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THE GALENICA GROUP – EXCELLENCE IN THE HEALTHCARE MARKET

ANNUAL REPORT 2013of the Galenica Group and Galenica Ltd.

EXCELLENCE IN THE HEALTHCARE MARKET

_Galenica is a diversified Group active throughout the healthcare market which, among other activities, develops, manufactures and markets pharmaceutical products, provides logistical services, runs pharmacies, offers database services and sets up networks through its four divisions: Pharma, Logistics, Retail and HealthCare Information._In 2013, the Galenica Group employed about 7,700 people and generated sales of CHF 3,359.4 million (+2.0%). Taking into account onetime effects, Galenica recorded doubledigit net profit growth for the 18th consecutive year, this both before and after deduction of minority interests. _Further information is available at www.galenica.com.

STRATEGY

_Since 1995, Galenica has pursued, with great success, a strategy that has transformed the former pharmaceutical wholesaler into a diversified international healthcare company. Galenica has always sought longterm growth and, at the same time, carefully distributed risk. Thanks to its wellbalanced diversification, the company has not only been able to withstand difficult times, but also to grow during these periods. Galenica will continue to adhere to its vision, pursue its goals persistently and tenaciously, and secure the future through targeted investments.

VISUAL CONCEPT

_“In tune with the customer”: Every year, Galenica defines an annual motto. This annual motto is defined and implemented by the Comité des Jeunes, a network of young staff members who have been identified as having management potential. The committee is a think tank that discusses ideas and exchanges views with the aim of getting to know the entire company better and contributing to consolidating the corporate culture, in particular through the development and practical implementation of the annual motto._To regularly remind employees of the annual motto “In tune with the customer”, the Comité des Jeunes launched a postcard campaign for staff. All employees were able to share on postcards how they embraced the annual motto on a daily basis in 2013. A total of more than 300 postcards were received. This annual report includes a selection of situations in which our employees show they are in tune with the customer.

Galenica annual report 2013

In tune with the customer_The annual motto for 2013, “In tune with the customer”, is also depicted symbolically: all employees received a heartshaped stress ball with the printed logo of the annual motto. This heart should remind us on a daily basis why we are here: to listen to and be there for our customers.

Cover picture

99Sept.95 Dez.96 97 98 00 01 02 03 04 05 06 07 08 09 10 11 12

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Key figures overview · Galenica annual report 2013 Key figures overview · Galenica annual report 2013

KEY FIGURES OVERVIEW

in million CHF 2013 2012

Galenica Group

Net sales_Pharma_Logistics_Retail_HealthCare Information (HCI)1) _Intersegment net sales

3,359.4662.7

2,118.21,245.7

39.8(707.0)

3,294.3633.3

2,102.31,189.2

47.1(677.6)

EBITDA6) 466.2 428.0EBITDA in % of net sales6) 13.9% 13.0%

EBIT6)

_Pharma_Logistics_Retail_HealthCare Information (HCI)1)

_Other and eliminations

390.6269.3

31.163.0

4.023.2

352.0257.130.760.3

4.3(0.4)

EBIT in % of net sales6) 11.6% 10.7%

Net profit6) 334.8 276.5

Attributable to:_Shareholders of Galenica Ltd.6)

_Noncontrolling interests296.2

38.6255.2

21.3

Investment in property, plant and equipment and intangible assets 71.7 53.5

Cash flow from operating activities 329.0 291.7

Cash and cash equivalents at reporting date 215.6 347.9

Employees at reporting date (FTE) 6,352 6,089

Total assets6) 3,069.4 3,152.4

Shareholders’ equity6) 1,555.1 1,331.8

Equity ratio6) 50.7% 42.2%

Net debt 442.8 567.5

Gearing6) 28.5% 42.6%

Galenica Ltd.

Profit for the year 210.4 202.2

Shareholders’ equity 628.0 489.1

in CHF 2013 2012

Share information

Nominal value per share at reporting date 0.10 0.10

Number of outstanding shares2) 6,478,741 6,475,339

Share price at reporting date 898.00 530.50

Highest share price for the year 920.00 626.00

Lowest share price for the year 527.50 479.25

Earnings per share3) 6) 45.71 39.40

Shareholders’ equity per share3) 6) 232.42 200.68

Gross dividend per share 14.004) 11.00

Payout ratio5) 6) 30.6% 27.9%

Stock exchange capitalisation at reporting date in thousand CHF 5,815,374 3,437,6001) In the operating segment information, HealthCare Information business sector is summarised as “Other” along with the activities of the Corporate Division 2) Number of shares minus weighted average number of treasury shares3) Attributable to the shareholders of Galenica Ltd. 4) According to Board of Directors’ proposal to Annual General Meeting on 8 May 20145) Gross dividend in % of net profit per share6) Previous year adjusted due to the restatement of IAS 19 (see page 107 and 108)

Net salesin million CHF

EBIT in million CHF

Net profitin million CHF

Net sales 2013 by Business sector

Number of employees 2013Net sales 2013 by region

Pharma CHF 662.7 million

Logistics CHF 2,118.2 million

Retail CHF 1,245.7 million

HCI CHF 39.8 million

(Galenica Group CHF 3,359.4 million)

Switzerland CHF 3,655.6 million

Europe CHF 364.5 million

Americas CHF 143.8 million

Other countries CHF 62.2 million

(Galenica Group CHF 3,359.4 million)

Galenica Ltd. 48

Pharma 1,955

Logistics 1,191

Retail 4,288

HCI 181

(Galenica Group 7,663)

EBIT 2013 by Business sector

Investments 2013by Business sector

EBITDA 2013 by Business sector


Logistics CHF 31.1 million

Retail CHF 63.0 million

HCI CHF 4.0 million

(Galenica Group CHF 390.6 million)




HCI CHF 2.4 million





HCI CHF 8.2 million


Cumulative growth: 2,232%; Average growth rate p.a.: 21%; Total shareholderʼs return p.a.: 23% Galenica Swiss Performance Index (SPI)

Share price performance 1995–2013 _Change in percentages at the end of each quarter

Five-year-comparison

2,400

2,100

1,800

1,500

1,200

in %

Dec.96

2,911

3,104

3,2943,359

327.1

352.0

390.6

3,187

209.5

230.5

255.6

276.5

264.9

334.8

322.8

Galenica annual report 2013 _1

CONTENT

ANNUAL REPORT 2013

3 _Statement by the Executive Chairman

5 _Foreword by the CEO

9 _Vision, mission and values

13 _Strategy

17 _Galenica 2013 in brief

Reporting

21 _Pharma

31 _Logistics

37 _Retail

45 _HealthCare Information

50 _Political environment

54 _Corporate Governance

71 _Remuneration Report

77 _Sustainability

91 _Human Resources

FINANCIAL STATEMENTS 2013

Galenica Group

100 _Key figures

101 _Consolidated income statement

102 _Consolidated statement of comprehensive income

103 _Consolidated statement of financial position 104 _Consolidated statement of cash flows

105 _Consolidated statement of changes in equity

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

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

Galenica Ltd.

155 _Income statement of Galenica Ltd.

156 _Statement of financial position of Galenica Ltd.

157 _Notes to the financial statements of Galenica Ltd.

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

ANNEX

164 _Glossary

Front Cover

_Key figures overview

Back Cover

_ Addresses of companies of the Galenica Group

_Impressum

2_ Galenica annual report 2013

Giving our undivided attention to our shareholders._Once a year, we get to meet our shareholders in person at the Annual General Meeting. This much we can reveal at this point: thanks to the new electronic voting devices and the possibility to submit instructions to the independent proxy holder elec-tronically, not only the registration will be simplified, also less paper will be generated in future._The Annual General Meeting is a unique opportunity for the shareholders’ register team to maintain personal contacts and give their undivided attention to shareholders of Galenica, making it a special event for all those involved.

Galenica annual report 2013 · Statement by the Executive Chairman _3

Dear Shareholders,Ladies and Gentlemen,

_We had another successful year in 2013, with net profit growth in double digits for the 18th consecutive year. This time it was achieved with the help of one-time effects. In spite of this restriction, the performance is exceptional and was only possible thanks to the commitment of each and every one of our employees. Furthermore, we believe that our strategic decisions as well as our corporate philosophy and culture are also decisive factors in our business model. As a result, the value of our share in-creased by almost 70% in 2013 and by more than 2,200% since 1995, when the strategy to transform Galenica was launched.

_We believe that our future success depends on continu-ing to respect our principles, which are firmly established across the corporate management. In order to illustrate the course we have taken, it is worthwile looking at some of the strategic decisions that influenced our Group in recent times:

_The agreement in 1999 with a key shareholder (Alliance UniChem, later Alliance Boots and now Alliance Boots Investments) allows us to work with a long-term perspective without having to adjust to short-term pressures. On the contrary, the agreement enables us to address simultaneously both short- and long-term demands, a much more difficult way of working, but one which means greater creation of shareholder value.

_The 2008 acquisition of Aspreva and the associated partnership with Roche have provided funding for our network of sales affiliates and clinical work, both es-sential to the development of Ferinject®/Injectafer® and Velphoro®.

_The agreements with Fresenius Medical Care in the US and the subsequent creation of Vifor Fresenius Medical Care Renal Pharma are enabling us to consolidate our position in nephrology, to launch Velphoro® with the best possible chance of success and to seek for new partnership agreements. We believe our common company is potentially a key strategic advantage.

_The acquisitions of OM Pharma, Sun Store, Medi-Service and Medifilm have strengthened our positions in the Pharma, Retail and Logistics Business sectors.

STATEMENT BY THE EXECUTIVE CHAIRMAN Strategy, philosophy and culture – A proven, long-term business model

Etienne Jornod_“Our strategic decisions and our corporate philosophy and culture are also decisive factors for the success of our business model.”

4_ Statement by the Executive Chairman · Galenica annual report 2013

Our key message to our shareholders

Strategy_Our core activities in Switzerland - Retail, Logistics and HealthCare Information - are solid and generate important free cash flow, guaranteeing us stability which enables us to focus our efforts on the global potential of iron re-placement products. We need time to raise the medical community’s awareness about the issue of iron deficiency since its negative effects on patients are generally still underestimated as they are unknown to many.

Corporate philosophy and culture_“Galenica is a long-term story” as our long-standing share-holders, who have been with us since 1995, like to say. Our strategy remains the same, and our vision “Galenica 2022” strengthens our confidence as we continue to maintain our strategy, philosophy and culture with their focus on creating long-term value.

_We hope that our existing and new shareholders will sup-port our Group in this regard. This is the key to success. We would like to thank them for their trust in us.

Etienne JornodExecutive Chairman

The “Galenica journey” continues

_Culture shock_Restructuring_Dispensing doctors_Iron/OTC

_Specialty Pharma_Aspreva, OM Pharma, Sun Store _Sales Affiliates_Venofer® in the USA_ Vifor Fresenius Medical Care Renal Pharma

_Stock exchange “revolution” _Alliance Boots partnering_US Venofer® explosion_Pharmacy chain “revolution”

_Ferinject® expansion_Velphoro® penetration_Six other projects

Well-balanced specialty pharma company _Global iron business_Other pharma businesses

Santé Division_Fully integrated company

Galenica annual report 2013 · Foreword by the CEO _5

Dear Shareholders,Ladies and Gentlemen,

_The Galenica motto for 2013 was “In tune with the cus-tomer”. Living this motto day by day also helped us to be in tune with our shareholders. By focusing on the specific needs of every single customer we continue to support the growth of our Group and have made real progress across all our businesses.

_In 2013, Galenica increased consolidated net sales by 2.0% to CHF 3,359.4 million. _On a comparable basis consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 4.1% to CHF 443.1 million, the earnings be-fore interest and taxes (EBIT) by 5.1% to CHF 367.5 million as well as net profit before minority interests by 7.8% to CHF 296.2 million and by 1.6% to CHF 257.6 million after deduction of minority interests.

_Taking into account positive one-time effects due to IAS 19 and the settlement of an international tax case EBITDA grew by 8.9% to CHF 466.2 million, EBIT by 11.0% to CHF 390.6 million. Net profit grew for the 18th consecutive year in double digits, this time by 21.1% to CHF 334.8 million before deduction of minority interests and by 16.1% to CHF 296.2 million after deduction of minority interests. The one-time effects are only influencing the consolidated earnings of the Group but not the earnings of the Business sectors.

FOREWORD BY THE CEO2013: Growing stronger

_Over the year, Galenica invested CHF 121.9 million (–12.2%) in research and development. Investments in tangible and intangible assets totalled CHF 71.7 million (+34.2%). Against the backdrop of continued price pres-sure and strong competition across all markets, this set of results is particularly impressive.

A spirit of close collaboration_Pharma division highlights of the year included two FDA approvals, for Injectafer® (US brand name of Ferinject®) for the treatment of Iron Deficiency Anaemia, and for Velphoro® (PA21) for the control of serum phosphorus levels in patients with Chronic Kidney Disease on dialysis. As important as these highlights are, success and contin-ued performance are based on a broad variety of activities and initiatives in the Pharma Business sector. Vifor Pharma has again invested in marketing and sales for Ferinject®, which expanded in existing markets, entered new ones and is now available to patients in 42 countries, as well as in clinical research to better understand the impact of Ferinject® in many therapeutic contexts.

_The Logistics, Retail and HealthCare Information Busi-ness sectors also had a successful year. Highlights were the acquisition of Medifilm, the leading company in the field of blister packaging for medicines, as well as the acquisition of a minority stake in Bahnhof Apotheke Zurich, a pharmacy with an excellent position in the most heavily frequented place in Switzerland. Good progress was also made over the year on several projects intro-duced jointly by Logistics, Retail and HealthCare Informa-tion to increase effectiveness and efficiency.

David Ebsworth_“All Business sectors made real progress in their activities as well as in important projects.”

6_ Foreword by the CEO · Galenica annual report 2013

Shared services are good, shared values even better_Our greatest asset is our employees. Around 7,700 talented individuals contribute every day to advancing the business and adapting it to ever-changing circum-stances. They are the source of our innovation and growth. I am grateful for their dedication.

_Last year, we made our employees’ contributions and our culture even more central to our operations by refining and sharpening the Galenica values. These give employ-ees, in particular those who joined Galenica recently, a common understanding of who we are and what we stand for as we strive to create long-term value for our custom-ers, communities and shareholders. Active in a broad va-riety of businesses, with operations in over 18 countries, it is essential for the Group that every employee shares the five Galenica key values:

_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.

_Based on these key values, and with continuing customer focus, the “Comité des Jeunes” of Galenica, a group of young staff members, has developed the motto for 2014: “Our passion, customer satisfaction”.

Commitment to sustainability_Galenica became more eco-friendly in 2013. The Group’s CO2 emissions declined for the first time since it started recording data in 2003 – although Galenica itself contin-ued to grow. Since the beginning of 2013, two Galenica production sites have exclusively been using electricity from hydroelectric power plants. Using natural resources economically is an important prerequisite for sustainable commercial success and forms part of our social respon-sibility. We consider the award of the “Best Newcomer” prize for our first formal report to the Carbon Disclosure Project in 2013 to be a positive confirmation of our com-mitment. We will continue to promote this.

Solid foundations, new avenues _Political changes, the economic environment, new legis-lation, exchange rates, etc. make the future in the health-care sector uncertain. However, we are confident of suc-cess in this changing environment thanks to our solid foundations and the clear, consistent strategy we have developed for capitalising on new opportunities and pen-etrating new markets.

_Our milestones for 2014 include the following:_Vifor Pharma will continue the expansion of Ferinject®

in international markets and in parallel support the US partner Luitpold Pharmaceuticals, Inc. in launching Injectafer®. We have the resources and the stamina to build and grow new markets over time.

_Furthermore, the registration and commercialisation of the novel phosphate binder Velphoro® will be pre-pared.

_In the Logistics, Retail and HealthCare Information Business sectors we will continue to seize opportuni-ties and expand our franchise. We will further optimise processes to improve profitability.

_By making progress, using our business opportunities and achieving our milestones, we look forward to still being in tune with our shareholders in a year from now. Your confidence and continued support is very much ap-preciated.

David EbsworthChief Executive Officer

P.S.: We encourage you to visit www.galenica.com through-out the year for news and updates on how we are executing our strategy.


The paperless medical centre in tune with the times._The new health centre at Bern station is using TriaMed®, produced by HCI Solutions, a proven medical information system for the Hirsladen network of medical practices. Electronic management of patient records across all internal treatment processes is making a long-term contribution to efficiency and quality assurance._Training is tailored to the needs of users and the process landscape of the medical centre. The respectful and enthusiastic approach in the training sessions engenders trust in the information system and in the staff of HCI Solutions.


Individualised advisory services for the Ticino market._The Extended Sales Service project is a tailored service offered by Unione Farmaceutica Distribuzione to producers of pharma-ceutical and parapharmaceutical products that want to have a presence in Ticino but do not have any local representatives. Together with ELK pharma Sagl, Unione Farmaceutica Distribuzione provides suppliers with a team of field staff who are familiar with regional specifics. _The Extended Sales Service enables Ticino-based pharmacists to benefit from excellent local advice as well as support in Italian, and therefore to improve quality.

Galenica annual report 2013 · Vision, mission and values _9

OUR VISION

_Thanks to our excellence in the healthcare market, we are a leading healthcare partner in our areas of activity._We strive for excellence in our fields of expertise: with our leading iron therapies and other pharma specialties, we are markedly improving patients’ quality of life right across the world. In Switzerland, we are making a signifi-cant contribution to efficient, high-quality healthcare with our services and products.

OUR MISSION

_In our day-to-day work, we are passionately committed to the welfare of patients and the needs of our customers, thus creating added value and benefits for customers, patients, employees, shareholders and partners in the long term.

OUR KEY VALUES

_Our five key values are the reference point for our actions and shape our conduct and decision-making each day. They therefore play an essential part in the implemen-tation of the strategy and objectives and are a crucial element to our success.

THE GALENICA JOURNEY

_Since the current strategy was launched on 1 September 1995, Galenica has passed through various phases. Clear objectives have been defined for each phase, and these have to be achieved before the next phase is entered. All companies, activities and projects contribute to achieving the objectives and focus on the priorities set. These pri-orities are derived in turn from our vision and our will to see Galenica continue to develop successfully in the long term. The vision is the aim of our journey and is something we should always keep in mind.

What we want to achieve by 2022

_The Galenica Group is a diversified healthcare company with a focus on two strategic areas: international pharma-ceutical activities and services for the Swiss healthcare market. The two areas are independent, successful, solid and profitable units that continue to develop sustainably, successfully and with clear objectives.

A worldwide leader for specialty pharmaceutical products_Our core area of expertise is the treatment of iron defi-ciency and iron deficiency anaemia, kidney diseases and infectious diseases. In these areas, we research, develop, manufacture and market world-leading medicines for pre-venting, alleviating or treating illnesses. Non-prescription drugs complete this portfolio of activities. We therefore contribute to improving the quality of life of people suffer-ing from illness and provide doctors and pharmacists with cost-effective support in the treatment of their patients. _From an organisational point of view, the pharmaceutical activities are brought together into an integrated pharma company that offers a balanced risk profile as a provider of world-leading, innovative iron replacement drugs and other products.

VISION, MISSION AND VALUES

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.

10_ Vision, mission and values · Galenica annual report 2013

The “Galenica journey” continues

_Culture shock_Restructuring_Dispensing doctors_Iron/OTC

_Specialty Pharma_Aspreva, OM Pharma, Sun Store _Sales Affiliates_Venofer® in the USA_ Vifor Fresenius Medical Care Renal Pharma

_Stock exchange “revolution” _Alliance Boots partnering_US Venofer® explosion_Pharmacy chain “revolution”

_Ferinject® expansion_Velphoro® penetration_Six other projects

Well-balanced specialty pharma company _Global iron business_Other pharma businesses

Santé Division_Fully integrated company

The leading service provider in the Swiss healthcare market_Our core area of expertise is the development, distribu-tion and sale of products and services for health, wellness and beauty. We ensure that pharmaceuticals together with professional advice for patients are available in our pharmacies nationwide, distribute our own products and offer IT solutions for safe medication processes. In doing so, we make a significant contribution to the provision of efficient, high-quality healthcare in Switzerland.

_With our business activities we are market leaders and support various partners in the Swiss healthcare market. We make the best use of synergies of our Business sectors and together develop innovative and customer-oriented ranges of products.


Advice in eight languages for an international clientele._The Sun Store pharmacy in Zermatt is situated at the foot of the world-famous Matterhorn, surrounded by Switzerland’s majestic mountains. We look after our demanding international clientele competently 365 days a year, advising and informing, comforting and supplying our customers in a total of eight languages. _Therefore, locals and tourists, large and small customers, amateur and professional sportspeople and even our four-legged friends feel at ease in the company of our charming team. That’s how we are – “In tune with the customer”.


“In tune with the customer” through quality products._For over 40 years and since before it became the No.1 premium skin care brand in France, we have maintained a loyal partner-ship with Clarins. Much has changed during that time. Both companies have expanded and become firmly established in their markets. _The contacts are, of course, no longer between the same people who were involved at the beginning. Nonetheless, we under-stood the importance of keeping regular contact with Clarins and maintaining a business relationship based on trust and com-petence. This continuity allows us to offer our customers high-quality products now and in the future.

Galenica annual report 2013 · Strategy _13

Diversification in the healthcare market

_The Galenica strategy seeks to create long-term growth while distributing risk effectively. This allows it to mitigate the effects of fluctuations in certain sectors without jeop-ardising the entire Group. Thanks to its healthy diversifica-tion, Galenica is active in many different complementary areas creating synergies for the benefit of all partners in the healthcare industry._The Group strategy is based on two key elements: a con-sistent focus on one particular sector, the healthcare mar-ket, and a steady diversification of activities over time to achieve a manageable distribution of risk. Strategic deci-sions are always focused on the long-term development of the Group. Galenica strives for market leadership in all its businesses and to be active along the entire value chain, thereby gaining the greatest possible knowledge of its markets and their specific development. It also seeks to forge links among the various players in the healthcare industry.

Two strategic areas of emphasis

_The Galenica Group focuses on two strategic areas: Specialty Pharma and Swiss HealthCare Services.

Specialty Pharma _The core of Specialty Pharma is the fully integrated specialty pharma group Vifor Pharma. The company researches, develops and produces its own products and markets them worldwide. It also produces and markets in-licensed pharmaceutical products. _Vifor Pharma operates in the following key business areas: iron deficiency with and without anaemia, kidney disease, infectious diseases/OTX products and Consumer Healthcare, with a focus on non-prescription (OTC, over-the-counter) products. _Vifor Pharma seeks to leverage its strengths and fully exploit the international potential of its products – particu-larly Ferinject® and the new phosphate binder Velphoro® (PA21) – to enhance its leading position worldwide. The company achieves this through its affiliates in key markets and through new and established partnerships with other leading companies. Vifor Pharma is also involved in the research and development of new products with global potential.

_Iron deficiency. In many countries, intravenous iron replacement products are used by nephrologists mainly to treat patients with chronic kidney disease who are undergoing dialysis. However, iron deficiency is also a symptom of many other diseases. Intravenous iron is used to treat patients with iron deficiency in cardiology, in oncology, in gastroenterology, in gynaecology, and for pre- and post-operative anaemia. This diversity in patient needs means that the iron replacement products of Vifor Pharma have considerable market potential.

STRATEGY

Strategy of the Galenica Group

Iron Deficiency RetailInfectious Diseases/OTX

LogisticsConsumer Healthcare

Information

Specialty PharmaInternational

Swiss HealthCare ServicesNational

14_ Strategy · Galenica annual report 2013

_Raising awareness in the international medical commu-nity for iron deficiency in indications outside dialysis is a high priority for Vifor Pharma. The ongoing development of scientific evidence supporting the use of Ferinject® and the evaluation of new opportunities in the treatment of iron deficiency in different therapeutic areas are therefore essential. Galenica is making significant investments in research, development and commercialisation to achieve these goals.

_Vifor Fresenius Medical Care Renal Pharma – the com-mon company of Galenica and Fresenius Medical Care – holds the international marketing rights of Venofer® and Ferinject®/Injectafer® in the area of nephrology as well as all rights of the new phosphate binder Velphoro® (PA21). Thanks to this strategic partnership, Vifor Pharma can focus on the further development and marketing of its iron replacement products outside the indication of nephrology.

HISTORY

From a pharmaceutical logistics provider to aninternational healthcare company _Galenica was founded in 1927 by 16 French-speaking pharmacists who came together to create a central pur-chasing group. In 1938, Galenica laid the foundation for its current information management business by devel-oping a scientific documentation service. From 1957 onwards, Galenica diversified its core business through the targeted acquisition of several companies, such as Panpharma, a specialist distributor of parapharmaceu-tical products to pharmacies. Other acquisitions fol-lowed in the 1970s, including Vifor and Cooper in 1977, and Laboratorien Hausmann in 1983, with a view to diversifying into hospital supply and non-prescription (OTC) medicines._In 1991, Galenica sold its hospital supply business to B. Braun (Germany) and decided to refocus its activities on distribution._In 1995, in response to the rapid and fundamental changes in market conditions, the Group’s management developed a new strategy based on a vision of turning Galenica into a healthcare player that is engaged in the entire value chain in Switzerland. _Thus in 1996, Galenica expanded its distribution ac-tivities to all players in the Swiss market (pharmacists, as well as dispensing physicians, chemists and hospi-tals), set up eHealth companies and laid the foundation for its pharmacy chains with the creation of GaleniCare in 2000 as well as the joint-venture with Coop establish-ing the Coop Vitality pharmacies. As of 2005 the phar-macies of GaleniCare appear under the new name Amavita with a single brand image. In 2007 Galenica took over the specialty pharmacy MediService. Together with the acquisition of the Sun Store pharmacy chain in 2009 the number of own pharmacies increased by 100

points of sales at one go. At the same time, the activities of HealthCare Information are constantly being devel-oped further. _In parallel, the Group focused on niches at the indus-trial level, and began to expand internationally with the iron replacement products initially produced by Labora-torien Hausmann. These were fundamentally redesigned and repositioned by the research & development team, and became Venofer® and Maltofer®. They were joined by Ferinject®, which was launched at the end of 2007, as well as other projects, notably PA21 (brand name Velphoro®), a novel iron-based phosphate binder, for which the approval dossiers were submitted to different regulatory authorities at the end of 2012 and beginning of 2013, and VIT91, which is currently in the preclinical phase. The acquisition of the Canadian pharmaceutical company Aspreva Pharmaceuticals in 2008 and of OM Pharma in 2009 led to the creation of what is today a globally active, fully integrated specialty pharma com-pany, Vifor Pharma, with a broad range of products and projects._In mid-2013, Injectafer® (US brand name for Ferinject®) received marketing authorisation approval from the US Food and Drug Administration (FDA). This represented a major milestone for Vifor Pharma, which was able to launch its best-selling product in the world’s largest healthcare market. At the end of 2013, the FDA also gave the first approval for the new phosphate binder PA21, which will be sold under the brand name Velphoro®. In the Logistics Business sector, the range of services was expanded with the acquisition of Medifilm, a leading company in the field of blister packaging for medicines. The pharmacy network was extended with the acquisi-tion of a 49% stake in Bahnhof Apotheke Zurich, a highly successful and strategically well-positioned pharmacy.

Galenica annual report 2013 · Strategy _15

_Infectious diseases/OTX products. With the acquisition of OM Pharma in November 2009, Vifor Pharma gained unique expertise in the area of immunology and a product portfolio of infectious diseases and OTX products that com-plemented the existing prescription and over -the-counter businesses of Vifor Pharma. Its flagship products are Broncho-Vaxom®, Uro-Vaxom®, Doxium® and Dicynone®.

_Consumer Healthcare. In Consumer Healthcare, Vifor Pharma manufactures and markets non-prescription drugs (OTC, over-the-counter products) developed by Vifor Pharma or sold under licence. Vifor Pharma plays a leading role in Switzerland, its home market, with key brands such as Algifor®, Triofan®, Perskindol® and Anti-Brumm®. Vifor Pharma continues to make advances in various therapeutic areas, and is building on its core brands.

Swiss HealthCare Services_The Group’s second area of strategic focus, Swiss HealthCare Services, has a unique business model offer-ing integrated services for the Swiss healthcare market. The driving force behind this model is the Retail Business sector. It is represented by five pharmacy formats that are positioned independently in the market: the Amavita and Sun Store pharmacy chains, the Coop Vitality joint venture, the specialty pharmacy MediService and Win concept, the marketing organisation for independent pharmacists. The optimisation and further expansion of the pharmacy network have high priority. Logistics and information management play important complementary roles and ensure both the businesses owned by Galenica and those of other players in the market. They have sig-nificant benefits and are important to a well-functioning supply chain. Therefore, these activities are being con-tinuously strengthened accordingly.

_Networked with all the players in the Swiss healthcare market. Thanks to its activities along the entire value chain, Galenica is able to develop and maintain relation-ships with all key elements of the market: pharmacists, physicians, druggists, hospitals, nursing homes, patients and consumers as well as suppliers. This provides Galenica with extensive knowledge of the market and its development. _The strategic options that the company has developed in this area in recent years will allow the Galenica Group to offer its services in Switzerland on very advantageous terms also in the future. Lean structures and rapid im-plementation of necessary measures also contribute to the company’s success.

Alliance Boots _Since 1999, the Galenica Group has had a strategic part-nership with Alliance UniChem Plc, today Alliance Boots Investments. This strategic partnership is based on a con-tract that will remain in force until the end of 2014.

Principles for the implementation of the strategy and objectives_In implementing its strategy and achieving its objectives, the Galenica Group is not governed by a short-term profit mentality but instead directs its activities towards ensur-ing a continuity of success. Galenica strives to achieve this long-term success through product and service innovations and the highest quality standards. It aims to achieve high returns from its activities. Flexibility allows market trends to be anticipated, and timely, targeted deci-sions to be made. In all its activities, the Galenica Group recognises its environmental and social responsi bi lities.


All in one – providing the customer with a specific service._In Galexis, Dr. med. Urs Sieber chose a full-service pharmaceutical wholesaler that could offer him comprehensive support with anything from furniture to diagnostic instruments to pharmacy equipment when he set up his medical practice. When he opened his practice, we supplied all the pharmaceutical products and all of his medical requirements from the examination couches and stools to devices such as blood pressure monitors, sterilisers and much more._We, as a wholesaler, offer our customer everything from a single source. He has one contact for all his medical needs, which means we also reduce the administrative burden of the customer and simplify the ordering process. For us, this is also part of being “In tune with the customer”.

Galenica annual report 2013 · Galenica 2013 in brief _17

GALENICA 2013 IN BRIEF

Strategy: focus on two strategic areas_Specialty Pharma: The core of Specialty Pharma is the fully integrated, specialty pharmaceutical group Vifor Pharma, which researches, develops and produces its own and in-licensed phar-maceutical products and markets them worldwide. Vifor Pharma concentrates on three key business areas: iron deficiency, infectious diseases/OTX products and Consumer Healthcare, which focuses on over-the-counter (OTC) products. _Swiss HealthCare Services: Swiss HealthCare Services provides services to the Swiss healthcare market, including a range of phar-macy formats, logistics and information management.

Highlights of 2013_Galenica raised its consolidated net sales by 2.0% to CHF 3,359.4 million in 2013. On a comparable basis profit increased by 7.8% to CHF 296.2 million before and by 1.6% to CHF 257.6 million after deduction of minority interests. Taking into account one-time ef-fects, Galenica recorded double-digit net profit growth for the 18th consecutive year, up by 21.1% to CHF 334.8 million before deduction of minority interests and by 16.1% to CHF 296.2 million after deduc-tion of minority interests. _Among the highlights of 2013 were the approvals issued by US Food and Drug Administration (FDA) for Injectafer® (the US brand name of Ferinject®) for the treatment of iron deficiency anaemia and for Velphoro® (PA21) to control serum phosphorus levels in patients with dialysis-dependent chronic kidney disease._Further highlights were the acquisitions of Medifilm, the leading company in the field of blister packaging for medicines, as well as of a minority stake in Bahnhof Apotheke Zurich, a pharmacy with an excellent position in the most heavily frequented place in Switzer-land. Good progress was also made over the year on several projects introduced jointly by Logistics, Retail and HealthCare Information to increase effectiveness and efficiency.

Outlook for 2014_Specialty Pharma: Vifor Pharma will continue to expand Ferinject® in international markets and to support the US partner Luitpold Pharmaceuticals, Inc. in launching Injectafer® in the US. In addition, further registrations and the market launch of Velphoro® (PA21) are being prepared._Swiss HealthCare Services: The cost pressure in the Swiss healthcare market will continue. The focus is therefore on further optimising the processes in the Logistics, Retail and HealthCare Information Business sectors in order to improve efficiency and profitability. The projects launched in 2013 to achieve this objective will be continued. A further priority is to consolidate and increase customer loyalty by means of innovations and first-class services.

GALENICA GROUP

Business sectors _Pharma_Logistics_Retail_HealthCare Information

Key figures 2013 _Net sales: CHF 3,359.4 million_EBITDA: CHF 466.2 million_EBIT: CHF 390.6 million _Net profit: CHF 334.8 million_ Employees: 7,663

(6,352 full-time equivalents)

18_ Galenica 2013 in brief · Galenica annual report 2013

Strategy: tailored solutions_The Logistics Business sector plays an important role in the Swiss pharmaceutical supply chain. Galexis, Unione Farmaceutica Distribuzione, Alloga, G-Pharma and Medifilm provide country-wide integrated healthcare logistics services. They offer proven modular solutions supporting their customers’ success. The strategy centres on strengthening market position and working in close cooperation with all market participants, with a focus on maintaining a high level of availability and systematically leveraging synergies.

Activity_As the leading pharmaceutical wholesalers in Switzerland, Galexis and Unione Farmaceutica Distribuzione ensure delivery within a few hours to all healthcare partners throughout the country. The companies supply pharmacies, physicians, drugstores and hospitals with over 80,000 referenced healthcare products._Alloga offers a broad range of specialised logistics services (pre-wholesale) to pharmaceutical and healthcare companies. This allows customers to concentrate on their core areas of expertise, such as research and development or marketing._G-Pharma handles and coordinates the purchasing, sale, ware-housing and distribution of products for third parties and provides its customers with marketing support._Medifilm prepares medicines and food supplements individually on behalf of pharmacies according to the treatment plan for perma-nent and long-term patients (blister packaging).

Highlights of 2013_Several companies are interested in Switzerland-wide exclusive distribution via Galexis. The acquisition of new customers proves that a broad range, competitive prices and high quality are in de-mand throughout the logistics process. _In July 2013, Galexis acquired Medifilm, the leading company in the field of blister packaging for medicines, thus expanding its range of services with a new, attractive offering._As part of the “Coaxial” programme to improve efficiency, the different IT infrastructures in the Logistics, Retail and HealthCare Information Business sectors are being standardised and merged into a single data centre in Niederbipp. The project is proceeding according to plan. A project to increase transport synergies between Alloga and Galexis also got off to a good start.

Outlook for 2014_The Federal Office of Public Health (FOPH) has mandated further price reductions. Pressure on costs will therefore continue in 2014._In light of this, the Logistics Business sector has the same priorities as in 2013: reinforce customers’ competitiveness via services and reduce costs via increased efficiency. Customer loyalty should therefore be strengthened in all segments. The focus is on broad product ranges, exclusive ranges and process improvements._Processes will also be further optimised and the “Coaxial” project completed in 2014. Furthermore, the logistics and distribution cen-tre in Burgdorf will be equipped with a new pick-by-voice system.

LOGISTICS

Strategy: a fully integrated specialty pharma company with sustainable growth_Vifor Pharma is an internationally active specialty pharma company that researches, develops, produces and markets its own pharma-ceutical products. The company has three main areas of focus: iron deficiency with and without anaemia, infectious diseases/OTX prod-ucts and Consumer Healthcare (OTC, over-the-counter).

Activity_With its iron replacement products Ferinject®/Injectafer®, Venofer® and Maltofer®, Vifor Pharma is a leader in the treatment of iron deficiency, a widespread ailment around the world. The pro-duct portfolio is completed by Velphoro®, a new drug developed by Vifor Pharma, to effectively control phosphorus levels in the blood for patients with Chronic Kidney Disease on dialysis. To gain rapid and direct access to the various international markets, Vifor Pharma works through its own sales affiliates as well as with partners. _The immuno-stimulant products Broncho-Vaxom® and Uro-Vaxom® supplement the portfolio of Vifor Pharma and offer significant poten-tial for expansion._The Consumer Healthcare sector manufactures and markets over-the-counter products developed within the Group, as well as products manufactured or sold under licence. Vifor Pharma plays a leading role in the area of non-prescription medicines in Switzer-land.

Highlights of 2013_The US Food and Drug Administration approved in July 2013 Injectafer® for the treatment of Iron Deficiency Anaemia. Luitpold Pharmaceuticals, Inc., partner of Galenica in the United States, launched Injectafer® upon approval._By the end of 2013, Velphoro® (PA21) received FDA approval for the control of serum phosphorus levels in patients with Chronic Kidney Disease on dialysis. In the US, Velphoro® will be marketed by Fresenius Medical Care North America. _Within the immunostimulant product range Broncho-Vaxom®

especially shows dynamic growth._Vifor Pharma Consumer Healthcare performed clearly better in Switzerland than in the previous year. The strategy change initiated in 2012 is paying off.

Outlook for 2014_The focus is on supporting growth of Ferinject® and Injectafer®, as the drug is branded in the US. With the publication of the FIND-CKD study, expansion will start in the ND-CKD market._The goal for Venofer® is to maintain sales, supported by recent data showing the differences between ISS products and Venofer® as effective medication for haemodialysis patients._For Velphoro®, the US launch, driven by Fresenius Medical Care North America, is expected to occur in the first quarter of 2014. Market approvals are anticipated in the EU, Switzerland and Singa-pore, followed by launch activities in the respective markets.

PHARMA

Companies _Vifor Pharma Ltd., www.viforpharma.com_Sales affiliates_OM Pharma SA, www.viforpharma.com_Vifor Fresenius Medical Care Renal Pharma Ltd.

Key figures 2013 _Net sales: CHF 662.7 million_EBITDA: CHF 304.7 million_EBIT: CHF 269.3 million_Employees: 1,955 (1,865 full-time equivalents)

Companies _Alloga Ltd., www.alloga.ch _Galexis Ltd., www.galexis.com _ Unione Farmaceutica Distribuzione SA,

www.unione.ch_G-Pharma AG_Medifilm AG, www.medifilm.ch

Key figures 2013 _Net sales: CHF 2,118.2 million_EBITDA: CHF 46.6 million_EBIT: CHF 31.1 million_Employees: 1,191 (971 full-time equivalents)

Galenica annual report 2013 · Galenica 2013 in brief _19

Strategy: innovation within a strong network_GaleniCare is the leading retail structure in the Swiss pharmacy market. It is the intention of GaleniCare to play an active role in shaping the future of the deregulated and rapidly changing Swiss pharmaceutical market. GaleniCare therefore focuses on develop-ing, promoting and managing strong pharmacy networks. With its pharmacy formats, GaleniCare is one of the most important partners for the various players in the healthcare market. Innovative and attractive services meet rising customer demands.

Activity_The pharmacy network of Galenica is the largest in Switzerland, with 312 group-owned stores and 171 partner pharmacies. The net-work comprises the Amavita and Sun Store pharmacies, which are managed directly by GaleniCare, the Amavita partner pharmacies, which are integrated under a franchise concept, as well as the Coop Vitality pharmacies, which are operated as a joint venture with Coop. The MediService specialty pharmacy focuses specifically on home healthcare for people with chronic illnesses. The brand name Feelgood’s includes independent pharmacies for which the com-pany Winconcept offers services and marketing concepts.

Highlights of 2013_Expansion of market presence. In July 2013 GaleniCare acquired a 49% stake in the pharmacy Bahnhof Apotheke Zurich at Zurich’s main railway station, thereby adding a highly successful pharmacy to the network. Amavita set up an agreement with the Hirslanden Private Hospital Group whereby hospital patients can make use of the advantages of the Amavita StarCard, the Amavita pharmacy loyalty card. Amavita and Coop Vitality own brands offer attractively priced, quality products. The pharmacies benefit from increased market presence and recognition. _Optimum care from pharmacies. GaleniCare is promoting sev-eral projects aimed at freeing up more time to take care of custom-ers and patients in the pharmacy. In the pilot project Team Perfor-mance, selected Amavita pharmacies successfully trialled ways of increasing efficiency in administrative processes. _More efficient business processes. Under the heading “LoRe”, various activities were rolled out aimed at broadly enhancing effi-ciency. Two important elements are shelf pricing and more efficient stock management in pharmacies.

Outlook for 2014_The drop in sales and margins resulting from cost and price pressures will continue to be offset by moderate expansion of the pharmacy network, new service offerings and more efficient organisation._The information that comes out of pilot and test programmes in 2013 will play a central role, with Team Performance processes implemented on a broader basis at Amavita as well as Sun Store and whilst being introduced at Coop Vitality.

RETAIL

Strategy: promoting networking_The management of data, information and knowledge as well as network functionalities are increasingly becoming a strategic success factor as service providers in the healthcare sector are under growing pressure to optimise processes, leverage synergies and realise cost benefits. The businesses of HealthCare Information maintain databases and develop management solutions tailored specifically to the needs of the networked healthcare market. Documed’s and e-mediat’s products meet the needs of customers for IT tools quickly and efficiently and offer them valuable support in their daily activities. The businesses play a key role in the eHealth Switzerland strategy through their broad expertise in creating and operating databases and developing management systems for the healthcare sector.

Activity_e-mediat is the leading provider of master data systems for the entire Swiss healthcare market. _Documed publishes pharmaceutical information and provides the IT platform for regulatory drug information (Arzneimittelinformation Publikationsplattform Swissmedic, AIPS)._HCI Solutions maintains databases and develops management solutions geared in particular to the needs of the networked health-care market. TriaPharm® is a total management software solution for pharmacies. TriaMed® software was developed for physicians and is suitable for both individual and networked medical centres and group practices.

Highlights of 2013_The system for regulatory drug information (Arzneimittelinfor mation Publikationsplattform Swissmedic, AIPS), created by Documed, was rolled out successfully. Since only information required by law is being published in AIPS, HealthCare Information channelled consid-erable energies into persuading pharmaceutical companies to con-tinue collaborating with Documed via the compendiumPORTAL, thereby contributing to drug safety._With the support of Documed and e-mediat, the Zurich Children’s Hospital launched the “kinderdosierungen.ch” website, which gives specialists access to reliable child dosage data covering approxi-mately 330 active substances available in 3,000 data sets. _HCI Solutions completed the harmonisation of POS software for the Galenica Group’s two largest pharmacy formats and began the simplification of central software components for Amavita and Sun Store.

Outlook for 2014_At e-mediat and Documed, there are plans to introduce a new platform, vitavista.ch, on which consumers and patients can obtain information about pharmacies’ and drugstores’ product ranges. _Documed is extending the data content of portal functions in compendium.ch and the INDEX databases for pharmaceutical com-panies._HCI Solutions will introduce a new component, ActiveStock, in TriaPharm®, to simplify stock management processes. Central control functions will be extended in TriaMed®.

HEALTHCARE INFORMATION

Companies and pharmacy formats

_ GaleniCare Management Ltd., www.galenicare.com

_Amavita pharmacies, www.amavita.ch_Sun Store SA, www.sunstore.ch_MediService Ltd., www.mediservice.ch_Winconcept Ltd., www.winconcept.ch_Coop Vitality AG1), www.coopvitality.ch

Key figures 2013 _Net sales: CHF 1,245.7 million_EBITDA: CHF 85.1 million_EBIT: CHF 63.0 million_ Employees: 4,288 (3,313 full-time equivalents)

1) Consolidated at equity

Companies _HCI Solutions Ltd., www.hcisolutions.ch_Documed Ltd., www.documed.ch _e-mediat Ltd., www.e-mediat.ch

Key figures 2013 _Net sales: CHF 39.8 million_EBITDA: CHF 8.2 million_EBIT: CHF 4.0 million_Employees: 181 (162 full-time equivalents)

20_ Pharma · Galenica annual report 2013

Close collaboration is the key to our success._Biogen Idec is an important customer for Vifor Pharma in third-party development and manufacturing. We are constantly in contact with Biogen Idec management, enabling us to guide and support the company optimally in its projects. _From project planning to market launch, we make sure that we acknowledge and implement all aspects of the customer’s requirements at each stage of the project. We will be able to successfully conclude the project for the drug Tecfidera® (BG-12), which is currently being launched worldwide together with Biogen Idec because we are “In tune with the customer”.

20% 69% 26%

Galenica annual report 2013 · Pharma _21

Sales and operating result

_For the Pharma Business sector, 2013 was a good year. Net sales increased by 4.6% to CHF 662.7 million. _Income from licensing fees from CellCept amounted to CHF 100.2 million (CHF 90.9 million in the previous year). Investments in research and development remained at high levels, totalling CHF 115.6 million. The funds were mainly used for clinical studies with Ferinject® to provide further evidence of the benefit of iron treatments in ther-apeutic areas such as nephrology, gynaecology and car-diology (chronic heart failure) and for studies providing scientific evidence to support the filing of Velphoro® (PA21). EBITDA was CHF 304.7 million, up 4.5%, and con-solidated earnings before interest and taxes (EBIT) increased by 4.8% to CHF 269.3 million.

Key figures 2013

Pharma CHF 662.7 million(Galenica Group CHF 3,359.4 million)

Pharma CHF 269.3 million(Galenica Group CHF 390.6 million)

Net sales EBIT Number of staff

Pharma 1,955(Galenica Group 7,663)

PHARMAInjectafer® (Ferinject®) approval in the USA for the treatment of Iron Deficiency Anaemia

STRATEGIC PRIORITIES 2014

_ Expanding Ferinject® in international markets_ Supporting US partner Luitpold Pharmaceuticals, Inc.

in launching Injectafer® in the US_ Further developing and expanding the Vaxom products_ Preparing for the registration and commercialisation

of novel phosphate binder Velphoro® (PA21)_ Establishing Vifor Fresenius Medical Care Renal

Pharma in all key markets _ Continuing to strengthen strategic over-the-counter

brands (OTC) and consolidating the company’s position as a top tier consumer healthcare product provider in Switzerland

David Ebsworth_“Two FDA approvals within four months – one for Injectafer® and one for the novel iron-based phosphate binder Velphoro® – are a good demonstration of how Vifor Pharma is continuously broadening its product portfolio.”


in million CHF 2013 2012 Change in %

Intravenous (iv) iron replacement products:Ferinject®

Venofer®158.2128.8

127.1142.7

+24.5–9.8

Oral iron replacement products: thereof, Maltofer®

63.452.6

66.050.8

-3.9+3.5

Other Rx products: 71.9 70.3 +2.2

Revenues and licence fee income: CellCept, other 179.7 256.8 –30.0

Vifor Pharma Rx

_Solid growth of Ferinject®. Indicated for the treatment of iron deficiency when oral iron preparations are ineffec-tive or cannot be used, Ferinject® showed growth in all therapeutic areas, with sales rising 24.5% to CHF 158.2 million._At the global level, the number of units sold (100mg) grew by 37%. France (23%), Germany (16%), Great Britain and Ireland (44%) as well as Spain (21%) posted solid increases several years after the launch of the product, as did Switzerland (13%). Ferinject® was launched in six countries in the year under review. A cost-reimbursement agreement for the use of Ferinject® in hospitals was signed in Italy._Finally, new 1,000 mg vials of Ferinject® were shipped to the German, Swedish and UK markets for launch in January 2014.

