VIFOR PHARMA ANNUAL REPORT 2019 On the cover Learn more about Christine’s story ‘Facing iron deficiency’ viforpharma.com/patients TABLE OF CONTENTS 4 Letter from the Executive Chairman 66 CORPORATE GOVERNANCE 6 Letter from the Chief Operating Officer 68 Group structure and shareholders 8 Financial highlights 2019 70 Structure of the share capital 10 Our vision, mission, strategy 72 The Board of Directors 16 Performance overview 77 Management and areas of responsibility 18 2020 Outlook and financial guidance 80 Shareholders’ rights to participate 82 Change of control and protective measures 20 OUR PRODUCTS 82 Vifor Pharma Group compliance network Key growth drivers 83 Management information and monitoring 22 – Ferinject®/Injectafer® tools of the Board of Directors 28 – Nephrology 84 Auditors 28 – Mircera® 85 Information policy 29 – Retacrit™ 88 Members of the Board of Directors 29 – Venofer® 94 Members of the Executive Committee 30 – Vadadustat 30 – Velphoro® 100 REMUNERATION 32 – Rayaldee® 102 Chairwoman’s overview 33 – Invokana® 103 Philosophy and approach to remuneration 33 – Avacopan 104 Governance 34 – CCX140 108 Board and Executive remuneration 34 – CR845 (Difelikefalin) 114 Remuneration awarded in 2019 and 2018 36 – Veltassa® 120 Overview of executive remuneration 40 Other products in 2019 and 2018 40 – Maltofer® 121 Outlook: no changes in remuneration model 40 – VIT-2763 for 2020 41 – OM Pharma products 122 Statutory auditor’s report 41 – Broncho-Vaxom® 41 – Uro-Vaxom® 124 CONSOLIDATED FINANCIAL STATEMENTS 41 – Doxium® 126 Consolidated statement of income 127 Consolidated statement of 42 OUR PATIENTS comprehensive income 46 Patient stories 128 Consolidated statement of financial position 129 Consolidated statement of changes in equity 52 OUR PEOPLE 130 Consolidated statement of cash flows 131 Notes to the consolidated financial statements 60 CORPORATE RESPONSIBILITY 177 Statutory auditor’s report 180 FINANCIAL STATEMENTS OF VIFOR PHARMA LTD. 182 Statement of income 183 Statement of financial position 184 Notes to the financial statements 190 Statutory auditor’s report 192 Upcoming dates 193 Contact information Vifor Pharma Ltd. Annual Report 2019 3 Letter to Shareholders EXECUTIVE CHAIRMAN “ Our strong ability to execute on our strategy drove us to deliver profitable growth and exceed expectations in 2019.” DEAR SHAREHOLDERS, In 2019, Vifor Pharma Group continued to focus on delivery and execution, which are key to ensuring we keep our promises to you and to the ever growing number of patients around the world being treated with our medicines. This focus enabled us in 2019 to take another step towards achieving the ambitious Milestone 2020 targets. Our ability to execute on our strategy of becoming the global leader in iron deficiency, nephrology and cardio-renal therapies is helping us to make that ambition a reality. Our revenues in 2019 grew by 18.5% to CHF 1,877.2 million, and our EBITDA increased by 37.9% to CHF 540.0 million. We continued to optimise our existing products and invested in our future pipeline, while carefully managing costs and ensuring positive returns for our shareholders. As we have done for each of the last 25 years, in 2019 we delivered profitable growth and delivered on our commitments. ETIENNE JORNOD Execution has enabled us to build Ferinject®/ Executive Chairman of the Board of Directors, Injectafer® into our first blockbuster product, Vifor Pharma Group exceeding USD 1 billion of in-market sales during 2019. We have also established a clear leader- ship position in nephrology with a broadening pipeline of innovative products and services. In addition, we have continued to build awareness in hyperkalaemia to ensure that Veltassa® becomes our second blockbuster product. 4 Vifor Pharma Ltd. Annual Report 2019 Our Values underpin our success. Entrepreneur- We continued to be endorsed by partners of the ship has been at the heart of our ability to highest calibre. During 2019, we announced a identify opportunities and take calculated risks – collaboration with Johnson & Johnson to commer- creating world-class products such as Venofer®, cialise Invokana® in the US to nephrologists for Velphoro®, and Ferinject®/Injectafer® and patients with diabetic kidney disease; we expanded allowing us to develop areas of unmet medical our agreement with Akebia for vadadustat in the need, first in iron deficiency and now also in US; and we established a joint venture with hyperkalaemia. Evotec to discover and develop novel nephrology therapies. Teamwork encompasses not just the tremendous skills and dedication of the approximately One of the reasons that we attract great partners 2,800 Vifor Pharma Group employees around the is because we are seen as a responsible company, world, but also the