Annual Report 2015 of the Galenica Group and Galenica Ltd

Full Version Annual report 2015 of the Galenica Group and Galenica Ltd.

The Galenica Group – excellence in the healthcare market 2 Galenica Group Milestones 2015

January February March April

50 years of Anti-Brumm® Iron deficiency Alloga expansion Launch of vitavista.ch Anti-Brumm® is Whitney Toyloy, Miss Thanks to its new technical Using smartphones and Switzerland’s best-known Switzer land 2008, raises rooms, Alloga can now tablets, consumers can and most popular brand of awareness about iron store chemicals and certain search by theme for prod- mosquito repellent, earning deficiency in an impactful hazardous materials sepa- ucts that are available in a place in the Swiss Brand short film aimed at young rately in fireproof compart- pharmacies and drugstores Museum. women. As the film shows, ments or an explosion-proof and display the fastest iron deficiency has room. route to a specialist retailer. various symptoms which are not widely known.

May June July August

Mircera® Opti-Mix Vifor Consumer Health Patiromer FOS Galenica and Roche enter Preparations for the The activities of Vifor Vifor Fresenius Medical into an exclusive licensing first stage of the Opti-Mix Pharma Consumer Health- Care Renal Pharma and agreement for the market- launch run at full speed. care, which are primarily Relypsa, Inc. enter into an ing and distribution of the This stage involves the elec- focused on the Swiss exclusive partnership to Roche Mircera® product tronic transfer of batch market, are transferred to commercialise the potas- in the USA and Puerto Rico. and expiry data for medicinal the Galenica Santé Business sium binder Patiromer FOS products. unit. The new company is in Europe and additional called Vifor Consumer territories. Health.

September October November December

Galenica Santé Potters Celebrating pharmacies HCI Solutions In order to play an even Soho Flordis International Amavita looks back upon The management structures more active and dynamic signs an agreement for its 10-year existence and of the companies e-mediat role in the market, Galenica the acquisition of Potters Coop Vitality celebrates its and Documed are adapted Santé changes its organisa- and the Equazen™ brand 15th “birthday”. With various prior to their consolidation tional structure: the three portfolio from Vifor Pharma. activities, the anniversaries with HCI Solutions Ltd. in Business sectors are now were celebrated over the January 2016. called “Products & Brands”, course of the year with the “Retail” and “Services”. clients throughout Switzer- land.

Galenica annual report 2015 Content Galenica Group 3

Annual Report 2015

Galenica Group

4 Key figures 2015

6 Statement by the Executive Chairman

8 2015 in brief

Gradually and continuously improving efficiency 20 Vision, Mission, Values and For years Vifor Pharma sites have been implementing Strategy initiatives aimed at improving efficiency. In 2015, the focus has been on system maintenance – with the 24 Healthy from head to toe with goal of reducing standstills and malfunctions, and Galenica thereby increasing system performance. 60 Corporate Governance 34 76 Remuneration Report

90 Human Resources

Reporting

26 Vifor Pharma: Foreword by the CEO

29 Vifor Pharma

38 Galenica Santé: Foreword Reliable security and quality by the CEO Galenica Santé plays a central role in supplying 42 Health & Beauty: Switzerland with products and services for health, Products & Brands and Retail beauty and well-being. Security and quality is at its core – from professional transportation to 50 Services sustainable disposal.

56 Coverages

34 G radually and continuously improving efficiency

56 Reliable security and quality Information regarding the Sustainability Report Financial Statements 2015

To date, the Galenica Group Sustainability Report has 98 Galenica Group formed part of the Annual Report, and for scheduling reasons was always based on provisional data that had 16 4 Galenica Ltd. been extrapolated as at 31 December. The Sustainability Report will in future be published in the second quarter of the following year and include Annex the actual data as at 31 December. Accordingly, it no longer forms part of the Annual Report and will only be 17 2 Glossary published on the website: About Galenica > Sustainability. 17 8 Addresses of companies There are, however, two coverages on selected sus- of the Galenica Group tainability topics in this Annual Report 2015.

Galenica annual report 2015 4 Galenica Group Key figures 2015

Key figures 2015 1) Key figures are reported for each Business unit not taking into account Corporate and eliminations

Net sales1) Net sales Number of employees by Business unit by region Galenica Group in million CHF in million CHF

3,791.6 3,791.6 7,804 Galenica Group Galenica Group Galenica Group

Vifor Pharma CHF 967.0 million Switzerland CHF 2,985.6 million Galenica Ltd. 45 Galenica Santé CHF 2,891.3 million Americas CHF 415.0 million Vifor Pharma 1,825 Europe CHF 292.9 million Galenica Santé 5,934 Other countries CHF 98.1 million

EBITDA1) EBIT1) Net profit by Business unit by Business unit Galenica Group in million CHF in million CHF in million CHF

537.4 450.8 370.0 Galenica Group Galenica Group Galenica Group

in million CHF 2015 2014 Change Net sales 3,791.6 3,416.3 +11.0 % Personnel costs 659.2 639.3 +3.1 % EBITDA 537.4 446.8 +20.3 % in % of net sales 14.2 % 13.1 % EBIT 450.8 370.2 +21.8 % in % of net sales 11.9 % 10.8 % Income taxes 59.0 45.3 +30.2 % Net profit 370.0 312.0 +18.6 % – Attributable to shareholders of Galenica Ltd. 301.1 284.5 +5.8 % – Share of minority interests 68.9 27.5 +150.4 %

Investment in property, plant and equipment and intangible assets 368.61) 70.0 +426.3 % Investment in R&D 88.8 104.2 –14.8 % Employees at reporting date (FTE) 6,421 6,348 +1.1 % Cash flow from operating activities 522.2 355.8 +46.8 % Total assets 3,640.0 3,208.3 +13.5 % Shareholders’ equity 1,976.2 1,750.5 +12.9 % Equity ratio 54.3 % 54.6 % Net debt 159.1 341.1 –53.3 % Gearing 8.1 % 19.5 % 1) Including upfront and milestone payments of CHF 290.4 million from licensing agreements

Galenica annual report 2015 Key figures 2015 Galenica Group 5

Share price performance in percent

4,000%4’000%

3,500%3ʼ500%

3,000%3ʼ000%

2,500%2ʼ500%

2ʼ000%2,000%

1,500%1’500%

1,000%1’000%

Swiss Performance Index (SPI) 500%

0% 2011 2012 2013 2014 2015 +26 % +4,000 %

total shareholder return p.a. from cumulative growth in the share price from 1 995 (start of transformation strategy) 1 995 (start of transformation strategy) to 2015 to 2015

Share information

in CHF 2015 2014 Share price at reporting date 1,574.00 792.00 Highest share price for the year 1,617.00 971.00 Lowest share price for the year 696.00 694.00 Stock exchange capitalisation at reporting date in million CHF 10,194.6 5,130.3 Earnings per share1) 46.47 43.91 Earnings per share (excluding effects due to IAS 19)1) 47.67 44.27 Shareholders’ equity per share1) 290.02 264.35 Gross dividend per share 18.002) 15.00 Pay-out ratio3) 38.7 % 34.2 % Price-earnings ratio4) 33.87 18.04 1) Attributable to the shareholders of Galenica Ltd. 2) According to Board of Directors’ proposal to Annual General Meeting on 28 April 2016 3) Gross dividend in % of earnings per share 4) Share price exchange rate at reporting date in relation to earnings per share 18 .00 38.7 % 46 .47

gross dividend per share in CHF pay-out ratio earnings per share in CHF

Galenica annual report 2015 6 Galenica Group Statement by the Executive Chairman

The culture and the manner in which Vifor Pharma and Galenica Santé have been built make them unique companies.

Dear Shareholders, A unique Group in terms Ladies and Gentlemen, of strategy and performance

On behalf of our employees Just 20 years ago, on 27 June 1995 in who have given everything for Gerzen see (canton of Bern), the Board of our shareholders… Directors entrusted us with the management of the Galenica Group, a small na- Etienne Jornod On Tuesday, 1 December 2015, a new chap- tional wholesaler which was owned by and “As Chairman of the Galenica Group for the ter in the story of Galenica began, which I dedicated to the work of Swiss pharma- last 20 years, I would like to thank the am convinced will be even more exciting cists. thousands of individuals who, for every day than the one we have written up until now. What started out as a small team gradu- they dedicated to Galenica, believed it The recipe for success is quite simple. ally grew to create a Group with a unique was their privilege to work for the greatest First, a brief look back at our history. strategy. The value of this Group rose from company there is.” CHF 250 million to more than CHF 10 billion (value on 31 December 2015) – the best performance witnessed on the Swiss stock market in the last 20 years – creating an entirely novel and unique company which has grown every year without exception by an average of 23 %. If this company had belonged to the ex- +18.6 % tended family of those who designed and created it, its story would not have ended profit growth before deduction on Tuesday 1 December 2015, as it repre- of minority interests sents such an extraordinary diversity of stability and growth, not to mention entrepreneurial spirit. A perfect example, in my opinion, of a family business. However, with a value of around CHF 10 billion, Galenica has become one of the “blue +4,000 % chips” of the Swiss Stock Exchange and one of the largest companies in Switzer- cumulative growth in the share price land, and therefore unaffordable for a fam- from 1995 (start of the transformation ily, even a very wealthy one. Galenica is strategy) to 2015 now owned by shareholders who placed

Galenica annual report 2015 Statement by the Executive Chairman Galenica Group 7

their trust in us, and to whom I am grateful. Vifor Pharma and Galenica Santé: In their view, understandably and quite two unique companies naturally, Galenica represents one investment among many, falling into a specific The future will depend on the ability of the category such as Pharma (or Specialty two new directors to manage this outstand- Pharma), Retail, Logistics, or Consumer ing legacy and take on the specific chal- Health and Beauty products. lenges that await them. If there is one thing they should abide by, it is to do what’s best for Galenica Santé and for Vifor Pharma, as Creation of two independent these two companies are fundamentally listed companies different from any other. Their culture and the manner in which they have been con- In order to maintain the interest and appeal structed make them unique. By following of the Galenica Group to its owners in fu- this recommendation, a bright future is ture, we have adapted the management of assured. the business, and with input from the best As Chairman of the Galenica Group for Swiss and international specialists, we the last 20 years, I would like to thank the have realigned our strategies, objectives thousands of individuals who, for every day and priorities. On the strength of this exer- they dedicated to Galenica, believed it was cise, we reached the conclusion at the their privilege to work for the greatest com- end of 2015 that two companies, Galenica pany there is. At the end of 2016, I will hand Santé and Vifor Pharma, could be created over the keys to Vifor Pharma and Galenica from the Galenica Group and listed individ- Santé to two teams that I am convinced ually on the stock exchange. have all the assets and skills required to be In principle, these two companies will be successful. By doing what is best for the ready for this step by the fourth quarter of company, and only for the company, they 2016. There are still some important tasks cannot go wrong. to take care of, but we are nevertheless confident of being able to do so within this Bern, 15 March 2016 timescale, provided the global market does not experience a major crisis that would delay the deadline. From today’s perspective, only a strong price drop or unforeseen Etienne Jornod events could delay the date of the division. Executive Chairman The two companies will be an attractive proposition for shareholders, but also for their other partners and in particular for their employees.

Galenica annual report 2015 8 Galenica Group 2015 in brief 2015 in brief

Galenica annual report 2015 2015 in brief Galenica Group 9

Galenica Group

Vision: two independent listed Vifor Pharma expanded successfully in Galenica continued to invest in research companies the iron replacement product segment and, and development, with CHF 88.8 million at the same time, was able to conclude an (previous year: CHF 104.2 million) for The Galenica Group is a diversified health- exclusive licensing agreement with Roche projects including clinical studies with care company and, with all its activities, a for the commercialisation of the drug Ferinject ®. Investments in property, plant leading partner in the healthcare sector. Mircera® in the USA and Puerto Rico, as and equipment and intangible assets The Group operates two Business units: well as an exclusive partnership between totalled CHF 368.6 million (previous year: Vifor Pharma, covering international Vifor Fresenius Medical Care Renal Pharma CHF 70.0 million). This also includes pharma activities, and Galenica Santé, (VFMCRP) and the US company Relypsa upfront and future milestone payments providing services mainly to the Swiss to commercialise the potassium binder from licensing agreements, for example healthcare market, with the vision of trans- Patiromer FOS in all markets outside the with Roche (Mircera®) and Relypsa (Pati- forming them into two listed and stand- USA and Japan. romer FOS). alone companies. Galenica Santé also performed very well, especially in a market environment that came under heavy pressure from the Outlook for 2016 Highlights of 2015 euro exchange rate and consumer tourism. In July, the newly created company Vifor Preparatory work for the necessary deci- In December, the Board of Directors of Consumer Health was transferred to sions regarding the planned division of the Galenica concluded that the preconditions Galenica Santé, complementing the port- Galenica Group in the fourth quarter of had been met for dividing the Group in the folio perfectly thanks to its strong brands. 2016 was begun and is proceeding as fourth quarter of 2016, provided the eco- In addition, the organisational structure was scheduled. nomic environment remains stable. adapted with a view to the planned inde- Vifor Pharma is to focus on the fur- pendence. ther successful expansion of the leading In 2015, the Galenica Group realised iron product Ferinject®/Injectafer®, sup- consolidated net sales of CHF 3,791.6 mil- ported by launches in additional countries. lion (+11.0 %). Consolidated earnings before VFMCRP intends to further consolidate interest, taxes, depreciation and amortisa- its position in nephrology with a focus on tion (EBITDA) rose by 20.3 % to CHF 537.4 further launches of Velphoro® and the million, earnings before interest and taxes pre-launch activities of Patiromer FOS. (EBIT) by 21.8 % to CHF 450.8 million, and Galenica Santé intends to expand the Business units net profit increased by 18.6 % to CHF 370.0 existing product range and launch new Vifor Pharma million before deduction of minority inter- products via the new Products & Brands ests, and by 5.8 % to CHF 301.1 million after Business sector. In Retail, the focus is on Galenica Santé Business sectors deduction of minority interests. an even more efficient organisation and – Products & Brands Excluding the negative effects due to IAS leaner business processes. The Services – Retail 19, EBITDA was up by 22.3 %, EBIT by 24.2 %, segment will bring the expanded Nieder- – Services net profit before deduction of minority inter- bipp distribution centre into commission ests by 21.1 % and net profit after deduction and further consolidate and extend its mar- Key figures 2015 of minority interests by 8.6 %. The one-time ket position with high-quality services and – Net sales: CHF 3,791.6 million effects reduced 2015 EBITDA and EBIT by innovative offerings. – EBITDA: CHF 537.4 million CHF 9.0 million and net profit before and – EBIT: CHF 450.8 million after deduction of minority interests by – Net profit: CHF 370.0 million CHF 7.8 million. They only impacted the con- – Employees: 7,804 solidated earnings of the Group, and not the (6,421 full-time equivalents) earnings of the Business sectors.

Galenica annual report 2015 10 Galenica Group 2015 in brief

Business unit Vifor Pharma

Vifor Pharma Net sales EBIT in million CHF in million CHF Key figures 2015 – Net sales: CHF 967.0 million – EBITDA: CHF 378.4 million – EBIT: CHF 333.0 million 967.0 333.0 – ROS: 30.8 % Vifor Pharma Vifor Pharma – Investments: CHF 324.7 million – Employees: 1,825 (1,752 full-time equivalents)

Galenica Group CHF 3,791.6 million Galenica Group CHF 450.8 million

Strategy: become an Activity independent specialty pharma With its iron replacement products company Ferinject®/Injectafer®, Venofer® and Maltofer®, Vifor Pharma is a leader in the Vifor Pharma is an international specialty treatment of iron deficiency, a widespread pharma company that researches, devel- ailment around the world. The product ops, produces and markets its own phar- portfolio is completed by Velphoro®, a new maceutical products. The company has two drug developed by Vifor Pharma, to effec- main areas of focus: iron deficiency with tively control phosphorus levels in the and without anaemia as well as infectious blood for patients with chronic kidney dis- diseases/OTX products. The strategy also ease on dialysis. To gain rapid and direct includes the support of Vifor Fresenius access to the various international mar- Medical Care Renal Pharma (VFMCRP) to kets, Vifor Pharma works through its own broaden its position as leading player in sales affiliates as well as with partners. 70 nephrology. The immunostimulant products such as Broncho- Vaxom® and Uro-Vaxom® supple- number of countries in which ment the portfolio of Vifor Pharma and of- Ferinject® was registered in 2015 fer potential for expansion.

Galenica annual report 2015 2015 in brief Galenica Group 11

Highlights of 2015 Outlook for 2016 Companies – Vifor Pharma Ltd., www.viforpharma.com Vifor Pharma achieved strong growth with The top priority is to retain the global lead- – OM Pharma SA, www.viforpharma.com Ferinject® in all regions, including the im- ership position and assure expansion in the – Vifor Fresenius Medical Care portant US market where Injectafer® has iron deficiency market. Emphasis is on fur- Renal Pharma Ltd. become the market-leading high dose ther expansion of Ferinject®/Injectafer® in product and continues to build adoption in existing markets, in particular the USA. The full version of the Business unit the critical haematology segment. Ferinject®/Injectafer® growth will be sup- Vifor Pharma report is available The roll-out of the new phosphate binder ported by launches in additional countries at www.galenica.com, under the heading Velphoro® in the USA and major European in 2016. annual report. markets continued to drive the expansion Vifor Pharma will also back the common in the broader nephrology market. company VFMCRP in extending its position Vifor Pharma signed an exclusive licens- as leading player in nephrology. Core activ- ing agreement for the commercialisation of ities include the successful continuation of Roche’s drug Mircera® in the USA and the Velphoro® launch programme and pre- Puerto Rico. And VFMCRP entered into an launch activities for Patiromer FOS. exclusive partnership with the US company Relypsa to commercialise the potassium binder Patiromer FOS in all markets outside the USA and Japan. In the immunostimulant product range, progress was made in life cycle management. Preparations continued to prepare the organisation for its future as a stand-alone business, making progress in terms of structure, governance and processes.

Activities of Vifor Pharma

Vifor Fresenius Medical Care Production for third parties Iron replacement products Renal Pharma (VFMCRP) Infectious Diseases/OTX (contract manufacturing)

– Focus on iron deficiency with – Strategic partnership between – Includes products for brain – Development and production or without anaemia. Galenica and Fresenius Medical function and development, ear of products for third parties. Care. care, abdominal distension, – Key products: – Diversified manufacturing chronic obstructive pulmonary Ferinject®/Injectafer®, – Key products: equipment for the production disease, respiratory tract Venofer® and Maltofer®. Velphoro®, a non-calcium, of solid, semi-solid and liquid infections, lower urinary tract iron-based phosphate forms. – Therapeutic areas: infections, chronic venous insuf- binder to improve control of haemodialysis, non-dialysis ficiency, diabetic retinopathy, serum phosphorus levels in adult chronic kidney disease haemorrhoids, menometrorrha- patients with chronic kidney dis- (ND-CKD), cardiology, gastro- gia or heavy menstrual bleeding. ease (CKD) on dialysis; Venofer® enterology, oncology, obstetrics, and Ferinject®/Injectafer® in the – Key products: gynaecology, patient blood field of pre-dialysis and dialysis Broncho-Vaxom®, Uro-Vaxom®, management, women’s health in CKD patients, as well as Doxium®, Dicynone®, Otalgan® and paediatrics. Mircera® for the treatment of and Aero-OM®. – Comprehensive clinical symptomatic anaemia of CKD and scientific development patients. programme in place.

Galenica annual report 2015 12 Galenica Group 2015 in brief

Business unit Galenica Santé

Segment Health & Beauty Business sectors Products & Brands and Retail

Segment Health & Beauty Net sales EBIT in million CHF in million CHF Key figures 2015 – Net sales: CHF 1,396.7 million – EBITDA: CHF 107.7 million – EBIT: CHF 84.5 million 1 ,396.7 84. 5 – ROS: 6.1 % Health & Beauty Health & Beauty – Investments: CHF 17.7 million – Employees: 4,532 (3,452 full-time equivalents) Of which Producst & Brands: 85 (75 full-time equivalents) Galenica Santé CHF 2,891.3 million Galenica Santé CHF 125.2 million Of which Retail: 4,447 (3,377 full-time equivalents)

Health and more beauty The Health & Beauty segment comprises two Business sectors: the Business sector The Health & Beauty segment was created Retail as well as the newly created Busi- in the second half 2015 as a core element ness sector Products & Brands which in- of the new Galenica Santé strategy. With cludes the new company Vifor Consumer the largest pharmacy network in Switzer- Health, transferred to Galenica Santé in land, Galenica Santé offers unparalleled mid-2015. The Health & Beauty segment potential for selling strong brands – own grew net sales by 7.7 % to CHF 1,396.7 mil- brands as well as brands from business lion. On a comparable basis sales increased partners. Strategy is to further strengthen by 4.4 %. Earnings before interest and taxes the current leading position in pain, coughs, (EBIT) rose by 26.9 % to CHF 84.5 million. colds and respiratory diseases, and better Like-for-like EBIT grew by 15.5 %. Com- exploit areas such as cosmetics and pared to the previous year, Return on sales beauty. (ROS) increased to 6.1 %. Investments totalled CHF 17.7 million in 2015. + 15 .5 %

EBIT growth on a comparable basis

Galenica annual report 2015 2015 in brief Galenica Group 13

Products & Brands Highlights of 2015 Outlook for 2016

Vifor Consumer Health clearly outper- The Swiss consumer health and self-medi- Strategy formed in its market. It successfully cation market is expected to continue de- launched Vitafor® probi-immun®, a Swed- veloping positively. Future success will With the largest field force visiting pharma- ish probiotic prevention treatment against depend to a significant extent on launching cies and drugstores and its leading phar- colds, under the Ginsana® range. In the new products and building partnerships to macy network in Switzerland, Galenica period under review, Vifor Consumer broaden the Vifor Consumer Health prod- Santé offers unparalleled potential for Health was again successful in expanding uct portfolio. There is still a lot of potential selling strong brands. The aim of Vifor its product range by signing agreements in the pharmaceutical and health market, Consumer Health, with its current leading with established consumer brand compa- the traditional strength of Vifor Consumer position in pain, coughs, colds and respira- nies, taking over pharmacy distribution of Health, not to mention less exploited areas tory diseases, is to better exploit this po- the brands Clearblue®, worldwide market such as cosmetics and beauty. tential and provide a unique and attractive leader in pregnancy tests, and OralB®. 2016 will see the introduction of a num- distribution structure for third-party and In the product portfolio, leading analge- ber of new products, line extensions to exclusive brands - both in owned retail as sic Algifor® as well as Triofan®, the undis- support growth of existing brands and also well as in pharmacies and drugstores puted number one nasal decongestant in stretching of the portfolio into new catego- throughout the country. Switzerland, recorded very strong perfor- ries. mances. Companies Activity – Vifor Consumer Health Ltd., www.viforconsumerhealth.ch The Products & Brands Business sector, – G-Pharma AG through its company Vifor Consumer Health, has a portfolio of strong brands Key figures 2015 ® ® ® such as Perskindol , Anti-Brumm , Algifor – Net sales: CHF 113.0 million and Triofan®. The Business sector also – Employees: 85 (75 full-time equivalents) launches and distributes pharmaceutical and parapharmaceutical products as a service provider for own brands and commer- The full version of the Business sector cial partners. Products & Brands report is available at www.galenica.com, under the heading annual report.

The companies of the Products & Brands Business sector

Vifor Consumer Health G-Pharma

– Manufactures and markets non-prescription – Launch and distribution of pharmaceutical Around drugs (over-the-counter products) and parapharmaceutical products. developed by Vifor Consumer Health or sold – Service provider for own brands and com- under licence. mercial products – from idea development – Vifor Consumer Health plays a leading role to the brand. in its home market Switzerland with key 60 – Marketing and sales services. brands such as Algifor®, Triofan®, Perskindol® product brands in the Vifor Consumer or Anti-Brumm®. – Offers its range of products and services Health portfolio to all partners of the healthcare market.

Galenica annual report 2015 14 Galenica Group 2015 in brief

Retail Activity

The pharmacy network of the Retail Busi- Strategy: lean and flexible ness sector is the largest in Switzerland, organisation with 318 Group-owned stores and 173 partner pharmacies. The network com- The Retail Business sector manages the prises the Amavita and Sun Store phar- leading Swiss pharmacy network. It aims macies, which are managed directly by to play an active role in shaping the future Retail, the Amavita partner pharmacies, of the rapidly changing Swiss pharmaceu- which are integrated under a franchise con- tical market, by focusing on developing, cept, as well as the Coop Vitality pharma- promoting and managing strong pharmacy cies, which are operated as a joint venture networks. With its different pharmacy for- with Coop. The MediService specialty mats, Retail is one of the most important pharmacy focuses specifically on home partners for the various players in the healthcare for people with chronic illnesses. healthcare market. New offerings such as The brand name Feelgood’s includes inde- flu vaccinations in the pharmacy without a pendent pharmacies for which the com- prescription confirm the high degree of fo- pany Winconcept offers services and mar- cus on customer service. keting concepts.

Highlights of 2015

The new Amavita and Coop Vitality webshops, as well as those already existing of Sun Store, mean that their extensive ranges of health and beauty products are now available to customers around the clock. The Amavita app offers customer service on the go, providing directions to Amavita pharmacies and information on new campaigns and health tips. Electronic customer records continue to be in demand: with patients’ written agreement, Amavita and Sun Store pharmacies can access prescriptions and information from the relevant chains throughout Swit- zerland. The digital vaccination card, ob- tainable from Coop Vitality, guarantees secure access to important health data and reminds the holder when vaccinations need to be renewed. In collaboration with Pro Senectute, Coop Vitality offers the Docupass, which contains key information, forms and a declaration with details of personal wishes and contact information for according power of attorney in the event of 491 an emergency. own and partner pharmacies make up the Retail pharmacy network

Galenica annual report 2015 2015 in brief Galenica Group 15

Independent pharmacies need a lean Outlook for 2016 Companies and pharmacy formats quality assurance system to help them – GaleniCare Management Ltd., trade more successfully while simultane- The Retail Business sector continues to www.galenicare.com ously reducing their administrative burden. pursue its established strategy. Growth is – Amavita Apotheken, www.amavita.com The part-time, vocational continuing edu- to be achieved both organically and by – Sun Store SA, www.sunstore.ch cation course CAS Management for Phar- means of targeted acquisitions and new – MediService Ltd., www.mediservice.ch macists, which was developed in collabo- openings. Price pressure will be countered – Winconcept Ltd., www.winconcept.ch – Coop Vitality AG1), www.coopvitality.ch ration with the University of Basel, is also first and foremost by an even more effi- 1) committed to upholding quality standards. cient organisation and leaner business pro- Consolidated at equity level cesses. The introduction of new services for individual patient groups, such as dia- Key figures 2015 betics, will allow new customer segments – Net sales CHF 1,307.6 million to be developed. Finally, synergies will be – Employees: 4,447 exploited within the Business sector in the (3,377 full-time equivalents) areas of product range, purchasing and all services. The full version of the Business sector Retail report is available at www.galenica.com, under the heading annual report.

The pharmacy formats of the Retail Business sector

Amavita Sun Store Coop Vitality MediService Winconcept

– Largest pharmacy – First pharmacy chain – Joint venture between – Specialty pharmacy – Service provider for network in Switzerland. in Switzerland, has Coop and Galenica. for care of patients with autonomous and belonged to Galenica chronic illnesses. independent pharmacies. – Founded and managed – Located in larger Coop since 2009 and is by GaleniCare. centres. – Home and Pharma Care – Marketed under the managed by Galeni Care. therapy support service Feelgood’s brand. – Product focus: prescrip- – Comprehensive range – Product focus: non- for in-home care of long- tion and non-prescription in the fields of health, – Management and market- prescription medicines, term patients, including medicines and beauty prevention and ing concepts for beauty, wellness and specialist care and direct products. beauty combined with members focusing on health. delivery of medications. professional advice communication and – Points of sale in attract- – Larger-than-average and services. quality. ive public locations. retail space in places – Strong customer focus with high customer traffic (employee training, ser- such as shopping centres. vices, own-label brands).

Galenica annual report 2015 16 Galenica Group 2015 in brief

Business unit Galenica Santé

Segment Services Business sector Services

Segment Services Net sales EBIT in million CHF in million CHF Key figures 2015 – Net sales: CHF 2,224.6 million – EBITDA: CHF 56.4 million – EBIT: CHF 37.1 million 2,224.6 37.1 – ROS: 1.7 % Services Services – Investments: CHF 26.9 million – Employees: 1,402 (1,176 full-time equivalents) Of which Logistics: 1,223 (1,017 full-time equivalents) Galenica Santé CHF 2,891.3 million Galenica Santé CHF 125.2 million Of which HCI Solutions: 179 (159 full-time equivalents)

Profitable sales growth cines for the whole year. The latter have low margins, however – an effect that has been The Services segment was created in Sep- intensified by government-mandated price tember 2015 as part of the reorganisation reductions. Nonetheless, earnings before of Galenica Santé. Incorporating the former interest and taxes (EBIT) rose by 6.4 % to Logistics and HealthCare Information (HCI) CHF 37.1 million. Return on sales (ROS) Business sectors, Services experienced a slightly increased to 1.7 %. clear increase in sales in 2015 compared Investments were significantly higher to the previous year – proof that the unit is year-on-year at CHF 26.9 million (2014: large enough to set trends in the Swiss CHF 20.7 million). These investments were market and maintain its leadership in terms primarily in the extension of the Niederbipp of costs. Sales increased by 3.4 % to site, as well as heating systems and a new CHF 2,224.6 million, despite strong com- automated line for fast-moving items in the CHF petition and stricter legal requirements. Lausanne-Ecublens distribution centre. In Important drivers were the launch of addition, around a quarter of the vehicle new offers and acquisition of new custom- fleet at Galexis and Unione Farmaceutica 26.9 million ers, boosted by the widespread flu epi- Distribuzione (UFD) was replaced by quali- demic which had a beneficial effect on fied, fully air-conditioned delivery vehicles in investments, primarily for the extension business in the first half of 2015 and the in 2015. of the Niederbipp site significant increase in high-priced medi-

Galenica annual report 2015 2015 in brief Galenica Group 17

Services Highlights of 2015

Galexis is investing around CHF 25 mil- Strategy: tailored solutions lion to extend its distribution centre in Niederbipp, creating a new 3,300 m2 ware- The Services Business sector plays an im- housing space for over 9,000 additional portant role in the Swiss pharmaceutical articles. The extension is expected to be supply chain and provides countrywide completed in spring 2016. integrated healthcare logistics services Galexis has introduced electronic batch with proven modular solutions that support communication, eliminating the need for customers’ success. The strategy centres time-consuming manual registration. It has on strengthening market position and also expanded the Focus medical technol- working in close cooperation with all mar- ogy range in the area of gynaecology and ket participants, with a focus on maintain- extended the “DEAL” offering for pharma- ing a high level of availability and system- cies. atically leveraging synergies. Storing, The new European guidelines for Good despatching and providing products from Distribution Practice of Medicinal Products across the entire health market incorporat- for Human Use (GDP) have been in force ing the necessary master data and content since mid-2015. Alloga and Galexis have using HCI Solutions instruments – these amended all processes and are currently are the integrated solutions of the future. engaged in modernising their infrastructure. The strong demand for the services of Activity Medifilm continues to grow. The introduction of the Mediproc software platform As the leading pharmaceutical wholesalers makes the ordering process simpler and in Switzerland, Galexis and Unione more efficient for customers, at the same Farmaceutica Distribuzione ensure pro- time enabling automatic health insurance vision to all healthcare partners through- billing. out the country. The companies supply Another pioneering eHealth offer was pharmacies, physicians, drugstores and created in 2015 in the form of the Medica- hospitals with over 80,000 referenced tion Plan, which enables hospitals, nursing healthcare products. homes, care providers, pharmacies and Alloga offers a broad range of special- medical practices to keep and print patient ised logistics services (prewholesale) to medication records in full and archive them pharmaceutical and healthcare companies. online. With the assistance of HCI Solutions, Medifilm prepares medicines and food the Medication Plan was successfully pi- supplements individually on behalf of phar- loted in the cantons of St. Gallen, Thurgau macies according to the treatment plan for and Zug. permanent and long-term patients (blister packaging). HCI Solutions develops management solutions for pharmacies and medical practices as well as tools to securely manage, communicate and distribute sensitive health data.

Galenica annual report 2015 18 Galenica Group 2015 in brief

Outlook for 2016 Companies – Alloga Ltd., www.alloga.ch The Services Business sector aims to – Galexis Ltd., www.galexis.ch strengthen customer competitiveness with – Unione Farmaceutica Distribuzione SA, high-quality services and innovative offer- www.unione.ch ings while reducing costs with increased – Medifilm Ltd., www.medifilm.ch efficiency. – HCI Solutions Ltd., www.hcisolutions.ch The next concrete project is to complete the extension of the Galexis distribution The full version of the Business sector centre in Niederbipp, making Galexis the Services report is available at wholesaler with the broadest range in Swit- www.galenica.com, under the heading zerland and enabling it to deliver even more annual report. quickly throughout the country. Another priority is to replace the current Alloga and Galexis ERP (Enterprise Resource Planning) systems. The expansion of capacities at Medifilm, one of the key growth drivers, should also bolster the Business sector’s success. At HCI Solutions, the current business activities are to be driven forward and new offerings developed.

The companies of the Services Business sector

Unione Farmaceutica Galexis Distribuzione Alloga Medifilm HCI Solutions

– Market leader in Swiss – Leading pharmaceutical – Largest Swiss pre- – Swiss pioneer in the area – TriaMed® and TriaPharm® healthcare logistics. wholesaler and the wholesaler. of blister packaging comprehensive database.

only full-range supplier of drugs for individual – Distribution centres – Logistics centre in – Develops management in Ticino. patients with wholesaling in Niederbipp and Burgdorf. solutions for pharmacies and manufacturing li- Lausanne-Ecublens. – Distribution centre and medical practices – Modular, process- cence. in Barbengo-Lugano as well as tools to securely – Comprehensive product managed full-service with strong regional roots. – Customers include manage, communicate and service offerings. offering along the pharmacies and nursing and distribute sensitive – Supplies pharmacies, entire supply chain. – Supplies pharmacies, homes supplied with health data. drugstores, nursing homes medical practices, – Logistics services in pharmaceuticals. and hospitals. drugstores, nursing homes partnership with the and hospitals. pharmaceutical and healthcare industry.

Galenica annual report 2015 2015 in brief Galenica Group 19

Vifor Pharma products for the treatment of iron deficiency have been previously researched and developed in St. Gallen, where they are still manufactured today.

Galenica annual report 2015 20 Galenica Group Vision, Mission, Values and Strategy Vision, Mission, Values and Strategy

Galenica annual report 2015 Vision, Mission, Values and Strategy Galenica Group 21

Our vision Our mission Retrospect

Thanks to our excellence in the healthcare Galenica Group: In our day-to-day work, From a pharmaceutical logistics market, with our activities we are a leading we are passionately committed to the wel- provider to an international health- healthcare partner. fare of patients and the needs of our cus- care company As a Group, we represent a diversified tomers. It is our way of creating added Galenica was founded in 1927 by 16 healthcare company with two Business value and benefits for customers, patients, Swiss French-speaking pharmacists units: Vifor Pharma, with international employees, shareholders and partners in who came together to create a central pharma activities, and Galenica Santé, pro- the long term. purchasing group. In 1938, Galenica laid the foundation for its current informa- viding services mainly to the Swiss health- tion management business by develop- care market. Vifor Pharma: We strive for excellence in ing a scientific documentation service. Both Business units operate inde- our fields of expertise: with our leading iron From 1957 onwards, Galenica diversi- pendently and are successful, solid and therapies and other pharma specialties, we fied beyond its existing distribution ac- profitable. They develop in a focused and are noticeably improving patients’ quality tivities. successful way, sustainably and with the of life right across the world and enabling In 1995, in response to the rapid and vision to become two listed, independent service providers in the healthcare industry fundamental changes in market conditions, the Group’s management devel- companies. to prevent and treat illnesses as effectively oped a new strategy based on the vision as possible. of turning Galenica into a healthcare player that is engaged in the entire Galenica Santé: Our vision is to be the first value chain in Switzerland. choice for health, beauty and wellbeing. As Thus in 1996, Galenica expanded its a reliable, attractive partner and employer, distribution activities to all players in we are actively shaping the future of the the Swiss market (pharmacists, as well Swiss healthcare market and making a sig- as self-dispensing physicians, drugstores and hospitals), set up eHealth nificant contribution to efficient, high-qual- companies and laid the foundation for ity healthcare thanks to our services and its pharmacy chains with the creation products. of GaleniCare in 2000. In parallel, the Group focused on niches at the industrial level and began Our key values to expand internationally in the area of iron replacement products. These were fundamentally redesigned and Our five key values are the reference point repositioned by the research & devel- for our actions and shape our conduct and opment team, and became Venofer® decision-making each day. They therefore and Maltofer®. They were joined by play an essential part in the implementa- Ferinject®/Injectafer®, which was tion of the strategy and objectives and are launched at the end of 2007, as well as a crucial element to our success. other products, including the novel phosphate binder Velphoro®. The acquisition of the Canadian pharmaceutical company Aspreva Pharmaceuticals in 2008 and of OM Pharma in 2009 as well as the development of an own distribution network led to the creation of what is today an international, fully integrated specialty pharma company, Vifor Pharma, with a broad range of products and projects.

The five key values of Galenica We participate with passion and act as entrepreneurs. We build trust through credibility and competence. We show respect and know that together, we are stronger.

Galenica annual report 2015 22 Galenica Group Vision, Mission, Values and Strategy

One Group, two strategies Vifor Pharma Galenica Santé

Following the Galenica Group’s consistent Galenica has successfully strengthened To date, Galenica Santé has held the role and successful implementation of its trans- and expanded its pharma business in re- of a stable pillar, supporting the develop- formation strategy since 1995, the Board of cent years and made large investments in ment of the pharma business. Galenica Directors concluded that the Group was building a strong organisation. Thanks to Santé has everything it takes for this unit ready to prepare a new phase. In August its innovative proprietary product portfolio, too to become an independent listed com- 2014, a new management structure with an international commercialisation net- pany. In order to achieve long-term suc- two CEOs was introduced to enable the work comprising own affiliates and part- cess, however, Galenica Santé aims to play different business models of Vifor Pharma ners, and an organisation with first-class an even more active and dynamic role in and Galenica Santé to evolve in an even pharma expertise, Vifor Pharma is today a the market. To this end, a new organisa- more focused way, taking into account world leader in iron deficiency and has tional and management structure was in- their individual growth dynamics. The man- strong market positions in nephrology and troduced as of 1 September 2015. agement structure was adjusted accord- immunostimulants. The new Products & Brands Business ingly and organisational changes imple- The focus over the past years has been sector will develop the existing OTC prod- mented just a few weeks later. on the development and international reg- ucts business of Vifor Consumer Health, as istration of the intravenous iron replace- well as other own brands belonging to the Medium to long-term vision: ment product Ferinject® (Injectafer® in Group, and establish itself as an attractive two listed, independent companies the USA) and the new phosphate binder partner for third-party and exclusive In December 2015, the Board of Directors Velphoro®. These objectives have been brands. Products & Brands will play a key concluded that the preconditions for divid- met successfully: Ferinject® is now regis- role in the development of targeted part- ing the Group in the fourth quarter of 2016 tered in 70 countries and has also been nerships for selected products, as well as had been met, provided the economic on the market in the USA since mid-2013 in capturing synergies with the Retail Busi- environment remains stable. Thereby, the under the name Injectafer®. Velphoro® was ness sector, which possesses a unique Board of Directors initiated essential steps launched in the USA in March 2014 and pharmacy network of around 500 own and to create optimum conditions for the Vifor received approval for the EU member partner pharmacies in the best locations Pharma and Galenica Santé Business units states in August 2014. It is currently mar- throughout Switzerland. Products & Brands to be able to continue to develop in a fo- keted in 15 countries. and Retail will be supplemented by the cused and sustainable way. logistics business of the Services Business Objective: a stand-alone specialty sector, which has a top-performing infra- pharma company structure, combined with services and in- Thanks to its strong performance and de- formation relating to the medication pro- velopment over the past years, Vifor cess provided by HCI Solutions. Pharma now has the potential to become a successful stand-alone specialty pharma Objective: building on current company, characterised by a strong entre- strengths in a targeted manner preneurial culture and a clear strategic fo- The synergies between these three activi- cus. ties are promising and will enable Galenica To ensure Vifor Pharma is able to achieve Santé to respond to the challenges facing the critical size to become an independent the healthcare sector in general, which listed company, it needs to increase its should be developed further and exploited market orientation and fully exploit the sig- in a targeted manner. The new organisa- nificant potential of its key growth drivers tional structure will allow Galenica Santé Ferinject® / Injectafer® and Velphoro®. over the next few years to expand its posi- Changes to the organisational structure are tion in the fields of services, own-brands designed to create the competitive, fo- and third-party brands. cused and agile organisation that will be needed. Provided that the necessary synergies and strategic fit are in place, organic growth will be complemented by growth through acquisition of products or companies as well as through strategic partnerships.

Galenica annual report 2015 Vision, Mission, Values and Strategy Galenica Group 23

At Vifor Pharma in Villars-sur-Glâne, pharmaceutical production and other development activities are carried out for Vifor Pharma as well as third parties (contract development).

Galenica annual report 2015 24 Galenica Group Healthy from head to toe with Galenica Healthy from head to toe with Galenica

Headache

Earache

Cold

Respiratory tract infections

Flu prevention

Iron deficiency

Personal care

Medicine cabinet

Back pain

Mosquito bites

Urinary tract infections

Sports injuries

Calf muscle cramps

Galenica annual report 2015 Healthy from head to toe with Galenica Galenica Group 25

Excellence in the healthcare market

The subsidiaries of the Galenica Group, Vifor Pharma and Vifor Consumer Health, produce own-brand products which are marketed both in Switzerland and internationally. The diversified range of medications and healthcare products are used to combat and cure various diseases. In addition, the pharmacies and logistics enterprises offer comprehensive protection and security as part of their services, including:

3 ,700 3 6

AllergyChecks were carried pharmacies have added the Galexis out at the Amavita and Coop Vitality vascular check to their service offering, pharmacies, allowing customers enabling customers to have their pulse to have themselves tested for the ten waves measured so that their vascular most common respiratory allergy age can be determined. triggers.

Electronic customer records Polymedication check 13 ,250 2,8 00

electronic customer records were polymedication checks were carried opened at the Amavita and Sun Store out at the Amavita and Coop Vitality pharma cies with the prior written pharmacies as a service for customers consent of customers in 2015. taking several medications simultaneously.

Galenica annual report 2015 26 Reporting Vifor Pharma

Business unit Vifor Pharma

Galenica annual report 2015 Vifor Pharma: Foreword by the CEO Reporting 27

In growth mode unsaturated market this is still early days and much remains to be done. Global sales Dear Shareholders, of Ferinject® (US brand name Injectafer®) Ladies and Gentlemen, generated by Vifor Pharma affiliates and our partners totalled CHF 250.9 million At the start of the year we set ourselves (+33.2 %). ambitious goals for 2015 as we strive to The roll-out of our new phosphate binder make Vifor Pharma a highly competitive Velphoro® in the USA and major European global specialty pharmaceutical company. markets continues to drive our expansion in Søren Tulstrup These goals include: accelerating market the broader nephrology market. With a sub- CEO Vifor Pharma penetration with our key growth drivers, stantially lower pill burden compared to the particularly Ferinject® and Velphoro®; pre- current standard treatment of hyperphos- paring the organisation for its future as an phatemia in chronic kidney disease (CKD), independent company; and reinforcing our Velphoro® is being well received by patients portfolio by adding complementary prod- and clinicians around the world. Confirming ucts through in-licensing. our expectations, we generated increased Over the past twelve months we have revenues of 190.6 % to CHF 43.2 million with made substantial progress in achieving Velphoro®. these goals. With our existing portfolio, we These advances, and the positive contri- are clearly poised for strong growth with bution from other business activities of Ferinject®, a remarkable product that com- Vifor Pharma, resulted in a net sales in- bines excellent patient outcomes with a crease of 36.9 % to CHF 967.0 million in differentiated profile. Ferinject® is instru- 2015. Vifor Pharma’s revenues also include mental in the success of our iron business, the first sales income of CHF 206.8 million showing rapid growth in key geographies, from the commercialisation of Roche’s including the important US market. The medication Mircera® in the USA. Earnings acceleration of the already high growth before interest and taxes (EBIT) increased performance of Ferinject® in 2015 was very by 25.7 % to CHF 333.0 million. encouraging, although given the still very

Net sales EBIT Number of employees in million CHF in million CHF

967.0 333.0 1,825 Vifor Pharma Vifor Pharma Vifor Pharma

Galenica Group CHF 3,791.6 million Galenica Group CHF 450.8 million Galenica Group 7,804

Galenica annual report 2015 28 Reporting Vifor Pharma: Foreword by the CEO

We continued to prepare the organisa- outside the USA and Japan. This is a highly on increasing our operational effectiveness tion for its future as a stand-alone business, promising new treatment for elevated lev- and efficiency and directing our invest- making progress in terms of structure, gov- els of potassium in the blood. Hyperkalae- ments and resources towards the most ernance and processes. Furthermore, Vifor mia occurs more frequently in patients with attractive growth opportunities. Pharma sharpened its specialty pharma CKD and heart failure. The two pillars of our future success as profile by moving Vifor Consumer Health to Both Mircera® and Patiromer FOS are an independent business are our products Galenica Santé, and by selling Potters, the managed by our common company with and our people. With a differentiated and UK-based manufacturer and supplier of tra- Fresenius Medical Care, VFMCRP, which is young product portfolio, growing recogni- ditional herbal treatments, to Soho Flordis destined to become an even stronger part- tion in our chosen markets for our unique International. ner to the nephrology community. In 2015, capabilities and leadership, and the entre- In addition to focusing on expanding our VFMCRP has not only expanded its neph- preneurial spirit and dedication of our em- leadership in the iron deficiency market rology product portfolio but also estab- ployees, I am confident that our prospects and growing the overall market through lished its own sales and marketing organ- have never been brighter. Let me thank all optimising the performance of existing isation in Europe. In Europe’s key markets, employees of Vifor Pharma and Vifor products, we have also prioritised finding VFMCRP took over the commercialisation Fresenius Medical Care Renal Pharma for inorganic growth opportunities within this of some of the best known nephrology their contribution to making 2015 a very and adjacent markets. In the first half of brands from Fresenius Medical Care. successful year. 2015 we signed an exclusive licensing These developments contribute to making agreement for the commercialisation of VFMCRP even more competitive in meet- Bern, 15 March 2016 Roche’s drug Mircera® in the USA and ing the very specific needs of patients and Puerto Rico. Mircera® is a perfect comple- customers in the highly specialised field of ment to our existing range of products for nephrology. patients with CKD and iron deficiency. This We have also been able to make further was followed in the second half of 2015 by progress in our efforts to improve organi- Søren Tulstrup the announcement of an exclusive partner- sational efficiency and profitability, ena- CEO Vifor Pharma ship between Vifor Fresenius Medical Care bling us to better invest in strong, sustain- Renal Pharma (VFMCRP) and the US com- able growth and to attract investors in a pany Relypsa to commercialise the potas- very competitive market. As we approach sium binder Patiromer FOS in all markets independence, we continue to be focused

CHF +25.7 % 81.8 million

EBIT increase investments in research & development

Galenica annual report 2015 Vifor Pharma Reporting 29

Vifor Pharma Broadening the iron portfolio

“We continue to expand our strong franchise in the iron deficiency market.”

Strategic priorities 2016 Sales and operating result

– Retain global leadership position Vifor Pharma demonstrated strong momen- in iron deficiency and ensure market tum throughout the year. The Business unit expansion generated total net sales of CHF 967.0 mil- – Support Vifor Fresenius Medical Care lion, up 36.9 % from the previous year. Ad- Renal Pharma (VFMCRP) to broaden justed for currency effects, the increase position as leading player in nephrology was 40.1 %. Within this context, the distri- – Expand business portfolio into related bution agreement with Roche for Mircera®, Søren Tulstrup markets and technologies effective as of May 2015, has already CEO Vifor Pharma – Grow Infectious Diseases franchise contributed with significant sales of – Create organisation that is able CHF 206.8 million. On the other hand, with to compete globally as independent Vifor Consumer Health having been trans- speciality pharmaceuticals company ferred to Galenica Santé, the respective revenues, both in Switzerland and export sales, have not been attributed to Vifor Pharma since 1 July 2015. Income from licensing fees for CellCept was CHF 88.5 million compared to CHF 91.8 million in 2014. Earnings before interest and taxes (EBIT) rose by 25.7 % to CHF 333.0 million. This outweighed the expected decline in other operating income of CHF 93.0 million. In- vestment in research and development totalled CHF 81.8 million (previous year: CHF 98.1 million).

