avatar RECIPHARM LIMITED Manufacturing


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    Annual report 2008

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    2 | CONTENTS Contents Recipharm in brief 3 Administration report 32 CEO statement 4 Proposed disposition of earnings 33 Vision, mission, objectives and strategies 7 Risks 34 Business model 8 5-year summary 35 Growth and aquisitions 9 Consolidated income statement 36 The Recipharm story 10 Consolidated balance sheet 37 Market 13 Consolidated cash flow statement 39 Services 16 Parent company income statement 40 Customers 19 Parent company balance sheet 41 Customer case 20 Parent company cash flow statement 43 Operations 23 Accounting policies and notes 44 Sustainability 25 Auditor’s report 55 Organisation and management 27 Board of Directors 56 Personnel 28 Work of the Board of Directors 57 Group Management 58 “Recipharm’s vision is to be acknowledged as the best-in-class provider of contract development and manufacturing solutions to the pharmaceutical industry” The annual report is prepared in Swedish and translated into English. In the event of differences between the Swedish version and the English translation, the Swedish version prevails.

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    RECIPHARM IN BRIEF | 3 Recipharm in brief INTEGRATED SOluTION PROVIDER WIDE CuSTOMER BASE Recipharm offers a wide range of integrated solutions, Recipharm has a wide customer base, with companies of incorporating advanced technological expertise and cap- different types and sizes; big pharma as well as specialty acity for pharmaceutical development and manufacturing. and virtual companies. MANuFACTuRING SERVICES SERVICE-ORIENTED ORGANISATION Recipharm supplies more than 1,500 different product Recipharm offers an entrepreneurial organisation with presentations in more than 200 product groups to flexibility, local adaptation and customer focus. pharmaceutical companies worldwide. the year in brief key ratios • Recipharm increased its operating margin to 2008 2007 4.1% (1.7%) Net sales, SEKm* 1,422.9 924.2 • Acquisition of aseptic filling and lyophilisation business in Basel, Switzerland Operating profit, SEKm* 58.0 16.0 • Acquisition of production facility in Dijon, France Net profit, SEKm 46.3 208.9 • Partnership with AstraZeneca in biologics Sales growth 54.0% 0.6% services in Södertälje, Sweden Operating margin 4.1% 1.7% • Recipharm successfully managed the transition to become an international contract development Return on capital employed 13.2% 7.7% and manufacturing organisation (CDMO) net sales* operating profit* SEKm SEKm 1,600 100 1,400 80 1,200 1,000 60 800 600 40 400 20 200 0 0 2004 2005 2006 2007 2008 YEar 2004 2005 2006 2007 2008 YEar * Note that our own and marketed products were divested at the end of 2007. Own products were included in all income statement line items for 2006. For 2007, they were only included in finance income/costs and thus not in revenue or operating profit/loss.

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    4 | CEO STATEMENT Continuing on a successful path 2008 was a year of change for Recipharm. Since the sale of Possible further acquisitions aside, we predict that Recipharm’s Recip, with the Company’s own products, in December 2007 we sales will rise by approximately 25% in total during 2009, have been working intensively on changing the direction of the including the effect of two acquisitions at the turn of the year. Company’s business. We have reached important milestones on For comparable units, the 2009 sales increase is predicted at the way towards achieving our new vision: “to be acknowledged 3–4%. However, our biotech venture will affect profits, leading to as the best-in-class provider of contract development and a somewhat lower operating margin. manufacturing solutions to the pharmaceutical industry”, as well as towards our long-term goal of becoming one of the largest SuCCESSFul ACquISITIONS companies in the international CDMO market. With the site in Fontaine-lès-Dijon, France, acquired from Solvay and the partnership with AstraZeneca regarding develop- ment of new biological substances (both deals were clinched ”I have good reason to believe that at the turn of 2007/2008), Recipharm is now an even more our model enables everyone to significant operator in the CDMO market. We currently have a wide technology base with eight manufacturing facilities and contribute to the progress two development laboratories in four countries, with a total of the Company” of more than 1,400 employees and annual sales of over SEK 1,800 million. What’s more, we have achieved satisfactory risk distribution, partly through our international expansion, and Today, Recipharm is a fast-growing international CDMO with a partly through our diverse customer base with no customer strong customer base and a clear strategy for geographical, representing more than 30% of our total sales. technological and customer expansion. The company name, Recipharm, is new, but preserving important parts of Recip is A GOOD POSITION FOR FuRTHER GROWTH a key task. Since lars Backsell, my business partner and the current chairman of the board, and I founded Recip in 1995, The consolidation of the global pharmaceutical industry the Company has successfully developed, manufactured and continues and, as a natural consequence, new business marketed a wide range of pharmaceuticals, at the same time as opportunities will emerge. The current recession and insecurity manufacturing various pharmaceuticals for other companies in in the global financial system will probably result in financing the industry. The Recip journey has given us a good understand- problems for our customers and competitors. During these trying ing of our customers’ businesses as well as significant exper­ times our good financial position, with no net debt and equity of ience of market and registration issues that our competitors over SEK 450 million, is a major strength. Debt might increase often lack. This knowledge is very important now that the with future acquisitions, but our financial strength brings other Company is entirely focused on providing development and competitive advantages, such as the possibility of supporting manufacturing services to other companies. our customers’ projects through various forms of risk sharing. GOOD SAlES AND PROFITABIlITy IMPORTANT VENTuRES Sales increased substantially during 2008 compared to the Significant development ventures, such as in biotechnology previous year. A large part of the increase relates to the full-year and a new pharmaceutical development laboratory, have given impact of the acquisitions made in Great Britain and France in us an excellent opportunity for further growth through projects 2007. Considering the Company’s major recent organisational for small and medium-sized biotech, pharmaceutical, virtual, changes, I am very pleased with the 9% increase in sales technology and development companies. regarding comparable units – an increase that exceeded Over the next few years our strong focus areas will include expectations. Profit for 2008 was negatively affected by high expanding our offer to include bioprocess development and costs related to restructuring and acquisitions, but apart from manufacture of therapeutic proteins. This part of the pharma- that the operating companies’ profitability grew more than ceutical industry is growing robustly and we see increasing expected; this was mainly achieved through successful pro- demand for services within the area. During 2009 we will integrate ductivity-improvement work. I am especially pleased with the our expansion into our wide range of development services. I profits of the newly acquired foreign companies, which amply also see good opportunities for supplementary acquisitions in fulfilled our expectations. this area, especially with access to new markets in mind.

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    CEO STATEMENT | 5 FOCuS ON IMPROVING quAlITy Many of Recipharm’s operating companies performed well during 2008, and their combined profits were better than expected. Still, on some occasions we experienced difficulty in fully meeting customer demands, particularly in part of the Swedish operation and in Great Britain. Change processes are thomas eldered, Ceo rarely completely smooth, and we gave the difficulties encoun- tered along the way high priority during the year. In Sweden we are currently addressing an increase in production volume as well as several new projects and changes. In Great Britain much of our focus is on reaching sufficient capacity, delivering on time in sterile production operations, and implementing an extensive quality improvement programme in order to reach quality levels demanded by customers and authorities. Comprehensive improvement programmes are under way in the companies concerned, which – combined with some organisational changes – contributed to a considerably better situation during q4. These improvements will continue during the spring of 2009. RAPID INTEGRATION OF NEW OPERATIONS We have successfully developed the Recipharm Model in order to integrate acquired companies and operations with preserved A ClEAR PATH AHEAD growth and profitability at a relatively low risk. The business activities are organised in independent operating units with own We have a clear path ahead of us. using our strong customer profit and loss responsibility. Return on capital employed is the base, broad technology base, innovative development expertise measure used internally to follow up and evaluate profitability in and financial strength we will continue to generate growth the operating subsidiaries. This shows the Recipharm Group’s and good profitability. The Recipharm Model forms the basis capital allocation, as well as efficiency indicators and margins in of our operations. It has proved to be efficient in our present each individual company. The Company’s management is to be companies and is also well-suited for application in different characterised by rapid decision-making in small units in order kinds of new operations. I have good reason to believe that our to encourage good business practices, swiftness and flexibility model enables everyone to contribute to the progress of the throughout the Group. Our ability to help customers reach their Company, and I hope that new employees will regard Recipharm goals will be of decisive importance in the future, and our cen- as an attractive workplace. tral management supports the managers of the subsidiaries in I want to thank all employees for their great efforts during an important coordinating functions for customer relations, sales, eventful year, and I look forward to further success in 2009. marketing and business development. OuR EMPlOyEES ARE THE KEy TO SuCCESS Our employees are unquestionably the key to our continuing success. I was pleased to note the excellent contributions towards improving our organisation that were made in many areas during the year. With our internationalisation and new demanding customer projects, many employees had to take on challenges, all of which they tackled successfully. Through our acquisitions in recent years, we have gained a high number of new talents and competences. My challenge as CEO is to ensure that we are able to continue offering our employees exciting challenges and opportunities for personal development, and that we manage to safeguard our employees’ leading talents. An important part in Thomas Eldered, CEO strengthening employees’ commitment to the Company in the long term is the convertible bond programme that we offer all employees during 2009 as an opportunity for ownership.

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    In Sweden, all electric energy used within recipharm is labeled “Good Environmental Choice” and comes from renewable sources such as biofuel and solar, wind, and water power. The purpose of ”Good Environmental Choice” energy is to hasten the development towards a more sustainable energy production.

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    VISION, MISSION, OBjECTIVES AND STRATEGIES | 7 How to become best in class VISION CuSTOMERS Recipharm will be the first choice among prioritised customer “To be acknowledged as the best-in- groups. class provider of contract develop- This will be achieved by ment and manufacturing solutions to • developing in­depth relationships with Recipharm’s customers to provide them with a full-service solution to their the pharmaceutical industry.” outsourcing requirements • broad marketing and cross­selling of Recipharm’s services MISSION • sharing risk with customers through royalties, profit sharing Recipharm offers its expertise and facilities in the development, or – in certain cases – equity investments, allowing smaller production and supply of biologics and pharmaceuticals to enterprises to profit from Recipharm’s services demanding customers for global use. • always delivering on promises Recipharm also • contributes to the improvement of health and care PROCESSES for the environment Recipharm will offer customers access to best practice • rewards success, encourages personal and professional operations in development, manufacturing and maintenance of development and offers exciting challenges and pharmaceutical products. The Company will be characterised by participation in the Company’s development continuous development and improvement. • is characterised by: pride in the Company, high quality This will be achieved by standards, creativity, and delivering on the Company’s • maintaining and developing world­class processes built on a promises high-quality management system • ensuring that the organisation secures operations and OBjECTIVES AND STRATEGIES new project acquisitions FINANCIAl Recipharm’s long-term objective (3-5 years) is to be one of PEOPlE AND INNOVATION Europe’s top three CDMOs, both in terms of market share and Recipharm will be among the most attractive employers in the return on capital employed. industry. The Company will increase the contribution of its own know-how to total sales. This will be achieved through • organic growth by leveraging Recipharm’s resources and This will be achieved through capabilities across the CDMO market • a learning organisation characterised by creativity and • additional growth from selected acquisitions that support, openness to new ideas differentiate and develop the Company’s competitive position • attracting professionals with high potential and expertise • highly efficient operations • investing in own technology and new intellectual property

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    8 | BuSINESS MODEl The CDMO business model Recipharm’s business model is based on three cornerstones: ADDING NEW VAluE Companies that only offer CMO services are often forced into • Efficient utilisation of production capacity using price as their main competitive lever. Recipharm, on the • Adding value by combining development and other hand, is able to attract new business by offering complex manufacturing services development services and comprehensive support throughout • Best manufacturing practices – optimising operations a product’s lifecycle and value chain. At the same time, these services complement the manufacturing business, adding value EFFICIENT uTIlISATION OF PRODuCTION CAPACITy for customers and thereby creating higher margins. In-house production facilities in the pharmaceutical market are suffering from over-capacity. Plagued by increased overheads To further increase value, Recipharm contributes to customers’ and reduced profit levels, or even losses, many pharmaceutical innovations. As a strong partner of small and medium-sized companies are now actively looking for cost-cutting measures. One companies, Recipharm is also able to opt for joint risk-sharing aspect of this, which is becoming increasingly attractive, is to divest solutions together with customers and in this way invest in the manufacturing facilities and effectively outsource production to a future profit of attractive projects. contract manufacturing organisation (CMO) or contract develop- ment and manufacturing organisation (CDMO) – hence releasing OPTIMISING OPERATIONS resources, improving flexibility and lowering costs. With its starting point in the competitive manufacturing business, Recipharm maintains an industrial approach to pharmaceutical Offering its expertise and long-term commitment to customers, development and manufacturing, always seeking to implement Recipharm – as a skilled CDMO – is well-positioned to take over best practice manufacturing techniques. The aim is constantly and further develop facilities, at the same time as increasing to enhance efficiency in order to boost productivity and quality facility utilisation and adding new customers through its in all areas. When Recipharm acquires a new plant, it introduces extensive market network. The company’s development services improved knowledge management and best practice processes also “feed” the production facilities new business, acting as a to optimise operations. springboard into higher-margin manufacturing projects. Deeper relationships are then cultivated through cross-selling between As a CDMO, Recipharm offers integrated supply chain man- facilities, giving customers access to Recipharm’s multitude of agement, giving its customers access to a complete range of formulation technologies. services throughout the value chain. These are services such as raw material supply or VMI* or CMI** solutions for distribution of pharmaceuticals. a Cdmo works much volumE Utilisation of prodUCtion CapaCity like a CMO, filling ca- pacity through an exten- CroSS-SEllInG Full sive market network. In unuSEd addition, through its de- produCTIon produCTIon velopment competence, CapaCITY dEvElopmEnT CapaCITY SErvICES it can feed its facilities with development work Cdmo marKET that progresses into nETworK production. The broader CDMO with manufactur­ ing plants focused on various technologies can also increase production by cross-selling between production facilities. *VMI, Vendor Managed Inventory ** CMI, Customer Managed Inventory