_Venofer® maintains strong market position. Venofer® achieved sales of CHF 128.8 million (–9.8%) in 2013; the number of units sold, however, only decreased by 2.5%. Sales development was again impacted by price pressure in various markets and government-mandated price cuts. In several markets, sales were additionally affected by

rival ISS (iron sucrose similars) products and by substitu-tion with Ferinject®. In the US, the new agreement between Fresenius Medical Care and Luitpold Pharma-ceuticals, Inc. had a negative impact on sales, as did the optimised use of intravenous iron drugs in haemodialysis. In Europe, Venofer® maintained its leading position against ISS preparations.

_Sales of other prescription products. Sales of other iron replacement products amounted to CHF 63.4 million (–3.9%). Maltofer® grew by 3.5% to CHF 52.6 million. Sales of other Vifor Pharma prescription products, which are mainly sold in Switzerland and Spain, increased by 2.2% to CHF 71.9 million.

Production Sites

Vifor PharmaSwitzerlandUnited Kingdom

OM PharmaPortugalSwitzerland

Sales Affiliates

Vifor PharmaAustriaBelgiumFranceGermanyItalyNetherlandsRomaniaSpainSwedenSwitzerlandUnited Kingdom

OM PharmaPeruPortugalSwitzerland

Hubs

Vifor Pharma ArgentinaAustraliaCanadaRussiaSingaporeUSA

Headquarters

Vifor PharmaSwitzerland

R & D

Vifor PharmaSwitzerland

OM PharmaSwitzerland

Total net sales Rx products

Vifor Pharma locations around the world


Achieving a high degree of flexibility through social commitment._Thanks to Valida, the Vifor Pharma logistics team in St. Gallen is able to react quickly and flexibly when faced with express orders or launches in new countries. The Valida team supports us in packaging products according to country-specific requirements and resolving bottlenecks. _Valida employs people with physical, mental or multiple disabilities. Responding flexibly to the wishes of customers and partners while fulfilling our social commitment is also a form of remaining “In tune with the customer”.


Strong continuing need to raise the awareness of the significance of iron deficiency._By year-end, Ferinject® was registered in 58 countries worldwide. Ferinject® has already been launched in 42 markets and further launches are planned. Much remains to be done in terms of raising the awareness of iron defi-ciency among healthcare professionals. It takes time to develop and expand knowledge in this area, which is why providing information on the significance of iron defi-ciency in the various therapeutic areas continues to be a top priority.

_Approval of Injectafer® in the US. A highlight in 2013 was the US Food and Drug Administration (FDA) approval for Injectafer® in July. The FDA approved indication is the treatment of Iron Deficiency Anaemia (IDA) in adult patients who have had an unsatisfactory response to oral iron or have intolerance to oral iron. Injectafer® is the first non-dextran intravenous iron therapy to gain FDA approval for the treatment of IDA in a diverse group of patients with this debilitating condition, irrespective of the underlying origin. Injectafer® is also indicated for first line therapy for IDA in adult patients with non-dialysis-dependent Chronic Kidney Disease (ND-CKD).

_Luitpold Pharmaceuticals, Inc., the Galenica partner in the United States, launched Injectafer® after approval. The initial focus is on establishing Injectafer® with pre-scribing physicians (haematology and oncology) who man-age the principal infusion centres where intravenous treatment is provided. In the US market, the product is available in 750 mg vials and is produced at the Luitpold facility in Columbus, Ohio._Approvals were also gained in new markets such as Mexico, under the name Renegy®, as well as in several other Latin American markets, notably Bolivia, Ecuador, El Salvador and Honduras.

Highlights in 2013 were the US Food and Drug Administration (FDA) approvals for Injectafer® (US brand name of Ferinject®) in July and for Velphoro® in November.

_In the US, there are an estimated 7.5 million people with Iron Deficiency Anaemia (IDA), a condition that occurs when the body’s iron stores are inadequate for normal red blood cell production. IDA is a frequent com-plication in many gastro-intestinal disease states and conditions, affecting up to one-third of inflammatory bowel disease patients and up to 24% of patients under-going bariatric bypass surgery. IDA is a common condi-tion in Chronic Kidney Disease and other chronic dis-eases. It is also prevalent in children and women, with over 3 million US women of childbearing age affected due to conditions such as heavy uterine bleeding, post-partum anaemia and pregnancy.

_Injectafer® is the first intravenous iron in the US approved to treat IDA of any aetiology. With this broad label and with IDA being significantly under-diagnosed and under-treated, extensive education in the US is essential. Accordingly, Luitpold Pharmaceuticals, Inc., the partner of Galenica, has initiated a variety of pro-grammes to educate medical professionals on the underlying science, diagnosis and proper treatment of iron deficiency anaemia.

Injectafer®, the first intravenous iron for IDA of any aetiology in the US


Tapping market potential beyond dialysis _One of the strategic priorities is to realise the market potential of injectable iron in therapeutic areas beyond the dialysis market. In 2013, an important step was taken in the non-dialysis area of Chronic Kidney Disease (ND-CKD) with the finalisation of the FIND-CKD study. The study results were presented at the American Society of Nephrology (ASN) Kidney Week in November 2013 in Atlanta, Georgia, USA. _In the area of cardiology, recruitment for the CONFIRM-HF trial in chronic heart failure patients has been com-pleted.

Expansion into new areas _Marketing efforts were focused on preparing expansion into new areas, with emphasis on gastroenterological diseases beyond inflammatory bowel disease and on symptomatic iron deficiency without other pathologies. Vifor Pharma also continued to build awareness of iron deficiency, its symptoms and treatment with a concerted programme of activities including satellite symposia and the re-launch of the www.irontherapy.org site._Vifor Pharma has filed a variation application in the EU to cover the key therapeutic areas of nephrology, gastro-enterology and women’s health. The purpose of this filing is to enrich the clinical section of the Ferinject® label (Summary of Product Characteristics, SmPC) with more relevant information for healthcare professionals, based on the extensive clinical trial experience of the company. In the home market, Swissmedic has approved a labelling variation to increase the maximum dose per kilogram body weight to 20 mg/kg (up to a maximum dose of 1,000 mg for both infusion and injection)._In June 2013, the Committee for Medical Products for Human Use (CHMP) completed its review of intravenous iron-containing medicines used to treat iron deficiency and anaemia.

_The FIND-CKD results demonstrate that Ferinject® (ferric carboxymaltose) targeting a serum ferritin of 400–600 µg/L in patients with non-dialysis-dependent Chronic Kidney Disease (ND-CKD) and iron deficiency anaemia significantly reduces or delays the need for alternative anaemia management (such as erythro-poiesis-stimulating agents (ESAs) or blood transfusion). Ferinject® also results in a faster haemoglobin response with a greater proportion of patients achieving a Hb increase ≥1g/dL. Furthermore, intravenous Ferinject® was shown to be well-tolerated with fewer treatment-related adverse events and study discontinuations com-pared to oral iron.

_FIND-CKD is the largest and longest prospective, ran-domised clinical study ever conducted comparing in-travenous versus oral iron for the treatment of iron de ficiency anaemia in patients with ND-CKD who were not receiving ESA therapy. More than 600 patients from 20 countries were included in this 56-week clinical study. The study met its primary endpoint, demonstrat-ing that Ferinject® given at a starting dose of 1,000 mg with subsequent dosing as required to maintain a serum ferritin of 400–600 µg/L significantly reduced or de-layed the need for alternative anaemia management or the occurrence of two consecutive haemoglobin (Hb) levels <10 g/dL compared to oral iron. These results were achieved with an average of four Ferinject® injec-tions only.

Finalisation of the FIND-CKD study – an important step

Marketing efforts have been focused on preparing Ferinject® expansion into new areas for IDA treatment, in particular in gastroenterological diseases.

63%

11%

in Mio.CHF

09 10 11 12 13

11%

36%37% 36%

34% 33%

in Mio.CHF

08 09 10 11 12

32.9%

35.1%36.2% 35.3%

33.1%


The CHMP concluded that the benefits of these medicines are greater than their risks, provided that adequate meas-ures are taken to minimise the risk of allergic reactions. These measures include a class hypersensitivity warning label for all intravenous iron replacement products and a Direct Healthcare Professional Communication (DHPC), to be coordinated by the competent national authorities.

Broadened partnerships_Fresenius Medical Care continues to be an important partner. Additional countries have been activated, and Fresenius Medical Care has taken on full responsibility for these new markets. Progress has also been made in sev-eral other countries, notably Italy and the Baltics. _In the course of 2013, Vifor Pharma signed several new agreements and partnerships, such as distribution agree-ments with Zeria for Japan and with Lupin in India, both for Ferinject®, and with local partners in several countries in Latin America were negotiated. International collabora-tion with Takeda/Nycomed has been extended to South Africa regarding Ferinject®, building on existing distribu-tion agreements for Russia, Brazil, Argentina and Mexico.

_Kissei Pharmaceuticals Co., Ltd. continues to develop PA21 in Japan under the existing licensing agreement. In early 2013, Kissei initiated four Phase III studies, with completion of the programme slated for 2014._Vifor Pharma and Helsinn signed a licensing agreement for a fixed-dose netupitant-palonosetron combination for the treatment of chemotherapy-induced nausea and vomiting (CINV). This agreement will cover a number of European countries. Aloxi®, another Helsinn product already sold in several markets by Vifor Pharma and indi-cated for the prevention of acute nausea and vomiting associated with cancer chemotherapy, was launched in May 2013 by the Vifor Pharma team in France._Vifor Pharma España and Astra Zeneca signed a promo-tion agreement for Symbicort®, and a co-promotion agreement for Rupafin® has been started with Ferrer, both in Spain. In addition, various promotion agreements were signed for Ferinject®, Uro-Vaxom® and Broncho-Vaxom®.

Global market for iron products

Overall development

Market share Vifor Pharma Other (~1,700 corporations)

(Source: IMS Midas; CHF/MNF, MAT 2013–Q3)

Total CHF 947 million Total CHF 1,313 million

Market share 2013 Intravenous iron

Market share 2013 Oral ironin million CHF

1,9472,085

2,1522,195

2,260


Venofer® maintained its leadership position despite competition from iron sucrose similars (ISS) and substitution with Ferinject® in many countries.

Venofer® maintaining market position_Venofer® is the best-documented intravenous iron. A new promotional platform with enhanced branding has been launched to further reinforce the benefits of the drug. It strengthens the position of Venofer® as the pre-ferred intravenous iron for the treatment of haemodialysis patients. Vifor Fresenius Medical Care Renal Pharma, the common company of Galenica and Fresenius Medical Care, presented Venofer® at the European Dialysis and Transplant Association (EDTA) congress in Istanbul in May 2013, and at the World Congress of Nephrology in Hong Kong in June 2013. The ability of the common company to focus its efforts on the renal field has led to sustained market leadership in nephrology for Venofer®, despite the impact of fierce price competition, the availability of a generic version of iron gluconate in the US, as well as iron sucrose similar (ISS) preparations in Europe._Clinical data on differences in efficacy between Venofer® and the ISS preparations have also been published, as have new clinical observations of increased adverse event rates in gynaecological patients treated with ISS prod-ucts. Regulators have recognised the complexity of the parenteral iron preparations and the limitations of the generic approval process for follow-on products. To date, Venofer® has proven its clinical value, as demonstrated in more than 16 million patient years of experience and more than 320 million (100 mg) doses sold.

FDA approval for Velphoro® _In November 2013, Velphoro® (formerly named PA21) received US Food and Drug Administration (FDA) approval for the control of serum phosphorus levels in patients with Chronic Kidney Disease (CKD) on dialysis. The approval was based on a pivotal Phase III study involving more than 1,000 patients, which met its primary and secondary endpoints and demonstrated that Velphoro® successfully controls hyperphosphatemia with fewer pills than seve-lamer carbonate, the current standard of therapy in pa-tients with CKD on dialysis. The average daily dose to control hyperphosphatemia was 3.3 pills per day after 52 weeks._In the US, Velphoro® will be marketed by Fresenius Medical Care North America, a company with a strong marketing and sales organisation and expertise in dialysis care. The active ingredient of Velphoro® is produced by Vifor Pharma in Switzerland.

_Hyperphosphatemia, an abnormal elevation of phos-phorus levels in the blood, is a common and serious con-dition in CKD patients on dialysis. Most dialysis patients are treated with phosphate binders. However, despite the availability of a number of different phosphate bind-ers, up to 50% of patients – depending on the region – are still unable to achieve and maintain their target serum phosphorus levels. In some patients, non-compliance due to the high pill burden and poor tolerability appear to be key factors in the lack of control of serum phosphorus levels. On average, dialysis patients take approximately 19 pills per day with phosphate binders comprising approximately 50% of the total daily pill burden. The rec-ommended starting dose of Velphoro® is three tablets per day (one tablet per meal)._Preparations for the commercialisation of Velphoro® in other countries are advancing. _The regulatory processes in the EU, Switzerland and Sin-gapore are ongoing, and decisions are expected in the first half of 2014. Further submissions for approval are being prepared.

Successful inspections_Regulatory agencies inspected Vifor Pharma sites as part of their periodic surveillance activities, as well as for product pre-approval. Several FDA inspections were passed successfully for Velphoro® trial sites. The sites of Vifor Pharma Villars-sur-Glâne and OM Pharma Geneva-Meyrin were successfully recertified as part of the ISO programme. The site in St. Gallen passed a Good Labora-tory Practice (GLP) inspection by Swissmedic. _Also, several customer audits were successfully passed at various sites.


Infectious Diseases/OTX

_Sales of the Infectious Diseases/OTX franchise amounted to CHF 117.0 million (–2.0%) in total, the slight decline resulted predominantly from reducing inventory of Doxium® and Dicynone® at partners. However, the sales of immuno-stimulant products posted significant year- on-year growth. This growth was driven in particular by Broncho-Vaxom®, which saw sales increase by 10.1% to CHF 47.6 million. Contributory factors here were a new distribution partner in Russia and the good results achieved in Brazil. Global net sales of Uro-Vaxom® amounted to CHF 15.9 million (+6.7%). _It is a strategic objective for Vifor Pharma to further develop and expand the Vaxom products in new and emerging markets. In 2013, Uro-Vaxom® was launched in Argentina, Kazakhstan and Ukraine. Vifor Pharma also launched a new patient disease awareness campaign for Uro-Vaxom® on the www.freeyourselffromcystitis.com platform. The campaign aims to encourage women of all ages suffering from recurrent cystitis to seek advice from their physicians on treatment and preventive options.

The strongest Infectious Diseases/OTX products in terms of net sales


Broncho-Vaxom® 47.6 43.3 +10.1

Doxium® 25.7 30.8 –16.6

Dicynone® 17.0 18.0 –5.5

Uro-Vaxom® 15.9 14.9 +6.7

Vifor Pharma Consumer Healthcare

Performing well, above market average _Vifor Pharma Consumer Healthcare improved results significantly compared with the previous year. In 2013, global sales of OTC products increased to CHF 87.4 mil-lion, a rise of 11.6%. _Sales in Switzerland rose by 12.7% to CHF 59.7 million and thus clearly exceeded the 4.2% market growth. The strategy change initiated in 2012, focusing on sales effici-ency, marketing measures based on consumer insights and a unique medical training programme for pharmacies and drugstores has been rolled out and is paying off. _Triofan®, Anti-Brumm® and Algifor® performed parti-cularly well, confirming their market leader positions and gaining further share, while the branding strategy of Perskindol® was reviewed in the course of the year following unsatisfactory sales developments. _Magnesium Vital Sport® and Magnesium Vital One® products, launched in 2012, have continued to outperform the market in their categories. In 2013, new products were successfully introduced such as Tenderdol® Herpatch Serum to treat orolabial herpes and Triofan® Hay Fever natural relief nasal spray and eye drops. _Export sales in 2013 developed positively as well by growing 9.1% to CHF 22.7 million. Geographic expansion continues to progress.

Growth of toll manufacturing _Third-party manufacturing continued to expand. Sales rose by 22.1% to CHF 36.0 million in 2013. Tecfidera® (formerly named BG-12) was approved by the FDA in March 2013 as an oral therapy for multiple sclerosis. Manufacturing activities for Biogen Idec are going accor-ding to plan.

The strongest Consumer Healthcare products (OTC) in terms of net sales (Switzerland and exports)


Perskindol® 14.3 14.3 +0.2

Algifor® 12.2 10.4 +17.4

Equazen eyeq™ 9.3 9.4 –1.4

Triofan® 9.2 8.4 +9.3

Anti-Brumm® 8.2 5.0 +65.2

Vifor Pharma Consumer Healthcare clearly performed better than in the previous year.


Strategic priorities for 2014 are very similar to those in 2013. The focus is on supporting growth of Ferinject® and Injectafer®.

Outlook: building the US market for Injectafer® and Velphoro®

_Vifor Pharma will continue on the successful path it embarked upon many years ago. Strategic priorities for 2014 are very similar to those in 2013. The focus is on supporting growth of Ferinject® and Injectafer®, as the drug is branded in the US. Uptake in the US will take time, and investments in market education are crucial. _Expansion of Ferinject® will continue across the globe, with market approvals and launches expected in a number of additional countries. With the publication of the FIND-CKD study, expansion will start in the ND-CKD market._Venofer® is still the gold standard in iron treatments. The goal is to maintain the market position, supported by re-cent data showing the differences between ISS products and Venofer® as effective medication for haemodialysis patients._The US launch of Velphoro®, driven by Fresenius Medical Care North America, is expected to occur in the first quar-ter of 2014. Additional approval decisions for launching in the EU, Switzerland and Singapore are anticipated in the course of the first half of the year._The 50th anniversary of Maltofer® will be marked by the full roll-out of the modernised brand._The Vaxom business should again show reasonable growth. Investments in emerging markets will continue._In the Infectious Diseases/OTX franchise, the objective is to defend the market position of all brands in an envi-ronment of price pressure and increasing competition from over-the-counter (OTC) brands._In the Consumer Healthcare market, conditions are also expected to be challenging. The focus is on enlarging the portfolio through new product launches and new distribu-tion deals.

30_ Logistics · Galenica annual report 2013

Learning from experience._What makes the Alloga SC Box so secure? How does it work and how is it used? In personal meetings we explain to our partner, Vifor Pharma, the benefits and the handling of the cool box. This enables to both improve contact with our customers and ensure that our refrigerated products don’t suffer from any loss in quality when delivered to our customers._Exchanging our experiences of using the SC Box gives us direct feedback. The information we receive is used to further optimise our products and processes, which is entirely in line with the motto “In tune with the customer”.

63%

16 %8%

Galenica annual report 2013 · Logistics _31

Stable sales, rising profitability

_The Logistics Business sector posted slightly higher sales year-on-year at CHF 2,118.2 million (+0.8%). Thanks to the acquisition of new customers the effect of lower prices could be compensated. _Earnings before interest and taxes (EBIT) increased by 1.3% to CHF 31.1 million. This margin growth was due to further improvements in efficiency, as also reflected in the figures in the table “Key figures Wholesale/Prewhole-sale 2013” (see page 32). _The Business sector also benefited from the expansion of its third party logistics service, a comprehensive offer-ing that allows customers and suppliers to outsource both their bulk and dispersion logistics to Alloga, Galexis and Unione Farmaceutica Distribuzione. A number of suppliers and customers took advantage of this service in 2013. Significant savings were achieved through the consistent exploitation of transport synergies within the Business sector.

Key figures 2013

Logistics CHF 2,118.2 million(Galenica Group CHF 3,359.4 million)

Logistics CHF 31.1 million(Galenica Group CHF 390.6 million)

Logistics 1,191(Galenica Group 7,663)


LOGISTICSHigh quality, broad range

Jean-Claude Clémençon_“The acquisition of new customers compensated for the effect of lower prices.”


_Increase customer loyalty_More sustainable use of energy_Improve existing services and develop new ones_Improve profitability by optimising processes


Wholesale:Galexis, Unione Farmaceutica Distribuzione

Prewholesale:Alloga

Storage_Number of prepared boxes_Number of delivered order lines_Number of prepared packages

> 6,795,000> 31,946,000

> 111,204,000

—> 1,895,000

> 84,085,000

Distribution_Annual tonnage_Number of postal packages_Number of pallets

> 15,400> 99,000

—

> 7,400> 543,000

> 57,400

Structure_Number of items in stock_Number of suppliers/partners_Number of points of sale supplied

> 43,000> 1,150> 6,600

> 14,000> 72

> 14,400

Technology_Degree of automation in Niederbipp_Degree of automation in Lausanne-Ecublens_Degree of automation in Barbengo-Lugano_Degree of automation in Burgdorf

> 72%> 24%> 50%

—

———

> 31%

Key figures Wholesale/Prewholesale 2013

The acquisition of new customers proves that a broad range, competitive prices and high quality are in demand throughout the logistics process.

Continued pressure on drug prices _The second round of government-mandated price reduc-tions in the Swiss healthcare market came into effect in the period under review. The Federal Office of Public Health (FOPH) is aiming to generate annual savings of CHF 150 to 200 million through these cuts. The actual figures are likely to be higher because falling drug prices coincide with patent expiry on some higher price, higher margin drugs. As the price regulator noted, the costs of originator products whose patents have expired are now on average 15% more expensive in Germany than in Swit-zerland. In addition, price reductions are leading to the unusual situation where, for example, a prescription-only pack of a drug to lower fever currently costs less than a pack of herbal throat sweets.

_Pressure on prices is evident throughout the entire value chain in the healthcare industry. For full-service pharmaceutical wholesalers such as Galexis and Ticino-based Unione Farmaceutica Distribuzione (UFD), lower prices and margins mean that costs have to be monitored even more closely to take advantage of synergies between the companies. If pressure on drug prices continues un-abated, the service profile of the wholesalers will have to be reviewed and adjusted. This conflicts to some extent with the role as the backbone of pharmaceutical supply in Switzerland. In the event of pandemics or cases of men-ingitis, it is up to companies such as Galexis to rapidly make available and distribute vaccines, disinfectants, masks and antibiotics. The situation is becoming increas-ingly tight in this regard in Ticino, where the market is

difficult due to a range of other factors, not least consumer tourism, which also affects cosmetics and other products in the healthcare market.

Value-added product range _Several companies are interested in Switzerland-wide exclusive distribution via Galexis. Following Procter & Gamble, the cosmetics supplier Quarz Ltd., whose brands include Sans Soucis, opted for exclusive delivery by Galexis in 2013. _The acquisition of new customers proves that a broad range, competitive prices and high quality are in demand throughout the logistics process. The Logistics Business sector expanded and strengthened all three elements in 2013. The product range was extended and expanded to include various special ranges to meet specific customer needs, for example, veterinary products. _G-Pharma, which specialises in trade brands, also expanded its range of products and services in 2013. The trade brands programme, with now over 100 products, allows pharmacies and drugstores to improve their com-petitiveness._In addition, Galexis launched a standard range of medical technology devices in the second half of the year for fam-ily doctors and general practitioners. The range includes furniture, diagnostic, emergency and laboratory products offered at EU prices. The new offering has been well re-ceived. _Galexis again parallel imported individual products, such as plasters, giving its customers a competitive alternative to offerings of the major distributors.


_The Alloga logistics centre in Burgdorf, the Galexis distribution centres in Lausanne-Ecublens and Niederbipp and the Unione Farmaceutica Distribuzione distribution centre in Barbengo- Lugano allow the Logistics Business sector to guarantee the supply of drugs throughout Switzerland.

Niederbipp

Barbengo-Lugano

Lausanne-Ecublens

Burgdorf

Wholesale Prewholesale

Thanks to the innovative Alloga coolbox, Galexis has already implemented increasingly strict regulatory requirements for the transport and the storage of drugs.

_Finally, in July 2013, Galexis acquired Medifilm, the lead-ing company in the field of blister packaging for medicines. Blister means that medicines are put into a transparent packaging. In this respect Medifilm prepares medicines individually on behalf of pharmacies. Through the integra-tion of Medifilm into the Logistics Business sector, the range of services has been extended by a new, attractive offering.

Focus on quality_The new Good Distribution Practice (GDP) guidelines entered into force in the EU in summer 2013. They will soon apply similarly in Switzerland and, among other

things, clearly stipulate at which temperatures drugs must be stored and transported. Thanks to the innovative Alloga coolbox, Galexis has implemented these increasingly strict regulatory requirements early and can therefore already service all customers in line with the new EU guidelines, as well as offering them a choice of suitable transport options._The Regional Medicines Inspectorate (RHI) has assessed Alloga’s infrastructure and processes. Further improve-ments were achieved in 2013 compared to the inspection in 2011. Services were rated as “very good” by the Re-gional Medicines Inspectorate, which demonstrates that Alloga is also a market leader in this area.

_Drugs are only fully effective when they are taken cor-rectly. Drug safety is also directly affected by this. People who regularly have to take a number of drugs know the difficulties and uncertainties this involves. Unit-dosed drugs solve this problem for patients at home, in care homes and in assisted living facilities. Medifilm packages tablets and capsules in individual sachets, each labelled with the time at which they must be taken and a descrip-tion of the medications. _Nursing homes benefit in two respects. First, medica-tion dispensing is safer and transparent. Second, it redu-

ces the burden on nursing staff. The value of the working time freed up is greater than the costs of the Medifilm service. _Dispensing pharmacies transfer the doctor’s prescrip-tions into the Medifilm software. Medifilm packs the sachet according to the treatment details entered by the pharmacy, and the entire batch is distributed to the phar-macies overnight using pharmaceutical logistics. This results in the pharmacies receiving a clearly structured treatment for patients, making it much easier to advise patients and nursing staff.

Individually packaged tablet doses increase treatment adherence and safety


Exploiting synergies_An important, ongoing efficiency enhancement pro-gramme is operating under the name Coaxial, covering the Logistics, Retail and HealthCare Information Business sectors. As part of this programme, the different IT infra-structures are being standardised and merged into a sin-gle data centre in Niederbipp. The project is proceeding according to plan._A project to increase transport synergies got off to a good start. Customers in the Logistics Business sector benefit from receiving orders from Galexis and Alloga in a combined delivery – an economically and ecologically efficient solution. A newly launched electronic delivery confirmation also increases process security.

Outlook: continuous optimisation

_The FOPH mandated further price reductions for around 500 of 800 drugs examined as of November 2013; pres-sure on costs will therefore continue in 2014._In light of this, the Logistics Business sector has the same priorities as in 2013: strengthen customers’ competitive-ness with services and reduce costs via increased effi-ciency. Customer loyalty should therefore be strengthened in all segments. The focus is on broad product ranges, exclusive ranges and process improvements._Processes will also be further optimised, as cost leader-ship is key. In this regard, the Coaxial efficiency improve-ment programme should be completed in 2014. Further-more, the logistics and distribution centre in Burgdorf will be equipped with a new pick-by-voice system. Employees will wear headphones and be guided by voice to the loca-tion to pick the drug required.

Processes will also be further optimised, as cost leadership is key. In this regard, the Coaxial efficiency improvement programme should be completed in 2014.

_ Market leader in Swiss healthcare logistics.

_ Distribution centres in Niederbipp and Lausanne-Ecublens.

_ Comprehensive product and service offerings.

_ Supplies pharmacies, medical practices, drugstores, nursing homes and hospitals.

_ Leading pharmaceutical wholesaler and the only full-range supplier in Ticino.

_ Distribution centre in Barbengo-Lugano with strong regional roots.

_ Supplies pharmacies, drugstores, nursing homes and hospitals.

_ Largest Swiss pre- w holesaler.

_ Logistics centre in Burgdorf.

_ Modular, process-managed full-service offering along the entire supply chain.

_ Logistics services in partnership with the pharmaceutical and healthcare industry.

_ Launch and distribution of pharmaceutical and para-pharmaceutical products.

_ Service provider for own brands and commercial products – from idea devel-opment to the brand.

_ Marketing and sales ser-vices.

_ Offers its range of products and services to all partners of the healthcare market.

_ Swiss pioneer in the area of blister packaging of drugs for individual patients.

_ Only Swiss blister packag-ing centre with wholesaling and manufacturing licence.

_ Customers include pharma-cies and nursing homes supplied with pharmaceuticals.

Logistics companies of Galenica


In tune with the customer with a focus on drug safety._Medifilm packages medicines and nutritional supplements on an individual basis for long-term patients in accordance with their daily dosage specifications. Our pharmacy customers, such as Breite pharmacy in Basel, provide care to patients and distribute the strips of labelled medicine sachets (our medifilms)._Medifilm is a service aimed at optimising the quality of care and avoiding incorrect dosages. Hospitals, nursing homes and patients can use Medifilm to improve their working processes.

36_ Retail · Galenica annual report 2013

More time for customers._The Tripet pharmacy in Neuchâtel was one of the three Amavita pilot pharmacies at the start of the “Team Performance” project. The extremely constructive collaboration with the team gave us the opportunity to test and optimise the efficiency of the pro-gramme in practice. You can read more about the fruits that this collaboration has already borne on page 38. _We were able to identify a significant improvement in customer satisfaction within only five months: 70% of customers at “Team Performance” pharmacies recommend them to their friends.

37% 16% 56%

Galenica annual report 2013 · Retail _37

Growth and efficiency in the healthcare market

_In 2013, the Retail Business sector increased sales by 4.8% to CHF 1,245.7 million (excluding Coop Vitality). By far the largest proportion of this increase was due to the continued expansion of the pharmacy network. Like-for-like growth amounted to 1.6%, the Business sector thus developed slightly above market growth of 1.0%. Overall, twelve locations were added to the network of Group-owned pharmacies, and the addition of a group of pharmacies in the Biel-Bienne region increased the total number of Winconcept partners by seven locations. In addition, GaleniCare Holding acquired a 49% stake in the Bahnhof Apotheke Zurich at Zurich’s main railway station. _Price cuts in the Swiss pharmaceutical market continued to have a discernible impact and the Retail Business sector compensated for these with increased customer traffic and service-related sales in the pharmacies. Earn-ings before interest and taxes (EBIT) increased by 4.5% to CHF 63.0 million in 2013, return on sales remained at the previous year's level at 5.1%.

Retail CHF 1,245.7 million(Galenica Group CHF 3,359.4 million)

Retail CHF 63.0 million(Galenica Group CHF 390.6 million)

Retail 4,288 (Galenica Group 7,663)

Key figures 2013


RETAILTeam Performance

Felix Burkhard_“GaleniCare does a lot to provide even better care to customers and patients in pharmacies.”


_ Creating scope for price reductions by optimising the pharmacy network and business processes

_ Exploiting synergies for customers in the areas of product ranging, services, purchasing and employee training

_ Sustainable expansion through internal growth and acquisitions as well as by reinforcing the network with Galenica-owned and independent partner pharmacies

_ Strengthening customer focus through own-label brands, optimising the product range and new services


Expansion of market presence

_Stake in Bahnhof Apotheke Zurich. In July 2013, Galeni Care acquired a 49% stake in the pharmacy Bahnhof Apotheke Zurich at Zurich’s main railway station, thereby adding to the pharmacy network a pharmacy that is highly successful and strategically very well positioned. With over 350,000 commuters and travellers passing through the station every day, Zurich’s main railway station is the most heavily frequented place in Switzerland. The acquisi-tion marked the first step on the part of the sole proprie-tor of the Bahnhof Apotheke Zurich towards putting in place a succession plan. It is planned that GaleniCare becomes the majority shareholder at a later stage. Until then, the current majority shareholder will retain sole re-sponsibility for managing the pharmacy.

_Amavita and Hirslanden collaboration. Amavita has an agreement with the Hirslanden Private Hospital Group that will allow hospital patients with a Hirslanden Privé card to make use of the advantages of the Amavita StarCard, the Amavita pharmacy loyalty card. The Star-Card is credited with “stars” each time a purchase is made in an Amavita pharmacy, and these stars can then either be cashed in or used as credit vouchers.

_Step-by-step expansion of own-brand range. Amavita and Coop Vitality include a growing number of own brands in their range. Customers have the advantage of being able to buy attractively priced, quality alternatives to brand products, while the pharmacies of both formats benefit from increased market presence and recognition.

_Success in the anniversary promotions. The “Sunny Monday” promotion, which was launched in 2012 by Sun Store to mark the pharmacy chain’s 40th anniversary, has been continued in 2013 due to its great success. In addition, various special offers and promotions have ac-companied the magazine “for me” to celebrate its 25th anniversary. The cosmetic magazine “J’adore” also had an event to celebrate: in August the 100th edition of the magazine was published in the form of a special issue with special offers and a competition for customers.

Optimal service from our pharmacies

_Team Performance. GaleniCare is conducting several projects aimed at improving service for customers and patients in the pharmacy. In a pilot project, selected Amavita pharmacies successfully tried ways of increasing efficiency in administrative processes so as to allow staff to spend more time in advising customers and focusing on sales. The staff in the various pharmacies set their own goals as a team, work out their solutions and check at-tainment of the objectives on a regular and systematic basis. The effectiveness of this approach is reflected not only in the positive feedback from the personnel involved, but also in hard facts such as the sales development in the pharmacies concerned. The processes required to improve Team Performance will be implemented on a step-by-step basis in all Amavita pharmacies and, in parallel, at Sun Store as well.

_Systematic customer surveys. The Amavita pilot phar-macies are evaluating the effect of Team Performance using systematic customer surveys. The aim is to gain a better understanding of what is particularly important for customers during their visit to the pharmacy. Over 1,300 feedback forms were collected from customers and eval-uated by the end of the year. Among the feedback were a number of suggestions for improvements, and these are being implemented in the individual pharmacies. Overall, the results also show that customers of pharmacies that have initiated the Team Performance process are more satisfied. This system, too, will be introduced gradually in all Amavita, Sun Store and Coop Vitality pharmacies.

_More than 3,100 polymedication checks. The polymed-ication check is just one example of how time that has been freed up through more efficient service can be put to good use in advising customers more intensively. Many patients take several medicines at the same time and are reliant on advice about their treatment. In personal dis-cussions with patients, pharmacists check whether the products being taken, work in the best possible way. This service provided by pharmacies is one which health insur-ance schemes recognise and reimburse. The service has been very well received. In 2013, more than 3,100 poly-medication checks were carried out at Amavita and Coop Vitality pharmacies, five times as many as in 2012. It is not only patients who benefit from this improved treat-ment process; the healthcare system benefits too, thanks to the cost savings generated.

The aim of the Team Performance project is to free up more time for staff to be used in advising customers and focusing on sales. Pharmacies set their own goals as a team, work out their solutions and check attainment of the objectives on a regular and systematic basis.


Checking that the team is “in tune”._In the spirit of the 2013 annual motto “In tune with the customer”, we are testing the pharmacies’ advisory services. Unannounced and unrecognised, we adopt the role of a customer in order to check out the shopping experience at the Bümpliz pharmacy & drug store, because small things can make an occasional customer a regular one – or a regular customer a former one. _We at Winconcept developed the mystery shopping service, which is available to all pharmacies, for the sole purpose of optimis-ing the shopping experience.


The Amavita and Coop Vitality pharmacies expanded their own-brand ranges. The pharmacies of both formats benefitted from increased levels of recognition and market presence.

_AllergyCheck pilot project. The quick allergy tests offered are a step in the same direction. In a pilot project in their pharmacies in the Canton of Zurich, Amavita and Coop Vitality provided customers with the possibility of undergoing such a test. Within 20 minutes, each customer received a personal allergy profile covering the ten most common allergens. Around one-quarter of the population in Switzerland suffers from an allergy. The test will be introduced in all Amavita and Coop Vitality pharmacies in 2014.

_Demand for alternative medicine. Coop Vitality features a range of alternative medicine treatments and, outside of its pharmacies, offered customers a series of lectures on Schuessler salts in 2013. German physician Wilhelm Heinrich Schuessler developed this treatment method in the 19th century, based on his belief that illness results from a lack of specific minerals that are vital for health._Staff at all Coop Vitality pharmacies were given a basic training course that also included spagyric complex rem-edies. Spagyric medicine is a natural treatment method where active substances from plants are first extracted, processed and then recombined.

_Customer-specific medication. With the acquisition of Medifilm by Galenica (for more information, see the sec-tion on Logistics, page 33), it is now possible to also offer patients in care homes customer-specific medication. Medifilm blister packages medicines and can “tailor make” packaging for individual patients so that all the drugs that need to be taken at a specific time are packed together in a transparent sachet.

_Looking after chronically ill patients. MediService, which specialises in therapy support for chronically ill patients, expanded its Home and Pharma Care services in the core therapeutic areas of neurology (multiple sclerosis), auto-immune diseases (rheumatoid arthritis), oncology and haematology. The service is now also offered to haemo-philia patients. _At MediService, looking after patients and compliance are becoming increasingly important. The driving forces are demographic developments, cost pressures and improving efficiency in chronic long-term treatment by empowered patients._MediService implemented Europe-wide guidelines for good distribution practice (GDP) for medicinal products for human use in force since September 2013. The areas that form the main focus of the guidelines are risk man-agement, temperature control, IT validation and the skills of and training for employees. The guidelines are in step with increasingly stricter regulations on the part of the authorities. Pharmaceutical partners also conduct more regular audits. In consequence, MediService accords the greatest possible attention to quality management.


Home Care that is literally “In tune with the customer”._We in therapy support are always touched by the open, friendly welcome we receive. Even if the reason for the visit often provides no cause for celebration, we are constantly amazed by the bravery shown by patients who are frequently living with serious illnesses._Therapy support by MediService is provided in the familiar surroundings of the patient’s home. The patients greatly appreciate always having someone they can call at any time, who is there to offer them advice and support. For us, that’s “In tune with the customer” at its finest.


1) Fully consolidated 2) Consolidated at equity level

31.12.2013 31.12.2012 Change

Amavita pharmacies1) 145 138 +7

Sun Store pharmacies1) 104 106 –2

Coop Vitality pharmacies2) 55 51 +4

MediService specialty pharmacy1) 1 1 —

Majority holdings in other pharmacies1) 4 2 +2

Minority holdings in other pharmacies2) 3 2 +1

Total own points of sale 312 300 +12

Own pharmacies and shareholdings

31.12.2013 31.12.2012 Change

Amavita partnerships 11 14 –3

Winconcept partner pharmacies 160 153 +7

Total independent partners 171 167 +4

Independent partners

Shelf price labelling continued, resulting in leaner goods delivery processes and increased transparency for customers.

More efficient business processes

_Alongside focusing on range expansion using suitable products and services, the back office units at GaleniCare are constantly looking at how workflows can be optimised.

_LoRe making its mark. Under the heading “LoRe”, which stands for Logistics and Retail, various activities aimed at enhancing efficiency were developed further and rolled out in 2013 following the successful conclusion of pilot projects. Two important elements are shelf price labelling and more efficient stock management in pharmacies. Shelf price labelling resulted in leaner goods delivery processes and increased transparency for customers, and the first Amavita and Sun Store pharmacies have completed implementation._In Amavita and Sun Store pharmacies, various key ratios on goods flows and stock management are defined and measured on a monthly basis. This allows order volumes to be adapted more efficiently in line with actual require-ments.

_Centralisation of administrative processes. At the Retail Business sector’s two central locations in Bern and St-Sulpice, the Finance and HR departments are still working with different processes and two different IT sys-tems. In the context of the Alterno project, Finance and HR processes are being standardised and only one system will be in operation in 2014. _Another objective of Alterno is to take away as much administrative work as possible from the pharmacies and reassign this work to the headquarter locations. In HR, primarily time-keeping processes are affected. Electronic staff resource planning (PEP) is to be deployed at around 300 points of sale starting in 2014 (see also the informa-tion in the Human Resources section, page 93). In Finance, the aim is to centralise accounts receivable with the exception of health insurers.

_Winconcept optimising over-the-counter display op-tions. Winconcept develops management and marketing concepts for a growing number of affiliated independent pharmacies. In 2013, the team stepped up its range of consulting services, namely in category management. One element is the optimal selection and positioning of OTC products in over-the-counter display units, i.e. behind the counter, and not on a self-service basis. The other instru-ments offered by Winconcept, such as mystery shopping, customer surveys and customer card concepts, were also well used.


_ Largest pharmacy network in Switzerland.

_ Founded and managed by GaleniCare.

_ Product focus: prescription and non-prescription medicines and beauty products.

_ Points of sale in attractive public locations.

_ Strong customer focus (employee training, services, own-label brands).

_ First pharmacy chain in Switzerland, belongs to Galenica since 2009 and is managed by GaleniCare.

_ Product focus: non-prescription medicines, beauty, wellness and health.

_ Larger-than-average retail space in places with high customer traffic such as shopping centres.

_ Joint venture between Coop and Galenica.

_ Located in larger Coop centres.

_ Comprehensive range in the fields of health, prevention and beauty combined with professional advice and services.

_ Specialty pharmacy for care of patients with chronic illnesses.

_ Home and Pharma Care therapy support service for in-home care of long-term patients, including specialist care and direct delivery of medications.

_ Service provider for autonomous and independent pharmacies.

_ Marketed under the Feelgood’s brand.

_ Management and marketing concepts for members focusing on communication and quality.

The Galenica pharmacy formats

Outlook: moderate growth

_Drug prices will see further reductions and the market will remain extremely competitive. Against this backdrop, the Retail Business sector is maintaining its defined, tried-and-tested strategy. _The drop in sales and margins resulting from cost and price pressures will continue to be offset by moderate expansion of the pharmacy network, new service offerings and a more efficient organisation. On balance, the objec-tive is modest growth, with profitability remaining at least at the current good level._The information that comes out of pilot and test pro-grammes in 2013 will play a central role, with Team Per-formance processes being implemented on a broader basis at Amavita as well as Sun Store and whilst being introduced at Coop Vitality. This also applies to the related systematic customer survey process._At MediService, the focus will remain on selective target-ing of the specialty pharmaceutical market and of the treatment for chronically ill patients. A range of patient-centric programmes will be launched in 2014.

44_ HealthCare Information · Galenica annual report 2013

Model for the transfer of knowledge to our customers._The example of the e-mediatACADEMY® shows the reach of the annual motto “In tune with the customer”. The course “INDEX products – do you know your way around them?” was especially developed for our database users. The INDEX products of e-mediat are becoming ever more complex, both for pharmaceutical and medical reasons and as a result of legal requirements. _The course, held in the e-mediat training room, gives employees of more than 100 software companies the necessary basic pharmaceutical knowledge and technical know-how to ensure that the data is correctly interpreted and the INDEX products can also be applied efficiently.

1 % 1 % 2 %

Galenica annual report 2013 · HealthCare Information _45

eHealth provides fundamental framework

_In 2013, sales for the HealthCare Information Business sector declined by 15.5% to CHF 39.8 million. This was due to the absence of turnover from services following the sale of external ERP activities and a decline in the number of contracts concluded with the pharmaceutical industry for the Swiss Drug Compendium (Arzneimittel-Kompen-dium der Schweiz®) as a result of the new regulatory framework. Earnings before interest and taxes (EBIT) amounted to CHF 4.0 million and therefore decreased by 5.7%._The HealthCare Information Business sector continued to improve the coordination of its processes, particularly between the Content and Process units.

Key figures 2013

HCI CHF 39.8 million(Galenica Group CHF 3,359.4 million)

HCI CHF 4.0 million(Galenica Group CHF 390.6 million)

HCI 181 (Galenica Group 7,663)


HEALTHCARE INFORMATIONFocus on eHealth and drug safety

Ulrich Schaefer_“eHealth remains a central issue in the Swiss healthcare market. This was reinforced by the Swiss federal government’s new ‘Health2020ʼ strategy.”


_ Develop pioneering eHealth solutions for the Swiss healthcare market

_Adapt database technologies for use with new media_ Exploit synergies in key HealthCare Information

software components


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

_Additional information such as reimbursement eligibility and links to further offerings

_Networking of users and providers: practice-based physicians, pharmacists, drug stores, hospitals, nursing homes, health insurers, wholesalers

_Efficient provision of correct information to benefit patients

_Record of changes available daily_Labelling of drugs requiring cold

storage_Distribution of wholesaler-specific

information (terms and conditions, return regulations, prices)

_Online publication of drug information

_Integrated distribution with more than 140 system providers throughout Switzerland and in all language regions

Identa by Documed

Embedding eHealth in the new “Health2020” strategy

_In January 2013, the Swiss Federal Council published healthcare policy priorities as set out in its “Health2020” strategy. This strategy provides an overview of all the healthcare challenges being faced currently, with short- and medium-term areas for action. One of the aims set out in the agenda is to use eHealth more intensively. According to those who formulated the agenda, eHealth contributes to greater efficiency as it eliminates dupli-cated effort during patient diagnosis and ensures better coordination of all those involved in the treatment pro-cess. The most important measures listed for achieving the objective of eHealth are:

_The introduction and development of eMedication, with the possibility for doctors, pharmacists and hospitals to have electronic access to patients’ med-ication details;

_The introduction and development of electronic patient records to improve quality of care and patient safety;

_Digital support for treatment processes such as hos-pital discharge processes.

_The “Health2020” strategy has placed the hitherto iso-lated electronic patient file project in a wider context, add-ing further eHealth measures. In light of this, the national rollout of the electronic patient record, initially planned for 2015, has been postponed. _Over the coming years, government incentives and requirements grouped together in the “Health2020” strat-egy under eHealth will shape the fundamental framework for the HealthCare Information Business sector and the development of solutions offered.

The Swiss federal government’s “Health2020” strategy places the hitherto isolated project of electronic patient files in a wider context and will shape the regulatory framework over the coming years.


Documed and e-mediat provide additional value in respect of the new system for regulatory drug information (Arzneimittelinformation Publikationsplattform Swissmedic, AIPS) by supporting the software of other applications and ensuring a higher level of data quality.

e-mediat and Documed: compendium.ch and the INDEX databases will remain at the heart of drug information

_The beginning of 2013 saw the successful rollout of Documed’s new system for regulatory drug information (Arzneimittelinformation Publikationsplattform Swiss-medic, AIPS). However, only information required by law is published in AIPS. With their information platforms, Documed and e-mediat provide substantial additional value by supporting the software of other information ap-plications used by hospitals, medical practices and phar-macies. They also provide a higher level of data quality as the information is checked in all language versions, both technically and in terms of content. _In the second half of 2013, a Swiss Medical Association (FMH) initiative led to the creation of a round table, involv-ing all stakeholders from the pharmaceuticals area, which examined the issue of structured drug information. Those present at the round table recognised the danger of potential steps backwards in patient safety due to data being either out-of-date or incomplete. HealthCare Information has invested a lot to convince the phamaceu-tical companies to continue to work with Documed via the compendiumPORTAL so as to contribute to medication safety.