Galenica annual report 2015 30 Reporting Vifor Pharma

Mircera® – supply “Spurred by expansion in the USA, the leading for almost 100,000 iron product Ferinject®/Injectafer® increased global sales US patients in 2015 by 33.2 % to CHF 250.9 million.” The active substance in Mircera® is methoxy polyethylene glycol-epoetin beta and it comes in a variety of dose strengths in prefilled single-use sy- Ferinject® grows Geographic expansion continued over ringes. It is prescribed for chronic kid- the entire year. By end of 2015, Ferinject® ney diseases (CKD) patients suffering from anaemia because their kidneys no Spurred by expansion in the USA, the lead- has been approved in 70 and launched in longer produce enough of the hormone ing iron product Ferinject®/Injectafer® 61 countries. The exposure to Ferinject® is erythropoietin to stimulate the produc- increased global sales by 33.2 % to estimated to be more than 3,181,000 pa- tion of red blood cells. Mircera®, a com- CHF 250.9 million. These sales comprise tient years since the International Birth plex biological product has been shown own sales by Vifor Pharma sales affiliates Date. to be more effective than natural eryth- and sales by partners, with Vifor Pharma In addition to geographic expansion, ropoietin because it works for longer in receiving a share of partner sales. The growth was driven by Vifor Pharma suc- the patient’s system and so does not have to be administered as frequently. number of units sold grew in all regions in cessfully extending its iron franchise into Currently, there are almost 100,000 total by 49 %. The lower growth in net sales new therapeutic areas. While iron defi- patients in the United States treated in CHF is primarly due to negative currency ciency plays a role in many clinical indica- with Mircera® in Fresenius Medical effects relating to the euro. Also, prices tions, the company has extended its strong Care dialysis centres. remained under pressure due to competi- foothold in haemodialysis and non-dialysis The Mircera® deployment plan was tion and regulatory cost containment chronic kidney disease (ND-CKD) and fo- put in place in record time. Patient measures. cussed its effort on the key areas of gas- access has been assured thanks to However, the IMS data reflects the ac- troenterology and cardiology. In the report- Fresenius Medical Care which has been in touch with over 10,000 healthcare tual market sales development, which con- ing period, countries such as the USA, professionals. A team of reimburse- tinues to accelerate. In 2015, global market Germany, Spain and Portugal were particu- ment support specialists successfully sales totalled approximately CHF 370 mil- larly successful in activating these new verified Mircera® reimbursement with lion, an increase of 40 %. therapeutic areas. over 300 payers to ensure access to In the USA, 138.4 % more units were sold Vifor Pharma is strengthening its posi- the product for all eligible patients. than in 2014 – a strong result in the second tion through disease awareness pro- Thanks to the seamless interaction of full year of launch. Injectafer® has become grammes, clinical studies, medical educa- specialists in regulatory, production and logistics, the equivalent of 75 re- the market-leading high dose product in tion support for physicians and participation frigerated truckloads of product, con- the USA and continues to build adoption in at congresses. The list of research projects sisting of 1.9 million packs of syringes the critical haematology segment. Luitpold includes the Ferinject® EFFECT study in in 2,150 cool packs, were put in place Pharmaceuticals, Inc., posted net sales in Chronic Heart Failure patients with iron to meet demand. the USA of USD 117.4 million in 2015, re- deficiency. The study is well on track. sulting in net sales of CHF 38.5 million for Among various congress highlights, Vifor Pharma. Ferinject® was presented in February 2015 The number of units sold (100 mg) grew at the European Crohn’s and Colitis Organi- worldwide by 49 %. Increases were particu- zation (ECCO) congress, which marked the larly strong in Australia (+115 %), Germany publication of the ECCO guidelines on the (+46 %), Spain (+44 %), the Nordics (+36 %), diagnosis and management of iron defi- as well as UK/Ireland (+35 %). France ciency and anaemia in inflammatory bowel showed good performance with numbers diseases. These new guidelines recom- of units sold up 28 % after a regulatory re- mend diagnosis and prevention of anaemia striction that had impacted the business in and iron deficiency and make a distinction the prior year. In Switzerland, the number between different methods of iron therapy, of 100 mg units of Ferinject® grew by 10 %. recommending intravenous iron as a first- line therapy for specific patients. And in August, at the European Society of Cardi- ology (ESC) Congress in London, Vifor Pharma presented a meta-analysis of indi-

Galenica annual report 2015 Vifor Pharma Reporting 31

“In May 2015, Galenica and Roche entered into an Global market exclusive licensing agreement for the commercialisation for iron products ® of Mircera in the USA and Puerto Rico.” Overall development in million CHF1) 2’4522,452 2,3422’342 2’2602,260 ® 2’195 vidual patient data which demonstrated Velphoro – market approval 2’1522,152 2,195 that Ferinject® treatment of iron deficiency in Japan in patients with systolic chronic heart failure is associated with reduced rates of In 2015, Vifor Pharma recorded sales of cardiovascular hospitalisations and cardio- CHF 43.2 million for the phosphate binder vascular deaths. In a satellite symposium Velphoro®. Launched in the USA in 2014 by the latest data was discussed with more partner Fresenius Medical Care North than 400 cardiologists. America, its roll-out continued in 2015. By the end of 2015, Velphoro® had been ap- 36% 34% proved in 37 markets and launched in 15 36% 34% 33% Mircera® – new in the portfolio countries. At the end of September 2015, Vifor Pharma partner Kissei Pharmaceuti- In May 2015, Galenica and Roche entered cal Co., Ltd. received Japanese approval into an exclusive licensing agreement for for P-TOL® – the Velphoro® brand name in the commercialisation of Mircera® in the Japan – for the treatment of hyperphos- USA and Puerto Rico. Mircera®, a prescrip- phatemia in CKD patients on dialysis. 2011 2012 2013 2014 2015 tion medicine for the treatment of sympto- Kissei launched the chewable tablets of Market share Vifor Pharma matic anaemia associated with CKD, rep- 250 mg and 500 mg in November 2015. Other (~1,700 corporations) resents an ideal complement to the existing More launches in markets around the globe (Source: IMS Midas; CHF/MNF, MAT 2015–Q3) product portfolio. In 2015, the distribution are expected in 2016. agreement for Mircera® generated sales of CHF 206.8 million (see text box). Sub-market share 2015 Mircera® is approved in the USA by the Venofer® – trust in reliable Intravenous iron FDA and in the European Union by the iron delivery European Medicines Agency (EMA) for the treatment of anaemia associated with CKD Price pressure was felt on sales of Venofer® in adult patients on dialysis as well as those of CHF 108.9 million in 2015 (–4.0 %). 66 % not on dialysis. In October 2015, the FDA Venofer® is still the leading intravenous Vifor Pharma granted a licence to Vifor Pharma to exer- iron brand globally. So far, more than 400 cise its exclusive right to market Mircera® million 100 mg doses of Venofer® have in the United States and Puerto Rico under been used in patients, equivalent to 20 mil- its own name. lion patient years. This vast application Total CHF 1,134 million1) Anaemia in CKD is associated with re- experience, together with its long-estab- duced quality of life and increased risk of lished safety and efficacy record, forms the cardiovascular diseases, hospitalisations, solid basis for healthcare professionals’ Sub-market share 2015 cognitive impairment and mortality. confidence in Venofer® and its reliable iron Oral iron Mircera® is a long-acting erythropoietin- delivery for haemodialysis patients. Grow- stimulating-agent for bi-weekly or monthly ing evidence showing 30 % higher efficiency treatment. It works like the human protein for Venofer® was confirmed in an inde- called erythropoietin to help the body pro- pendent clinical study in haemodialysis 10 % duce more red blood cells and is used to patients from Spain. The data supports the Vifor Pharma reduce or avoid the need for red blood cell Vifor Pharma position that copy products transfusion. of nanomedicines – so-called iron sucrose similars – might not be therapeutically equivalent. Total CHF 1,318 million1)

1) Average exchange rates 2015

Galenica annual report 2015 32 Reporting Vifor Pharma

Vifor Fresenius Medical “Tackling infectious diseases is an increasing concern Care Renal Pharma in light of the continued increase of antimicrobial resistance.” becoming an even stronger partner for the nephro logy community

Vifor Fresenius Medical Care Renal Maltofer® – initial sales In addition, VFMCRP entered into a part- Pharma (VFMCRP) aims to become the in Australia nership with Relypsa and obtained an ex- global leader in renal pharma by offering clusive marketing right for Patiromer FOS best-in-class products and innovative Sales of other iron products totalled in worldwide territories outside of the services. In 2015, VFMCRP established CHF 63.5 million by year-end (+5.4 %). Of United States and Japan. VFMCRP will also eight affiliates in some of Europe’s most ® important markets with a sales, market- these, the oral iron product Maltofer re- collaborate with Relypsa on the ongoing ing and medical organisation dedicated ported sales of CHF 53.2 million (+5.4 %). development of Patiromer FOS, including to renal pharmaceuticals. The sales and Following a reimbursement grant, Maltofer® submission of a Marketing Authorisation marketing organisation of Fresenius recorded its first sales in Australia. Application (MAA) with the European Med- Medical Care nephrology medicines Sales of other prescription medicines, icines Agency (EMA). was integrated into the newly created which are primarily marketed in Switzer- Patiromer FOS is an oral potassium affiliates. The goal of this initiative is to land and Spain, amounted to CHF 75.3 mil- binder being developed for the treatment make VFMCRP a stronger partner for the nephrology community and acceler- lion (+5.2 %). of hyperkalaemia, a potentially life-threat- ate its development into a truly interna- ening condition defined as abnormally ele- tional, specialist nephrology company. vated levels of potassium in the blood. Vifor Fresenius Medical Care Hyperkalaemia occurs most frequently in Renal Pharma now patients with chronic kidney disease (CKD) and heart failure. A New Drug Application including Patiromer FOS (NDA) for Patiromer FOS (US brand name: The success of Vifor Pharma relies on a Veltassa™) for the treatment of hyperkala- strong network with business partners and emia was approved by the Food and Drug on established partnerships. The collabo- Administration (FDA) in October 2015. ration with Fresenius Medical Care, via the common company Vifor Fresenius Medical Care Renal Pharma (VFMCRP), merits spe- Infectious Diseases/OTX – cial reference. The VFMCRP portfolio in supporting actions to the renal space now includes intravenous iron Ferinject® and Venofer® for use in overcome antibiotic resistance nephrology, phosphate binders Velphoro® Following outstanding sales growth in the and Osvaren®, and the potassium binder previous year, sales in the Infectious Dis- Sorbisterit®. eases/OTX franchise fell slightly in 2015 to CHF 122.0 million (–3.7 %), which was due in particular to the negative impact of the euro exchange rate as well as regulatory- based delays to deliveries in South Amer- ica.

Galenica annual report 2015 Vifor Pharma Reporting 33

“The top priority for 2016 is to retain our global leadership position Outlook and assure expansion in the iron deficiency market.” The top priority for 2016 is to retain the global leadership position and assure expansion in the iron deficiency market. Em- phasis is on further expansion of Ferinject® in existing markets, in particular the USA, Tackling infectious diseases is an in- Toll manufacturing by continuing to build on the foundation of creasing concern in light of the continued haematology infusion clinics and usage increase of antimicrobial resistance. In May Sales in the third-party manufacturing within the gastroenterology segment. 2015, the World Health Assembly endorsed business were CHF 47.7 million (+12.9 %). Ferinject® growth will be supported by a global action plan to tackle antimicrobial This increase is solely due to the sales for launches in additional countries in 2016. resistance – including antibiotic resistance, the production of the OTC products now Vifor Pharma will also back the common the most urgent drug resistance trend. The being listed as sales with Galenica Santé company VFMCRP in extending its position first World Antibiotic Awareness Week was following the transfer of Vifor Consumer as leading player in nephrology. Core activ- held in November, a campaign aiming to Health (previously eliminated by consolida- ities include the successful continuation of focus public attention on global antibiotic tion within Vifor Pharma). the Velphoro® launch programme and pre- resistance. Both Broncho-Vaxom® and launch activities for Patiromer FOS. Uro-Vaxom® can play an important role in Last but not least, internal projects will this context by helping patients to prevent Focus on resources for future continue to progress in order to prepare recurrent infections and therefore lower as independent company Vifor Pharma for its future as an independ- the intake of antibiotics. ent pharmaceuticals company. Vifor Pharma decided to focus resources and efforts on maximising and expanding its portfolio of specialty pharmaceuticals in preparation for its future as an independent specialty pharma company. As part of these efforts, the business unit Potters, producer of herbal-based treatments in the UK, has been sold to Soho Flordis Interna- tional. Potters has a broad range of well- established products, including brands like Red Kooga®, Seatone®, Calcia™ as well as Equazen™, one of the world’s leading fish-oil-containing health products.

The strongest Infectious Diseases/OTX products Total net sales Rx products in terms of net sales in million CHF 2015 2014 Change in % in million CHF 2015 2014 Change in % Intravenous (i. v.) iron replacement products Broncho-Vaxom® 50.5 53.2 –5.2 ® ® Ferinject and Injectafer 250.9 188.3 +33.2 Doxium® 27.1 26.6 +2.1 of which Injectafer® USA 38.5 15.6 +147.7 Venofer® 108.9 113.4 –4.0 Dicynone® 18.6 18.5 +0.8 Other iron replacement products 63.5 60.2 +5.4 Uro-Vaxom® 15.7 17.5 –10.3 of which Maltofer® 53.2 50.5 +5.4 Erythropoietin (ESA/EPO) Mircera® 206.8 n.a. — Phosphate binder Velphoro® 43.2 14.9 +190.6 Other Rx products 75.3 71.5 +5.2 Revenues and licence fee income CellCept 88.5 91.8 –3.6

Galenica annual report 2015 34 Coverage Vifor Pharma

Gradually and continuously improving efficiency

Vifor Pharma has enjoyed very strong internal and external growth in recent years. These changes have resulted notably in an increase in the complexity that must be taken on board as part of day-to-day work – not least with regard to economically sustainable production.

Galenica annual report 2015 Vifor Pharma Coverage 35

Operational Excellence initiatives to in- company should never lose sight of the fact unidentified opportunities for improvement crease efficiency and improve perfor- that implementation always takes the form and, by replacing sub-optimal, outdated mance were launched at all Vifor Pharma of team initiatives across different func- processes and structures with dynamic industrial sites back in 2014. In fact, Oper- tions. OPEX aligns perfectly with one of the ones, it can set continuous improvement in ational Excellence (abbreviated to OPEX) Galenica Group’s key values: “Together, we motion. At the same time, it can unleash has been growing in importance at Swiss are stronger”. the company’s full innovative potential. companies for several years. When implementing OPEX, companies apply it to their entire strategy, continuously and dynami- Not just a tool, but an attitude OPEX training cally optimising all processes and systems for 250 employees along the value chain. The core principle of By definition, OPEX has to be sustained; it OPEX is to maximise customer benefit and is not a philosophy that can be imple- In the process of OPEX implementation, at the same time minimise waste. In other mented piecemeal or cosmetically. Proper the management approach used at each words: use all resources in a way that will implementation requires long-term effort Vifor Pharma location is based directly on generate added value for the customer. and willingness to drive continuous im- corporate culture. According to this “lean This requires the company to take a holistic provement in a disciplined way. Rather than management” approach, on-the-ground view, which is why OPEX invariably de- being about tools and techniques, OPEX is information is used to drive optimisation mands investment in employees and sus- more a question of attitude that involves from the bottom up to management level tainability. A very wide range of methods constantly striving for improvement. Build- – with employees at the centre of the can be used to implement OPEX, which can ing on corporate culture and employee improvements. With this initiative, Vifor be tailored individually to a company’s spe- know-how, OPEX methodology has the Pharma aims to prepare for future chal- cific situation. Whatever the situation, the power to uncover great, often previously lenges and, in particular, for the increasing

Galenica annual report 2015 36 Coverage Vifor Pharma

A wide range of tools

Project implementation at all Vifor Pharma locations began by defining objectives for the individual areas and levels – from production through to management. In the process, the methods to be used within the initiative’s framework were determined. Next, individual areas at the location (production, laboratories, offices) were examined using dedicated tools. The focus here was on three easily applicable tools in particular: one for improving workplace ergonomics (5S; see text box page 37), one for the visualisation of specific performance indicators and activities (visual management) and one for directly involving employees in the Contin- uous Improvement Process (CIP; see text box). At the Improving step by step same time, value stream analysis was carried out. This resulted first in a “map” of the production process – The term Continuous Improvement Process (CIP) describes an approach from the supply of raw materials through to delivery of that aims to bring about steady, incremental improvement in order to the finished product to the customer. Next, the analysis strengthen a company’s competitiveness. The CIP relates to product, highlighted key interactions (exchange of information, process and service quality. Unlike innovations, which take the form of major breakthroughs, the CIP within a team means taking small steps to transport, checks, release, etc.). A similar production achieve ongoing improvement. CIP is a basic principle of quality manage- process mapping for the Vifor Pharma product ment and is comparable to the Japanese Kaizen philosophy applied to both Broncho-Vaxom® had already led to significant process work and personal life. This philosophy – which, loosely translated, means improvements. “change for the better” – was developed in the 1950s and rose to promi- nence mainly because of its adoption by the Japanese car industry. CIP eventually spread to all areas of work and industry, evolving into a typical Supply Chain change project feature of an employee-oriented corporate culture.

To improve customer service and internal process efficiency, Vifor Pharma Supply Chain launched a change project starting with an end-to-end review of processes and structures. This was based on a project carried out complexity of regulatory demands. It also aims to in- with the University of St. Gallen to assess the current crease productivity and efficiency and to ensure the situation and define a target. The overview drawn up sustainable development of the Business unit by as a first step gave rise to 23 sub-projects necessary streamlining cost-, resource- or labour-intensive activ- in order for the target processes to be implemented. ities. In addition to the project activities, organisational At the Geneva site, Vifor Pharma began implement- changes were made within Supply Chain. For instance, ing OPEX in spring 2014, with 120 employees from var- a new Sales & Operations Planning (S & OP) process ious areas receiving training at the outset. The initiative was initiated, and Supply Teams were set up in the was then rolled out at the St. Gallen site in autumn of areas of production and quality assurance. In parallel the same year when an OPEX ambassador organisation with the completion of these projects at the end of was also set up, consisting of representatives from 2015, target processes were rolled out and fine-tuned different departments. Since then, around 250 employ- as part of the Continuous Improvement Process (CIP). ees across all Vifor Pharma locations have received One impressive example of the initiative’s effective- OPEX training, either as Green Belts (improvement ness can be seen in the iron-based, non-calcium phos- experts) or Black Belts (full-time improvement experts) phate binder Velphoro®, where the standard time from under the Six Sigma system. approval to availability on the market was reduced by two thirds.

Galenica annual report 2015 Vifor Pharma Coverage 37

Scaling new heights with YETI The successes of OPEX initiatives at Vifor Pharma have raised a great deal of interest and resulted in At present, Vifor Pharma is focusing on production fa- strong commitment and momentum. Anyone who has cility maintenance. The aim is to improve facilities got to know the new ways of working will no longer wish maintenance so that downtime and interruptions are to return to old habits. Meanwhile, thanks to the activ- reduced and output increased. One specific example ities conducted jointly over several years across all of the remarkable results that can be achieved through locations, those within the “LEAN community” are now such measures is Project YETI, which Vifor Pharma able to share experiences and best practices. On the carried out at the Villars-sur-Glâne site. The abbrevia- basis of road maps defined for the years ahead, im- tion YETI has nothing to do with the abominable snow- provements will continue to be driven forward in 2016. man that stalks the Himalayas, but is an acronym of Yield Efficiency Tecfidera® Improvement. As the name suggests, the project aims to improve yield efficiency in the production of Tecfidera® – a drug which Vifor Pharma manufactures under contract for Biogen and Workplace organisation according which is used to treat multiple sclerosis and rheuma- to the 5S methodology toid arthritis. Thanks to the success of Tecfidera®, production volume of the drug increased significantly in Taking their cue from Japanese manufacturing ideas, European com- 2014 and 2015, necessitating weekend production at panies in the production industry are now applying the 5S methodo- Villars-sur-Glâne on numerous occasions. On the basis logy. Loosely translated, the five S in question are as follows: of Six Sigma, a process improvement management – Sort (Seiri) Remove any items not needed for work at the site. system, the issue was tackled using the DMAIC method. – Straighten (Seiton) All necessary items are allocated a fixed, DMAIC stands for Define, Measure, Analyse, Improve designated place, defined according to ergonomic principles. and Control, describing the different phases of process – Shine (Seiso) The workplace is cleaned from top to bottom. management. – Standardise (Seiketsu) Constant tidying prevents new items Project YETI has been instrumental in increasing from accidentally making their way into the workplace. yield and making better use of existing capacity. Dime- – Sustain (Shitsuke) Discipline is necessary to maintain order and thyl fumarate is used as an active pharmaceutical sub- cleanliness. If a space has been designated for a particular tool, stance in Tecfidera®. As this substance can irritate the then that is where the tool belongs – always. eyes, respiratory tract and skin, employees working in By using this methodology, workplaces and work environments can production must wear a full-body protective suit. It was be made safe, clean and orderly – thus creating the basic conditions observed that losses occurred during the tabletting for improving work processes. A key feature of the 5S methodology process in particular, so improvements were intro- is to organise the workplace in a way that enables work to be carried duced at three levels: human, equipment and raw ma- out without interruptions, avoiding any need to search for equipment terials. The results are clear: cleaning process effi- and preventing long transport distances and waiting times. This mi- ciency improved by 20 %, production output per time nimises waste and at the same time lays the foundations for high-qua- unit increased by 10 %, and the on-time delivery rate lity work. The 5S methodology is applied across a range of different areas within an organisation, including production, administration rose. and IT.

Galenica annual report 2015 38 Reporting Galenica Santé

Business unit Ga lenica Santé

Galenica annual report 2015 Galenica Santé: Foreword by the CEO Reporting 39

The first choice for health, This effect was more than offset by further beauty and wellbeing progress in operational efficiency as well as the strong flu season during the first few months of the year. Dear Shareholders, Since July 2015, the newly formed Vifor Ladies and Gentlemen, Consumer Health has come under the management of Galenica Santé. With its strong Galenica Santé made a buoyant start to brands such as Perskindol®, Anti-Brumm®, 2015 and was able to continue this momen- Algifor® and Triofan®, Vifor Consumer Jörg Kneubühler tum throughout the year. All Business sec- Health is an excellent addition to our port- CEO Galenica Santé tors performed well. The sales growth of folio. With the largest pharmacy network in 3.9 % to CHF 2,891.3 million is a pleasing Switzerland, Galenica Santé offers unique result in view of the market environment, potential for the sale of these and other with cosmetic products and non-prescrip- brands. Nearly 500 points of sale in the tion medicines in particular under heavy best locations and over 100,000 custom- pressure from the euro exchange rate and ers daily provide a unique and attractive consumer tourism. Earnings before inter- distribution structure for third-party and est and taxes (EBIT) increased by 21.7 % to exclusive brands. CHF 125.2 million, which was also boosted Our aim of exploiting this potential con- by the founding of Vifor Consumer Health sistently is reflected in our investments. In on 1 July 2015. On a comparable basis EBIT 2015, these amounted to CHF 43.8 million increased by 14.4 %. At the same time, the (previous year: CHF 40.7 million). The ma- increase in volumes and profitability is all jor part of operational investments was the more significant, given that sales in the used for the expansion of the logistics cen- reporting period were driven by high-priced tre in Niederbipp, which is proceeding as medications with relatively low margins. planned and will enable future volume in-

Net sales EBIT Number of employees in million CHF in million CHF

2,891.3 125.2 5,934 Galenica Santé Galenica Santé Galenica Santé

Galenica Group CHF 3,791.6 million Galenica Group CHF 450.8 million Galenica Group 7,804

Galenica annual report 2015 40 Reporting Galenica Santé: Foreword by the CEO

creases to be handled with greater effi- Our focus is on continued growth, which One of our core principles is: “We want ciency, while complying with ever stricter we aim to achieve both organically and by to be a reliable, attractive partner and em- government regulations, such as storing means of targeted acquisitions and the ex- ployer”. If we are to keep this promise on a and transporting medications at specific pansion of our product and service offer- daily basis, then our employees are key. I room or refrigerated temperatures. ing. As in the past, we will concentrate on would like to thank them and all our part- In view of the Group’s vision to develop our core activities and build on partner- ners for contributing to a successful 2015 Galenica Santé into an independent listed ships. and look forward to continued cooperation company, we adapted our organisational We are fundamentally very well-posi- in the future. structure in September 2015 to allow tioned. In our day-to-day operations we will Galenica Santé to play an even more active though continue to face developments that Bern, 15 March 2016 and dynamic role in the Swiss healthcare have a negative impact on the healthcare market. Galenica Santé is now structured market, with further government-man- in two segments with a total of three Busi- dated price and margin reductions likely to ness sectors, and the management posi- impact on our results. Our unique market tions have been reorganised, too. The position, extensive know-how and our Jörg Kneubühler “Health & Beauty” segment comprises the strong entrepreneurial culture form a solid CEO Galenica Santé “Products & Brands” Business sector led by foundation which we can build upon and Torvald de Coverly Veale and the “Retail” which will help us to overcome these chal- Business sector led by Jean-Claude lenges. There are still potential synergies Clémençon. The “Services” segment, com- that we can exploit more effectively. We prising the former Business sectors Logis- aim to actively shape the future of the tics and HealthCare Information, is headed healthcare market through innovation and by Christoph Amstutz. turn our vision into reality. We want our customers, partners and employees to be able to feel, see and experience the reality of Galenica Santé as the first choice for health, beauty and wellbeing.

CHF +14 .4 % 43.8 million

EBIT increase on a comparable basis investments

Galenica annual report 2015 Galenica Santé Reporting 41

As an experienced wholesaler and service provider, Galexis ensures on- schedule delivery of medications to all of its partners in the healthcare sector throughout Switzerland.

Galenica annual report 2015 42 Reporting Galenica Santé, Health & Beauty

Segment Health & Beauty Business sectors Products & Brands and Retail

Health and more beauty The Health & Beauty segment comprises two Business sectors: the Business sector The Health & Beauty segment was created Retail as well as the newly created Busi- in the second half of 2015 as a core ele- ness sector Products & Brands which in- ment of the new Galenica Santé strategy. cludes the new company Vifor Consumer With the largest pharmacy network in Swit- Health, transferred to Galenica Santé in zerland, Galenica Santé offers unparalleled mid-2015. The Health & Beauty segment potential for selling strong brands – own grew net sales by 7.7 % to CHF 1,396.7 mil- Jörg Kneubühler brands as well as brands from business lion. This growth also includes the newly CEO Galenica Santé partners. The strategy is to further added sales of Vifor Consumer Health as strengthen the current leading position in of 1 July 2015. On a comparable basis sales pain, coughs, colds and respiratory dis- increased by 4.4 %. Earnings before inter- eases, and better exploit areas such as est and taxes (EBIT) rose by 26.9 % to cosmetics and beauty. CHF 84.5 million. Like-for-like EBIT grew by 15.5 %. Compared to the previous year, Return on sales (ROS) increased to 6.1 %. Investments totalled CHF 17.7 million in 2015.

Segment Health & Beauty

Key figures 2015 – Net sales: CHF 1,396.7 million Net sales EBIT – EBITDA: CHF 107.7 million in million CHF in million CHF – EBIT: CHF 84.5 million – ROS: 6.1 % – Investments: CHF 17.7 million – Employees: 4,532 (3,452 full-time equivalents) 1, 396.7 84.5 Of which Producst & Brands: 85 Health & Beauty Health & Beauty (75 full-time equivalents) Of which Retail: 4,447 (3,377 full-time equivalents) Galenica Santé CHF 2,891.3 million Galenica Santé CHF 125.2 million

Galenica annual report 2015 Galenica Santé, Health & Beauty, Products & Brands Reporting 43

Products & Brands Building a differentiated consumer experience

“We are a unique and attractive distribution and marketing partner for third-party and exclusive brands.”

Strategic priorities 2016 Expanding the portfolio…

– Consolidate and further grow share The new Products & Brands Business sec- of the consumer health market tor is made up of the newly created Vifor in both owned pharmacies and in Consumer Health and G-Pharma. Including pharmacies and drugstores throughout the sales of Vifor Consumer Health, which the country were added as of 1 July 2015, Products & – Expand branded business into new Brands generated sales of CHF 113.0 mil- areas and develop related skills lion in 2015, up by 68.3 %. On a comparable Torvald de Coverly Veale – Build sourcing competencies to meet basis sales grew by 4.5 %. Head Products & Brands Business sector the entire spectrum of opportunities On 1 July 2015, Vifor Consumer Health became part of Galenica Santé, bringing with it around 60 product brands, among which Net sales are strong brands such as Perskindol®, in million CHF Anti-Brumm®, Algifor® and Triofan®. This complete portfolio of consumer health products is sold to all Swiss pharmacies and drugstores. Internally, the Business 11 3.0 Products & sector benefits from the reach of around Brands 500 pharmacies, allowing it to fine-tune promotions and test new products. In 2014, Vifor Consumer Health took over distribution of the Ginsana® range Galenica Santé CHF 2,891.3 million and in 2015 successfully launched Vitafor® probi-immun®, a Swedish probiotic prevention treatment against colds. In the period Number of employees under review, Vifor Consumer Health was again successful in expanding its product range by signing agreements with established consumer brand companies, taking 85 Products & over pharmacy distribution of the brands Brands OralB® and Clearblue®, worldwide market leader in pregnancy tests.

Galenica Santé 5,934

Galenica annual report 2015 44 Reporting Galenica Santé, Health & Beauty, Products & Brands

“The aim of Vifor Consumer Health, with its current leading position rent leading position in pain, coughs, colds and respiratory diseases, is to better ex- in pain, coughs, colds and respiratory diseases, is to better ploit this potential - both in owned retail as exploit this potential - both in owned retail as well as in pharmacies well as in pharmacies and drugstores throughout the country. Vifor Consumer and drugstores throughout the country.” Health intends to get closer to consumers and develop compelling insights on which to build a differentiated experience. Future success will depend to a significant extent on launching new products and … and the market share More own brands building partnerships to broaden the Vifor Consumer Health product portfolio. There Vifor Consumer Health clearly outper- The Products & Brands Business sector is still a lot of potential in the pharmaceu- formed in its market. In 2015, net sales in also launches and distributes pharmaceutical and health market, the traditional Switzerland grew by 6.3 % to CHF 63.4 mil- tical and parapharmaceutical products as strength of Vifor Consumer Health, not to lion. a service provider for own brands and com- mention less exploited areas such as cos- In particular, the leading analgesic mercial partners. This business did well in metics and beauty. Algifor® as well as Triofan®, the undisputed 2015, continuing to grow alongside new 2016 will see the introduction of a num- number one nasal decongestant in the own products being launched by Amavita, ber of new products, line extensions to Swiss domestic market, recorded very Sun Store and Coop Vitality pharmacies. support growth of existing brands and also strong performances. The Vifor Consumer stretching of the portfolio into new catego- Health approach where experts train per- ries. sonnel in pharmacies yielded positive re- Getting closer to customers sults. At CHF 18.1 million, export sales de- The Swiss consumer health and self-medi- clined by 13.1 % compared to the previous cation market is expected to continue de- year, in part due to the effects of ware- veloping positively, with several categories house relocations and currency effects, benefiting from population ageing, ongoing which negatively affected total sales price competition and new products. The of products such as Perskindol® and aim of Vifor Consumer Health, with its cur- Anti-Brumm®.

The companies of the Products & Brands Business sector

Vifor Consumer Health G-Pharma

– Manufactures and markets non-prescription – Launch and distribution of pharmaceutical drugs (over-the-counter products) and parapharmaceutical products. developed by Vifor Consumer Health or sold – Service provider for own brands and com- under licence. mercial products – from idea development – Vifor Consumer Health plays a leading role to the brand. in its home market Switzerland with key – Marketing and sales services. brands such as Algifor®, Triofan®, Perskindol® or Anti-Brumm®. – Offers its range of products and services to all partners of the healthcare market.

Galenica annual report 2015 Galenica Santé, Health & Beauty, Retail Reporting 45

Retail Competence creates trust

“We win the trust of our clients with competence, credibility and passion. Real customer service, every day, at each encounter.”

Strategic priorities 2016 Sales growth despite challenging market conditions – Focus on the customer: tailored offerings, new services, innovative own Government-mandated price reductions on brands and a compelling presence prescription medicines continued to have for all pharmacy formats a negative effect on the Swiss pharmaceu- – Create a lean, flexible organisation: tical market in 2015. Sales also came under take advantage of synergies in procure- pressure from consumer tourism due to the ment, product range management strong franc and increasing competition Jean-Claude Clémençon, and all services from retailers. This was offset to an extent Head Retail Business sector – Achieve leeway for price reduction by a severe, persistent flu epidemic and measures through efficient business sales growth in high-priced specialty med- processes ications. The Retail Business sector was Net sales – Organic and inorganic growth with able to increase sales by 4.5 % in 2015, to in million CHF network expansion through own CHF 1,307.6 million. As in 2014, sales de- and independent partner pharmacies velopment reflects like-for-like growth with the number of consolidated pharmacies remaining stable at 318 locations. Various 1, 307.6 strategic measures are to be deployed to Retail strengthen sales development.

Strong pharmacy network Galenica Santé CHF 2,891.3 million

The pharmacy network remained virtually stable in 2015: The closure of one Amavita Number of employees pharmacy and two Sun Store pharmacies was balanced by three new openings of Coop Vitality pharmacies. End of 2015, the pharmacy network included a total of 491 4,447 locations, both own pharmacies and inde- Retail pendent partners.

Galenica Santé 5,934

Galenica annual report 2015 46 Reporting Galenica Santé, Health & Beauty, Retail

Two anniversaries in 2015 “Our digital solutions give our customers access to a wide range of health and beauty products around the clock, There were two reasons to celebrate in the year under review. In spring, Amavita whether they are at home or on the go.” employees celebrated the pharmacy chain’s tenth anniversary in Bern’s Kursaal. Over a million customer con- tacts take place every month in the pharmacies. Amavita thanked its cus- Amavita and Coop Vitality are constantly Loyalty programmes and tomers in the form of a variety of offers expanding the proportion of own brands in online services and a prize draw of a holiday on the their product range, thereby contributing tenth of each month. to the recognition and market presence of Customer loyalty is recognised with a vari- November marked the 15th anniver- both pharmacy formats. ety of offers. Holders of the Amavita sary of Coop Vitality, which it cele- The Team Performance programme fo- StarCard as well as the Sun Store Suncard brated with customers throughout cuses on customer and patient satisfac- receive benefits and discounts on the re- Switzerland with a range of activities and promotions. tion. By simplifying and speeding up admin- spective product ranges, as well as special istrative processes, staff have more time offers from participating partner compa- to advise customers and focus on sales. In nies. 2015 the programme was successfully im- Electronic customer records are evoking plemented at additional Amavita and Sun considerable interest: with patients’ writ- Store points of sale and, for the first time, ten agreement, Amavita and Sun Store at all Coop Vitality points of sale. Valuable pharmacies can access prescriptions and insights are also gained directly from cus- information from the relevant chains tomer feedback. The system has now been throughout Switzerland. Digital vaccination installed in the majority of the pharmacies. cards obtained from Coop Vitality guaran- By means of a text on till receipts custom- tee secure access to important health data ers are invited to complete a survey online and can be programmed to inform the or by telephone. Further time has been holder when vaccinations need to be re- saved with shelf pricing, which had already newed. In collaboration with Pro Senec- been successfully introduced at Amavita tute, Coop Vitality also offers the Docu- and Sun Store, and was implemented at all pass. This is a comprehensive care dossier Coop Vitality locations in the year under containing all key information, forms and a review. The new Amavita and Coop Vitality declaration with details of personal wishes webshops, as well as those already existing and contact information for the according of Sun Store, mean that their extensive power of attorney in the event of an emer- ranges of health and beauty products are gency. now available to customers around the clock. The Amavita app offers customer service on the go, providing directions to Amavita pharmacies and information on new campaigns and health tips.

Galenica annual report 2015 Galenica Santé, Health & Beauty, Retail Reporting 47

Popular health check offers Quality services When the post office moves into the pharmacy There was great demand for the range of The demand for Winconcept services re- rapid allergy tests offered in the Amavita mains high. Accordingly, revenue from ser- Lifestyle changes are having an impact and Coop Vitality pharmacies in 2015, vices with partners increased. There is a on public services, with text messaging, while the cardiac, vascular and polymedi- real need for a new, lean, quality assurance e-mail and Internet banking reducing cation checks also proved popular. As part system for independent pharmacies that conventional postal services. Fewer and fewer letters, parcels and payments are of the polymedication check, pharmacists helps them trade more successfully while sent via the traditional post office coun- analyse if and how several medicines being simultaneously reducing their administra- ter. But rather than closing down post taken at the same time interact and tive burden. The continuing education offices completely there are also inno- whether there is room for improvement. course CAS Management for Pharmacists, vative solutions, such as the sub-post This service is recognised and reimbursed which was developed in collaboration with office in the pharmacy. This service was by health insurers. the University of Basel, is committed to recently adopted by Amavita pharma- A new service was offered for the first upholding quality standards. The part-time, cies in Acacias in Geneva, Marly near Freiburg and Riehen near Basel, with time at three Coop Vitality and Amavita vocational two-year course focuses on the the result that letters and packages can locations in Fribourg, Neuchâtel and Zu- topics of management, personnel manage- be dropped off and collected at the rich. In the past, if you wanted to be immu- ment and business administration in phar- pharmacies. In addition to selling nised against flu, you had to make an ap- macies. stamps, they offer a cashless payment pointment with your family doctor. It was Over the course of 2015, all Sun Store facility and cash withdrawals with the possible to be vaccinated in certain phar- pharmacies were switched to direct invoic- PostFinance Card. Operating a sub- macies with a medical prescription, but in ing to health insurers via the Triafact plat- post office in the pharmacy provides some cantons this is now possible without form developed by HCI Solutions. Amavita customers and local residents with a good alternative to a post office, allow- a prescription, subject to the requirement followed, with five selected pilot pharma- ing them to take care of a variety of that the pharmacist carrying out the immu- cies. The goal is to convert all Amavita everyday postal transactions. A sub- nisations has completed a five-day training pharmacies in 2016. The direct exchange post office also contributes to an in- course to attain the FPH certificate of com- between pharmacies and health insurers crease in the number of store visits, petence in vaccination and blood collec- not only allows costs to be reduced, but which has a positive economic impact tion. also increases data quality. for the pharmacies and surrounding businesses.

Own pharmacies and shareholdings

31.12.2015 31.12.2014 Change Amavita pharmacies1) 145 146 –1 Sun Store pharmacies1) 102 104 –2 Coop Vitality pharmacies2) 64 61 +3 MediService specialty pharmacy1) 11— Majority holdings in other pharmacies1) 43+1 Minority holdings in other pharmacies2) 23–1 Total own points of sale 318 318 — 1) Fully consolidated 2) Consolidated at equity level

Independent partners 31.12.2015 31.12.2014 Change Amavita partnerships 12 12 — Winconcept partner pharmacies 161 161 — Total independent partners 173 173 —

Galenica annual report 2015 48 Reporting Galenica Santé, Health & Beauty, Retail

“In collaboration with the University of Basel, not only are we passing Outlook: growth thanks on valuable knowledge, we’re also nurturing young talent.” to innovative offers The Retail Business sector continues to pursue its established strategy. Growth is The market for prescription medicines to be achieved both organically and by remains challenging. As a leading specialty means of targeted acquisitions and new pharmacy, MediService has again boosted openings. Price pressure will be countered sales and profitability by focusing consist- first and foremost with an even more effi- ently on its own strengths and expanding cient organisation and leaner business pro- its cooperative activities. Measures include cesses. The introduction of new services centralisation of invoicing and delivery for individual patient groups, such as dia- risks for high-priced medicines. The web- betics, will allow new customer segments based Senaca® system was developed on to be developed. Finally, synergies will be the basis of expert knowledge to provide a exploited within the Business sector in the personalised digital health coach for senior areas of product range, purchasing and all citizens. It was presented to customers in services. the fourth quarter of 2015. The Retail Business sector uses various social media platforms for its marketing activities. Amavita is represented on both Facebook and YouTube, while Sun Store also employs Google+ and Pinterest.

The pharmacy formats of the Retail Business sector

Amavita Sun Store Coop Vitality MediService Winconcept

– Largest pharmacy – First pharmacy chain – Joint venture between – Specialty pharmacy – Service provider for network in Switzerland. in Switzerland, has Coop and Galenica. for care of patients with autonomous and belonged to Galenica chronic illnesses. independent pharmacies. – Founded and managed – Located in larger Coop since 2009 and is by GaleniCare. centres. – Home and Pharma Care – Marketed under the managed by Galeni Care. therapy support service Feelgood’s brand. – Product focus: prescrip- – Comprehensive range – Product focus: non- for in-home care of long- tion and non-prescription in the fields of health, – Management and market- prescription medicines, term patients, including medicines and beauty prevention and ing concepts for beauty, wellness and specialist care and direct products. beauty combined with members focusing on health. delivery of medications. professional advice communication and – Points of sale in attrac- – Larger-than-average and services. quality. tive public locations. retail space in places – Strong customer focus with high customer traffic (employee training, ser- such as shopping centres. vices, own-label brands).

Galenica annual report 2015 Galenica Santé, Health & Beauty Reporting 49

Demand is high for the range of services such as allergy, cardiac, vascular and polymedication checks offered in Amavita and Coop Vitality pharmacies.

Galenica annual report 2015 50 Reporting Galenica Santé, Services

Segment Services Business sector Services

Profitable sales growth cines for the whole year. The latter have low margins, however – an effect that has been The Services segment was created in Sep- intensified by government-mandated price tember 2015 as part of the reorganisation reductions. Nonetheless, earnings before of Galenica Santé. Incorporating the former interest and taxes (EBIT) rose by 6.4 % to Logistics and HealthCare Information (HCI) CHF 37.1 million. Return on sales (ROS) Business sectors, Services experienced a slightly increased to 1.7 %. clear increase in sales in 2015 compared Investments were significantly higher Christoph Amstutz to the previous year – proof that the unit year-on-year at CHF 26.9 million (2014: Head Services Business sector is large enough to set trends in the Swiss CHF 20.7 million). These investments were market and maintain its leadership in primarily in the extension of the Niederbipp terms of costs. Sales increased by 3.4 % to site, as well as heating systems and a new CHF 2,224.6 million, despite strong com- automated line for fast-moving items in petition and stricter legal requirements. the Lausanne-Ecublens distribution centre Important drivers were the launch of (see text box on page 52). In addition, new offers and acquisition of new custom- around a quarter of the vehicle fleet at ers, boosted by the widespread flu epi- Galexis and Unione Farmaceutica Distribu- demic which had a beneficial effect on zione (UFD) was replaced by qualified, fully business in the first half of 2015 and the air-conditioned delivery vehicles in 2015. significant increase in high-priced medi-

Segment Services

Key figures 2015 – Net sales: CHF 2,224.6 million Net sales EBIT – EBITDA: CHF 56.4 million in million CHF in million CHF – EBIT: CHF 37.1 million – ROS: 1.7 % – Investments: CHF 26.9 million – Employees: 1,402 (1,176 full-time equivalents) 2,224.6 37.1 Of which Logistics: 1,223 Services Services (1,017 full-time equivalents) Of which HCI Solutions: 179 (159 full-time equivalents) Galenica Santé CHF 2,891.3 million Galenica Santé CHF 125.2 million

Galenica annual report 2015 Galenica Santé, Services Reporting 51

Services Offers from a single source

“The commissioned expansion of the Niederbipp distribution centre will make Galexis the wholesaler with the broadest range in Switzerland and enable it to deliver even more quickly throughout the country.”

Strategic priorities 2016 Logistics integrates offerings

– Reinforce customer competitiveness In September 2015, the former Logistics with high-quality services and innovative Business sector was integrated into the offerings newly formed Services Business sector. – Bundle the competences for customers In a price-sensitive market, the Galenica as a wholesaler and in prewholesale Santé logistics companies were again able – Develop trend-setting eHealth offerings to increase sales and volumes by gaining for the Swiss healthcare market new customers and expanding their ranges. – Improve profitability by further This pleasing business trend came about optimising processes thanks to the strong performance of pharmaceutical wholesaler Galexis, whose new services allow the pharmacies and drugstores to achieve efficiency gains. One Net sales example of this is the electronic batch in million CHF communication introduced in mid-2015, whereby drug deliveries are recorded using electronic despatch notifications when they arrive at Galexis. Batch and expiry 2,224.6 dates are recorded in the inventory man- Services agement system and electronically sent to customers’ software when the goods leave the warehouse. This eliminates the need for time-consuming manual registration. Galenica Santé CHF 2,891.3 million Webshops are another example of process simplification. Galexis takes care of all processes for third-party providers’ Number of employees webshops, from receipt of the order in the customer’s webshop to delivery of the goods by Galexis. Galexis strengthens customer retention 1, 402 by means of new services as well as by fur- Services ther simplifying processes. For the medical profession, the Focus medical technology range, which offers investment goods at euro-level prices, has been expanded in the Galenica Santé 5,934

Galenica annual report 2015 52 Reporting Galenica Santé, Services

Quick installation “The industry is increasingly seeking integrated of machinery solutions for the distribution of its products.” for fast-moving items Committed employees worked over the Ascension weekend at the Galexis dis- area of gynaecology. For pharmacies, the Galexis and Alloga implement tribution centre in Lausanne-Ecublens expansion of the “DEAL” range has proved new GDP guidelines to dismantle the automated line for popular, with customers receiving different fast-moving items and replace it with a product offers each week at the best price The new European guidelines for Good Dis- new, better performing model in this short time frame. It is not the auto- on the market. In addition, Galexis has tribution Practice of Medicinal Products for mated line itself that is fast-moving, but taken account of currency fluctuations by Human Use (GDP) have been in force since rather the products handled by the reducing the price of over 13,000 non- mid-2015, with a transitional period of six plant that are fast-moving in the phar- pharma products. Finally, the customer months. One of the new requirements is that macies, i.e. they sell quickly. Around launch of a vascular check to measure pulse medicines must be shipped at storage tem- four employees work on the fast-mov- waves has been a great success. Many peratures of 15–25 °C. Alloga and Galexis ing line during the day, processing up pharmacies use this service and now sev- amended all processes by the end of 2015 to 9,500 lines and an average of 30,000 boxes per day. eral pharmacy chains and groups are look- and are continuing to work on modernising ing to introduce it. their infrastructure (transport boxes, build- Growth requires sufficient capacity. As a ings, external platforms, vehicle fleet). result, Galexis is investing around CHF 25 As part of the ongoing process optimisa- million in extending its distribution centre in tions, conveyor technology in Burgdorf was Niederbipp, which will create a new 3,300 m2 renewed and order entry with optical char- warehousing space for over 9,000 additional acter recognition (OCR) introduced. This articles. The new building envelope was allows Alloga to electronically record faxed ready by mid-2015, with work on the interior orders, simplifying their processing. following in the second half of the year. The extension is expected to be completed in spring 2016. The expansion will also in- UFD now offering marketing crease throughput, with more transport and sales support containers being processed every hour and every day. While continuing to face difficult market conditions in the southern canton of Swit- zerland, Ticino-based Unione Farmaceutica Distribuzione is now successfully offering its customers marketing and sales support. With pharma4.net, a management system was developed for pharmacies and drugstores. Its numerous functions, simple and efficient user interface and attractive price model make pharma4.net a unique offer.

Galenica annual report 2015 Galenica Santé, Services Reporting 53

“Together with Galexis, Medifilm offers accelerated delivery What is surprising in the digital age is that there continues to be demand for a printed to its customers in French-speaking Switzerland.” drug compendium. In response to multiple requests from its customers, HCI Solutions reissued this via the specialist trade for the Medifilm covers all HCI Solutions supports new first time in 2016. of Switzerland e-Health offers Another pioneering eHealth offer was created for the Swiss healthcare market at The strong demand continues to grow for In September 2015, the former HealthCare the beginning of 2015 in the form of the the services of Medifilm, which packages Information Business sector was inte- Medication Plan. This patient-focused, free- portioned medications for individual pa- grated into the newly formed Services of-charge tool has been designed for ease tients. Medifilm introduced the Mediproc Business sector. Furthermore, the compa- of use. It enables hospitals, nursing homes, software platform to make the ordering nies e-mediat and Documed were merged care providers, pharmacies and medical process simpler and more efficient for cus- into HCI Solutions Ltd. in January 2016 and practices to keep and print patient medica- tomers, mainly pharmacies and care their management structure adapted action records in full and archive them online. homes. It also enables automatic health cordingly. The goal is to achieve synergies The Medication Plan was successfully pi- insurance billing. Furthermore, Medifilm between the former departments so that loted in the cantons of St. Gallen, Thurgau now carries a comprehensive range of ge- integrated solutions for the healthcare and Zug in the second half of 2015. nerics from leading providers. market can be implemented more quickly The new vitavista.ch offering has been Together with Galexis, Medifilm offers and efficiently. well received. Using PCs, smartphones and accelerated deliveries to its customers in The work carried out in previous years tablets, consumers can search by theme for French-speaking Switzerland: orders sub- bore fruit, with the majority of pharma products that are available in pharmacies mitted in the afternoon are sometimes companies now also offering information and drugstores and, if required, even dis- delivered to the customer as early as the about their products on compendium.ch play the route to their nearest specialist following morning. Last year’s preparatory and in the index databases. retailer. Many companies provide their work to provide the service in Italian has Supplying specialised technical and product information on this platform. contributed to Medifilm acquiring its first commercial information is an important Finally, HCI Solutions is working closely customers in Ticino in the period under re- service provided by HCI Solutions through with hospitals to expand their solution view. compendium.ch and the Index databases. portfolios. A project has been initiated with

Key figures Wholesale/Prewholesale 2015

Wholesale: Prewholesale: Galexis, Unione Farmaceutica Distribuzione Alloga Storage – Number of prepared boxes > 7,895,000 — – Number of delivered order lines > 35,955,000 > 1,943,000 – Number of prepared packages > 115,875,000 > 88,497,000

Distribution – Annual tonnage > 14,810 > 7,610 – Number of postal packages > 90,635 > 555,000 – Number of pallets — > 61,764

Structure – Number of items in stock > 42,000 > 11,210 – Number of suppliers/partners > 1,200 > 74 – Number of points of sale supplied > 7,600 > 15,100

Technology – Degree of automation in Niederbipp > 70 % — – Degree of automation in Lausanne-Ecublens > 28 % — – Degree of automation in Barbengo-Lugano > 55 % — – Degree of automation in Burgdorf — > 37 %

Galenica annual report 2015 54 Reporting Galenica Santé, Services

“A project has been initiated with the Cantonal Hospital of St. Gallen wholesalers Galexis and Alloga makes it possible to harness additional synergies. to simplify the administration of hospitals’ medication data, increasing The combination of these strengths should drug and patient safety.” make an even greater contribution in future. Storing, despatching and providing products from across the entire health market incorporating necessary master data and the Cantonal Hospital of St. Gallen that will Outlook: integration content using HCI Solutions instruments – simplify the administration of hospitals’ of services these are the integrated solutions of the medication data, increasing drug and pa- future. tient safety. While the healthcare market will continue The next concrete project is the com- to expand as a result of immigration and missioning of the extended Galexis distri- longer life expectancy, it will also still be bution centre in Niederbipp. This will make subject to cost pressure. For the Services Galexis the wholesaler with the broadest Business sector, the previous priorities range in Switzerland and enable it to deliver therefore remain valid: to reinforce cus- across the country even more quickly. In tomer competitiveness with high-quality addition, the replacement of the current services and innovative offerings, and to Alloga and Galexis ERP (Enterprise Re- reduce costs by increasing efficiency. The source Planning) systems will be a priority. Services Business sector will benefit from The expansion of capacities at Medifilm, the industry increasingly seeking integrated one of the key growth drivers, should also solutions for the distribution of its products. bolster the Business sector’s success. At Collaboration is sought with a partner that HCI Solutions, the current business activi- meets the most requirements. The close ties are to be driven forward and new offer- collaboration between the pharmaceutical ings developed.