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    GROWTH AND ACquISITIONS | 9 Growth and acquisitions GROWTH ACquISITION MODEl Based on an extensive platform of development and technology A business that is for sale is thoroughly evaluated and must facilities, strong customer relationships and its dedicated, highly meet at least one of the following three criteria to be considered experienced workforce, Recipharm is well-equipped to leverage for acquisition: its market position and generate future growth and attractive • It gives Recipharm access to an attractive geographical return on capital. market • It provides valuable, long­term client relationships Individual units work on a local basis, promoting their own • It brings with it a new technology that has good market facility to existing customers. Central Management plays a key potential – strengthening Recipharm’s market offer. role in boosting the customer base and encouraging cross-sales between units and customers. Through its development services, the Company focuses on aCqUisitions 2007-2008 joint development projects with customers, who feed additional production to local facilities. Development of Recipharm’s own know-how and intellectual property will become an increasingly important part of organic growth. rElaTIonShIp SElECTED ACquISITIONS • FonTaInE-lèS-dIjon In a period of extensive big pharma divestments and consolidations in the market for manufacture of pharmaceuticals, acquisitions are a key strategy in order to form a foundation for profitable growth. Through selected acquisitions, Recipharm can support, • differentiate and further improve its competitive position. BaSEl • INVESTING TO RETAIN AND DEVElOP aShTon • • Since its first acquisition in 1995, Recipharm (formerly Recip) monTS SödErTäljE has gained valuable experience from acquiring and developing facilities as part of its work to become the best-in-class provider of development and manufacturing services. The aim is to further develop acquired facilities in the long term; marKET TEChnoloGY in turn the former owners and their personnel gain a financially robust, well-established and committed owner with clear targets for performance and profitability. Technology Södertälje (Sweden), Dec. 2008 Majority stake in biotech laboratory from AstraZeneca reCipharm’s growth and aqUisitions 1995-2008 relationship rEvEnuES (SEKm) aShTon Fontaine­lès­Dijon (France), Dec. 2008 monTS 1,600 Tablet and capsule manufacturing site, Laboratoires = Growth by aquisition = Organic growth Fournier, a subsidiary of Solvay Pharmaceuticals 1,400 1,200 market, technology and relationship KarlSKoGa 1,000 Basel (Switzerland), Aug. 2008 SalE 800 STränGnäS oF rECIp Inotech Labor AG’s lyophilisation facilities höGanäS 600 market, technology and relationship 400 Ashton (United Kingdom), Nov. 2007 200 Ashton Pharmaceuticals, previously a CMO 0 -96 -97 -98 -99 -00 -01 -02 -03 -04 -05 -06 -07 -08 YEar market and technology Monts (France), Jun. 2007 in 1995-2008, Recipharm experienced continuous growth both Sterile manufacturing facility, organically and through acquisitions. previously a subsidiary to AstraZeneca

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    10 | THE RECIPHARM STORy The Recipharm story A WIN-WIN ACquISITION of SEK 220 million. However, when Pharmacia disappeared so did all administrative functions. What had until recently been Recipharm started its journey in 1995 with the acquisition of a part of a big well-functioning corporation was now a manufactur- solid-dose facility in Stockholm, including a portfolio with about ing facility with advanced technologies and competence, but no 20 well known pharmaceutical products. Pharmacia, a global infrastructure to support it. pharmaceutical company, had made a strategic decision to concentrate its tablet production to a few select locations, after The new situation also included strong determination and the acquisition of an Italian pharmaceutical company in 1993. entrepreneurial spirit among all employees. Everyone contributed Production in Pharmacia’s facility in Årsta, Stockholm, was to be by pitching in where they could and gradually a real, complete gradually transferred to Italy over a five­year period. company was created – largely thanks to the employees playing a major part in the building process. At the time, lars Backsell was head of Pharmacia’s OTC business and Thomas Eldered was site manager at the Årsta facility. Both Both existing employees and external recruitments benefited were involved in Pharmacia’s re-structuring and together they from Recip’s small-company ethos. There were worries of saw an attractive opportunity for a joint management buy-out. whether big-pharma employees, who could bring important Complementing each other well – one with market and product experience to the company, would be interested in working development experience and the other with in-depth knowledge for a new company with a relatively uncertain future. But as it of manufacturing and the facility – they decided to realise the turned out, Recip was able to offer valuable opportunities such acquisition, creating what became Recip. as making a significant difference and being an important part of running an advanced business. SHAPING THE STRATEGIES thomas eldered lars baCksell It took a few years for Recip to form its current CDMO strategy. In 1995 the pharmaceutical industry was prospering from the many profitable products it had developed during the 1980s and cost-cutting measures, such as outsourcing, had not yet become a priority. At the same time, Recip’s production for Pharmacia gradually decreased due to the transfer to Italy, which made it crucial for The acquisition turned out to be a beneficial deal for both comp­ Recip to develop a strategy for full utilisation of future production anies. Recip gained a modern, efficient production facility, a five­ capacity. year “respite” with continued production for Pharmacia and four The first step was to develop an ambitious business plan and one years to develop a plan for future business. At the same time, of the goals was to produce and market a line of own products. Pharmacia managed to avoid a costly liquidation of the facility With big pharma focusing internationally, Recip seized the as well as significant and controversial lay­offs, thereby enabling opportunity to occupy a strong position in the Swedish market the implementation of the company’s production strategy. and built up an extensive 80-product portfolio, with products that later became well known, such as MittVal, Kalcipos and TrioBe. EVERyONE IS A CONTRIBuTOR Keeping the facility’s management and other personnel, Recip Mainly targeting pharmacies, Recip also saw growing environ- commenced production with 140 employees and annual sales mental awareness in the market. Implementing an extensive 1995 1998 2001 2002 2003 2004 2005 Management buy­out Recip’s first CMO Recipharm contract Penicillin facility New state-of-the- Semi-solid facil- Organisation of Pharmacia’s solid­ commissions from manufacturing brand acquired from art packaging site ity acquired from restructured dose facility two large Nordic established AstraZeneca opened AstraZeneca into separate pharmaceutical operating 140 employees, sales companies companies of SEK 220 million Tricum ABs business is acquired

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    THE RECIPHARM STORy | 11 environmental policy gave the company a strong competitive SEll THE PRODuCTS – KEEP THE COMPETENCE edge at the same time as adding important corporate values. In 2007 Recip decided to dedicate itself fully to the outsourcing This environmental profile remains an important part of Reci­ business. The rights to all products were sold, but the valuable pharm, and customers are attracted to the security of working development expertise and experience gained in the process to with a CDMO that guarantees high standards of sustainability. build up the Company remained in house. Keeping only the CDMO brand “Recipharm” and acquiring a new development facility, the NEW OuTSOuRCING OPPORTuNITIES Company’s position as a pure CDMO was established. Still producing for Pharmacia in 1997, Recip faced a pharma- ceutical market that was increasingly leaning towards cost- cutting measures. New laws introduced tighter restrictions on “Proactivity and confidence in people healthcare spending, with increased competition and lower are important parts of preserving margins, which in turn favoured Recip’s contract manufacturing business. In the years that followed, Recip – helped by increased Recipharm’s small-company ethos” cost pressure – gradually filled a large part of its capacity with outsourced production for other pharmaceutical companies. Over the years, Recipharm has created a comprehensive start-up checklist for its new facilities. Even though every THE PACKAGING SPRINGBOARD acquisition is unique in many respects, some success factors remain universal. For example, Recipharm almost always keeps In 1998 Recip began its journey to become a CDMO with the existing site management team, thus gaining important local packaging assignments for two large Nordic pharmaceutical companies. A new head of sales was recruited from a large knowledge and facility­specific competence. packaging CMO, bringing valuable market experience. Big-pharma customers were demanding and Recip proved able PROFITABlE GROWTH WITH RETAINED VAluES to take on advanced and complex tasks. Today Recipharm is one of Europe’s ten largest CDMOs and is still growing, with ten development and manufacturing sites Operating exclusively in the Nordic market, Recip also benefited spread out across Europe. A lot has changed during the past from its local presence. Easy access and communications 13 years, but holding on to original key values has been an are highly valued criteria when customers evaluate potential important strategy throughout the journey. suppliers. The Recipharm Model, with proactivity and confidence in people, NEW SITES, NEW BRAND is an important part of preserving Recipharm’s small-company ethos. For example, new manufacturing sites are always granted By 1999 Recip had established two parallel strategies: its a high level of independence, working as separate companies own product line and its role as an outsourcing partner to the with full responsibility for running profitable operations. Much pharmaceutical industry. Building on its network, the Stockholm in the same way as when the first facility was acquired in 1995, facility soon won commissions to produce pharmaceuticals for most employees keep their jobs and are given the opportunity to some of the largest pharmaceutical companies in the world. contribute in every way possible to the start-up process. In 2001 the brand name Recipharm was established for the The central management’s most important tasks include contract manufacturing part of Recip’s business. Now focusing supporting, inspiring and maintaining corporate cohesion at even more on the CDMO market, a further six facilities were the widely spread-out sites. As the company continues to grow, acquired between 2001 and 2007, which added capacity, maintaining close contact and consistent internal communication new advanced technologies and dosage forms, and a growing is as crucial as it is challenging. network of customers. 2007 2008 reCip/reCipharm’s revenUe 1995-2008 (SEKm) 1,400 = CDMO activities = Own products Acquisition of: 1,200 a lyophilisation facility, Switzerland Decision to focus entirely on 1,000 a capsule and manufacturing pro- outsourcing business, own products duction site Laboratoires Fournier, 800 sold to Meda Fontaine­lès­Dijon, France New sterile facility acquired in France 600 a majority stake in a biotech from AstraZeneca 400 laboratory from AstraZeneca, Acquisition of new development centre Södertälje, Sweden 200 Multi­purpose facility acquired in the UK 1,210 employees, sales of 0 SEK 1,427 million 1995 2000 2005 2008 YEar

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    There are extensive regulations (Gmp) controlling the quality-related work within the pharmaceutical industry for assurance of patient safety.

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    MARKET | 13 A growing market for the CDMO THE GlOBAl PHARMACEuTICAl MARKET The rising demand for effective medicines is driven by several factors. These include population growth and ageing, higher The pharmaceutical industry develops, produces and markets healthcare expectations, the disease burden of the developing medicinal drugs, which are typically divided into generic and world increasingly resembling that of the developed world, patented pharmaceuticals. These, in turn, are commonly increased diagnosis and more diseases being treated effectively. divided into prescription-only and OTC (over the counter). There are many different types of pharmaceutical companies, but they The global pharmaceutical market is expected to achieve tend to fall into one or more of these categories: essentially the same level of growth in 2009 as in 2008: 4.5–5.5 %, bringing worldwide sales to uS$ 820–830 bil- lion.* The European market is expanding and increased its contribution to global market growth from 17 to 23% between big pharma – traditionally large companies 2006 and 2007. While the growth of the uS market is slowing operating throughout the value chain down, it remains the leading region in the industry, accounting for more than 25 % of global market growth in 2007. However, pharmaCeUtiCal Company Categories biotech – develop, produce or market sub- stances based on biotechnology platforms the emerging markets in Asia and South America are currently experiencing very high growth levels.* generic – market copies of products whose patents have expired A TREND TOWARDS OuTSOuRCING specialty pharma – typically in-license late- As governments need to control the insatiable demand for stage products and commercialise, without healthcare, the pharmaceutical industry is in a period of tighter necessarily possessing all the resources in pricing restrictions and stronger prescribing regulations. This is house exacerbated by the greater hurdles that must now be overcome to gain licences for new drugs: not only is the cost rising, but also research – often small start-up companies the length of time required – hence reducing the period of patent that identify and partially develop new protection. Much of the industry’s current focus is therefore chemicals which they sell on on protecting profitability through cost­cutting measures; one technology/platform – develop a drug attempt is to outsource parts of the value chain. delivery system to be used in combination with a drug Outsourcing has always been common practice for small niche companies that could not afford or chose not to have certain virtual network creators – have intellectual capacity or competence in house. But in recent years this has property, but do not necessarily run any become an industry-wide trend and today big pharmaceutical operations themselves companies also tend to limit their in-house manufacturing activities and instead invest in research or other core areas. This has resulted in the sale or closure of many facilities. global pharma market valUe 2004–2008 ContribUtion of different geographiCal markets to global pharma market 2009* SalES uS$bn japan 10.4% norTh 800 amErICa rEST oF 38.6% 700 world 8.1% 600 500 400 300 EmErGInG 13.3% 2) 0 EuropE 29.6% 1) -04 -05 -06 -07 -08 YEar = Forecast 1) Excl. Turkey and Russia Source: IMS Health, IMS Market PrognosisTM, Sep 2008 2) Emerging includes China, Brazil, India, South Korea, Mexico, Turkey and Russia * 2009 IMS Global Pharmaceutical Market Forecast

