 _realised in the consolidated income statement (219) 2,207 8 Available-for-sale financial assets 9 _change in fair value (2,331) 911 10 _realised in the consolidated income statement 369 862 11 Translation differences (205) (2,889) 12 Income tax — — 13 14 total other comprehensive income 2,419 4,256 15 16 Comprehensive income 277,226 259,888 17 18 Attributable to: 19 _Shareholders of Galenica Ltd. 255,883 227,374 20 _Non-controlling interests 21,343 32,514 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 94_ Consolidated statement of comprehensive income · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Consolidated statement oF FinanCial position assets in thousand CHF Notes 31.12. 2012 31.12. 2011 Current assets Cash 347,915 338,687 Securities 13 8,960 6,604 Receivables 14 541,543 547,647 Tax receivables 2,898 4,236 Inventories 16 340,704 333,592 Prepaid expenses and accrued income 88,869 31,411 total current assets 42% 1,330,889 41 % 1,262,177 non-current assets Property, plant and equipment 17 438,436 447,536 Investment properties 17 38,297 53,862 Intangible assets 18 1,251,648 1,252,338 Investments in associates 19 21,791 24,768 Financial assets 20 45,113 51,946 Deferred tax assets 15 9,245 6,375 Employee benefit assets 25 11,327 15,155 total non-current assets 58% 1,815,857 59% 1,851,980 total assets 100% 3,146,746 100% 3,114,157

liabilities and shareholders’ equity in thousand CHF Notes 31.12. 2012 31.12. 2011 Current liabilities Financial liabilities 21 282,994 167,603 Other liabilities 22 394,979 461,049 Tax payable 39,968 33,289 Accrued expenses and prepaid income 165,743 131,534 Provisions 24 36,004 34,783 total current liabilities 29% 919,688 26% 828,258 non-current liabilities Financial liabilities 23 755,046 997,614 Deferred tax liabilities 15 74,006 68,008 Employee benefit liabilities 25 17,272 17,412 Provisions 24 2,820 266 total non-current liabilities 27% 849,144 35% 1,083,300 shareholders’ equity Share capital 26 650 650 Reserves 1,344,955 1,156,258 equity attributable to shareholders of galenica ltd. 1,345,605 1,156,908 Non-controlling interests 32,309 45,691 total shareholders’ equity 27 44% 1,377,914 39% 1,202,599 total liabilities and shareholders’ equity 100% 3,146,746 100% 3,114,157

Galenica financial statements 2012 · Consolidated statement of financial position _95 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Consolidated statement oF Cash Flows

1 in thousand CHF 2012 2011 2 Net profit 274,807 255,632 3 4 Income tax 46,361 43,767 5 Depreciation and amortisation on property, plant and equipment, investment properties 6 and intangible assets 76,053 72,284 7 (Gain)/Loss on disposal of property, plant and equipment (5,496) (184) 8 Increase/(Decrease) in provisions, receivables and liabilities from employee benefit 7,312 (8,764) 9 Net financial result 31,005 36,088 10 (Gain)/Loss from associates (2,567) (8,362) 11 12 Other non-cash items 14,992 14,358 13 Change in receivables 11,586 (22,629) 14 Change in inventories (4,802) (20,472) 15 Change in other liabilities (68,161) 23,927 16 Change in other net current assets (31,355) (3,254) 17 Interest received 1,468 1,474 18 19 Interest paid (34,300) (34,781) 20 Other financial receipts/(financial payments) 4,368 2,501 21 Dividends received 5,799 101 22 Income tax paid (35,374) (40,940) 23 Cash flow from operating activities 291,696 310,746 24 25 Investments in property, plant and equipment and investment properties (45,491) (51,718) 26 27 Investments in intangible assets (6,272) (8,669) 28 Investments in associates (255) (2,104) 29 Investments in financial assets and securities (715) (2,319) 30 Proceeds from property, plant and equipment and investment properties 22,050 1,018 31 Proceeds from intagible assets 67 — 32 33 Proceeds from financial assets and securities 3,926 1,928 34 Purchase of subsidiaries (net cash flow) (18,945) (12,953) 35 Cash flow from investing activities (45,635) (74,817) 36 37 Dividend payment (92,565) (52,302) 38 Purchase of treasury shares (11,466) (44,313) 39 Sale of treasury shares 3,496 6,851 40 Proceeds from financial liabilities 30,340 1,207 41 42 Repayment of financial liabilities (165,977) (185,848) 43 Purchase of non-controlling interests (687) (7,391) 44 Sale of non-controlling interests — 93,000 45 Cash flow from financing activities (236,859) (188,796) 46 47 Translation differences 26 (327) 48 increase/(decrease) in cash 9,228 46,806 49 50 Cash at 1 January 338,687 291,881 51 Cash at 31 december 347,915 338,687 52 53 54 55 56 57 58 59 60 61 96_ Consolidated statement of cash flows · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Consolidated statement oF Changes in equity

Equity Fluctuation in Accumulated attributable to Non- Share Treasury value of financial Retained translation shareholders controlling Total in thousand CHF capital shares instruments earnings differences of Galenica Ltd. interests equity Balance as of 31 december 2010 650 (10,152) (17,383) 1,038,095 (92,114) 919,096 13,330 932,426 Net profit 223,118 223,118 32,514 255,632 Other comprehensive income 7,145 (2,889) 4,256 4,256 Comprehensive income 7,145 223,118 (2,889) 227,374 32,514 259,888 Dividend (51,916) (51,916) (401) (52,317) Transactions on treasury shares (29,187) (8,275) (37,462) (37,462) Share-based payments 14,455 14,455 14,455 Change in non-controlling interests 85,276 85 85,361 248 85,609 Balance as of 31 december 2011 650 (39,339) (10,238) 1,300,753 (94,918) 1,156,908 45,691 1,202,599 Net profit 253,464 253,464 21,343 274,807 Other comprehensive income 2,624 (205) 2,419 2,419 Comprehensive income 2,624 253,464 (205) 255,883 21,343 277,226 Dividend (58,308) (58,308) (34,253) (92,561) Transactions on treasury shares 28,505 (52,188) (23,683) (23,683) Share-based payments 15,020 15,020 15,020 Change in non-controlling interests (215) (215) (472) (687) Balance as of 31 december 2012 650 (10,834) (7,614) 1,458,526 (95,123) 1,345,605 32,309 1,377,914

Galenica financial statements 2012 · Consolidated statement of changes in equity _97 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Notes to the coNsolidated fiNaNcial statemeNts of the GaleNica Group

1 1. accouNtiNG priNciples future changes in accounting standards 2 3 _On the balance sheet date, various new International Financial 4 General information Reporting Standards and interpretations have been published 5 that will become effective in the financial year 2013 or at a 6 _Galenica is a diversified Group active throughout the health future date. Galenica renounces the early adaption of the follow 7 care market which, among other activities, develops, manufac ing standards, amendments of standards and interpretations. 8 tures and markets pharmaceutical products, runs pharmacies, Galenica intends to adopt these standards, changes to standards 9 provides logistical and database services and sets up networks. and interpretations when they become effective. 10 _The parent company is Galenica Ltd., a public limited company 11 with its head office in Bern, where it is also registered. The _IFRS 7 – Offsetting Financial Assets and Financial Liabilities 12 re gistered offices are at Untermattweg 8, 3027 Bern, Switzer (1 January 2013) 13 land. Shares in Galenica Ltd. are traded on the SIX Swiss Ex _IFRS 9 – Financial Instruments (1 January 2015) 14 change under securities no. 1553646 (ISIN CH0015536466). _IFRS 10 – Consolidated Financial Statements 15 _The Board of Directors released the consolidated financial state (1 January 2013) 16 ments 2012 for publication on 7 March 2013. The consolidated _IFRS 11 – Joint Arrangements (1 January 2013) 17 financial statements 2012 will be submitted for approval to the _IFRS 12 – Disclosure of Interests in Other Entities 18 Annual General Meeting of shareholders on 2 May 2013. (1 January 2013) 19 _IFRS 13 – Fair Value Measurement (1 January 2013) 20 _IAS 1 – Presentation of Other Comprehensive Income 21 Basis of accounting (1 July 2012) 22 _IAS 12 – Joint Arrangements (1 January 2013) 23 _The consolidated financial statements of Galenica comply with _IAS 19 – Employee Benefits (1 January 2013) 24 the International Financial Reporting Standards (IFRS) as issued _IAS 27 – Separate Financial Statements (1 January 2013) 25 by the International Accounting Standard Board (IASB), as well _IAS 28 – Investments in Associates and Joint Ventures 26 as the interpretations of the IFRS Interpretations Committee (1 January 2013) 27 and the provisions of Swiss law. _IAS 32 – Offsetting Financial Assets and Financial 28 _The consolidated financial statements base on the financial Liabilities (1 January 2014) 29 statements of the individual companies of Galenica, which have _IFRIC 20 – Stripping costs in the Production Phase 30 all been prepared under the same principles. The period under of a Surface Mine (1 January 2013) 31 review comprises twelve months to 31 December. 32 _The present consolidated financial statements are available _Galenica is evaluating the impact of the new or amended Inter 33 in German, French and English. However, the German is the national Financial Reporting Standards and interpretations. 34 authoritative version. Apart from the amendments to IAS 19, Galenica does not expect 35 _The consolidated financial statements are presented under the a significant impact on the consolidated financial statements. 36 historical cost accounting convention. Nonmonetary assets are 37 valued at the lower of historical cost and net realizable value ias 19 – employee Benefits 38 (market value or value in use). Specific financial assets and _The amendment of IAS 19 eliminates the corridor approach and 39 financial liabilities are measured at fair value in the statement of requires that actuarial gains and losses are immediately recog 40 financial position. Details of the measurement principles are nized in other comprehensive income of the consolidated state 41 given in the summary of significant accounting policies below. ment of comprehensive income. Moreover, interests on the net 42 recognized defined benefit assets or liability will be recognized 43 in profit or loss, in place of the currently separate recognition of 44 amendments of accounting standards interest cost on the benefit obligation and of an expected return 45 on plan assets. 46 _The accounting standards adopted are consistent with those _Based on a first evaluation, Galenica estimates that this amend 47 of the previous financial year with the following exceptions. ment will lead to a reduction of consolidated equity of approxi 48 As of 1 January 2012, Galenica adopted the following amended mately CHF 31 million at the date of conversion (1 January 2012) 49 International Financial Reporting Standards and interpretations. and a reduction of consolidated equity of approximately CHF 46 50 million as of 31 December 2012. Galenica estimates that the net 51 _IFRS 7 – Transfer of Financial Assets income would have been about CHF 1.7 million higher, if this 52 _IAS 12 – Recovery of the Carrying Amount method had already been applied on the consolidated financial 53 statements 2012. Galenica will implement the provision from the 54 _These changes have no or no significant impact on the con 2013 financial year. 55 solidated financial statements or Galenica is not affected by 56 these amendments. 57 58 59 60 61 98_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 2. summarY of siGNificaNt accouNtiNG policies _In the consolidated financial statements, the assets and lia bilities from the statement of financial position of foreign subsidi aries prepared in a foreign currency have been converted scope of consolidation into Swiss francs using yearend rates. The income statements and cash flow statements have been translated using the _The consolidated financial statements of Galenica comprise average exchange rate for the year. those of Galenica Ltd. and all its subsidiaries, including asso _Exchange differences arising from net investments in foreign ciate companies and jointventures. operations as a result of changes in exchange rates compared _Subsidiaries and associates acquired during the reporting with the previous year and translation differences arising from period are included in the consolidated annual financial state the calculation of Galenica’s results using average annual ments as of the date when control or significant influence was exchange rates and yearend rates are recognised directly in the obtained. Companies sold during the year are included up to the consolidated statement of comprehensive income and reported date when control or significant influence has been lost. separately as cumulative translation differences. Cumulative _Details of changes in the scope of consolidation in the year trans lation differences recognised directly in the consolidated under review are included in the section entitled business statement of comprehensive income are only recognised in the combinations, purchase and sale of noncontrolling interests in consolidated income statement when control is lost. In the case note 6. The subsidiaries and associates are listed in note 35. of a full or partial loss of significant influence, the cumulative translation differences are recognised accordingly in the con solidated income statement. method of consolidation _Translation differences on equitylike loans that form part of the net investment in a foreign operation are recognised directly _Companies in which Galenica directly or indirectly holds more in the consolidated statement of comprehensive income, than 50% of the voting rights or where Galenica has operational provided that repayment of this loan is not possible or intended and financial control have been fully consolidated. Assets and in the near future. liabilities as well as income and expenses of these companies _The principal exchange rates against the Swiss franc which are have been fully included in the consolidated financial statements of importance for the consolidated annual financial statements from the date of acquisition, i.e. the date when control or are as follows: significant influence was obtained. Noncontrolling interests in Statement of financial position1) Income statement2) net assets and profit are indicated separately in the consolidated statement of financial position, the consolidated income state exchange rates 2012 2011 2012 2011 ment, the consolidated statement of comprehensive income, 1 EUR 1.21 1.22 1.21 1.24 and in the consolidated statement of changes in equity. 1 GBP 1.49 1.46 1.48 1.43 _All intercompany receivables and liabilities, income and 1 USD 0.92 0.94 0.94 0.89 expenses, participations and dividends as well as unrealised 1 CAD 0.92 0.92 0.93 0.91 gains and losses on transactions are fully eliminated. _Investments in associates where Galenica holds between 20% 1) Yearend rates 2) Average rates for the year and 50% of the voting rights have been accounted for using the equity method. Unrealised gains and losses from transactions with associates are eliminated in proportion to Galenica’s interest. maturities _Investments of less than 20% and Galenica has no significant influence are carried under securities or financial assets on the _Assets which are realised or consumed within one year or in the statement of financial position. normal course of business, or which are held for trading purposes are classified as current assets. All other assets are classified as noncurrent assets. Group currency and translation of foreign currencies _All liabilities which Galenica aims to settle in the normal course of business or which fall due within one year after the balance _Galenica’s consolidated financial statements are prepared in sheet date are classified as current liabilities. All other liabilities Swiss francs (CHF) and, if not otherwise indicated, are rounded are classified as noncurrent liabilities. to the nearest CHF 1,000. _The functional currency of the Group companies corresponds to the usual currency in the local economic area. Transactions in foreign currencies are converted at the daily rate effective at the time they are carried out. On the balance sheet date non monetary items are converted into the functional currency using yearend rates. The resulting exchange gains and losses are recognised in profit or loss.

Galenica financial statements 2012 · Notes _99 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 financial assets and liabilities derivative financial instruments and hedge accounting 2 3 Valuation of financial assets and liabilities _Derivative financial instruments are initially recognised at cost 4 _Financial assets and financial liabilities are initially recognised and subsequently recorded at their fair value. Depending on 5 at cost including trans action costs with the exception of f inancial their maturity, derivative financial instruments with a positive 6 assets and liabilities classified as “at fair value through profit or fair value are either classified as securities in current assets or 7 loss”, for which transaction costs are recognised directly in the as financial assets in noncurrent assets. Derivative financial 8 consolidated income statement. All purchases and sales are instruments with a negative fair value are presented as current 9 recognised using trade date accounting. Assets that are not or noncurrent financial liabilities according to their maturity. 10 carried at fair value through profit or loss are regularly assessed _Galenica uses derivative financial instruments such as foreign 11 for potential impairment. Financial assets are derecognised exchange forwards, interest rate swaps and cross currency 12 when Galenica has relinquished control over them, i.e. if the interest rate swaps in order to minimize and hedge existing 13 relevant rights have been sold or expire. Financial liabilities are interest rate and exchange risks. Foreign exchange forwards are 14 derecognised when they have been discharged. valued using relevant market exchange rates at the balance 15 _In the subsequent measurement Galenica distinguishes sheet date. The fair values of crosscurrency and interest rate 16 between the following types of financial assets and financial swaps are determined by financial institutions on the basis of the 17 liabilities: forward rates and interest rates at the balance sheet date. 18 _Galenica only uses hedge accounting for certain selected 19 financial assets and liabilities at fair value transactions. Changes in the fair value of hedging instruments 20 through profit or loss designated as cash flow hedges are recorded in the consolidated 21 _Financial assets and liabilities are classified at fair value statement of comprehensive income if the requirements con 22 through profit or loss if they are acquired with a view to realising cerning documentation, probability, effectiveness and reliable 23 a profit from current fluctuations in the price. This also includes measurability are met. 24 derivative financial instruments. The resulting realised and _Gains and losses on derivatives not designated in active hedge 25 unrealised changes in fair value are recognised directly in profit relationships are recorded in profit or loss as they arise. 26 or loss (financial result) for the relevant reporting period. 27 cash flow hedges 28 loans and receivables _Cash flow hedges are hedges against changes in cash flows due 29 _Loans and receivables are nonderivative financial assets with to fluctuations in the foreign exchange or interest rate of a finan 30 fixed or determinable payments that are not quoted in an active cial instrument or a forecast transaction. Gains or losses on the 31 market and include in particular receivables from the supply of effective portion of the hedging instrument are recognised in the 32 goods and services as well as loans to third parties. These types consolidated statement of comprehensive income while gains or 33 of financial instruments are recognised in the statement of finan losses on the ineffective part of the hedging instrument are 34 cial position at amortised cost using the effective interest rate recognised in the consolidated income statement. 35 method less cumulative impairment. The definitive derecogni _At the designation date of a hedge relationship, a formal docu 36 tion of loans and receivables is made only once there is a mentation is drawn up defining the hedging instrument, the 37 certificate of unsatisfied claims. hedged item or transaction, the nature of the risk being hedged 38 and the way in which the effectiveness of the hedge relationship 39 financial assets available for sale will be assessed. Hedge accounting is only applied if the hedge 40 _All other financial assets are classified as availableforsale relationship is highly effective throughout the entire term. 41 financial assets. These financial instruments are recognised in _Any cumulative unrealised gain or loss on the hedging instru 42 the statement of financial position at their fair values with any ment remains in equity until the underlying hedged item affects 43 changes in value, adjusted for deferred taxes, being recognised profit or loss. However, if a hedged forecasted transaction is no 44 in the consolidated statement of comprehensive income. On longer expected to occur, the cumulative unrealised gain or loss 45 sale, impairment or any other form of disposal, the cumulative on the hedging instrument is immediately reclassified into profit 46 gain or loss previously recognised in the consolidated statement or loss. 47 of comprehensive income is recognised in profit or loss for the 48 period. 49 _An impairment is recognised when it’s permanent, i.e. longer 50 than 6 months or significant, i.e. more than 20% below the 51 acquisition value. 52 53 financial liabilities at amortised cost 54 _Financial liabilities mainly comprise financial debts measured 55 at amortised cost using the effective interest rate method. 56 57 58 59 60 61 100_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 cash and cash equivalents inventories

_Cash and cash equivalents include cash, sight deposits at _Raw materials and merchandise purchased are carried in the financial institutions and time deposits with an original maturity statement of financial position at cost or net realisable value if of three months or less. Cash and cash equivalents are valued at lower, semifinished and finished goods at manufacturing cost nominal value. They form the basis of the consolidated state or net realisable value if lower. Manufacturing costs include all ment of cash flows. direct production costs and a proportion of the general produc tion costs. Financing costs are not included in manufacturing costs. The carrying value of inventories in the consolidated securities statement of financial position and the charging of purchase or manufacturing costs to the consolidated income statement are _On the statement of financial position, securities under current based largely on the weighted average cost method. In certain assets include marketable, easily realisable securities and time pharmacies the alternative permissible method is used, which deposits with an original maturity of 3 to 12 months, and deriva involves recalculation from the selling price. tive financial instruments with positive fair value and a residual _Adjustments are recognised for inventories with a lower net term to maturity of up to 12 months. Quoted securities and realisable value, slow turnover or for goods that are difficult to derivative financial instruments are measured at fair value, time sell. deposits at amortised cost. Unquoted securities are measured at their estimated fair value, based on their intrinsic value or other financial information. Where no such market data are avail property, plant and equipment and investment properties able, unquoted equity instruments are included in the statement of financial position at cost minus accumulated impairments. _Property, plant and equipment and investment properties are Changes in value of the securities and the derivative financial valued at historical cost or manufacturing cost less cumulative instruments not held for hedge accounting are recognised in the depreciation and impairments. Depreciation is charged on a consolidated income statement for the period. straight line basis over the following useful lives: Years Land unlimited treasury shares Buildings 10–50 _Shares in Galenica Ltd. that have been bought by the company Manufacturing systems 5–15 are deducted from shareholders’ equity. Gains and losses from Warehouse equipment 6–15 buying and selling treasury shares in Galenica Ltd. are recognised Furniture, fittings 5–10 directly in consolidated shareholders’ equity. IT equipment 3–10 Vehicles 3–10 receivables _Where an impaired asset is identified as a result of impairment _Trade accounts receivables are carried in the statement of testing, the impairment charge is included in the consolidated financial position at their original invoice value. If there are income statement under depreciation and reported separately objective indications that the debt will not be paid in full, the as an impairment. carrying value is adjusted accordingly. These allowances for _Land and buildings not used for operations are included in doubtful accounts are based on the difference between the investment properties and recognised in the consolidated state carrying amount and the recoverable amount as derived from ment of financial position and depreciated on the same basis as individual valuations or for groups with comparable credit risk property, plant and equipment used for operations. This includes profiles. land and buildings or parts thereof that are being maintained for _The remaining receivables are carried in the statement of an undetermined future purpose or to generate rental income. financial position at nominal value less any individual allowances The fair value of these properties, which is reported separately, required. is based on external assessments by proven experts. _Costs are only capitalised if they result in added economic value, for example the extension of useful life, the expansion of capacity, the improvement of product quality or a marked reduction in operating costs. Nonvalueenhancing maintenance or repair costs are recognised directly in profit or loss. _When property, plant and equipment and investment properties are sold or derecognised, the gains are recognised in other revenue and losses in other operating costs in the consolidated income statement.