The companies of the Services Business sector

Unione Farmaceutica Galexis Distribuzione Alloga Medifilm HCI Solutions

– Market leader in Swiss – Leading pharmaceutical – Largest Swiss pre- – Swiss pioneer in the – TriaMed® and TriaPharm® healthcare logistics. wholesaler and the wholesaler. area of blister packaging comprehensive database. only full-range supplier of drugs for individual – Distribution centres – Logistics centre in – Develops management in Ticino. patients with wholesaling in Niederbipp and Burgdorf. solutions for pharmacies and manufacturing Lausanne-Ecublens. – Distribution centre and medical practices – Modular, process- licence. in Barbengo-Lugano as well as tools to securely – Comprehensive product managed full-service with strong regional roots. – Customers include manage, communicate and service offerings. offering along the pharmacies and nursing and distribute sensitive – Supplies pharmacies, entire supply chain. – Supplies pharmacies, homes supplied with health data. drugstores, nursing homes medical practices, – Logistics services in pharmaceuticals. and hospitals. drugstores, nursing homes partnership with the and hospitals. pharmaceutical and healthcare industry.

Galenica annual report 2015 Galenica Santé, Services Reporting 55

Alloga offers a broad range of specialised logistics services (prewholesale) to pharmaceutical and healthcare companies.

Galenica annual report 2015 56 Coverage Galenica Santé

Reliable security and quality

With its diversified business activities, Galenica Santé is a leading provider of healthcare services in Switzerland. This is a position based on its vision – to be the first choice for health, beauty and wellbeing.

In their day-to-day work, Galenica Santé staff are pas- Good distribution practice guarantees sionately committed to winning over customers on all secure delivery fronts with their expertise, services and products. In contrast to other business areas, Galenica Santé faces Through the companies comprising the Services Busi- a particular challenge in that the healthcare sector ness sector, Galenica Santé plays a key role in the focuses on customers’ most precious asset – their distribution and supply of pharmaceutical and medic- health. As a result, patient safety and product quality inal products throughout Switzerland. Around 9,000 have top priority in all areas of activity. The following customers obtain their products through Galexis pages give examples that highlight how Galenica Santé alone, making it the market leader in Swiss healthcare is committed to customer safety throughout the value logistics. The distribution centres in Niederbipp and chain. Lausanne- Ecublens deliver urgently required medicines to pharmacies, drugstores, doctors, care homes and hospitals – in some cases, several times a day. Since the spring of 2013, the revised Good Distribu- tion Practice (GDP) guidelines have been in place within the European Union. The aim of the GDP guidelines on Medicinal Products for Human Use is to prevent coun- terfeit drugs from entering the legal supply chain, while also guaranteeing control over the distribution chain to ensure product quality and integrity. As a major manufacturing country for pharmaceuticals, Switzerland adopted the revised GDP guidelines in the summer of 2015, prior to their implementation on 1 January 2016.

Galenica annual report 2015 Galenica Santé Coverage 57

Forward-looking initiative by the fleet comprises around 100 box-type 3.5-tonne trans- market’s leading healthcare wholesaler porters, more than 80 of which have already been equipped with state-of-the-art climate-control technol- The path towards GDP-conformity at Galexis began ogy. Galexis uses this pool of transporters to help serve more than eight years ago with a thorough internal its customers over the “last mile”, which is character- stocktaking of its vehicle fleet. It was also around this ised primarily by multiple stops, requiring the vehicle’s time that the progressive changeover to insulated box doors to be opened repeatedly and making this form lorries began, leading to actively temperature-con- of logistics considerably more challenging than trolled vehicles with insulated mountings. Today the long-distance pharma transport by HGV, for example.

Galenica annual report 2015 58 Coverage Galenica Santé

Storage and delivery conditions Reacting to changing circumstances dictated by the product portfolio with innovative ideas

Conversion to temperature-controlled systems at Ensuring constant temperature compliance represents Galexis was not determined purely by GDP guidelines, a huge advance in drug safety. However, it comes at a however. The proportion of temperature-sensitive me- price: integrating rigorous climate-control systems and dicinal products in the product portfolio has been heavy insulation as part of the ongoing renewal of the steadily increasing. Around 45,000 items are perma- fleet means that valuable transport volume is lost. nently stocked in the two distribution centres, includ- These changes increase the need for new, innovative ing 16,000 drugs, of which 10 % are refrigerated prod- ideas that we can develop with our partners to provide ucts (see text box) that have to be stored and cost-effective and high-quality solutions for guideline transported at controlled temperatures of all classes, compliance. from –18 °C via 2 to 8 °C up to ambient (15 to 25 °C). Alongside GDP guidelines, Galexis also relies on its Compliance with storage temperatures to ensure im- own standards and processes to ensure safety and peccable product quality is guaranteed by Galexis up quality on a day-to-day basis. A critical factor in deter- to the point that the goods are received by the cus- mining service quality for healthcare logisticians is that tomer. If sensitive medicines are sent by post, the medicinal products reach the customer intact and in Alloga Safety Cold Box is used. Specially developed prime condition. Measures taken to achieve this aim in-house, it is easily able to withstand even large exter- include photographing the contents of each container nal temperature fluctuations and guarantees a stable before shipment so that, in the event of any errors in internal temperature between 2 and 8 °C for 34 hours. the provision of goods, checks can be carried out. Goods dispatched by post are issued with a security seal to guarantee their intact delivery.

Disposing drugs safely and in an environmentally sound manner

In an ideal scenario, the life cycle of a medicinal product ends once it is used. Frequently, however, patients do not use all their medication. This could be because treatment has been discontinued or adjusted, or because the patient has not followed treatment specifi- cations – or the product has exceeded its expiry date. The consumer is then faced with the issue of what to do with the tablets, creams, sprays etc. that are no longer required. As a diversified provider of healthcare services, The challenge posed by refrigerated products Galenica plays an active role throughout the entire value chain, and its employees understand that respon- Handling refrigerated products generally requires specific storage and sibility for the safe and sustainable handling of phar- transport conditions in order to guarantee their efficacy, safety and shelf- life right up until their use by the patient. These products are often very maceutical products doesn’t end with delivery to the expensive medications that are usually extremely costly to produce. No- patient. While drugs provide a cure, or at least relief, if table examples include biopharmaceuticals (also known as biologicals), used correctly, the active ingredients they contain can which comprise complex, temperature-sensitive biomolecules that are also constitute a burden to the environment, and there- produced using genetic engineering. Their manufacture often involves fore to people themselves. Consequently, expired or numerous stages and is very different to the production process for tra- unused medicinal products are classified under Swiss ditional medicinal products. Sales of biopharmaceuticals are steadily on legislation as hazardous waste. the rise, particularly as they are predominantly used in the treatment of illnesses for which there were previously either no therapies or where these were unsatisfactory. In the treatment of cancer or autoimmune diseases in particular, these new complex drugs can often significantly improve patients’ quality of life.

Galenica annual report 2015 Galenica Santé Coverage 59

Protecting humans, animals and the environment through controlled The issues with donating medicine disposal to developing countries Pharmacies play a key role in legal drug disposal. It is With regard to the return and disposal of medication, many customers often raise here where returned drugs undergo an initial disposal the question as to whether these products could not be put to better use by being triage by pharmacists, who use their specialist knowl- donated to developing countries. This is a delicate issue for many reasons, as a edge to sort products according to specific criteria. glance at the relevant recommendations by the World Health Organization shows. According to WHO guidelines, medicines which have already been stored at a They focus on critical ingredients (such as heavy met- patient’s home may not be included in drug donations for safety reasons. In addi- als, solvents and highly active ingredients), as well as tion, it generally makes little sense to donate drugs to developing countries be- dosage form, particularly in the case of pressurised gas cause the range of drugs donated often does not satisfy local needs. Drugs used containers. Based on this preselection, the drugs are to treat widespread illnesses in Switzerland and Europe such as high blood pres- then dispatched for proper disposal, whether at a reg- sure or diabetes, for example, are rarely required by people in developing coun- ular incineration plant or in a specially designed high- tries. Another problem is that packaging and package information leaflets are temperature furnace. For safety reasons, all returned written in the national languages of Switzerland and the information is therefore incomprehensible to patients and sometimes also staff members of aid organisa- drugs are disposed of – without exception – even if they tions. Special programmes are therefore financed by the pharma industry or have not yet expired and/or the packaging is still intact charitable organisations in order to provide the medicinal products that are most (see text box). needed in developing countries, thereby effectively ensuring the local provision Controlled disposal prevents pharmaceutical waste of high-quality, safe medicines. endangering waste collection companies’ operatives, as well as children or animals coming into contact with the material, e. g. in the case of torn rubbish bags at the roadside. The process also ensures that household rubbish, and wastewater in particular, are not polluted. Medication should never be poured down sinks or lav- A core component of these requirements is hygiene, atories because sewage plants are unable to filter out consistent adherence to which is integral to day-to-day certain substances in medicinal products during waste- work in the pharmacy. The legal basis for this is pro- water treatment. As a result, these substances are vided by the Ordinance on Hygiene established by the discharged into the aquatic environment, causing harm Federal Department of Home Affairs (FDHA), which to the animals that inhabit it. Pharmacies therefore prescribes, among other things, the conditions under make a valuable contribution towards an environmen- which drugs may be manufactured in a pharmacy’s tally compatible and controlled disposal of hazardous laboratory. In addition, standardised quality processes waste. also apply, which define, for example, the procedure for cleaning equipment on loan (e. g. milk pumps, inha- lation devices) or the required protective measures New services lead to increasing for handling biological fluids (e. g. when taking a demands blood sample for a test). For services such as the CardioTest®, employees are provided with additional Pharmacies offer the public easy access to basic med- external training and assessed by representatives from ical treatment, so the services they offer need to adapt professional organisations. The ultimate aim of this to ever-changing needs, for example by adopting an wave of quality measures is to consistently guarantee increasingly strong focus on healthcare services. One the safety of the patient and the medicinal product, as of the consequences of this development is that med- well as that of pharmacy employees. ications are often no longer simply dispensed, but are also administered directly on site. At the same time, more and more services are being offered to monitor specific aspects of health such as the CardioTest® and AllergyCheck which are enjoying growing popularity. This expansion in services means that the requirements for patient and employee protection measures, as well as those for ensuring the quality of these services – both of which were already extremely high – are continually being raised.

Galenica annual report 2015 60 Galenica Group Corporate Governance Corporate Governance

Galenica annual report 2015 Corporate Governance Galenica Group 61

Content Galenica is committed to the principles of Shareholders Corporate Governance. Galenica meets the On 31 December 2015, Galenica had 8,500 61 Group structure and shareholders requirements of Swiss law and those stated shareholders, four of which, according to in the Directive of the SIX Swiss Exchange documents submitted to Galenica Ltd. and 62 Structure of the share capital on Information Relating to Corporate Gov- the SIX Swiss Exchange, were major share- 63 The Board of Directors ernance. It also follows the recommenda- holders holding more than 3 % of the voting tions of the Swiss Code of Best Practice for rights in Galenica Ltd.: 65 Management and areas Corporate Governance of economiesuisse. of responsibility The remuneration and profit-sharing for top Sprint Investments 2 GmbH, Ostermun- management are disclosed in a separate digen, Switzerland, (beneficial owners: 71 Shareholders’ rights to participate Remuneration Report. Stefano Pessina, Monaco, and Kohlberg Kravis Roberts & Co. L.P., New York, USA) 71 Change of control and protective with 1,656,172 registered shares. These measures Group structure and shares are registered in accordance with 72 Combating corruption shareholders the Articles of Association as follows: – 1,300,000 registered shares with voting 72 Information and monitoring Structure of the Group rights (20 %); tools of the Board of Directors Galenica Ltd., headquartered at Untermatt- – 356,172 registered shares without voting with respect to management weg 8, CH-3027 Bern, Switzerland, is a rights. corporation under Swiss law. As a holding 73 Auditors company, Galenica Ltd. owns all the com- Patinex AG, Wilen, Switzerland, and BZ panies in the Galenica Group directly or Bank Aktiengesellschaft, Wilen, Switzer- Information policy 73 indirectly. The Group’s structure and the land, (beneficial owners: Martin and consolidated subsidiaries and associates Rosmarie Ebner) with 1,065,369 registered 74 Brand management are shown in the financial statements 2015 shares. Of these shares, 325,000 are reg- 75 Main brands of the Galenica Group on pages 161 and 162 respectively. The ad- istered in accordance with the Articles of dresses of the main Group companies are Association with voting rights. listed on the beginning of page 178. The Articles of Association of Galenica, the Alecta pensionsförsäkring, ömsesidigt, Organisational Regulations as well as Stockholm, Sweden, with 210,000 regis- the Charters of the Committees of the tered shares. Board of Directors can be accessed at www.galenica.com. BNP PARIBAS SA, Paris, France, 205,284 The shares of Galenica Ltd. are listed on shares – this is a temporary bond to be the SIX Swiss Exchange; shares of individ- repaid on 16 February 2016. ual Group companies are not publicly traded.

Galenica annual report 2015 62 Galenica Group Corporate Governance

Structure of the Galenica Group Galenica

Business unit Business unit Vifor Pharma Galenica Santé

Segment Health & Beauty Segment Services

Business sector Business sector Business sector Products & Brands Retail Services

Pharma companies Companies Management company Prewholesale Vifor Pharma Vifor Consumer Health GaleniCare Alloga OM Pharma G-Pharma Vifor Fresenius Medical Care Renal Pharma Pharmacy formats Wholesale Amavita Galexis Sun Store Unione Farmaceutica Coop Vitality Distribuzione MediService Services Medifilm

Services Content & Process Winconcept HCI Solutions Status: February 2016

No other shareholder has announced a Structure of the share capital Conditional capital crossing of the 3 % threshold of registered Galenica has no conditional capital. shares. Share capital The transactions disclosed to the stock On 31 December 2015, the fully paid Changes in the capital in the last years exchange Disclosure Office pursuant to share capital of Galenica amounted to Information about changes in the share Art. 20 of the Stock Exchange Act can be CHF 650,000, divided into 6,500,000 pub- capital, reserves and distributable profit viewed on the Disclosure Office website of licly listed registered shares with nominal over the past few years can be found on the SIX Swiss Exchange: value of CHF 0.10 each. page 170 of the financial statements 2015. www.six-exchange-regulation.com/obliga- Galenica shares (securities no. 1553646) Please see previous annual reports for in- tions/disclosure/major_shareholders_ are listed on the SIX Swiss Exchange. As of formation about prior years. en.html 31 December 2015, 6,476,864 registered shares were outstanding (not including Participation certificates Cross shareholdings treasury shares). The market capitalisation Galenica has no participation certificates. Galenica Ltd. has no cross shareholdings amounted to CHF 10,194,583,936. in companies outside the Galenica Group. Dividend certificates Authorised capital Galenica has not issued any dividend cer- Events after the balance sheet date According to Art. 3a of the Articles of tificates. There are no events after the balance sheet Association, the Board of Directors is date to report. authorised to increase the share capital of Registration of shareholders CHF 650,000 by a maximum of CHF 65,000 and limitations upon transferability at any time up to and including 8 May 2016 The transfer of registered shares requires by issuing no more than 650,000 fully paid the authorisation of the Board of Directors, registered shares. who may delegate this responsibility. The

Galenica annual report 2015 Corporate Governance Galenica Group 63

transfer is granted if the buyer discloses its of submission at the Annual General Meet- outside board activity to five mandates in identity and confirms that the shares are ing. No applications for exceptions were listed and seven mandates in non-listed being acquired in its own name and for its submitted during the financial year 2015. companies. own account. With the exception of the Executive Registration of nominees Chairman, none of the members of the Registration and voting rights A nominee may be registered with voting Galenica Board of Directors performed an Each registered share entitles the holder to rights up to a limit of 2 % of the share capital operational management function at one vote at the Annual General Meeting. entered in the commercial register. Shares Galenica or any of the companies in the Pursuant to Art. 6 of the Articles of Associ- in excess of this limit can only be registered Group in the year under review or at any ation, voting rights at Galenica are re- if the nominee in question discloses the time during the previous three years. stricted to 5 % of the share capital. name, address and number of shares of the Disclosure of potential conflicts of inter- Legal entities and partnerships, other person for whose account the nominee est: No member of the Galenica Board of groups of persons or joint owners who are holds 0.5 % or more of the share capital en- Directors has any significant relations with interrelated through capital ownership, vot- tered in the commercial register. During the Galenica or any of its subsidiaries. Stefano ing rights, common management or are financial year 2015, agreements of this na- Pessina represents Sprint Investments 2 otherwise linked, as well as individuals or ture were signed with two nominees. GmbH, which is the largest shareholder of legal entities or partnerships that act in Galenica. concert to circumvent this provision, shall Convertible bonds and options be treated as one single entity. Galenica has no outstanding convertible Election and term of office The Board of Directors may refuse reg- bonds, nor has it issued any traded options. Each member of the Board of Directors, its istration in the shareholders’ register if Chairman, each member of the Remunera- purchasers do not declare explicitly, upon tion Committee as well as the independent request, that they have acquired the shares The Board of Directors proxy are elected individually by the Annual in their own name and for their own ac- General Meeting for a term of office of one count. The Board of Directors is also au- The Board of Directors of Galenica Ltd. de- year, i. e. from one Annual General Meeting thorised, after hearing the individuals con- termines the strategic goals, the general to the next. Members may be re-elected. cerned, to cancel any entries in the ways and means to achieve them while The Articles of Association do not stipulate shareholders’ register that were obtained harmonising strategy, risks and financial a limit regarding terms of office. Elections on the basis of incorrect information. resources, and appoints and oversees the are held separately for each Board member The Board of Directors may approve ex- managers responsible for conducting the being elected. ceptions to the voting rights restrictions in company’s businesses. It also designs the order to permit the participation of strate- company’s corporate governance profile The Board of Directors and gic partners in Galenica Ltd., in an amount and puts it into practice. its committees in 2015 not exceeding 20 % of the share capital. The The duties of the Board of Directors of The Board of Directors is made up of the Board has already exercised this right in Galenica Ltd. are based on the Swiss Code Executive Chairman, one or more Vice- connection with Sprint Investments 2 of Obligations, the company’s Articles of Chairmen and the other members. Accord- GmbH (previously Alliance Boots Invest- Association and its Organisational Regula- ing to the Articles of Association, the Board ments 2 GmbH). tions. Pursuant to the Articles of Associa- must consist of a minimum of five and a In order to guarantee vested rights, the tion, the Board of Directors consists of a maximum of twelve members. The Board Articles of Association allow the pension minimum of five and a maximum of twelve of Directors forms the following commit- funds of the companies in the Galenica members. It consisted of ten members as tees from its members: Group to be registered as shareholders of the end of 2015. – Governance and Nomination Committee with voting rights in an amount not exceed- In selecting the members of the Board – Remuneration Committee ing 10 % of all shares with voting rights. As of Directors, care is taken to ensure that – Audit and Risk Committee of 31 December 2015, the pension funds competency for each area of the Galenica – Scientific and Pharma Committee were registered with 0.08 %. Group’s activities is represented by at least – Swiss Healthcare Committee Within the scope of a change in the Arti- one member, if possible, and that the nec- cles of Association, the Annual General essary specialised expertise is also availa- Each committee has its own charter set- Meeting may pass, by a relative majority, a ble. The Board of Directors reviews its ting out its duties and responsibilities. The resolution to approve exceptions to the per- functional effectiveness once a year. committee charters are published on the centage limits. At least half of all shares The Articles of Association of Galenica Galenica website (www.galenica.com). entered in the commercial register must be Ltd. restrict the ability of its directors to act represented in order for such a resolution to in the board or senior management of other be legally binding. The applicant has a right profit-oriented companies, limiting such

Galenica annual report 2015 64 Galenica Group Corporate Governance

Committees and their chairmen and members 2015

Board member Governance and Nomination Remuneration Audit and Risk Scientific and Pharma Swiss Healthcare since Committee Committee Committee Committee Committee Etienne Jornod 1996 Chairman Member Chairman Daniela Bosshardt-Hengartner 2008 Chairman Member Member Michel Burnier 2010 Member Chairman Member Romeo Cerutti 2015 Member Member Marc de Garidel 2015 Member Hans Peter Frick 2010 Chairman Sylvie Grégoire 2013 Member Member Member Fritz Hirsbrunner 2012 Member Member Stefano Pessina 2000 This E. Schneider 2004 Member Member Member Member Number of meetings 2015 6 5 6 4 3

Internal organisation In 2015, the Board of Directors held Each committee has its own charter gov- The Board of Directors may pass binding eleven meetings. In addition to meetings erning its duties and responsibilities. resolutions for the company with respect and the associated flow of information to all matters that are not expressly re- (documentation on individual agenda Governance and Nomination Committee served for the authority of the Annual Gen- items, reports), the Board of Directors is The Governance and Nomination Commit- eral Meeting either by law or the Articles of also informed on a regular basis about the tee ensures the management and monitor- Association. Group’s activities and challenges, as well ing of the Group’s business activities by the The Executive Chairman calls a meeting as the current state and general develop- Board of Directors (overall management of the Board of Directors at least once a ment of the Business sectors. Further- and ultimate supervision pursuant to quarter, prepares and leads the meetings. more, the Board of Directors is often con- Art. 716a of the Swiss Code of Obligations). The individual agenda items are set by sulted by the Corporate Executive In addition, the Governance and Nomina- the Executive Chairman. He decides on a Committee in its role as advisory body. tion Committee has the following duties in case-by-case basis whether to involve ad- As part of its risk management, the particular: ditional persons in the consultations of the Board of Directors receives from the Cor- – Develops the values, short- and long- Board of Directors. The Corporate Execu- porate Executive Committee an overview term objectives and strategy of the Group tive Committee usually participates at least of the most important risks, along with pre- in close cooperation with the CEOs for in part of every meeting to report on ongo- ventive measures to be implemented submission to the Board of Directors; ing business and to explain in more detail Group-wide as part of the risk management – Takes provisional decisions and inter- the documentation in light of the decisions process. It evaluates and takes decisions venes in urgent cases where a decision to be taken. Any member of the Board may on this overview of risks and measures, of the Board of Directors cannot be ob- propose, in writing, items to be included in which is provided when circumstances retained in a timely manner; the agenda, or may request that a meeting quire it, but at least once a year. Further – Draws up selection criteria for the nomi- of the Board of Directors be convened, information on this topic can be found on nation of members of the Board of Direc- briefly giving reasons for doing so. The page 72. tors, Committees and Corporate Execu- members of the Board receive the docu- tive Committee, and reviews the relevant mentation they need to prepare for the Committees succession plans; agenda items in a timely manner, normally The committees prepare the business of the – Evaluates and makes proposals for the at least ten days before the meeting in Board of Directors in the areas of activity appointment and dismissal of members question. Decisions are made by the entire assigned to them and submit recommenda- of the Board of Directors, Committees Board of Directors. Minutes of the meeting tions to the entire Board of Directors. Ex- and Corporate Executive Committee (in- are kept, recording all discussions and res- cept for the Remuneration Committee, the cluding the CEOs). olutions. committees have no decision-making au- The Executive Chairman, in consultation thority of their own. They meet as often as with the CEOs, represents the interests of business requires and report to the Board the Group towards third parties in impor- of Directors on activities and results. They tant matters. draw up their own agendas and keep minutes of meetings.

Galenica annual report 2015 Corporate Governance Galenica Group 65

Remuneration Committee – Issues new guidelines, instructions or tee six times. The Scientific and Pharma The Remuneration Committee is made up clarifications in connection with the Code Committee met four, and the Swiss Health- of three members, who must be independ- of Conduct; care Committee met three times. On aver- ent. The Remuneration Committee carries – Assesses the financial structure, the de- age the members of the Board of Directors out the following duties in particular: velopment of investments and acquisi- participated in more than 94 % of the meet- – Proposes a remuneration strategy for the tions, and the influence of currency fluc- ings and exchanged their views with other Group and the members of the Corporate tuations and measures to be taken; committee members and the Executive Executive Committee to the Board of Di- – Monitors the Group’s financial situation Chairman in numerous telephone confer- rectors; and financial controls; ences. The allocation of tasks among the – Proposes to the Board of Directors the – Receives regular information from the committees is described starting from salaries and remuneration for the mem- Corporate Executive Committee con- page 63 of this report. bers of the Board of Directors and the cerning major changes that could affect Committees as well as the CEOs; the Group’s financial situation. – Decides on the remuneration for the Management and areas members of the Corporate Executive Scientific and Pharma Committee of responsibility Committee within the scope of the guide- The Scientific and Pharma Committee acts lines adopted by the Annual General as an advisory body to the Executive Chair- The Board of Directors is legally responsi- Meeting. man and the Board of Directors in matters ble for the overall management and ulti- of R & D strategy for the Group, innovation mate supervision of the Group. It has the Audit and Risk Committee process, innovation pipeline, protection of duties provided for under Art.716a para.1 The Audit and Risk Committee carries out intellectual property and in the assess- of the Swiss Code of Obligations; it cannot the following duties in particular: ment, selection and prioritisation of target be deprived of these duties, nor can it del- – Verifies compliance with internal and ex- markets and therapeutic fields. egate them. In addition, it may pass reso- ternal regulations by carrying out random It also gives its view on acquisitions and lutions with respect to all matters that are checks; proposals aimed at strengthening the tech- not reserved for the authority of the Annual – Checks the performance and independ- nology base of the Group or accelerating General Meeting either by law or the Arti- ence of the external auditor and approves market penetration. cles of Association. In particular, the Board its fees; of Directors is responsible for approving or – Evaluates and submits its nomination for Swiss Healthcare Committee passing resolutions on: external auditor to the Board of Directors The Swiss Healthcare Committee acts as – The values, objectives and strategy for the Annual General Meeting; an advisory body to the Executive Chair- of the Group; – Reviews together with the external audi- man and the Board of Directors in matters – The essential framework of the tors the scope and method of the audit; concerning the market for healthcare ser- company’s activities; – Defines the internal audit programmes, vices in Switzerland, in particular the pro- – The Group’s planning, budget and including compliance and IT security, and vision of medical products, services and projections; checks the audit reports and the status information to pharmacists and other – Selection and deselection of the reports on the implementation of meas- healthcare professionals, the assessment, members of the Committees, the CEOs ures; selection and prioritisation of target mar- and the members of the Corporate – Analyses at least once a year the scope kets, and the optimisation of logistics pro- Executive Committee; of internal control systems, the auditing cesses. – The organisation of the remuneration projects and processes affected, the re- It also gives its view on mergers and ac- system. sults of internal audits and the implemen- quisitions and divestiture projects of its tation of recommendations by the Corpo- points of sale aimed at strengthening mar- The Board of Directors has delegated the rate Executive Committee; ket penetration and efficiency. management of the company in accord- – Reviews with the external auditors the ance with the Organisational Regulations. Group’s compliance with accounting pol- Frequency of meetings of the Board of Etienne Jornod serves as Executive Chair- icies and standards; Directors and its committees in 2015 man and has certain clearly defined oper- – Assesses the organisation of risk man- In 2015, the Board of Directors held eleven ational duties. More precise details of his agement processes; meetings, together with members of the duties are set out later in this section. The – Reviews, if necessary together with the Corporate Executive Committee. The Gov- CEOs, Søren Tulstrup and Jörg Kneubühler, external auditors, the risks that could af- ernance and Nomination Committee met assume operational management of the fect the Group’s result and the measures six times, the Remuneration Committee planned for reducing those risks; five times and the Audit and Risk Commit- continued on page 70

Galenica annual report 2015 66 Galenica Group Corporate Governance

Members of the Board of Directors

Etienne Jornod, Executive Chairman, elected since 1996 – Born 1953, Swiss citizen – Lic. oec., HEC University of Lausanne/Senior Executive Program, Stanford University (USA) – Joined the Group in 1975 as a Junior Product Manager; left the Group in 1978; returned in 1981 (after obtaining a university degree) as Assistant to the Corporate Executive Committee; joined the Corporate Executive Committee in 1989; Chairman of the Board of Directors and CEO of Galenica from 1996 to 2011; Executive Chairman since 2012 – Chairman of the Board of Directors of the Aktiengesellschaft für die Neue Zürcher Zeitung (Zurich) and member of the Board of Directors of Vaudoise Assurances Holding SA (Lausanne)

Daniela Bosshardt-Hengartner, elected since 2008 – Born 1972, Swiss citizen – Pharmacist, Federal Diploma in Pharmacy, Federal Institute of Technology, Zurich – Financial analyst at Bank am Bellevue (1998–2002) and M2 Capital (2003–2004) – Management consultant in the pharmaceutical, medical technology and biotechnology sectors since 2004 – Member of the Board of Directors of RepRisk AG (Zurich)

Prof. Dr. Michel Burnier, elected since 2010 – Born 1953, Swiss citizen – Swiss-registered Doctor of Internal Medicine and Nephrology – University Lecturer, University of Lausanne – Formerly a member of the Medicines Committee of the Swiss Association of Pharmacists (until 2001), the Board of Swissmedic (2002–2010) and the Board of Directors of Speedel Holding Ltd. (2007–2009) – Member of the following organisations: Swiss Society of Nephrology (President), Scientific Council of the European Society of Hypertension (Treasurer) and Swiss Society of Hypertension (President)

Dr. Romeo Cerutti, elected since 2015 – Born 1962, Swiss and Italian citizen – Doctor of Law, Law studies at the University of Fribourg, Switzerland; Master of Laws from the University of California, School of Law, Los Angeles – Attorney-at-law with Latham and Watkins (1993–1995) and Homburger Rechtsanwälte (1995–1999) – Head of Corporate Finance at Lombard Odier Darier Hentsch & Cie (1999–2006) and partner of the Group Holding of Lombard Odier Darier Hentsch & Cie (2004–2006) – General Counsel of the Private Banking division of Credit Suisse (2006–2009) – General Counsel and a member of the Executive Board of Credit Suisse Group Ltd. and Credit Suisse Ltd. since April 2009 – Member of the Board of Trustees of the University of Fribourg since 2006

Marc de Garidel, elected since 2015 – Born 1958, French citizen – Master in Engineering, Ecole Supérieure des Travaux Publics, Paris; Master in International Management, Thunderbird School of Management, Phoenix (USA); Executive Master in Business Administration, Harvard University, Boston (USA) – Various positions at Lilly, most recently as finance director Germany (1983–1995) – Various positions at Amgen, including Vice-President Finance and Administration Europe, Vice-President and Chief Administration Officer, and General Manager for France and Vice-President of the South International Region (1995–2010) – Since 2010 Chairman of the Board of Directors and CEO of Ipsen

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Dr. Hans Peter Frick, elected since 2010 – Born 1946, Swiss citizen – Doctor of Law, LL.M., University of Zurich; postgraduate University of Alberta, Edmonton, Canada; studies in business management at the International Management Institute (IMI), Geneva – Legal Counsel at Hewlett Packard, EMEA in Geneva (1975–1987) – Chief Executive of the Association of International Bond Dealers (AIBD) in Zurich and London (1987–1989) – Joined Nestlé in 1990, General Counsel of the Nestlé Group (1992–2011) – Member of the Executive Committee of the law school HEAD (Hautes Etudes Appliquées du Droit), Paris – Member of the Advisory Board of Mentor Group, Boston – Honorary member of the Board of Directors of CPR, International Institute for Conflict Prevention & Resolution, New York

Dr. Sylvie Grégoire, elected since 2013 – Born 1961, Canadian and US citizen – Dr. pharm., State University of New York in Buffalo (NY/USA), pharmacy degree from Université Laval, Quebec City (Canada) – Formerly President of Shire Human Genetic Therapies (2007–2013), worked in various roles at companies including Merck & Company (1987–1995), Biogen Inc. (1995–2003), GlycoFi Inc. (2004–2005) and IDM Pharma (2006–2007) – Advisor to venture capital and biotech companies – Former member of the Boards of Directors of various companies in the USA and Canada, and the boards of various charitable organisations – Member of the Board of Directors of Novo Nordisk and PerkinElmer Inc.

Fritz Hirsbrunner, elected since 2012 – Born 1949, Swiss citizen – Lic. oec., HEC University of Lausanne/Senior Executive Program, IMD, Lausanne – 1972–1977 Controller at Ciba-Geigy – Joined the Galenica Group in 1977 as Assistant to the Corporate Executive Committee; member of the Corporate Executive Committee from 1992 to 2011; Deputy CEO and CFO; Head Investor Relations until February 2014 – Member of the Board of Directors of Berlac AG, Sissach, and IVF Hartmann Holding AG, Neuhausen – Member of the Board of Trustees of IST Investmentstiftung für Personalvorsorge, Zurich – Member of the Board of Directors of VenCap 6 Ltd., Jersey

Stefano Pessina, elected since 2000 – Born 1941, citizen of Monaco – Nuclear engineering degree, Milan Polytechnic – Former management consultant, active as an entrepreneur in various pharmaceutical distribution companies since 1976; became Deputy Chairman in 1997, and CEO between 2001 and 2006 of Alliance UniChem Plc, Weybridge (UK); since 2007 Executive Chairman of Alliance Boots, London (UK) and Executive Vice Chairman of the Board and Chief Executive Officer of Walgreens Boots Alliance, Inc., having been appointed to the Board of Walgreens in 2012

This E. Schneider, Vice-Chairman, elected since 2004 – Born 1952, Swiss citizen – Lic. oec., HSG University of St. Gallen/Graduate School of Business, Stanford University (USA) – Previously held various managerial positions in Europe and in the USA, at SAFAA (1991–1993), Valora (1994–1997) and Selecta Group (1997–2002). From 2004 until March 2014, Delegate of the Board of Directors and CEO of Forbo International AG, Baar, since April 2014 Executive Chairman of Forbo International AG, Baar – Rieter Holding AG, Winterthur (Vice-Chairman of the Board of Directors), Antoneum Holding AG, Winterthur (member of the Board of Directors)

Galenica annual report 2015 68 Galenica Group Corporate Governance

Members of the Corporate Executive Committee

Dr. Jörg Kneubühler, CFO of the Galenica Group and CEO Galenica Santé – Born 1960, Swiss citizen – Dr. rer. pol., University of Bern – Held various positions in finance at the Swatch Group before joining Galenica – Joined the Group in 2002 as Head of Finance and Administration at Vifor Pharma; Head of Controlling for the Galenica Group as of 2006; Head Corporate Finance and Controlling for the Galenica Group and member of the Corporate Executive Committee since 2009; CFO since 2012 and Head Human Resources from 2012 until August 2014 – Since 2014 CFO Galenica Group and CEO Galenica Santé

Søren Tulstrup, CEO Vifor Pharma – Born 1965, Danish citizen – M. Sc. in Economics and Business Administration, Copenhagen Business School – Worked from 1990 to 1992 at Abbott Laboratories, Denmark, and from 1992 to 1996 at Sandoz Pharma Ltd., Switzerland; held various general management positions at Merck & Co., Inc., Denmark, Ireland and USA between 1996 and 2008; was President and CEO of Santaris Pharma A/S from 2008 to 2012 and then Head Global Franchise (MPS) at Shire Pharmaceuticals, Switzerland/USA – Joined the Group in 2014 as CEO Vifor Pharma and as member of the Corporate Executive Committee

Felix Burkhard, Head Strategic Projects – Born 1966, Swiss citizen – Lic. oec., HSG University of St. Gallen (HSG), and Swiss certified accountant – Financial Auditor at Revisuisse PriceWaterhouse, Bern, and Head of Finance and Controlling at Amidro, Biel-Bienne, before joining the Group – Joined the Group in 1996 as Corporate Controller, Deputy Head Retail Business sector from 2000; in addition, Head of the Amavita pharmacy chain from 2008; Head Retail Business sector from 2010 to 2015; member of the Corporate Executive Committee since 2010; since 2015 Head Strategic Projects

Jean-Claude Clémençon, Head Retail Business sector – Born 1962, Swiss citizen – Degree in Logistics, sfb Technical College, Zurich – Program for Executive Development (PED), IMD, Lausanne – Before joining the Group he was Head of Manufacturing at Rheintub AG, Rheinsulz, and CEO of Raintec GmbH, Dogern (Germany) – Joined the Group in 1995 as Operations Manager Galexis Zurich; Head of Schönbühl Distribution Centre from 1999; Head of Galexis from 2002; Head Logistics Business sector from 2005 to 2015 and in addition in charge of HealthCare Information and member of the Corporate Executive Committee since 2010; since 2015 Head Retail Business sector – Member of the Board of Helvecura cooperative society, Bern

Dr. Gianni Zampieri, Head Pharma Operations – Born 1956, Swiss citizen – Dr. sc. nat., NDS BWI, Federal Institute of Technology, Zurich/Senior Executive Program, Stanford University (USA) – Held positions at Roche, Sandoz and Novartis before joining the Group – Joined the Group in 1996; became CEO of Vifor (International) in 1997; member of the Corporate Executive Committee since 2002; Head of the Pharma Division of the Galenica Group from 2004 to 2008; Head of Industrial Operations at Vifor Pharma since 2008; CEO OM Pharma from 2009 to 2010; Vice-CEO Vifor Pharma since 2011

Galenica annual report 2015 Corporate Governance Galenica Group 69

Organisation of Group Management

Executive Chairman Etienne Jornod

CFO, Corporate Finance Jörg Kneubühler*

Strategic Projects Felix Burkhard*

General Secretary Andreas Walde

Corporate Communications Christina Hertig

CEO Vifor Pharma CEO Galenica Santé Søren Tulstrup* Jörg Kneubühler*

Finance, Adm., IT Corporate Legal Corporate Legal Alex Sigalas Oliver Kronenberg Oliver Kronenberg

Human Resources Michael Puri

Pharma Operations Global Business Global Marketing Vifor Fresenius Medical Products & Brands Retail Services Operations Care Renal Pharma Gianni Zampieri*, Vice-CEO Dario Eklund Abdul Mullick Stefan Schulze, CEO Torvald de Coverly Veale Jean-Claude Clémençon* Christoph Amstutz

Research & Development Stefan Wohlfeil

* Members of the Corporate Executive Committee Status: February 2016

Duties of the Executive Chairman – Leading the Board of Directors – Ongoing strategic development of the Group – Supporting alliances and acquisitions – Positioning of the Group re. communications – Maintaining relationships with partners – Overall responsibility for the corporate culture (HR policy, communications) – Involvement in implementing key strategic projects – Member of the Group’s strategic Boards of Directors

Duties of the two CEOs – Operational management of the Group’s Business units Vifor Pharma and Galenica Santé respectively – Budget realisation and control – Ensuring compliance, internal control systems and risk management – Developing relationships with customers, suppliers and authorities – Supporting the Executive Chairman in preparing strategic, HR-related and financial business for consultation and decision-making

Galenica annual report 2015 70 Galenica Group Corporate Governance

continued from page 65 Each of the two CEOs is responsible for The Articles of Association of Galenica implementing the strategic and operational restrict the ability of the members of the Group’s Business units Vifor Pharma and objectives approved by the Board of Direc- Corporate Executive Committee to act in Galenica Santé respectively and head the tors, for preparing budgets and ensuring the board or senior management of other Corporate Executive Committee. The that they are met, and for developing rela- profit-oriented companies, limiting such Board of Directors maintains close contact tionships with customers, suppliers and outside board activity to one mandate sub- with the CEOs and the members of the Cor- authorities. They implement the Group val- ject to prior approval by its Board of Direc- porate Executive Committee and invites ues (including safety, quality and the Code tors. them, or sometimes each of the CEOs on of Conduct) and issue binding guidelines Further information on the other duties their own, to attend its meetings when rel- for their respective Business unit. In doing of the Board of Directors, Executive Chair- evant items are to be discussed. At each so, they work closely with each other and man and Corporate Executive Committee meeting, the members of the Corporate with the Executive Chairman on the most can be found in the Organisational Regula- Executive Committee are invited to report important decisions. The two CEOs lead tions published on the Galenica website on their respective Business sectors and to the Corporate Executive Committee. Each (www.galenica.com). discuss important business matters with of the CEOs reports directly to the Execu- the Board. Other members of senior or ex- tive Chairman, with whom he prepares the Information and monitoring tools ecutive management of companies within information for the meetings of the Board The Board of Directors monitors the Cor- the Group are also regularly invited to re- of Directors. At these meetings, the CEOs, porate Executive Committee and super- port on their activities or present their pro- and on some occasions other members of vises its working practices. The Galenica jects. the Corporate Executive Committee, in- Group has a comprehensive electronic inform the Board of Directors and submit formation management system. The Board Duties of the Executive Chairman strategic, HR-related and financial busi- of Directors receives a written report on a As Executive Chairman, Etienne Jornod is ness to the Board for consultation and de- quarterly basis and is informed on a responsible for leading the Board of Direc- cision-making. monthly basis about the Group’s financial tors, the ongoing strategic development and operating performance. In addition, of the Group, alliances and acquisitions, Corporate Executive Committee operating performance, opportunities and the positioning of the Group concerning The instructions and resolutions of the risks are discussed in depth at meetings communications and stakeholder relations. Board of Directors are implemented for attended by members of the Corporate Ex- In particular, he carries out his executive each of the Group’s Business units by the ecutive Committee. role in important strategic boards of Corporate Executive Committee under the the Galenica Group, such as Chairman of leadership of the respective CEO. The Management contracts the Board of Directors of Vifor Fresenius Board sets appropriate objectives for each No management contracts exist as speci- Medical Care Renal Pharma Ltd. CEO and those members of the Corporate fied under point 4.3 of the SIX Swiss Ex- The Executive Chairman is closely in- Executive Committee allocated to his Busi- change Directive on Information Relating volved in the implementation of the most ness unit, approves the budget and contin- to Corporate Governance. important strategic projects. In addition, ually monitors compliance with these tar- he has overall responsibility for the Group’s gets. Monitoring is based on monthly corporate culture, a competitive factor that reports to the Board, which include key is becoming increasingly important in the figures and reporting on important events labour market. Likewise, he helps shape and developments, and on the planning the HR policy and communications of the cycle. In the first quarter, the results for the Galenica Group. The Swiss heritage of the previous year are compared with the Galenica Group should be preserved as a budget for that year. In the second quarter, competitive advantage and continue to the current financial year is evaluated by be developed. Almost 7,100 of over 7,800 means of a “Last Estimate 1”, and a medi- Galenica employees are based in Switzer- um-term plan for the next three years is land. drawn up. In the third quarter, the results for the first half-year are prepared and re- Duties of the CEOs viewed, and in the fourth quarter the ex- Each of the two Business units Vifor pected annual result “Last Estimate 2” is Pharma and Galenica Santé has its own determined and the budget for the follow- CEO in charge of operational management. ing year agreed.

Galenica annual report 2015 Corporate Governance Galenica Group 71

Shareholders’ rights indicate its approval based on a quorum, 28 April 2016 must be submitted no later to participate as defined by the Articles of Association, than 18 March 2016. The items to be in- of at least two-thirds of the votes repre- cluded on the agenda must be specified The Annual General Meeting is held each sented and an absolute majority of the along with the motion on which the share- year within six months of the close of the share par values represented. holder requests a vote. financial year. Extraordinary General Meet- ings are called as often as necessary by a Quorums under the Articles Shareholders’ register decision of the Annual General Meeting or of Association There are no regulations in the Articles of Board of Directors, at the request of the In addition to the cases cited in Art. 704 of Association regarding a deadline for entry auditors or at the written request of share- the Swiss Code of Obligations, approval by in the shareholders’ register. However, for holders representing on aggregate not less at least two-thirds of the votes represented practical reasons the shareholders’ regis- than 7 % of the share capital entered in the and the absolute majority of the nominal ter remains closed to entries for several commercial register. capital represented is required in the fol- days prior to an Annual General Meeting. Each share recorded as a share with vot- lowing cases: This will be the case from Tuesday 19 April ing rights in the shareholders’ register en- – A change in the provisions relating to re- 2016 for financial year 2015 and from Tues- titles the holder to one vote at the Annual strictions on the transfer of registered day 2 May 2017 for financial year 2016. General Meeting. Shareholders are also shares, Art.15c) of the Articles of Associ- Shareholders entered in the shareholders’ entitled to dividends and have other rights ation; register by Monday 18 April 2016 and Mon- pursuant to the Swiss Code of Obligations. – Conversion of registered shares into day 1 May 2017 respectively may exercise Results of the ballots taken at the Annual bearer shares and vice versa, Art. 15d) of their voting rights at the corresponding General Meetings are made available on the Articles of Association. Annual General Meeting. the Galenica website within one week after Instructions to the independent proxy each meeting. Convening of the Annual General holder may be given in writing and – since Meeting 2014 – also electronically through a plat- Voting restrictions and proxy voting The Articles of Association do not differ form named Nimbus ShApp® which is used A registered shareholder may be repre- from legal regulations with regard to the by Galenica. The invitation to the Annual sented at the Annual General Meeting on convening of the Annual General Meeting General Meeting, which will be sent to all the basis of a written power of attorney by and the setting of the agenda. The Annual shareholders on or around 1 April 2016, another shareholder or the independent General Meeting is convened by the Board includes the required login information to proxy to whom instructions may be given of Directors at least 20 days before the create a personal user profile. The instruc- in writing or electronically. There are no date of the meeting. The shareholders are tions must be received by the independent rules that deviate from legal provisions re- invited to attend by a notice placed in offi- proxy holder by the evening of the penulti- lating to attendance of the Annual General cial publications. The meeting may also be mate day before the Annual General Meet- Meeting. convened by sending a letter to all the reg- ing, i.e. by Tuesday 26 April 2016 for the The Board of Directors may refuse to istered shareholders at the addresses en- 2016 Annual General Meeting and by Tues- recognise voting rights of a share pur- tered in the shareholders’ register. The day 9 May 2017 for the 2017 Annual Gen- chaser as a shareholder or beneficiary for notice of a meeting shall state the items on eral Meeting. voting rights for any shares which, when the agenda, the proposals of the Board of added to shares already registered as vot- Directors and the requests of any share- ing shares in the purchaser’s name, would holders who have called for a General Change of control and give the purchaser more than 5 % of all vot- Meeting to be convened or for a particular protective measures ing shares. See page 63 for further details. item to be included on the agenda. The obligation to make a public offer pur- Procedure and conditions for lifting Inclusion of items on the agenda suant to Art. 22 of the Stock Exchange Act restrictions on voting rights Shareholders who together represent not (Federal Act on Stock Exchanges and For restrictions on the registration of voting less than 0.5 % of the share capital entered Securities Trading) has not been changed rights to be lifted, shareholders who to- in the commercial register may request in the Articles of Association. The employ- gether represent not less than 0.5 % of the that an item be included on the agenda. ment contracts of the members of the Cor- share capital entered in the commercial They must submit such requests in writing porate Executive Committee and the mem- register must request in writing that such no later than 40 days before the scheduled bers of senior management also contain an item be included on the agenda no later date of the meeting. Agenda items relating no provisions to this effect. than 40 days before the Annual General to financial year 2015 that are to be dealt Meeting. The Annual General Meeting must with at the Annual General Meeting on

Galenica annual report 2015 72 Galenica Group Corporate Governance

Combating corruption then evaluated in accordance with the will be taken in an efficient manner and probability of their occurrence and their that experience will be broadly reinforced Galenica attaches considerable value to effect. These risks are entered into a risk within the Galenica Group. doing business in a manner that is ethically matrix for each Business sector and, de- The systematic overview of the key risks correct and in accordance with the legal pending on the extent, also incorporated enables the Board of Galenica to coordi- requirements in place. It is committed to into the Group risk matrix. nate with the chosen strategy, prioritise complying with legal and ethical standards. The Board of Directors of Galenica re- risk, allocate resources and specify any This must be reflected in every aspect of ceives an overview of the most important action required. The Galenica Board of Di- staff conduct. Galenica enforces a zero-tol- risks from the Corporate Executive Com- rectors receives an overview of risk assess- erance approach to corruption and bribery mittee when circumstances require it but ment when circumstances require it but at on the part of employees, partners, suppli- at least once a year. The Board evaluates least once a year. ers or representatives of third parties. the overview, adding information as The Corporate Executive Committee as Many countries have legislation which stip- needed, and where required takes deci- well as other management figures holding ulates that bribing public officials is an of- sions on any preventive measures neces- responsibility in the companies of the fence. Violations of these provisions or sary, which will then be implemented Group are familiar with the risks of the other laws prohibiting unfair competition Group-wide as part of the risk management Group, their Business sector or their Group may result in criminal or civil proceedings process. company. They successfully implement any against Galenica as well as the responsible measures decided upon and are responsi- employees. Definition of risk ble for the efficient operation of the risk In order to ensure full compliance with Galenica defines risk as the possibility that management process. They also draw at- rules and regulations Galenica has devel- an event or an action will lead to immediate tention, however, to new risks which have oped an anti-bribery and corruption check. financial loss or other negative conse- become apparent or to any other change in This check is used each time a new busi- quences. the risk situation and, in addition to imple- ness relationship is established with third menting measures to prevent or minimise parties and is being introduced gradually Objectives such elements, ensure that these are incor- and on the basis of specific priority criteria. GRM defines three basic objectives: porated into the risk management process. – Creating a framework for effective risk Additional information about the man- management within the Galenica Group agement of financial risks can be found in Information and monitoring that will be embedded in existing man- the notes to the consolidated financial tools of the Board of Directors agement and planning processes and will statements on pages 119 and 120. therefore effectively strengthen risk with respect to management awareness at all management levels. Internal control system – Creating and guaranteeing a lean and As part of its risk management system Risk management process pragmatic risk management system that Galenica operates an internal control sys- will effectively protect the Business sec- tem (ICS) to provide reliable internal and Galenica has a risk management process tors and their profit-earning ability. external financial reporting and to prevent in place which enables the Board of Direc- – A credible presentation to stakeholders false information and errors about busi- tors, the Corporate Executive Committee that Galenica is managing its risks effec- ness transactions. The ICS provides the as well as the relevant management of tively. necessary processes and controls to en- Group companies to identify potential risks sure that risks relating to the quality of the in a timely manner and take the preventive Monitoring and management company’s financial reporting can be de- measures necessary. The goal of this pro- Risk management at the level of the tected and managed in a timely manner. A cess is to identify and assess significant Galenica Group records strategic risks that thorough review of the existence of the risks at all management levels and to man- could have significant consequences at processes and controls of the Galenica ICS age them while making conscious use of Group level or at least at Business sector is carried out annually by the external au- the opportunities the process provides. level. Operational risk management is spe- ditors at the time of the interim audit. The As part of Group-wide Galenica Risk cifically defined and managed by the indi- results of these reviews are reported to the Management (GRM), the companies in the vidual Group operating companies, although Audit and Risk Committee and appropriate Group conduct a risk assessment at least it is recognised that events in individual measures are taken by management to once a year. This standardised process is companies can clearly have an influence on continually improve the company’s pro- based on a risk grid in which the most im- the strategic risks of the Group. Risks are cesses with regard to bookkeeping, ac- portant strategic and operational risks and managed at the appropriate level by the counting and financial reporting. their possible financial effects are identi- management hierarchy that is best suited fied in line with pre-defined criteria and for this purpose. This ensures that action

Galenica annual report 2015 Corporate Governance Galenica Group 73

Internal Audit porting, compliance with deadlines, inde- Contact persons and important Internal Audit carries out audits of opera- pendence and costs. The involvement of publication dates tional and strategic risk management and the auditors in the financial elements of the ICS in accordance with the audit plan due diligence reviews for acquisitions and For shareholders determined by the Audit Committee. It car- in the related legal advice improves the ef- For shareholders in relation to ries out reviews, analyses and interviews ficiency of the process. corporate governance: across the Group and helps the Business Andreas Walde, General Secretary sectors to meet their targets by ensuring Phone +41 58 852 81 11 an independent assessment of the effec- Information policy [email protected] tiveness of the internal control processes. Internal Audit regularly produces reports Galenica and its companies operate an ac- For investors on its audits and reports directly to the Au- tive and transparent information policy Julien Vignot, Head Investor Relations dit and Risk Committee in writing. The ac- towards all their stakeholder groups. Con- Phone +41 58 852 85 29 tivities of Internal Audit are conducted sistency and credibility are two fundamen- [email protected] through contracts issued to external ser- tal principles that are reflected in factual, vice providers. comprehensive and objective communica- For the media tion. Christina Hertig, Head Corporate Communications Auditors Ad hoc publicity Phone +41 58 852 85 17 Important and price-relevant events are [email protected] Ernst & Young Ltd., Bern, Switzerland, have communicated in a timely manner via elec- been the Group’s auditors since 1992. tronic media and in accordance with the Agenda 2016/2017 Roland Ruprecht, lic. rer. pol., CPA, a part- Directive of the SIX Swiss Exchange. Any – Annual General Meeting 2016: ner at Ernst & Young, has been in charge of employees affected are informed first, as 28 April 2016 the audit since 2015. long as this is possible in the specific situ- – Half-year report 2016: The fees paid to the Group’s auditors ation and allowed by law. 9 August 2016 Ernst & Young in 2015 for their audit – Annual General Meeting 2017: of Galenica and companies within the Periodic publications 11 May 2017 Galenica Group totalled approximately Once a year, Galenica publishes an annual CHF 1,252,000. report and a half-year report. The full ver- Further important dates can be found The fees paid to Ernst & Young and their sions of these reports are available on on the website www.galenica.com under close collaborators for other services ren- the Galenica website. In addition, Galenica the heading Investors. dered to Galenica and its subsidiaries in publishes a printed short version of the the period under review amounted to annual report which is sent to the share- CHF 472,000. They break down as follows: holders by mail upon request. – Additional advice in audit matters The invitation to the Annual General CHF 135,000; Meeting is sent to shareholders electroni- – Tax and legal advice CHF 186,000; cally or by mail, and is additionally pub- – Transaction support incl. due diligence lished in the “Schweizerisches Handels- CHF 151,000. amtsblatt”.