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    14 | MARKET The growing generics market is another driving force in the THE CDMO MARKET outsourcing trend. When patents expire, many best-selling The market for CDMO services consists of CMOs and CDMOs, products become subject to competition, forcing prices and the later offering more comprehensive services to the margins down. By outsourcing manufacturing to a contract pharmaceutical industry, from drug development right through manufacturing organisation (CMO), production can often be to manufacturing. carried out more efficiently, flexibly and cost­effectively. The pure CMO market is more price-sensitive, whereas success- NEED FOR STRATEGIC ful CDMOs have found a way to differentiate themselves through DEVElOPMENT PARTNERSHIPS specialist expertise and capacity in late-stage development The outsourcing model is very dynamic and has taken yet another processes, thereby creating opportunities to boost margins. step in its development with the emergence of technologically capable contract development and manufacturing organisations CDMOs’ clients vary in size and operate throughout the (CDMOs). The trend away from doing everything in house has led pharmaceutical industry. They include big pharma companies many companies to consciously outsource not only production looking for cost­efficiency and specialist CDMO expertise, or but also some of their development activities. The accelerated biotech, generics, and virtual network creators that do not have advancement of new manufacturing techniques and products in-house development and manufacturing capacity. has also reinforced this. For example, the pharmaceutical industry is currently investing heavily in biological capabilities, Pre­formulation Common Cdmo serviCes primarily due to the need for new products and the more targeted Formulation development nature of such products. There are many small companies who develop products in a laboratory with the aim of taking it through Stability studies to phase II clinical trials before selling the intellectual property Method development on to a larger partner. These companies are often very special- Pre­clinical and clinical trial materials ised and need external support in many fields, including process Scale-up development and production. Regulatory support This means that the pharmaceutical companies are increasingly Commercial production looking for integrated partners rather than just manufacturers. Supply chain management In the future this is likely to evolve even more, with greater Logistics sharing of risks and rewards among partners. top ten Cdmos/Cmos in the eUropean market 2007 EST. rEvEnuE 2007 (uS$m) 700 recipharm has become one of the largest companies in the European market. 600 500 400 300 200 100 0 CompanY r S E Ca dE E Fr uK E Fr ,G d ,S ,u d xi, r, a, n, a, ar a, a, rm nt te m eo m ev ov ne m le ha t ar ar ve th Fa r n ta Ce Fa ip ae ph ph pa Ca Source: PharmTech.com, November 2008 c xt re pt ne u ha

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    MARKET | 15 The European dose-contract manufacturing market is estimated are significantly lower than in the west. Most benefit from the at uS$ 5.75 billion, representing about 55 % of global contract globalisation of CDMO services is gained where the work-intensity dose manufacturing.* The market for CDMO services has a is highest: in manufacturing commodity-type pharmaceuticals stable annual growth rate of about 8 %. Recipharm estimates with large sales volumes. With CDMOs in emerging markets that there are more than 300 CMOs and CDMOs in the uS and further improving their capabilities, development projects are Europe alone. However, gradually maturing, the market is now also predicted to be attractive for export. entering a phase of increased consolidation. For example, Reci- pharm recently acquired a competitor and its manufacturing site However, locating development and manufacturing in emerging in Ashton in the uK. markets also involves some concerns. Problems regarding intellectual property protection, counterfeiting, product safety, The market is quite diversified, with niche companies specialised environmental impact and development process control have in certain therapeutic areas, and others, like Recipharm, offering made pharmaceutical companies cautious. Seeking to meet a wide range of advanced technologies and dosage forms. The the demands of a globalised market, western CDMOs are now largest CDMOs are Catalent and Patheon. Recipharm’s major considering acquisitions in Asia and other emerging markets in competitors, with a similar market offer and structure, are Next an attempt to offer a more controllable low-cost alternative. Pharma, Famar and Haupt Pharma. Revenue-wise, Recipharm is a top-ten CDMO in the European market. yet another answer to CMO market competition is an even stronger focus on development. Western CDMOs are now A GlOBAlISED MARKET focusing heavily on products in an early stage of development where close proximity to the contractor is critical in order to Globalisation is increasingly influencing the contract manu­ cooperate and maintain control. facturing market. Companies in emerging markets are entering the western market, offering additional cost-saving opportunities for the pharmaceutical industry. Most globalised outsourcing of manufacturing is located in Asia, where operating costs * Pharmaceutical Technology Volume 32, Issue 11 oUtsoUrCing within the pharmaCeUtiCal valUe Chain the diagram illustrates the typical activities  = activity typically performed in house different types of pharmaceutical companies – = activity typically not performed undertake throughout the value chain.  = activity typically outsourced Clinical Commercial pre-clinical Clinical Formulation Trial material manufacture Sales & CompanY TYpE discovery development Studies development Supply & packaging distribution marketing rESEarCh      – – – BIG pharma         BIoTECh         SpECIalITY pharma – –       GEnErIC – – –      TEChnoloGY/plaTForm – –    – – – vIrTual nETworK CrEaTor         activities typically performed by a Cdmo

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    16 | SERVICES A value-adding solution provider Recipharm offers a wide range of integrated solutions, incorporating advanced technological expertise and capacity Formulation development for pharmaceutical development and manufacturing, at the development Clinical supplies same time as adding value and cutting considerable costs for serviCes customers throughout the supply chain. Analytical development Stability studies The wide range of solutions includes not only the many services offered, but also a full-service concept, with a focus on high Packaging development and selection quality and an aim to always exceed customers’ expectations. Raw material selection Customers in a given project rarely need to look elsewhere for additional competence, capacity or ancillary services. DEVElOPMENT SERVICES Solid dose (e.g. tablets and powders) Recipharm’s Pharmaceutical Development Group offers a wide range of services from straightforward early clinical supply Sterile injectables manUfaCtUring through to more complex product development and formulation, Beta­lactam/penicillin antibiotics serviCes as well as complementing project management and medical and toxicological expertise. Recipharm’s development processes Dry powder inhalation are always tailored to suit specific requirements regarding Semi-solids (e.g. gels, ointments, creams formulations and each customer’s preferences. and suppositories) MANuFACTuRING SERVICES Lyophilisation (freeze drying) Recipharm supplies over 1 500 different product presentations Biologics in more than 200 product groups to pharmaceutical companies worldwide. entering into new fields: biologiCs the new partnership with AstraZeneca within the field of biologics has provided Recipharm with the possibility of offering development and supply of recombinant proteins and monoclonal antibodies. The Recipharm Biologics initiative enables strategic partnerships in biotech development, with Recipharm adding value to customers’ projects through close co­operation during the design and development phases. For example: • cell line and process development • analytical method development • supply of material according to GMP for phase I and II studies This type of partnership gives the customer a possibility to take the discovery effort from a vial containing DNA to a medicinal product suitable for use in patients.

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    SERVICES | 17 Full-SERVICE SuPPORT ENVIRONMENTAl CARE In addition to development and manufacturing services, another Recipharm always aims to minimise its environmental impact important part of Recipharm’s integrated solutions is the ability and develop new sustainable solutions in cooperation with to offer customers tailored projects that meet their unique its customers. needs. Recipharm has therefore built up capacity for a wide range of ancillary services. Since the start, operations have met the highest environmental and occupational standards and most sites and support services For example, regulatory documentation packages to support have or are working towards ISO 14001 and OHSAS 1800 new submissions as well as re-registrations and variations can certification. be developed in house on behalf of customers. For those who wish to import products into the Eu, Recipharm also offers full Recipharm also has an extensive environmental policy, which Eu gateway release and testing services. In addition, Recipharm serves as a guide for how the Company handles environmental has the systems and expertise in place to manage customer issues. This is of great importance to the company. stocks through vendor managed inventory. reCipharm offers a wide range quality assurance of integrated solUtions Product release Commercial stability testing regulatory Documentation packages fUll-serviCe sUpport Expert reports Summaries of product characteristics (SPCs) product maintenance Technical support Dossier management Technical transfer logistics support Vendor managed inventory (VMI) Stock management Logistics interfaces Upstream supplier/supply management

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    1818 || Pharmaceuticals in tablet form are manufactured by first mixing the active ingredient and the excipients, making a fine powder, and then pressing the powder into a mould under high pressure. recipharm proactively analyses risks in the work environment in order to protect our employees from dust and other hazards that can occure in the manufacturing of pharmaceuticals.

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    CuSTOMERS | 19 Developing a stable customer base By offering a wide range of integrated solutions, incorporating EuROPEAN CuSTOMERS advanced technological expertise and capabilitiy for pharma- – WORlDWIDE DISTRIBuTION ceutical development and manufacturing, Recipharm aims to Currently most of Recipharm’s customers are situated in Europe be the first choice for its target groups. but their products are supplied globally. Several of Recipharm’s facilities deliver pharamaceuticals to countries outside of CuSTOMERS THROuGHOuT THE INDuSTRy Europe, such as the uS and japan. Recipharm’s customers operate throughout the pharmaceutical industry and the Company’s market offering is designed to meet lOyAl AND GROWING CuSTOMER BASE the requirements of two important customer groups: At the end of 2008, Recipharm had more than 60 customers. By • Big pharma companies form the basis of Recipharm’s sales. further diversifying its range of dosage forms and technologies, Big pharma typically choose Recipharm as a partner in Recipharm is gaining the opportunity of extending its relation- manufacturing projects where volumes are significant and ships with existing customers, at the same time as generating the product maintenance and update requirements are high. new business. These customers are increasingly interested in solutions Because customer focus and long-term relationships are of such as VMI (vendor managed inventory), where Recipharm high priority to Recipharm, the full-service concept, offering often takes full responsibility for supply and distribution. comprehensive services and treating customers in a fair and • Small and medium-sized companies, for example niche, skilled manner, is of great importance. High transfer costs and specialty and virtual companies who don’t have the the increasingly regulated pharmaceutical market also motivate necessary skills and capacity in house, are the main customers to carefully choose those suppliers who they can trust target groups in the development of sales from existing for a long-term, successful business relationship. This further facilities. These customers make best use of the full-service reinforces the stability of Recipharm’s customer base. concept, benefiting from Recipharm’s wide range of manufacturing technologies and development services. Recipharm aims to win comprehensive projects by entering the development process as early as possible. CUstomer groUps in shares top 3 CUstomers in shares of reCipharm’s sales, 2008 of reCipharm’s revenUe, 2008 BIG pharma Small and rEvEnuE Fro Top 3 rEvEnuE From oThEr CompanIES* mEdIum-SIzEd CuSTomErS 77% CuSTomErS 23% 59% CompanIES 41% * Big Pharma refers to companies with revenue in excess of US$ 3 billion and/or R&D expenditure in excess of US$ 500 million.

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    20 | CuSTOMER CASE Abstral reduces breakthrough pain The following is an example of how Recipharm works as a Orexo combines in-house expertise with extensive use of CDMO, in close cooporation with its customers. external partners in different development projects. This allows the company to focus on its core competencies and to release IMPROVING ExISTING PHARMACEuTICAlS valuable resources, enabling an even larger portfolio. Since 2005 Recipharm has been working with Orexo, a pharma- ceutical company, on the development and manufacture of ABSTRAl REDuCES BREAKTHROuGH PAIN Abstral, a new rapid acting analgesic for patients experiencing A good example of how Orexo improves pharmaceuticals through cancer-related breakthrough pain, a pain that comes on drug delivery is its most advanced product Abstral, a rapid acting suddenly and is not alleviated by the patients’ normal pain analgesic for treatment of breakthrough pain in cancer patients suppression management. who are already using strong opioid medication for their chronic pain. The active substance in Abstral is fentanyl, a member of the opioid family, and in its new form it is administered sublingually, i.e. under the tongue, which allows for rapid absorption and pain vp of drUg delivery projeCts relief as well as convenient dosing. Abstral will be marketed in many different countries, delivered nils-otto ahnfelt, in several types of packs and containers, and since the patient needs to increase the dosage gradually in order to obtain sufficient pain relief, the product is to be supplied in a number of different strengths. In the important western European market, ProStrakan – the uK based international specialty pharma company – will market Abstral, and there are also marketing partners for the Asia Pacific, CIS, Chinese and Japanese markets. In the Nordic market Orexo will share the product licence with ProStrakan throught their joint venture. ProStrakan has further extended its licensing agreement with Orexo to include North America, and plans to file the product for US approval in 2009. Based in uppsala, Sweden, Orexo specialises in improving exist- NEED FOR A SyNCHRONISED CDMO ing, patented pharmaceuticals by combining well-documented For the Abstral project, Orexo was looking for a CDMO partner substances with innovative technologies, and in develpment of with advanced technological expertise and the ability to handle a new treatments for respiratory and inflammatory diseases as wide variety of tasks: development of the tablet form, packaging well as pain control. The company’s expert knowledge in select and package design, analyses and stability studies, as well as the therapeutic areas leads to new effective forms of treatment. transfer to and implementation of commercial manufacturing. By focusing on improving drug-delivery, Orexo can achieve faster market access with lower risks in development – all at a An especially challenging task for a CDMO partner is to transfer relatively low cost. the formulation platform from a development laboratory to a the abstral team at different stages in bringing Abstral to the market, Orexo has worked closely with manufacturing, Recipharm in manufacturing Clinical development sales & marketing and late-stage development and packaging & distribution with ProStrakan in sales and marketing. Recipharm has been responsible for bringing the for- mulation platform from a labora- oreXo reCipharm prostrakan tory environment to commercial manufacture as well as for packaging and distribution.

