Annual Report 2010 MEDICULT MEDIA
HUM AGEN PIPE TS
MIDATL ANTIC DE V ICES
Origio Annual Report 2010 Highlights 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cover
B
Key Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cover C Letter from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 6 Management Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 8 Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 11 R&D Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 14 ORIGIO Prepares for the Next Generation of Culture Media . . . . . . . . . . . . . page 18 Financial Guidance and Business Milestones 2011 . . . . . . . . . . . . . . . . . . . . . . page 23 New Facilities in Måløv, Copenhagen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 26 Precision Micro Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 27 ORIGIO ScanLab Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 28 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 30 ORIGIO AUSTRALASIA Pty. Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 35 Control and Risk Management Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 36 Corporate Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 37 Company Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 38 Shareholder Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 41 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 42 Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 44 ORIGIO’s Recent Journey – a Corporate Transformation . . . . . . . . . . . . . . . . page 46 Product Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 48 Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 49 Statement by the Board of Directors and Executive Board . . . . . . . . . . . . . . . page 79 Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 80 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 82 Obituary, Professor Kjell Bertheussen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 82
Vision:
Mission:
To make the #1 dream of every infertile couple come true
We deliver leading, innovative ART solutions to the benefit of families
ORIGIO Around the World
Letter from the CEO Dear customers, colleagues and shareholders, Over thirty years have passed since Professor Robert Edwards developed human in vitro fertilization (IVF) therapy. In 2010, he was awarded the Nobel Prize for his pioneering work that made it possible to treat infertility. Assisted Reproductive Technology (ART) has created hope for millions of infertile couples throughout the world to make
• the patient wins due to a more gentle and cost-effective fertility process,
their ‘#1 dream come true’, and a cumulative total of
• the IVF clinics win, as they can provide improved
more than 4 million babies have been conceived via
treatment options and, in that way, potentially
ART since 1978.
also attract more patients to their clinics, • the society at large wins by welcoming more new
The ART market has progressed tremendously since the inception three decades ago, but it is still
world citizens at a lower cost per baby, • and ultimately, ORIGIO wins by being able to
a young and hugely underpenetrated market. At
execute on its vision – to help infertile couples
the same time, several mega-trends support the
around the world make their #1 dream come true
continued development and growth of the ART
– while launching a financially, highly attractive
market.
product.
ORIGIO wants to be in the forefront of the evolution
Our family
of the ART industry and again in 2010, the ORIGIO
We are very happy to have welcomed more new
team secured substantial progress on key targets.
members into the ORIGIO corporate family during the year;
Our pipeline Most notable was the headline data from the world’s largest fertility culture media study ever. The data substantiated a very interesting product
• the joint venture of ORIGIO ScanLab Equipment a/s securing our customers’ high quality IVF workstations, • the acquisition of Precision Micro Devices, LLC
concept named EmbryoGen® – a superior medium
further strengthening our already excellent value
for the commercially attractive subgroup of patients
proposition for micropipettes for ART,
having had a previous miscarriage. We believe,
• our new Russian and Australian colleagues
by launching a product for this subgroup, we can
allowing us to expand faster in these sizeable IVF
create a rare win-win-win-win situation:
markets,
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ORIGIO offices Worldwide presence
• also, it was my pleasure to welcome a new Chairman of the Board of Directors – Mr. Flemming Pedersen, an experienced healthcare industry insider – while thanking the previous Chairman – Mr. Jens Holst – wholeheartedly for
I would like to take this opportunity to thank, yet
his strong contributions during the past years,
again, my colleagues in ORIGIO globally as well as
• 2010 was also the year during which ORIGIO’s
our many distribution partners around the world for
new media manufacturing facility and corporate
their strong contributions to our sustained growth
headquarters in Måløv, Denmark was completed
and development; our customers for their continued
ensuring adequate space for a continued
support and inspiration to further innovation; and
expansion in the years to come.
our shareholders for their loyalty and patience towards our cause and corporation.
It was with great sadness that we learned of the passing of Professor Kjell Bertheussen on February
Our mission is as motivating to us all, as it ever was.
14, 2011. Professor Bertheussen was one of the
We are confident that we – yet again – during 2011
founders of ORIGIO and his deep insight into
will pursue an exciting path of continued progress
biochemistry and cell biology has been of great
for the benefit of all stakeholders.
value to ORIGIO. Our financials Last but not least, ORIGIO secured attractive progress on the key financial guiding parameters of organic growth, EBITDA development, and operating cash flow. In conclusion, I find that 2010 was a very exciting year
Yours sincerely,
for the ART industry and ORIGIO, and that we, once
Jesper Funding Andersen
again, proved to live out our corporate values of being
CEO, ORIGIO a/s
aspirational, reliable and caring at the same time. 5
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Management Report Introduction
• Increased wealth creation. In developing
ORIGIO is a leader in delivering leading innovative
countries like Brazil, Russia, India and China,
ART solutions that benefit families. Through
increased wealth leads to a growing middle-
innovation and product advancement, we aim to
classes making ART affordable for more couples.
help the #1 dream of every infertile couple come true. ORIGIO currently consists of three product
• Maternal age. The average age for a mother
families; MediCult Media, Humagen Pipets and
at first birth has increased over the last several
MidAtlantic Devices, that cater for the broadest
decades. This is a consequence of societal
range of products – from disposables to equipment
changes, as more women are in the workforce
– for global ART professionals.
and many are waiting to further their career and secure their financial position before
Our market
having children. This does not correlate well
It is estimated that one in six couples world-wide
with the biological fact that women’s fertility
experience some kind of infertility problem at
decreases with age, with a significant drop in
least once during their reproductive lifespan.
their early thirties, as the quality of women’s
Approximately one third of infertility cases is female
eggs decreases. Developing technologies, such
factor related infertility, one third is male factor, and
as cryopreservation for the storage of gametes,
the remaining third involves problems on either side
embryos and blastocysts, can extend the natural
or unexplained causes.
fertility period, as it is the age of the eggs – not the age the of the mother – which is relevant for a
The development of ART has progressed
successful reproduction.
significantly over the last three decades. Today, the global ART market is estimated to be around
• Obesity and other health related problems.
1.4 million cycles per year, and more than 300,000
The rise of health problems like obesity (chart
babies were conceived from ART in 2010. The
2), eating disorders and diabetes world-wide
ART market has experienced steady growth but
impacts the reproduction capacity negatively.
with big variations from country to country due to
This together with e.g. Chlamydia, gonococcal,
e.g. infrastructure and reimbursement levels. A
and other diseases have negative consequences
number of mega-trends support the growth and the
for fertility rates.
continued development of the ART industry in the years to come:
• Lower sperm quality. There has been a genuine decline in semen quality over the past 50 years.
• The reproduction challenge. Many developed
As male fertility is to some extent correlated
countries face a “reproductive challenge” (see
with sperm count, the results reflect an overall
chart 1), as the number of children being born is
reduction in male fertility. Male infertility is
not sufficient to sustain the population. In order
believed to be on the rise due to among other
to maintain the current population, an average
things increased environmental contamination.
of 2.1 children must be born per female. ORIGIO
ART can help couples facing this problem by
believes that this population deficit brings
either sperm treatment or full ICSI cycles.
attention to the need for fertility treatment and that it thus will play an increasingly important role in the stabilization and demographic management of a country’s population.
Chart 1: Total fertility rate in Top 20 economies (GDP). Average number of children born by women in the reproductive age span (age 15-49) 3,0 2,5
Demographic Balance = 2.1 2,0 1,5 1,0 0,5 0,0 Japan
Korea, South
Italy
Russia
Germany
Switzerland
Spain
China
Canada
Belgium
Netherlands
Australia
United Kingdom
France
United States
Turkey
Brazil
Indonesia
Mexico
India
Source: CIA World Fact Book, 2010 estimate
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Due to the abovementioned economic, sociological
• Broadening of motherhood. Many countries are experiencing an increasing acceptance of a
and medical reasons, ORIGIO believes that the
broadening of motherhood from the traditional
underlying need for ART will increase in the future.
heterosexual couples to other types of potential
In addition, the global ART market is massively
parents (single mothers, donors, surrogacy,
underpenetrated (please refer to page 20-21),
homosexuals, etc.). The use of ART can make this
supporting the fact that this market is poised for
happen.
attractive growth in years to come.
Chart 2: Obesity* across G-20 economies (excluding EU) % of population
Japan India Indonesia China France South Korea Italy Russia Brazil Turkey South Africa Germany UK Canada Australia Saudi Arabia Mexico Argentina USA 0
10
* Body Mass Index of at least 30 kg/m2 Source: Financial Times, September 2010
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30
40
50
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Sales and Marketing Revenue for 2010 totaled DKK 308.0 million,
equipment sales was driven by the mini incubator
corresponding to an increase of 16% in floating
ORIGIO/Planer BT37, equipment sales in North
currencies. Overall organic growth for the group
America, as well as a heads-up start for the new
amounted to 12% in constant currencies. Sales of
joint venture, ORIGIO ScanLab Equipment, which
disposables amounted to DKK 261.0 million and
specializes in sales of equipment for IVF laboratories
now represents 85% of the total revenue. The
world-wide.
sales of disposables achieved organic growth of 8% in 2010, particularly as a result of selling direct
The strongest geographical growth in 2010 was
in more markets, a successful introduction of the
seen outside Europe and Americas with organic
CryopetteŽ, and better cross-selling of ORIGIO’s
growth of 22%. In Europe, revenue was up by 13% in
products in general. In 2010, revenue within
constant currencies and now represents 51% of total
equipment increased by 43% in constant currencies
revenue. In the Americas, organic growth amounted
and totaled DKK 47.0 million. The high growth in
to 7%, mainly driven by high equipment sales.
Product split of revenue DKK million
Revenue 2009
Revenue 2010
Revenue growth
Organic growth*
Disposables
237.7
261.0
10%
8%
Equipment
28.0
47.0
68%
43%
265.7
308.0
16%
12%
Revenue 2009
Revenue 2010
Revenue growth
Organic growth*
142.5
156.4
10%
13%
Total *Constant currency
Geographical split of revenue DKK million Europe Americas
78.6
87.1
11%
7%
Rest of World
44.6
64.5
45%
22%
265.7
308.0
16%
12%
Total *Constant currency
Chart 3: Geographical and product sales mix Sales by Region 2010
Sales by Product Groups 2010
15%
21% Europe 51%
51%
IVF pipets 38%
38%
9%
Americas 28%
IVF other disposables 9%
Rest of World 21%
28%
IVF media 38%
IVF equipment 15%
38%
9
A number of organizational initiatives were taken
Canada. As part of the US integration, the two US
during 2010 to further strengthen the sales and
entities were legally merged and are now operating
marketing organization.
on the same software platform. The merger enables an enhanced ability to leverage resources and
To broaden the already strong footprint in terms
product synergies and thereby strengthen the
of sales subsidiaries and distributor networks
Group’s leading position in the US.
around the world, ORIGIO LLC was established in St. Petersburg, Russia. The company successfully
The strengthening of the sales and marketing
initiated its operation during the third quarter of
organization world-wide furthermore included the
2010. ORIGIO LLC is owned 51% by ORIGIO and
recruitment of an International Technical Product
49% by AVA-Peter Ltd. – a leading medical supply
Director for equipment support and a new General
company in Russia and ORIGIO’s long-term partner
Manager for the Nordic & Baltic regions. Extra
in Russia.
resources were also added to the sales teams in China and Italy to better support the customers.
In Australia and New Zealand, ORIGIO started direct sales of all product categories July 1, 2010
Finally, ORIGIO ScanLab Equipment a/s, was
(please refer to page 35). To manage the full scale
established as a joint venture on July 1, 2010
roll-out of ORIGIO’s products, a new General
with the objective of selling work stations for IVF
Manager was hired. Also in July, ORIGIO began
laboratories world-wide (please refer to page 28).
direct sales to customers in Finland. In the US, the ORIGIO sales force was expanded in April 2010 to take over direct sales to customers in
A new corporate website was launched in June 2010. The website embraces all three brands and has detailed information about the products and services that ORIGIO offers. Furthermore, new functionalities like online ordering and order tracking are in development.
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ORIGIO also presented a new Product Catalogue during 2010 containing all three brands: MediCult Media, Humagen Pipets and MidAtlantic Devices.
Trade Exhibitions At the annual European Society of Human Reproduction and Embryology (ESHRE) exhibition 2010 in Rome, ORIGIO was represented with two exhibition stands, split into the traditional ORIGIO brands and ORIGIO ScanLab Equipment. The Cryopette® was presented at two live demonstration desks, which attracted several hundreds of embryologists. Also the bench top Incubator “ORIGIO/Planer BT37” was demonstrated at ESHRE for the first time – with great interest from many potential customers. The 2010 American Society for Reproductive Medicine (ASRM) annual conference was held in Denver, Colorado, October 24-27, with approximately 5,000 participants. Based on numerous comments from customers, management believes that the ORIGIO brand is an increasingly recognized and acknowledged brand as the company of choice in relation to ART needs.
