Annual Report 2015 - Meda

1 Annual Report 2015 . The company The products 2 The year in brief 20 Product portfolio 3 The Mylan offer 24 Respiratory 4 CEO's comment 26 Dermatology 6 Strategy and business model 28 Pain and Inflammation 10 Investment story 30 Non-prescription 12 Market products: Cx 16 Sales and marketing 32 Non-prescription products: OTC. 34 Product development 38 Manufacturing and supply Sustainability Report Management Report and financial reports 41 About the sustainability Report 65 Operations 42 Focus, objectives and 70 Risks performance 73 Corporate governance Report 44 Meda in context 76 Board members 45 Value chain 80 Executive management team 46 Sustainability aspects 84 Accounts Group 47 Product portfolio and market 90 Notes Group development 117 Accounts parent company 48 Manufacturing and distribution 122 Notes parent company 50 Employees 128 Statement of the board 52 Environment 129 Auditor's Report 55 Patient and consumer safety 130 Financial review 56 Governance 132 The Meda share 59 Community engagement 134 Definitions 60 GRI content table 135 Glossary and trademark rights 63 Auditor's Report 136 Shareholder information Key therapy areas and product areas1).

2 Prescription drugs Non-prescription drugs Rx Cx OTC. Aerospan EpiPen Fortilase Azep/ Novolizer Ialumar Respiratory Astepro Pafinur Dymista Acnatac Betadine EndWarts Aldara Babygella Naloc Dermatology Elidel Dermasol AKN. Zyclara Rantudil Dona/Viartril Pain and Rheumon GO-ON. Inflammation Zamadol Reparil Tambocor Agiolax CB12. Other key Thioctacid ArmoLIPID. products Uralyt Legalon Zyma Saugella 1) The chart shows examples of Meda's products within selected areas. Definitions Rx Rx products are pre . Cx Cx are clinically-proven OTC. OTC products are over- scription based pharma- consumer healthcare the-counter products sold ceuticals prescribed by products recommended directly to consumers via doctors and therapists by doctors and pharma- pharmacies and retail for patients. cists to consumers. chains. SALES BY THERAPY AREA 2015 SALES BY PRODUCT AREA 2015 . Dermatology, 22% Prescription Respiratory, 15% (Rx), 62%.

3 Pain and Non-prescription Inflammation, 14% (Cx/OTC), 36%. Cardiology, 12% Other sales, 2%. Gastroenterology, 11%. CNS1) , 8%. Metabolism/vitamins, 6%. Other, 12%. 1) Central Nervous System Mission We strive to be a fast-growing, innovative company that is open to different kinds of commercial models and that will be market-leading in certain therapy areas with prescription and non-prescription products. We are dedicated to providing products that serve society by increasing the well-being and quality of life of individuals. As a company, our aim is to attract the best talent and reward our employees for outstanding performance. Maintaining our excellent reputation is vital to us. Countries where Meda has its own sales organizations Vision Our vision is to become a world- leading specialty pharma company with a focus on sustainable and profitable growth to provide value for our patients, shareholders and other stakeholders.

4 REVENUES BY GEOGRAPHY 2015 . 19,648 6,482. Group sales reached EBITDA excluding WESTERN EUROPE, 62%. EMERGING MARKETS, 19%. USA, 17%. SEK 19,648 million nonrecurring items OTHER SALES, 2%. amounted to SEK 6,482 million 150. Our pharmaceuticals 60. Our sales organizations are sold in more than are present in over 150 countries 60 countries MEDA Annual Report 2015 1. The year in brief Important events in 2015 . Completing the integration Dymista approved for treatment Divestment of Euromed of the Italian acquisition of seasonal allergic rhinitis in manufacturing unit, a former Rottapharm. children aged 6 to 11. Rottapharm company located in Spain. The year in figures Group sales amounted to SEK 19,648 million (15,352). Organic growth of 11)% (2). Free cash flow excluding non-recurring items of SEK 4,172 million (3,000). Free cash flow per share excluding non-recurring items of SEK ( ). Increased focus on the Respiratory therapy area and the OTC portfolio Profit after tax excluding non-recurring items amounted to SEK 1,531 million (1,181).

5 Earnings per share excluding non-recurring items was SEK ( ). EBITDA excluding non recurring items amounted to SEK 6,482 million (4,700), equivalent to a margin of ( ). Proposed dividend per share SEK ( ). NET SALES EBITDA2) FREE CASH FLOW2). SEK million SEK million SEK million 20,000 8,000 5,000. 7,000. 4,000. 15,000 6,000. 5,000. 3,000. 10,000 4,000. 2,000. 3,000. 5,000 2,000. 1,000. 1,000. 0 0 0. 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 . 1) Organic growth pro forma 2) Excluding non-recurring items 2 MEDA Annual Report 2015 . Important events after 2015 . The Mylan offer On 10 February, 2016, Mylan announced a representing more than 90% of the total num- Enhances critical mass in key therapeutic public offer to aquire the shares in Meda. The ber of shares of Meda, Meda will sub sequently areas: consideration consists of a combination of cash be de-listed from the Stockholm Stock Exchange.

