Nycomed Annual Report 2006

CO N T E N T S

2 3 4 12 14 16 22

D E F I N I T IONS OF KEY FIGURES A N D F I NANCIAL RATIOS EBITDA

=

Earnings before interest, tax, depreciation and amortisation

Adjusted EBITDA

=

EBITDA adjusted for inventory step-up values as a result of purchase accounting, restructuring and integration expenses and project costs regarding abandoned acquisition (the latter relevant for 2002) and the effect from the warrants programme

Gross profit margin

=

Gross profit × 100/Total net turnover

EBITDA margin

=

EBITDA × 100/Total net turnover

Adjusted EBITDA margin

=

Adjusted EBITDA × 100/Total net turnover

NYCOMED S.C.A. SICAR 8-10 RUE MATTHIAS HARDT 1717 LUXEMBOURG www.nycomed.com

Annual Report 2006 Nycomed S.C.A. SICAR

COMPANY PROFILE LET TER FROM THE CEO FINANCIAL SUMMARY KEY PRODUCTS PIPELINE CORPORATE GOVERNANCE FINANCIAL STATEMENTS

CO NTENTS

2 3 4 12 14 16 22

COM PA N Y PRO F I L E

I M P ORTA N T N OT I C E • The Annual Report 2006 covers the period from 1 January 2006 to 31 December 2006. The consolidated financial statements for 2006 cover this period.

LET T E R FRO M T H E C E O

• The acquisition of ALTANA Pharma AG on 29 December 2006 makes comparisons with previous years difficult.

FINA N C I A L S U M M A RY

With this in mind, please note that comparative figures for 2002-2005 are pro forma figures.

• Unless otherwise stated, the number of employees stated

KEY PRO D U C T S PIPE L I N E CORPORATE GOVERNANCE FINA N C I A L S TAT E M E N T S

is on an annual basis.

FINANCIAL HIGHLIGHTS AND KEY FIGURES

I MPORTANT NOTICE • The Annual Report 2006 covers the period from 1 January 2006 to 31 December 2006. The consolidated

Pro forma Consolidated figures € million

financial statements for 2006 cover this period.

• The acquisition of ALTANA Pharma AG on 29 December 2006 makes comparisons with previous years difficult.

With this in mind, please note that comparative figures for 2002-2005 are pro forma figures.

• Unless otherwise stated, the number of employees stated is on an annual basis.

Net turnover/geographical regions North Western Europe Finland CIS Big Five Central Europe International Sales Other Total net turnover

20061

20052

2005

2004

IFRS

IFRS

IFRS

IFRS

01.01.06 04.01.05 01.01.05 31.12.06 31.12.05 31.12.05 (12 months (8 months (12 months of operations) of operations) of operations) (unaudited) 289.1 127.6 189.1 69.3 47.1 70.3 221.9 105.7 150.7 60.7 66.4 98.0 107.1 85.3 125.1 98.9 60.9 89.1 22.9 14.9 25.2 869.9 507.9 747.5

2003

20023

2001

Danish GAAP4

176.7 66.3 98.8 85.3 107.1 81.6 28.8 644.6

196.1 70.0 77.3 79.1 97.7 92.2 23.1 635.5

195.2 23.0 64.2 71.1 87.8 98.4 23.2 562.9

179.0 20.8 37.8 59.5 76.3 107.1 27.8 508.3

Cost of sales Gross profit Operating income (EBIT) Financial result Net result/profit EBITDA Adjusted EBITDA

349.9 520.1 46.0 -156.1 -83.4 168.0 180.7

266.3 241.6 -36.8 -75 -86.5 44.6 110.7

369.3 378.2 -16.5 -88.7 -81.0 90.5 156.7

284.6 360.0 52.9 -67.4 5.6 126.3 129.3

316.3 319.2 -14.5 -63.1 -65.7 87.8 125.5

256.2 306.7 52.6 -23.2 12.1 108.2 120.8

239.7 268.6 48.9 -23.5 11.7 100.9 107.6

Balance sheet Total assets Change in working capital Capital expenditures Total equity

9,176.5 -41.1 30.3 1,232.4

2,350.7 -35.2 16.6 819.4

2,350.7 -58.1 20.7 819.4

1,486.9 -12.2 27.1 548.8

1,518.0 -9.0 16.8 562.3

1,640.6 -42.9 25.0 636.3

643.6 12.4 20.0 107.9

-44.1 -4,089.3 -53.3 4,837.9 651.2

16.8 -748.3 -29.4 807.6 46.7

20.7 -784.5 -39.9 827.3 23.6

51.0 24.0 -76.1 -14.2 -15.3

35.0 -37.6 -27.4 -18.5 -48.5

31.1 -894.6 -29.9 935.0 41.6

81.3 -40.8 -91.2 -50.7

59.8 % 19.3 % 20.8 %

47.6 % 8.8 % 21.8 %

50.6 % 12.1 % 21.0 %

55.8 % 19.6 % 20.1 %

50.2 % 13.8 % 19.7 %

54.5 % 19.2 % 21.5 %

52.8 % 19.9 % 21.2 %

3,821

3,252

3,252

3,019

2,831

2,665

2,418

Cash flow Operating activities Sale/purchase of business activities Other investment activities Financing activities Net cash flow Ratios Gross profit margin EBITDA margin Adjusted EBITDA margin Number of employees Number of employees including ALTANA Pharma AG at 31 December 2006

12,741

See inside back cover for definition of key figures and financial ratios.

1) 29 December 2006 the Nycomed Group acquired ALTANA Pharma AG. 2) 9 May 2005 the Nycomed Group (Nyco Holdings ApS) was acquired by Nycomed A/S. 3) 29 November 2002 the Nycomed Group (Nycomed Holding A/S) was acquired by Nyco Holdings ApS. 4) As the ultimate parent of the Nycomed Group during the years 2001-2003 was incorporated in Denmark, the financial figures presented for those years have been prepared in accordance with Danish GAAP. From 2004 onwards, International Financial Reporting Standards have been applied.

Published by Nycomed S.C.A. SICAR Concept and design Bysted A/S Text by Eye for Image ApS Print PE Offset A/S

H I G H LIGHTS 2006 JANUARY

MAY

The European Committee for Medicinal Products for Human Use (CHMP) recommends an extension of indication for TachoSil® (haemostatic surgical patch).

Matrifen® (fentanyl patch) for severe chronic opioid-sensitive pain receives Mutual Recognition. It is subsequently launched in Germany, Denmark and Sweden.

MARCH Nycomed and The Medicines Company announce the results from the first 30 days of the global 13,819 patient ACUITY trial, confirming that Angiox® (bivalirudin) used alone significantly reduces the incidence of clinically relevant bleedings.

JUNE

APRIL

ImagifyTM (perflubutane polymer microspheres), an ultrasound contrast agent for use in the evaluation of coronary artery disease, shows positive preliminary results in its phase III clinical trials.

Nycomed’s new common cold product ZyComb® (xylometazoline hydrochloride and ipratropium bromide) is approved in Sweden.

Nycomed acquires Romanian pharmaceutical company Ruby De Tacos. The company has 30 employees and already markets a number of Nycomed products in Romania.

The European Commission approves and issues EU marketing authorisation for Preotact®, the first full-length parathyroid hormone (PTH 1-84) for osteoporosis.

SEPTEMBER

TOTAL NET TURNOVER

ADJUST E D E B I T D A

(€ million) 3500 Nycomed 1 ALTANA 2 3000

(€ million) 1000 Nycomed 1 ALTANA 2 800

Nycomed announces its intention to acquire ALTANA Pharma AG from German-based pharmaceuticals and

chemicals group, ALTANA AG. The transaction, including cash, marketable securities and working capital, has a total value of € 4,768.6 million.

OCTOBER The new Executive Management Committee is finalised. Hans-Joachim Lohrisch, ALTANA Pharma President and CEO, will be a member of the board.

NOVEMBER Nycomed and US-based DURECT Corporation announce the signing of a licence agreement for POSIDURTM (SABERTM-bupivacaine) for the treatment of post-surgical pain.

DECEMBER Nycomed acquires German-based international pharmaceuticals group ALTANA Pharma AG.

NUMBER OF EMPLOYEES 15000

Nycomed 1 ALTANA 2

12000

2500 600

2000 1500 1000 500 0

2002

2003

2004

2005

9000

400

6000

200

3000

0

2006

2002

2003

2004

2005

2006

0

2002

2003

2004

2005

2006

NET TURNOVER BY REGION (€ million) 2006

98.9

2005 1

22.9

89.1

North Western Europe

25.2

Finland

289.1

Central Europe

277.7 150.6

221.9

Big Five Russia/CIS International Sales

69.3 60.7

107.1

43.9 92.5

68.4

Contract Production

1) The numbers for Nycomed for 2002-2005 are pro forma. The 2005 numbers are unaudited.

2) The numbers for ALTANA Pharma AG are unaudited.

A N N UA L R E P O RT 2 0 0 6

1

CO M PANY PRO F I LE Following the acquisition of ALTANA Pharma AG on 29 December 2006, Nycomed is a pharmaceutical company of 12,000 people. We provide medicines and products for hospitals, specialists and general practitioners, as well as over-thecounter medicines in selected markets.

Our aim is to bring medicines that make a real difference to patients and to healthcare providers. We are engaged in all aspects of a product’s life, from research and development to production, marketing and customer relations.

We also work closely with innovative research-based companies, always looking for products with real promise for patients.

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A N N UA L R E P O RT 2 0 0 6

The result is a broad portfolio of products and a powerful pipeline. We work in a wide range of therapeutic areas, particularly cardiology, gastroenterology, osteoporosis, respiratory, pain and tissue management.

We diligently test our medicines to evaluate safety and efficacy, and collaborate with local and international authorities to shepherd our products through approval, registration and reimbursement programmes.

Our goal is to always keep patients in focus. We are constantly searching for ways to make treatments more manageable. Medicinal travel packs, easy-toadminister injections and fast-acting formulas help people administer treatments more simply, allowing them to live fuller, more productive lives.

A European-based company, we have a wide geographical scope and operate extensively throughout Europe and in fast-growing markets in Latin America, Russia/CIS and Asia-Pacific. No matter where we are in the company, we know that everything we do matters to someone and that we all contribute to making healthcare better for patients around the world.

Nycomed is privately owned and has its corporate headquarters in Zurich, Switzerland. There are production sites in Austria, Belgium, Brazil, Denmark, Estonia, Finland, Germany, India, Ireland, Mexico, Norway, Poland and the US. Nycomed’s R&D facilities are led out of Konstanz in Germany, with additional sites in Denmark, the US and India.

L E T T ER FROM T H E CEO Nycomed saw strong growth throughout 2006. Our regions and products performed well, and the year ended with the completion of the acquisition of ALTANA Pharma AG. The bringing together of Nycomed and ALTANA Pharma marks the start of a new era in which we have the opportunity to build an even stronger healthcare company.

Together, we are creating a Nycomed with the ambition of making an even bigger difference to patients and the pharmaceutical industry. The resulting Nycomed is strong in Europe and has a significant presence in growing markets such as Russia/CIS, Latin America and Asia-Pacific.

Challenges ahead Of course, change takes time. Building a new company with new strategic goals does not happen overnight and challenges lie ahead. We must work hard to maintain customer focus while integrating the companies and we must ensure that we quickly tap into the considerable potential and expertise we have within the company.

With a staff and management made up of highly motivated and talented people from both companies, we can respond quickly to the changes and build a powerful company with an exciting future.

Our products are performing well, giving us a solid platform from which we can grow. But over the next few years, patents will expire on our biggest product, Pantoprazole for acid-related gastrointestinal diseases. We need to prepare for the change. Until then, Pantoprazole’s revenues will help us continue to develop Nycomed.

Bringing medicines that matter to patients We must always remember our commitment. We are here to bring new and better medicines to patients. And it is the patients who judge our success. By listening and responding to the needs of patients, medical professionals and payers, Nycomed can take great strides towards improving the quality of life of people around the world.

I am pleased to be working with old and new colleagues and look forward to learning from their creativity and experience. Together, we will all continue to bring healthcare solutions to the people who need them.

Håkan Björklund

A N N UA L R E P O RT 2 0 0 6

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F I N A NCIAL S U M M ARY With year-to-date growth in net turnover of 16.4% and growth in adjusted EBITDA of 15.4%, full year results have been very satisfactory for the Group.

Russia/CIS and most of our established European home markets continued to show satisfactory growth rates. The European pharmaceutical industry is facing intensified focus on cost containment from health authorities and increasing generic competition. Despite this, we have increased sales in most markets and in 2006 we further expanded sales and marketing coverage in line with our strategy. The launches of Matrifen® (fentanyl patch) for severe chronic opioid-sensitive pain and Preotact®, the first full-length parathyroid hormone (PTH 1-84) for osteoporosis, are on track – with introductions in the key European markets continuing into 2007. We remain optimistic about these important products and their contribution to Nycomed’s continued growth.

In 2006, adjusted EBITDA increased by 15.4% compared to 2005. This is a result of strong revenue growth, focus on costs and development in operating expenses according to our plans, as well as good production performance due to a high yield in production and cost control.

ACQUISITION OF ALTANA PHARMA AG On 21 September 2006, we reached an agreement to acquire ALTANA Pharma AG. The transaction, including cash and marketable securities and working capital acquired, has a total value of € 4,768.6 million. The transaction was financed by a consortium consisting of international banks. Closing of the transaction took place on 29 December 2006.

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A N N UA L R E P O RT 2 0 0 6

The acquisition of ALTANA Pharma AG and the related application of purchase accounting adjustments and financing transactions have affected, and will continue to affect, our results of operations following the acquisition. In particular: • The substantial debt we incurred to finance the acquisition will increase the combined Group’s interest expense onwards significantly • The significant adjustment to intangible assets we recorded in connection with the acquisition in respect of patents and other intellectual property rights will lead to a significant increase in amortisation expense • The purchase accounting adjustment relating to inventory resulted in a nonrecurring charge of € 49.4 million. This will be reflected in our consolidated income statement, net of the related income tax benefit, as the inventory on hand at the acquisition date is sold to customers. This impact and the related effect on gross and operating margins will be reflected in our consolidated income statement within the first six months following the closing of the acquisition • The purchase price allocation and purchase accounting adjustments may be subject to subsequent adjustments of fair values. IFRS 3 Business Combinations effectively requires allocation of the cost of an acquisition to identifiable assets, liabilities and contingent liabilities to be completed within a period of 12 months of the acquisition date (29 December 2006).

COMPARATIVE FIGURES The consolidated income statement for 2006 was not impacted by the acquisition

of ALTANA Pharma AG as closing of the acquisition took place on 29 December 2006.

As a result of the new ownership of Nycomed in 2005, the consolidated financial statements for 2005 comprise consolidated figures reflecting eight months of operations from May to December 2005. For comparative reasons, we have stated a pro forma income statement and cash flow statement covering 12 months from January to December 2005. These 12-month figures are based on consolidated figures from January to April 2005 for Nyco Holdings ApS and subsidiaries, and consolidated figures from May to December 2005 for Nycomed A/S and subsidiaries.

All figures stated below, which are compared to 2006, are the unaudited figures from the 12-month pro forma income statement and cash flow statement.

OVERALL PERFORMANCE Net turnover increased by 16.4% to € 869.9 million in 2006. Adjusted for the impact from foreign currency fluctuations, net turnover increased by approximately 17.0%.

Operating profit increased by € 62.5 million in 2006, from € -16.5 million to € 46.0 million. Excluding the impact from inventory step-up of € 58.7 million in 2005, the impact from incentive programmes in both 2005 and 2006, and adjustments for integration costs in 2006 and restructuring costs in 2005 and 2006, operating profit increased by 18.4% from € 49.6 million in 2005 to € 58.8 million in 2006. Adjusted for the impact from

foreign currency fluctuations, operating profit adjusted for these items increased by approximately 23.7%.

impact from foreign currency fluctuations (mainly NOK), net turnover increased by approximately 4.2%.

EBITDA and adjusted EBITDA are key measures used in order to have a more comprehensive analysis of Nycomed ’s operating performance and of the ability to service our debt.

Operating profit increased by € 9.3 million, 6.9%, from € 134.5 million in 2005 to € 143.8 million in 2006. Adjusted for the impact from foreign currency fluctuations (mainly NOK), operating profit increased by approximately 7.1%.

Adjusted EBITDA amounted to € 180.7 million in 2006, which is a 15.4% increase compared to 2005. Adjusted for the negative impact from foreign currency fluctuations, adjusted EBITDA increased by approximately 17.1%.

DEVELOPMENT

BY SEGMENTS Nycomed’s sales and operating profit derive from the following geographical segments: • North Western Europe • Central Europe • Big Five • Finland • Russia/CIS • International Sales (Export) In addition, Nycomed has other business entities comprising central functions which are: International Product Development, International Marketing and Business Development, Operations, Contract Production and Administration.

NORTH WESTERN EUROPE This region, comprising Denmark, Norway, Sweden, the Baltic States, Belgium and the Netherlands, is Nycomed’s largest region by turnover.

Net turnover increased by € 11.4 million, 4.1%, from € 277.7 million in 2005 to € 289.1 million in 2006. Adjusted for the

All markets in the region, except for Norway, had positive sales growth. In Denmark, the sales of Pantoloc® (pantoprazole) for gastrointestinal diseases continued to perform very well and Pamol® (paracetamol) for pain relief showed significant growth. In Sweden, sales of Matrifen® (fentanyl patch) for severe chronic opioid-sensitive pain, the anticoagulant Angiox® (bivalirudin) and the anticoagulant Waran® (warfarin) showed strong growth. The Baltic countries saw a positive development in net turnover mainly driven by Ibumetin® (ibuprofen) for pain relief, Xymelin® (xylometazolin) for nose congestion, Xefo® (lornoxicam) for the management of acute pain, and TachoSil® (haemostatic surgical patch). Despite the introduction of different reimbursement modalities for cheaper PPIs (generics) in Belgium, Zurcale® (pantoprazole) for gastrointestinal diseases continued to perform very well. In general, the changes to the PPI reimbursement system introduced during 2005 have had a positive effect on our sales. TachoSil® and the antithrombotic Asaflow (acetylsalicyl acid) showed strong growth in Belgium in 2006. In the Netherlands, sales of TachoSil® increased and sales of Pantoprazole developed well.

The negative development in Norway is mainly related to lost distribution in pharmacy chains. Despite this, Norway slightly improved operating profit due to strong cost control.