Galenica financial statements 2012 · Notes _101 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 intangible assets _Goodwill is recognised at purchase cost at the time of the 2 business combination and corresponds to the difference 3 _Intangible assets include brands, patents, licences, technolo between the purchase consideration and the fair value of iden 4 gies, acquired or internally developed software and other assets tifiable assets, liabilities and contingent liabilities as identified 5 without physical substance. These items are measured at cost in the purchase price allocation. Positive goodwill is capitalised 6 and recognised in the statement of financial position after and included in intangible assets, while negative goodwill is 7 deduc ting cumulative amortisation and impairment. The cost of recognised immediately in the consolidated income statement. 8 intangible assets acquired in a business combination correspond After initial measurement goodwill is recognised in the state 9 to the fair value as determined in the purchase price allocation. ment of financial position at purchase cost less any cumulative 10 _Amortisation is charged on a straightline basis for the esti impairments. 11 mated economic or legal useful life, whichever is shorter. In _Goodwill is allocated to the cashgenerating unit or groups of 12 justi fied cases a longer useful life as shown in the table below or cashgenerating units that is the principal economic beneficiary. 13 even an indefinite useful life is applied. Potential impairment of goodwill is tested once a year or more

14 Years frequently if there is a justified indication of diminution in value. 15 The impairment test is based on the estimated future cash flow Trademarks, patents, licences, technologies 5–20 16 of the cashgenerating unit or groups of cashgenerating units 17 Software 2–7 to which the goodwill was allocated. If the recoverable amount 18 Other intangible assets 3–5 (higher of fair value less costs to sell and its value in use) is lower 19 than the carrying amount, the carrying amount is reduced to the 20 _Amortisation of intangible assets with an indefinite useful life recoverable amount by recording an impairment loss. 21 is not charged on a straight line basis but subjected to an impair _The difference arising from the acquisition of additional non 22 ment test annually or, if there are justified indications of loss of controlling interests in fully consolidated companies (purchase 23 value, more frequently. At the same time, the events and circum consideration minus proportionate bookvalue of noncontrolling 24 stances that justify the estimation of an indefinite useful life are interests) is considered to be an equity transaction and is thus 25 verified. Any diminution in value is recorded under depreciation taken directly to retained earnings in consolidated shareholders’ 26 and amortisation and reported separately as an impairment in equity. Gains and losses resulting from the disposal of interests 27 the consolidated income statement. in fully consolidated companies without loss of control are also 28 _If intangible assets are sold or derecognised, any gains result recognised in retained earnings in consolidated shareholders’ 29 ing are recognised under other revenue and losses under other equity with no impact on the consolidated income statement. 30 operating expenses in the consolidated income statement. _If cashgenerating units or groups of cashgenerating units are 31 _Internally developed Software is capitalised under intangible sold, goodwill is taken into account when calculating the profit 32 assets on condition that it will generate profit in the future or loss on the sale. The profit or loss on deconsolidation is 33 through being either sold or used within the company and that its recognised in the operating result of the consolidated income 34 production cost can be measured reliable. Other conditions that statement. 35 must be met concern the technical feasibility, the intention and _Impairments are recognised in the consolidated income 36 ability to complete the development, and the availability of suf statement and reported separately. 37 ficient resources. Software developed inhouse is measured at 38 production costs and included on the statement of financial posi 39 tion after deduction of cumulative amortisation and impairments. research and development 40 Amortisation is charged on a straight line basis using estimated 41 useful economic life. Potential impairment of the capitalised _Expenditure on research and development (excluding software 42 production costs is tested annually if the software is not yet developed inhouse) is recognised directly in the consolidated 43 being used, or more frequently if there are justified indications income statement at the time it incurred. The costs of develop 44 of loss of value. ment cannot be capitalised since the regulatory risks and the 45 considerable periods of time before a product is launched on the 46 market do not allow a reli able estimate to be made of the 47 Business combinations and goodwill economic benefit which would be necessary for capitalisation. 48 49 _Business combinations are accounted for in the statement of 50 financial position using the acquisition method. The purchase financing costs 51 consideration comprises payments in cash as well as the fair 52 value of the assets issued, the liabilities incurred or taken over _Financing costs are recognised directly in the consolidated 53 and the equity instruments issued. Acquisition costs are income statement at the time they incurred. In the case of 54 recognised directly in the consolidated income statement. The qualifying assets such as plants under construction, which take 55 statement of financial position and the income statement are a considerable time to build, the financing costs are added to the 56 consolidated from the time of the effective transfer of control. value of the property until it is completed. 57 58 59 60 61 102_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 leasing of value. If the recoverable amount (higher of fair value less costs to sell and its value in use) is lower than the carrying amount, the _Leasing contracts where Galenica takes on all the risks and carrying amount is written down to the recoverable amount. To rewards of ownership are treated as finance leases. Assets that determine the value in use, the future cash flows are discounted are taken over as part of a finance lease are recognised as at a pretax interest rate which most accurately reflects the risks property, plant and equipment in the consolidated statement inherent in the asset and the time value of money. Impairments of financial position at fair value or the net present value of are recognised in the consolidated income statement and future noncancellable lease payments, whichever is the lower, reported separately. and liabilities as financial debt. Equipment included in the finance _On the balance sheet date, impairments recognised earlier are leasing is depreciated over its estimated useful economic life or reviewed to ascertain whether and to what extent they are still the term of the contract if shorter, if it cannot be assumed that necessary. If the assumptions needed for recognising an impair ownership of the item will be transferred. Each leasing payment ment have changed in such a way that an impairment charge is is divided into amortisation and interest paid. The amortisation no longer necessary in the amount recognised in the statement part is deducted from the recognised leasing liability. of financial position, the asset value, except goodwill, is revalued _The remaining lease contracts are treated as operating leases. to its new estimated achievable value. At the most it may be Lease payments are recognised directly as operating costs in the raised to the level that would have been reached if the historical consolidated income statement for the duration of the lease. cost had continued to be amortised and no impairment had occurred previously. Any recovery of an earlier impairment is recognised in the consolidated income statement. Amortisation investments in associates is adjusted prospectively and systematically spread over the remaining useful life. _Investments in associates and jointventure companies are accounted for in the statement of financial position using the equity method. According to this method, investments in provisions as sociates are recognised on the statement of financial position at their acquisition value on the date of purchase. Goodwill paid _Provisions are recorded when Galenica has a present legal or upon acquisition is included in the book value of the investment. constructive obligation towards a third party following an event In the accounting period following the acquisition, the book in the past, when the amount of the obligation can be reliably value of the investment is increased by the proportional profit or estimated and an outflow of economic resources is probable. A reduced by the proportional loss of the associate, which is possible obligation where funds will probably not be required or recognised in profit or loss. Transactions that are recorded in the which cannot be accurately estimated is indicated as a contin statement of comprehensive income of associates without being gent liability and is only recognised as a provision when funds recognised in profit or loss are recognised proportionately will probably be required. directly in the consolidated statement of comprehensive income. _A provision for restructuring is recorded only when detailed Receivables and liabilities as well as transactions with these measures have been officially drawn up, the relative costs can companies are reported separately. be accurately estimated, justification for expecting them to be used can be provided and the plan has been forwarded to those concerned. financial assets _Fund outflows expected within a year are included under current provisions. Where funds are expected to be required in _Financial assets include securities in the category “available the medium or long term, provisions are measured at the present forsale financial assets”, loans, time deposits with a maturity of value of the expected economic outflows and presented in the more than 12 months, securities for rent, receivables for leasing noncurrent provisions. contracts with a maturity of more than 12 months and derivative financial instruments with a positive fair value and a residual term to maturity of more than 12 months. Impairment of loans is income tax determined on the basis of the creditworthiness of the counter party and recognised in the consolidated income statement. _Current income tax is based on taxable profit for the current year and is recognised in the consolidated income statement for the corresponding period. impairment of non-financial assets _Deferred taxes are taxes on temporary differences between the tax base of assets and liabilities and the carrying amounts _The impairment of assets is always tested when it appears pos indicated in the Group’s consolidated financial statements. sible that book values may be too high owing to events or Deferred taxes are calculated using the liability method on the changes in circumstances. In the case of goodwill and intangible basis of real or expected effective local tax rates once the assets with an indefinite useful life or an intangible asset that is temporary differences will be eliminated. Tax effects from losses not yet available for use, impairment is tested at least once a carried forward and other deductible temporary differences are year and more frequently if there are justified indications of loss only capitalised when it is probable that they will be realised in

Galenica financial statements 2012 · Notes _103 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 the future. Deferred tax assets are reported separately under long-service awards 2 noncurrent assets while deferred tax liabilities are recorded 3 separately under noncurrent liabilities. _The company rewards its personnel for long service through 4 _Changes in deferred tax assets and liabilities are recognised in specific awards. These obligations are also determined and 5 the consolidated income statement. Deferred taxes on transac recognised under employee benefit liabilities in the statement 6 tions that are recognised directly in the consolidated statement of financial position using the projected unit credit method. 7 of comprehensive income are likewise recognised in the con These obligations are unfunded. 8 solidated statement of comprehensive income. 9 _Deferred tax liabilities for withholding tax or other taxes 10 connec ted with undistributed profits generated by foreign sub share-based payments 11 sidiaries are only taken into account if a dividend distribution is 12 planned or a dividend can be expected in the foreseeable future. _Galenica has a number of sharebased payment plans which 13 are always settled through equity instruments. 14 _The sharebased payments are measured at fair value on the 15 employee benefits grant date. Only those market conditions which are directly linked 16 to the price of Galenica’s shares and any nonvesting conditions 17 _Galenica has a number of employee benefit plans based on are taken into account when measuring these transactions. 18 local conditions and legal stipulations in the corres ponding _The expenditure thus incurred is recognised directly in con 19 countries. These plans are legally and financially independent of solidated shareholders’ equity and apportioned over the vesting 20 Galenica and are defined contribution as well as defined benefit period until the employees meet the necessary requirements 21 plans. for purchasing Galenica shares. The cumulative expenditure for 22 _The vast majority of Galenica’s employees are insured in sharebased payment transactions from the balance sheet 23 Switzer land through pension funds which are defined contribu date up to the vesting date represents Galenica’s best estimate 24 tion plans with performance targets. These pension plans meet of the number of Galenica shares which can then actually be 25 the requirements for a defined benefit pension plan according purchased by employees. Expense adjustments due to changes 26 to IAS 19. The plans cover the risks of the economic conse in expectations regarding the number of Galenica shares to be 27 quences of ageing, disability and death. The emplo yee benefit purchased are recognised in personnel costs for the relevant 28 plans are generally funded by contributions from the employees reporting period. 29 and the employer. _If the plans’ conditions change during the life of an equity 30 _The expenses and liabilities of Galenica in connection with settled sharebased payment plan, the effects of modifications 31 defined benefit pension plans are calculated annually by exter that increase the total fair value of the plan (incremental fair 32 nal experts on the basis of actuarial assessments using the value) or are otherwise beneficial to the employee are immedi 33 projected unit credit method. In this connection, the number of ately recognised in the consolidated income statement. 34 years with the company up to the balance sheet date are taken _If the plan is cancelled, exercise is assumed on the date of 35 into account and projections of future salary developments are cancellation and the expense is recognised immediately. If the 36 made. In addition, the Group’s actuarial consultants use statisti cancelled plan is replaced straight away with a new remunera 37 cal information such as withdrawal and mortality rates for their tion plan, the expense is recognised in the same way as changes 38 estimates. in the plan conditions described above. 39 _Liabilities in connection with defined benefit pension plans are _The dilutive effect of the sharebased payments is taken into 40 covered in the statement of financial position through funded account in the calculation of the diluted earnings per share. 41 plans. The assets are managed separately from those of Galenica 42 by independent welfare funds. The difference between the 43 present value of the defined benefit obligation and the fair value 44 of the plan assets is reported separately as a liability or asset in 45 the consolidated statement of financial position. An asset is only 46 capitalised if Galenica has a future economic benefit in the form 47 of refunds or lower contributions. If the future benefit is not 48 available to Galenica it is not capitalised but reported in the 49 notes to the consolidated financial statements. 50 _Actuarial gains and losses arise from changes in actuarial 51 assumptions and the difference between actuarial assumptions 52 and effective values. The as yet unrecognised actuarial gains and 53 losses that fall outside the 10% corridor are debited or credited 54 to the costs of employee benefits in the consolidated income 55 statement over the average remaining serviced period. 56 57 58 59 60 61 104_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 revenue royalties, milestone and upfront payments _Royalties (licence fee income) are recognised in accordance Net sales with the provisions of the underlying contract when an inflow of _Net sales consisting of sale of goods and services correspond economic benefit is probable and the amount of revenue can be to sales after deduction of price discounts, cash discounts, bulk reliably measured. The revenue is reported separately under discounts and other discounts and loyalty bonuses from cus other revenue. tomer retention programmes, as well as taxes linked directly to _In accordance with the conditions of an agreement with Roche, sales. Galenica receives royalties which, after taking account of an agreed basic sum, correspond to half of the net sales for non sale of goods transplant indications of CellCept, developed by Roche. Roche _The sale of all products arising from the production and trading and Galenica have developed a sales tracking methodology companies of Galenica is recognised as sale of goods. The sale to assess net sales of CellCept and to determine the portion of products is recognised in revenues upon the transfer of the attributable to sales from use in nontransplant indications. principal risks and rewards to the purchaser and once it is Therefore Roche and Galenica have defined a fixed percentage sufficiently certain Galenica will enjoy an economic benefit that of CellCept’s total sales results as a means to determine the por can be reliably measured. In the retail trade, the transfer of tion attributable to sales from use in nontransplant indications. principal risks and rewards occurs with the transfer of ownership _Certain Group companies receive milestone and upfront to the purchaser or the legal transfer of ownership in accordance payments from third parties for the sale or granting of licence with recognised international trading practice. rights to products and technologies. Payments relating to mile _Should principal risks remain with Galenica following the sale stone services are recognised in profit and loss according to the of products, the transaction is not considered a sale and the achievement of the targets defined in the agreements. Upfront revenue is not recognised. Price discounts, cash discounts, bulk payments for which services have yet to be provided are deferred discounts and other discounts and loyalty bonuses granted to and included in other revenue, spread over the duration of the customers are recognised in revenues. These reductions in development collaboration or production obligation. revenue for receivables pending on the balance sheet date are estimated on the basis of past experience, historical develop other revenue ments or contractual provisions, deducted from revenues and _Revenue from the sale of property, plant and equipment in reported in the consolidated statement of financial position as financial leasing is recognised at the time of transfer of risks and accrued expenses or a reduction in trade accounts receivable. rewards to the lessee at the present value of the anticipated Loyalty bonuses from customer retention programmes are minimum lease payments. estimated on the basis of past experience and deducted directly _Gain on disposal of property, plant and equipment is recog from the corresponding revenues and accrued at the time of the nised at the time of the transfer of ownership and the related sales concerned. transfer of risks and rewards. _Revenue from rent is based on the provisions of the under lying services rental contracts. _Revenue from services includes logistics services, the prepara _Allocated marketing costs and partpayment of expenses are tion and sale of information, marketing and IT services and other recognised as income on the basis of contractual agreements. services provided on a contractual basis. In order for revenue from services to be recognised, it must be possible to reliably interest and dividends estimate the stage of completion, the amount of revenue, the _Interest is recognised using the effective interest rate method. probability of the inflow of economic benefit and any further Unpaid interest is recognised on the balance sheet date as costs to completion. The logistics services provided are depend accrued income. Interest is recognised in the consolidated in ent on volume, while the marketing and IT services are contract come statement as financial income. based and are measured in terms of the progress made. Access _Dividends are profit distributions to Galenica as the holder of to information made available electronically is calculated in equity investments and are recognised when the legal claim to terms of volume or on the basis of subscribers. payment arises. Dividends are recognised as “Securities and _Price discounts and cash discounts granted to customers are other financial income” in profit or loss in the consolidated recognised in revenues. In order to determine the stage of financial statements. completion, experience involving the same or similar services is used as a reference. _If revenue from goods or services are recognised reliably on the basis of the provisions described above and the estimate subse quently changes with regard to the collectability of an amount, the uncollectible amount, or the amount in respect of which re covery has ceased to be probable, is recognised as an expense.

Galenica financial statements 2012 · Notes _105 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 3. fiNaNcial risk maNaGemeNt market risk management 2 _Market risks are potential losses that Galenica could incur 3 through changes in the variable market consitions. These 4 _Galenica is exposed to various financial risks caused by variables may be interest rates, foreign exchange rates and share 5 movements in exchange rates and interest rates, by receivables prices. Changes in the fair value of financial assets, financial 6 and by liquidity requirements. These risks are managed by the liabilities or derivative financial instruments caused by such 7 Group Finance Division in line with the hedging policy approved variable factors may affect Galenica’s financial position and 8 by the Board of Directors and internal guidelines on cash and results. The market risks are monitored and regularly reported 9 liability management. In order to optimise financial resources, to management. The impact of changes in the market variables 10 all cash that is surplus to operating requirements and the Group’s is monitored using sensitivity analyses. Sensitivity analysis is 11 longterm financing requirements are managed centrally. In this a widespread and accepted analysis for quantifying the risk 12 way, Galenica ensures that it obtains capital in a costeffective relation to an isolate change in a variable. 13 manner and that its cash funds match its financial liabilities. 14 _It is Galenica’s policy not to enter into any speculative financial interest rate risk 15 arrangements and to ensure matching maturities. Due to the _Interest rate risks arise from changes in interest rates that may 16 combination of the risk management and monitoring measures have a negative impact on Galenica’s financial position and 17 described in the following, an excessively negative impact on the results. Fluctuations in interest rates lead to changes in interest 18 consolidated financial statements will be avoided. earned and interest paid on floatingrate assets and liabilities 19 and thus affect the financial result. 20 liquidity risk management _In addition fluctuations in interest rates may affect the fair 21 _The aim of liquidity risk management is to provide sufficient value of certain financial assets, liabilities and derivatives, as ex 22 cash to meet the Group’s financial liabilities on time while main plained under market risks. Interest rates are managed centrally 23 taining the flexibility to take advantage of market opportunities in order to limit the effects of interest rate fluctuations on the 24 and optimum investment conditions. The Group Finance Division financial result. 25 is responsible for entering short and longterm loans as well as _Interest rate risks are managed through a balanced mix of fixed 26 for decisions on investments. Apart from financing operations, and floatingrate financial assets and liabilities. Galenica also 27 Galenica’s credit standing enables it to borrow cash for financing uses interest rate swaps for that purpose. 28 at an advantageous rate. To ensure that Galenica can meet its _No interest rate risk arises from payments of operating leases 29 payment obligations in good time, liquidity is monitored centrally. and rental agreements. 30 The Treasury department monitors the cash flows using ongoing 31 liquidity planning. This takes into account the maturities of the currency risk 32 financial instruments as well as the cash flows from business _Galenica is exposed to foreign exchange rate risks, mainly in 33 activities. relation to the USD, CAD, GBP and EUR, that may affect 34 Galenica’s assets and earnings in CHF. Derivatives, in particular 35 credit risk management foreign exchange forwards and options, are used to hedge the 36 _Credit risks arise when a customer or a third party fails to meet risk of fluctuation in exchange rates. 37 its contractual obligations and causes Galenica a financial loss. _Galenica is further exposed to currency transaction risk. This 38 Credit risks are minimised and kept under surveillance by limit risk arises when income and expenses are incurred in a currency 39 ing business relations to known, reliable partners. other than the functional currency. Foreign currency transaction 40 _Corporate policy ensures that the solvency of customers who risks are mostly hedged, however, hedge accounting is not 41 are supplied on credit have been checked. In the case of applied. 42 receivables for goods and services supplied, the risk is continu 43 ally monitored and credit risks are reviewed as part of group other market risk 44 reporting procedures. According to standard corporate guide _Other market risks include the change in equity price and the 45 lines concerning the measurement of outstanding debts, the general economic environment. Galenica holds securities for 46 necessary impairment charges for foreseeable losses on the cash management purposes. Apart from unlisted securities, se 47 receivables portfolio are made. curities under current assets primarily react to the performance 48 _In addition, credit risks arise in relation to financial assets, of share indices on the SIX Swiss Exchange. Securities under 49 comprising cash and cash equivalents, securities, financial noncurrent assets comprise investments in venture funds 50 assets and certain derivative financial instruments. The main which are normally not openly traded. Potential changes in fair 51 financial assets that are exposed to credit risk are loans granted. value should be assessed for each fund separately, based on the 52 the creditworthiness of the counterparties is regularly moni profitearning capacity and prospects of success of the respec 53 tored and reports are submitted to management. tive investment and independently of the stock markets. 54 55 56 57 58 59 60 61 106_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 4. estimatioN uNcertaiNtY aNd assumptioNs 5. operatiNG seGmeNt iNformatioN

_In order to prepare annual financial statements that comply with _The management approach is used to determine the operating generally accepted accounting principles, senior management is segments with reporting obligations. Accordingly, external obliged to use estimates and assumptions. This has an impact on segment reporting is based on the internal organisational and the reported carrying amounts of assets and liabilities, the disclo management structures of Galenica and the internal financial sure of contingent assets and liabilities at the balance sheet date, reporting to the Chief Operating Decision Maker (CODM). The and the income and expenses reported for the relevant accounting CODM of Galenica is the Board of Directors of Galenica Ltd. It period. Although the used estimates and assumptions are made defines business activities and monitors internal reporting to on the basis of all available information and with greatest care, the assess performance and resource allocation. actual results may differ. This applies primarily to the estimates _For the purpose of company management, Galenica is organ and assumptions of the areas listed below. ised into business sectors according to products and services and has the reportable segments Pharma, Logistics and Retail. deferred tax assets (note 15) The operating result comprises all operating income generated _Deferred tax assets on tax losses carried forward are taken into and expenses incurred in the corresponding segments. The account only if their future realisation is probable. The recogni financing of Galenica takes place at Group level, which is why tion of deferred tax assets is based on assumptions and estimates financial income and expenditure and income tax are reported with regard to future income and expenses relating to the corre at Group level only and not allocated to segments. The assets sponding taxable entity. and liabilities include all positions of the statement of financial position that can be directly attributed to a segment or reason Goodwill and intangible assets (note 18) ably allocated to a segment. _Capitalised goodwill and other intangible assets with an indefinite useful life or that are not yet available for use are pharma tested for impairment at least once a year. This requires an esti _Under the umbrella of Vifor Pharma, Galenica operates a fully mation of the value in use of these intangible assets, the cash integrated, internationally active speciality pharmaceutical generating unit (CGU) or group of cashgenerating units to which company that researches, develops and produces its own the goodwill is allocated. The estimation of the value in use pharmaceutical products, and markets and distributes them requires the forecast of expected future cash flows as well as the worldwide. application of an appropriate discount rate to calculate the _Vifor Pharma focuses its activities on the core competences of present value of these cash flows. iron deficiency (including iron deficiency anaemia), infectious diseases/OTX products and Consumer Healthcare (OTC). To provisions (note 24) ensure rapid and direct access to the various global markets, the _When creating a provision, assumptions relating to the company operates its own subsidiaries and works together with probability, extent and timing of an outflow of resources are licensing partners. made. The actual costs may deviate from the estimated values. _Vifor Pharma is the world leader in the market for pharma ceutical iron replacement products. Customers in more than 100 employee benefit plans and other statutory benefits countries are supplied from Switzerland. Vifor Pharma manu for employees (note 25) factures a comprehensive range of prescription (Rx) and non _The costs of the employee benefit plans and other statutory prescription (OTC) products, and herbal remedies. Vifor Pharma benefits for employees are determined using actuarial valua also markets products manufactured by third parties. In tions. These valuations involve making assumptions about the OM Pharma, Vifor Pharma operates a biotechnology and phar discount rate, the expected rates of return on assets, future maceutical company that develops, produces and markets salary and pension developments and the personnel turnover worldwide highquality synthetic and biotech drugs (OTX) for the rate. Due to the longterm nature of the plans, these assumptions therapeutic area of immunology and infectious diseases. are subject to significant uncertainty. _Vifor Pharma runs Vifor Fresenius Medical Care Renal Pharma, a speciality pharmaceutical company founded by Galenica and Fresenius Medical Care thatglobally operates in the field of nephrology and develops and markets innovative, highquality products aimed at improving the quality of life of patients suffer ing from chronic kidney disease (CKD). _In addition, Vifor Pharma holds the global rights (ex. Japan) to develop and market CellCept, developed by Roche, for all applications involving autoimmune diseases with the exception of transplants.

Galenica financial statements 2012 · Notes _107 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 logistics _The companies of Corporate Finance Division mainly comprise 2 _The business sector Logistics plays an important role in the the Group’s central services. These include Group management, 3 pharmaceutical supply chain. Logistics offers prewholesale Corporate Finance, Controlling, Accounting, Tax, Treasury, 4 pharmaceutical and healthcare companies a broad range of Insurances, Human Resources, Legal Services, Processes and 5 specialised services including storage and distribution of their Methods, General Secretariat, Corporate Communications and 6 products in Switzerland as well as debt collection. Investor Relations. 7 _As a pharmaceutical wholesaler, Logistics ensures onschedule 8 delivery within short deadlines to all healthcare partners through 9 out Switzerland. The Logistics companies supply pharmacies, eliminations 10 physicians, drugstores and hospitals with over 80,000 referenced _Operations give rise to sales of goods and services between 11 healthcare products. the business sectors. Corporate Finance Division charges the 12 other operating segments management fees for the organisa 13 retail tional and financial management it provides. 14 _With 467 locations, Galenica operates the leading pharmacy _All intersegmental services are charged at arm’s length. Unre 15 network in Switzerland. The 300 own pharmacies and 167 part alised gains or losses may arise from the billing of services and 16 ner pharmacies are located at attractive points of sales through sales of assets between the different segments. Sales of goods 17 out the country. Galenica’s own pharmacies comprise the brand and services between the segments and unrealised gains or 18 Amavita with 138 locations and the brand Sun Store with 106 losses arising therefrom are eliminated in the “Eliminations” 19 locations. Galenica also operates a chain of own sales points in column. 20 partnership with Coop under the Coop Vitality brand. _The segments’ assets and liabilities include loans and current 21 _Galenica’s pharmacy network also covers the speciality phar accounts held with respect to other segments. These positions 22 macy MediService, which is specialised in the medication for are eliminated in the column “Eliminations”. 23 inhome therapies as well as 14 Amavita partner pharmacies, 2 24 majority holdings in pharmacies, 2 minority holdings in pharma 25 cies and 153 Winconcept partner pharmacies. 26 27 other 28 _The operating segment HealthCare Information does not fulfil 29 the threshold criteria pursuant to IFRS 8 and therefore has been 30 combined with the other activities of Corporate Finance Division 31 under “Other” in the operating segment information. 32 _The companies in the HealthCare Information business sector 33 offer solutions for the networked healthcare market. They oper 34 ate comprehensive databases that provide additional knowledge 35 for all service providers in the Swiss healthcare market and 36 develop management solutions tailored specifically to the needs 37 of the networked healthcare market. HealthCare Information is 38 the leading provider of master data systems for Switzerland’s 39 entire healthcare market and publishes printed and electronic 40 technical information on pharmaceutical products. Sectorspe 41 cific, allround management solutions are developed and mar 42 keted under the Triamun brand name. TriaPharm ® was designed 43 specifically for pharmacies, TriaOne® is a nonsectorspecific 44 ERP solution for retail, while TriaMed® has been developed for 45 physicians. 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 108_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 operating segment information 2012 products and services in thousand CHF Pharma Logistics Retail Other Eliminations Group Net sales 633,329 2,102,344 1,189,184 47,119 (677,635) 3,294,341 Other revenue 271,127 15,917 72,655 29,448 (75,470) 313,677 Revenue intersegment (58,660) (580,462) (71,179) (44,858) 755,159 — total revenue third parties 845,796 1,537,799 1,190,660 31,709 2,054 3,608,018 Depreciation and amortisation (34,591) (15,583) (20,703) (6,755) 1,579 (76,053) earnings before interest and taxes (eBit) 257,084 30,731 60,302 519 970 349,606 Interest received 1,577 Interest paid (37,297) Other financial result (net) 4,715 Income from associates — — 2,536 31 — 2,567 earnings before taxes (eBt) 321,168 Income tax (46,361) Net profit 274,807 assets 1,536,188 663,774 909,107 1,852,151 (1,814,474)1) 3,146,746 Investments in associates — — 21,685 106 — 21,791 liabilities 835,726 383,112 1,002,696 1,335,149 (1,787,851)2) 1,768,832