In 2015, Roland Ruprecht attended two Internet meetings of the Audit and Risk Committee. All Galenica publications, all media re- Moreover, the auditors presented their re- leases and other supplementary infor- port at the meeting of the Board of Direc- mation about the Group can be found at tors on 11 March 2016. www.galenica.com. The auditors are regularly informed of new projects by the Board of Directors. The auditors’ activities are reviewed at least once a year by the Audit and Risk Commit- tee. The criteria that are of particular importance in these reviews are: competence in reporting, understanding of the complex structure of the Group, the quality of re-

Galenica annual report 2015 74 Galenica Group Corporate Governance

Brand management The Group’s brands Product and service brands

Philosophy and implementation Organisational basis The Galenica company brands are supple- The Galenica Group is structured into two mented by the product and service brands Excellence in the healthcare market Business units, Vifor Pharma and Galenica of the companies within the Group, focused Galenica seeks to be recognised as a reli- Santé, the latter being structured into the on the customers of the individual Business able, dynamic and efficient Group within two segments Health & Beauty, comprising units: for example, the products of Vifor the healthcare market which creates value the Products & Brands and Retail Business Pharma, the offering of the pharmacy for- for all stakeholder groups with high-quality sectors, and Services. The Group compa- mats Amavita and Sun Store, and the Ser- products and services. Thus, Galenica also nies are assigned to the Business units vices offering including logistics and the invests its energies in looking after its on the basis of their core activities. The databases and software products in the brands. Galenica stands for quality and Galenica brand is supported at all levels area of information management. The pres- professionalism, for credibility and trans- by the descriptor (the support line) used entation of these products and services is parency, for reliability and continuity. There with the logo. At Group level, it is the broad tailored to markets and customers specific is a clear focus on excellence in our sup- basis of excellence that is communicated; to individual companies and, therefore, dif- port line “Galenica – excellence in the at company level, it is the fact that the com- fers from the Group corporate design. The healthcare market”. Group Corporate Com- pany is part of the Galenica Group that is corporate design and the accompanying munications, in particular, is responsible signalled. communication and marketing measures for implementing Galenica brand commu- The majority of companies in which are defined and implemented by the rele- nication. Galenica has more than a 50 % holding fol- vant company. Special events and activities low this strategy and use the common cor- organised in conjunction with the branding Corporate identity porate design. New companies are inte- of products and services along with cus- Galenica is a broad-based Group which grated progressively in line with a clearly tomer surveys during the year under review manages well-established company, prod- defined process. Important strategic mar- can be found in the sections for the Busi- uct and service brands in the healthcare keting considerations are taken into ac- ness units of the Galenica Group starting market. Products and services under the count when dealing with well-established on page 26. Galenica brand guarantee a high level of and well-known brands. quality. The communication philosophy “as Basic guidelines on corporate design are Protection of product and centralised as necessary and as decentral- summarised in two handbooks for staff and service brands ised as possible” is also reflected in brand external partners and include all areas of Product and service brands are systemati- management. This means giving the indi- application, such as corporate stationery, cally fostered and protected by the individ- vidual companies under the Galenica um- printed products, company signs and web- ual companies in the countries where they brella room to address target groups in the site design. The handbook for employees are marketed. best way possible for the market segment is available in printed and electronic form, and product involved. That is why Galenica while the handbook for external partners is companies operate under their own names available in electronic form. In addition, in the market. At the same time, over and internal training sessions on how to use the above this diversity, the Galenica Group Galenica corporate design take place reg- seeks in particular to express clearly the ularly for new employees; the sessions are shared identity of the companies compris- also open to established employees inter- ing the Group. A consistent identity is vital; ested in refreshing or deepening their therefore, it is reflected in the uniformly knowledge. defined corporate identity and corporate design. Presenting a uniform corporate de- Protection of the Group’s brands sign across all Group companies supports Galenica systematically fosters and pro- the consistent positioning of the Group and tects its company brands in all countries its companies. where it is active and guarantees a high standard of quality.

Galenica annual report 2015 Corporate Governance Galenica Group 75

Main brands of the Galenica Group

Umbrella brand

Brands of the Galenica Group companies

Vifor Pharma Galenica Santé Products & Brands Retail Services

Pharmacy formats

Product and service brands Iron and Rx products Consumer Health Products Services Services

Commercial merchandise OTX products

Information Solutions

Galenica annual report 2015 76 Galenica Group Remuneration Report Remuneration Report

Galenica annual report 2015 Remuneration Report Galenica Group 77

Content Remuneration benefits Key remuneration principles and philosophy 77 Remuneration benefits and Remuneration of members of the philosophy The salary policy of Galenica aims to at- Board of Directors tract, motivate and retain best-in-class The remuneration of non-executive mem- 83 Annual remuneration 2015 employees who are entrepreneurially ori- bers of the Board of Directors is independ- 86 Annual remuneration 2014 ented, successful and have high personal ent from the performance of the company standards. The remuneration system is and comprises a fixed salary depending on 87 Remuneration trend designed to provide appropriate reward in their function assumed in the Board of a highly competitive employment market Directors and its committees, either as a 87 Dev elopment of maximum possible and in a complex industry. It is aligned with member or chairperson of a committee. remuneration and effective pay-out the long-term Group strategy and its Such remuneration may be drawn fully or pay-for-performance philosophy. The re- half in registered shares of Galenica 87 Evolution of remuneration of the muneration system of Galenica aims at (blocked for five years). In addition, after a Corporate Executive Committee strengthening its overall industry position period of two years, each member of the 88 Re port of the statutory auditor to the benefit of its customers and patients Board is required to hold shares equal in on the remuneration report while delivering the expected returns to its value to at least one annual salary which of Galenica Ltd. shareholders. remain blocked during his/her mandate. The remuneration system of Galenica is The members of the Board of Directors part of a sustainable, long-term develop- except the Executive Chairman do not par- ment policy to support the strategic goals ticipate in the employee benefit plans, defined by the Board of Directors, recog- therefore the remuneration of the Board of nising that under certain conditions, eco- Directors is not pensionable. nomic success is achieved over a longer The remuneration of the members of the period. Accordingly, the company does not Board of Directors is reviewed regularly pay any remuneration in the form of traded against prevalent market practice of other options. Members of the Corporate Execu- multinational industrial companies listed in tive Committee and Members of Senior Switzerland as well as based on data pub- Management participate in the Group’s lished by Ethos (a Swiss Foundation for value creation in the form of blocked Socially Responsible Investment and Active shares, so being aligned with the interests Share Ownership). The last review took of shareholders. place in 2014 by Hostettler Kramarsch Partner, Zurich.

Galenica annual report 2015 78 Galenica Group Remuneration Report

Remuneration of members of the On 1 January 2012, Etienne Jornod re- of the contract the blockage for the shares Corporate Executive Committee ceived for his duties as Executive Chairman previously earned will be lifted, enabling The remuneration of members of the Cor- for the period from 1 January 2012 to 31 Etienne Jornod to dispose of them at his porate Executive Committee as well as December 2016 a one-off remuneration in sole discretion. However, no severance Senior Management is strongly linked to the form of 40,000 Galenica registered package has been agreed. the financial performance of the Group and shares. To compensate for the lack of peri- to a lesser part to their individual perfor- odic remuneration over the contract period Remuneration Report mance and the performance of the share (salary, bonuses, shares, etc.), the Execu- With this report, Galenica provides an over- price. Exceptional results are recognised tive Chairman received these shares at that view of the compensation principles and and rewarded. time at the market price on the date of con- programmes applied within its Group as The remuneration system rewards short- clusion of the contract (CHF 528.00). In well as information on the process of de- term success as well as long-term perfor- accordance with IFRS the expense for this termining the compensation for the Execu- mance and sustainable value creation for share package was recognised over the life- tive Chairman, the Board of Directors as customers and shareholders in a balanced time of the contract (69 months) and ac- well as for the members of the Corporate way. In order to align the interests of mem- cordingly at CHF 3,670,000 in the consoli- Executive Committee. The remuneration bers of the Corporate Executive Commit- dated financial statements of the Galenica system as well as its reporting is in accord- tee and Senior Management with the inter- Group for 2015. In addition, Etienne Jornod ance with the Swiss Code of Obligations, ests of shareholders, a part of the bonus receives CHF 150,000 per year in cash, the Ordinance against Excessive Remuner- and the long-term incentive of the remu- which is used to pay the employee part of ation in Listed Companies Limited by neration is awarded in shares of the com- social security contributions. The contract Shares, the standards related to Corporate pany. In addition, after a period of five has been amended in accordance with leg- Governance issued by SIX Swiss Exchange years, each member of the Corporate Ex- islation relating to the Ordinance against and the principles of the Swiss Code of ecutive Committee is required to hold Excessive Remuneration in Listed Compa- Best Practice for Corporate Governance shares equal in value to at least 75 % of his nies Limited by Shares (VegüV) for the year issued by economiesuisse. The statutory fixed base salary and target bonus. 2016, adjusting the payment mechanism auditor verifies compliance of the report In order to ensure attraction of best-in- from a pre-payment to a payment at the with the law and Articles 14–16 of the Or- class talents, Galenica performs regularly end of the year without changing the eco- dinance against Excessive Remuneration in benchmarks of its remuneration levels nomics of the contract. In 2015, the Board Listed Companies Limited by Shares and against relevant peer markets. Generally, of Directors and Etienne Jornod agreed to issues a written report to the Annual Gen- the Group targets median levels represent- extend the contract until the Annual Gen- eral Meeting. ing competitive offers. eral Meeting 2020 and to continue to pay out compensation exclusively in registered Determination of remuneration Remuneration of the Executive shares. The annual payment to be approved In accordance with the Articles of Associ- Chairman of the Board of Directors will also change from a pre-payment to a ation and the Organisational Regulations of In 2011, the Board and the Executive Chair- payment at the end of the year from 2016 Galenica, the Remuneration Committee man decided to align the economic interest onwards. The registered shares to be paid consists of three members, all of whom are of the Executive Chairman as much as pos- out in future are blocked over the entire independent from Galenica and are elected sible with the interests of the shareholders term of the contract until the Annual Gen- annually by the shareholder meeting. The of Galenica and to remunerate him during eral Meeting 2020. It was also agreed that Remuneration Committee evaluates and the period from 2012 to 2016 exclusively in the block on sale for 20,000 of the already approves principles and programmes for shares of the company. Such a remunera- acquired shares would be extended until remuneration of the Galenica Group and tion system demonstrates how closely the Annual General Meeting 2020. The re- assesses criteria and the level achieve- Etienne Jornod identifies himself with the maining shares, however, may be sold from ments reached by the CEOs and the mem- shareholders and proves his confidence in the current financial year onwards. Should bers of the Corporate Executive Commit- the strategy and management of the Group. the contract be terminated before the end tee based on the targets set by the Board. It was also the subject of the remuneration of 2016, the employment contract contains It also proposes the maximum remunera- report submitted to shareholders for an detailed provisions which stipulate how tion of members of the Board (including the advisory vote at the Annual General Meet- many shares Etienne Jornod is entitled to, Executive Chairman) as well as for the ings held on 3 May 2012, 2 May 2013, pro rata temporis, at such a date and at members of the Corporate Executive Com- 8 May 2014 and 7 May 2015 and approved what price, depending on whether the em- mittee (including the CEOs) for approval by by 89.9 %, 91.6 %, 90.3 % and 91.4 % respec- ployee or the employer has called for a the Annual General Meeting. Such approval tively. premature termination. Upon termination is prospective for the next business year

Galenica annual report 2015 Remuneration Report Galenica Group 79

following the Annual General Meeting. Fur- Employee remuneration generally con- Galenica Economic Profit (GEP) target. The ther details on the composition and the sists of a fixed base salary, which depends GEP target for the Long-term Incentive Pro- responsibilities of the Remuneration Com- on the employee’s position level, and a bo- gramme is set by the Board of Directors mittee are provided in the Corporate Gov- nus for the CEOs, the members of the Cor- upon recommendation of the Remunera- ernance section of the Annual Report as porate Executive Committee, Senior Man- tion Committee for a three-year period on well as in the Remuneration Committee agement and Management. The bonus a rolling basis. The GEP is a measure de- Regulations, which can be found on the system allows members of the Corporate signed to reflect the principles of value- Galenica website. Executive Committee, Senior Management based management derived from an eco- and Management to benefit from the prof- nomic-value-added (EVA) approach. It is its of the relevant Business units and the based on the understanding that in the in- Method of determination Group. The achievement of personal tar- terests of shareholders and other impor- gets set at the beginning of a business year tant stakeholder groups, the Galenica In order to attract and retain talented em- and assessed after year-end is also re- Group will strive to achieve a long-term ployees, it is critical to offer competitive warded. The CEOs, members of the Corpo- investment return which exceeds the remuneration. The Remuneration Commit- rate Executive Committee and certain weighted average cost of capital. It is cal- tee reviews remuneration of the CEOs and members of Senior Management also re- culated as the net operating profit (before the members of the Corporate Executive ceive additional long-term remuneration. interest and after depreciation, amortisa- Committee annually and compares it to the The purpose of the bonus system is to en- tion and tax) less the weighted average remuneration levels of similar positions at sure that all members of Senior Manage- cost of capital (WACC) over the average companies which are comparable in scope, ment and Management act and make deci- invested capital. The performance of the geography and business complexity, i. e. sions in such a way as to support the GEP calculated this way has a 75 % impact companies with which Galenica competes achievement of targets at all levels and on the bonus and a 100 % impact on the for talents. In support of such a review, ex- thereby contribute to sustained positive number of shares allocated under the long- ternal consultants are hired as needed to results for the Group as a whole, as well as term incentive plan; the personal targets assist in reviewing the mix of short-term the Business unit and company to which may account for a maximum of 12.5 % of and long-term remuneration, the mix of they belong. This serves to harmonise the the remuneration of the CEOs or the mem- cash versus equity-based remuneration as interests of shareholders with those of the bers of the Corporate Executive Commit- well as the remuneration levels. They also Group and its management. Through share tee (in 2015: 7.8 % on average for the mem- assist in developing the strategy that forms participation, identification with the com- bers of the Corporate Executive Committee the foundation of the remuneration system. pany is further enhanced. Finally, members – excluding the CEOs). Poor performance A benchmark study on the remuneration of of the Corporate Executive Committee, inevitably has a negative impact on the to- members of the Corporate Executive Com- Senior Management and Management re- tal remuneration (fewer shares, with each mittee and certain other functions was ceive contributions to pension funds. of them having eventually a lower value). carried out by Kienbaum Consultants Inter- In addition to the attainment of personal However, the remuneration system does national in 2012. No other external suppli- targets, both bonus and long-term remu- not include any particular malus provisions. ers were mandated in the reporting period. neration depend on the achievement of the

Responsibility for the remuneration process

Executive Remuneration Level of authority CEOs Chairman Committee Board of Directors Annual General Meeting

Remuneration of the Executive Chairman proposes approves approves maximum possible remu- Remuneration of the Board proposes approves neration for the Board of Directors including the Executive Chairman Remuneration of the Remuneration Committee proposes approves for the following year Remuneration of the CEOs proposes recommends approves approves maximum possible Remuneration of members of the remuneration for the Corporate Corporate Executive Committee propose approves is informed Executive Committee including the CEOs for the following year The Executive Chairman is invited to all meetings of the Remuneration Committee except those dealing with his own remuneration. The CEOs are invited to attend discussions on a case-by-case basis.

Galenica annual report 2015 80 Galenica Group Remuneration Report

The weighting of the individual remuner- Responsibilities ticular product or implementation of a par- ation components depends on an employ- ticular process). The bonuses of members ee’s position level. Criteria such as budget The overall responsibility for the remuner- of Senior Management are determined by responsibility are important factors. The ation system of Galenica and in particular the Corporate Executive Committee based greater the employee’s direct influence on the guiding principles for the remuneration on the performance appraisal by the re- such factors, the higher the weighting of of its Board of Directors, the CEOs and the spective direct line manager. the variable component of remuneration. members of the Corporate Executive Com- Members of the Corporate Executive When defining the weighting, setting tar- mittee are defined in the Articles of Asso- Committee and certain members of Senior gets and measuring their achievement, the ciation of Galenica. On such basis, the re- Management participate in the LTI pro- responsible body is always permitted a muneration strategy and the related gramme. Eligibility for the LTI programme degree of discretion in the application of remuneration system for the members of is determined by the Remuneration Com- the criteria mentioned in this report, even the Board of Directors, the Corporate Ex- mittee for members of the Corporate Exec- if this is not specifically mentioned in indi- ecutive Committee and Senior Manage- utive Committee, and by the Corporate vidual cases. ment (including the principles of equity Executive Committee for members of Sen- Variable remuneration arising from the remuneration plans) are decided by the ior Management. Targets set for the LTI are bonus and from the long-term incentive Board of Directors based on a proposal exclusively financial and are defined as a plan paid out to eligible members of the from the Remuneration Committee. three-year GEP increase for the Group, Corporate Executive Committee and Sen- On an annual basis the Board of Directors whereby the relevant targets for the LTI are ior Management amounts to between 0 % decides on the individual remuneration of set by the Board of Directors upon recom- and 200 % of the fixed salary component. the Executive Chairman and the CEOs as mendation of the Remuneration Commit- However, the annual bonus and variable well as for the aggregate for the other mem- tee. long-term incentives represent two inde- bers of the Corporate Executive Committee The remuneration of members of the pendent elements and are calculated and as proposed by the Remuneration Commit- Board of Directors, which may be paid in weighted separately. tee. The Remuneration Committee is re- the form of blocked shares, is decided by To a lesser degree, but in accordance sponsible for deciding on the individual re- the Board of Directors based upon a pro- with the principles described above, mem- muneration and participation in equity posal of the Remuneration Committee bers of Management are also paid a perfor- remuneration plans by members of the within the range set by the Annual General mance-related bonus. Corporate Executive Committee other than Meeting. Independent of their remuneration and the CEOs and informs the Board of Directors under the terms of the share acquisition at least once a year of its decisions and the Elements of remuneration plan for employees, every year employees development of the remuneration process. for the CEOs and the members of the are entitled to acquire a certain number of Remuneration and participation in equity Corporate Executive Committee blocked shares, which is specified in com- remuneration plans by the CEOs and mem- In order to reward performance, promote pany regulations, at a reduced price (more bers of the Corporate Executive Committee loyalty of key talents and their long-term information on pages 117, 157 and 158 in as well as Senior Management are deter- engagement towards Galenica, the remu- the financial statements 2015). mined and objectives set at the beginning neration system consistently applied com- of the reporting year within the frame set prises an annual base salary, short-term by the Annual General Meeting. For mem- bonus, long-term incentive and customary bers of the Corporate Executive Commit- benefits. The ratio between annual base tee, the Remuneration Committee is re- salary and variable elements is defined in sponsible for determining the target bonus, the Articles of Association of Galenica. The the weighting of the individual components aggregate of the maximum possible varia- and for the evaluation of individual target ble elements irrespective of the effective achievement. For the CEOs, the Board of pay-out is limited to 300 % of the base sal- Directors decides on the basis of a recom- ary of each of the CEOs and to 250 % of the mendation made by the Executive Chair- base salary of each of the members of the man and the Remuneration Committee. Corporate Executive Committee. Thereof, Measurement of targets consists of both the short-term bonus must not exceed financial and qualitative elements (for ex- 200 % of the base salary for each of the ample, sales growth of a particular product CEOs and 150 % of the salary of each mem- or a group of products, the launch of a par- ber of the Corporate Executive Committee.

Galenica annual report 2015 Remuneration Report Galenica Group 81

Annual base salary Upon approval of the annual results by Influence of variable the Board of Directors, the GEP attainment remuneration by the GEP The annual base salary is the fixed compen- level for the financial components “Group” sation reflecting the scope and key areas and “Business units” is calculated as a per- Bonus LTI of responsibilities of the function, the skills centage. The achievement of financial and required to fulfil the function and the indi- individual objectives which were laid down 25 % personal vidual experience and competencies of the in both quantitative and qualitative form at objectives respective manager. The base salary is the beginning of the business year is as- determined according to the typical market sessed by the Executive Chairman and the practice (external benchmark) and the Remuneration Committee for the CEOs and Group internal salary structure. A base sal- submitted to the Board of Directors for ap- 75 % 100% ary at median of the benchmark is consid- proval. The attainment of these objectives GEP GEP ered competitive to satisfy the expected of the members of the Executive Commit- level of skills and competencies. The base tee is assessed by the responsible CEO and salary is typically reviewed annually based the Executive Chairman and submitted to on market salary trends, the company’s the Remuneration Committee for approval. ability to pay based on its financial per- Within the range set by the Annual General formance and the evolving experience of Meeting, the Board of Directors may award the manager in the function. The annual an individual supplement to the calculated Per Duration base salary is paid out in cash on a monthly bonus for exceptional performance of ei- year 3 years basis. ther of the CEOs over the previous year and the Remuneration Committee may award Short-term bonus such an individual supplement for excep- The short-term bonus aims at rewarding tional performance of any member of the the achievement of the company’s financial Corporate Executive Committee. results and recognises individual contribu- The payment of the bonus is made in the tions to the company’s overall performance subsequent year after the publication of over a business year. The target bonus is the full-year results. The CEOs, the mem- expressed as a percentage of the annual bers of the Corporate Executive Commit- base salary and varies depending on the tee and Senior Management are required level of the function in the organisation and to draw 32 % of the bonus in shares of on the impact of the function on the overall Galenica; the rest is paid out in cash. A business result. Typically, the target incen- discount of currently 25 % on the average tive amounts to 60–80 % of the annual base stock market price for the month of January salary for the CEOs and between 30 % and in the year in which the bonus is paid is 60 % for the members of the Corporate Ex- granted as the shares remain blocked for ecutive Committee. five years. The CEOs and members of the At the beginning of the calculation pe- Corporate Executive Committee are re- riod, the target bonus is defined, i. e. the quested to build up a shareholding of amount paid out if the targets for all bonus shares of Galenica over a period of five components are reached 100 % (target bo- years equivalent to 75 % of their annual nus) whereby the achievement of financial base salary and target bonus. objectives of the Group and the Business units is weighted 75 % and individual objectives 25 %. This is normally set individually on an annual basis as an absolute amount together with the relevant fixed salary for the next year. For both financial and individual objectives, a target, a threshold and a payment curve are defined against which the results are assessed and which translate to a total bonus with an upper limit of 200 % of the target bonus.

Galenica annual report 2015 82 Galenica Group Remuneration Report

Relevant parameter: Long-term Incentive Programme so aligning the interests of participants Galenica Economic Profit (GEP) with those of Galenica shareholders. Ac- The Long-term Incentive Programme (LTI) cordingly, the main factor influencing the GEP: Net Operating Profit (NOPAT) is designed to motivate eligible managers transformation of performance units into minus cost of capital for necessarily to ensure that their actions and decisions Galenica shares is the operating perfor- invested capital. support the achievement of the medium- mance of the Galenica Group over the re- Goal: Cost of continuously and long-term value-based targets across spective three-year period applying a linear NOPAT capital increasing GEP all levels. With this instrument Galenica interpolation between the threshold of the also seeks to harmonise the interests of GEP at the time of the allocation of the per- management and the Group with the inter- formance units and a maximum target at- ests of its shareholders, and to sustainably tainment of 200 %. At the beginning of each create value for patients, customers and its financial year, a new LTI programme with a shareholders over the long term. In addi- new three-year target and assessment pe-

GEP GEP GEP tion, the LTI programme aims to further riod is issued. strengthen the loyalty of its managers to Galenica, identification with the company Pensions and other employee benefits and to motivate its key talents to stay with Employee benefit plans consist mainly of the company. retirement, insurance and healthcare plans The CEOs, members of the Corporate that are designed to protect the employees Executive Committee and selected mem- against the hazards of life. Employee ben- bers of Senior Management participate in efits are country-specific and are struc- the LTI programme. Eligibility and extent of tured in accordance with local legal re- participation in the LTI programme is de- quirements and local competitive market cided by the Board of Directors for the practice. The CEOs and the members of the CEOs and by the Remuneration Committee Corporate Executive Committee are cov- for the members of the Corporate Execu- ered by the pension scheme applicable to tive Committee. all employees in Switzerland. The Swiss The LTI programme is based on perfor- pension plan of Galenica exceeds the legal mance units which are granted to partici- requirements of the Swiss Federal Law on pants after the release of the results of the Occupational Pension Schemes (BVG) and preceding year and which convert into is in line with what is being offered in Swit- shares of Galenica subject to the attain- zerland by other listed companies of com- ment of a performance target defined by parable size. the Remuneration Committee over a three- Except for the expense allowance and year period. Performance units are virtual; the right to use a company car in line with no real units are issued. The number of the car policy applicable to all managers in performance units allocated at the begin- Switzerland (and apart from some minor ning of the plan period depends on a de- reimbursement of costs for relocation, tax fined percentage of the annual base salary and legal advice), the Executive Chairman, as well as the average share price during the CEOs and the members of the Corpo- the last three months of the current busi- rate Executive Committee do not receive ness year. The performance target for each any particular additional benefits. The mon- three-year LTI programme is defined by the etary value of the allowance is disclosed at Remuneration Committee by setting a tar- fair value in the remuneration table. get GEP increase reflecting the risk-appropriate return requirements of its sharehold- Employment contracts ers over the programme period. The The CEOs and the members of the Corpo- number of performance units initially allo- rate Executive Committee are employed cated increases or decreases depending on under employment contracts of unlimited the proportion of the achievement of the duration and are subject to a notice period GEP target set. Upon completion of the of a maximum of 12 months. They are not three-year programme period, such perfor- entitled to any severance packages or ter- mance units are transformed into a corre- mination payments or change-of-control sponding number of shares of Galenica, payments.

Galenica annual report 2015 Remuneration Report Galenica Group 83

Annual remuneration 2015 Board of Directors The members of the Board of Directors, Since 2015, in accordance with the Articles excluding the Executive Chairman, whose of Association, the shareholders of Galenica remuneration is described separately, are make a prospective annual decision on the remunerated independent of the perfor- maximum remuneration for members of mance of the company in the form of a the Board of Directors and members of the fixed salary depending on their function Corporate Executive Committee for the assumed in the Board of Directors and its next business year. In order to allow for a committees, either as member or chairper- comparable basis with the prospective son of a committee. A minimum of 50 % of vote, remuneration paid or attributed in such remuneration is paid out in shares of 2015, as well as that of the previous year, Galenica (blocked for five years). is presented on the same basis perspective Remuneration settled in the form of reg- of cost to the company. Consequently, istered shares of Galenica was paid at the Galenica discloses for the year 2015 the average price for the month of December remuneration of the Executive Chairman at 2015, i. e. CHF 1,507.15 per share. the IFRS costs as booked in the consolidated financial statements, and shares Executive Chairman distributed as part of the compensation are For his service in the period from 1 January shown at market value at the date of allo- 2012 to 31 December 2016, Etienne Jornod cation, not taking into account the 25 % received a non-recurring share-based discount granted for tax purposes in rela- payment on 1 January 2012 in the form of tion with the blocking period of five years. 40,000 registered shares in Galenica. To

Remuneration of the members of the Board of Directors in 2015 Registered shares Fee Fee equivalent Other Held as at Allocated in thousand CHF in cash in shares remuneration1) Total 31.12.2015 for 2015 Etienne Jornod, Executive Chairman 150 3,670 341 4,161 20,518 — Executive member of the Board of Directors 150 3,670 341 4,161 20,518 —

Daniela Bosshardt-Hengartner 80 107 11 198 937 71 Michel Burnier 722) 95 10 177 616 63 Romeo Cerutti (as of Annual General Meeting 2015) 43 57 6 106 — 38 Marc de Garidel (as of Annual General Meeting 2015) — 107 5 112 — 71 Hans Peter Frick 70 93 7 170 963 62 Sylvie Grégoire 70 93 9 172 231 62 Fritz Hirsbrunner3) 31 173 7 211 6,333 115 Stefano Pessina — 146 5 151 1,878 97 This E. Schneider — 226 11 237 3,520 150 Non-executive members of the Board of Directors 366 1,097 71 1,534 14,478 729 Remuneration of the members of the Board of Directors 516 4,767 412 5,695 34,996 729 1) Other remuneration corresponds to the social security costs due from the member of the Board of Directors but 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 350,000 2) The amount is paid to the Centre Hospitalier Universitaire Vaudois (CHUV) in Lausanne 3) The remuneration of Fritz Hirsbrunner also includes the remuneration for services rendered to the Galenica Pension Fund

Registered shares held by related parties of members of the Board of Directors are included in the declaration of the number of shares they hold.

Galenica annual report 2015 84 Galenica Group Remuneration Report

compensate for the lack of periodic remu- Corporate Executive Committee neration over the five-year period (salary, The Members of the Corporate Executive bonuses, shares, etc.), the Executive Chair- Committee are remunerated in the form of man received these shares at the market a fixed base salary, with variable elements price on the date of conclusion of the con- and certain employee benefits. They also tract (CHF 528.00). In accordance with participate in certain share-based compen- IFRS the expense for this share package sation plans. was recognised over the lifetime of the The bonus payment for the business contract (69 months) and accordingly at year 2015 has been calculated based on a CHF 3,670,000 in the consolidated finan- target achievement of 177.1 % of the objec- cial statements of the Galenica Group for tives of the CEOs and the members of the 2015. In addition, Etienne Jornod receives Corporate Executive Committee, i. e. 75.8 % CHF 150,000 per year, which is used to of the maximum possible bonus for such pay the employee share of social security year. For the LTI programme 2015–2017, contributions. The contract has been the allocation of performance units will be amended in accordance with legislation defined on the basis of the average share relating to the Ordinance against Excessive price from January 2016 and a target in- Remuneration in Listed Companies Limited crease of the GEP defined by the Remuner- by Shares (VeguV) for the year 2016, ad- ation Committee of CHF 30 million. The justing the payment mechanism from a target achievement of the LTI programme pre-payment to a payment at the end of 2013–2015 due at the end of 2015 was the year without changing the economics 149.9 %. of the contract. In 2015, the Board of Direc- In 2015, Søren Tulstrup, CEO Vifor tors and Etienne Jornod agreed to extend Pharma, was the member of the Corporate the contract until the Annual General Meet- Executive Committee with the highest re- ing 2020 and to continue to pay out com- muneration. In 2014, David Ebsworth was pensation exclusively in registered shares. the member of the Corporate Executive The annual payment to be approved will Committee with the highest remuneration; also change from a pre-payment to a pay- he stepped down from his function as CEO ment at the end of the year from 2016 on- and member of the Corporate Executive wards. The registered shares to be paid out Committee in August 2014. in future are blocked over the entire term of the contract until the Annual General Options Meeting 2020. It was also agreed that the Neither the members of the Board of Direc- block on sale for 20,000 of the already ac- tors nor the members of the Corporate Ex- quired shares would be extended until the ecutive Committee hold tradable options. Annual General Meeting 2020. The remaining shares, however, may be sold from the Loans and credits current financial year onwards. Should the Galenica did not grant any loans or credits contract be terminated before the end of to members of the Board of Directors, mem- 2016, the employment contract contains bers of the Corporate Executive Committee detailed provisions which stipulate how or related persons in the reporting period. many shares Etienne Jornod is entitled to, pro rata temporis, at such a date and Former members of the Board of at what price, depending on whether the Directors and the Corporate Executive employee or the employer has called for a Committee premature termination. Galenica did not pay any remuneration to former members of the Board of Directors or the Corporate Executive Committee in the reporting period except for payments to David Ebsworth who has assumed a new function in the Group as from 12 August 2014.

Galenica annual report 2015 Remuneration Report Galenica Group 85

Remuneration of the members of the Corporate Executive Committee in 2015

Total of which of which in thousand CHF Søren Tulstrup Jörg Kneubühler Base salary 2,246 580 500 Bonus in cash 1,321 492 313 Bonus in shares 829 309 196 Long-term Incentive Programme1) 722 216 186 Contributions to pension funds 359 71 83 Other remuneration2) 70 50 2 Remuneration received 5,547 1,718 1,280 Social security costs 380 116 87 Remuneration of the members of the Corporate Executive Committee3) 5,927 1,834 1,367 1) The performance units falling due after three years are included with the fair value at grant based on the estimated target achievement (IFRS 2) 2) Including private utilisation of company car, reimbursement for relocation as well as tax/legal advice 3) Remuneration to David Ebsworth, former CEO Galenica Group, for services provided to companies in the Galenica Group amounted to CHF 1,086,109

Shareholdings and rights to performance share units of members of the Corporate Executive Committee

Long-term Incentive Programme (LTI) Performance share units (PSU) 2) Number of registered PSU granted in 2015 PSU granted in 2014 PSU granted in 2013 shares held (potential vesting at (potential vesting (potential vesting at Total of PSU as at 31.12.20151) 31.12.2017)3) at 31.12.2016)3) 31.12.2015)3) granted Felix Burkhard 843 118 125 225 468 Jean-Claude Clémençon 549 144 125 225 494 Jörg Kneubühler 826 250 206 286 742 Søren Tulstrup 119 291 128 — 419 Gianni Zampieri 4,376 167 190 356 713 1) Registered shares held by related parties of members of the Corporate Executive Committee are also included in the totals disclosed above 2) Each performance share unit transforms at vesting into one registered share 3) The shares corresponding to the PSU are transferred to the beneficiaries in the subsequent year

For better comparability, the number of performance share units are shown already when granted and not only at vesting after the three-year plan period expires. Included in the table above is the expected number of performance share units that will – based on the current assessment of target achievement – ultimately vest.

Galenica annual report 2015 86 Galenica Group Remuneration Report

Annual remuneration 2014

Remuneration of the members of the Board of Directors in 2014 Fee in Registered shares

Fee equivalent Other Held as at Allocated for in thousand CHF Fee in cash in shares remuneration1) Total 31.12.20142) 2014 Etienne Jornod, Executive Chairman 150 3,670 341 4,161 41,856 — Executive member of the Board of Directors 150 3,670 341 4,161 41,856 —

Daniela Bosshardt-Hengartner 80 107 10 197 1,543 132 Kurt W. Briner3) —80 3833,04990 Michel Burnier 704) 94 9 173 545 116 Hans Peter Frick 70 94 7 171 847 116 Sylvie Grégoire 70 94 9 173 198 116 Fritz Hirsbrunner5) 78 173 9 260 10,202 215 Stefano Pessina — 147 5 152 1,771 182 This E. Schneider — 227 11 238 3,339 281 Non-executive members of the Board of Directors 368 1,016 63 1,447 21,494 1,248 Remuneration of the members of the Board of Directors 518 4,686 404 5,608 63,350 1,248 1) Other remuneration corresponds to the social security costs due from the member of the Board of Directors but 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 441,000 2) Includes shares allocated for the period 1 January 2014 until the Annual General Meeting 2014 3) Until Annual General Meeting 2014 4) The amount will be paid to the Centre Hospitalier Universitaire Vaudois (CHUV) in Lausanne 5) The remuneration of Fritz Hirsbrunner also includes the remuneration as Head Investor Relations from 1 January 2014 to 28 February 2014 (not member of the Corporate Executive Committee), and services rendered to the Galenica Pension Fund

Registered shares held by related parties of members of the Board of Directors are included in the declaration of the number of shares they hold.

Remuneration of the members of the Corporate Executive Committee in 2014 Total of which in thousand CHF David Ebsworth1) Base salary 2,514 744 Bonus in cash 1,137 505 Bonus in shares 651 254 Long-term Incentive Programme2) 627 97 Contributions to pension funds 434 136 Other remuneration3) 22 3 Remuneration received 5,385 1,739 Social security costs 374 144 Remuneration of the members of the Corporate Executive Committee 5,759 1,883 1) The remuneration includes remuneration as Group CEO until 11 August 2014 as well as contractually agreed remuneration until 31 December 2014 2) The performance units falling due after three years are included with the fair value at grant based on the estimated target achievement (IFRS 2) 3) Including private utilisation of company car, reimbursement for relocation as well as tax/legal advice

Shareholdings and rights to performance share units of members of the Corporate Executive Committee Long-term Incentive Programme (LTI) Performance share units (PSU)2) Number of registered PSU granted in 2014 PSU granted in 2013 PSU granted in 2012 shares held (potential vesting (potential vesting (potential vesting Total of PSU as at 31.12.20141) at 31.12.2016)3) at 31.12.2015)3) at 31.12.2014)3) granted Felix Burkhard 1,192 99 156 75 330 Jean-Claude Clémençon 536 99 156 75 330 David Ebsworth 2,118 112 339 410 861 Jörg Kneubühler 1,350 164 199 158 521 Søren Tulstrup 10 1014) ——101 Gianni Zampieri 4,047 150 247 202 599 1) Registered shares held by related parties of members of the Corporate Executive Committee are also included in the totals disclosed above 2) Each performance share unit transforms at vesting into one registered share 3) The shares corresponding to the PSU are transferred to the beneficiaries in the subsequent year 4) Pro rata temporis from 12 August 2014 until 31 December 2014 For better comparability, the number of performance share units are shown already when granted and not only at vesting after the three-year plan period expires. Included in the table above is the expected number of performance share units that will – based on the current assessment of target achievement – ultimately vest.

Galenica annual report 2015 Remuneration Report Galenica Group 87

Remuneration trend Development of maximum the assessment of such prospective remu- possible remuneration and neration, the corresponding amounts for The overall remuneration to the members the years 2015 and 2014 are shown on a of the Board of Directors increased by effective pay-out comparable basis in the table below. The CHF 87,000 compared to 2014. Such an At the next Annual General Meeting in ac- effective pay-out for the period 2014–2015 increase (pro rata since the Annual General cordance with Article 19b of the Articles of is much lower than the maximum possible Meeting 2015) is mainly the result of the Association of Galenica the maximum pos- remuneration in those two years and forms greater number of members of the Board sible remuneration to members of the the basis for the maximum possible of Directors with regard to a potential divi- Board of Directors, the CEOs and the mem- amounts submitted to the Annual General sion of the Group. bers of the Corporate Executive Commit- Meeting (including the initial number of The remuneration of the Executive Chair- tee is again submitted to shareholders for performance units allocated as well as de- man has been fixed for the entire period approval prospectively for the business ferred bonus valued at the grant date). The 2012–2016 and thus remains unchanged. year following the Annual General Meeting remuneration of the CEO in the years 2014 The overall remuneration to the mem- and therefore sets an upper limit to possi- and 2015 on average reached 73.6 % of the bers of the Corporate Executive Commit- ble remuneration taking into account all maximum possible remuneration and the tee is higher by CHF 156,000 than in the variable elements including in particular remuneration of the members of the Cor- prior year as a result of higher variable re- the bonus and the LTI programme (with porate Executive Committee in aggregate muneration due to the good 2015 result. blocked shares and performance units val- reached 74.6 % of the maximum possible ued at the grant date). In order to facilitate remuneration for the same years.

Evolution of remuneration of the Corporate Executive Committee

Evolution of remuneration of all the members Evolution of the highest remuneration paid to members of the of the Corporate Executive Committee Corporate Executive Committee, respectively to the two CEOs

in thousand CHF in thousand CHF 2014 2015 2014 2015

8,424 CEO Galenica Group CFO Galenica Group CEO Vifor Pharma and CEO Galenica Santé 2,742 7,358

32% 19 % 2,270 31 % 5,759 5,927 19 % 1,883 627 722 1,834 97 1,738 216 1,788 2,150 21 % 1,367 759 186 801 68% 81 % 808 69% 81% 809 280 509 79% 237 172 2,536 2,246 747 500 580

Potential Paid or Potential Paid or Potential Paid or Potential Paid or Potential Paid or 100 % allocated 100 % allocated 100 % allocated 100% allocated 100 % allocated

LTI STI Social insurance and other remuneration Annual base salary

Galenica annual report 2015 88 Galenica Group Report of the statutory auditor on the remuneration report of Galenica Ltd., Bern

Report of the statutory auditor on the remuneration report to the General Meeting of Galenica Ltd., Bern

We have audited the accompanying remuneration report (pages 83 to 85) of Galenica Ltd. for the year ended 31 December 2015.

Responsibility of the Board of Directors The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor’s responsibility Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14–16 of the Ordinance. An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material mis- statements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion, the remuneration report for the year ended 31 December 2015 of Galenica Ltd. complies with Swiss law and articles 14–16 of the Ordinance.

Bern, 10 March 2016

Ernst & Young Ltd.

Roland Ruprecht Julian Fiessinger Licensed audit expert Licensed audit expert Auditor in charge

Galenica annual report 2015 Remuneration Report Galenica Group 89

Medifilm prepares medicines and food supplements individually according to the treatment plan for permanent and long-term patients in care homes or at home.

Galenica annual report 2015 90 Galenica Group Human Resources Human Resources

Galenica annual report 2015 Human Resources Galenica Group 91

Content Culture and values Training and development

91 Culture and values Together, we are stronger Employee development A sign of a successful company is that it The continual transfer of knowledge and 91 Training and development continues to develop in line with the market information within a company is vital. A 93 Long-term prospects while also anticipating trends. The adapt- range of tools are used to support employ- ability of the Galenica Group is founded on ees, particularly members of Senior Man- 93 Stronger together the commitment and team spirit of its en- agement and Management. One such tool tire workforce. Through professional ser- is Corporate Management Development 94 Protecting employees vices and the manufacture of excellent (CMD), which comprises events (EVE), spe- products, 7,804 employees at Galenica cial staff training (SAM) and management 94 Employee profit-sharing programme play their part in ensuring the satisfaction training (FAB). 94 Employee benefit plans of our customers, contributing their passion, innovative ideas and entrepreneurial- Events 95 Works Committee ism every day. Not to mention diversity: EVE is a management platform for commu- employees from 90 countries and of all nicating strategic objectives. At the EVE 1 96 Social responsibility ages combine their knowledge and drive for event in spring 2015, around 200 members a forward-looking Galenica Group. of Senior Management attended a talk by guest speaker Benedikt Weibel (former CEO of SBB) and Executive Chairman Etienne Jornod on the topic of “Simplicity – the art of reducing complexity”, before exchanging their own views and discussing the performance of the business in 2014. As a result of the organisational and management re-structuring of the Galenica Group and the Galenica Santé Business unit, a further EVE 1 event was held in summer 2015 to brief members of Senior Management of Galenica Santé about the changes. At the EVE 2 event in autumn

The five key values of Galenica We participate with passion and act as entrepreneurs. We build trust through credibility and competence. We show respect and know that together, we are stronger.

Galenica annual report 2015 92 Galenica Group Human Resources

Talent Management 2015, around 800 members of Senior Man- Management training Programme agement at the Swiss sites came together The FAB 1 management training is built up with local pharmacy managers. The exten- of modules in three areas: self-manage- GaleniCare has set itself the objective sive programme focused on the strategies ment and management tools; managing of developing even more internal young of the Galenica Group and the Galenica people and communication skills; and lead- talent for key positions from within its Santé and Vifor Pharma Business units; it ing and developing teams. FAB 2 reinforces own ranks. The Retail Talent Manage- also featured distinguished guest Ottmar the topics of performance and health, and ment Programme was conducted for Hitzfeld, who shared his thoughts on the FAB 3 covers corporate management and the first time in autumn 2015 with around 40 participants. topic of change as part of a discussion with change management. These advanced The Talent Management Programme moderator Kurt Aeschbacher. The message training courses are aimed at members of is practice-based. Divided into three of change was brought to life with panel Senior Management and Management. groups, or pools, the modules are com- discussions and further performances. They are given in collaboration with exter- pleted over a period of nine months. nal partners. In 2015, 197 employees at- The five “Junior Talents” themed blocks Modular training formats for employees tended the courses; there was a particu- focus on basic techniques such as self During an induction day (SAM 1), new em- larly strong response to the new offering in organisation, presentation and project management, while the content of the ployees are introduced to the culture, the FAB 1 for participants to complete a coach- nine “Expert” and “Leadership” themed development, the strategy and the compa- ing session on each module. The overall blocks also covers marketing, commu- nies of the Galenica Group. Further SAM administration process for training has also nication, finance and human resources. seminars cover different specialist topics been improved, with new software allowing The Talent Management Programme and methodology. In 2015, over 270 em- registration and management to be han- will conclude in summer 2016 when the ployees took part in the induction day. dled electronically. completed project work is presented to the Executive Committee. The start of the programme is preceded by a multi-stage nomination process. At the beginning of the year, line managers initially assess the performance, personality, identification with the company and potential of their employees. The HR manager and talent manager are then asked to provide assessments, and individual interviews are conducted with the candidates. The process concludes with the drawing up of individual development plans. The Talent Management Programme is completed with existing training courses: in the “Fit4Pharmacy” course, Corporate Management Development those returning to employment or changing careers refresh their knowledge and obtain an insight into current UME topics within the industry. In the Corporate Management “Management for Pharmacists” course, Development which was developed in collaboration with the University of Basel, participants are provided with the requisite tools to successfully manage a phar- EVE Events SAM FAB macy over the course of a two-year – EVE 1 for MDI – Special training for – Management training for training programme divided into eight – EVE 2 for MDI/MKA employees MDI/MKA blocks. (Swiss locations) The comprehensive in-house educa- pharmacy managers tion and further training programme, – Learn & Lunch seminars for employees MDI = Member of Senior Management “Progress”, which focuses on improving MKA = Member of Management skills in sales and management, com- pletes the wide-ranging development opportunities at GaleniCare. UME includes all activities offered throughout the Galenica Group for the further development of staff and management.