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    CuSTOMER CASE | 21 commercial manufacturing environment. This particular project Dust and working with strong opioids are significant workplace came with considerable risk, as it involved an opioid, and the and environmental hazards in the production process. Investing CDMO needed a high degree of technological expertise in order in the requisite equipment and facilities to enable containment to fully understand and deliver the development, transfer and was therefore an important measure. The packaging also had to manufacture of Abstral. be adapted to be made childproof while still being user friendly for patients. Nils-Otto Ahnfelt is VP of Drug Delivery Projects at Orexo. “This has been one of the most challenging projects of my “Abstral’s unusually high level of complexity, with advanced career,” says Nils-Otto Ahnfelt. “Handling opioids requires processes and strict regulations, also placed major demands on extensive advance planning, and interaction with project the relationship between the different operators,” he explains. partners and regulatory authorities is of decisive importance. “Having advanced technological expertise as well as being easily The multitude of strengths, approvals and distributors further accessible and able to adapt to specific needs were therefore increase the already high demands on everyone involved”, he important criteria for a possible CDMO partner, which all in all explains. made Recipharm our preferred choice.” REACHING IMPORTANT MIlESTONES COMPlEx PRODuCT, COMPlEx PROjECT In 2008, after a detailed application process, ProStrakan In a complex development project such as Abstral, adjusting achieved Abstral’s first important milestone: becoming to a new organisation, advanced technologies and customised authorised for the European market by the European Medicines logistics, at the same time as working to tight deadlines, requires Agency (EMEA). National licenses have now been granted to a lot of time and energy from all parties involved. However, ProStrakan in a growing number of individual countries, and having ultimately reached a high level of synchronisation, a good product launches have already taken place in Sweden, uK base is set for a strong relationship and future cooperation. and Germany with others to follow during 2009. Recipharm This is ensured through shared logistics, knowledge of each has played a substantial part in supporting the application other’s work routines as well as through competence in specific process from a manufacturing perspective, providing validation technologies and products. schedules, analysis certificates, stability reports and data for manufacturing authorisation. Because Abstral will be marketed in many countries, with several different strengths and kinds of packaging, the logistics are looking ahead, Abstral will now enter its supply phase, providing extremely demanding and need to be tailored to the product’s pain relief for an increasing number of cancer patients as it specific needs. Accuracy and caution are of great importance obtains approval in more countries. since production and machinery need to be adjusted for swift changeovers. Orexo is a pharmaceutical company, focused on the ProStrakan Group plc is a rapidly growing specialty development of treatments for pain and inflammation. pharmaceutical company engaged in the development and commercialisation of prescription medicines for The company has three products on the market and the treatment of unmet therapeutic needs in major a competitive product portfolio in late-stage develop- markets. ment. Sales and product development are mainly carried out through worldwide partnership agreements ProStrakan’s development capabilities are centred on with larger pharmaceutical companies. Galashiels, Scotland and Bedminster, New Jersey, USA. Sales and marketing of ProStrakan’s portfolio of prod- ucts are handled by commercial subsidiaries in the UK, Listed on the NASDAQ OMX Nordic Market, Small Cap. US, France, Germany, Spain and other EU countries. Head office: Uppsala, Sweden number of employees: 127 (Dec. 2008) Head office: Galashiels, Scotland website: www.orexo.se website: www.prostrakan.com

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    22 | waste from recipharm’s production is handled according to regulations for pharmaceutical and hazardous waste, preventing it from being discharged into the environment. The majority of the waste goes to either energy or material recycling.

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    OPERATIONS | 23 Operations across Europe MANuFACTuRING AND DEVElOPMENT SERVICES development services – Recipharm’s Science and Technology business unit operates through a first­class multi­purpose Through its development and manufacturing platform that facility located in Stockholm, Sweden. The unit has its own GMP is spread out across the European market, Recipharm gives (good manufacturing practice) pilot facility for manufacture customers access to a wide range of technologies, competencies of solid dose and aseptic sterile vials. It also has a number and services. The aim is to always accommodate every customer’s of flexible areas to support other dosage forms. The primary specific needs, with focus on flexibility, quality and service. role of the Recipharm Science and Technology is to target new manufacturing services – Recipharm operates through nine development projects and clients, but it also cooperates in manufacturing subsidiaries located across Europe: in Sweden, ongoing development projects run by the many manufacturing France, the uK and Switzerland. These subsidiaries run facilities subsidiaries, most of whom have their own local scale-up that cover a wide variety of services and dosage forms, including facilities and resources. solid dose, sterile, penicillins, dry powder inhalation, semi-solids, granulates and lyophilisation as well as advanced packaging and logistics. reCipharm’s development and manUfaCtUring sites stockholm stockholm with 9 european subsidiaries, • solid dose • development Recipharm has a strong presence in Europe. The Company also • packaging services has a marketing company in the US. södertälje • biotech development and manufacturing facility karlskoga • semi­solids • creams, gels • ointments • suppositories strängnäs • beta­lactams (solid forms and dry syrups) höganäs • fibres • powders • suppositories ashton • solid dose • steriles • creams • dry powder inhalation monts • steriles • secondary packaging • distribution fontaine-lès-dijon • solid dose (tablets, capsules) • logistics center basel • lyophilisation • sterile vial filling

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    24 | OPERATIONS REGulATORy AND quAlITy MANAGEMENT Recipharm has its own team of regulatory experts, who specialise in developing documentation packages to support Recipharm’s goal is to create long-lasting relationships new submissions, re-registrations and variations. The regulatory permeated by mutual trust and customer satisfaction. To this end, experts also draw up information for SPC (summary of product Recipharm is committed to maintain regulatory compliance and characteristics) and assist in compiling expert reports. deliver high quality services to its customers. The company has also implemented a quality system with established processes throughout its organisation. Central quality Management is lOGISTICS responsible for drawing up quality policies and managing quality With an industrial approach to manufacturing and distribution, performance. All subsidiaries have their own staff who work Recipharm works closely with its customers in order to optimise with quality; they are responsible for implementation of policies all aspects of its operations, from the sourcing of raw materials and processes. In order to guarantee a high level of quality, to market supply. Recipharm performs Group-wide audits as well as internal audits within all subsidiaries. With a global network of suppliers and long experience of buying a wide range of raw materials, Recipharm can provide first­class All subsidiaries operate in accordance with current GMP as well as purchasing support. The Company works closely with suppliers with Recipharm’s own high quality standards; the goal is always in order to guarantee continuity of supply and high standards in to meet or exceed expectations. All of the subsidiaries produce quality and reliability of raw materials. pharmaceuticals registered with European union authorities and some of the subsidiaries are also registered with the FDA Moving forward in the value chain, Recipharm has developed (uS Food and Drug Administration). Every Recipharm facility is advanced online solutions, creating the opportunity to take over subject to periodic inspections by regulatory authorities. responsibility and management of distribution. net sales per sUbsidiary 2008 SEKm 450 400 350 300 250 200 150 100 50 0 CompanY m a * n ts s äs * og nä to rm ol l* on n h lsk kh ng ga se ha m as oc Ba hö rä r ip Ka St St c re * ”Recipharm” represents the parent company including Recipharm Science and Technology ** Basel data includes net sales from August 2008

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    SuSTAINABIlITy | 25 Making sustainability a tradition Earning a position as a top CDMO requires a proactive strategy for to achieve continuous development in the area, and new sustainability, including the ability to deal with the environmental employees participate in a course on environmental issues. issues facing the industry. Through its extensive environmental A keen will among management and staff to prioritise these programme, Recipharm is able to offer customers tailored issues has contributed to the achievement of many of important sustainable development services. milestones in reducing the environmental impact of Recipharm’s operations. lONG TRADITION OF ENVIRONMENTAl INITIATIVES The entire staff’s commitment to the implementation of Recipharm has been at the forefront for many years when it environmentally friendly values is also evident in everyday comes to managing environmental risks and opportunities. In actions and routines, such as performing risk analysis of 1997 Recipharm (known as Recip at that time) was one of the first chemicals, sorting different types of waste for recycling and companies in Europe to be ISO 14001 certified (which means that following a company policy promoting the use of environmentally the Company adheres to an environmental management system friendly cars. certified by a third party). Recipharm continues to maintain high environmental standards throughout the Company and today all SuPPlIER EVAluATION subsidiaries have, or are applying for, ISO 14001 certification. In addition, all subsidiaries comply with a joint environmental policy, Recipharm has the ambition to use environmentally responsible with the ambition of providing environmentally friendly CDMO suppliers to the greatest extent possible. Suppliers are services that are sustainable in the long term. continuously and systematically evaluated in order for Recipharm to be able to offer customers high quality environmentally friendly ENVIRONMENTAlly COMMITTED STAFF CDMO services. Through continuous improvements, the use of The top management, together with all local managers, is responsible for Recipharm’s environmental programme. All subsidiaries cooperate and exchange knowledge in order reCipharm international environmental award Since 1997, Recipharm has encouraged different kinds of efforts for the environment, through prices and awards. In 2008, the “Recipharm International Environmental Award” was established to inspire and stimulate the environmental work in the pharmaceutical industry. The award is given to a company, individual or organisa- tion that has shown a good example of how innovation and operations have contributed to a better environment. The first winner of the Recipharm International Environmental Award was Apoteket AB (the Swedish pharmacy monopoly). Apoteket AB received the award at the Swedish pharma- ceutical congress in Stockholm on 12 November 2008. environmentally adapted paCkaging In order to improve usability and limit environmental im- pact, Recipharm offers environmentally friendly pharma- ceutical packaging. The various types of packaging are made and disposed of according to applicable environ- mental standards, and the traditional PVC/aluminium foil in blister packs is being replaced with recyclable polypropylene plastic.

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    26 | SuSTAINABIlITy suppliers with high environmental standards gradually increases, Being a major contributor to fossil CO2 emissions, transport is all the while Recipharm’s indirect impact on the environment is a prioritised environmental issue for Recipharm. The company- being limited. At the same time, an increased demand among car policy states that all of Recipharm’s company cars shall be customers for ISO14001 certified suppliers is satisfied. Many of environmentally adapted and primarily be run on renewable fuels. Recipharm’s suppliers have been environmentally evaluated and an increasingly large proportion has ISO14001 certification. minimising waste and impact of chemical substances – Pharmaceuticals belong to a rare group of chemicals that are SuSTAINABlE AND PROFITABlE INVESTMENTS deliberately manufactured to be biologically active, creating a risk to plants and animals becoming affected should the Recipharm strives to be a responsible company by providing chemicals be discharged into the environment. environmentally friendly and sustainable pharmaceutical services. Some of the Company’s focus areas for sustainable In order to identify any environmental and health risks, development are: Recipharm always performs risk assessments before using a new chemical substance. Recipharm does not develop new Energy solutions reducing Co2 emissions – a systematic chemicals, but bases its development and manufacturing on approach in all parts of operations has reduced emissions of known substances. fossil carbon dioxide in relation to processing value. Recipharm also employs raw material processing methods that entail lower In 2008 Recipharm produced 60 million units of sterile products fossil fuel emissions. All Recipharm’s choices of electrical energy and 2,000 tonnes of solid and semi solid pharmaceuticals. take the environment into account, and renewable energy Waste from production is handled according to regulations for sources are used as much as possible. pharmaceutical and hazardous waste, preventing it from being discharged into the environment. The majority of the waste goes to either energy or material recycling facilities. energy ConsUmption 2008 – total 69,000 mwh prodUCtion volUmes (approx) hEaTInG 15% Solids/Semi solids Sterile products (units) ElECTrICITY 45% 2,000 tonnes 60 million GaS 40%