Investments in property, plant and equipment and investment properties 21,736 8,564 15,233 773 (309) 45,997 Investments in intangible assets 2,604 664 4,437 951 (1,176) 7,480 Employees as of 31 December (FTE) 1,764 916 3,200 209 — 6,089

Geographic areas Other in thousand CHF Switzerland Europe America countries Eliminations Group Net sales 3,555,448 341,434 144,911 71,352 (818,804) 3,294,341 Other revenue 476,239 157,469 7,771 3,642 (331,444) 313,677 Revenue intersegment (1,087,595) (60,139) (2,514) — 1,150,248 — total revenue third parties 2,944,092 438,764 150,168 74,994 — 3,608,018

Non-current assets3) 1,401,082 128,242 220,600 248 — 1,750,172 1) Of which elimination of intercompany positions CHF –1,810,163,000 and other unallocated amounts CHF –4,311,000 2) Of which elimination of intercompany positions CHF –1,810,163,000 and other unallocated amounts CHF 22,312,000 3) Without financial assets, deferred tax assets and employee benefit assets

Galenica financial statements 2012 · Notes _109 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 operating segment information 2011 2 3 products and services 4 5 in thousand CHF Pharma Logistics Retail Other Eliminations Group 6 Net sales 584,311 2,081,511 1,117,872 47,759 (644,069) 3,187,384 7 Other revenue 253,596 10,384 68,217 28,623 (67,598) 293,222 8 Revenue intersegment (57,640) (564,052) (49,246) (42,714) 713,652 — 9 total revenue third parties 780,267 1,527,843 1,136,843 33,668 1,985 3,480,606 10 11 Depreciation and amortisation (32,615) (15,266) (19,612) (6,057) 1,266 (72,284) 12 earnings before interest and taxes (eBit) 254,412 22,835 52,629 (5,032) 2,281 327,125 13 Interest received 1,543 14 Interest paid (39,954) 15 Other financial result (net) 2,323 16 Income from associates — — 2,575 5,787 — 8,362 17 18 earnings before taxes (eBt) 299,399 19 Income tax (43,767) 20 Net profit 255,632 21 22 assets 1,437,953 736,971 874,615 1,799,793 (1,735,175)1) 3,114,157 23 Investments in associates — — 18,981 5,787 — 24,768 24 liabilities 739,754 425,730 997,282 1,471,801 (1,723,009)2) 1,911,558 25 26 Investments in property, plant and equipment and 27 investment properties 23,296 8,669 19,232 792 (221) 51,768 28 29 Investments in intangible assets 3,384 1,321 3,952 1,171 (1,150) 8,678 30 Employees as of 31 December (FTE) 1,691 901 3,107 227 — 5,926 31 32 Geographic areas 33 Other 34 in thousand CHF Switzerland Europe America countries Eliminations Group 35 Net sales 3,452,975 277,400 151,273 56,070 (750,334) 3,187,384 36 Other revenue 430,194 104,723 8,221 2,940 (252,856) 293,222 37 Revenue intersegment (958,903) (42,078) (2,209) — 1,003,190 — 38 total revenue third parties 2,924,266 340,045 157,285 59,010 — 3,480,606 39 40 Non-current assets3) 1,428,862 127,422 221,898 322 — 1,778,504 41 1) 42 Of which elimination of intercompany positions CHF –1,736,062,000 and other unallocated amounts CHF 887,000 2) Of which elimination of intercompany positions CHF –1,736,062,000 and other unallocated amounts CHF 13,053,000 43 3) Without financial assets, deferred tax assets and employee benefit assets 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 110_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 6. BUSINESS COMBINATIONS, PURCHASE AND SALE Proforma figures for acquisitions made in 2012 OF NON-CONTROLLING INTERESTS for the full 2012 financial year _Since they were included in the Galenica Group’s scope of consolidation, the businesses acquired contributed net sales of _In 2012 and 2011, the scope of consolidation was changed as a approximately CHF 15.6 million and an operating profit (EBIT) of result of the following transactions: CHF 0.7 million to the Group’s result. If these acquisitions had already been concluded by 1 January 2012, they would have resulted in additional consolidated net sales of CHF 4.8 million and Business combinations 2012 an additional consolidated operating profit (EBIT) of CHF 0.1 million (unaudited). Retail business sector _Acquisition of pharmacies. GaleniCare Holding acquired 100% of the interests of pharmacies with different locations in Business combinations 2011 Switzerland. Upon acquisition, some of these pharmacies, which were mostly unincorporated businesses (asset deals), were Pharma business sector merged with GaleniCare Ltd. _Acquisition of the business activities of Grupo Uriach _The purchase consideration amounts to CHF 19.8 million, of (J. Uriach Y Compañia S.A. and Biohorm S.A.). On 14 November which CHF 18.9 million was settled in cash. The deferred consid- 2011 Galenica acquired the business activities of the sector eration of CHF 0.2 million falls due in 2013. The purchased good- Primary Care (dealing with medical practices) of the Spanish will of CHF 11.9 million was allocated to the operating segment Grupo Uriach, incorporating the medical, marketing and sales Retail and corresponds to the added value of the pharmacies organisation and associated assets (asset deal) and employees based on their locations. The transaction costs of CHF 0.1 million into Vifor Pharma España. This acquisition will improve the abi- were recorded as other operating costs in the consolidated lity of Galenica to commercialise the intravenous iron products income statement. The purchase price allocation has not been Ferinject® and Venofer® as well as several in-licensed products definitively concluded yet for acquisitions close to the balance in Spain. Galenica has acquired no shares of Grupo Uriach. sheet date.

Business combinations

Fair Value in thousand CHF 2012 2011 Cash 636 255 Trade accounts receivable 3,636 511 Inventories 2,288 1,015 Other current assets 1,627 835 Property, plant and equipment 978 501 Intangible assets 10 3,795 Financial assets — 11 Deferred tax assets 14 — Trade accounts payable — (203) Deferred tax liabilities (165) (33) Other current and non-current liabilities (1,208) (797) Fair value of net assets 7,816 5,890 Goodwill 11,935 14,873 Purchase consideration 19,751 20,763 Deferred purchase consideration (170) (7,555) Cash acquired (636) (255) Net cash flow 18,945 12,953

Galenica financial statements 2012 · Notes _111 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 _The purchase consideration amounts to EUR 10.6 million (CHF Sale of non-controlling interests 2011 2 13.2 million) and was settled by a cash payment of EUR 5.2 mil- 3 lion (CHF 6.5 million). The deferred consideration of EUR 5.4 Vifor Fresenius Medical Care Renal Pharma Ltd. 4 million (CHF 6.7 million) depends on future events and falls due _November 2010 Galenica set up Vifor Fresenius Medical Renal 5 in the years 2013 to 2017. Net assets on acquisition contains Pharma Ltd., with a registered office in Switzerland. The com- 6 non-current assets with a fair value of EUR 3.0 million (CHF 3.7 pany’s share capital amounts to CHF 1.0 million and its purpose 7 million). The purchased goodwill of EUR 7.6 million (CHF 9.4 mil- is to commercialise and distribute pharmaceutical products in 8 lion) was allocated to the operating segment Pharma and cor- the nephrology segment. Vifor Pharma transferred the distribu- 9 responds to the added value based on the acquirer-specific tion rights of Ferinject® (Injectafer® trade name of Ferinject® in 10 synergies expected to arise from the acquisition, the growth in USA) and Venofer® for Nephrology as well as the distribution 11 market share and the employees gained. The transaction costs rights of PA21 for North America to Vifor Fresenius Medical 12 of CHF 0.3 million were recorded as other operating costs in the Renal Pharma Ltd. Afterwards Galenica sold 45% of the share 13 consolidated income statement. capital and the voting rights to Fresenius Medical Care. Galenica 14 remains control of Vifor Fresenius Medical Renal Pharma Ltd. 15 Retail business sector with a proportion of 55% of the share capital and the voting 16 _Acquisition of pharmacies. GaleniCare Holding and Sun Store rights. The sale of 45% of the shares affected Galenica’s share- 17 acquired 100% of the interests of pharmacies with different holder’s equity. The carrying amount of the non-controlling 18 outlets in Switzerland. Upon acquisition, these pharmacies, interests was adjusted to reflect the changes in their relative 19 which were mostly unincorporated businesses (asset deals), interests in the net assets. 20 were merged with GaleniCare Ltd. and Sun Store SA, respec- _ In October 2011, Vifor Fresenius Medical Care Renal Pharma 21 tively. Ltd. received the approval from the competition authorities of 22 _The purchase consideration amounts to CHF 7.6 million, of Switzerland and the European Union to commence business 23 which CHF 6.8 million was settled in cash. The deferred consid- activities in Europe and other countries. On 1 November 2011, 24 eration of CHF 0.8 million was paid in 2012 or is falling due in Vifor Pharma subsequently transferred the nephrology marke- 25 2013. The purchased goodwill of CHF 5.4 million was allocated ting and sales rights of Ferinject® (Injectafer®) and Venofer® 26 to the operating segment Retail and corresponds to the added as well as all rights of PA21 for Europe and the rest of the world. 27 value of the pharmacies based on their locations. A further payment by Fresenius Medical Care became due upon 28 transfer of these rights, impacting on Galenica’s consolidated 29 shareholders’ equity. 30 Purchase of non-controlling interests 2011 _Vifor Pharma incurs the further development of PA21 on behalf 31 of Vifor Fresenius Medical Renal Pharma Ltd. Fresenius Medical 32 Pharma business sector Care committed to finance the subsequent development of 33 _Purchase of non controlling interests of Vifor Uriach PA21. These payments were recorded as other revenues in the 34 Pharma S.L. On 14 November 2011, Galenica acquired the re- consolidated income statement. Additional payments become 35 maining 50%, minus one share, of the voting shares of Vifor due if specific events occur. 36 Uriach Pharma S.L. based in Spain. Vifor Uriach Pharma S.L. 37 was renamed Vifor Pharma España S.L. after the acquisition. 38 The purchase consideration of EUR 4.6 million (CHF 5.7 million) 39 was settled by a cash payment. Non-controlling interests with 40 a negative net asset value of CHF 0.5 million are bought out by 41 this transaction. 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 112_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 7. NET SALES 10. OTHER OPERATING COSTS

in thousand CHF 2012 2011 in thousand CHF 2012 2011 Sale of goods 3,194,231 3,091,369 Maintenance and repairs 22,944 21,475 Services 100,110 96,015 Operating and production costs 151,144 132,502 Total net sales 3,294,341 3,187,384 Rent, leasing 58,178 53,959 Administration costs 77,489 70,849 Marketing and sales costs 133,977 120,685 Losses on disposals of property, 8. OTHER REVENUE plant and equipment 90 178 Taxes 2,368 2,663 Other operating costs 540 1,518 in thousand CHF 2012 2011 Total other operating costs 446,730 403,829 Royalties, milestone and upfront payments 256,823 232,101 Variation in inventories of semi-finished and finished goods (68) 9,413 Income from capitalised own production 3,042 3,551 11. FINANCIAL RESULT Rental income 6,766 5,766 Gain on disposals of property, plant and equipment and intangible assets 5,586 362 in thousand CHF 2012 2011 Other operating income 41,528 42,029 Interest received 1,576 1,543 Total other revenue 313,677 293,222 Securities and other financial income 7,310 7,113 Total financial income 8,886 8,656 _Income from royalties, milestone and upfront payments comprises income from sales of CellCept® in an amount of CHF 90.9 Interest paid 37,297 39,953 million (previous year: CHF 120.5 million). Other financial costs 2,099 4,391 _Other operating income includes principally allocated market- Foreign exchange differences 495 400 ing costs and part-payment of expenses by customers. Total financial expenses 39,891 44,744

_The main influence on the net interest expense of CHF 35.7 9. PERSONNEL COSTS million (previous year: CHF 38.4 million) had the financing costs of the previous years acquisition of Aspreva, Sun Store and OM Pharma and other activities of Galenica. Net interest expense in thousand CHF 2012 2011 was positively influenced by further repayments of financial Salaries and wages 463,800 446,149 liabilities. Other financial costs include impairments of securities in the “financial assets available for sale” category as well Social security costs and as other costs of financial liabilities. pension expenses 77,234 65,492 Other personnel costs 52,971 53,182 Total personnel costs 594,005 564,823

Average number of FTE 6,010 5,706

_Personnel costs include expenses for defined benefit plans of CHF 32.5 million (previous year: CHF 27.7 million) and for share-based payments of CHF 15.0 million (previous year: CHF 14.4 million) (see note 25 and note 29).

Galenica financial statements 2012 · Notes _113 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 12. EARNINGS PER SHARE 14. RECEIVABLES 2 3 4 _Earnings per share are obtained by dividing net profit by the in thousand CHF 2012 2011 5 weighted average number of shares outstanding during the Trade receivables 501,808 508,445 6 period in question, minus the average number of treasury shares Other receivables 44,239 45,817 7 held by Galenica. When calculating diluted earnings per share 8 the weighted average number of outstanding shares during the Allowances for doubtful accounts (4,504) (6,615) 9 period is adjusted by the weighted average number of outstand- Total receivables 541,543 547,647 10 ing shares that would be issued on the conversion of all the dilu- 11 tive potential outstanding shares into outstanding shares. Change in allowances for doubtful accounts 12 on trade receivables 13 2012 2011 in thousand CHF 2012 2011 14 Number of shares 6,500,000 6,500,000 1 January (6,615) (8,705) 15 Average number of treasury shares (24,661) (49,672) Addition (1,630) (1,485) 16 17 Average number of outstanding shares 6,475,339 6,450,328 Use 2,467 1,429 18 Share-based payments 17,172 35,308 Reversal 1,276 2,141 19 Theoretical average number of Translation differences (2) 5 20 outstanding shares (diluted) 6,492,511 6,485,636 31 December (4,504) (6,615) 21 Expense for complete derecognition of in thousand CHF 2012 2011 22 trade receivables 2,653 3,604 23 Net profit – attributable to shareholders Income from the receipt of 24 of Galenica Ltd. 253,464 223,118 derecognised trade receivables 134 1 25 Earnings per share 39.14 34.59 26 Diluted earnings per share 39.04 34.40 27 _The goods and services supplied by pharmacies for receivables 28 covered by health insurance companies are invoiced through an 29 invoicing and collecting office. Accounts receivables from the 30 13. SECURITIES invoicing and collecting office are derecognised only when the 31 invoicing and collecting office has been paid and there is no 32 longer a risk of loss for Galenica. At the balance sheet date, the 33 in thousand CHF 2012 2011 respective trade receivables amounted to CHF 59.0 million (pre- 34 Quoted securities 6,818 6,477 vious year: CHF 56.6 million) and the maximum risk of loss 35 amounted to CHF 84.2 million (previous year: CHF 80.9 million). Unquoted securities 136 127 36 37 Fixed deposit with a duration of 3 to 12 months 269 — 38 39 Derivative financial instruments 1,737 — 40 Total securities 8,960 6,604 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 114_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 15. INCOME TAxES Deferred taxes (net book values)

in thousand CHF 2012 2011 Deferred tax due to temporary differences in thousand CHF 2012 2011 _Current assets 15,926 14,687 Current income tax 44,948 41,447 _Property, plant and equipment 12,859 12,302 Income tax of previous years (1,596) (2,389) _Intangible assets 39,125 37,676 Deferred income tax 3,009 4,709 _Provisions 553 626 Total income tax 46,361 43,767 _Employee benefit plans (1,202) (523) Tax expense reconciliation _Other temporary differences (854) (609) in thousand CHF 2012 2011 _Shareholders’ equity (765) (1,524) EBT 321,168 299,399 Total net deferred tax due to temporary differences 65,642 62,635 Weighted income tax rate in % 17.2% 16.9% Tax loss carry forward (881) (1,002) Expected income tax 55,353 50,640 Total net deferred tax 64,761 61,633 Effects of income that is taxable at a lower tax rate or tax-free (7,130) (5,553)

Effects of changes in tax rates 261 (169) Recognised as deferred tax assets in the consolidated statement Effects of unrecognised losses of financial position 9,245 6,375 in the current year 782 978 _ of which due to recognised Fiscal realisation of unrecognised loss carry forwards 881 1,002 tax losses of previous years (2,138) (2,138) _ of which due to Items from previous years and other items (767) 9 temporary differences 8,364 5,373 Effective income tax 46,361 43,767 Recognised as deferred tax liabilities in the consolidated Effective income tax in % of EBT 14.4% 14.6% statement of financial position 74,006 68,008

_As Galenica is predominantly active in Switzerland and the Analysis of deferred taxes (net) Pharma business sector has international operations, the income in thousand CHF 2012 2011 tax paid depends on a number of different tax laws. The weighted 1 January 61,633 56,948 income tax rate reflects the weighted average of the tax rates Recognised in deferred income tax in the across the Swiss cantons and other countries in which Galenica consolidated income statement is active. The composition of Galenica’s taxable income and _ Addition/(reversal) of temporary changes in local tax rates cause the tax rate to vary from year differences 2,439 3,659 to year. _The actual rate of tax on earnings for Galenica was 14.4% _ Fiscal realisation of recognised tax loss carry forwards 525 1,488 (previous year: 14.6%) due to favourable arrangements with the tax authorities. _ Tax loss carry forwards taken into account for the first time or no longer taken into account (216) (269) _Effects of changes in tax rates 261 (169) Recognised in other comprehensive income in the consolidated statement of comprehensive income —— Recognised directly in the consolidated shareholders’ equity (28) (97) Change in scope of consolidation 151 33 Translation differences (4) 40 31 December 64,761 61,633

Galenica financial statements 2012 · Notes _115 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 Temporary differences on which no deferred taxes 2 have been recognised 3 in thousand CHF 2012 2011 4 Investments in subsidiaries 1,418,070 1,364,279 5 6 7 Non-capitalised tax assets 8 _Deferred tax assets, including tax on losses carried forward 9 that are relevant to taxes as well as expected tax rebates, are 10 only taken into account if it is likely that future profits will be 11 available against which the assets mentioned can be applied for 12 tax purposes. 13 14 15 Tax loss carry forwards and tax credits 16 2012 2011 17 Tax loss carry Tax loss carry 18 forwards/ forwards/ in thousand CHF tax credits Tax effect tax credits Tax effect 19 20 Total tax loss carry forwards and tax credits 62,972 13,208 71,185 15,878 21 Of which tax loss carry forwards and 22 tax credits taken into account under deferred tax assets (3,384) (881) (3,722) (1,002) 23 Of which tax loss carry forwards and 24 tax credits taken into account under deferred tax liabilities (6,120) (1,419) (7,424) (1,743) 25 Total tax loss carry forwards and 26 tax credits not taken into account 53,468 10,908 60,039 13,133 27 Of which expire: 28 _within 1 year 7,388 1,362 2,412 497 29 _in 2 to 5 years 10,994 1,792 23,105 4,241 _in more than 5 years 35,086 7,754 34,522 8,395 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 116_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 16. INveNtorIes

Raw material Semi-finished and Prepayments in thousand CHF and merchandise finished goods to suppliers Total Gross inventories 31.12.2010 279,406 54,692 15 334,113 Change in scope of consolidation 1,015 — — 1,015 Change in stock 10,210 10,722 124 21,056 Translation differences (33) (74) 3 (104) 31.12.2011 290,598 65,340 142 356,080 Change in scope of consolidation 2,288 — — 2,288 Change in stock 4,567 2,646 26 7,239 Translation differences 26 8 1 35 31.12.2012 297,479 67,994 169 365,642

Adjustments 31.12.2010 (17,536) (4,373) — (21,909) Addition (1,797) (2,171) — (3,968) Use 2,618 765 — 3,383 Translation differences 1 5 — 6 31.12.2011 (16,714) (5,774) — (22,488) Addition (1,058) (5,820) — (6,878) Use 972 3,469 — 4,441 Translation differences (8) (5) — (13) 31.12.2012 (16,808) (8,130) — (24,938)

Net inventories 31.12.2010 261,870 50,319 15 312,204 31.12.2011 273,884 59,566 142 333,592 31.12.2012 280,671 59,864 169 340,704

_There are no restrictions regarding the realisability of inventory.

Galenica financial statements 2012 · Notes _117 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 17. ProPertY, PLANt AND eQUIPMeNt AND INvestMeNt ProPertIes 2 3 Real estate Other Total 4 used for commercial Plants under property, plant property, plant Investment in thousand CHF operations construction and equipment and equipment properties 5 6 Net book values 31.12.2010 257,079 6,776 185,075 448,930 54,534 7 Investments 11,527 4,470 34,705 50,702 1,066 8 Disposals (107) — (873) (980) — 9 Reclassifications 6,037 (6,046) (59) (68) — 10 Depreciation (13,283) — (38,140) (51,423) (1,738) 11 Change in scope of consolidation 334 — 167 501 — 12 13 Translation differences (74) (2) (50) (126) — 14 Net book values 31.12.2011 261,513 5,198 180,825 447,536 53,862 15 Investments 9,436 1,701 32,655 43,792 2,205 16 Disposals — — (621) (621) (15,964) 17 Reclassifications 2,800 (6,446) 3,646 — — 18 19 Depreciation (14,596) — (38,712) (53,308) (1,806) 20 Change in scope of consolidation 647 — 331 978 — 21 Translation differences 45 (1) 15 59 — 22 Net book values 31.12.2012 259,845 452 178,139 438,436 38,297 23 24 of which finance lease 31.12.2010 (net) 1,526 — 22 1,548 — 25 of which finance lease 31.12.2011 (net) 801 — 32 833 — 26 27 of which finance lease 31.12.2012 (net) 1,260 — 25 1,285 — 28 29 overview as of 31.12.2010 30 Accumulated acquisition values 339,338 6,776 367,176 713,290 68,727 31 32 Accumulated depreciation and impairment (82,259) — (182,101) (264,360) (14,193) 33 Net book values 31.12.2010 257,079 6,776 185,075 448,930 54,534 34 35 overview as of 31.12.2011 36 Accumulated acquisition values 357,031 5,198 383,681 745,910 69,793 37 Accumulated depreciation and impairment (95,518) — (202,856) (298,374) (15,931) 38 Net book values 31.12.2011 261,513 5,198 180,825 447,536 53,862 39 40 overview as of 31.12.2012 41 42 Accumulated acquisition values 369,988 452 412,213 782,653 52,107 43 Accumulated depreciation and impairment (110,143) — (234,074) (344,217) (13,810) 44 Net book values 31.12.2012 259,845 452 178,139 438,436 38,297 45 46 47 _Other property, plant and equipment recognised on the state- the disposal of an investment property are presented in other 48 ment of financial position are manufacturing systems, ware- operating revenues. Losses arising on disposals of property, 49 house equipment, furniture, fittings, IT equipment and vehicles. plant and equipment of CHF 0.1 million (previous year: CHF 0.2 50 _In the previous year CHF 0.1 million were reclassified from million) are presented in other operating costs. 51 other property, plant and equipment (IT equipment) to intangible _In the reporting period, no borrowing costs were capitalised in 52 assets (acquired software). respect of plants under construction (previous year: CHF 0.03 53 _Gains arising from disposals of property, plant and equipment million) . A capitalisation rate of 3.3% was used in the previous 54 of CHF 0.3 million (previous year: CHF 0.4 million) and the oper- year. 55 ating profit of CHF 5.3 million (previous year: none) arising from 56 57 58 59 60 61 118_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 _Investment properties include non-operational real estate: _There are no significant restrictions regarding the realis ability in thousand CHF 2012 2011 or collection of rental income or sales proceeds. In addition, there are no contractual obligations to extend or maintain invest- Fair value 43,862 60,859 ment properties. Rental income 3,487 2,932 Book values of buildings which have not been rented out 130 130 Operating costs _ Real estate generating rental income 866 1,001 _ Real estate not generating rental income 15 1

_All fair values are calculated by external experts.

18. INtANGIbLe Assets Trademarks, Internally patents, licences, Acquired developped in thousand CHF technologies software software Goodwill Total Net book values 31.12.2010 189,174 15,080 15,820 1,028,113 1,248,187 Investments 225 5,712 2,741 — 8,678 Reclassifications (64) 107 25 — 68 Amortisation (8,437) (5,445) (5,241) — (19,123) Change in scope of consolidation 3,735 60 — 14,873 18,668 Translation differences (86) 1 — (4,055) (4,140) Net book values 31.12.2011 184,547 15,515 13,345 1,038,931 1,252,338 Investments 365 4,394 2,721 — 7,480 Disposals (94) — — — (94) Amortisation (8,915) (6,232) (5,792) — (20,939) Change in scope of consolidation — 10 — 11,935 11,945 Translation differences 156 4 1 757 918 Net book values 31.12.2012 176,059 13,691 10,275 1,051,623 1,251,648 overview as of 31.12.2010 Accumulated acquisition values 497,108 33,335 39,552 1,028,113 1,598,108 Accumulated amortisation and impairment (307,934) (18,255) (23,732) — (349,921) Net book values 31.12.2010 189,174 15,080 15,820 1,028,113 1,248,187 overview as of 31.12.2011 Accumulated acquisition values 499,525 38,660 30,374 1,038,931 1,607,490 Accumulated amortisation and impairment (314,978) (23,145) (17,029) — (355,152) Net book values 31.12.2011 184,547 15,515 13,345 1,038,931 1,252,338 overview as of 31.12.2012 Accumulated acquisition values 500,306 42,787 33,418 1,051,623 1,628,134 Accumulated amortisation and impairment (324,247) (29,096) (23,143) — (376,486) Net book values 31.12.2012 176,059 13,691 10,275 1,051,623 1,251,648

_There was no result from disposals in the reporting period. _Reclassifications in 2011 include a reallocation of CHF 0.1 mil- No intangible assets were sold in the previous year. lion from other property, plant and equipment (IT equipment) to internally developed software.