Galenica annual report 2015 Human Resources Galenica Group 93

Long-term prospects Information channels Headcount trends All employees have access to the intranet. 2011–2015 Galenica offers its employees a range of The platform is designed for cross-Busi- fringe benefits, with particular emphasis on ness sector access and rapidly provides 7,6637’663 7,7127’712 7’8047,804 7’7,289289 structured training and development. In comprehensive information on changes 7’0517,051 2015, CHF 5.3 million was invested in fur- and developments in all areas of the Group. ther training (previous year: CHF 5.5 mil- A survey carried out in spring 2015 on the lion). employee magazine Spot was met with a strong response, and reaffirmed the cur- Fostering talent rent policy of publishing the magazine The two-year Talent Management Pro- twice a year in print form, for dispatch to gramme has proved particularly popular. all employees’ homes in Switzerland. Inter- The goal of the programme is to benefit national sites will now be provided with an from the knowledge and abilities of experi- electronic version. The desire to learn more enced employees in further developing about the different professions within the talented staff, while at the same time pro- company has also been accommodated, moting inter-divisional exchange. For this with the “What does … actually do?” section purpose, every participant (mentee) is allo- being expanded. Guiding themes in the 2011 2012 2013 2014 2015 cated a mentor. In 2015, 15 new mentees 2015 editions of Spot were sustainability joined the programme. Following the intro- and the annual motto, “Our passion, cus- duction in previous years of new struc- tomer satisfaction”. tures, processes and responsibilities for Number of employees in 2015 recognising and fostering talents at Group level and at Vifor Pharma, similar measures Stronger together were implemented in the Galenica Santé Business unit in 2015. Comité des Jeunes 7,804 The Comité des Jeunes, an internal think Galenica Group Recruitment via new platforms tank, is used by Galenica to promote ex- In 2015, several Group companies success- change between employees while also de- fully reinforced their image as an employer veloping the next generation of managers via online media. Vifor Pharma enhanced and specialists. The think tank consists of Galenica Ltd. 45 its “active sourcing” strategy with digital around 35 young employees from the dif- Vifor Pharma 1,825 features and direct contact. Recruitment of ferent Group companies who contribute to Galenica Santé 5,934 pharmacists remains challenging in Swit- developing and firmly establishing an en- – Products & Brands 85 zerland, resulting in searches in neighbour- trepreneurial and ethical culture. An addi- – Retail 4,447 ing countries, too. tional task of the Comité des Jeunes is to – Services 1,402 submit a proposal for the Galenica Group Training apprentices annual motto, as well as planning and as- Galenica is putting a lot of effort into train- sisting in its implementation. ing future specialists. In 2015, the entire Number of women and men Group had 801 apprentices – 755 young Our passion, customer satisfaction in 2015 women and 46 young men, of whom 267 Considerable importance is attached to graduated, many with flying colours. The defining the annual motto. “Our passion, Group will continue to employ 128 gradu- customer satisfaction”, the motto intro- ate apprentices after qualification. duced in 2014, was retained for a further 7,804 year. Passion represents one of the key Galenica Group values of Galenica. A great response was achieved, when with a set of value-in- scribed dice and a “passion box”, employees were encouraged and challenged to O Women 5,566 (71 %) approach their work with passion. Initial O Men 2,238 (29 %) accounts of how the teams approached

Galenica annual report 2015 94 Galenica Group Human Resources

this challenge were presented at the EVE 2 Employee profit-sharing Employee benefit plans management event and published on the programme intranet, followed by further reports in the Galenica maintains different employee employee magazine Spot and the manage- All employees worldwide were again paid a benefit plans based on local conditions ment letter. The new annual motto for 2016 profit-sharing bonus in 2015. The bonus is and legal stipulations in the corresponding is “Keep it simple and stay focused!”. calculated based on the Group result com- countries. These plans and foundations pared with the previous year. are legally and financially independent of Per year, employees of Galenica in Swit- Galenica. Protecting employees zerland have the opportunity to purchase a maximum of ten registered shares at a Employee benefit plans according Health preferential price. These shares are to Swiss BVG The health of its employees is important to blocked for sale for three years after the The vast majority of Galenica employees are Galenica, which is why information events date of purchase. In 2015, almost 20 % of insured in Switzerland through pension on this topic are held within the Group. Ow- eligible employees participated in the funds. These pension funds cover the risks ing to low demand, the cold prevention pro- share purchase programme. and economic consequences of ageing, dis- gramme has been discontinued. Galenica The profit-sharing bonus forms part of ability and death according to the specifica- also puts in place measures to protect em- the annual bonus for members of Manage- tions of the Swiss Federal Law on Occupa- ployee health and maintain safety in the ment. This is dependent on quantitative tional Retirement, Survivors and Disability workplace in line with the directives of the and qualitative targets. Pension Plans (BVG). Federal Coordination Commission for Oc- The share-based remuneration pro- cupational Safety (FCOS). gramme (LTI, see page 82 in the remuner- Defined contribution plan principle ation report) for members of the Corporate These company pension funds are man- Illnesses Executive Committee and certain mem- aged according to the principle of defined Employees were again able to take advan- bers of Senior Management focuses on contributions and are generally funded by tage of Galenica Care Management in long-term performance; remuneration is contributions from the employee and the 2015. Employees who are ill or at risk are withheld for a period of three years. employer. The contributions made by em- given support before having to take sick ployer and employee are accrued into indi- leave. After illness or an accident, the pri- vidual savings capital for each employee. ority is on facilitating a rapid return to The savings capital is usually paid out as a work. The number of illness-related ab- lump sum or converted into an annuity on sences increased slightly year-on-year in reaching statutory retirement age. In cases 2015 to 1,339. of termination of employment, the savings are transferred as vested benefits. Accidents Based on data from Suva and private insurers, the Galenica accident statistics show Number of employees worldwide an increase in the number of industrial accidents. In 2014, 180 accidents were reported 2015 2014 (currently available data). Switzerland 7,084 6,969 Europe 632 626 South America 53 66 Asia 25 23 North America 10 28 Total 7,804 7,712

Galenica annual report 2015 Human Resources Galenica Group 95

Pension fund reporting Works Committee The financial statements of the pension funds of the Galenica Group in Switzerland In 2015, representatives of the Galenica provide a true and fair view of the financial Ltd. Corporate Executive Committee and position, the results of operations and cash HR management met twice with the Works flow. Committee, which represents all employ- The accounting and valuation principles ees of the Galenica Group. The meetings of the Swiss pension funds correspond to covered issues that go beyond matters ad- the Ordinance on Occupational Retire- dressed by staff committees in the individ- ment, Survivors and Disability Pension ual Business sectors which meet several Plans (BVV2) and the Swiss GAAP FER ac- times per year. counting and reporting recommendations. Assets and liabilities are recognised on the basis of the financial situation of the pen- Headcount trends of which part-time sion fund as of the balance sheet date only. Number of employees employees <90 % Full-time equivalents 2015 2014 2015 2014 2015 2014 Reporting in the consolidated Galenica Ltd. 45 43 7 8 41 39 financial statements, defined benefit Vifor Pharma 1,825 1,952 195 214 1,752 1,867 plan principle Galenica Santé 5,934 5,717 2,391 2,292 4,628 4,442 The recording and assessment of benefit – Products & Brands 85 3 27 2 75 2 obligations in the consolidated financial – Retail 4,447 4,324 1,993 1,920 3,377 3,287 statements is in accordance with Interna- – Services 1,402 1,390 371 371 1,176 1,152 tional Financial Reporting Standards (IFRS). Total 7,804 7,712 2,593 2,514 6,421 6,348 The Swiss pension funds are classed here Total employees in % 33.2 % 32.6 % as defined benefit plans. In addition to recording short-term benefits to employees, benefit obligations for these pension plans Number of managerial employees following the end of employment are also Total number calculated by actuaries. These actuarial of managerial employees of which women of which men calculations generally result in a lower cov- 2015 2014 2015 2014 2015 2014 erage ratio (ratio of assets to liabilities), but Galenica Ltd. 33 31 14 13 19 18 have no impact on the benefits the pension Vifor Pharma 604 612 240 249 364 363 funds pay under their regulations. Accord- Galenica Santé 535 493 264 245 271 248 ing to the provisions under BVG, an obliga- – Products & Brands 28 — 11 — 17 — tion on the part of the employee and the – Retail 372 370 208 208 164 162 employer to make additional contributions – Services 135 123 45 37 90 86 or take remediation measures only arises Total 1,172 1,136 518 507 654 629 if the coverage ratio falls below 100 %. This Total employees in % 15.0 % 14.7 % 6.6 % 6.6 % 8.4 % 8.2 % is the case when the liabilities of the pension funds are no longer covered in full by the assets of the pension funds. (For more details, see notes to the consolidated financial statements).

Galenica annual report 2015 96 Galenica Group Human Resources

Social responsibility advantaged backgrounds and offers, via The IT network enables local doctors to the Oficina, a contact point for people from digitally file X-rays and complete patient Social commitment the region who are in need of help. dossiers. Previously, everything was writ- As a leading player in the Swiss healthcare ten by hand and archived in a makeshift market, Galenica is committed at all levels Christmas and New Year card 2015. The manner. to the welfare of patients. The company is Galenica Group supported the Swiss In 2015 IT Galexis supplied a further 300 also involved in helping the following organ- Theodora Foundation with its Christmas PCs and laptops to the Drohobych project. isations and projects: and New Year card for 2015. Since its establishment in 1993, the Theodora Founda- Other commitments. Galenica and its Swiss Aids Care International. The tion has pursued the objective of easing the companies also supported the following Galenica Group has supported this founda- suffering of children in hospitals and spe- organisations in 2015: tion with regular donations since 2005. The cialist institutions with fun and laughter. – Children’s charity Sternschnuppe: Galexis Swiss Aids Care International foundation The Foundation, which is a recognised once again supported the Children’s char- was founded in 2003 by Professor Ruedi charity, now organises and finances visits ity Sternschnuppe organisation. Lüthy. Around 1.4 million people live with by 56 hospital clowns to 56 hospitals and – Maison Chance: Sun Store supported the HIV or AIDS in Zimbabwe, many of whom specialist institutions for children with dis- organisation Maison Chance by selling urgently require life-saving treatment. In abilities in Switzerland every week. stars and hearts made of fabric. Zimbabwe’s capital, Harare, the foundation – Winds of Hope: Sun Store has been sup- operates the walk-in Newlands Clinic with Swiss Solidarity. The Swiss Solidarity na- porting the Winds of Hope foundation for mobile outpatient stations, which currently tional donation day to support people in several years by selling small soft chick provides comprehensive treatment and need due to the earthquake in Nepal took toys at Easter. care to more than 5,500 patients. Since place on 5 May 2015. Employees organised – Apprentis du Monde: Sun Store is helping 1 December 2014, Matthias Widmaier has fundraising campaigns in their companies the association Apprentis du Monde by taken over the role of Country Director of at many Galenica Group locations. Money selling wristbands. Swiss Aids Care International (Zimbabwe); was collected at Galenica Ltd. (including the – International Committee of the Red Professor Ruedi Lüthy is the Medical Direc- Pension Fund), Vifor Pharma in Ettingen, Cross: In December 2015, Winconcept tor and member of the Foundation Board. Geneva, St. Gallen, Villars-sur-Glâne, Glatt- decided not to offer a material gift to the His daughter, Sabine Lüthy, has been the brugg and Germany, as well as at Alloga, Feelgood’s partners and chose instead to CEO of the foundation since 1 January 2012. Galexis, HCI Solutions, Retail, Unione make a donation to the International The Newlands Clinic in Zimbabwe re- Farmaceutica Distribuzione and Dauf. The Committee of the Red Cross in the name ceived everyday material for its onsite Corporate Executive Committee of the of all the Feelgood’s pharmacies. clinic staff from GaleniCare in 2015. Galenica Group agreed to double the amount raised by employees and also to Agua Viva. Since 2009, Galenica has been make a donation on behalf of the Galenica providing financial support to “Agua Viva, Group. the small aid organisation for children”. Operating in eastern Brazil, this association Drohobych. In 2014, on the initiative of a helps children in need and arranges spon- Galexis apprentice, Galexis and GaleniCare sorship for children from deprived areas of supported a project to tackle tuberculosis the cities of Olinda and Paulista. The con- in Drohobych, a town in West Ukraine. The tributions not only help to provide children project was carried out in collaboration with basic nutrition but also go into a fund with IT students at the Gewerblich Indus- that is used to finance medical treatment trielle Berufsschule Bern (Commercial- and medication. In Olinda, the association Industrial Vocational School Bern, gibb) offers an information and contact point for and the aid organisation Bär & Leu, in sup- all sponsored children and their relatives port of the WHO’s “Stop TB Strategy”. via the “Oficina Agua Viva”. Here, the chil- Galexis and GaleniCare provided PCs and dren receive food and are given the oppor- servers that were no longer in use. The tunity to attend daily school lessons. Agua Galexis apprentice himself invested his Viva also organises vocational and part- free time and holidays in configuring an time courses as well as traineeships for IT infrastructure in Switzerland for the children and adolescents from socially dis- Drohobych hospital.

Galenica annual report 2015 Human Resources Galenica Group 97

Work is also carried out directly for customers behind the scenes, such as in the preparation of goods for delivery via the webshops of the pharmacy formats of GaleniCare.

Galenica annual report 2015 98 Galenica Group Financial statements Financial statements

Galenica financial statements 2015 Consolidated financial statements 2015 of the Galenica Group 99

Consolidated financial statements 2015

100 Key figures of the Galenica Group 141 21. Current financial liabilities

101 Consolidated statement of income 141 22. Non-current financial liabilities 142 23. Provisions 102 Consolidated statement of comprehensive income 143 24. Employee benefit plans 147 25. Share capital and number of shares 103 Consolidated statement of financial position 147 26. Non-controlling interests 104 Consolidated statement of cash flows 148 27. Changes in consolidated 105 Consolidated statement of changes in equity shareholders’ equity 149 28. Financial instruments 106 Notes to the consolidated financial statements of the Galenica Group 157 29. Share-based payments

106 1. Accounting principles 158 30. Related party transactions 108 2. Summary of significant accounting policies 159 31. Lease liabilities 119 3. Financial risk management 159 32. Contingent liabilities and commitments 121 4. Estimation uncertainty and assumptions 160 33. Assets pledged to secure own liabilities 122 5. Operating segment information 160 34. Subsequent events 128 6. Business combinations 161 35. Investments 130 7. Net sales 163 Report of the statutory auditor on the consolidated financial statements of the 130 8. Other income Galenica Group 130 9. Personnel costs 131 10. Other operating costs 131 11. Financial result 132 12. Income tax 134 13. Earnings per share 134 14. Receivables 135 15. Inventories 136 16.Property, plant and equipment and investment properties 137 17. Intangible assets 140 18. Investments in associates and joint ventures 140 19. Financial assets 140 20. Payables

Galenica financial statements 2015 100 Key figures of the Galenica Group

Key figures of the Galenica Group 2015 1) Key figures are reported for each Business unit not taking into account Corporate and eliminations

Net sales1) Net sales Number of employees by Business unit by region Galenica Group in million CHF in million CHF

3,791.6 3,791.6 7,804 Galenica Group Galenica Group Galenica Group

EBITDA1) EBIT1) Net profit by Business unit by Business unit Galenica Group in million CHF in million CHF in million CHF

537.4 450.8 370.0 Galenica Group Galenica Group Galenica Group

Vifor Pharma CHF 378.4 million Vifor Pharma CHF 333.0 million Attributable to shareholders of Galenica Ltd. Galenica Santé CHF 166.2 million Galenica Santé CHF 125.2 million CHF 301.1 million Share of minority interests CHF 68.9 million in million CHF 2015 2014 Change Net sales 3,791.6 3,416.3 +11.0 % Personnal costs 659.2 639.3 +3.1 % EBITDA 537.4 446.8 +20.3 % in % of net sales 14.2 % 13.1 % EBIT 450.8 370.2 +21.8 % in % of net sales 11.9 % 10.8 % Income taxes 59.0 45.3 +30.2 % Net profit 370.0 312.0 +18.6 % – Attributable to shareholders of Galenica Ltd. 301.1 284.5 +5.8 % – Share of minority interests 68.9 27.5 +150.4 % Earnings per share 46.47 43.91 +5.8 % Earnings per share (excluding effects due to IAS 19) 47.67 44.27 +7.7 % Investment in property, plant and equipment and intangible assets 368.6 70.0 +426.3 % Investment in R&D 88.8 104.2 –14.8 % Employees at reporting date (FTE) 6,421 6,348 +1.1 % Cash flow from operating activities 522.2 355.8 +46.8 % Total assets 3,640.0 3,208.3 +13.5 % Shareholders’ equity 1,976.2 1,750.5 +12.9 % Equity ratio 54.3 % 54.6 % Net debt 159.1 341.1 –53.3 % Gearing 8.1 % 19.5 %

Galenica financial statements 2015 Consolidated statement of income 101

Consolidated statement of income

in thousand CHF Notes 2015 2014 Net sales 7 3,791,586 3,416,255 Other income 8 153,572 254,667 Operating income 3,945,158 3,670,922

Cost of goods and materials (2,333,566) (2,185,370) Personnel costs 9, 24 (659,154) (639,294) Other operating costs 10 (415,081) (399,446) Depreciation and amortisation 16 , 17 (86,599) (76,627) Operating costs (3,494,400) (3,300,737)

Earnings before interest and taxes (EBIT) 450,758 370,185

Financial income 11 10,546 11,316 Financial expenses 11 (35,783) (28,017) Income from associates and joint ventures 18 3,457 3,789 Earnings before taxes (EBT) 428,978 357,273

Income tax 12 (58,975) (45,286)

Net profit 370,003 311,987

Attributable to: – Shareholders of Galenica Ltd. 301,060 284,452 – Non-controlling interests 68,943 27,535 in CHF Earnings per share 13 46.47 43.91 Diluted earnings per share 13 46.38 43.84

Galenica financial statements 2015 102 Consolidated statement of comprehensive income

Consolidated statement of comprehensive income

in thousand CHF Notes 2015 2014 Net profit 370,003 311,987

Hedge transactions – change in fair value 28 (465) (1,976) – realised in profit or loss 3,026 437 Financial assets available for sale – change in fair value 28 1,372 55 – realised in profit or loss — — Translation differences (30,133) 18,029 Income tax — — Items that may be reclassified subsequently to profit or loss (26,200) 16,545

Remeasurements of the net defined benefit liability (asset) 24 (21,439) (13,436) Income tax from remeasurements of the net defined benefit liability (asset) 12 4,717 2,956 Share of other comprehensive income from joint ventures 18 (3,856) — Items that will not be reclassified to profit or loss (20,578) (10,480)

Other comprehensive income (46,778) 6,065

Comprehensive income 323,225 318,052

Attributable to: – Shareholders of Galenica Ltd. 254,285 290,517 – Non-controlling interests 68,940 27,535

Galenica financial statements 2015 Consolidated statement of financial position 103

Consolidated statement of financial position

Assets in thousand CHF Notes 31.12. 2015 31.12. 2014 Cash and cash equivalents 422,196 238,526 Securities 246 — Receivables 14 581,172 633,485 Tax receivables 634 1,083 Inventories 15 383,807 375,817 Prepaid expenses and accrued income 33,661 53,310 Current assets 39 % 1,421,716 41 % 1,302,221

Property, plant and equipment 16 450,202 441,090 Investment properties 16 34,722 35,685 Intangible assets 17 1,601,416 1,285,443 Investments in associates and joint ventures 18 40,736 44,431 Financial assets 19 64,971 66,455 Deferred tax assets 12 26,233 22,019 Employee benefit assets 24 — 10,968 Non-current assets 61 % 2,218,280 59 % 1,906,091

Assets 100 % 3,639,996 100 % 3,208,312

Liabilities and shareholders’ equity in thousand CHF Notes 31.12. 2015 31.12. 2014 Financial liabilities 21 144,892 107,597 Payables 20 444,302 406,693 Tax payable 47,728 32,546 Accrued expenses and deferred income 164,723 135,418 Provisions 23 2,257 2,372 Current liabilities 22 % 803,902 21 % 684,626

Financial liabilities 22 668,799 608,393 Deferred tax liabilities 12 86,420 80,615 Employee benefit liabilities 24 100,559 79,806 Provisions 23 4,154 4,378 Non-current liabilities 24 % 859,932 24 % 773,192

Share capital 25 650 650 Reserves 1,878,443 1,711,701 Equity attributable to shareholders of Galenica Ltd. 1,879,093 1,712,351 Non-controlling interests 26 97,069 38,143 Shareholders’ equity 27 54 % 1,976,162 55 % 1,750,494

Liabilities and shareholders’ equity 100 % 3,639,996 100 % 3,208,312

Galenica financial statements 2015 104 Consolidated statement of cash flows

Consolidated statement of cash flows

in thousand CHF 2015 2014 Net profit 370,003 311,987 Income tax 58,975 45,286 Depreciation and amortisation of property, plant and equipment, investment properties and intangible assets 86,599 76,627 (Gain)/loss on disposal of non-current assets 49 (4,450) (Gain)/loss on disposal of subsidiaries (273) — Increase/(decrease) in provisions and employee benefit assets and liabilities 9,227 4,853 Net financial result 25,237 16,701 Income from associates and joint ventures (3,457) (3,789) Other non-cash items 16,953 12,689 Change in receivables (36,886) 1,129 Change in inventories (10,566) (21,966) Change in payables 14,784 5,763 Change in other net current assets 47,346 (25,116) Interest received 1,553 1,631 Interest paid (19,832) (23,586) Other financial receipts/(financial payments) (1,596) 3,662 Dividends received 5,270 345 Income taxes paid (41,184) (45,922) Cash flow from operating activities 522,202 355,844

Investments in property, plant and equipment and investment properties (68,535) (59,866) Investments in intangible assets (96,342) (10,029) Investments in associates and joint ventures (1,973) (49) Investments in financial assets and securities (4,795) (87,628) Proceeds from property, plant and equipment and investment properties 1,045 8,980 Proceeds from intangible assets 353 — Proceeds from financial assets and securities 42,544 3,894 Purchase of subsidiaries (net cash flow) (42,659) (14,292) Sale of subsidiaries (net cash flow) 8,223 — Cash flow from investing activities (162,139) (158,990)

Dividends paid (102,424) (129,453) Purchase of treasury shares (20,264) (13,901) Sale of treasury shares 10,088 7,985 Proceeds from financial liabilities 40,594 33,314 Repayment of financial liabilities (101,194) (71,867) Purchase of non-controlling interests (2,751) — Cash flow from financing activities (175,951) (173,922)

Effects of exchange rate changes on cash and cash equivalents (442) 13 Increase/(decrease) in cash and cash equivalents 183,670 22,945

Cash and cash equivalents as at 1 January 238,526 215,581 Cash and cash equivalents as at 31 December 422,196 238,526

Galenica financial statements 2015 Consolidated statement of changes in equity 105

Consolidated statement of changes in equity

Equity Fluctuation in Accumulated attributable to Non- Share Treasury value of financial Retained translation shareholders controlling in thousand CHF capital shares instruments earnings differences of Galenica Ltd. interests Equity Balance as at 31 December 2013 650 (15,834) (3,750) 1,636,650 (111,953) 1,505,763 49,359 1,555,122 Net profit 284,452 284,452 27,535 311,987 Other comprehensive income (1,484) (10,480) 18,029 6,065 6,065 Comprehensive income (1,484) 273,972 18,029 290,517 27,535 318,052 Dividend (90,698) (90,698) (38,751) (129,449) Transactions on treasury shares (1,134) (4,785) (5,919) (5,919) Share-based payments 12,688 12,688 12,688 Balance as at 31 December 2014 650 (16,968) (5,234) 1,827,827 (93,924) 1,712,351 38,143 1,750,494 Net profit 301,060 301,060 68,943 370,003 Other comprehensive income 3,933 (20,578) (30,130) (46,775) (3) (46,778) Comprehensive income 3,933 280,482 (30,130) 254,285 68,940 323,225 Dividend (97,213) (97,213) (5,220) (102,433) Transactions on treasury shares (4,976) (5,655) (10,631) (10,631) Share-based payments 18,258 18,258 18,258 Change in non-controlling interests 2,043 2,043 (4,794) (2,751) Balance as at 31 December 2015 650 (21,944) (1,301) 2,025,742 (124,054) 1,879,093 97,069 1,976,162

Galenica financial statements 2015 106 Notes to the consolidated financial statements of the Galenica Group

Notes to the consolidated financial statements of the Galenica Group

1. Accounting principles

General information

Galenica is a diversified Group operating in the healthcare market. Its activities include the development, manufacture and distribution of pharmaceutical products. In addition, Galenica runs pharmacies, provides logistical and database services and sets up networks. The parent company is Galenica Ltd., a Swiss company limited by shares with its head office in Bern. The re gistered office is at Untermattweg 8, 3027 Bern, Switzerland. Shares in Galenica Ltd. are traded on the SIX Swiss Exchange under securities no. 1553646 (ISIN CH0015536466). The Board of Directors released the consolidated financial statements 2015 for publication on 11 March 2016. The 2015 consolidated financial statements will be submitted for approval to the Annual General Meeting of shareholders on 28 April 2016.

Basis of preparation

The consolidated financial statements of Galenica have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standard Board (IASB), as well as the interpretations of the IFRS Interpretations Committee and the provisions of Swiss law. The consolidated financial statements are based on the financial statements of the individual companies of Galenica, prepared in accordance with uniform accounting principles. The reporting period comprises twelve months to 31 December. The consolidated financial statements have been presented on a historical cost basis. Non-monetary assets are measured at the lower of cost and net realisable value or recoverable amount. Specific financial assets and financial liabilities are measured at fair value in the statement of financial position. Detailed disclosures on measurement are provided in the summary of significant accounting policies.

Amendments to IFRS

The standards adopted are consistent with the previous financial year with the following exceptions. As at 1 January 2015 Galenica adopted the following amended International Financial Reporting Standards. – IAS 19 – Defined Benefit Plans: Employee Contributions – Annual Improvements 2010–2012 Cycle – Annual Improvements 2011–2013 Cycle

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

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 107

Future amendments to IFRS

As at the reporting date, various new and amended standards and interpretations had been issued with effective dates in the financial year 2016 or later. Galenica has opted not to early adopt any of the following standards or amendments to standards or interpretations that are potentially relevant for Galenica. Galenica intends to apply the new or amended standards for the first time in the financial year beginning on or after the date shown:

– IFRS 9 – Financial Instruments (1 January 2018) – IFRS 11 – Accounting for Acquisitions of Interests in Joint Operations (1 January 2016) – IFRS 15 – Revenue from Contracts with Customers (1 January 2018) – IFRS 16 – Leases (1 January 2019) – IAS 1 – Disclosure Initiative (1 January 2016) – IAS 7 – Disclosure Initiative (1 January 2017) – IAS 12 – Recognition of Deferred Tax Assets for Unrealised Losses (1 January 2017) – IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and Amortisation (1 January 2016) – IAS 16 and IAS 41 – Agriculture: Bearer Plants (1 January 2016) – IAS 27 – Equity Method in Separate Financial Statements (1 January 2016) – IAS 28 and IFRS 10 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective date to be determined by the IASB) – Investment Entities; Amendments to IFRS 10, IFRS 12 and IAS 28 (1 January 2016) – Annual Improvements 2012–2014 Cycle (1 January 2016)

Galenica is currently assessing the impact of the new and amended standards. Based on the preliminary results of the analysis, Galenica does not expect there to be any material impact on the consolidated financial statements with the exception of IFRS 9, IFRS 15 and IFRS 16.

IFRS 9 will substantially change the classification and measurement of financial instruments. The standard will affect the Group’s accounting for its available-for-sale financial assets as gains and losses on certain instruments are never reclassified to the income statement on a later date. IFRS 15 amends revenue recognition requirements and establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The standard replaces IAS 18 – Revenue and IAS 11 – Construction contracts and related interpretations. IFRS 16 substantially changes the financial statements as the majority of leases will become on-balance sheet liabilities with corresponding right of use assets on the balance sheet. Amortisation and interest expense will be separately recorded, which will impact earnings before interest and taxes (EBIT) and financial result. The total amount of undiscounted lease commitments is disclosed in note 31.

Galenica financial statements 2015 108 Notes to the consolidated financial statements of the Galenica Group

2. Summary of significant accounting policies

Scope of consolidation

The consolidated financial statements of Galenica comprise those of Galenica Ltd. and all its subsidiaries, including associate companies and joint ventures. Subsidiaries, associates and joint ventures acquired during the reporting period are included in the consolidated financial statements as at the date when control, significant influence or joint control was obtained. Companies sold during the reporting period are included up to the date when control, significant influence or joint control was lost. Details of changes in the scope of consolidation in the reporting period are included in note 6, Business combinations. The investments are listed in note 35.

Consolidation method

Companies which Galenica controls have been fully consolidated. This is the case when Galenica has the ability to control significant decisions of a company, has rights to variable returns from its involvement with the investee and has the ability to affect those returns. When Galenica holds less than 50 % of the voting rights in a company, the Group considers all the relevant facts and circumstances in assessing whether it has control over that company. This includes contractual arrangements with the vote holders of the investee, rights arising from other contractual arrangements and the number of voting rights and potential voting rights. Assets and liabilities as well as income and expenses of such companies are fully included in the consolidated financial statements as at the acquisition date, i.e. the date on which the Group obtains control, significant influence or joint control. The share of net assets and net profit attributable to non-controlling interests is indicated separately in the consolidated statement of financial position, the consolidated statement of income, the consolidated statement of comprehensive income and the consolidated statement of changes in equity. All intercompany receivables and payables, income and expenses, investments and dividends as well as unrealised gains and losses on transactions are fully eliminated. Investments in associates where Galenica holds between 20 % and 50 % of the voting rights and investments in joint ventures are accounted for using the equity method. Unrealised gains and losses from transactions with associates and joint ventures are eliminated in proportion to Galenica’s interest. Investments of less than 20 % where Galenica has no significant influence are classified under securities or financial assets and are accounted for as financial instruments.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 109

Group currency and translation of foreign currencies

Galenica’s consolidated financial statements are prepared in Swiss francs (CHF) and, unless otherwise indicated, figures are rounded to the nearest CHF 1,000. The functional currency of the Group companies is the currency of the primary economic environment in which they operate. Transactions in foreign currencies are translated at the rate effective on the transaction date. Monetary items are re-translated into the functional currency using rates as at the reporting date. The resulting exchange gains and losses are recognised in profit or loss. Assets and liabilities of foreign subsidiaries are translated into Swiss francs using year-end rates. Income and expenses and cash flows are translated using the average exchange rate for the year. Exchange differences arising from net investments in foreign operations are recognised directly in comprehensive income and reported separately as accumulated translation differences. Cumulative translation differences recognised directly in comprehensive income are only released through profit or loss in the event of a loss of control, significant influence or joint control. Translation differences on equity-like loans that form part of the net investment in a foreign operation are recognised in comprehensive income, provided that repayment of these loans is neither planned nor likely to occur in the foreseeable future. The table below shows the exchange rates against the Swiss franc of the main currencies of relevance for the consolidated financial statements: Year-end rates A verage rates Exchange rates 2015 2014 2015 2014 1 EUR 1.09 1.20 1.07 1.22 1 GBP 1.48 1.55 1.48 1.51 1 USD 1.00 0.99 0.96 0.91 1 CAD 0.72 0.86 0.76 0.83

Classification as current or non-current

Assets which are realised or consumed within one year or in the normal course of business, or which are held for trading purposes are classified as current assets. All other assets are classified as non-current assets. All liabilities which Galenica aims to settle in the normal course of business in a financial year or which fall due within one year after the reporting date are classified as current liabilities. All other liabilities are classified as non-current liabilities.

Galenica financial statements 2015 110 Notes to the consolidated financial statements of the Galenica Group

Financial assets and financial liabilities

Measurement of financial assets and financial liabilities Financial assets and financial liabilities are initially recognised at cost including transaction costs with the exception of financial assets and liabilities classified as “at fair value through profit or loss”, for which transaction costs are recognised directly in profit or loss. All purchases and sales are recognised using trade date accounting. Assets that are not carried at fair value through profit or loss are regularly tested for impairment. Financial assets are derecognised when Galenica has relinquished control over them, i.e. when the associated rights have been sold or expired. Financial liabilities are derecognised when they have been settled. For subsequent measurement Galenica distinguishes between the following types of financial assets and financial liabilities:

Financial assets and financial liabilities at fair value through profit or loss Financial assets and financial liabilities are classified as at fair value through profit or loss if they are acquired with a view to realising a profit from current fluctuations in the price. This category also includes derivative financial instruments that are not designated as hedging instruments in hedge relationships. The resulting realised and unrealised changes in fair value are recognised directly in profit or loss (financial result) for the relevant reporting period.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They include, but are not limited to, trade receivables and loans to third parties. These types of financial instruments are recognised in the statement of financial position at amortised cost using the effective interest rate method less accumulated impairment. Uncollectible loans and receivables are only derecognised if a certificate of loss has been issued.

Financial assets available for sale All other financial assets are classified as available for sale. These financial instruments are recognised at fair value with any changes in value, adjusted for deferred taxes, being recognised in comprehensive income. On sale, impairment or any other form of disposal, the cumulative gain or loss previously recognised in comprehensive income is recognised in profit or loss for the reporting period. An impairment loss for an equity instrument is recognised when there is a significant or prolonged decline in fair value, i.e. longer than six months or material, i.e. more than 20 % below the acquisition value.

Financial liabilities at amortised cost Financial liabilities mainly comprise financial debts measured at amortised cost using the effective interest rate method.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 111

Derivative financial instruments and hedge accounting

Derivative financial instruments are initially and subsequently measured at fair value. Depending on their maturity, derivative financial instruments with a positive fair value are either classified within current assets as securities or within non-current assets as financial assets. Derivative financial instruments with a negative fair value are presented as current or non-current financial liabilities according to their maturity. Galenica uses derivative financial instruments such as currency forwards and cross currency interest rate swaps in order to minimise and hedge interest rate and exchange risks. Currency forwards and cross currency interest rate swaps are valued using the fair value of expected future cash flows. Galenica uses hedge accounting for selected transactions if the criteria relating to documentation, probability, effectiveness and reliability of measurement are met. The effective portion of changes in the fair value of cash flow hedging instruments is recognised in other comprehensive income. Gains and losses on derivatives not designated in active hedge relationships are recorded immediately in profit or loss.

Cash flow hedges Cash flow hedges are hedges against changes in cash flows due to fluctuations in foreign exchange or interest rates of a financial instrument or a forecast transaction. Gains or losses on the effective portion of the hedging instrument are recognised in comprehensive income while gains or losses on the ineffective part of the hedging instrument are recognised in profit or loss. At the inception of the hedge, Galenica prepares a formal documentation containing the strategy, objectives, identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and details of how the hedging instrument’s effectiveness will be assessed. Hedge accounting is only applied if the hedge relationship is expected to be highly effective throughout the entire term. Any cumulative unrealised gain or loss on the hedging instrument remains in equity until the underlying hedged item affects profit or loss. However, if a hedged forecast transaction is no longer expected to occur, the cumulative unrealised gain or loss on the hedging instrument is immediately reclassified to profit or loss.

Cash and cash equivalents

Cash and cash equivalents include cash, sight deposits at financial institutions and time deposits with an original term of three months or less. Cash and cash equivalents are measured at nominal value.

Securities

In the statement of financial position, securities recorded under current assets include marketable, highly liquid securities and time deposits with an original term to maturity of 3 to 12 months, and derivative financial instruments with a positive fair value and a residual term to maturity of up to 12 months. Quoted securities and derivative financial instruments are measured at fair value, time deposits at amortised cost. Unquoted securities are measured at their estimated fair value, based on valuation models. If the fair value cannot be reliably determined, unquoted equity instruments are included in the statement of financial position at cost less accumulated impairments. Changes in the value of securities and derivative financial instruments not designated as a hedge are recognised immediately in profit or loss for the current reporting period.

Galenica financial statements 2015 112 Notes to the consolidated financial statements of the Galenica Group

Receivables

Trade receivables are carried at their original invoice value. If there is objective evidence that the amounts will not be paid in full, the carrying value is adjusted accordingly. These bad debt allowances are based on the difference between the carrying amount and the recoverable amount as derived from individual valuations or for groups with comparable credit risk profiles. The remaining receivables are carried in the statement of financial position at nominal value less any individual allowances required.

Inventories

Inventories and purchased merchandise are carried at the lower of cost or net realisable value. Cost includes all direct manufacturing costs and a proportion of manufacturing overheads. Borrowing costs are not included. The weighted average method is primarily used to determine cost. At certain pharmacies the retail method is used to determine cost. Adjustments are recognised on inventories that have a lower net realisable value or slow turnover.

Property, plant and equipment and investment properties

Property, plant and equipment and investment properties are measured at cost less accumulated depreciation and impairment. Depreciation is charged on a straight-line basis over the assets’ useful lives as follows: Years Land unlimited Buildings 10–50 Manufacturing systems 5 –15 Warehouse equipment 6 –15 Furniture, fittings 5 –10 IT equipment 3 –10 Vehicles 3 –10

Land and buildings not used for operations are included in investment properties. They are recognised and depreciated on the same basis as property, plant and equipment. They include land and buildings or parts thereof that are being held for an undetermined future use or to generate rental income. The fair value of these properties, which is disclosed separately, is based on external appraisals. Costs are only capitalised if they result in extending the useful life, expanding capacity, improving product quality or contributing to a marked reduction in operating costs. Maintenance or repair costs are recognised directly in profit or loss. When property, plant and equipment or investment properties are sold or derecognised, gains are recognised in other operating income and losses in other operating costs.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 113

Intangible assets

Intangible assets include acquired trademarks, patents, licences, technologies, purchased or internally developed software and other assets without physical substance. These items are measured at cost less accumulated amortisation and/or impairment. The cost of an intangible asset acquired in a business combination corresponds to its fair value determined at acquisition. Expenditure on internally developed software is capitalised when the capitalisation criteria are met and future economic benefits from use or sale of the software are expected. Software that is not yet available for use is tested for impairment annually or more frequently if there are indications of impairment. Amortisation is charged on a straight-line basis over the estimated economic or legal useful life, whichever is shorter as follows: Years Trademarks, patents, licences, technologies 5–20 Software 2–7

The amortisation period and the amortisation method are reviewed at least at each financial year-end. With the exception of one trademark at Vifor Consumer Health and certain manufacturing technologies of OM Pharma, all intangible assets are assessed as having a finite useful life. Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or more frequently if there are indications of impairment. Any impairment is recorded in profit or loss under depreciation and amortisation and disclosed separately as an impairment in the notes. If intangible assets are sold or derecognised, gains are recognised under other operating income and any losses under other operating costs.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. Consideration transferred comprises payments in cash as well as the fair value of the assets transferred, the obligations entered into or assumed and the equity instruments transferred. Transaction costs are recognised directly in profit or loss. Goodwill is recognised at cost on the acquisition date and corresponds to the difference between the consideration transferred and the fair value of assets, liabilities and contingent liabilities identified in the purchase price allocation. Goodwill is capitalised and included in intangible assets, while negative goodwill is recognised immediately in profit or loss. After initial measurement goodwill is recognised at cost less any accumulated impairment. Goodwill is allocated to the cash-generating unit (CGU) or group of CGUs that benefit from the business combination. Goodwill is tested for impairment annually, or more frequently if there are indications of impairment. The impairment test is based on the estimated future cash flow of the CGU or group of CGUs to which the goodwill belongs. If the recoverable amount (higher of fair value less costs of disposal and value in use) is lower than the carrying amount, the carrying amount is reduced to the recoverable amount by recording an impairment charge. Contingent consideration is measured at fair value on the acquisition date and not remeasured subsequently for equity instruments. If the contingent consideration qualifies as a financial instrument, it is remeasured to fair value and any difference is recognised in other operating income or other operating costs. The difference arising from the acquisition of additional non-controlling interests in fully consolidated companies (purchase consideration less proportionate carrying amount of non- controlling interests) is considered to be an equity transaction and is thus taken directly to retained earnings in shareholders’ equity. Gains and losses resulting from the disposal of interests in consolidated companies without loss of control are also recognised in retained earnings. If a CGU or group of CGUs is sold, goodwill is taken into account when calculating the profit or loss on the sale. The profit or loss on deconsolidation is recognised in operating income or other operating costs. Any impairment on goodwill is recognised in profit or loss and disclosed separately.

Galenica financial statements 2015 114 Notes to the consolidated financial statements of the Galenica Group

Research and development

Expenditure on research and development (excluding internally developed software) is recognised directly in profit or loss as incurred. The costs of development cannot be capitalised since the regulatory risks and the considerable periods of time before a product is launched do not allow a reliable estimate to be made of the economic benefit, which would be necessary for capitalisation.

Borrowing costs

Borrowing costs are recognised directly in profit or loss as incurred. In the case of qualifying assets such as assets under construction, which take a considerable time to build, borrowing costs are capitalised.

Leases

Leases under which Galenica assumes substantially all the risks and rewards of ownership are treated as finance leases. Assets that are taken over as part of a finance lease are recognised at the lower of fair value or net present value of future non-cancellable lease payments under non-current assets, while liabilities are recorded under financial liabilities. Leased items of plant are depreciated over their estimated useful economic lives or the term of the lease if shorter, if it cannot be assumed that ownership of the asset will be transferred at the end of the lease term. Each lease payment is split into a finance charge and the reduction of the outstanding liability. The other leases are treated as operating leases. Lease payments are recognised on a straight-line basis directly as operating costs.

Investments in associates and joint ventures

Investments in associates and joint ventures are initially recognised at cost and subsequently accounted for using the equity method. Goodwill paid upon acquisition is included in the carrying amount of the investment. In the accounting periods following the acquisition, the carrying amount of the investment is increased by the share in profit or reduced by the share in loss of the associate. The corresponding amounts are recognised in profit or loss. Transactions that are recorded in comprehensive income of associates and joint ventures are recognised proportionately in comprehensive income.

Non-current financial assets

Non-current financial assets comprise securities categorised as “available-for-sale”, loans, time deposits with a term to maturity of more than twelve months, rental security deposits and derivative financial instruments with a positive fair value and a residual term to maturity of more than twelve months. Loans are assessed for impairment based on creditworthiness of the counterparty. Any impairment is recognised in financial expenses.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 115

Impairment of non-financial assets

Assets are tested for impairment whenever there are indications that they could be impaired. Goodwill and intangible assets with an indefinite useful life or intangible assets that are not yet available for use, are tested for impairment at least annually and more frequently if there are indications of impairment. If the recoverable amount (higher of fair value less costs of disposal and value in use) is lower than the carrying amount, the carrying amount is reduced to the recoverable amount by recording an impairment charge. To determine the value in use, the future cash flows are discounted on a pre-tax basis. Impairments are recognised in profit or loss under depreciation and amortisation and disclosed separately. Reversal of impairments are recognised immediately in profit or loss. An impairment loss for goodwill is not reversed.

Provisions and contingent liabilities

Provisions are recorded when Galenica has a present legal or constructive obligation towards a third party as a result of a past event, when the amount of the obligation can be reliably estimated and an outflow of economic resources is probable. A provision for restructuring is only recorded when there is a detailed formal plan, the expenditures that will be undertaken have been identified, there is evidence that the plan will be implemented and its main features have been announced to those affected by it. A contingent liability is disclosed for an obligation where it is not probable that an outflow of resources will be required or where the amount of the obligation cannot be estimated with sufficient reliability.

Income tax

Current income tax is based on taxable profit for the current year and is recognised in profit or loss unless the underlying transaction is recognised outside profit or loss. Deferred taxes are taxes on temporary differences between the value of assets and liabilities in the tax accounts and the carrying amounts included in the Group’s consolidated financial statements. Deferred taxes are calculated using the liability method on the basis of enacted or substantively enacted tax rates expected to apply when the tax asset is realised or the liability is settled. Tax effects from losses carried forward and other deductible temporary differences are only capitalised when it is probable that they will be realised in the future. Changes in deferred tax assets and liabilities are recognised in profit or loss. Deferred taxes on transactions that are recognised directly in comprehensive income or equity are likewise recognised in comprehensive income or equity. Deferred tax liabilities are recorded for all taxable temporary differences associated with investments in subsidiaries, except Galenica is able to control the timing of the distribution and no dividend distribution is planned or likely to occur in the foreseeable future.

Galenica financial statements 2015 116 Notes to the consolidated financial statements of the Galenica Group

Employee benefits

Galenica has a number of employee benefit plans based on local conditions and legal requirements in the respective countries. These plans are legally separate from Galenica and consist of both defined contribution and defined benefit plans. Galenica’s defined benefit obligation (DBO) is assessed annually by an independent pension actuaries using the projected unit credit method. This method considers employees’ service in the periods prior to the reporting date and their future expected salary development. In addition, actuaries make use of statistical data such as employee turnover and mortality to calculate the defined benefit obligation. For plans that are structured so that the largest proportion of benefits accrues in the years just before retirement (backloading), benefits earned are allocated based on the net obligation without considering future employee-funded benefit components (risk sharing). All defined benefit plans are funded. Plan assets are managed separately from Galenica’s assets by independent pension funds. Any deficit or surplus in funded defined benefit plans (when the fair value of plan assets falls short of or exceeds the present value of the defined benefit obligation) is recorded as a net defined benefit liability or asset. Galenica only recognises a net defined benefit asset if it has the ability to use the surplus to generate future economic benefits that will be available to the entity in the form of a reduction in future contributions. If Galenica does not have the ability to use the surplus or it will not generate any future economic benefit, Galenica does not recognise an asset, but instead discloses the effect of this asset ceiling in the notes. The components of defined benefit cost are service cost, net interest on the net defined benefit asset (liability) and remeasurements of the net defined benefit asset (liability). Service cost is a component of personnel costs and comprises current service cost, past service cost (including gains and losses from plan amendments) and gains and losses from plan settlements. Net interest is determined by multiplying the net defined benefit liability or asset by a discount rate at the beginning of the reporting period. Net interest is included in the financial result. Actuarial gains and losses result from changes in actuarial assumptions and differences between actuarial assumptions and actual outcomes. Actuarial gains and losses resulting from remeasuring the defined benefit plans are recognised immediately in comprehensive income as remeasurements of the net defined benefit liability or asset. This includes any differences in the return on plan assets (excluding interest, based on the discount rate) and, if applicable, the impact of a change in the asset ceiling. Remeasurements of the net defined benefit liability or asset are not reclassified through profit or loss at any point in time. Galenica rewards employees for long service with jubilee benefits. These long-term benefits to employees are also measured using the projected unit credit method and included in employee benefit liabilities. These obligations are unfunded. Changes in obligations are recorded as personnel costs and interest expense as part of the financial expense, in line with the defined benefit plans.

Treasury shares

When shares in Galenica Ltd. are acquired, they are deducted from shareholders’ equity. Gains and losses from buying and selling treasury shares in Galenica Ltd. are recognised directly in shareholders’ equity.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 117

Share-based payments

Galenica has a number of equity-settled share-based payment plans. The share-based payments are measured at fair value on the grant date. When measuring these transactions, only those conditions which are linked to the price of Galenica’s shares (market conditions) are taken into account, along with any non-vesting conditions. Galenica’s best estimate of the number of Galenica shares expected to vest. Expense adjustments due to changes in expectations regarding the number of Galenica shares to be purchased are recognised in personnel costs for the relevant reporting period. The expense is recognised over the vesting period as part of personnel expense and an increase in shareholders’ equity for the best estimate of the number of shares Galenica expects to vest. Adjustments to these expectations are immediately recognised. If the arrangements are modified during the life of an equity-settled share-based payment plan, any incremental fair value is recognised over the remaining vesting period. If the plan is cancelled, the rights are assumed to be exercised on the date of cancellation and the expense is recognised immediately. If the cancelled plan is replaced by a new share-based payment plan identified as a replacement award, the expense is recognised in the same way as for modifications. The dilutive effect of the share-based payments is taken into account in the calculation of the diluted earnings per share.

Net sales

Net sales, consisting of the revenue from sale of goods and revenue from services, are sales after deduction of price discounts, cash discounts, volume discounts and other discounts as well as taxes linked directly to sales.

Sale of goods The sale of all products from Galenica’s production and trading companies is recognised as sale of goods. The sale of products is recognised in revenue upon transfer of the principal risks and rewards to the customer once it is probable that future economic benefits will flow to the company and these benefits can be measured reliably. In the retail trade, the transfer of principal risks and rewards occurs with the transfer of ownership to the customer or the legal transfer of ownership in accordance with generally accepted trading practice. Should significant risks remain with Galenica following the sale of products, the transaction is not considered a sale and revenue is not recognised. Price discounts, cash discounts, volume discounts and other discounts granted to customers are recognised in revenue as sales discounts. For receivables pending on the reporting date, these discounts are estimated on the basis of past experience, historical developments or contractual provisions, deducted from revenues and reported in the statement of financial position as accrued expenses or a reduction in trade receivables. Revenue from customer loyalty programmes is deferred and recognised when the award credits are redeemed on the basis of past experience.