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R&D Pipeline Emerging technologies
IGF-II
The ORIGIO Group possesses a world-leading
The research activities on IGF-II, conducted at the
pipeline of R&D projects within ART and the related
University of Adelaide, Australia, have shown that
stem cell field (please see chart 4).
treatment of embryos with a combination of three components, added to ORIGIO’s EmbryoAssist™
GM-CSF / EmbryoGen®
and BlastAssist ® IVF media improves embryo
In December, 2010, ORIGIO completed the
development of murine embryos at day 5 and
world’s largest clinical study of IVF culture media,
implantation rates at day 8 compared to controls.
“The effect of granulocyte-macrophage colony-
In 2010, the research group demonstrated that
stimulating factor (GM-CSF) during in vitro culture
embryo culture in media supplemented with
of human embryos on subsequent implantation
the combination of insulin-like growth factor-II
rates”. The study included 1,332 patients and was
(IGF‑II), urokinase plasminogen activator (uPA)
designed as a multi-center, randomized, parallel
and plasminogen significantly increased the
group, double-blinded, placebo-controlled,
percentage of murine mothers pregnant at day 18
efficacy trial of a culture medium (EmbryoAssist™)
by 27.8% compared to controls. The treatment had
containing GM-CSF.
no adverse effects on maternal body composition, birth weight or postnatal growth.
Exposure to GM-CSF showed a statistical significant improvement of the ongoing implantation rate in
ORIGIO holds exclusive world-wide rights to any
the commercially attractive subgroup comprising
product concept emanating from the results.
women who have previously experienced miscarriage, either naturally or in relation to an IVF
Iloprost
cycle. The study documented that exposure to
The first part of the safety and efficacy study on
GM-CSF increased the overall ongoing implantation
the effect of the prostacyclin analogue, Iloprost,
rate for this subgroup by 44.1% (p = 0.001) in week
was completed successfully in March 2010. This
7 and by 40.6% in week 12 (p = 0.003) compared
study has proven that the addition of Iloprost
to the control group. This improvement correlates
to Blastocyst culture medium is safe as
well with the scientific hypothesis that GM-CSF
evaluated on embryo development.
positively influences the embryo implantation The second part of the study will,
potential.
on a preliminary basis, investigate ORIGIO plans to start the launch of the new culture
the efficacy of Iloprost on
medium during the third quarter of 2011. The
implantation rates. This part
product will be launched under the product name
will include approximately
EmbryoGen (for further details please refer to
100 patients and is
pages 18-19).
expected to be
®
completed by the third The patentability of the use of GM-CSF in IVF media
quarter of 2011.
within the EU has been opposed by a UK based company. On October 20, 2010, oral proceedings
The study is an
took place at the European Patent Office in Munich
investigator initiated
and the result was that the patent integrity for
study taking place in
human use of GM-CSF in IVF media was upheld.
Houston, USA. ORIGIO
ORIGIO thereby maintains its strong intellectual
has world-wide rights to the patent
property rights position for the use of IVF medium
that comprises the application of Iloprost added
enriched with GM-CSF for human use world-wide.
to media for ART.
The opposition has appealed the decision.
Our products facilitate human birth every 5 minutes somewhere around the world
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EmbryoSure™
and survival rates, in comparison to the existing
There is a growing trend within ART towards single
practice of growing embryos in a conventional
embryo transfer rather than transfer of multiple
culture dish. Data from the study showed that
embryos in order to reduce the risk of adverse
Incept’s SMART Start™ Embryo Culture System
effects on mother and child. Today, the selection of
met the primary endpoint of non-inferiority to the
embryos is based entirely on visual/morphological
conventional static dish culture.
scoring of the embryos. For single embryo transfer to replace multiple transfers world-wide,
ORIGIO plans to perform internal studies on bovine
an improved selection of the best embryo(s) by
embryos prior to initiating a second phase human
objective measures is required to achieve similar or
clinical study.
higher success rates. Stem cell media In Q1, 2009, ORIGIO signed a definitive agreement
ORIGIO has developed a superior well defined
with Novocellus Ltd. (Guildford, UK) to license
growth media for the culture of adult stem cells and
the non-invasive embryo selection technology,
embryonic stem cells. The patented SSRx media
EmbryoSure™, developed by Professor Henry Leese
supplement is free of any human or animal derived
at the University of York, UK. The technology is
components and is broadly applicable to other
based on amino acid profiling and is fully patented.
stem cell lines or bio-industrial lines. The ORIGIO technology has shown increased mesenchymal stem
As part of the agreement, ORIGIO will co-fund
cell growth by 50% compared to serum-free control
a human study program. The purpose of the
media without SSRx.
clinical program is to investigate the extent to which EmbryoSure™ is superior to current visual
Based on input from potential partners and to
techniques in selecting the most implantation
enable the optimal commercialization path of the
competent embryos. The clinical program will imply
concepts in this area, ORIGIO has in 2010 worked on
an exploratory phase followed by a prospective
three activities in parallel:
efficacy phase. The exploratory phase is to determine the algorithm for the selection of the embryos and is expected to take place in 4-6 clinics and involve 400 patients. Results are expected in the fourth quarter of 2011.
1. continued to develop and document the performance of the media concepts 2. performed media tests in collaboration with potential customers 3. continued progress on regulatory compliance of
By gaining access to this leading-edge technology,
the components
ORIGIO positions itself at the forefront of the emerging trend of single embryo transfer in ART.
Performance tests of human Embryonic Stem Cells (hESC) cultured with SSRx have shown promising
Incept BioSystems, Inc.
results. Furthermore, in-house studies have proved
In January 2011, ORIGIO completed an asset
that SSRx performs well in long-term tests and that
acquisition of the US-based Incept BioSystems,
stability is favorable for commercialization.
Inc. (Incept). Incept has developed an innovative and patented microfluidics system ‘SMART Start™‘
Material transfer agreements have been signed
that mimics in vivo conditions and thereby delivers
with potential partners in order for them to make
unique control and physiologic conditions ideal for
their own performance tests and thereby validate
embryo culture in the assisted reproduction lab.
ORIGIO’s results. These external tests are expected
Incept concluded an investigational human study
to run during the first half of 2011.
evaluating the SMART Start™ system in October 2010. The study assessed the system’s capacity to
The business potential (size of market, price point
safely support morphological embryo development
and speed of adoption) is dependent on the
outcome of the external performance tests as well
During 2010, ORIGIO obtained several new product
as the final conclusion on regulatory compliant
approvals. In EU, the following products were CE
components and performance tests hereof. Timing
marked:
of a potential product launch or partner agreement
• Cryopette®
will be decided shortly after the final results are
• ICSI Cumulase®
available (expected Q2 2011).
• MediCult Vitrification Cooling and Warming • Embryo Thawing Pack
Regulatory update 2010
• Biopsy Medium
IVF media and related disposables are classified as medical devices. Regulations on IVF products
In the US, the following products have been cleared:
continue to intensify and regulatory requirements
• Cryopette®
will further increase world-wide.
• MediCult Vitrification Cooling and Warming
In 2009, the name of the new company group
In Australia, the following product was registered:
comprising the previous MediCult, Humagen
• Cryopette®
Fertility Diagnostics and Mid-Atlantic Diagnostics was changed to ORIGIO. The name change
In China, regulatory demands are particularly strict.
required a re-registration of the product portfolio
ORIGIO is in the process of registering its media
in more than 50 countries world-wide. Furthermore,
range in this growth market. So far, the product test
ORIGIO moved to a new facility in Denmark and
standards are in preparation and meetings with the
changed the content of antibiotics in all media
Chinese authorities (SFDA) have taken place during
to gentamicin. All changes required a substantial
the second half of 2010. The regulation process is
additional regulatory effort from Regulatory Affairs
expected to last more than two years.
which continued in 2010.
Chart 4 R&D Pipeline
Product Probability of success
Research
Development
Preclinical
Human safety
0 - 10%
10 - 20%
Human efficacy Without transfer
With transfer
Regulatory
20 - 40%
40 - 80%*
80 - 100%
IVF media
EmbryoGen®
Q3 2011
Iloprost**
Q3 2011
Embryo selection
EmbryoSure™*
Microfluidics
SMART Start™
Stem cell medium
Stem cells
IVF
IGF-II
Stem cells
Q4 2011
Q4 2011
Different development path
Next milestone
Sequential launch
Est. revenue potential*** DKK mill/year
100+
Pilot impl data
0 - 100+
Update in April 2011
0 - 350+
Exploratory data
0 - 350+
Bovine test
0 - 200+
Agreement
0 - significant
* Probability at this stage estimated at 20-40% for EmbryoSure due to other uncertainties related to clinical use ** Timeline uncertain due to investigator initiated study. Probability at this stage estimated at 20-40% *** Revenue potentials may not be additive for IVF media projects
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ORIGIO Prepares for the Next Generation of Culture Media 2011 will be the year during which ORIGIO’s largest
cell death), slower compaction and expansion, and
media development investment, the GM-CSF
ultimately lower birth weight. GM-CSF has been
medium, moves from pipeline to product. Project
shown to alleviate most of these problems bringing
P-0022 becomes EmbryoGen , a new option for
IVF embryos closer to naturally conceived embryos.
couples who experience the greatest challenges in
The embryo is evolved to respond to growth factors
achieving and maintaining pregnancy.
such as GM-CSF, and its development is clearly
®
impaired when such factors are not present during The idea behind GM-CSF
early development.
Granulocyte-Macrophage Colony-Stimulating Factor was first known to control white blood cell
The trial
growth in the body, and thus its nomenclature. The
In December 2010, the results from the world’s
name of the molecule has no direct connection to
largest IVF media trial were announced. More than
embryology.
1,300 patients in 14 centers received IVF treatment with either a standard IVF medium or a medium
Since then, several other roles of GM-CSF have
supplemented with GM-CSF. The study end-point
been discovered in the human body. It is present
was Ongoing Implantation Rate, i.e. fetal heart beat
throughout the reproductive tract, and specific
monitored in week 7 of gestation, followed by a
GM-CSF receptors are expressed by the embryo.
follow-up monitoring in week 12.
Several studies have subsequently shown a powerful positive effect on IVF embryos, both animal and
For the entire patient mix, the effect of
human.
EmbryoGen® did not reach statistical significance by week 7; but further data exploration revealed a
IVF embryos are still inferior to their in vivo
striking effect:
counterparts showing lower cell numbers and cleavage rates, higher apoptosis (i.e. programmed
EmbryoGen® beneficiaries The group of patients who had suffered previous
Chart 5: Ongoing implantation rate* in the
miscarriages experienced a highly significant
subgroup ’previous miscarriage’
benefit from EmbryoGen®. At week 7 and 12, these patients were 44.1% and 40.6% more likely to have maintained an implanted embryo. The study demonstrated that access to GM-CSF strongly improves the embryo implantation capacity in women who struggle to maintain ongoing implantation and pregnancy. These patients, who must endure repeated IVF attempts and whom IVF centers struggle to assist, now have an improved treatment option. Improving success rates in this group of patients means raising the baseline of IVF capabilities.
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EmbryoGen® market potential
ORIGIO is committed to advancing IVF treatment.
At the moment, the primary target group for
The growth factor-enriched EmbryoGen® is a bold
EmbryoGen® is assessed to be at least 200,000
step towards helping women who are capable of
cycles per year. Clinics offering i.e. multiple
pregnancy and healthy childbirth, but for whom
treatment “packages” will see a substantial financial
both natural conception and even standard IVF is
benefit (and professional satisfaction) in improving
not quite enough. Perfectly in line with ORIGIO’s
success rates in this group. And clinics under
vision and mission.
M I DAT L A N T I C DEVICES
reimbursement will see the cost of securing live birth from this group decrease substantially. Having
Pending regulatory approvals, EmbryoGen® is
secured world-wide exclusive rights for the use of
expected to be available in most jurisdictions as
GM-CSF in human ART media, EmbryoGen® poses
from Q3 2011.
a very attractive prospect for commercial value.