extraordinary partnerships committed to conducting business with integrity, we maintain with leading multinational companies focusing on patients, valuing our employees, and innovators such as Fresenius Medical Care, caring about the environment and engaging with Roche, Johnson & Johnson, Pfizer, ChemoCentryx the communities in which we operate. By and many more. upholding these principles, which are the five pillar foundation of our corporate responsibility Respect is part of our DNA. Respect for patients, approach, we are demonstrating our determi- our communities, our employees and for our nation to lead by example and to remain at the competitors. forefront of our industry. In a highly competitive field, we increasingly I would like to thank all our employees, who attract the best talent in our industry. With are our most valuable asset and who delivered five expected launches ahead in Europe, commer- this outstanding performance for our patients cial and medical excellence becomes ever and shareholders. We look forward with optimism more critical and we will benefit greatly from the to a great future as we develop and define leadership of our new Chief Medical Officer, Objective 2025. Dr. Klaus Henning Jensen, and President Interna- tional, Lee Heeson joining the Executive Commit- Yours sincerely, tee in early 2020. Our Board of Directors was further strengthened during the year by the election of Dr. Sue Mahony and Kim Stratton, taking over from Daniela Bosshardt-Hengartner, Dr. Sylvie Grégoire and Fritz Hirsbrunner, who stepped down after many years of distinguished Etienne Jornod service. Executive Chairman of the Board of Directors The high quality of our business and our solid financial basis was reflected with the award of an investment grade rating by Standard & Poor’s. Vifor Pharma Group is the smallest pharmaceutical company ever to receive this rating, which pro- vides us with flexibility for the future as we look to invest in the next wave of innovation and growth. Vifor Pharma Ltd. Annual Report 2019 5 Letter to Shareholders PRESIDENT OF THE EXECUTIVE COMMITTEE AND COO “ With our three strategic growth drivers and the exciting potential of our pipeline, we are confident we can deliver our Milestone 2020 targets.” DEAR SHAREHOLDERS, By executing on our three strategic growth drivers, investing in our pipeline and ensuring we have the right people and organisation for success, Vifor Pharma Group continued to make excellent progress in 2019. Ferinject®/Injectafer® reached blockbuster status, reinforcing its position as the world’s leading intravenous (i.v.) iron product, supported by almost 12 million patient years of experience. This out- standing achievement demonstrates our execution capability in a market we have created together with our partners by investing in disease awareness initiatives. Major growth opportunities remain due to high unmet medical need for the treatment of iron deficiency and iron deficiency anaemia, as well as our plans to expand geographically. In March, Ferinject® became the first high-dose i.v. iron approved in Japan, and we are preparing for regulatory submissions in China in 2020. In nephrology, the success of our joint company Vifor Fresenius Medical Care Renal Pharma was driven by strong performance in the US. Revenues STEFAN SCHULZE from the long-acting erythropoiesis-stimulating President of the Executive Committee agent Mircera® benefited from continued expansion and Chief Operating Officer, in the US mid-sized and independent dialysis Vifor Pharma Group segments. Venofer® remained the world’s leading i.v. iron brand in volume terms. Veltassa®, our innovative therapy for the manage- ment of hyperkalaemia in chronic kidney disease (CKD) and heart failure patients, continued to 6 Vifor Pharma Ltd. Annual Report 2019 transform treatment options and grow in line with CCX140 and avacopan, CR845 and vadadustat will expectations. At the end of 2019, Veltassa® had generate significant growth alongside Veltassa® been prescribed to more than 120,000 patients in and Ferinject®, and will establish us as the global the US and Europe. The positive results from leader in nephrology. the AMBER study showed Veltassa®’s potential to help patients with resistant hypertension and Our strategy remains to drive growth in our key CKD and to maintain optimal treatment. Our focus therapeutic areas, through a combination of is also to generate additional data demonstrating commercial deals, in-licensed innovation, in-house Veltassa®’s benefits in cardiology so we can discovery and relevant acquisitions. This was continue to expand the market to help patients demonstrated in 2019 by both the agreement to with hyperkalaemia. In May, we enrolled the first co-market Janssen’s Invokana® for diabetic