Galenica financial statements 2012 · Notes _119 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 trademarks, patents, licences, technologies Goodwill 2 _ The net value of trademarks, patents, licenses, technologies _In the event of a business combination, the difference between 3 includes a contractual right to the payment of royalties for the the purchase price and the fair value of the net assets is recog- 4 sale of CellCept, developed by Roche, with a book value of nised as goodwill. The added value paid for assets that are not 5 CHF 28.7 million (previous year: CHF 34.4 million) and a remain- capable of being individually identified and separately recog- 6 ing useful life of 5 years. nised, e.g. employees, know-how, advantages of the location and 7 _The net value of trademarks, patents, licences, technologies non-negotiable client bases, is recognised in the consolidated 8 includes a trademark with an indefinite useful life and a book statement of financial position as goodwill. 9 value of CHF 21.6 million (previous year: CHF 21.6 million) that _Goodwill is allocated to the cash-generating unit or group of 10 is well known nationally and internationally and actively adver- cash-generating units that is the principal economic beneficiary. 11 tised. This trademark has been allocated to the cash-generating For the purposes of the impairment test, the cash-generating 12 unit Vifor in the Pharma business sector. units or group of cash-generating units are allocated to the 13 _The net value of trademarks, patents, licences, technologies operating segments pursuant to the internal financial reporting 14 includes technology assets with an indefinite useful life and a to the Chief Operating Decision Maker, CODM. The CODM 15 book value of CHF 104.1 million (previous year: CHF 104.1 monitors the Goodwill at operating segment level. The allocation 16 million). These technology assets have been allocated to the of the net book values of the goodwill to the operating segments 17 cash-generating unit OM Pharma in the Pharma business sector. is summarised in the table below. 18 _The trademarks and technology assets are not subject to a _Goodwill is subject to an impairment test once a year or more 19 linear decline in value and since management plans to use them frequently if there are justified indications of impairment. The 20 indefinitely, the value is not amortised on a straight-line basis. impairment tests are based on the discounted cash flow method. 21 In contrast, trademarks and technology assets are subject to an The weighted average cost of capital (WACC) is used to determine 22 impairment test every year, or more frequently if there are justi- the applied pre-tax discount rate. Goodwill is usually evaluated 23 fied indications of impairment. on the basis of the medium-term plans for the next three years 24 _The recoverable amount is determined on the basis of future approved by the CODM. For cash flows beyond the planning 25 discounted cash flows. The weighted average cost of capital horizon, an extrapolation is performed using a sales growth rate 26 (WACC) is used to determine the applied pre-tax discount rate. equivalent to the anticipated inflation rate or below. The growth 27 The future cash flows derive from the medium-term plans for the rates and capital cost rates before taxes shown below were used. 28 next three years approved by the Chief Operating Decision 29 Maker, CODM. For cash flows beyond the planning horizon, the Goodwill 2012

30 below mentionned growth and capital cost rates are used. Data base used 31 in thousand CHF Book value Growth rate Interest rate 32 trademark and technologies 2012 Pharma 548,423 1.7% 7. 3 % 33 Data base used Logistics 38,577 1.3% 5.6% 34 in thousand CHF Book value Growth rate Interest rate Retail 455,844 1.3% 5.3% 35 Vifor 21,590 1.3% 6.7% 36 OM Pharma 104,145 1.3% 6.7% HealthCare Information 8,779 1.3% 8.5% 37 total 125,735 total 1,051,623 38 39 40 trademark and technologies 2011 Goodwill 2011 41 Data base used in thousand CHF Book value Growth rate Interest rate Data base used 42 in thousand CHF Book value Growth rate Interest rate Vifor 21,590 1.5% 6.6% 43 Pharma 547,666 1.8% 7.3 % 44 OM Pharma 104,145 1.5% 6.9% Logistics 38,577 1.5% 5.6% 45 total 125,735 46 Retail 443,909 1.5% 5.2% 47 HealthCare Information 8,779 1.5% 8.2% 48 _According to the results of impairment testing for 2012 and total 1,038,931 49 2011, which were based on the discounted cash flows according 50 to the discounted cash flow method, the trademark and techno- 51 logy assets are supported by their value in use. Galenica perfor- _According to the results of impairment testing for 2012 and 52 med a sensitivity analysis taking into account reasonable chan- 2011, which were based on the discounted cash flows according 53 ges in the assumptions used for the calculation of the discounted to the discounted cash flow method, goodwill is supported by its 54 cash flows, such as higher discount rates, lower EBITDA, lower value in use and no impairment charges are necessary. Galenica 55 gross margins or lower perpetual growth rates. The sensitivity performed a sensitivity analysis taking into account reasonable 56 analysis 2012 and 2011 did not result in an impairment as of the changes in the assumptions used for the calculation of the 57 balance sheet date. discounted cash flows, such as higher discount rates, lower 58 EBITDA, lower gross margins or lower perpetual growth rates. 59 The sensitivity analysis for 2012 and 2011 did not result in an 60 impairment as of the balance sheet date. 61 120_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Costs for research and development 20. FINANCIAL Assets _During the reporting period, expenses for research and development totalling CHF 138.9 million were recognised directly in the consolidated income statement (previous year: CHF 130.4 in thousand CHF 2012 2011 million). Loans 10,311 13,318 Derivative financial instruments — 359 Other financial assets 2,788 2,506 19. INvestMeNts IN AssoCIAtes total loans and other financial assets 13,099 16,183 Securities available for sale 32,014 35,763 total financial assets 45,113 51,946 in thousand CHF 2012 2011 Net book value 1 January 24,768 14,403 _No impairment charges on financial assets are included. _Other financial assets in the consolidated statement of finan- Contribution to net profit 2,567 8,362 cial position include rental guarantee deposits and guarantees Investments 255 2,104 for leasing contracts (see note 31). Dividends received (5,799) (101) Net book value 31 December 21,791 24,768

_GaleniCare Holding and Coop acquired 49% respectively 51% 21. CUrreNt FINANCIAL LIAbILItIes of the voting rights of a pharmacy in Switzerland. The purchase consideration amounted to CHF 0.3 million (previous year: CHF 2.1 million) and was settled by a cash payment. At acquisi- in thousand CHF 2012 2011 tion this pharmacy was merged with Coop Vitality AG. This trans- Bank debts 27,501 20,028 action has not changed the participating interests of Galenica Loans — 1,116 and Coop in Coop Vitality AG. Pension fund liabilities 418 25,478 _Cumulated value of associates: Current portion of non-current financial liabilities 112,174 120,981 in thousand CHF 2012 2011 Derivative financial instruments 43,941 — Assets 78,982 93,035 Private placement (notes) 98,960 — Liabilities 29,130 37,800 Net sales 159,740 151,093 total current financial liabilities 282,994 167,603 Result 5,870 18,534 _Galenica recalled a loan of CHF 106.2 million prematurely to _The value of associates is based on their annual financial the 30 June 2013 and reclassified the loan from non-current statements or the most recent figures that are available for the liabilities to the current portion of non-current liabilities. companies. _In the prior period, the promissory notes of CHF 118.0 million _If an associated company is over-indebted, Galenica has an paid on 10 November 2012 for the acquisition of OM Pharma unlimited obligation, in proportion to its equity interest, to were reallocated from non-current financial liabilities to the financially rescue the company. At the balance sheet date, none current portion of non-current financial liabilities. of the associated companies were over-indebted. _The private placement notes of CHF 99.0 million, payable on 5 November 2013 are now considered in the current portion of non-current financial liabilities. Likewise, the cross currency interest rate swaps and interest rate swaps with a negative fair value of CHF 43.9 million, which were entered to hedge the currency and interest rate risk on the private placement notes, were reclassifed from non-current financial liabilities to current financial liabilities.

Galenica financial statements 2012 · Notes _121 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 22. otHer LIAbILItIes Private placement (notes) 2 _In November 2003 and March 2008 Galenica borrowed the 3 amounts of CHF 26.6 million, USD 53.0 million, GBP 35.0 million 4 in thousand CHF 2012 2011 and EUR 25.0 million respectively USD 105.0 million and GBP 5 Trade payables 337 ,689 399,100 20.0 million from a number of American and British insurance 6 companies by means of a private placement such as unsecured Other liabilities 57,290 61,949 7 loans with different maturities. The interest-rate and currency 8 total other liabilities 394,979 461,049 risk involved in the private placement was hedged. The loans of 9 November 2003 are maturing on 5 November 2013. The payable 10 amount of CHF 99.0 million was reallocated from non-current 11 financial liabilities to current financial liabilities. 12 23. NoN-CUrreNt FINANCIAL LIAbILItIes _With respect to private placement notes, credit conditions 13 (Debt Coverage Ratio and Interest Coverage Ratio) were agreed; 14 if these conditions are not adhered to, an early repayment of the 15 in thousand CHF 2012 2011 notes can be demanded. These conditions had been adhered to 16 Bank debts 220,000 220,000 on the balance sheet date. There are no indications that Galenica 17 would be unable to comply with these conditions in the future. Loans 472 106,663 18 Derivative financial instruments 40,785 86,932 19 bond 20 Private placement (notes) 126,400 226,420 _On 5 October 2010, Galenica issued a fixed-rate bond for a 21 Bond 297,464 296,977 nominal amount of CHF 300.0 million with an annual coupon of 22 Financial leasing 1,371 1,478 2.5% and a term of seven years, maturing on 27 October 2017. 23 The bond is traded on the SIX Swiss Exchange under securities Other financial liabilities 68,554 59,144 24 no. 11848005 (ISIN CH0118480059). 25 total non-current financial liabilities 755,046 997,614 26 27 bank debts, loans 28 _The acquisitions of Sun Store and OM Pharma were partially 29 financed with non-current bank loans totalling CHF 200.0 mil- 30 lion. Repayment will be made in tranches as follows: CHF 50.0 31 million on 2 November 2014, CHF 50.0 million on 2 November 32 2016 and CHF 100.0 million on 1 July 2019. 33 _Galenica recalled a loan of CHF 106.2 prematurely and reallo- 34 cated the loan from non-current liabilities to the current portion 35 of non-current liabilities in the reporting period. 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 122_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 24. ProvisioNs

Provisions for residual Provisions for Other in thousand CHF acquisition price restructuring provisions Total As of 31.12.2010 2,645 929 37,867 41,441 Addition 14 62 442 518 Use (1,972) (495) (2,771) (5,238) Reversal (254) (63) (628) (945) Translation differences — (4) (723) (727) As of 31.12.2011 433 429 34,187 35,049 Change in Scope of consolidation — — 145 145 Addition — 210 4,865 5,075 Use (433) (186) (499) (1,118) Reversal — (165) (168) (333) Translation differences — 6 — 6 As of 31.12.2012 — 294 38,530 38,824

Current provisions 2010 2,645 601 37,754 41,000 Non-current provisions 2010 — 328 113 441

Current provisions 2011 433 163 34,187 34,783 Non-current provisions 2011 — 266 — 266

Current provisions 2012 — 274 35,730 36,004 Non-current provisions 2012 — 20 2,800 2,820

_In the case of current provisions, the outflow of resources is _There is a provision of CHF 32.8 million (previous year: CHF expected within 12 months. The non-current provisions are ex- 32.8 million) in the Pharma business sector with respect to an pected to be settled in more than 12 months. Where the effect audit by the Canadian tax authorities initiated prior to the acqui- of the time value of money is material, the expected cash flows sition of Aspreva International Ltd. The Canada Revenue Agency are discounted. (CRA) issued Aspreva with a taxation in 2009, which Aspreva disagreed. After several consultations between Aspreva, the Provisions for residual acquisition price CRA and Swiss tax authorities a basic consensus could be found _If the purchase consideration in a business combination is in 2012 for the years 2003 to 2006. Aspreva didnʼt receive the partly linked to turnover, earnings targets or similar conditions, taxation up to Balance sheet date. There is no agreement for the provisions are made for assumed payments that will become year 2007 and the following. An agreement as a result of the due in the future. These provisions are related to the Retail busi- ongoing consultations is expected for the next months. Based ness sector. on a fiscal and legal opinion commissioned by Aspreva, the latest information available, and supported by expert opinion, the pro- Provisions for restructuring vision equates to the best estimate of the expected cash out- _A provision for the operational integration of Globopharm’s flow. The cash outflow for this provision is expected within the activities (Logistics business sector) into the Galenica Group next 12 months. was recognized in 2009. The remaining amount of CHF 0.3 million matures within the next 36 months. other provisions _This category includes provisions for the estimated cost of excess on damage not covered by insurance, contractual liabilities, liabilities related to sureties, customer complaints, litigation risks and ongoing legal proceedings in Switzerland and abroad. These provisions concern all business sectors. The cash outflow from these provisions is expected within the next 12 months.

Galenica financial statements 2012 · Notes _123 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 25. EMPloyEE bENEfit PlANs 2 3 4 Defined benefit plans/long-service award 2012 5 Defined Long-service 6 in thousand CHF benefit plans award Total 7 Plan assets at fair value 791,697 — 791,697 8 Present value of defined benefit obligation (843,478) (11,326) (854,804) 9 surplus/(liability) (51,781) (11,326) (63,107) 10 Unrecognised actuarial losses/(gains) 61,642 — 61,642 11 12 Assets not recognised in the consolidated statement of financial position pursuant 13 to limit of IAS 19.58 b) (4,480) — (4,480) 14 total net book value 5,381 (11,326) (5,945) 15 of which presented in the consolidated statement of financial position under assets 11,327 — 11,327 16 of which presented in the consolidated statement of financial position under liabilities (5,946) (11,326) (17,272) 17 18 19 Defined benefit plans/long-service award 2011 20 Defined Long-service 21 in thousand CHF benefit plans award Total 22 Plan assets at fair value 702,920 — 702,920 23 Present value of defined benefit obligation (736,051) (8,346) (744,397) 24 surplus/(liability) (33,131) (8,346) (41,477) 25 Unrecognised actuarial losses/(gains) 41,199 — 41,199 26 27 Assets not recognised in the consolidated statement of financial position pursuant 28 to limit of IAS 19.58 b) (1,979) — (1,979) 29 total net book value 6,089 (8,346) (2,257) 30 of which presented in the consolidated statement of financial position under assets 15,155 — 15,155 31 of which presented in the consolidated statement of financial position under liabilities (9,066) (8,346) (17,412) 32 33 34 Multi-year comparison 35 36 in thousand CHF 2012 2011 2010 2009 2008 37 Plan assets at fair value 791,697 702,920 709,219 659,059 506,461 38 Present value of defined benefit obligation (843,478) (736,051) (692,087) (642,005) (496,187) 39 surplus/(liability) (51,781) (33,131) 17,132 17,054 10,274 40 Experienced adjustments on plan assets 27,649 (63,313) 1,618 13,732 (166,547) 41 42 Experienced adjustments on defined benefit obligation (11,492) (2,817) (9,146) (21,950) 14,243 43 44 45 _One defined benefit plan shows a surplus. This surplus was only _The long-service awards comprise provisions for payments to 46 recognised to the extent of the future economic benefit for personnel under the plan regulations. 47 Galenica. _Further information concerning employee benefit plans are 48 _The assets of the defined benefit plans include shares of available in the Galenica Annual Report 2012 in chapter Human 49 Galenica Ltd. with a fair value of CHF 29.2 million (previous year: Resources plans on pages 87 and 88. 50 CHF 37.1 million). 51 52 53 54 55 56 57 58 59 60 61 124_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Changes in fair value of plan assets investment structure of net assets in thousand CHF 2012 2011 Weighted average in % 31.12.2012 31.12. 2011 1 January 702,920 709,219 Shares 38.6 38.4 Expected return on plan assets 28,156 29,604 Bonds 29.3 30.2 Actuarial gains/(losses) 27,649 (63,313) Properties 17.8 20.2 Employees’ contributions 17,229 17,172 Cash and other assets 14.3 11.2 Employer’s contributions 31,837 30,599 total 100.0 100.0 Retirement benefits paid (16,094) (20,361) 31 December 791,697 702,920 Principal assumptions

Weighted average in % 2012 2011 Changes in present value of defined benefit obligation Discount rate 2.00 2.50 in thousand CHF 2012 2011 Expected return on assets 4.00 4.00 1 January (736,051) (692,087) Future salary increases 1.0 1.0 Service cost current year (29,868) (25,400) Future pension increases 0.0 0.0 Past service cost — 106 Mortality BVG 2010 BVG 2010 Interest cost of defined benefit obligation (18,418) (19,265) Employee turnover BVG 2010 BVG 2010 Actuarial gains/(losses) (58,006) (2,594) Employees’ contributions (17,229) (17,172) _The expected return on plan assets of the employee benefit Retirement benefits paid 16,094 20,361 plans are based on market expectations regarding the antici- 31 December (843,478) (736,051) pated return from the assets of employee benefit plans over the term of the respective obligation. Expenses in connection with employee benefit obligation _The employer’s contributions to personnel pension funds are for defined benefit plans estimated at CHF 32.4 million for 2013. in thousand CHF 2012 2011 Service cost current year 29,868 25,400 Interest cost of defined benefit obligation 18,418 19,265 Expected return on plan assets (28,156) (29,604) Recognised actuarial (gains)/losses 9,914 50,854 Past service cost — (106) Impact of limit from IAS 19.58 b) 2,500 (38,127) Employee benefit expenses 32,544 27,682

Actual return on plan assets 7.0% (4.6%)

Galenica financial statements 2012 · Notes _125 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 26. shArE CAPitAl AND NuMbEr of shArEs 27. ChANgEs iN CoNsoliDAtED 2 shArEholDErs’ Equity 3 4 _On 31 December 2012 and consistent to the previous year, 5 Galenica had a fully paid-up share capital of CHF 650,000, _At the Annual General Meeting of shareholders held on 3 May 6 divided into 6,500,000 publicly listed registered shares with a 2012 it was decided to pay out a dividend of CHF 9.00 per share, 7 par value of CHF 0.10 each. All shares have the same capital constituting a total payment of CHF 58.5 million. In the previous 8 rights with the exception of the treasury shares which do not year it was decided to pay out a dividend of CHF 8.00 per share, 9 generate any dividends. Voting rights and restrictions on voting constituting a total amount of CHF 52.0 million. 10 rights are described in detail in the section Corporate Govern- _In the reporting period, 21,453 treasury shares (previous year: 11 ance on the present annual report. 85,151 treasury shares) were bought at an average price of CHF 12 _According to Art. 3a) of Galenica’s statutes, the Board of 534.45 (previous year: CHF 520.41) and 77,319 treasury shares 13 Directors may raise the share capital of CHF 650,000 by 10%, (previous year: 28,947 treasury shares) were issued under share- 14 i.e. an amount of CHF 65,000 (650,000 shares), at any time until based payment plans. Additionally, forward purchases of 20,000 15 5 May 2014. treasury shares at an average price of CHF 569.25 are outstan- 16 ding as of 31 December 2012. The forward purchases become 17 Total shares Treasury Outstanding due in the years 2013 to 2016. 18 Number Galenica Ltd. shares shares _The expense for share-based payment transactions, allocated 19 31.12.2010 6,500,000 (19,737) 6,480,263 over the vesting period, has been recognised in the consolidated 20 Variation — (56,204) (56,204) income statement and accrued under the consolidated share- 21 31.12.2011 6,500,000 (75,941) 6,424,059 holders’ equity. 22 Variation — 55,866 55,866 _The purchase of non-controlling interests reduced the consoli- 23 dated shareholders’ equity by CHF 0.7 million (previous year: 31.12.2012 6,500,000 (20,075) 6,479,925 24 CHF 7.4 million). Due to the sale of non-controlling interests, the 25 consolidated shareholders’ equity increased by CHF 93.0 million 26 _In connection with share-based payment plans, 20,075 in the previous year. 27 treasury shares (previous year: 57,540 treasury shares) are _The Board of Directors proposes to the Annual General Meeting 28 reserved for employees. of Shareholders on 2 May 2013 to pay out a dividend of CHF 71.5 29 million, corresponding to CHF 11.00 per registered share for the 30 business year 2012 (previous year: CHF 58.5 million, CHF 9.00 31 per registered share). 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 126_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 28. FiNaNcial iNsTrumeNTs 28.1 categories of financial instruments

_All financial assets and liabilities at fair value through profit and _The financial assets of Galenica include cash, securities, trade loss are held for trading purposes or are derivative financial receivables, other receivables, loans and venture funds. instruments. There are no other financial assets and liabilities _Galenica’s financial liabilities primarily include advances on cur- designated on initial recognition as at fair value through profit or rent bank accounts, trade payables, financial leasing l iabilities, loss. loans, a bond, private placements (notes) as well as promissory notes in the prior year. They are used to finance Galenica’s operations and acquisitions. _Galenica uses derivatives such as interest rate swaps and foreign exchange forwards in order to manage and hedge the interest and currency risks resulting from operations and financing activities. _The financial instruments of Galenica are generally exposed to liquidity risks, credit risks, interest rate risks, currency risks and other market risks.

Book values of financial instruments 2012

Financial assets Financial liabilities at fair value through Loans and Financial assets at fair value through Financial liabilities in thousand CHF profit and loss receivables available for sale profit and loss at amortised cost Total Cash — 347,915 — — — 347,915 Securities 8,960 — — — — 8,960 Receivables — 541,543 — — — 541,543 Financial assets — 13,099 32,014 — — 45,113 Current financial liabilities —— — 43,941 239,053 282,994 Other Liabilities —— — — 394,979 394,979 Non-current financial liabilities —— — 40,785 714,261 755,046 Total 8,960 902,557 32,014 84,726 1,348,293

Book values of financial instruments 2011 Financial assets Financial liabilities at fair value through Loans and Financial assets at fair value through Financial liabilities in thousand CHF profit and loss receivables available for sale profit and loss at amortised cost Total Cash — 338,687 — — — 338,687 Securities 6,604 — — — — 6,604 Receivables — 547,647 — — — 547,647 Financial assets 359 15,824 35,763 — — 51,946 Current financial liabilities —— — — 167,603 167,603 Other Liabilities —— — — 461,049 461,049 Non-current financial liabilities —— — 86,932 910,682 997,614 Total 6,963 902,158 35,763 86,932 1,539,334

Galenica financial statements 2012 · Notes _127 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 Net gain/(loss) on financial instruments 2012

2 Financial assets Financial liabilities 3 at fair value Financial assets at fair value Financial 4 through Loans and available through liabilities at in thousand CHF profit and loss receivables for sale profit and loss amortised cost Total 5 6 Income from securities 326 — 3,874 — — 4,200 7 Change in fair value 1,542 — — (673) — 869 8 Net gain/(loss) on foreign exchange — (307) — — (188) (495) 9 Loss on receivables and other financial result — (1,085) — — (1,057) (2,142) 10 Interest income — 1,530 — — — 1,530 11 12 Interest expense — — — — (37,297) (37,297) 13 Fees recognised in profit and loss — — — — (30) (30) 14 Interest income on impaired trade receivables — 46 — — — 46 15 Change in allowance for doubtful accounts 16 on trade receivables — 2,113 — — — 2,113 17 Impairment on financial assets — — (369) — — (369) 18 Net gain/(loss) recognised in 19 consolidated income statement 1,868 2,297 3,505 (673) (38,572) (31,575) 20 Net gain/(loss) recognised in consolidated 21 statement of comprehensive income1) — — (2,331) 4,805 — 2,474 22 23 1) The consolidated statement of comprehensive income includes the changes in value of hedging instruments (foreign exchange forwards, interest rate swaps and cross currency interest rate swaps) as well as venture funds 24 25 26 27 Net gain/(loss) on financial instruments 2011

28 Financial assets Financial liabilities 29 at fair value Financial assets at fair value Financial 30 through Loans and available through liabilities at in thousand CHF profit and loss receivables for sale profit and loss amortised cost Total 31 32 Income from securities 474 — 3,939 (2,207) — 2,206 33 Change in fair value (941) — — — — (941) 34 Net gain/(loss) on foreign exchange — (10,306) — — 12,367 2,061 35 Loss on receivables and other financial result — (3,894) — — — (3,894) 36 Interest income — 1,493 — — — 1,493 37 38 Interest expense — — — — (39,077) (39,077) 39 Fees recognised in profit and loss — — — — (206) (206) 40 Interest income on impaired trade receivables — 50 — — — 50 41 Change in allowance for doubtful accounts 42 on trade receivables — 2,085 — — — 2,085 43 Impairment on financial assets — — (862) — — (862) 44 Net gain/(loss) recognised in consolidated 45 income statement (467) (10,572) 3,077 (2,207) (26,916) (37,085) 46 Net gain/(loss) recognised in consolidated 47 statement of comprehensive income1) — — 911 3,165 — 4,076 48 1) 49 The consolidated statement of comprehensive income includes the changes in value of hedging instruments (foreign exchange forwards, interest rate swaps and cross currency interest rate swaps) as well as venture funds 50 51 52 53 54 55 56 57 58 59 60 61 128_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Fair value _Book values and fair values of financial assets and financial liabilities are listed as follows:

Book value Fair value in thousand CHF 2012 2011 2012 2011 Cash 347,915 338,687 347,915 338,687 Securities 7,223 6,604 7,223 6,604 Receivables 541,543 547,647 541,543 547,647 Securities available for sale 32,014 35,763 32,014 35,763 Loans and other financial assets 13,099 15,824 13,099 15,824 Current financial liabilities 239,053 167,603 244,050 168,111 Derivative financial instruments (net) 82,989 86,573 82,989 86,573 Other Liabilities 394,979 461,049 394,979 461,049 Non-current financial liabilities 714,261 910,682 770,952 975,597

_The fair values of securities are basically determined by using stock exchange prices. The securities available for sale recognised in financial assets on the consolidated statement of financial position largely consist of venture funds. The venture funds are valued at net asset value. There are currently no intentions to sell these equity instruments. Securities and financial assets contain other non-marketable equity instruments with a value of CHF 136,000 (previous year: CHF 127,000) respectively CHF 1,502,000 (previous year: CHF 1,987,000). These non- marketable equity instruments represent holdings in smaller unlisted companies. The fair value cannot be reliably determined for these equity instruments, thus they are shown at amortised cost minus accumulated impairments. _The fair values of non-current financial liabilities are calculated based on the expected cash flows and the current market interest rates.