CENTRAL EUROPE Our Central Europe region comprises Austria, Switzerland, Greece, Poland, the Czech Republic and Romania. Net turnover increased by € 14.6 million, 15.8%, from € 92.5 million in 2005 to € 107.1 million in 2006. Operating profit increased by € 5.1 million, 17.2%, from € 29.6 million in 2005 to € 34.7 million in 2006. The increase in both net turnover and operating profit for the region was mainly due to: overall sales improvements in Switzerland with TachoSil® (haemostatic surgical patch) and the food supplement Litozin® (rosehip extract) developing well; a sales increase in Greece mainly driven

by TachoSil®, Xefo Rapid® (lornoxicam) for the management of acute pain and Calcium; and increased sales of TachoSil® in Poland. Despite the impact on sales of changes in the law in Austria, which strictly regulates discounts for selfdispensing doctors, Austria had a positive development in operating profit.

BIG FIVE This area comprises Germany, France, Spain, Italy and the UK. Net turnover increased by € 16.8 million, 38.3%, from € 43.9 million in 2005 to € 60.7 million in 2006. Operating profit decreased by € 3.5 million.

Sales in Germany increased by 26.2%, mainly driven by the launch of Matrifen® (fentanyl patch) for severe chronic opioidsensitive pain in cooperation with our partner Betapharm and increased sales of TachoSil® (haemostatic surgical patch).

Sales growth in France was driven by Gutron® (midodrine hydrochloride) indicated for hypotension, and the 2006 launches of TachoSil® and the anticoagulant Angiox® (bivalirudin). Sales growth in Spain was due to the launch of TachoSil® where the product has been very well

A N N UA L R E P O RT 2 0 0 6

5

accepted. TachoSil® also developed positively in Italy, where sales of Xefo® (lornoxicam) for the management of acute pain also contributed to growth. 2006 sales in the UK are based on TachoSil® and Angiox®; however sales have not developed according to our plans.

FINLAND Net turnover increased by € 0.9 million, 1.3%, from € 68.4 million in 2005 to € 69.3 million in 2006. Sales development in Finland was strongly impacted by changes in legislation effective per 1 January 2006 within the over-the-counter segment; reimbursed prescription products experienced a 5% price reduction from the same date. Despite these changes to the market, our company in Finland achieved a significant improvement in operating profit due to cost reductions.

RUSSIA/CIS

International Sales comprises our export business, out-licensing agreements and our sales in China. Net turnover increased by € 9.8 million, 11.0%, from € 89.1 million in 2005 to € 98.9 million in 2006.

Adjusted for the impact from foreign currency fluctuations (mainly USD and JPY), net turnover increased by approximately 12.2%. Operating profit increased by € 4.6 million, 7.5%, from € 61.4 million in 2005 to € 66.0 million in 2006.

Adjusted for the impact from foreign currency fluctuations (mainly USD, JPY and NOK), operating profit increased by approximately 8.9%.

CENTRAL FUNCTIONS Our central functions comprise our Contract Production activities, Operations comprising manufacturing and supply chain, International Product Management, International Product Development and Administration.

Net turnover for Contract Production decreased by € 2.3 million, -9.2%, from € 25.2 million in 2005 to € 22.9 million in 2006. The decrease was mainly due to lower sales of aminobisamid, partly offset by strong demand from a partner on secondary production.

The underlying performance for Operations in 2006 was very satisfactory with a significant increase in volumes for our

NET TU R N O V E R 2 0 0 6 (€ million)

250 200 150 100 50 0

o pr ct tra s on Sale /c er nal th O atio rn te In CIS a/ ssi Ru d an nl Fi ny a rm Ge ce an Fr d lan Po e c d ee Gr rlan e itz s Sw ia tate S str Au altic ds B rlan e e Th eth N e Th m u lgi Be n e ed Sw ay w

or

N ar

nm

De

k

Net turnover increased by € 71.3 million, 47.3%, from € 150.6 million in 2005 to € 221.9 million in 2006. Adjusted for the impact of the US dollar, net turnover increased by approximately 48.9%. Operating profit increased by € 29.7 million, 48.6%, from € 61.2 million in 2005 to € 90.9 million in 2006. Adjusted for the impact of the US dollar, operating profit increased by 50.7%.

INTERNATIONAL SALES (EXPORT)

d.

CHANG E 2 0 0 5 - 2 0 0 6 40% 30% 20% 10% 0% -10%

o pr ct tra s on Sale /c er nal th O atio rn te In CIS a/ ssi Ru d an nl Fi ny a rm Ge ce an Fr d lan Po e c d ee Gr rlan e itz s Sw ia tate S str Au altic ds B rlan e e Th eth N e Th m u lgi Be n e ed Sw y a w k ar

nm

or

N

De

This considerable sales growth is mainly driven by Actovegin® (deproteinized haemoderivative) for metabolic stimulation, as well as sales of Calcium and Concor® (bisoprolol fumarate) for hypertension treatment from our Merck portfolio. Despite additional investments to expand our sales and marketing organisation in Russia/CIS, operating profit grew at the same level as sales.

d.

6

A N N UA L R E P O RT 2 0 0 6

own produced products. The cost of goods as a percentage of net turnover continued to decrease. This positive development is a result of continuous cost control and an increased yield in our plants. The main challenge in 2006 has been to match production capacity to the increasing demand from our markets, especially the demand from Russia/CIS. The start-up of the new TachoSil® (haemostatic surgical patch) production facility was implemented, and we have increased the yield in the production of TachoSil®.

2006. Excluding the amortisation of inventory step-up of € 58.7 million in 2005, gross profit increased by € 83.4 million, 19.1%, from € 436.9 million to € 520.3 million for the year ended 31 December 2006. The related gross profit margin as a percentage of net turnover, excluding the inventory step-up in 2005, increased from 58.5% for the year ended 31 December 2005 to 59.8% for the year ended 31 December 2006. A favourable product mix in 2006 compared to 2005 and improved yield in production were the main reasons for the improved margin.

Cost of sales

Operating expenses

As a percentage of net turnover, cost of sales decreased from 42.6% in 2005, excluding the amortisation of inventory step-up from purchase accounting in 2005, to 40.2% in 2006. Excluding amortisation of inventory step-up, cost of sales as a percentage of net turnover decreased to 41.5% in 2005. Total direct costs as a percentage of net turnover decreased from 29.4% for the year ended 31 December 2005 to 28.3% for the year ended 31 December 2006. This decrease primarily reflects a more favourable product mix in most of our markets. Indirect production costs as a percentage of net turnover decreased from 11.1% to 9.8% in the 12 months ended 31 December 2006. Despite the increased volumes, we have been able to keep the overall cost of goods unchanged. The improved yield was mainly driven by high yield in the TachoSil® (haemostatic surgical patch) production in Austria and in the production of Calcium in Norway.

Sales and marketing expenses in the regions increased by € 39.2 million, 21.4%, from € 183.0 million for the year ended 31 December 2005, to € 222.2 million for the year ended 31 December 2006. This increase mainly reflects the increased costs in connection with the expansion of our activities in Russia/CIS, as well as the further expansion and launch of products in our Big Five region.

Gross profit Gross profit increased by € 142.1 million, 37.6%, from € 378.2 million in the year ended 31 December 2005, to € 520.1 million for the year ended 31 December

The increase in centralised selling expenses of € 4.1 million, 22.5%, is related to international sales and marketing resources and support, business development and in-licensing activities. The total amortisation of intangible assets included in sales and marketing expenses increased by € 15.1 million, 18.1%, from € 83.7 million for the year ended 31 December 2005, to € 98.9 million for the year ended 31 December 2006. This increase was mainly related to the 2006 full-year effect of the application of purchase accounting and amortisation on the stepup values related to patents and rights and development projects.

Research and development expenses increased by € 9.1 million, 32.2%, from € 28.3 million in 2005 to € 37.4 million in

2006. As a percentage of net turnover, research and development expenses increased from 3.8% in 2005 to 4.3% in 2006. As Nycomed does not perform basic research, our research and development expense line consists of a mix of various non-capitalised product development and support costs. Including capitalised development costs and milestone payments concerning in-licensed products, the total development costs as a percentage of net turnover increased from 6.8% in 2005 to 7.2% in 2006.

Administration expenses increased by € 13.5 million, 16.8%, from € 80.3 million in 2005 to € 93.8 million in 2006. As a percentage of net turnover, administration expenses increased from 10.7% in 2005 to 10.8% in 2006. Included in administration expenses for 2006 are restructuring costs and costs related to the integration of ALTANA Pharma AG. Excluding this, administration expenses increased by € 5.8 million, 7.2%, compared to last year and 9.9% as a percentage of sales.

The increase in administration expenses was mainly due to increased activities in our new subsidiaries and several corporate projects.

Net financial items Net financial items increased by € 67.4 million, from net expenditure of € 88.7 million in 2005 to net expenditure of €156.1 million in 2006. This was primarily impacted by the redemption of most of the € 400 million Senior PIK Notes and € 225 million Senior Notes on which a premium above par was paid in connection with the redemption. Furthermore, unamortised financing costs, expenditure of € 18.4 million relating to the Senior PIK Notes and fair value adjustment on the Senior Notes income of € 27.4

A N N UA L R E P O RT 2 0 0 6

7

million have been charged to the income statement in connection with the redemption. In addition to this, the increase in net financial items is impacted by the full-year effect of interest on the Senior PIK Notes on which there was interest for a nine-month period in 2005, a total increase of €15.7 million.

Tax Income tax benefit for the year was € 26.7 million in 2006 compared to an income tax benefit of € 24.1 million for 2005. The increase in tax benefit of € 2.6 million was mainly due to an increase in loss before tax which went from a loss of € 105.2 million in 2005 to a loss of € 110.1 million in 2006. This increase in tax benefit was additionally affected by the net effect of prior year adjustments, differences in local tax rates and non-deductible expenses related to our warrant programme, as well as other minor permanent differences.

Net income (loss) Our net income decreased slightly from a loss of € 81.0 million in 2005 to a loss of € 83.4 million in 2006. Excluding the 2005 non-cash items, inventory step-up net of tax and the 2006 full-year impact from higher amortisations on intangible assets as a result of the application of purchase accounting and the related step-up of values on intangible assets, as well as the additional financial expenses in 2006 in connection with the repayment of PIK Notes and Senior Notes, our net income increased by € 12.7 million.

CASH FLOW AND CAPITAL RESOURCES CASH FLOW Operating activities Cash flow from operating activities decreased from € 20.7 million in 2005 to € -44.1 million in 2006. The decrease was primarily caused by the payment of interest in PIK, originally capitalised in 2005 and during 2006 until payment end of December 2006. Excluding this impact, cash flow from operating activities showed an increase of € 25.7 million. This increase compared to 2005 was mainly due to increased profitability in the underlying business activities, lower impact from working capital and slightly increased tax payments. Working capital had a negative development of € 41.1 million for the year ended 31 December 2006 compared to a negative development of € 58.1 million for the year ended 31 December 2005. The negative development in working capital in 2006 is impacted by the prolongation of the credit terms under the Federal Programme in Russia. In addition, we have increased the level of inventories primarily related to the launch of Matrifen® (fentanyl patch) for severe chronic opioid-sensitive pain and Preotact®, the first full-length parathyroid hormone (PTH 1-84) for osteoporosis, and to take into account growth in Russia/CIS. We are continuing to put a lot of resources into our on-going working capital project.

Investment activities The cash flow from investing activities was impacted by the acquisition of ALTANA Pharma AG for € 4,689.8 million, before taken over cash and marketable securities of € 600.5 million.

8

A N N UA L R E P O RT 2 0 0 6

Please refer to the Financial Statements section, note 1, for further details. Investments in property, plant and equipment amounted to € 30.3 million and mainly comprised: expansion of our production line in Austria which produces Actovegin® (deproteinized haemoderivative) for metabolic stimulation; other investments in production in Austria, Norway and Denmark; investments in IT and new office facilities; and general maintenance investments. Investments in intangible assets comprised development costs and milestone payments for future growth products.

Financing activities Cash flow from financing activities was impacted by the acquisition of ALTANA Pharma AG. The transaction was financed through senior credit facilities under which we have drawn in total € 5,491.2 million end of 2006. Financing costs related to the transaction amounted to € 107.5 million of which € 103.0 was paid in 2006. Our shareholders contributed € 500.0 million in cash to the Nycomed Group. Cash net outflow from other financing activities amounted to € 1,050.3 million covering mainly ordinary installments on senior credit facilities of € 6.8 million; repayment of the former senior credit facilities; and repayment of Senior PIK Notes and Senior Notes, including premium paid in connection according to the loan agreement.

Nycomed’s total cash position at 31 December 2006 amounted to € 697.8 million, including cash taken over from ALTANA Pharma AG of € 600.5 million.

CAPITAL RESOURCES In line with our business plan and strategy, we plan to continue to devote significant cash resources to the ongoing growth of

our business. As at 31 December 2006, we had a cash position of € 697.8 million including cash from the acquisition of ALTANA Pharma AG. In connection with the acquisition, our old senior credit facilities were repaid and new senior credit facilities were made available. As part of our senior credit facilities, we have the following facilities (the figures disclosed are book values as per 31 December 2006): • Term A Loan facilities of € 1,533.0 million • Term B and C Loan facilities of € 1,208.1 million each • Second Lien of € 425 million • Bridge facility of € 551.8 million • A € 250 million revolving facility that may be used for general corporate and working capital purposes of the Group • A € 450 million In-licensing/ Restructuring facility that may be used to finance in-licensing payments and, up to € 150 million, to finance restructuring costs. As per 31 December 2006, € 241.2 million was drawn under this facility and the amount was repaid at the beginning of 2007.

We believe that our operating cash flow, together with available borrowings under the senior credit facilities and existing cash resources, will be sufficient to fund our anticipated working capital needs, capital expenditures and debt service requirements. In particular, future drawings under the senior credit facilities will be available only if we meet certain conditions such as the financial maintenance covenants and other conditions included in the senior credit facilities. Our ability to meet these covenants will depend on our results of operations and factors outside our control.

Subsequent events On 14 February 2007, the Company’s interest in Sangtec Molecular Diagnostic A.B. and the PCR licence rights were sold to an investor. The selling price attained, USD 26.5 million, corresponded to the total of the net book values and an additional profit mark-up.

In the opinion of the Board of Directors, no important events that could have a material influence on the assessment of the consolidated financial statements have occurred after the balance sheet date, except for what is stated above.

products, either alone or together with external partners. The global franchise team, Respiratory Therapeutics, remains in Florham Park.

In the future, the distribution strategy for the US will focus more on collaboration with partners and on out-licensing products. The ALTANA Research Institute in Waltham, Massachusetts, will be closed during the first half of 2007. The core projects will be transferred to the ALTANA Pharma Research Centre in Konstanz where appropriate. ALTANA Inc. in Melville on Long Island is not affected by the restructuring.

Outlook for the financial year 2007 In 2007, we will mainly concentrate on the integration of ALTANA Pharma AG with a continuous focus on our customers and markets.

The acquisition of ALTANA Pharma AG may result in relatively major changes for the organisation of ALTANA Pharma AG. The strategic decisions necessary for this will be taken by the new management board in the course of 2007. Therefore, it is not yet possible to specify any concrete changes. The planning process for possible restructuring has been under way since the beginning of January 2007 and has not yet been completed.

As a result of this realignment, about 400 employees will have left the company by mid-2007.

Costs of € 33.7 million were incurred for the restructuring in 2006 by ALTANA Pharma AG. We expect growth in our revenues and EBITDA of approximately 5-10% in 2007, excluding restructuring and integration costs.

In October 2006, it was decided to restructure some areas of the pharmaceuticals business in the US. The US marketing and sales organisation, Florham Park, New Jersey, was dismantled at the end of 2006.

The functions of Clinical Development and Regulatory Affairs in Florham Park will continue with development work for ALTANA Pharma AG’s new respiratory

A N N UA L R E P O RT 2 0 0 6

9

MANAGEMENT’S STATEMENT Today we approved the Annual Report of Nycomed S.C.A. SICAR for the period 1 January 2006-31 December 2006.

In our opinion, the Annual Report 2006 gives a true and fair view of the Group’s financial position, cash flows and results

of operations. The Annual Report 2006 has been prepared in accordance with International Financial Reporting Standards as adopted by the EU. We consider that the accounting policies used to compile the Annual Report 2006 are appropriate.

We recommend that the Annual Report 2006 is approved at the Annual General Meeting.

Luxembourg, 14 March 2007

APPROVED BY THE BOARD OF DIRECTORS OF THE GENERAL PARTNER, NYCOMED S.A.

10

Toni Weitzberg, Chairman

Håkan Björklund

Colin Taylor

Kristoffer Melinder

Carl-Gustaf Johansson

Newton X. Aguiar

Thompson Dean

Hans-Joachim Lohrisch

A N N UA L R E P O RT 2 0 0 6

INDEPENDENT AUDITORS’ REPORT To the management of Nycomed S.C.A. SICAR Société Anonyme Luxembourg:

priate accounting policies and making accounting estimates that are reasonable in the circumstances.

REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

Responsibility of the “Réviseur d’Entreprises”

Following our appointment by the management of the Company, we have audited the accompanying consolidated financial statements of Nycomed S.C.A. SICAR, which comprise the consolidated balance sheet as at 31 December 2006 and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management responsibility for the consolidated financial statements The management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; and selecting and applying appro-

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted by the “Institut des Réviseurs d’Entreprises”.

Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the judgment of the “Réviseur d’Entreprises”, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the “Réviseur d’Entreprises” considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of Nycomed S.C.A. SICAR as of 31 December 2006, and of the consolidated results of its operations for the period then ended in accordance with International Financial Reporting Standards as adopted by the EU.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS The consolidated management report, which is the responsibility of the management, is in accordance with the consolidated financial statements.

Luxembourg, 14 March 2007

ERNST & YOUNG Société Anonyme Réviseur d’Entreprises

Isabelle Nicks

A N N UA L R E P O RT 2 0 0 6

11

KEY PRO D UCTS We provide medicines and products for hospitals, specialists and general practitioners, as well as over-the-counter medicines in selected markets.

Product highlights During 2006, our products performed well, with Pantoloc® (pantoprazole) for

12

gastrointestinal diseases and CalciChew® (calcium and vitamin D) for osteoporosis showing particularly strong sales.