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    ORGANISATION & MANAGEMENT | 27 The Recipharm Model The Recipharm Model for organizational development is a CENTRAl MANAGEMENT SuPPORT cornerstone in the development and growth of the Company. The Parent Company, Recipharm AB, is responsible for The model aims to keep and nurture an entrepreneurial management of the Group. Central management plays an organisation. Flexibility, local adaptation and customer focus important role in supporting local operating units, for example are important priorities that influence the corporate structure as by boosting the customer base and encouraging cross-selling well as the way the management is organised. between units and customers. Implementation and promotion of knowledge management and best practice between different STAND-AlONE OPERATING uNITS units are also centrally managed. Business development, Due to the limited scope for coordination and economies of acquisitions and financing for both the Group and the separate scale in manufacturing, all Recipharm facilities operate as units are other key tasks. Recipharm’s global policies and stand-alone units, usually in the form of legally separate entities. manuals are important management tools for the Group. Each company has a general manager with authority and responsibility to implement strategies and policies. Performance CuSTOMERS MEET ONE RECIPHARM is primarily measured in profitability, using return on capital Recipharm’s customers meet a single brand and a standardised employed. Second to profitability, growth is the most important customer interface. The brand name Recipharm applies to all performance indicator. The key responsibilities of the units are operating companies in the Group. Customers utilising more building local networks and promoting themselves in the local than one unit encounter the same business model and ethics community. throughout the Group. Promotion and brand management are key tasks in order to maintain a strong brand. Corporate strUCtUre rECIpharm aB rECIpharm rECIpharm rECIpharm rECIpharm SToCKholm aB höGanäS aB STränGnäS aB KarlSKoGa aB rECIpharm rECIpharm rECIpharm rECIpharm rECIpharm uS InC parTICIpaTIon SaS aG BIoloGICS aB* lTd the recipharm model comprises stand-alone rECIpharm rECIpharm monTS SaS FonTaInE SaS operating units, each with its own manage- ment. The operating units work independently, but Recipharm maintains a small central management team, who are responsible for administrative functions, co-ordination of sales, CEo major customer relationships and marketing of groUp management Recipharm’s broad technology­base. ThomaS EldErEd vp SCIEnCE & vp opEraTIon vp BuSInESS vp hr & vp CorporaTE CFo vp nEw vEnTurES TEChnoloGY dEvElopmEnT manaGEmEnT CommunICaTIon dEvElopmEnT Björn wESTBErG STurE nordBErG maGnuS rEnCK KEnTh BErG anna lEna CEnTInG marK quICK Carl-johan SpaK * Recipharm owns 80.1%

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    28 | PERSONNEl Diverse management and staff As Recipharm has gradually changed, expanding its operations therefore encourages networking and knowledge exchange at all and focusing even more on comprehensive CDMO services, different levels between the subsidiaries, resulting in increased human resources management has followed suit. Since july sharing and building of the company values. 2007, Recipharm has acquired three new subsidiaries in three different countries, thus doubling its workforce and further TAlENT AND SuCCESSION DEVElOPMENT establishing its position as an international CDMO. leadership and employee development are keys to Recipharm’s future success and are therefore highly prioritised. The central VAluES FOR A DIVERSE COMPANy management are important ambassadors for leadership Keeping cohesion among an increasingly international and development throughout the organisation, working closely otherwise diversified staff who work in several different countries together with local management to achieve business growth. All is an important challenge for Recipharm’s management. Guided subsidiaries are responsible for their own training activites, but by the Company’s core values, there is strong resolve within cooperation between units is encouraged. Recipharm to maintain a small-scale, entrepreneurial approach. All subsidiaries are therefore stand-alone units, working as Recipharm has a diverse leadership and staff with long separate companies with full responsibility for running profitable experience from many different parts of the pharmaceutical businesses. The shared core values and the code of conduct industry. However, successful growth requires planned have a major influence on daily interactions between managers succession of leaders and management work. Companies must and employees as well as on dealings with external parties. also respond to demographic changes related to the preferences of the workforce that is entering the labour market. Subsidiaries In a company that operates internationally, with many different are responsible for their own recruitment. Recipharm is also a cultures, nationalities and laws, it is often difficult to find a single member of ”Teknikcollege”, a partnership between Swedish way of solving a problem. In order to implement desired cultures industry, municipalities and educational institutions to promote and support new team members in their decision making, improved education and contact with the industry. Recipharm has replaced traditional instructions and policies with the shared company values, thus making the implementation of CONVERTIBlE BONDS PROGRAMME these as well as of the Code of Conduct highly prioritised activities In the beginning of 2009 Recipharm will introduce a convertible during 2008. The 10 uN Global Compact rules are also important bonds programme, offering all employees the opportunity to guidelines that unite the Company as a whole, and are included share the future growth and profit of the Company. In addition to in the Code. In addition to this, executive managers have to sign this, training programmes in business skills and understanding a comprehensive contract, assuring that they have followed the of investment risks and opportunities will be launched, Code in all of their business activities during the year. contributing to a better understanding of the different factors that influence the company result. When expanding, Recipharm wants to capitalise on the existing industry experience of its acquired subsidiaries. The Company general statistiCs on personnel 2008 2007 2006 2005 2004 average number of employees 1,210 723 570 571 457 of whom work outside sweden 518 141 - - - women/men employed, % 59/41 60/40 63/37 62/38 56/44 employee turnover, % 7 10 4 3 5 absence due to illness, % 6 7 7 7 7 number of incidents/accidents 17/32 40/25 54/39 32/44 - per 1000 employees average age 41 43 44 44 43

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    | 29 Recipharm’s Company Values TEnaCITY rElIaBIlITY we show commitment in we create trust by always everything we do. delivering on promises. we are committed to reach- we are reliable and deliver ing our goals. with quality and in time. we are persistent and we we are honest and always will not give up easily. if we follow our ethic rules. encounter an obstacle, we try harder to find a solution. EnTrEprEnEurShIp proFESSIonalISm we are innovative and creative in finding ways to we maintain a high level develop and improve our of competence in order to business. deliver return on investment to our stakeholders. we are open to change but respect that it can take We are flexible, service time to achieve. minded and always looking for the best solutions. we we have a “can do”-attitude learn from our mistakes. and always take on chal- lenges with a mindset we show respect - to cus- that nothing is too difficult. tomer, peers, partners and managers.

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    30 | PERSONNEl A GOOD WORK ENVIRONMENT promote healthy eating, and some subsidiaries have their own kitchens with cooks who prepare nutritious meals daily. Other The health and wellbeing of employees are imperative for any ways in which Recipharm creates opportunities for better health company to successfully take on future challenges. Recipharm are through a health care service and activities designed to not only complies with all local occupational health and safety reduce illness caused by smoking, alcohol and drugs. regulations, but also works proactively to promote a healthier lifestyle among employees, which in turn creates a better work Equality, diversity and discrimination – All employees are environment. These proactive efforts involve many aspects treated with respect and offered equal opportunities for such as the physical, mental and social wellbeing of employees. personal development and career advancement. For example, Recipharm’s measures and focus areas for creating a better all vacancies are primarily posted internally and are available to work environment include: all employees. Guidelines regarding this have been drawn up in the Code of Conduct. Safety – Recipharm works proactively to maintain a safe work environment. Risk analyses are performed regularly to identify Recipharm has specific guidelines regarding prevention of and eliminate risks in the workplace. The Company also has set discrimination that are supported by local yearly plans. It is the routines and safety measures in case of, and in prevention of company’s firm belief that actively promoting a mix of ages, accidents. genders, ethnicities and functional disabilities contributes to a higher level of creativity and widens Recipharm’s competence. high occupational standards – All facilities meet high occupational standards, and all Swedish facilities are OHSAS 25% of Recipharm’s top management are women and in the 18001 certified. Management and all new employees participate operating companies three out of eight General Managers in work environment courses. For the management the course is are women. With increased recruitment, the average age of repeated every fifth year. the employees is gradually sinking. Most subsidiaries have increased their staff as business has grown during the year, healthy employees – By working proactively with health-related making competence development programmes an important issues, Recipharm minimises the number of employees on long area in order to keep and motivate employees. Cooperation periods of sick leave. The Company’s measures to promote a between management and employees, as well as everyone’s healthy lifestyle include non-smoking policies, subsidised health commitment, are essential keys to maintaining a good work promotion activities such as sports and exercise, and different environment. health-related seminars. Recipharm also works actively to to a higher level of Creativity a diverse staff ContribUtes

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    admInISTraTIon rEporT aCCounTS aCCounTInG polICIES & noTES Board & Group manaGEmEnT

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    32 | ADMINISTRATION REPORT Administration report The Board of Directors and Chief Executive Officer hereby present PARENT COMPANy the annual report and consolidated accounts for the financial year The Parent Company’s cash and cash equivalents totalled SEK 2.2 1 january–31 December 2008. million (180.9) as of 31 December 2008. In addition, the Company can utilise the Group’s bank overdraft facility of SEK 185.0 million GROuP STRuCTuRE (162.4). Cash flow equalled SEK ­178.7 million (131.0). This total included SEK -227.1 million (-211.4) from operating activities, SEK The Recipharm Group, in which Recipharm AB (formerly Recip 5.4 million (294.9) from investing activities, and SEK 53.9 million Pharma AB) is the parent company, is a wholly owned sub-group of B&E Participation AB, corporate identification number 556510­1879, (47.4) from financing activities. with its registered office in Stockholm. The consolidated annual accounts for the Recipharm Group were prepared by Recipharm CAPITAl INVESTMENT AB and its subsidiaries, while B&E Participation AB prepares the consolidated annual accounts for the larger group. The Group’s gross investment in property, plant, and equipment, ex- cluding corporate acquisitions, totalled SEK 68.9 million (109.7) in financial 2008. Of this amount, SEK 48.3 million (51.1) were invested NET SAlES AND PROFIT in machinery and equipment, and SEK 20.6 million (58.6) in buildings Consolidated net sales for the financial year totalled SEK 1,422.9 and land. The majority was replacement investments, though a sig- million (924.2), up 54%. This increase met the Group objective of a nificant portion related to investment in new projects and expansion long-term annual growth rate of more than 15%. of capacity, especially in Recipharm Stockholm AB. The Group’s total investment in product rights was SEK 0 million (13.2). Operating profit totalled SEK 58.0 million (16.0). The increase in operating profit was due to organic growth and profitability outside The Parent Company’s gross investments totalled SEK 3.5 million Sweden related to acquisitions. (18.0). Of this amount, SEK 0 million (13.2) were investments in product rights, and SEK 3.5 million (4.8) investments in machinery Consolidated profit after financial items ended at SEK 66.3 million and equipment. (208.9). Profitability, calculated as return on capital employed, was 13% (8). ACquISITIONS The long-term target is a return of more than 20% on capital em- Recipharm AG, a newly formed company, acquired an aseptic filling ployed. and lyophilisation business in Basel. The seller was Inotech labor AG. The company’s sales and earnings are consolidated in the Group Net sales for the Parent Company amounted to SEK 50.9 as of 1 August. The number of employees in the company is approxi- million (80.3), down 37%. The loss after financial items totalled mately 20. SEK –68.4 million (-321.3). Recipharm Fontaine SAS, another newly formed company, acquired lIquIDITy AND CASH FlOW a business in Fontaines-lès-Dijon as of 31 December. The business manufactures tablets and capsules and includes a distribution cen- The Group’s cash and cash equivalents at year-end were SEK tre. It was acquired from laboratories Fournier, a subsidiary in the 107.1 million (253.2). In addition to cash and cash equivalents, Solvay Group. The number of employees is a little more than 200. the unutilised portion of the bank overdraft facility granted was SEK 129.8 million. RESEARCH AND DEVElOPMENT The Group’s businesses are financed by shareholders’ equity of Recipharm’s research and development activities concern the phar- SEK 455.5 million (418.0), long-term loans of SEK 31.9 million maceutical development of new products and the improvement of (15.0), and a bank overdraft facility of SEK 185.0 million (185.0). existing products and processes to achieve greater efficiency and customer benefit. Many product projects are conducted as assign- Consolidated cash flow was SEK ­143.6 million (152.4). This ments for internal and external customers. Costs for the develop- total included SEK -92.0 million (-78.3) from operating activities, ment of products and production processes are expensed as they SEK -70.2 million (332.1) from investing activities, and SEK 18.7 mil- arise. During the year, new laboratories were put into service, sig- lion (­101.3) from financing activities. nificantly increasing our capacity and our possibilities for accepting The Group’s equity/assets ratio at the end of the financial year was new projects. Now we are also able to fulfil contracts with sterile 37% (48), somewhat lower than the long-term Group objective of products. Because of this, R&D costs rose sharply during the year, 40%. The debt/equity ratio for the Group was 0.0 (-0.3), which is ending at SEK 41.4 million (32.3) net. significantly less than the long­term goal of no more than 0.6.

