VIFOR PHARMA ANNUAL REPORT 2018 TABLE OF CONTENTS 4 Letter from the Executive Chairman 58 Corporate governance 6 Letter from the Chief Operating Officer 60 Group structure and shareholders 8 Financial highlights 2018 62 Structure of the share capital 10 Our vision, mission, strategy 64 The Board of Directors 14 Performance overview 68 Management and areas of responsibility 16 2019 Outlook and financial guidance 70 Shareholders’ rights to participate 72 Change of control and protective measures 18 Our products 72 Vifor Pharma Group compliance network Key growth drivers 73 Management information and monitoring 20 – Ferinject®/Injectafer® tools of the Board of Directors 24 – Vifor Fresenius Medical Care Renal Pharma 74 Auditors 24 – Mircera® 75 Information policy 24 – Venofer® 78 Members of the Board of Directors 25 – Retacrit™ 84 Members of the Executive Committee 25 – Vadadustat 26 – Velphoro® 90 Remuneration 27 – Rayaldee® 92 Chairwoman’s overview 27 – Avacopan 93 Philosophy and approach to remuneration 28 – CCX140 94 Governance 29 – CR845 98 Board and Executive remuneration 30 – Veltassa® 104 Remuneration awarded in 2018 and 2017 32 Other products 110 Overview of executive remuneration 32 – Maltofer® in 2017 and 2018 32 – VIT-2763 111 Outlook: changes in remuneration model 33 – OM Pharma products for 2019 33 – Broncho-Vaxom® 112 Statutory auditor’s report 33 – Uro-Vaxom® 33 – Doxium® 114 Consolidated financial statements 116 Consolidated statement of income 34 Our patients 117 Consolidated statement of 36 Patient stories comprehensive income 42 Looking ahead: addressing patient needs 118 Consolidated statement of financial position with patient blood management 119 Consolidated statement of changes in equity 120 Consolidated statement of cash flows 44 Our people 121 Notes to the consolidated financial statements 168 Statutory auditor’s report 52 Corporate responsibility 172 Financial statements of Vifor Pharma Ltd. 174 Statement of income 175 Statement of financial position 176 Notes to the financial statements 181 Statutory auditor’s report 184 Upcoming dates 185 Contact information Vifor Pharma Ltd. Annual Report 2018 3 LETTER TO SHAREHOLDERS EXECUTIVE CHAIRMAN DEAR SHAREHOLDERS, 2018 was another outstanding year for the Vifor Pharma Group, with significant progress made towards achieving our vision of becoming a leading global pharmaceutical company in iron deficiency, nephrology and cardio-renal therapies. It marked our first year of operating as a fully focused pharmaceutical business following the highly successful listing of Galenica Santé in April 2017. As we have done for the last 23 years, we over- delivered on what we promised and we once again increased our profit before minorities in 2018. The headline numbers highlight our strong growth story, with 2018 net sales up 22.7% to CHF 1,584.6 million, and EBITDA up 39.7% to CHF 391.5 million. Our three growth drivers – Ferinject®/Injectafer®, the joint company Vifor Fresenius Medical Care Renal Pharma (VFMCRP) and Veltassa® – all continued to perform strongly. We are well on track to achieve the promises we 4 Vifor Pharma Ltd. Annual Report 2018 made when we set out our Milestone 2020 plan 2018 was also the year when we refreshed our to deliver sales of more than CHF 2 billion and company values, building them around the EBITDA in the high triple-digit millions in 2020. As core themes of Entrepreneurship, Respect and we explained during our Capital Markets Day in Teamwork. We believe our values reflect the October 2018, our focus is already moving further unique aspects of our business and culture. afield with an ambitious growth strategy to take Entrepreneurship is the key to our success and us up to 2025. the foundation of our many thriving partnerships. Respect is a value we demonstrate in our daily In 2018, we continued to build on our patient- interactions, inside and outside the company. focused and partner-led strategy. Major mile- Teamwork reflects both the collaborative environ- stones included the conclusion of a licensing ment within Vifor Pharma and our distinctive agreement with Zeria to market Veltassa® in external relationships with some of the best- Japan and a greater emphasis on rare kidney performing and most respected companies in diseases through an increased equity investment our industry, such as Fresenius Medical Care. in ChemoCentryx. In addition, we maintained the momentum of our pipeline through VFMCRP’s On behalf of around 2,700 colleagues at the agreement with Cara Therapeutics to develop Vifor Pharma Group, and the many more patients and commercialise CR845 for the treatment of around the world who depend on us every chronic kidney disease-associated pruritus. day, I would like to thank you for your sustained Furthermore, we moved our own ferroportin commitment and support. I look forward to inhibitor VIT-2763 into human clinical studies engaging with you as we continue to execute our to help counter iron overload in patients with plans to achieve Milestone 2020 and set out impaired metabolism. a clear path to long-term success as we