Our osteoporosis portfolio was strengthened by the addition of Preotact®, the first full-length parathyroid hormone (PTH) for osteoporosis. Preotact®

received European market authorisation in April 2006 and was subsequently launched in the UK, Germany, Denmark, Sweden, Austria and Greece.

Matrifen® (fentanyl patch) for severe chronic opioid-sensitive pain received Mutual Recognition in May 2006. It was

PANTOLOC® 1 (pantoprazole)

CALCICHEW® 2 (calcium and vitamin D)

ACTOVEGIN ® (deproteinized haemoderivative)

TACHOSIL ® 3 (haemostatic surgical patch)

Therapeutic area

Gastroenterology

Osteoporosis

Neurology

Tissue management

Net turnover € million

€ 1,589.8

€ 93.4

€ 78.8

€ 61.1

% of total net turnover

46.8 %

10.7 %

9.1 %

7.0 %

% growth 2005-2006

13.6 %

20.2 %

22.5 %

29.9 %

Indication

Acid-related gastrointestinal diseases such as gastroesophageal reflux disease (GERD)

Osteoporosis

Metabolic stimulation

Haemostasis

Key customers

Hospitals Specialists General practitioners

Hospitals Specialists General practitioners Pharmacists

Hospitals Specialists General practitioners OTC

Hospitals Specialists

Key markets

US Germany Canada

Benelux CIS Switzerland UK Germany France

Russia/CIS Germany China

Europe Russia/CIS Japan

A N N UA L R E P O RT 2 0 0 6

launched in Germany, Denmark and Sweden and will be launched in the rest of Europe during 2007-2008.

The 2006 global ACUITY clinical trial showed that Angiox® (bivalirudin), indicated for use as an anticoagulant in patients undergoing percutaneous

XEFO® 4 and XEFO® RAPID (lornoxicam)

coronary intervention (PCI), can significantly reduce the incidence of clinically relevant bleeding. The results of the trial should establish Angiox® as a treatment for patients with a high risk of heart attack.

Key products are those that had a substantial impact on our business during 2006. Please note that annual sales stated below for 2006 for Pantoloc® are pro forma unaudited figures for Nycomed and ALTANA Pharma AG combined.

CUROSURF ® (lung surfactant)

MATRIFEN ® (fentanyl patch)

ANGIOX® (thrombin-specific anticoagulant)

PREOTACT ® (full-length parathyroid hormone)

Pain

Respiratory/ Neonatalology

Pain

Cardiology

Osteoporosis

€ 30.9

€ 12.8

€ 7.6

€ 7.3

€ 0.7

3.5 %

1.5 %

0.9 %

0.8 %

0.1 %

29.1 %

26.0 %

N.A.

48.7 %

N.A.

Pain and inflammatory diseases

Respiratory distress syndrome (RDS) in premature infants

Severe chronic opioid-sensitive pain

Percutaneous coronary indication

Treatment of osteoporosis in postmenopausal women at high risk of fractures

Hospitals Specialists General practitioners

Hospitals Specialists

Hospitals Specialists General practitioners Pharmacists

Hospitals Specialists

Hospitals Specialists

Austria CIS Greece Spain Turkey

Austria CIS Germany Netherlands

Germany

Europe

Europe

4

1 ) Including: Anagastra®, Apton®, Controloc®, Eupantol®, Inipomp®, Pantecta®, Panto®, Pantoc®, Pantodac®, Pantoloc®, Pantop®, Pantopac®, Pantopan®, Pantorc®, Pantoscope®, Pantozol®, Pantpas®, Peptazol®, Protium®, Protonix®, Rifun®, Somac®, Ulcepraz®, Ulcotenal®, Zurcal®, Zurcale®, Zurcazol® 2) Including: Orocal®, Calcia™, Calcimagon®, Calcigran®, Calcilac®, Calcitugg®, Cavid®, Mastical®, Nycoplus® Calcigran®, Orotre®, Steocar®, Steovit D3®, Vicalvit® 3) Including: TachoComb® 4) Including: Xafon®, Xefocam®, Telos®, Acabel®, Taigalor®

A N N UA L R E P O RT 2 0 0 6

13

P I P E L I NE Following the acquisition of ALTANA Pharma AG on 29 December 2006, our pipeline has products at every stage of development and

covers the therapeutic areas of respiratory, gastroenterology, pain and cardiology, as well as oncology.

PRECLINICAL PHASE

PHASE II

P-CABs

Ciclesonide HFA

POSIDUR™

Preclinical

Phase I

Phase II

THERAPEUTIC AREA Gastroenterology

THERAPEUTIC AREA Respiratory

THERAPEUTIC AREA Pain

KEY CUSTOMER Specialists/General practitioners

KEY CUSTOMER Specialists/General practitioners

KEY CUSTOMER Hospitals

INDICATION Gastroesophageal reflux disease (GERD)

INDICATION Allergic rhinitis

PDE inhibitors Preclinical THERAPEUTIC AREA Respiratory KEY CUSTOMER Hospitals/Specialists/ General practitioners INDICATION Inflammation

HDAC inhibitors Preclinical THERAPEUTIC AREA Oncology KEY CUSTOMER Hospitals/Specialists INDICATION Cancer

Kinase and Kinesine inhibitors Preclinical THERAPEUTIC AREA Oncology KEY CUSTOMER Hospitals/Specialists INDICATION Cancer

14

PHASE I

A N N UA L R E P O RT 2 0 0 6

INDICATION Post-surgical pain

Ciclesonide/formoterol combination Phase II THERAPEUTIC AREA Respiratory KEY CUSTOMER Specialists/General practitioners INDICATION Asthma/Chronic obstructive pulmonary disease (COPD)

PHASE III

REGISTRATION

Imagify™

OMNARIS™/OMNAIR™

Phase III

Approved in US (phase III outside US)

THERAPEUTIC AREA Cardiology

THERAPEUTIC AREA Respiratory

KEY CUSTOMER Hospitals/Specialists

KEY CUSTOMER Specialists/General practitioners

INDICATION Diagnosis of coronary artery disease

INDICATION Allergic rhinitis

TransMID ®

ZyComb ®

Phase III

Registration

THERAPEUTIC AREA Oncology KEY CUSTOMER Hospitals

THERAPEUTIC AREA Common cold/ Respiratory

INDICATION Malignant brain tumours

KEY CUSTOMER Pharmacists

NAF (nasal fentanyl)

LAUNCH

INDICATION Common cold

Phase III THERAPEUTIC AREA Pain KEY CUSTOMER Hospitals/Specialists INDICATION Breakthrough pain

Biopharmaceuticals Registration/Phase III THERAPEUTIC AREA Various KEY CUSTOMER Hospitals/Specialists INDICATION Various

Daxas ® Phase III THERAPEUTIC AREA Respiratory KEY CUSTOMER Specialists/General practitioners INDICATION Chronic obstructive pulmonary disease (COPD)

Venticute ® Phase III THERAPEUTIC AREA Respiratory KEY CUSTOMER Hospitals INDICATION Acute lung failure

A N N UA L R E P O RT 2 0 0 6

15

COR P ORATE G OV E RNANCE A privately owned company, we have obligations to our financial stakeholders.

In accordance with our financial arrangements, we prepare financial reports that comply with set standards. Nycomed is credit rated by Standard & Poor’s and Moody. As of 31 December 2006, our ratings were B+ and B1 respectively.

CORPORATE STRUCTURE Nycomed S.C.A. SICAR was established on 30 November 2006 in Luxembourg.

Nycomed S.A. is the general partner company and the sole manager in Nycomed S.C.A. SICAR and is, therefore, formally the management of the Nycomed Group. The Board of Directors in the general partner company consists of the individuals listed in the Board of

Directors section. The Board is elected at the Annual General Meeting. The Board appoints and supervises the Executive Management Committee, and oversees the Company’s performance and results.

Daily management is carried out by the Executive Management Committee. In addition to the Executive Management Committee, there are three other committees: • The Development Portfolio Committee decides which projects enter development. It also reviews development projects and makes decisions on development programmes and levels of investment.

• The Licensing Committee determines the in- and out-licensing strategy, approving licensing opportunities and reviewing the performance of licensing partnerships.

• The Commercialisation and Lifecycle Management Committee reviews and decides on Lifecycle Management (LCM) plans, agrees LCM projects and decides on global strategy and launch plans for key products.

Nycomed also has an independent internal audit function which reports directly to the Nycomed Audit Committee. All subsidiaries are internally audited, with audit visits occurring at least every second year.

SHAREHOLDERS There are two classes of shares. There are no differences in voting rights and all shareholders are entitled to have matters considered at the Annual General Meeting.

For details of management incentive programmes, please refer to the Financial Statements section.

AS AT 31 DECEMBER 2006, THE FOL LOW I N G S H A R E H O L D E RS H ELD MORE THAN 5% OF THE COL L E C T I V E S H A R E H O L D I N G: Shareholders Nordic Capital • Nordic Capital V, L.P. • Nordic Capital VI, Alpha LP • Nordic Capital VI, Beta LP • NC VI Limited • Nordic Industries Limited • NC V Limited Credit Suisse (DLJMB) • DLJMB Overseas Partners III, C.V. • DLJMB Overseas Partners IV, L.P. • DLJ Offshore Partners IV, L.P. • DLJ Merchant Banking Partners IV (Pacific), L.P. • MBP IV Plan Investors • DLJ Offshore Partners III, C.V. • DLJ Offshore Partners III-1, C.V. • DLJ Offshore Partners III-2, C.V. • DLJMB Partners III GmbH & Co. KG • Millennium Partners II, L.P. • MBP III Plan Investors, L.P. Coller International Partners • Coller International Partners IV Limited as nominee for Coller International Partners IV-D, L.P., Coller International Partners IV-E, L.P. and Coller German Investors GmbH & Co. KG • Coller International Partners V-A, L.P. Avista • ACP Nycom Holdings, LLC Others (less than 5% ownership)

16

A N N UA L R E P O RT 2 0 0 6

Share

Share ownership

ownership

(fully diluted)

41.4% 23.3% 8.0% 9.4%

39.8% 22.4% 7.7% 9.1%

25.1% 17.4%

24.2% 16.7%

9.4%

9.0%

5.1%

4.9%

6.4% 6.4% 17.7%

6.1% 6.1% 20.9%

RISK M A N AGEMENT Nycomed operates in a highly competitive and regulated business area. Specific risks are inherent in our product range and business model of in-licensing products.

FINANCIAL RISKS Financial risks at Nycomed are managed centrally. The overall objectives and policies for Nycomed’s financial risk management are outlined in the Treasury Policy, which is approved by the Audit Committee on behalf of the Board. The Treasury Policy sets guidelines for permitted exposure to financial risks and the financial instruments that can be employed as part of financial management.

These guidelines include risks pertaining to foreign exchange and interest rates related to commercial exposure only.

Consequently, Nycomed does not enter into speculative positions. As a result of the acquisition of ALTANA Pharma AG, Nycomed has decided to update the Treasury Policy in order to cover foreign exchange and interest rate risk related to the commercial activities of the acquired business.

As a result of the international focus of ALTANA Pharma AG, currency fluctuations have a major impact on profits.

ALTANA Pharma AG’s procedure for dealing with these currency exchange risks has been regulated in a currency management directive; it followed systematic procedures, which were reviewed and controlled by a special steering committee (Treasury Committee). The Treasury Committee defined amongst other things, the use of derivatives with the aim of limiting losses from fluctuations in the exchange rate of the euro against other currencies, especially

the US dollar, the Mexican peso, the Brazilian real or the Canadian dollar. Only forward exchange deals, currency swaps and simple currency options were used.

These were concluded exclusively with banks that have impeccable credit ratings.

ALTANA Pharma AG – like all players in the market – is subject to financial risks, but not such that there is a danger to the continued existence of the company as a going concern.

As stated above, Nycomed has decided to update the Treasury Policy in order to cover foreign exchange and interest rate risk related to the commercial activities of ALTANA Pharma AG.

FOREIGN EXCHANGE The overall objective of foreign exchange risk management is to limit the short-term negative impact on earnings and cash flows from exchange rate fluctuations.

Nycomed is exposed to foreign exchange transaction risk as sales and purchases may be denominated in currencies that differ from the functional currency of our subsidiaries. In the past, most sales were denominated in euro, Japanese yen, US dollars, Norwegian kroner and Danish kroner. The main currency exposure in Nycomed is US dollars deriving from our activities in Russia/CIS. Our costs were incurred in the various currencies of countries where we maintain our production facilities, primarily Austria, Norway and Denmark. After the acquisition of ALTANA Pharma AG the exposure will also cover sales and costs in Canadian dollars, Brazilian real, Mexican pesos, as well as sales and costs in US dollars regarding the business activities in the US, including sales to a main distributor in the US.

As mentioned above, Nycomed is in the process of updating the Treasury Policy in order to cover the activities of ALTANA Pharma AG.

INTEREST The interest rate under our senior facility is based on variable interest plus a margin.

Changes in interest rates affect Nycomed’s income statement as well as the balance sheet. The overall objective of the interest rate risk management is to limit negative impact on earnings and on the balance sheet from interest rate fluctuations.

The Treasury Policy stipulates that at least 50-100% of the interest risk relating to the Group’s budgeted debt for the current year and next year should be hedged. In addition, 100% of the interest exposure relating to existing long-term loans may be hedged, by fixing the interest on debt in the periods up to the planned outstanding debt. To finance the acquisition of ALTANA Pharma AG and the redemption of old debt, Nycomed entered into a new Senior Credit Facilities Agreement.

Under this agreement Nycomed is committed to hedge a minimum of 50% of our interest rate risk within 3 months from closing.

CREDIT Nycomed continuously monitors and evaluates credit risk on outstanding payments. In general, we estimate the risk to be limited for countries in the EU. In Russia/CIS, the standard payment conditions are cash payment or 60 to 90day payment terms. During 2006, the payment terms related to reimbursement under the Federal Programme were expanded from 180 days to 270 days. Due to changes proposed for 2007 by the government, the credit period might

A N N UA L R E P O RT 2 0 0 6

17

expand to 360 days. As a consequence of strict control and close follow-up on outstanding payments, we have had very few defaulted payments in this region since the rouble crisis in 1998. We maintain that this region is subject to higher than average political and economic risk and we continue to make every effort to secure payment from our customers. We try to cover outstanding payments through insurance companies. As at 31 December 2006, we had € 73.4 million outstanding receivables from customers in Russia/CIS, of which 46.7% was covered by credit insurance.

WORKING CAPITAL Due to the current rate of growth, we are experiencing increased pressure on our working capital and longer cycles for the payment of trade receivables. This is due mainly to a new reimbursement system in Russia introduced on 1 January 2005. All sales under this system have longer than average payment terms; but as payments are under the reimbursement system introduced by the government, the counterpart risk is considered to be low.

In December 2005, our working capital project was relaunched to further improve the efficiency of our internal processes related to inventory, trade receivables and creditors; and during 2006 we experienced important improvement in trade working capital.

18

A N N UA L R E P O RT 2 0 0 6

INSURANCES The objective of the Insurance Policy is to protect the Company’s assets and profitability by minimising the adverse effects of accidental losses occurring within the Company or at the premises of our key business partners. Nycomed uses an internationally recognised insurance broker as a consultant.

Nycomed’s operations in some countries and regions are subject to a high degree of political and economic risk. Russia/CIS is currently one of our largest and fastestgrowing markets and we remain vigilant and highly focused on this particular region. Financial risk management is an important tool to minimise risk in the short term; in the longer term, we are building up operations in lower-risk markets with significant growth potential.

COMMERCIAL RISKS PRODUCT PORTFOLIO One of the key responsibilities of the Executive Management Committee is to continuously assess and discuss business risks. The Board discusses the commercial risks outlined below on a case-by-case basis.

Listed below are examples of the current, most relevant risks (i.e. where the combination of impact and vulnerability is highest), along with counter measures.

BUSINESS ENVIRONMENT Our business is subject to extensive government regulation, control and approval.

In addition, continued cost-control efforts by governments and managed-care organisations may lead to lower pricing and reimbursement levels. We regularly undertake thorough evaluations of the potential impact these scenarios could have on our product development and marketing activities. Pricing and reimbursement evaluations are also conducted before we enter into any agreements to in-license new products.

Many of our products are mature and encountering competitive pressure. To minimise losses/risk when products mature, we actively manage product lifecycles.

We depend on sole-source suppliers for materials used in the production of several of our products. To limit our vulnerability, we constantly evaluate new potential sources and secure our supply and stock of materials. Bovine spongiform encephalopathy (BSE) risks may adversely affect the marketing and market share of products containing bovine-sourced materials. Where necessary, bovine components are sourced from countries which, according to the classification adopted by the European Commission Scientific Steering Committee, are currently BSE-free or have a low risk of BSE. With respect to bovine components sourced from low-risk countries, we comply with the EU guidelines for BSErisk material. We have developed bovine-free products and currently expect to switch all sales in existing markets from TachoComb® (containing bovine components) to TachoSil® (bovine-free) and we intend to launch only TachoSil® in new markets.

IN-LICENSING

PEOPLE

Nycomed’s future growth and success depends on the ability to identify, inlicense, acquire, develop and market new products. Before we in-license a new product, its potential, along with any adverse effects and similar factors, is scrutinised by a team of specialists who produce a detailed evaluation report.

In this way, we seek to ensure that the decision-making process results in commercially viable, profitable investments.

Nycomed has an extensive growth strategy, so there is a risk that recruiting the right people and ensuring appropriate training will be increasingly difficult.

To limit this risk, HR has initiated Good Recruitment Practice to guide recruitment procedures. A consistent approach to training is achieved through the Nycomed Academy, which provides training programmes throughout the company.

Our strategy is to mainly acquire products with clinical proof of concept (CPoC), meaning that efficacy and safety in patients have been demonstrated in clinical studies. This puts us in a better position to obtain marketing authorisation for our new products compared to other companies with earlier-phase product pipelines.

ENVIRONMENT We operate ten production facilities in five European countries. Two of the plants specialise in packaging, presenting limited environmental risks. To minimise external environmental risks, we place compliance responsibility with the local site manager in accordance with our HSE policy.

Dependency on development competencies, commitment and the financial situation of co-development partners are risk factors that we assess prior to a final decision. Having agreed on collaboration, we and the partner dedicate project managers and executive teams to expedite implementation and execution.

Nycomed’s focus on fewer, but potentially larger, products for in-licensing may increase risk if a key product faces unexpected clinical, regulatory or competitive challenges. To minimise this risk, we seek to diversify our pan-European in-licensing focus across at least four main hospital specialist areas: osteoporosis, cardiology, tissue management and pain management.