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    ADMINISTRATION REPORT | 33 THE ENVIRONMENT THE WORK OF THE BOARD Our vision is for Recipharm to be a model on environmental issues. At the 2008 Annual General Meeting, all five members of the Board Environmental efforts are important to Recipharm and are an inte- were re-elected. All members elected by the AGM are men. The gral part of day-to-day work. Board has had five regular meetings during the year. Recipharm has decided that all companies in the Group will obtain ISO14001 environmental certification. All companies are already OuTlOOK there or are working towards it. The Swedish companies in the Group The Recipharm market is expected to continue growing 5-10% per are also certified according to OHSAS 18001 and AFS 2001:1 (for year, depending on the general growth of the pharmaceutical market the work environment). and on pharmaceutical companies using external suppliers for de- velopment and production services to a greater extent. The impact of the Recipharm Group on the external environment is related to our manufacturing of pharmaceuticals. The direct impact In addition to organic growth in existing operations, several contract- consists of air and water emissions from our manufacturing proc- ing projects already initiated and the full-year impact of acquired pro- esses, in which we use gases and solvents, and effluent in the form duction facilities will sustain healthy sales growth in coming financial of pharmaceutical residual products. The indirect impact consists years. Good opportunities for additional acquisitions are also ex- of emissions from transport to and from our plant and from energy pected, both from competitors and operations from pharmaceutical consumed. companies that change their production strategy. In all, improved operating profit/loss and profitability are forecast in coming years. A Every company in the Group monitors its environmental impact, decline may occur in individual years following strategic acquisitions through its own environmental management system, and continu- that will not generate good profitability until the change or the invest- ously works to follow up and improve its operations with respect to ment phase has been completed. the environment. No environmental or other similar injunctions are outstanding from SIGNIFICANT EVENTS AFTER yEAR-END any governmental authority. During the year, the Company complied Recipharm Biologics AB, a new company founded by Recipharm AB with environmental legislation as well as the terms of all valid per- (majority shareholder) and AstraZeneca AB (minority shareholder), mits. Only Recipharm Stockholm AB has operations requiring a per- acquired the assets for biotech manufacture from AstraZeneca AB. mit according to the Swedish Environmental Code, while the other The company has about 30 employees. Swedish companies have operations requiring registration. PROPOSED DISPOSITION OF EARNINGS In the opinion of the Company, there are no environmental liabilities that would require decontamination in the future. The following earnings of the Parent Company are available to the annual meeting (SEK): PERSONNEl Profit brought forward 433,269,875 In 2008, the average number of employees (corresponding to full- loss for the year –52,825,325 time positions) was 1,204 (747), a change of 61%. Women account- ed for 59% (60) of the workforce. total 380,444,550 Recipharm’s Swedish business has for many years been certified according to AFS 2000:1 and OHSAS 18001 for the work environ- The Board proposes that the earnings be allocated as follows: ment. Dividend to shareholders of SEK 0 per share 0 Please refer to Note 5 for additional information on personnel. Balance carried forward 380,444,550 total 380,444,550 DIVIDEND An additional general meeting taking place on 31 december 2008 THE GROuP decided on an extra dividend of 370,652,500 SEK. According to the consolidated balance sheet, unrestricted equity totalled SEK 436,995,946. The Board proposes no allocations to restricted reserves from consolidated profit for the year.

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    34 | RISKS Risks RISKS Recipharm has identified the following types of risk: market related, internal process related and financial. MARKET-RElATED RISK The growing CDMO market is attracting strong suppliers, and the competition may negatively affect Competition Recipharm’s profit margins. Through continuous improvement of business processes and custom- er relationships, Recipharm generates value for customers, thereby improving its competitive edge. A significant portion of Recipharm’s business comes from a limited number of customers. Customer dependence Through acquisitions and a strong emphasis on increasing the number of customer relation- ships, Recipharm decreases its dependence on a few customers. In previous years, the three largest customers accounted for 80% of Company sales. Moving into 2009, with several new acquisitions, the five largest customers now account for approxi- mately 80% of sales. Cost pressure from To secure revenue flows, Recipharm enters into long­term contracts, thereby stabilising prices. customers Price levels are maintained by providing services with high customer value. RISKS IN INTERNAl PROCESSES Building and Recipharm has a strong emphasis on leadership training, career planning, and creating an maintaining expertise attractive workplace. All subsidiaries operate in compliance with current GMP as well as with Recipharm’s own high product failure quality standards. Regulatory authorities as well as Recipharm’s own team of regulatory experts periodically inspect every Recipharm facility. Acquisitions expose the Company to different types of risk: financial, commercial and opera- acquisition projects tional. Before a decision is made on an acquisition, due diligence in line with the risk level of that acquisition is always performed, as is an executive management assessment. To ensure the successful integration of new acquisitions, the Company follows well-established internal procedures. FINANCIAl RISKS Foreign exchange Recipharm does not normally hedge its foreign exchange exposure, but the Company aims to exposure limit its foreign exchange risk in operations by balancing income and expenses in local cur- rencies. Group transactions are mainly in euros. Foreign investments such as acquisitions are financed in local currency as much as possible. Credit risk Recipharm only accepts creditworthy counterparts in financial transactions and, when needed, uses a framework for managing overdue invoices. long-term contracts and customers’ dependence on their CDMOs are key factors that reduce the level of credit risk. Recipharm has many financially solid customers and few credit losses. Operations are partly financed by borrowings. Fluctuations in interest rates have a direct impact Financing on earnings. Recipharm aims to have a loan portfolio with a balanced mix of short- and long- term borrowings, usually at interest rates linked to official interbank rates.

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    FIVE-yEAR SuMMARy | 35 Five-year summary sek million 2004 2005 2006 2007 2008 income statement Net sales 602.9 835.2 918.7 924.2 1,422.9 Operating profit/loss 60.3 69.8 89.5 16.0 58.0 Financial income 0.3 0.5 1.2 21.2 13.0 Financial expense 2.1 4.5 6.0 41.8 4.7 Profit after financial items 58.6 65.7 84.7 208.9 66.3 Profit for the year 43.4 49.2 71.2 208.9 46.3 balance sheet Non-current assets 105.2 173.5 302.9 162.3 180.5 Cash and cash equivalents 12.8 80.9 99.2 253.2 107.1 Total assets 390.4 578.4 798.2 865.9 1,231.4 Equity 142.5 174.9 227.1 418.1 455.5 Interest-bearing liabilities 31.7 126.5 205.4 111.4 88.8 Non-interest-bearing liabilities1 216.2 277.0 365.7 336.4 687.0 Capital employed2 174.2 301.4 432.5 529.5 544.4 Net indebtedness3 18.9 45.6 106.2 -141.8 -18.2 cash flow Cash flow from operating activities4 62.8 167.9 42.3 –857.5 –101.0 Cash flow from investing activities –47.9 –99.0 –63.6 1,111.3 –61.3 Cash flow from financing activities –4.6 –1.4 40.7 –101.3 18.7 Total cash flow 10.3 67.5 19.4 152.4 –143.6 share information Average no. of shares, basic 10,000 10,000 10,000 10,000 10,000 Average no. of shares, diluted 10,000 10,000 10,000 10,000 10,000 No. of shares at year-end 10,000 10,000 10,000 10,000 10,000 key ratios Operating margin5 10.0% 8.4% 9.7% 1.7% 4.1% Return on capital employed6 34.8% 29.5% 24.7% 7.7% 13.2% Interest coverage ratio7 28.9 15.5 15.2 0.9 15.3 Debt/equity ratio8 0.22 0.72 0.90 0.27 0.20 Net debt/equity ratio9 0.13 0.26 0.47 -0.34 -0.04 Equity/assets ratio10 36.5% 30.2% 28.5% 48.3% 37.0% Earnings per share11 4.34 4.92 7.12 20.89 4.63 Equity per share12 14.25 17.49 22.71 41.81 45.55 NOTE COMMENT 1/ Non-interest bearing liabilities Includes deferred tax in untaxed reserves 2/ Capital employed Total assets less non-interest-bearing liabilities 3/ Net indebtedness Interest-bearing liabilities less cash and equivalents 4/ Cash flow from operating activities Before changes in working capital 5/ Operating margin Operating profit/loss divided by net sales 6/ Return on capital employed Operating profit/loss plus financial income divided by average capital employed 7/ Interest coverage ratio Operating profit/loss plus financial income divided by financial expense 8/ Debt/equity ratio Interest-bearing liabilities divided by equity 9/ Net debt/equity ratio Net liabilities divided by equity 10/ Equity/assets ratio Equity in relation to balance sheet total 11/ Earnings per share Net profit/loss divided by no. of shares at year­end 12/ Equity per share Equity divided by no. of shares at year-end

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    36 | CONSOlIDATED INCOME STATEMENT Consolidated income statement 1 Jan 2008– 1 Jan 2007– sek note 31 dec 2008 31 dec 2007 operating income Net sales 1 1,422,879,228 924,250,449 Other operating income 6,358,355 28,408,799 totoal operating income 1,429,237,583 952,659,248 Operating expenses Raw materials and consumables –453,558,360 –312,425,611 Other external costs 3, 4 –345,580,487 –227,621,984 Personnel costs 5 –529,241,373 –355,529,928 Depreciation/Amortisation and write-downs on property, plant and equipment and intangible assets 9, 10 –28,925,640 –27,105,259 Reversal of negative goodwill - 2,217,186 loss on disposal of property, plant and equipment - –3,421,496 Other operating costs 6 –13,903,844 –12,814,300 Total operating expenses –1,371,209,702 –936,701,392 Operating profit/loss 58,027,881 15,957,856 Profit/Loss on financial items Profit/Loss on participations in Group companies 7 - 213,576,252 Interest income and similar profit/loss items 12,967,913 21,217,452 Interest expense and similar profit/loss items –4,652,562 –41,846,118 Total financial items 8,315,351 192,947,586 Profit/Loss after financial items 66,343,233 208,905,442 Tax on profit for the year 8 –20,020,903 34,899 profit/loss for the year 46,322,330 208,940,341

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    CONSOlIDATED BAlANCE SHEET | 37 Consolidated balance sheet sek note 31 dec 2008 31 dec 2007 aSSETS non-current assets Intangible assets 9 Product rights 11,814,583 13,139,583 Total intangible assets 11,814,583 13,139,583 Property, plant and equipment 10 land and buildings 68,911,511 59,524,362 leasehold improvements 763,027 1,356,253 Plant and machinery 17,267,626 11,995,666 Equipment, tools, fixtures and fittings 74,520,493 59,031,886 Construction in progress 19,027,666 16,291,491 Total property, plant and equipment 180,490,323 148,199,657 Financial assets Other securities held as non-current assets 148,605 92,980 Deferred tax assets 13 727,686 830,115 Other financial assets 1,344,021 - Total financial assets 2,220,312 923,095 total non-current assets 194,525,218 162,262,335 current assets Inventories Raw materials and consumables 150,123,118 110,182,453 Products in process 55,979,309 49,092,618 Finished products and goods for resale 89,134,234 61,213,067 Total inventories 295,236,661 220,488,139 Current receivables Accounts receivable 189,164,986 154,531,624 Receivables from related companies 370,652,500 - Tax assets 8,771,768 17,240,702 Other receivables 44,798,142 37,218,154 Prepaid expenses and accrued income 14 21,169,282 20,969,152 Total current receivables 634,556,678 229,959,632 Cash and bank balances 107,092,218 253,215,247 total current assets 1,036,885,557 703,663,017 total assets 1,231,410,775 865,925,352

  • Page 38

    38 | CONSOlIDATED BAlANCE SHEET Consolidated balance sheet sek note 31 dec 2008 31 dec 2007 EquITY and lIaBIlITIES 15 eQuity Restricted equity Share capital (10,000,000 shares) 10,000,000 10,000,000 Restricted reserves 8,548,698 4,139,993 Total restricted equity 18,548,698 14,139,993 Non-restricted equity Non-restricted reserves 390,673,617 194,993,981 Profit for the year 46,322,330 208,940,341 Total non-restricted equity 436,995,947 403,934,322 total eQuity 455,544,645 418,074,315 Provisions Other provisions 17, 18 4,416,637 1,104,432 Deferred tax liabilities 2,329,780 775,309 Total provisions 6,746,417 1,879,741 Non-current liabilities liabilities to credit institutions 19 31,916,674 15,000,000 Total non-current liabilities 31,916,674 15,000,000 Current liabilities Bank overdraft facility 20 55,175,615 94,682,998 Accounts payable - trade 124,697,350 187,353,079 liabilities to parent company 370,652,500 - Current tax liability 17,341,274 1,173,895 Other liabilities 53,181,204 57,065,871 Accrued expenses and prepaid income 21 116,155,096 90,695,452 Total current liabilities 737,203,039 430,971,296 total eQuity and liabilities 1,231,410,775 865,925,352 pledged assets and contingent liabilities pledged assets 22 117,400,000 117,400,000 contingent liabilities none none