look towards Objective 2025. Having the right leadership team in place is another key component of our strategy. With the Yours sincerely, appointment of Jacques Theurillat to the Board of the Vifor Pharma Group at the 2018 Annual Shareholder Meeting (AGM), we have added new expertise and experience to complement our existing capabilities. Towards the end of 2018, Etienne Jornod Barbara Angehrn joined the Executive Committee Executive Chairman of the Board of Directors in the newly-created role of Chief Business Officer, bringing invaluable international experi- ence in product in-licensing and commercial- isation. I was delighted to see Patrick Treanor step up to take over from Scott Garland as President of Relypsa, a Vifor Pharma Group Company. These are just a few examples of the many talented people we promoted or welcomed to Vifor Pharma during 2018 to support our growth. It is clear that we are increasingly able to attract the best talent in our industry due to our exciting vision and plans for the future of the company. Vifor Pharma Ltd. Annual Report 2018 5 LETTER TO SHAREHOLDERS PRESIDENT OF THE EXECUTIVE COMMITTEE AND COO DEAR SHAREHOLDERS, Our strong financial and operating performance in 2018 is the consequence of our focus on two critical strengths of the Vifor Pharma Group. First, our capacity to build and leverage best-in-class partnerships to maximise our performance. Second, our ability to create and develop valuable new markets. These capabilities are the basis of our current success and enable us to leverage the future potential of our key growth drivers – Ferinject®/Injectafer®, Vifor Fresenius Medical Care Renal Pharma (VFMCRP) and Veltassa®. We saw another excellent performance from our market-leading i.v. iron product Ferinject®/ Injectafer®. Net sales increased by 23.8% versus the previous year, a remarkable result for a product which has been on the market for more than ten years. Ferinject®/Injectafer® continued to drive market growth and gain market share in 2018, as a result of therapeutic and geographic expansion. Major international studies are underway to further increase growth in the treatment of heart failure, and 6 Vifor Pharma Ltd. Annual Report 2018 we are also supporting initiatives in patient blood In March, we announced that Zeria, our partner management. These are aimed at improving in Japan for Ferinject®, had also signed an clinical outcomes, reducing the need for blood agreement to commercialise Veltassa® in the transfusions and, at the same time, reducing same market. healthcare costs. Geographically, we continue to prepare for the launch of Ferinject® in Japan in Our partnership with Fresenius Medical Care 2019 and to progress studies which are intended through the joint company VFMCRP is the to support a launch in China in 2021. foundation of our ambition to be the global leader in nephrology. Continued strong Our second leading i.v. iron therapy Venofer® performances by Mircera®, licensed from was supported by results from the pioneering F. Hoffmann-La Roche, and Velphoro® made PIVOTAL study, which provided strong evidence this another excellent year for VFMCRP as of its efficacy and safety in treating anaemia it cements its leading position in the US and in patients on haemodialysis. international nephrology markets. Our experience in developing and expanding the While our three key growth drivers all made global market in iron deficiency products over significant progress in 2018, we also focused several decades is now helping us create another on the new products that will drive growth in new market for Veltassa®, our potassium binder years to come. We confirmed our commitment for treating hyperkalaemia. By the end of 2018, to rare renal diseases by increasing our stake more than 77,000 patients had received Veltassa® by 14.5% to a total of 21.1% in ChemoCentryx. in the US, helped by an important FDA-approved We also acquired rights to CR845 from Cara label change for its use with or without food that Therapeutics for the treatment of CKD-associated increased flexibility for people using it to control pruritus, a highly debilitating condition which their hyperkalaemia. Veltassa® has also been affects around two-thirds of dialysis patients. successfully launched in a number of European countries and obtained reimbursement at prices We completed phase-I studies on our own that recognise its value to patients. Launches in ferroportin inhibitor, which is designed to prevent further European countries will continue through- excessive iron release into the blood. Phase-II out 2019 and 2020, subject to the outcome of is expected to start in the second half of 2019. negotiations for reimbursement. With another excellent performance in 2018, we Veltassa® is already transforming the way look forward confidently to 2019 and beyond nephrologists treat hyperkalaemia, and by as we continue to build on our unique capabilities showing its benefits supporting cardio-renal as an organisation and to drive real changes to therapies, our focus will now expand to car- the way patients are treated.