A N N UA L R E P O RT 2 0 0 6

19

B OA R D OF D I R E C TORS Board members of the general partner are elected by majority vote on an annual basis at the general partner’s Annual

20

General Meeting. Nycomed employees elect two representatives. The largest shareholder has the right to elect the

Chairman. Four to five Board meetings are held every year and the proceedings are recorded.

NATIONALITY

BORN

REMUNERATION AS BOARD MEMBER

NYCOMED SHARES HELD

OTHER BOARD MEMBERSHIPS

CHAIRMAN OF

Toni Weitzberg Chairman of the Board

Swedish

1950

-

-

Synphora AB Biovitrum AB Unomedical A/S Permobile AB

Atos Medical AB

Håkan Björklund CEO

Swedish

1956

-

Shares: 58,976 Warrants: 124,800

Atos Medical AB Biovitrum AB Coloplast Danisco A/S

-

Thompson Dean

American

1958

-

-

BioPartners Merrill NextPharma Safilo Visant

Investment Committees of DLJMB II, DLJMB III and DLJMB Growth Capital Partners DeCrane Aircraft Holdings, Inc., Mueller Holdings (N.A.), Inc.

Carl-Gustaf Johansson

Swedish

1937

50,000 USD

-

EffeRx, Inc. NeuroNova AB

-

Kristoffer Melinder

Swedish

1971

-

-

Atos Medical Holding 2 AB Glacier Luxembourg Two S.a.r.l.

-

Colin Taylor

Canadian

1962

-

-

Glacier Luxembourg Two S.a.r.l.

Supervisory Boards of Grohe AG and Grohe Beteiligungs GmbH

-

Hans-Joachim Lohrisch

German

1949

-

-

ALTANA Pharma Asset Management GmbH ALTANA Pharma Pty. Ltd. Member of the Executive Board of the Herbert-QuandtFoundation

Sangtec Molecular Diagnostics AB ALTANA Pharma Inc. ALTANA Pharma US Inc. ALTANA Pharma Re Insurance AG

Newton X. Aguiar

American

1964

-

-

Supervisory Board of Grohe AG and Grohe Beteiligungs GmbH

-

A N N UA L R E P O RT 2 0 0 6

E X E C UTIVE MANAGEMENT CO M MIT TEE

TITLE

NATIONALITY

BORN

NUMBER OF YEARS IN INDUSTRY

ACADEMIC DEGREES

Håkan Björklund

Chief Executive Officer

Swedish

1956

22

PhD in Neuroscience from Karolinska Institutet, Sweden

Runar Bjørklund

Chief Financial Officer

Norwegian

1956

17

MSc in Business from Lund University, Sweden

Alfred Goll

Executive Vice President Human Resources

German

1956

23

MBA from Trier University, Germany

Charles Depasse

Executive Vice President Integration

Belgian

1958

21

Electromechanical Engineering degree from the University of Brussels, Belgium, and an MBA from New York University, USA

Anders Ullman

Executive Vice President Research & Development

Swedish

1956

16

Physician and clinical pharmacologist with a PhD from the University of Gothenburg, Sweden

Kerstin Valinder

Executive Vice President Business Development

Swedish

1960

22

University Certificate in Journalism from Gothenburg University, Sweden

Otto Schwarz

Executive Vice President Commercial Operations

Austrian

1955

22

PhD in Pharmaceutical Chemistry from the University of Vienna, Austria

Barthold Piening

Executive Vice President Operations

German

1958

18

PhD in Pharmaceutical Chemistry from Kiel University, Germany, and an MBA from WHU Koblenz, Germany, and the Northwestern University of Chicago, USA

Dick Söderberg

Executive Vice President Marketing

Swedish

1958

22

BSc in International Economics and Business Administration from Uppsala University, Sweden

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F I N A NCIAL S TAT EMENTS ACCO U N T I N G PR I N C I P L E S CORPORATE INFORMATION The consolidated financial statement of Nycomed S.C.A. SICAR (the Company) as at and for the year ended 31 December 2006 comprises the Company and its subsidiaries (collectively, the Group).

BASIS OF PREPARATION The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The consolidated financial statements have been prepared on the historical cost basis except for available for-sale financial assets, financial assets and liabilities (including derivative financial instruments) that have been measured at fair value.

To facilitate the reading of the Annual Report, part of the information required

by IFRS has been included in the Financial Discussion.

The consolidated financial statements are presented in euros and all values are rounded to the nearest thousand (€ thousand) except when otherwise indicated.

NEW OWNERSHIP In connection with Nycomed’s acquisition of ALTANA Pharma AG on 29 December 2006, a new holding structure became effective by way of a share exchange between the private equity investors of Nycomed A/S (the former holding company in the Nycomed Group) and the

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new holding company, Nycomed S.C.A. SICAR, Luxembourg. At that date, Nycomed S.C.A. SICAR became the ultimate parent company in the Nycomed Group. Details of the transactions are disclosed in the Financial Summary and note 1.

The share exchange between the private equity investors and Nycomed S.C.A. SICAR is considered a common control transaction as there is no change of control over the Nycomed Group. As such, the transaction does not represent a business combination per the definitions in IFRS. The transaction has been accounted for using the pooling of interest method.

As a consequence: • The assets and liabilities are reflected at their carrying amounts, meaning that no adjustments are made to reflect fair values • No goodwill is recognised as a result of the transaction • The income statement reflects the results for the full year, irrespective of when the transaction took place • Comparatives are presented as if Nycomed S.C.A. SICAR had always been the ultimate parent company.

BASIS OF CONSOLIDATION The consolidated financial statements comprise the financial statements of Nycomed S.C.A. SICAR (the parent company) and all the companies in which Nycomed S.C.A. SICAR directly or indi-

rectly owns more than 50% of the voting rights, or in some other way has a controlling influence (subsidiaries). Nycomed S.C.A. SICAR and these companies are referred to as the Group.

The consolidated financial statements are prepared on the basis of the financial statements of the parent company and the subsidiaries, and by consolidating uniform accounting items. The consolidated financial statements are based on financial statements prepared by applying the Group’s accounting policies.

On consolidation, intra-Group transactions, shareholdings, intra-Group dividend and balances and realised and unrealised gains and losses on intra-Group transactions are eliminated. Minority interests’ pro rata shares of profit or loss and the net assets are disclosed as separate items in the income statements and within equity in the consolidated balance sheet respectively.

The Group accounts for its investments in joint ventures using the proportional consolidation method as permitted under IAS 31 “Financial Reporting of Interests in Joint Ventures”. These joint ventures include ALTANA Madaus, South Africa, and Zydus ALTANA Healthcare, India.

CHANGES IN ACCOUNTING POLICIES OR EFFECT OF NEW PRONOUNCEMENTS The following new amendments and interpretations considered relevant for the Group have been adopted during the year. Adoption of these revised standards

and interpretations did not have any effect on the Annual Report of the Group. However, they did give rise to additional disclosures: • Amendment to IAS 19 “Employee Benefits” • Amendment to IAS 39 “Financial Instruments: Recognition and Measurement – Cash Flow Hedge Account of Forecast Intra-Group Transactions” • Amendment to IAS 39 “Financial Instruments: Recognition and Measurement – Fair Value Option”. The amendment concerns the definition of financial instruments classified in the category “at fair value through profit and loss” and restricts the ability to designate certain financial investments as part of this category • IFRIC 4 “Determining Whether an Agreement Contains a Lease” • Amendment to IAS 21 “The Effects of Changes in Foreign Exchange Rates”.

The following standards and amendments were issued with effect from 1 January 2007. IFRS 7 “Financial Instruments: Disclosures” and amendment to IAS 1 “Presentation of Financial Statements – Capital Disclosures”. IFRS 7 and the amendment to IAS have not been early adopted. Except for additional disclosures, the adoption of the standard and amendment is not expected to have any effect on the Annual Report of the Group.

In November 2006, IFRS Interpretation 8 “Operating Segments” was issued and is effective from 1 January 2009. IFRS Interpretation 8 replaces IAS 14 “Segment Reporting”. IFRS Interpretation 8 is not expected to have any effect on the

Annual Report except for additional disclosures. IFRS Interpretation 8 has not been early adopted.

A/S consolidated comparatives as at 31 December 2005.

Except as described above, the accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS

Certain comparative amounts have been reclassified to conform with the current year’s presentation.

COMPARATIVE FIGURES The Annual Report 2005 of Nycomed A/S covered the period from incorporation of Nycomed A/S on 4 January 2005 to 31 December 2005, and the consolidated financial statements covered the eightmonth period of operations from acquisition of the Nycomed Group on 9 May 2005 to 31 December 2005. For comparative reasons, we stated a pro forma income statement and cash flow statement covering 12 months from January to December 2005. These 12-month figures were based on consolidated figures from January to April 2005 for Nyco Holdings ApS and subsidiaries, and consolidated figures from May to December 2005 for Nycomed A/S and subsidiaries. The pro forma 2005 figures have been prepared in accordance with IFRS. We have not stated comparative figures for the full year of 2005 in the notes to the consolidated financial statements. Accordingly, the comparative income statement and cash flow figures in the Annual Report 2006 comprise the eight-month period of operations and the 12-month pro forma figures of Nycomed A/S. Balance sheet comparative figures comprise Nycomed

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s). Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. This forms the basis for making judgments about the reported carrying amounts of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results could differ from those estimates. Estimates are used when accounting for sales discounts and incentives, depreciation, amortisation, employee benefits, restructuring and other provisions, contingencies and any asset impairments. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Management believes the following are the significant accounting estimates and related judgments used in the preparation of its consolidated financial statements.

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INDIRECT PRODUCTION COSTS Work in progress and finished goods are stated at cost assigned by using the average weighted price method. Cost comprises direct production costs such as raw materials, consumables, energy and labour, and indirect production costs such as employee costs, depreciation and maintenance.

The indirect production costs are measured based on a standard cost method which is reviewed regularly in order to ensure relevant measures of utilisation, production lead time and other relevant factors.

Changes in the method for calculation of indirect production costs, including utilisation levels and production lead time in the calculation of indirect production costs, could have an impact on the gross margin and the overall valuation of inventories.

DEFERRED TAXES Management’s judgement is required in determining the Group’s provision for income taxes, deferred tax assets and liabilities, and the extent to which deferred tax assets can be recognised. The Group recognises deferred tax assets if it is probable that sufficient taxable income will be available in the future, against which the temporary differences and unused tax losses can be utilised.

IMPAIRMENT OF GOODWILL AND OTHER INTANGIBLE ASSETS The Group determines whether goodwill and other intangible assets comprising patents and rights and development projects are impaired at least on an annual basis. This requires an estimation of the value in use of the overall business to which the goodwill is allocated and of

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other intangible assets. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the overall business and other intangible assets and also to choose a suitable discount rate in order to calculate the present value of those cash flows.

SALES AND REVENUE RECOGNITION The Group derives revenue from two primary revenue streams, namely product sales and the licensing of product rights.

Sales represent the fair value of the sale of goods excluding value added tax and, after deduction of provisions for trade discounts, allowances and returned products.

Revenue from the sale of goods is recognised when all the following specific conditions have been satisfied: • Nycomed has transferred to the buyer the significant risk and rewards of ownership of goods • Nycomed retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold • The amount of revenue can be measured reliably • It is probable that the economic benefit associated with the transaction will flow to Nycomed • The costs incurred, or to be incurred, in respect of the transaction can be measured reliably.

These conditions are usually met by the time the products are delivered to the

customer with regard to revenue from product sales; whereas for royalty income related to the licensing of product rights, these conditions are usually met when royalty becomes payable or on an accrual basis in accordance with the substance of the relevant agreement. In certain circumstances, the Group enters into long-term contracts that provide an upfront payment in lieu of future royalty payments. This payment is recorded as deferred revenue and recognised in income over the contractual period until payment is non-refundable, based on the expected underlying product sales.

Up-front payments are initially recognised when research and development contracts are signed. Up-front payments that are attributable to subsequent research and/or development activities are recognised as deferred revenue and will subsequently be recognised as revenue over the expected contract period. Non-refundable up-front payments that are not attributable to subsequent research and/or development activities are recognised as revenue when the contracts are signed. Up-front fees in connection with licensing agreements are recognised as income over the period to which they relate.

Provisions for discounts, rebates to customers and customer returns are estimated and provided for in the period that the related sales are recognised and reflected in net sales.

RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses comprise expenses that relate to the Group’s research and development

functions, including wages and salaries, depreciation and other overheads. Any milestone payments to third parties in respect of research and development are recognised in the income statement, or are capitalised as appropriate, in the period in which the milestones are reached.

Research expenses are charged to the income statement as incurred. Development expenses are capitalised if certain criteria are met and they are likely to generate future economic benefits.

CONSOLIDATION PRINCIPLES Please refer to the Basis of Consolidation section.

FOREIGN CURRENCY TRANSLATION FUNCTIONAL AND PRESENTATION CURRENCY The consolidated financial statements are presented in euros, which is Nycomed’s functional and presentation currency. A functional currency is designated for each entity in the Group. The functional currency is the currency used in the primary economic environment in which the individual entity operates. Transactions denominated in currencies other than the functional currency are transactions in foreign currency.

TRANSLATION OF TRANSACTIONS AND BALANCES Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the date of the

transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which time they are recognised in profit or loss. Tax charges attributable to exchange differences on those borrowings are also dealt with in equity. Non-monetary items, which are measured in terms of historical cost in a foreign currency, are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Transactions in foreign currencies are translated into the functional currency at the exchange rate prevailing on the date of transaction. Exchange rate gains and losses arising between the transaction date and the date on which the payments are made or received are recognised in the income statement under financial income and expenses.

Receivables and payables and other monetary items denominated in foreign currencies are translated into the functional currency at the exchange rate at the end of each period. Realised and unrealised exchange rate gains and losses are recognised in the income statement under financial income and expenses.

Unrealised exchange gains and losses on loans in foreign currency that serve to hedge future foreign currency cash flows are deferred until repayment of the loan.

TRANSLATION OF FINANCIAL STATEMENTS AND GROUP COMPANIES For consolidation purposes, the income statements of foreign subsidiaries with functional currencies other than euro are translated at transaction rates, and assets and liabilities are translated using balance sheet rates. Transactions rates are calculated as the average rates of the individual month to the extent that this does not provide a materially different picture.

Exchange rate differences are recognised directly in capital and reserves.

BUSINESS COMBINATIONS Enterprises acquired during the year are recognised in the consolidated financial statements from the date control commences. Enterprises disposed of or liquidated are recognised in the consolidation income statement until the date where control ceases or the entity is liquidated.

Acquisitions of enterprises in which the parent company obtains control are accounted for by using the purchase method. The purchase price is measured as the fair value of the assets given and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination, are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.

Identifiable intangible assets are recognised insofar as they are separable or arise from contractual rights and a reliable fair

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value can be calculated. The amount in deferred tax resulting from the restatement is recognised.

carrying amount of net assets, including goodwill at the date of disposal plus anticipated disposal or liquidation costs.

The excess of the cost of acquisition over the fair value of the acquired asset, liability and contingent liability is capitalised as goodwill. Goodwill is tested annually for impairment – the first impairment test is performed before the expiry of the year of acquisition. Upon the acquisition, goodwill is allocated to the cash-generating units, subsequently providing a basis for the impairment test.

Entities in which the Group and outside shareholders have agreed to exercise joint control over significant financial and operational policies are accounted for using the proportionate consolidation method. A list of all the subsidiaries is presented separately.

If the initial accounting for a business combination can be determined only provisionally by the end of the period in which the combination is effected, adjustments made within twelve months of the acquisition date to the provisional fair value of acquired assets, liabilities and contingent liabilities or cost of the acquisition, are adjusted to the initial goodwill.

The adjustment is calculated as if it was recognised at the acquisition date. The effect of the adjustment is recognised in capital and reserves, and the comparative figures are restated. Subsequent to this period, goodwill is only adjusted for changes in estimates of the cost of the acquisition that are contingent on future events. However, subsequent realisation of deferred tax assets not recognised on acquisition will result in the recognition in the income statement of the tax benefit concurrently with a write-down of the carrying amount of goodwill to the amount that would have been recognised if the deferred tax asset had been recognised at the time of the acquisition.

COST OF SALES

Gains or losses on the disposal or liquidation of subsidiaries and associates are measured as the difference between the sales or liquidation amount and the

FINANCIAL INCOME AND EXPENSES

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INCOME STATEMENT Cost of sales consists of variable production costs, including raw materials, other production materials and direct labour costs. In addition, cost of sales includes fixed production overhead costs such as indirect labour and materials, repairs, maintenance and depreciation costs related to property, plant and equipment used in the production process and costs related to production administration and management.

SALES AND MARKETING EXPENSES Sales and marketing expenses comprise all expenditures incurred in connection with selling and marketing of the Group’s products, including distribution costs and amortisation of intangible assets.

ADMINISTRATIVE EXPENSES Administration expenses comprise costs relating to the Group’s management and administration, office premises and depreciation.

Financial income and expenses comprise interest, amortisation of financing costs,

realised and unrealised exchange gains and losses, and other financial expenses.

The unrealised exchange gains and losses include changes in the fair value of derivatives designated as fair value hedges.

INCOME TAX (EXPENSE) BENEFIT Income tax is allocated to the relevant fiscal year and recognised in the income statement. Income tax comprises current tax as well as deferred tax.

BALANCE SHEET INTANGIBLE ASSETS Intangible assets acquired separately are measured on initial recognition at cost.

The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost, less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the

intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis. Costs relating to development projects are capitalised if all of the following capitalisation requirements are met: • It is probable that all the necessary regulatory approvals, public registration and marketing authorisations will be received • The completion of products is technically feasible • There is an ability and continuing intention to complete the underlying product and use or sell it • The costs related to the development of the product are readily measurable • Future economic benefits are likely to be generated.

If these criteria are not achieved, all development expenses are expensed as incurred.

In determining the probability of regulatory approval, the following are regarded as strong indicators that a product will receive regulatory approval: • The product is a generic substitute of an approved product • The product is approved in other countries

• The product is in late phase II or phase III clinical trials with the results of previous trials indicating that there is no obvious reason why the product should not be approved • The product is based on a known substance or existing product.