_“kinderdosierungen.ch”. Incorrect dosage is one of the most frequent sources of error when it comes to medicat-ing children. Medicines are often insufficiently researched in children, leading to inadequate information about dos-age and methods of administration. With the support of Documed and e-mediat, the Zurich Children’s Hospital has launched the “kinderdosierungen.ch” website to tackle this problem. It gives specialists access to reliable dosage data for children, covering around 330 active substances in 3,000 data sets. The project was given the Swiss Qual-ity Award 2013 in Patient Safety by the Swiss Medical Association FMH. The next step will be to release child dosage information via e-mediat’s hospINDEX® database so that all Swiss hospitals can integrate it into their elec-tronic prescription systems.

_Each year in Switzerland, there are 6,000 avoidable deaths in the healthcare system, many of which are due to medication errors. Documed is an important link in the quality assurance chain, focusing on correct special-ist and patient information and on how this information is prepared for practice-oriented incorporation into soft-ware solutions, e.g. in hospitals. _The rate of error in specialist and patient information is largely unknown, but should not be underestimated. Safety-related errors include, for example, incorrect dosage details. A microgram can easily become a milli-gram, and the consequences can be fatal. Another example of error is confusing hypertension (high blood pressure) with hypotension (low blood pressure), the

exact opposite. Over the past few years, the Documed team has corrected in specialist and patient information around 4,000 errors per year, an estimated 200 of which relate to patient safety._The publication platform AIPS was designed simply as a reference database for basic regulatory information and is the final part of the registration process. It does not support the software in other information applica-tions for INDEX-listed products. Documed and e-mediat therefore offer data links and products that are supple-mentary to all legal publication requirements. In addi-tion, with carefully checked and wide-ranging specialist and patient information, they help ensure that multiple medication errors are avoided.

Important contribution to patient safety in Switzerland


_HCI Solutions maintains databases and develops management solutions tailored specifi-cally to the needs of the networked healthcare market. TriaPharm® is a total management soft-ware solution for pharmacies. TriaMed® was developed for physicians and is suitable for both individual and networked medical centres and group practices.

_e-mediat specialises in establishing and operating databases for the Swiss healthcare industry. The company’s broad experience in data distribution and processing in the healthcare market makes e-mediat the leading provider of master data systems in the health market.

_Documed, an intermediary between the pharmaceutical industry and healthcare specialists, publishes electronic information on pharmaceutical products, and provides the IT platform for the new system for regulatory drug information (Arzneimittelinformation Publikationsplattform Swissmedic, AIPS).

HealthCare Information companies of Galenica

TriaPharm® and TriaMed®: harmonisation of POS software completed

_ActivePOS was introduced at all Sun Store pharmacies in 2013, making efficiency gains also possible in this phar-macy format. This concluded HCI Solutions’ harmonisa-tion of POS software for the Galenica Group’s two largest pharmacy formats. _This rollout has an impact not only in the pharmacies, but at head office as well. The harmonisation and simpli-fication of the central software components of Amavita and Sun Store began in 2013, and these modules will be progressively transferred to a new common platform._In addition, HCI Solutions has developed a new compo-nent for TriaPharm®, called ActiveStock. The application simplifies stock management, from ordering to warehouse delivery and expiry date monitoring, and guarantees more reliable inventory control. _TriaMed® gives all physicians involved in a patient’s treatment access to that patient’s medical history. Sales activities for TriaMed® have been intensified. The system is particularly suitable for group practices, doctors’ net-works, medical centres and HMOs (health maintenance organisations, health centres) because it is able to cope with the strict security regulations regarding data protec-tion. This software is used currently by over 1,300 physi-cians.

Outlook: new functions

_Ongoing process optimisation will continue to be a top priority for 2014. Across the entire HealthCare Informa-tion Business sector, the procedures between the Content and Process units can be further optimised.

_e-mediat and Documed: There are plans to introduce a new platform, vitavista.ch, on which consumers and pa-tients can obtain information about pharmacies’ and drug-stores’ product ranges. More detailed information about products in the areas of health, wellbeing and beauty is available anytime, anyplace online and on devices such as tablets and smartphones. _Documed is extending data content portal functions in compendium.ch and the INDEX databases for pharma-ceutical companies, offering more editing options, making it possible, for example, to enter structured information directly themselves.

_TriaPharm® and TriaMed®: HCI Solutions will introduce the new component, ActiveStock, in TriaPharm®, to sim-plify goods flow processes. _Central control functions in TriaMed® will be extended. Examples of such functions include the definition of treatment standards for an entire network of doctors and statistical query functions across multiple practice locations.

ActivePOS was rolled out at all Sun Store pharmacies in 2013, making efficiency gains possible.


Customer loyalty thanks to presenting innovations._Interdelta is one of our industry partners. We understand additions and innovations to the service package, such as an upgrade to the communication version of the compendium.ch, as a reason to get in touch with our partner. _Individual contact is very important to us. When discussing additions and innovations with customers, their reactions and comments allow us to be fully “In tune with the customer”. At the same time, exchanging ideas strengthens our relationship with the customer.

50_ Political environment · Galenica annual report 2013

POLITICAL ENVIRONMENT“Old and new world” with very different challenges and approaches

SWISS HEALTHCARE POLICY

Comprehensive “Health2020” strategy _The Federal Department of Home Affairs (FDHA), headed by Federal Councillor Alain Berset, presented the new “Health2020” package at the beginning of the year 2013. The strategy defines 36 measures designed to ensure quality of life, reinforce equality of access, increase the quality of services, improve transparency and conse-quently should lead to cost savings of 20%. Given the limited formal authority of the federal government and the prevailing responsibility of the cantons in many areas, the extent of the programme’s impact remains to be seen.

Health insurance premiums continue to rise_The latest figures on costs of compulsory health insur-ance, which are among the most important figures in Swiss healthcare, were published in September 2013. Total payments of CHF 25.7 billion or CHF 3,259 per in-sured person were made in 2012 (+2.9% year-on-year), with considerable cost and premium differences from canton to canton. Almost half of this increase in costs is accounted for by in-patient treatments, but the rise in costs for out-patient treatments carried out by hospitals was also considerable. As a consequence, standard pre-miums increased by an average of 2.2% for 2014, which is slightly lower than the average rise of 3.5% per year over the last decade.

Drug price-setting agreement_In April 2013, the FDHA, the pharmaceutical associations Vips and Interpharma reached an agreement on drug prices under which the FDHA will propose accelerated approval by the Federal Office of Public Health (FOPH) to the Federal Council while the pharmaceutical associations will ensure that their members withdraw the pending law suits on drug prices and abstain from filing new cases. Consequently, the proposed measures in order to reduce prices will be implemented, leading to savings totalling CHF 720 million to 2015. Discussions on the price-setting mechanism will be continued in 2015. _There are continued calls from various parties for a fur-ther reduction in drug prices and the Price Supervisor is demanding steps towards fixed prices for generics.

Vote on “single health insurance scheme initiative”_In autumn 2013, the Federal Council decided to with -draw the indirect counterproposal to the popular initiative “For public health insurance” and instead recommend the rejection of the initiative itself. This move was in reaction to the results of the consultation and associated motions. The vote on the “single health insurance scheme initiative” should thus be held in 2014._The “Yes to General Practitioner medicine” initiative was withdrawn by the initiators because the direct counter-proposal by the Council of States, which was accepted by the Federal Parliament in September 2013, adopted the key concerns of the initiative. Further progress in strength-ening primary care therefore revolves around the mea-sures being developed by the Federal Council and FOPH together with this direct counterproposal, which will be voted on in 2014.

Further block possible on registrations for specialists_Since July 2013, the cantons have again been able to react to a potential oversupply of doctors and manage registrations for specialists in their own areas. This block on registrations is limited to three years.

Revision of the Therapeutic Products Act_The draft bill and dispatch on the revision of the Thera-peutic Products Act (TPA) was submitted to Parliament at the end of 2012. The National Council Committee has started a detailed consultation.

Changes to distribution_The population of the canton of Aargau voted in the fall of 2013 for medicines to continue to be dispensed by pharmacies. A further expansion of self-dispensation, which is also being discussed in other cantons, has there-fore been stopped for the time being._The Swiss Association of Pharmacists pharmaSuisse is negotiating with health insurers on an extension of the applicable service fee for pharmacists. As a continuation of the existing tariff agreement, valuation of services should be further strengthened, in order to reduce depend-ency on purely price-driven margins.

CH DKUS UK1)NL SEATFRDE IT0

200

400

600

800

1000983

640 635

511 510481 474

331369

525

Galenica annual report 2013 · Political environment _51

eHealth: law on electronic patient dossier_The draft bill for a federal law on the electronic patient dossier was submitted to Parliament in May 2013. The law stipulates minimum technical and organisational require-ments for all parties, compliance with which will be en-sured by means of a certification procedure.

INTERNATIONAL DEVELOPMENTS

Cost containment, broader access and innovation in emerging markets_Developments in the international healthcare markets have been marked by increasing budget restrictions, cost containment, patient co-payments and efforts to improve patient access to healthcare services. While US progress in healthcare is hindered by political debate and Europe continues to focus on cost containment, countries in Asia-Pacific and Latin America are developing innovative mod-els to improve patient access to new technologies within budget limits.

US: Obamacare delayed_After the initial delays, the “Obamacare” Act, as the Pa-tient Protection and Affordable Care Act (ACA) is labelled, was implemented in December 2013. Obamacare man-dates health insurance for all, expanding subsidies for low-income families while taxing healthcare providers and higher-income earners.

Europe: role model Sweden_In Europe, the process of benefit assessment for new innovative drugs under the Pharmaceutical Market Re-structuring Act (AMNOG) will see important changes as a result of the third amendment to the law on medicines in Germany. Up to March 2013, around 60% of the 48 drugs that completed the early benefit assessment were con-sidered to bring added benefit. Even with the imposed discounts, the remaining drugs were not judged to im-prove expected outcomes._Sweden’s Minister of Health decided to move away from International Reference Pricing towards maintaining value-based cost-effectiveness pricing and reimburse-ment, which is a model for European countries._In Greece, under pressure from the EU, the Ministry of Health has agreed on four measures to ensure more cost containment in the public healthcare system, including therapeutic protocols for the prescription of medicines and a delay in the introduction of a system of “dynamic pricing” for generics. Higher patient co-payments were also at the centre of discussions in Italy and several coun-tries in Central and Eastern Europe.

1) Data from 2008. Source: OECD Health Data 2012.

Share of healthcare costs (in USD, at purchase power parity) 2010

International comparison of spending on medicines

_At USD 510, Switzerland spends less on medicines per capita than, for example, other comparable countries, such as Germany (USD 640) or the US (USD 983). Spending on medicines per capita in both of these countries increased year-on-year, whereas it fell in Switzerland.

52_ Political environment · Galenica annual report 2013

Latin America: market with substantial growth opportunities_The successful launch of Ferinject® in Argentina is driv-ing the market towards optimal dosage of iron deficiency anaemia treatment. _In a published study, the government of Brazil assessed iron deficiency anaemia treatments as a priority. Patient access to new technologies in this area continues to be challenging. _Mexico’s Federal Commission for Protection against Health Risks has set out new standards to ease internal regulatory barriers and facilitate the entry of drugs into the country.

Asia-Pacific: health care reform in China_China’s State Council unveiled health care reform targets that include greater reimbursement for patients under the national social welfare schemes and expansion of essen-tial drug designations and use. In neighbouring Vietnam, the government is considering a draft amendment to the Law on Health Insurance that would make signing up to the national welfare scheme compulsory for all. Mean-while, Taiwan’s National Health Insurance Committee is considering raising co-payments.


“In tune with the customer” through quick deliveries._Optimising our deliveries has allowed us to meet an important customer need even more effectively. Instead of two deliveries – one by Alloga and one by Galexis – we now deliver goods to the Kantonsspital of Lucerne in a single round. This makes sense environmentally, is a big advantage for our customers and saves time._Customers benefit from quick deliveries and high quality.

54_ Corporate Governance · Galenica annual report 2013

CORPORATE GOVERNANCE

Galenica is committed to the principles of Corporate Governance. Galenica meets the requirements of Swiss law and those stated in the Directive of the SIX Swiss Exchange on Information Relating to Corporate Governance. It also follows the recommendations of the Swiss Code of Best Practice for Corporate Governance of economiesuisse. The remuneration and profit-sharing for top management are disclosed in a separate Remuneration report.

GROUP STRUCTURE AND SHAREHOLDERS

Structure of the Group_Galenica Ltd., headquartered at Untermattweg 8, CH-3027 Bern, Switzerland, is a corporation under Swiss law. As a holding company, Galenica Ltd. owns all the companies in the Galenica Group directly or indirectly. The Group’s structure and the consolidated subsidiaries and associates are shown on pages 151 and 152 respectively. The addresses of the main Group companies are listed on the back cover._The shares of Galenica Ltd. are listed on the SIX Swiss Exchange; shares of individual Group companies are not publicly traded.

Shareholders_On 31 December 2013, Galenica had 9,421 shareholders, four of which were major shareholders holding more than 3% of the voting rights in Galenica Ltd.:

_Alliance Boots Investments 2 GmbH, Bern (Switzer-land), with 1,656,172 registered shares. These shares are registered in accordance with the Articles of As-sociation as follows:

_1,300,000 registered shares with voting rights (20%); _356,172 registered shares without voting rights.

_Alecta pensionsförsäkring, ömsesidigt, Stockholm (Sweden), with 210,000 registered shares.

_Patinex AG, Wilen (Switzerland), and BZ Bank AG, Wilen (Switzerland), (beneficial owners: Martin and Rosmarie Ebner) with 232,620 registered shares.

Content

54 _Group structure and shareholders56 _Structure of the share capital57 _The Board of Directors61 _Management and areas of responsibility64 _Shareholders’ rights to participate65 _Change of control and protective measures65 _Combating corruption65 _ Information and monitoring tools of the

Board of Directors with respect to management66 _Auditors67 _Information policy67 _Brand management69 _Main brands of the Galenica Group

Pharma Santé

Logistics RetailPharma

Prewholesale

Wholesale Content

ProcessServices Services

HealthCare Information

Galenica annual report 2013 · Corporate Governance _55

_Credit Suisse Group AG, Zurich, with 325, 204 registered shares, indirectly held for:

_ Credit Suisse AG, Paradeplatz, 8070 Zurich, Switzerland

_ Credit Suisse Holdings (USA) Inc., Eleven Madison Avenue, 10010 New York, USA

_ Credit Suisse (USA) Inc., Eleven Madison Avenue, 10010 New York, USA

_ Credit Suisse Securities (USA) LLC, Eleven Madison Avenue, 10010 New York, USA

_ Credit Suisse International, One Cabot Square, E14 4QJ London, England

_ Credit Suisse Life (Bermuda) Ltd., Canons Court, 22 Victoria Street, HM12 Hamilton, Bermuda

_ Credit Suisse Investments (UK), One Cabot Square, E14 4QJ London, England

_ Credit Suisse Investment Holdings (UK), One Cabot Square, E14 4QJ London, England

_ Credit Suisse Securities (Europe) Limited, One Cabot Square, E14 4QJ London, England

_No other shareholder has reached the 3% threshold of registered shares.

_The transactions disclosed to the stock exchange Disclo-sure Office pursuant to Art. 20 of the Stock Exchange Act can be viewed on the Disclosure Office website of the SIX Swiss Exchange: http://www.six-exchange-regulation.com/obligations/disclosure/major_shareholders_en.htm

Cross shareholdings_Galenica Ltd. has no cross shareholdings in companies outside the Galenica Group.

Events after the balance sheet date_There are no events after the balance sheet date to re-port.

Pharma companies Management companyManagement company

Structure of the Galenica Group

Pharmacy formats

DivisionBusiness sectors

Status: March 2014


STRUCTURE OF THE SHARE CAPITAL

Share capital_On 31 December 2013, the fully paid 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. _Galenica shares (securities no. 1553646) are listed on the SIX Swiss Exchange. As of 31 December 2013, 6,475,918 registered shares were outstanding (not includ-ing treasury shares). The market capitalisation amounted to CHF 5,815,374,364.

Authorised capital_According to Article 3a) of the Articles of Association, 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 2 May 2014 by issuing no more than 650,000 fully paid registered shares.

Conditional capital_Galenica has no conditional capital.

Changes in the capital in the last years_Information about changes in the share capital, reserves and distributable profit over the past years can be found on page 158. Please see previous Annual Reports for information about prior years.

Participation certificates_Galenica has no participation certificates.

Dividend certificates_Galenica has not issued any dividend certificates.

Registration of shareholders and limitations upon transferability_The transfer of registered shares requires the authorisa-tion of the Board of Directors, which may delegate this responsibility. This authorisation is granted if the buyer discloses its identity and confirms that the shares are being acquired in its own name and for its own account.

Registration and voting rights_Each registered share entitles the holder to one vote at the Annual General Meeting. Pursuant to Article 6 of the Articles of Association, voting rights at Galenica are re-stricted to 5% of the share capital.

_Legal entities and partnerships, other groups of persons or joint owners who are interrelated through capital own-ership, voting rights, common management or are other-wise linked, as well as individuals or legal entities or part-nerships that act in concert to circumvent this provision, shall be treated as one single entity._The Board of Directors may refuse registration in the shareholders’ register if purchasers do not declare expli-citly, upon request, that they have acquired the shares in their own name and for their own account. The Board of Directors is also authorised, after hearing the individuals concerned, to cancel any entries in the shareholders’ reg-ister that were obtained on the basis of incorrect informa-tion._The Board of Directors may approve exceptions to the voting rights restrictions in order to permit the partici-pation of strategic partners in Galenica Ltd., in an amount not exceeding 20% of the share capital. The Board has already exercised this right in connection with Alliance Boots Investments 2 GmbH. _In order to guarantee vested rights, the Articles of As-sociation allow the pension funds of the companies in the Galenica Group to be registered as shareholders with vot-ing rights in an amount not exceeding 10% of all shares with voting rights. As of 31 December 2013, the pension funds were registered with 0.23%._Within the scope of a change in the Articles of Associa-tion, the Annual General Meeting may pass, by a relative majority, a resolution to approve exceptions to the per-centage limits. At least half of all shares entered in the commercial register must be represented in order for such a resolution to be legally binding. The applicant has a right of submission at the Annual General Meeting. No applica-tions for exceptions were submitted during the financial year 2013.

Registration of nominees_A nominee may be registered with voting rights up to a limit of 2% of the share capital entered in the commercial register. Shares in excess of this limit can only be regis-tered if the nominee in question discloses the name, address and number of shares of the person for whose account the nominee holds 0.5% or more of the share capital entered in the commercial register. During the fi-nancial year 2013, agreements of this nature were signed between Galenica and two nominees.

Convertible bonds and options_Galenica has no outstanding convertible bonds, nor has it issued any traded options.


THE BOARD OF DIRECTORS

_The duties of the Board of Directors of Galenica Ltd. are based on the Swiss Code of Obligations, the company’s Articles of Association and its Organisational Regulations. Pursuant to the Articles of Association, the Board of Direc-tors consists of a minimum of five and a maximum of twelve members. It consisted of nine members as of the end of 2013._In selecting the members of the Board of Directors, care is taken to ensure that competency for each area of the Galenica Group’s activities is represented by at least one member, if possible, and that the necessary specialised expertise is also available. The Board of Directors com-missions a review of its functional effectiveness once a year. _With the exception of the two members referred to be-low, none of the members of the Galenica Board of Direc-tors was actively involved in the operations of Galenica or any of the companies in the Group in the year under review or at any time during the previous three years. This was, however, the case for Executive Chairman of the Board of Directors Etienne Jornod, who was additionally CEO until the end of 2011, and Fritz Hirsbrunner, who was also the Group’s Deputy CEO and CFO until the end of 2011 and held a mandate as Head Investor Relations in 2013._The Board of Directors has assigned This E. Schneider as Deputy Chairman as of 1 January 2013._Disclosure of potential conflicts of interest: No member of the Galenica Board of Directors has any significant relations with Galenica or any of its subsidiaries. Stefano Pessina represents Alliance Boots Investments 2 GmbH, which is the largest shareholder of Galenica.

Election and term of office_The Board of Directors and its Chairman are elected by the General Meeting. From 2014, according to the imple-mentation of the “Ordinance against excessive compensa-tion in listed corporations” (VegüV), the term of office between two annual General Meetings is one year. Mem-bers may be re-elected. The Articles of Association do not stipulate a limit regarding terms of office. Elections are held separately for each Board member being elected.

The Board of Directors and its committees from 2014_The Board of Directors is made up of the Executive Chairman of the Board of Directors, one or more deputy chairmen and the other members. According to the Arti-cles of Association, the Board must consist of a minimum of five and a maximum of twelve members. From 2014, the Board of Directors forms the following committees from its members:

_Governance and Nomination Committee_Remuneration Committee_Audit and Risk Committee_Scientific and Pharma Committee_Swiss Healthcare Committee

_Each committee has its own charter setting out its duties and responsibilities. The committee charters are pub-lished on the Galenica website.

Internal organisation_The Board of Directors may pass binding resolutions for the company with respect to all matters that are not expressly reserved for the authority of the Annual General Meeting either by law or the Articles of Association.

Committees and their chairmen and members from 2014

Board member since

Governance and Nomination Committee

Remuneration Committee

Audit and Risk Committee

Scientific and Pharma Committee

Swiss Healthcare Committee

Etienne Jornod 1996 Chairman Member Chairman

Daniela Bosshardt-Hengartner 2008 Chairman* Member Member

Kurt W. Briner 2004 Chairman**

Michel Burnier 2010 Member Chairman

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 * from Annual General Meeting 2014 ** until Annual General Meeting 2014


_The Executive Chairman of the Board of Directors calls a meeting of the Board of Directors at least once a quarter, and prepares and leads the meetings. The individual agenda items are set by the Executive Chairman of the Board of Directors. He decides on a case-by-case basis whether to involve additional persons in the consultations of the Board of Directors. The Corporate Executive Com-mittee usually participates at least in part of every meet-ing, to report on ongoing business and to explain in more detail the documentation in light of the decisions to be taken. Any member of the Board may propose, in writing, items to be included in the agenda, or may request that a meeting of the Board of Directors be convened, briefly giving reasons for doing so. The members of the Board receive the documentation they need to prepare for the agenda items in a timely manner, normally at least ten days before the meeting in question. Decisions are made by the entire Board of Directors. Minutes of the meeting are kept, recording all discussions and resolutions._The Executive Chairman of the Board of Directors, in consultation with the CEO, represents the interests of the Group towards third parties in important matters._In 2013, the Board of Directors held seven meetings. In addition to meetings and the associated flow of informa-tion (documentation on individual agenda items, reports), the Board of Directors is also informed on a very regular basis about the Group’s activities and challenges, as well as the current state and general development of the Busi-ness sectors. Furthermore, the Board of Directors is often consulted by the Corporate Executive Committee in its role as advisory body._As part of its risk management, the Board of Directors receives from the Corporate Executive Committee an overview of the most important risks, along with preventa-tive measures to be implemented Group-wide as part of the risk management process. It evaluates and takes deci-sions on this overview of risks and measures, which is provided when circumstances require it, but at least once a year. Further information on this topic can be found on pages 65 and 161.

Committees_The committees prepare the business of the Board of Directors in the areas of activity assigned to them and submit recommendations to the entire Board of Directors. Except for the Remuneration Committee, the committees have no decision-making authority of their own. They meet as often as business requires and report to the Board of Directors on activities and results. They draw up their own agendas and keep minutes of meetings. _Each committee has its own charter governing its duties and responsibilities.

_Governance and Nomination Committee_The Governance and Nomination Committee ensures the management and monitoring of the Group’s business activities by the Board of Directors (overall management and ultimate supervision pursuant to Art. 716a of the Swiss Code of Obligations). In addition, the Governance and Nomination Committee has the following duties in particular:

_develop the values, short and long-term objectives and strategy of the Group in close cooperation with the CEO for submission to the Board of Directors;

_take provisional decisions and intervene in urgent cases where a decision of the Board of Directors can-not be obtained in a timely manner;

_draw up selection criteria for the nomination of mem-bers of the Board of Directors, Committees and Cor-porate Executive Committee and review the relevant succession plans;

_evaluate and make proposals for the appointment and dismissal of members of the Board of Directors, Committees and Corporate Executive Committee (in-cluding the CEO).

_Remuneration Committee_The Remuneration Committee is made up of three mem-bers, two of whom must be independent. The Remunera-tion Committee:

_proposes a remunieration strategy for the Group and the members of the Corporate Executive Committee to the Board of Directors;

_proposes to the Board of Directors the salaries and remuneration for the members of the Board of Direc-tors and the Committees as well as the CEO;

_decides on the remuneration for the members of the Corporate Executive Committee within the scope of the guidelines adopted by the Annual General Meeting.

_Audit and Risk Committee_The Audit and Risk Committee carries out the following duties in particular:

_verifies compliance with internal and external regula-tions by carrying out random checks;

_checks the performance and independence of the external auditor and approves its fees;

_evaluates and submits its nomination for external au-ditor to the Board of Directors for the Annual General Meeting;

_reviews together with the external auditors the scope and method of the audit;

_defines the internal audit programmes, including com-pliance and IT security, and checks the audit reports and the status reports on the implementation of measures;


Financial Committee

Audit and Risk Committee Compensation & Nomination Committee

Etienne Jornod Member

Daniela Bosshardt-Hengartner Member

Kurt W. Briner Chairman

Michel Burnier Member

Hans Peter Frick Chairman

Sylvie Grégoire Member

Fritz Hirsbrunner Member

Stefano Pessina

This E. Schneider Chairman Member Member

Number of meetings 2013 3 4 6

Members of the Board of Directors and the Board Committees 2013

_analyses at least once a year the scope of internal control systems, the auditing projects and processes affected, the results of internal audits and the imple-mentation of recommendations by the Corporate Ex-ecutive Committee;

_reviews with the external auditors the Group’s compli-ance with accounting policies and standards;

_assesses the organisation of risk management pro-cesses;

_reviews, if necessary together with the external audi-tors, the risks that could affect the Group’s result and the measures planned for reducing those risks;

_issues new guidelines, instructions or clarifications in connection with the Code of Conduct;

_assesses the financial structure, the development of investments and acquisitions, and the influence of currency fluctuations and measures to be taken;

_monitors the Group’s financial situation and financial controls;

_receives regular information from the Corporate Executive Committee concerning major changes that could affect the Group’s financial situation.

_Scientific and Pharma Committee_The Scientific and Pharma Committee acts as an advi-sory body to the Executive Chairman and the Board of Directors in matters of R&D strategy for the Group, in-novation process, innovation pipeline, protection of intel-lectual property and in the assessment, selection and prioritisation of target markets and therapeutic fields._It also gives its view on acquisitions and proposals aimed at strengthening the technology base of the Group or ac-celerating market penetration.

_Swiss Healthcare Committee_The Swiss Healthcare Committee acts as an advisory body to the Executive Chairman and the Board of Directors, in matters concerning the market of healthcare services in Switzerland, in particular the provision of medical products and information to pharmacists and other healthcare professionals, the assessment, selection and prioritisation of target markets and the optimisation of logistics processes. _It also gives its view on mergers and acquisitions and divestiture projects of its points of sale aimed at strength-ening market penetration and efficiency.

Frequency of meetings of the Board of Directors and its committees in 2013_In 2013, the Board of Directors held seven meetings, together with members of the Corporate Executive Com-mittee. The Compensation and Nomination Committee met six times, the Financial Committee three times and the Audit and Risk Committee four times. On average the members of the Board of Directors participated in more than 95% of the meetings. In the future, the members of the Remuneration Committee are to focus more heavily on compensation issues. Therefore, remuneration matters have been separated from nominations. Likewise, critical evaluation and investigation of scientific and pharma is-sues are coordinated by a Scientific and Pharma Commit-tee with in-depth knowledge. The new allocation of tasks among the committees is described starting page 57 of this report.


Members of the Board of Directors

Etienne Jornod, Executive Chairman of the Board of Directors, 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); member of the Board of Directors of Alliance Boots (London and Bern) and Vaudoise Assurances Holding SA (Lausanne)

Daniela Bosshardt-Hengartner, elected since 2008_Born in 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 Nobel Biocare

Management AG (Zurich) and RepRisk AG (Zurich)

Kurt W. Briner, elected since 2004_Born 1944, Swiss citizen_School of Commerce Basle/Lausanne_Formerly CEO of Sanofi Pharma (1988–1998)

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. 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

The Board of Directors 2013 _From the left: Sylvie Grégoire, Stefano Pessina, Fritz Hirsbrunner, Kurt W. Briner, Etienne Jornod, This E. Schneider, Hans Peter Frick, Michel Burnier, Daniela Bosshardt-Hengartner


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 IDM Pharma (2006–2007), GlycoFi Inc. (2004–2005), Biogen Inc. (1995–2003) and Merck & Company (1987–1995)

_Advisor to venture capital and biotech companies_ Former member of the Boards of Directors of various compa-

nies in the US and Canada, and the boards of various charita-ble organisations

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 since 2012

_ 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 in various

pharmaceutical distribution companies since 1976; became Deputy Chairman in 1997, and CEO between 2001 and 2006 of Alliance UniChem Plc, Weybridge (UK); from 2007, Executive Chairman of Alliance Boots, London; member of the Board of Directors of Walgreens (USA) since 2012

This E. Schneider, 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 US, at SAFAA (1991–1993), Valora (1994–1997) and Selecta Group (1997–2002); became CEO of Forbo International AG, Baar, Switzerland in 2004

_ Member of the Board of Directors of Forbo Holding AG, Baar, (Delegate of the Board of Directors); Rieter Holding AG, Winterthur (Vice-Chairman of the Board of Directors) Antoneum Holding AG, Winterthur (member of the Board of Directors)

MANAGEMENT AND AREAS OF RESPONSIBILITY

_The Board of Directors is legally responsible for the over-all management and ultimate supervision of the Group. It has the duties provided for under Art.716a para.1 of the Swiss Code of Obligations; it cannot be deprived of these duties, nor can it delegate them. In addition, it may pass resolutions with respect to all matters that are not re-served for the authority of the Annual General Meeting either by law or the Articles of Association. In particular, the Board of Directors is responsible for approving or passing resolutions on:

_the values, objectives and strategy of the Group; _the essential framework of the company’s activities;_the Group’s planning, budget and projections; _selection and deselection of the members of the Com-

mittees, the CEO and the members of the Corporate Executive Committee

_the organisation of the remuneration system

_The Board of Directors has delegated the management of the company in accordance with the Organisational Regulations. Etienne Jornod serves as Executive Chairman of the Board of Directors and has certain clearly defined operational duties. More precise details of his duties are set out later in this section. The CEO, David Ebsworth, assumes operational management of the Group, as Head of the Corporate Executive Committee. The Board of Di-rectors maintains close contact with David Ebsworth and the members of the Corporate Executive Committee and invites them, or sometimes the CEO on his own, to attend its meetings when relevant items are to be discussed. At

each meeting, the members of the Corporate Executive Committee are also invited to report on their respective Business sectors and to discuss important business mat-ters with the Board. Other members of senior or executive management of companies within the Group are also regularly invited to report on their activities or present their projects.

Duties of the Executive Chairman of the Board of Directors _As Executive Chairman, Etienne Jornod is responsible for leading the Board of Directors, the ongoing strategic de-velopment of the Group, alliances and acquisitions, the positioning of the Group concerning communications and stakeholder relations. In particular, he carries out his ex-ecutive role in important strategic boards of the Galenica Group, such as Chairman of the Board of Directors of Vifor Fresenius Medical Care Renal Pharma and member of the Board of Directors of Coop Vitality. He is also a member of the Board of Directors of Alliance Boots, which has had a strategic partnership with the Galenica Group since 1999._The Executive Chairman is also closely involved in the implementation of the most important strategic projects. In addition, he has overall responsibility for the Group’s corporate culture, a competitive factor that is becoming increasingly important in the labour market. Likewise, he helps shape the HR policy and communications of the Galenica Group. The Swiss heritage of the Galenica Group should be preserved as a competitive advantage and con-tinue to be developed. Approximately 6,900 of around 7,700 Galenica employees are based in Switzerland.


Duties of the Executive Chairman of the Board of Directors _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 CEO_Operational management of the Group _ Leading the Corporate Executive Committee _Budget realisation and control_ Ensuring compliance, internal control sys-

tems and risk management_ Developing relationships with customers, suppliers and authorities

_ Supporting the Executive Chairman of the Board of Directors in preparing strategic, HR-related and financial business for consul-tation and decision-making

* = Members of the Corporate Executive Committee

The Corporate Executive Committee 2013_From the left: Gianni Zampieri, Jean-Claude Clémençon, David Ebsworth, Felix Burkhard, Jörg Kneubühler

Organisation of Group Management

Corporate FinanceJörg Kneubühler*

PharmaDavid Ebsworth*

PharmaGianni Zampieri*Deputy CEO Pharma

RetailFelix Burkhard*

Logistics /HealthCare InformationJean-Claude Clémençon*

Corp. CommunicationsChristina Hertig

Internal Audit

General SecretaryAndreas Walde

Executive ChairmanEtienne Jornod

CEODavid Ebsworth*

LegalOliver Kronenberg

Human ResourcesJörg Kneubühler*

Status: March 2014


Members of the Corporate Executive Committee

Dr. David R. Ebsworth, CEO Galenica Group and Head Pharma Division, CEO Vifor Pharma

_Born 1954, British citizen_ BSc in Chemistry and German, PhD in Comparative Industrial

Relations, University of Surrey (UK)_ Worked from 1980 as a Product Manager at Pfizer, Germany;

held various management positions at Bayer AG in Germany, Canada and the US between 1983 and 2001; became CEO of Oxford Glycosciences UK Ltd. in 2002; then from 2003 held positions as a consultant while being a member of or chairing the Boards of Directors of several companies in Germany, England and Eastern Europe

_ Joined the Galenica Group in 2009 as a member of the Corporate Executive Committee; Head Pharma Division and CEO Vifor Pharma; CEO of Galenica Group since 2012

Felix Burkhard, Head Retail Business sector_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 of Retail from 2000; in addition, Head of the Amavita pharmacy chain from 2008; Head Retail and member of the Corporate Executive Committee since 2010

Jean-Claude Clémençon, Head Logistics Business sectorand Responsible for HealthCare Information

_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 since 2005; Head HealthCare Information and member of the Corporate Executive Committee since 2010

_Member of the Board of Helvecura cooperative society, Bern

Dr. Jörg Kneubühler, CFO and Head Human Resources_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 Administra-

tion 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 and Head Human Resources since 2012

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 and Novartis (Strategic Planning)

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 from 2008 to 2012; CEO OM Pharma from 2009 to 2010; Vice-CEO Vifor Pharma since 2011; Head Pharma Operations since 2012

Duties of the CEO_David Ebsworth, as CEO, is responsible for the opera-tional management of all of the Group’s Business sectors, for implementing the strategic and operational objectives approved by the Board of Directors, for preparing budgets and ensuring that they are met, and for developing rela-tionships with customers, suppliers and authorities. He leads the Corporate Executive Committee, implements the Group values (including safety, quality and the Code of Conduct) and issues binding guidelines for the Group. In doing so, he works closely with the Executive Chairman on the most important decisions. The CEO reports directly to the Executive Chairman, with whom he prepares the information for the meetings of the Board of Directors. At these meetings, the CEO, and on some occasions other members of the Corporate Executive Committee, inform the Board of Directors and submit strategic, HR-related and financial business to the Board for consultation and decision-making.

Corporate Executive Committee_The instructions and resolutions of the Board of Direc-tors are implemented by the Corporate Executive Com-mittee under the leadership of the CEO. The Board sets appropriate objectives for the CEO and the Corporate Executive Committee, approves the budget and continu-ally monitors compliance with these targets. Monitoring

is based on monthly reports to the Board, which include key figures and reporting on important events and devel-opments, and on the planning cycle. In the first quarter, the results for the previous year are compared with the budget for that year. In the second quarter, the current financial year is evaluated by means of a “Last Estimate1”, and a medium-term plan for the next three years is drawn up. In the third quarter, the results for the first half-year are prepared and reviewed, and in the fourth quarter the expected annual result “Last Estimate 2” is determined and the budget for the following year agreed._For information on the other duties of the Board of Direc-tors, Executive Chairman and Corporate Executive Com-mittee, please see the Organisational Regulations pub-lished on the Galenica website.

Information and monitoring tools_The Board of Directors monitors the Corporate Executive Committee and supervises its working practices. The Galenica Group has a comprehensive electronic informa-tion management system. The Board of Directors receives a written report on a quarterly basis and is informed on a monthly basis about the Group’s financial and operating performance. In addition, operating performance, oppor-tunities and risks are discussed in depth at meetings attended by members of the Corporate Executive Com-mittee.


Procedure and conditions for lifting restrictions on voting rights_For voting restrictions to be lifted, shareholders who together represent not less than 0.5% of the share capital entered in the commercial register must request in writing that such an item be included on the agenda no later than 40 days before the Annual General Meeting. The Annual General Meeting must indicate its approval based on a quorum, as defined by the Articles of Association, of at least two-thirds of the votes represented and an absolute majority of the share par values represented.

Quorums under the Articles of Association_In addition to the cases cited in Art.704 of the Swiss Code of Obligations, approval by at least two-thirds of the votes represented and the absolute majority of the share par values represented is required in the following cases:

_Art.15c) of the Articles of Association: a change in the provisions relating to restrictions on the transfer of registered shares;

_Art.15d) of the Articles of Association: conversion of registered shares into bearer shares and vice versa.

Convening of the Annual General Meeting_The Articles of Association do not differ from legal regu-lations with regard to the convening of the Annual General Meeting and the setting of the agenda. The Annual General Meeting is convened by the Board of Directors at least 20 days before the date of the meeting. The shareholders are invited to attend by a notice placed in official publications. The meeting may also be convened by sending a letter to all the registered shareholders at the addresses entered in the shareholders’ register. The notice of a meeting shall state the items on the agenda, the proposals of the Board of Directors and the requests of any shareholders who have called for a General Meeting to be convened or for a particular item to be included on the agenda.

Inclusion of items on the agenda_Shareholders who together represent not less than 0.5% of the share capital entered in the commercial register may request that an item be included on the agenda. They must submit such requests in writing no later than 40 days before the scheduled date of the meeting. Agenda items relating to financial year 2013 that are to be dealt with at the Annual General Meeting on 8 May 2014 must be submitted no later than 29 March 2014. The items to be included on the agenda must be specified along with the motion on which the shareholder requests a vote.

Management contracts_No management contracts exist as specified under point 4.3 of the SIX Swiss Exchange Directive on Information Relating to Corporate Governance.

SHAREHOLDERS’ RIGHTS TO PARTICIPATE

_The Annual General Meeting is held each year within six months of the close of the financial year. Extraordinary General Meetings are called as often as necessary by a decision of the Annual General Meeting or Board of Directors, at the request of the auditors or at the written request of shareholders representing in aggregate not less than 7% of the share capital entered in the commer-cial register._Each share recorded as share with voting rights in the shareholders’ register entitles the holder to one vote at the Annual General Meeting. Shareholders are also enti-tled to dividends and have the other rights pursuant to the Swiss Code of Obligations. _Annual General Meeting 2014. The Board of Directors resolved to execute for the first time, on the occasion of the Annual General Meeting on 8 May 2014, the remote electronic ballot by means of authorisations and instruc-tions to the independent proxy, which do not become mandatory until 2015, and to submit to the Annual General Meeting for its resolution in 2014 the amendments to the Articles of Association required under the VegüV.

Voting restrictions and proxy voting_A registered shareholder may be represented at the Annual General Meeting on the basis of a written power of attorney by another shareholder or the independent proxy. There are no rules that deviate from legal provisions relating to attendance of the Annual General Meeting._The Board of Directors may refuse to recognise a share purchaser as a shareholder or beneficiary with voting rights for any shares which, when added to shares already registered as voting shares in the purchaser’s name, would give the purchaser more than 5% of all voting shares. See page 56 for further details.


Shareholders’ register_There are no regulations in the Articles of Association regarding a deadline for entry in the shareholders’ regis-ter. However, for practical reasons the shareholders’ reg-ister remains closed to entries for several days prior to an Annual General Meeting. This will be the case from Tues-day, 29 April 2014 for financial year 2013 and from Tues-day, 28 April 2015 for financial year 2014. Shareholders entered in the shareholders’ register by Monday, 28 April 2014 and Monday, 27 April 2015 respectively may exer-cise their voting rights at the correspondent Annual General Meeting._Instructions to the independent proxy holder may be given in writing and – as of this year – also electronically through a platform named Nimbus ShApp® which is used by Galenica. The required login information will be e-mailed to the shareholders upon request. The invitation to the Annual General Meeting, which will be sent to all shareholders on 11 April 2014 include a registration and proxy form by means of which the login information can be requested. The instructions must be received by the independent proxy holder until the evening of the penul-timate day before the Annual General Meeting, i.e. until Tuesday, 6 May 2014 for the 2014 Annual General Meeting and by Tuesday, 5 May 2015 for the 2015 Annual General Meeting.

CHANGE OF CONTROL AND PROTECTIVE MEASURES

_The obligation to make a public offer pursuant to Art.22 of the Stock Exchange Act (Federal Act on Stock Ex-changes and Securities Trading) has not been changed in the Articles of Association. The employment contracts of the members of the Corporate Executive Committee and the members of senior management also contain no pro-visions to this effect.

COMBATING CORRUPTION

_Galenica attaches considerable value to doing business in a manner that is ethically correct and in accordance with the legal requirements in place. It is committed to complying with legal and ethical standards. This must be reflected in every aspect of staff conduct. Galenica

enforces a zero-tolerance approach to corruption and bribery on the part of employees, partners, suppliers or representatives of third parties. Many countries have legislation which stipulates that bribing public officials is an offence. Violations of these provisions or other laws prohibiting unfair competition may result in criminal or civil proceedings against Galenica as well as the respon-sible employees._In order to ensure full compliance with rules and regula-tions Galenica has developed an anti-bribery and corrup-tion check. This check is used each time a new business relationship is established with third parties and is being introduced gradually and on the basis of specific priority criteria.

INFORMATION AND MONITORING TOOLS OF THE BOARD OF DIRECTORS WITH RESPECT TO MANAGEMENT

Risk management process

_Galenica has a risk management process in place which enables the Board of Directors, the Corporate Executive Committee as well as the relevant management of Group companies to identify potential risks in a timely manner and take the preventive measures necessary. The goal of this process is to identify and assess significant risks at all management levels and to manage them while making conscious use of the opportunities the process provides._As part of Group-wide “Galenica Risk Management” (GRM), the companies in the Group conduct a risk assess-ment at least once a year. This standardised process is based on a risk grid in which the most important strategic and operational risks and their possible financial effects are identified in line with pre-defined criteria and then evaluated in accordance with the probability of their oc-currence and their effect. These risks are entered into a risk matrix for each Business sector and, depending on the extent, also incorporated into the Group risk matrix. _The Board of Directors of Galenica receives an overview of the most important risks from the Corporate Executive Committee when circumstances require it but at least once a year. The Board evaluates the overview, adding information as needed, and where required takes deci-sions on any preventive measures necessary, which will then be implemented Group-wide as part of the risk man-agement process.


Definition of risk_Galenica defines risk as the possibility that an event or an action will lead to immediate financial loss or other negative consequences.

Objectives_Galenica Risk Management (GRM) defines three basic objectives:

_Creating a framework for effective risk management within the Galenica Group that will be embedded in existing management and planning processes and will therefore effectively strengthen risk awareness at all management levels.

_Creating and guaranteeing a lean and pragmatic risk management system that will effectively protect the Business sectors and their profit-earning ability.

_A credible presentation to stakeholders that Galenica is managing its risks effectively.

Monitoring and management_Risk management at the level of the Galenica Group re-cords strategic risks that could have significant conse-quences at Group level or at least at Business sector level. Operational risk management is specifically defined and managed by the individual Group operating companies, although it is recognised that events in individual compa-nies can clearly have an influence on the strategic risks of the Group. Risks are managed at the appropriate level by the management hierarchy that is best suited for this purpose. This ensures that action will be taken in an ef-ficient manner and that experience will be broadly rein-forced within the Galenica Group._The systematic overview of the key risks enables the Board of Galenica to coordinate with the chosen strategy, prioritise risk, allocate resources and specify any action required. The Galenica Board of Directors receives an overview of risk assessment when circumstances require it but at least once a year. _The Corporate Executive Committee as well as other management figures holding responsibility in the compa-nies of the Group are familiar with the risks of the Group, their Business sector or their Group company. They suc-cessfully implement any measures decided upon and are responsible for the efficient operation of the risk manage-ment process. They also draw attention, however, to new risks which have become apparent or to any other change in the risk situation and, in addition to implementing meas-ures to prevent or minimise such elements, ensure that these are incorporated into the risk management process. _Additional information about the management of finan-cial risks can be found in the Notes to the Consolidated Financial Statements on pages 117 and 118.

Internal control system_As part of its risk management system Galenica operates an internal control system (ICS) to provide reliable internal and external financial reporting and to prevent false infor-mation and errors about business transactions. The inter-nal control system provides the necessary processes and controls to ensure that risks relating to the quality of the company’s financial reporting can be detected and managed in a timely manner. A thorough review of the existence of the processes and controls of the Galenica internal control system is carried out annually by the ex-ternal auditors at the time of the interim audit. The results of these reviews are reported to the Audit and Risk Com-mittee and appropriate measures are taken by manage-ment to continually improve the company’s processes with regard to bookkeeping, accounting and financial re-porting.

Internal Audit_Internal Audit carries out audits of operational and stra-tegic risk management and the internal control system in accordance with the audit plan determined by the Audit Committee. It carries out reviews, analyses and interviews across the Group and helps the Business sectors to meet their targets by ensuring an independent assessment of the effectiveness of the internal control processes. Internal Audit regularly produces reports on its audits and reports directly to the Audit and Risk Committee in writing. The activities of Internal Audit are conducted through contracts issued to external service providers.

AUDITORS

_Ernst & Young Ltd., Bern, Switzerland, have been the Group’s auditors since 1992. Thomas Nösberger, Prof.Dr.rer.pol., CPA, a partner at Ernst & Young, is in charge of the audit since 2008._The fees paid to the Group’s auditors Ernst & Young in 2013 for their audit of Galenica and companies within the Galenica Group totalled approximately CHF 1,168,000. _The fees paid to Ernst & Young and their close collabora-tors for other services rendered to Galenica and its sub-sidiaries in the period under review amounted to about CHF 375,000. They break down as follows:

_Additional advice in audit matters CHF 257,000;_Tax and legal advice CHF 118,000.


_In 2013, Thomas Nösberger attended two meetings of the Audit and Risk Committee. Moreover, the auditors presented their report at the meeting of the Board of Directors on 7 March 2013._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 Committee. The criteria that are of particular importance in these reviews are: competence in reporting, understanding of the com-plex structure of the Group, the quality of reporting, compliance with deadlines, independence and costs. The involvement of the auditors in the financial elements of due diligence reviews for acquisitions and in the related legal advice improves the efficiency of the process.