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    CONSOlIDATED CASH FlOW STATEMENT | 39 Consolidated cash flow statement sek note 31 dec 2008 31 dec 2007 operating activities Profit/Loss after financial items 66,343,233 208,905,442 Adjustments for non-cash items etc. 43,685,559 –191,429,207 Tax paid 6,272,310 32,616,175 Cash flow from operating activities before changes in working capital 116,301,102 50,092,410 Cash flow from changes in working capital Increase(-)/Decrease(+) in inventories -74,748,522 –51,667,437 Increase(-)/Decrease(+) in operating receivables -45,066,534 –52,198,401 Increase(+)/Decrease(-) in operating liabilities -88,537,074 –24,548,955 Cash flow from operating activities -92,051,028 –78,322,383 investing activities , Disposal of subsidiaries, less cash and cash equivalents 7 - 1,097,501,796 Acquisition of subsidiaries - -779,162,974 Acquisition of property, plant and equipment 10 –68,817,573 -109,729,760 Acquisition of intangible assets 9 - -13,250,000 Acquisition of financial assets –1,399,646 - Disposal of non-current assets 9, 10 - 136,666,538 Disposal of financial assets - 61,730 Cash flow from investing activities –70,217,219 332,087,330 financing activities Borrowings 20,000,000 73,455,239 Dividends paid - –30,000,000 Repayment of borrowings –1,333,326 –144,787,329 Cash flow from financing activities 18,666,674 –101,332,090 change in cash and cash eQuivalents –143,601,573 152,432,857 Cash and cash equivalents at the beginning of the year 253,215,247 99,180,124 Exchange rate differences in cash and cash equivalents –2,521,457 1,602,266 cash and cash equivalents at the end of the year 107,092,217 253,215,247 adjustments for non-cash items etc. Depreciation, amortisation and write-downs on assets 28,925,640 806,268,233 Capital gain/loss on disposal of non-current assets - 3,421,496 Capital gain/loss on disposal of subsidiaries - –999,931,658 unrealised foreign exchange gains - –74,524 Other provisions 3,312,205 1,104,432 Other items 11,447,714 –2,217,186 total adjustments for non-cash items etc. 43,685,559 –191,429,207

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    40 | PARENT COMPANy INCOME STATEMENT Parent company income statement 1 Jan 2008– 1 Jan 2007– sek note 31 dec 2008 31 dec 2007 operating income Net sales 1 50,869,147 80,258,331 Other operating income 1,664,736 9,495,656 total operating income 52,533,883 89,753,987 Operating expenses Raw materials and consumables –363,919 –24,279,515 Other external costs 3, 4 –66,966,464 –64,481,867 Personnel costs 5 –57,722,667 –61,935,377 Depreciation/Amortisation and write-downs 9, 10 on property, plant and equipment and intangible assets –4,570,921 –8,985,311 loss on disposal of property, plant and equipment –49,637 –2,788,446 Other operating costs 6 –1,794,886 –9,783,051 Total operating expenses –131,468,494 –172,253,567 Operating profit/loss –78,934,611 –82,499,580 Profit/Loss on financial items Profit/Loss on participations in Group companies 7 –31,812 –226,659,184 Interest income and similar profit/loss items 12,435,872 20,482,986 Interest income from Group companies 17,295,590 7,203,811 Interest expense and similar profit/loss items –2,804,625 –39,218,921 Interest expense to Group companies –16,340,539 –564,120 Total financial items 10,554,486 –238,755,428 Profit/Loss after financial items –68,380,124 –321,255,008 Appropriations Reversal from tax allocation reserve - 38,222,218 Change in accelerated depreciation/amortisation –4,836,254 26,776,876 total appropriations –4,836,254 64,999,094 Profit/Loss before tax –73,216,378 –256,255,914 Tax on profit for the year 8 20,391,053 15,081,360 profit/loss for the year –52,825,325 –241,174,554

  • Page 41

    PARENT COMPANy BAlANCE SHEET | 41 Parent company balance sheet sek note 31 dec 2008 31 dec 2007 aSSETS non-current assets Intangible assets 9 Product rights 11,814,583 13,139,583 Total intangible assets 11,814,583 13,139,583 Property, plant and equipment 10 land and buildings 835,431 874,969 leasehold improvements 201,831 246,960 Equipment, tools, fixtures and fittings 7,832,004 7,268,785 Construction in progress 317,523 665,990 Total property, plant and equipment 9,186,789 9,056,704 Financial assets Participations in Group companies 11 20,267,867 18,139,667 Receivables from Group companies 12 125,000,000 142,000,000 Other securities held as non-current assets 148,605 92,980 Total financial assets 145,416,472 160,232,647 total non-current assets 166,417,844 182,428,934 current assets Current receivables Accounts receivable 2,826,645 2,657,892 Receivables from Parent company 132,200 - Receivables from Group companies 304,770,255 1,739,635,071 Receivables from related companies 370,652,500 - Tax assets 1,886,923 1,780,850 Other receivables 1,534,144 5,123,238 Prepaid expenses and accrued income 14 6,176,683 6,444,424 Total current receivables 687,979,349 1,755,641,475 Cash and bank balances 2,155,858 180,906,360 total current assets 690,135,207 1,936,547,835 total assets 856,553,051 2,118,976,769

  • Page 42

    42 | PARENT COMPANy BAlANCE SHEET Parent company balance sheet sek note 31 dec 2008 31 dec 2007 EquITY and lIaBIlITIES 15 eQuity Restricted equity Share capital (10,000,000 shares) 10,000,000 10,000,000 Statutory reserve 2,000,000 2,000,000 Total restricted equity 12,000,000 12,000,000 Non-restricted equity Profit brought forward 433,269,875 630,126,147 Profit/Loss for the year –52,825,325 –241,174,554 Total non-restricted equity 380,444,550 388,951,593 total eQuity 392,444,550 400,951,593 Untaxed reserves 16 Accumulated accelerated depreciation 952,783 –3,883,471 Total untaxed reserves 952,783 –3,883,471 Current liabilities Bank overdraft facility 20 33,843,119 77,429,974 Accounts payable - trade 11,272,644 76,478,286 liabilities to Parent company 370,652,500 - liabilities to Group companies 2,410,532 1,502,941,705 Other liabilities 34,066,619 39,666,148 Accrued expenses and prepaid income 21 10,910,304 25,392,534 Total current liabilities 463,155,718 1,721,908,647 total eQuity and liabilities 856,553,051 2,118,976,769 pledged assets and contingent liabilities pledged assets 22 102,400,000 102,400,000 contingent liabilities guarantee, recipharm karlskoga fastighets ab, corporate identity number 556657-8315

  • Page 43

    PARENT COMPANy CASH FlOW STATEMENT | 43 Parent company cash flow statement sek note 31 dec 2008 31 dec 2007 operating activities Profit/Loss after financial items –68,380,124 –321,255,008 Adjustments for non-cash items etc. 5,919,829 237,986,700 Tax paid - 37,465,896 Cash flow from operating activities before changes in working capital –62,460,295 –45,802,412 Cash flow from changes in working capital Increase(-)/Decrease(+) in inventories - 6,834,201 Increase(-)/Decrease(+) in operating receivables 1,444,463,022 –1,488,799,275 Increase(+)/Decrease(-) in operating liabilities –1,609,120,449 1,316,389,852 Cash flow from operating activities –227,117,722 –211,377,634 investing activities Acquisition of subsidiaries –2,229,200 –792,866,641 Disposal of subsidiaries 7 100,000 1,105,733,801 Acquisition of property, plant and equipment 10 –3,500,466 –4,802,573 Acquisition of intangible assets 9 - –13,250,000 Disposal of financial assets - 184,655 Disposal of property, plant and equipment and intangible assets 9, 10 218,000 - Cash flow from investing activities -5,411,666 294,999,242 financing activities Borrowings - 77,429,974 Repayment of borrowings - –144,787,329 Dividends paid - –30,000,000 Group contributions received/paid 53,862,000 144,750,000 Cash flow from financing activities 53,862,000 47,392,645 change in cash and cash eQuivalents –178,667,388 131,014,253 Cash and cash equivalents at the beginning of the year 180,906,360 48,289,841 Exchange rate differences in cash and cash equivalents –83,114 1,602,266 cash and cash equivalents at the end of the year 2,155,858 180,906,360 adjustments for non-cash items etc. Depreciation, amortisation and write-downs of assets 4,572,036 1,363,344,905 Anticipated dividends from subsidiaries - –1,535,200,000 Capital gain/loss on sale of non-current assets –94,655 - Capital gain/loss on sale of subsidiaries - 407,499,589 Other items 1,442,448 2,342,206 total adjustments for non-cash items etc. 5,919,829 237,986,700

  • Page 44

    44 | ACCOuNTING POlICIES AND NOTES Accounting policies and notes SuPPlEMENTARy DISClOSuRE Leases that substantially transfer all risks and benefits associated with ownership to the lessor are classified as operating leases. Lease payments for ACCOuNTING PRINCIPlES operating leases are recognised as expenses in the income statement and are The accounting principles applied are in accordance with the Swedish Annual distributed on a straight-line basis over the lease term. Accounts Act and the general advice and guidelines of the Swedish Account- In the Parent Company, all leases are classified as operating leases. ing Standards Board. Any deviations are accounted for in the Notes below. The accounting principles remain unchanged compared with the previous year. DEPRECIATION/AMORTISATION METHOD FOR NON-CuRRENT ASSETS VAluATION PRINCIPlES ETC. Non-current assets are reported at acquisition value, less accumulated de- preciation/amortisation. Depreciation/Amortisation is charged systematically Assets, provisions and liabilities have been valued at acquisition cost, unless over each asset’s expected useful life, according to the schedule below: otherwise stated below. Receivables non-current assets useful life Receivables are reported in the amounts estimated to be received. Foreign receivables and liabilities have been recorded at the closing rate of exchange. Product rights 9 - 10 years Other intangible assets 5 years Inventories Inventories are valued at the average of acquisition and manufacturing cost Machinery and equipment 3 - 8 years during the year, although not at a rate higher than the market value. Buildings 25 years Revenue recognition leasehold improvements 8 - 10 years Revenue is recognised at the same time as the material risks and benefits associated with the Company’s goods are transferred to the purchaser. CONSOlIDATED ACCOuNTS Tax The consolidated accounts have been prepared according to the Swedish The Company applies the Swedish Financial Accounting Standards Council’s Financial Accounting Standards Council’s recommendation RR 1:00, using recommendation RR9 Income Tax. Total tax consists of current tax and the purchase method. The Group’s equity comprises the Parent Company’s deferred tax. Taxes are accounted for in the income statement, except when equity and that portion of the subsidiaries’ equity arising after the acquisition the underlying transaction is charged directly to equity, whereupon the of these companies. Besides the Parent Company, the consolidated accounts consequent tax effects are recognised in equity. Current tax is tax to be paid include all companies in which the Parent Company, directly or indirectly, or received regarding the current year, including adjustments of current tax holds more than 50 percent of the votes or in any other manner exercises attributable to previous periods. Deferred tax is calculated in accordance with control in accordance with the Swedish Annual Accounts Act, 1:4. the balance sheet method, taking as its basis temporary differences between the carrying amounts and written-down values of assets and liabilities. These TRANSlATION OF FOREIGN SuBSIDIARIES amounts are calculated based on the manner in which the temporary differ- The annual accounts of foreign subsidiaries have been translated to SEK ences are expected to be settled and by using tax rates and tax rules decided using the current method. The current method specifies that all assets, provi- or announced by the balance sheet date. Deferred tax assets attributable to sions and other liabilities are translated using the exchange rate applicable deductible temporary differences and loss carry-forwards are recognised only at the balance sheet date, and that all items in the income statement are to the extent they are likely to result in lower tax payments in the future. translated at the average exchange rate for the year. Accrued translation dif- ferences are recognised directly in equity. Group contributions Group contributions are reported in accordance with the statement of the Council for Financial Reporting (uFR 2). Group contributions are reported according to their financial significance, that is, minimising the Group’s total NOTES tax. Group contributions rarely constitute compensation for work performed, so they are recognised directly in retained earnings after deductions for their tax effects. NOTE 1 Purchases and sales within the Group and transactions with related parties leasing Finance leases, which substantially transfer all risks and benefits associated parent company 2008 2007 with ownership of the leased asset to the Company, are recognised as assets in the consolidated balance sheet from the date on which the agreement is Sales to Group companies 34,083,576 24,930,130 entered into. The asset is then valued at the fair value of the leased object or Purchases from Group companies 7,021,943 31,896,272 at the present value of the minimum lease payments for the leasing period, if this value is less. Lease payments are divided between finance charges and reduction of the lease obligation (financial liability), so as to achieve The Group rents factory and office premises from KB Titania, which is a a constant rate of interest on the remaining balance of the liability. These related party. Annual rent for 2008 amounted to SEK 14.7 million (14.6). finance charges are recognised in the income statement. Assets in finance leases are written off over the shortest period of estimated useful life and the duration of the lease.