These development projects are amortised over the life of the associated product; amortisation begins when the product becomes marketable. Distribution rights to pharmaceutical products that are acquired from third parties, prior to receipt of regulatory approval to market the products, are capitalised in certain circumstances using the same criteria as for the capitalisation of development expenses.

These rights are amortised on a straightline basis over their estimated useful life once the product has begun to be distributed. Intangibles are subject to an impairment test when events or circumstances indicate that impairment may exist. The amortisation periods are generally as follows: Completed development projects and patent and distribution rights: • 2-30 years Development projects in progress: • Estimated product life

GOODWILL Goodwill is initially measured at cost as described in Business Combinations.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or circumstances indicate that the carrying value may be impaired.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are measured at cost, less accumulated depreciation and impairment losses. Costs comprise the purchase price and any costs directly attributable to the asset purchase until the asset is available for use.

Depreciation is generally calculated on a straight-line basis over the expected useful lives of the assets, as follows: Buildings Machinery and equipment Other property, plant and equipment

5-50 years 2-14 years 1-20 years

Land is not depreciated.

The depreciation base is determined taking into account the scrap value of the asset and with reduction of any depreciation. The scrap value is determined at the time of acquisition and is re-valued annually. If the scrap value exceeds the carrying amount of the asset, depreciation will cease.

The carrying values of plant and equipment are tested for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the income statement in the year the asset is derecognised. The asset’s residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each financial year-end.

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When each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.

IMPAIRMENT If an asset does not generate cash flows that are largely independent of cash flows from other assets, an enterprise should determine the recoverable amount of the cash-generating unit. A cash-generating unit is the smallest identifiable group of assets for which identifiable cash flows can be identified and measured. Nycomed considers the total business to be one cash-generating unit as the cash flows from individual brands, products, other assets or geographical segments are not clearly identifiable. As such, Nycomed tests impairment at Group level.

Impairment of goodwill is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised.

An impairment test is conducted in respect of the book value of intangible, tangible and financial assets, and where write-downs are required, the book value is written down to the higher of net realisable value and the present value of future cash flows in connection with continued use. Consequently, intangible and tangible assets are written down in the income statement in those cases where the book value exceeds the expected future cash flow from the undertaking or the assets to which the goodwill is related.

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The book value of financial assets is written down if, as a result of a change in the expected cash flows, the expected present value of such cash flows is lower than the carrying value. When computing the present value, the original effective rate of interest is applied. If, subsequently, the present value of written-down financial assets increases, the write-down is reversed. Such reversal of previous impairments will not result in financial assets being measured at more than the amortised cost.

INVESTMENTS AND OTHER FINANCIAL ASSETS Financial assets in the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on investments held for trading are recognised in the income statement.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method.

Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified in any of the two preceding categories. After initial recognition, available-for-sale financial assets are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired. In this case, the cumulative gain or loss previously reported in equity is recognised in the income statement. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices

at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market value of another instrument (which is substantially the same), discounted cash flow analysis, and option pricing models.

INVENTORIES Inventories are measured at the lower of cost in accordance with the weighted average price method and the net realisable value. The net realisable value is made up of the expected sales price, considering obsolescence, less any remaining production and sales costs.

The cost of manufactured, finished and semi-finished products includes raw materials, direct labour, other production materials and production overheads.

Production overheads include indirect labour and materials, repair, maintenance and depreciation costs related to machinery and buildings used in the production process, and costs related to production administration and management.

Goods for resale include the purchase price and related transportation costs.

TRADE AND OTHER RECEIVABLES Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

Allowances are made on the basis of probability of default.

in-hand and short-term deposits, with an original maturity of three months or less.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

TREASURY SHARES Own equity instruments which are reacquired (treasury shares) are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

INTEREST-BEARING LOANS AND BORROWINGS All loans and borrowings are initially recognised at the fair value of the consideration received, less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest method. Gains and losses are recognised in net profit or loss when the liabilities are derecognised, as well as through the amortisation process.

TAXES Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the balance sheet date.

Deferred tax

CASH AND CASH EQUIVALENTS Cash and short-term deposits in the balance sheet comprise cash at banks and

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their

carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except: • Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss • In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses, can be utilised, except: • Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss • In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences

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will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Sales tax Revenues, expenses and assets are recognised net of the amount of sales tax except: • Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the

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asset or as part of the expense item as applicable • Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

effects of changes in actuarial assumptions (actuarial gains/losses) are recognised in the period they occur and charged to equity.

The defined benefit liability is the aggregate of the present value of the defined benefit obligation, including recognition of all actuarial gains and losses and the fair value of plan assets out of which the obligations are to be settled directly.

DIVIDENDS Proposed dividend for the year is shown as a separate item within shareholders’ equity. There were no such dividends proposed or paid in any of the periods presented.

EMPLOYEE BENEFITS AND PENSIONS Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Group.

Pension provisions The Group operates a number of defined benefit and defined contribution plans in the subsidiaries.

The costs for the year for defined benefit plans are determined using the projected unit credit method. This reflects services rendered by employees to the dates of valuation and is based on actuarial assumptions primarily regarding discount rates used in determining the present value of benefits, projected rates of remuneration growth, and long-term expected rates of return for plan assets.

The impact from differences between assumptions and actual events, and

The Group’s contributions to the defined contribution plans are charged to the income statement in the year to which they relate.

SHARE-BASED PAYMENT TRANSACTIONS Nycomed operates equity-settled, sharebased compensation plans.

The cost of equity-settled transactions with employees is measured by reference to the fair value at grant date, measured

by Black & Scholes.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which any performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘the vesting date’). If there are no vesting conditions, the fair vale is expensed in full at grant date. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event occurring before or at the balance sheet date. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

CURRENT DEBT Generally, other liabilities, which also include trade payables, amounts owed to Group enterprises and associated enterprises and other liabilities, are measured at amortised cost unless specifically mentioned otherwise.

SEGMENT INFORMATION The Group’s primary segment reporting is geographic, based on the location of its

customers. The Group’s segments reflect the structure of its management and sales organisation, its system of internal financial reporting, and the predominant source of risk and return in its business. Segment reporting is therefore divided into six geographic segments: (i) the North Western Europe region consists of product sales in Denmark, Sweden, Norway, the Baltic States, Belgium and the Netherlands; (ii) the Central Europe region includes product sales in Austria, Switzerland, Greece and Poland (iii) the Big Five includes product sales in Germany, France, the UK, Spain and Italy; (iv) operations in Finland; (v) Russia/CIS; (vi) sales in China and export arrangements primarily in Japan and the US, collectively constituting the International Sales segment. The segment ‘Other’ comprises our contract production activities for third parties.

as management believes that any such allocation would be based on arbitrary factors, such as sales in a particular segment, and would not provide a better understanding of the business. These expenses are managed on a worldwide basis.

For purposes of segment reporting, the following measures are used: • Segment net sales comprise sales to third parties. For purposes of management reporting, all internal sales are eliminated from the measures that are used to monitor the business

Any gains or losses arising from changes in fair value on derivatives that do not qualify for hedge accounting are recognised in net profit or loss for the year. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. In general, Nycomed does not apply hedge accounting under the specific rules of IAS 39 to forward exchange contracts and other derivative financial instruments except interest rate swaps applied to maintain a reasonable balance between fixed and floating interest rate risk. For the financial year 2006, management decided to apply hedge accounting under IAS 39 for certain future transactions and customers or contracts.

• Segment operating income is an internal financial reporting measurement utilised by the Group’s management.

Under this approach, transfers from the Group’s centralised production facilities in Europe are charged to the segments at standard production costs and any deviation from standard production costs is included in indirect production costs.

Unallocated expenses include indirect production overheads, amortisation of intangible assets, and costs associated with centralised support functions to the segments. These costs are not allocated,

FINANCIAL INSTRUMENTS The Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its risks associated with interest rate and foreign currency fluctuations.

Such derivative financial instruments are initially measured at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value. Derivatives are included in other receivables when the fair value is positive and in other payables when the fair value is negative.

A N N UA L R E P O RT 2 0 0 6

31

Hedges of a net investment Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are treated as follows: • Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised directly in equity, while any gains or losses relating to the ineffective portion are recognised in profit or loss

CONSOLIDATED CASH FLOW STATEMENT The consolidated cash flow statement is prepared using the indirect method.

The cash flow statement shows the consolidated cash flow for the year and the net cash position at the end of the year. The cash flow relates to three main activities: operating, investing and financing activities.

Cash flow from operating activities • On disposal of the foreign operation, the cumulative value of any such gains or losses recognised directly in equity is transferred to profit or loss.

32

A N N UA L R E P O RT 2 0 0 6

Cash flow from operating activities is calculated as the operating income or loss, adjusted for non-cash items, plus changes in working capital, less taxes paid and interest paid or received. Working capital consists of current assets, excluding items included in net cash; and current liabilities, excluding items included in net cash; and debt to financial institutions, taxes and dividend.

Cash flow from investing activities Cash flow from investing activities comprises the purchases and sales of noncurrent assets including investments in enterprises. The purchase prices are measured at cost, including distribution rights and goodwill.

Cash flow from financing activities Cash flow from financing activities comprises payments to and from shareholders, the raising and repayment of debt to financial institutions, and other long-term and current liabilities not included in the working capital or in net cash.

N YCO M E D S . C . A . S I CA R CO N S O L I DAT E D I N CO M E S TAT E M E N T 1 J A N U A RY - 3 1 D E C E M B E R

01.01.06 31.12.06 € thousand

Note 2 3

(8 months of operations) 04.01.05 31.12.05 € thousand

Pro forma unaudited 01.01.05 31.12.05 € thousand

Net turnover Cost of sales

869,949 -349,859

507,870 -266,270

747,483 -369,269

GROSS PROFIT

520,090

241,600

378,214

3 3 3

Sales and marketing expenses Research and development expenses Administrative expenses

-342,925 -37,368 -93,775

-208,992 -18,440 -50,970

-286,143 -28,281 -80,260

2

OPERATING INCOME/(LOSS)

46,022

-36,802

-16,470

4 5

Financial income Financial expenses

2,269 -158,367

4,967 -79,924

2,814 -91,500

-110,076

-111,759

-105,156

Income tax

26,684

25,251

24,115

NET LOSS

-83,392

-86,508

-81,041

-80,005 -3,387 -83,392

-83,013 -3,495 -86,508

-81,041 -81,041

LOSS BEFORE TAX 6

Attributable to: Equity holders of the parent Minority interest

A N N UA L R E P O RT 2 0 0 6

33

NYCOMED S.C . A . S I CA R CONSOLIDAT E D BA L A N C E S H E E T 3 1 DECEMBER Note ASSETS

31.12.06 € thousand

31.12.05 € thousand

3,828,918 2,097,691 521,670 6,448,279

914,599 642,237 223,304 1,780,140

7 7 7

Non-current assets Patents and rights, currently marketed products Goodwill Development projects in progress and prepayments for intangibles Total intangibles

8 8 8 8

Land and buildings Machinery and equipment Other property, plant and equipment Assets under construction and prepayments for assets

392,542 205,975 158,437 45,353

105,919 53,102 12,210 11,099

Total property, plant and equipment

802,307

182,330

Other investments in shares and bonds Other receivables

13,090 24,958

13,245 378

Total investments

38,048

13,623

Deferred tax assets

151,173

8,356

7,439,807

1,984,449

9 9

12

TOTAL NON-CURRENT ASSETS Current assets

34

15

Total inventories

432,765

156,688

14

Trade receivables Income tax receivable Other receivables and prepayments

517,491 255 88,417

140,363 117 22,439

Total receivables

606,163

162,919

Cash and cash equivalents

697,754

46,617

TOTAL CURRENT ASSETS

1,736,682

366,224

TOTAL ASSETS

9,176,489

2,350,673

A N N UA L R E P O RT 2 0 0 6

N YCO M E D S . C . A . S I CA R CO N S O L I DAT E D BA L A N C E S H E E T 31 DECEMBER Note EQUITY AND LIABILITIES 10 10

Capital stock Other reserves

31.12.06 € thousand

31.12.05 € thousand

16,677 1,178,480 1,195,157

99 819,285 819,384

Minority interest

37,279

0

TOTAL EQUITY

1,232,436

819,384

11 12 13

Non-current liabilities Pension commitments Deferred tax Provisions Deferred income and other non-current liabilities

289,390 1,435,415 55,024 18,198

31,444 298,595 0 0

18

Financial institutions

4,266,754

1,025,624

6,064,781

1,355,663

1,140,502 233,814 55,213 167,804 211,257 70,682

33,690 57,167 15,914 0 68,855 0

TOTAL CURRENT LIABILITIES

1,879,272

175,626

TOTAL LIABILITIES

7,944,053

1,531,289

TOTAL EQUITY AND LIABILITIES

9,176,489

2,350,673

TOTAL NON-CURRENT LIABILITIES Current liabilities 18 14 13

16 17 18 19 20

Financial institutions Trade payables Income tax payable Provisions Other payables Deferred income

Contingent liabilities, guarantee commitments, etc.

Employee costs Foreign currency and interest rate exposure Related party transactions Auditors’ fees

A N N UA L R E P O RT 2 0 0 6

35

NYCOMED S.C . A . S I CA R EQUITY S TAT E M E N T O F C H ANGES IN EQUITY Capital stock Reserves (note 10) (note 10) Total € thousand € thousand € thousand Capital increase 4 January 2005 Capital increase 9 May 2005 Share-based payments (note 17)

Total equity € thousand

64 31 -

861,514 8,232

64 861,545 8,232

3 36,271 347

67 897,816 8,579

95

869,746

869,841

36,621

906,462

Unrealised result on cash flow hedging, interest rate swaps Unrealised gain/loss on investments available for sale Change in actuarial gains and losses (note 11) Tax on equity postings Foreign currency translation Total income and expense for the year recognised directly in equity

-

5,035 2,478 -2,726 772 -6,106

5,035 2,478 -2,726 772 -6,106

212 104 -115 33 -257

5,247 2,582 -2,841 805 -6,363

0

-547

-547

-23

-570

Net loss for the period Total income and expense for the year

0

-83,013 -83,560

-83,013 -83,560

-3,495 -3,518

-86,508 -87,078

Equity as at 31 December 2005

95

786,186

786,281

33,103

819,384

Equity as at 1 January 2006

95

786,186

786,281

33,103

819,384

31 4,808 -95 11,838

495,193 95 -11,838

31 500,001 0 0

1 2,634 -

32 502,635 0 0

-

-5,179 3,240

-5,179 3,240

5,179 136

0 3,376

16,677

1,267,697

1,284,374

41,053

1,325,427

Issue of share capital (Nycomed S.C.A. SICAR) Subscription of new shares by fund investors Issue of shares in exchange for shares in Nycomed A/S Issue of shares in exchange for shares in Nycomed A/S Effect of changes in minority share and investors contribution Share-based payments (note 17)

Unrealised result on cash flow hedging, interest rate swaps Unrealised gain/loss on investments available for sale Change in actuarial gains and losses (note 11) Tax on equity postings 2006 Foreign currency translation Other direct equity postings Total income and expense for the year recognised directly in equity

-

-1,895 -8,275 769 275 1,001 -1,086

-1,895 -8,275 769 275 1,001 -1,086

-80 -348 32 12 42 -46

-1,975 -8,623 801 287 1,043 -1,132

0

-9,211

-9,211

-388

-9,599

Net loss for the year Total income and expense for the year

0

-80,005 -89,216

-80,005 -89,216

-3,387 -3,775

-83,392 -92,991

16,677

1,178,480

1,195,157

37,279

1,232,436

Equity as at 31 December 2006

36

Minority interest € thousand

A N N UA L R E P O RT 2 0 0 6

N YCO M E D S . C . A . S I CA R CO N S O L I DAT E D CAS H F LOW S TAT E M E N T 1 J A N U A RY - 3 1 D E C E M B E R

01.01.06 31.12.06 € thousand

Note Cash flow from operating activities Operating income (loss) 21

23

1 1

Pro forma unaudited 01.01.05 31.12.05 € thousand

46,022

-36,802

-16,470

Adjustments Change in working capital Financial income received Financial expenses paid Income taxes received (paid)

127,404 -41,076 2,269 -147,967 -30,725

144,779 -35,160 2,020 -31,820 -26,226

168,890 -58,139 2,304 -47,732 -28,171

Net cash flow from operating activities

-44,073

16,791

20,682

Cash flow from investing activities Acquisition of ALTANA Pharma AG Net cash from acquisition of ALTANA Pharma AG Acquisition of Nyco Holdings ApS Net cash from the acquisition of Nyco Holdings ApS Acquisition fees, acquistion of Nyco Holdings ApS

-4,689,800 600,497 0 0 0

0 0 -777,299 36,164 -7,211

0 0 -777,299 0 -7,211

Purchase of tangible assets, net Purchase of intangible assets, net Other investments Net cash flow from (used in) investing activities

-30,345 -23,366 378 -4,142,636

-16,578 -12,806 0 -777,730

-20,672 -22,876 3,651 -824,407

5,491,206 500,001 2,634 0 0

0 412,000 0 396,000 856

0 412,000 0 396,000 856

0 -1,052,965 -103,008 4,837,868

47,800 -30,572 -18,475 807,609

47,800 -10,872 -18,475 827,309

Net cash flow

651,159

46,670

23,584

Net cash beginning of the period Currency translation adjustments Net cash at 31 December

46,617 -22 697,754

0 -53 46,617

23,073 -40 46,617

Cash flow from financing activities Proceeds from new facilities Capital contribution from shareholders Capital contribution from minority interest Proceeds from issuance of PIK Notes Interest on financing funds 22

(8 months of operations) 04.01.05 31.12.05 € thousand

Proceeds from exercise of warrants Change in long-term bank debt Financing fees Net cash flow from (used in) financing activities

A N N UA L R E P O RT 2 0 0 6

37

NYCOMED S.C . A . S I CA R NOTES

1.

Business combination Acquisition of ALTANA Pharma AG On 29 December 2006, Nycomed acquired all the shares in ALTANA Pharma AG for € 4,768.6 million. ALTANA Pharma AG is a pharmaceutical company and provides innovative pharmaceutical products with a focus on prescription drugs for gastrointestinal and respiratory diseases. If the acquisition had occurred at 1 January 2006, management estimates that consolidated revenue would have been € 3,394.1 million and consolidated adjusted EBITDA for the period would have been € 933.4 million. The consolidated income statement for 2006 has not been impacted by the acquisition of ALTANA Pharma AG as the closing of the transaction took place at 29 December 2006. Consolidated EBITDA, stated as EBITDA, and adjusted EBITDA are key measures used in order to have a more comprehensive analysis of Nycomed’s operating performance and of the ability to service our debt.