Services Revenue from services includes logistics services, the processing and sale of information, marketing and IT services as well as other contractually agreed services. In order for revenue from services to be recognised, it must be possible to reliably estimate the stage of completion, the amount of revenue, the probability of the inflow of economic benefit and any further costs to completion. The logistics services provided are dependent on volume, while the marketing and IT services are contract-based and measured in accordance with the stage of completion. Access to information made available electronically is calculated in terms of volume or on the basis of subscribers. Price discounts and cash discounts granted to customers are recognised in revenue. In order to determine the stage of completion, experience involving the same or similar services is used as a reference.

Galenica financial statements 2015 118 Notes to the consolidated financial statements of the Galenica Group

Other income

Royalties, milestone and upfront payments Royalties (licence fee income) are recognised in accordance with the provisions of the underlying contract when an inflow of economic resources is probable and the amount of revenue can be measured reliably. The revenue is disclosed separately under other income. In accordance with the conditions of an agreement with Roche, Galenica receives royalties which, after taking account of an agreed basic sum, correspond to half of the net sales for non-transplant indications of CellCept, developed by Roche. Roche and Galenica have developed a sales tracking method to assess net sales of CellCept and to determine the portion attributable to sales from use in non-transplant indications. Therefore Roche and Galenica have defined a fixed percentage of total sales of CellCept as a means to determine the portion attributable to sales from use in non-transplant indications. Certain Group companies receive milestone and upfront payments from third parties for the sale or granting of licence rights to products and technologies. Milestone payments are recognised in profit and loss according to the achievement of the targets defined in the agreements. Upfront payments for which services have yet to be provided are deferred and included in other income, spread over the duration of the development collaboration or production.

Other income Gains on disposal of property, plant and equipment are recognised at the time of the transfer of ownership and the related transfer of risks and rewards. Allocated marketing costs and expenses covered by cost-sharing arrangements are recognised as income on the basis of the contractual agreements. Rental income is based on the provisions of the underlying rental contracts.

Financial income

Interest and dividends Interest is recognised using the effective interest rate method. Unpaid interest is recognised on the reporting date as accrued income. Interest is recognised as financial income. Dividends are profit distributions to Galenica as the holder of equity investments and are recognised when the legal claim to payment arises. Dividends are recognised in securities and other financial income.

Cost of goods and materials

Cost of goods and materials mainly include costs of goods and merchandise from the business sectors Retail and Services as well as costs of materials used for the production of pharmaceutical products, including procure- ment, transport and packaging costs. Price discounts, rebates or supplier discounts on the purchase of goods and materials are directly deducted from costs of goods and materials.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 119

3. Financial risk management

Galenica is exposed to various financial risks caused by movements in exchange rates and interest rates, by receivables and by liquidity requirements. These risks are managed by the Group Finance Division in line with the hedging policy approved by the Board of Directors as well as internal guidelines on cash and liability management. In order to optimise financial resources, all cash that is surplus to operating requirements and the Group’s long-term financing requirements is managed centrally. In this way, Galenica ensures that it has cost-effective access to capital and that its liquidity situation reflects its liquidity requirements. It is Galenica’s policy not to enter into any speculative financial arrangements and to ensure matching maturities. Together, the risk management and monitoring measures described below are designed to limit negative impact on the financial statements.

Liquidity risk management The aim of liquidity risk management is to provide sufficient cash to meet the Group’s financial liabilities on time while maintaining the flexibility to take advantage of market opportunities and optimum investment conditions. The Group Finance Division is responsible for raising short-term and long-term loans as well as for decisions on investments. Apart from financing operations, Galenica’s credit standing enables it to borrow cash at an advan- tageous rate. To ensure that Galenica can meet its payment obligations in good time, liquidity is monitored centrally. The Treasury department monitors the cash flows using rolling liquidity planning. This takes into account the maturities of the financial instruments as well as the cash flows from operating activities.

Credit risk management Credit risks arise when a customer or a third party fails to meet its contractual obligations and causes Galenica a financial loss. Credit risks are minimised and monitored by restricting business relations to known, reliable partners. Corporate policy ensures that credit checks are performed for customers who are supplied on credit. Trade receivables are subject to active risk management procedures. They are continually monitored and credit risks are reviewed in the process of reporting to management. Necessary allowances are made for foreseeable losses in accordance with uniform Galenica guidelines on the measurement of outstanding receivables. In addition, credit risks arise in relation to financial assets, comprising cash and cash equivalents, securities, loans and certain derivative financial instruments. The creditworthiness of the counterparties is regularly monitored and reported to management.

Market risk management Market risks are potential losses that Galenica could incur as a result of changes in the variable market conditions. These variables include things such as interest rates, foreign exchange rates and share prices. Changes in the fair value of financial assets, financial liabilities or derivative financial instruments caused by such variables may affect Galenica’s financial position and results. The market risks are monitored and regularly reported to management. The impact of changes in market variables is monitored using sensitivity analyses. Sensitivity analysis is a widespread and accepted analysis to quantify the risk in relation to an isolated change in a variable.

Interest rate risk Interest rate risks arise from changes in interest rates that may have a negative impact on Galenica’s financial position and results. Fluctuations in interest rates lead to changes in interest income and interest expense on floating-rate assets and liabilities and thus affect the financial result. In addition fluctuations in interest rates may affect the fair value of certain financial assets, financial liabilities and derivatives, as explained under market risks. Interest rates are managed centrally in order to limit the effects of interest rate fluctuations on the financial result. Interest rate risks are managed through a balanced mix of fixed-rate and floating-rate financial assets and financial liabilities. Galenica also uses interest rate swaps for that purpose.

Galenica financial statements 2015 120 Notes to the consolidated financial statements of the Galenica Group

Currency risk Galenica is exposed to foreign exchange rate risks, mainly in relation to the USD and EUR, that may affect Galenica’s financial position and results in CHF. Derivatives, especially currency forwards and currency swaps are used to hedge the risk of fluctuation in exchange rates. Galenica is further exposed to currency transaction risk. This risk arises when income and expenses are incurred in a currency other than the functional currency. Foreign currency transaction risks are mostly hedged without applying hedge accounting.

Other market risk Other market risks include changes in share prices and the general economic environment. Galenica holds securities for cash management purposes. Apart from unquoted securities, securities classified as current assets primarily react to the performance of share indices on the SIX Swiss Exchange. Securities under non-current assets comprise investments in venture funds which are normally not publicly traded. Potential changes in fair value are assessed independently of the stock markets and separately for each fund based on the earnings power and prospects of the respective investment.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 121

4. Estimation uncertainty and assumptions

The preparation of the Group’s consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense, and the disclosure of contingent assets and contingent liabilities as at the reporting date. Although these estimates and assumptions are made on the basis of all available information and with the greatest of care, the actual results may differ. This applies primarily to estimates and assumptions made with regard to the items set out below.

Deferred tax assets (note 12) Deferred tax assets on tax losses carried forward are taken into account only if their future realisation is probable. Deferred tax assets are recognised based on assumptions and estimates with regard to future income and expenses relating to the corresponding taxable entity.

Goodwill and intangible assets (note 17) Goodwill and other intangible assets with an indefinite useful life or that are not yet available for use are tested for impairment at least once a year. This involves estimating the value in use of the cash-generating unit (CGU) or group of CGUs to which the goodwill is allocated. It also requires a forecast of expected future cash flows as well as the application of an appropriate discount rate to calculate the present value of these cash flows.

Intangible assets acquired for contingent consideration (note 17) The Group has entered into in-licencing agreements or similar arrangements which require Galenica to make certain milestone payments dependent on the achievement of agreed objectives or performance targets as defined in the arrangements. Such payments for rights are recognised as intangible assets when they become probable. The estimated amount corresponds to the present value of expected payments determined by considering possible scenarios. These estimates could change significantly over time and could significantly affect the carrying amount of intangible assets and related amortisation expense as well as the corresponding liability.

Provisions (note 23) When creating a provision, assumptions are made with regard to the probability, extent and timing of an outflow of resources. The actual costs may deviate from the estimated values.

Employee benefit plans and other non-current employee benefits (note 24) The costs of the employee benefit plans and other long-term employee benefits are determined using actuarial valuations. These valuations involve making assumptions about the discount rate, future salary and pension developments, mortality and the employee turnover rate. Galenica considers the discount rate and development of salaries to be key assumptions.

Galenica financial statements 2015 122 Notes to the consolidated financial statements of the Galenica Group

5. Operating segment information

The management approach is used to determine the reportable operating segments. Accordingly, external segment reporting is based on the internal organisational and management structures of Galenica and the internal financial reporting to the chief operating decision maker (CODM). The CODM of Galenica is the Board of Directors of Galenica Ltd. It defines business activities and monitors internal reporting to assess performance and allocate resources. Galenica has determined three operating segments: Vifor Pharma, Health & Beauty and Services. The operating result (EBIT) comprises all operating income generated and expenses incurred in the corresponding segments. Galenica is financed at Group level, therefore financial income and expenses as well as income tax are reported at Group level only and not allocated to the segments. The assets and liabilities include all items of the statement of financial position that can be directly or reasonably allocated to a segment.

Vifor Pharma Under the business unit Vifor Pharma, Galenica operates a fully integrated, international speciality pharmaceutical company that researches, develops and produces its own pharmaceutical products, and markets and distributes them worldwide. Vifor Pharma’s activities focus on the treatment of iron deficiency (including iron deficiency anaemia) and infectious diseases (OTX products). To ensure rapid and direct access to the various global markets, the company operates through its own subsidiaries and works together with licencing partners. Vifor Pharma leads the global market for pharmaceutical iron replacement products. Customers in more than 100 countries are supplied from Switzerland. Vifor Pharma manufactures a comprehensive range of prescription (Rx) products. Vifor Pharma also markets products manufactured by third parties. In OM Pharma, Vifor Pharma operates a biotechnology and pharmaceutical company that develops, produces and markets premium synthetic and biotech drugs (OTX) for use in immunology and the treatment of infectious diseases. Vifor Pharma runs Vifor Fresenius Medical Care Renal Pharma, a speciality pharmaceutical company founded by Galenica and Fresenius Medical Care that operates globally in the field of nephrology and develops and markets innovative, high-quality products aimed at improving the quality of life of patients suffering from chronic kidney disease (CKD). In addition, Vifor Pharma holds the global rights (excluding Japan) to develop and market CellCept, developed by Roche, for all applications involving auto-immune diseases with the exception of transplants.

Galenica Santé Under the business unit Galenica Santé, Galenica operates in Switzerland within the two segments Health & Beauty and Services.

Health & Beauty The Health & Beauty segment was created in the second half 2015 as a core element of the new Galenica Santé strategy. With the largest pharmacy network in Switzerland, Galenica Santé offers unparalleled potential for selling strong brands – own brands as well as brands from business partners. The Health & Beauty segment comprises two business sectors: The former business sector Retail as well as the newly created business sector Products & Brands. The new Products & Brands business sector is made up of the newly created Vifor Consumer Health and G-Pharma. On 1 July 2015, Vifor Consumer Health became part of Galenica Santé (previously included in the business unit Vifor Pharma), transferring a complete portfolio of consumer health products which is sold to all Swiss pharmacies and drugstores. G-Pharma, active as service provider for own brands and commercial products, launches and distributes pharmaceutical and parapharmaceutical products and offers marketing and sales services. G-Pharma offers its range of products and services to all partners of the healthcare market.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 123

The Retail business sector operates at 491 locations Galenica’s pharmacy network – the largest in Switzerland. With 318 pharmacies of its own and 173 partner pharmacies, Retail has attractive outlets throughout the country. Galenica’s own pharmacies comprise the Amavita brand with 146 branches and the Sun Store brand with 102 branches. Galenica also operates a chain of 64 own pharmacies in partnership with Coop under the Coop Vitality brand. Galenica’s pharmacy network also covers the speciality pharmacy MediService, which is focused on medication for the treatment of patients in their own homes, as well as 12 Amavita partner pharmacies, 4 majority interests in pharmacies, 2 minority interests in pharmacies and 161 Winconcept partner phar macies.

Services The Services segment was created in September 2015 as part of the reorganisation of Galenica Santé, incorporating the former Logistics and HealthCare Information (HCI) business sectors. The companies of the Services business sector play an important role in the pharmaceutical supply chain. Services offers pharmaceutical and healthcare companies a broad range of specialised pre-wholesale services, from storage and distribution of products in Switzerland to debt collection. As a pharmaceutical wholesaler, Services ensures on-schedule delivery within short deadlines to pharmacies, physicians, drugstores, care homes and hospitals throughout Switzerland. The companies of the Services business sector offer solutions for the healthcare market. They operate comprehensive databases that provide additional knowledge for all service providers in the Swiss healthcare market and develop management solutions tailored specifically to the needs of the healthcare market. Services is the leading provider of master data systems for Switzerland’s entire healthcare market and publishes printed and electronic technical information on pharmaceutical products as well as complete management solutions for pharmacies and physicians.

Corporate The activities included within Corporate mainly comprise the Group’s central operations, which include Group Management, Controlling, Accounting, Tax, Treasury, Insurance, Human Resources, Legal Services, Corporate Services, General Secretariat, Corporate Communications and Investor Relations.

Eliminations Operating activities involve the sales of goods and services between the business units and business sectors. Corporate charges management fees to the other business units and operating segments for the organisational and financial management services that it provides. All intercompany services are charged at arm’s length. Sales of goods and services between the segments and resulting unrealised gains are eliminated in the “Eliminations” column. The segments’ assets and liabilities include loans and current accounts held with respect to other segments. These positions are eliminated in the column “Eliminations”.

Galenica financial statements 2015 124 Notes to the consolidated financial statements of the Galenica Group

Operating segment information 2015

The segment Health & Beauty (business unit Galenica Santé) includes the financial information of the business sector Products & Brands since 1 July 2015 as the relevant information was not yet available for prior periods.

Products and services of business units

in thousand CHF Vifor Pharma Galenica Santé Corporate Eliminations Group Net sales 967,024 2,891,318 — (66,756) 3,791,586 Other income 112,936 44,059 33,908 (37,331) 153,572 Intersegmental sales and income (67,084) (5,773) (31,230) 104,087 — Third party operating income 1,012,876 2,929,604 2,678 — 3,945,158 Depreciation and amortisation (45,415) (41,002) (182) — (86,599) Earnings before interest and taxes (EBIT) 333,000 125,225 2,874 (10,341) 450,758 Interest income 1,698 Interest expense (21,149) Other financial result (net) (5,786) Income from associates and joint ventures — 3,457 —— 3,457 Earnings before taxes (EBT) 428,978 Income tax (58,975) Net profit 370,003

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

Investments in property, plant and equipment and investment properties 30,675 37,835 52 — 68,562 Investments in intangible assets 294,005 5,965 35 — 300,005

Employees as at 31 December (FTE) 1,752 4,628 41 — 6,421 1) Of which elimination of intercompany positions CHF –1,946.6 million and other unallocated amounts CHF 20.2 million 2) Of which elimination of intercompany positions CHF –1,946.6 million and other unallocated amounts CHF 100.2 million

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 125

Products and services of Galenica Santé segments in thousand CHF Health & Beauty Services Eliminations Galenica Santé Net sales 1,396,675 2,224,596 (729,953) 2,891,318 Other income 81,908 13,666 (51,515) 44,059 Intersegmental sales and income (103,173) (679,454) 782,627 — Sales and income from other business units (1,675) (4,098) — (5,773) Third party operating income 1,373,735 1,554,710 1,159 2,929,604 Depreciation and amortisation (23,184) (19,273) 1,455 (41,002) Earnings before interest and taxes (EBIT) 84,514 37,094 3,617 125,225 Income from associates and joint ventures 3,457 — — 3,457

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

Investments in property, plant and equipment and investment properties 14,404 23,854 (423) 37,835 Investments in intangible assets 3,263 3,067 (365) 5,965

Employees as at 31 December (FTE) 3,452 1,176 — 4,628 1) Of which elimination of intercompany positions CHF –50.2 million and other unallocated amounts CHF –8.6 million 2) Of which elimination of intercompany positions CHF –50.2 million and other unallocated amounts CHF –1.8 million

Geographic areas in thousand CHF Switzerland Europe America Other countries Group Net sales 2,985,600 292,923 414,998 98,065 3,791,586 Other income 133,610 7,025 1,037 11,900 153,572 Third party operating income 3,119,210 299,948 416,035 109,965 3,945,158

Non-current assets1) 1,822,956 114,155 189,902 63 2,127,076 1) Without financial assets, deferred tax assets and employee benefit assets

Galenica financial statements 2015 126 Notes to the consolidated financial statements of the Galenica Group

Operating segment information 2014

The operating segment information 2014 has been restated to the changed management structure and the internal financial reporting to the chief operating decision maker (CODM).

Products and services of business units

in thousand CHF Vifor Pharma Galenica Santé Corporate Eliminations Group Net sales 706,200 2,781,885 — (71,830) 3,416,255 Other income 205,947 45,939 32,452 (29,671) 254,667 Intersegmental sales and income (68,546) (6,320) (26,635) 101,501 — Third party operating income 843,601 2,821,504 5,817 — 3,670,922 Depreciation and amortisation (35,995) (40,463) (169) — (76,627) Earnings before interest and taxes (EBIT) 264,988 102,859 5,019 (2,681) 370,185 Interest income 1,889 Interest expense (24,591) Other financial result (net) 6,001 Income from associates and joint ventures — 3,789 —— 3,789 Earnings before taxes (EBT) 357,273 Income tax (45,286) Net profit 311,987

Assets 1,551,043 1,629,856 1,779,551 (1,752,138)1) 3,208,312 Investments in associates and joint ventures — 44,431 —— 44,431 Liabilities 816,646 1,384,807 951,637 (1,695,272)2) 1,457,818

Investments in property, plant and equipment and investment properties 25,479 34,488 —— 59,967 Investments in intangible assets 3,786 6,230 41 — 10,057

Employees as at 31 December (FTE) 1,867 4,442 39 — 6,348 1) Of which elimination of intercompany positions CHF –1,776.6 million and other unallocated amounts CHF 24.5 million 2) Of which elimination of intercompany positions CHF –1,776.6 million and other unallocated amounts CHF 81.3 million

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 127

Products and services of Galenica Santé segments in thousand CHF Health & Beauty Services Eliminations Galenica Santé Net sales 1,297,133 2,151,636 (666,884) 2,781,885 Other income 81,541 12,537 (48,139) 45,939 Intersegmental sales and income (79,045) (636,749) 715,794 — Sales and income from other business units (1,840) (4,480) — (6,320) Third party operating income 1,297,789 1,522,944 771 2,821,504 Depreciation and amortisation (23,450) (18,778) 1,765 (40,463) Earnings before interest and taxes (EBIT) 66,609 34,859 1,391 102,859 Income from associates and joint ventures 3,789 — — 3,789

Assets 980,974 708,801 (59,919)1) 1,629,856 Investments in associates and joint ventures 44,431 — — 44,431 Liabilities 1,033,443 403,961 (52,597)2) 1,384,807

Investments in property, plant and equipment and investment properties 17,185 17,404 (101) 34,488 Investments in intangible assets 3,363 3,303 (436) 6,230

Employees as at 31 December (FTE) 3,290 1,152 — 4,442 1) Of which elimination of intercompany positions CHF –50.6 million and other unallocated amounts CHF –9.3 million 2) Of which elimination of intercompany positions CHF –50.6 million and other unallocated amounts CHF –2.0 million

Geographic areas in thousand CHF Switzerland Europe America Other countries Group Net sales 2,892,411 297,099 157,749 68,996 3,416,255 Other income 153,542 96,886 895 3,344 254,667 Third party operating income 3,045,953 393,985 158,644 72,340 3,670,922

Non-current assets1) 1,464,755 127,297 214,482 115 1,806,649 1) Without financial assets, deferred tax assets and employee benefit assets

Galenica financial statements 2015 128 Notes to the consolidated financial statements of the Galenica Group

6. Business combinations

In 2015 and 2014 the scope of consolidation has changed as a result of the following transactions:

Business combinations 2015

Vifor Pharma business unit Vifor Fresenius Medical Care Renal Pharma: Expansion of product portfolio and establishment of a marketing and sales organisation in Europe. On 31 July 2015 Vifor Fresenius Medical Care Renal Pharma acquired 100 % of the interests in the German company Fresenius Medical Care Nephrologica Deutschland GmbH (FMC Nephrologica) and the net assets and employees of several marketing and sales companies in Europe (asset deals). With this acquisition Vifor Fresenius Medical Renal Pharma expands its product portfolio with the phosphate binders Osvaren® and Phosphosorb® and substantially develops its sales and marketing organisation for nephrology medicines in Europe. The overall purchase consideration amounting to EUR 65.3 million (CHF 67.9 million) includes a cash payment of EUR 29.1 million (CHF 30.2 million), a deferred purchase consideration of EUR 23.6 million (CHF 24.6 million) and contingent consideration of EUR 12.6 million (CHF 13.1 million) which falls due in the years 2016 to 2024 if certain earning targets are achieved. The fair value of net assets amounts to EUR 48.4 million (CHF 50.4 million) on the acquisition date and consisted of cash of EUR 0.1 million (CHF 0.2 million), inventories and other current assets of EUR 0.2 million (CHF 0.2 million), fixed assets of EUR 54.6 million (CHF 56.7 million) and liabilities of EUR 6.5 million (CHF 6.7 million). The goodwill of EUR 16.9 million (CHF 17.5 million) has been allocated to the Vifor Pharma business unit and corresponds to the added value based on the acquirer-specific synergies expected to arise from the acquisition, the growth in market share and the workforce. Transaction costs of EUR 0.4 million (CHF 0.4 million) were recognised in other operating costs.

Galenica Santé business unit Health & Beauty segment Acquisition of pharmacies. GaleniCare Holding acquired 100 % of the interests in pharmacies at various locations in Switzerland. Upon acquisition, most of these pharmacies were merged with GaleniCare Ltd. The purchase consideration amounting to CHF 8.2 million, of which CHF 5.6 million was settled in cash. CHF 2.6 million was offset against loans receivable. The goodwill of CHF 2.3 million was allocated to the business sector Retail and corresponds to the added value of the pharmacies based on their locations. Transaction costs of CHF 0.06 million were recognised in other operating costs.

Services segment Acquisition of i-medify AG. On 29 December 2015 Galenica acquired 100 % of the shares in the Swiss company i-medify AG. i-medify AG is specialised in development, production, distribution and service support in the field of information technology. The purchase consideration amounting to CHF 1.5 million, of which CHF 1.0 million was settled in cash. CHF 0.5 million was offset against loans receivable. The goodwill of CHF 0.4 million was allocated to the business sector Services. Transaction costs were insignificant.

Pro forma figures for acquisitions made in 2015 for the full 2015 financial year Since their inclusion in the Galenica Group’s scope of consolidation, the businesses acquired contributed net sales of approximately CHF 9.1 million and a negative operating profit (EBIT) of CHF 0.7 million to the Group’s results. If these acquisitions had already been concluded by 1 January 2015, they would have contributed additional consolidated net sales of CHF 7.9 million and decreased the consolidated operating profit (EBIT) by CHF 1.5 million (unaudited).

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 129

Business combinations 2014

Galenica Santé business unit Health & Beauty segment Acquisition of pharmacies. GaleniCare Holding acquired 100 % of the interests in pharmacies at various locations in Switzerland. Upon acquisition, all these pharmacies were merged with GaleniCare Ltd. The purchase consideration of CHF 7.3 million was fully settled in cash. The goodwill of CHF 5.5 million was allocated to the business sector Retail and corresponds to the added value of the pharmacies based on their locations. Transaction costs of CHF 0.03 million were recognised in other operating costs.

Services segment Acquisition of business activities of Brunner Pharma AG. On 1 October 2014 Galexis acquired several business activities from Brunner Pharma AG (asset deal), a Swiss company specialised in trading of pharmaceutical products. The marketing and sales organisation and associated assets were integrated in Galexis. The purchase consideration amounted to CHF 15.0 million, of which CHF 6.0 million was settled in cash. The deferred purchase consideration of CHF 9.0 million, of which CHF 5.0 million was paid in 2015 and CHF 4.0 million will be paid in 2016. The fair value of net assets amounted to CHF 0.5 million on the acquisition date. The goodwill of CHF 14.5 million has been allocated to the business sector Logistics. Transaction costs were insignificant.

Business combinations 2015 2014 FMC Total Total in thousand CHF Nephrologica Others Fair value Fair value Cash 153 1,214 1,367 371 Trade receivables — 1,503 1,503 1,222 Inventories 6 1,895 1,901 757 Other current assets 226 343 569 2 Property, plant and equipment 227 2,531 2,758 538 Intangible assets 56,515 530 57,045 — Financial assets — 29 29 25 Deferred tax assets — 378 378 36 Trade payables (35) — (35) — Deferred tax liabilities (6,205) (95) (6,300) (41) Other current and non-current liabilities (515) (1,363) (1,878) (604) Fair value of net assets 50,372 6,965 57,337 2,306 Goodwill 17,548 2,713 20,261 19,986 Purchase consideration 67,920 9,678 77,598 22,292 Cash acquired (153) (1,214) (1,367) (371) Offset against loans receivables — (3,090) (3,090) — Deferred consideration (24,570) — (24,570) (9,020) Contingent consideration (13,104) — (13,104) — Net cash flow from current business combinations 30,093 5,374 35,467 12,901 Payment of consideration due to previous business combinations 7,192 1,391 Net cash flow 42,659 14,292

Galenica financial statements 2015 130 Notes to the consolidated financial statements of the Galenica Group

Disposal of subsidiaries 2015

On 30 November 2015 Vifor Pharma UK sold its business unit Potters to Soho Flordis International. Potters has a broad range of well-established products, including brands like Red Kooga®, Seatone®, Calcia™ as well as Equazen™, one of the world’s leading fish-oil-containing health products. The consideration amounting to CHF 9.2 million was settled in cash. The carrying amount of the disposed net assets amounted to CHF 8.9 million including cash and cash equivalents of CHF 1.0 million. The net gain from this transaction of CHF 0.3 million has been recognised as other income.

7. Net sales

in thousand CHF 2015 2014 Sale of goods 3,676,198 3,306,220 Services 115,388 110,035 Net sales 3,791,586 3,416,255

8. Other income

in thousand CHF 2015 2014 Royalties, milestone and upfront payments 100,732 190,777 Changes in inventories of semi-finished and finished goods 40 4,718 Income from own work capitalised 3,315 2,907 Rental income 4,699 4,815 Gain on disposal of property, plant and equipment, investment properties and intangible assets 258 4,622 Gain on disposal of subsidiaries 273 — Other operating income 44,255 46,828 Other income 153,572 254,667

Royalties, milestone and upfront payments comprises income from sales of CellCept of CHF 88.5 million (previous year: CHF 91.8 million). In 2015, lower income was generated from collaboration agreements than in prior periods. Other operating income primarily consists of marketing costs and other expenses charged to customers.

9. Personnel costs

in thousand CHF 2015 2014 Salaries and wages 517,337 504,321 Social security costs and pension expenses 87,040 80,364 Other personnel costs 54,777 54,609 Personnel costs 659,154 639,294

Average number of FTE 6,395 6,343

Personnel costs include expenses for defined benefit plans of CHF 42.7 million (previous year: CHF 37.4 million) and for share-based payments of CHF 16.9 million (previous year: CHF 12.5 million) (see note 24 and note 29).

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 131

10. Other operating costs in thousand CHF 2015 2014 Maintenance and repairs 32,910 27,456 Operating and production costs 93,860 91,657 Rental and other lease expense 61,848 62,219 Administration costs 70,877 72,219 Marketing and sales costs 148,817 140,521 Loss on disposals of property, plant and equipment 307 172 Non-income taxes 3,826 3,571 Other operating costs 2,636 1,631 Other operating costs 415,081 399,446

11. Financial result in thousand CHF 2015 2014 Interest income 1,698 1,889 Securities and other financial income 8,848 4,046 Net foreign exchange differences — 5,381 Financial income 10,546 11,316

Interest expense 21,149 24,591 Net interest expense from employee benefit plans 661 403 Other financial costs 2,014 3,023 Net foreign exchange differences 11,959 — Financial expenses 35,783 28,017

The net interest expense of CHF 19.5 million (previous year: CHF 22.7 million) was mainly attributable to financing costs from the acquisitions in the previous years. It was positively influenced by further repayments of financial liabilities. Net foreign exchange differences are mainly influenced by the development of the EUR as a consequence of the discontinuation of the minimum exchange rate CHF/EUR by the Swiss National Bank on January 2015.

Galenica financial statements 2015 132 Notes to the consolidated financial statements of the Galenica Group

12. Income tax

in thousand CHF 2015 2014 Current income tax 56,107 39,843 Income tax of previous years 912 689 Deferred income tax 1,956 4,754 Income tax 58,975 45,286

Tax reconciliation

in thousand CHF 2015 2014 Earnings before taxes (EBT) 428,978 357,273 Weighted income tax rate in % 17.0 % 16.9 % Expected income tax 72,835 60,473 Effects of income that is taxable at a lower tax rate or tax-free (11,838) (8,660) Effects of changes in tax rates (901) (629) Effects of unrecognised losses in the current year 23 89 Realisation of unrecognised tax losses of previous years (1,056) (1,311) Subsequent recognition of loss carry forwards from previous years — (7) Items from previous years and other items (88) (4,669) Effective income tax 58,975 45,286 Effective income tax rate in % of EBT 13.7 % 12.7 %

As Galenica predominantly operates in Switzerland and the Vifor Pharma business unit has international operations, the income tax paid depends on a number of different tax laws. The weighted income tax rate reflects the weighted average of the tax rates across the Swiss cantons and other countries in which Galenica is active. The composition of Galenica’s taxable income and changes in local tax rates cause the tax rate to vary from year to year.

Deferred taxes

in thousand CHF 2015 2014 Deferred tax due to temporary differences – Current assets 20,485 18,605 – Property, plant and equipment 10,372 11,279 – Intangible assets 42,638 38,827 – Investments 21,224 21,496 – Provisions 252 480 – Employee benefit plans (22,115) (15,126) – Other temporary differences 641 (1,102) – Shareholders’ equity (2,407) (1,045) Deferred tax due to temporary differences 71,090 73,414 Tax loss carry forwards (10,903) (14,818) Net deferred tax 60,187 58,596

Recognised as deferred tax assets in the statement of financial position 26,233 22,019 – of which due to recognised tax loss carry forwards 1,656 1,474 – of which due to temporary differences 24,577 20,545 Recognised as deferred tax liabilities in the statement of financial position 86,420 80,615

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 133

Analysis of deferred taxes (net) in thousand CHF 2015 2014 1 January 58,596 56,728 Recognised in income tax in profit or loss – Addition/(reversal) of temporary differences (1,163) (75) – Fiscal realisation of recognised tax loss carry forwards 4,079 5,573 – Tax loss carry forwards taken into account for the first time or no longer taken into account (59) (115) – Effects of changes in tax rates (901) (629) Recognised in other comprehensive income (4,717) (2,956) Recognised in shareholders’ equity (related to share-based payments) (1,305) 1 Addition to scope of consolidation 5,922 5 Disposal from scope of consolidation (561) — Translation differences 296 64 31 December 60,187 58,596

Temporary differences on which no deferred taxes have been recognised in thousand CHF 2015 2014 Investments in subsidiaries 1,429,142 1,502,231

Unrecognised tax assets Deferred tax assets, including tax loss carry forwards and expected tax credits, are only taken into account if it is probable that future profits will be available against which the assets mentioned can be applied for tax purposes.

Tax loss carry forwards and tax credits 2015 2014 Tax loss carry Tax loss carry forwards/ forwards/ in thousand CHF tax credits Tax effect tax credits Tax effect Tax loss carry forwards and tax credits 68,653 14,111 94,676 20,251 Of which tax loss carry forwards and tax credits taken into account under deferred tax assets (7,302) (1,656) (6,185) (1,474) Of which tax loss carry forwards and tax credits taken into account under deferred tax liabilities (42,437) (9,247) (61,319) (13,344) Tax loss carry forwards and tax credits not recognised 18,914 3,208 27,172 5,433 Of which expire: – within 1 year 1,410 286 3,587 771 – in 2 to 5 years 6,460 619 5,355 378 – in more than 5 years 11,044 2,303 18,230 4,284

Galenica financial statements 2015 134 Notes to the consolidated financial statements of the Galenica Group

13. Earnings per share

Basic earnings per share are arrived at by dividing net profit by the weighted average number of shares outstanding during the reporting period in question, minus the average number of treasury shares held by Galenica. When calculating diluted earnings per share, the weighted average number of outstanding shares during the reporting period is adjusted assuming conversion of all potentially dilutive effects that would occur if Galenica’s obligations were converted. 2015 2014 Number of shares 6,500,000 6,500,000 Average number of treasury shares (20,738) (22,406) Average number of outstanding shares 6,479,262 6,477,594 Share-based payments 11,341 10,424 Theoretical average number of outstanding shares (diluted) 6,490,603 6,488,018

in thousand CHF 2015 2014 Net profit – attributable to shareholders of Galenica Ltd. 301,060 284,452 Earnings per share 46.47 43.91 Diluted earnings per share 46.38 43.84

14. Receivables

in thousand CHF 2015 2014 Trade receivables 551,512 513,045 Other receivables 37,048 126,282 Bad debt allowances (7,388) (5,842) Receivables 581,172 633,485

Change in bad debt allowances for trade receivables

in thousand CHF 2015 2014 1 January (5,842) (4,625) Addition (2,301) (1,765) Use 74 103 Reversal 607 439 Disposal from scope of consolidation 12 — Translation differences 62 6 31 December (7,388) (5,842)

Goods and services supplied by pharmacies for receivables covered by health insurance companies are invoiced through an invoicing and collection office. Receivables from the invoicing and collection office are derecognised only when the invoicing and collection office has been paid and there is no longer a risk of loss for Galenica. At the reporting date, the respective trade receivables amounted to CHF 51.2 million (previous year: CHF 62.1 million). The maximum risk of loss amounted to CHF 73.1 million (previous year: CHF 88.8 million).

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 135

15. Inventories

Raw material Semi-finished and in thousand CHF and merchandise finished goods Total Gross carrying amounts as at 31.12.2013 305,008 71,017 376,025 Addition to scope of consolidation 757 — 757 Change in stock 17,816 3,570 21,386 Translation differences (60) 3 (57) Gross carrying amounts as at 31.12.2014 323,521 74,590 398,111 Addition to scope of consolidation 1,901 — 1,901 Disposal from scope of consolidation (2,668) (978) (3,646) Change in stock 9,557 3,616 13,173 Translation differences (1,027) (145) (1,172) Gross carrying amounts as at 31.12.2015 331,284 77,083 408,367

Adjustments as at 31.12.2013 (16,848) (6,029) (22,877) Addition (1,850) (2,256) (4,106) Use 1,351 3,335 4,686 Translation differences 5 (2) 3 Adjustments as at 31.12.2014 (17,342) (4,952) (22,294) Addition (1,410) (5,706) (7,116) Use 2,355 2,154 4,509 Disposal from scope of consolidation 190 43 233 Translation differences 93 15 108 Adjustments as at 31.12.2015 (16,114) (8,446) (24,560)

Net carrying amounts as at 31.12.2014 306,179 69,638 375,817 Net carrying amounts as at 31.12.2015 315,170 68,637 383,807

Galenica financial statements 2015 136 Notes to the consolidated financial statements of the Galenica Group

16. Property, plant and equipment and investment properties

Real estate used for Other Total commercial Assets under property, plant property, plant Investment in thousand CHF operations construction and equipment and equipment properties Net carrying amounts as at 31.12.2013 257,004 964 183,463 441,431 37,536 Investments 18,917 8,346 31,822 59,085 882 Disposals (2,397) — (727) (3,124) (1,419) Reclassifications 99 (72) (10) 17 (17) Depreciation (18,861) — (38,070) (56,931) (1,297) Addition to scope of consolidation 57 — 481 538 — Translation differences 66 (1) 10 75 — Net carrying amounts as at 31.12.2014 254,885 9,237 176,969 441,091 35,685 Investments 15,362 14,412 38,443 68,217 345 Disposals (64) — (1,028) (1,092) — Reclassifications 2,199 (7,532) 5,333 — — Depreciation (19,021) — (38,690) (57,711) (1,308) Addition to scope of consolidation 1,568 — 1,190 2,758 — Disposal from scope of consolidation (1,903) — (568) (2,471) — Translation differences (313) 5 (282) (590) — Net carrying amounts as at 31.12.2015 252,713 16,122 181,367 450,202 34,722

of which finance lease as at 31.12.2014 (net) 1,002 — — 1,002 — of which finance lease as at 31.12.2015 (net) — — 3 3 —

Overview as at 31.12.2014 Cost 396,877 9,237 473,570 879,684 50,775 Accumulated depreciation and impairment (141,992) — (296,601) (438,593) (15,090) Net carrying amounts as at 31.12.2014 254,885 9,237 176,969 441,091 35,685

Overview as at 31.12.2015 Cost 409,562 16,122 500,538 926,222 51,121 Accumulated depreciation and impairment (156,849) — (319,171) (476,020) (16,399) Net carrying amounts as at 31.12.2015 252,713 16,122 181,367 450,202 34,722

Other property, plant and equipment recognised in the statement of financial position are manufacturing systems, warehouse equipment, furniture, fittings, IT equipment and vehicles. Assets under construction are mostly related to the expansion of the logistics center of Galexis Ltd. in Nieder- bipp. Borrowing costs of CHF 0.5 million (previous year: none) were capitalised using a capitalisation rate of 3.2 %. The gain on disposals of property, plant and equipment and investment properties of CHF 0.3 million (previous year: CHF 4.6 million) is recognised in other income. Losses arising on disposals of property, plant and equipment of CHF 0.3 million (previous year: CHF 0.2 million) are presented in other operating costs.

Investment properties include non-operating real estate:

in thousand CHF 2015 2014 Fair value 41,263 49,363 Rental income 2,782 2,462 Operating costs of real estate generating rental income 477 465

Fair values of investment properties (level 3 of the fair value hierarchy) are calculated by external experts. There are no significant restrictions regarding the realisability or collectibility of rental income or sales proceeds. In addition, there are no contractual obligations to improve or maintain investment properties.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 137

17. Intangible assets Trademarks, Trademarks patents, licences, and technologies Internally technologies with with indefinite Acquired developed in thousand CHF finite useful lives useful lives software software Goodwill Total Net carrying amounts as at 31.12.2013 48,171 125,735 12,042 9,136 1,066,198 1,261,282 Investments 1,626 — 5,911 2,520 — 10,057 Disposals — — — — — — Reclassification — — 603 (603) — — Amortisation (9,451) — (5,656) (3,293) — (18,400) Addition to scope of consolidation — — — — 19,986 19,986 Translation differences 278 — 2 3 12,235 12,518 Net carrying amounts as at 31.12.2014 40,624 125,735 12,902 7,763 1,098,419 1,285,443 Investments 290,429 — 6,326 3,250 — 300,005 Disposals (353) — (3) — — (356) Reclassification — — (24) 24 — — Amortisation (18,732) — (5,460) (3,388) — (27,580) Addition to scope of consolidation 56,483 — 95 467 20,261 77,306 Disposal from scope of consolidation (2,860) — — — (899) (3,759) Translation differences (413) — (3) (3) (29,224) (29,643) Net carrying amounts as at 31.12.2015 365,178 125,735 13,833 8,113 1,088,557 1,601,416

Overview as at 31.12.2014 Cost 384,248 125,735 52,019 40,814 1,098,419 1,701,235 Accumulated amortisation and impairment (343,624) — (39,117) (33,051) — (415,792) Net carrying amounts as at 31.12.2014 40,624 125,735 12,902 7,763 1,098,419 1,285,443

Overview as at 31.12.2015 Cost 708,094 125,735 57,864 27,894 1,088,557 2,008,144 Accumulated amortisation and impairment (342,916) — (44,031) (19,781) — (406,728) Net carrying amounts as at 31.12.2015 365,178 125,735 13,833 8,113 1,088,557 1,601,416

Trademarks, patents, licences, technologies with finite useful lives In May 2015, Vifor Fresenius Medical Care Renal Pharma (VFMCRP) and Roche have entered into an exclusive licence agreement for the commercialisation of Roche’s drug Mircera® in the US and Puerto Rico by VFMCRP. Under this license agreement Roche will manufacture and supply Mircera® to VFMCRP and will receive upfront and milestone payments, supply reimburse- ments, as well as tiered royalties on Mircera® sales in the US and Puerto Rico. Under the terms of the agreement, Roche received upfront and milestone cash payments of USD 100.0 million (CHF 94.8 million). The expected upfront and milestone payments of USD 167.0 million (CHF 158.4 million) have been capitalised at present value at the signing date, whereof USD 67.0 million are expected to fall due in the years 2017 to 2020. Amortisation is charged on a straight-line basis over the expected useful life of 10 years. In August 2015, Vifor Fresenius Medical Care Renal Pharma (VFMCRP) and Relypsa, Inc. signed an exclusive agreement to commercialise the potassium binder Patiromer for Oral Suspension (Patiromer FOS), an investigational drug of Relypsa for the treatment of hyperkalaemia that occurs most frequently in chronic kidney disease and heart failure patients, in worldwide territories outside of the US and Japan. A New Drug Application (NDA) for Patiromer FOS (US brand name: Veltassa™) for the treatment of hyperkalaemia was approved by the United States Food and Drug Administration (FDA) in October 2015. VFMCRP will also collaborate with Relypsa on the ongoing development of Patiromer FOS, including submission of a Marketing Au- thorisation Application (MAA) with the European Medicines Agency (EMA). Under the terms of the agreement, Relypsa received an upfront cash payment of USD 40 million (CHF 39.3 million). The expected milestone payments of USD 115.0 million have been capitalised at present value at the signing date, whereof USD 75 million will fall due in the years 2017 to 2024. The amortisation is charged on a straight-line basis over the expected useful life of 10 years, beginning at the approval date of EMA.

Galenica financial statements 2015 138 Notes to the consolidated financial statements of the Galenica Group

Galenica is party to in-licensing and similar arrangements and intangible asset purchase agreements. These arrangements may require Galenica to make certain milestone or other similar payments dependent upon achievement of agreed objectives or performance targets as defined in the agreements. The maximum amount of unrecognised potential future commitments is USD 235 million. These amounts are undiscounted and are not risk-adjusted, meaning that they include all such potential payments that can arise assuming all projects currently in development are successful.

Trademarks and technologies with indefinite useful lives This caption includes a trademark with a carrying amount of CHF 21.6 million (previous year: CHF 21.6 million) that is well known nationally and internationally and actively advertised. This acquired trademark is regarded as having an indefinite useful life for the following reasons: it was created many years ago, it does not expire, and the products sold under the trademark have a history of strong revenue and cash flow performance. Galenica intends and has the ability to support the trademark to maintain its value for the foreseeable future. For impairment testing purposes the trademark has been allocated to the cash-generating unit Vifor Consumer Health in the Products & Brands business sector (previous year: cash-generating unit Vifor in the Vifor Pharma business unit). The caption also includes unpatented technology assets with a carrying amount of CHF 104.1 million (previous year: CHF 104.1 million) related to OM Pharma. These acquired manufacturing technologies are regarded as having indefinite useful lives because they have been in existence for many years, they are not patent-registered in order to prevent publication and as such there are no legal provisions that limit the useful lives of the technologies. The products generated using the technologies have a history of strong revenue and cash flow performance. These technology assets have been allocated to the cash-generating unit OM Pharma in the Vifor Pharma business unit for impairment testing purposes. These intangible assets with an indefinite useful life are subject to an annual impairment test or more frequently if there is an indication that they may be impaired. The recoverable amount is determined on the basis of future discounted cash flows. The weighted average cost of capital (WACC) is used to determine the applicable pre-tax discount rate. Future cash flows beyond the three-year planning period are based on the growth rates and capital cost rates before tax set out below, as approved in medium-term planning by management:

Trademark and technologies 2015 Carrying Underlying data used in thousand CHF amount Growth rate Interest rate Vifor Consumer Health 21,590 1.0 % 6.6 % OM Pharma 104,145 1.0 % 6.6 % Total 125,735

Trademark and technologies 2014 Carrying Underlying data used in thousand CHF amount Growth rate Interest rate Vifor 21,590 1.0 % 6.6 % OM Pharma 104,145 1.0 % 6.6 % Total 125,735

According to the results of impairment testing for 2015 and 2014, no impairment charges are necessary. Galenica performed a sensitivity analysis taking into account reasonable changes in the assumptions used to calculate the discounted cash flows, such as higher discount rates, lower EBITDA, lower gross margins or lower perpetual growth rates. The sensitivity analysis for 2015 and 2014 did not reveal any indicators of impairment as at the reporting date.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 139

Goodwill Goodwill is allocated to the cash-generating unit (CGU) or group of CGUs that is the principal economic beneficiary. Following the reorganisation of Galenica in 2015 Goodwill is allocated to the CGUs Vifor Pharma, Products & Brands, Retail and Services. The management monitors the Goodwill at business sector level. The allocation of the net carrying amount of the goodwill to the business sectors is summarised in the table below. Goodwill is subject to an impairment test once a year or more frequently if there are indications of impairment. The impairment tests are based on the discounted cash flow method. The WACC is used to determine the applicable pre-tax discount rate. Goodwill is evaluated on the basis of the medium-term plans for the next three years approved by the management. Cash flows beyond the planning horizon are extrapolated using a perpetual growth rate. The growth rates and capital cost rates before taxes shown below were used.

Goodwill 2015

Carrying Underlying data used in thousand CHF amount Growth rate Interest rate Vifor Pharma 505,289 1.5 % 7.1 % Products & Brands 26,175 1.0 % 6.6 % Retail 483,267 1.0 % 5.7 % Services 73,826 1.0 % 5.8 % Total 1,088,557

Goodwill 2014

Carrying Underlying data used in thousand CHF amount Growth rate Interest rate Vifor Pharma 544,040 1.4 % 7.4 % Logistics 64,669 1.0 % 5.7 % Retail 480,931 1.0 % 5.4 % HealthCare Information 8,779 1.0 % 8.0 % Total 1,098,419

Costs of research and development During the reporting period, expenses for research and development totalling CHF 88.8 million were recognised directly in other operating costs (previous year: CHF 104.2 million).

Galenica financial statements 2015 140 Notes to the consolidated financial statements of the Galenica Group

18. Investments in associates and joint ventures

Galenica has no individually material associates or joint ventures.

Associates

in thousand CHF 2015 2014 Net carrying amount as at 1 January 20,603 19,852 Income from associates 1,220 1,096 Dividends received (370) (345) Net carrying amount as at 31 December 21,453 20,603

Joint ventures

in thousand CHF 2015 2014 Net carrying amount as at 1 January 23,828 21,086 Income from joint ventures 2,237 2,693 Remeasurement of the net defined benefit liability from joint ventures (see note 24) (3,856) — Investments 1,973 49 Dividends received (4,900) — Net carrying amount as at 31 December 19,283 23,828

If one specific joint venture is overindebted, Galenica has an unlimited obligation, in proportion to its equity interest, to restructure the company. At the reporting date, this joint venture is not overindebted.

19. Financial assets

in thousand CHF 2015 2014 Loans 6,160 9,385 Derivative financial instruments 1,013 118 Other financial assets 14,133 19,456 Loans and other financial assets 21,306 28,959 Securities available for sale 43,665 37,496 Financial assets 64,971 66,455

Other financial assets in the consolidated statement of financial position include receivables from non-current agreements and rental guarantee deposits.

20. Payables

in thousand CHF 2015 2014 Trade payables 364,502 346,660 Other payables 79,800 60,033 Payables 444,302 406,693

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 141

21. Current financial liabilities in thousand CHF 2015 2014 Bank debts 9,618 13,569 Loans 64,161 1,009 Liability to pension funds 5,375 29,928 Current portion of non-current financial liabilities 64,021 14,120 Derivative financial instruments 1,717 9,371 Private placement (notes) — 39,600 Current financial liabilities 144,892 107,597

In 2015 Galenica reclassified the short-term portion of a long-term bank loan to current financial liabilities. At its maturity on 12 March 2015 Galenica redeemed CHF 39.6 million (USD 40.0 million) of the private placement notes.

22. Non-current financial liabilities in thousand CHF 2015 2014 Bank debts 100,000 150,000 Loans 472 22,752 Derivative financial instruments 24,645 24,236 Private placement (notes) 94,600 95,350 Bond 299,005 298,478 Finance leases — 1,136 Other financial liabilities 150,077 16,441 Non-current financial liabilities 668,799 608,393

Bank debts The acquisition of Sun Store in 2009 was partially financed with non-current bank loans. The remaining amount totaling CHF 150.0 million will be repaid in tranches as follows: CHF 50.0 million on 2 November 2016 (reclassified to current financial liabilities) and CHF 100.0 million on 1 July 2019.

Private placement (notes) On 12 March 2008 Galenica borrowed USD 105.0 million and GBP 20.0 million from a number of American and British insurance companies by means of a private placement of unsecured notes. The remaining amount totalling USD 65.0 million and GBP 20.0 million will be repaid on 12 March 2018. The interest rate and currency risk of the private placement was hedged. Financial covenants (debt coverage ratio and interest coverage ratio) were agreed in connection with the private placement. Failure to comply with these could trigger early repayment of the notes. Galenica complied with the covenants on the reporting date.

Galenica financial statements 2015 142 Notes to the consolidated financial statements of the Galenica Group

Bond On 5 October 2010, Galenica issued a fixed-rate bond for a nominal amount of CHF 300.0 million with an annual coupon of 2.5 % and a term of seven years, falling due on 27 October 2017. The bond is traded on the SIX Swiss Exchange under securities no. 11848005 (ISIN CH0118480059). The bond closed at 104.08 % as at 31 December 2015 (previous year: 105.77 %).