Galenica financial statements 2012 · Notes _129 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 Hierarchy of fair values _Level 3: inputs for the asset or liability are used which are not 2 _Galenica valued financial instruments at fair value and uses the based on observable market data. These inputs reflect the best 3 following hierarchies for determining the fair value: estimates of Galenica based on criteria that market participants 4 _Level 1: quoted prices (unadjusted) in active markets for would use to determine prices for assets or liabilities at the 5 identical assets or liabilities balance sheet date. 6 _Level 2: inputs other than quoted prices included within Level 7 1 that are observable for the asset or liability, they exist either 8 directly (i.e. as prices) or indirectly (i.e. derived from prices) 9 10 11 Financial assets measured at fair value 2012 12 13 in thousand CHF 31.12.2012 Level 1 Level 2 Level 3 14 Securities 6,818 6,818 —— 15 Derivative financial instruments 1,737 — 1,737 — 16 Securities available for sale 30,512 —— 30,512 17 18 Financial liabilities measured at fair value 2012

19 in thousand CHF 31.12.2012 Level 1 Level 2 Level 3 20 Derivative financial instruments 84,726 — 84,726 — 21 22 23 24 Financial assets measured at fair value 2011

25 in thousand CHF 31.12.2011 Level 1 Level 2 Level 3 26 Securities 6,477 6,477 —— 27 28 Derivative financial instruments 359 — 359 — 29 Securities available for sale 33,776 —— 33,776 30 31 Financial liabilities measured at fair value 2011

32 in thousand CHF 31.12.2011 Level 1 Level 2 Level 3 33 Derivative financial instruments 86,932 — 86,932 — 34 35 36 37 _No transfer took place between Level 1 and Level 2 in the finan- _Galenica determines the fair values for the venture funds 38 cial year, nor were there any transfers into or out of Level 3. using the net asset values. According to the venture funds, the 39 _Galenica is invested in venture funds. These funds are struc- determination of the net asset values for the funds is based on 40 tured as closed end funds, in respect of which Galenica has the net asset values of the respective investments reported to 41 committed itself to a defined investment amount (capital them, and the determination of this net asset values does not 42 commitment). These investment amounts are accessed by the normally depend on publicly available input data, or only to an 43 funds during the term. Galenica and the other investors are insignificant extent. Galenica therefore classifies all venture 44 usually bound to their fund units throughout the entire term; funds as assets of Level 3. 45 consequently there is no active market for units in these funds, 46 although a transaction cannot be ruled out in principle. The in thousand CHF 2012 2011 47 funds themselves are likewise usually invested in venture funds 1 January 33,776 30,722 48 with the same attributes (fund of funds). Investments — 1,980 49 50 Disposals (269) — 51 Gains/(losses) recognised in the 52 consolidated income statement (369) (862) 53 Gains/(losses) recognised in 54 the consolidated statement of 55 comprehensive income (1,962) 1,773 56 Translations differences (664) 163 57 31 December 30,512 33,776 58 59 60 61 130_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 28.2 liquidity risks maturity structure of financial liabilities and derivative financial instruments 2012

Total Maturities undiscounted up to more than in thousand CHF Book values cash flows 3 months 3 to 12 months 1 to 5 years 5 years Trade payables and other liabilities 394,979 394,979 382,926 12,053 —— Current financial liabilities 140,093 141,684 31,154 110,530 —— Non-current financial liabilities (unhedged) 290,397 321,534 2,259 9,341 204,158 105,776 Bond 297,464 337,500 — 7,500 330,000 — Private placement (notes) 225,360 342,352 4,085 150,313 70,893 117,061 _of which hedged 225,360 342,352 4,085 150,313 70,893 117,061 _ Cross currency interest rate swaps – cash inflow (268,401) (4,009) (108,377) (63,484) (92,531) 83,695 _Cross currency interest rate swaps – cash outflow 342,352 4,085 150,313 70,893 117,061 Other derivative financial instruments (current and non-current) (62) (6) — (6) —— _Interest rate swaps – cash inflow (964) — (964) — — (62) _Interest rate swaps – cash outflow 958 — 958 — — Total 1,431,926 1,611,994 420,500 331,667 612,460 247,367

maturity structure of financial liabilities and derivative financial instruments 2011

Total Maturities undiscounted up to more than in thousand CHF Book values cash flows 3 months 3 to 12 months 1 to 5 years 5 years Trade payables and other liabilities 461,049 461,049 446,511 14,538 — — Current financial liabilities 167,603 170,276 29,601 140,675 — — Non-current financial liabilities (unhedged) 387,285 450,105 1,573 7,172 208,149 233,211 Bond 296,977 345,000 — 7,500 30,000 307,500 Private placement (notes) 226,420 356,160 4,085 9,723 219,286 123,066 _of which hedged 226,420 356,160 4,085 9,723 219,286 123,066 _ Cross currency interest rate swaps – cash inflow (283,247) (4,052) (9,431) (170,612) (99,152) 86,388 _Cross currency interest rate swaps – cash outflow 356,160 4,085 9,723 219,286 123,066 Other derivative financial instruments (current and non-current) 186 (3) — (1) (2) — _Interest rate swaps – cash inflow (570) — (285) (285) — 186 _Interest rate swaps – cash outflow 567 — 284 283 — Total 1,625,908 1,855,500 481,803 179,899 506,107 687,691

_The values presented above are contractually agreed undis- _In order to ensure that Galenica can meet its payment obliga- counted payment amounts including interest. Wherever the tions in good time, the liquidity management is performed contractually agreed payment amount is liable to change before centrally. The Treasury department monitors the cash flows maturity as a result of variable interest rates, the payment using ongoing liquidity planning, which takes into account the amounts based on the interest rates on the balance sheet date maturities of financial assets and liabilities, monetary assets and are disclosed. cash flows from business activities.

Galenica financial statements 2012 · Notes _131 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 28.3 credit risk 28.4 market risks 2 3 in thousand CHF 2012 2011 interest rate risk 4 Cash (without cash on hand) 346,251 337,194 _Galenica manages the risk of changes in interest rates by 5 modi fying the ratio of fixed to floating-rate liabilities. Derivative financial instruments 1,737 359 6 _Interest rates are managed centrally in order to limit the effects Receivables 541,543 547,647 7 of interest rate fluctuations on the financial result. The Treasury 8 Loans and other financial assets 13,099 15,824 department is responsible for operational risk management in 9 Total financial assets subject to connection with interest rates. The risks are monitored using 10 credit risk 902,630 901,024 sensitivity analyses and management is informed periodically of 11 the current situation. The scenarios for the sensitivity analyses 12 _The financial assets subject to credit risk are primarily receiva- assume a parallel shift of the yield curve across all maturities. 13 bles. This assumption is justified by the weighted distribution of ma- 14 _Galenica applies internal risk management guidelines when turities. The effects of interest rate changes on floating-rate fi- 15 identifying concentrations of credit risks. nancial assets and liabilities are recognised in the consolidated 16 _Galenica’s financial assets are not subject to a concentration income statement and affect without exception the financial 17 of credit risks. result. Galenica does not have any fixed interest financial liabili- 18 _No past due financial assets have been renegotiated. Based on ties classified as at fair value through profit and loss. Changes 19 past experience, Galenica perceives the creditworthiness of non in interest rates therefore have no effect on profit or loss on 20 past due customer receivables to be good. Past due customer fixed interest financial liabilities such as the bond and private 21 receivables are analysed on an ongoing basis. These receivables placements notes. 22 are accounted for using individual allowances for doubtful _The financial assets and liabilities subject to interest rate risk 23 accounts, which are calculated on the basis of past experience. are almost exclusively floating-rate current bank deposits and 24 _In order to secure future deliveries, Galenica accepted bank debts, loans, in terest rate swaps as well as cross currency 25 guarantees and assignments of claim from various customers in interest rate swaps. Had the market rate been 50 basis points 26 the amount of CHF 20.3 million (previous year: CHF 20.3 million). higher or lower at the balance sheet date, the consolidated 27 earnings before taxes would have been CHF 0.03 million higher 28 and CHF 0.03 million lower (previous year: CHF 0.1 million higher, 29 respectively CHF 0.1 million lower) and the other comprehensive 30 income in the consolidated statement of comprehensive income 31 CHF 1.2 million higher (previous year: CHF 1.3 million) or CHF 1.5 32 million lower (previous year: CHF 2.0 million), respectively. 33 34 35 36 37 maturity structure of trade receivables 38 2012 2011 39 in thousand CHF Trade receivables Allowances for Trade receivables Allowances for doubtful acconts doubtful acconts 40 41 not past due 375,940 (828) 359,733 (773) 42 past due: 43 _ 1–30 days 103,625 (486) 80,787 (164) 44 _31–60 days 10,124 (303) 46,454 (118) _61–90 days 4,555 (288) 8,289 (132) 45 _more than 90 days 7,564 (2,599) 13,182 (5,428) 46 Total 501,808 (4,504) 508,445 (6,615) 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 132_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 currency risk _The table below shows the unhedged net financial assets and net liabilities per currency pair as well as the sensitivity per currency pair to changes in exchange rates for monetary financial assets and monetary financial liabilities. _The sensitivity analysis is based on assumptions of reasonable changes in exchange rates. Currency risks exist on all monetary financial assets and liabilities denominated in a different currency to the functional currency. The effect on the consolidated earnings before taxes arises from the change of currency-related adjustments in fair value of monetary financial assets and liabilities. exchange rate risks of monetary financial instruments and sensitivity analysis

2012 2011 Exchange rate risks Effect in consoli- Exchange rate risks Effect in consoli- of monetary dated income of monetary dated income in thousand CHF financial instruments Sensitivity in % statement financial instruments Sensitivity in % statement 4% 628 8% 811 EUR/CHF 15,700 10,143 (4%) (628) (8%) (811) 5% 1,597 13% 8,997 USD/CHF 31,943 69,207 (5%) (1,597) (13%) (8,997) 5% 202 10% 22 GBP/CHF 4,035 222 (5%) (202) (10%) (22) 7% 123 6% 131 EUR/USD 1,764 2,182 (7%) (123) (6%) (131)

Other market risks _Shares held as securities are recognised at fair value through profit or loss. All other conditions remaining unchanged, a 10% rise or fall in share prices would have resulted in a CHF 0.7 million increase or decline in the consolidated earnings before taxes (previous year: CHF 0.6 million). _The values of the securities classified as available for sale depend on the general market environment and not directly on the share price index. A change in value of +/–15% would have had a positive or negative effect on the other comprehensive income in the consolidated statement of comprehensive income of CHF 4.6 million (previous year: +/–15%, +/–CHF 5.1 million).

Galenica financial statements 2012 · Notes _133 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 28.5 Derivative financial instruments 2 3 Derivative financial instruments 2012

4 Fair value Total expiring date 5 in thousand CHF Positive Negative Contract value up to 3 months 3 to 12 months 1 to 5 years more than 5 years 6 currency instruments 7 Foreign exchange forwards 833 189 44,429 12,420 23,117 8,892 — 8 Total currency instruments 833 189 44,429 12,420 23,117 8,892 — 9 interest instruments 10 Interest rate swaps and 11 Cross currency interest rate swaps 904 84,537 285,860 — 159,460 36,800 89,600 12 Total interest instruments 904 84,537 285,860 — 159,460 36,800 89,600 13 14 Total derivative financial instruments 1,737 84,726 330,289 12,420 182‚577 45‚692 89‚600 15 16 17 Derivative financial instruments 2011 18 19 Fair value Total expiring date 20 in thousand CHF Positive Negative Contract value up to 3 months 3 to 12 months 1 to 5 years more than 5 years 21 currency instruments 22 Foreign exchange forwards 1 — 9,394 — — 9,394 — 23 Total currency instruments 1 — 9,394 — — 9,394 — 24 interest instruments 25 Interest rate swaps and 26 Cross currency interest rate swaps 358 86,932 287,420 — — 197,120 90,300 27 Total interest instruments 358 86,932 287,420 — — 197,120 90,300 28 Total derivative financial instruments 359 86,932 296,814 — — 206,514 90,300 29 30 31 32 28.6 cashflow Hedges Foreign currency and interest rate risk hedging 33 (cross currency interest rate swaps) 34 Foreign currency hedging of cash flows _Galenica entered into cross currency interest rate swaps to 35 _Galenica selectively hedged expected cash flows in USD hedge foreign currency risks and interest rate risks in connec- 36 against foreign currency risks by means of foreign exchange tion with the private placement notes in the foreign currencies 37 forwards. The contract value adds up to an amount of CHF 26.2 USD, EUR and GBP. The contract value amounted to CHF 226.4 38 million (previous year: CHF 0.0 million) with a positive fair value million (previous year: CHF 226.4 million) with a negative fair 39 of CHF 0.8 million at balance sheet date. value of CHF 83.7 million (previous year: CHF 86.4 million). 40 _The derivatives deemed to be effective and the changes in fair _These cross currency interest rate swaps are deemed to be 41 value were recognised directly in the consolidated statement of highly effective. Consequently, the changes in fair value of these 42 comprehensive income (hedge accounting). In 2012, CHF 1.0 derivatives are recognised directly in the consolidated state- 43 million (previous year: CHF 0.0 million) were recognised directly ment of comprehensive income (hedge accounting). In 2012, 44 in the consolidated statement of comprehensive income. CHF 3.8 million (previous year: CHF 2.5 million) were recognised 45 Thereof CHF 0.2 million (previous year: CHF 0.0 million) were directly in the consolidated statement of comprehensive income. 46 reallocated to the consolidated income statement at expiration 47 of the hedged item. 48 49 Foreign currency and interest rate risk hedging 50 (foreign exchange forwards and interest rate swaps) 51 _In previous years Galenica hedged foreign currency risks and 52 interest risks arising from USD liabilities relating to the acquisi- 53 tion of Aspreva with foreign exchange forwards and interest rate 54 swaps. These liabilities were fully paid in 2011 and CHF 0.7 55 million directly accounted for in the consolidated statement of 56 comprehensive income. 57 58 59 60 61 134_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 28.7 capital management 29. sHare-BaseD paymeNTs

_The objective of capital management at Galenica is to ensure the continuity of operations, increase enterprise value on a sus- retention plan tainable basis, provide an adequate return to investors, provide _A retention plan existed for selected members of the senior the financial resources to enable investments in areas that de- management (Retention Plan). Under this plan, the employees liver future benefits for patients and customers and returns to received a fixed number of registered shares of Galenica at 31 investors. December 2012 respectively one employee at 31 December _Galenica defines the capital that it manages as invested 2011. In total 15,750 shares were alloted at the end of the vesting interest-bearing liabilities and equity. Galenica uses a system of period. The fair value was calculated on the basis of the share financial control based on various parameters. Capital is moni- price on the day on which the shares were granted minus the tored with the aid of the key figure “Gearing”. This indicator is present value of the anticipated dividends during the vesting calculated as the percentage of net borrowings to shareholders’ period. In the reporting period, 12,000 shares (previous year: equity and communicated regularly to management as part of 3,750 shares) were vested. At 31 December 2012 8,750 shares internal reporting. were transferred and 3,250 shares were transferred in January _Net borrowings, shareholders’ equity and gearing are shown in 2013. the table below. share plan for the executive chairman in thousand CHF 2012 2011 _ At 1 January 2012 the Executive Chairman received a one-off Current financial liabilities 282,994 167,603 remuneration for his function until the end of 2016 in the form of 40,000 registered shares of Galenica. The agreement was made Non-current financial liabilities1) 686,492 938,470 in March 2011 and is valid for the period from 1 January 2012 to Cash (347,915) (338,687) 31 December 2016. The shares are measured at fair value at the Securities (8,960) (6,604) time of signing the contract (CHF 528.00) and are blocked over Financial assets (45,113) (51,946) the entire term of the contract until 31 March 2017. If the em- Net borrowings 567,498 708,836 ployment contract is terminated before the end of the period, the contract contains detailed provisions how many shares Equity attributable to shareholders Etienne Jornod is entitled to at this date and at what price, in of Galenica Ltd. 1,345,605 1,156,908 principle pro rata temporis. This depends in particular on Non-controlling interests 32,309 45,691 whether the employee or the employer has called for a premature termination. Total shareholder’s equity 1,377,914 1,202,599

Gearing 41.2% 58.9 % compensation for members of the Board of Directors _The members of the Board of Directors receive annual remu- 1) Excluding other financial liabilities (not interest-bearing) neration as well as additional meeting fees. The remuneration includes a fixed amount which can be paid for 100% or 50% in _Galenica has no covenants concerning minimum capital, nor is registered shares of Galenica. The amount which is to be settled it subject to any externally regulated capital requirements as are in shares will be paid out with a discount of 25%. The shares may known in the financial services sector. not be traded for the first five years for tax reasons. Members of the Board of Directors may keep their shares if they leave Galenica, even if the period during which the shares may not be traded has not expired. _The fair value of these allocated shares is equivalent to the amount to be paid out in shares plus a discount of 25%. The actual number of shares and the fair value per share are of no relevance in determining the expense.

share plan for members of senior management _According to the participation plan, members of senior management receive their profit-related bonus partly in cash and partly in registered shares of Galenica. The proportion of cash to shares is set out in the regulations and is based on the salary grade of the recipient. In addition, all members of senior management are obliged to hold a number of shares in Galenica. The amount which is to be settled in shares will be paid out in spring in registered shares of Galenica with a discount of 25%. The shares may not be traded for the first five years for tax reasons. Members of senior management may keep their shares if they leave Galenica, even if the period during which the shares may not be traded has not expired yet.

Galenica financial statements 2012 · Notes _135 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 _The fair value of these allocated shares is equivalent to the 30. relaTeD parTy TraNsacTiONs 2 amount to be paid out in shares plus a discount of 25%. The 3 actual number of shares and the fair value per share are of no 4 relevance in determining the expense. _Related parties include associates, pension funds, members of 5 the Board of Directors of Galenica Ltd., members of the Cor- 6 long-term incentive plan (lTi) porate Executive Committee and major shareholders, as well as 7 _For members of the Corporate Executive Committee and cer- the companies controlled by them. All transactions with related 8 tain members of senior management there is a long-term in- parties are complied with standard conditions prevailing on the 9 centive plan (LTI). The long-term incentive is based on what are market (at arm’s length). 10 called “Performance Units”. The number of these performance _At balance sheet date trade receivables and loans concerning 11 units is based on the extent to which defined long-term perfor- associates amounted to CHF 4.6 million (previous year: CHF 4.4 12 mance targets are attained. An LTI plan always runs for a vesting million). The main receivables and loans relate to Coop Vitality 13 period of 3 years. At the beginning of the financial year a new LTI AG. The trade payables to associates amounted to CHF 1.7 14 plan with a new vesting period is issued. At the start of the vest- million (previous year: CHF 1.4 million) and to pension funds 15 ing period a defined number of performance units are individu- amounted to CHF 0.4 million (previous year: CHF 25.5 million). 16 ally allocated. The number of performance units allocated is There are no receivables or liabilities with respect to other re- 17 dependent on the defined percentage of the annual basis salary, lated parties. 18 which is incorporated into the LTI plan as well as the effective _The transactions with associates shown in the table below 19 share price at the time of the allocation. At the end of the ves ting largely concern transactions with Coop Vitality AG. 20 period those eligible will have their performance units paid out 21 in the form of registered shares of Galenica. related party transactions

22 _4,740 performance units (previous year: 5,436 performance 2012 2011 23 units) were allocated at an average price of CHF 540.00 (previ- Other Other 24 ous year: CHF 556.60) to the entitled persons at the beginning Related Related 25 of the reporting period for the 2012 issued LTI Plan. in thousand CHF Associates parties Associates parties 26 Sale of goods 82,480 2 79,255 4 27 employee share plan Income from services 297 — 226 — 28 _Employees of Galenica are entitled to buy a fixed number of Rental income 20 — 16 — 29 registered shares of Galenica Ltd. at a preferential price. All Purchase of goods 1,545 — 5,702 — 30 employees who, at the time of the purchase offer, are not under Financial income 27 — 47 — 31 notice and have an employment contract of unlimited duration 32 are entitled to acquire shares under these terms. Financial expenses 69 — 49 — 33 _The purchase price for the registered shares is calculated at the 34 time of the purchase offer from the average price for the previ- remuneration of the Board of Directors and 35 ous month less a 30% discount. The price discount is borne by the corporate executive committee

36 the employer. The shares may not be traded for the first three in thousand CHF 2012 2011 37 years for tax reasons. Remuneration 4,630 8,486 38 _In the reporting period, employees purchased 8,079 registered 39 shares of Galenica (previous year: 7,500 registered shares) at a Social security costs and pension expenses 2,178 1,244 40 price of CHF 392.00 (previous year: CHF 328.00). This includes 41 a price discount of CHF 167.75 (previous year: CHF 141.20) per Share-based payments 7,631 7,711 42 registered share. Other non-current benefits —— 43 Employment benefits at termination —— 44 share-based payments Total 14,439 17,441 45 in thousand CHF 2012 2011 46 Retention Plan 915 1,346 47 _During the reporting period, Galenica acquired 125 unblocked 48 Share plan for the Executive Chairman 3,670 2,767 Galenica shares from members of the Corporate Executive 49 Remuneration for members of the Committee for a total of CHF 0.1 million (previous year: 5,480 50 Board of Directors 1,300 1,747 unblocked Galenica shares for a total of CHF 2.8 million). 51 Share plan for members of _The details of the transparency law under the Swiss Code of 52 senior management 5,268 5,535 Obligations are included in the notes to the annual financial 53 Long-term incentive plan (LTI) 2,484 1,904 statements of Galenica Ltd. 54 Employee share plan 1,355 1,059 55 Total 14,992 14,358 56 57 58 59 60 61 136_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 31. leasiNG receivaBles aND liaBiliTies 32. cONTiNGeNT liaBiliTies

_The following claims from financial leasing have been entered _Galenica entered into various obligations regarding the purchase in the consolidated statement of financial position under other of services, goods, and equipment as part of its ordinary business receivables and other financial assets and classified on their operations. These liabilities do not exceed the current market maturity: prices.

2012 2011 _Galenica has signed purchase agreements to acquire pharma- Nominal Present Nominal Present cies in the next few years. The purchase prices will be fixed at in thousand CHF value value value value the time of transfer of ownership on the basis of net asset value Within 1 year 94 88 134 112 and discounted cash flow. The purchase obligations are ex- In 2 to 5 years 37 37 138 128 pected to involve total payment of CHF 5.1 million (previous year: CHF 7.2 million) at the most. The purchase rights amount to an In more than 5 years ———— estimated volume of CHF 5.5 million (previous year: CHF 10.0 Total 131 125 272 240 million). These purchase rights or obligations will mature be- Interest (6) (32) tween 2013 and 2016. Total receivables _Galenica signed purchase agreements to acquire property, from financial leasing 125 240 plant and equipment in the amount of CHF 1.7 million (previous of which included in year: CHF 1.0 million). These purchase agreements will mature other receivables 88 112 in 2013. of which included in _Galenica is subject to a variety of risks depending on the other financial assets 37 128 countries in which it operates. These risks include in particular risks regarding product liability, patent law, tax law, competition laws and anti-trust laws. A number of Group companies are _The following payables from operational leasing and financial currently involved in administrative proceedings, legal disputes leasing were outstanding at the balance sheet date: and investigations relating to their business activities. The

2012 2011 results of ongoing proceedings cannot be predicted with cer- Operating Financial Operating Financial tainty. Management has established appropriate provisions for in thousand CHF leasing leasing leasing leasing any expenses likely to be incurred. These projections, however, Within 1 year 49,412 321 52,950 244 are also subject to uncertainty. Galenica does not expect the In 2 to 5 years 143,150 1,020 138,504 1,008 results of these proceedings to have a significant impact on the consolidated financial statements. In more than 5 years 45,239 876 46,603 1,113 _Furthermore, there are guarantees to customers in the amount Total 237,801 2,217 238,057 2,365 of CHF 1.1 million (previous year: CHF 1.4 million), and guaran- Interest (656) (781) tees to third parties in the amount of CHF 170.8 million (previous Total liabilities from year: CHF 195.2 million). This includes a guarantee to secure financial leasing 1,561 1,584 intraday transactions in connection with the Zero Balance Cash Pooling of CHF 159.2 million (previous year: CHF 159.2 million). _Operating leases essentially consist payment obligations under Galenica entered into payment obligations for the purchase of rental contracts. Financial leases relate in general to a building securities available for sale in the amount of CHF 11.0 million at used for business purposes. the most (previous year: CHF 8.2 million). _There are no unusual pending transactions or risks to be disclosed.