The acquisition of ALTANA Pharma AG and the related application of purchase accounting adjustments and financing transactions have affected, and will continue to affect, our results of operations following the acquisition. In particular: • The substantial indebtedness we incurred to finance the acquisition will increase our interest expense onwards significantly for the combined Group • The significant adjustment to intangible assets we recorded in connection with the acquisition in respect of patents and other intellectual property rights will lead to a significant increase in amortisation expense • The purchase accounting adjustment relating to inventory resulted in a non-recurring charge of € 49.4 million. This will be reflected in our consolidated income statement, net of the related income tax benefit, as the inventory on hand at the acquisition date is sold to customers. This impact and the related effect on gross and operating margins will be reflected in our consolidated income statement within the first six months following the closing of the acquisition • The purchase price allocation and purchase accounting adjustments may be subject to subsequent adjustments of fair values. IFRS 3 Business Combinations effectively requires allocation of the cost of an acquisition to identifiable assets, liabilities and contingent liabilities to be completed within a period of 12 months of the acquisition date (29 December 2006).

The fair value of indentifiable assets and liabilities at the date of acquisition was:

Patents and rights In process research & development Intangible assets, recorded by ALTANA Pharma AG Contract manufacturing Chemical library Property, plant and equipment Inventories Long-term investment Other non-current assets Trade receivables Deferred tax asset Other current assets Marketable securities Cash Total assets

38

A N N UA L R E P O RT 2 0 0 6

Recognised on acquisition € million 2,970.0 275.0 0.0 18.2 25.0

Fair value adjustment € million 2,970.0 275.0 -151.9 18.2 25.0

Carrying amount € million 0.0 0.0 151.9 0.0 0.0

614.3 269.2 8.5 24.9 355.0 92.5 60.8 20.0 580.5 5,313.9

83.0 49.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 3,268.7

531.3 219.8 8.5 24.9 355.0 92.5 60.8 20.0 580.5 2,045.2

N YCO M E D S . C . A . S I CA R N OT E S

1.

Business combination, continued Recognised on acquisition € million 259.8 1,151.7 597.7

Fair value adjustment € million 0.0 0.0 0.0

Carrying amount € million 259.8 0.0 597.7

Total liabilities

2,009.2

0.0

857.5

Fair value of net assets Goodwill arising on acquisition Purchase price

3,304.7 1,463.9 4,768.6

3,268.7

1,187.7

Pension provisions Deferred tax on fair value adjustments Current and non-current liabilities

The cost of the acquisition was € 4,768.6 million and comprised: Net cash Purchase price adjustment accrued Acquisition costs

4,689.8 49.7 29.1 4,768.6

Separable intangible assets have been identified and valued at € 3,288.2 million.

We considered the following approaches when estimating the fair value (FV) of the subject assets of the Company: the Income Approach, the Market Approach, and the Cost Approach.

• The Income Approach indicates the FV of an asset based on the projected annual cash flows that the subject asset can be expected to generate over its remaining useful life. The projected annual cash flows are then discounted to a present value equivalent by applying a rate of return appropriate to the risk of the asset • The Market Approach estimates the FV of an asset by comparing it to market transactions of other similar assets.

The time of sale, physical characteristics, conditions of sale, location and other factors are considered for the comparable asset. The market price of the comparable asset is then adjusted to indicate the FV of the subject asset • The Cost Approach is based on the theory that a prudent investor would pay no more for an asset than the amount for which the asset could be replaced. To the extent that the asset being valued provides less utility than the new asset, replacement cost is reduced for such factors as physical deterioration and functional or economic obsolescence.

The selection of the appropriate valuation approach is based on the nature and specific characteristics of the underlying asset that is valued. In general, income-producing assets, such as certain intangibles, are often valued based on the Income Approach; while certain tangible assets, such as property, plant and equipment, are valued based on a combination of the Market and/or the Cost Approaches.

In order to utilise the Income Approach in valuing the currently marketed products In process research and development and Toll manufacturing contracts, appropriate discount rates must be derived. We have computed these rates by considering an industry-based weighted average cost of capital and the Internal Rate of Return implied by the FV of the Operating Business Enterprise Value of ALTANA Pharma AG. A deferred tax liability of € 1,151.7 million has been provided against intangible assets, resulting in an increase in residual goodwill by this amount. Although this liability has been recognised in accordance with IAS 12, and a proportion will be amortised to the income statement as the related intangible asset is amortised, this liability is only payable if the intangible asset is sold separately.

The residual goodwill recognised on the acquisition is attributable mainly to the synergies expected to be achieved from integrating the company into the Group’s existing business.

These synergies result from R&D savings; sales force reduction where there are overlaps and reduction in general; reduction in administrative expenses; and revenue upside by introducing respective products in each of the entity’s networks. In addition, the Company’s diversified revenue sources from in-licensing and product development, combined with a strong product pipeline and an opportunity to cross-sell products, provides significant potential for growth both in the medium- and the long-term.

The acquisition also strengthens the Company’s geographic presence and in-licensing potential, as well as providing a more diversified product portfolio and complementary R&D skills.

In June 2006, Nycomed acquired the Romanian pharmaceutical company Ruby de Tacos. The value of total assets taken over in connection with the acquisition was less than € 1 million and there were no material fair value adjustments.

A N N UA L R E P O RT 2 0 0 6

39

NYCOMED S.C . A . S I CA R NOTES

1.

Business combination, continued (comparatives) Acquisition of Nyco Holdings ApS On 10 March 2005, Nycomed A/S entered into a subscription, share purchase and contribution agreement pursuant to which Nycomed A/S agreed to acquire all of the capital stock of Nyco Holdings ApS (the former parent company in the Group). The acquisition was consummated on 9 May 2005, following regulatory approvals.

The fair value of indentifiable assets and liabilities of Nycomed A/S and subsidiaries as at the date of acquisition:

Patents and rights Development projects Property, plant and equipment Investment in shares and bonds and other receivables Inventories Trade receivables Other current assets Cash Total assets Pension provisions Deferred tax liability Other provisions Debt to financial institutions Trade payables Income tax payable Other payables Deferred income Total liabilities Fair value of net assets Goodwill arising on acquisition Purchase price

Recognised on acquisition € million 979.9 211.0 180.8 12.7 200.1 124.3 15.5 36.2 1,760.5

Carrying amount € million 358.6 199.6 180.8 12.7 141.4 124.3 15.5 102.6 1,135.5

28.4

28.4

344.4 2.9 643.9 47.2 15.1 69.4 2.2 1,153.5

173.7 2.9 621.5 47.2 15.1 69.3 2.2 960.3

607.0 668.3

175.2

1,275.3

The cost of the acquisition was € 1,275.3 million and comprised an issue of shares. In total 9,883,603 ordinary shares were issued in connection with the acquisition of Nyco Holdings ApS.

Cash Conversion of shares of Nyco Holdings ApS Shares issued, capital increase, paid in capital, cash Acquisition costs

777.3 485.0 5.4 7.6 1,275.3

All business activities in the Nycomed A/S Group relate to Nyco Holdings ApS and subsidiaries and the consolidated financials reflect the business activities from the date of acqusition.

Included in the € 642.2 million of goodwill recognised above are certain marketing- and customer-related intangible assets and contract-based intangible assets, which are not recognised separately mainly because the fair value of these assets cannot be measured reliably and therefore they do not meet the criteria for recognition as intangible assets under IAS 38.

40

A N N UA L R E P O RT 2 0 0 6

N YCO M E D S . C . A . S I CA R N OT E S

2.

Segment information The Group’s primary segment reporting is geographic, based on the location of its customers. The Group’s segments reflect the structure of its management and sales organisation, its system of internal financial reporting, and the predominant source of risk and return in its business.

The secondary segment is the total business. Nycomed does not split its business into business segments as the Group has over 6 thousand products across a whole range of markets and distribution channels, even within individual countries. None of Nycomed’s major products meets the definition of a reporting segment.

Segment liabilities are not segmented as each legal entity contains a mix of management responsibilities and functions related to the worldwide Group.

The segments are: North Western Europe Central Europe Big Five Finland CIS Export Other Unallocated central costs

Norway, Denmark, Sweden, Belgium, the Netherlands and the Baltics Austria, Greece, Switzerland, Poland, the Czech Republic, Romania, Hungary France, Germany, Italy, Spain, Portugal, UK Finland Russia/CIS Direct export business Contract production Administration, Operations, International Product Development, International Product Management, Amortisations and write-downs.

INCOME STATEMENT 01/01 - 31/12 2006 North Western Europe Revenue Sales to external customers Inter-segment sales

Central Europe Big Five Finland

Russia/ CIS

Export

Unallocated central Other costs*

Eliminations

Consolidated Group

289,099

107,115 60,748

69,262

221,902

98,943

22,880

0

0

869,949

80,139

66,712 36,529

8,694

0

0

0

0

-192,074

0

22,880

Total revenue

369,238 173,827 97,277

77,956 221,902 98,943

Result Segment results (operation income/loss)

140,409

30,061

34,653

-1,440

90,877

66,034

0 -192,074 869,949

8,994 -323,566

0

46,022

Royalty and other income from primary activities included in net turnover, € 24,214 thousand. * Unallocated central costs include amortisations, € 98,863 thousand.

A N N UA L R E P O RT 2 0 0 6

41

NYCOMED S.C . A . S I CA R NOTES

2.

Segment information, continued BALANCE SHEET 31/12 2006 North Western Europe

Central Europe Big Five Finland 4,947

Export

UnalloOther cated

0

0

0 27,618

Land & buildings

55,218

18,212

Machinery & equipment

19,321

21,181

0

938

0

0

0

Other PP&E

7,789

4,304

642

440

4,355

0

0 0

Assets under construction

0

Russia/ CIS

ALTANA ConsoliPharma dated AG Group 286,547

392,542

11,016

153,519

205,975

-433

141,340

158,437

6,755

5,591

0

107

0

0

0

32,900

45,353

Finished goods

39,921

41,275

1,274

8,850

18,234

1,065

265 -16,419

150,322

244,787

Raw materials & semi-ďŹ nished

21,126

238

0

1,126

1,642

4,271

4,045 34,991

111,714

179,153

Prepayments for goods Trade receivables

1,692

0

0

0

0

0

0

0

7,133

8,825

41,384

24,808

7,983

6,486

73,537

16,390

2,705

-1,871

346,069

517,491

Segment assets Intangibles

1,752,563 1,704,644 4,743,635 6,448,279

Other receivables

39,966

237,927

Cash

97,257

600,497

Total assets

277,893 697,754 9,176,489

Property plant and equipment and inventory are based on physical location. Trade receivables are based on customer location.

As the acquired group ALTANA Pharma AG does not segment any balance sheet items, the total balance sheet of ALTANA Pharma AG is disclosed separately above.

42

A N N UA L R E P O RT 2 0 0 6

N YCO M E D S . C . A . S I CA R N OT E S

2.

Segment information, continued (comparatives) The geographical segmentation in 2005 was different from the segmentation for 2006 due to changes in the management structure for the sales organisation.

The segments are: Scandinavia and Baltics Central Europe Western Europe Finland and Poland CIS Export Other Unallocated central costs

Norway, Denmark, Sweden and the Baltics Austria, Switzerland, Germany, Greece and Italy Belgium, Holland, France, UK, Spain and Portugal Finland and Poland Russia/CIS Direct export business Contract production Administration, Operations, International Product Development, International Product Management, Amortisations and write-downs.

INCOME STATEMENT 4/1 - 31/12 2005 Scandinavia and Baltics

CIS

Export

Unallocated Consolicentral Elimidated Other costs* nations Group

47,088 105,731

60,856

14,784

0

0

100,727

52,231 105,731

60,856

25,822

18,992 36,869

42,656

Finland Central Western and Europe Europe Poland

Revenue Sales to external customers

127,551

85,318

66,381

Inter-segment sales

34,377

12,166

34,346

161,928

97,484

65,752

23,959

Total revenue Result Segment results (operation income/loss)

5,143

161

0

507,870

0

0 -86,032

0

14,784

161 -86,032

507,870

5,957 -256,809

0

-36,802

Royalty and other income from primary activities included in net turnover, € 11,418 thousand. * Unallocated central costs include amortisations (€ 65,600 thousand), step-up of inventory (€ 58,732 thousand), and warrants programme (€ 8,579 thousand).

A N N UA L R E P O RT 2 0 0 6

43

NYCOMED S.C . A . S I CA R NOTES

2.

Segment information, continued (comparatives) BALANCE SHEET 31/12 2005 Scandinavia Central Western and Baltics Europe Europe

Finland and Poland

CIS

Export Other

Unallocated

Consolidated Group

Land & buildings

51,810

17,913

4,408

2,948

0

0

0

28,840

105,919

Machinery & equipment

15,893 21,070

1,482

964

0

0

0

13,693

53,102

Other PP&E

7,289

3,811

1,058

478

0

0

0

-426

12,210

Assets under construction

5,872

3,220

406

1,601

0

0

0

0

11,099

Finished goods

28,596

16,887

11,197

13,338

31,182

0

0

-15,281

85,919

Raw materials & semi-ďŹ nished

14,739 49,322

69,077

Prepayments for goods Trade receivables

3,762

1,254

0

0

0

0

1,692

0

0

0

0

0

0

0

1,692

36,233

19,196

14,350

10,514

44,794

11,582

3,414

280

140,363

Segment assets Intangibles

479,381 1,780,140 1,780,140

Other receivables

44,535

Cash

46,617

Total assets

44,535 46,617 2,350,673

Property plant and equipment and inventory are based on physical location. Trade receivables are based on customer location.

44

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3.

Amortisation/depreciation of fixed assets

01.01.06 31.12.06 € thousand

(8 months of operations) 04.01.05 31.12.05 € thousand

Amortisation/depreciation and write-down of fixed assets is included in the total expenses of the Group at the following amounts: Cost of sales Sales and marketing expenses Research and development expenses Administrative expenses Total 4.

8,537 67,905 754 4,240 81,436

2,269 0 2,269

2,533 2,434 4,967

-57,958 -52,880 -4,758 -20,503 -22,027 -241 -158,367

-33,709 -37,652 -4,728 0 0 -3,835 -79,924

Financial income Interest income Amortisation of financing cost Total

5.

11,607 103,118 1,011 6,220 121,956

Financial expenses Interest expenses Interest PIK Notes Foreign exchange losses Loan disbursement premium and charge of fair value adjustment Amortisation of outstanding finance fee and discount PIK Notes Other financial expenses Total

A N N UA L R E P O RT 2 0 0 6

45

NYCOMED S.C . A . S I CA R NOTES

6.

Income tax Accrued income tax for the year Adjustment of deferred tax for the year

-45,376 72,904

-25,699 50,903

Adjustment prior years (accrued tax) Adjustment prior years (deferred tax) Total

127 -971 26,684

-839 886 25,251

633 587 -716 504

760 -456 501 805

30,821 -2,066 -1,880

31,426 -1,486 -1,711

-945 0 1,587 -833 26,684

-2,402 727 -1,350 47 25,251

Income tax related to items charged directly to equity: Pension commitments Unrealised result on cash flow hedging, interest rate swaps Exchange rate adjustment of internal gain on inventory

Analysis of income tax: Calculated 28% of income before tax Non-deductible interest expenses Other non-deductible expenses Non-deductible expenses related to warrants programme Impact of change in Danish tax rate from 30% to 28% Higher/(lower) tax rates in foreign subsidiaries Adjustment of tax concerning prior years Total

46

01.01.06 31.12.06 € thousand

(8 months of operations) 04.01.05 31.12.05 € thousand

A N N UA L R E P O RT 2 0 0 6

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7.

Intangibles

Cost as at 4 January 2005

Patents and rights, currently marketed products 0

Development projects in progress and prepayments Goodwill for intangibles 0 0

Total 0

Additions from acquisition of subsidiaries Additions in the year Disposals of business activities Cost as at 31 December 2005

979,913 317 -717 979,513

642,237 0 0 642,237

211,000 12,304 0 223,304

1,833,150 12,621 -717 1,845,054

Amortisations as at 4 January 2005 Amortisation for the period Write-down for the year Amortisations as at 31 December 2005

0 65,631 -717 64,914

0 0

0 0

0 65,631

0

0

64,914

Book value as at 31 December 2005

914,599

642,237

223,304

1,780,140

Cost as at 1 January 2006 Currency retranslation effect

979,513 0

642,237 3

223,304 0

1,845,054 3

3,013,182 0 3,992,695

1,455,451 0 2,097,691

275,000 23,366 521,670

4,743,633 23,366 6,612,056

64,914 98,863 163,777

0 0 0

0 0 0

64,914 98,863 163,777

Book value as at 31 December 2006

3,828,918

2,097,691

521,670

6,448,279

Amortisation period

2-30 years

-

-

Additions from acquisition of subsidiaries Additions in the year Cost as at 31 December 2006 Amortisations as at 1 January 2006 Amortisation for the period Amortisations as at 31 December 2006

As a result of the impairment tests, there is no basis for recognising impairment loss on goodwill or other intangibles.

Impairment tests are conducted at least annually and in connection with management’s strategy review. In the impairment tests, the discounted values of future cash flows are compared against the carrying amounts. Future cash flows are based on the budget for 2007, strategic plans for the years 2008-2011 and projections for the following years. Important parameters are sales, EBIT, working capital and growth assumptions subsequent to the budget and strategic plan period. Budget and strategic plans build on specific commercial assessments of the business entities and the relevant products, while projections that go beyond 2011 build on general parameters for growth rates. For discounted cash flow calculations, a discount rate of 12% has been applied, based on the Group’s weighted average cost of capital before the new financing relating to the acquisiton of ALTANA Pharma AG. Furthermore, external Company valuations have been applied for the impairment testing of the goodwill.

A N N UA L R E P O RT 2 0 0 6

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NYCOMED S.C . A . S I CA R NOTES

8.