6 C omplementary therapeutic presence in and Mylan shares. If shareholders representing less than 90% all regions will create a leader in allergy Mylan is a leading global pharmaceutical of the shares accept the offer, Mylan may and respiratory and a scale player in company whose shares are traded on the choose to withdraw from the offer or to accept dermatology, pain and inflammation NASDAQ Global Select Market and the Tel Aviv shares tendered in the offer in which case P rovides opportunity to sell combined Stock Exchange. Meda may continue to be listed. portfolio in new markets The Board of Meda has made an evaluation Financially compelling transaction: of Mylan's offer and recommends Meda's The evaluation of the Board of Meda E nhances size and scale with combined shareholders to accept it. The two largest The Board believes that there are a number of 2015 sales of approximately USD shareholders, Stena Sessan AB and Fidim , strategic benefits to Meda from combining its billion and combined 2015 adjusted have undertaken to accept the offer.

7 Operations with Mylan, including: EBITDA of approximately USD billion Mylan will publish an offer document that will Significantly strengthens and diversifies S ubstantial synergy opportunity, with be made available to all shareholders. The offer commercial presence: approximately USD 350 million of pre-tax document is expected to be published on or Diversifies Meda's global portfolio mix Annual operational synergies expected around 19 May 2016. by strengthening branded platform and to be achieved by year four after consum- Mylan has made the offer conditional upon creates USD 1 billion business in attractive mation of the offer the offer being accepted to such an extent that OTC market Mylan becomes the owner of shares in Meda E stablishes critical mass across all com- representing more than 90% of the total num- mercial channels in Europe; creates a lead- ber of shares of Meda. ing US specialty business; and provides If the offer is accepted to such an extent that exciting platform for growth in new Mylan becomes the owner of shares in Meda Emerging Markets THE TIME TABLE AND THE STEPS OF THE OFFER PROCESS READ MORE.

8 1. 2. 3. You may read more about the offer in Statement by the Board of Directors of Meda in relation to the public offer by Mylan , published Estimated date for Estimated acceptance Estimated settlement on on February 10, publication of the offer period: 20 May 2016 to date: 5 August 2016 2016 and the Mylan's offer announcement available at: document: 19 May 2016 29 July 2016. This means that the transaction might be finalized during the third quarter of 2016. MEDA Annual Report 2015 3. CEO's Comment Keeping our focus Meda's strong performance in 2015 reconfirmed that our strategy is successful. We have built a cohesive portfolio of products that improve the quality of life for many people.. Meda's performance in 2015 reconfirmed that cash flow. I truly believe we are now on the right Meda is a very attractive company in this industry;. we were on the right track with our strategy to track with our business in Italy.

9 In addition, we we have an extensive and interesting product focus on growth products, optimized base busi- have made progress with our efforts to improve portfolio and a fantastic organization in key mar- ness and acquisitions. Sales rose to SEK our manufacturing and supply organization with kets such as Western Europe, Emerging Markets billion driven by a strong performance in our the divestment of Euromed in Spain end of and the US. We are a highly interesting company growth business which was up 6%. 2015 . for other companies that need to strengthen their I am proud of what Meda and its employees We believe it is important to be a responsible own presence in these key areas. have achieved in 2015 . We have successfully part in the global pharmaceutical market. In February 2016, Mylan announced that it integrated Rottapharm, our largest ever acqui- Meda's intention is to keep the sustainability has made an offer to acquire the shares in sition, ahead of plan and achieved more than efforts relevant and close to the business.

10 Our Meda. I find the proposed transaction with the planned synergies for the year while at the approach is about making constant improve- Mylan very compelling from a strategic stand- same time continuing to drive our day-to-day ments. Meda shall be a reliable and trustworthy point and I believe Mylan's and Meda's busi- business forward in our respective markets. partner within the value chain. 2015 meant nesses are highly complementary. The Board of We have now achieved a leading position in the renewed takeoff in a new organization and new Meda has made an evaluation of the offer and European specialty pharma market with good resources. Some highlights from the year are recommends Meda's shareholders to accept profitability and strong cash flow generation. the renewed ISO 14001 group certificate, we the offer. The two largest shareholders have Apart from synergies and increased revenues, are well underway on the Rottapharm integra- undertaken to accept the offer.