INFORMATION POLICY

_Galenica and its companies operate an active and trans-parent information policy towards all their stakeholder groups. Consistency and credibility are two fundamental principles that are reflected in factual, comprehensive and objective communication.

_Ad hoc publicity. Important and price-relevant events are communicated in a timely manner via electronic media and in accordance with the Directive of the SIX Swiss Exchange. Any employees affected are informed first, as long as this is possible in the specific situation and it is allowed by law.

_Periodic publications. Once a year, Galenica publishes an annual report and a half-year report. The sales figures for the previous year are announced each year in a press release in January. _Upon request, all periodic publications are sent to the shareholders electronically or by post. The invitation to the Annual General Meeting is also sent to shareholders electronically or by post, and is additionally published in the “Schweizerisches Handelsamtsblatt”.

_Internet. All Galenica publications, all media releases and other supplementary information about the Group can be found at www.galenica.com.

Contact persons and important publication dates_For shareholders

_For shareholders in relation to corporate governance: Andreas Walde, General Secretary

Phone +41 58 852 81 11 E-mail [email protected]

_For investors _Jörg Kneubühler, CFO and Head Investor

Relations Phone +41 58 852 85 29 E-mail [email protected]

_For the media _Christina Hertig, Head Corporate

Communications Phone +41 58 852 85 17

E-mail [email protected]

_Agenda 2014/2015_Annual General Meeting 2014: 8 May 2014_Annual General Meeting 2015: 7 May 2015

_Half-year report 2014: 12 August 2014_Half-year report 2015: August 2015

_Sales figures 2014: January 2015_Sales figures 2015: January 2016

BRAND MANAGEMENT

Philosophy and implementation

_Excellence in the healthcare market. Galenica seeks to be recognised as a reliable, dynamic and efficient Group within the healthcare market which creates value for all stakeholder groups with high-quality products and ser-vices. Thus, Galenica also invests its energies in looking after its brands. Galenica stands for quality and profes-sionalism, for credibility and transparency, for reliability and continuity. There is a clear focus on excellence in our support line “Galenica – excellence in the healthcare mar-ket”. Group Corporate Communications, in particular, is responsible for implementing Galenica brand communica-tion.


_Corporate identity. Galenica is a broad-based Group which manages well-established company, product and service brands in the healthcare market. Products and services under the Galenica brand guarantee a high level of quality. The communication philosophy “as centralised as necessary and as decentralised as possible” is also reflected in brand management. This means giving the individual companies under the Galenica umbrella room to address target groups in the best way possible for the market segment and product involved. That is why Galenica companies operate under their own names in the market. At the same time, over and above this diversity, the Galenica Group seeks in particular to express clearly the shared identity of the companies comprising the Group. A consistent identity is vital; therefore, it is re-flected in the uniformly defined corporate identity and corporate design. Presenting a uniform corporate design across all Group companies supports the consistent po-sitioning of the Group and its companies.

The Group’s brands

_Organisational basis. The Galenica Group is structured across two divisions, Pharma and Santé, which are broken down into four Business sectors: Pharma, Logistics, Retail and HealthCare Information. The Group companies are assigned to these Business sectors on the basis of their core activities. The Galenica brand is supported at all lev-els by the descriptor (the support line) used with the logo. At Group level, it is the broad basis of excellence that is communicated; at company level, it is the fact that the company is part of the Galenica Group that is signalled._The majority of companies in which Galenica has more than a 50% holding follow this strategy and use the com-mon corporate design. New companies are integrated progressively in line with a clearly defined process. Im-portant strategic marketing considerations are taken into account when dealing with well-established and well-known brands. _Basic guidelines on corporate design are summarised in two handbooks for staff and external partners and include all areas of application, such as corporate stationery, printed products, company signs, website design and gifts for customers. The handbooks are available in printed and electronic form. In addition, internal training sessions on how to use the Galenica corporate design take place regularly for new employees; the sessions are also open to established employees interested in refreshing or deep-ening their knowledge.

_Protection of the Group’s brands. Galenica systemati-cally fosters and protects its company brands in all coun-tries where it is active and guarantees a high standard of quality.

Product and service brands

_The Galenica company brands are supplemented by the product and service brands of the companies within the Group, focused on the customers of the individual Busi-ness sectors: for example, the products of the Pharma Business sector, the services of the Logistics Business sector, the offering of the pharmacy formats Amavita, Sun Store and MediService in the Retail Business sector, as well as the database and software products in information management. The presentation of these products and services is tailored to markets and customers specific to individual companies and, therefore, differs from the Group corporate design. The corporate design and the accompanying communication and marketing measures are defined and implemented by the relevant company. Special events and activities organised in conjunction with the branding of products and services along with cus-tomer surveys during the year under review can be found in the sections for the Business sectors of the Galenica Group starting from page 21.

_Protection of product and service brands. Product and service brands are systematically fostered and protected by the individual companies in the countries where they are marketed.

PHARMA LOGISTICS RETAIL HEALTHCARE INFORMATION

Process

Services Services Content

®


Umbrella brand

Product and service brands

Brands of the Galenica Group companies

MAIN BRANDS OF THE GALENICA GROUP

Pharmacy formats

Consumer Healthcare Products

Iron replacement products

OTX products

Commercial merchandise


The ultimate accolade: tested by the customer._GaleniCare is working with the teams from the TriaPharm® department at HCI Solutions to test the next version of the TriaPharm® software, which will be installed in all Amavita and Sun Store pharmacies._These tests, which are carried out on each new version of TriaPharm® (twice a year), check that the new functionalities requested by GaleniCare and covering the needs of pharmacies are working properly._By implementing new internal processes including these joint tests, TriaPharm® is more in tune with the customer and is work-ing to increase user satisfaction by further improving the performance and ergonomics of TriaPharm®.

Galenica annual report 2013 · Remuneration Report _71

REMUNERATION REPORT

REMUNERATION, PROFIT-SHARING AND LOANS

Basis for evaluation

Salary policy and long-term Group strategy (stakeholder value)_In accordance with the sustainable, long-term develop-ment policy defined by the Board of Directors, remunera-tion is also in line with the strategic aims. Additionally, it is taking into account the fact that under certain condi-tions, economic success is achieved over the long term. Since other parameters of the Group’s long-term develop-ment strategy are also met, short-term profits do not have a corresponding effect on remuneration. The company therefore does not pay any remuneration in the form of traded options. Members of the Corporate Executive Committee and members of senior management all share in the Group’s profit in the form of blocked shares. Inde-pendent of their remuneration and under the terms of the share acquisition plan for employees, every year employees are entitled to acquire a certain number of blocked shares, which is specified in company regulations, at a reduced price (more information on pages 115 and 148).

Key remuneration principles_Employee remuneration generally consists of a fixed basic salary, which depends on the employee’s position level and, for members of the Corporate Executive Committee and senior management and management, a bonus. The bonus system allows members of the Corpo-rate Executive Committee to participate in the profits of the Group and senior management and management to participate in the profits both of the Group and of the relevant Business sector. The attainment of personal tar-gets is also rewarded. Members of the Corporate Execu-tive Committee and certain members of senior manage-ment also receive additional long-term remuneration._The purpose of the bonus system is to ensure that mem-bers of senior management and management act and make decisions in such a way as to support the achieve-ment of targets at all levels and thereby contribute to sustained positive results for the Group as a whole, as well as the Business sector and company to which they belong. This serves to harmonise the interests of shareholders with those of the Group and the management. Through share participation, identification with the company is further enhanced. Finally, members of the Corporate Ex-ecutive Committee, senior management and management receive contributions to pension funds.

_In addition to the attainment of personal targets, both bonuses and long-term remuneration depend on the achievement of the Galenica Economic Profit (GEP) target and on the performance of the share price. The GEP is a measure designed to reflect the principles of value-based management derived from an economic-value-added (EVA) approach and is based on the understanding that in the interests of shareholders and other important stake-holder groups the Galenica Group will strive to achieve a long-term investment return which exceeds the weighted average cost of capital. It is calculated as the net operat-ing profit (before interest and after depreciation, amorti-sation and tax) less the weighted average cost of capital (WACC) over the average invested capital. The perfor-mance of the GEP calculated in this way has a 75% impact on the bonus and a 100% impact on the number of shares allocated under the Long-Term Incentive programme; the personal targets may account for a maximum of 12.5% of the remuneration of the CEO or the members of the Cor-porate Executive Committee (in 2013: 4.1% on average for the members of the Corporate Executive Committee – without the CEO). Poor performance inevitably has a negative impact on the total remuneration. However, the remuneration system does not include any particular malus provisions._The weighting of the individual remuneration compo-nents depends on an employee’s position level. Criteria such as budget responsibility are also important. The greater the employee’s direct influence on these factors, the higher the weighting of the variable component of remuneration. When defining the weighting, setting tar-gets and measuring their achievement, the responsible body is always permitted a degree of discretion in the application of the criteria mentioned in this report, even if this is not specifically mentioned in individual cases._Variable remuneration arising from the bonus and from the long-term incentive plan paid out to eligible members of the Corporate Executive Committee and senior man-agement amounts to between 0% and 200% of the fixed salary component. However, the annual bonus and vari-able long-term incentives represent two independent ele-ments and are calculated and weighted separately._To a lesser degree, but in accordance with the consid-erations above, members of management are also paid a performance-related bonus, while employees receive a bonus based on the performance of the company.

72_ Remuneration Report · Galenica annual report 2013

Responsibilities_The remuneration strategy and the related remuneration system for the members of the Board of Directors, the Corporate Executive Committee and senior management (including the principles of equity remuneration plans) are decided by the Board of Directors based on a proposal from the Remuneration and Nomination Committee. _The salaries of members of the Board of Directors, which may be paid in the form of blocked shares, are decided by the Board of Directors based on a proposal from the Remuneration and Nomination Committee._The Remuneration and Nomination Committee is respon-sible for deciding on remuneration and participation in equity remuneration plans by members of the Corporate Executive Committee including the CEO. It informs the Board of Directors at least once a year of its decisions and the progress of the remuneration process. Remuneration and participation in equity remuneration plans by mem-bers of the Board of Directors, the Corporate Executive Committee and senior management are determined at the beginning of the reporting year by the committees respon-sible. _The bonuses of members of senior management are de-termined by the Corporate Executive Committee based on the performance appraisal by the direct line manager, which is then passed on via the relevant senior manage-ment body to the Corporate Executive Committee. For members of the Corporate Executive Committee, the Remuneration and Nomination Committee is responsible for determining the target bonus and for the evaluation of individual target attainment._Members of the Corporate Executive Committee and certain members of senior management participate in the LTI programme. Eligibility for the LTI programme is deter-mined by the Remuneration and Nomination Committee for members of the Corporate Executive Committee, and by the Corporate Executive Committee for members of senior management._For members of the Corporate Executive Committee, the weighting of the individual components of the target which determine the bonus are defined by the Remuneration and Nomination Committee. Measurement of targets consists of both financial and qualitative elements (for example, sales growth of a particular product or a group of products, the launch of a particular product or implementa-tion of a particular process)._For the “Group” and “Business sector” financial compo-nents a target is set for the GEP increase for the Group or Business sector. The relevant targets are set by the Cor-

porate Executive Committee for the members of senior management and by the Remuneration and Nomination Committee for the members of the Corporate Executive Committee. _The Board of Directors is informed of the setting and weighting of the targets once a year. _External consultants are hired as needed to assist in developing the remuneration strategy that forms the foun-dation of the remuneration system. A benchmark study on the remuneration of members of the Corporate Execu-tive Committee and certain other functions was carried out by Kienbaum Consultants International in 2012. No other mandates with external suppliers were issued in the reporting period.

Bonus

Bonus calculation_At the beginning of the calculation period, a figure is defined which will be paid out as a bonus if the targets (100%) for all components are reached (target bonus). This is normally set individually on an annual basis as an abso-lute amount together with the relevant fixed salary for the next year. _The proportionate maximum bonus, based on the finan-cial components for the achievement of Group and Busi-ness sector targets, amounts to 220% of the target bonus and the proportionate maximum bonus for the individual components can rise to a maximum of 150% of the target bonus. Based on the weighting of the components, the total bonus is subject to an upper limit of 200% of the target bonus. _Once the annual results have been published, the GEP attainment level for the financial components “Group” and “Business sector” can be calculated as a percentage. The extent to which the individual targets which were laid down in both quantitative and qualitative form at the be-ginning of the assessment period have been attained is assessed by the line manager and expressed as a percent-age. The line manager then submits a proposal to the Business sector management. The final approval of the bonus that is paid out, which may contain an individual supplement within the above-mentioned parameters for exceptional performance over the previous year, is the responsibility of the Corporate Executive Committee for members of senior management and of the Remuneration and Nomination Committee for the members of the Cor-porate Executive Committee.

Galenica annual report 2013 · Remuneration Report _73

_Additional information on the subject of share-based payment can be found in the Notes to the consolidated financial statements on pages 115 and 148.

Payment of bonus _The payment of the bonus is made in the following year, after the publication of the full-year results. Members of the Corporate Executive Committee and senior manage-ment must draw 32% of the bonus in shares of Galenica Ltd.; the rest is paid out in cash. For some members of senior management the share portion is lower and the cash portion of the bonus is higher. A discount is granted on the issue price, as the shares are blocked for five years, during which time they cannot be sold._The issue price for the registered shares is as follows:

_for members of senior management, the average stock market price of the month prior to the press conference held to present the financial statements, less a 25% discount; the shares are issued in the month following the press conference;

_for members of the Corporate Executive Committee, the average stock market price for the month of Janu-ary in the year in which the bonus is paid, less a 25% discount.

Variable long-term incentives

_The Long-Term Incentive programme (LTI), the third re-muneration component, is designed to motivate eligible managers to ensure that their actions and decisions sup-port the achievement of the medium- and long-term value-based targets across all levels. With this instrument Galenica also seeks to harmonise the interests of manage-ment and the Group with the interests of shareholders, and to achieve positive results over the long term. In ad-dition, the LTI programme aims to further strengthen com-mitment to Galenica and identification with the company._Members of the Corporate Executive Committee and certain members of senior management participate in the LTI programme. Eligibility and extent of participation in the LTI programme is decided by the Remuneration and Nomination Committee for members of the Corporate Executive Committee, and by the Executive Chairman upon proposal of the Corporate Executive Committee for members of senior management. _The LTI programme is based on performance units. Per-formance units include a commitment that upon achieving defined long-term performance targets, a certain number

of shares will be allocated to eligible participants. Per-formance units are virtual; no real units are issued. The number of performance units allocated depends on the defined percentage of the basic annual salary as well as the effective share price at the time of allocation. The main factor influencing the calculation of the numbers of performance units is the operating performance of the Galenica Group. The bonus curve (0% of the number of performance units allocated) starts with the Galenica Eco-nomic Profit (GEP) at the time of the allocation of the performance units as the benchmark and is measured in terms of the subsequent performance of GEP over time. If the bonus curve reaches the growth in value defined for the three-year period, the relevant number of Galenica shares are allocated, to which no blocking periods apply. The programme is limited to a maximum target attainment of 200%. An LTI programme always runs for a period of three years. At the beginning of each financial year, a new LTI programme with a new three-year target and assess-ment period is issued. A three-year programme of this kind again became due for payment at the end of 2013. The following parameters were used for the calculation:

_defined share of the basic salary per participant; share price at allotment: CHF 541.40;

_target achievement: 101.1%.

Remuneration for members of the Board of Directors_The members of the Board of Directors, excluding the Executive Chairman, who was remunerated separately for the financial year 2013 in accordance with the remunera-tion system set out below, receive annual remuneration for their work as defined by specific regulations. This remuneration comprises a fixed salary and an attendance fee for every meeting of the full Board of Directors and of the committees. These may be drawn fully or in part in registered shares of Galenica (blocked for five years).

Annual remuneration for 2013

Board of Directors_The remuneration for the members of the Board of Directors for 2013 is shown in the Notes to the financial statements of Galenica Ltd. (page 159).

74_ Remuneration Report · Galenica annual report 2013

_On 31 December 2013, the members of the Board of Directors together held 63,943 shares (for details see tables below and page 159).

Members of the Corporate Executive Committee_The remuneration for the members of the Corporate Executive Committee is shown in the Notes to the financial statements of Galenica Ltd. (page 160). After a period of five years, each member of the Corporate Executive Committee is required to hold shares equal in value to at least 75% of his or her fixed basic salary. The shares held by the members of the Corporate Executive Committee on 31 December 2013 are shown in the tables below and on page 161.

Options_Neither the members of the Board of Directors nor the members of the Corporate Executive Committee hold tradable options. The Group did not make any loans to Board members or to members of the Corporate Executive Committee during the year under review.

Severance packages_No severance packages or other additional remuneration of any kind were paid out in 2013 to current or former members of the Board of Directors or the Corporate Executive Committee.

Remuneration trend _Thanks to good achievement of targets and improved results, the individual remuneration of members of the Board of Directors is higher than in the prior year. How-ever, the published figures are not comparable with those from 2012 due to the change in the composition of the Board of Directors.

Remuneration of the Executive Chairman of the Board of Directors _The share-based remuneration system described below demonstrates how closely Etienne Jornod identifies with shareholders and is evidence of his confidence in the strategy and management of the Group. _It was also subject of the remuneration report submitted to shareholders for an advisory vote at the Annual General Meetings held on 3 May 2012 and 2 May 2013 and ap-proved by 89.9% and 91.6% respectively._On 1 January 2012, Etienne Jornod received for his duties as Executive Chairman for the period from 1 January 2012 to 31 December 2016 a one-off remuneration in the form of 40,000 Galenica registered shares, which will be blocked over the entire term of the contract until 31 March 2017. To compensate for the lack of periodic remuneration over the five-year period (salary, bonuses, shares, options, etc.), the Executive Chairman received these shares at that time at the market price of the date of conclusion of the contract (CHF 528.00). The expense for this share package was recognised at CHF 3ʼ670ʼ000 in the con-solidated financial statements for 2013. In addition, Etienne Jornod receives CHF 150,000 per year, which is used to pay employee part of social security contribu-tions. As the shares are blocked until 31 March 2017, they cannot be sold before the expiry of the contract. Should the contract be terminated before the end of the period, the employment contract contains detailed provisions which stipulate, how many shares Etienne Jornod is enti-tled to, pro rata temporis, at such a date and at what price, depending on whether the employee or the employer has called for a premature termination. However, no sever-ance package has been agreed. The contract will be amended in due time in accordance with new legislation relating to unfair remuneration in public listed companies (VegüV). This entered into force on 1 January 2014 and provides for a transitional period running until the end of 2015, during which employment contracts may be amended as necessary.

Shares held asof 31.12. 2013

Board of Directors

Etienne Jornod, Executive Chairman 43,702

Daniela Bosshardt-Hengartner 1,432

Kurt W. Briner 2,833

Michel Burnier 437

Hans Peter Frick 847

Sylvie Grégoire —

Fritz Hirsbrunner 10,001

Stefano Pessina 1,592

This E. Schneider 3,099

Corporate Executive Committee

Felix Burkhard 1,010

Jean-Claude Clémençon 720

David Ebsworth 1,765

Jörg Kneubühler 1,330

Gianni Zampieri 3,679

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


Specialists training specialists._For Vifor Pharma Consumer Healthcare, “In tune with the customer” means passing on our knowledge and discussing our ex-periences together. We visit pharmacies and offer sales-oriented training sessions to the specialists. The courses that are being offered include refresher sessions on specialist and product knowledge to support the sale of products on offer at the POS. _The specialised knowledge and the self-confidence they gain motivate the employees to provide customers in their pharmacies with comprehensive and competent advice. We therefore see our mission as a means to promote customer loyalty.


A team to oppose grey energy._Vifor Pharma’s Green Team is made up of volunteers from all departments at the Geneva-Meyrin site. The Green Team acts locally and aims to sustainably change employees’ behaviour with regard to saving energy and improving energy efficiency. It also encourages all employees to submit proposals for using energy more efficiently and plays an active part in implementing their suggestions. _For the Green Team, “In tune with the customer” means taking ecological responsibility within the company. For customers and employees, it means collaborating with a partner that takes the issue of sustainability seriously and uses as little grey energy to manufacture its products and in daily life as possible.

Galenica annual report 2013 · Sustainability _77

SUSTAINABILITYDecrease in CO2 emissions and award by Carbon Disclosure Project

INTRODUCTION

_In 2013, the CO2 emissions of the Galenica Group de-clined for the first time since data were first recorded. Greenhouse gas emissions were reduced despite the com-pany’s continued growth in 2013 and an increase in abso-lute energy consumption._This important result validates the Group’s conviction that it has chosen the right path. Galenica is aware of the challenges ahead in the area of energy supply and with regard to the global climate. Since the beginning of 2013, the two Vifor Pharma production sites in Geneva-Meyrin and Villars-sur-Glâne have been using electricity exclu-sively from hydroelectric power plants._A separate efficiency table, giving a precise comparison of resources consumed with value added and number of employees, will be published on the Galenica website (www.galenica.com) at the end of the first quarter of the subsequent year. _Expansion of system limits. The system limits for re-porting have again been expanded in this year’s report. Data for Unione Farmaceutica Distribuzione (hereinafter UFD), which is part of the Logistics Business sector, are now available for the first time. Stakeholders are taking due note of the consistent expansion of reporting: in 2013, the Galenica Carbon Disclosure Project report was awarded a newcomer prize.

_Sustainability Report. The current Sustainability Report and the 2013 Annual Report were examined and approved by the Board of Directors of Galenica Ltd. at its meeting on 13 February 2014.

Content 77 _Introduction 78 _Management 79 _Data 82 _Continous improvement82 _Environmental responsibility88 _Social responsibility

78_ Sustainability · Galenica annual report 2013

MANAGEMENT

Goals and objectives_Galenica realises that shouldering social responsibility and using natural resources economically are important prerequisites for sustainable commercial success. At the heart of this commitment are the three key sustainability goals of the Galenica Group, which are supported by the Corporate Executive Committee and form essential part of the Group’s corporate culture:

_Continually increase stakeholder value through sustainable practices;

_Encourage staff to act in a responsible and entrepreneurial way;

_Increase resource management efficiency, particularly in energy use.

Business sector Key activities 2013 Goals 2014

Pharma _ Two sites analysed by experts from the Energy Agency for Industry (EnAW) and objectives agreed for reducing CO2 emissions (St.Gallen and Geneva-Meyrin);

_ Two production sites (Ettingen and St.Gallen) certified according to ISO 14001, Geneva-Meyrin since 2013;

_ Various awareness-raising measures implemented in Geneva-Meyrin, including an energy week.

_ Implementation of initial measures from the EnAW report in Villars-sur-Glâne;

_ Support for sustainable mobility when travelling to work;

_ Implementation of further energy efficiency measures under the Ambition Négawatt/éco21 programme at OM Pharma in Geneva-Meyrin;

_Development of measures to reduce waste.

Logistics _ Development of a new box for transportation at room temperature (15–25°C) completed and field tests performed;

_ Programming in order to optimise control of expiry dates completed.

_ Detailed plans prepared for building renovation at Untermattweg 8 in Bern;

_ Replacement of the heating system and modernisation of the air conditioning at the Lausanne site;

_New concept for storage of chemicals at UFD;_ Increase in employee safety through introduction

of a pick-by-voice system at Alloga (see Logistics section, page 34).

Retail _ Installation of energy-saving light bulbs in renovated pharmacies;

_ Awareness campaign with ideas competition for employees.

_ Consideration of this concept in all renovation projects;

_Repetition of ideas competition following good response.

HealthCare Information _ Faster integration of new developments in content into existing practice and pharmacy software solutions.

_Further information on sustainability management is available at www.galenica.com (under the heading “Sustainability”).

Key activities of the Business sectors in 2013 and the targets for 2014

Sustainability Committee_The Galenica Group has formalised its commitment in the area of environmental responsibility with the creation of the Sustainability Committee. This is composed of one manager each from the Logistics and Retail Business sec-tors, three representatives from the Vifor Pharma produc-tion sites and the Head Group Legal Services, who chairs the Committee. The latter retired at the end of 2013 and Jean-Claude Clémençon (member of the Corporate Ex-ecutive Committee, Head Logistics Business sector and Responsible for HealthCare Information) now chairs the Committee. _The Committee met twice in the year under review to foster the exchange of experience in resource efficiency. Over the past few years, the Committee has established itself as a Group-wide platform for exchange. It facilitates discussion and implementation of specific measures


across Business sectors as well as exchange on the over-arching goals of the Business sectors. In 2013, the Green Code of Conduct developed by Galexis and also adopted by Alloga was refined and implemented as a Group-wide guideline. There were also initial discussions on how the supplier code of conduct for the Pharma Business sector could be expanded to the Group as a whole.

Code of Conduct_The computer-based self-learning tool available in the Pharma Business sector, with which employees can test their own knowledge of the Galenica Code of Conduct, was also introduced in the other Business sectors in the fourth quarter of 2013. By the end of the first quarter of 2014 over 500 employees will have taken this test.

DATA

_Throughout the year, the Galenica Group updates stake-holders about its sustainability plans and activities. This is done by means of the Annual Report, published in March (Sustainability and Human Resources sections), the Carbon Disclosure Project (CDP) report in September and on an ongoing basis on the website.

Carbon Disclosure Project_Galenica began formal reporting to the Carbon Disclo-sure Project (CDP) in 2013. CDP is an international, non-profit organisation providing the largest and sole global environmental database for companies and cities. The aim of CDP is to encourage as many companies as possible to publish data on their impact on the environment and na-tural resources. In 2013, this information was collected in the name of 722 institutional investors, who together represent more than USD 87 trillion in assets. The ques-tionnaire completed by Galenica can be viewed on the CDP website (www.cdproject.net).

_As part of the presentation of important insights into the climate strategies and emission levels of the 350 largest listed companies in the DACH region (Germany, Austria, Switzerland), Galenica was awarded a prize in the “Best newcomer” category with the results below. According to the organisers, a score of 70 in disclosure is extremely rare the first time a company participates in CDP:

_Climate Disclosure Score: 73/100_Climate Performance Band: D

(A to E, A = highest rating)_The Climate Disclosure Score is a degree for transpar-ency and denotes the completeness of the reporting. The Climate Performance Band is assigned from a disclosure score of 50/100 or greater and is a degree for the effec-tiveness of the measures taken by the company in order to reduce the CO2 emissions and adjust to the climate change.

Adjustment of system limits_This Sustainability Report covers all four Business sectors – Pharma, Logistics, Retail and HealthCare Information – at the quantitative level. Environmental indicators for UFD, which is part of the Logistics Business sector, were recorded for the first time in 2013. The performance of Galenica with respect to employees in all Business sectors is covered in the corresponding section (from page 91).

Comparability_All graphics in the Sustainability Report 2013 show the year under review and the four prior years for comparison. Given the continuous optimisation of the environmental indicator system and gradual expansion of system limits (due to the primarily inorganic growth of the company), data have only limited comparability from year to year. The figures for UFD were recorded for 2013 only, and not ret-rospectively for the period 2009–2012. To enable a com-parison of the indicators with the previous year, all com-parative statements for 2013 in this Sustainability Report exclude UFD. However, in the graphics, the data for UFD are included.


Data collection_Environmental data published for 2013 are well-docu-mented projections, extrapolated over the full year from data collected over the first three quarters. For organi-sational reasons, definitive figures for 2013 will only be published in the Annual Report 2014, thus allowing for a long-term comparison._Additional figures on eco-efficiency will be published on www.galenica.com (under the heading “Sustainability”) at the end of the first quarter of 2014. These show the ratio of resource consumption to value added and to the num-ber of employees, based on definitive figures. This sup-plement is an integral part of the Sustainability Report.

Consumption data_Consumption data for the Pharma Business sector cover the production sites in Switzerland and Portugal. Con-sumption data for the Logistics Business sector include data from all subsidiaries comprising, in particular, energy consumption data from the Burgdorf, Niederbipp, Laus-anne-Ecublens and Barbengo-Lugano sites, as well as diesel consumption of own vehicles and that of third-party suppliers as the greatest source of indirect consumption. Waste volumes, type of waste generated and disposal methods are also recorded for both Business sectors.

_Energy consumption (electricity and heat) for Retail must be calculated, as pharmacy locations are generally leased. Energy costs per location are therefore shown rather than actual energy consumption. The energy consumption of and energy sources used by the Amavita and Sun Store pharmacies have been calculated based on energy costs in 2012. Specifically, electricity and heat consumption were determined in detail for 36 reference stores (18 Ama-vita and 18 Sun Store pharmacies). These figures are then extrapolated over the entire Business sector applying to-tal energy costs and statistically determined factors based on the buildings and type of heating and energy source._Overall consumption data (electricity, heating and waste) are also estimated for the HealthCare Information Busi-ness sector. The known energy consumption of the Bern site has been extrapolated to the entire Business sector (four sites) based on the number of employees. As HealthCare Information is a service company that operates only in leased offices and has no significant fluctuations in production, this approach is appropriate. HealthCare Information accounts for approximately 2% of the environ-mental footprint of the Galenica Group.

Business sector Locations included Locations not included

Pharma _OM Pharma S.A., Amadora-Lisbon (Portugal)_OM Pharma SA, Geneva-Meyrin_Vifor Ltd., Villars-sur-Glâne_Vifor Ltd., Ettingen_Vifor (International) Ltd., St.Gallen

Vifor Pharma_Headquarters: Glattbrugg_Regional sales offices outside of Switzerland

Logistics _Alloga Ltd., Burgdorf_Dauf SA, Barbengo-Lugano

Galexis Ltd._Niederbipp site_Lausanne-Ecublens site_G-Pharma AG, Niederbipp_ Unione Farmaceutica Distribuzione SA,

Barbengo-Lugano

_ Medifilm Ltd. (acquired 2013), will be integrated in 2014

Retail _All companies at the Bern site_All Amavita pharmacies (estimate)_All Sun Store pharmacies (estimate)

_MediService Ltd., Zuchwil_Sun Store SA, St-Sulpice

HealthCare Information _ All companies at the Bern, Basel, Gümligen and Le Mont-sur-Lausanne sites (estimate)

The following detailed overview provides information on the locations covered by the indicator system


Temperature-controlled transport_Transport of pharmaceuticals has to meet strict re-quirements. For example, products requiring cool chain handling cannot be transported without appropriate measures being taken. The revised Good Distribution Practice (GDP) guidelines entered into force in the EU in 2013 (the date on which they will enter into force in Switzerland is currently unknown). To ensure patient safety, these guidelines specify and make more stringent the requirements for transporting pharmaceuticals. Accordingly, storage temperature must now also be maintained throughout the entire transportation and must be verifiable at all times.

_Various innovations at Alloga and Galexis. Before these changes in GDP came into effect, they had already stimulated various innovations at Alloga and Galexis. For example, new delivery vehicles have been equipped with air conditioning systems in the load space since 2011, and with heating since 2012, as “temperature-con-trolled” means that the temperature must be maintained at a constant level throughout the load space. In Swit-zerland, with its four distinct seasons, this means that pharmaceuticals have to be refrigerated during the sum-mer, but kept warm during the winter, particularly in mountain areas, so maintaining constant temperature distribution throughout the load space all year round is

a considerable challenge. Galexis therefore decided to take an entirely new approach to vehicle construction and build a prototype together with a well-known spe-cialist company. This vehicle was subject to extensive field tests in 2013 and could come into widespread use as early as 2014. In addition, new UFD delivery vehicles will be equipped with temperature-controlled load space with immediate effect.

_Absolute consumption reduced, despite additional fuel consumption. In addition to a 100 kg reduction in vehicle load capacity, additional heating and cooling results in a considerable increase in fuel consumption (around 1 l more per 100 km). Despite this, absolute consumption has been reduced by over 10% at Galexis since 2010 through parallel investments in new vehicles, driver training and process reorganisation.

_Alloga SC Box. The Alloga SC Box has been used for dispatches of refrigerated products by post since March 2013, due to the longer transport time. The coolbox, which is equipped with paraffin elements, can easily maintain the desired temperature over a period of 34 hours, even at very high or low external temperatures. It is also made from 100% recyclable materials and has a minimum life-span of three years.

Continuous increase in stakeholder value through sustainable practices

_The calculated CO2 emissions data include both direct and indirect sources in the Business sectors mentioned above. According to the Greenhouse Gas Protocol, direct sources of emissions include: pharmaceutical production (for example, the burning of gas to generate process heat);

the production of heat for buildings; and transportation using the company’s own vehicles (= scope 1). The largest indirect sources of CO2 emissions included in the indicator system are electricity generation (= scope 2) and trans-port by third-party suppliers (= scope 3).


CONTINUOUS IMPROVEMENT

_Continual increase in value is key for a company that is constantly growing. Only through a strong focus on qual-ity and efficiency Galenica can grow sustainably and achieve its three sustainability goals. The information be-low outlines some of the activities demonstrating that Galenica is not content to settle for the status quo._As part of the ongoing Coaxial project, all servers (ex-cluding pharmacies) in the Santé Division were centralised in autumn 2012 at Galexis in Niederbipp, meaning better utilisation of existing resources and lower cooling require-ments, resulting in lower electricity consumption. As new data show, the annual electricity consumption for this IT infrastructure has been reduced by 67%. This corresponds to a reduction in the carbon footprint of around 20 tonnes of CO2._The ideas competition on sustainability issues run in the Retail Business sector in 2012 generated numerous inputs, two of which were implemented in 2013, together with the people behind the ideas. A flyer was designed, showing how each employee can save energy and separate waste on a day-to-day basis. This flyer was then sent to all employees with their salary slip. Stickers and posters were also dis-played in all pharmacies as a daily reminder. Naturally, it is difficult to assess the impact of such a measure. Neverthe-less, the huge success of the ideas competition indicates that the issue of sustainability is important to employees. A similar campaign will therefore be run in 2014.

_Better advantage was also taken of the synergies between the transport services provided by Alloga and Galexis in 2013. Around 2,500 Alloga packages for Galexis customers per month are now no longer delivered by third parties, but directly on Galexis runs. This ensures that the Galexis vehicles are better utilised and optimises the use of resources.

ENVIRONMENTAL RESPONSIBILITY

_As a diversified healthcare company, Galenica is con-fronted with many environmental issues. The production of active ingredients and provision of services require both renewable and non-renewable resources, in particu-lar fossil fuels. These processes generate gaseous, liquid and solid waste products as well as greenhouse gases. Galenica seeks to use resources as efficiently as possible through economically worthwile measures and thus re-duce the resulting environmental impact as far as techni-cally possible.

Energy consumption_The Galenica Group’s total energy consumption in 2013 was 81,149 MWh (including UFD). Excluding UFD, energy consumption increased only slightly over the previous year, by around 1%. This result was achieved alongside 5% growth in production (end products) in the Pharma busi-

Energy consumption 2009–2013 Energy mix 2009–2013

09 10 11 12 13

%

0

20

40

60

80

100

2009 2010 2011 2012 2013

MWh

ErdgasStrom Diesel: Drittfahrer

Diesel: eigene Flotte

TotalHeizöl Fernwärme0

10’000

20’000

30’000

40’000

50’000

60’000

70’000

80’000

90’00090,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0Electricity Gas Diesel:

own fleetDiesel:

third-party drivers

Heating oil District heating

Diesel: third-party drivers

Diesel: own fleet

Gas

Electricity

District heating

Heating oil

http://nzz.ch


ness sector, which accounts for 44% of the Group’s total energy consumption. Since 2008, the Group’s energy consumption has increased by 18%.

_Fuel. Galenica covers approximately one-third of its energy needs with the fossil fuels heating oil and gas. Absolute consumption increased by 2% (heating oil) and 1% (gas) respectively over the previous year. Galenica remains committed to reducing its dependency on oil by making greater use of renewable energies, natural gas and heat recovery/district heating (share of district heating in the energy mix: approximately 2%). In addition, energy efficiency is continually enhanced through planned recon-struction measures. Heating oil consumption has been reduced by 11% compared to 2009. Consumption of natu-ral gas, which has less of an impact on the environment, increased over the same period by 10%.

_Vehicle fuel. Fuel for vehicles accounted for 22% of the energy used in 2013. Most of this was consumed in the Logistics Business sector by company vehicles and those of third-party suppliers. Vehicle fuel consumption fell again by 1% over the previous year (excluding UFD). Con-sumption by the company’s own vehicles decreased in 2013 by 2% compared to the prior year. Fuel consumption through third-party vehicles remained at roughly the same level as 2012.

_Electricity. Electricity is by far the most important en-ergy source for Galenica, accounting for 43% of total en-ergy consumption. Over the last five years, this share has remained relatively stable. Total electricity consumption in 2013 was 35,108 MWh (including UFD). Compared to the prior year, electricity consumption therefore increased by 5% (excluding UFD). This is primarily due to increased production in the Pharma Business sector.

Emission of greenhouse gases and air pollutants_CO2 emissions from the use of energy are calculated using scientifically determined emission measures. In 2013, the Galenica Group’s CO2 emissions amounted to 15,160 tonnes, a 7% decline on the prior year (excluding UFD). This gratifying reduction was primarily due to the Geneva-Meyrin and Villars-sur-Glâne production sites sourcing electricity exclusively from hydroelectric power plants with effect from 2013. Hydroelectric power is con-siderably less CO2 intensive than the average Swiss elec-tricity mix. The Amadora-Lisbon site (Portugal) has even gone one step further: a photovoltaic system was con-structed on company premises in 2013, which should sup-ply 170,000 kWh electricity per year. This corresponds to approximately 11% of annual electricity consumption at the site, and an annual reduction in CO2 emissions of 80 tonnes. Initial measurements indicate that this figure could even be exceeded in practice. However, conclusive statements will not be possible until 2015, when more than twelve months of data are available. The site also plans to use solar power to provide hot water.

Energy consumption 2013 by Business sector

Pharma 44% Logistics 34% Retail 20% HCI 2%

CO2 emissions 2009–2013

2009 2010 2011 2012 2013

0

2’000

4’000

6’000

8’000

10’000

12’000

14’000

16’000TonnenTonnes16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000


_In 2013, 43% of emissions were generated from sources owned by Galenica (scope 1). 40% of emissions were pro-duced indirectly by purchased electricity and heating (scope 2). 17% of emissions were attributable to the pur-chase of transport services (scope 3).

_Transport. Road transport is a substantial cause of direct and indirect CO2 emissions at Galenica. In 2013, 4,651 tonnes of greenhouse gases were emitted, which corre-sponds to around one-third of the Group’s overall CO2 emis-sions. Galexis and UFD each operate their own fleet, which together comprise 120 delivery vans (up to 3.5 tonnes). 60 of these vehicles have an air conditioning system in the loading space. Diesel consumption, the source of the emis-sions, is also an important cost factor in the Logistics busi-ness, which is why measures are regularly examined and implemented to reduce consumption of same. For example, driver safety training is organised for Galexis drivers every two years, in which all drivers are taken on a test drive and observed by a driving instructor. One of the aims of this training is to ensure drivers have an environmentally friendly, fuel-efficient driving style. Newly purchased vehi-cles also have smaller capacity engines, resulting in 15% lower CO2 emissions per 100 kilometres compared to 2006 (now between 225 and 233g CO2/100 km)._Market innovations in the area of transport are con-stantly evaluated and tested in pilot projects. The result of one such pilot project is the first fully electric vehicle in the UFD fleet, which has been in use by the field sales force since 2012. This Nissan car can cover up to 160

kilometres on a single charge. Thanks to a rapid charging system, the battery can be charged to 80% during a short lunch break.

_Volatile Organic Compounds (VOC). Switzerland has had a tax on VOCs for several years to help meet the country’s goal of reducing VOC emissions. Galenica has been systematically collecting emission data on VOCs since 2007. The figures reported here concern VOCs that are emitted into the atmosphere during production. These are subject to a tax. In 2013, the company paid tax on 24 tonnes of VOCs, an increase of 7% over the prior year. This was due, on the one hand, to the general increase in production in the Pharma Business sector and, on the other hand, to the reintegration of a production line during 2013.

_Other pollutants. In 2013, around 80% of vehicles used by Galexis met the Euro 5 emission standard. Ten percent of the Euro 5-compliant vehicles also meet the stringent, voluntary EEV exhaust emission standard (EEV stands for “Enhanced Environmentally-friendly Vehicle”). The vehi-cles used by third-party suppliers of Alloga and Galexis all comply with the Euro 5 emission standard as they are contractually obliged to use only vehicles that meet this high standard. The Euro emission standards aim to lower vehicle pollution by setting emission limits for carbon monoxide (CO), nitrogen oxides (NOx), hydrocarbons (CxHx) and particles. The higher the number of the stand-ard, the stricter it is. Euro 5 is currently the strictest and

CO2 emissions by scope 2011–2013

2009 2010 2011 2012 2013

VOC emissions 2009–2013

Scope 3

Scope 2

Scope 10

2’000

4’000

6’000

8’000

10’000

12’000

14’000

16’000TonnenTonnes16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

5’000

10’000

15’000

20’000

25’000kg

25,000

20,000

15,000

10,000

5,000

According to the Greenhouse Gas Protocol, direct sources of emissions in-clude: pharmaceutical production (for example, the burning of gas to generate process heat); the production of heat for buildings; and transportation using the company’s own vehicles (= scope 1). The largest indirect sources of CO2 emissions included in the indicator system are electricity generation (= scope 2) and transport by third-party suppliers (= scope 3).


has been in force since 2009 for all new cars on the road, and is likely to be replaced by Euro 6 in 2014. When pur-chasing new vehicles, Galexis seeks to introduce only vehicles with the latest emission control technologies.

Resource efficiency_Galenica aims to continuously improve energy efficiency while reducing greenhouse gas emissions.

_Collaboration with the Energy Agency for Industry (EnAW). Production processes and the buildings at the two production sites in Villars-sur-Glâne and St.Gallen were analysed by energy experts from the EnAW for fur-ther energy saving potential in 2013. Based on these analyses, an individual energy plan was developed for both sites, by means of which a defined reduction in CO2 emissions and energy consumption over the next ten years through economic measures shall be achieved. In addition, this energy plan is part of a so-called target agreement, which both sites have signed with the Depart-ment of the Environment, Transport, Energy and Com-munications (FOEN). As a result, they are exempt from the CO2 levy. In return, they are committed to implementing the agreed efficiency measures. The Geneva-Meyrin site is also exempt from the CO2 levy, as it signed a target agreement in 2009.

_Energy-saving lighting. The entire UFD building in Barbengo-Lugano has been equipped with the latest gen-eration LED lights since 2012. The impact of this measure has been considerable: the 892 newly fitted lights con-sume a total of 54% less electricity than the old lights. Unlike traditional energy-saving light bulbs, they also con-tain no toxic substances. In addition, the new lighting, which recreates daylight, has effectively improved work-ing comfort in the building.

_Potential savings, particularly in electricity consump-tion. In the Retail Business sector, the influence of Galenica on the choice of energy source for heating and electricity is very limited, as pharmacy locations are gen-erally leased. There is the possibility of influencing elec-tricity consumption, which is why the focus is on consist-ently installing energy-saving lighting and motion sensors when refurbishing pharmacies. In addition, flyers aim to raise employee awareness of specifically selected sus-tainability issues. Seven Amavita and seven Sun Store pharmacies were refurbished in 2013, corresponding to 5% and 7% of all points of sale, respectively.

Waste_In 2013, Galenica generated 1,846 tonnes of non-haz-ardous waste (largely general waste, cardboard and plas-tics) and 612 tonnes of hazardous waste, which consisted primarily of returned outdated medicines. Non-hazardous waste volumes increased by 6% and hazardous waste by 16% compared with the prior year (excluding UFD). This increase is due, on one hand, to production increases at Vifor Pharma locations, and on the other hand, to the Galenica Group’s overall growth. Waste disposal volumes in the Logistics Business sector vary greatly from year to year, as they also depend on the volumes which pharma partners wish to dispose of.

_Recycling. 50% of the waste generated is recycled. In 2013, this amounted to 1,226 tonnes across the Group, almost 90% of which were paper and cardboard. Com-pared to the prior year, the volume of recyclable waste increased by 2% (excluding UFD). This increase is attribut-able to the elimination of old stocks at the Geneva-Meyrin site. 25% of the waste was incinerated normally at the waste incineration plant, while a further 25% was inciner-ated at a specialist facility for hazardous waste._To optimise the waste and recycling concept, Alloga and Galexis collaborate with the company “Abfallbörse” (Waste Exchange). The aim is to concentrate current volumes of residual waste, making them as suitable as possible for recycling. Due to the resulting simplified pro-cedures, this collaboration will to continue in the future and be further reinforced, as necessary.


Environmental performance indicators

GRI1)

G31)

EN2)

Unit 2013 2012

Direct energy consumption categorised by primary energy sources_Heating oil_Gas_Vehicle fuel: own fleet_Vehicle fuel: third-party

EN3 GJGJGJGJGJ

158,60348,79146,62327,89535,294

152,77847,90143,57426,11935,184

Indirect energy consumption categorised by primary energy sources_District heating_Electricity

EN4 GJGJGJ

133,5317,142

126,389

124,7896,689

118,100

Energy saved by environmentally-conscious use and enhanced efficiency_Process optimisation_Exchange and retrofitting of plants and installations_Changes in employee behaviour

EN5from page 82from page 83from page 83

———

Initiatives to decrease indirect energy consumption EN7 from page 83 —

Total water consumption EN8 m3 192,381 188,026

Total direct and indirect greenhouse gas emissions, by weight_Direct CO2 emissions (fuels and combustibles, scope 1)_Indirect CO2 emissions (purchased electricity and heat, scope 2)

EN16 ttt

12,5616,5655,996

13,3396,3317,008

Other relevant greenhouse gas emissions, by weight_Indirect CO2 emissions (purchased transport services, scope 3)

EN17t 2,598 2,590

Initiatives to reduce greenhouse gas emissions and results achieved EN18 from page 83 —

Other significant atmospheric emissions, by weight_VOC

EN20

kg

24,016

22,451

Total waste weight by type and disposal methodBy type:

_Non-hazardous waste_Hazardous waste

By disposal method:_Incineration_Hazardous waste incineration_Recycling

EN22

tt

ttt

1,846612

620612

1,226

1,686511

539511

1,147

Total number and volume of significant spills EN23 Numbert

——

——

Initiatives to minimise the environmental impact of products and services, and the extent of their impact EN26 from page 82 —

Monetary value of significant fines and total number of non-monetary penalties due to violation of environmental regulations EN28 CHF — —

Environmental impacts of transporting goods_Energy consumption (diesel)_Greenhouse gas emissions (CO2)_Waste (packaging materials)

EN29GJtt

63,1894,6511,160

61,3034,5131,090

1) GRI: Global Reporting Initiative, guidelines version G 3.02) EN: Environment


_The OM Pharma site in Geneva-Meyrin has been in-volved in the Ambition Négawatt programme of local energy and water supplier SIG (Services Industriels de Genève) for over a year. The main aim of the programme is to support companies and private individuals in the Geneva area in reducing their energy consumption and cutting their CO2 emissions. This includes explaining the technical options for reducing energy consumption to the participants. In companies, the programme also supports additional measures to raise awareness among employees.