Property, plant and equipment Assets under construction and prepayments for assets 0

Total 0

Land and buildings 0

Machinery and equipment 0

Other property plant and equipment 0

Additions from acquisition of subsidiaries 106,615 Currency retranslation effect 668 Additions in the year 1,833 Disposals in the year -603 Transfers 818 Cost as at 31 December 2005 109,331

55,053 539 5,209 -1,243 248 59,806

12,720 465 4,020 -2,871 25 14,359

6,382 50 5,758 0 -1,091 11,099

180,770 1,722 16,820 -4,717 0 194,595

0 222 3,775 -585 3,412

0 346 7,586 -1,228 6,704

0 350 4,444 -2,645 2,149

0 0 0 0 0

0 918 15,805 -4,458 12,265

105,919

53,102

12,210

11,099

182,330

Cost as at 1 January 2006 109,331 Additions from acquisition of subsidiaries 286,548 Currency retranslation effect -1,190 Additions in the year 2,935 Disposals in the year -137 Revaluations 453 Transfers 3,960 Cost as at 31 December 2006 401,900

59,806 153,519 -666 9,523 -1,785 1,010 1,898 223,305

14,359 141,339 -1,164 9,104 -6,616 -3,301 514 154,235

11,099 32,900 -117 8,674 0 -906 -6,298 45,353

194,595 614,306 -3,137 30,237 -8,537 -2,744 73 824,793

3,412 -403 6,147 -136 338 9,358

6,704 -603 10,413 -1,828 2,644 17,330

2,149 -642 6,532 -6,516 -5,726 -4,203

0 0 0 0 0 0

12,265 -1,648 23,093 -8,480 -2,744 22,486

392,542

205,975

158,437

45,353

802,307

5-50 years

2-14 years

1-20 years

-

Cost as at 4 January 2005

Depreciation as at 4 January 2005 Currency retranslation effect Depreciation for the year Disposals in the year Depreciation as at 31 December 2005 Book value as at 31 December 2005

Depreciation as at 1 January 2006 Currency retranslation effect Depreciation for the year Disposals in the year Revaluations Depreciation as at 31 December 2006 Book value as at 31 December 2006 Amortisation period

Total official assessment of Danish property at a book value of € 23,688 thousand is € 38,761 thousand (€ 33,510 thousand in 2005) at the yearly assessment made 1 October 2006.

Note 16 provides more details on security for loans, etc., as regards property, plant and equipment.

48

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9.

Investments Other investments in shares 0 12,454 0

Other receivables 0 243 135

Total 0 12,697 135

12,454

378

12,832

0 791 791

0 0 0

0 791 791

Book value as at 31 December 2005

13,245

378

13,623

Cost as at 1 January 2006 Additions from acquisition of subsidiaries Additions in the year

12,454 8,451 53

378 24,912 0

12,832 33,363 53

Cost as at 31 December 2006

20,958

25,290

46,248

Revaluations as at 1 January 2006 Write-up/down for the year Revaluations as at 31 December 2006

791 -8,659 -7,868

0 -332 -332

791 -8,991 -8,200

Book value as at 31 December 2006

13,090

24,958

38,048

Cost as at 4 January 2005 Additions from acquisition of subsidiaries Additions in the year Cost as at 31 December 2005 Revaluations as at 4 January 2005 Write-up/down for the year Revaluations as at 31 December 2005

A N N UA L R E P O RT 2 0 0 6

49

NYCOMED S.C . A . S I CA R NOTES

10

Reserves

Capital increase 9 May 2005

Share premium € thousand 897,785

Other reserves € thousand -

Total reserves € thousand 897,785

Share-based payments (note 17) Unrealised result on cash flow hedging, interest rate swaps Unrealised gain/loss on investments held for sale Change in actuarial gains and losses (note 11) Tax on equity postings Foreign currency translation

-

-

-

8,579

8,579

-

-

-

5,247

5,247

-

-

-6,363

2,582 -2,841 805 -

2,582 -2,841 805 -6,363

Net loss for the period

-

-86,508

-

-

-86,508

At 31 December 2005

897,785

-86,508

-6,363

14,372

819,286

Subscription of new shares by fund investors Share exchange by shareholders

497,827 95

-

-

-

497,827 95

Share exchange by shareholders -11,838 Share-based payments (note 17) Unrealised result on cash flow hedging, interest rate swaps Unrealised gain/loss on investments held for sale (note 9) Change in actuarial gains and losses (note 11) Tax on equity postings Foreign currency translation Other direct equity postings -

-

-

3,376

-11,838 3,376

-

-

-1,975

-1,975

-

1,043 -

-8,623 801 287 -1,132

-8,623 801 287 1,043 -1,132

-

-83,392

-

-

-83,392

1,383,869

-169,900

-5,320

7,106

1,215,755

Net loss for the year At 31 December 2006

Reserves attributable to equity holders of the parent Reserves attributable to minority interest

50

Retained earnings € thousand -

Foreign currency translation reserve € thousand -

A N N UA L R E P O RT 2 0 0 6

1,178,480 37,275 1,215,755

N YCO M E D S . C . A . S I CA R N OT E S

10

Capital stock Number of shares issued Issuance of ordinary shares in connection with establishing Nycomed A/S Issuance of ordinary shares in connection with acquisition, 9 May 2005 Reduction of number of shares, 9 May 2005 Conversion of shares in Nyco Holdings A/S Issuance of ordinary shares in connection with establishing Nycomed S.C.A. SICAR Issuance of ordinary shares in connection with share exchange Issuance of ordinary shares in connection with capital contribution Number of shares issued as at 31 December Capital stock value Issuance of ordinary shares in connection with acquisition, 9 May 2005 Reduction of number of shares, 9 May 2005 Conversion of shares in Nyco Holdings A/S Issuance of ordinary shares in connection with establishing Nycomed S.C.A. SICAR Issuance of ordinary shares in connection with share exchange Issuance of ordinary shares in connection with capital contribution Capital stock value as at 31 December

31.12.06

31.12.05

-

1,480 9,077,500 -4,539,490 5,344,113

24,800 9,470,415 3,846,156 13,341,371

9,883,603

â‚Ź thousand -

â‚Ź thousand 91 -45 53

31 11,838 4,808

-

16,677

99

A N N UA L R E P O RT 2 0 0 6

51

NYCOMED S.C . A . S I CA R NOTES

11.

Pension commitments Many employees in Nycomed are covered by retirement plans in the form of primarily defined contribution plans or alternatively defined benefit plans. Nycomed entities sponsor these plans either directly or by contributing to independently administered funds. The nature of such plans varies according to legal regulations, fiscal requirements and the economic conditions of the countries in which the employees are employed. The benefits are generally based on the employees’ remuneration and years of service. Defined benefit plans comprise Nycomed subsidiaries in Norway, Austria, Germany, Belgium and the Netherlands, ALTANA Italy, ALTANA France, ALTANA US and ALTANA Mexico.

Post-employment benefit plans are usually funded by payments from Nycomed entities and by employees to funds independent of the Group. Where a plan is unfunded, a liability for the obligation is recognised in the balance sheet.

The following tables summarise the components of net benefit expense recognised in the consolidated income statement, the funded status and amounts recognised in the consolidated balance sheet for the respective plans.

31.12.06 € thousand 2,959 2,787 -1,591 20 0 4,175

31.12.05 € thousand 2,471 2,805 -1,813 22 0 3,485

1,046 1,591

305 1,813

378,710 89,321 289,390

66,716 35,272 31,444

Changes in the present value of the defined benefit obligation are as follows: Opening defined benefit obligation Additions from acquisition of subsidiaries Interest cost Current service cost Benefits paid Actuarial (gains)/losses on obligation Exchange differences on foreign plans

66,716 312,383 2,787 2,959 -3,301 -1,585 -1,249

0 59,013 2,805 2,471 -3,212 5,438 200

Defined benefit obligation at 31 December

378,710

66,716

Changes in the fair value of plan assets are as follows: Opening fair value of plan assets Additions from acquisition of subsidiaries Expected return Contributions by employer Benefits paid Actuarial gains/(losses) Exchange differences on foreign plans

35,272 52,782 1,046 2,711 -1,614 0 -877

0 30,572 305 2,533 -1,310 3,172 0

Fair value of plan assets at 31 December

89,321

35,272

4.5% - 5.5% 4.5% - 7% 3.0% - 4.5% 1.4% - 1.8%

4.25% - 5.5% 4.25% - 5.5% 2.5% - 3.0% 2.0% - 3.0%

Current service cost Interest cost on benefit obligation Expected return on plan assets Net actuarial (gain)/loss recognised in the year Past service cost Net benefit expense Actual return on plan assets Expected return on plan assets Defined benefit obligation at 31 December Fair value of plan assets at 31 December Recognised as pension obligation in balance sheet

The actuarial assumptions used in the actuarial computations and valuations vary from country to country due to local economic and social conditions.

The range of assumptions used is as follows: Assumptions Discount rate: Expected rate of return on assets: Future salary increases: Future pension increases: 52

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12.

31.12.06 € thousand

31.12.05 € thousand

290,239 1,066,586 -363 -248 971

0 343,144 0 12 -886

Adjustment for the year Deferred tax posted to equity Provision as at 31 December

-72,904 -39 1,284,242

-50,903 -1,128 290,239

Deferred tax relates to: Intangibles Property, plant and equipment Financial fixed assets Current assets Provisions Non-current liabilities Tax loss carry-forwards Unamortised financing costs Foreign exchange gains/losses

1,380,468 51,371 3,858 -370 -58,252 -1,731 -94,926 20,151 6,240

303,240 10,369 0 -2,805 -7,970 -7,666 -15,829 -4,539 4,870

Deferred income for tax purposes Provision as at 31 December

-22,567 1,284,242

10,569 290,239

1,435,415 151,173 1,284,242

298,595 8,356 290,239

Deferred tax Provision as at 1 January Deferred tax in subsidiaries acquired in 2006 Reclassification deferred tax/accrued tax Currency retranslation effect Adjustment prior years

Allocation of deferred tax: Deferred tax liabilities Deferred tax assets

Deferred tax assets mainly relates to tax loss carry-forwards in the Danish, German and Austrian companies and timing differences in the Norwegian subsidiary.

Calculation of deferred taxes is based on local tax rates.

Based on the concrete expectation of future profits, deferred tax assets were recognised based on the tax loss carry-forwards primarily in Denmark.

A N N UA L R E P O RT 2 0 0 6

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NYCOMED S.C . A . S I CA R NOTES

13.

31.12.06 31.12.05 € thousand € thousand

Provisions

Employees Provisions as at 1 January 0 Addition from acquisition of subsidiaries 104,920 Arising during the year 0 Utilised during the year Unused amount reserved Provisions as at 31 December

0 0 104,920

Thereof long-term at 31 December 2006

Sales and marketing 0 57,156 0

Warranty 0 8,040 0

Other 0 52,712 0

Total 0 222,828 0

Total 0 0 2,299

0 0 57,156

0 0 8,040

0 0 52,712

0 0 222,828

-1,101 -1,198 0

55,024

0

The employee-related provisions encompass accruals for special bonuses, as well as anniversary and paid vacation. Provisions for sales and marketing pertain primarily to sales bonuses and commissions. Provisions for warranty cover commitments in connection with goods delivered and services rendered.

The items included in other provisions are primarily related to taxes other than income taxes and similar fees, pending litigation, legal costs, professional fees, clinical trials and research. Additionally, at 31 December 2006, an accrual for environmental costs totaling € 3.8 million was included and a part of the provisions for environmental risks. A corresponding asset of € 3.8 million was recorded which represents amounts due from the previous land owners.

Owing to the delay in new products gaining their anticipated approval in the USA, the sales and marketing structure at ALTANA Pharma Inc. US was significantly reduced. A restructuring reserve of € 21.8 million was set aside for this purpose, mainly to be used late 2006/early 2007. A restructuring reserve of € 3.8 million was also set aside due to a necessary adaptation of the sales and marketing structures at ALTANA Pharma Ltd. UK.

14.

Income tax receivable/payable Accrued as at 1 January Accrued tax in subsidiaries acquired in 2006 Reclassification accrued tax/deferred tax Currency retranslation effect Income taxes paid during the year Adjustment prior years Accrued income tax for the year Accrued tax posted to equity Accrued as at 31 December Allocation of income tax Income tax payables Income tax receivables

54

A N N UA L R E P O RT 2 0 0 6

31.12.06 31.12.05 € thousand € thousand 15,797 25,047 363 -306 -30,727 -127 45,376 -465 54,958

0 15,081 0 80 -26,225 839 25,699 323 15,797

55,213 255 54,958

15,914 117 1,579

N YCO M E D S . C . A . S I CA R N OT E S

15

Inventories Raw materials and packaging Semi-finished goods Finished goods Prepayment for goods Total The amount of write-down of inventories recognised as an expense (recognised in cost of sales) during the period Amount of reversal of write-down of inventories during the year Amount of write-down to net realisable value

16.

31.12.06 € thousand

31.12.05 € thousand

95,103 84,050 244,787 8,825 432,765

32,664 36,413 85,919 1,692 156,688

7,688 3,252 -86

7,486 3,329 819

Operating leases 37,343 30,689 21,920 14,425

Operating leases 6,105 3,937 2,253 1,366

10,747 19,333 134,457

841 972 15,474

32,544 15,387 47,931

0 392 392

Contingent liabilities, guarantee commitments, etc.

Contractual obligations The Company rents and leases property, company cars and equipment used in its operations.

These leases are classified as either operating or capital leases and amortised over the life of the respective lease. The lease contracts expire on various dates in the future.

Future minimum lease payments for non-cancellable operating and capital leases were: Lease and rent commitments expiring within the following periods as from the balance sheet date: Finance leases Within one year 53 Between one and two years 50 Between two and three years 38 Between three and four years Between four and five years After five years

141

The majority of the operating lease obligations represented rent or leasing of buildings in the USA and UK, which are partially counterreflected in a provision for onerous contracts based on the restructuring decision for the US and UK. Commitments and guarantees Commitments for capital expenditures and other purchase obligations Other Total The main commitments are for the new administration building in Konstanz with a respective commitment of € 18.4 million.

A N N UA L R E P O RT 2 0 0 6

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NYCOMED S.C . A . S I CA R NOTES

16.

Contingent liabilities, guarantee commitments, etc., continued The following legal entities are borrowers or guarantors under the Senior Facilities Agreement and therefore liable under that agreement for the full amount or part of the amount. Except for Nyco Holdings 2 ApS, the shares of these entities have been pledged in favour of the banks. The shares of the following additional legal entities are pledged to the banks: ALTANA Pharma AG (Germany), OY Leiras Finland AB, Nycomed Pharma GmbH, Nycomed Austria GmbH and ALTANA Pharma GmbH (Austria). Nycomed Danmark ApS, Nycomed Pharma AS (Norway) and Nycomed Christiaens SCA (Belgium) have also granted security over receivables, registered bonds, floating charges over business equipment and inventory and real property. The Danish entities have also registered negative pledges in the personal register.

Nyco Holdings 3 ApS, Denmark Nycomed Danmark ApS, Denmark Nycomed Germany Holding GmbH, Germany Nycomed AB, Sweden Nycomed Holding GmbH, Austria Nycomed Christiaens B.V., the Netherlands Nycomed Christiaens SCA, Belgium Nycomed Holding ApS, Denmark Nyco Holdings 2 ApS, Denmark Nyco Holdings Belgium SPRL, Belgium Nycomed Pharma AS, Norway The total debt covered by such guarantees as of 31 December 2006 is € 5,497,956 thousand.

The assets covered by these guarantees as of 31 December 2006 are set out below:

Asset securities Mortgage of property, plant and equipment Property mortgage for property in Norway (Nycomed Pharma AS) Property mortgage for property in Roskilde (Nycomed Danmark ApS) Pledge over plant and equipment in Norway (Nycomed Pharma AS) Total

31.12.06 € thousand

31.12.05 € thousand

25,496 23,688 15,340 64,524

26,098 24,641 17,847 68,586

14,329 14,878 14,322 5,914 0 269,650 79,300

15,119 14,298 14,882 2,273 3,655 0 0

0 8,117

0 0

0 406,510

0 50,227

Securities over other current assets Pledge over inventory in Norway (Nycomed Pharma AS) Receivables in Belgium (Nycomed Christiaens SCA) Receivables in Norway (Nycomed Pharma AS) Deposits in specific bank accounts in Norway (Nycomed Pharma AS) Deposits in specific bank accounts in Belgium Receivables in Austria under intra-Group agreement (Nyco Holdings 3 ApS) Pledge over registered bonds in Belgium Negative pledge registered in personal and land registry (Nyco Holdings 2 ApS, Nyco Holdings 3 ApS, Nyco Holdings ApS, Nycomed Danmark ApS) Account pledge (Nyco Holdings 2 ApS) Assignment of rights under Share Purchase Agreement between Nycomed Group and ALTANA Pharma AG Total

The above securities are to some extent limited to certain amounts. However, the limitation generally exceeds the value of the assets so that the limitation does not actually limit or reduce the security granted to the banks.

56

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16.

Contingent liabilities, guarantee commitments, etc., continued Mortgages on the property St. Hede Roskilde Jorder 54, totaling € 33,530 thousand, have been registered to the mortgagor and are held by Nordea AB as security for bank debt.

In connection with the 2005 acquisition, certain contingent notes to the sharesholders selling shares as part of the transaction have been issued. The aggregate principal amount of the contingent notes will be an amount equal to 30% of the financial value to Nycomed of a final judicial decision or settlement related to claims made by Nycomed against a certain third-party pharmaceutical company relating to the alleged infringement by such third party of intellectual property rights relating to a particular substance/products, to which Nycomed has exclusive rights pursuant to a development and license agreement. The contingent notes are not current obligations for Nycomed A/S but would become obligations of Nycomed A/S only upon the successful outcome of patent infringement proceedings that a subsidiary of Nyco Holdings ApS has commenced. The subsidiary has a contingent asset in connection with this.

Contingencies From time to time, the Group may be party to legal proceedings in the ordinary course of business. The Group decides from case to case whether it will settle the matter or whether it will defend itself (depending on the general or strategic importance of the case to the Group). In the opinion of management, the ultimate resolution of any threatened or pending litigation will not have a material effect on the Group’s financial position or results of operations.

The Group maintains liability insurance in an effort to reduce the impact of negative judgements in legal matters.

The Group has entered into long-term contracts for the purchase of raw materials for certain strategic products in order to secure supplies. Furthermore, certain of the Group’s in-licensing agreements require the purchase of minimum quantities.

The Group has certain other contingent liabilities resulting from claims, performance guarantees and other commitments incidental to the ordinary course of business. Management believes that the probable resolution of any other contingencies will not materially impact the financial position or results of operations.