  • Page 45

    NOTES | 45 NOTE 2 Segment reporting sek 2008 sweden rest of world operating income Net sales 1,422,879,228 841,002,407 581,876,821 Other operating income 6,358,355 3,761,576 2,596,779 total operating income 1,429,237,583 844,763,983 584,473,600 operating expenses Raw materials and consumables –453,558,360 –301,645,841 –151,912,519 Other external costs –345,580,487 –191,195,843 –154,384,644 Personnel costs –529,241,373 –322,705,179 –206,536,194 Depreciation/Amortisation and write-downs on property, –28,925,640 –21,968,786 –6,956,854 plant and equipment and intangible assets Other operating costs –13,903,844 –8,424,176 –5,479,668 total operating expenses –1,371,209,702 –845,939,823 –525,269,879 Operating profit/loss 58,027,881 –1,175,840 59,203,721 operating margin 4.1% –0.1% 10.2% NOTE 3 lease payments attributable to operating leases NOTE 4 Fees and remuneration to auditors group 2008 2007 group 2008 2007 Leasing costs for the financial year 1,002,632 252,336 Ernst & Young Estimated payments for 2009 654,485 172,272 Audit assignment 1 270,603 1,766,597 Estimated payments for 2010-2013 520,949 - Other assignments 328,321 2,643,663 total 1,598,924 4,410,260 parent company 2008 2007 Alliance Audit/KPMG Leasing costs for the financial year 1,660,162 1,435,544 Audit assignment 355,404 114,029 Estimated payments for 2009 229,485 - total 355,404 114,029 Estimated payments for 2010-2013 - - parent company 2008 2007 Lease payments attributable to financial leases Ernst & Young group 2008 2007 Audit assignment 536,872 1,513,324 Leasing costs for the financial year 1,762,220 2,017,994 Other assignments 219,500 2,528,901 Estimated payments for 2009 - 1,842,887 total 756,372 4,042,225 Estimated payments for 2010-2013 - 7,937,226

  • Page 46

    46 | NOTES NOTE 5 Personnel average number of employees The average number of employees is based on hours of attendance, paid by the Company, in relation to normal working hours. group parent company 2008 2007 2008 2007 sweden Men 270 228 37 31 Women 422 354 44 36 total 692 582 81 67 france Men 85 44 Women 131 67 total 216 111 uk Men 137 14 Women 152 16 total 289 30 switzerland Men 3 - Women 4 - total 7 - total average number of employees 1,204 723 The number of employees in Switzerland, France and the united Kingdom is adjusted based on the proportion of time they have been included in the Group. Senior management group parent company 2008 2007 2008 2007 Members of the Board including CEO 7 7 7 7 of whom women - - - - Other members of senior management 12 10 6 4 of whom women 3 3 1 1

  • Page 47

    NOTES | 47 NOTE 5 cont’d. Salaries, other remuneration and Absence due to illness social security contributions Total absence due to illness as a percent of ordinary working hours. group 2008 2007 parent company 2008 2007 Board of Directors and CEO Absence due to illness for all employees Salaries and remuneration 14,736,344 7,284,066 Short-term 1.14% 1.59% Pension expenses 1,807,664 1,660,788 long-term 1.21% 1.00% total for board of directors and ceo 16,544,008 8,944,854 Total 2.35% 2.59% Other employees Salaries and remuneration 355,942,218 203,049,395 Absence due to illness for women 2.22% 3.65% Pension expenses 19,170,804 16,376,245 Absence due to illness for men 2.50% 3.31% total for other employees 375,113,022 219,425,640 Distribution of absence due to illness by age: Social security contributions 108,438,158 68,793,888 Absence due to illness for personnel 0.51% 1.16% 29 years old and younger total for board of directors, Absence due to illness for personnel 3.43% 3.33% ceo and other employees 500,095,188 297,164,382 30-49 years Absence due to illness for personnel 0.74% 1.62% Pension commitments to Board 50 years old and older - - members and CEO NOTE 6 Other operating costs parent company 2008 2007 Board of Directors and CEO group 2008 2007 Salaries and remuneration 2,218,088 2,468,935 Exchange losses from receivables/liabili- –14,004,120 –12,775,420 ties relating to operations Pension expenses 665,100 629,400 Other 100,276 –38,880 total for board of directors and ceo 2,883,188 3,098,335 total –13,903,844 –12,814,300 Other employees Salaries and remuneration 33,167,754 34,196,023 parent company 2008 2007 Pension expenses 4,308,374 3,278,612 Exchange losses from receivables/liabili- –1,800,181 –9,767,442 ties relating to operations total for other employees 37,476,128 37,474,635 Other –44,342 –15,609 Social security contributions 11,557,457 12,790,428 total –1,844,523 –9,783,051 total for board of directors, ceo and other employees 51,916,773 53,363,398 NOTE 7 Profit/Loss on participations in Group companies Pension commitments to Board - - of Directors and CEO group 2008 2007 Capital gain/loss on divestment of Of the total salaries and other remuneration in the Parent Company, - 999,931,658 subsidiaries SEK 0 (1,440,836) refers to the Norwegian branch office. Write-downs on participations - -786,355,406 total - 213,576,252 parent company 2008 2007 Anticipated dividends - 1,535,200,000 Capital gain/loss on divestment of - –407,499,590 subsidiaries Write-downs on shares in subsidiaries –31,812 –1,354,359,594 total –31,812 –226,659,184

  • Page 48

    48 | NOTES NOTE 7 cont’d. Income statement for divested NOTE 8 Tax on profit for the year operations group 2008 2007 2008 2007 Current tax –18,316,931 –17,979,372 Operating income - 579,337,341 Deferred tax., untaxed reserves –1,601,544 18,077,851 Operating costs - –499,544,064 Deferred tax, temporary differences –102,428 –63,580 Operating profit/loss - 79,793,277 total –20,020,903 34,899 Profit/Loss on financial items Difference between tax according to current tax rates and actual tax Interest income - 502,327 Interest expense - –15,880,796 Net profit before tax 66,343,233 208,905,442 Profit/loss after financial items - 64,414,808 Tax at the tax rate valid for the Parent Company, 28% Tax income/Tax expense –18,576,105 58,493,524 Cash flow effect Tax effect of non-deductible expenses –17,172,307 119,743,506 Tax effect of non-taxable income 4,341,706 –405,682,811 group and parent company 2008 2007 Tax income (-)/Tax expense (+) –74,252 8,892,409 Assets and liabilities divested Effect of different tax rates –3,983,099 - Intangible assets - 830,591,385 Adjustment from previous tax Property, plant and equipment - 3,361,328 1,329,970 - assessment years Financial assets - 102,056 Change in temporary differences 14,113,184 218,588,271 Inventories - 88,026,854 Current tax expense, 28% –20,020,903 34,899 Operating receivables - 156,272,473 Cash and cash equivalents - 8,232,005 parent company 2008 2007 total assets - 1,086,586,101 Current tax 20,391,053 - Tax on Group contribution provided - 15,081,360 Provisions - 11,434,701 total 20,391,053 15,081,360 Borrowings - 898,904,120 Operating liabilities - 66,661,493 Difference between tax according to total liabilities and provisions - 977,000,314 current tax rates and actual tax Net profit before tax –73,216,378 –256,255,914 Purchase consideration received - 1,105,733,801 Tax at the tax rate valid for the Parent less: Company, 28% Cash and cash equivalents in the Tax income/Tax expense 20,500,586 –71,751,656 operations divested - –8,232,005 Tax effect of non-deductible expenses –117,250 275,320,737 effect on cash and cash equivalents - 1,097,501,796 Tax effect of non-taxable income 7,717 –429,888,649 Change in temporary differences - 241,400,928 Current tax expense, 28% 20,391,053 15,081,360

  • Page 49

    NOTES | 49 NOTE 9 Product rights NOTE 10 land and buildings group 2008-12-31 2007-12-31 group 2008-12-31 2007-12-31 Opening acquisition value 13,250,000 282,293,099 Opening acquisition value 60,231,693 1,637,193 Purchases - 13,250,000 Translation difference –7,458,750 - Divestment/Disposal - –185,996,840 Acquisition value via transfer of as- 20,451,430 58,072,500 sets and liabilities Acquisition value via transfer of as- sets and liabilities - –96,296,259 Purchases 145,171 522,000 closing accumulated acquisition cost 13,250,000 13,250,000 closing accumulated acquisition cost 73,369,544 60,231,693 Opening amortisation according to Opening depreciation according to –110,417 –50,278,647 –707,331 –257,588 plan plan Translation difference 48,122 5,733 Divestment/Disposal - 22,293,499 Depreciation for the year according Accumulated amortisation via –4,000,655 –455,476 - 27,985,148 to plan transfer of assets and liabilities Amortisaton for the year according closing accumulated depreciation –4,659,864 –707,331 –1,325,000 –110,417 to plan closing accumulated amortisation –1,435,417 –110,417 carrying amount 68,709,680 59,524,362 carrying amount 11,814,583 13,139,583 Carrying amount, buildings 68,462,307 59,276,989 Carrying amount, land 247,373 247,373 Amortisation according to plan is calculated according to a useful life of 9-10 years. carrying amount 68,709,680 59,524,362 Depreciation according to plan is calculated according to a useful life of 25 years. parent company 2008-12-31 2007-12-31 Opening acquisition value 13,250,000 99,708,032 2008-12-31 2007-12-31 Purchases - 13,250,000 Tax-assessed value 44,413,000 44,413,000 Divestment/Disposal - - of which buildings 37,444,000 37,444,000 Acquisition value via transfer of as- sets and liabilities - –99,708,032 closing accumulated acquisition cost 13,250,000 13,250,000 parent company 2008-12-31 2007-12-31 Opening acquisition value 1,135,998 1,135,998 Opening amortisation according to –110,417 –27,985,148 closing accumulated acquisition cost 1,135,998 1,135,998 plan Divestment/Disposal - - Opening depreciation according to –261,029 –221,491 Accumulated amortisation via plan - 27,985,148 transfer of assets and liabilities Depreciation for the year according –39,538 –39,538 Amortisation for the year according to plan –1,325,000 –110,417 to plan closing accumulated depreciation –300,567 –261,029 closing accumulated amortisation –1,435,417 –110,417 carrying amount 835,431 874,969 carrying amount 11,814,583 13,139,583 Carrying amount, buildings 687,882 727,420 Amortisation according to plan is calculated according to a useful life of 10 years. Carrying amount, land 147,549 147,549 carrying amount 835,431 874,969 Depreciation according to plan is calculated according to a useful life of 25 years. 2008-12-31 2007-12-31 Tax-assessed value 23,830,000 23,830,000 of which buildings 21,512,000 21,512,000

  • Page 50

    50 | NOTES NOTE 10 cont’d. leasehold improvements Plant and machinery group 2008-12-31 2007-12-31 group 2008-12-31 2007-12-31 Opening acquisition value 22,325,575 22,399,788 Opening acquisition value 12,247,322 - Divestments - –74,213 Translation difference –1,712,332 - closing accumulated acquisition Acquisition value via transfer of as- 22,325,575 22,325,575 4,913,624 12,247,322 value sets and liabilities Divestment/Disposal –3,925 - Opening depreciation according to –20,969,322 –19,252,844 Reclassifications 306,089 - plan Divestments - 31,304 Purchases 4,668,311 - Depreciation for the year according closing accumulated acquisition –391,396 –1,747,782 20,419,089 12,247,322 to plan value closing accumulated depreciation –21,360,718 –20,969,322 Opening depreciation according to –251,657 - plan carrying amount 964,857 1,356,253 Translation difference 22,524 3,851 Divestment/Disposal 776 - parent company 2008-12-31 2007-12-31 Reclassifications –5,095 - Opening acquisition value 9,007,750 9,105,878 Depreciation for the year according –2,918,001 –255,508 to plan Purchases - - closing accumulated depreciation –3,151,453 –251,657 Divestments - –98,128 closing accumulated acquisition carrying amount 17,267,636 11,995,665 value 9,007,750 9,007,750 Depreciation according to plan is calculated according to a useful life of Opening depreciation according to between 3 - 5 years –8,760,790 –8,770,880 plan Divestments - 55,219 Equipment, tools, fixtures and fittings Depreciation for the year according –45,129 –45,129 to plan group 2008-12-31 2007-12-31 closing accumulated depreciation –8,805,919 –8,760,790 Opening acquisition value 230,277,144 216,585,936 carrying amount 201,831 246,960 Translation difference –44,957 - Acquisition value via transfer of as- Depreciation according to plan is calculated according to a useful life of 2,770,893 313,656 sets and liabilities 8–10 years. Purchases 17,824,466 22,282,293 Divestment/Disposal –18,158,003 –11,695,995 Reclassifications 14,913,769 2,791,254 closing accumulated acquisition value 247,583,312 230,277,144 Opening depreciation according to –171,245,258 –159,662,790 plan Translation difference 11,062 150 Divestment/Disposal 18,034,661 7,359,825 Depreciation for the year according –19,863,284 –18,942,443 to plan closing accumulated depreciation –173,062,819 –171,245,258 carrying amount 74,520,493 59,031,886 Depreciation according to plan is calculated according to a useful life of 3–8 years.

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