A Win - Win - Win - Win Situation Society
Patient
• Help intertile couples
• Quality of life (less cycles)
• Less costs per IVF baby
• Less cost
ORIGIO
Clinic
• Executing on ORIGIO’s vision • Increased revenue/profit
• Better treatment • Increased patient intake
• Increased scientfic voice
17
Size of world population
Percentage being women age 15-44
6.9 billion x
23% 1.6 bn
Women desiring pregnancy during reproductive age span (estimate)
x
75% 1.2 bn
Share of related infertile couples (1 of 6) or women with no partner (estimate)
x
17% 200 mill
Global IVF – a massively underpenetrated market
Share of these for which IVF/ICSI would be optimal treatment option (estimate)
x
15% - 30% 30 - 60 mill
x
Number of treatment cycles needed for life birth (average)
Estimated global medical need for IVF. Number of IVF/ICSI cycles
3-4
= 90 - 240 mill
• Infrastructure – the infrastructure of capable IVF clinics is in many countries insufficient to meet demand and develop the market. New clinics are
WHO has defined both male and female infertility
opening at increased speed in many developing
as diseases. The equation above estimates the
countries but it will take a long time before the
world-wide medical need for treatment of these
global infrastructure is fully developed to meet
diseases to correspond to 90-240 million IVF/ICSI
the medical need.
cycles. • Investment – IVF treatment is costly – and in Why then is the actual annual number of treatment
most countries around the world patients have
cycles only some 1.4 million per year leading to a
to pay all or the majority of the treatment costs
penetration of only some 1% of the medical need?
themselves. This severely limits current treatment
There are many reasons for this but on top of the list
levels. Naturally, ongoing wealth creation in
presides the following four ‘I’s:
developing countries as well as potential for increased reimbursement in countries where
• Information – the fact that knowledge about
governments have demographic imbalances
treatment options and outcome in many parts of
(i.e. too low fertility rates) or for other reasons
the world are insufficiently prevalent. Education
decide to offer public funds for treating this
of patient groups is growing but is still a vast
medical need, will over time alleviate this
challenge in most jurisdictions.
obstacle. Several socio-economic calculations
M ED I C U LT M ED I A
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Chart 6: Global medical need for IVF versus current penetration
1%
Global medical need for IVF (100% = 90-240 million cycles) Annual current penetration (1.4 million cycles)
99%
Source: ORIGIO estimate based on Demographic and Health Surveys (DHS) Comparative reports No. 9: ”Infecundity, infertility, and childlessness in developing countries” by ORC Macro and the World Health Organization (2004)
show that ART treatment clearly adds value to
It is a fact that the global IVF market is still
the society, also from an economic perspective,
underpenetrated (although the exact levels
as the lifetime societal benefits outweigh the
of under-penetration can always be debated)
costs of an ART baby – this calculation supports a
and will be so for many years ahead. ORIGIO is
reimbursement policy from the government (see
grateful to serve a market with a clear medical
page 37 for details).
need and massive room for improvement in terms of penetration levels and does believe
• Innovation – improving treatment efficacy and
that penetration will increase going forward. The
gentleness via innovation will also improve
company does not anticipate a decrease of the
penetration, as more patients will seek the IVF
underlying infertility prevalence or that any good
treatment option, if success rates are higher and
alternative to IVF treatment will surface in the near
the overall treatment less stressful for the patient.
future. From a penetration perspective, it is also worth noting that just 30 years ago only around
While ORIGIO will do its part in relation to the last
200 IVF cycles were performed globally. It truly is
mentioned ‘I’ above (Innovation – please refer to
a young market in which ORIGIO is operating, and
‘R&D Pipeline’ on page 14), the company does
the company feels that there is an ever-increasing
anticipate other stakeholders to work gradually more
demand for fertility treatments which will support
on the other ‘I’s in the years to come.
the growth for many years to come.
19
Profit and loss 2010
Net financial expenses increased from a net of
Revenue for 2010 totaled DKK 308.0 million,
partly due to the increased debt associated with
corresponding to an increase of 16% in floating
the new manufacturing and headquarters building.
currencies and 12% organic growth, on a constant
Impairment test of investments has resultated
DKK 9.1 million in 2009 to DKK 18.2 million in 2010
currency basis.
in a write-down of DKK 6.8 million of ORIGIO’s initial investments from 2005/2008 in Incept
The gross margin was 59.4% in 2010, which was
BioSystems, Inc. The write-down is due to the fact
slightly higher than in 2009. In 2010, EBITDA before
that ORIGIO in January 2011 purchased assets
special items increased by 21% to DKK 43.8 million
from Incept BioSystems Inc. at a price of which the
bringing the EBITDA-margin before special items
corresponding part is substantially lower than the
to 14.2% of revenue. The increase in EBITDA before
acquisition cost of ORIGIO’s 10% shareholding in
special items is a result of higher revenue combined
Incept BioSystems, Inc. The amount is included
with effective cost management.
under financial expenses.
Depreciation in 2010 was DKK 7.1 million. The
Corporate tax for 2010 was DKK 6.3 million
increase of DKK 3.0 million compared to 2009 is
compared to DKK 5.5 million in 2009.
related to depreciation of the newly constructed media manufacturing and headquarters building in
Net loss was DKK -10.0 million in 2010 compared
Denmark. Amortizations of DKK 8.9 million is DKK
to a profit of DKK 1.4 million in 2009. The decrease
2.0 million lower than the previous year. A significant
in net profit is due to the negative effect of special
part of the amortizations relates to the acquisitions
items of DKK -13.2 million and write-down of the
of the US business in 2007 and 2008, and the
investment in Incept BioSystems Inc.
majority of the intangible assets were amortized within the first three years.
Cash flow It has been decided to state a number of items separately (special items) in the income statement
Cash flow from operating activities
to give a more transparent view of the ORIGIO
Cash flow from operating activities increased from
group’s ongoing operating profit/(loss). Special
DKK 25.6 million in 2009 to DKK 27.5 million in 2010.
items amounted to DKK -13.2 million in 2010.
Cash management is a discipline within ORIGIO that
Of this DKK 5.7 million relates to ORIGIO’s old
has received increased focus during the past couple
headquarters in Jyllinge as management has
of years. This focus will continue, as management
assessed the net selling price and decided to
acknowledge the importance of cash management
write the book value down. Furthermore, special
supporting the continued growth of the company.
items include DKK 6.7 million as write-down of the former automation project following the acquisition in Q2 2010 of the new state-of-the-art
Balance sheet
manufacturing technology for micropipettes (PMD). ORIGIO succeeded to establish a joint venture
Assets
in Russia in 2010, ORIGIO LLC. The associated
Total assets increased from DKK 478.8 million at
expenses amounted to DKK 0.8 million and are
the end of 2009 to DKK 529.9 million at the end of
also included under special items. Special items in
2010, predominantly due to the completion of the
2009 amounted to a total of DKK -5.1 million, which
building project in Denmark. Total capitalization of
relates to the VitroLife/Merck offer process and
the new building amounted to DKK 161 million.
corporate re-branding project.
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Liabilities
Denmark of 25%, this asset represents a potential
Total liabilities increased from DKK 300.3 million at
future (not discounted) value of DKK 19 million at
the end of 2009 to DKK 337.0 million at the end of
current taxation rates. Of this, DKK 15 million is
2010. Net equity increased from DKK 178.5 million
recognized as an asset. ORIGIO has accumulated
at the end of 2009 to DKK 192.9 million at the end of
negative taxable income in its subsidiaries with a
2010 generating a 2010 year-end equity ratio of 36%.
potential tax value of DKK 9 million of which only DKK 4 million is recognized as assets.
Net Interest Bearing Debt (NIBD) as at December 31, 2010 was DKK 233.2 million. ORIGIO believes
Own shares
it has sufficient capital reserves to run its daily
ORIGIO currently holds a total of 213,824 of its
business as well as execute on its pipeline projects.
own shares. In June, 2010, 25,240 shares were used in
A clear strategy has been defined to reduce NIBD
connection with the closing of the PMD acquisition,
by consistently growing EBITDA and ensuring that
and in November, 2010, 35,680 shares were
EBITDA is converted into free cash flow by focused
transferred in connection with the deferred payment
cash management.
to the sellers of Mid-Atlantic Diagnostics, Inc.
Tax assets
The shareholders
ORIGIO a/s has accumulated significant negative taxable income. This negative income represents
ORIGIO aims to increase its shareholder value in
an asset, as it will reduce taxes to be paid on future
order to make the company an attractive long-
earnings. The accumulated negative taxable income
term investment. The company strives to provide
to be carried forward in Denmark amounted to
open and trustworthy information to shareholders,
DKK 74 million in 2010. With a corporate tax rate in
other investors, analysts, the press, and other
Financial Guidance and Business Milestones 2011 Ensuring profitable growth, while furthering ambitions to develop superior products within ART and stem cells, continues to be the key objective for ORIGIO in 2011. ORIGIO will strive to ensure a balance between shortterm progress in EBITDA investment in an industry leading product portfolio and R&D pipeline, and a powerful organization capable of realizing its long-term objectives and vision.
Financial Milestones
Business Milestones
• Revenue of DKK 330-340 million including organic
• Launch of EmbryoGen® in Europe, the Middle East,
growth of ~7-10% (constant currencies), excluding revenue from EmbryoGen® • EBITDA percentage of 13-15%, excluding EmbryoGen® launch effect and related costs • Capital expenditures (capex) of DKK 10-15 million • Operating cash flow above DKK 25 million
Asia and South America (Q3 2011) • Consolidate US manufacturing of disposables at one site (Q2 2011) • Full implementation of PMD workstations for ICSI pipettes (Q3 2011) • EmbryoSure: interim exploratory data (Q4 2011) • Microfluidics: completion of bovine test (Q4 2011) • Stem cells: partnering agreement (Q2 2011)
Note: Guidance is based on a USD/DKK rate (average) of 5.35 for 2011 21
stakeholders and thereby give the best possible
• The global economic climate. Although the
basis for assessing the company’s activities,
general economic climate in the world economy
potential, and risk elements. ORIGIO endeavors to
does impact ORIGIO, management is of the
increase the proportion of institutional investors
opinion that ORIGIO is relatively less exposed
amongst its shareholders to further increase the
to general economic conditions than many
robustness of its shareholder structure.
other industries. However, in markets with limited reimbursement there will be a short-term
ORIGIO’s shares are listed on the Oslo Stock
negative impact, as IVF treatment is expensive.
Exchange. At the end of 2010, ORIGIO had more than 29.0 million shares outstanding. The share
• Radical innovation from competition. There
price as at December 31, 2010 was NOK 15.2,
is always a risk that radical innovation from
equivalent to a 25% increase during 2010. The
competition could circumvent a company’s
market capitalization at the end of 2010 was NOK
products or make its segments less valuable.
441 million.
However, ORIGIO does not foresee any ‘game changing’ innovation from competition or new
In previous years, ORIGIO has offered warrant-
entrants into human IVF in the short to mid-term
based incentive programs to its Executive
future that could render its products or services
Management and other employees, but during
irrelevant. Competition can always emerge with
2010, no warrants were issued. Details of
radical innovation, but ORIGIO believes it is well-
outstanding warrants are provided in the notes
positioned in the ART market.
to the financial statements. Warrants are always offered at exercise prices equaling the share price at
• Competitive pressure. Increasing price
the time of allotment to ensure maximum alignment
competition is always a risk that could impact
of interests between the officers of the company
earnings negatively. This could occur because
and its shareholders.
the buying side increases its bargaining power or because the selling side becomes more
Capital structure
competitive, e.g. some commoditization of the
The ORIGIO Group aims to have an adequate
products over time. ORIGIO believes that, over
capital structure in relation to the underlying
time, the buying side will gain more power, as
operating requirements and R&D projects. In this
clinics will team up in larger entities in certain
way, it is always possible for the Group to provide
markets.
sufficient and the necessary credit and guarantee facilities to support its operations and its long-term growth targets.
• Price competition. Even without ongoing incremental or radical innovation, product ranges will commoditize and be exposed to increased price competition. If the ORIGIO Group is not
Risk management
successful in terms of ongoing incremental and radical innovation, it will be more exposed to
Key risk elements
price competition. ORIGIO’s response to this is,
The ORIGIO business model involves, as any other
at all times, to increase cost-effectiveness within
commercial business model, a number of risk
its processes while pursuing innovation.
factors that potentially could impact its earning power and future business life. The most relevant of
Financial risks
these are commented on below:
Developments in ORIGIO’s results and equity are impacted by a number of financial risks,
Profit and loss risk
including foreign exchange risks, interest rate risks,
A number of factors may impact ORIGIO’s future
liquidity and credit risks. ORIGIO has a centralized
profitability, among these:
management of financial risks in the group’s
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M I DAT L A N T I C DEVICES
finance function. The financial risks are presented
versus the bank – NIBD/EBITDA – by borrowing
and discussed regularly at the Board Meetings.
approximately USD 14.2 million denominated
The strategy has in general been to use the least
in USD. Apart from this, no currency hedge is
complicated type of hedging .
undertaken.
• Exchange rate fluctuations. W ith a substantial turnover in non-DKK based currencies, ORIGIO’s
• Interest rate fluctuations. As can be seen from note 14, ORIGIO’s biggest single loan, the real
income faces a substantial currency risk exposure
estate loan of DKK 100.2 million, is interest-rate
– especially versus the USD and EUR, and to a
hedged with an interest rate swap fixed at 4.97%
smaller extent versus the GBP. While ORIGIO
for 20 years. Details regarding the reminding
does not perceive the EUR as carrying a large
interest-bearing debt can be seen in note 14.
negative risk, there is inherent risk particularly in the USD exposure. However, with a large
The ORIGIO group does not engage in speculative
part of the cost base denominated in USD,
transactions.
the net risk decreases. Rather than hedging EBITDA or balance sheet exposure per se,
Financial risks and financial risk management are
ORIGIO has decided to hedge its key covenant
described in further detail in notes 12, 14 and 15.