_Creation of a “Green Team”. The first action at the Geneva-Meyrin site was to set up an internal Green Team, representing as many of the different depart-ments as possible, to look for energy saving potential in the various buildings._As an initial measure, the Green Team organised “Flash-Ateliers” with a specialist in the area of environ-mental training, which were attended by around 100 employees. The aim of these workshops was to expand the circle of people involved, to inform them about the energy saving potential identified and to encourage a debate on the issue. All employees were then informed about the upcoming energy week via the “Vifor Pharma is taking action...so am I!” poster campaign.

_Energy week as the highlight of the awareness- raising programme. The energy week from 27 to 31 May 2013 was the highlight of the awareness-raising pro-gramme. It included a range of activities, such as a kick-off event involving all employees and a competition. Employees were able to submit their energy saving suggestions throughout the week in an ideas box. Some of the ideas were implemented immediately and reduced annual energy consumption by a full 40,000 kWh._Overall, the energy week was a resounding success, thanks also to the support from management, SIG and the enthusiasm and commitment of the Green Team members. Initial results also show that, following the energy week, electricity consumption in the administra-tion buildings has decreased by around 4%. This is at-tributable, among other things, to lights being more consistently switched off in rooms that are not being used. In addition to raising awareness, a range of techni-cal optimisation measures were implemented, which should save an estimated 154,000 kWh of electricity and over 500,000 kWh of heat in each future year.

Increase in resource efficiency, particularly in energy use

Waste by type 2009–2013 Waste by disposal method 2009–2013

Hazardous waste

Non-hazardous waste

Recycling

Hazardous waste incineration

Incineration

Tonnen

09 10 11 12 130

250

500

750

1’000

1’250

1’500

1’750

2’000

2’250

2’500

Tonnes2,500

2,250

2,000

1,750

1,500

1,250

1,000

750

500

250

Tonnen

09 10 11 12 130

250

500

750

1’000

1’250

1’500

1’750

2’000

2’250

2’500

Tonnes2,500

2,250

2,000

1,750

1,500

1,250

1,000

750

500

250


Water consumption_Galenica consumed 192,381m3 of water in 2013. On a Group-wide basis, water consumption therefore increased by around 2% over the previous year. The Pharma Business sector accounts for approximately 95% of the Group’s overall water consumption. The growth in consumption is due to increased production and the associated higher frequency of equipment cleaning.

Loss events, compliance and new regulations_No new regulations for hazardous waste management in industry and commerce were enacted in 2013. Galenica once again operated in compliance with the law in 2013. No fines were imposed for failing to comply with statutory environmental regulations.

SOCIAL RESPONSIBILITY

Employees_Employees and their specialised knowledge play a key role in the development, production, distribution and sale of pharmaceuticals. It is only thanks to their commitment, motivation and willingness to achieve above-average performance that the Galenica Group is able to maintain its leading position in the Swiss healthcare market. To ensure that this continues, in 2013 Galenica once again invested in training on its corporate values, in the techni-cal and managerial development of employees, as well as in employees’ health._Due to the essential role employees play, a separate section of the annual report is dedicated to human re-sources (see page 91).

Social commitment_As a leading player in the Swiss healthcare market, Galenica is committed at all levels to the welfare of pa-tients. The company was also involved in helping the fol-lowing organisations and projects:

_Swiss Aids Care International. The Galenica Group has supported this foundation with regular donations since 2005. One in seven people in Zimbabwe is infected with HIV, and some 80,000 people die of the immune disorder every year. Since 2003, Swiss Aids Care International has been operating a clinic for AIDS patients in Harare, Zimbabwe, under the direction of Professor Ruedi Lüthy.

Water consumption 2009–2013

2009 2010 2011 2012 2013

0

20’000

40’000

60’000

80’000

100’000

120’000

140’000

160’000

180’000

200’000

220’000

m3

220,000

200,000

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000


_Galenica not only supports the Swiss Aids Care Interna-tional foundation in financial form, but also through spe-cial campaigns. At the EVE_2 event in September 2013, the members of Galenica management attending were able to have a photograph of themselves taken in the lunch break and donate an amount of their choosing for the photo. The total amount donated was then rounded up at the end by Galenica. This donation will finance AIDS treatment for 30 patients for one year.

_Agua Viva. Since 2009, Galenica has been providing financial support to “Agua Viva, the small aid organisation for children”, an association operating in eastern Brazil. This association helps children in need and arranges spon-sorship for children from the deprived areas of the cities of Olinda and Paulista. The contributions not only help provide children with basic nutrition but also go into a fund that is used to finance medical treatment and medication. In Olinda, the association offers an information and con-tact point for all sponsored children and their relatives via the “Oficina Agua Viva”. Here, the children receive food and are given the opportunity to attend daily school les-sons. Agua Viva also organises vocational and part-time courses as well as traineeships for children and adoles-cents from socially disadvantaged backgrounds and of-fers, via the Oficina, a contact point for the region’s needy.

_Christmas and New Year card 2013. The Galenica Group selected a card from the “Kinderhilfe Sternschnuppe” foundation as its Christmas and New Year card for 2013. This was linked to a donation to the foundation. “Kinder-hilfe Sternschnuppe” is a nationally active Swiss non-profit organisation that grants wishes to children and young people aged up to 18 years living with a disease, disability or the consequences of a serious injury.

_Fifth World Healthcare Student Symposium 2013. Galenica supported this international symposium that was organised in Switzerland in 2013 as a sponsor and “pearl mentor”, in particular to enable less well-off students from abroad to participate. The title of the event held in Lausanne in September 2013 was “Demystifying inter-professional collaboration”, and focused on various ap-proaches to interdisciplinary collaboration in the health-care sector. It was aimed at students on health study programmes.

_Médecins Sans Frontières. Médecins Sans Frontières (MSF) is an international, independent humanitarian or-ganisation that delivers emergency aid to people affected by armed conflicts, epidemics, natural disasters and ex-clusion from healthcare in their country. The Sun Store pharmacies supported MSF in 2013 with a campaign in which tissues were sold. The proceeds from this campaign were donated to MSF along with the revenue from adver-tising space in the Sun Store magazine.

_IT Drohobych aid project. On the initiative of a Galexis apprentice, GaleniCare and Galexis are supporting a pro-ject to tackle tuberculosis in Drohobych, a town in West Ukraine with a population of approximately 77,000. The project is being carried out in collaboration with IT stu-dents at the Gewerblich Industrielle Berufsschule Bern (Commercial-Industrial Vocational School Bern) and the aid organisation Bär&Leu, and supports the WHO’s “Stop TB Strategy”. Galexis and GaleniCare provided PCs and servers that were no longer in use. The Galexis apprentice himself is investing his free time and holidays in configur-ing an IT infrastructure in Switzerland for the Drohobych hospital. The network should come online on-site in 2014.


Meeting customer needs through new services._Since 2013, patients can be tested for the most common allergies quickly and reliably in all Amavita and Coop Vitality pharma-cies in the Canton of Zurich. Expanding our services with low-cost, patient-friendly offerings gives us access to new customer segments._The AllergyCheck serves as an example of how we can offer new services that are “In tune with the customer” while raising the public’s awareness of our pharmacies as professional partners in the medical triage system.

Galenica annual report 2013 · Human Resources _91

HUMAN RESOURCESPassion at all levels

CULTURE AND VALUES

Corporate culture: a crucial element for success _The strong Galenica corporate culture is a crucial ele-ment in the Group’s success. As the company grows, the number of employees also increases. The dynamic growth in recent years has led to many new employees joining the company: at the end of 2013, Galenica employed around 7,700 people of some 80 different nationalities. _The Group’s growth makes it ever more important to discuss the culture and the values and make them clear to all employees. Based on the experiences of what made Galenica successful in the past and on suggestions put forward in many lively meetings and discussions right across the company, the Corporate Executive Committee formulated five key values in 2013. These were first pre-sented at the internal EVE_2 management event and then communicated to all employees in the form of an explan-atory brochure at the beginning of 2014. Other communi-cation measures planned for 2014 aim to keep reminding employees of the values through real-life examples and stories about how they are being implemented, and to motivate employees to put the key values into practice on a daily basis.

_Incorporating the key values into Human Resources processes. Many employees represent the face of the company to customers. Human Resources (HR) processes therefore aim to ensure new staff are integrated quickly and gain a rapid understanding of the Galenica Group culture. The key values also play a significant role in the recruitment process, facilitate integration into the com-pany and create a sense of identity. In addition, they act as a reference point for behaviour and decision-making in a rapidly changing market environment.

Content 91 _Culture and values 93 _Trust through competence 94 _Stronger together 95 _For our employees 95 _Employee profit-sharing programme 96 _Employee benefit plans 96 _Works committee

The five Galenica key values

_ 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.

92_ Human Resources · Galenica annual report 2013

_The Human Resources Management of Galenica aims to implement standard solutions for clearly defined pro-cesses and structures, while nevertheless accommodat-ing specific HR needs of the individual Business sectors which are part of the decentralised business model.

Overall employee development concept _Galenica has a range of management tools to support employees, particularly members of Senior Management and Management. They align their decisions and activities with the principles of value creation (value-based manage-ment). One such element is the overall corporate manage-ment development (CMD) concept, which comprises events (EVE), special staff training (SAM) and manage-ment training (FAB). In 2013, around 650 employees par-ticipated in various seminars as part of the CMD pro-gramme.

_Events. EVE is a platform for communicating strategic objectives. In 2013, the EVE_1 event took place on the evening before the full-year results media conference, to inform Senior Management of the highlights and results of the previous year. Using external examples, it began by addressing the Group’s motto for the year, “In tune with the customer”. The EVE_2 event addresses the members of senior management and management at the Swiss loca-tions and all pharmacy managers. The theme of the morn-ing of the event was also the 2013 motto for the year, “In

tune with the customer”. In the afternoon, the participants were given an overview of the different projects that the Galenica Group companies support as part of their social commitment and Professor Ruedi Lüthy, the founder of the Swiss Aids Care International foundation, which Galenica has been supporting for many years, gave a pres-entation. The third item on the agenda was the presenta-tion and explanation of the five Galenica key values by the Executive Chairman, followed by a podium discussion with the members of the Corporate Executive Committee.

_Modular training formats for employees. New employ-ees are given an induction day (SAM_1) during which the culture, the development, the strategy and the companies of the Galenica Group are presented. Further SAM semi-nars cover specialist topics and methodology.

_Management training. The FAB_1 management training is built up of modules in three areas: self-management and management tools, managing people and communi-cation skills, as well as leading and developing teams. FAB_2 reinforces the themes of performance and health, while FAB_3 does the same for corporate management and change management. These advanced training courses are aimed at members of senior management and management and are offered in collaboration with exter-nal partners.

Corporate Management Development

UMECorporate Management Development

EVEEvents

SAM FAB

_special training for employees

_management training for MDI/MKA

_EVE_1 for MDI_EVE_2 for MDI/MKA(Swiss locations) pharmacy managers

_Learn & Lunch seminarsfor employees

_CMD includes all activities offered throughout the Galenica Group for the further development of staff and management.

MDI = Member of Senior Management MKA = Member of Management


TRUST THROUGH COMPETENCE

_Fostering talent. The Galenica Group offers its staff a wide range of benefits, including in particular structured training and development. In 2013, Galenica invested about five million Swiss Francs in employee training, sig-nificantly more than in the previous year. The two-year talent development programme, which was launched four years ago, is one specific aspect that continued to prove popular in the year under review. Around 30 mentees took part, each of whom was allocated an internal mentor to assist and advise their mentee above and beyond the for-mal programme, and support them in their further devel-

opment. Mentees are employees from any level of the Galenica Group who have considerable potential. The goal of the programme is to make optimum use of the wealth of experience within the Group to further develop talented staff and to promote cross-Business sector exchange. _In the same vein, broader recognition and fostering of talent in the Group as a whole are a priority. The necessary structures, processes and responsibilities were imple-mented systematically for the first time in the year under review.

_Employee satisfaction. To obtain regular, institutional-ised feedback, the Galenica Group conducts the Opinio employee survey every three years. The next Group-wide survey is scheduled for 2014.

_Innovative recruitment methods. Alongside proven methods, the Vifor Pharma Global Sourcing Recruitment Team is increasingly using social media tools such as LinkedIn, with great success. The ever-stronger profile of Vifor Pharma in the market is helpful in this regard.

Competitive pharmacies

_The Amavita, Sun Store and Coop Vitality pharmacies have launched numerous initiatives to provide even bet-ter care for customers and improve the efficiency of processes (see also the section on Retail, from page 37). Here is a brief presentation of two of these projects.

Team Performance: more time for customers_The “Team Performance” strategic project was launched in March 2013. The objective is to free up more time to advise customers and take care of sales. Three Amavita pharmacies in Neuchâtel, Geneva and Lausanne were selected for the pilot phase and supported by a Galeni Care project group._The results of the pilot were impressive – in terms of both sales and motivation. Employees clearly value being kept informed about the pharmacy’s business position and objectives and playing a more active role in further business development by taking on more responsibility. The project will therefore be progressively expanded to all Amavita, Sun Store and Coop Vitality pharmacies.

PEP (Personaleinsatzplanung): new staff resource planning and modern time management system_Due to longer opening times and varying working time models, staff resource planning in pharmacies, drug-stores and perfumeries has become increasingly com-plex. In many locations, planning and recording of work-ing hours was still done manually. _A uniform staff resource planning system will be in-troduced for all locations at the beginning of 2014. At Amavita, Sun Store and Coop Vitality, all of the former, individual working materials and timesheets will be re-placed by an electronic time management system, mas-sively reducing the administrative burden. Among other things, this removes the need to manually draw up time reports each month for employees paid by the hour as well as the necessity to submit timesheets for interim and annual financial statements. These will now be re-placed by an electronic exchange of data between the resource planning and salary systems.

Number of employees worldwide

2013 2012

Switzerland 6,901 6,558

Europe 646 620

South America 64 59

North America 32 37

Asia 20 15

Total 7,663 7,289

09 10 11 12 13


_Due to a general shortage of dispensing pharmacists, recruitment of pharmacists remains a challenge in Swit-zerland. Extending the search for candidates for newly vacant positions to surrounding countries is mandatory.

_Training apprentices. Galenica is deeply committed to apprentice training. In 2013, the entire Group had 754 apprentices in training, and 232 completed their appren-ticeships, many passing with flying colours. Ten appren-tices achieved a mark of 5.5 or higher.

_Information channels. Galenica operates an intranet as an internal information tool. It has a cross-Business sector design, enabling employees to access information from all Business sectors. A new version of the intranet with a new structure, new layout and improved user-friendliness was launched in autumn 2013. _Additional information channels include the employee magazine Spot and letters to employees as required. Information events for employees are also held in each Business sector, while current information is communi-cated by intranet, e-mail, electronic newsletters and on notice boards.

STRONGER TOGETHER

_Comité des Jeunes. Galenica promotes exchange within the Group. The Comité des Jeunes is made up of around 30 young staff members from all the companies. It acts as a type of internal think tank that helps promote and develop the next generation of managers and specialists. The members also contribute to developing a corporate culture that demonstrates a strong commitment to ethics. One of this Committee’s tasks is to submit a proposal to the Corporate Executive Committee for the annual Galenica Group motto and to develop a plan for how it will be put into practice.

_In tune with the customer. The motto for 2012, “In tune with the customer”, is such an important topic for Galenica that it was continued for another year to serve as the annual motto 2013. The objective of several Comité des Jeunes initiatives was to promote customer focus and sales culture at Galenica. In the year under review, a post-card campaign was launched and employees were invited to submit specific examples of how they were in tune with the customer. Galexis received so many postcards that they ended up covering whole walls of the logistics centre in Niederbipp. The sheer diversity of examples caused employees and visitors to reflect on the topic, and led to intense discussions. The idea of the postcard campaign has also been explored through photos in this annual re-port. The annual motto was similarly a theme in articles in the employee magazine Spot and at a booth at EVE_2.

Headcount trends 2009–2013 Number of employees in 2013 by Business sectors

Number of women and men in 2013

6,298

6,634

7,051

7,663

7,289

Galenica Ltd. 48 (29 women, 19 men)

Pharma 1,955 (997 women, 958 men)

Logistics 1,191 (548 women, 643 men)

Retail 4,288 (3,816 women, 472 men)

HCI 181 (80 women, 101 men)

Women 5,470 (72%)

Men 2,193 (28%)


_The motto for 2014 is “Our passion, customer satisfac-tion”. This will continue the customer focus theme, which is a key topic for all business activities and, on the sug-gestion of the Comité des Jeunes, links it with the key value “passion”.

FOR OUR EMPLOYEES

_Health. Anyone who is active in the healthcare market should look after their own health. Galenica promotes health through prevention campaigns, information ses-sions and specific fitness offers. In line with the directives of the Federal Coordination Commission for Occupational Safety (FCOS), the company has put in place the required measures to protect staffʼs health and maintain safety in the workplace.

_Illnesses. Employees were again able to take advantage of Galenica Care Management in the year under review. Employees who are ill or at risk are given support before they have to be put on sick leave. The ultimate aim is a rapid return to work after an illness or accident. The num-

ber of illness-related absences increased slightly in 2012 (currently available data) compared with the previous year: 902 illness-related absences were reported.

_Accidents. Based on data from Suva and private insurers, the Galenica accident statistics show an increase in the number of industrial accidents in all Business sectors. Out of 189 reported accidents in total in 2012 (currently avail-able data), the majority (60%) were minor accidents, which did not result in an incapacity to work or at least not ex-ceeding three working days.

EMPLOYEE PROFIT-SHARING PROGRAMME

_The profit-sharing bonus forms part of the annual bonus for members of Management. This is dependent on quan-titative and qualitative targets. _The share-based remuneration programme (LTI, see page 73 in the Remuneration report) for members of the Corporate Executive Committee and certain members of Senior Management focuses on long-term performance; remuneration is withheld for a period of three years.

Headcount trends

Number of managerial staff

Number of employeesOf which part-time

employees <90% Full-time equivalents

2013 2012 2013 2012 2013 2012

Galenica Ltd. 48 42 12 10 41 37

Pharma 1,955 1,850 190 162 1,865 1,764

Logistics 1,191 1,096 331 294 971 916

Retail 4,288 4,110 1,847 1,698 3,313 3,200

HealthCare Information 181 191 42 40 162 172

Total 7,663 7,289 2,422 2,204 6,352 6,089

Total employees in % 31.6 30.2

Total number of managerial staff Of which women Of which men

2013 2012 2013 2012 2013 2012

Galenica Ltd. 29 27 12 12 17 15

Pharma 588 504 237 196 351 308

Logistics 85 90 25 28 60 62

Retail 356 342 237 227 119 115

HealthCare Information 37 43 12 13 25 30

Total 1,095 1,006 523 476 572 530

Total employees in % 14.3 13.8 6.8 6.5 7.5 7.3


_Every year employees of Galenica in Switzerland have the opportunity to purchase a maximum of ten registered shares at a discounted price. These shares cannot be sold for three years after the date of purchase. In 2013, 20% of eligible employees participated in the share purchase programme._All employees worldwide are paid a profit-sharing bonus. The bonus is calculated based on the Group result com-pared to the previous year.

EMPLOYEE BENEFIT PLANS

_Galenica has a number of employee benefit plans based on local conditions and legal stipulations in the corre-sponding countries. These plans and foundations are le-gally and financially independent of Galenica.

_Employee benefit plans according to Swiss BVG. The vast majority of Galenica employees are insured in Swit-zerland through the pension funds of the Galenica Group. These pension funds cover the risks of the economic con-sequences of ageing, disability and death according to the specifications of the Swiss Federal Occupational Retire-ment, Survivors and Disability Pension Plans Act (BVG).

_Defined contribution plan principle. These pension funds are managed according to the defined contribution plan principle. They are generally funded by contributions from the employee and the employer. The contributions made by employer and employee are accrued into indi-vidual savings capital for each employee. The savings capital is usually paid out or converted into a pension on reaching statutory retirement age or transferred as vested benefits on termination of employment.

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

_Defined benefit plan principle in the Galenica consoli-dated financial statements. The recording and assess-ment of benefit obligations in accordance with Interna-tional Financial Reporting Standards (IFRS) is compulsory under the defined benefit plan. In addition to recording current benefits to employees, benefit obligations follow-ing the end of employment are also calculated by actuar-ies. These actuarial calculations generally result in a lower coverage ratio. According to the provisions under BVG, an obligation to make additional contributions or take reme-diation measures only arises if the coverage ratio falls below 100% (for more details see pages 115 and 134 until 137).

_New technical basis for 2014. The technical basis of both pension funds of the Galenica Group in Switzerland has been adjusted to reflect economic realities and de-mographic developments. In particular, in accordance with BVG 2010, a new technical interest rate of 3.5% (cur-rently 4.0%) and the latest life tables BVG 2010 will apply from 2014, with the effect of reducing conversion rates used to determine pensions for future pensioners. All em-ployees at each location have been informed of these changes in writing and by means of information events.

WORKS COMMITTEE

_In the year under review, representatives of the Galenica Group Corporate Executive Committee and HR manage-ment met twice with the Works Committee, representing all employees of the Galenica Group, to discuss issues that go beyond matters addressed by staff committees in the individual Business sectors which meet several times a year.


Giving it your all – over four months of discussions with the customer. _The www.alles-geben.ch campaign marked the launch of our first competition using social networks. The speeches by the individual athletes were an additional new feature. _The campaign gave us the opportunity to continually maintain dialogue with the customer over a period of four months and emotionalise the brand. By way of encouragement for meeting their sporting goals, the winners of the competition, on the picture Sven Küchler, received a cheque.

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Passionate about picking the right products for the specific customers accurately._Our employees in the Lausanne-Ecublens distribution centre’s warehouse compile the items ordered by the pharmacies… Continue page 163.

Galenica financial statements 2013 _99

100 _Key figures

101 _Consolidated statement of income

102 _Consolidated statement of comprehensive income

103 _Consolidated statement of financial position

104 _Consolidated statement of cash flows

105 _Consolidated statement of changes in equity

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

106 _1. Accounting principles 109 _2. Summary of significant accounting policies 117 _ 3. Financial risk management 118 _4. Estimation uncertainty and assumptions 118 _5. Operating segment information 122 _ 6. Business combinations 123 _7. Net sales 123 _8. Other revenue 123 _9. Personnel costs 123 _10. Other operating costs 123 _11. Financial result 124 _12. Earnings per share 124 _13. Securities 124 _14. Receivables 125 _15. Income taxes 127 _16. Inventories 128 _17. Property, plant and equipment and investment properties 129 _18. Intangible assets 131 _ 19. Investments in associates and joint

ventures 131 _20. Financial assets 131 _21. Other liabilities 132 _22. Current financial liabilities 132 _23. Non-current financial liabilities 133 _24. Provisions 134 _25. Employee benefit plans 138 _26. Share capital and number of shares 138 _ 27. Non-controlling interests 138 _ 28. Changes in consolidated shareholders’

equity 139 _29. Financial instruments 148 _30. Share-based payments 149 _31. Related party transactions 149 _ 32. Lease liabilities 150 _33. Contingent liabilities 150 _ 34. Assets assigned to secure own liabilities 150 _35. Subsequent events 151 _36. Investments

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

CONSOLIDATED FINANCIAL STATEMENTS 2013 OF THE GALENICA GROUP

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100_ Key figures · Galenica financial statements 2013

KEY FIGURES

in million CHF 2013 2012

Galenica Group

Net sales_Pharma_Logistics_Retail_HealthCare Information1)

_Net sales to other segments

3,359.4662.7

2,118.21,245.7

39.8(707.0)

3,294.3633.3

2,102.31,189.2

47.1(677.6)

EBITDA6) 466.2 428.0

EBITDA in % of net sales6) 13.9% 13.0%

Earnings before interest and taxes (EBIT)6)

_Pharma_Logistics_Retail_HealthCare Information1)

_Other and eliminations

390.6269.3

31.163.0

4.023.2

352.0257.130.760.3

4.3(0.4)

EBIT in % of net sales6) 11.6% 10.7%

Net profit6) 334.8 276.5


_Non-controlling interests296.2

38.6255.2

21.3

Investment in property, plant and equipment and intagible assets 71.7 53.5

Cash flow from operating activities 329.0 291.7

Cash and cash equivalents at reporting date 215.6 347.9

Employees at reporting date (FTE) 6,352 6,089

Total assets6) 3,069.4 3,152.4

Shareholders’ equity6) 1,555.1 1,331.8

Equity ratio6) 50.7% 42.2%

Net debt 442.8 567.5

Gearing6) 28.5% 42.6%

in CHF 2013 2012

Share information

Nominal value per share at reporting date 0.10 0.10

Number of outstanding shares2) 6,478,741 6,475,339

Share price at reporting date 898.00 530.50

Highest share price for the year 920.00 626.00

Lowest share price for the year 527.50 479.25

Earnings per share3) 6) 45.71 39.40

Shareholders’ equity per share3) 6) 232.42 200.68

Gross dividend per share 14.004) 11.00

Pay-out ratio5) 6) 30.6% 27.9%

Stock exchange capitalisation at reporting date in thousand CHF 5,815,374 3,437,6001) In the operating segment information, HealthCare Information business sector is summarised as “Other” along with the activities of the Corporate Division2) Number of shares minus weighted average number of treasury shares3) Attributable to the shareholders of Galenica Ltd.4) According to Board of Directors’ proposal to Annual General Meeting on 8 May 20145) Gross dividend in % of net profit per share6) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

Galenica financial statements 2013 · Consolidated statement of income _101

in thousand CHF Notes 2013 2012

Net sales 7 3,359,433 3,294,341

Other revenue 8 304,720 313,677

Revenue 3,664,153 3,608,018

Cost of goods sold (2,179,384) (2,141,624)

Personnel costs1) 9, 25 (608,157) (591,633)

Other operating costs 10 (410,378) (446,730)

Depreciation and amortisation 17, 18 (75,673) (76,053)

Operating costs (3,273,592) (3,256,040)

Earnings before interest and taxes (EBIT) 390,561 351,978

Financial income 11 9,983 8,886

Financial expenses1) 11 (39,886) (40,162)

Income from associates and joint ventures 19 2,602 2,567

Earnings before taxes (EBT) 363,260 323,269

Income tax1) 15 (28,419) (46,798)

Net profit 334,841 276,471


_Non-controlling interests296,16238,679

255,12821,343

in CHF

Earnings per share1) 12 45.71 39.40

Diluted earnings per share1) 12 45.63 39.301) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

CONSOLIDATED STATEMENT OF INCOME

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102_ Consolidated statement of comprehensive income · Galenica financial statements 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

in thousand CHF 2013 2012

Net profit1) 334,841 276,471

Hedge transactions_change in fair value _realised in the consolidated statement of income

4,168(888)

4,805(219)

Available-for-sale financial assets_change in fair value_realised in the consolidated statement of income

(69)653

(2,331)369

Translation differences (16,830) (205)

Income tax — —

Items that may be reclassified subsequently to the statement of income (12,966) 2,419

Remeasurements of the net defined benefit liability (asset)1) (5,299) (20,935)

Income tax from remeasurements of the net defined benefit liability (asset)1) 1,166 4,581

Items that will not be reclassified to the statement of income (4,133) (16,354)

Other comprehensive income (17,099) (13,935)

Comprehensive income 317,742 262,536


_Non-controlling interests279,063

38,679 241,19321,343

1) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

Assets

in thousand CHF Notes 31.12.2013 31.12.2012 1.1.2012

Cash and cash equivalents 215,581 347,915 338,687

Securities 13 393 8,960 6,604

Receivables 14 547,619 541,543 547,647

Tax receivables 1,729 2,898 4,236

Inventories 16 353,148 340,704 333,592

Prepaid expenses and accrued income 84,883 88,869 31,411

Current assets 39% 1,203,353 42% 1,330,889 40% 1,262,177

Property, plant and equipment 17 441,431 438,436 447,536

Investment properties 17 37,536 38,297 53,862

Intangible assets 18 1,261,282 1,251,648 1,252,338

Investments in associates and joint ventures 19 40,938 21,791 24,768

Financial assets 20 64,329 45,113 51,946

Deferred tax assets1) 15 17,159 20,928 17,406

Employee benefit assets1) 25 3,336 5,259 7,426

Non-current assets 61% 1,866,011 58% 1,821,472 60% 1,855,282

Assets 100% 3,069,364 100% 3,152,361 100% 3,117,459

Liabilities and shareholders’ equity

in thousand CHF Notes 31.12.2013 31.12.2012 1.1.2012

Financial liabilities 22 115,128 282,994 167,603

Other liabilities 21 401,685 394,979 461,049

Tax payable 38,563 39,968 33,289

Accrued expenses and deferred income 192,765 165,743 131,534

Provisions 24 1,981 36,004 34,783

Current liabilities 24% 750,122 29% 919,688 26% 828,258

Financial liabilities 23 632,062 755,046 997,614

Deferred tax liabilities1) 15 73,887 72,671 70,166

Employee benefit liabilities1) 25 53,572 70,374 50,018

Provisions 24 4,599 2,820 266

Non-current liabilities 25% 764,120 29% 900,911 36% 1,118,064

Share capital 26 650 650 650

Reserves1) 1,505,113 1,298,803 1,124,796

Equity attributable to shareholders of Galenica Ltd. 1,505,763 1,299,453 1,125,446

Non-controlling interests 27 49,359 32,309 45,691

Shareholders’ equity 28 51% 1,555,122 42% 1,331,762 38% 1,171,137

Liabilities and shareholders’ equity 100% 3,069,364 100% 3,152,361 100% 3,117,4591) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

Galenica financial statements 2013 · Consolidated statement of financial position _103

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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104_ Consolidated statement of cash flows · Galenica financial statements 2013

CONSOLIDATED STATEMENT OF CASH FLOWS


Net profit1) 334,841 276,471

Income tax1) 28,419 46,798

Depreciation and amortisation of property, plant and equipment, investment properties and intangible assets 75,673 76,053

(Gain)/loss on disposal of non-current assets (1,687) (5,496)

Increase/(decrease) in provisions, receivables and liabilities from employee benefit1) (52,949) 4,940

Net financial result1) 29,903 31,276

(Gain)/loss from associates and joint ventures (2,602) (2,567)

Other non-cash items 13,297 14,992

Change in receivables (995) 11,586

Change in inventories (7,825) (4,802)

Change in other liabilities 2,924 (68,161)

Change in other net current assets (43,264) (31,355)

Interest received 1,902 1,468

Interest paid (29,863) (34,300)

Other financial receipts/(financial payments) 2,685 4,368

Dividends received 253 5,799

Income tax paid (21,666) (35,374)

Cash flow from operating activities 329,046 291,696

Investments in property, plant and equipment and investment properties (57,203) (45,491)

Investments in intangible assets (14,393) (6,272)

Investments in associates and joint ventures (16,798) (255)

Investments in financial assets and securities (1,907) (715)

Proceeds from property, plant and equipment and investment properties 3,161 22,050

Proceeds from intangible assets 4 67

Proceeds from financial assets and securities 9,529 3,926

Purchase of subsidiaries (net cash flow) (30,704) (18,945)

Cash flow from investing activities (108,311) (45,635)

Dividend payment (92,588) (92,565)

Purchase of treasury shares (21,654) (11,466)

Sale of treasury shares 7,760 3,496

Proceeds from financial liabilities 34,846 30,340

Repayment of financial liabilities (281,322) (165,977)

Purchase of non-controlling interests (185) (687)

Cash flow from financing activities (353,143) (236,859)

Translation differences 74 26

Increase/(decrease) in cash (132,334) 9,228

Cash and cash equivalents as at 1 January 347,915 338,687

Cash and cash equivalents as at 31 December 215,581 347,9151) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

Galenica financial statements 2013 · Consolidated statement of changes in equity _105

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

in thousand CHFShare

capitalTreasury

shares

Fluctuation invalue of financial

instrumentsRetainedearnings

Accumulatedtranslationdifferences

Equity attributable to

shareholders of Galenica Ltd.

Non- controlling

interests

Equity

Balance as at 31 December 2011 650 (39,339) (10,238) 1,300,753 (94,918) 1,156,908 45,691 1,202,599

Changes in accounting standards1) (31,462) (31,462) (31,462)

Balance as at 1 January 2012 (restated) 650 (39,339) (10,238) 1,269,291 (94,918) 1,125,446 45,691 1,171,137

Net profit1) 255,128 255,128 21,343 276,471

Other comprehensive income1) 2,624 (16,354) (205) (13,935) (13,935)

Comprehensive income 2,624 238,774 (205) 241,193 21,343 262,536

Dividend (58,308) (58,308) (34,253) (92,561)

Transactions on treasury shares 28,505 (52,188) (23,683) (23,683)

Share-based payments 15,020 15,020 15,020

Change in non-controlling interests (215) (215) (472) (687)

Balance as at 31 December 2012 650 (10,834) (7,614) 1,412,374 (95,123) 1,299,453 32,309 1,331,762

Net profit 296,162 296,162 38,679 334,841

Other comprehensive income 3,864 (4,133) (16,830) (17,099) (17,099)

Comprehensive income 3,864 292,029 (16,830) 279,063 38,679 317,742

Dividend (71,301) (71,301) (21,292) (92,593)

Transactions on treasury shares (5,000) (10,409) (15,409) (15,409)

Share-based payments 13,805 13,805 13,805

Change in non-controlling interests 152 152 (337) (185)

Balance as at 31 December 2013 650 (15,834) (3,750) 1,636,650 (111,953) 1,505,763 49,359 1,555,1221) Adjusted due to restatement IAS 19 (see page 107 and 108)

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106_ Notes · Galenica financial statements 2013

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE GALENICA GROUP

Amendments to IFRS

_The standards adopted are consistent with the previous finan-cial year with the following exceptions. As at 1 January 2013 Galenica adopted the following amended International Financial Reporting Standards.

_ IFRS 7 – Disclosures – Offsetting Financial Assets and Financial Liabilities_IFRS 10 – Consolidated Financial Statements_IFRS 11 – Joint Arrangements_IFRS 12 – Disclosure of Interests in Other Entities_IFRS 13 – Fair Value Measurement _ IAS 1 – Presentation of Items of Other Comprehensive Income _IAS 19 – Employee Benefits _IAS 27 – Separate Financial Statements_IAS 28 – Investments in Associates and Joint Ventures_ IFRIC 20 – Stripping Costs in the Production Phase of a Surface Mine

_With the exception of the standards set out below, these amend-ments have no, or no material, impact on financial position, financial performance and cash flow statements of Galenica.

IFRS 11 – Joint Arrangements_In adopting IFRS 11, Galenica examined contractual arrange-ments with other shareholders which could potentially be affected by IFRS 11 to identify any instances of joint control. Galenica concluded that its investment in Coop Vitality consti-tutes a joint venture under IFRS 11 rather than an associate due to the existence of joint control. The accounting treatment is unchanged, however, and the investment continues to be recog-nised using the equity method.

IFRS 12 – Disclosure of Interests in Other Entities_IFRS 12 describes the disclosure requirements relating to sub-sidiaries, joint arrangements, associates and structured entities. The disclosure requirements have been extended, especially with regard to subsidiaries with non-controlling interests that are material to the reporting entity. Refer to note 27 for further details.

IFRS 13 – Fair Value Measurement_The standard sets out in a single IFRS a framework for measur-ing fair value in most instances. The adoption of IFRS 13 did not materially impact fair value measurements of Galenica._IFRS 13 also requires further disclosures about fair value measurements. These replace some of the disclosures made in accordance with other standards (e.g. IFRS 7). Refer to note 29 for further details.

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, where it is also registered. The re gistered offices are at Untermattweg 8, 3027 Bern, Switzer land. 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 2013 for publication on 7 March 2014. The 2013 consolidated financial statements will be submitted for approval to the Annual General Meeting of shareholders on 8 May 2014.

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 finan-cial statements of the individual companies of Galenica, prepared in accordance with uniform principles. The reporting period comprises twelve months to 31 December._The consolidated financial statements are available in German, French and English. The German version is binding._The consolidated financial statements have been presented on a historical cost basis. Non-monetary assets are valued 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 dis-closures on measurement are provided in the summary of sig-nificant accounting policies.

Galenica financial statements 2013 · Notes _107

in thousand CHF Reported Changes Restated

Personnel costs (594,005) 2,372 (591,633)

Operating costs (3,258,412) 2,372 (3,256,040)

Earnings before interest and taxes (EBIT) 349,606 2,372 351,978

Financial expenses (39,891) (271) (40,162)

Earnings before taxes (EBT) 321,168 2,101 323,269

Income tax (46,361) (437) (46,798)

Net profit 274,807 1,664 276,471

Attributable to:_Shareholders of Galenica Ltd._Non-controlling interests

253,464 21,343

1,664 —

255,12821,343

in CHF

Earnings per share 39.14 0.26 39.40

Diluted earnings per share 39.04 0.26 39.30

Consolidated statement of income 1.1.–31.12.2012


Net profit 274,807 1,664 276,471

Remeasurements of the net defined benefit liability (asset) — (20,935) (20,935)

Income tax remeasurement of employee benefits — 4,581 4,581

Items that will not be reclassified to the statement of income — (16,354) (16,354)

Other comprehensive income 2,419 (16,354) (13,935)

Comprehensive income 277,226 (14,690) 262,536

Attributable to:_Shareholders of Galenica Ltd._Non-controlling interests

255,883 21,343

(14,690) —

241,193 21,343

Consolidated statement of comprehensive income 1.1.–31.12.2012

IAS 1 – Presentation of Items of Other Comprehensive Income_IAS 1 (amended) requires entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently. The amendments only affect the presentation of items in the con-solidated statement of comprehensive income.

IAS 19 – Employee Benefits_The amendments to IAS 19 (revised) led to several changes, of which the elimination of the corridor method was the most significant. As a result, actuarial gains and losses will be recog-nised immediately in other comprehensive income in the con-solidated statement of comprehensive income. In addition, in-stead of recording the expected return on plan assets and the

interest on the defined benefit obligation, entities are now re-quired to record the net interest on the net defined benefit liabil-ity (asset) in profit or loss. Risk-sharing between the employees and employer was also redefined, impacting the defined benefit obligation and the allocation of service cost. _In adopting IAS 19, Galenica amended the presentation in the consolidated statement of income. The net interest is now included in the financial result (previously in personnel costs), while the effect of discounting the non-current portion of the net defined liability (asset) is better reflected in the consolidated statement of income._The amendments were applied retroactively and the compara-tive figures restated. The table below shows the effect on each relevant item of the consolidated financial statements:

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Deferred tax assets 6,375 11,031 17,406

Employee benefit assets 15,155 (7,729) 7,426

Non-current assets 1,851,980 3,302 1,855,282

Assets 3,114,157 3,302 3,117,459

Deferred tax liabilities 68,008 2,158 70,166

Employee benefit liabilities 17,412 32,606 50,018

Non-current liabilities 1,083,300 34,764 1,118,064

Reserves 1,156,258 (31,462) 1,124,796

Shareholders’ equity 1,202,599 (31,462) 1,171,137

Liabilities and shareholders’ equity 3,114,157 3,302 3,117,459

Consolidated statement of financial position as at 1 January 2012


Net profit 274,807 1,664 276,471

Income tax 46,361 437 46,798

Increase/(decrease) in provisions, receivables and liabilities from employee benefit 7,312 (2,372) 4,940

Net financial result 31,005 271 31,276

Cash flow from operating activities 291,696 — 291,696

Consolidated statement of cash flows 1.1.–31.12.2012


Equity attributable to shareholders of Galenica Ltd. as at 31 December 2011/1 January 2012 1,156,908 (31,462) 1,125,446

Net profit 253,464 1,664 255,128

Other comprehensive income 2,419 (16,354) (13,935)

Comprehensive income 255,883 (14,690) 241,193

Balance as at 31 December 2012 1,345,605 (46,152) 1,299,453

Consolidated statement of changes in equity as at 31 December 2012


Deferred tax assets 9,245 11,683 20,928

Employee benefit assets 11,327 (6,068) 5,259

Non-current assets 1,815,857 5,615 1,821,472

Assets 3,146,746 5,615 3,152,361

Deferred tax liabilities 74,006 (1,335) 72,671

Employee benefit liabilities 17,272 53,102 70,374

Non-current liabilities 849,144 51,767 900,911

Reserves 1,344,955 (46,152) 1,298,803

Shareholders’ equity 1,377,914 (46,152) 1,331,762

Liabilities and shareholders’ equity 3,146,746 5,615 3,152,361

Consolidated statement of financial position as at 31 December 2012


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 2014 or later. Galenica has opted not to early adopt the following standards or amendments to standards or interpre-tations. 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 (effective date to be defined)

_IFRS 14 – Regulatory Deferral Accounts (1 July 2014)_IAS 19 – Defined Benefit Plans: Employee Contributions (1 July 2014)_ IAS 32 – Offsetting Financial Assets and Financial Liabilities (1 January 2014)_ IAS 39 – Novation of Derivatives and Continuation of Hedge Accounting (1 January 2014)_IFRIC 21 – Levies (1 January 2014)_ Investment Entities; Amendments to IFRS 10, IFRS 12 and IAS 27 (1 January 2014)

_Galenica is evaluating the impact of these new and amended standards and interpretations. Based on the preliminary results of the analysis, Galenica does not expect there to be any mate-rial impact on the consolidated financial statements._Galenica early adopted the amendment to IAS 36 - Recoverable Amount Disclosures for Non-Financial Assets (1 January 2014). This amendment did not lead to further disclosures in the con-solidated financial statements.

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 asso-ciate companies and joint ventures._Subsidiaries, associates and joint ventures acquired during the reporting period are included in the consolidated financial state-ments as at the date when control, significant influence or joint control was gained. 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 report-ing period are included in note 6, Business combinations. The investments are listed in note 36.

Consolidation method

_Companies which Galenica controls have been fully consoli-dated. This is the case when Galenica has the ability to control significant divisions of a company, has rights to variable returns from its involvement with the investee and has the ability to affect those returns. Galenica regularly reassesses the control situation within the Group._When Galenica holds less than 50% of the voting rights in a company, the Group considers all the relevant facts and circum-stances in assessing whether it has power 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 state-ments as at the acquisition date, i.e. the date on which the Group gains control. The portion of net assets and net profit attribut-able to non-controlling interests is indicated separately in the consolidated statement of financial position, the consolidated statement of income, the consolidated statement of comprehen-sive income, and the consolidated statement of changes in eq-uity._All intercompany receivables and liabilities, income and expenses, participations 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 carried under securities or financial assets.

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Group currency and translation of foreign currencies

_Galenica’s consolidated financial statements are prepared in Swiss francs (CHF) and, unless otherwise indicated, are rounded to the nearest CHF 1,000._The functional currency of the Group companies is the usual currency of the respective local economic area. Transactions in foreign currencies are translated at the effective rate on the transaction date. Non-monetary items are translated into the functional currency using year-end rates as at the reporting date. The resulting exchange rate gains and losses are recog-nised in profit or loss._Assets and liabilities from the statements of financial position of foreign subsidiaries prepared in a foreign currency are trans-lated into Swiss francs using year-end rates for the consolidated financial statements. The statements of income and statements of cash flow are translated using the average exchange rate for the year._Exchange differences arising from net investments in foreign operations as a result of changes in exchange rates compared with the previous year and translation differences arising from the calculation of Galenica’s net profit using average exchange rates for the year and year-end rates are recognised directly in the consolidated statement of comprehensive income and re-ported separately as cumulative translation differences. Cumu-lative translation differences recognised directly in the consoli-dated statement of 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 directly in the consolidated statement of comprehensive income, pro-vided that repayment of this loan is not possible or intended in the near future._The table below shows the material exchange rates against the Swiss franc of the main currencies of relevance for the consoli-dated financial statements:

Statement offinancial position1)

Statement of income2)

Exchange rates 2013 2012 2013 2012

1 EUR 1.23 1.21 1.23 1.21

1 GBP 1.48 1.49 1.45 1.48

1 USD 0.89 0.92 0.93 0.94

1 CAD 0.84 0.92 0.90 0.931) Year-end rates2) Average rates for the year

Maturities

_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.

Financial assets and financial liabilities

Measurement of financial assets and liabilities_Financial assets and financial liabilities are initially recognised at cost including transaction costs with the exception of finan-cial assets and liabilities classified as “at fair value through profit or loss”, for which transaction costs are recognised directly in the consolidated statement of income. 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 expire. Financial liabilities are derecog-nised 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 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 di-rectly 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 amor-tised cost using the effective interest rate method less impair-ment. 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 in the statement of financial position at their fair values with any changes in value, adjusted for deferred taxes, being recognised in the consoli-dated statement of comprehensive income. On sale, impairment or any other form of disposal, the cumulative gain or loss previ-ously recognised in the consolidated statement of comprehen-sive income is recognised in profit or loss for the period.


Cash and cash equivalents

_Cash and cash equivalents include cash, sight deposits at financial institutions and time deposits with an original term to maturity of three months or less. Cash and cash equivalents are measured at nominal value. They make up the cash and cash equivalents shown in the consolidated statement of cash flows.

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 three to 12 months, and derivative financial instruments with 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 minus accumulated impairments. Changes in the value of securities and derivative financial instruments not des-ignated as a hedge are recognised in the consolidated statement of income for the current period.

Treasury shares

_When shares in Galenica Ltd. are bought by the company, they are deducted from shareholders’ equity. Gains and losses from buying and selling treasury shares in Galenica Ltd. are recognised directly in consolidated shareholders’ equity.

_An impairment is recognised when it is permanent, i.e. longer than six months or material, i.e. more than 20% below the acqui-sition value.

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

Derivative financial instruments and hedge accounting

_Derivative financial instruments are initially recognised at cost and subsequently recorded at their 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 cur-rency forwards, interest rate swaps and cross currency interest rate swaps in order to minimise and hedge interest rate and exchange risks. Currency forwards are valued using the fair values of expected future cash flows. The fair values of cross currency interest rate swaps are determined based on the 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 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 the foreign exchange or interest rate of a finan-cial instrument or a forecast transaction. Gains or losses on the effective portion of the hedging instrument are recognised in the consolidated statement of comprehensive income while gains or losses on the ineffective part of the hedging instrument are recognised in the consolidated statement of income._At the inception of the hedge, Galenica prepares formal docu-mentation 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 highly effective throughout the entire term._Any cumulative unrealised gain or loss on the hedging instru-ment 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.

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Receivables

_Trade receivables are carried in the statement of financial posi-tion at their original invoice value. If there are objective indica-tions that the debt 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

_Raw materials and purchased merchandise are carried in the statement of financial position at the lower of cost or net realis-able value while semi-finished and finished goods at manufac-turing are carried at the lower of cost or net proceeds. 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 measure inven-tories in the consolidated statement of financial position and determine the cost recognised in the consolidated statement of income. At certain pharmacies an alternative permissible method is used involving recalculation based on the selling price._Write-downs are recognised on inventories that have a lower net realisable value, slow turnover or are difficult to sell.