Galenica financial statements 2012 · Notes _137 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 33. asseTs assiGNeD TO secure OwN liaBiliTies 2 3 4 _No assets were pledged to secure own liabilities (previous year: 5 none). 6 7 8 9 34. eveNTs aFTer THe repOrTiNG periOD 10 11 12 _Several business combinations occurred between 31 Decem- 13 ber 2012 and the date the consolidated financial statements 14 were released. 15 16 retail busines sector 17 _Acquisition of pharmacies. GaleniCare Holding acquired 100% 18 of the interests of pharmacies with different outlets in Switzer- 19 land. The net assets of these acquisitions will be consolidated 20 for financial year 2013 as of the date control was obtained. The 21 purchase consideration was CHF 19.9 million, the fair value of 22 the provisional net assets resulting from these additions was 23 estimated at CHF 4.6 million on the acquisition date. The differ- 24 ence is reflected in the purchased goodwill due to the locations. 25 Since the transactions were concluded shortly before the annual 26 accounts were prepared and released, it was not possible to 27 publish the additional information required by IFRS. 28 _There are no further significant events after the reporting 29 period. 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 138_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 35. INVESTMENTS Voting Method of Share capital Headquarters Capital rights consolidation in thousand Pharma Aspreva International Ltd. CDN-Victoria 100% 100% full CAD 0 Aspreva Pharmaceuticals Ltd. CH-Bern 100% 100% full CHF 2,700 Aspreva Pharmaceuticals Inc. USA-Basking Ridge 100% 100% full USD 0 Cophar Ltd. CH-Villars-sur-Glâne 100% 100% full CHF 700 Etrea Ltd. CH-Meyrin 100% 100% full CHF 200 Laboratoires de spécialités scientifiques, sérums et vaccins SA CH-Meyrin 100% 100% full CHF 150 OM Pharma Ltd. CH-Meyrin 100% 100% full CHF 3,000 OM Pharma S.A. PER-Lima 100% 100% full PEN 5,493 OM Pharma S.A. P-Amadora-Lisboa 100% 100% full EUR 5,000 S-OM Ltd. CH-Meyrin 100% 100% full CHF 100 Swiss Pharma GmbH D-Freiburg im Breisgau 100% 100% full EUR 51 Vifor Ltd. CH-Villars-sur-Glâne 100% 100% full CHF 2,250 Vifor France SA F-Neuilly-sur-Seine 100% 100% full EUR 50 Vifor Fresenius Medical Care Renal Pharma Ltd. CH-St. Gall 55% 55% full CHF 1,000 Vifor Fresenius Medical Care Renal Pharma Pharma France S.A.S F-Neuilly-sur-Seine 55% 55% full EUR 10 Vifor (International) Ltd. CH-St. Gall 100% 100% full CHF 2,000 Vifor Pharma Ltd. CH-Glattbrugg 100% 100% full CHF 100 Vifor Pharma America Latina S.A. ARG-Buenos Aires 100% 100% full USD 304 Vifor Pharma Asia Pacific Pte. Ltd. SIN-Singapore 100% 100% full SGD 100 Vifor Pharma België N.V. B-Antwerp 100% 100% full EUR 61 Vifor Pharma Deutschland GmbH D-Munich 100% 100% full EUR 50 Vifor Pharma España SL E-Barcelona 100% 100% full EUR 200 Vifor Pharma Italia S.r.L. I-Palazzo Pignano (CR) 100% 100% full EUR 10 Vifor Pharma Nederland B.V. NL-Breda 100% 100% full EUR 18 Vifor Pharma Nordiska AB S-Kista 100% 100% full SEK 200 Vifor Pharma Österreich GmbH A-Vienna 100% 100% full EUR 36 Vifor Pharma Pty Ltd. AUS-Melbourne 100% 100% full AUD 0 Vifor Pharma Romania Srl. RUM-Cluj-Napoca 100% 100% full RON 258 Vifor Pharma UK Ltd. GB-Bagshot 100% 100% full GBP 36

Logistics Alloga Ltd. CH-Burgdorf 100% 100% full CHF 8,332 Dauf SA CH-Barbengo-Lugano 73.58% 73.58% full CHF 100 Galexis Ltd. CH-Niederbipp 100% 100% full CHF 25,000 G-Pharma AG CH-Niederbipp 100% 100% full CHF 100 Unione Farmaceutica Distribuzione SA CH-Barbengo-Lugano 73.58% 73.58% full CHF 2,000

HealthCare Information Documed Ltd. CH-Basle 100% 100% full CHF 50 e-mediat Ltd. CH-Bern 100% 100% full CHF 108 e-prica AG CH-Bern 100% 100% full CHF 100 HCI Solutions Ltd. CH-Bern 100% 100% full CHF 100

Galenica financial statements 2012 · Notes _139 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 Voting Method of Share capital 2 Headquarters Capital rights consolidation in thousand 3 Retail 4 Amavita GmbH CH-Bern 100% 100% full CHF 20 5 Amavita Health Care Ltd. CH-Niederbipp 100% 100% full CHF 100 6 Aristea SA CH-St-Sulpice 100% 100% full CHF 100 7 Bahnhof Apotheken Thun AG CH-Thun 50% 50% full CHF 200 8 Coop Vitality AG CH-Bern 49% 49% at equity CHF 5,000 9 Coop Vitality Health Care GmbH CH-Niederbipp 49% 49% at equity CHF 20 10 Distripharm SA CH-St-Sulpice 100% 100% full CHF 100 11 GaleniCare Ltd. CH-Bern 100% 100% full CHF 700 12 GaleniCare Holding Ltd. CH-Bern 100% 100% full CHF 50,000 13 GaleniCare Management Ltd. CH-Bern 100% 100% full CHF 500 14 Golaz Chemist SA CH-Lausanne 45% 45% at equity CHF 300 15 Grosse Apotheke Dr. G. Bichsel AG CH-Interlaken 25% 25% at equity CHF 200 16 Kloster-Apotheke Muri AG CH-Muri AG 100% 100% full CHF 100 17 MediService Ltd. CH-Zuchwil 100% 100% full CHF 363 18 Pharmacie de la Croix Blanche SA CH-Epalinges 100% 100% full CHF 100 19 20 Pharmacie du Salève SA CH-Chêne-Bourg 100% 100% full CHF 100 21 St. Jakob-Apotheke AG CH-St. Gall 100% 100% full CHF 100 22 Sun Store Ltd. CH-St-Sulpice 100% 100% full CHF 485 23 Winconcept Ltd. CH-Bern 100% 100% full CHF 100 24 Corporate Finance 25 26 1L Logistics AG CH-Burgdorf 100% 100% full CHF 100 27 Adima Panpharma AG CH-Bern 100% 100% full CHF 110 28 Bürgschaftsgenossenschaft Galenica CH-Bern 100% 100% full CHF 1,200 29 Democal AG CH-Bern 100% 100% full CHF 100 30 Galenica Deutschland GmbH D-Frankfort on the Main 100% 100% full EUR 511 31 Galenica Finance Limited GB-Jersey 100% 100% full CHF 5,000 32 Galenica International (B.V.I.) Limited GB-British Virgin Islands 100% 100% full USD 50 33 Galenica Santé Ltd. CH-Bern 100% 100% full CHF 100 34 Laboratoire Golaz Ltd. CH-Villars-sur-Glâne 100% 100% full CHF 100 35 Laurimmo “S” SA CH-Geneva 50% 50% at equity CHF 100 36 medcommerce Hospilog AG CH-Bern 100% 100% full CHF 137 37 Medichemie Bioline AG CH-Bern 100% 100% full CHF 100 38 Perskindol AG CH-Bern 100% 100% full CHF 100 39 Sigal AG CH-Bern 100% 100% full CHF 2,000 40 Triamun Ltd. CH-Bern 100% 100% full CHF 150 41 42 Pension funds 43 Galenica Pension Fund CH-Bern 44 GaleniCare Pension Fund CH-Bern 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 140_ Notes · Galenica financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 REPORT OF THE STATuTORy AuDITOR ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE GALENICA GROuP

_As statutory auditor, we have audited the consolidated financial Report on other legal requirements statements of Galenica Ltd., which comprise the income statement, statement of comprehensive income, statement of finan- _We confirm that we meet the legal requirements on licensing cial position, cash flow statement, statement of changes in equity according to the Auditor Over-sight Act (AOA) and independence and notes (pages 93 to 140) for the year ended 31 December 2012. (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. Board of Directors’ responsibility _In accordance with article 728a paragraph 1 item 3 CO and _The Board of Directors is responsible for the preparation and Swiss Auditing Standard 890, we confirm that an internal control fair presentation of the consolidated financial statements in ac- system exists, which has been designed for the preparation of cordance with International Financial Reporting Standards consolidated financial statements according to the instructions (IFRS) and the requirements of Swiss law. This responsibility of the Board of Directors. includes designing, implementing and maintaining an internal _We recommend that the consolidated financial statements sub- control system relevant to the preparation and fair presentation mitted to you be approved. of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Direc- tors is further responsible for selecting and applying appropriate Bern, 7 March 2013 accounting policies and making accounting estimates that are reasonable in the circumstances. Ernst & Young Ltd. Auditor’s responsibility _Our responsibility is to express an opinion on these consoli- Thomas Nösberger Julian Fiessinger dated financial statements based on our audit. We conducted Licensed audit expert Licensed audit expert our audit in accordance with Swiss law and Swiss Auditing Stand- (Auditor in charge) ards and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. _An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion _In our opinion, the consolidated financial statements for the year ended 31 December 2012 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.

Galenica financial statements 2012 · Report of the statutory auditor _141 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Financial StatementS 2012 oF Galenica ltd.

1 143 _Income statement of Galenica Ltd. 2 3 144 _Statement of financial position of Galenica Ltd. 4 5 145 _Notes to the financial statements of Galenica Ltd. 6 7 150 _Report of the statutory auditor on the financial 8 statements of Galenica Ltd. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 142_ Galenica Ltd. financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 income Statement oF Galenica ltd.

in thousand CHF 2012 2011 income Investment income 253,890 435,099 Financial income 56,269 84,974 Other income 28,743 27,863 total income 338,902 547,936 expenses Personnel costs (29,286) (28,139) Financial expenses (36,148) (61,757) Depreciation and amortisation (62,914) (393,174) Other expenses (8,217) (7,782) total expenses (136,565) (490,852)

Profit for the year before taxes 202,337 57,084

Taxes (102) (62)

Profit for the year 202,235 57,022

Galenica Ltd. financial statements 2012 · income statement _143 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Statement oF Financial PoSition oF Galenica ltd. prior to appropriation of available earnings

1 assets 2 3 in thousand CHF 31.12.2012 31.12.2011 4 current assets 5 Cash 296,918 188,275 6 Securities 6,015 6,477 7 Receivables from third parties 2,510 4,595 8 Receivables from affiliated companies 19,469 20,280 9 10 Prepaid expenses and accrued income 17,215 230 11 total current assets 22% 342,127 15% 219,857 12 13 non-current assets 14 Intangible assets 229 467 15 Loans to affiliated companies 884,171 884,171 16 Participations 362,672 407,400 17 Financial assets 1,100 1,600 18 19 total non-current assets 78% 1,248,172 85% 1,293,638 20 21 total assets 100% 1,590,299 100% 1,513,495 22 23 24 liabilities and shareholders’ equity 25 26 in thousand CHF 31.12.2012 31.12.2011 27 liabilities 28 Current liabilities to third parties 261,357 132,400 29 Current liabilities to affiliated companies 98,020 26,532 30 Accrued expenses and prepaid income 9,419 19,726 31 Non-current liabilites 732,410 989,479 32 33 total liabilities 69% 1,101,206 77% 1,168,137 34 35 Shareholders’ equity 36 Share capital 650 650 37 Legal reserves 38 _General reserve 40,000 40,000 39 _Reserve for treasury shares 8,700 38,250 40 Free reserve 237,300 207,750 41 Available earnings 202,443 58,708 42 total shareholders’ equity 31% 489,093 23% 345,358 43 44 total liabilities and shareholders’ equity 100% 1,590,299 100% 1,513,495 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 144_ Statement of financial position · Galenica Ltd. financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 noteS to the Financial StatementS oF Galenica ltd.

GeneRal major Shareholders Number of % of share registered shares capital Basis of accounting as of 31 december 2012 _The financial statements as of 31 December 2012 comply with Alliance Boots Investments 2 Limited, UK 1,656,172 25.5 the provisions of the Swiss Code of Obligation. The basis of accounting for the consolidated financial statements of Galenica Ltd. _thereof with voting rights 1,300,000 20.0 are stated in the notes to the consolidated financial statements. Patinex AG, Switzerland1) 2) 578,325 8.9 Alecta pensionsförsäkring, Sweden1) 210,000 3.2 investments in subsidiaries and associates as of 31 december 2011 _The list of the most important participations is shown on pages Alliance Boots Investments 2 Limited, UK 1,656,172 25.5 139 to 140. _thereof with voting rights 1,300,000 20.0 authorised capital Morgan Stanley, USA1) 354,593 5.5 _According to Article 3a of the articles of incorporation, the Alecta pensionsförsäkring, Sweden1) 210,000 3.2 Board of Directors is authorised to increase the share capital of Patinex AG, Switzerland1) 206,166 3.2 CHF 650,000 by a maximum of CHF 65,000 at any time up to 1) According to disclosure notifications field with Galenica AG and SIX Swiss Exchange and including 2 May 2014 by issuing no more than 650,000 fully 2) Thereof call options over 324,990 shares in total paid-up registered shares. _On the balance sheet date, Galenica was not aware of any ad- Bond ditional shareholders or shareholder groups that owned more _On 5 October 2010, Galenica issued a fixed-rate bond for a than 3% of shareholder votes (see pages 50 to 51). nominal amount of CHF 300.0 million with an annual coupon of 2.5% and a term of seven years, maturing on 27 October 2017. contingent liabilities The bond is traded on the SIX Swiss Exchange under securities _At the end of 2012 contingent liabilities amounted to CHF no. 11848005 (ISIN CH0118480059). 221.1 million (previous year: CHF 255.2 million), including CHF 1.9 million (previous year: CHF 36.0 million) representing guar- treasury shares antees to third parties, and CHF 60.0 million (previous year: _Galenica registered shares owned by subsidiaries: CHF 60.0 million) for bank guarantees to Group companies in Number in CHF favour of financial institutions set up in order to obtain favoura- as of 31 december 2010 19,737 ble conditions for local financing and CHF 159.2 million (previous year: CHF 159.2 million) for a guarantee to secure intraday 1st quarter 2011 _Bought 5,347 2,786,654 _Sold (7,440) (3,791,872) transactions in connection with the zero balance cash pooling. 2nd quarter 2011 _Bought 63,970 33,448,127 _Sold (11,802) (6,358,463) Promise of funding _At the end of 2012 fixed-term funding promises in favour of 3rd quarter 2011 _Bought 5,219 2,422,786 subsidiaries and associates amounted to CHF 9.6 million. At the _Sold — — end of 2011 there were promises of unlimited funding for sub- th 4 quarter 2011 _Bought 10,615 5,655,748 sidiaries and associates, in part fixed-term. _Sold (9,705) (4,553,101) as of 31 december 2011 75,941 Subordinated loans 1st quarter 2012 _Bought 2,398 1,153,150 _At the end of 2012 subordinated loans to subsidiaries and as- _Sold (48,651) (25,723,904) sociates amounted to CHF 12.9 million (previous year: CHF 18.5 2nd quarter 2012 _Bought 3,005 1,777,824 million). _Sold (10,951) (6,052,366) 3rd quarter 2012 _Bought 440 264,915 insurance _Sold (78) (46,461) _At the end of 2012, furnishings and fixtures were covered by 4th quarter 2012 _Bought 15,610 8,269,746 fire insurance for a value of CHF 0.9 million (previous year: CHF _Sold (17,639) (9,179,993) 0.9 million). as of 31 december 2012 20,075 derivative financial instruments _The treasury shares are basically reserved for share-based _Cross currency interest rate swaps and interest rate swaps payments in connection with benefit plans. with a contract value of CHF 285.9 million (previous year: CHF 287.4 million) were concluded in connection with the private placement of foreign currency notes (USD, EUR and GBP). At the end of 2012, this resulted in a negative gross replacement value of CHF 83.6 million (previous year: CHF 86.6 million).

Galenica Ltd. financial statements 2012 · notes _145 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 1 Shareholders’ equity 2 _The changes in shareholders’ equity over the past three years 3 are as follows: 4

5 General Reserve for Free Retained Shareholders 6 in thousand CHF Share capital reserve treasury shares reserve earnings equity 7 as of 31.12.2009 650 40,000 3,800 242,200 49,787 336,437 8 Dividend (48,750) (48,750) 9 10 Adjustment to the reserve for treasury shares 4,850 (4,850) — 11 Profit for the year 52,649 52,649 12 as of 31.12.2010 650 40,000 8,650 237,350 53,686 340,336 13 Dividend (52,000) (52,000) 14 Adjustment to the reserve for treasury shares 29,600 (29,600) — 15 Profit for the year 57,022 57,022 16 17 as of 31.12.2011 650 40,000 38,250 207,750 58,708 345,358 18 Dividend (58,500) (58,500) 19 Adjustment to the reserve for treasury shares (29,550) 29,550 — 20 Profit for the year 202,235 202,235 21 as of 31.12.2012 650 40,000 8,700 237,300 202,443 489,093 22 23 24 _Based on the Swiss federal law Corporate Tax Reform II, 25 Galenica has not identified any tax-relevant capital contribu- 26 tions in respect of holders of participation right (Capital Contri- 27 bution Principle). 28 29 30 appropriation of available earnings for the year 31 ending 31 december 32 _The Board of Directors proposes to the Annual General Meet- 33 ing of shareholders to be held on 2 May 2013 the following 34 appropriation of retained earnings:

35 in CHF 2012 2011 36 Balance brought forward 208,436 1,686,255 37 Profit for the year 202,235,119 57,022,181 38 39 available earnings 202,443,555 58,708,436 40 41 appropriation of available earnings 42 Transfer to free reserve (130,000,000) — 43 Dividend per share CHF 11.00 44 (2011: CHF 9.00) (71,500,000) (58,500,000) 45 Balance to be carried forward 943,555 208,436 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 146_ notes · Galenica Ltd. financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Remuneration of the Board of Directors and 8,000 registered shares per year and which will be blocked over the Corporate Executive Committee the entire term of the contract until 31 March 2017. The agreement covers the period from 1 January 2012 to 31 December 2016. To compensate for the lack of regular compensation over Board of Directors this five-year period (salary, bonuses, shares, options or other _The members of the Board of Directors of Galenica Ltd. receive reward), the Executive Chairman of the Board of Directors has annual remuneration as well as additional time and expense re- received shares measured at fair value on the date the agree- imbursement payments for their membership of standing com- ment was finalised. In addition, he receives CHF 150,000 per mittees. The remuneration includes a fixed fee, of which 100% year for the employee’s contribution to the social security. The or 50% can be paid in registered shares of Galenica Ltd., and a value of the shares corresponds to an average annual taxable variable bonus that is entirely paid in registered shares of Ga- income of about CHF 3.4 million. If the employment contract is lenica Ltd. and whose value depends on business performance. terminated before the end of the period, the contract contains _Remuneration in registered shares of Galenica Ltd. was paid at detailed provisions how many shares Etienne Jornod is entitled the average price for the month of January 2013, i.e. CHF to at this date and at what price, in priciple pro rata temporis. 554.55 per share, (January 2012: CHF 556.00 per share) less This depends in particular on whether the employee or the em- 25% for shares blocked for five years. ployer has called for a premature termination. _On 1 January 2012, Etienne Jornod received a one-off remuneration for his function until the end of 2016 in the form of 40,000 registered shares of Galenica, which are divided into

Remuneration of the members of the Board of Directors in 2012

31.12.2012 Fee Fee Other remu- Registered shares in thousand CHF in cash in shares nerations1) Total Held Allocated Executive members of the Board of Directors Etienne Jornod, Executive Chairman3) 150 3,420 379 3,949 47,261 — Fritz Hirsbrunner2) 120 133 9 262 13,032 319 Total executive members of the Board of Directors 270 3,553 388 4,211 60,293 319

Non-executive members of the Board of Directors Daniela Bosshardt-Hengartner 70 70 9 149 1,265 167 Kurt W. Briner — 140 7 147 2,496 337 Michel Burnier 64 64 8 136 284 153 Hans Peter Frick — 130 7 137 534 313 Stefano Pessina — 115 6 121 1,315 277 This E. Schneider — 155 10 165 2,727 372 Total non-executive members of the Board of Directors 134 674 47 855 8,621 1,619 Total remuneration of the members of the Board of Directors 404 4,227 435 5,066 68,914 1,938

1) Other remuneration respresent the social security costs due by the member of the Board of Directors and paid by Galenica as well as the employer’s contribution to the pension funds. The employer’s contributions to social security costs amounted to CHF 748,000 2) Fritz Hirsbrunnerʼs remuneration also includes fees for his work as Head of Investor Relations 3) The compensation for the 2010 LTI plan (CHF 990,000), while Etienne Jornod was still CEO, have been paid out in 2012 _Registered shares held by people closely associated with members of the Board of Directors are included in the declaration of the number of shares they hold WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica Ltd. financial statements 2012 · Notes _147 1 Remuneration of the members of the Board of Directors in 2011

2 31.12.2011 3 Fee Fee Bonus in Registered shares 4 in thousand CHF in cash in shares shares Total Held Allocated 5 Executive member of the Board of Directors 6 Etienne Jornod, Chairman and CEO — — — — 7,501 48,750 7 8 Non-executive members of the Board of Directors 9 Paul Fasel, Vice Chairman and Lead Director 140 140 15 295 5,885 372 10 Daniela Bosshardt-Hengartner 59 59 12 130 1,094 171 11 Kurt W. Briner — 125 12 137 2,166 330 12 13 Michel Burnier 51 51 10 112 137 147 14 Hans Peter Frick — 105 10 115 257 277 15 Stefano Pessina — 100 10 110 1,051 264 16 This E. Schneider — 134 13 147 2,373 354 17 Total non-executive members of the Board of Directors 250 714 82 1,046 12,963 1,915 18 19 Total remuneration of the members of the Board of Directors 250 714 82 1,046 20,464 50,665 20 _Etienne Jornod did not receive any remuneration for his membership of the Board of Directors 21 _Paul Fasel’s basic fee includes remuneration for his work as Lead Director _Included in the number of shares held by members of the Board of Directors are also registered shares held by people closely associated with them 22 23 24 Corporate Executive Committee 25 _The members of the Corporate Executive Committee of Galenica 26 Ltd. receive a fixed basic salary with variable indirect benefits and 27 participate in certain equity compensation plans. 28 _Etienne Jornod was the member of the Board of Directors and 29 the Corporate Executive Committee with the highest total remu- 30 neration in 2011. Since 2012 he is exclusively Executive Chairman 31 of the Board of Directors. 32 33 Remuneration of the members of the Corporate Executive Committee 34 2012 of which 2011 of which 35 in thousand CHF David Ebsworth Etienne Jornod 36 Basic salary 2,775 650 4,391 995 37 Bonus in cash 1,373 430 3,666 1,682 38 Bonus in shares 616 203 933 —1) 39 Long-term incentive plan 723 302 1,837 682 40 41 Expenses reimbursement 64 — 55 — 42 Contributions to pension funds 350 107 523 107 43 Other remuneration 14 — 124 13 44 Total remuneration received 5,915 1,692 11,529 3,479 45 Social insurance costs 645 104 721 238 46 3) 4) 2) 47 Total 6,560 1,796 12,250 3,717 48 1) Due to remuneration for the period 2012 to 2016 in the form of shares, the bonus 2011 was paid in cash 49 2) From 1 July 2011 excludes Philippe Weigerstorfer who stepped down as member of the Corporate Executive Committee on this date 3) The compensation paid to Fritz Hirsbrunner for the transfer of his duties to his successors from 1 January 2012 to 30 April 2012 is included in the remuneration 50 of the members of the Corporate Executive Committee. In addition, he received CHF 382,000 as compensation for the variable Long-term incentive plan (LTI) 51 over the period 2010–2012. 4) 52 This includes the salary of Karin Priarollo as member of the Corporate Executive Committee from 1 May 2012 to 9 November 2012 53 54 55 56 57 58 59 60 61 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 148_ Notes · Galenica Ltd. financial statements 2012 Shareholdings of members of the corporate executive committee

31.12.2012 31.12.2011 Number of registered shares Held Allocated Held Allocated Felix Burkhard 1,312 375 860 375 Jean-Claude Clémençon 881 — 674 — David Ebsworth 1,268 — 782 — Fritz Hirsbrunner1) — — 7,198 2,500 Jörg Kneubühler 1,814 500 1,121 500 Gianni Zampieri 5,040 1,250 3,292 1,250

1) Stepped down as member of the Corporate Executive Committee on 31 December 2011 _ Included in the number of shares held by members of the Corporate Executive Committee are also registered shares held by people closely associated with them

Board of directors and corporate executive committee _Galenica did not pay any remuneration to former members of the Board of Directors or the Corporate Executive Committee in the reporting period. _Galenica did not grant any loans or credits to current members of the Board of Directors, members of the Corporate Executive Committee or related persons in the reporting period.