23
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New Facilities in Måløv, Copenhagen ORIGIO has moved to brand new facilities in the Copenhagen area in Måløv, Denmark. The new production site meets all the highest quality and clean-room standards required by regulatory authorities, clinics and customers throughout the world. The entire facility has been designed to optimize On July 12, ORIGIO successfully relocated the
material flow and manufacturing processes while
majority of its Danish activities to Måløv. On
supporting interdepartmental cooperation and
November 26, after four months of process
team work.
validation and qualification, the ORIGIO MediCult Media production also relocated to the new state of
ORIGIO MediCult Media comprises mixed, sterile
the art facilities.
filtered media aseptically filled in ISO classified clean rooms. To guarantee the quality of the
We have done our utmost to make sure that the
manufactured media, the clean rooms are divided
only thing customers noticed was the new address
into a number of zones classified from ISO 8
on media bottles. But many changes were made to
to ISO 5, according to a decreasing number of
further improve our reliability in the quality and the
particles. ISO 5 is the cleanest zone and this is
delivery of our media.
where filling is performed.
The first floor of the building is almost completely
Quality Control and Research laboratories are
occupied by the clean rooms’ ventilation system.
designed for maximum performance and flexibility
Running and maintaining a high standard of clean
and include isolator technology for sterility testing,
rooms require very significant investments in
bovine research facilities and specialized facilities
technical installations.
for stem cell media research.
To further improve the robustness of manufacturing, the new facilities incorporate a
The environment also benefits from our new
number of new features:
facilities, as ORIGIO has installed and validated an innovative ventilation system in its clean
• continuous monitoring of critical parameters,
room enabling a significantly reduced energy
• access to manufacturing IT systems at all
consumption compared to traditional technology.
workstations, • further automation of filling to improve reproducibility.
The new facility has been designed to meet the highest standards for aseptic manufacturing. It was designed and constructed by NNE-Pharmaplan
Further to quality improvements, the new facilities
contributing with its vast experience in the design
constitute a significant increase in capacity enabling
and construction of pharmaceutical manufacturing
ORIGIO to service its customers even better.
plants throughout the world.
Precision Micro Devices An acquisition of Precision Micro Devices (PMD) and thereby its operational assets was completed in June, 2010. PMD has developed an automated workstation for the production of quality specialty pipettes and microtools for ART. The new technology enables ORIGIO Humagen Pipets to substantially increase the productivity of the micropipette manufacturing process while further improving ORIGIO Humagen Pipets already leading and consistent quality.
25
ORIGIO ScanLab Equipment ORIGIO ScanLab Equipment a/s was established
the IVF labs; but also because ORIGIO expects that
as a joint venture and is owned 51% by ORIGIO and
advanced equipment will be part of some emerging
49% by LaboGene ApS. The company specializes in
technology concepts in IVF that hold a promise
sales of equipment for IVF laboratories world-wide.
for an increasing baby-take-home rate within the
The joint venture has been operational as from July
coming decade. In preparation for this, ORIGIO
1, 2010 and is located in Måløv, Denmark.
has thus decided to expand its offerings and capabilities in this area of IVF.
LaboGene ApS is a Danish company that specializes in the design, development and manufacture of
With the introduction of the ORIGIO/Planer
laboratory and industrial equipment in the fields
BT37 mini-incubator and now ORIGIO ScanLab
of clean air & laminar flow, vacuum & cooling
Equipment, this is an important starting point
and centrifugation. Prior to the joint venture
enabling the ORIGIO sales organization to handle
establishment, LaboGene had, for many years, been
equipment service and support as well as sales
in close co-operation with ORIGIO MidAtlantic
activities. Sales and technical seminars have
Devices regarding laminar flow cabinets to the
been held in 2010 to educate and develop the
Americas IVF market.
distribution network.
The establishment of this joint venture signals
ORIGIO ScanLab Equipment offers highly
ORIGIO’s desire to become more involved on a
specialized laminar air flow cabinets and
global scale in high quality IVF equipment – both in
centrifuges.
order to be able to supply an even broader range of high-end current products to our customers, i.e.
Centrifuges: ScanFuge is a range of low speed centrifuges of distinction from ORIGIO ScanLab Equipment comprising ideal centrifuge and accessories for IVF applications and protocols from the ScanFuge range: ScanFuge-Mini “The personal Micro –
Centrifuge of Choice”
ScanFuge Midi “Low Speed with Finesse” ScanFuge Maxi “Quality with Class”
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Advantages • considerably reduced noise levels • significantly improved air distribution and prolonged filter life • better balanced and uniform down flow • superior product protection
Laminar Air Flow cabinets
70% being re-circulated and 30% exhausted via an HEPA exhaust filter. The filter is surrounded by an
The Fortuna IVF cabinets & Mars IVF Class 2
area of negative pressure to ensure that no leakages
cabinets utilize a revolutionary new design of digital
can occur around the seals. An activated charcoal
electronically commutated fans with 110 mm deep
filter can also be fitted on the exhaust side of the
HEPA filters. Both cabinets can be customized to
airflow, facilitating the removal of volatile organic
suit the needs and preferences of embryologist, for
compounds from both the work chamber and the
example by installing a microscope or a monitor.
laboratory.
The Mars-IVF Class 2 provides a comfortable
The Fortuna-IVF Class 1 range of cabinets offers
working environment with maximum protection
the ultimate in sample protection, operator comfort
for the operator, the embryo and the laboratory.
and optional fittings to provide the cabinet best
It is built and tested according to the EN 12469
suited for laboratories and laboratory procedures.
Standard. Fortuna-IVF Cabinets – vertical flow laminar with The Mars-IVF Class 2 provides ultimate clean air
turbulent-free air flow gives a clean, sterile work
performance. A unique laminator system ensures
chamber environment with complete protection of
that the down flow is uniform and balanced, thus
the procedures against microbiological intrusion or
ensuring that embryos are well protected by
contamination.
turbulent-free laminar flow, clean air, and with improved anti vibration performance.
Low energy and noise free electronically commutated fans and laminator technology ensure:
The Mars-IVF Class 2 is a dual HEPA filter cabinet
less vibration less heat transmission a turbulent-free
and has a re-circulated air flow configuration with
air flow to the chamber.
27
Corporate Governance The Norwegian Corporate Governance Board
Business
issued on October 21, 2010, a revised Code of
ORIGIO’s business activities clause in its Articles of
Practice for Corporate Governance. The Code
Association reads: “The Objects of the Company
of Practice outlines the corporate governance
are to develop, produce and sell products for use
guidelines for companies quoted on the Oslo Stock
within the area of human reproduction and cell
Exchange. Adherence to the Code of Practice is
cultures and other related business at the Board of
based on a ‘comply or explain’ principle whereby
Directors’ discretion”. The Articles of Association
companies must comply with the individual items
can be found on ORIGIO’s website at www.ORIGIO.
or explain why they have chosen an alternative
com.
approach. The below descriptions cover every section of the Code of Practice.
Equity and dividends The Board of Directors considers the consolidated
According to Norwegian company law, a company
equity to be satisfactory. ORIGIO’s need for
with more than 200 employees must elect a
financial strength is considered at any given time
corporate assembly. ORIGIO, being a Danish
in light of its objectives, strategy and risk profile.
company, does not have a corporate assembly.
ORIGIO focuses on optimizing shareholder value and believes that for the coming years, this
Implementation and reporting on corporate
will mean that the company should not pay out
governance
dividends, but rather re-invest the proceeds from
It is the responsibility of ORIGIO’s Board of
its operations into future growth. Once its improved
Directors to define how it wants to exercise
‘pipeline’ products have been launched successfully,
corporate governance. The Board of Directors has
the company believes dividend payments may be
decided that ‘the Norwegian Code of Practice for
relevant.
Corporate Governance’ is to be observed with only a few exceptions as per below.
A mandate can be given by the Annual General Meeting to The Board of Directors to increase
The Board of Directors does not define the
ORIGIO’s share capital for the use at the Board of
corporate values of ORIGIO, but approves
Directors’ discretion, hereunder for the purpose
them after such values have been defined by
of acquiring other companies or parts thereof.
management and staff. Guidelines regarding
The Board of Directors believes that a mandate
corporate social responsibility is defined in
with a wider scope than what the Code of Practice
accordance with the Board of Directors (for more
recommends will provide the necessary flexibility to
details, please see ORIGIO’s stated values on page
act to the best interest of the shareholders and the
38 and its corporate social responsibility on page
company. The mandate is limited in time to the date
37).
of the next Annual General Meeting.
The Board of Directors and the management
Equal treatment of shareholders and
have ensured that employees (either directly or
transactions with close associates
through employee representatives) have direct
ORIGIO’s share capital consists of shares subject
access to the Board of Directors, should they find
to public trading and without voting limitations
that management acts illegally or violates ethical
or special rights. All shares are equal. Neither the
standards.
Board of Directors nor Management is aware of the existence of any shareholders’ agreement containing pre-emption rights or restrictions in voting rights.
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ORIGIO has defined in-house guidelines for trading
body. The AGM will be held before May 1 each
in the ORIGIO shares. The rules are in compliance
year. The 2011 AGM is scheduled for April 28. The
with applicable legislation and regulations for
relevant documents are available on ORIGIO’s
primary insiders and insider trading. The in-house
website at least 21 days prior to the date of the
guidelines require, among other things, that primary
General Meeting. The documents will contain the
insiders must obtain internal clearance from the
information necessary for the shareholders to take
company’s Chief Executive Officer prior to trading
a position on agenda items. The final registration
in the company’s shares.
date for attending the AGM is seven days prior to the date of the General Meeting.
The Board of Directors’ mandate to acquire treasury shares is based on the assumption that purchases
Registration to attend the AGM can be made
will take place on the market. Acquired shares
by mail, telefax, or electronically via VPS
may be disposed on the market as payment for
Investortjenester or www.ORIGIO.com.
acquisitions. The Board of Directors tries to make it possible In the Board of Directors’ opinion there have
for as many shareholders as possible to attend the
been no transactions between the company and
General Meeting. Shareholders, who cannot attend
a shareholder, director, member of the executive
the General Meeting themselves, may choose to
management or a party closely related to such
authorize a proxy, which clearly states that the proxy
individuals that can be described as significant.
can be used on each individual item for discussion. The shareholders may also choose to vote in writing,
The Board of Directors has appointed the law firm
including electronic means of communication,
Plesner as ORIGIO’ key legal council. Plesner is
during a specified period in advance of the General
represented by the Vice Chairman of the Board of
Meeting.
Directors, Mr. Jens Zilstorff. Fees paid to Plesner in this capacity can be summarized to (amount in
At least one representative of the Board of Directors
thousands): 2008: DKK 2,135, 2009: DKK 3,300 (of
participates in the General Meetings. Management
which DKK 1,363 relates to the take-over process
is represented by the Chief Executive Officer and
and branding project), and 2010: DKK 1,785.
the Chief Financial Officer. In 2010, 42.97% of the aggregate share capital was represented.
The Board of Directors should always be notified in the event that a board member or executive
The agenda is prepared by the Board of Directors,
personnel possesses a material interest in a
and the main items on the agenda are specified in
transaction or other matter entered into by the
§8 of the Articles of Association. The first item is the
company or legally binding on the company. The
selection of the chairman of the General Meeting.
Board of Directors will in such event evaluate
The Chief Executive Officer will review the status
the need for a valuation to be obtained from an
of ORIGIO. The minutes of the AGM are made
independent third party.
available on ORIGIO’s website.
Freely Negotiable Shares
ORIGIO does not fully comply with ‘the Norwegian
ORIGIO’s share capital consists of shares subject
Code of Practice for Corporate Governance’ in
to public trading and without voting limitations or
relation to the presence of Auditor, and the entire
special rights.
Board of Directors does not usually attend the AGM. The items on the agenda for the AGM do not
General Meetings
require this. The Chairman or the Vice Chairman of
The Annual General Meeting (AGM) ensures the
the Board of Directors is always present to respond
shareholders’ participation in ORIGIO’s governing
to questions.
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Nomination Committee
representatives. The Chief Executive Officer is not a
A Nomination Committee was appointed at
member of the Board of Directors.
the Extraordinary General Meeting on June 10, 2009. According to the Articles of Association,
The board members are elected for one year at a
the Nomination Committee is tasked with
time, except for the employee representatives who
recommending the General Meeting candidates
according to Danish law are elected for a 4-year
for the company’s Board of Directors as well as the
term. Expertise of the elected board members
board members’ fees. The Nomination Committee
and information on records of attendance at board
shall comprise up to four members, the majority
meetings as well as individual shareholdings in
of whom must be shareholders of the company or
ORIGIO is listed on page 41.
representatives of shareholders of the company, and they shall be independent of the company’s
All shareholder elected members are considered
Board of Directors and management. The
autonomous and independent of ORIGIO’s
Chairman of the Nomination Committee must be
management. The same applies in connection with
a shareholder of the company or a representative
important business associates. Laboratories LETI
of a shareholder of the company. In case of a tied
S.L., represented by Jaime Grego-Mayor, owned
vote, the vote of the Chairman of the Nomination
8.58% at year-end 2010. The Board of Directors
Committee shall count as two votes.
favors a representation of a long-term shareholder.