Property, plant and equipment and investment properties

_Property, plant and equipment and investment properties are valued at cost less accumulated depreciation and impairments. 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

_Where impairment testing reveals that an asset is impaired, the impairment charge is included in the consolidated statement of income under depreciation and amortisation and disclosed separately as an impairment._Land and buildings not used for operations are included in in-vestment properties. They are recognised and depreciated on the same basis as property, plant and equipment used for op-erations. They include land and buildings or parts thereof that are being held for an undetermined future purpose or to gener-ate rental income. The fair value of these properties, which is disclosed separately, is based on external assessments by ac-credited experts._Costs are only capitalised if they result in added economic value, for example by extending the useful life, expanding capac-ity, improving product quality or contributing to a marked reduc-tion in operating costs. Non-value-enhancing 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 operat-ing income and losses in other operating costs in the consoli-dated statement of income.

Intangible assets

_Intangible assets include brands, patents, licences, technolo-gies, purchased or internally developed software and other as-sets without physical substance. These items are measured at cost and recognised in the statement of financial position after deducting accumulated amortisation and impairment. The cost of intangible assets acquired in a business combination corre-spond to the fair value as determined in the purchase price allo-cation._Amortisation is charged on a straight-line basis over the esti-mated economic or legal useful life, whichever is shorter. A longer useful life than those presented in the table below can be used, including an unlimited useful life, in justified cases.

Years

Trademarks, patents, licences, technologies 5–20

Software 2–7

Other intangible assets 3–5

_Intangible assets with an indefinite useful life are not amortised on a straight-line basis but tested for impairment annually or whenever there are indications of impairment. At the same time, the events and circumstances that justify the assumption of an indefinite useful life are verified. Any impairment is recorded under depreciation and amortisation and reported separately in the consolidated statement of income._If intangible assets are sold or derecognised, any gains are recognised under other operating income and any losses under other operating costs in the consolidated statement of income.


_Internally developed software is capitalised under intangible assets on condition that it will generate profit through its future sale or use within the company, and that its production cost can be measured reliably. Other conditions that must be met concern the technical feasibility, the intention and ability to complete the development, and the availability of sufficient resources. Software that is not yet being used is tested for impairment annually or more frequently if there are justified indications of potential impairment.

Business combinations and goodwill

_Business combinations are accounted for in the statement of financial position using the acquisition method. The purchase price 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. Acquisition costs are recognised directly in the consolidated statement of income. The statement of financial position and the statement of income are consolidated on the date that control is transferred._Goodwill is recognised at cost on the acquisition date and cor-responds to the difference between the purchase price and the fair value of assets, liabilities and contingent liabilities identified in the purchase price allocation. Goodwill is capitalised and in-cluded in intangible assets, while negative goodwill is recog-nised immediately in the consolidated statement of income. After initial measurement goodwill is recognised in the state-ment of financial position at cost less any accumulated impair-ment._Goodwill is allocated to the cash-generating unit (CGU) or group of CGUs that benefit from the business combination. Goodwill is tested for impairment once a year, or more frequently if there is an indication 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 to sell and value in use) is lower than the carrying amount, the carrying amount is reduced to the recoverable amount by recording an impairment loss._Contingent considerations are measured at fair value on the acquisition date. If the final amount of the contingent considera-tion is dependent on the outcome of future events after the ac-quisition date, e.g. meeting an earnings target (earn-out), the contingent consideration is accounted for differently depending on whether it is an equity instrument or financial instrument. For equity instruments, the original amount is not remeasured. If the contingent consideration qualifies as a financial instrument, the difference is recorded in operating income or cost. _The difference arising from the acquisition of additional non- controlling interests in fully consolidated companies (purchase consideration minus share in they carrying amount of non- controlling interests) is considered to be an equity transaction and is thus taken directly to retained earnings in consolidated shareholders’ equity. Gains and losses resulting from the dis-posal of interests in fully consolidated companies without loss of control are also recognised in retained earnings in consoli-dated shareholders’ equity with no impact on the consolidated istatement of income.

_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 result in the con-solidated statement of income._Impairment losses are recognised in the consolidated state-ment of income and disclosed separately.

Research and development

_Expenditure on research and development (excluding software developed in-house) is recognised directly in the consolidated statement of income as incurred. The costs of development can-not be capitalised since the regulatory risks and the considera-ble 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 the consolidated statement of income as incurred. In the case of qualifying assets such as assets under construction, which take a considerable time to build, borrowing costs are added to the value of the asset until it is completed.

Leases

_Leases under which Galenica assumes 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 pay-ments under non-current assets in the consolidated statement of financial position, while liabilities are recorded under financial liabilities. Leased items of plant are depreciated over their esti-mated useful economic lives or the term of the lease if shorter, if it cannot be assumed that ownership of the asset will be trans-ferred. Each lease payment is apportioned between the finance charge and the reduction of the outstanding liability. The part reducing the outstanding liability is deducted from the recog-nised lease liability._The remaining leases are treated as operating leases. Lease payments are recognised directly as operating costs in the con-solidated statement of income for the duration of the lease.

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Investments in associates and joint ventures

_Investments in associates and joint ventures are accounted for using the equity method. According to this method, investments in associates and joint ventures are recognised in the statement of financial position at their acquisition value on the date of purchase. Goodwill paid upon acquisition is included in the car-rying amount of the investment. In the accounting period follow-ing 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 the statement of comprehensive income of associates and joint ventures without being recognised in profit or loss are recognised proportionately in the consolidated statement of comprehensive income. Re-ceivables and liabilities as well as transactions with these com-panies are disclosed separately.

Financial assets

_Financial assets comprise securities categorised as “available- for-sale financial assets”, loans, time deposits with a term to maturity of more than twelve months, rental security deposits, receivables from finance leases with a term to maturity of more than twelve months 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 recog-nised in the consolidated statement of income.

Impairment of non-financial assets

_Assets are always tested for impairment when there are observable indications that they could be overvalued. Goodwill, intangible assets with an indefinite useful life or intangible assets that are not yet available for use, are tested for impair-ment at least once a year and more frequently if there are indica-tions 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 written down to the recoverable amount. To determine the value in use, the future cash flows are discounted on a pre-tax basis, which most ac-curately reflects the risks inherent in the asset and the time value of money. Impairments are recognised in the consolidated statement of income and disclosed separately._On the reporting date, previously recorded impairments are reviewed to ascertain whether and to what extent they are still necessary. If the assumptions made for an impairment have changed in such a way that an impairment charge is no longer necessary in the amount recognised in the statement of financial position, the impairment of assets (except for goodwill) is re-versed to reflect the new estimated net present value. The rever-sal may not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Any reversal of an earlier impairment is recognised in the consolidated statement of income. Depreciation is adjusted prospectively and spread over the remaining useful life.

Provisions

_Provisions are recorded when Galenica has a present legal or constructive obligation towards a third party following an event in the past, when the amount of the obligation can be reliably estimated and an outflow of economic resources is probable. 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 measured with sufficient reliability. Such cases are only recognised as a provision when the outflow of resources becomes 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 im-plemented and its main features have been announced to those affected by it._Outflows of resources embodying economic benefits included under current provisions if they are expected within a year. If the resources are expected to be required in the medium or long term, provisions are measured at the present value of the expected future economic outflows and presented in non- current provisions.

Income tax

_Current income tax is based on taxable profit for the current year and is recognised in the consolidated statement of income for the corresponding period._Deferred taxes are taxes on temporary differences between the value of assets and liabilities in the tax accounts and the carrying amounts indicated in the Group’s consolidated financial statements. Deferred taxes are calculated using the liability method on the basis of real or expected effective local tax rates once temporary differences have been eliminated. 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. Deferred tax assets are reported sepa-rately under non-current assets while deferred tax liabilities are recorded separately under non-current liabilities._Changes in deferred tax assets and liabilities are recognised in the consolidated statement of income. Deferred taxes on trans-actions that are recognised directly in the consolidated state-ment of comprehensive income are likewise recognised in the consolidated statement of comprehensive income._Deferred tax liabilities for withholding tax or other taxes con-nected with undistributed profits generated by subsidiaries are only taken into account if a dividend distribution is planned or a dividend can be expected in the foreseeable future.


Employee benefits

_Galenica has a number of employee benefit plans based on local conditions and legal requirements in the respective coun-tries. These plans are legally and financially independent of Galenica and consist of both defined contribution and defined benefit plans._Galenica’s defined benefit obligation (DBO) is assessed annu-ally by an independent pension actuary 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 statisti-cal data such as employee turnover and mortality to calculate the DBO. For plans that are structured so that the largest propor-tion 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 plans. _Any deficit or surplus in funded defined benefit plans (when the fair value falls short of or exceeds the fair value of the claims) is recorded separately in the consolidated statement of financial position 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 contribu-tions or a cash refund. If it 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 an asset ceiling in the notes to the consolidated financial statements._The components of defined benefit cost are service cost, net interest on the net defined benefit asset (liability) and remeas-urements 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 defined discount rate at the start of the reporting period. It is included in the financial result._Actuarial gains and losses result from changes in actuarial assumptions and differences between actuarial assumptions and actual values. Actuarial gains and losses resulting from remeasuring the defined benefit plans are recognised immedi-ately in the consolidated statement of comprehensive income as remeasurements of the net defined benefit liability (asset). This item also includes any differences in the return on plan assets (not including interest, based on the discount rate) and, if applicable, the impact of a change in the asset ceiling. The remeasurements of the net defined benefit liability (asset) are subsequently are not recycled through the consolidated state-ment of income at any later point in time._Galenica rewards employees for long service with jubilee ben-efits. 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. Actuarial changes in obligations are recorded through profit or loss under personnel costs or interest expense as part of the financial expense, in line with the defined benefit plans.

Share-based payments

_Galenica has a number of share-based payment plans which are always settled through equity instruments._The share-based payments are measured at fair value on the grant date. When measuring these transactions, only those mar-ket conditions which are linked to the price of Galenica’s shares are taken into account, along with any non-vesting conditions._The associated expenses are recognised directly in consoli-dated shareholders’ equity and recognised over the vesting period until the employees meet the necessary requirements for purchasing Galenica shares. The cumulative expenses for share-based payment transactions from the reporting date up to the vesting date represents Galenica’s best estimate of the number of Galenica shares which can then be purchased by employees. 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._If the arrangements are modified during the life of an equity-settled share-based payment plan, the effect of modifications on the incremental fair value as at the date of the modifications are recognised in the consolidated statement of income over the 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 straight away with a new remuneration plan, the expense is recognised in the same way as modifications to arrangements described above._The dilutive effect of the share-based payments is taken into account in the calculation of the diluted earnings per share.

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Revenue

Net sales_Net sales, consisting of the sale of goods and revenue from services, are sales after deduction of price discounts, cash dis-counts, bulk discounts and other discounts and bonuses from customer loyalty programmes, 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 purchaser once it is probable that future eco-nomic benefits will flow to the entity 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 purchaser or the legal transfer of ownership in accordance with recognised international trading practice._Should principal 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, bulk dis-counts and other discounts and loyalty bonuses granted to cus-tomers are recognised in revenue as sales discounts. For re-ceivables pending on the reporting date, these discounts are estimated on the basis of past experience, historical develop-ments or contractual provisions, deducted from revenues and reported in the consolidated statement of financial position as accrued expenses or a reduction in trade receivables. Bonuses from customer loyalty programmes are estimated on the basis of past experience and deducted directly from the correspond-ing revenue and accrued at the time of the sales concerned.

Services_Revenue from services includes logistics services, the process-ing 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 esti-mate the stage of completion, the amount of revenue, the prob-ability 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. Ac-cess 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 com-pletion, experience involving the same or similar services is used as a reference._If the sale of goods or revenue from services is recognised reli-ably on the basis of the provisions described above and the as-sessment of collectibility subsequently changes, the uncollect-ible or doubtful amount is recognised as an expense.

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 benefit is probable and the amount of revenue can be measured reliably. The revenue is disclosed separately under other revenue._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 pay-ments from third parties for the sale or granting of licence rights to products and technologies. Milestone payments are recog-nised 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 revenue, spread over the duration of the development col-laboration or production obligation.

Other revenue_Gain on disposal of property, plant and equipment is recog-nised at the time of the transfer of ownership and the related transfer of risks and rewards._Rental income is based on the provisions of the underlying rental contracts._Allocated marketing costs and expenses covered by cost-shar-ing arrangements are recognised as income on the basis of the contractual agreements.

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 in the consolidated statement of income 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 as “Securities and other financial income” in profit or loss in the consolidated finan-cial statements.


3. FINANCIAL RISK MANAGEMENT

_Galenica is exposed to various financial risks caused by move-ments 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 li-ability 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 in the following are designed to avoid any excessively negative impact on the consolidated 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 main-taining the flexibility to take advantage of market opportunities and optimum investment conditions. The Group Finance Division is responsible for raising short 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 liquid-ity planning. This takes into account the maturities of the finan-cial instruments as well as the cash flows from operating activi-ties.

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 con-tinually 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 receiv-ables._In addition, credit risks arise in relation to financial assets, comprising cash and cash equivalents, securities, financial as-sets and certain derivative financial instruments. The main finan-cial assets that are exposed to credit risk are loans granted to third parties. 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 vari-ables include things such as interest rates, foreign exchange rates and share prices. Changes in the fair value of financial as-sets, financial liabilities or derivative financial instruments caused by such variables may affect Galenica’s financial position and cash flows. The market risks are monitored and regularly reported to management. The impact of changes in market vari-ables is monitored using sensitivity analyses. Sensitivity analysis is a widespread and accepted analysis to quantify the risk rela-tion 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 re-sults. Fluctuations in interest rates lead to changes in interest earned and interest paid 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, liabilities and derivatives, as explained under market risks. Interest rates are managed cen-trally 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 and floating-rate financial assets and liabilities. Galenica also uses interest rate swaps for that purpose._No interest rate risk arises from payments of operating leases and rental agreements.

Currency risk _Galenica is exposed to foreign exchange rate risks, mainly in relation to the USD, CAD, GBP and EUR, that may affect Galeni-ca’s financial position and cash flows in CHF. Derivatives , espe-cially 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 per-formance 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 should be assessed independently of the stock mar-kets and separately for each fund based on the earnings power and prospects of success of the respective investment.

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4. ESTIMATION UNCERTAINTY AND ASSUMPTIONS

_The preparation of the Group’s consolidated financial state-ments in accordance with generally accepted accounting princi-ples 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 liabil-ities 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 re-gard to the items set out below.

Deferred tax assets (note 15)_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 correspond-ing taxable entity.

Goodwill and intangible assets (note 18)_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 these intangible assets of the 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.

Provisions (note 24)_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 25)_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 associated with material uncertainty.

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._For the corporate management purposes, Galenica is organ-ised into business sectors based on the products and services offered and has the reportable segments Pharma, Logistics and Retail. The operating result (EBIT) comprises all operating in-come generated and expenses incurred in the corresponding segments. Galenica is financed at Group level, which is why fi-nancial income and expenses as well as income tax are reported at Group level only and not allocated to segments. The assets and liabilities include all positions of the statement of financial position that can be directly or reasonably allocated to a seg-ment.

Pharma_Under the umbrella of 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 defi-ciency (including iron deficiency anaemia), infectious diseases (OTX products) and Consumer Healthcare (OTC). To ensure rapid and direct access to the various global markets, the company operates its own subsidiaries and works together with licensing 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) and over-the-counter (OTC) products, and herbal remedies. 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 suffer-ing from chronic kidney disease (CKD)._In addition, Vifor Pharma holds the global rights (apart from Japan) to develop and market CellCept, developed by Roche, for all applications involving auto-immune diseases with the excep-tion of transplants.


Logistics_The business sector Logistics plays an important role in the pharmaceutical supply chain. Logistics 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, Logistics ensures on-schedule delivery within short deadlines to all healthcare partners through-out Switzerland. The Logistics companies supply phar-macies, physicians, drugstores, care homes and hospitals with over 80,000 referenced healthcare products.

Retail_Operating at 483 locations, Galenica’s pharmacy network is the largest in Switzerland. With 312 pharmacies of its own and 171 partner pharmacies, Retail has attractive outlets throughout the country. Galenica’s own pharmacies comprise the Amavita brand with 145 branches and the Sun Store brand with 104 branches. Galenica also operates a chain of 55 own pharmacies in partnership with Coop under the Coop Vitality brand._Galenica’s pharmacy network also covers the speciality phar-macy MediService, which is focused on medication for the treatment of patients in their own homes, as well as 11 Amavita partner pharmacies, 4 majority interests in pharmacies, 3 minor-ity interests in pharmacies and 160 Winconcept partner phar-macies.

Other_The operating segment HealthCare Information does not fulfil the quantitative threshold criteria pursuant to IFRS 8 and has therefore been combined with the activities of the Corporate Division under “Other” for segment reporting purposes._The companies in the HealthCare Information business sector offer solutions for the networked healthcare market. They oper-ate comprehensive databases that provide additional knowledge for all service providers in the Swiss healthcare market and de-velop management solutions tailored specifically to the needs of the networked healthcare market. HealthCare Information is the leading provider of master data systems for Switzerland’s entire healthcare market and publishes printed and electronic technical information on pharmaceutical products. Sector-spe-cific, complete management solutions are developed and mar-keted under the Triamun brand name. TriaPharm® was designed specifically for pharmacies, TriaOne® is a non-sector-specific ERP solution for retail, while TriaMed® has been developed for physicians. _The companies in the Corporate Division mainly comprise the Group’s central operations, which include Group Management, Controlling, Accounting, Tax, Treasury, Insurances, Human Re-sources, Legal Services, Corporate Services, General Secre-tariat, Corporate Communications and Investor Relations.

Eliminations_Operating activities involve the sales of goods and services between the business sectors. The Corporate Division charges management fees to the other operating segments for the or-ganisational and financial management services that it provides._All intersegment services are charged at arm’s length. Unreal-ised gains or losses may arise from the billing of services or sale of assets between the individual segments. Sales of goods and services between the segments and resulting unrealised gains or losses 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”.

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in thousand CHF Pharma Logistics Retail Other Eliminations Group

Net sales 662,662 2,118,174 1,245,748 39,815 (706,966) 3,359,433

Other revenue 252,593 13,449 87,522 29,617 (78,461) 304,720

Intersegment revenue (65,875) (605,524) (75,428) (44,628) 791,455 —

Third-party revenue 849,380 1,526,099 1,257,842 24,804 6,028 3,664,153

Depreciation and amortisation (35,383) (15,446) (22,075) (4,541) 1,772 (75,673)

Earnings before interest and taxes (EBIT) 269,316 31,120 62,993 (630) 27,762 390,561

Interest received 2,101

Interest paid (30,909)

Other financial result (net) (1,095)

Income from associates and joint ventures — — 2,505 97 — 2,602

Earnings before taxes (EBT) 363,260

Income tax (28,419)

Net profit 334,841

Assets 1,598,543 687,111 976,025 1,837,911 (2,030,226)1) 3,069,364

Investments in associates and joint ventures — — 40,938 — — 40,938

Liabilities 898,031 411,907 1,051,660 1,130,494 (1,977,850)2) 1,514,242

Investments in property, plant and equipment and investment properties 28,870 8,833 19,178 579 (132) 57,328

Investments in intangible assets 7,553 265 5,613 1,827 (837) 14,421

Employees as at 31 December (FTE) 1,865 971 3,313 203 — 6,352

Geographic areas

in thousand CHF Switzerland Europe AmericaOther

countries Eliminations Group

Net sales 3,655,574 364,472 143,766 62,218 (866,597) 3,359,433

Other revenue 466,475 79,415 47,550 9,351 (298,071) 304,720

Intersegment revenue (1,094,805) (66,028) (3,767) (68) 1,164,668 —

Revenue third parties 3,027,244 377,859 187,549 71,501 — 3,644,153

Non-current assets3) 1,450,437 126,041 204,561 148 — 1,781,1871) Of which elimination of intercompany positions CHF –2,028,472,000 and other unallocated amounts CHF –1,754,000 2) Of which elimination of intercompany positions CHF –2,028,472,000 and other unallocated amounts CHF 50,622,000

3) Without financial assets, deferred tax assets and employee benefit assets

Operating segment information 2013

Products and services

_The segment information includes the following non-cash items: _A contingent financial obligation no longer meets the require-ments for recognition. The derecognition of this liability of CHF 49.6 million affects other revenue of the business sector Pharma.

_Adjusting the pension fund regulations led to an increase in the EBIT of CHF 22.9 million according to IAS 19, and an increase in the net profit of CHF 17.9 million. This effect has not been allo-cated to a business sector and is included in eliminations (see notes 9 and 25)._Income tax includes the reversal of a provision of CHF 16.8 million in connection with the completion of a tax audit (see notes 15 and 24).


in thousand CHF Pharma Logistics Retail Other Eliminations Group

Net sales 633,329 2,102,344 1,189,184 47,119 (677,635) 3,294,341

Other revenue 271,127 15,917 72,655 29,448 (75,470) 313,677

Intersegment revenue (58,660) (580,462) (71,179) (44,858) 755,159 —

Third-party revenue 845,796 1,537,799 1,190,660 31,709 2,054 3,608,018

Depreciation and amortisation (34,591) (15,583) (20,703) (6,755) 1,579 (76,053)

Earnings before interest and taxes (EBIT)1) 257,084 30,731 60,302 519 3,342 351,978

Interest received 1,577

Interest paid (37,297)

Other financial result (net)1) 4,444

Income from associates and joint ventures — — 2,536 31 — 2,567

Earnings before taxes (EBT) 323,269

Income tax1) (46,798)

Net profit 276,471

Assets1) 1,536,188 663,774 909,107 1,852,151 (1,808,859)2) 3,152,361

Investments in associates and joint ventures — — 21,685 106 — 21,791

Liabilities1) 835,726 383,112 1,002,696 1,335,149 (1,736,084)3) 1,820,599

Investments in property, plant and equipment and investment properties 21,736 8,564 15,233 773 (309) 45,997

Investments in intangible assets 2,604 664 4,437 951 (1,176) 7,480

Employees as at 31 December (FTE) 1,764 916 3,200 209 — 6,089

Geographic areas

in thousand CHF Switzerland Europe AmericaOther

countries Eliminations Group

Net sales 3,555,448 341,434 144,911 71,352 (818,804) 3,294,341

Other revenue 476,239 157,469 7,771 3,642 (331,444) 313,677

Intersegment revenue (1,087,595) (60,139) (2,514) — 1,150,248 —

Revenue third parties 2,944,092 438,764 150,168 74,994 — 3,608,018

Non-current assets4) 1,401,082 128,242 220,600 248 — 1,750,1721) Adjusted due to restatement IAS 19 (see page 107 and 108) 2) Of which elimination of intercompany positions CHF –1,810,163,000 and other unallocated amounts CHF 1,304,000 3) Of which elimination of intercompany positions CHF –1,810,163,000 and other unallocated amounts CHF 74,079,000 4) Without financial assets, deferred tax assets and employee benefit assets

Operating segment information 2012

Products and services

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6. BUSINESS COMBINATIONS

_In 2013 and 2012 the scope of consolidation was changed as a result of the following transactions:

Business combinations 2013

Logistics business sector_Acquisition of Medifilm AG. On 8 July 2013 Galexis acquired 100% of the shares in the Swiss company Medifilm AG.Medifilm is specialised in the individual packaging (blister) of medicine and nutritional supplements on behalf of pharmacies for long-term patients. _The purchase consideration amounts to CHF 12.6 million, of which CHF 4.4 million was settled in cash. The deferred pur-chase price consideration of CHF 8.2 million falls due in the years 2014 to 2016. The fair value of net assets amounts to CHF 1.0 million on the acquisition date. The goodwill of CHF 11.6 million has been allocated to the business sector Logistics and reflects access to customers that take orders from homes to prepare medicines for individual patients. Transaction costs of CHF 0.1 million were recognised in other operating costs in the consolidated statement of income.

Business combinationsFair Value


Cash 504 636

Trade receivables 3,831 3,636

Inventories 4,566 2,288

Other current assets 2,388 1,627

Property, plant and equipment 2,631 978

Intangible assets 186 10

Financial assets 425 —

Deferred tax assets 560 14

Trade payables (313) —

Deferred tax liabilities (172) (165)

Other current and non-current liabilities (6,107) (1,208)

Fair value of net assets 8,499 7,816

Goodwill 31,194 11,935

Purchase consideration 39,693 19,751

Deferred purchase consideration (8,485) (170)

Cash acquired (504) (636)

Net cash flow 30,704 18,945

Retail business sector_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. or Sun Store SA._The purchase consideration amounts to CHF 27.1 million, of which CHF 26.8 million was settled in cash. The deferred consid-eration of 0.3 million falls due between 2014 and 2017. The purchased goodwill of CHF 19.6 million was allocated to the operating segment Retail and corresponds to the added value of the pharmacies based on their locations. The transaction costs of CHF 0.3 million were recorded as other operating costs in the consolidated statement of income. The purchase price alloca-tion has not been definitively concluded yet for acquisitions close to the reporting date.

Pro forma figures for acquisitions made in 2013 for the full 2013 financial year_Since their inclusion in the Galenica Group’s scope of consoli-dation, the businesses acquired contributed net sales of ap-proximately CHF 37.5 million and an operating profit (EBIT) of CHF 0.7 million to the Group’s results. If these acquisitions had already been concluded by 1 January 2013, they would have contributed consolidated net sales of CHF 8.5 million and re-duced the consolidated operating profit (EBIT) by CHF 0.1 million (unaudited).

Business combinations 2012

Retail business sector_Acquisition of pharmacies. GaleniCare Holding acquired 100% of the interests in pharmacies at various locations in Switzerland. Upon acquisition, some of these pharmacies, which were mostly unincorporated businesses (asset deals), were merged with GaleniCare Ltd. _The purchase consideration amounts to CHF 19.8 million, of which CHF 18.9 million was settled in cash. The deferred consid-eration of CHF 0.2 million was paid in 2013. The purchased goodwill of CHF 11.9 million was allocated to the operating seg-ment Retail and corresponds to the added value of the pharma-cies based on their locations. The transaction costs of CHF 0.1 million were recorded as other operating costs in the consoli-dated statement of income.


7. NET SALES


Sale of goods 3,255,627 3,194,231

Services 103,806 100,110

Net sales 3,359,433 3,294,341

8. OTHER REVENUE


Royalties, milestone and upfront payments 179,708 256,823

Changes in inventories of semi-finished and finished goods 5,662 (68)

Income from own work capitalised 4,028 3,042

Rental income 5,312 6,766

Gain on disposals of property, plant and equipment, investment properties and intangible assets

1,854 5,586

Other operating income 108,156 41,528

Other revenue 304,720 313,677

_Royalties, milestone and upfront payments comprises income from sales of CellCept of CHF 100.2 million (previous year: CHF 90.9 million)._Other operating income primarily consists of allocated market-ing costs and part-payment of expenses by customers._A contingent financial obligation no longer meets the require-ments for recognition. The derecognition of this liability of CHF 49.6 million affects other operating income.

9. PERSONNEL COSTS


Salaries and wages 493,332 463,800

Social security costs and pension expenses1) 57,589 74,862

Other personnel costs 57,236 52,971

Personnel costs 608,157 591,633

Average number of FTE 6,290 6,0101) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

_Personnel costs include expenses for defined benefit plans of CHF 35.6 million (previous year: CHF 30.41) million) and for share-based payments of CHF 13.3 million (previous year: CHF 15.0 million) (see note 25 and note 30)._Adjusting the pension fund regulations led to a decrease in social security costs and pension expenses of CHF 22.9 million according to IAS 19 (see note 25).

10. OTHER OPERATING COSTS


Maintenance and repairs 28,137 22,944

Operating and production costs 105,582 151,144

Rent, leasing 62,021 58,178

Administration costs 73,171 77,489

Marketing and sales costs 136,656 133,977

Loss on disposals of property, plant and equipment

167

90

Taxes 3,843 2,368

Other operating costs 801 540

Other operating costs 410,378 446,730

_The decrease in the operating and production costs relates to signficantly lower costs of clinical studies.

11. FINANCIAL RESULT


Interest received 2,101 1,576

Securities and other financial income 7,882 7,310

Financial income 9,983 8,886

Interest paid 30,909 37,297

Net interest paid employee benefit plans1) 996 271

Other financial costs 2,898 2,099

Foreign exchange differences 5,083 495

Financial expenses 39,886 40,1621) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

_The net interest expence of CHF 28.8 million (previous year: CHF 35.7 million) was mainly attributable to financing costs from the acquisition of Aspreva, Sun Store and OM Pharma in the previous years, as well as other activities of Galenica. It was positively influenced by further repayments of financial liabili-ties. _Other financial costs include impairments of securities in the category financial assets available for sale as well as other costs of financial liabilities. _The foreign exchange differences are mainly influenced by the negative trend of the USD and the CAD.

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12. EARNINGS PER SHARE

_Basic earnings per share are obtained by dividing net profit by the weighted average number of shares outstanding during the reporting period in question, minus the average number of treas-ury shares held by Galenica. When calculating diluted earnings per share, the weighted average number of outstanding shares during the reporting period is adjusted assuming all potentially dilutive effects that would occur if Galenica’s obligations were converted.

2013 2012

Number of shares 6,500,000 6,500,000

Average number of treasury shares (21,259) (24,661)

Average number of outstanding shares 6,478,741 6,475,339

Share-based payments 12,104 17,172

Theoretical average number of outstanding shares (diluted) 6,490,845 6,492,511


Net profit – attributable to shareholdersof Galenica Ltd.1) 296,162 255,128

Earnings per share1) 45.71 39.40

Diluted earnings per share1) 45.63 39.301) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

13. SECURITIES


Marketable securities — 6,818

Unquoted securities 136 136

Fixed deposit with a duration of 3 to 12 months 196 269

Derivative financial instruments 61 1,737

Securities 393 8,960

14. RECEIVABLES


Trade receivables 514,904 501,808

Other receivables 37,340 44,239

Bad debt allowances (4,625) (4,504)

Receivables 547,619 541,543

Change in bad debt allowances for trade receivables


1 January (4,504) (6,615)

Addition (1,153) (1,630)

Use 120 2,467

Reversal 906 1,276

Translation differences 6 (2)

31 December (4,625) (4,504)

Expense for complete derecognition oftrade receivables 674 2,653

Income from the receipt ofderecognised trade receivables — 134

_The goods and services supplied by pharmacies for receivables covered by health insurance companies are invoiced through an invoicing and collecting office. Receivables from the invoicing and collecting office are derecognised only when the invoicing and collecting 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 62.1 million (previous year: CHF 59.0 million). The maximum risk of loss amounted to CHF 88.7 million (previous year: CHF 84.2 million).


15. INCOME TAXES


Current income tax 43,185 44,948

Income tax of previous years (21,755) (1,596)

Deferred income tax1) 6,989 3,446

Income tax 28,419 46,798

Tax expense reconciliation


EBT1) 363,261 323,269

Weighted income tax rate in %1) 14.2% 17.3%

Expected income tax 51,698 55,790

Effects of income that is taxable at a lower tax rate or tax-free (7,107) (7,130)

Effects of changes in tax rates 25 261

Effects of unrecognised losses in the current year 4,776 782

Fiscal realisation of unrecognisedtax losses of previous years (1,117) (2,138)

Subsequent recognition of losscarry forwards from previous years (63) —

Items from previous years and other items (19,793) (767)

Effective income tax 28,419 46,798

Effective income tax in % of EBT1) 7.8% 14.5%1) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

_As Galenica predominantly operates in Switzerland and the Pharma business sector has international operations, the in-come 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._The income tax for 2013 is significantly influenced by the com-pletion of a tax audit by the Canada Revenue Agency (CRA), which was already started before the acquisition of Aspreva In-ternational Ltd. The one-off effect of reversing the provision together with the repayment from the Swiss Tax Authorities amounts to CHF 21.4 million. The effective income tax expense would be 13.7% of EBT without these effects.

Deferred taxes


Deferred tax due to temporary differences

_Current assets 17,523 15,951

_Property, plant and equipment 11,398 12,859

_Intangible assets 39,529 40,108

_Investments 21,577 —

_Provisions 480 553

_Employee benefit plans1) (10,987) (14,219)

_Other temporary differences (1,268) (443)

_Shareholders’ equity (1,226) (765)

Deferred tax due to temporary differences 77,026 54,044

Tax loss carry forwards (20,298) (2,300)

Net deferred tax 56,728 51,744

Recognised as deferred tax assets in the consolidated statement of financial position

_ of which due to recognised tax loss carry forwards

_ of which due to temporary differences1)

17,159

1,483

15,676

20,927

881

20,046

Recognised as deferred tax liabilities in the consolidated statement of financial position 73,887 72,6711) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

Analysis of deferred taxes (net)


1 January1) 51,744 52,759

Recognised in deferred income tax in the consolidated statement of income

_ Addition/(reversal) of temporary differences1) 24,619 2,876

_ Fiscal realisation of recognised tax loss carry forwards 436 525

_ Tax loss carry forwards taken into account for the first time or no longer taken into account (18,091) (216)

_Effects of changes in tax rates 25 261

Recognised in other comprehensive income in the consolidated statement of comprehensive income1) (1,166) (4,581)

Recognised directly in the consolidated shareholders’ equity (507) (28)

Change in scope of consolidation (388) 151

Translation differences 56 (3)

31 December 56,728 51,7441) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

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Temporary differences on which no deferred taxes have been recognised


Investments in subsidiaries 1,503,281 1,446,545

Non-capitalised tax assets _Deferred tax assets, including tax loss carry forwards and ex-pected tax rebates, 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 credits2013 2012

in thousand CHF

Tax loss carry forwards/

tax credits Tax effect

Tax loss carry forwards/

tax credits Tax effect

Tax loss carry forwards and tax credits 153,029 31,496 62,972 13,208

Of which tax loss carry forwards and tax credits taken into account under deferred tax assets (6,197) (1,483) (3,384) (881)

Of which tax loss carry forwards andtax credits taken into account under deferred tax liabilities (86,245) (18,815) (6,120) (1,419)

Tax loss carry forwards andtax credits not taken into account 60,587 11,198 53,468 10,908

Of which expire:_within 1 year_in 2 to 5 years_in more than 5 years

2,84714,39243,348

6291,7288,841

7,38810,99435,086

1,3621,7927,754


16. INVENTORIES

in thousand CHFRaw material

and merchandise Semi-finished and

finished goods

Total

Gross carrying amounts

31.12.2011 290,740 65,340 356,080

Change in scope of consolidation 2,288 — 2,288

Change in stock 4,593 2,646 7,239

Translation differences 27 8 35

31.12.2012 297,648 67,994 365,642

Change in scope of consolidation 4,566 — 4,566

Change in stock 2,783 2,984 5,767


31.12.2013 305,008 71,017 376,025

Adjustments

31.12.2011 (16,714) (5,774) (22,488)

Addition (1,058) (5,820) (6,878)

Use 972 3,469 4,441

Translation differences (8) (5) (13)

31.12.2012 (16,808) (8,130) (24,938)

Addition (1,070) (1,401) (2,471)

Use 1,029 3,499 4,528


31.12.2013 (16,848) (6,029) (22,877)

Net carrying amounts

31.12.2012 280,840 59,864 340,704

31.12.2013 288,160 64,988 353,148

_Galenica made no material prepayments to suppliers in the reporting period (previous year: none)._There are no restrictions regarding the realisability of invento-ries.

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17. PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES

in thousand CHF

Real estateused for commercial

operationsAssets underconstruction

Other property, plant and equipment

Totalproperty, plant and equipment

Investmentproperties

Net carrying amounts as at 31.12. 2011 261,513 5,198 180,825 447,536 53,862

Investments 9,436 1,701 32,655 43,792 2,205

Disposals — — (621) (621) (15,964)

Reclassifications 2,800 (6,446) 3,646 — —

Depreciation (14,596) — (38,712) (53,308) (1,806)

Change in scope of consolidation 647 — 331 978 —

Translation differences 45 (1) 15 59 —

Net carrying amounts as at 31.12. 2012 259,845 452 178,139 438,436 38,297

Investments 11,772 964 44,076 56,812 516

Disposals (205) — (1,324) (1,529) —

Reclassifications 468 (457) (172) (161) 161

Depreciation (15,218) — (39,505) (54,723) (1,438)

Change in scope of consolidation 376 — 2,255 2,631 —

Translation differences (34) 5 (6) (35) —


of which finance lease as at 31.12. 2012 (net) 1,260 — 25 1,285 —

of which finance lease as at 31.12. 2013 (net) 1,104 — 17 1,121 —

Overview as at 31.12.2012

Accumulated cost 369,988 452 412,213 782,653 52,107

Accumulated depreciation and impairment (110,143) — (234,074) (344,217) (13,810)


Overview as at 31.12.2013

Accumulated acquisition values 382,414 964 448,467 831,845 52,783

Accumulated depreciation and impairment (125,410) — (265,004) (390,414) (15,247)


_Other property, plant and equipment recognised in the state-ment of financial position are manufacturing systems, ware-house equipment, furniture, fittings, IT equipment and vehicles._The gain on disposals of property, plant and equipment of CHF 1.9 million (previous year: CHF 0.3 million) is presented in other revenue. In the previous year this item comprised a gain of CHF 5.3 million arising on the disposal of an investment property. Losses arising on disposals of property, plant and equipment of CHF 0.2 million (previous year: CHF 0.1 million) are presented in other operating costs. _No borrowing costs were capitalised for assets under construc-tion in the reporting period or in the previous year.

_Investment properties include non-operational real estate:


Fair value 45,562 43,862

Rental income 2,909 3,487

Carrying amount of buildings not rented out 130 130

Operating costs_ Real estate generating rental income_ Real estate not generating

rental income

623

8

866

15

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


18. INTANGIBLE ASSETS

in thousand CHF

Trademarks,patents, licences,

technologiesAcquiredsoftware

Internallydeveloped

software Goodwill Total

Net carrying amounts as at 31.12. 2011 184,547 15,515 13,345 1,038,931 1,252,338

Investments 365 4,394 2,721 — 7,480

Disposals (94) — — — (94)

Amortisation (8,915) (6,232) (5,792) — (20,939)

Change in scope of consolidation — 10 — 11,935 11,945

Translation differences 156 4 1 757 918


Investments 6,954 4,155 3,312 — 14,421

Disposals — (4) — — (4)

Amortisation (9,084) (5,978) (4,450) — (19,512)

Change in scope of consolidation — 186 — 31,194 31,380

Translation differences (23) (8) (1) (16,619) (16,651)


Overview as at 31.12. 2012

Accumulated cost 500,306 42,787 33,418 1,051,623 1,628,134

Accumulated amortisation and impairment (324,247) (29,096) (23,143) — (376,486)


Overview as at 31.12. 2013

Accumulated cost 507,138 46,481 37,152 1,066,198 1,656,969

Accumulated amortisation and impairment (333,232) (34,439) (28,016) — (395,687)


_There were no gains or losses on disposals in the reporting period or in the previous year.

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Goodwill _In the event of a business combination, the difference between the purchase price and the fair value of the net assets is recog-nised as goodwill. The added value paid for assets that are not capable of being individually identified and separately recog-nised, e.g. employeesʼ know-how, advantages of the location and non-marketable client bases, is recognised in the consoli-dated statement of financial position as goodwill. _Goodwill is allocated to the cash-generating unit or group of cash-generating units that is the principal economic beneficiary. For the purposes of the impairment test, the cash-generating units or group of cash-generating units are allocated to the operating segments pursuant to the internal financial reporting to the CODM. The CODM monitors the Goodwill at operating segment level. The allocation of the net carrying amount of the goodwill to the operating segments is summarised in the table below._Goodwill is subject to an impairment test once a year or more frequently if there are justified 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 usually evaluated on the basis of the medium-term plans for the next three years approved by the CODM. Cash flows beyond the planning horizon are extrapolated using a per-petual growth rate. The growth rates and capital cost rates before taxes shown below were used.

Goodwill 2013

Carrying Underlying data usedin thousand CHF amount Growth rate Interest rate

Pharma 531,805 1.6% 7.3%

Logistics 50,131 1.3% 5.6%

Retail 475,483 1.3% 5.3%

HealthCare Information 8,779 1.3% 8.5%

Total 1,066,198

Goodwill 2012


Pharma 548,423 1.7% 7.3%

Logistics 38,577 1.3% 5.6%

Retail 455,844 1.3% 5.3%

HealthCare Information 8,779 1.3% 8.5%

Total 1,051,623

Trademarks, patents, licences, technologies _The net value of trademarks, patents, licenses, technologies includes a contractual right to the payment of royalties for the sale of CellCept, developed by Roche, with a carrying amount of CHF 22.9 million (previous year: CHF 28.7 million) and a re-maining useful life of 4 years._The net value of trademarks, patents, licences, technologies includes a trademark with an indefinite useful life and a carrying amount of CHF 21.6 million (previous year: CHF 21.6 million) that is well known nationally and internationally and actively adver-tised. This trademark has been allocated to the cash-generating unit Vifor in the Pharma business sector._The net value of trademarks, patents, licences, technologies includes technology assets with an indefinite useful life and a carrying amount of CHF 104.1 million (previous year: CHF 104.1 million). These technology assets have been allocated to the cash-generating unit OM Pharma in the Pharma business sector._The trademarks and technology assets are not subject to a linear decline in value and since management plans to use them indefinitely, the value is not amortised on a straight-line basis. Instead, trademarks and technology assets are subject to an impairment test every year, or more frequently if there are justi-fied indications of impairment._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 the Chief Operating Decision Maker (CODM):

Trademark and technologies 2013


Vifor 21,590 1.3% 6.6%

OM Pharma 104,145 1.3% 6.8%

Total 125,735

Trademark and technologies 2012


Vifor 21,590 1.3% 6.7%

OM Pharma 104,145 1.3% 6.7%

Total 125,735

_According to the results of impairment testing for 2013 and 2012, which were based on the cash flows discounted using the discounted cash flow method, the trademark and technology assets are supported by their value in use and 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 2013 and 2012 did not result in the need for impairment as at the reporting date.


_According to the results of impairment testing for 2013 and 2012, which were based on the cash flows discounted using the discounted cash flow method, goodwill is supported by its value in use and no impairment charges are necessary. Galenica per-formed 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 2013 and 2012 did not result in an impairment as at the reporting date.

Costs of research and development _During the reporting period, expenses for research and devel-opment totalling CHF 121.9 million were recognised directly in the consolidated statement of income (previous year: CHF 138.9 million).

19. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

_Galenica has no significant associates or joint ventures.

_Cumulative value of associates:


Net carrying amount as at 1 January 3,779 9,349

Contribution to net profit 310 229

Investments 16,016 —

Dividends received (253) (5,799)

Net carrying amount as at 31 December 19,852 3,779

_Cumulative value of joint ventures:


Net carrying amount as at 1 January 18,012 15,419

Contribution to net profit 2,292 2,338

Investments 782 255

Dividends received — —

Net carrying amount as at 31 December 21,086 18,012

_If a joint venture is over-indebted, Galenica has an unlimited obligation, in proportion to its equity interest, to restructure the company. At the reporting date, none of the associated compa-nies were over-indebted.

20. FINANCIAL ASSETS


Loans 9,855 10,311

Derivative financial instruments 263 —

Other financial assets 21,683 2,788

Loans and other financial assets 31,801 13,099

Securities available for sale 32,528 32,014

Financial assets 64,329 45,113

_No impairment charges on financial assets are included._Other financial assets in the consolidated statement of finan-cial position include receivables from non-current agreements and rental guarantee deposits.

21. OTHER LIABILITIES


Trade payables 342,240 337 ,689

Other liabilities 59,445 57,290

Other liabilities 401,685 394,979

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22. CURRENT FINANCIAL LIABILITIES


Bank debts 10,970 27,501

Loans 442 —

Pension fund liabilities 23,251 418

Current portion of non-current financial liabilities

80,046

112,174


Private placement (notes) — 98,960

Current financial liabilities 115,128 282,994

_CHF 50.0 million of a loan for CHF 200.0 million is due for re-payment on 2 November 2014. Galenica reclassified this portion from non-current financial liabilities to the current portion of non-current financial liabilities._On 5 November 2013 Galenica redeemed the private placement notes of CHF 99.0 million and the cross currency interest rate swaps and interest rate swaps of CHF 43.9 million, which were entered into to hedge the currency and interest rate risk on the private placement notes.

23. NON-CURRENT FINANCIAL LIABILITIES


Bank debts 150,000 220,000

Loans 577 472

Derivative financial instruments 41,564 40,785

Private placement (notes) 123,050 126,400

Bond 297,964 297,464

Finance leases 1,223 1,371

Other financial liabilities 17,684 68,554

Non-current financial liabilities 632,062 755,046

Bank debts_The acquisitions of Sun Store was partially financed with non-current bank loans totalling CHF 200.0 million. Repayment will be made in tranches as follows: CHF 50.0 million on 2 November 2014, CHF 50.0 million on 2 November 2016 and CHF 100.0 mil-lion on 1 July 2019._Galenica reclassified the tranche of 50.0 million due on 2 November 2014 from non-current financial liabilities to the current portion of non-current financial liabilities.

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 insur-ance companies by means of a private placement of unsecured notes. Repayment will be made as follows: USD 40.0 million on 12 March 2015, USD 65.0 million and GBP 20.0 million on 12 March 2018. The interest rate and currency risk involved in 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. There are no indications that Galenica would be unable to comply with them in the future.

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 105.79% as at 31 December 2013 (previous year: 105.97%).

Other financial liabilities_A contingent financial obligation of CHF 49.6 million no longer meets the requirements for recognition. The liability has been derecognised. _Non-current contingent considerations from business combi-nations have been recognised as other financial liabilities.


24. PROVISIONS

in thousand CHFProvisions

for restructuringOther

provisions Total

As at 31.12.2011 429 34,620 35,049

Change in scope of consolidation — 145 145

Addition 210 4,865 5,075

Use (186) (932) (1,118)

Reversal (165) (168) (333)

Translation differences 6 — 6

As at 31.12.2012 294 38,530 38,824

Change in scope of consolidation — 413 413

Addition 336 1,337 1,673

Use (255) (15,977) (16,232)

Reversal (13) (17,203) (17,216)

Translation differences (7) (875) (882)

As at 31.12.2013 355 6,225 6,580

Current provisions 2012 274 35,730 36,004

Non-current provisions 2012 20 2,800 2,820

Current provisions 2013 350 1,631 1,981

Non-current provisions 2013 5 4,594 4,599

_In the case of current provisions, the outflow of resources is expected within 12 months. The non-current provisions are ex-pected to be settled in more than 12 months. Where the effect of the time value of money is material, the expected cash flows are discounted.

Provisions for restructuring_Provisions for restructuring only include unavoidable expenses incurred in connection with restructuring and not those related to continuing operations. The timing for these cash outflows can reliable be estimated._The provision for operational integration of activities into the Logistics business sector was used in the reporting period.