Based on a tax assessment towards our Indian subsidiary Zydus ALTANA Pharma Healthcare Pvt. Ltd stating an amount of € 7.9 million, a contingent liability exists. An objection was raised against this tax assessment. We consider the legal enforceability of this claim as improbable. ALTANA Pharma AG owns 50% of the shares in this company.

A N N UA L R E P O RT 2 0 0 6

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NYCOMED S.C . A . S I CA R NOTES

17.

Employee costs

01.01.06 31.12.06 € thousand

(8 ( months of operations) 04.01.05 31.12.05 € thousand

Salaries and wages, etc. are included in the Group’s total expenses at the following amounts: Wages and salaries for the employees Pension Other social security costs Warrants Total

169,711 11,671 24,935 3,376 209,693

106,058 6,722 15,677 8,579 137,036

59,743 85,530 22,426 41,994 209,693

44,956 51,436 15,575 25,069 137,036

3,821 12,741

3,252 -

Salaries and wages, etc. are included in the income statement as follows: Cost of sales Sales and marketing expenses Research and development expenses Administrative expenses Total Average number of employees Total number of employees after the acquisition

The aggregate amount of salary, pension and compensation paid to the Executive Management Committee for the year was € 2,642 thousand (€ 2,525 thousand for 2005). In addition, a total bonus of € 629 thousand was paid for the year (€ 686 thousand for 2005). The aggregate amount of salary, pension and compensation paid to the CEO in 2006 was € 791 thousand. In addition, a bonus of € 424 thousand was paid. A fee of USD 50 thousand was paid to the Board in 2006. The shareholders have authorised the Board to remunerate the Directors with fees which cannot exceed USD 50 thousand per director per year. In 2006, one Director of the Board received a fee.

In connection with the acquisition of ALTANA Pharma AG and the financing of the transaction, a new legal holding company structure was implemented in 2006. As a consequence of this, management’s shares and warrants in Nycomed A/S were exchanged with shares and warrants in Nycomed Sweden Holding 2 AB. Each warrant corresponds to one share in this company.

In July 2006, Nycomed granted management and a group of other employees warrants corresponding to 1.26% of the current capital stock at the time of granting the warrants, in total 124,450 warrants. Each warrant corresponds to one share. The exercise price is based on the share price level for the shares in Nycomed A/S applied in connection with the 2005 acquisition. The warrants will vest for exercise in the period from the time of granting the warrants and the following 10 years. € 3,376 thousand was expensed in the income statement in 2006 for this programme.

The market value for the warrants has been calculated using the Black-Scholes option pricing model.

The main assumptions were as follows: • Expected volatility of 30% has been calculated based on historical data for comparable companies • Risk-free interest rate is 3.95% and the share price used is the price for the Nycomed A/S shares in connection with the 2005 acquisition • Expected life of the warrants has been set to four years and no expected dividend has been included in the calculation.

58

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N YCO M E D S . C . A . S I CA R N OT E S

17.

Employee costs, continued In August 2005, Nycomed A/S granted management and a group of other employees warrants corresponding to 3.83% of the current capital stock, in total 379,000 warrants. Each warrant corresponds to one share in Nycomed A/S. The exercise price is based on the share price level for the shares in Nycomed A/S applied in connection with the 2005 acquisition. The warrants will vest for exercise in the period from the time of granting the warrants and the following 10 years. € 8,579 thousand was expensed in the income statement in 2005 for this programme. The market value for the warrants has been calculated using the Black-Scholes option pricing model. The main assumptions were as follows: • Expected volatility of 26% has been calculated based on historical data for comparable companies • Risk-free interest rate is 2.8% and the share price used is the price for the Nycomed A/S shares in connection with the 2005 acquisition • Expected life of the warrants has been set to four years and no expected dividend has been included in the calculation.

The Executive Management Committee effective in 2006 has a total of 115,012 shares and 213,406 warrants as of 31 December 2006.

The Company’s CEO has 58,976 shares and 124,800 warrants. The CEO’s contract is subject to a six-month termination clause. If the Board of Directors terminates the contract, the CEO will receive severance pay for 18 months in addition to salary during the notice period.

18.

Foreign currency and interest rate exposure Market risk The Group is exposed to market risk, primarily related to foreign exchange and interest rates. Management actively monitors these exposures. The Group has established strategies to hedge fluctuations in exchange rates and interest rates. The Group’s objective is to reduce, where it is deemed appropriate to do so, fluctuations in earnings and cash flows associated with changes in market interest rates and foreign currency exchange rates. The Group does not engage in financial transactions or risk exposures that are not related to the hedging of underlying business driven risks. Only transactions that are justified from a hedging perspective are allowed. Financial instruments normally have a maximum duration of 12 months.

Foreign exchange rates The Group uses euro as its reporting currency and is therefore exposed to foreign exchange currency movements, with the exposure primarily in Danish, Norwegian, Swiss, Japanese and US currencies. Consequently, the Group enters into various contracts which change in value as foreign exchange rates change, to preserve the value of Group assets, and to mitigate currency-related increases in its commitments. Forward contracts in foreign currencies are entered into to hedge receivables, payables and cash flows in foreign currencies.

Outstanding forward contracts classified as fair value hedges, by currency Purchases of currency NOK DKK CHF SEK JPY Total purchases of currency Sales of currency EUR USD DKK GBP JPY PLN SEK Total sales of currency

31.12.06 € thousand

31.12.05 € thousand

121,388 84,608 5,600 0 892 212,488

88,935 66,956 5,785 2,343 0 164,019

0 77,448 937 3,723 0 522 3,318 85,948

88,500 65,271 7,796 1,459 864 0 0 163,890

A N N UA L R E P O RT 2 0 0 6

59

NYCOMED S.C . A . S I CA R NOTES

18.

31.12.06 € thousand

31.12.05 € thousand

Purchases of currency DKK Total purchases of currency

6,162 6,162

90,372 90,372

Sales of currency USD SEK CHF JPY Total sales of currency

3,797 1,106 622 637 6,162

63,575 9,586 7,781 11,879 92,821

Foreign currency and interest rate exposure, continued Forward contracts classified as cash flow hedges, by currency

In connection with the acquisition of ALTANA Pharma AG on 29 December 2006, the Nycomed Group has taken over additional derivatives which are based on the following: The due date of transactions depends on the time of the Company’s anticipated foreign currency payment transactions. Pending contracts have a remaining term of no more than two years.

Forward foreign exchange contracts are also used to hedge against currency risks arising in connection with internal financing.

The nominal values of pending forward foreign exchange contracts amounted to € 207.4 million as of 31 December 2006, of which € 167.9 million was in USD. The nominal values of pending option transactions amounted to € 50.1 million of which € 50.1 million was in USD.

Non-current A-tranche B-tranche C-tranche Second Lien Financing fees A-, B-, C-tranche Current A-tranche Revolver facility In-licensing facility Fougera bridge PIK Notes High yield bond Other current debt Revolver facility In-licensing facility

Total debt

60

A N N UA L R E P O RT 2 0 0 6

Currency USD USD/EUR USD/EUR EUR EUR -

USD EUR EUR USD EUR EUR EUR

Effective Maturity interest rate 2013 EURIBOR + 2% 2014 EURIBOR + 2.5% 2015 EURIBOR + 3% 2016 EURIBOR + 5.25% -

2007 2007 2007 2007 2007 2007 2007

EURIBOR + 2% EURIBOR + 2% EURIBOR + 2% EURIBOR + 2% 11.75% 11.50% -

31.12.06 € thousand 1,533,014 1,208,100 1,208,100 425,000 -107,460 4,266,754

31.12.05 € thousand -18,402 332,727

80,692 250,000 241,206 551,844 3,864 4,104 8,792 1,140,502

433,579 252,379 3,831 15,000 40,200

5,407,256

1,059,314

N YCO M E D S . C . A . S I CA R N OT E S

18.

Foreign currency and interest rate exposure, continued In accordance with our Senior Facility Agreement, we are committed to hedging a minimum of 50% of our interest rate risk within three months of closing.

We are also committed to fulfilling several restrictions, including testing of the covenants on a quarterly basis.

In connection with this, we have to deliver a compliance certificate to the syndicate.

Long-term bank loans covered by basis and interest rate swaps: Market value at 31 December 2006 NOK interest rate swap, maturity 30 September 2008 EUR interest rate swap, maturity 31 March 2006

NOK currency swap, maturity 30 September 2008

19.

31.12.06 € thousand 1,398 0 1,398

31.12.05 € thousand 450 -181 269

2,670

1,276

Related party transactions Related parties with a significant interest include Group enterprises and associated enterprises, including such enterprises’ supervisory boards, executive boards and executive officers and members of their families. Furthermore, related parties include enterprises and companies in which aforementioned persons have significant interests.

In the periods presented, no transactions with members of the supervisory or executive boards, executive officers, significant shareholders, other than stated in note 17, or other related parties, were undertaken apart from intraGroup transactions, which have been eliminated in the consolidated financial statements.

Affiliates of CSFB also own a controlling interest in BioPartners SA (BioPartners), one of the Group’s significant inlicensing partners with which there are eight in-licensed products currently in phase III clinical trials. However, the agreements with BioPartners were entered into prior to CSFB Private Equity acquiring an interest in the Group.

For the acquired group of ALTANA Pharma AG, the amount for services and goods acquired, and balances due to and due from related parties, mainly related to the toll manufacturing of Bracco ALTANA Pharma GmbH and business transactions with Nycomed companies. The latter have been eliminated in the consolidated balance sheet as of 31 December 2006. The terms and conditions of the agreements are at arm’s length.

In connection with the acquisition of ALTANA Pharma AG, financing of the transaction and refinancing of old debt, an advisory fee to Nordic Capital and a fee to CSFB of € 10 million and € 2 million respectively have been accrued and paid in 2007.

A N N UA L R E P O RT 2 0 0 6

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NYCOMED S.C . A . S I CA R NOTES

20.

21.

Auditors’ fee Audit fees, Ernst & Young Audit fees, other

1,007 14

951 0

Total audit fees

1,021

951

Fees other services, Ernst & Young Total fees other services

1,251 1,251

365 365

Total

2,272

1,316

23,093 98,863 0 3,376 483 1,589

15,805 65,631 58,732 8,579 -2,732 -1,236

127,404

144,779

-412,848 -406,108 -252,068 -6,819 0 25,000 0

0 0 0 -8,182 -52,390 25,000 5,000

-122 -1,052,965

0 -30,572

-90,084 -32,155 -25,728 -147,967

0 -12,937 -18,883 -31,820

Adjustments Depreciations of property, plant and equipment Amortisations of goodwill and other intangibles Inventory step-up Warrants programme Change in provisions Foreign exchange differences

22.

Change in long-term bank debt Repayment PIK Notes Repayment Senior Credit Facility Repayment Senior Notes Ordinary installments, Senior Credit Facilities Repayment Mezzanine loan Drawn under in-licensing facility Drawn under export credit facility Unrealised swap result

23.

Financial expenses paid Interest PIK Notes Interest, Senior Notes Interest, Senior Credit Facilities

62

01.01.06 31.12.06 € thousand

(8 months of operations) 04.01.05 31.12.05 € thousand

A N N UA L R E P O RT 2 0 0 6

N YCO M E D S . C . A . S I CA R S U B S I D I A R I E S I N T H E N YCO M E D G RO U P

The table below contains information on the subsidiaries included in the consolidated ďŹ nancial statements as at 31 December 2006.

Company Nycomed S.C.A. SICAR Nycomed Sweden Holding 1 AB Nycomed Sweden Holding 2 AB Nycomed Germany Holding GmbH Nycomed Holding GmbH Nycomed A/S Nyco Holdings ApS Nyco Denmark ApS Nyco Holdings 2 ApS Nyco Holdings 3 ApS Nycomed Holding ApS ApS KBIL 38 NR 2505 Nycomed Danmark ApS Nettopharma ApS Nycomed Consumer ApS Nycomed Pharma GmbH Nycomed Christiaens B.V. Nycomed Nederland B.V. APIC B.V. Nycomed France SAS Nycomed Christiaens SCA Sandipro Centrapharm Exel Pharma Nyco Holdings Belgium Sprl Nirvana Netherlands Holdings BV Nycomed Belgium Nycomed Beteiligungs GmbH Nycomed Austria GmbH Nycomed AG Nycomed Hellas SA Nycomed East Europe Marketing Service GmbH Chemisch Pharmazeutische Forschungs GmbH Nycomed A/O Nycomed Distribution Center T.O.O Nycomed Siberia B.N.S. Pharma Vertriebs GmbH Nycomed Pharma AS Nycomed AB Nycomed BV Nycomed SEFA AS Nycomed Eesti AS Oy Leiras Finland AB Nycomed UK Limited Nycomed Italia S.r.l.

Nycomed Polska Sp. z.o.o Nycomed Spain SL SC Ruby De Tacos S.R.L Nycomed Czeck Rep. s.r.o

Country Luxembourg Sweden Sweden Germany Austria Denmark Denmark Denmark Denmark Denmark Denmark Denmark Denmark Denmark Denmark Germany Holland Holland Holland France Belgium Belgium Belgium Belgium Belgium Holland Belgium Austria Austria Switzerland Greece Austria Austria Russia Russia Russia Austria Norway Sweden Holland Estonia Estonia Finland UK Italy Poland Spain Romania Czech Rep.

Nominal capital stock (in thousands) EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR DKK EUR DKK DKK DKK EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR CHF EUR EUR EUR RUB RUB RUB EUR NOK SEK EUR EEK EEK EUR GBP EUR PLN EUR RON CZK

16,677 94,715 138 10,000 64,145 99 129 17 81 82 10,084 17 800,000 125 4,000 2,000 13,457 18 16 38 5,578 62 273 62 18 18 62 6,500 7,825 500 2,700 37 37 50 0,1 55 37 79,200 2,000 23 2,200 875 1,322 300 90 50 3 2,500 200,000

Equity interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

A N N UA L R E P O RT 2 0 0 6

63

NYCOMED S.C . A . S I CA R SUBSIDIARIES I N T H E N YCO M E D G RO U P

The table below contains information on the subsidiaries included in the consolidated ďŹ nancial statements as at 31 December 2006.

Company ATP GmbH ALTANA Pharma AG ALTANA Pharma Asset Management GmbH ALTANA Pharma Deutschland GmbH ALTANA Pharma Re Insurance AG Byk Tosse Arzneimittel GmbH Schnetztor-Verlag GmbH Unipharma GmbH Byk Diagnostica GmbH ALTANA Pharma Oranienburg GmbH ALTANA Pharma Netherland B.V. ALTANA Pharma Belgium ALTANA Pharma Austria GmbH ALTANA Pharma Italy S.p.A. ALTANA Pharma France S.A.S. ALTANA Pharma Switzerland AG ALTANA Pharma Portugal Lda. ALTANA Madaus RSA ALTANA Pharma Australia Zydus ALTANA India ALTANA Pharma Private Ltd. ALTANA Pharma Japan KK AP US Specialities ALTANA Pharma Canada Inc. ALTANA Pharma US Inc. ALTANA Pharma ARI ALTANA Pharma Mexico S.A. de C.V. ALTANA Pharma Argentina S.A. ALTANA Pharma Brazil Ltda.

Byk Gulden S.ADE C.V. ALTANA Pharma Spain S.A. ALTANA Pharma Ireland Production ALTANA Pharma UK Ltd. ALTANA Pharma Czech Rep. ZF ALTANA Pharma Poland (Distribution) ZF ALTANA Pharma Poland Sangtec Molecular Diagnostics AB ALTANA Pharma Greece ALTANA Pharma Turkey ALTANA Pharma Romania ALTANA Pharma Service Sp. z.o.o ALTANA Pharma Slovakia s.r.o.

ALTANA Pharma Hungary ALTANA Pharma Croatia d.o.o.

64

A N N UA L R E P O RT 2 0 0 6

Country Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany Holland Belgium Austria Italy France Switzerland Portugal South Africa Australia India India Japan USA Canada USA USA Mexico Argentina Brazil Mexico Spain Ireland UK Czech Rep. Poland Poland Sweden Greece Turkey Romania Poland Slovakia Hungary Croatia

Nominal capital stock (in thousands) EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR CHF EUR ZAR AUD INR INR JPY USD CAD USD USD MXN ARS BRL MXN EUR EUR GBP CZK PLN PLN SEK EUR TRY RON PLN SKK HUF HRK

10,500 70,000 5,625 2,000 7,500 30 30 30 1,050 7,700 4,600 250 600 1,500 920 250 249 1,400 451 200,000 333,917 20,000 4,000 6,000 12,572 0 1,741 1,267 23,826 1,000 1,214 500 500 1,000 26,854 164,479 100 18 15 4 50 250 3,000 20

Equity interest 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 50% 100% 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

DEFINITIONS OF KEY FIGURES A N D F I N A N C I A L R AT I O S EBITDA

=

Earnings before interest, tax, depreciation and amortisation

Adjusted EBITDA

=

EBITDA adjusted for inventory step-up values as a result of purchase accounting, restructuring and integration expenses and project costs regarding abandoned acquisition (the latter relevant for 2002) and the effect from the warrants programme

Gross profit margin

=

Gross profit × 100/Total net turnover

EBITDA margin

=

EBITDA × 100/Total net turnover

Adjusted EBITDA margin

=

Adjusted EBITDA × 100/Total net turnover

Published by Nycomed S.C.A. SICAR Concept and design Bysted A/S Text by Eye for Image ApS Print PE Offset A/S

CO N T E N T S

2 3 4 12 14 16 22

D E F I N I T IONS OF KEY FIGURES A N D F I NANCIAL RATIOS EBITDA

=

Earnings before interest, tax, depreciation and amortisation

Adjusted EBITDA

=

EBITDA adjusted for inventory step-up values as a result of purchase accounting, restructuring and integration expenses and project costs regarding abandoned acquisition (the latter relevant for 2002) and the effect from the warrants programme

Gross profit margin

=

Gross profit × 100/Total net turnover

EBITDA margin

=

EBITDA × 100/Total net turnover

Adjusted EBITDA margin

=

Adjusted EBITDA × 100/Total net turnover

NYCOMED S.C.A. SICAR 8-10 RUE MATTHIAS HARDT 1717 LUXEMBOURG www.nycomed.com

Annual Report 2006 Nycomed S.C.A. SICAR

COMPANY PROFILE LET TER FROM THE CEO FINANCIAL SUMMARY KEY PRODUCTS PIPELINE CORPORATE GOVERNANCE FINANCIAL STATEMENTS