The Nomination Committee currently consists
The work of the Board of Directors
of the following four members: Janne Flessum
The Board of Directors has an annual plan for its
(Chairman, representing Orkla), Kristian Falnes
work and decides on all matters of substantial
(representing Skagen Vekst), Nils Vogt (representing
importance pertaining to the ORIGIO group’s
Miami AS), and Jaime Grego-Mayor (representing
activities. Such matters include decisions on
Leti Pharma S.L.).
strategic priorities, approval of periodic plans and budgets, as well as decisions on major investments
The Chairman of the Board of Directors shall –
or divestitures. The Board of Directors performs
without having any voting right – be convened to
an annual self-assessment in which it evaluates its
at least one meeting in the Nomination Committee
performance and expertise.
prior to it submitting its final recommendation to the General Meeting.
In matters of material character in which the Chairman of the Board of Directors is, or has
Corporate assembly and Board of Directors:
been, personally involved, the Board of Directors’
composition and independence
consideration of such matters will be chaired by the
It is essential that the Board of Directors as a whole
Vice Chairman.
is competent to deal with the board’s work and the main business activities of ORIGIO.
There is a clear division of responsibilities between the Board of Directors and the executive
According to the Articles of Association, four to
management. The Chairman is responsible for
six members of ORIGIO’s Board of Directors shall
the board’s work being conducted in an efficient,
be external members. At present, the Board of
correct manner. The Chief Executive Officer is
Directors consists of five external members and
responsible for the operational management of
two employee representatives: Flemming Pedersen
the ORIGIO group, including the responsibility
(Chairman), Jens Zilstorff (Vice Chairman), Jaime
for ORIGIO being organized, operated and
Grego-Mayor, Flemming Juul Jensen, Jørgen Drejer,
further developed in compliance with applicable
Kirsten Bakbøl, and Bente Jensen. The two latter
legislation, the Articles of Association, and
have been elected by the employees as employee
decisions made by the Board of Directors and the
Risk management and internal control
shareholders at the Annual General Meeting.
The executive management consists of seven individuals, see pages 44-45. ORIGIO’s executive
A key responsibility of the Board of Directors is to
management has monthly conferences calls
appoint the Chief Executive Officer and participate
supplemented by face-to-face meetings on an ad
in the appointment of other executive management
hoc basis. Subgroups of the executive management
members, as well as make recommendations to the
meet on a weekly basis in order to review various
General Meeting for the appointment of auditors.
operational issues.
The Board of Directors schedules regular board
Management provides monthly performance
meetings each year. There are usually five fixed
reports to be reviewed by the board members. The
board meetings per year, and additional meetings
quarterly financial statements are also reviewed at
are held whenever needed, some face to face, and
board meetings. The Board of Directors undertakes
some as teleconferences. In 2010, there were six
an annual review in early February. The independent
face-to-face meetings, three conference calls and
auditor attends this meeting.
one board seminar. Risk management and internal controls are typically All board members receive regular information
agenda items for at least one board meeting per
about ORIGIO’s operational and financial progress,
year (for further information on risk management
and the management seeks to mail the information
and internal control, please see page 36).
to the Board of Directors in sufficient time for its preparation. The ORIGIO business plan, strategy
Remuneration of the Board of Directors
and risk management are routinely reviewed
According to the Articles of Association,
and evaluated by the Board of Directors. Board
the Nomination Committee is tasked with
members are free to consult the executives of
recommending the board members’ fees. The
ORIGIO, if needed.
members’ fees are not linked to performance, warrant programs or the like. Only one board
The Chief Executive Officer usually proposes the
member, Jens Zilstorff (Vice Chairman), works for
agenda for each board meeting. The final agenda
ORIGIO in another capacity, as he is the key legal
is completed in consultation between the Chief
counsel of ORIGIO. Fees paid to Plesner in this
Executive Officer and the Chairmanship. Besides
capacity are summarized on page 31.
the board members, board meetings are attended by the executive management, except for non-
Remuneration of the Executive Management
Danish resident members, who participate in at
Company guidelines for remuneration of the
least one board meeting per year or by conference
executive management can be described as follows:
calls when relevant.
The executive management shall at any point in time obtain a fully competitive compensation
The Danish Public Companies Act stipulates that
package reflecting each member’s experience,
large companies must appoint an Audit Committee.
capabilities and contributions to the company.
The Audit Committee is charged with the overview
The package shall consist of fixed and variable
of the financial reporting and disclosure as well as
components – the latter typically comprising
regulatory compliance and risk management.
an annual bonus with an absolute limit, linked to a realized EBITDA-level as well as the ad hoc
The Audit Committee consists of two members:
allocation of warrants. Warrants are always allocated
Flemming Pedersen (Chairman) and Jens Zilstorff.
at the market price at the time of the allocation.
The auditor participates in at least one annual meeting with the the Audit Committee.
The Code of Practice stipulates that the annual report should provide disclosure of the
31
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
remuneration of all members of the company’s
In the event that a bid is made for the company,
executive management. For privacy reasons,
the Board of Directors will arrange for a valuation
ORIGIO’s Board of Directors has decided not to
by an independent expert and make a statement
abide by this and only disclose the remuneration of
containing a well-founded evaluation of the bid,
the Chief Executive Officer in the annual report.
including a recommendation to shareholders whether or not to accept the offer. It will be
Information and communication
explained, if any specific board members have
ORIGIO normally presents provisional annual
excluded themselves from the Board of Directors’
accounts in late February. The annual report is
statement. Furthermore, the Board of Directors
available on the company’s website at least 21 days
has a responsibility to ensure that the company’s
prior to the Annual General Meeting. In addition to
business activities are not disrupted unnecessarily,
this, ORIGIO publishes its accounts on a quarterly
that the shareholders are treated equally, and that
basis. The presentations of the annual and quarterly
the shareholders are given sufficient information
reports are posted on ORIGIO’s website after they
and time to form a view of the offer.
have been published at the Oslo Stock Exchange. Auditor It is considered essential to keep owners and
The independent auditor is always present during
investors informed about ORIGIO’s progress and
the Board of Directors’ discussions of the annual
economic and financial status. Open investor
financial statements. At such meeting, the financial
presentations are conducted in relation to ORIGIO’s
statements and any issues of particular concern
annual and quarterly reports. The Chief Executive
to the auditor, including any points of contention
Officer reviews results and comments on markets
between the auditor and the management, are
and prospects for the future. Other members
discussed.
of the executive management, the Director of Investor Relations, and the Chairman of the Board
At least once a year, a meeting will be held between
of Directors participate in these presentations from
the auditor and the Board of Directors without the
time to time.
presence of the Chief Executive Officer or other members of the executive management.
All shareholders are treated equally as a matter of principle, thus the same information is released to
In the long-form Audit Report, the independent
the entire equity market at the same time whenever
auditor reports to the Board of Directors on,
information is deemed share price sensitive.
among other things, significant weaknesses in the procedures and intern controls. Furthermore,
The financial calendar for 2011 including an
management letters with recommendations are
overview of the financial reporting dates, the date
issued by the independent auditor.
for the Annual General Meeting, etc. is published on ORIGIO’s website.
Details of the fee paid for audit work and for other specific auditor assignments are specified in the
Takeovers There are no defense mechanisms against takeover bids in ORIGIO’s Articles of Association, nor have other measures been implemented to limit opportunities to acquire shares in ORIGIO.
financial statement, note 18.
ORIGIO AUSTRALASIA Pty. Ltd.
Northern Territory 1 clinic Queensland 16 clinics Western Australia 5 clinics South Australia 3 clinics New South Wales incl. Australian Capital Territory 20 clinics
New Zealand 7 clinics
Victoria 9 clinics
ORIGIO AUSTRALASIA, representing the MediCult Media, Humagen Pipets and MidAtlantic Devices branded products, is now up and running in the important markets of Australia and New Zealand. The three brands were previously represented
Tasmania 2 clinics
by MediCult Australasia for culture media and a local Australian distributor for the Humagen and MidAtlantic brands. ORIGIO AUSTRALASIA began its operations in the third quarter of 2010 and is concentrating on building the foundations for a sustainable business in this important market. The Australian and New Zealand markets have a combined annual number of fresh ART cycles approaching 40,000 and more than 62,000 fresh and frozen cycles combined. Although the population is relatively low when compared to some of the larger world markets, the uptake of ART services by the population of reproductive age women (15-45 years), particularly in the larger Australian market, is very high, being 12.6 per 1,000 women. Population growth and favorable demographics mean that the market is likely to return to its longterm growth trajectory.
Michael Henman, General Manager: “After 23 years working as an embryologist in an IVF laboratory, I saw it as a challenge to develop ORIGIO’s position in the Australian and New Zealand ART market. I have been impressed by the way ORIGIO has strategically expanded the business, and today has the strongest, full-scale product portfolio within embryo culture media, pipettes, devices and equipment for ART labs.”
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Control and Risk Management Systems The main features of ORIGIO’s internal control and risk
other things, procedures for producing the financial
management systems in connection with its financial
statement, procedures for approval and attestation,
reporting are as follows:
reconciliation, analyses and general IT controls.
Control environment
ORIGIO has introduced internal control standards, i.e.
The Board of Directors has established an auditing
standards for checks in connection with the financial
committee. The Audit Committee assists the Board
reporting from subsidiaries. The purpose of these
of Directors in supervising the presentation of the
standards is to establish and maintain a uniform level
financial statement and the efficiency of the internal
of internal checks and controls in connection with the
control and risk management systems regarding the
financial reporting. A central function is responsible
preparation of the financial statement.
for controlling the financial reporting from the subsidiaries.
The management has the responsibility for sustaining an effiencient control environment and an internal
Information and communication
control and risk management system in connection
ORIGIO wil continue to improve its information and
with the presentation of the financial statement.
communication systems to ensure the correctness and
Managers at various levels are responsible within their
completeness of its financial reporting. The reporting
respective areas.
instructions are updated as necessary, including budgeting and month-end accounting
The Board of Directors approves ORIGIO’s conduct of
procedures, and are reviewed at least once a year.
business including the currency and interest policies. Other policies and procedures are approved by the
Monitoring
Executive Management. The daily supervision of
At least once a year, updated risk and control analysies
compliance is the responsibility of all managers.
are presented to the Audit Committee including a control overview and evaluation of its effectiveness.
The organisational structure and the internal
The independent auditor reports to the Board of
guidelines constitute the control environment together
Directors in the long-form Audit Report, among
with the international Reporting Standards and the
others, about significant weaknesses in the procedures
Danish Financial Statements Act.
and internal controls. Furthermore, management letters with recommendations are issued.
Risk assessment The risk and control overview has been updated for
Comprehensive monthly data are reported from
2010. The risk assessment in relation to the financial
all group companies. The data are analysed and
statement is performed to identify items posing
questioned making it possible to identify and
potential risks. Based on the risk assessment, it is
correct any errors and irregularities in the financial
ORIGIO’s aim to describe and evaluate all business
reporting at an early stage to ensure correctness and
units’ existing procedures and controls to minimise
completeness.
or eliminate the potiential risks. Generally, it is the evaluation that the group has reasonable procedures
ORIGIO is in the process of implementing the same
and controls.
ERP platform – Navision – in all its companies. In 2010, the Navision ERP system was implemented in ORIGIO
Control activities
LLC in Russia, and ORIGIO Scanlab Equipment a/s
The purpose of the control activities is to prevent,
had already implemented Navision entering the joint
reveal and correct any errors or irregularities. These
venture with ORIGIO. Using the same platform will
activities are integrated into ORIGIO’s accounting
ensure more standardized reporting and transparency.
and reporting procedures and include, among
Corporate Social Responsibility ORIGIO aims to actively contribute with a positive
the mother’s age at birth) in present value on an
impact on society through our activities, customer,
“investment” of an IVF-conceived citizen.
colleagues and communities. The company’s core values of being aspirational, reliable and caring
ORIGIO considers it essential to supply high quality
form the basis for its decision making, both in terms
products that are safe for the patient, ensure that
of being a social responsible cooperation as well as
clinicians obtain consistent and optimal results, and
being a sound business.
at the same time guarantee that the products are manufactured in a sustainable manner. ORIGIO has
The ORIGIO Group has a vision to ‘make the #1
received CE markings in EU, clearance by the Food
dream of every infertile couple come true’. This
and Drug Administration (FDA (USA)) as well as
is highly meaningful to us and could per se be
Therapeutic Goods Administration (TGA (Australia))
perceived as ORIGIO’s core quest in relation to
certifications for a large range of its marketed
Corporate Social Responsibility. In addition to
IVF products. This provides reassurance that the
this very significant endeavor, several national
products comply with the relevant regulatory
economic analyses have proven that investing in
authorities’ health and safety legislation. ORIGIO
reimbursement of human IVF can be a healthy
is pursuing CE markings of the full MediCult Media
investment for a government. Chart 8 shows
portfolio and in 2010, 92% of the product sales were
that e.g. the Danish government after 50 years
obtained from products with a CE markings.
has received a 7-16 fold return (dependent of
Chart 8: Cost and net present value of benefit to society per IVF-baby after 50 years (Danish example) DKK
NPV of net benefit to society 50 years after birth
1.500.000
Cost of IVF-baby
1.200.000
900.000
600.000
300.000
0
<40 years old mother
>40 years old mother
Source: Dr. Mark Connolly, Global market Access Solutions
35
Company Values
Aspiration With our focus on the future, we are committed to improve IVF through innovation, to consistently provide high quality products and services, to attract and retain the top talent, to take on new challenges, and to anticipate and embrace change.