Other provisions _This category includes provisions for the estimated cost of ex-cess 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.

_The Canada Revenue Agency (CRA) initiated a tax audit prior to the acquisition of Aspreva International Ltd. by Galenica. Apreva received the tax assessment for the years 2003–2006 in the first half of 2013 and the final tax bill for the years 2007–2011 in the second half of 2013. There are no more divergent positions. The existing provision of CHF 32.8 million relating to the Pharma business sector was used and the unnecessary portion reversed. Thus a positive income tax effect of CHF 16.8 million is reported in the consolidated statement of income.

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Defined benefit plans/long-service awards

in thousand CHFDefined

benefit plansLong-service

awards1)

2013

TotalDefined


awards1)

2012

Total

Plan assets at fair value 893,575 — 893,575 791,697 — 791,697

Present value of defined benefit obligation (873,712) (11,589) (885,301) (841,006) (11,326) (852,332)

Surplus (deficit) 19,863 (11,589) 8,274 (49,309) (11,326) (60,635)

Effect of asset ceiling (58,510) — (58,510) (4,480) — (4,480)

Net carrying amount (38,647) (11,589) (50,236) (53,789) (11,326) (65,115)

of which recognised in assets 3,336 — 3,336 5,259 — 5,259

of which recognised in liabilities (41,983) (11,589) (53,572) (59,048) (11,326) (70,374)

1) The long-service awards relate to provisions for employee awards defined in the regulations

Change in the present value of the defined benefit obligation

in thousand CHFDefined

benefit planLong-service

awards

2013

TotalDefined-


awards

2012

Total

1 January (841,006) (11,326) (852,332) (735,188) (8,346) (743,534)

Current service cost (34,894) (1,700) (36,594) (30,174) (1,285) (31,459)

Past service cost 22,937 — 22,937 — (2,187) (2,187)

Net interest on the net defined benefit liability (16,183) (250) (16,433) (18,397) (229) (18,626)

Actuarial gain/(loss) (3,753) 588 (3,165) (56,112) (186) (56,298)

Employee contributions (17,957) — (17,957) (17,229) — (17,229)

Benefits/awards paid 17,144 1,099 18,243 16,094 907 17,001

31 December (873,712) (11,589) (885,301) (841,006) (11,326) (852,332)

25. EMPLOYEE BENEFIT PLANS

_The vast majority of employees in Switzerland are 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 Retirement, 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 struc-tured 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 ap-praisals do not apply the projected unit credit method required by IFRS. If the calculations made in accordance with the provi-sions of BGV/LPP reveal a funded status of less than 100%, suitable restructuring measures are introduced. The Board of Trustees is made up of employee and employer representatives.

_The most recent actuarial valuation was prepared as at 31 December 2013. 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 themselves. _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 2013 is 110.4% to 115.3% (previous year: 109.1% to 112.7%, final)._The prior-year figures were adjusted to reflect the amendments to IAS 19 (revised). This change in accounting policy was adopted with retroactive effect and the comparative figures have been restated for each of the relevant items of the consolidated finan-cial statements in the tables on pages 107 and 108.


Change in fair value of plan assets


1 January 791,697 702,921

Net interest 15,984 18,208

Remeasurement gains/(losses) 51,937 37,596

Employee contributions 17,957 17,229

Employer contributions 33,144 31,837

Benefits paid (17,144) (16,094)

31 December 893,575 791,697

Net defined benefit cost


Current service cost 34,894 30,174

Net interest on the net defined benefit liability 746 271

Past service cost (22,937) —

Defined benefit cost 12,703 30,445

_The trustees of the Swiss pension funds passed resolutions to make forward-looking modifications with a view to safeguarding the settlement of obligations towards insured members in the long term. The pension fund regulations were updated accord-ingly starting from 1 January 2014. These modifications lead to a decrease in the fair value of the defined benefit obligation ac-cording to the actuarial calculation in accordance with IAS 19. The resulting negative past service cost led to a non-recurring decrease in personnel costs of CHF 22.9 million on the date the resolution was passed.

Remeasurement of net defined benefit liability (asset)


Actuarial gain (loss)_Changes in demographic assumptions_Changes in financial assumptions_Experience adjustments

—13,246

(16,999)

(44,286)(25,212)

13,386

Remeasurement of plan assets 51,937 37,596

Effect in the change of asset ceiling (53,483) (2,419)

Remeasurements of net defined benefit liability (asset) recognised in other comprehensive income of the consolidated statement of comprehensive income (5,299) (20,935)

Effect of the asset ceiling


1 January (4,480) (1,979)

Interest expense (income) (547) (82)

Change in the asset ceiling (recorded in OCI) (53,483) (2,419)

31 December (58,510) (4,480)

_One defined benefit plan shows a surplus when calculated pursuant to IFRS. This surplus was only recognised to the extent that future economic benefits are available to Galenica.

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Investment structure of plan assets


Cash and cash equivalents 43,763 4.9% 71,170 9.0%

Debt instruments 250,678 28.1% 245,340 31.0%

Equity instruments 374,800 41.9% 299,022 37.7%

Real estate 165,776 18.5% 139,077 17.6%

Other investments 58,558 6.6% 37,088 4.7%

Fair value of plan assets 893,575 100.0% 791,697 100.0%

Current return on investments 7.6% 7.0%

_The Board of Trustees is responsible for investing 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 institu-tions with a rating of A or above._Debt instruments (e.g. bonds) generally have a credit rating of at least A and quoted prices in active markets (hierarchy of fair values level 1). 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 (hierarchy of fair values level 1). Equity instruments include treasury shares of Galenica Ltd. with a fair value of CHF 13.6 million (previous year: CHF 29.2 million).

_Real estate relates to both residential property and offices. These can be investments in quoted real estate funds (hierarchy of fair values level 1) or direct investment funds hierarchy of fair values level 3). If real estate is held directly, it is valued by an independent expert._Other investments consist of hedge funds, insurance linked securities (ILS), mixed investments and receivables. There are receivables from Group companies amounting to CHF 23.3 mil-lion (previous year: CHF 0.4 million). Investments in hedge funds are classed 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 (hierarchy of fair values level 2 or level 3). _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 5,797 active members (previous year: 5,496) and 867 pensioners (previous year: 820)._Galenica does not use any pension fund assets.

Basis for measurementWeighted average as a % 2013 2012

Discount rate 2.20 2.00

Salary development 1.5 1.0

Pension development 0.0 0.0

Mortality (mortality tables) BVG 2010 BVG 2010

Turnover BVG 2010 BVG 2010


Sensitivity analysis_The discount rate and future salary development were identi-fied as key actuarial assumptions. Changes in these would affect the defined benefit obligation (DBO) as follows:

in thousand CHFBasis for

calculation

2013

DBOBasis for

calculation

2012

DBO

Discount rate 2.20% 2.70% 1.70%

873,712834,273918,203

2.00% 2.50% 1.50%

841,006808,050878,418

Salary development 1.50% 1.75% 1.25%

873,712875,848871,626

1.00% 1.25% 0.75%

841,006843,766839,038

_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 1 year 31,000 30,268

in 2 years 33,093 29,445

in 3 years 33,084 31,262

in 4 years 36,736 30,300

in 5 years 37,598 33,637

in 6–10 years 200,385 174,276

_The pension obligations have an average duration of 18.2 years (previous year: 18.8 years)._Cash outflows for pension payments and other obligations can be budgeted reliably. Funded benefit plans collect regular con-tribution payments. Furthermore, the investment strategies all safeguard liquidity at all times. _The contributions paid by the employer to the pension funds on behalf of employees are estimated at CHF 33.9 million for 2014._Further details on employee benefit plans are included in Galenica’s 2013 annual report in the chapter Human Resources on page 96.

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26. 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 regis-tered shares with a par value of CHF 0.10 each, as at the report-ing date. All shares have the same capital rights with the excep-tion of the treasury shares which do not generate any dividends. Voting rights and restrictions on voting rights are described in detail in the corporate governance section of the present annual report._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 2 May 2014.

NumberTotal shares

Galenica Ltd.Treasury

sharesOutstanding

shares

31.12.2011 6,500,000 (75,941) 6,424,059

Change — 55,866 55,866

31.12.2012 6,500,000 (20,075) 6,479,925

Change — (4,007) (4,007)

31.12.2013 6,500,000 (24,082) 6,475,918

_The treasury shares are reserved for share-based payments.

27. NON-CONTROLLING INTERESTS

_Vifor Fresenius Medical Care Renal Pharma is the only Group company with significant non-controlling interests. The com-pany 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 share-holder has extensive rights of protection. In the event of disa-greement Galenica has the casting vote within a defined escala-tion process.

_Condensed financial information of Vifor Fresenius Medical Care Renal Pharma (before elimination of intercompany trans-actions):


Assets 103,585 58,774

Liabilities 16,062 9,966

Equity before appropriation of earnings 87,523 48,807

Revenue 130,565 117,763

EBIT 97,549 55,289

Net profit 85,916 47,288

Cash flow from operating activities 83,673 37,447

_There were non-controlling interests in the equity of Vifor Fresenius Medical Care Renal Pharma of CHF 39.4 million as at 31 December 2013 (previous year: CHF 22.0 million). Dividends of CHF 21.2 million were paid to non-controlling interests in 2013 (previous year: CHF 34.2 million)._The non-controlling interests in the net profit of Vifor Fresenius Medical Care Renal Pharma total CHF 38.7 million in the report-ing period (previous year: CHF 21.3 million).

28. CHANGES IN CONSOLIDATED SHAREHOLDERSʼ EQUITY

_At the Annual General Meeting of Shareholders held on 2 May 2013 a resolution was passed to pay out a dividend of CHF 11.00 per share, constituting a total payment of CHF 71.5 million. In the previous year a resolution was passed to pay out a dividend of CHF 9.00 per share, constituting a total amount of CHF 58.5 million._In the reporting period, 34,556 treasury shares (previous year: 21,453 treasury shares) were bought at an average price of CHF 626.66 (previous year: CHF 534.45) and 30,549 treasury shares (previous year: 77,319 treasury share) were issued as share-based payments. Additionally, forward purchases of 15,000 treasury shares at an average price of CHF 576.00 are outstanding as at 31 December 2013. The forward purchases fall due in the years 2014 to 2016._The expense for share-based payment transactions, allocated over the vesting period, has been recognised in the consolidated statement of income and accrued under consolidated sharehold-ers’ equity._The purchase of non-controlling interests reduced consoli-dated shareholders’ equity by CHF 0.2 million (previous year: CHF 0.7 million)._The Board of Directors will submit a proposal to the Annual General Meeting of Shareholders on 8 May 2014 to pay out a dividend of CHF 91.0 million, corresponding to CHF 14.00 per registered share for the financial year 2013 (previous year: CHF 71.5 million, CHF 11.00 per registered share).


Carrying amounts of financial instruments 2013

in thousand CHF

Financial assetsat fair value through

profit or lossLoans and

receivablesFinancial assets

available for sale

Financial liabilitiesat fair value through

profit or lossFinancial liabilitiesat amortised cost Total

Cash — 215,581 — — — 215,581

Securities 61 196 136 — — 393

Receivables — 547,619 — — — 547,619

Financial assets 263 31,538 32,528 — — 64,329

Current financial liabilities — — — 2,168 112,960 115,128

Other liabilities — — — — 401,685 401,685

Non-current financial liabilities — — — 52,618 579,444 632,062

Total 324 794,934 32,664 54,786 1,094,089

Carrying amounts of financial instruments 2012

in thousand CHF

Financial assetsat fair value through

profit or lossLoans and

receivablesFinancial assets

available for sale

Financial liabilitiesat fair value through

profit or lossFinancial liabilitiesat amortised cost Total

Cash — 347,915 — — — 347,915

Securities 8,555 269 136 — — 8,960

Receivables — 541,543 — — — 541,543

Financial assets — 13,099 32,014 — — 45,113

Current financial liabilities — — — 43,941 239,053 282,994

Other liabilities — — — — 394,979 394,979

Non-current financial liabilities — — — 47,235 707,811 755,046

Total 8,555 902,826 32,150 91,176 1,341,843

29. FINANCIAL INSTRUMENTS

_The financial assets of Galenica include cash, securities, trade receivables, other receivables, loans and venture funds. In the reporting period, Galenica sold shares held as securities which had been classified as at fair value through profit or loss in the previous year._Galenica’s financial liabilities primarily comprise advances on current bank accounts, trade payables, finance lease l iabilities, loans, a bond as well as private placements (notes). They are used to finance Galenica’s operations and acquisitions._Galenica uses derivatives such as interest rate swaps and for-eign exchange forwards in order to manage and hedge the inter-est and currency risks resulting from operations and financing ac tivities.

_The financial instruments of Galenica are mainly exposed to liquidity risks, credit risks, interest rate risks, currency risks and other market risks.

29.1 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.

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in thousand CHF

Financial assets at fair value

through profit or loss

Loans and receivables

Financial assets available

for sale

Financial liabilities at fair value


Financial liabilities at

amortised cost Total

Income from securities 297 — 3,303 — — 3,600

Change in fair value 2,010 — — (1,322) — 688

Net gain/(loss) on foreign exchange — (1,943) — — (3,140) (5,083)

Loss on receivables and other financial result — 1,574 — — (897) 677

Interest income — 2,026 — — — 2,026

Interest expense — — — — (30,909) (30,909)

Fees recognised in profit and loss — — — — (30) (30)

Interest income on impaired trade receivables — 75 — — — 75

Change in bad debt allowances — (127) — — — (127)

Impairment on financial assets — — (653) — — (653)

Net gain/(loss) recognised in consolidated statement of income 2,307 1,605 2,650 (1,322) (34,976) (29,736)

Net gain/(loss) recognised in consolidated statement of comprehensive income1) — — (69) 4,168 — 4,099

1) The consolidated statement of 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 2013

in thousand CHF

Financial assets at fair value


Loans and receivables

Financial assets available

for sale

Financial liabilities at fair value


Financial liabilities at

amortised cost Total

Income from securities 326 — 3,874 — — 4,200

Change in fair value 1,542 — — (673) — 869

Net gain/(loss) on foreign exchange — (307) — — (188) (495)

Loss on receivables and other financial result — (1,085) — — (1,057) (2,142)

Interest income — 1,530 — — — 1,530

Interest expense — — — — (37,297) (37,297)

Fees recognised in profit and loss — — — — (30) (30)

Interest income on impaired trade receivables — 46 — — — 46

Change in bad debt allowances — 2,113 — — — 2,113

Impairment on financial assets — — (369) — — (369)

Net gain/(loss) recognised in consolidated statement of income 1,868 2,297 3,505 (673) (38,572) (31,575)

Net gain/(loss) recognised in consolidated statement of comprehensive income1) — — (2,331) 4,805 — 2,474

1) The consolidated statement of comprehensive income includes the changes in value of hedge transactions (foreign exchange forwards, interest rate swaps and cross currency interest rate swaps) as well as venture funds

Net gain/(loss) on financial instruments 2012


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

_The fair values of securities are primarily determined by using stock exchange prices (level 1 of the fair value hierarchy). During the reporting period, Galenica has liquidated its shares catego-rized as securities. Securities and financial assets contain other non-marketable equity instruments with a value of CHF 136,000 (previous year: CHF 136,000) and CHF 2,106,000 (previous year: CHF 1,502,000) respectively. For these equity instruments the fair value cannot be determined reliably, thus they are disclosed at amortised cost less accumulated impairments. The remaining securities relate to fixed deposits._The securities available for sale within the financial instruments mainly consist of venture funds (level 3 of the fair value hierar-chy). The venture funds are valued at net asset value. Currently there is no intention to sell these equity instruments.

Carrying amount Fair value

in thousand CHF 2013 2012 2013 2012

Cash1) 215,581 347,915 — —

Securities1) 332 7,223 — —

Receivables1) 547,619 541,543 — —

Securities available for sale 32,528 32,014 32,528 32,014

Loans and other financial assets1) 31,538 13,099 — —

Current financial liabilities1) 114,709 239,053 — —

Derivative financial instruments (net) 41,659 82,989 41,659 82,989

Other liabilities1) 401,685 394,979 — —

Non-current financial liabilities 590,498 714,261 634,053 770,952

1) The carrying amount corresponds roughly to the fair value

_The derivatives largely consist of currency- and interest-rate swaps and are measured at fair value. The fair values of the cur-rency- 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 based on its significance. _Non-current financial liabilities contain contingent considera-tions 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 hierar-chy). _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).

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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).

_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 commit-ment over the term. Galenica and the other investors are usually bound to their fund units throughout the entire term; conse-quently there is no active market for units in these funds, al-though 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 clas-sifies all venture funds as assets in level 3 of the fair value hier-archy.

Financial assets measured at fair value 2013

in thousand CHF 31.12.2013 Level 1 Level 2 Level 3

Derivative financial instruments 324 — 324 —

Securities available for sale 30,422 — — 30,422

Financial liabilities measured at fair value 2013


Derivative financial instruments 41,983 — 41,983 —

_Level 3_Level 3 inputs are unobservable inputs for the asset or liabil-

ity. 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.

Financial assets measured at fair value 2012


Securities 6,818 6,818 — —


Securities available for sale 30,512 — — 30,512

Financial liabilities measured at fair value 2012



_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 finan-cial statements.


1 January 30,512 33,776

Investments 1,807 —

Disposals (793) (269)

Gain/(loss) recognised in theconsolidated statement of income (653)

(369)

Gain/(loss) recognised in other comprehensive income in the consolidated state-ment of comprehensive income 584

(1,962)

Translations differences (1,035) (664)

31 December 30,422 30,512


29.2 Liquidity risks

Maturity structure of financial liabilities and derivative financial instruments 2013

in thousand CHFCarrying amount

Total undiscounted

cash flowsup to

3 months 3 to 12 months 1 to 5 years

Maturities more than

5 years

Trade payables and other liabilities 401,685 401,685 397,350 4,335 — —

Current financial liabilities 114,709 116,081 40,893 75,188 — —

Non-current financial liabilities (unhedged) 169,484 190,648 1,099 3,357 83,650 102,542

Bond 297,964 330,000 — 7,500 322,500 —

Private placement (notes) 123,050 187,954 4,085 4,085 179,784 —

_of which hedged_ Cross currency interest rate swaps – cash inflow_Cross currency interest rate swaps – cash outflow

123,050

41,301

187,954(151,946)

187,954

4,085(3,906)

4,085

4,085(3,906)

4,085

179,784(144,134)

179,784

———

Total 1,148,193 1,262,376 443,606 94,644 621,584 102,542

Maturity structure of financial liabilities and derivative financial instruments 2012

in thousand CHFCarrying amounts

Total undiscounted

cash flowsup to

3 months 3 to 12 months 1 to 5 years

Maturities more than

5 years

Trade payables and other liabilities 394,979 394,979 382,926 12,053 — —

Current financial liabilities 140,093 141,684 31,154 110,530 — —

Non-current financial liabilities (unhedged) 290,397 321,534 2,259 9,341 204,158 105,776

Bond 297,464 337,500 — 7,500 330,000 —

Private placement (notes) 225,360 342,352 4,085 150,313 70,893 117,061

_of which hedged_ Cross currency interest rate swaps – cash inflow_Cross currency interest rate swaps – cash outflow

225,360

83,695

342,352(268,401)342,352

4,085(4,009)

4,085

150,313(108,377)

150,313

70,893(63,484)

70,893

117,061(92,531)117,061

Other derivative financial instruments (current and non-current) (62) (6) — (6) — —

_Interest rate swaps – cash inflow_Interest rate swaps – cash outflow (62)

(964)958

——

(964)958

——

——

Total 1,431,926 1,611,994 420,500 331,667 612,460 247,367

_The values presented above are contractually agreed undis-counted payment amounts 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 obliga-tions on time, liquidity management is performed centrally. The Treasury department monitors the cash flows using ongoing liquidity planning, which takes into account the maturities of fi-nancial assets and liabilities, monetary assets and cash flows from operating activities.

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_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 custom-ers; these total CHF 20.5 million (previous year: CHF 20.3 million).

29.3 Credit risk


Cash (without cash on hand) 214,078 346,251


Receivables 547,619 541,543

Loans and other financial assets 31,538 13,099

Total financial assets subject to credit risk 793,559 902,630

_The financial assets subject to credit risk are primarily receiva-bles._Galenica applies internal risk management guidelines to iden-tify concentrations of credit risks. _Galenica’s financial assets are not exposed to a concentration of credit risks.

Maturity structure of trade receivables

in thousand CHF Trade receivables2013

Bad debt allowances

Trade receivables2012

Bad debt allowances

not past due 416,172 (664) 375,940 (828)

past due:_ 1–30 days_31–60 days_61–90 days_more than 90 days

71,2337,4986,672

13,329

(263)(187)(364)

(3,147)

103,62510,1244,5557,564

(486)(303)(288)

(2,599)

Total 514,904 (4,625) 501,808 (4,504)

29.4 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 distribu-tion of maturities. The effects of interest rate changes on floating-rate financial assets and liabilities are recognised in the consolidated statement of income and affect without exception the financial result. Galenica does not have any fixed interest 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 and debts, loans, in terest rate swaps as well as cross currency interest rate swaps. Had the market rate been 50 basis points higher or lower at the reporting date, the consolidated earnings before taxes would remain unchanged (previous year: CHF 0.03 million higher or CHF 0.03 million lower, respectively). The other comprehensive income in the consolidated statement of com-prehensive income would have been CHF 0.7 higher (previous year: CHF 1.2 million) or CHF 0.7 million lower (previous year: CHF 1.5 million).


Exchange rate risks of monetary financial instruments and sensitivity analysis

2013 2012

in thousand CHF

Exchange rate risks of monetary

financial instruments Sensitivity in %

Effect on consoli-dated statement

of income

Exchange rate risks of monetary

financial instruments Sensitivity in %

Effect on consoli-dated statement

of income

EUR/CHF (16,205)2% (324)

15,7004% 628

(2%) 324 (4%) (628)

USD/CHF 75,8126% 4,549

31,9435% 1,597

(6%) (4,549) (5%) (1,597)

GBP/CHF 4,7453% 142

4,0355% 202

(3%) (142) (5%) (202)

Currency risk _The table below shows the unhedged net financial assets and net liabilities per currency pair as well as the sensitivity per cur-rency 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 mon-etary financial assets and liabilities denominated in a different currency to the functional currency. The effect on the consoli-dated earnings before taxes arises from currency related changes in fair value of monetary financial assets and liabilities.

Other market risks_The values of the securities classified as available for sale depend on the general market environment and not directly on the share index. A change in value of +/–15% would have had a positive or negative effect of CHF 4.6 million (previous year: +/–15%, +/–CHF 4.6 million) on other comprehensive income in the consolidated statement of comprehensive income.

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29.6 Cash flow hedges

Foreign currency hedging of cash flows_Galenica selectively hedges expected cash flows in USD against foreign currency risks by means of foreign exchange forwards. The contract volume amounted to CHF 0.0 million (previous year: CHF 26.2 million) as at the reporting date with a positive fair value of CHF 0.8 million in the previous year.

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 connec-tion with the private placement notes in the foreign currencies USD, EUR and GBP. The contract volume amounted to CHF 123.1 million (previous year: CHF 226.4 million) with a negative fair value of CHF 41.6 million (previous year: CHF 83.7 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 the consolidated statement of comprehensive income (hedge accounting). In 2013, CHF 3.9 million (previous year: CHF 3.8 million) was recognised directly in the consolidated statement of comprehensive income.

29.5 Derivative financial instruments

Derivative financial instruments 2013

Fair value Expiry date of contract valuesin thousand CHF Positive Negative Contract value up to 3 months 3 to 12 months 1 to 5 years more than 5 years

Foreign exchange forwards 61 419 18,060 14,760 3,300 — —

Total currency instruments 61 419 18,060 14,760 3,300 — —

Interest rate swaps and cross currency interest rate swaps 263 41,564 123,050 — — 123,050 —

Total interest instruments 263 41,564 123,050 — — 123,050 —

Total derivative financial instruments 324 41,983 141,110 14,760 3,300 123,050 —

Derivative financial instruments 2012

Fair value Expiry date of contract valuein thousand CHF Positive Negative Contract value up to 3 months 3 to 12 months 1 to 5 years more than 5 years

Foreign exchange forwards 833 189 44,429 12,420 23,117 8,892 —

Total currency instruments 833 189 44,429 12,420 23,117 8,892 —

Interest rate swaps and cross currency interest rate swaps 904 84,537 285,860 — 159,460 36,800 89,600

Total interest instruments 904 84,537 285,860 — 159,460 36,800 89,600

Total derivative financial instruments 1,737 84,726 330,289 12,420 182,577 45,692 89,600


29.7 Capital management

_The objective of capital management at Galenica is to ensure the continuity of operations, increase enterprise value on a sus-tainable 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.


Current financial liabilities1) 108,739 282,994

Non-current financial liabilities1) 614,378 686,492

Cash (215,581) (347,915)

Securities (393) (8,960)

Financial assets (64,329) (45,113)

Net debt 442,814 567,498

Equity attributable to shareholders of Galenica Ltd.2)

1,505,763

1,299,453

Non-controlling interests 49,359 32,309

Shareholders’ equity 1,555,122 1,331,762

Gearing2) 28.5% 42.6%

1) Excluding non -interest-bearing financial liabilities 2) Previous year adjusted due to restatement IAS 19 (see page 107 and 108)

_Galenica has no covenants concerning minimum capital, nor is it subject to any externally regulated capital requirements as seen in the financial services sector.

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30. SHARE-BASED PAYMENTS

Retention plan _A retention plan existed for selected members of the senior management. Under this plan, the beneficiaries received a fixed number of registered shares in Galenica at the end of the vesting period. The fair value was calculated based on the share price on the grant date minus the present value of the anticipated divi-dends during the vesting period._12,000 shares became vested in the previous year. Of these, 8,750 shares were transferred at 31 December 2012 and 3,250 shares in January 2013. This retention plan is now finished.

Share plan for the Executive Chairman _For his service in the period from 1 January 2012 to 31 Decem-ber 2016, Etienne Jornod received a non-recurring share-based payment in the form of 40,000 registered shares in Galenica. The shares are measured at fair value at the time of signing the con-tract (CHF 528.00) and are restricted over the entire term of the contract until 31 March 2017. The contract contains detailed provisions on the pro rata temporis allocation of shares to Etienne Jornod, including number and price, if the employment contract is terminated before the end of the period. The exact arrangements depend in particular on whether the employee or the employer has prematurely terminated the contract.

Compensation for members of the Board of Directors _The members of the Board of Directors receive annual remu-neration as well as additional meeting fees. The remuneration includes 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 dis-count of 25%. The shares may not be traded for the first five years for tax reasons. Members of the Board of Directors may keep their shares if they leave Galenica, even if the vesting period has not expired yet._The fair value of these allocated shares is equivalent to the amount to be paid out in shares plus a discount of 25%. The actual number of shares and the fair value per share are of no relevance in determining the expense.

Share plan for members of senior management _According to the participation plan, members of senior management receive their preformance-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. Members of senior management may keep their shares if they leave Galenica, even if the vesting period has not expired yet.

_The fair value of these allocated shares is equivalent to the amount to be paid out in shares plus a discount of 25%. The actual number of shares and the fair value per share are of no relevance in determining the expense.

Long-term incentive plan (LTI)_For members of the Corporate Executive Committee and certain members of senior management there is a long-term in centive plan (LTI). The long-term incentive is based on what are called performance units. The number of these performance units is based on the extent to which defined long-term perfor-mance 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 effec-tive share price at the time of the allocation. At the end of the ves ting period performance units are paid out to eligible benefi-ciaries in the form of registered shares in Galenica._5,379 performance units (previous year: 4,740 performance units) were allocated to beneficiaries at an average price of CHF 501.50 (previous year: CHF 540.00) at the beginning of the reporting period for the 2013 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 employ-ees who, at the time of the purchase offer, are not under notice and have an employment contract of unlimited duration are en-titled to acquire shares under these terms._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 9,749 registered shares of Galenica (previous year: 8,079 registered shares) at a price of CHF 436.00 (previous year: CHF 392.00). This includes a price discount of CHF 187.40 (previous year: CHF 167.75) per registered share.

Share-based payments


Retention plan — 915

Share plan for the Executive Chairman 3,670 3,670

Remuneration for members of the Board of Directors 1,272 1,300

Share plan for members of senior management 3,864 5,268

Long-term incentive plan (LTI) 2,665 2,484

Employee share plan 1,827 1,355

Total 13,298 14,992


32. LEASE LIABILITIES

_The following payables from operating leasing and finance leas-ing were outstanding at the reporting date:

2013 2012

in thousand CHFOperating

leases Finance

leasesOperating

leases Finance

leases

Within 1 year 47,109 257 49,412 321

In 2 to 5 years 138,192 1,005 143,150 1,020

In more than 5 years 45,645 622 45,239 876

Total 230,946 1,884 237,801 2,217

Interest (522) (656)

Liabilities from finance leases 1,362 1,561

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

31. RELATED PARTY TRANSACTIONS

_Related parties include associates, joint ventures, pension funds, members of the Board of Directors of Galenica Ltd., mem-bers of the Cor porate Executive Committee and major share-holders, as well as the companies controlled by them. All trans-actions 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 4.1 million (pre-vious year: CHF 4.6 million). The receivables and loans primarily relate to Coop Vitality. The trade payables to associates and joint ventures amounted to CHF 0.6 million (previous year: CHF 1.7 million) and those to pension funds amounted to CHF 23.3 mil-lion (previous year: CHF 0.4 million). There are no receivables from or 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

2013 2012

in thousand CHF Associates

Other related parties Associates

Other related parties

Sale of goods 92,254 3 82,480 2

Income from services 479 — 297 —

Rental income 20 — 20 —

Purchase of goods 1,866 — 1,545 —

Other operating costs 582 — 135 —

Financial income 268 — 27 —

Financial expenses 57 — 69 —

Remuneration of the Board of Directors and the Corporate Executive Committee


Remuneration 3,772 4,630

Social security costs and pension expenses 1,547 2,178

Share-based payments 6,855 7,631

Other non-current benefits — —

Termination benefits — —

Total 12,174 14,439

_During the reporting period, Galenica acquired 244 unre-stricted Galenica shares from members of the Corporate Execu-tive Committee for a total of CHF 0.1 million (previous year: 125 shares for a total of CHF 0.1 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.

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33. CONTINGENT LIABILITIES

_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 pharma-cies 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 purchase obligations are ex-pected to involve payments of CHF 6.1 million (previous year: CHF 5.1 million) at the most. The purchase rights have an esti-mates volume of CHF 6.5 million (previous year: CHF 5.5 million). These purchase rights or obligations fall due between 2015 and 2018._Galenica signed purchase agreements to acquire property, plant and equipment totalling CHF 0.4 million (previous year: CHF 1.7 million). These purchase agreements fall due in 2014._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 com-panies are currently involved in administrative proceedings, legal disputes and investigations relating to their business ac-tivities. The results of ongoing proceedings cannot be predicted with certainty. Management has established appropriate provi-sions 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 customers of CHF 0.9 million (previous year: CHF 1.1 million), and guarantees to third parties of CHF 160.9 million (previous year: CHF 170.8 million). This includes a guarantee to secure intraday transactions in con-nection with the zero balance cash pooling of CHF 159.2 million (previous year: CHF 159.2 million). Galenica entered into pay-ment obligations for the purchase of securities available for sale up to a maximum of CHF 11.4 million (previous year: CHF 11.0 million)._There are no unusual pending transactions or risks to be dis-closed.

34. ASSETS ASSIGNED TO SECURE OWN LIABILITIES

_No assets were pledged to secure own liabilities (previous year: none).

35. SUBSEQUENT EVENTS

_Several business combinations occurred between 31 Decem-ber 2013 and the date the consolidated financial statements were issued.

Retail business sector_Acquisition of pharmacies. GaleniCare Holding acquired 100% of the interests in pharmacies at various locations in Switzer-land. The net assets of these acquisitions will be consolidated for financial year 2014 from the date control was obtained. The purchase consideration was CHF 1.0 million, the fair value of the provisional net assets resulting from these additions was esti-mated at CHF 0.2 million on the acquisition date. The purchased goodwill corresponds to the added value of the pharmacies based on their locations. Since the transactions were concluded shortly before the consolidated financial statements were pre-pared and issued, it was not possible to publish the additional information required by IFRS._There were no further significant events after the reporting date.


36. INVESTMENTS

Registered office CapitalVotingrights

Method ofconsolidation

Share capitalin thousand

Pharma

Aspreva International Ltd. CDN-Victoria 100% 100% full CAD 0Aspreva Pharmaceuticals Ltd. CH-Bern 100% 100% full CHF 2,700Aspreva Pharmaceuticals Inc. USA-Basking Ridge 100% 100% full USD 0Cophar Ltd. CH-Villars-sur-Glâne 100% 100% full CHF 700Etrea Ltd. CH-Meyrin 100% 100% full CHF 200OM Pharma Ltd. CH-Meyrin 100% 100% full CHF 3,000OM Pharma S.A. PER-Lima 100% 100% full PEN 5,493OM Pharma S.A. P-Amadora-Lisboa 100% 100% full EUR 5,000Swiss Pharma GmbH D-Freiburg im Breisgau 100% 100% full EUR 51Vifor Ltd. CH-Villars-sur-Glâne 100% 100% full CHF 2,250Vifor France SA F-Neuilly-sur-Seine 100% 100% full EUR 50Vifor Fresenius Medical Care Renal Pharma Ltd. CH-St. Gall 55% 55% full CHF 1,000Vifor Fresenius Medical Care Renal PharmaPharma France S.A.S F-Neuilly-sur-Seine 55% 55% full EUR 10

Vifor (International) Ltd. CH-St. Gall 100% 100% full CHF 2,000Vifor Pharma Ltd. CH-Glattbrugg 100% 100% full CHF 100Vifor Pharma America Latina S.A. ARG-Pilar, Buenos Aires 100% 100% full USD 304Vifor Pharma Asia Pacific Pte. Ltd. SIN-Singapore 100% 100% full SGD 100Vifor Pharma België N.V. B-Antwerp 100% 100% full EUR 61Vifor Pharma Deutschland GmbH D-Munich 100% 100% full EUR 50Vifor Pharma España SL E-Barcelona 100% 100% full EUR 200Vifor Pharma Italia S.r.L. I-Rome 100% 100% full EUR 10Vifor Pharma Nederland B.V. NL-Breda 100% 100% full EUR 18Vifor Pharma Nordiska AB S-Kista 100% 100% full SEK 200Vifor Pharma Österreich GmbH A-Vienna 100% 100% full EUR 100Vifor Pharma Pty Ltd. AUS-Melbourne 100% 100% full AUD 0Vifor Pharma Romania Srl. RUM-Cluj-Napoca 100% 100% full RON 258Vifor Pharma UK Ltd. GB-Bagshot 100% 100% full GBP 36

Logistics

Alloga Ltd CH-Burgdorf 100% 100% full CHF 8,332Dauf SA CH-Barbengo-Lugano 74.46% 74.46% full CHF 100Galexis Ltd CH-Niederbipp 100% 100% full CHF 25,000G-Pharma AG CH-Niederbipp 100% 100% full CHF 100Medifilm Ltd CH-Oensingen 100% 100% full CHF 1,300Unione Farmaceutica Distribuzione SA CH-Barbengo-Lugano 74.46% 74.46% full CHF 2,000


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

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Registered office CapitalVotingrights

Method ofconsolidation

Share capitalin thousand

Retail

Amavita GmbH CH-Bern 100% 100% full CHF 20Amavita Health Care Ltd. CH-Niederbipp 100% 100% full CHF 100Aristea SA CH-St-Sulpice 100% 100% full CHF 100Bahnhof Apotheken Thun AG CH-Thun 50% 50% full CHF 200Coop Vitality AG CH-Bern 49% 49% at equity CHF 5,000Coop Vitality Health Care GmbH CH-Niederbipp 49% 49% at equity CHF 20Distripharm SA CH-St-Sulpice 100% 100% full CHF 100GaleniCare Ltd. CH-Bern 100% 100% full CHF 700GaleniCare Holding Ltd. CH-Bern 100% 100% full CHF 50,000GaleniCare Management Ltd. CH-Bern 100% 100% full CHF 500Golaz Chemist SA CH-Lausanne 45% 45% at equity CHF 300Grosse Apotheke Dr. G. Bichsel AG CH-Interlaken 25% 25% at equity CHF 200Ingrid Barrage AG CH-Küsnacht 49% 49% at equity CHF 300Kloster-Apotheke Muri AG CH-Muri AG 100% 100% full CHF 100MediService Ltd. CH-Zuchwil 100% 100% full CHF 363Pharmacie de la Croix Blanche SA CH-Epalinges 100% 100% full CHF 100St. Jakob-Apotheke AG CH-St. Gall 100% 100% full CHF 100Sun Store Ltd. CH-St-Sulpice 100% 100% full CHF 485"Wettstein"-Apotheke AG CH-Basel 100% 100% full CHF 200Winconcept Ltd. CH-Bern 100% 100% full CHF 100

Corporate

1L Logistics AG CH-Burgdorf 100% 100% full CHF 100Adima Panpharma AG CH-Bern 100% 100% full CHF 110Bürgschaftsgenossenschaft Galenica CH-Bern 100% 100% full CHF 1,200Democal AG CH-Bern 100% 100% full CHF 100Galenica Finance Limited GB-Jersey 100% 100% full CHF 5,000Galenica International (B.V.I.) Limited GB-British Virgin Islands 100% 100% full USD 50Galenica Santé Ltd. CH-Bern 100% 100% full CHF 100Laboratoire Golaz Ltd. CH-Villars-sur-Glâne 100% 100% full CHF 100medcommerce Hospilog AG CH-Bern 100% 100% full CHF 137Medichemie Bioline AG CH-Bern 100% 100% full CHF 100Perskindol AG CH-Bern 100% 100% full CHF 100Sigal AG CH-Bern 100% 100% full CHF 2,000Triamun Ltd. CH-Bern 100% 100% full CHF 150

Pension funds

Galenica Pension Fund CH-BernGaleniCare Pension Fund CH-Bern

Galenica financial statements 2013 · Report of the statutory auditor _153

_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, cash flow statement, statement of changes in equity and notes (pages 101 to 152) for the year ended 31 December 2013.

Board of Directors’ responsibility_The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in ac-cordance with International Financial Reporting Standards (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 Direc-tors 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 consoli-dated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Stand-ards and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. _An audit involves performing procedures to obtain audit evi-dence 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 inter-nal control system. An audit also includes evaluating the appro-priateness of the accounting policies used and the reasonable-ness 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 2013 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 Over-sight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circum-stances 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 sub-mitted to you be approved.

Bern, 7 March 2014

Ernst & Young Ltd.

Julian FiessingerLicensed audit expert

Thomas NösbergerLicensed audit expert(Auditor in charge)

REPORT OF THE STATUTORY AUDITOR ON THE CONSOLIDATED FINANCIAL STATEMENTS OF THE GALENICA GROUP

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154_ Galenica Ltd. financial statements 2013

155 _Statement of income of Galenica Ltd.

156 _Statement of financial position of Galenica Ltd. 157 _Notes to the financial statements of Galenica Ltd. 162 _Report of the statutory auditor on the financial

statements of Galenica Ltd.

FINANCIAL STATEMENTS 2013 OF GALENICA LTD.

Galenica Ltd. financial statements 2013 · Statement of income _155


Investment income 276,592 253,890

Financial income 82,207 56,269

Other income 42,503 28,743

Income 401,302 338,902

Personnel costs (25,443) (29,286)

Financial expenses (30,539) (36,148)

Depreciation and amortisation (121,641) (62,914)

Other expenses (13,090) (8,217)

Expenses (190,713) (136,565)

Profit for the year before taxes 210,589 202,337

Taxes (142) (102)

Profit for the year 210,447 202,235

STATEMENT OF INCOME OF GALENICA LTD.

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156_ Statement of financial position · Galenica Ltd. financial statements 2013

STATEMENT OF FINANCIAL POSITION OF GALENICA LTD.prior to appropriation of available earnings

Assets

in thousand CHF 31.12.2013 31.12.2012

Cash and cash equivalents 123,413 296,918

Securities — 6,015

Receivables from third parties 927 2,510

Receivables from Group companies 84,995 19,469

Prepaid expenses and accrued income 12,916 17,215

Current assets 16% 222,251 22% 342,127

Intangible assets 115 229

Loans to Group companies 824,200 884,171

Participations 306,172 362,672

Financial assets 1,750 1,100

Non-current assets 84% 1,132,237 78% 1,248,172

Assets 100% 1,354,488 100% 1,590,299

Liabilities and shareholders’ equity

in thousand CHF 31.12.2013 31.12.2012

Current liabilities to third parties 72,465 261,357

Current liabilities to Group companies 32,996 98,020

Accrued expenses and deferred income 15,340 9,419

Non-current liabilities 605,647 732,410

Liabilities 54% 726,448 69% 1,101,206

Share capital 650 650

Legal reserves_General reserve_Reserve for treasury shares

40,00012,976

40,0008,700

Free reserve 363,024 237,300

Available earnings 211,390 202,443

Shareholders’ equity 46% 628,040 31% 489,093

Liabilities and shareholders’ equity 100% 1,354,488 100% 1,590,299

Galenica Ltd. financial statements 2013 · Notes _157

NOTES TO THE FINANCIAL STATEMENTS OF GALENICA LTD.

GENERAL

Basis of accounting _The financial statements as at 31 December 2013 comply with the provisions of the Swiss Code of Obligations. The basis of accounting for the consolidated financial statements of Galenica Ltd. are stated in the notes to the consolidated financial state-ments.

Investments in subsidiaries and associates _The list of the participations is shown on pages 151 and 152.

Authorised capital _According to Art. 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 2 May 2014 by issuing no more than 650,000 fully paid-up registered shares.

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, maturing on 27 October 2017. The bond is traded on the SIX Swiss Exchange under securities no. 11848005 (ISIN CH0118480059).

Treasury shares _Galenica registered shares owned by subsidiaries:

Number in CHF

As at 31 December 2011 75,941

1st quarter 2012 _Bought_Sold

2,398(48,651)

1,153,150(25,723,904)

2nd quarter 2012 _Bought_Sold

3,005(10,951)

1,777,824(6,052,366)

3rd quarter 2012 _Bought_Sold

440(78)

264,915(46,461)

4th quarter 2012 _Bought_Sold

15,610(17,639)

8,269,746(9,179,993)


1st quarter 2013 _Bought_Sold

10,716(10,347)

5,957,616(5,549,408)

2nd quarter 2013 _Bought_Sold

8,585(9,692)

4,804,688(5,263,019)

3rd quarter 2013 _Bought_Sold

2,610—

1,843,090—

4th quarter 2013 _Bought_Sold

12,645(10,510)

9,049,536(6,563,560)


_The treasury shares are reserved for share-based payments in connection with benefit plans.

Major shareholdersNumber of

registered shares% of share

capitalAs at 31 December 2013

Alliance Boots Investments 2 GmbH,Switzerland 1,656,172 25.5

_of which with voting rights 1,300,000 20.0

Credit Suisse Group AG, Switzerland1) 325,204 5.0

Patinex AG, Switzerland and BZ Bank Aktiengesellschaft, Switzerland1) 2) 232,620 3.6

Alecta pensionsförsäkring, Sweden 210,000 3.2

As at 31 December 2012

Alliance Boots Investments 2 Limited, UK 1,656,172 25.5

_of which with voting rights 1,300,000 20.0

Patinex AG, Switzerland1) 2) 253,3353) 3.93)

Alecta pensionsförsäkring, Sweden 210,000 3.2

1) Options not considered2) Beneficial owners: Martin and Rosmarie Ebner, Switzerland3) Previous year: 578,325 registered shares (8.9% of share capital), of which call

options for a total of 324,990 shares

_On the reporting date, Galenica was not aware of any additional shareholders or shareholder groups that owned more than 3% of shareholder votes (see pages 54 and 55).

Contingent liabilities_At the end of 2013 contingent liabilities amounted to CHF 220.9 million (previous year: CHF 221.1 million), including CHF 1.7 mil-lion (previous year: CHF 1.9 million) for guarantees to third parties, and CHF 60.0 million (previous year: CHF 60.0 million) for bank guarantees to Group companies in favour of financial institutions set up in order to obtain favourable conditions for local financing as well as CHF 159.2 million (previous year: CHF 159.2 million) for a guarantee to secure intraday transactions in connection with the zero balance cash pooling.

Promise of funding _At the end of 2013, no promises of funding had been made. Fixed-term funding promises of CHF 9.6 million were made in favour of Group companies in the previous year.

Subordinated loans _At the end of 2013 subordinated loans to Group companies amounted to CHF 97.5 million (previous year: CHF 12.9 million).

Insurance _At the end of 2013, property, plant and equipment were covered by fire insurance for a value of CHF 0.9 million (previous year: CHF 0.9 million).

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158_ Notes · Galenica Ltd. financial statements 2013

in thousand CHF Share capitalGeneralreserve

Reserve fortreasury shares

Freereserve

Retainedearnings

Shareholders’equity

As at 31 December 2011 650 40,000 38,250 207,750 58,708 345,358

Dividend (58,500) (58,500)

Adjustment to the reserve for treasury shares (29,550) 29,550 —


As at 31 December 2012 650 40,000 8,700 237,300 202,443 489,093

Transfer to free reserve 130,000 (130,000) —

Dividend (71,500) (71,500)

Adjustment to the reserve for treasury shares 4,276 (4,276) —


As at 31 December 2013 650 40,000 12,976 363,024 211,390 628,080

Derivative financial instruments _Cross currency interest rate swaps and interest rate swaps with a contract value of CHF 123.1 million (previous year: CHF 285.9 million) were concluded in connection with the private place-ment of foreign currency notes (USD, EUR and GBP). At the end of 2013, this resulted in a negative fair value of CHF 41.6 million (previous year: CHF 83.6 million).

Shareholders’ equity _Shareholders’ equity developed as follows over the past two years:

_Based on the Swiss Corporate Tax Reform II, Galenica has not identified any tax-relevant capital contributions from holders of qualifying participations (capital contribution principle).

Appropriation of available earnings for the year ending 31 December _At the Annual General Meeting of Shareholders to be held on 8 May 2014, the Board of Directors will propose the following appropriation of available earnings:

in CHF 2013 2012

Balance brought forward 943,555 208,436

Profit for the year 210,446,565 202,235,119

Available earnings 211,390,120 202,443,555

Appropriation of available earnings

Transfer to statutary reserve (120,000,000) (130,000,000)

Dividend per share CHF 14.00(2012: CHF 11.00) (91,000,000) (71,500,000)

Balance to be carried forward 390,120 943,555


REMUNERATION OF THE BOARD OF DIRECTORS AND THE CORPORATE EXECUTIVE COMMITTEE

Board of Directors_The members of the Board of Directors, excluding the Executive Chairman, whose remuneration is defined separately in accord-ance with the remuneration system set out below, receive annual remuneration for their work as defined by specific regulations. This remuneration comprises a fixed salary and an attendance fee for every meeting of the Board of Directors in its entirety and of the committees. The members of the Board of Directors can choose to receive this remuneration in full or in part in the form of registered shares in Galenica._Remuneration settled in registered shares in Galenica was paid at the average price for the month of January 2014, i.e. CHF 894.21 per share, (January 2013: CHF 554.55 per share) less 25% for shares restricted from trading for five years.