Other financial liabilities Non-current contingent and deferred consideration liabilities from business combinations as well as deferred and milestone payments for the acquisition of intangible assets have been recognised as other financial liabilities.

23. Provisions

in thousand CHF 2015 2014 Provisions as at 1 January 6,750 6,580 Addition 601 1,181 Use (727) (922) Reversal (268) (170) Addition to scope of consolidation 236 87 Disposal from scope of consolidation (110) — Translation differences (71) (6) Provisions as at 31 December 6,411 6,750

Current provisions 2,257 2,372 Non-current provisions 4,154 4,378

Provisions are recognised 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 3 to 4 years.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 143

24. Employee benefit plans

The vast majority of employees works in Switzerland and is insured at least in accordance with the legal provisions by pension funds that are financed by Galenica and the employees. The pension plans cover the risks of the economic consequences of old age, disability and death in accordance with the Swiss Federal Occupational Retire- ment, Survivors and Disability Pension Plans Act (BVG/LPP). The benefits target is 85 % of the most recent basic salary as at statutory retirement age for employees with a full insurance history of 35 years. The pension plans are structured in the legal form of a foundation. All actuarial risks are borne by the foundation and regularly assessed by the Board of Trustees based on an annual actuarial appraisal prepared in accordance with BVG/LPP. The calculations made in these appraisals do not apply the projected unit credit method required by IFRS. If the calculations made in accordance with the provisions of BGV/LPP reveal a funded status of less than 100 %, suit- able restructuring measures need to be introduced. The Board of Trustees is made up of employee and employer representatives. Galenica noticed in 2015 that the employees of a joint venture company had been erroneously included in the computation of the DBO and plan assets in prior years. Consequently, the net pension liability as of 31 December 2014 was overstated by CHF 6.8 million (resulting from an overstatement of DBO of CHF 42.7 million and related plan assets of CHF 35.9 million), the carrying amount of the joint venture by CHF 2.6 million, deferred taxe assets by CHF 1.5 million and total equity was understated by CHF 2.7 million. As the impact is not deemed material, Galenica has decided to adjust this difference prospectively in the 2015 financial statements through other comprehensive income (OCI) without restating prior year amounts. Without this effect, the remeasurement of the net pension liability recognised in OCI would amount to a loss of CHF 28.2 million (actuarial loss due to changes in financial assumptions of CHF 49.4 million, actuarial gain due to experience adjustments of CHF 2.4 million and a gain from remeasurement of plan assets of CHF 18.8 million). The share of the OCI related to joint ventures accounted for using the equity method was also corrected prospectively. As at 31 December 2014, the accumulated loss relating to joint ventures amounted to CHF 2.6 million (net of taxes). Without this effect, the share of the OCI related to joint ventures would amount to a loss of CHF 1.3 million for the year 2015 (net of taxes). The most recent actuarial valuation was prepared as at 31 December 2015. The underlying assumptions reflect the economic circumstances. The pension funds’ assets are invested in accordance with local investment guidelines. Galenica pays its contributions to the pension funds in accordance with the regulations defined by the funds. The final funded status pursuant to BVG/LPP is not available until the first quarter of the subsequent year. The projected funded status as at 31 December 2015 is 115.9 % to 120.0 % (previous year: 117.7 % to 120.8 %, final).

Galenica financial statements 2015 144 Notes to the consolidated financial statements of the Galenica Group

Defined benefit plans and long-service awards

2015 2014 Defined Long-service Defined Long-service in thousand CHF benefit plans awards1) Total benefit plans awards1) Total Plan assets at fair value 1,034,726 — 1,034,726 1,004,460 — 1,004,460 Present value of defined benefit obligation (1,120,839) (14,446) (1,135,285) (1,059,674) (13,624) (1,073,298) Surplus (deficit) (86,113) (14,446) (100,559) (55,214) (13,624) (68,838) Net carrying amount (86,113) (14,446) (100,559) (55,214) (13,624) (68,838) of which recognised in assets — — — 10,968 — 10,968 of which recognised in liabilities (86,113) (14,446) (100,559) (66,182) (13,624) (79,806) 1) The long-service awards relate to provisions for jubilee payments

Change in the present value of the defined benefit obligation

2015 2014 Defined Long-service Defined Long-service in thousand CHF benefit plan awards Total benefit plan awards Total 1 January (1,059,674) (13,624) (1,073,298) (873,712) (11,589) (885,301) Current service cost (40,965) (1,946) (42,911) (35,976) (1,864) (37,840) Net interest on the net defined benefit liability (11,703) (170) (11,873) (19,304) (282) (19,586) Actuarial gain/(loss) (47,035) (59) (47,094) (126,979) (1,209) (128,188) Employee contributions (19,524) — (19,524) (19,980) — (19,980) Benefits/awards paid 15,382 1,353 16,735 16,277 1,320 17,597 Adjustment (see page 143) 42,680 — 42,680 ——— 31 December (1,120,839) (14,446) (1,135,285) (1,059,674) (13,624) (1,073,298)

Change in fair value of plan assets

in thousand CHF 2015 2014 1 January 1,004,460 893,575 Net interest 11,212 19,935 Remeasurement gains/(losses) 18,811 54,281 Employee contributions 19,524 19,980 Employer contributions 33,224 34,250 Benefits paid (15,382) (16,277) Administration cost (1,228) (1,284) Adjustment (see page 143) (35,895) — 31 December 1,034,726 1,004,460

Net defined benefit cost

i n thousand CHF 2015 2014 Current service cost 40,965 35,976 Net interest on the net defined benefit liability 491 121 Administration cost 1,228 1,284 Defined benefit cost 42,684 37,381

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 145

Remeasurement of net defined benefit liability (asset) i n thousand CHF 2015 2014 Actuarial gain/(loss) – Changes in demographic assumptions — — – Changes in financial assumptions (49,476) (124,693) – Experience adjustments 2,441 (2,286) Remeasurement of plan assets 18,811 54,281 Effect in the change of asset ceiling — 59,262 Adjustment (see page 143) 6,785 — Remeasurements of net defined benefit liability (asset) recognised in other comprehensive income (21,439) (13,436)

Effect of the asset ceiling in thousand CHF 2015 2014 1 January — (58,510) Interest expense/(income) — (752) Change in the asset ceiling (recognised in other comprehensive income) — 59,262 31 December — —

Investment structure of plan assets in thousand CHF 2015 2014 Cash and cash equivalents 47,221 4.6 % 46,082 4.6 % Debt instruments 251,718 24.3 % 262,949 26.2 % Equity instruments 418,786 40.5 % 425,042 42.3 % Real estate 254,071 24.5 % 195,924 19.5 % Other investments 62,930 6.1 % 74,463 7.4 % Fair value of plan assets 1,034,726 100.0 % 1,004,460 100.0 % Current return on investments 3.0 % 8.3 %

The Board of Trustees is responsible for investing the plan assets. It defines the investment strategy and determines the long-term target asset structure (investment policy), taking account of the legal requirements, objectives set, the benefit obligations and the foundationsʼ risk capacity. The Board of Trustees delegates implementation of the investment policy in accordance with the investment strategy to an investment committee, which also comprises trustees from the Board of Trustees and a general manager. Plan assets are managed by external asset managers in line with the investment strategy. Cash and cash equivalents are deposited with financial institutions with a rating of A or above. Debt instruments (e. g. bonds) have a credit rating of at least BBB- and quoted prices in active markets (level 1 of the fair value hierarchy). They can also be investments in funds and direct investment funds. Equity instruments are investments in equity funds and direct investments. These generally have quoted prices in active markets (level 1 of the fair value hierarchy). Equity instruments include treasury shares of Galenica Ltd. with a fair value of CHF 8.3 million (previous year: CHF 12.0 million). Real estate relates to both residential property and offices. These can be investments in quoted real estate funds (level 1 of the fair value hierarchy) or direct investments (level 3 of the fair value hierarchy). If real estate is held directly, it is valued by an independent expert.

Galenica financial statements 2015 146 Notes to the consolidated financial statements of the Galenica Group

Other investments consist of hedge funds, insurance linked securities (ILS), mixed investments and receivables. There are receivables from Group companies amounting to CHF 5.2 million (previous year: CHF 29.9 million). Investments in hedge funds are classified as alternative investments. They are primarily used for risk management purposes. In most cases, quoted prices in an active market are not available for hedge funds investments (level 2 or level 3 of the fair value hierarchy). The use of derivative financial instruments is only permitted if sufficient liquidity or underlying investments are available. Leverage and short selling are not permitted. The pension funds manage the assets of 5,486 active members (previous year: 5,895) and 890 pensioners (previous year: 901). Galenica does not use any pension fund assets.

Basis for measurement

Weighted average in % 2015 2014 Discount rate 0.80 1.15 Salary development 1.50 1.50 Pension development 0.00 0.00 Mortality (mortality tables) BVG 2010 GT BVG 2010 GT Turnover BVG 2010 BVG 2010

Sensitivity analysis The discount rate and future salary development were identified as key actuarial assumptions. Changes in these would affect the defined benefit obligation (DBO) as follows:

2015 2014 Basis for Basis for in thousand CHF calculation DBO calculation DBO Discount rate 0.80 % 1,120,839 1.15 % 1,059,674 +0.25 % 1,079,306 +0.50 % 986,202 –0.25 % 1,165,361 –0.50 % 1,143,831 Salary development 1.50 % 1,120,839 1.50 % 1,059,674 +0.25 % 1,124,299 +0.25 % 1,062,895 –0.25 % 1,117,473 –0.25 % 1,056,534

The sensitivity analysis assumes potential changes in the above parameters as at year-end. Every change in a key actuarial assumption is analysed separately; interdependencies were not taken into account.

Maturity structure of pension obligations

in thousand CHF 2015 2014 in 1 year 29,895 30,964 in 2 years 30,715 30,324 in 3 years 31,906 31,400 in 4 years 31,786 32,113 in 5 years 31,031 31,785 in 6–10 years 222,790 219,475

The pension obligations have an average duration of 20.8 years (previous year: 20.2 years). Cash outflows for pension payments and other obligations can be budgeted reliably. The benefit plans collect regular contribution payments. Furthermore, the investment strategies safeguard liquidity at all times. The employer contributions to the pension funds are estimated at CHF 34.1 million for 2016. Further details on employee benefit plans are included in Galenica’s 2015 annual report in the chapter Human Resources on pages 94 and 95.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 147

25. Share capital and number of shares

As in the previous year, Galenica had fully paid-up share capital of CHF 650,000, divided into 6,500,000 publicly listed registered shares with a par value of CHF 0.10 each, as at the reporting date. All shares have the same capital rights with the exception of the treasury shares which do not generate any dividends. Voting rights and restrictions on voting rights are described in detail in Galenica’s 2015 annual report in the chapter Corporate Governance (unaudited). According to Art. 3a) of Galenica’s articles of incorporation, the Board of Directors may raise the share capital of CHF 650,000 by 10 %, i. e. an amount of CHF 65,000 (650,000 shares), at any time until 8 May 2016.

Total shares Treasury Outstanding Number of shares Galenica Ltd. shares shares as at 31.12.2013 6,500,000 (24,082) 6,475,918 Change — 1,684 1,684 as at 31.12.2014 6,500,000 (22,398) 6,477,602 Change — (738) (738) as at 31.12.2015 6,500,000 (23,136) 6,476,864

The treasury shares are reserved for share-based payments to employees.

26. Non-controlling interests

Vifor Fresenius Medical Care Renal Pharma is the only Group company with significant non-controlling interests. The company is registered in St. Gallen, Switzerland. Galenica owns 55 % of the share capital and voting rights, Fresenius Medical Care 45 % of the share capital and voting rights. The minority shareholder has extensive protection rights. In the event of disagreement Galenica has the casting vote within a defined escalation process. Condensed financial information of Vifor Fresenius Medical Care Renal Pharma (before elimination of intercompany trans actions): in thousand CHF 2015 2014 Current assets 196,849 139,737 Non-current assets 356,603 903 Current liabilities 198,677 28,508 Non-current liabilities 150,508 49,500 Equity before appropriation of earnings 204,267 62,632 Operating income 348,785 103,646 EBIT 177,615 72,076 Net profit 153,244 61,109 Cash flow from operating activities 156,637 55,527

There were non-controlling interests in the equity of Vifor Fresenius Medical Care Renal Pharma of CHF 91.9 million as at 31 December 2015 (previous year: CHF 28.2 million). Dividends of CHF 5.2 million were paid to non-controlling interests in 2015 (previous year: CHF 38.7 million). The non-controlling interests in the net profit of Vifor Fresenius Medical Care Renal Pharma total CHF 69.0 million in the reporting period (previous year: CHF 27.5 million).

Galenica financial statements 2015 148 Notes to the consolidated financial statements of the Galenica Group

27. Changes in consolidated shareholdersʼ equity

At the Annual General Meeting of Shareholders held on 7 May 2015 a resolution was passed to pay out a dividend of CHF 15.00 per share, constituting a total amount of CHF 97.5 million. In the previous year a resolution was passed to pay out a dividend of CHF 14.00 per share, constituting a total amount of CHF 91.0 million. In the reporting period, 20,443 treasury shares (previous year: 17,770 treasury shares) were bought at an average price of CHF 991.26 (previous year: CHF 782.28) and 19,705 treasury shares (previous year: 19,454 treasury shares) were issued as share-based payments. Additionally, forward purchases of 5,000 treasury shares at a price of CHF 593.00 are outstanding as at 31 December 2015 (previous year: 10,000 treasury shares at an average price of CHF 584.00). The forward purchases fall due in the year 2016. The expense for share-based payment transactions, allocated over the vesting period, has been recognised in personnel costs and accrued under consolidated shareholders’ equity. The acquisition of non-controlling interests reduced consolidated shareholders’ equity by CHF 2.8 million (previous year: none). The Board of Directors will submit a proposal to the Annual General Meeting of Shareholders on 28 April 2016 to pay out a dividend of CHF 117.0 million, corresponding to CHF 18.00 per registered share for the financial year 2015 (previous year: CHF 97.5 million, CHF 15.00 per registered share).

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 149

28. Financial instruments

The financial assets of Galenica include cash, securities, trade receivables, other receivables, loans and venture funds. Galenica’s financial liabilities primarily comprise advances on current bank accounts, trade payables, finance lease liabilities, loans, a bond, private placements (notes) and liabilities from deferred and contingent consideration from business combinations as well as deferred and milestone payments for the acquisition of intangible assets. 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 ac tivities. Galenica is mainly exposed to liquidity risks, credit risks, interest rate risks, currency risks and other market risks from its financial instruments.

28.1 Categories of financial instruments

All financial assets and liabilities at fair value through profit or loss are held for trading purposes or are derivative financial instruments. There are no other financial assets and liabilities designated on initial recognition as at fair value through profit or loss.

Carrying amounts of financial instruments 2015

Financial assets Financial Financial Financial at fair value assets liabilities at fair liabilities at through profit Loans and available value through amortised in thousand CHF or loss receivables for sale profit or loss cost Total Cash — 422,196 — — — 422,196 Securities 246 — — — — 246 Receivables — 581,172 — — — 581,172 Financial assets 1,013 20,293 43,665 — — 64,971 Current financial liabilities — — — 3,613 141,279 144,892 Payables — — — — 444,302 444,302 Non-current financial liabilities — — — 43,695 625,104 668,799 Total 1,259 1,023,661 43,665 47,308 1,210,685

Carrying amounts of financial instruments 2014

Financial assets Financial Financial Financial at fair value assets liabilities at fair liabilities at through profit Loans and available value through amortised in thousand CHF or loss receivables for sale profit or loss cost Total Cash — 238,526 — — — 238,526 Receivables — 633,485 — — — 633,485 Financial assets 118 28,841 37,496 — — 66,455 Current financial liabilities — — — 11,666 95,931 107,597 Payables — — — — 406,693 406,693 Non-current financial liabilities — — — 32,806 575,587 608,393 Total 118 900,852 37,496 44,472 1,078,211

Galenica financial statements 2015 150 Notes to the consolidated financial statements of the Galenica Group

Net gain/(loss) on financial instruments 2015

Financial assets Financial Financial Financial at fair value assets liabilities at fair liabilities at through profit Loans and available value through amortised in thousand CHF or loss receivables for sale profit or loss cost Total Income from securities 4 — 3,145 — — 3,149 Change in fair value 3,985 — — — — 3,985 Net gain/(loss) on foreign exchange — (11,057) — — (902) (11,959) Loss on receivables and other financial result — (696) — — (399) (1,095) Interest income — 1,606 — — — 1,606 Interest expense — — — — (21,149) (21,149) Fees recognised in profit and loss — — — — (30) (30) Interest income on impaired trade receivables — 92 — — — 92 Change in bad debt allowances — (1,621) — — — (1,621) Net gain/(loss) recognised in profit or loss 3,989 (11,676) 3,145 — (22,480) (27,022) Net gain/(loss) recognised in other comprehensive income1) — — 1,372 (465) — 907 1) Other comprehensive income includes the changes in value of hedge transactions (foreign exchange forwards and cross currency interest rate swaps) as well as venture funds

Net gain/(loss) on financial instruments 2014

Financial assets Financial Financial Financial at fair value assets liabilities at fair liabilities at through profit Loans and available value through amortised in thousand CHF or loss receivables for sale profit or loss cost Total Income from securities 4 — 2,736 — — 2,740 Change in fair value 419 — — (2,611) — (2,192) Net gain/(loss) on foreign exchange — 10,399 — — (5,018) 5,381 Loss on receivables and other financial result — 480 — — (413) 67 Interest income — 1,822 — — — 1,822 Interest expense — — — — (24,591) (24,591) Fees recognised in profit and loss — — — — (30) (30) Interest income on impaired trade receivables — 67 — — — 67 Change in bad debt allowances — (1,223) — — — (1,223) Net gain/(loss) recognised in profit or loss 423 11,545 2,736 (2,611) (30,052) (17,959) Net gain/(loss) recognised in other comprehensive income1) — — 55 (1,976) — (1,921) 1) Other comprehensive income includes the changes in value of hedge transactions (foreign exchange forwards, and cross currency interest rate swaps) as well as venture funds

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 151

Fair value The carrying amounts and fair values of financial assets and financial liabilities are set out in the table below:

Carrying amount Fair value in thousand CHF 2015 2014 2015 2014 Cash1) 422,196 238,526 — — Receivables1) 581,172 633,485 — — Securities available for sale 43,665 37,496 43,665 37,496 Loans and other financial assets1) 20,293 28,841 — — Current financial liabilities1) 143,175 98,226 — — Derivative financial instruments (net) 25,103 33,489 25,103 33,489 Payables1) 444,302 406,693 — — Non-current financial liabilities 644,154 584,157 675,762 627,223 1) The carrying amount approximates to the fair value

The securities available for sale within the financial instruments mainly consist of venture funds (level 3 of the fair value hierarchy). The venture funds are valued at net asset value. The derivatives largely consist of currency- and interest-rate swaps and are measured at fair value. The fair values of the currency- and interest-rate swaps are calculated as the present value of the estimated future cash flows (level 2 of the fair value hierarchy). The counterparties’ credit risk is considered in the valuation of these derivatives if material. Non-current financial liabilities contain contingent consideration liabilities from business combinations which are measured at fair value. The fair value of these financial instruments is measured based on the expected cash flows in due consideration of the probability of occurrence and the current market interest rates (level 3 of the fair value hierarchy). The fair value of the bond, which is included in the non-current financial liabilities, is derived from observable price quotations at the reporting date (level 1 of the fair value hierarchy). The fair values of the other non-current financial liabilities are calculated based on the expected cash flows, the current market interest rates and the counterparties’ credit risk (level 3 of the fair value hierarchy).

Fair value hierarchy Galenica measures financial instruments at fair value using the following hierarchies for determining the fair value: – Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. – Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). – Level 3: Level 3 inputs are unobservable inputs for the asset or liability. These inputs reflect the best estimates of Galenica based on criteria that market participants would use to determine prices for assets or liabilities at the reporting date.

There have been no transfers between Level 1 and Level 2 in the financial year, or any transfers into or out of Level 3.

Galenica financial statements 2015 152 Notes to the consolidated financial statements of the Galenica Group

Financial assets measured at fair value

in thousand CHF 2015 2014 Derivative financial instruments Level 2 1,259 118 Securities available for sale Level 3 41,237 35,326

Financial liabilities measured at fair value

in thousand CHF 2015 2014 Derivative financial instruments Level 2 26,362 33,607 Contingent consideration liabilities from business combinations Level 3 20,946 10,865

Fair value of securities available for sale (level 3 of the fair value hierarchy)

in thousand CHF 2015 2014 1 January 35,326 30,422 Investments 4,344 1,522 Disposals (384) (211) Gain/(loss) recognised in profit or loss — — Gain/(loss) recognised in other comprehensive income 1,372 55 Translations differences 579 3,538 31 December 41,237 35,326

Galenica invests in venture funds. These funds are structured as closed end funds, for which Galenica has undertaken a defined capital commitment. The funds call this capital commitment over the term. Galenica and the other investors are usually bound to their fund units throughout the entire term; consequently there is no active market for units in these funds, although a transaction cannot be ruled out in principle. The funds themselves are likewise usually invested in venture funds with the same attributes (fund of funds). Galenica determines the fair values for the venture funds using the net asset values. According to the venture funds, the net asset values for the funds are based on the net asset values reported to them by the respective investments; net asset values are not usually determined based on publicly available input data, or only to an insignificant extent. Galenica therefore classifies all venture funds as assets in level 3 of the fair value hierarchy. Compared to the previous year, the fair value of the venture funds has not changed significantly, nor have there been any changes in the measurement methods used since the last financial statements.

Fair value of contingent consideration liabilities (level 3 of the fair value hierarchy)

in thousand CHF 2015 2014 1 January 10,865 12,804 Arising from business combinations 13,104 — Total unrealised gains and losses included in the income statement – Unused amounts reversed (1,175) (649) – Additional amount created 630 186 Total gains and losses included in other comprehensive income – Translation differences (286) (85) Payments (cash out) (2,192) (1,391) 31 December 20,946 10,865

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 153

28.2 Liquidity risks

Maturity profile of financial liabilities and derivative financial instruments 2015

Total Maturities Carrying undiscounted up to 3 to more than in thousand CHF amount cash flows 3 months 12 months 1 to 5 years 5 years Payables 444,302 444,302 441,693 2,609 —— Current financial liabilities 143,175 144,947 24,674 120,273 —— Non-current financial liabilities (unhedged) 250,549 274,582 758 3,058 222,901 47,865 Bond 299,005 315,000 — 7,500 307,500 — Private placement (notes) 94,600 129,071 3,002 3,003 123,066 — of which hedged 94,600 129,071 3,002 3,003 123,066 — – Cross currency interest rate swaps – cash inflow (110,035) (3,087) (3,087) (103,861) — 24,645 – Cross currency interest rate swaps – cash outflow 129,071 3,002 3,003 123,066 — Other derivative financial instruments (current and non-current) 459 459 580 892 (1,013) — – Foreign exchange forwards – cash inflow (144,595) (36,296) (76,299) (32,000) — 459 – Foreign exchange forwards – cash outflow 145,356 37,000 78,000 30,356 — Total 1,256,735 1,327,699 470,746 138,060 671,028 47,865

Maturity profile of financial liabilities and derivative financial instruments 2014

Total Maturities Carrying undiscounted up to 3 to more than in thousand CHF amount cash flows 3 months 12 months 1 to 5 years 5 years Payables 406,693 406,693 404,492 2,201 —— Current financial liabilities 58,626 58,679 50,125 8,554 —— Non-current financial liabilities (unhedged) 190,329 206,747 1,099 3,357 201,442 849 Bond 298,478 322,500 — 7,500 315,000 — Private placement (notes) 134,950 179,784 47,710 3,003 129,071 — of which hedged 134,950 179,784 47,710 3,003 129,071 — – Cross currency interest rate swaps – cash inflow (157,925) (43,877) (3,116) (110,932) — 28,111 – Cross currency interest rate swaps – cash outflow 179,784 47,710 3,003 129,071 — Other derivative financial instruments (current and non-current) 5,378 5,378 1,540 3,838 —— – Foreign exchange forwards – cash inflow (132,751) (18,257) (114,494) — — 5,378 – Foreign exchange forwards – cash outflow 138,427 19,800 118,627 — — Total 1,122,565 1,201,938 508,802 28,635 663,652 849

The values presented above are contractually agreed undiscounted cash flows including interest. Wherever the contractually agreed payment amount is liable to change before maturity as a result of variable interest rates, the payment amounts based on the interest rates on the reporting date are disclosed. In order to ensure that Galenica can meet its payment obligations on time, liquidity is managed centrally. The Treasury department monitors the cash flows using ongoing liquidity planning, which takes into account the maturities of financial assets and liabilities, monetary assets and cash flows from operating activities.

Galenica financial statements 2015 154 Notes to the consolidated financial statements of the Galenica Group

28.3 Credit risk

in thousand CHF 2015 2014 Cash (without cash on hand) 420,751 237,195 Derivative financial instruments 1,259 118 Receivables 581,172 633,485 Loans and other financial assets 20,293 28,841 Total financial assets subject to credit risk 1,023,475 899,639

The financial assets subject to credit risk are primarily receivables. Galenica applies internal risk management guidelines to identify concentrations of credit risks. Galenica’s financial assets are not exposed to a concentration of credit risks. No past due financial assets have been renegotiated. Based on past experience, Galenica considers the creditworthiness of non past due trade receivables to be good. Trade receivables past due are analysed on an ongoing basis. These receivables are accounted for using individual bad debt allowances, which are calculated on the basis of past experience. As collateral for future deliveries, Galenica has accepted bank guarantees and assignment of receivables from various customers; these total CHF 2.1 million (previous year: CHF 23.9 million).

Maturity profile of trade receivables 2015 2014 Trade Bad debt Trade Bad debt in thousand CHF receivables allowances receivables allowances not past due 463,546 (474) 437,493 (630) past due: – 1–30 days 43,483 (704) 39,259 (268) – 31–60 days 12,468 (304) 7,276 (116) – 61–90 days 4,778 (467) 7,289 (345) – more than 90 days 27,237 (5,439) 21,728 (4,483) Total 551,512 (7,388) 513,045 (5,842)

28.4 Market risks

Interest rate risk Galenica manages the risk of changes in interest rates by modi fying the ratio of fixed to floating-rate liabilities. Interest rates are managed centrally in order to limit the effects of interest rate fluctuations on the financial result. The Treasury department is responsible for operational risk management in connection with interest rates. The risks are monitored using sensitivity analyses. The management is informed periodically of the current situation. The scenarios for the sensitivity analyses assume a parallel shift of the yield curve across all maturities. This assumption is justified by the weighted distribution of maturities. The effects of interest rate changes on floating-rate financial assets and financial liabilities are recognised in profit or loss and affect the financial result. Galenica does not have any fixed-rate financial liabilities classified as at fair value through profit or loss. For fixed- rate financial liabilities such as the bond and private placements notes, changes in interest rates therefore have no effect on profit or loss. The financial assets and liabilities subject to interest rate risk are almost exclusively floating-rate current bank deposits, debts and loans. Had the market rate been 50 basis points higher or lower at the reporting date, the consolidated earnings before taxes would remain unchanged as in the previous year. The other comprehensive income would have been CHF 0.3 million higher (previous year: CHF 0.4 million) or CHF 1.0 million lower (previous year: CHF 0.4 million).

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 155

Currency risk The table below shows the unhedged net financial assets and net financial 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. There are currency risks for 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 currency related changes in fair value of monetary financial assets and financial liabilities.

Exchange rate risks of monetary financial instruments and sensitivity analysis

2015 2014 Effect on Effect on in thousand CHF Net exposure Sensitivity profit or loss Net exposure Sensitivity profit or loss 5 % (527) 15 % 3,778 EUR/CHF (10,534) 25,187 (5 %) 527 (15 %) (3,778) 7 % (4,438) 10 % 13,093 USD/CHF (63,405) 130,926 (7 %) 4,438 (10 %) (13,093) 3 % (1) 12 % 292 GBP/CHF (45) 2,431 (3 %) 1 (12 %) (292)

Other market risks The values of the securities classified as available for sale depend on the general market environment and not directly on a share index. A change in value of +/–15 % would have had a positive or negative effect of CHF 6.2 million (previous year: +/–15 %, +/–CHF 5.3 million) on other comprehensive income.

28.5 Derivative financial instruments

Derivative financial instruments 2015

Fair Value Contract Value Expiry date of contract values in thousand CHF Positive Negative up to 3 months 3 to 12 months 1 to 5 years Foreign exchange forwards 1,259 1,717 147,000 37,000 78,000 32,000 Currency instruments 1,259 1,717 147,000 37,000 78,000 32,000 Cross currency interest rate swaps — 24,645 94,600 — — 94,600 Interest instruments — 24,645 94,600 — — 94,600 Derivative financial instruments 1,259 26,362 241,600 37,000 78,000 126,600

Derivative financial instruments 2014

Fair Value Contract Value Expiry date of contract values in thousand CHF Positive Negative up to 3 months 3 to 12 months 1 to 5 years Foreign exchange forwards — 5,378 141,075 19,800 121,275 — Currency instruments — 5,378 141,075 19,800 121,275 — Cross currency interest rate swaps 118 28,229 134,950 39,600 — 95,350 Interest instruments 118 28,229 134,950 39,600 — 95,350 Derivative financial instruments 118 33,607 276,025 59,400 121,275 95,350

Galenica financial statements 2015 156 Notes to the consolidated financial statements of the Galenica Group

28.6 Cash flow hedges

Foreign currency hedging Galenica selectively hedges liabilities and expected cash flows in USD against foreign currency risks by means of foreign exchange forwards. The contract volume amounted to CHF 147.0 million (previous year: CHF 141.1 million) as at the reporting date with a negative fair value of CHF 0.5 million (previous year: negative fair value of CHF 5.4 million).

Foreign currency and interest rate risk hedging (cross currency interest rate swaps) Galenica entered into cross currency interest rate swaps to hedge foreign currency risks and interest rate risks in connection with the private placement notes issued in USD and GBP. The contract volume amounted to CHF 94.6 million (previous year: CHF 135.0 million) as at the reporting date with a negative fair value of CHF 24.6 million (previous year: negative fair value of CHF 28.1 million). These cross currency interest rate swaps are deemed to be highly effective. Consequently, the changes in fair value of these derivatives are recognised directly in other comprehensive income (hedge accounting). In 2015, CHF 0.3 million (previous year: CHF 1.4 million) was recognised directly in other comprehensive income.

28.7 Capital management

The objective of capital management at Galenica is to ensure the continuity of operations, increase enterprise value on a sustainable basis, provide an adequate return to investors, provide the financial resources to enable investments in areas that deliver future benefits for patients and customers and further returns to investors. Galenica defines the capital that it manages as invested interest-bearing liabilities and equity. Galenica uses a system of financial control based on various key performance indicators. Capital is monitored based on the gearing, for example, which expresses net debt as a percentage of shareholders’ equity including minority interests and is communicated regularly to management as part of internal reporting. Net debt, shareholders’ equity and gearing are shown in the table below.

in thousand CHF 2015 2014 Current financial liabilities1) 135,992 97,413 Non-current financial liabilities1) 518,722 591,951 Cash (422,196) (238,526) Securities (246) — Interest-bearing receivables (8,167) (43,307) Financial assets (64,971) (66,455) Net debt 159,134 341,076

Equity attributable to shareholders of Galenica Ltd. 1,879,093 1,712,351 Non-controlling interests 97,069 38,143 Shareholders’ equity 1,976,162 1,750,494

Gearing 8.1 % 19.5 % 1) Excluding non-interest-bearing financial liabilities

Galenica has no covenants requiring a minimum level of equity, nor is it subject to any externally regulated capital requirements as seen in the financial services sector.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 157

29. Share-based payments

Share plan for the Executive Chairman For his service in the period from 1 January 2012 to 31 December 2016, Etienne Jornod will have received a non- recurring share-based payment in the form of 40,000 registered shares in Galenica. The shares were measured at fair value at the time of signing the contract (CHF 528.00). Should the contract be terminated before the end of 2016, the employment contract contains detailed provisions which stipulate how many shares Etienne Jornod is entitled to, pro rata temporis, at such a date and what price, depending on whether the employee or the employer has called for premature termination.

Remuneration for members of the Board of Directors The members of the Board of Directors receive annual remuneration. The remuneration is a fixed amount which the members can choose to receive in full (100 %) or in part (50 %) as registered shares in Galenica. The amount settled in shares is paid out with a discount of 25 %. The shares may not be traded for the first five years for tax reasons. The fair value of the shares granted is equivalent to the amount to be paid out in shares plus the discount of 25 %.

Share plan for members of senior management According to the participation plan, members of senior management receive their performance-related bonus partly in cash and partly in registered shares in 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 to be settled in shares is paid out in spring in the form of registered shares in Galenica with a discount of 25 %. The shares may not be traded for the first five years for tax reasons. The fair value of the shares granted is equivalent to the amount to be paid out in shares plus the discount of 25 %.

Long-term incentive plan (LTI) For members of the Corporate Executive Committee and certain members of senior management exists a LTI plan for the allocation of performance units. The number of these performance units is based on the extent to which defined long-term performance targets are attained. An LTI plan always runs for a vesting period of 3 years. At the beginning of each financial year a new LTI plan with a new vesting period of 3 years is issued. At the start of the vesting period a defined number of performance units are individually allocated. The number of performance units allocated is dependent on the defined percentage of the annual salary incorporated into the LTI plan as well as the effective share price at the time of the allocation. At the end of the vesting period performance units are paid out to eligible beneficiaries in the form of registered shares in Galenica. 4,357 performance units (previous year: 3,425 performance units) were granted to beneficiaries at an average price of CHF 744.50 (previous year: CHF 864.50) at the beginning of the reporting period for the 2015 LTI plan.

Employee share plan Employees of Galenica are entitled to buy a fixed number of registered shares in Galenica at a preferential price. All employees who, at the time of the purchase offer, are not under notice and have an employment contract of unlimited duration are entitled to acquire shares. The purchase price for the registered shares is calculated at the time of the purchase offer based on the average price for the previous month less a 30 % discount. The price discount is borne by the employer. The shares may not be traded for the first three years for tax reasons. In the reporting period, employees purchased 9,478 registered shares of Galenica (previous year: 7,461 registered shares) at a price of CHF 728.60 (previous year: CHF 605.60). This includes a price discount of CHF 312.25 (previous year: CHF 259.55) per registered share.

Galenica financial statements 2015 158 Notes to the consolidated financial statements of the Galenica Group

Share-based payment expense

in thousand CHF 2015 2014 Share plan for the Executive Chairman 3,670 3,670 Remuneration for members of the Board of Directors 1,156 1,156 Share plan for members of senior management 5,712 3,508 Long-term incentive plan (LTI) 3,357 2,187 Employee share plan 2,960 1,937 Total 16,855 12,458

30. Related party transactions

Related parties include associates, joint ventures, pension funds, members of the Board of Directors of Galenica Ltd., members of the Corporate Executive Committee and major shareholders, as well as the companies controlled by them. All transactions with related parties are conducted at arm’s length. As at the reporting date trade receivables and loans concerning associates and joint ventures amounted to CHF 8.6 million (previous year: CHF 7.1 million). The receivables and loans primarily relate to Coop Vitality. The trade payables to associates and joint ventures amounted to CHF 3.5 million (previous year: CHF 1.5 million) and those to pension funds amounted to CHF 5.4 million (previous year: CHF 29.9 million). In the previous year, Galenica granted a short-term loan of CHF 35.8 million to other related parties which was repaid in January 2015. There are no liabilities to other related parties. The transactions with associates and joint ventures shown in the table below largely concern transactions with Coop Vitality.

Related party transactions 2015 2014 Associates Other Associates Other and joint ventures related parties and joint ventures related parties in thousand CHF Sale of goods 110,177 5 103,057 2 Income from services 461 — 423 — Other income 3,841 — 1,323 — Purchase of goods 598 — 2,780 — Other operating costs 2,798 82 958 — Financial income 221 — 6 700 Financial expenses 6 12 — —

Remuneration of the Board of Directors and the Corporate Executive Committee

in thousand CHF 2015 2014 Remuneration 4,153 4,191 Social security costs and pension expenses 1,501 1,653 Share-based payments 6,323 5,914 Total 11,977 11,758

During the reporting period, Galenica acquired 228 unrestricted Galenica shares from members of the Corporate Executive Committee for a total of CHF 0.2 million (previous year: 268 shares for a total of CHF 0.2 million). The disclosures in accordance with transparency law required by the Swiss Code of Obligations are included in the notes to the financial statements of Galenica Ltd.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 159

31. Lease liabilities

The table below summarises the maturity profile of lease payments (undiscounted).

2015 2014 Operating Finance Operating Finance in thousand CHF leases leases leases leases Within 1 year 55,436 3 46,947 256 In 2 to 5 years 141,589 — 136,651 1,044 In more than 5 years 32,623 — 37,417 404 Total 229,648 3 221,015 1,704 Interest — (423) Liabilities from finance leases 3 1,281

Operating leases essentially consist of payment obligations under rental contracts. Finance leases mainly relate to a building used for business purposes.

32. Contingent liabilities and commitments

Galenica entered into various obligations regarding the purchase of services, goods, and equipment as part of its ordinary business operations. These liabilities do not exceed the current market prices. Galenica has signed purchase agreements to acquire pharmacies in the next few years. The purchase prices will be fixed at the time of transfer of ownership on the basis of net asset value and discounted cash flow. The unrecognised commitments are expected to involve payments of CHF 20.1 million (previous year: CHF 6.3 million) at the most. The purchase rights have an estimated volume of CHF 20.5 million (previous year: CHF 6.7 million). These purchase rights or obligations fall due between 2017 and 2020. Galenica signed purchase agreements to acquire property, plant and equipment totalling CHF 7.8 million (previous year: CHF 16.7 million). The payments under these purchase commitments become due between 2016 and 2018. Galenica has entered into strategic arrangements with various companies in order to gain access to potential new products. Potential future payments may become due to certain collaboration partners achieving certain milestones as defined in the collaboration agreements. The maximum amount of future commitments for such payments is disclosed in Note 17. Galenica is subject to a variety of risks depending on the countries in which it operates. These risks include, but are not limited to, risks regarding product liability, patent law, tax law, competition laws and anti-trust laws. A number of Group companies are currently involved in administrative proceedings, legal disputes and investiga- tions relating to their business activities. The results of ongoing proceedings cannot be predicted with certainty. Management has established appropriate provisions for any expenses likely to be incurred. These projections, however, are also subject to uncertainty. Galenica does not expect the results of these proceedings to have a significant impact on the consolidated financial statements. Furthermore, there are guarantees to third parties of CHF 7.7 million (previous year: CHF 2.1 million). Galenica entered into payment obligations for the purchase of securities available for sale up to a maximum of CHF 19.7 million (previous year: CHF 15.4 million). There are no unusual pending transactions or risks to be disclosed.

Galenica financial statements 2015 160 Notes to the consolidated financial statements of the Galenica Group

33. Assets pledged to secure own liabilities

No assets were pledged to secure own liabilities (previous year: none).

34. Subsequent events

The following business combination occurred between 31 December 2015 and the date the consolidated financial statements were issued.

Galenica Santé business unit Health & Beauty segment Acquisition of pharmacies. GaleniCare Holding and Sun Store acquired 100 % of the interests in pharmacies at various locations in Switzerland. The net assets of these acquisitions will be consolidated for financial year 2016 from the date control was obtained. The purchase consideration was CHF 10.0 million, the fair value of the provisional net assets resulting from these additions was estimated at CHF 1.6 million on the acquisition date.

There were no further significant events after the reporting date.

Galenica financial statements 2015 Notes to the consolidated financial statements of the Galenica Group 161

35. Investments

Voting Method of Share capital Registered office Capital rights consolidation in thousand Vifor Pharma Aspreva International Ltd. CDN-Victoria 100%2) 100% full CAD 0 Aspreva Pharmaceuticals Ltd. CH-Bern 100%2) 100% full CHF 2,700 Aspreva Pharmaceuticals Inc. USA-Basking Ridge 100%2) 100% full USD 0 Cophar Ltd. CH-Villars-sur-Glâne 100%2) 100% full CHF 700 Etrea Ltd. CH-Meyrin 100%2) 100% full CHF 200 Fresenius Medical Care Nephrologica Deutschland GmbH D-Bad Homburg 55%2) 55% full EUR 225 OM Pharma Ltd. CH-Meyrin 100%2) 100% full CHF 3,000 OM Pharma S.A. PER-Lima 100%2) 100% full PEN 12,375 OM Pharma S.A. P-Amadora-Lisboa 100%2) 100% full EUR 5,000 Swiss Pharma GmbH D-Lörrach 100%2) 100% full EUR 51 Vifor Ltd. CH-Villars-sur-Glâne 100%2) 100% full CHF 2,250 Vifor France SA F-Paris La Défense 100%2) 100% full EUR 50 Vifor Fresenius Medical Care Renal Pharma Ltd. CH-St. Gall 55%1) 55% full CHF 1,000 Vifor Fresenius Medical Care Renal Pharma België NV B-Antwerp 55%2) 55% full EUR 61 Vifor Fresenius Medical Care Renal Pharma Danmark A/S DK-Taastrup 55%2) 55% full DKK 500 Vifor Fresenius Medical Care Renal Pharma España SL E-Palau-Solità i Plegamans 55%2) 55% full EUR 3 Vifor Fresenius Medical Care Renal Pharma France S.A.S. F-Paris La Défense 55%2) 55% full EUR 10 Vifor Fresenius Medical Care Renal Pharma Italia S.r.l. I-Rome 55%2) 55% full EUR 10 Vifor Fresenius Medical Care Renal Pharma Nederland B.V. NL-Breda 55%2) 55% full EUR 10 Vifor Fresenius Medical Care Renal Pharma UK Ltd. GB-London 55%2) 55% full GBP 1 Vifor (International) Ltd. CH-St. Gall 100%2) 100% full CHF 2,000 Vifor Pharma Ltd. CH-Glattbrugg 100%2) 100% full CHF 100 Vifor Pharma America Latina S.A. ARG-Pilar, Buenos Aires 100%2) 100% full USD 304 Vifor Pharma Asia Pacific Pte. Ltd. SIN-Singapore 100%2) 100% full SGD 100 Vifor Pharma België NV B-Antwerp 100%2) 100% full EUR 61 Vifor Pharma Deutschland GmbH D-Munich 100%2) 100% full EUR 50 Vifor Pharma España SL E-Palau-Solità i Plegamans 100%2) 100% full EUR 200 Vifor Pharma Italia S.r.l. I-Rome 100%2) 100% full EUR 10 Vifor Pharma Nederland B.V. NL-Breda 100%2) 100% full EUR 18 Vifor Pharma Nordiska AB S-Kista 100%2) 100% full SEK 200 Vifor Pharma Österreich GmbH A-Vienna 100%2) 100% full EUR 100 Vifor Pharma Participations Ltd. CH-Bern 100%1) 100% full CHF 1,000 Vifor Pharma Pty Ltd. AUS-Melbourne 100%2) 100% full AUD 0 Vifor Pharma Romania Srl. RUM-Cluj-Napoca 100%2) 100% full RON 258 Vifor Pharma UK Ltd. GB-Bagshot 100%2) 100% full GBP 36

1) Directly held by Galenica Ltd. 2) Indirectly held by Galenica Ltd.

Galenica financial statements 2015 162 Notes to the consolidated financial statements of the Galenica Group

Voting Method of Share capital Registered office Capital rights consolidation in thousand Products & Brands G-Pharma AG CH-Niederbipp 100%1) 100% full CHF 100 Vifor Consumer Health Ltd. CH-Villars-sur-Glâne 100%1) 100% full CHF 100

Retail Amavita GmbH CH-Bern 100%2) 100% full CHF 20 Amavita Health Care Ltd. CH-Niederbipp 100%1) 100% full CHF 100 Bahnhof Apotheken Thun AG CH-Thun 50%2) 50% full CHF 200 Coop Vitality AG CH-Bern 49%2) 49% at equity CHF 5,000 Coop Vitality Health Care GmbH CH-Niederbipp 49%2) 49% at equity CHF 20 Coop Vitality Management AG CH-Bern 49%2) 49% at equity CHF 100 Distripharm SA CH-St-Sulpice 100%2) 100% full CHF 100 GaleniCare Ltd. CH-Bern 100%2) 100% full CHF 700 GaleniCare Holding Ltd. CH-Bern 100%1) 100% full CHF 50,000 GaleniCare Management Ltd. CH-Bern 100%2) 100% full CHF 500 Golaz Chemist SA CH-Lausanne 100%2) 100% full CHF 300 Grosse Apotheke Dr. G. Bichsel AG CH-Interlaken 25%2) 25% at equity CHF 200 Ingrid Barrage AG CH-Küsnacht 49%2) 49% at equity CHF 300 Kloster-Apotheke Muri AG CH-Muri AG 100%2) 100% full CHF 100 MediService Ltd. CH-Zuchwil 100%1) 100% full CHF 363 Pharmacie de la Croix Blanche SA CH-Epalinges 100%2) 100% full CHF 100 St. Jakob-Apotheke AG CH-St. Gall 100%2) 100% full CHF 100 Sun Store Ltd. CH-St-Sulpice 100%2) 100% full CHF 485 Wettstein-Apotheke AG CH-Basel 100%2) 100% full CHF 200 Winconcept Ltd. CH-Bern 100%2) 100% full CHF 100

Services Alloga Ltd. CH-Burgdorf 100%1) 100% full CHF 8,332 Dauf SA CH-Barbengo-Lugano 87.30 % 2) 87.30 % full CHF 100 Documed Ltd. CH-Basle 100%1) 100% full CHF 50 e-mediat Ltd. CH-Bern 100%1) 100% full CHF 108 e-prica AG CH-Bern 100%1) 100% full CHF 100 Galexis Ltd. CH-Niederbipp 100%1) 100% full CHF 25,000 HCI Solutions Ltd. CH-Bern 100%1) 100% full CHF 100 i-medify AG CH-Oensingen 100%1) 100% full CHF 375 Medifilm Ltd. CH-Oensingen 100%2) 100% full CHF 1,300 Unione Farmaceutica Distribuzione SA CH-Barbengo-Lugano 87.30 %1) 87.30 % full CHF 2,000

Corporate 1L Logistics AG CH-Burgdorf 100%1) 100% full CHF 100 Galenica International (B.V.I.) Limited GB-British Virgin Islands 100%1) 100% full USD 50 Galenica Santé Ltd. CH-Bern 100%1) 100% full CHF 100 Medichemie Bioline AG CH-Bern 100%2) 100% full CHF 100 Perskindol AG CH-Bern 100%1) 100% full CHF 100 Sigal AG CH-Bern 100%1) 100% full CHF 2,000 Triamun Ltd. CH-Bern 100%1) 100% full CHF 150

Pension funds Galenica Pension Fund CH-Bern GaleniCare Pension Fund CH-Bern

1) Directly held by Galenica Ltd. 2) Indirectly held by Galenica Ltd.

Galenica financial statements 2015 Report of the statutory auditor on the consolidated financial statements of the Galenica Group 163

Report of the statutory auditor on the consolidated financial statements to the General Meeting of the Galenica Ltd., Bern

As statutory auditor, we have audited the consolidated financial statements of Galenica Ltd., which comprise the statement of income, statement of comprehensive income, statement of financial position, statement of cash flows, statement of changes in equity and notes (pages 101 to 162) for the year ended 31 December 2015.

Board of Directors’ responsibility The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards 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 2015 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.

Report on other legal requirements

We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors. We recommend that the consolidated financial statements submitted to you be approved.

Bern, 11 March 2016

Ernst & Young Ltd.

Roland Ruprecht Julian Fiessinger Licensed audit expert Licensed audit expert Auditor in charge

Galenica financial statements 2015 164 Financial statements 2015 of Galenica Ltd.

Financial statements 2015

165 Statement of income of Galenica Ltd.

166 Statement of financial position of Galenica Ltd.

167 Notes to the financial statements of Galenica Ltd.

171 Report of the statutory auditor on the financial statements of Galenica Ltd.

Galenica Ltd. financial statements 2015 Statement of income of Galenica Ltd. 165

Statement of income of Galenica Ltd.

in thousand CHF 2015 2014 Investment income 192,028 227,668 Financial income 138,776 49,794 Other income 40,778 34,745 Income 371,582 312,207

Personnel costs (24,173) (22,807) Financial expenses (32,695) (28,962) Depreciation and amortisation (2,251) (67,127) Other expenses (7,562) (2,856) Expenses (66,681) (121,752)

Profit for the year before taxes 304,901 190,455

Direct taxes (123) (120)

Profit for the year 304,778 190,335

Galenica Ltd. financial statements 2015 166 Statement of financial position of Galenica Ltd.

Statement of financial position of Galenica Ltd.

Assets

in thousand CHF 31.12. 2015 31.12. 2014 Cash and cash equivalents 329,110 184,368 Receivables – Third parties 295 585 – Shareholders — 35,814 – Group companies 17,287 47,121 Prepaid expenses and accrued income 5,531 12,081 Current assets 22 % 352,223 20 % 279,969

Financial assets 905,117 853,175 Investments 347,757 257,283 Property, plant and equipment 40 — Intangible assets 71 98 Non-current assets 78 % 1,252,985 80 % 1,110,556

Assets 100 % 1,605,208 100 % 1,390,525

Liabilities and shareholders’ equity

in thousand CHF 31.12. 2015 31.12. 2014 Short-term interest-bearing liabilities – Third parties 51,718 49,003 – Group companies 91,042 16,703 Other short-term liabilities – Third parties 810 3,264 – Group companies 1,252 19,371 Accrued expenses and deferred income 11,575 10,651 Short-term liabilities 10 % 156,397 7 % 98,992

Long-term interest-bearing liabilities – Third parties 514,158 564,158 Long-term liabilities 32 % 514,158 41 % 564,158

Share capital 650 650 Legal retained earnings – General legal retained earnings 40,000 40,000 – Reserve for treasury shares 12,200 10,100 Voluntary retained earnings – Free reserve 576,800 485,900 – Profit brought forward 225 390 – Profit for the year 304,778 190,335 Shareholders’ equity 58 % 934,653 52 % 727,375

Liabilities and shareholders’ equity 100 % 1,605,208 100 % 1,390,525

Galenica Ltd. financial statements 2015 Notes to the financial statements of Galenica Ltd. 167

Notes to the financial statements of Galenica Ltd.