Reliability You can depend on us to provide the best products, tailor-made services and timely, relevant information. Issues are dealt with openly, fearlessly and fairly, every time.
Care How we handle our business from the supply of vital products, to our interactions with colleagues, customers and shareholders, and ultimately to the lives our products help create.
M ED I C U LT M ED I A
Safe and healthy work environment
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
The company has safety representatives, who are responsible for creating a safe and healthy work
ORIGIO believes that each employee contributes
environment. The safety representatives make
directly to ORIGIOâ&#x20AC;&#x2122;s growth and success. It is the
suggestions for reducing risks, implementing
objective of the company to create a place of
preventive actions, and, in that way, ensure that
employment with a good and challenging working
employee safety is incorporated in the daily routines.
climate where employees jointly produce results which are beneficial to the key stakeholders.
Results The focused program on building a better
Policies
workplace has also resulted in a significant decrease
ORIGIO wants to retain its employees and ensure
in the illness rate. The illness rate in Denmark has
that they are well-trained for their jobs and that the
for example decreased from 4.2% in 2008 to 3.4% in
individual skills are developed through continuous
2010.
education, in-job-challenges and changes. At the same time, ORIGIO is committed to creating a safe and healthy work environment and continuously
Anticorruption
improve the physical and psychological work environment. It is our objective to provide
ORIGIO is a global company present, either directly
equal employment opportunities for all persons
or through distributors, in a large number of
regardless of race, color, gender, age, religion,
countries with many different cultures. ORIGIO is in
marital status, national origin, disability, or other
favor of competition on fair terms and it is important
protected categories.
to ORIGIO to act responsibly. The objective of the company is therefore always to comply with
This policy applies to all terms and conditions
legislation and rules in the countries in which it
of employment, including hiring, promotion,
operates.
termination, layoff, recall, transfers, leaves of absence, benefits, and training.
Policies ORIGIO does not tolerate or support any form of
Actions
corruption, including but not limited to extortion
Upon joining ORIGIO, the employee participates
and bribery.
in an orientation program during which he/ she receives an introduction to the company, its
Actions
mission, vision, values and work expectations. At the
Efforts will be directed to make a specific
same time, each employee receives an individual
policy covering this area and ensure that all
training program regarding his/her specific, new
employees know the policy and are aware that
job function as well as associated work- and safety
the consequences of non-compliance could have
procedures.
implications for continued employment. This obviously applies especially for employees who
ORIGIO regularly conducts working climate
have interaction with suppliers, customers or public
surveys among all employees world-wide, in which
authorities.
employees respond anonymously to a series of questions. Based on the results, actions are
Results
established to improve the work environment.
ORIGIO is not aware of any involvement in anti-
Action plans are followed up at appropriate
corruption issues.
intervals. ORIGIO will continue to work on Corporate Social Responsibility matters during 2011.
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Shareholder Information As at December 31, 2010, the share capital
stricter requirements are imposed by the Danish
consisted of 28,995,246 shares with a nominal value
company law. The annual general meeting approves
of DKK 5. All shares are subject to public trading
the annual report and any amendments to the
and without voting limitation or special rights.
articles.
Shareholders have the ultimate authority over the company, and exercise their right to make decisions
On February 22, 2011, the share capital consisted of
regarding ORIGIO at general meetings, either in
29,115,695 shares with a nominal value of DKK 5. The
person or by proxy. Resolutions can be passed by
companyâ&#x20AC;&#x2122;s 20 largest registered shareholders were
a simple majority, while resolutions to amend the
as follows:
articles are subject to adoption by at least two thirds of votes cast and capital represented unless
Name Shareholding Number Of Shares
Ownership%
Orkla Asa
3,110,100
10.68%
Leti Pharma S.L.
2,488,000
8.55%
Skagen Vekst
1,550,000
5.32%
MP Pensjon
950,000
3.26%
Storebrand Vekst
769,029
2.64%
Bio Holding As v/Jens Holst
751,419
2.58%
Ormestad Tellef
680,272
2.34%
Danske Bank A/S (Nominee Account)
661,719
2.27%
Miami As
600,000
2.06%
Zwilgmeyer Peter Kenneth
500,000
1.72%
Nordea Bank (Nominee Account)
454,416
1.56%
Ml Pierce Fenner (Nominee Account)
409,824
1.41%
SEB Enskilda Asa Egenhandelskonto
400,000
1.37%
Holst Jens Ulrik
385,445
1.32%
Hovde Reidar
365,500
1.26%
Kvam Jan Arvid
325,500
1.12%
Skjerven Ketil Einar
310,100
1.07%
Joff Eiendom A/S
309,527
1.06%
Noer Eiendom A/S
308,500
1.06%
303,701
1.04%
Debra Bryant Other
13,482,643 46.31%
Total
29,115,695 100.00%
39
Board of Directors Flemming Pedersen (Chairman)
Flemming Juul Jensen
Diploma in Business Economics and MSc. in Business
M.Sc. Pharm. Born 1949. Elected to the board of Directors
Administration and Auditing from the Copenhagen
in 2000. Former Executive Vice President, Sales &
Business School. Born 1965. Joined the Board of
Marketing and member of the management at Lundbeck
Directors in 2010. Chief Financial Officer, Executive
A/S (a leading Danish pharmaceutical company). Has a
Vice President at ALK Abelló A/S (leading allergy
broad expertise in international sales and marketing of
vaccine company). Possesses an extensive experience
pharmaceutical products and subsidiary management.
from several board and executive positions involving
Member of the Board of Directors of STT-Condigi
general management, acquisitions and finance. Member
Holding AB. Lives in Buckinghamshire, UK. Owns 110,500
of the Board of Directors of MBIT Consulting A/S. Lives
shares and 0 warrants. Participated in all board meetings
in Copenhagen, Denmark. Owns 0 shares and 0 warrants.
in 2010.
Participated in all board meetings in 2010 after his election to the Board of Directors in April 2010.
Jens Zilstorff (Vice Chairman)
Jaime Grego-Mayor
Master of Law. Born 1955. Elected to the Board of
B.A. Liberal Arts from Brown University, General
Directors in 1990. Partner at Plesner Advokatfirma (Law
Management Program IESE Business School. Born 1964.
Firm) since 1989. Possesses strong legal expertise in an
Elected to the Board of Directors in 2007. Possesses a
international and Scandinavian arena and has an in-depth
strong international expertise within pharma, medtech
knowledge of ORIGIO. Member of the Board of Directors
and business development areas. Specific experience
of Baxter A/S, Solar Fonden af 1978, H.C. Petersen
within strategy, innovation and corporate finance. Vice
& Co.’s Eftf. A/S, Consort A/S, Consort Immobilien
Chairman of the Board of Directors of Laboratorios
A/S, Geograf A/S, Info-Connect A/S, RC-Holding A/S,
LETI, S.L.U. (leading Spanish allergy vaccine company).
Jobindex A/S, Bruun Rasmussen Kunstauktioner A/S, Key
Chairman of Audit and Election Committees of
Maritime Rederi A/S, MEIVIC ApS, Skanacid A/S, SEW-
Laboratorios LETI, S.L.U. Chairman of the Board of
Eurodrive A/S, Inge og Skjold Burnes Fond, The Danish
Directors and Executive Committee in Calzados Royalty,
European High Yield Fund F.M.B.A., Aktieselskabet af
S.A. General Manager of Laboratorios LETI, S.L.U. 1993-
20. november 2003, Consort KHB A/S, Consort Isefjord
2005. Lives in Barcelona, Spain. Represents Leti Pharma,
A/S, Colexon Renewable Energy A/S, CHA Furniture A/S,
S.L., which owns 2,488,000 ORIGIO shares. Participated in
Colexon Solar Invest A/S, HTI-Import og Handel A/S, ITH
all board meetings in 2010, except two.
Træindustri A/S. Lives in Copenhagen, Denmark. Owns 50,000 shares and 0 warrants. Participated in all board meetings in 2010.
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Jørgen Drejer
Bente Jensen
Ph.D. Neurobiology. Born 1955. Elected to the
Diploma in International Trade. Born 1950. Joined
Board of Directors in 1998. Executive Vice President
the Board of Directors in 2003 as employee
and member of the executive management of
representative. Joined ORIGIO in 2000 as Customer
NeuroSearch A/S (a leading Danish biotech company).
Service Representative. Has an in-depth knowledge
Possesses a strong and broad competence within
of ORIGIO business and its organization. Owns
pharmaceutical research and development as well
5,000 shares and 0 warrants. Participated in all board
as biotechnology in general. Member of the Board
meetings in 2010.
of Directors of NsGene A/S, Atonomics A/S, Delta and the Danish Council for Independent Research. Member of the Academy of Technical Sciences. Lives in Copenhagen, Denmark. Owns 50,000 shares and 0 warrants. Participated in all board meetings in 2010.
Kirsten Bakbøl Born 1955. Joined the Board of Directors in 2004 as employee representative. Joined ORIGIO in 1999 as Assistant, Purchasing department. Has an in-depth knowledge of ORIGIO business and its organization. Owns 10,200 shares and 0 warrants. Participated in all board meetings in 2010, except one.
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M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Executive Management Jesper Funding Andersen, CEO – ORIGIO a/s
Debra Bryant, EVP – ORIGIO a/s, CEO – ORIGIO, Inc.
Master of Business Economics from Copenhagen Business
Ph.D. Microbiology, Wake Forest University, 1980. Born
School. Born 1966. Appointed Chief Executive Officer of
1955. NIH Postdoctoral Fellow in Molecular Biology, 1980-
ORIGIO in November 2005. Previous experience includes
1983. Research Scientist, Oncogen (owned by Bristol
Management Consultant in McKinsey & Co. Inc. (a global
Myers) 1983-1984. Research Scientist for Humagen Pipets
strategy consulting company), Group Vice President at
Inc. 1984-1990. Chief Executive Officer at Humagen 1990.
Maersk Medical A/S (a leading Danish medical device
2007, appointed Executive Vice President of ORIGIO a/s
company), Senior Vice President for International Business
and Chief Executive Officer of ORIGIO, Inc. Owns 303,701
at GN Resound A/S (a large Danish hearing aid company).
shares and 55,000 pre-assigned warrants.
Member of the Board of Directors of MissionPharma A/S (a supplier of generic pharmaceuticals to third world countries) and Chairman of the Board of Directors of Ellipse A/S (a Danish supplier of laser and light based medical equipment). Owns 88,046 shares and 665,000 warrants.
Susanne Hauschildt Bendz, CSO, EVP Innovation &
Søren Østergaard, EVP International Sales – ORIGIO a/s
Corporate Marketing – ORIGIO a/s
Bachelor of Science in Medical engineering from
Ph.D. in biology (immunology) from University of
Engineering Academy of Aarhus, Denmark. Born 1959.
Copenhagen. Born 1958. Appointed Executive Vice
Appointed Executive Vice President of in December
President and Chief Scientific Officer in August 2004.
2007. Previous experience includes more than 20 years of
Previous experience includes Research Assistant, and
international sales and marketing experience in the medical
Clinical Research Director at ALK Abelló A/S (a leading
technology sector, latest as Vice President and General
Danish allergy vaccine company) and later in Coloplast
Manager in GN Resound A/S (a large Danish hearing aid
A/S in Wound Care Management Group and Corporate
company) and as Director of Sales in Europe at Medicotest
responsible for clinical development (the largest Danish
(a Danish manufacturer of electrodes for medical
medical device company). Owns 75,000 shares and
applications). Owns 0 shares and 55,000 warrants.
135,000 warrants.
Allan Toft Jacobsen, EVP Manufacturing – ORIGIO a/s
Jeannett Hvidkjær, CFO – ORIGIO a/s
M.Sc. in Chemical Engineering from the Technical
Bachelor in Business Economics and Accounting
University of Denmark, specialized in microbiology and
from Copenhagen Business School. Born 1966.
molecular biology. Born 1971. Joined ORIGIO in 2005.
Joined ORIGIO in 2005 as Chief Accountant.
Appointed Executive Vice President Manufacturing in
Appointed Chief Financial Officer in August 2009.
December 2007. Previous experience includes Manager
12 years of experience as a public accountant at
for Manufacturing and QC at ORIGIO, various other QC,
Ernst & Young and 5 years as Chief Accountant at
manufacturing and production positions at Colgate
a national Danish newspaper. Owns 0 shares and
Palmolive in Denmark and France. Owns 10,000 shares
45,000 warrants.
and 85,000 warrants.