_For his service in the period from 1 January 2012 to 31 Decem-ber 2016, Etienne Jornod received a non-recurring share-based payment on 1 January 2012 in the form of 40,000 registered shares in Galenica. These are restricted over the term of con-tract until 31 March 2017. To compensate for the lack of periodic remuneration over the five-year period (salary, bonuses, shares, options, etc.), the Executive Chairman received these shares at the market price on the date of conclusion of the contract (CHF 528.00). In addition, Etienne Jornod receives CHF 150,000 per year, which is used to pay the employee share of social security contributions. As the shares are restricted until 31 March 2017, they cannot be sold before the expiry of the contract. The con-tract contains detailed provisions on the pro rata temporis al-location of shares to Etienne Jornod, including number and price, if the employment contract is terminated before the end of the period. These arrangements depend on whether the employee or the employer has prematurely terminated the contract.

Remuneration of the members of the Board of Directors in 2013

Fee in cash

Fee equivalent

in sharesOther remu-

neration1) Total

31.12.2013

Registered shares Held Allocated2)

in thousand CHF

Etienne Jornod, Executive Chairman 3) 150 3,420 293 3,863 43,702 —

Fritz Hirsbrunner 4) 180 138 30 348 10,001 190

Executive members of the Board of Directors 330 3,558 323 4,211 53,703 190

Daniela Bosshardt-Hengartner 75 75 11 161 1,432 106

Kurt W. Briner — 145 7 152 2,833 205

Michel Burnier 745) 74 10 158 437 103

Hans Peter Frick 125 10 3 138 847 —

Sylvie Grégoire — 125 8 133 — 186

Stefano Pessina — 120 6 126 1,592 168

This E. Schneider — 159 12 171 3,099 225

Non-executive members of the Board of Directors 274 708 57 1,039 10,240 993

Remuneration of the members of the Board of Directors 604 4,266 380 5,250 63,943 1,183

1) Other remuneration is 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 481,000

2) Pro rata temporis from 3 May 2013 to 31 December 20133) The compensation for the 2011 LTI plan (CHF 1,419,000), while Etienne Jornod was still CEO, was determined in 20134) Fritz Hirsbrunnerʼs remuneration also includes fees for his work as Head of Investor Relations5) The amount will be paid to the Centre Hospitalier Universitaire Vaudois (CHUV) in Lausanne _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

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Corporate Executive Committee_The members of the Corporate Executive Committee of Galenica Ltd. receive a fixed basic salary with variable indirect benefits and participate in certain equity compensation plans. _David Ebsworth was the member of the Corporate Executive Committee with the highest remuneration in 2012 and 2013.

Remuneration of the members of the Corporate Executive Committee

in thousand CHF2013 of which

David Ebsworth2012 of which

David Ebsworth

Basic salary 2,154 701 2,775 650

Bonus in cash 1,003 489 1,373 430

Bonus in shares 472 230 616 203

Long-term incentive plan 571 260 723 302

Expenses reimbursement — — 64 —

Contributions to pension funds 292 107 350 107

Other remuneration 11 — 14 —

Remuneration received 4,503 1,787 5,915 1,692

Social security costs 394 114 645 104

Remuneration of the members of the Corporate Executive Committee 4,897 1,901 6,5601) 2) 1,796

1) The compensation paid to Fritz Hirsbrunner for the handover to his successors in the period from 1 January 2012 to 30 April 2012 is included in the remuneration of the members of the Corporate Executive Committee. In addition, he received CHF 382,000 on the 30 April 2012 as compensation for the variable LTI plan over the period 2010–2012

2) This includes the salary of Karin Priarollo as member of the Corporate Executive Committee from 1 May 2012 to 9 November 2012

Remuneration of the members of the Board of Directors in 2012

31.12.2012

in thousand CHFFee

in cash

Fee equivalent

in sharesOther remu-

neration1) TotalRegistered shares

Held Allocated

Etienne Jornod, Executive Chairman2) 150 3,420 379 3,949 47,261 —

Fritz Hirsbrunner3) 120 133 9 262 13,032 319

Executive members of the Board of Directors 270 3,553 388 4,211 60,293 319

Daniela Bosshardt-Hengartner 70 70 9 149 1,265 167

Kurt W. Briner — 140 7 147 2,496 337

Michel Burnier 64 64 8 136 284 153

Hans Peter Frick — 130 7 137 534 313

Stefano Pessina — 115 6 121 1,315 277

This E. Schneider — 155 10 165 2,727 372

Non-executive members of the Board of Directors 134 674 47 855 8,621 1,619

Remuneration of the members of the Board of Directors 404 4,227 435 5,066 68,914 1,938

1) Other remunerationis 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 748,000

2) The compensation for the 2010 LTI plan (CHF 990,000), while Etienne Jornod was still CEO, have been paid out in 20123) Fritz Hirsbrunnerʼs remuneration also includes fees for his work as Head of Investor Relations_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


Shareholdings of members of the Corporate Executive Committee

Number of registered shares31.12.2013

Held31.12.2012

Held

Felix Burkhard 1,010 1,312

Jean-Claude Clémençon 720 881

David Ebsworth 1,765 1,268

Jörg Kneubühler 1,330 1,814

Gianni Zampieri 3,679 5,040

_ Registered shares held by related parties of members of the Corporate Executive Committee are also included in the totals disclosed above

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

RISK MANAGEMENT

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

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REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEMENTS OF GALENICA LTD.

_As statutory auditor, we have audited the financial statements of Galenica Ltd., which comprise the statement of income, state-ment of financial position and notes (pages 155 to 161) for the year ended 31 December 2013.

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 re-sponsibility 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 responsi-ble 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 mis-statement 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 pur-pose 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 2013 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 Over-sight Act (AOA) and indepen dence (Art. 728 CO and Art. 11 AOA) and that there are no circum-stances incompatible with our indepen dence._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 avail able earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Bern, 7 March 2014

Ernst & Young Ltd.

Julian FiessingerLicensed audit expert

Thomas NösbergerLicensed audit expert(Auditor in charge)

_Continued from page 98:… Individually, in line with the customers’ needs, Galexis offers a tailor-made package – adapted to how each pharmacy operates. _Everything from a single source, simple and transparent, our consistently high product availability makes us “In tune with the customer”.


164_ Glossary · Galenica annual report 2013

ActivePOS_The expansion module of TriaPharm® pharmacy software designed for POS cash register usage.

ActiveStock_TriaPharm® application. Simplifies processes in the goods cycle from ordering to checking incoming goods and expiry dates, and guarantees more reliable inventory levels.

AIPS_New official Swissmedic drug information publication plat-form (Arzneimittelinformation Publikationsplattform Swiss-medic).

Algifor®

_The leading ibuprofen-based OTC analgesic in Switzerland; developed and sold by Vifor Pharma.

AllergyCheck_Service provided by Amavita and Coop Vitality: in just 20 minutes, customers receive a personal allergy profile for the ten most common allergens.

Alloga SC Box_A box specially designed by Alloga to transport heat-sensi-tive products. SC stands for Safety Cold.

Amavita partnership_Franchise system developed by GaleniCare for pharmacists wishing to enjoy the benefits of the Amavita network while retaining their independence.

Ambition Négawatt/éco21_Programme developed by electricity and water supplier SIG (Services Industriels de Genève). The main objective of this programme is to support companies and private individuals in the Geneva area in reducing their energy consumption and CO2 emissions.

Anaemia, anaemic_A deficiency of red blood cells or haemoglobin in the bloodstream, frequently caused by iron deficiency.

Anti-Brumm®

_The leading insect repellent spray and lotion in Switzerland, also widely sold in other European countries; a proprietary product of Vifor Pharma.

Audit_Investigation of processes with regard to compliance with requirements and guidelines. The examination is carried out by an external expert such as an FDA inspector or by a rep-resentative of an accredited auditing company such as SGS.

Autoimmune disease_The general term for diseases caused by an overreaction of the immune system to the body’s own tissues. In such condi-tions, the immune system mistakenly perceives the body’s own tissues to be foreign bodies that need to be attacked. This leads to acute inflammation reactions that result in dam-age to the affected organs.

Azathioprin_An active ingredient in medications to suppress the immune system.

Blister pack_A type of packaging that allows the customer to see the packaged product (see-through packaging).

Blister packaging_Packaging of medications in portions arranged in rows – like a rolled film strip; service offered by Medifilm to care homes. Increases safety in taking medications, improves therapy compliance and decreases the workload of staff in care homes.

Bolus injection_The administration of a medicine by injection using a syr inge.

Broncho-Vaxom®

_Biotech drug for the prevention and alleviation of respira-tory tract infections; developed and marketed by OM Pharma.

Carbon Disclosure Project (CDP)_An international, non-profit organisation providing the larg-est and only global environmental database for companies and cities. The aim of CDP is to encourage as many compa-nies as possible to publish data on their impact on the envi-ronment and natural resources.

Cardiology_The branch of medicine dealing with the heart and cardio-vascular diseases.

CardioTest®

_A cardiovascular check-up and individual risk profile (heart passport) offered by GaleniCare in its pharmacies in coop-eration with the Swiss Heart Foundation.

careINDEX®

_A fully compatible database designed to meet the needs of care or nursing homes and home care services. It supports electronic invoicing of service providers; developed and sold by e-mediat.

CAS (Certificate of Advanced Studies)_In-service professional development programme targeted at university graduates. Upon completion of the course, a certificate is awarded by the participating university.

Case management_A form of organised assistance given to employees to meet their individual needs in the event of inability to work due to illness or injury.

CellCept_A drug developed by Roche for the treatment of rejection reactions following organ transplants. Vifor Pharma holds the global rights (excluding Japan) to develop and market this drug for all applications involving autoimmune diseases.

Certified general pharmacist_Pharmacist who manages or works in a dispensary.

Change management_All tasks, actions and activities designed to bring about comprehensive and radical change in a company in order to implement new strategies, structures, etc.

CHMP_Committee for Medicinal Products for Human Use (CHMP) at the European Medicines Agency (EMA). The CHMP prepares the opinions of the EMA and deals with the approval and risk assessment of medicines that are used to treat humans and that require EU-wide approval.

Chronic Kidney Disease (CKD)_A slow, progressive loss of renal function, over months or years.

Chronic Obstructive Pulmonary Disease (COPD)_Collective term for a group of pulmonary diseases. Some-times referred to colloquially as “smoker’s lung”.

CIS_Clinical Information System: a module that supports electronic drug prescription in hospitals on the basis of hospINDEX® data.

Climate disclosure scoring_Indicates the completeness of reporting to the Carbon Disclosure Project and the usefulness of the data.

Clinical development/clinical studies_Trials carried out as part of the development process for new drugs in which the drugs are extensively tested as to their efficacy and safety. The clinical study programme is broken down into several phases.

Coaxial_Galenica efficiency improvement programme in which various IT infrastructures in the Logistics, Retail and Health-Care Information Business sectors are standardised and consolidated in a data centre in Niederbipp.

Code of Conduct_A collection of the principles of conduct that are to be fol-lowed in specific situations and consequently promote uni-form conduct by groups of individuals within the corporation.

Cognitive disorder_Disruption of the processing of sensory impressions (as in hyperactivity) that may lead to learning difficulties, inat-tentiveness, etc.

COMCO_The Swiss Competition Commission.

Comité des Jeunes_A Galenica advisory committee composed of young staff members from the Galenica Group.

compendiumPORTAL_New editorial system for the Swiss Drug Compendium (Arzneimittel-Kompendium der Schweiz®); developed and distributed by Documed.

Compliance_The willingness of patients to follow medical instructions. With regard to taking medications, following a diet or making lifestyle changes, compliance is particularly important for individuals suffering from chronic diseases or psychological disorders.

CONFIRM-HF_Vifor Pharma study investigating the effect of intravenously administered ferric carboxymaltose in patients with chronic heart failure and iron deficiency.

Consumer Healthcare Products_Non-pharmaceutical healthcare products sold directly to the consumer in pharmacies and drugstores (OTC), for exam-ple Anti-Brumm®.

Content management_The development and digital management of content from initial creation to archiving or deletion.

Corporate Management Development (CMD)_CMD includes all the staff development activities that Galenica offers to employees and managerial staff.

GLOSSARYSpecialised terms and expressions used by Galenica

Galenica annual report 2013 · Glossary _165

Cystic fibrosis_Cystic fibrosis, also known as mucoviscidosis, is a congeni-tal metabolic disease that causes chronic coughing and fre-quent lung infections due to viscous mucus in the bronchial tubes.

Cytostatics_Naturally occurring or artificially produced substances that inhibit cell growth and division. Used primarily in the treat-ment of cancer (chemotherapy) or autoimmune diseases.

Data warehousing_The management and evaluation of stored data.

Decentralised procedure_A specific drug authorisation process in Europe.

Defibrillator_Device for treating life-threatening abnormal heart rhythms, ventricular fibrillation and ventricular flutters.

Dermatology_The branch of medicine that deals with the diagnosis, treat-ment and care of patients with non-infectious and infectious skin diseases as well as benign and malignant skin tumours.

Dextran, dextran-free_Dextrans are branched, neutral polysaccharides with a high molecular weight that are used by yeasts and bacteria as storage substances.

Dialysis_A blood cleansing process used in cases of kidney failure, also called haemodialysis.

Diavita_An exclusive service provided by Amavita pharmacies specifically to diabetics; includes therapy support enabling patients to have their blood sugar levels checked and docu-mented, for example.

Dicynone®

_Synthetic drug for the prevention and treatment of capillary haemorrhages, a circulatory disorder; developed and mar-keted by OM Pharma.

Direct Healthcare Professional Communication (DHPC)_Risk information provided to medical professionals.

Dispensing check_A service provided by pharmacists as defined by the ser-vice-based remuneration (SBR) agreement, which requires pharmacists to keep patient files.

Doxium®

_Synthetic drug to normalise capillary permeability and improve venous blood flow; developed and marketed by OM Pharma.

DRG (diagnosis-related groups)_Economic and medical classification system used to deter-mine flat-rate payments for hospital treatment.

EDTA_European Dialysis and Transplant Association.

EEV emission standard_The voluntary EEV emission standard (Enhanced Environ-mentally Friendly Vehicle) is an emission standard for vehi-cles that produce lower emissions than the currently valid Euro 5 emission standard without increased fuel consump-tion.

eHealth_A general term for IT-supported networking efforts in the healthcare industry.

EMA (European Medicines Agency)_Agency responsible for the assessment and monitoring of medications in the European Union. Plays a central role in the authorisation of medications in the European Union and the member states of the European Economic Area. The European Commission approves or rejects marketing author-isation applications based on the EMA’s scientific evaluation.

e-MED_Electronic prescription software designed to enhance pa-tient safety in the medication process. The pilot project at the Bern University Hospital in cooperation with e-mediat was successfully completed in 2009.

eMedication_Electronic access for doctors, pharmacies and hospitals to a platform containing information on medication for patients.

EnAW_Energy Agency for the Industry (Energie-Agentur der Wirtschaft).

EPO (erythropoietin)_A hormone that promotes the formation of red blood cells. Classified as an erythropoiesis-stimulating agent (ESA).

Equazen eye q™

_A nutritional supplement designed to improve cognitive functions, based on omega-3 and omega-6 fatty acids derived from fish oils.

Equazen QI™

_The brand name used in French-speaking Switzerland for Equazen eye q™.

ERS (European Respiratory Society)_Society which researches respiratory diseases and pro-motes lung health.

Erythropoiesis_Process by which red blood cells (erythrocytes) are pro-duced.

ESA (erythropoiesis-stimulating agents)_Group of hormones that promote the formation of red blood cells, the most important of which is EPO (erythropoietin).

EVE (EVEnts)_A series of professional development events for members of senior management and management (MDI and MKA) of the Galenica Group organised within the framework of the company’s Corporate Management Development (CMD) programme.

Extended-release form (or sustained-release form)_A dosage form in which the pharmaceutical substance is released slowly over an extended period.

Extended sales service (ESS)_Service for pharmaceutical companies offered by the Lo-gistics Business sector that supplies a local field sales force and manages sales promotion.

FAB (management training)_A series of professional development events for members of senior management and management (MDI and MKA) of the Galenica Group offered within the framework of the com-pany’s corporate management development (CMD) pro-gramme.

FAIR-HF study_Ferinject® Assessment in patients with IRon deficiency and chronic Heart Failure; a major, multi-centre, randomised, double-blind, placebo-controlled study that examined whether correction of iron deficiency with Ferinject® could improve patient health.

FCOS (Federal Coordination Commission for Occupational Safety)_Central information and coordination authority for occupa-tional safety and health. Coordinates preventative measures, responsibilities for enforcement and the uniform application of regulations in Switzerland.

FDA_The US Food and Drug Administration; the agency in the US that regulates drugs.

FERGI-COR study_FERinject® in GastroIntestinal disorders to CORrect iron deficiency; a major, multi-centre, randomised, prospective, comparative, open Phase III study that examined the effi-cacy, tolerability and safety of a simplified and standardised dosing scheme of Ferinject® in the correction of iron defi-ciency anaemia in patients with inflammatory bowel dis-ease.

FERGI-MAIN study_A follow-on from the FERGI-COR study.

Ferinject®

_An innovative iron replacement product for the intrave-nous treatment of iron deficiency; developed and produced by Vifor Pharma.

FERRIM study_A randomised, multi-centre, double-blind, placebo-con-trolled Phase III study in non-anaemic patients with iron deficiency and fatigue symptoms. The first study to investi-gate whether correction of iron deficiency with Venofer® is beneficial to patients with iron deficiency and fatigue symptoms.

Film-coated tablet_A tablet coated with only a single thin film. Unlike a sugar-coated tablet, a film-coated tablet is coated with a polymer rather than sugar.

FIND-CKD study_A clinical study examining the benefits of Ferinject® over oral iron replacement products for the treatment of anaemia in patients with Chronic Kidney Disease (without dialysis).

Footprint_The term environmental footprint defines how much of the Earth’s surface it would take to support humanity over the long term with a given lifestyle and standard of living.

FPH_FPH, which stands for Foederatio Pharmaceutica Helvetiae (Swiss Association of Pharmacists), is also a professional title used in general and clinical pharmacy in Switzerland that is analogous to the FMH title for physicians.


galdat®

_A commercial and scientific database of around 200,000 pharmaceutical and non-pharmaceutical products. It in-cludes reference data in a standardised and uniform struc-ture for all IT systems in the Swiss healthcare industry – for pharmacies, physicians, hospitals and health insurers; galdat® forms the basis of all INDEX products. Developed and sold by e-mediat.

GALecoline®

_The brand name of a line of products from Galexis.

GAL e-Learn_An online training platform for customers (particularly pharmacies); developed and distributed by Galexis.

Galenics_Pharmaceutical technology for preparing the dosage form of medications (e.g. tablets or injection solutions).

Gastroenterology_The branch of internal medicine that deals with the gastro-intestinal tract or digestive system.

Generic_A drug that contains the same active ingredient as a brand-name pharmaceutical product (originator product) already on the market. Generics can differ from the originator products with respect to non-active ingredients and manufacturing technologies.

GEP (Galenica Economic Profit)_An internally defined parameter used in capital manage-ment and capital employment based on income components, free cash flow components and invested capital. The goal of the Galenica Group is to achieve a sustainable increase in GEP in all Business sectors.

Global Compact_An international initiative of the United Nations and partici-pating corporations established to achieve socially responsi-ble and environmentally compatible globalisation.

Global Reporting Initiative (GRI 3)_An international organisation established by investors and environmental organisations in partnership with the United Nations Environment Programme (UNEP); it develops guide-lines, through a participatory process, for the preparation of sustainability reports by companies, governments and NGOs.

Good Distribution Practice (GDP)_Guidelines for good logistics practice followed by Switzer-land, the EU and the FDA for quality assurance in the storage, handling and shipment of pharmaceuticals, active sub-stances and other medicinal products.

Good Manufacturing Practice (GMP)_Guidelines issued by the EU and the FDA for quality assur-ance in the production of pharmaceuticals, active substances and other medicinal products.

Green Code of Conduct_Internal guidelines aimed at promoting ecological behav-iour (Code of Conduct).

Gynaecology_The branch of medicine concerned with women’s health issues.

Haematology_The branch of medicine concerned with the physiology, pathophysiology and diseases of the blood and blood-form-ing organs. It includes, for example, malignant blood diseases and diseases of the bone marrow.

Haemodialysis_A blood cleansing process used in the treatment of kidney diseases.

Haemoglobin_Iron-rich protein that transports oxygen; found in the red blood cells.

Health2020_Overview of the “Federal Council’s Health Policy Priorities”.

Health and Social Care Bill_Proposal to reform the UK healthcare system.

Heart failure_Heart failure can lead to impaired performance in persons affected due to a lack of oxygen and blood supply to the or-gans.

HMO_Health Maintenance Organizations.

Home nurses_Qualified nursing professionals with specific additional training in home nursing; a form of patient care offered by MediService in conjunction with Pharma Care.

hospINDEX®

_A medical database for all processes such as logistics, invoicing and prescription that replaces galdat® in hospitals; developed and distributed by e-mediat.

Hyperactivity_Excessively active behaviour that cannot be adequately controlled by the person affected. Also referred to as atten-tion deficit disorder (ADD).

Hypertension_High blood pressure.

Hypotension_Low blood pressure.

IAS 19_New accounting requirements for employee benefits.

Ibuprofen_An active ingredient that relieves pain, reduces fever and is anti-inflammatory.

Identa_Image database created to simplify the identification of medicines, compiled and distributed by Documed.

IFRS_International Financial Reporting Standards.

Immunology_The science concerned with the biological and biochemical principles of the body’s defence against pathogens, such as bacteria, viruses and fungi, and other foreign substances such as biological poisons.

Immunoprophylaxis_The prevention of infectious diseases via the stimulation of the immune system.

IMS Health_An international consulting and market research company based in Hergiswil, Switzerland, that is active in the pharma-ceutical sector.

Indication_A reason for a medical treatment or procedure.

Inflammatory bowel disease (IBD)_Inflammation of the digestive tract.

Injectafer®

_Brand name of Ferinject® in the US and Belgium.

insureINDEX®

_A database for cost units in the healthcare sector that replaces galdat® in health insurance companies; developed and distributed by e-mediat.

Intravenous (iv)_A term referring to the administration of a medication or a liquid directly into a blood vessel.

Iron deficiency anaemia_Anaemia due to iron deficiency: the production of haemo-globin, the red pigment in the blood, is disrupted by the lack of iron. Iron deficiency anaemia is the most common form of anaemia throughout the world. According to the World Health Organization (WHO), two billion people suffer from iron deficiency anaemia worldwide.

Iron deficiency syndrome_A mild form of iron deficiency characterised by symptoms such as fatigue and exhaustion, irritability, paleness and brittle nails.

ISS (Iron Sucrose Similar)_Intravenous iron sucrose is used to treat iron deficiency. Copies of the complex structure of iron sucrose are called iron sucrose similars (ISSs).

Jarsin®

_A plant-based antidepressant that is also prescribed in-creasingly for mild forms of multiple sclerosis; developed, produced and sold by Vifor Pharma.

KAV guidelines_Guidelines of the Swiss Association of Cantonal Pharma-cists.

Key Performance Indicator (KPI)_A measurement of performance in terms of progress made or level of achievement with regard to important objectives.

Kidney Disease: Improving Global Outcome (KDIGO)_Global foundation to improve the care and treatment out-comes of patients with kidney disease worldwide.

Kinderdosierungen.ch_Website for the Children’s Hospital in Zurich, which con-tains reliable dosage data for children for around 330 active substances in 3,000 data sets; developed with the support of Documed and e-mediat.


Life cycle management_Refers to a strategic concept for managing a product throughout its entire life cycle.

Lipids_General term for natural substances that are insoluble in water such as fatty acids, fats and oils. This group also in-cludes the omega-3 and omega-6 unsaturated fatty acids, which are the active ingredients of Equazen eye q™.

logINDEX®

_Database for wholesalers in the Swiss healthcare industry which contains information on approximately 180,000 items. Developed by, and available through, e-mediat.

LoRe_The internal Galenica LoRe (Logistics-Retail) project should improve product availability. It also aims to give pharmacy employees more time for customer service.

LTI programme (long-term incentive programme)_Share-based profit-sharing bonus programme for members of the Corporate Executive Committee and certain members of management.

Lupus nephritis_Inflammation of the kidneys as the result of a systemic autoimmune disease.

Magnesium® Vital_A magnesium replacement product for cramps in the calf muscles; developed and distributed by Vifor Pharma.

Maltofer®

_An oral iron replacement product for the treatment of iron deficiency that is sold worldwide; developed and produced by Vifor Pharma.

Managed Care_A healthcare management model. The Managed Care model incorporated into the revision of the Swiss Federal Health Insurance Act is intended to promote integrated healthcare networks and improve ability to offset risk.

MDI_Member of senior management of the Galenica Group.

Medical affairs_A general term covering the following activities: contact with physicians who are opinion leaders, planning and coor-dination of clinical trials, interface between marketing and medicine, medical-scientific training and continuing educa-tion for sales representatives.

Medical technology_Equipment and technical procedures used in medical prac-tices and laboratories.

Medication check_A service provided by pharmacists under the service-based remuneration (SBR) agreement; includes remunera-tion for checking prescriptions, checking for interactions (compatibility with other medications), writing instructions for use, etc.

medINDEX®

_A medical database that replaces galdat® in medical prac-tices; developed and sold by e-mediat.

mediVISTA.ch_Web-based information platform for doctors in private practice and those working in hospitals which complements medINDEX®.

Meningitis_Inflammation of the membranes covering the brain and spinal cord.

Mg5®

_An oral magnesium replacement product for the treatment of magnesium deficiency; distributed by Vifor Pharma.

MHRA (Medicines and Healthcare Products Regulatory Agency)_Licensing and regulatory body for medicines in the UK.

Minergie standard_Minergie is the main energy standard in Switzerland for low energy buildings.

MKA_Member of the management of the Galenica Group.

Mutual recognition procedure_Procedure that allows member states of the European Union to approve decisions about a medicinal product, such as a marketing authorisation, that have been decided by another EU country.

my-eDossier_Pharmaceutical database with information about a patient’s drug therapy which is part of the pharmacy management tool TriaPharm®.

Nasmer®

_A moisturising nasal spray produced and distributed by Vifor Pharma.

NDA (New Drug Application)_The NDA is the official means by which manufacturers of pharmaceutical products in the USA apply to the FDA for approval to market a drug in the USA.

ND-CKD_Non-dialysis-dependent Chronic Kidney Disease.

Nephrology_The branch of medicine dealing with the kidney and with the diagnosis and treatment of kidney diseases.

netCare_A project initiated by pharmaSuisse, the Swiss pharmacy association, and a health insurer, whereby physicians can speak to pharmacists and patients via a screen.

Neurology_The branch of medicine concerned with diseases of the nervous system.

Noripurum®

_Brand name of the oral iron replacement product Maltofer® in Brazil.

Nova_An invoicing system for Galexis customers.

OID (object identifiers)_Unique numerical codes that permit objects to be identified simply. OIDs are useful when creating electronic registers for eHealth systems.

OLPCockpit_Payment control function of the pharmacy management tool TriaPharm®.

OLPFact_Function of the pharmacy management tool TriaPharm® that supports invoicing to health insurers.

Omega-3 and omega-6-fatty acids_Unsaturated fatty acids that are essential for human life and are found in substances such as fish oils.

Onco-haematology_The branch of medicine concerned with cancers that affect the blood system.

Oncology_The branch of medicine that deals with cancer.

Ophthalmology_The branch of medicine concerned with the anatomy, func-tions, pathology and treatment of the eye.

OPINIO_The Galenica Group employee survey.

Oral_A term referring to a medication ingested through the mouth.

Osteoporosis_A disease (of old age) involving a greater vulnerability to bone fracture due to an overly rapid reduction in bone mass; often associated with calcium deficiency.

Otalgan®

_A product for the treatment of earache and inflammation of the eardrum; produced and distributed by Vifor Pharma.

OTC_Over the counter, a term used to refer to medicines available without a prescription (Consumer Healthcare Products).

OTX_OTX medications are drugs which are not prescription-only, but are nonetheless largely prescribed by doctors; they are not always reimbursed by health insurers.

Parapharmaceuticals_Products such as wound dressings that are sold along with pharmaceuticals but do not meet the legal definition of a pharmaceutical.

Parcel Service_Transport of parcels to and between Galexis customers, performed along with regular deliveries by Galexis.

Parenteral_A term referring to administration of a medicine by a route other than the gastrointestinal tract; generally by infusion (such as with Venofer®), injection, through the skin (trans-dermal) or mucous membranes.

Patient Protection and Affordable Care Act, ACA_US law (also known as Obamacare).

Pemphigus vulgaris_An autoimmune disease in which the immune system produces antibodies against certain proteins of the skin and the mucous membranes.

PEP (Personaleinsatzplanung)_Staff resource planning: New IT system for recording time and planning staff resources in pharmacies.


Performance units_Performance-related measurement unit used in the long-term incentive programme.

Perskindol®

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

Pharma Care_Comprehensive medical in-home care of patients with chronic and rare diseases; provided by MediService.

Pharmacovigilance _Stands for the ongoing, systematic monitoring of the safety of a drug with the objective of identifying and assessing any undesirable effects in order to take measures to minimise the risk.

pharmavista_An Internet-based product information platform developed and sold by e-mediat.

Photovoltaic plant_Solar power plant in which some of the sun’s rays are con-verted to electrical energy using solar cells.

Phytopharmacy_The science that deals with the effects and manufacture of plant-based pharmaceuticals.

Pick-by-light system_Logistics system in which a beam of light guides staff work-ing in order picking to the location where they can collect the product.

Pick-by-voice system_Logistics system in which a voice guides staff working in order picking to the location where they can collect the product.

Polymedication check_A compliance-related check by the pharmacist to ascer-tain whether various medicines being taken simultaneously by the patient are tolerated in combination.

Predialysis_The stage of renal insufficiency prior to commencement of dialysis.

PREFER study_Clinical study with Ferinject® in women with iron defi-ciency without anaemia which aims to confirm the results of the FERRIM study in a larger number of patients.

Prewholesale_The prewholesaler operates the warehouse logistics based on the guidelines of the producer at the producers expenses. In other words: warehouse logistics are being outsourced. For example, Alloga in the Galenica Group.

Process management_The design and management of entire processes.

Promologistics_A logistics system for pharmaceutical companies’ promo-tional materials; marketed by Galexis.

RefData_Independent foundation promoting low-cost, socially re-sponsible and economically relevant referencing of products, services, people and institutions.

Regulatory affairs_A general term for the activities that are required in order to obtain approval from the authorities for the development, manufacture, marketing and distribution of pharmaceuticals.

Renegy®

_Brand name of Ferinject® in Latin American countries.

Rheumatology_The branch of medicine dealing with the diagnosis and treatment of chronic diseases which mostly become evident through musculoskeletal pain.

RHI_Regional Medicines Inspectorate (Regionales Heilmittelins-pektorat).

Roll-out_The market launch of a product or service. The term refers primarily to technical applications.

Rx_A designation for prescription drugs or medicines.

SAM (special staff training)_A series of training seminars for new employees focused on processes and personal development, offered within the framework of the Corporate Management Development (CMD) programme.

SDC (Swiss Agency for Development and Cooperation)_Swiss federal authority responsible for the country’s involvement in international collaborations, development activities and humanitarian assistance. Administratively subordinate to the Federal Department of Foreign Affairs.

SECO (State Secretariat for Economic Affairs) _The State Secretariat for Economic Affairs is responsible for creating the regulatory and economic policy conditions for sustainable economic growth. SECO is an office of the Federal Department of Economic Affairs.

Self-dispensation_Direct dispensation of medicines by physicians.

Serum ferritin_Iron content in the blood.

Serum phosphorus level_Concentration of phosphorus in the blood.

Service-based remuneration (SBR)_The agreement between santésuisse (the Swiss Associa-tion of Health Insurers) and pharmaSuisse (formerly the Schweizerische Apothekerverband – the Swiss Association of Pharmacists), under which a pharmacy’s income is no longer linked to the product price.

Sevelamer_An active ingredient from the phosphate binder group, which is used in dialysis patients with hyperphosphataemia to bind dietary phosphates.

Specialty Pharma, a strategic area_The strategic focus by the Galenica Group on the develop-ment, production and sale of its own medicines in interna-tional markets, particularly products for iron deficiency, as well as its own infectious diseases/OTX and OTC products.

Surgery_The branch of medicine that uses operative manual or in-strumental techniques on a patient to treat diseases and injuries.

SwissDocu®

_A service that provides information on products and on scientific and non-scientific questions from pharmacies and drugstores; operated by e-mediat.

Swiss Drug Compendium (Arzneimittel-Kompendium der Schweiz®)_A standard reference work for medical professionals that contains extensive technical product information; developed and marketed by Documed.

Swiss HealthCare Services, a strategic area_The focus by the Galenica Group on a business model providing services for the Swiss healthcare market. This model integrates the Amavita, Sun Store, Coop Vitality, MediService and Winconcept pharmacy formats, logistics services and information management.

Swissmedic_The Swiss Agency for Therapeutic Products; the regulatory agency for medicines and medical devices based in Bern. No pharmaceutical products for humans or animals may be marketed in Switzerland until they have been licensed by Swissmedic. All clinical trials in Switzerland must also be approved by Swissmedic.

Symfona®

_A gingko-based product for the treatment of age-related impaired cerebral blood flow, for enhancing the power of concentration and for increasing memory retention; devel-oped and distributed by Vifor Pharma.

Tecfidera® (BG-12)_Medication produced by Biogen Idec for the treatment of relapsing-remitting multiple sclerosis and rheumatoid arthri-tis. Manufactured by Vifor Pharma in Switzerland under con-tract.

Technical interest rate_Interest rate for discounting pension reserves.

Telemedicine_Medical diagnosis and therapy via telecommunications.

Third party logistics service_Extensive offering that enables customers and suppliers to transfer their logistics (both bulk and dispersion) to the Lo-gistics Business sector.

Top Homecare_A sales and consulting concept in the homecare area for pharmacies and drugstores; developed and marketed by Galexis.

Toxicity profile_Profile of the toxicity of a substance. Determinations of toxicity are generally made in animal studies.

Track’n’Trace_IT-based tracking and tracing of deliveries.

Transdermal_A type of treatment (generally patch systems) in which the active ingredient is absorbed through the skin.

TriaMed®

_A management software solution for medical practices; developed and marketed by HCI Solutions.


TriaMed® Box_A small computer, fully preconfigured with TriaMed®. An entry product launched by HCI Solutions.

TriaMed TS®

_Management software for medical practices which runs via an external server of HCI Solutions; developed and sold by HCI Solutions.

TriaOne®

_Integrated administrative solution with complete coverage of all necessary functionalities of a company (ERP); based on the former product Arizona, developed by BMC.

TriaPharm®

_A management software solution for pharmacies; devel-oped and marketed by HCI Solutions.

TriaScan®

_Expansion software from TriaPharm® to scan in and digitalise prescriptions; developed and marketed by HCI Solutions.

Triofan®

_Nasal spray for colds, the leading product of its type in Switzerland; produced and sold by Vifor Pharma.

Ulcerative colitis_Ulcerative colitis is a form of chronic inflammatory bowel disease that affects the rectum and large intestine.

Uro-Vaxom®

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

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

Velphoro® (PA21)_Iron-based phosphate binder used to control serum phos-phorus levels in patients with dialysis-dependent Chronic Kidney Disease (CKD). Developed and produced by Vifor Pharma; distributed by Vifor Fresenius Medical Care Renal Pharma.

Venofer®

_An intravenous product for the treatment of iron defi-ciency; developed and produced by Vifor Pharma and sold worldwide.

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

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

Warehoused cosmetics_Cosmetics (particularly perfumery products) distributed through specialist shops or specialist sections of depart-ment stores.

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

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

WTO_The World Trade Organization is an international organi-sation headquartered in Geneva, that regulates trade and economic relations.

170_ Notes · Galenica annual report 2013

NOTES

Galenica annual report 2013 · Notes _171

NOTES

Galenica Group

Galenica Ltd.Untermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 81 11, fax +41 58 852 81 12www.galenica.com

Sigal AGUntermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 81 11, fax +41 58 852 85 35

Pharma

HeadquarterVifor Pharma Ltd.Flughofstrasse 61, P.O. Box, 8152 Glattbrugg, SwitzerlandPhone +41 58 851 80 00, fax +41 58 851 80 01www.viforpharma.com

ArgentinaVifor Pharma America Latina S.A.Los Crisantemos 265, Edificio SkyglassPiso 2 Oficina 306, Del Viso, PilarProvincia de Buenos Aires, CP (1669), Argentina Phone +54 2320 477200 fax +54 2320 477200251www.viforpharma.com

Asia/PacificVifor Pharma Asia Pacific Pte. Ltd.89 Amoy Street, 01–00 Singapore 069908Phone +65 6327 5937, fax +65 6327 5936www.viforpharma.sg

AustraliaVifor Pharma Pty Ltd. Level 8, 80 Dorcas Street, Southbank, Melbourne, VIC, 3006, AustraliaPhone +61 3 96 86 0111, fax +61 3 96 86 0333www.viforpharma.com.au

AustriaVifor Pharma Österreich GmbHLinzerstrasse 221, 1140 Wien, AustriaPhone +43 1 41 64 777, fax +43 1 41 64 777 17www.viforpharma.at

BelgiumVifor Pharma België N.V.Uitbreidingstraat 84, 2600 Antwerpen, BelgiumPhone +32 3218 2070, fax +32 3218 2208www.viforpharma.com

CanadaAspreva International Ltd.1203–4464 Markham Street, Victoria BC V8Z 7X8, CanadaPhone +1 250 744 2488, fax +1 250 744 2498www.viforpharma.com

ChinaVifor Pharma Asia Pacific Pte. Ltd.Beijing Representative OfficeUnit 1201-30, China Resources Building8 Jianguomenbei AvenueDongcheng District, Beijing 100005, ChinaPhone +86 10 5811 1891 fax +86-10-5811 1999www.viforpharma.com

FranceVifor France SA7–13, Boulevard Paul-Emile Victor, 92521 Neuilly-sur-Seine cedex, FrancePhone +33 1 41 06 58 90, fax +33 1 41 06 58 99www.viforpharma.com

GermanyVifor Pharma Deutschland GmbHBaierbrunner Strasse 29, 81379 Munich, GermanyPhone +49 89 324 918 600 fax +49 89 324 918 601www.viforpharma.de

ItalyVifor Pharma Italia S.r.LRegus Business CentreVia Luca Gaurico 9/1100143 Rome, ItalyPhone +39 06 5483 1, fax +39 06 5483 4000www.viforpharma.com

NetherlandsVifor Pharma Nederland B.V.Westbroek 43, NL-4822 ZX Breda, NetherlandsPhone +31 88 848 43 00, fax +31 88 848 43 19www.viforpharma.com

PeruOM Pharma S.A.Jr. Rey Basadre 385, Lima 17 – Apartado 3605Lima 100, PeruPhone +51 1 61 68 100, fax +51 1 61 68 199www.viforpharma.pe

PortugalOM Pharma S.A.Rua Industria n°2, Quinta Grande, 2610-088 Amadora – Lisboa, Portugal(Apartado 60 001 – 2701-951 Amadora)Phone +351 21 470 85 00, fax +351 21 470 85 06www.ompharma.pt

RomaniaVifor Pharma Romania Srl.34, C. Brancoveanu Str., 400467 Cluj-Napoca, RomaniaPhone +40 264 449 556, fax +40 264 550 230www.viforpharma.ro

RussiaVifor (International) Inc.44, 3rd Tverskaya-Yamskaya St., 125047 Moscow, RussiaPhone +7 495 564 82 66, fax +7 499 251 58 08www.viforpharma.ru

SpainVifor Pharma España SLAv. Cami Reial, 51–57, 08184 Palau-Solità i Plegamans, Barcelona, SpainPhone +34 902 471 511, fax +34 93 863 05 58www.viforpharma.es

SwedenVifor Pharma Nordiska ABTorshamnsgatan 30 A, 164 40 Kista, SwedenPhone +46 8 558 066 00, fax +46 8 558 06 699www.viforpharma.se

SwitzerlandAspreva Pharmaceuticals Ltd.Untermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 81 11, fax +41 58 852 81 12www.viforpharma.com

OM Pharma Ltd.22, rue du Bois-du-Lan, P.O. Box 88, 1217 Meyrin 2, SwitzerlandPhone +41 22 783 11 11, fax +41 22 783 11 22www.viforpharma.com

Vifor Ltd.10, route de Moncor, P.O. Box, 1752 Villars-sur-Glâne, SwitzerlandPhone +41 58 851 61 11, fax +41 58 851 60 50www.viforpharma.ch

_ Vifor Ltd. Branch Medichemie Ettingen Brühlstrasse 50, P.O. Box, 4107 Ettingen, Switzerland Phone +41 58 851 22 00 fax +41 58 851 22 05 www.viforpharma.com

Vifor Fresenius Medical Care Renal Pharma Ltd.Rechenstrasse 37, P.O. Box, 9001 St. Gallen, SwitzerlandPhone +41 58 851 84 84, fax +41 58 851 84 88

Vifor (International) Ltd.Rechenstrasse 37, P.O. Box, 9001 St. Gallen, SwitzerlandPhone +41 58 851 84 84, fax +41 58 851 84 88www.viforpharma.com

United KingdomVifor Pharma UK LimitedPotters Division1 Botanic Court, Martland Park, Wigan, WN5 0JZ, UKPhone +44 1942 219 960, fax +44 1942 219 966www.pottersherbal.co.uk

Vifor Pharma UK LimitedThe Old Stables, Bagshot Park, Bagshot, Surrey GU19 5PJ, UKPhone +44 1276 853 600, fax +44 1276 452 341www.viforpharma.co.uk

USAAspreva Pharmaceuticals Inc.106 Allen Road, Basking Ridge, NJ 07920, USAPhone +1 908 212 1020, fax +1 908 212 1029www.viforpharma.com

Logistics

Alloga Ltd.Buchmattstrasse 10, P.O. Box, 3401 Burgdorf, SwitzerlandPhone +41 58 851 45 45, fax +41 58 851 46 00www.alloga.ch

Dauf SAVia Figino 6, 6917 Barbengo-Lugano, SwitzerlandPhone +41 91 985 66 11, fax +41 91 985 66 67www.dauf.ch

Galexis Ltd.Industriestrasse 2, P.O. Box, 4704 Niederbipp, SwitzerlandPhone +41 58 851 71 11, fax +41 58 851 71 14www.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, case postale 135, 1024 Ecublens, Switzerland Phone +41 58 851 51 11 fax +41 58 851 51 51

G-Pharma AGIndustriestrasse 2, P.O. Box, 4704 Niederbipp, SwitzerlandPhone +41 58 851 71 11, fax +41 58 851 72 57

Medifilm AGOstringstrasse 10, 4702 Oensingen, SwitzerlandPhone +41 62 369 40 45, fax +41 62 396 40 47www.medifilm.ch

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

Retail

Amavita Health Care Ltd.Industriestrasse 2, 4704 Niederbipp, SwitzerlandPhone +41 58 851 71 11, fax +41 58 851 71 14

Coop Vitality Health Care GmbHIndustriestrasse 2, 4704 Niederbipp, SwitzerlandPhone +41 58 851 71 11, fax +41 58 851 71 14

GaleniCare Ltd.Untermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 84 00, fax +41 58 852 84 84www.galenicare.com

GaleniCare Holding Ltd.Untermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 84 00, fax +41 58 852 84 84www.galenicare.com

GaleniCare Management Ltd.Untermattweg 8, 3027 Bern, Switzerland Phone +41 58 852 84 00, fax +41 58 852 84 84www.galenicare.com

MediService Ltd.Ausserfeldweg 1, 4528 Zuchwil, SwitzerlandPhone +41 32 686 20 20, fax +41 32 686 20 30www.mediservice.ch

Sun Store SA38, rue des Jordils, 1025 St-Sulpice, SwitzerlandPhone +41 21 694 21 00, fax +41 21 694 21 01www.sunstore.ch

Winconcept AGUntermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 82 00, fax +41 58 852 82 10www.winconcept.ch

Not fully consolidated:

Coop Vitality AGUntermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 86 20, fax +41 58 852 86 30www.coopvitality.ch

ADDRESSES OF COMPANIES OF THE GALENICA GROUP

Status: March 2014


Documed Ltd.Elisabethenanlage 11, 4010 Basel, SwitzerlandPhone +41 58 851 21 11, fax +41 58 851 21 15www.documed.ch

e-mediat Ltd.Untermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 851 26 00, fax +41 58 851 27 10www.e-mediat.ch

_ e-mediat Ltd.

Bureau de référencement 17, rue des Pierres de Niton, 1207 Genf, Switzerland Phone +41 58 851 28 00 fax +41 58 851 28 09 www.medwin.ch

HCI Solutions Ltd.Untermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 851 26 00, fax +41 58 851 27 10www.hcisolutions.ch

_ HCI Solutions Ltd. Department TriaMed® Worbstrasse 201, 3073 Gümligen, Switzerland Phone +41 31 950 05 00 fax +41 31 950 05 99 www.hcisolutions.ch

_ HCI Solutions Ltd. Department TriaPharm® Worbstrasse 201, 3073 Gümligen, Switzerland Phone +41 31 950 05 00 fax +41 31 950 05 99 www.hcisolutions.ch

_ HCI Solutions Ltd.

Department TriaPharm® En Budron H16, 1052 Le Mont-sur-Lausanne, Switzerland Phone +41 21 654 50 50 fax +41 21 654 50 51 www.hcisolutions.ch

Personnel pension funds

Galenica Pension FundUntermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 87 00, fax +41 58 852 87 01www.galenica-pvs.ch

GaleniCare Pension FundUntermattweg 8, 3027 Bern, SwitzerlandPhone +41 58 852 87 00, fax +41 58 852 87 01www.galenicare-pvs.ch

Galenica Ltd.Untermattweg 8 · P.O. Box · CH-3001 BernPhone +41 58 852 81 11 · Fax +41 58 852 81 [email protected] . www.galenica.com

Contact person for Investor Relations: Jörg Kneubühler, CFO, Head Investor Relations, [email protected] Person for Media: Christina Hertig, Head Corporate Communications, [email protected] Person for Shareholders: Andreas Walde, General Secretary, [email protected]

_The annual Report is also available in French and German und can be downloaded as a PDF at www.galenica.com.

Impressum

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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

Corporate Communications and Corporate Finance Division

Text: IRF Communications, Zurich

Translation: CLS Communication AG, Basel

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