Principles The financial statements of Galenica Ltd. with registered office in Bern, Switzerland have been prepared in accordance with Article 957 et seqq. of Title 32 of the revised Accounting law based on the Swiss Code of Obliga- tions. Where not prescribed by law, the significant accounting and valuation principles applied are described below. Certain prior-year amounts have been reclassified to conform to the current year’s presentation.

Financial income Financial income was positively affected by the revaluation of investments of CHF 83.5 million (previous year: none).

Investments in subsidiaries and associates The list of the investments is shown on pages 161 and 162.

Financial assets Financial assets include long-term loans to Group companies of CHF 903.3 million (previous year: CHF 851.4 million) and other financial assets of CHF 1.8 million (previous year: CHF 1.8 million).

Long-term interest-bearing liabilities The interest-bearing liabilities are recognised at nominal value. in thousand CHF 31.12. 2015 31.12. 2014 Bank debts 100,000 150,000 Bond 2.5 % (27 October 2010–27 October 2017) ISIN CH0118480059 300,000 300,000 Private placement (notes) 114,058 114,058 Other financial liabilities 100 100 Long-term interest-bearing liabilities 514,158 564,158

Derivative financial instruments Galenica selectively hedges liabilities and expected cash flows in USD against foreign currency risks by means of foreign exchange forwards. The contract volume amounted to CHF 147.0 million (previous year: CHF 141.1 million) as at 31 December 2015 with a negative fair value of CHF 0.5 million (previous year: negative fair value of CHF 5.4 million). Galenica entered into cross currency interest rate swaps to hedge foreign currency risks and interest rate risks in connection with the private placement notes issued in USD and GBP. The contract volume amounted to CHF 94.6 million (previous year: CHF 135.0 million) as at 31 December 2015 with a negative fair value of CHF 24.6 million (previous year: negative fair value of CHF 28.1 million).

Share capital At 31 December 2015, the share capital of Galenica amounted to CHF 650,000, divided into 6,500,000 publicly listed registered shares with nominal value of CHF 0.10 each.

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 any time up to and including 8 May 2016 by issuing not more than 650,000 registered shares.

Contingent liabilities At the end of 2015, contingent liabilities amounted to CHF 368.6 million (previous year: CHF 249.0 million), including CHF 7.7 million (previous year: CHF 2.1 million) for guarantees to third parties, and CHF 201.7 million (previous year: CHF 87.7 million) for guarantees to Group companies as well as CHF 159.2 million (previous year: CHF 159.2 million) for guarantees to secure intraday transactions in connection with the zero balance cash pooling.

Galenica Ltd. financial statements 2015 168 Notes to the financial statements of Galenica Ltd.

Subordinated loans At the end of 2015, subordinated loans to Group companies amounted to CHF 97.4 million (previous year: CHF 97.4 million).

Treasury shares Galenica registered shares owned by subsidiaries: Number in CHF As at 31 December 2013 24,082 1st quarter 2014 – Bought 1,493 1,353,514 – Sold (5,504) (4,614,490) 2nd quarter 2014 – Bought 8,260 7,252,506 – Sold (5,919) (5,227,978) 3rd quarter 2014 – Bought 1,001 861,995 – Sold — — 4th quarter 2014 – Bought 7,016 4,433,061 – Sold (8,031) (6,948,020) As at 31 December 2014 22,398 1st quarter 2015 – Bought 2,907 2,371,185 – Sold (4,531) (3,636,544) 2nd quarter 2015 – Bought 4,797 4,266,227 – Sold (4,297) (3,323,997) 3rd quarter 2015 – Bought 2,588 2,968,507 – Sold (744) (719,476) 4th quarter 2015 – Bought 10,151 10,658,481 – Sold (10,133) (10,546,933) As at 31 December 2015 23,136 The treasury shares are reserved for share-based payments to employees.

Major shareholders Number of % of share registered shares capital As at 31 December 2015 Sprint Investments 2 GmbH, Switzerland1) 1,656,172 25.5 – of which with voting rights 1,300,000 20.0 Patinex AG, Switzerland and BZ Bank Aktiengesellschaft, Switzerland2) 3) 1,065,369 16.4 – of which with voting rights 325,000 5.0 Alecta pensionsförsäkring, Sweden 210,000 3.2 BNP PARIBAS SA, France 205,284 3.2 As at 31 December 2014 Alliance Boots Investments 2 GmbH, Switzerland1) 1,656,172 25.5 – of which with voting rights 1,300,000 20.0 Credit Suisse Group AG, Switzerland2) 389,070 6.0 Patinex AG, Switzerland and BZ Bank Aktiengesellschaft, Switzerland2) 3) 255,972 3.9 Alecta pensionsförsäkring, Sweden 210,000 3.2 1) Beneficial owners: Stefano Pessina, Monaco and Kohlberg Kravis Roberts & Co. L.P., USA 2) Options not considered 3) Beneficial owners: Martin and Rosmarie Ebner, Switzerland

At the reporting date, no other shareholder has reached the 3 % threshold of registered shares.

Full-time equivalents The average number of full- time equivalents for the reporting period amounted to 41 (previous year: 39).

Galenica Ltd. financial statements 2015 Notes to the financial statements of Galenica Ltd. 169

Shareholdings of the members of the Board of Directors and the members of the Corporate Executive Committee

Shareholdings of the members of the Board of Directors

Registered shares Registered shares Held as at Allocated for Held as at Allocated for Number of registered shares 31.12.2015 2015 31.12.20141) 2014 Etienne Jornod, Executive Chairman 20,518 — 41,856 — Shares of the executive member of the Board of Directors 20,518 — 41,856 —

Daniela Bosshardt-Hengartner 937 71 1,543 132 Michel Burnier 616 63 545 116 Romeo Cerutti (as of Annual General Meeting 2015) — 38 — — Marc de Garidel (as of Annual General Meeting 2015) — 71 — — Hans Peter Frick 963 62 847 116 Sylvie Grégoire 231 62 198 116 Fritz Hirsbrunner 6,333 115 10,202 215 Stefano Pessina 1,878 97 1,771 182 This E. Schneider 3,520 150 3,339 281 Shares of the non-executive members of the Board of Directors 14,478 729 18,445 1,158 Shares of the members of the Board of Directors 34,996 729 60,301 1,158 1) Includes shares allocated for the period 1 January 2014 until the Annual General Meeting 2014 Registered shares held by related parties of members of the Board of Directors are included in the disclosed numbers.

Shareholdings of the members of the Corporate Executive Committee

Held as at Held as at Number of registered shares 31.12.2015 31.12.2014 Felix Burkhard 843 1,192 Jean-Claude Clémençon 549 536 Jörg Kneubühler 826 1,350 Søren Tulstrup 119 10 Gianni Zampieri 4,376 4,047 Registered shares held by related parties of members of the Corporate Executive Committee are included in the disclosed numbers.

Information relating to the number and value of participations rights of the members of the Board of Directors and the members of the Corporate Executive Committee are disclosed in the Remuneration Report (pages 83 to 86). In 2015, 338 performance share units with fair value at grant date of CHF 742,319 have been allocated to other employees of Galenica Ltd.

Galenica Ltd. financial statements 2015 170 Notes to the financial statements of Galenica Ltd.

Shareholdersʼ equity

Shareholders’ equity developed as follows:

General legal Reserve for Free Available Shareholders’ in thousand CHF Share capital retained earnings treasury shares reserve earnings equity As at 31 December 2013 650 40,000 12,976 363,024 211,390 628,040 Transfer to free reserve 120,000 (120,000) — Dividend (91,000) (91,000) Adjustment to the reserve for treasury shares (2,876) 2,876 — Profit for the year 190,335 190,335 As at 31 December 2014 650 40,000 10,100 485,900 190,725 727,375 Transfer to free reserve 93,000 (93,000) — Dividend (97,500) (97,500) Adjustment to the reserve for treasury shares 2,100 (2,100) — Profit for the year 304,778 304,778 As at 31 December 2015 650 40,000 12,200 576,800 305,003 934,653

Appropriation of available earnings for the year ending 31 December

At the Annual General Meeting of shareholders as at 28 April 2016, the Board of Directors will propose the following appropriation of available earnings:

in CHF 2015 2014 Balance brought forward 224,874 390,120 Profit for the year 304,777,972 190,334,754 Available earnings 305,002,846 190,724,874

Appropriation of available earnings Transfer to free reserve (187,000,000) (93,000,000) Dividend per share CHF 18.00 (2014: CHF 15.00) (117,000,000) (97,500,000) Balance to be carried forward 1,002,846 224,874

Galenica Ltd. financial statements 2015 Report of the statutory auditor on the financial statements of Galenica Ltd. 171

Report of the statutory auditor on the financial statements to the General Meeting of Galenica Ltd., Bern

As statutory auditor, we have audited the financial statements of Galenica Ltd., which comprise the statement of income, statement of financial position and notes (pages 165 to 170) for the year ended 31 December 2015.

Board of Directors’ responsibility The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the 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 of the 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 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 financial statements for the year ended 31 December 2015 comply with Swiss law and the company’s articles of incorporation.

Report on other legal requirements

We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and indepen dence (Art. 728 CO and Art. 11 AOA) and that there are no circumstances incompatible with our independence. In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Bern, 11 March 2016

Ernst & Young Ltd.

Roland Ruprecht Julian Fiessinger Licensed audit expert Licensed audit expert Auditor in charge

Galenica Ltd. financial statements 2015 172 Annex Glossary

Glossary – Specialised terms and expressions used by Galenica

A B Chronic obstructive pulmonary disease (COPD) Collective term for a group of pulmonary diseases. AIPS – Drug information publication system Blister pack Sometimes referred to colloquially as “smoker’s New official Swissmedic drug information publi- A type of packaging that allows the customer to see lung”. cation platform (Arzneimittelinformation Publika- the packaged product (see-through packaging). tionsplattform Swissmedic). CIS Blister packaging Clinical Information System: a module that sup- Algifor® Packaging of medications in portions arranged in ports electronic drug prescription in hospitals on The leading ibuprofen-based OTC analgesic in rows – like a rolled film strip; service offered by the basis of hospINDEX® data. Switzerland; developed and sold by Vifor Pharma. Medifilm to care homes. Increases safety in taking medications, improves therapy compliance and Climate disclosure scoring AllergyCheck decreases the workload of staff in care homes. Indicates the completeness of reporting to the Service provided by Amavita and Coop Vitality: in Carbon Disclosure Project and the usefulness of just 20 minutes, customers receive a personal al- Broncho-Vaxom® the data. lergy profile for the ten most common respiratory Biotech drug for the prevention and alleviation of allergy triggers. respiratory tract infections; developed and mar- Clinical development/clinical studies keted by OM Pharma. Trials carried out as part of the development pro- Amavita partnership cess for new drugs in which the drugs are exten- Franchise system developed by GaleniCare for sively tested as to their efficacy and safety. The pharmacists wishing to enjoy the benefits of the C clinical study programme is broken down into sev- Amavita network while retaining their independ- eral phases. ence. Carbon Disclosure Project (CDP) An international, non-profit organisation providing CMS (content management system) Anaemia, anaemic the largest and only global environmental database The development and digital management of con- A deficiency of red blood cells or haemoglobin in for companies and cities. The aim of CDP is to tent from initial creation to archiving or deletion. the bloodstream, frequently caused by iron defi- encourage as many companies as possible to pub- ciency. lish data on their impact on the environment and Code of Conduct natural resources. A collection of the principles of conduct that are Anti-Brumm® to be followed in specific situations and conse- The leading insect repellent spray and lotion in Cardiology quently promote uniform conduct by groups of Switzerland, also widely sold in other European The branch of medicine dealing with the heart and individuals within the corporation. countries; a proprietary product of Vifor Pharma. cardiovascular diseases. Cognitive disorder Audit CardioTest® Disruption of the processing of sensory impres- Investigation of processes with regard to compli- A cardiovascular check-up and individual risk pro- sions (as in hyperactivity) that may lead to learn- ance with requirements and guidelines. The exam- file (heart passport) offered by GaleniCare in its ing difficulties, inattentiveness, etc. ination is carried out by an external expert such as pharmacies in cooperation with the Swiss Heart an FDA inspector or by a representative of an ac- Foundation. COMCO credited auditing company such as SGS. The Swiss Competition Commission. Care management Autoimmune disease A form of organised assistance given to employees Comité des Jeunes The general term for diseases caused by an over- to meet their individual needs in the event of ina- A Galenica advisory committee composed of young reaction of the immune system to the body’s own bility to work due to illness or injury. staff members from the Galenica Group. tissues. In such conditions, the immune system mistakenly perceives the body’s own tissues to be CellCept Committee for Medicinal Products foreign bodies that need to be attacked. This leads A drug developed by Roche for the treatment of for Human Use (CHMP) to acute inflammation reactions that result in dam- rejection reactions following organ transplants. Committee for Medicinal Products for Human Use age to the affected organs. Vifor Pharma holds the global rights (excluding (CHMP) at the European Medicines Agency (EMA). Japan) to develop and market this drug for all ap- The CHMP prepares the opinions of the EMA and plications involving autoimmune diseases. deals with the approval and risk assessment of medicines that are used to treat humans and that Certified general pharmacist require EU-wide approval. Pharmacist who manages or works in a dispensary. compendiumPORTAL Change management New editorial system for the Swiss Drug Compen- All tasks, actions and activities designed to bring dium (Arzneimittel-Kompendium der Schweiz®); about comprehensive and radical change in a com- developed and distributed by HCI Solutions. pany in order to implement new strategies, structures, etc. Compliance The willingness of patients to follow medical in- Chronic kidney disease (CKD) structions. With regard to taking medications, A slow, progressive loss of renal function, over following a diet or making life-style changes, com- months or years. pliance is particularly important for individuals suffering from chronic diseases or psychological disorders.

Galenica annual report 2015 Glossary Annex 173

Consumer Healthcare Products E Extended-release form Non-pharmaceutical healthcare products sold di- (or sustained-release form) rectly to the consumer in pharmacies and drug- ECCO (European Crohn’s and Colitis Organisa- A dosage form in which the pharmaceutical sub- stores (OTC), for example Anti-Brumm®. tion) stance is released slowly over an extended period. European organisation for Crohn’s disease and Corporate Management Development (CMD) ulcerative colitis (inflammation of the colon). CMD includes all the staff development activities F that Galenica offers to employees and managerial EDI staff. Federal Department of Home Affairs (Eidgenössi- FAB (management training) sches Departement des Innern). A series of management-based professional devel- Cystic fibrosis opment courses for members of the Galenica Also known as mucoviscidosis, is a congenital met- EDTA Group’s senior management (MDI) and manage- abolic disease that causes chronic coughing and European Dialysis and Transplant Association. ment (MKA), offered within the framework of the frequent lung infections due to viscous mucus in company’s Corporate Management Develop- the bronchial tubes. EFFECT study Ferinject® ment (CMD) programme. Study of the effects of intravenously adminis- Cytostatics tered iron on the mobility and quality of life of pa- FAIR-HF study Naturally occurring or artificially produced sub- tients with chronic heart failure and iron defi- Ferinject® Assessment in patients with IRon de- stances that inhibit cell growth and division. Used ciency. ficiency and chronic Heart Failure; a major, mul- primarily in the treatment of cancer (chemother- ti-centre, randomised, double-blind, placebo-con- apy) or autoimmune diseases. eHealth trolled study that examined whether correction of A general term for IT-supported networking efforts iron deficiency with Ferinject® could improve in the healthcare industry. patient health. D EMA (European Medicines Agency) FCOS (Federal Coordination Commission Decentralised procedure Agency responsible for the assessment and mon- for Occupational Safety) A specific drug authorisation process in Europe. itoring of medications in the European Union. Plays Central information and coordination authority for a central role in the authorisation of medications occupational safety and health. Coordinates pre- Dermatology in the European Union and the member states of ventative measures, responsibilities for enforce- The branch of medicine that deals with the diagno- the European Economic Area. The European Com- ment and the uniform application of regulations in sis, treatment and care of patients with non-infec- mission approves or rejects marketing authorisa- Switzerland. tious and infectious skin diseases as well as benign tion applications based on the EMA’s scientific and malignant skin tumours. evaluation. FDA (Food and Drug Administration) US food supervision and drug regulation authority Dialysis eMedication responsible for protecting public health in the USA. A blood cleansing process used in cases of kidney Electronic access for doctors, pharmacies and failure, also called haemodialysis. hospitals to a platform containing information on Ferinject® medication for patients. An innovative iron replacement product for the Dicynone® intravenous treatment of iron deficiency; devel- Synthetic drug for the prevention and treatment of EPO (erythropoietin) oped and produced by Vifor Pharma. capillary haemorrhages, a circulatory disorder; A hormone that promotes the formation of red developed and marketed by OM Pharma. blood cells. Classified as an erythropoiesis-stim- Film-coated tablet ulating agent (ESA). A tablet coated with only a single thin film. Unlike Direct Healthcare Professional a sugar-coated tablet, a film-coated tablet is Communication (DHPC) ERS (European Respiratory Society) coated with a polymer rather than sugar. Risk information provided to medical professionals. Society which researches respiratory diseases and promotes lung health. FIND-CKD study Docupass A clinical study examining the benefits of Docupass is a care dossier containing details of Erythropoiesis Ferinject® over oral iron replacement products personal preferences, needs, requirements and Process by which red blood cells (erythrocytes) are for the treatment of anaemia in patients with requests covering illness, healthcare, dying and produced. chronic kidney disease (without dialysis). death, offered by Coop Vitality in collaboration with Pro Senectute. ESA (erythropoiesis-stimulating agents) FPH Group of hormones that promote the formation of FPH, which stands for Foederatio Pharmaceutica Doxium® red blood cells, the most important of which is Helvetiae (Swiss Association of Pharmacists), is Synthetic drug to normalise capillary permeability EPO (erythropoietin). also a professional title used in general and clinical and improve venous blood flow; developed and pharmacy in Switzerland that is analogous to the marketed by OM Pharma. E-vaccination card FMH title for physicians. The Coop Vitality digital vaccination card provides DRG (Diagnosis Related Groups) secure access to your own vaccination data and Economic and medical classification system used can be programmed to inform the holder when to determine flat-rate payments for hospital treat- vaccinations need to be renewed. ment. EVE (EVEnts) A series of professional development events for members of the senior management (MDI) and management (MKA) of the Galenica Group, organised within the framework of the company’s Cor- porate Management Development (CMD) programme.

Galenica annual report 2015 174 Annex Glossary

G H I galdat® Haematology IAS 19 A commercial and scientific database of around The branch of medicine concerned with the phys- Accounting requirements for employee benefits. 200,000 pharmaceutical and non-pharmaceutical iology, pathophysiology and diseases of the blood products. It includes reference data in a standard- and blood-forming organs. It includes, for exam- Ibuprofen ised and uniform structure for all IT systems in the ple, malignant blood diseases and diseases of the An active ingredient that relieves pain, reduces Swiss healthcare industry for pharmacies, physi- bone marrow. fever and is anti-inflammatory. cians, hospitals and health insurers; galdat® forms the basis of all Index products. Developed and sold Haemodialysis IFRS by HCI Solutions. A blood cleansing process used in the treatment International Financial Reporting Standards. of kidney diseases. GALecoline® Immunology The brand name of a line of products from Galexis. Haemoglobin The science concerned with the biological and bi- Iron-rich protein that transports oxygen; found in ochemical principles of the body’s defence against Galenics the red blood cells. pathogens, such as bacteria, viruses and fungi, and Pharmaceutical technology for preparing the dos- other foreign substances such as biological poi- age form of medications (e. g. tablets or injection Heart failure sons. solutions). Heart failure can lead to impaired performance in persons affected due to a lack of oxygen and blood Immunomodulators Gastroenterology supply to the organs. Biological products based on bacterial lysates to The branch of internal medicine that deals with the strengthen the body’s immune system again recur- gastrointestinal tract or digestive system. HMO ring respiratory or urinary tract infections. Health Maintenance Organization. Generic Immunoprophylaxis A drug that contains the same active ingredient as Home nurses The prevention of infectious diseases via the stim- a brand-name pharmaceutical product (originator Qualified nursing professionals with specific addi- ulation of the immune system. product) already on the market. Generics can dif- tional training in home nursing; a form of patient fer from the originator products with respect to care offered by MediService in conjunction with IMS Health non-active ingredients and manufacturing technol- Pharma Care. An international consulting and market research ogies. company based in Hergiswil, Switzerland, that is hospINDEX® active in the pharmaceutical sector. GEP (Galenica Economic Profit) A medical database for all processes such as logis- An internally defined parameter used in capital tics, invoicing and prescription that replaces Indication management and capital employment based on galdat® in hospitals; developed and distributed by A reason for a medical treatment or procedure. income components, free cash flow components HCI Solutions. and invested capital. The goal of the Galenica Injectafer® Group is to achieve a sustainable increase in GEP Hyperactivity Brand name of Ferinject® in the USA and Belgium. in all Business sectors. Excessively active behaviour that cannot be ade- quately controlled by the person affected. Also insureINDEX® Ginsana® referred to as attention deficit disorder (ADD). A database for cost units in the healthcare sector Ginsana® is the completely natural energy source that replaces galdat® in health insurance compa- to combat tiredness, weakness and exhaustion. Hyperkalaemia nies; developed and distributed by HCI Solutions. Ginsana® products contain only G115® standard- Potentially life-threatening condition defined as ised ginseng extract obtained from the roots of abnormally elevated levels of potassium in the Intravenous (i. v.) panax ginseng. blood. Hyperkalaemia occurs most frequently in A term referring to the administration of a medica- chronic kidney disease patients (CKD), heart tion or a liquid directly into a blood vessel. Good Distribution Practice (GDP) failure patients (HF) and patients who suffer from Guidelines for good logistics practice followed by hypertension or diabetes. Iron deficiency anaemia Switzerland, the EU and the FDA for quality assur- Anaemia due to iron deficiency: the production of ance in the storage, handling and shipment of Hyperphosphatemia haemoglobin, the red pigment in the blood, is pharmaceuticals, active substances and other An abnormally high serum phosphate level. disrupted by the lack of iron. Iron deficiency anae- medicinal products. mia is the most common form of anaemia through- Hypertension out the world. According to the World Health Good Manufacturing Practice (GMP) High blood pressure. Organization (WHO), two billion people suffer Guidelines issued by the EU and the FDA for quality from iron deficiency anaemia worldwide. assurance in the production of pharmaceuticals, Hypotension active substances and other medicinal products. Low blood pressure. Iron deficiency syndrome A mild form of iron deficiency characterised by Green Code of Conduct symptoms such as fatigue and exhaustion, irrita- Internal guidelines aimed at promoting ecological bility, paleness and brittle nails. behaviour (Code of Conduct). ISS (iron sucrose similar) Gynaecology Intravenous iron sucrose is used to treat iron defi- The branch of medicine concerned with women’s ciency. Copies of the complex structure of iron health issues. sucrose are called iron sucrose similars.

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K Medical technology N Equipment and technical procedures used in med- Key Performance Indicator (KPI) ical practices and laboratories. Nasmer® A measurement of performance in terms of pro- A moisturising nasal spray produced and distrib- gress made or level of achievement with regard to Medication check uted by Vifor Pharma. important objectives. A service provided by pharmacists under the service-based remuneration (SBR) agreement; in- NDA (New Drug Application) Kidney Disease: cludes remuneration for checking prescriptions, The NDA is the official means by which manufac- Improving Global Outcomes (KDIGO) checking for interactions (compatibility with other turers of pharmaceutical products in the USA Global foundation to improve the care and treat- medications), writing instructions for use, etc. apply to the FDA for approval to market a drug in ment outcomes of patients with kidney disease the USA. worldwide. medINDEX® A medical database that replaces galdat® in med- ND-CKD ical practices; developed and sold by HCI Solutions. Non-dialysis-dependent chronic kidney disease. L mediVISTA.ch Nephrology Life cycle management Web-based information platform for doctors in The branch of medicine dealing with the kidney and Refers to a strategic concept for managing a prod- private practice and those working in hospitals with the diagnosis and treatment of kidney dis- uct throughout its entire life cycle. which complements medINDEX®. eases. logINDEX® Mg5® netCare Database for wholesalers in the Swiss healthcare An oral magnesium replacement product for the A project initiated by pharmaSuisse, the Swiss industry which contains information on approxi- treatment of magnesium deficiency; distributed by pharmacy association, and a health insurer, mately 180,000 items. Developed by, and available Vifor Pharma. whereby physicians can speak to pharmacists and through, HCI Solutions. patients via a screen. MHRA (Medicines and Healthcare Products LTI programme Regulatory Agency) Neurology (Long-term Incentive Programme) Licensing and regulatory body for medicines in the The branch of medicine concerned with diseases Share-based profit-sharing bonus programme for UK. of the nervous system. members of the Corporate Executive Committee and certain members of management. Mircera® Noripurum® Mircera® is a prescription medicine used to treat Brand name of the oral iron replacement product symptomatic anaemia associated with chronic Maltofer® in Brazil. M kidney disease (CKD) in adult patients. Galenica and Roche have entered into an exclusive licensing Nova Magnesium® Vital agreement for the marketing and distribution of An invoicing system for Galexis customers. A magnesium replacement product for cramps in the Roche Mircera® product in the USA and Puerto the calf muscles; developed and distributed by Rico. Vifor Pharma. O MKA Maltofer® Member of the management of the Galenica Group. OLPCockpit An oral iron replacement product for the treat- Payment control function of the pharmacy man- ment of iron deficiency that is sold worldwide; Mutual recognition procedure agement tool TriaPharm®. developed and produced by Vifor Pharma. Procedure that allows member states of the Euro- pean Union to approve decisions about a medicinal OLPFact Managed Care product, such as a marketing authorisation, that Function of the pharmacy management tool A healthcare management model. The Managed have been decided by another EU country. TriaPharm® that supports invoicing to health Care model incorporated into the revision of the insurers. Swiss Federal Health Insurance Act is intended to my-eDossier promote integrated healthcare networks and im- Pharmaceutical database with information about Onco-haematology prove ability to offset risk. a patient’s drug therapy which is part of the phar- The branch of medicine concerned with cancers macy management tool TriaPharm®. that affect the blood system. Marketing Authorization Application MAA Marketing authorization application submitted to Oncology the European Medicines Agency (EMA). The branch of medicine that deals with cancer.

MDI Operational Excellence (OPEX) Member of senior management of the Galenica When implementing OPEX, companies apply it to Group. their entire strategy, continually and dynamically optimising all processes and systems along the Medical affairs value chain. A general term covering the following activities: contact with physicians who are opinion leaders, Ophthalmology planning and coordination of clinical trials, inter- The branch of medicine concerned with the anat- face between marketing and medicine, medi- omy, functions, pathology and treatment of the cal-scientific training and continuing education for eye. sales representatives. OPINIO The Galenica Group employee survey.

Galenica annual report 2015 176 Annex Glossary

Oral Pharma Care R A term referring to a medication ingested through Comprehensive medical in-home care of patients the mouth. with chronic and rare diseases; provided by Regulatory affairs MediService. A general term for the activities that are required Osteoporosis in order to obtain approval from the authorities for A disease (of old age) involving a greater vulnera- pharmavista the development, manufacture, marketing and dis- bility to bone fracture due to an overly rapid reduc- An Internet-based product information platform tribution of pharmaceuticals. tion in bone mass; often associated with calcium developed and sold by HCI Solutions. deficiency. Renegy® Phosphosorb® Brand name of Ferinject® in Latin American coun- Osvaren® Phosphate binder for the treatment of elevated tries. Phosphate binder for the treatment of elevated phosphate levels in patients with chronic kidney phosphate levels in patients with chronic kidney disease who are undergoing dialysis (haemodia- Rheumatology disease who are undergoing dialysis lysis or peritoneal dialysis). Marketed by Vifor The branch of medicine dealing with the diagnosis (haemodia lysis or peritoneal dialysis). Marketed Fresenius Medical Care Renal Pharma. and treatment of chronic diseases which mostly by Vifor Fresenius Medical Care Renal Pharma. become evident through musculoskeletal pain. Phytopharmacy Otalgan® The science that deals with the effects and manu- Roll-out A product for the treatment of earache and inflam- facture of plant-based pharmaceuticals. The market launch of a product or service. The mation of the eardrum; produced and distributed term refers primarily to technical applications. by Vifor Pharma. Polymedication check A compliance-related check by the pharmacist to Rx OTC products ascertain whether various medicines being taken A designation for prescription drugs or medicines. Over-the-counter products, a term used to refer to simultaneously by the patient are tolerated in com- medicines available without a prescription (Con- bination. sumer Healthcare Products). S Predialysis OTX products The stage of renal insufficiency prior to com- SAM (special staff training) OTX medications are drugs which are not prescrip- mencement of dialysis. A series of training seminars for new employees tion-only, but are nonetheless largely prescribed focused on processes and personal development, by doctors; they are not always reimbursed by Prewholesale offered within the framework of the Corporate health insurers. The prewholesaler operates the warehouse logis- Management Development (CMD) programme. tics based on the guidelines of the producer at the producer’s expense. In other words: warehouse SDC (Swiss Agency for Development P logistics are being outsourced. For example, Alloga and Cooperation) in the Galenica Group. Swiss federal authority responsible for the coun- Parapharmaceuticals try’s involvement in international collaborations, Products such as wound dressings that are sold Process management development activities and humanitarian assis- along with pharmaceuticals but do not meet the The design and management of entire processes. tance. Administratively subordinate to the Federal legal definition of a pharmaceutical. Department of Foreign Affairs. Promologistics Parcel Service A logistics system for pharmaceutical companies’ SECO (State Secretariat for Economic Affairs) Transport of parcels to and between Galexis cus- promotional materials; marketed by Galexis. The State Secretariat for Economic Affairs is re- tomers, performed along with regular deliveries by sponsible for creating the regulatory and economic Galexis. policy conditions for sustainable economic growth. Q SECO is an office of the Federal Department of Parenteral Economic Affairs. A term referring to administration of a medicine by QMS (quality management system) a route other than the gastrointestinal tract; gen- Quality management systems ensure that the sys- Self-dispensation erally by infusion (such as with Venofer®), injec- tem quality, process quality and product quality in Direct dispensation of medicines by physicians. tion, through the skin (transdermal) or mucous an organisation are checked and improved. The membranes. aim of a quality management system is to perma- Senaca® nently improve a company’s performance. With the web-based system Senaca®, MediService Pemphigus vulgaris helps patients to adapt their lifestyle in a struc- An autoimmune disease in which the immune tured and scheduled manner. system produces antibodies against certain pro- teins of the skin and the mucous membranes. Serum ferritin Iron content in the blood. Performance units Performance-related measurement unit used in Serum phosphorus level the Long-term Incentive Programme. Concentration of phosphorus in the blood.

Perskindol® A product line that provides relief from aching muscles and joints; manufactured and distributed by Vifor Pharma.

Galenica annual report 2015 Glossary Annex 177

Service-based remuneration (SBR) T U The agreement between santésuisse (the Swiss Association of Health Insurers) and pharmaSuisse Tecfidera® (BG-12) Uro-Vaxom® (formerly the Schweizerische Apothekerverband Medication produced by Biogen Idec for the treat- Biotech drug for the prevention and alleviation of – the Swiss Association of Pharmacists), under ment of relapsing-remitting multiple sclerosis and urinary tract infections; developed and marketed which a pharmacy’s income is no longer linked to rheumatoid arthritis. Manufactured by Vifor Pharma by OM Pharma. the product price. in Switzerland under contract.

Sevelamer Telemedicine V An active ingredient from the phosphate binder Medical diagnosis and therapy via telecommunica- group, which is used in dialysis patients with hy- tions. Value-based management perphosphataemia to bind dietary phosphates. A management approach that ensures that com- Third-party logistics service panies are focused on improving enterprise value Sorbisterit® Extensive offering that enables customers and (corporate value). Sorbisterit® is a preparation that can be adminis- suppliers to transfer their logistics (both bulk and tered orally or rectally in the event of an increase dispersion) to the Logistics Business sector. Vascular check in blood potassium levels in acute or chronic kid- The Galexis vascular check allows pharmacists to ney failure. Marketed by Vifor Fresenius Medical Top Homecare give customers important information about the Care Renal Pharma. A sales and consulting concept in the homecare condition of their blood vessels within five min- area for pharmacies and drugstores; developed utes. Specialty Pharma, a strategic area and marketed by Galexis. The strategic focus by the Galenica Group on the Velphoro® (PA21) development, production and sale of its own TriaMed® Iron-based phosphate binder used to control se- medicines in international markets, particularly A management software solution for medical prac- rum phosphorus levels in patients with dialysis- products for iron deficiency, as well as its own in- tices; developed and marketed by HCI Solutions. dependent chronic kidney disease (CKD). Devel- fectious diseases/OTX and OTC products. oped and produced by Vifor Pharma; distributed TriaMed® Box by Vifor Fresenius Medical Care Renal Pharma. Surgery A small computer, fully preconfigured with The branch of medicine that uses operative manual TriaMed®. An entry product launched by HCI Veltassa™ (Patiromer FOS) or instrumental techniques on a patient to treat Solutions. Investigational medicinal product from Relypsa diseases and injuries. Inc. for the treatment of hyperkalaemia, which TriaMed TS® occurs most frequently in chronic kidney disease SwissDocu® Management software for medical practices which and heart failure patients. A service that provides information on products runs via an external server of HCI Solutions; devel- and on scientific and non-scientific questions from oped and sold by HCI Solutions. Venofer® pharmacies and drugstores; operated by HCI Solu- An intravenous product for the treatment of iron tions. TriaOne® deficiency; developed and produced by Vifor Integrated administrative solution with complete Pharma and sold worldwide. Swiss Drug Compendium coverage of all necessary functionalities of a com- (Arzneimittel-Kompendium der Schweiz®) pany (ERP); based on the former product Arizona, Vial A standard reference work for medical profession- developed by BMC. A small bottle with various types of closure (e. g. als that contains extensive technical product infor- capsule closure with a membrane for piercing). mation; developed and marketed by HCI Solutions. TriaPharm® A management software solution for pharmacies; Vitafor® probi-immun® Swiss HealthCare Services, a strategic area developed and marketed by HCI Solutions. Swedish probiotic prevention treatment against The focus by the Galenica Group on a business colds. Marketed by Vifor Consumer Health. model providing services for the Swiss healthcare TriaScan® market. This model integrates the Amavita, Sun Expansion software from TriaPharm® to scan in Store, Coop Vitality, MediService and Winconcept and digitise prescriptions; developed and mar- W pharmacy formats, logistics services and informa- keted by HCI Solutions. tion management. WHO Triofan® The World Health Organization of the United Na- Swissmedic Nasal spray for colds, the leading product of its tions, based in Geneva, Switzerland. The Swiss Agency for Therapeutic Products; the type in Switzerland; produced and sold by Vifor regulatory agency for medicines and medical de- Pharma. Wholesale vices based in Bern. No pharmaceutical products Link between the various stages of distribution; for humans or animals may be marketed in Swit- purchases goods that it does not generally process zerland until they have been licensed by Swiss- or manufacture itself (merchandise) and distributes medic. All clinical studies in Switzerland must these to processing, retail, industrial or other com- also be approved by Swissmedic. mercial companies, etc. For example, Galexis and Unione Farmaceutica Distribuzione in the Galenica Symfona® Group. A gingko-based product for the treatment of age- related impaired cerebral blood flow, for enhanc- WTO ing the power of concentration and for increasing The World Trade Organization is an international memory retention; developed and distributed by organisation headquartered in Geneva that regu- Vifor Pharma. lates trade and economic relations.

Galenica annual report 2015 178 Annex Addresses of companies of the Galenica Group

Addresses of companies of the Galenica Group

Galenica Group Belgium Netherlands Vifor Pharma België NV Vifor Pharma Nederland B.V. Headquarters Uitbreidingstraat 84, 2600 Antwerp, Belgium Westbroek 43, NL-4822 ZX Breda, Netherlands Galenica Ltd. Phone +32 3218 2070, fax +32 3218 2208 Phone +31 88 848 43 00, fax +31 88 848 43 19 Untermattweg 8, 3027 Bern, Switzerland www.viforpharma.be www.viforpharma.nl Phone +41 58 852 81 11, fax +41 58 852 81 12 www.galenica.com Canada Peru Aspreva International Ltd. OM Pharma S.A. Pension funds 1203–4464 Markham Street, Jr. Rey Basadre 385, Lima 17 – Apartado 3605 Galenica Pension Fund Victoria BC V8Z 7X8, Canada Lima 100, Peru Untermattweg 8, 3027 Bern, Switzerland Phone +1 250 744 2488, fax +1 250 744 2498 Phone +51 1 61 68 100, fax +51 1 61 68 199 Phone +41 58 852 87 00, fax +41 58 852 87 01 www.viforpharma.com www.ompharma.pe www.galenica-pvs.ch China Portugal GaleniCare Pension Fund Vifor Pharma Asia Pacific Pte. Ltd. OM Pharma S.A. Untermattweg 8, 3027 Bern, Switzerland Beijing Representative Office Rua Industria n°2, Quinta Grande, Phone +41 58 852 87 00, fax +41 58 852 87 01 Unit 1201-30, China Resources Building 2610-088 Amadora – Lisboa, Portugal www.galenicare-pvs.ch 8 Jianguomenbei Avenue (Apartado 60 001 – 2701-951 Amadora) Dongcheng District, Beijing 100005, China Phone +351 21 470 85 00, fax +351 21 470 85 06 Phone +86 10 5811 1891 www.ompharma.pt Vifor Pharma fax +86-10-5811 1999 www.viforpharma.sg Romania Headquarters Vifor Pharma Romania Srl. Vifor Pharma Ltd. France Bd. 21 Decembrie 1989 nr. 77 Flughofstrasse 61, P.O. Box, 8152 Glattbrugg, Vifor France SA Cladirea A The Office, etaj 6, camera 6.5 Switzerland 100-101, Terrasse Boieldieu, Tour Franklin, 400604 Cluj-Napoca, Romania Phone +41 58 851 80 00, fax +41 58 851 80 01 La Défense 8 Phone +40 264 449 556, fax +40 264 550 230 www.viforpharma.com 92042 Paris La Défense Cedex, France www.viforpharma.ro Phone +33 1 41 06 58 90, fax +33 1 41 06 58 99 Argentina www.viforpharma.fr Russia Vifor Pharma America Latina S.A. Vifor (International) Inc. Los Crisantemos 265, Edificio Skyglass Germany 44, 3rd Tverskaya-Yamskaya St., Piso 2 Oficina 306, Buenos Aires, Vifor Pharma Deutschland GmbH 125047 Moscow, Russia CP (1669), Argentina Baierbrunner Strasse 29, 81379 Munich, Phone +7 495 564 82 66, fax +7 499 251 58 08 Phone +54 2320 477272 Germany www.viforpharma.ru fax +54 2320 477272251 Phone +49 89 324 918 600 www.viforpharma.com fax +49 89 324 918 601 Saudi Arabia www.viforpharma.de Vifor (International) Ltd. Asia/Pacific Technical Science Office Vifor Pharma Asia Pacific Pte. Ltd. Ireland Level 29, Tower B, Olaya Towers 89 Amoy Street, 01–00 Singapore 069908 Vifor Pharma UK Limited 11523 Riyadh, Kingdom of Saudi Arabia Phone +65 6327 5937, fax +65 6327 5936 70 Sir John Rogerson’s Quay, Dublin, Ireland Phone +966 011 297 8070 www.viforpharma.sg Phone +353 1 232 2000, fax +353 1 232 3333 www.viforpharma.com www.viforpharma.co.uk Australia Spain Vifor Pharma Pty Ltd. Italy Vifor Pharma España SL Level 8, 80 Dorcas Street, Southbank, Vifor Pharma Italia S.r.l. Avenida Diagonal 611, Planta 10, Melbourne, VIC, 3006, Australia Via Luigi Lilio, 62, 00142 Rome, Italy 08028 Barcelona, Spain Phone +61 3 96 86 0111, fax +61 3 96 86 0333 Phone +39 06 45650120, fax +39 06 87739761 Phone +34 902 121 111, fax +34 93 863 05 58 www.viforpharma.com.au www.viforpharma.com www.viforpharma.es

Austria Sweden Vifor Pharma Österreich GmbH Vifor Pharma Nordiska AB Linzerstrasse 221, 1140 Wien, Austria Torshamnsgatan 30 A, 164 40 Kista, Sweden Phone +43 1 41 64 777 0 Phone +46 8 558 066 00, fax +46 8 558 06 699 fax +43 1 41 64 777 17 www.viforpharma.se www.viforpharma.at

Galenica annual report 2015 Addresses of companies of the Galenica Group Annex 179

Switzerland Vifor Fresenius Medical Care Galenica Santé Aspreva Pharmaceuticals Ltd. Renal Pharma Untermattweg 8, 3027 Bern, Switzerland (business addresses) Phone +41 58 852 81 11, fax +41 58 852 81 12 Products & Brands www.viforpharma.com Belgium Vifor Fresenius Medical Care Vifor Consumer Health AG OM Pharma Ltd. Renal Pharma België NV Route de Moncor 10, P.O. Box 22, Rue du Bois-du-Lan, P.O. Box 88, Uitbreidingstraat 84 1752 Villars-sur-Glâne, Switzerland 1217 Meyrin 2, Switzerland 2600 Antwerpen, Belgium Phone +41 58 851 61 11, fax +41 58 851 60 50 Phone +41 22 783 11 11, fax +41 22 783 11 22 www.viforconsumerhealth.ch www.viforpharma.com Denmark Vifor Fresenius Medical Care G-Pharma AG Vifor Pharma Renal Pharma Danmark A/S Industriestrasse 2, P.O. Box, c/o OM Pharma Ltd. Oldenburg Alle 1, Høje Taastrup 4704 Niederbipp, Switzerland 22, Rue du Bois-du-Lan, P.O. Box 88, 2630 Taastrup, Denmark Tel. +41 58 851 72 58, Fax +41 58 851 72 57 1217 Meyrin 2, Switzerland Phone +41 22 783 11 11, fax +41 22 783 11 22 France www.viforpharma.com Vifor Fresenius Medical Care Retail Renal Pharma France S.A.S. Vifor Ltd. 100–101, Terrasse Boieldieu, Tour Franklin, Amavita Health Care Ltd. 10, Route de Moncor, P.O. Box, La Défense 8 Industriestrasse 2, 4704 Niederbipp, 1752 Villars-sur-Glâne, Switzerland 92042 Paris La Défense Cedex, France Switzerland Phone +41 58 851 61 11, fax +41 58 851 60 50 Phone +41 58 851 71 11, fax +41 58 851 71 14 www.viforpharma.ch Germany Fresenius Medical Care Nephrologica GaleniCare Ltd. Vifor Ltd. Deutschland GmbH Untermattweg 8, 3027 Bern, Switzerland Branch Medichemie Ettingen Siemensstrasse 21 Phone +41 58 852 84 00, fax +41 58 852 84 84 Brühlstrasse 50, P.O. Box, 61352 Bad Homburg, Germany www.galenicare.com 4107 Ettingen, Switzerland Phone +41 58 851 22 00, fax +41 58 851 22 05 Italy GaleniCare Holding Ltd. www.viforpharma.ch Vifor Fresenius Medical Care Untermattweg 8, 3027 Bern, Switzerland Renal Pharma Italia S.r.l. Phone +41 58 852 84 00, fax +41 58 852 84 84 Vifor (International) Ltd. Via Camillo Benso Conte di Cavour, 17 www.galenicare.com Rechenstrasse 37, P.O. Box, 9001 St. Gallen, 26010 Vaiano Cremasco CR, Italy Switzerland GaleniCare Management Ltd. Phone +41 58 851 84 84, fax +41 58 851 85 88 Netherlands Untermattweg 8, 3027 Bern, Switzerland www.viforpharma.com Vifor Fresenius Medical Care Phone +41 58 852 84 00, fax +41 58 852 84 84 Renal Pharma Nederland B.V. www.galenicare.com United Arab Emirates Westbroek 43 Vifor International AG Rep Office 4822 ZX BREDA, Netherlands MediService Ltd. Aspin Tower, Aspin Commercial Building Ausserfeldweg 1, 4528 Zuchwil, Switzerland 12th Floor, Office No: 1202, Shiek Zayed Road, Spain Phone +41 32 686 20 20, fax +41 32 686 20 30 PO Box: 214866, Dubai, U.A.E Vifor Fresenius Medical Care www.mediservice.ch Phone +971(4) 352 3774, fax +971(4) 352 1142 Renal Pharma España SL www.viforpharma.com Avenida Diagonal 613, Planta 7a, Sun Store SA 08028 Barcelona, Spain 38, rue des Jordils, 1025 St-Sulpice, United Kingdom Switzerland Vifor Pharma UK Limited Switzerland Phone +41 58 851 90 00, fax +41 58 851 90 01 The Old Stables, Bagshot Park, Bagshot, Vifor Fresenius Medical Care www.sunstore.ch Surrey GU19 5PJ, UK Renal Pharma AG Phone +44 1276 853 600, fax +44 1276 452 341 Flughofstrasse 61, P.O. Box, Winconcept AG www.viforpharma.co.uk 8152 Glattbrugg, Switzerland Untermattweg 8, 3027 Bern, Switzerland Phone +41 58 851 82 00, fax +41 58 851 80 01 Phone +41 58 852 82 00, fax +41 58 852 82 10 USA www.winconcept.ch Aspreva Pharmaceuticals Inc. United Kingdom 106 Allen Road, Basking Ridge, NJ 07920, USA Vifor Fresenius Medical Care Golaz Chemist SA Phone +1 908 212 1020, fax +1 908 212 1029 Renal Pharma UK Ltd. Place Saint-François 6, 1003 Lausanne, www.viforpharma.com The Old Stables, Bagshot Park, Bagshot, Switzerland Surrey GU19 5PJ, UK Phone +41 21 310 20 71, fax +41 21 310 20 81 www.golaz.ch

Galenica annual report 2015 180 Annex Addresses of companies of the Galenica Group

Not fully consolidated: HCI Solutions Ltd. Untermattweg 8, P.O. Box, 3000 Bern 1, Coop Vitality AG Switzerland Untermattweg 8, 3027 Bern, Switzerland Phone +41 58 851 26 00, fax +41 58 851 27 10 Phone +41 58 852 86 20, fax +41 58 852 86 30 www.hcisolutions.ch www.coopvitality.ch HCI Solutions Ltd. Coop Vitality Management AG Worbstrasse 201, Untermattweg 8, 3027 Bern, Switzerland 3073 Gümligen, Switzerland Phone +41 58 852 86 20, fax +41 58 852 86 30 Phone +41 58 851 26 00, fax +41 58 851 27 10 www.coopvitality.ch www.hcisolutions.ch

Coop Vitality Health Care GmbH HCI Solutions Ltd. Industriestrasse 2, 4704 Niederbipp, En Budron H16, Switzerland 1052 Le Mont-sur-Lausanne, Switzerland Phone +41 58 851 71 11, fax +41 58 851 71 14 Phone +41 58 851 26 00, fax +41 58 851 27 10 www.hcisolutions.ch

Services HCI Solutions Ltd. Elisabethenanlage 11, Alloga Ltd. 4010 Basel, Switzerland Buchmattstrasse 10, P.O. Box, 3401 Burgdorf, Phone +41 58 851 26 00, fax +41 58 851 27 10 Switzerland www.hcisolutions.ch Phone +41 58 851 45 45, fax +41 58 851 46 00 www.alloga.ch HCI Solutions Ltd. Bureau de référencement Dauf SA 17, rue des Pierres-du-Niton Via Figino 6, 6917 Barbengo-Lugano, 1207 Geneva, Switzerland Switzerland Phone +41 58 851 28 00, fax +41 58 851 28 09 Phone +41 91 985 66 11, fax +41 91 985 66 67 www.hcisolutions.ch www.dauf.ch

Galexis Ltd. Industriestrasse 2, P.O. Box, 4704 Niederbipp, Switzerland Phone +41 58 851 71 11, fax +41 58 851 71 14 www.galexis.com

Distributionszentrum Niederbipp Industriestrasse 2, P.O. Box, 4704 Niederbipp, Switzerland Phone +41 58 851 71 11, fax +41 58 851 71 14

Centre de distribution Lausanne-Ecublens 2, route de Crochy, P.O. Box 135, 1024 Ecublens, Switzerland Phone +41 58 851 51 11, fax +41 58 851 53 33

Medifilm AG Ostringstrasse 10, 4702 Oensingen, Switzerland Phone +41 58 851 40 00, fax +41 58 851 40 99 www.medifilm.ch

Unione Farmaceutica Distribuzione SA Via Figino 6, 6917 Barbengo-Lugano, Switzerland Phone +41 91 985 61 11, fax +41 91 994 47 62 www.unione.ch

Status: February 2016

Galenica annual report 2015 Impressum

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

Overall responsibility Corporate Communications and Corporate Finance Division

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

Concept and Layout Werbelinie AG, Bern and Thun

Lithographs Form AG, Bern

Pictures Jean-Jacques Ruchti, Schönenwerd

The full version of the annual Report is also available in French and German and can be downloaded as a PDF at www.galenica.com.

Galenica annual report 2015 Galenica Ltd. Untermattweg 8 · P.O. Box · CH-3001 Bern Phone +41 58 852 81 11 · Fax +41 58 852 81 12 [email protected] · www.galenica.com

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