RiSk manaGement

_As part of the group-wide “Galenica Risk Management (GRM)”, group companies conduct a risk assessment at least once a year. This standardised process is based on a risk register in which the most important strategic and operational risks and their possible financial effects are identified in line with pre-defined criteria and then evaluated in accordance with the probability of their occurrence and their effect. These risks are entered into a risk matrix for each business sector and, depending on the extent, incorporated into the Group risk matrix. _The Board of Directors is regularly informed about the most important risks by the Corporate Executive Committee and de- cides on appropriate preventative measures. _Galenica Ltd. is wholly included in the group-wide risk management process.

Galenica Ltd. financial statements 2012 · notes _149 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 RePoRt oF the StatutoRy auditoR on the Financial StatementS oF Galenica ltd.

1 _As statutory auditor, we have audited the financial statements Report on other legal requirements 2 of Galenica Ltd., which comprise the income statement, state- 3 ment of financial position and notes (pages 143 to 149) for the _We confirm that we meet the legal requirements on licensing 4 year ended 31 December 2012. according to the Auditor Over-sight Act (AOA) and indepen- 5 dence (Art. 728 CO and Art. 11 AOA) and that there are no cir- 6 Board of directors’ responsibility cumstances incompatible with our indepen dence. 7 _The Board of Directors is responsible for the preparation of _In accordance with article 728a paragraph 1 item 3 CO and 8 the financial statements in accordance with the requirements Swiss Auditing Standard 890, we confirm that an internal con- 9 of Swiss law and the company’s articles of incorporation. This trol system exists, which has been designed for the prepara- 10 responsibility includes designing, implementing and maintain- tion of financial statements according to the instructions of the 11 ing an internal control system relevant to the preparation of Board of Directors. 12 financial statements that are free from material misstatement, _We further confirm that the proposed appropriation o avail- 13 whether due to fraud or error. The Board of Directors is further able earnings complies with Swiss law and the company’s 14 responsible for selecting and applying appropriate accounting articles of incorporation. We recommend that the financial 15 policies and making accounting estimates that are reasonable statements submitted to you be approved. 16 in the circumstances. 17 18 auditor’s responsibility Bern, 7 March 2013 19 _Our responsibility is to express an opinion on these financial 20 statements based on our audit. We conducted our audit in ac- 21 cordance with Swiss law and Swiss Auditing Standards. Those Ernst & Young Ltd. 22 standards require that we plan and perform the audit to obtain 23 reasonable assurance whether the financial statements are free Thomas Nösberger Julian Fiessinger 24 from material misstatement. Licensed audit expert Licensed audit expert 25 _An audit involves performing procedures to obtain audit evi- (Auditor in charge) 26 dence about the amounts and disclosures in the financial 27 statements. The procedures selected depend on the auditor’s 28 judgment, including the assessment of the risks of material mis- 29 statement of the financial statements, whether due to fraud or 30 error. In making those risk assessments, the auditor considers 31 the internal control system relevant to the entity’s preparation 32 of the financial statements in order to design audit procedures 33 that are appropriate in the circumstances, but not for the pur- 34 pose of expressing an opinion on the effectiveness of the enti- 35 ty’s internal control system. 36 _An audit also includes evaluating the appropriateness of the 37 accounting policies used and the reasonableness of accounting 38 estimates made, as well as evaluating the overall presentation 39 of the financial statements. We believe that the audit evidence 40 we have obtained is sufficient and appropriate to provide a basis 41 for our audit opinion. 42 43 opinion 44 _In our opinion, the financial statements for the year ended 45 31 December 2012 comply with Swiss law and the company’s 46 articles of incorporation. 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 150_ notes · Galenica Ltd. financial statements 2012 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 From manual to automated production of print media _A PC was used to produce printed materials for the first time in the mid-1980s. This marked the dawn of a new era in the printing industry: desktop publishing was born. For employees in the graphic design industry, this also meant a rapid change in job descriptions. Advanced technology and new programs mean that even competent users can now generate printed products without specific professional training. _Galexis is also benefiting from this development. Since the start of 2012, brochures, flyers and other printed products have been produced in-house. This step enables Galexis to systematically build up knowledge in the area of its print material , increase efficiency and reduce costs. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 _151 GLOSSARy Specialised terms and expressions used by Galenica

ActivePOS Blister pack Chronic Obstructive Pulmonary Disease (COPD) _The expansion module of TriaPharm® pharmacy software _A type of packaging that allows the customer to see the _Collective term for a group of pulmonary diseases. Some- designed for POS cash register usage. packaged product (see-through packaging). times referred to colloquially as “smoker’s lung”.

Agar-agar Bolus injection CIS Mineral-rich gelling agent derived from seaweed. _The administration of a medicine by injection using a sy- _CIS (Clinical Information System) is a module that supports ringe. electronic drug prescription in hospitals on the basis of AIPS hospINDEX ® data. _New official Swissmedic drug information publication plat- Bramitob® form (Arzneimittelinformation-Publikationsplattform Swiss- _A product for the treatment of cystic fibrosis, a hereditary Clinical development/clinical studies medic). disease that leads to severe respiratory and digestive diffi- _Trials carried out as part of the development process for culties; sold under licence in Switzerland by Vifor Pharma new drugs in which the drugs are extensively tested as to ALAT (Asociación Latinoamericana de Tórax) since 2009. their efficacy and safety. The clinical study programme is _Association which promotes research and education of broken down into several phases. respiratory diseases. Broncho-Vaxom® _Biotech drug for the prevention and alleviation of respiratory CMD (corporate management development) Algifor® tract infections; developed and marketed by OM Pharma. _CMD includes all the staff development activities that _The leading ibuprofen-based OTC analgesic in Switzerland; Galenica offers to employees and managerial staff. developed and sold by Vifor Pharma. CAPA concept Code of Conduct Alloga SC Box _Corrective and preventive action. Corrective action is taken _A collection of the principles of conduct that are to be _A box specially designed by Alloga to transport heat-sensi- in order to eliminate the cause of a discrepancy, while pre- followed in specific situations and consequently promote tive products. SC stands for Safety Cold. ventive action is intended to ensure that a discrepancy does uniform conduct by groups of individuals within the corpora- not occur or reoccur. tion. Amavita _The brand name of GaleniCare’s own pharmacy chain, Cardiology Cognitive disorder launched throughout Switzerland in 2005. _The branch of medicine dealing with the heart and cardio- _Disruption of the processing of sensory impressions (as in vascular diseases. hyperactivity) that may lead to learning difficulties, inat- Amavita partnership tentiveness, etc. _Franchise system developed by GaleniCare for pharmacists CardioTest® wishing to enjoy the benefits of the Amavita network while _A cardiovascular check-up and individual risk profile (heart COMCO retaining their independence. passport) offered by GaleniCare in its pharmacies in coop- _The Swiss Competition Commission. eration with the Swiss Heart Foundation. Anaemia, anaemic Comité des Jeunes _A deficiency of red blood cells or haemoglobin in the blood- careINDEX® _A Galenica advisory committee composed of young staff stream, frequently caused by iron deficiency. _A fully compatible database designed to meet the needs of members from the Galenica Group. care or nursing homes and home care services. It supports Anti-Brumm® electronic invoicing of service providers; developed and sold compendiumPORTAL _The leading insect repellent spray and lotion in Switzerland, by e-mediat. _New editorial system for the Swiss Drug Compendium also widely sold in other European countries; a proprietary (Arzneimittel-Kompendium der Schweiz®) developed and product of Vifor Pharma. CAS (Certificate of Advanced Studies) distributed by Documed. _In-service professional development programme targeted Aspreva Lupus Management Study (ALMS) at university graduates. Upon completion of the course, a Compliance _An international clinical study by Vifor Pharma that is being certificate is awarded by the participating university. _The willingness of patients to follow medical instructions. carried out in over 20 countries to determine the efficacy of With regard to taking medications, following a diet or making CellCept for the treatment of lupus nephritis. Case management lifestyle changes, compliance is particularly important for _A form of organised assistance given to employees to meet individuals suffering from chronic diseases or psychological Audit their individual needs in the event of inability to work due to disorders. _Investigation of processes with regard to compliance with illness or injury. requirements and guidelines. The examination is carried out Consumer healthcare products by an external expert such as an FDA inspector or by a rep- CellCept _Non-pharmaceutical healthcare products sold directly resentative of an accredited auditing company such as SGS. _A drug developed by Roche for the treatment of rejection to the consumer in pharmacies and drugstores (OTC. for reactions following organ transplants. Vifor Pharma holds example Anti-Brumm®). Autoimmune disease the global rights (excluding Japan) to develop and market this _The general term for diseases caused by an overreaction of drug for all applications involving autoimmune diseases. Content management the immune system to the body’s own tissues. In such condi- _The development and digital management of content from tions, the immune system mistakenly perceives the body’s Central registration authority initial creation to archiving or deletion. own tissues to be foreign bodies that need to be attacked. _The authority that collects, manages and updates basic This leads to acute inflammation reactions that result in dam- data (master data) relating to all items in use in the Swiss Coop Vitality age to the affected organs. healthcare system. _A pharmacy format run jointly by Coop and GaleniCare.

Azathioprin Certified general pharmacist Corporate design _An active ingredient in medications to suppress the im- _Pharmacist who manages or works in a dispensary. _The visual image of a company. The totality of all clearly mune system. defined visual elements of a company such as its logo, Change management printed materials and signs on buildings or vehicles, includ- _All tasks, actions and activities designed to bring about ing the production of these elements in the corporate font, Benchmark comprehensive and radical change in a company in order to colour, etc. _Analysis whereby something is compared with a standard implement new strategies, structures, etc. point of reference. Cystic fibrosis Chronic Kidney Disease (CKD) _Cystic fibrosis, also known as mucoviscidosis, is a con- BG-12 _A slow, progressive loss of renal function, over months or genital metabolic disease that causes chronic coughing and _A product candidate from the pharmaceutical company years. frequent lung infections due to viscous mucus in the bron- Biogen Idec used to treat relapsing-remitting multiple sclerosis chial tubes. and rheumatoid arthritis. Manufactured by Vifor Pharma under contract. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 152_ Glossary · Galenica annual report 2012 Cytostatics e-MED FDA _Naturally occurring or artificially produced substances that _Electronic prescription software designed to enhance _The US Food and Drug Administration; the agency in the inhibit cell growth and division. Used primarily in the treat- patient safety in the medication process. The pilot project at USA that regulates drugs. ment of cancer (chemotherapy) or autoimmune diseases. the Bern University Hospital in cooperation with e-mediat was successfully completed in 2009. Feelgood’s _A network of around 100 independent pharmacies in Data warehousing EPO (erythropoietin) Switzerland; Winconcept customers. _The management and evaluation of stored data. _A hormone that promotes the formation of red blood cells. Classified as an erythropoiesis-stimulating agent (ESA). FERGI-COR study Decentralised procedure _FERinject in GastroIntestinal disorders to CORrect iron _A specific drug authorisation process in Europe. Equazen eye q™ deficiency; a major, multi-centre, randomised, prospective, _A nutritional supplement designed to improve cognitive comparative, open Phase III study that examined the effi- Dermatology functions, based on omega-3 and omega-6 fatty acids cacy, tolerability and safety of a simplified and standardised _The branch of medicine that deals with the diagnosis, treat- derived from fish oils. dosing scheme of Ferinject® in the correction of iron defi- ment and care of patients with non-infectious and infectious ciency anaemia in patients with inflammatory bowel disease. skin diseases as well as benign and malignant skin tumours. Equazen IQ™ _The brand name used in Switzerland for Equazen eye q™. FERGI-MAIN study Dialysis _A follow-on from the FERGI-COR study. _A blood cleansing process used in cases of kidney failure, ERS (European Respiratory Society) also called haemodialysis. _Society which researches respiratory diseases and pro- Ferinject® motes lung health. _An innovative iron replacement product for the intrave- Diavita nous treatment of iron deficiency; developed and produced _An exclusive service provided by Amavita pharmacies Erythropoiesis by Vifor Pharma. specifically to diabetics; includes therapy support enabling _Process by which red blood cells (erythrocytes) are pro- patients to have their blood sugar levels checked and docu- duced. FERRIM study mented, for example. _A randomised, multi-centre, double-blind, placebo-con- ESA (erythropoiesis-stimulating agents) trolled Phase III study in non-anaemic patients with iron Dicynone® _Group of hormones that promote the formation of red blood deficiency and fatigue symptoms. The first study to investi- _Synthetic drug for the prevention and treatment of capillary cells, the most important of which is EPO (erythropoietin). gate whether correction of iron deficiency with Venofer® is haemorrhages, a circulatory disorder; developed and mar- beneficial to patients with iron deficiency and fatigue symp- keted by OM Pharma. ESPID (European Society for Paediatric Infectious Dis- toms. eases) Dispensing check _Society whose mission is to promote excellence in paediat- FIGO (International Federation of Gynecology and _A service provided by pharmacists as defined by the ric infectious diseases and child health. Obstetrics) service-based remuneration (SBR) agreement, which _Worldwide organisation for obstetrics and gynecology. requires pharmacists to keep patient files. ESS (extended sales services) _Service for pharmaceutical companies offered by the Lo- Film-coated tablet Doxium® gistics business sector that supplies a local field sales force _A tablet coated with only a single thin film. Unlike a sugar- _Synthetic drug to normalise capillary permeability and and manages sales promotion. coated tablet, a film-coated tablet is coated with a polymer improve venous blood flow; developed and marketed by rather than sugar. OM Pharma. EVE (EVEnts) _A series of professional development events for members FIND CKD study DRG (diagnosis-related groups) of middle and senior management (MDI and MKA) of the _A clinical study examining the benefits of Ferinject® over _Economic and medical classification system used to deter- Galenica Group organised within the framework of the oral iron replacement products for the treatment of anaemia mine flat-rate payments for hospital treatment. company’s corporate management development (CMD) in patients with chronic kidney disease (without dialysis). programme. Footprint EAU (European Association of Urology) Extended-release form (or sustained-release form) _The term environmental footprint defines how much of the _Association for urological practice, research and educa- _A dosage form in which the pharmaceutical substance is Earth’s surface it would take to support humanity over the tion. released slowly over an extended period. long term with a given lifestyle and standard of living.

EEV emission standard Forward order _The voluntary EEV emission standard (Enhanced Environ- FAB (management training) _A forward order is a payment order that is executed in the mentally Friendly Vehicle) is an emission standard for vehi- _A series of professional development events for members future on a specific date rather than immediately. cles that produce lower emissions than the currently valid of senior and middle management (MDI and MKA) of the Euro 5 standard without increased fuel consumption. Galenica Group offered within the framework of the com- FPH pany’s corporate management development (CMD) pro- _FPH, which stands for Foederatio Pharmaceutica Helvetiae eHealth gramme. (Swiss Association of Pharmacists), is also a professional _A general term for IT-supported networking efforts in the title used in general and clinical pharmacy in Switzerland healthcare industry. FAIR-HF study that is analogous to the FMH title for physicians. _Ferinject® Assessment in patients with IRon deficiency and EMA (European Medicines Agency) chronic Heart Failure; a major, multi-centre, randomised, _Agency responsible for the assessment and monitoring of double-blind, placebo-controlled study that examined medications in the European Union. Plays a central role in whether correction of iron deficiency with Ferinject® could the authorisation of medications in the European Union and improve patient health. the member states of the European Economic Area. The European Commission approves or rejects marketing FCOS (Federal Coordination Commission for authorisation applications based on the EMA’s scientific Occupational Safety) evaluation. _Central information and coordination authority for occupational safety and health. Coordinates preventative measures, responsibilities for enforcement and the uniform application of regulations in Switzerland. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Glossary _153 galdat® Haematology insureINDEX® _A commercial and scientific database of around 200,000 _The branch of medicine concerned with the physiology, _A database for cost units in the healthcare sector that re- pharmaceutical and non-pharmaceutical products. It in- pathophysiology and diseases of the blood and blood-form- places galdat® in health insurance companies; developed cludes reference data in a standardised and uniform struc- ing organs. It includes, for example, malignant blood dis- and distributed by e-mediat. ture for all IT systems in the Swiss healthcare industry – for eases and diseases of the bone marrow. pharmacies, physicians, hospitals and health insurers; Intravenous (IV) galdat® forms the basis of all INDEX products. Developed Haemodialysis _A term referring to the administration of a medication or a and sold by e-mediat. _A blood cleansing process used in the treatment of kidney liquid directly into a blood vessel. diseases. GALecoline® Iron deficiency anaemia _The brand name of a line of products from Galexis HCFC _Anaemia due to iron deficiency: the production of haemo- _Refers to a group of chlorofluorocarbons (e.g. freon and globin, the red pigment in the blood, is disrupted by the lack GAL e-Learn halons). of iron. Iron deficiency anaemia is the most common form of _An online training platform for customers (particularly anaemia throughout the world. According to the World pharmacies); developed and distributed by Galexis. Health and Social Care Bill Health Organization (WHO), two billion people suffer from _Proposal to reform the UK healthcare system. iron deficiency anaemia worldwide. Galenics _Pharmaceutical technology for preparing the dosage form Heart failure Iron deficiency syndrome of medications (e.g. tablets or injection solutions). _Heart failure can lead to impaired performance in persons _A mild form of iron deficiency characterised by symptoms affected due to a lack of oxygen and blood supply to the such as fatigue and exhaustion, irritability, paleness and Gastroenterology organs. brittle nails. _The branch of internal medicine that deals with the gastrointestinal tract or digestive system. Home nurses _Qualified nursing professionals with specific additional Jarsin® Generic training in home nursing; a form of patient care offered by _A plant-based antidepressant that is also prescribed in- _A drug that contains the same active ingredient as a brand- MediService in conjunction with Pharma Care. creasingly for mild forms of multiple sclerosis; developed, name pharmaceutical product (originator product) already produced and sold by Vifor Pharma. on the market. Generics can differ from the originator prod- hospINDEX® ucts with respect to non-active ingredients and manufactur- _A medical database for all processes such as logistics, in- ing technologies. voicing and prescription that replaces galdat® in hospitals; KAV guidelines developed and distributed by e-mediat. _Guidelines of the Swiss Association of Cantonal Pharma- GEP (Galenica Economic Profit) cists. _An internally defined parameter used in capital manage- Hyperactivity ment and capital employment based on income components, _Excessively active behaviour that cannot be adequately Key performance indicator (KPI) free cash flow components and invested capital. The goal of controlled by the person affected. Also referred to as atten- _A measurement of performance in terms of progress made the Galenica Group is to achieve a sustainable increase in tion deficit disorder (ADD). or level of achievement with regard to important objectives. GEP in all business sectors. Hypertonic Kidney Disease: Improving Global Outcome (KDIGO) Global Compact _Solution with a higher concentration of salt than blood _Global foundation to improve the care and treatment _An international initiative of the United Nations and par- plasma (physiological solution). outcomes of patients with kidney disease worldwide. ticipating corporations established to achieve socially responsible and environmentally compatible globalisation. KUKO® Ibuprofen _Customer-specific conditions, a Galexis service for cus- Global Reporting Initiative (GRI 3) _An active ingredient that relieves pain, reduces fever and is tomers and suppliers. _An international organisation established by investors and anti-inflammatory. environmental organisations in partnership with the United Nations Environment Programme (UNEP); it develops guide- Identa Life cycle management lines, through a participatory process, for the preparation of _Image database created to simplify the identification of _Refers to a strategic concept for managing a product sustainability reports by companies, governments and medicines, compiled and distributed by Documed. throughout its entire life cycle. NGOs. Immunology Lipids Good Distribution Practice (GDP) _The science concerned with the biological and biochemical _General term for natural substances that are insoluble in _Guidelines for good logistics practice followed by Switzer- principles of the body’s defence against pathogens, such as water such as fatty acids, fats and oils. This group also in- land, the EU and the FDA for quality assurance in the storage, bacteria, viruses and fungi, and other foreign substances cludes the omega-3 and omega-6 unsaturated fatty acids, handling and shipment of pharmaceuticals, active sub- such as biological poisons. which are the active ingredients of Equazen eye q™. stances and other medicinal products. Immunoprophylaxis logINDEX® Good Manufacturing Practice (GMP) _The prevention of infectious diseases via the stimulation of _Database for wholesalers in the Swiss healthcare industry _Guidelines followed by Switzerland, the EU and the FDA the immune system. which contains information on approximately 180,000 for quality assurance in the production of pharmaceuticals, items. Developed by, and available through, e-mediat. active substances and other medicinal products. IMS Health _An international consulting and market research company LoRe Green Code of Conduct based in Hergiswil, Switzerland, that is active in the pharma- _The internal Galenica LoRe (Logistics-Retail) project should _Internal guidelines aimed at promoting ecological behav- ceutical sector. improve product availability. It also aims to give pharmacy iour (Code of Conduct). employees more time for customer service. Indication Gynaecology _A reason for a medical treatment or procedure. LTI programme (long-term incentive programme) _The branch of medicine concerned with women’s health _Share-based profit-sharing bonus programme for members issues. Inflammatory bowel disease (IBD) of the Corporate Executive Committee and certain members _Inflammation of the digestive tract. of management.

Injectafer® _Brand name of Ferinject® in the USA and Belgium WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 154_ Glossary · Galenica annual report 2012 Lupus nephritis MHRA (Medicines and Healthcare products Oncology _Inflammation of the kidneys as the result of a systemic Regulatory Agency) _The branch of medicine that deals with cancer. autoimmune disease. _Licensing and regulatory body for medicines in the UK. Ophthalmology Minergie standard _The branch of medicine concerned with the anatomy, func- Magnesium® Vital _Minergie is the main energy standard in Switzerland for low tions, pathology and treatment of the eye. _A magnesium replacement product for cramps in the calf energy buildings. muscles; developed and distributed by Vifor Pharma. OPINIO MKA _The Galenica Group employee survey. Maltofer® _Member of middle management in one of the companies of _An oral iron replacement product for the treatment of iron the Galenica Group. Oral deficiency that is sold worldwide; developed and produced _A term referring to a medication ingested through the by Vifor Pharma. Mutual recognition procedure mouth. _Procedure that allows member states of the European Managed Care Union to approve decisions about a medicinal product, such Osteoporosis _A healthcare management model. The Managed Care as a marketing authorisation, that have been decided by _A disease (of old age) involving a greater vulnerability to model incorporated into the revision of the Swiss Federal another EU country. bone fracture due to an overly rapid reduction in bone mass; Health Insurance Act is intended to promote integrated often associated with calcium deficiency. healthcare networks and improve ability to offset risk. my-eDossier _Pharmaceutical database with information about a Otalgan® MDI patient’s drug therapy which is part of the pharmacy man- _A product for the treatment of earache and inflammation of _Member of senior management in one of the companies of agement tool TriaPharm®. the eardrum; produced and distributed by Vifor Pharma. the Galenica Group. OTC Medical affairs Nasmer® _Over the counter, a term used to refer to medicines avail- _A general term covering the following activities: contact _A moisturising nasal spray produced and distributed by able without a prescription. with physicians who are opinion leaders, planning and coor- Vifor Pharma. dination of clinical trials, interface between marketing and OTX medicine, medical-scientific training and continuing educa- NDA (New Drug Application) _OTX medications are drugs which are not prescription-only, tion for sales representatives. _The NDA is the official means by which manufacturers of but are nonetheless largely prescribed by doctors; they are pharmaceutical products in the USA apply to the FDA for not always reimbursed by health insurers. Medical technology approval to market a drug in the USA. _Equipment and technical procedures used in medical practices and laboratories. Nephrology PA21, phosphate binder _The branch of medicine dealing with the kidney and with the _A new product currently under development by Vifor Medicare Improvements for Patients and diagnosis and treatment of kidney diseases. Pharma. PA21 binds excess phosphate in the blood and thus Providers Act (MIPPA) promotes phosphate elimination. It is intended primarily for _Medicare is a public health insurance programme in the netCare haemodialysis patients. USA for elderly and/or disabled individuals. The MIPPA is _A project initiated by pharmaSuisse, the Swiss pharmacy part of the US healthcare reform package and covers areas association, and a health insurer, whereby physicians can Parapharmaceuticals such as the reimbursement system for medicines. speak to pharmacists and patients via a screen. _Products such as wound dressings that are sold along with pharmaceuticals but do not meet the legal definition of a Medication check Neurology pharmaceutical. _A service provided by pharmacists under the service- _The branch of medicine concerned with diseases of the based remuneration (SBR) agreement; includes remunera- nervous system. Parcel Service tion for checking prescriptions, checking for interactions _Transport of parcels to and between Galexis customers, (compatibility with other medications), writing instructions Noripurum® performed along with regular deliveries by Galexis. for use, etc. _Brand name of the oral iron replacement product Maltofer® in Brazil. Parenteral medINDEX® _A term referring to administration of a medicine by a route _A medical database that replaces galdat® in medical prac- Nova other than the gastrointestinal tract; generally by infusion tices; developed and sold by e-mediat. _An invoicing system for Galexis customers. (such as with Venofer®), injection, through the skin (transdermal) or mucous membranes. MediService _MediService is a specialty pharmacy that delivers prescrip- OID (object identifiers) Pemphigus vulgaris tion-only medications directly to its patients at home and _Unique numerical codes that permit objects to be identified _An autoimmune disease in which the immune system through Pharma Care offers specialist in-home therapy simply. OIDs are useful when creating electronic registers produces antibodies against certain proteins of the skin and counselling and patient support for chronically ill people with for eHealth systems. the mucous membranes. rare diseases requiring complex therapies. OLPCockpit Performance units mediVISTA.ch _Payment control function of the pharmacy management _Performance-related measurement unit used in the long- _Web-based information platform for doctors in private tool TriaPharm®. term incentive programme. practice and those working in hospitals which complements medINDEX®. OLPFact Perskindol® _Function of the pharmacy management tool TriaPharm® _A product line that provides relief from aching muscles and Mg5® that supports invoicing to health insurers. joints; manufactured and distributed by Vifor Pharma. _An oral magnesium replacement product for the treatment of magnesium deficiency; distributed by Vifor Pharma. Omega-3 and omega-6-fatty acids Pharma Care _Polyunsaturated fatty acids that are essential for human _Comprehensive medical in-home care of patients with life and are found in substances such as fish oils. chronic and rare diseases; provided by MediService.