Terry Fortino, EVP Americas Sales – ORIGIO a/s, CEO – ORIGIO, Inc. B.S. Marketing, Michigan State University, 1970. Born 1947. Diagnostics Sales, Wampole Laboratories 19701973. Laboratory Equipment & Diagnostics Sales, Rupp & Bowman Co. 1973-1984. Eastern U.S. Division Manager, Rupp & Bowman Co. 1984-1988. Director of Sales, Biogen 1988-1989. Founder & President, MidAtlantic Diagnostics 1989-2008. Executive Vice President, ORIGIO a/s and CEO, ORIGIO, Inc. 2008. Owns 85,936 shares and 0 warrants.
43
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
ORIGIO’s Recent Journey – a Corporate Transformation ORIGIO (MediCult Media) was founded in Norway
the fertility market with media applications for IVF
in 1987 by Doctors Kjell Bertheussen and Nicolai
treatments. ORIGIO developed subsequently a full
Holst together with Jens U. Holst after Doctor
range of media products covering all processes
Bertheussen, professor of biochemistry at Norway’s
within IVF. The company was listed on the Oslo
Tromsø University, pioneered the novel serum-free
Stock Exchange in 1996, and its first two sales
Synthetic Serum Replacement (SSR™) principle
subsidiaries were established in the UK and France
for media production. In 1988, ORIGIO entered
during the same period.
In 2005, ORIGIO embarked on a transformative journey along three dimensions Key milestones on that journey are depicted on the opposite page – including, the acquisitions of Humagen Pipets and MidAtlantic Devices. So far, the transformation has created the largest, focused player on the global ART scene, with a broad product offering and a leading pipeline of new technologies.
Product range dimension - in terms of current product range offered to ART clinics
2.
Geographical dimension
Innovative dimension
– in terms of ORIGIO’s global
- in terms of ORIGIO’s exposure
foot-print with direct sales
to emerging and radical new
presence
technologies each with a potentially substantial impact on the relevant ‘baby-take-home-rate’
1. 3.
Key Milestones on ORIGIO’s Transformational Journey
1. Expansion of geographical presence (via own subsidiaries) • 2005 Italy
• 2006 USA
• 2005 Germany
• 2008 Benelux
• 2005 Australia
• 2008 China
• 2006 Spain
• 2010 Russia
2. Current product range • 2007 Humagen Pipets acquired (quality specialty pipettes and microtools for IVF) from founder Debra Bryant, Ph.D. • 2008 MidAtlantic Devices acquired (innovative devices and ‘total supplier’ to IVF labs) from founder Terry Fortino • 2009 Exclusive global rights obtained to the Planer/BT37 mini-incubator • 2010 Joint venture, ORIGIO ScanLab Equipment, established with a leading manufacturer of equipment for IVF labs
3. Emerging/innovative technologies • 2005 Global exclusive rights obtained to the patented concept of adding Iloprost to a fertility media • 2005 Global exclusive rights obtained to the patented concept of adding IGF-II to a fertility media • 2005 Initial investment undertaken by Humagen Pipets in IVF microfluidics via Incept BioSystems • 2007 The world’s largest IVF study on culture media enhanced by GM-CSF undertaken by ORIGIO • 2008 Positive interim results published by ORIGIO regarding the GM-CSF study • 2009 Global exclusive rights acquired to the patented embryo selection technology from Novocellus Ltd. (EmbryoSure) • 2010 Positive headline results for the GM-CSF study published by ORIGIO announcing the product launch of EmbryoGen® for a commercially attractive subgroup of IVF patients
45
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Product Offering Selected products
Sperm preparation
Oocyte retrieval
Oocyte retrieval
Sperm preparation In vitro maturation Sperm immobilization Denudation Oocyte cryopreservation
Microtools Fertilization
IVF
ART equipment
ICSI
Embryo culture
Embryo biopsy / PGD
Embryo transfer
Blastocyst transfer
Embryo
Blastocyst
cryopreservation
cryopreservation
More than 100,000 babies per year are born using ORIGIO products
Financial Statement
47
Income Statement (DKK ’000)
Group
Parent
Note 2010 2009 2008 2010 2009 2008 Revenue
2
307,988
265,683 203,235
95,238
88,706
89,047
Costs of sales
3
(125,051)
(108,664) (75,171)
(37,766)
(33,279)
(31,016)
Gross contribution 182,937
157,019 128,064
57,472
55,427
58,031
Sales and Marketing expenses
3
(85,043)
(71,590) (60,049)
(22,168)
(21,413)
(24,300)
Administrative expenses
3
(34,348)
(31,236) (24,129)
(17,818)
(19,357)
(17,094)
Research and Development expenses
3
(19,725)
(17,997) (18,891)
(17,477)
(16,224)
(18,115)
EBITDA before special items
43,821
36,196
9
(1,567)
(1,478)
Depreciation
3 (7,137)
EBITA before special items
36,684
24,995
(4,182) (3,152) 32,014
21,843
(5,148) (5,139)
(2,404) (1,939) (3,971)
(3,417)
Amortization
3
EBIT before special items
(8,934) 27,750
(10,928) (11,499) 21,086
10,344
(1,339) (6,478)
(331) (2,793) (4,302)
(6,210)
Special items
4
(13,232)
EBIT 14,518
(5,140)
0
(6,551)
15,946 10,344 (13,029) 2,882
15,822
(5,140)
0
(9,442) (6,210)
Financial income
5
161
967
7,988
13,116
Financial expenses
5
(18,339)
(10,045)
(7,491)
(7,580)
(7,946)
(5,596)
Profit/loss before income tax
(3,660)
6,868
5,735
(4,787)
(9,400)
1,310
6
(6,335)
(5,476)
7,773
Profit/loss for the year
Income tax
(9,995)
1,392
13,508
0
0
(4,787)
(9,400)
9,800 11,110
Distribution of profit/loss Minority interests 582 243 584 – – – Transferred to retained earnings
(10,577)
1,149
12,924
(4,787)
(9,400)
11,110
Profit/loss for the year
(9,995)
1,392
13,508
(4,787)
(9,400)
11,110
Earnings per share Earnings per share (EPS)
7
(0.37)
0.04
0.47
Earnings per share diluted (EPS diluted)
7
(0.37)
0.04
0.47
Statement of Comprehensive Income (DKK ’000)
Group
Parent
Note
2010
2009
2008
2010
2009
2008
Profit/loss for the year
(9,995)
1,392
13,508
(4,787)
(9,400)
11,110
(44) (10,087)
(3,624)
(44)
(10,087)
Other comprehensive income: Interest swap
(3,624)
Exchange rate adjustment foreign subsidiaries 4,202 (1,513) 917 – – – Other comprehensive income
578
(1,557)
(9,170)
(3,624)
Comprehensive income
(9,417)
(165)
4,338
(8,411)
(44) (10,087) (9,444)
1,023
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Statement of Financial Position as at December 31 – Assets (DKK ’000)
Group Note
2010
Parent 2009
2010
Goodwill 139,450 131,560
2009
0
0
Licenses and rights 1,829 2,017 1,619 1,787 Development projects in progress 9,635 6,166 9,635 6,166 Other intangible assets 37,279 21,178 21,818 Intangible assets
8 188,193 160,921 33,072
141 8,094
Properties 158,824 30,341 145,315 17,356 Plant and machinery 14,590 4,861 9,333 2,156 Assets under construction
2,636
86,637
125
81,872
17,462
7,420
15,646
5,387
Other fixtures and fittings, tools and equipment Property, plant and equipment
9 193,512 129,259 170,419 106,771
Shares in subsidiaries
10
–
–
25,960
25,499
Loan to subsidiaries
10
–
–
181,574
183,365
Other investments
10 561 6,747 0 0
Deferred tax asset
6 18,977 18,777 15,000 15,000
Financial non-current assets
19,538
25,524
222,534
223,864
Total non-current assets 401,243 315,704 426,025 338,729
Inventories
11 39,622 30,833 11,844 10,147
Trade receivables
12 53,408 42,630 6,695 6,701
Receivables from group enterprises
–
–
23,673
14,367
Other receivables 2,409 7,644 169 5,620 Prepayments 2,254 2,996 849 1,923 Receivables, etc. 58,071 53,270 31,386 28,611
Securities
437 63,437
71 63,437
Cash and cash equivalents
18,560
15,551
3,783
6,674
Assets classified as held for sale
13
11,995
0
11,995
0
Total current assets
128,685
163,091
59,079
108,869
Total assets 529,928 478,795 485,104 447,598
49
Statement of Financial Position as at December 31 â&#x20AC;&#x201C; Equity and Liabilities (DKK â&#x20AC;&#x2122;000)
Group
Parent
Note 2010 2009 2010 2009 Share capital 144,976 141,964 144,976 141,964 Translation reserve (1,383) (5,585) 106 106 Retained earnings 47,642 41,131 40,596 28,295 Equity attributable to ORIGIO a/s
191,235
177,510
185,678
170,365
Minority interest in equity
1,696
985
-
-
Total equity
192,931 178,495 185,678 170,365
Credit institutions
14 203,147 196,013 202,321 195,693
Other non-current liabilities Deferred tax
529
8,890
6 465 465
0
0
0
0
Non-current liabilities 204,141 205,368 202,321 195,693 Short-term portion of non-current liabilities
14
26,832
25,916
16,636
15,352
Bank borrowings 20,554 4,502 17,527 3,088 Trade payables 27,097 25,119 9,996 16,859 Payables to group enterprises
-
-
10,322
19,476
Income taxes
3,252
1,047
0
0
Other payables 43,726 38,348 31,229 26,765 Other current liabilities 121,461 94,932 85,710 81,540 Liabilities associated with assets held for sale
13
11,395
0
11,395
0
Total current liabilities 132,856 94,932 97,105 81,540 Total liabilities 336,997 300,300 299,426 277,233 Total equity and liabilities
529,928
478,795
485,104
447,598
Financial instruments
15
Contingent assets and liabilities, security etc.