Onco-haematology _The branch of medicine concerned with cancers that affect the blood system. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Glossary _155 Pharmaceutical Market Restructuring Act (AMNOG) SAM (special staff training) Swiss HealthCare Services, a strategic area _Act to restructure the pharmaceutical market in Germany. _A series of training seminars for new employees focused on _The focus by the Galenica Group on a business model processes and personal development, offered within the providing services for the Swiss healthcare market. This Pharmacovigilance framework of the corporate management development model integrates the Amavita, Sun Store, Coop Vitality, _Stands for the ongoing, systematic monitoring of the safety (CMD) programme. MediService and Winconcept pharmacy formats, logistics of a drug with the objective of identifying and assessing any services and information management. undesirable effects in order to take measures to minimise SDC (Swiss Agency for Development and Cooperation) the risk. _Swiss federal authority responsible for the country’s in- Swissmedic volvement in international collaborations, development _The Swiss Agency for Therapeutic Products; the regulatory pharmavista activities and humanitarian assistance. Administratively agency for medicines and medical devices based in Bern. No _An Internet-based product information platform developed subordinate to the Federal Department of Foreign Affairs. pharmaceutical products for humans or animals may be and sold by e-mediat. marketed in Switzerland until they have been licensed by SECO (State Secretariat for Economic Affairs) Swissmedic. All clinical trials in Switzerland must also be Phytopharmacy _The State Secretariat for Economic Affairs is responsible approved by Swissmedic. _The science that deals with the effects and manufacture of for creating the regulatory and economic policy conditions plant-based pharmaceuticals. for sustainable economic growth. SECO is an office of the Symfona® Federal Department of Economic Affairs. _A gingko-based product for the treatment of age-related Pipeline impaired cerebral blood flow, for enhancing the power of _All future products currently in various stages of devel- Self-dispensation concentration and for increasing memory retention; devel- ment. _Direct dispensation of medicines by physicians. oped and distributed by Vifor Pharma.

Polymedication check Serum phosphate level _A compliance-related check by the pharmacist to ascertain _Concentration of phosphate in the blood. Telemedicine whether various medicines being taken simultaneously by _Medical diagnosis and therapy via telecommunications. the patient are tolerated in combination. Service-based remuneration (SBR) _The agreement between santésuisse (the Swiss Associa- TOP HOMECARE Predialysis tion of Health Insurers) and pharmaSuisse (formerly the _A sales and consulting concept in the homecare area for _The stage of renal insufficiency prior to commencement of Schweizerische Apothekerverband – the Swiss Association pharmacies and drugstores; developed and marketed by dialysis. of Pharmacists), under which a pharmacy’s income is no Galexis. longer linked to the product price. PREFER study Toxicity profile _Clinical study with Ferinject® in women with iron defi- Sevelamer _Profile of the toxicity of a substance. Determinations of ciency without anaemia which aims to confirm the results of _An active ingredient from the phosphate binder group, toxicity are generally made in animal studies. the FERRIM study in a larger number of patients. which is used in dialysis patients with hyperphosphataemia to bind dietary phosphates. Track’n’Trace Prewholesale _IT-based tracking and tracing of deliveries. _The logistical link between the manufacturer (pharmaceuti- SmartLOG cal industry) and the wholesale trade. For example, Alloga _The name of a pilot test performed in connection with the Transdermal in the Galenica Group. development of a system for tracking drug deliveries. Its goal _A type of treatment (generally patch systems) in which the is to improve protection against counterfeit drugs. Documed active ingredient is absorbed through the skin. Process management is collaborating in the feasibility study at the request of _The design and management of entire processes. RefData. TriaMed® _A management software solution for medical practices; Promologistics Specialty Pharma, a strategic area developed and marketed by HCI Solutions. _A logistics system for pharmaceutical companies’ promo- _The strategic focus by the Galenica Group on the develop- tional materials; marketed by Galexis. ment, production and sale of its own medicines in interna- TriaMed® Box tional markets, particularly products for iron deficiency, _A small computer, fully preconfigured with TriaMed®. An as well as its own OTX and OTC products. entry product launched by HCI Solutions. RefData _Independent foundation promoting low-cost, socially re- Subanalysis TriaMed TS® sponsible and economically relevant referencing of products, _Analysis of data relating to one or more clinical studies _Management software for medical practices which runs via services, people and institutions. following their completion for further interesting findings. an external server of HCI Solutions; developed and sold by HCI Solutions. Regulatory affairs Sublicence _A general term for the activities that are required in order _A portion of a licence that is granted to another company TriaOne® to obtain approval from the authorities for the development, or another person. _Integrated administrative solution with complete coverage manufacture, marketing and distribution of pharmaceuti- of all necessary functionalities of a company (ERP); based on cals. Sun Store the former product Arizona, developed by BMC. _Leading pharmacy chain in Switzerland with points of sale Rheumatology in high-traffic locations; acquired by Galenica in 2009; con- TriaPharm® _The branch of medicine dealing with the diagnosis and tinues to operate under its own name. _A management software solution for pharmacies; devel- treatment of chronic diseases which mostly become evident oped and marketed by HCI Solutions. through musculoskeletal pain. Surgery _The branch of medicine that uses operative manual or in- TriaScan® Roll-out strumental techniques on a patient to treat diseases and _Expansion software from TriaPharm® to scan in and digi- _The market launch of a product or service. The term refers injuries. talise prescriptions; developed and marketed by HCI Solu- primarily to technical applications. tions. SwissDocu® Rx _A service that provides information on products and on Triofan® _A designation for prescription drugs or medicines. scientific and non-scientific questions from pharmacies and _Nasal spray for colds, the leading product of its type in drugstores; operated by e-mediat. Switzerland; produced and sold by Vifor Pharma.

Swiss Drug Compendium (Arzneimittel-Kompendium der Schweiz®) _A standard reference work for medical professionals that contains extensive technical product information; developed and marketed by Documed. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 156_ Glossary · Galenica annual report 2012 Ulcerative colitis _Ulcerative colitis is a form of chronic inflammatory bowel disease that affects the rectum and large intestine.

Uro-Vaxom® _Biotech drug for the prevention and alleviation of urinary tract infections; developed and marketed by OM Pharma.

Value-based management _A management approach that ensures that companies are focused on improving enterprise value (corporate value).

Venofer® _An intravenous product for the treatment of iron deficiency; developed and produced by Vifor Pharma and sold worldwide.

Vial _A small bottle with various types of closure (e.g. capsule closure with a membrane for piercing).

VIT91 _A pipeline product currently in chemical development at Vifor Pharma.

VOCs _Volatile organic compounds; a collective term for organic, i.e. carbon-containing substances that evaporate easily and are present as a gas at low temperatures. Term used primarily in connection with air pollutants.

Warehoused cosmetics _Cosmetics (particularly perfumery products) distributed through specialist shops or specialist sections of department stores.

WHO _The World Health Organization of the United Nations, based in Geneva, Switzerland.

Wholesale _Link between the various stages of distribution; purchases goods that it does not generally process or manufacture itself (merchandise) and distributes these to processing, retail, industrial or other commercial companies, etc. For example, Galexis and Unione Pharmaceutica Distribu zione in the Galenica Group.

Winconcept _The management and marketing company for Feelgood’s pharmacies. Winconcept develops marketing concepts designed to promote communication and quality, with a strong focus on the consumer.

World Trade Organization (WTO) _The World Trade Organization is an international organisation headquartered in Geneva, that regulates trade and economic relations. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Glossary _157 PICTURE LEGENDS TEAMS

Team Production, Vifor Pharma, Villars-sur-Glâne (p.16) Team Global Information Services, St.Gallen, Glattbrugg, _ Top from left to right: Patrice Pittet, Alexandre El Soda, Myriam Voltz, Villars-sur-Glâne, Victoria (CA) (p.19) Nathalie Terrapon, Vera Viligiardi, Pierre Portmann _Standing: Brigitte Winter, Matthias Morgenstern, Roman Bauer, _ On the stairs, from top to bottom and then from left to right: Alex Sigalas, Michele Bernasconi, Mischa Giannini Manuel Raemy, Matthias Lauber, Patrick Obrist, Sébastien Kunetka, _ Seated: Natascha Hamel, Curtis LeBoutillier, Wolfgang Schätzle, Pascal Perret, Nunzio Salluce, Frédéric Baeriswyl, Roger Bossard, Pascal Perret Pierre Muller, Florian Minois, Yvan Liard, Karin Waterkamp, Federico Cimini, Frédéric Zwahlen, Renaud Villard

Team Marketing Communications, Galexis Niederbipp (p.26) Team Sales Pharmacies, Drugstores, Hospitals and Homes, _ From left to right: Monika Kammermann, Rommy Peterli, Rosmarie Pauli, Galexis, Niederbipp (p.31) Melanie Wetzler, Adrian Schray, Leena Majaranta, Stefanie Forster, _ From left to right: André Bolliger, Tino Munguia, Ariel Choffat, Natalina Polito, Jean-Christophe Stöckli, Nadine Spycher, Monika Spasova Bruno Kühni, Thierry Lannaz, Renzo Zihlmann, Ruth Röösli, Marcel Bosson, Ruth Oehrli, Christoph Metzger, Patrik Knupp WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 158_ Picture legends teams · Galenica annual report 2012 Team HomeCare, MediService, Zuchwil (p.32) Team Business Support, GaleniCare, Bern (p.35) _ Top from left to rigth: Greta Pettersen, André Näf, Susanne Klinger, _ From left to right: Ursula Luder, Daniel Grob, Daniela Schild, Elias Olivera, Manuela Mani Sonja Hubl _ Bottom from left to right: Debora Haag, Nadja Münzel, Dominique Chevailler, Dirk Böhme, Ulrike Murer, Günther Scheirlinckx

Aristea Graphics Team, Sun Store, St-Sulpice (p.37) Team Marketing & Sales, Documed, Bern (p.40) _ From left to right: Tanja Doepke, Isabelle Hubner, Sandy Magnin, _ From left to right: Doris Soltermann, Andreas Lutz, Regula Hayoz, Jessica Grand, Séverine Frautschi, Olaya Torea Chantal Candrian, Matthias Sonnenschein, David Fleming, Michèle Schär

The pictured employees are representative for their corresponding team. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Galenica annual report 2012 · Picture legends teams _159 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 ADDRESSES OF COMPANIES OF THE GALENICA GROUP

Galenica Group Austria Romania United Kingdom Retail HealthCare Information Vifor Pharma Österreich GmbH Vifor Pharma Romania Srl. Vifor Pharma UK Ltd. Galenica Ltd. Amavita HealthCare Ltd. Documed Ltd. Linzerstrasse 221, 1140 Vienna, Austria 34, C. Brancoveanu Str., 400467 Cluj-Napoca, Potters Division Untermattweg 8, 3027 Bern, Switzerland Industriestrasse 2, 4704 Niederbipp, Elisabethenanlage 11, 4010 Basel, Switzerland Phone +43 1 41 64 777, fax +43 1 41 64 777 17 Romania 1 Botanic Court, Martland Park, Phone +41 58 852 81 11, fax +41 58 852 81 12 Switzerland Phone +41 58 851 71 11, fax +41 Phone +41 58 851 21 11, fax +41 58 851 21 15 www.viforpharma.at Phone +40 264 449 556, fax +40 264 550 230 Wigan, WN5 0JZ, UK www.galenica.com 58 851 71 14 www.documed.ch www.viforpharma.ro Phone +44 1942 219 960, fax +44 1942 219 966 Belgium www.pottersherbal.co.uk GaleniCare Ltd. e-mediat Ltd. Vifor Pharma België N.V. Russia Corporate Finance Untermattweg 8, 3027 Bern, Switzerland Untermattweg 8, 3027 Bern, Switzerland Uitbreidingstraat 84, 2600 Antwerpen, Vifor (International) Inc. Vifor Pharma UK Ltd. Phone +41 58 852 84 00, fax +41 58 852 84 84 Phone +41 58 851 26 00, fax +41 58 851 27 10 Bürgschaftsgenossenschaft Galenica Belgium 44, 3rd Tverskaya-Yamskaya St., The Old Stables, Bagshot Park, Bagshot, www.galenicare.com www.e-mediat.ch (Galenica Guarantee Cooperative) Phone +32 3218 2070, fax +32 3218 2208 125047 Moscow, Russia Surrey GU19 5PJ, UK Untermattweg 8, 3027 Bern, Switzerland www.viforpharma.com Tel. +7 495 564 82 66, Fax +7 499 251 58 08 Phone +44 1276 853 600, fax +44 1276 452 341 GaleniCare Holding Ltd. _ e-mediat Ltd. Phone +41 58 852 81 11, fax +41 58 852 85 35 www.viforpharma.ru www.viforpharma.co.uk Untermattweg 8, 3027 Bern, Switzerland 17, rue des Pierres de Niton, Canada Phone +41 58 852 84 00, fax +41 58 852 84 84 1210 Genf, Switzerland Sigal AG Aspreva International Ltd. Spain USA www.galenicare.com Phone +41 58 851 28 00 Untermattweg 8, 3027 Bern, Switzerland 1203–4464 Markham Street, Vifor Pharma España SL Aspreva Pharmaceuticals Inc. fax +41 58 851 28 09 Phone +41 58 852 81 11, fax +41 58 852 85 35 Victoria BC V8Z 7X8, Canada Av. Cami Reial, 51–57, 106 Allen Road, Basking Ridge, NJ 07920, USA GaleniCare Management Ltd. www.e-mediat.ch Phone +1 250 744 2488, fax +1 250 744 2498 08184 Palau-Solità i Plegamans, Barcelona, Phone +1 908 212 1020, fax +1 908 212 1029 Untermattweg 8, 3027 Bern, Switzerland www.viforpharma.com Spain www.viforpharma.com Phone +41 58 852 84 00, fax +41 58 852 84 84 e-prica Ltd. Personnel pension funds Phone +34 902 471 511, fax +34 93 863 05 58 www.galenicare.com Untermattweg 8, 3027 Bern, Switzerland France www.viforpharma.es Galenica Pension Fund Phone +41 58 851 26 00, fax +41 58 851 27 10 Vifor France SA Logistics Untermattweg 8, 3027 Bern, Switzerland MediService Ltd. 7–13, boulevard Paul-Emile Victor, Sweden Phone +41 58 852 87 00, fax +41 58 852 87 01 Alloga Ltd. Ausserfeldweg 1, 4528 Zuchwil, Switzerland HCI Solutions Ltd. 92521 Neuilly-sur-Seine cedex, France Vifor Pharma Nordiska AB www.galenica-pvs.ch Buchmattstrasse 10, P.O. Box, 3401 Burgdorf, Phone +41 32 686 20 20, fax +41 32 686 20 30 Untermattweg 8, 3027 Bern, Switzerland Phone +33 1 41 06 58 90, fax +33 1 41 06 58 99 Torshamnsgatan 30 A, 164 40 Kista, Sweden Switzerland www.mediservice.ch Phone +41 58 851 26 00, fax +41 58 851 27 10 www.viforpharma.com Tel. +46 8 558 066 00, Fax +46 8 558 06 699 GaleniCare Pension Fund Phone +41 34 421 45 45, fax +41 34 421 46 00 www.hcisolutions.ch www.viforpharma.se Untermattweg 8, 3027 Bern, Switzerland www.alloga.ch Sun Store SA Germany Phone +41 58 852 87 00, fax +41 58 852 87 01 38, rue des Jordils, 1025 St-Sulpice, _ HCI Solutions Ltd. Department Vifor Pharma Deutschland GmbH Switzerland www.galenicare-pvs.ch Dauf SA Switzerland TriaPharm® Baierbrunner Strasse 29, D-81379 Munich, Aspreva Pharmaceuticals Ltd. Via Figino 6, 6917 Barbengo-Lugano, Phone +41 21 694 21 00, fax +41 21 694 21 01 Worbstrasse 201, 3073 Gümligen, Germany Untermattweg 8, 3027 Bern, Switzerland Switzerland www.sunstore.ch Switzerland Phone +49 89 324 918 600, Phone +41 58 852 81 11, fax +41 58 852 81 12 Pharma Phone +41 91 985 66 11, fax +41 91 985 66 67 Phone +41 31 950 05 00 fax +49 89 324 918 601 www.viforpharma.com www.dauf.ch Winconcept Ltd. fax +41 31 950 05 99 Headquarter www.viforpharma.de Untermattweg 8, 3027 Bern, Switzerland www.hcisolutions.ch Vifor Pharma Ltd. OM Pharma SA Galexis Ltd. Phone +41 58 852 82 00, fax +41 58 852 82 10 Flughofstrasse 61, P.O. Box, 8152 Glattbrugg, Italy 22, rue du Bois-du-Lan, P.O. Box 88, Industriestrasse 2, P.O. Box, 4704 Niederbipp, www.winconcept.ch _ HCI Solutions Ltd. Department Switzerland Vifor Pharma Italia S.r.L 1217 Meyrin 2, Switzerland Switzerland TriaPharm® Phone +41 58 851 80 00, fax +41 58 851 80 01 Via Crema, 8 Phone +41 22 783 11 11, fax +41 22 783 11 22 Phone +41 58 851 71 11, fax +41 58 851 71 14 En Budron H16, www.viforpharma.com 26020 Palazzo Pignano (CR), Italy www.viforpharma.com www.galexis.com Not fully consolidated: 1052 Le Mont-sur-Lausanne, Switzerland Tel. +39 0373 974 1, fax +39 0373 974 201 Phone +41 21 654 50 50, Argentina www.viforpharma.com Vifor Ltd. _ Distributionszentrum Niederbipp Coop Vitality AG fax +41 21 654 50 51 Vifor Pharma America Latina S.A. 10, route de Moncor, P.O. Box, Industriestrasse 2, P.O. Box, Untermattweg 8, 3027 Bern, Switzerland www.hcisolutions.ch Maipú 1300, piso 13 Netherlands 1752 Villars-sur-Glâne, Switzerland 4704 Niederbipp, Switzerland Phone +41 58 852 86 20, fax +41 58 852 86 30 Buenos Aires, Argentina (C1006ACT) Vifor Pharma Nederland B.V. Phone +41 58 851 61 11, fax +41 58 851 60 50 Phone +41 58 851 71 11, www.coopvitality.ch Tel. +54 11 4318 9900, fax +54 11 4318 9999 Westbroek 43, NL-4822 ZX Breda, www.viforpharma.ch fax +41 58 851 71 14 www.viforpharma.com Netherlands Phone +31 88 848 43 00, fax +31 88 848 43 19 _ Vifor Ltd. _ Centre de distribution Lausanne-Ecublens Asia/Pacific www.viforpharma.com Branch Medichemie Ettingen 2, route de Crochy, P.O. Box 135, Vifor Pharma Asia Pacific Pte. Ltd. Brühlstrasse 50, P.O. Box, 4107 Ettingen, 1024 Ecublens, Switzerland 89 Amoy Street, 01–00 Singapore 069908 Peru Switzerland Phone +41 58 851 51 11, Phone +65 6327 5937, fax +65 6327 5936 OM Pharma S.A. Phone +41 58 851 22 00, fax +41 58 851 51 51 www.viforasiapac.com Jr. Rey Basadre 385, Lima 17 – Apartado 3605 fax+41 58 851 22 05 Lima 100, Perú www.viforpharma.com G-Pharma AG Australia Tel. +51(1) 61 68 100, Fax +51(1) 61 68 199 Industriestrasse 2, P.O. Box, 4704 Niederbipp, Vifor Pharma Pty Ltd. www.viforpharma.pe Switzerland Level 8, 80 Dorcas Street, Southbank, Vifor Fresenius Medical Care Renal Pharma Ltd. Phone +41 58 851 71 11, fax +41 58 851 72 57 Melbourne, VIC, 3006, Australia Portugal Rechenstrasse 37, P.O. Box, 9001 St. Gallen, Phone +61 3 96 86 0111, fax +61 3 96 86 0333 OM Pharma S.A. Switzerland Unione Farmaceutica Distribuzione SA www.viforpharma.com.au Rua Industria n°2, Quinta Grande, Phone +41 58 851 84 84, fax +41 58 851 84 85 Via Figino 6, 6917 Barbengo-Lugano, 2610-088 Amadora – Lisboa, Portugal Switzerland (Apartado 60 001 – 2701-951 Amadora) Vifor (International) Ltd. Phone +41 91 985 61 11, fax +41 91 994 47 62 Phone +351 21 470 85 00, fax +351 21 470 85 06 Rechenstrasse 37, P.O. Box, 9001 St. Gallen, www.unione.ch www.viforpharma.com Switzerland Phone +41 58 851 84 84, fax +41 58 851 84 85 www.viforpharma.com

Situation: January 2013 WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291 Masthead

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

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Pictures _Plastic polymer pellets, Srebrina Yaneva, iStockphoto, cover _SC Box, Alloga AG Burgdorf, inside cover, front

_HTML tags, Krzysztof Zmij, iStockphoto, page 2 _iMac, Apple Inc. Cupertino, page 2

_Petri dish for clinical investigations, Sven Hoppe, iStockfoto, page 8 _Broncho-Vaxom®, Vifor Pharma Ltd., Glattbrugg, page 8

_Battery of Alessandro Volta, P. Faligot, Musée des arts et métiers-Cnam Paris, page 12 _Nissan Leaf, Nissan Center Europe GmbH Brühl, page 12

_Faber-Castell, Faber-Castell AG Stein, page 45 _Amavita Senses, GaleniCare AG Bern, page 45

_Upper Lusatian Library of Sciences, Municipal Collections on the History and Culture of Görlitz, page 49 _iPad, Apple Inc. Cupertino, page 49

_Cathode ray tube of Thomson, Science Museum/Science&Society Picture Library, page 70 _Mass spectrometry, Jean Jacques Ruchti, page 70

_Great Pyramid of Kheops, holgs, iStockphoto, page 82 _Microprocessor, Jean Jacques Ruchti, page 82

_Linus Pauling, Ava Helen and Linus Pauling Papers. Oregon State University Library, page 89 _Hair analysis, Otho-Analythik AG Rapperswil-Jona, page 89 _Original Giroux Daguerreotype, Science Museum/Science&Society Picture Library, page 90 _netCare, GaleniCare AG Bern, page 90

_Apple II desktop computer and monitor, Science Museum/Science&Society Picture Library, Galenica Ltd. page 151 Untermattweg 8 · P.O. Box · CH-3001 Bern _Galexis print products, Galexis AG Niederbipp, page 151 Phone +41 58 852 81 11 · Fax +41 58 852 81 12 [email protected] . www.galenica.com Pictures Teams _ Jean-Jacques Ruchti, Aarau Contact person for Investor Relations: Fritz Hirsbrunner, Head of Investor Relations, [email protected] Media contact person: Christina Hertig, Head of Corporate Communications, [email protected]

_The annual report is also available in French and German and can be downloaded as a PDF at www.galenica.com. WorldReginfo - b0e4b2ae-fb55-48c5-9a56-266a8e884291