16
Staff and remuneration
17
Fee to the independent auditor
18
Related parties and transactions 19
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Statement of Cash Flow (DKK ’000)
Group
Parent
Note
2010
2009
2010
2009
Profit/loss for the year
(9,995)
1,392
(4,787)
(9,400)
Depreciation and other adjustments
20
51,406
31,691
4,189
4,751
Changes in net working capital
21
(4,290)
(473)
(4,670)
4,044
financial items and tax
37,121
32,610
(5,268)
(605)
Cash flow from operations before
Financial income 3,780 598 16,301 1,448 Financial expenses (9,080) (3,514) (4,527) (5,444) Tax (4,363) (4,134) 0 0 Cash flow from operating activities
27,458
25,560
6,506
(4,601)
Investment in intangible assets
(5,265)
(6,249)
(4,963)
(4,154)
Investment in property, plant and equipment (100,167) (49,435) (94,766) (45,308) Investment in securities (net) 55,495 75,673 55,861 77,826 Investment in group companies
–
–
(461)
(4,569)
Loans to group companies
–
–
1,791
(9,818)
Loans from group companies
–
–
(8,615)
16,846
Interest on loans to group companies
–
–
7,682
7,293
Investment in associated companies
0
(560)
0
0
Investment deferred payment
–
–
0
1,091
Cash flow from investment activities
(49,937)
19,429
(43,472)
39,207
Cash flow before financing activities
(22,479)
44,989
(36,966)
34,606 (14,768)
Loan and credit institutions repayment
(16,246)
(15,019)
(16,246)
Deferred payment acquisitions
(11,503)
(10,292)
0
0
Short-term employee loan
0
1,619
0
1,619
Capital paid by minority
424
173
–
–
New loans established
36,376
0
35,857
0
Capital increase including warrants exercised 3,055
0 3,055
0
Interest paid on acquisition loans
(3,052)
(2,363)
(3,052)
(2,363)
Cash flow from financing activities
9,054
(25,882)
19,614
(15,512)
Change in cash and cash equivalents
(13,425)
19,107
(17,352)
19,094
Cash and cash equivalents at January 1
11,049
(8,048)
3,586
(15,508)
Exchange rate adjustments
382
(10)
(8)
0
11,049
(13,774)
3,586
Cash and cash equivalents as at December 31
22
(1,994)
51
Statement of Changes in Equity (DKK ’000) Group Equity as at January 1, 2009 Comprehensive income
Share capital Translation reserve Retained earnings
Disposals of own shares
Total 175,925
141,964
(4,072)
37,464
569
–
(1,513)
1,105
243
(165)
2,058
2,058
Warrants compensation Capital increases
Minority interest
504 504 173 173
Equity as at December 31, 2009
141,964
(5,585)
41,131
985
178,495
Equity as at January 1, 2010
141,964
(5,585)
41,131
985
178,495
4,202
(14,201)
582
(9,417)
Comprehensive income
–
Warrants compensation
738
738
Disposals of own shares 823 Dividend paid to minority (295) Capital increases 3,012 19,151 424
823 (295) 22,587
Equity as at December 31, 2010
144,976
(1,383)
47,642
1,696
192,931
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
(DKK ’000) Parent
Share capital
Translation reserve
Retained earnings
Total
Equity as at January 1, 2009
141,964
106
35,177
177,247
Comprehensive income
–
–
(9,444)
(9,444)
Warrant compensation
–
– 2,058 2,058
Disposals of own shares
–
–
504
504
141,964
106
28,295
170,365
Equity as at December 31, 2009 Equity as at January 1, 2010
141,964
106
28,295
170,365
Comprehensive income
–
–
(8,411)
(8,411)
Warrant compensation
–
– 738 738
Disposals of own shares
–
–
Capital increase Equity as at December 31, 2010
3,012 144,976
823
823
– 19,151 22,163 106
40,596
185,678
(DKK ‘000) Group Share capital (nominal)
2007
2006
Share capital as at January 1, 2010 141,964 141,964 138,442 Equity issues 3,012 – 3,522 Warrants exercised – – –
113,217 25,000 225
100,124 10,000 3,093
Share capital as at December 31, 2010
Total number of shares
2010
2009
2008
144,976
141,964
141,964
138,442
113,217
28,995,246
28,392,897
28,392,897
27,688,424
22,643,424
Number of
Costs of
Nominal
% of share
Own shares
shares
shares
value
capital
Own shares as at January 1, 2010 274,744 3,178 1,374 1.0% Purchase – – – 0% Sale 60,920 705 305 0.3% Own shares as at December 31, 2010
213,824
2,473
1,069
0.7%
53
Note 1. Accounting Policies and Estimates Accounting Policies The Financial Statement for ORIGIO a/s for 2010 has been prepared in accordance with the International Financial Reporting Standards (IFRS) as approved adopted by the EU, the Oslo Stock Exchange’s requirements for financial reporting by listed companies, and Danish disclosure requirements for listed companies. The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all years presented, except for the implementation of IFRS3 (revised in 2009) – please refer to page 62 for a description of the impact on the reporting. In the Income Statement, a number of items are classified separately in order to give a more transparent view of the ORIGIO Group’s operating profit/(loss). The comparable figures and key figures for 2009 have consequently been presented accordingly. The Consolidated Financial Statements The consolidated financial statement comprises the parent company, ORIGIO a/s, and subsidiaries in which ORIGIO a/s directly or indirectly owns more than 50% of the voting rights or in other way has control. The group financial statement is prepared on the basis of the financial statements of the individual companies, compiled according to uniform accounting principles. Eliminations are made for dividends from subsidiaries, all revenue and expenditure items, internal profits and internal-company balances as well as inter-company shares. Minority interests’ share of the result is included in the net results for the group and the share of the group’s equity is included as a separate item of the group equity Acquisition and Divestment of Companies Newly acquired or newly established companies are recognized in the consolidated financial statement from the date of acquisition. Divested or terminated (closed down) companies are recognized in the consolidated income statement to the date of divestment. Comparative figures are not adjusted for newly acquired, divested or terminated companies. On acquisition of companies, the purchase method is applied, according to which the newly acquired companies’ identified assets and liabilities are measured at fair value on the date of acquisition. Any excess of the cost of acquisition over the fair value of the identifiable net assets acquired is recognized as goodwill. Any deficiency in the cost of acquisition below the fair value of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit and loss in the year of acquisition. The interest of minority shareholders is stated at the minority proportion of the fair value of the assets and liabilities recognized. Subsequently, any losses applicable to the minority interest in excess of the minority interests are allocated against the interests of the parent company. Foreign Currency Transactions in foreign currency are stated at the exchange rate on the transaction date. Monetary items in foreign currency are converted at the exchange rates on the balance sheet date. Financial statements of foreign subsidiaries are converted using the exchange rates on the balance sheet date for balance sheet items and average exchange rate for items of the profit and loss account. All exchange rate adjustments are included in the profit and loss account under financial items, apart from the exchange rate differences arising on: • • • • •
Conversion of equity in subsidiaries at the beginning of the year at the exchange rates on the balance sheet date Conversion of the profit for the year from average exchange rates to exchange rates on the balance sheet date Conversion of long-term loans that constitute an addition to the holding of shares in subsidiaries Conversion of the forward hedging of investments in subsidiaries Conversion of capital interests in associated companies
These exchange rate differences are recognized as other comprehensive income. Derivative Financial Instruments On initial recognition, derivative financial instruments are recognized at cost in the balance sheet and subsequently measured at fair value. Positive and negative fair values of derivative financial instruments are recognized under other receivables or other payables, respectively.
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Changes in the fair value of a derivative financial instrument that meets the criteria for hedging the fair value of a recognized asset or liability are recognized in the income statement with the changes in the value of the hedged asset or liability. Changes in the fair value of a derivative financial instrument that meets the criteria for hedging the fair value of a future asset or liability are recognized in other comprehensive income. Income and expenses related to such hedging transactions are transferred from other comprehensive income at the realization of the hedged asset or liability and recognized under the same item as the hedged asset or liability. Changes in the fair value of derivative financial instruments that do not meet the criteria for treatment as hedging instruments are recognized in the income statement. Warrant Programs Equity based warrant programs have been established and are offered to a number of employees, the Executive Board and members of the Board of Directors. Warrant programs were offered in 2005, 2007 and 2008. The value of services received as consideration for granted warrants is measured at the fair value of the warrant. The fair value is measured at the allotment date and recognized in the income statement under staff costs over the period in which the final right to the warrants is obtained. The contra entry to this is recognized under equity. In connection with the initial recognition of the warrants, an estimate is made of the number of warrants that the employees are expected to obtain rights to. Subsequently, an adjustment is made for changes in the estimate of the number of shares that the employees have obtained rights to so that the total recognition is based on the actual number of shares that the employees have obtained rights to. The fair value of the allotted warrants is estimated by application of the Black and Scholes pricing model. Segment Information The information is based on business segments which the management uses to report on and control the group internally. The segment information complies with the groupâ&#x20AC;&#x2122;s accounting policies, risks and internal controls. Geographical segmentation is provided for revenue and non-current assets of the major individual countries or areas. The Income Statement In the income statement, classifications are made according to function. This means that all costs have been transferred to the function to which they relate: costs of sales, sales and marketing, administrative costs or development expenses. Revenue Revenue related to sales of goods for resale and finished goods is recognized in the income statement provided that delivery and risk transition has taken place before the year-end. Revenue is recognized less VAT and discounts. Cost of Sales Cost of sales comprises raw materials and consumables, trading goods, QC costs and other costs including premises and salaries, which have been incurred in order to obtain the net revenue for the year. Sales and Marketing Expenses Sales and marketing expenses include expenses for sales and marketing personnel, advertising and exhibition expenses, distribution expenses and premises. Administrative Expenses Administrative expenses comprise the expenses related to the management and administration of the group, including expenses related to the administrative staff, management, office premises as well as office expenses. Research and Development Expenses Research and development expenses comprise regulatory expenses, wages and salaries, clinical and non-clinical testing, external scientific consultancy as well as other expenses, which directly or indirectly can be attributed to the companyâ&#x20AC;&#x2122;s research and development projects, product improvements and development projects which do not fulfil the criteria for capitalization. In addition, the amortization and impairment of capitalized development projects are recognized. All expenses concerning research activities are recognized as expenses incurred.
55
Special Items Special items comprise significant income and expenses of an exceptional nature relative to ORIGIO’s operating activities. Significant amounts such as costs of restructuring processes, costs related to investment in or divestment of activities/ companies and amounts of a one-off nature such as costs related to take-over offers, corporate branding process and impairment write-down are included in special items. Financials Financial income and financial expenses include interest, exchange gains and losses on securities, debt and transactions denominated in foreign currencies, amortization of financial assets, etc. Tax on Results for the Year Calculated tax, comprising tax on the taxable income for the year and the year’s change in deferred tax, is recognized in the income statement with the part that relates to profit and in other comprehensive income with the part that relates to items recognized there. The Danish corporation tax is allocated to the jointly taxed Danish companies according to their taxable incomes (full division with refund regarding tax losses). Jointly taxed companies are included in the Danish tax prepayment scheme. Deferred tax is calculated on all temporary differences between accounting and taxable values. Deferred tax is calculated with the actual tax rate. Deferred tax arising on tax-deductible temporary differences (tax assets) is included in the balance sheet only if there is reasonable certainty that the tax assets can be off set by the company against future taxable income. STATEMENT OF THE FINANCIAL POSITION Intangible Assets Licenses and patent investigating costs related to the license agreements are entered at cost less accumulated amortization. Amortization is made on a straight-line basis over term of the agreement. Other intangible fixed assets are stated at cost less accumulated amortisation. Amortization of these assets is made according to a declining method over the expected future lifetime of the assets. The expected lifetimes are: • Licenses: 10 years • Customer relations: 9 years • Technology: 15 years Goodwill arisen from acquisition of companies and activities is measured at cost price less any impairment as a result of permanent decreases in the earning capacity of the company in question. Development Expenses Development projects that are clearly defined and identifiable and where sufficient resources are allocated to complete the project and a potential future market can be proven and where the company intends to produce, market or use the project, are recognized as intangible assets where the expenses of the project can be calculated reliably and there is sufficient certainty that the future earnings or the net selling price can cover the production, selling, administration and development expenses. ORIGIO defines the above criteria for capitalization of development expenses as the point in time when projects have successfully passed the interim data phase in the human efficacy trial. Other development expenses are recognized in the income statement as incurred. Recognized development expenses are measured at cost less accumulated amortization and impairment losses. The cost comprises salaries and other costs attributable to the company’s development activities. Upon completion of the development activity, development projects are amortized according to the straight-line method over the estimated useful life as from the point in time when the asset is ready for use. The basis of amortization is reduced by impairment losses, if any.
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Properties, Plant and Equipment Properties, plant and equipment are measured at cost less depreciation on a straight-line basis according to the physical and financial lifetime of the assets. Cost comprises acquisition price and costs directly related to acquisition until the time when the company starts using the asset. The expected lifetimes are: • Building and building parts: 20-30 years • Plant and machinery: 15-30 years • Other fixtures and fittings, tools and equipment: 3-10 years The carrying amount of land is not depreciated. The depreciation basis is determined taking into account the scrap value of the asset less any impairment losses. The scrap value is revalued on a regular basis. Profit and losses arising from disposals are recognized in the income statement under depreciation. Leases Leases related to property, plant and equipment where the company assumes all material risks and rewards of ownership (financial leases), are recognized as assets. On initial recognition, the assets are valued at computed cost equal to fair value. Assets held under finance leases are depreciated as other similar tangible assets. Lease payments under agreements considered as operating leases and other rental agreements are recognized in the income statement over the term of the agreements. The company’s total obligation related to operating leases and rental agreements is stated under contingent assets and liabilities, etc. Other Investments The shares in other investments are measured at fair value less any impairment as a result of permanent decreases in the earning capacity of the company in question. Received dividends are included in the financial income. Investments in Subsidiaries and Associated Companies by the Parent Company The parent company’s shares in subsidiaries and associated companies are measured at cost less write-downs as a result of permanent decreases in the earning capacity of the company in question. For transactions with companies within the group, inter-company profits are eliminated. Received dividends are included in the income statement of the parent company. Impairment of Non-current Assets The carrying amount of intangible assets, property, plant and equipment as well as non-current asset investments is reviewed for impairment when events or changed conditions indicate that the carrying amount may not be recoverable. If there is such an indication, an impairment test is made. An impairment loss is calculated based on the higher of the net present value and the net selling price. In order to assess the impairment, the assets are grouped on the smallest identifiable group of assets that generates cash flows (cash flow generating units). Impairments are recognized in the income statement under the same items as the related depreciation and amortization. Inventories Inventories are valued at the lower of historical cost (compiled by the FIFO principle) and net realisation value. Cost of goods for resale as well as raw materials and consumables comprises the purchase costs. Costs of finished goods and work in progress comprises the cost of raw materials, consumables, direct payroll, manufacturing costs and indirect production costs. Indirect production costs comprise indirect materials and payroll costs as well as maintenance of and depreciation on machinery, plant and equipment used in the production, plant administration and management. Borrowing costs are not capitalized. The net realizable value of stocks is measured as the selling price less costs related to the completion of the products and costs related to the execution of sales. Furthermore, net realizable value is determined with regard to marketability, obsolescence and development in expected selling price.
57
Receivables Receivables are measured after write-offs for individual risks. Securities â&#x20AC;&#x201C; Bonds Bonds are measured at market value. Both realized and unrealized value adjustments are recognized in the income statement as financial items. Prepayments Prepayments recognized under assets comprise expenses incurred related to the following financial year. Assets held for sale Assets are classified as assets held for sale when activities to carry out such sale have been initiated and it is probable that the assets will be disposed of within 12 months. They are stated at the lower of carrying amount and fair value less selling costs. Assets held for sale are not depreciated. Equity Own shares acquired by the parent company or subsidiaries are recognized directly under equity. Correspondingly, sales fees and dividends are included directly under equity. Income Tax Payable and Deferred Tax Current tax liabilities and current tax receivables are measured as tax calculated on the taxable income for the year adjusted for tax on the previous yearsâ&#x20AC;&#x2122; taxable income and taxes paid on account/prepaid. Deferred tax is measured in respect of temporary differences between the carrying amount and the tax base of assets and liabilities. No deferred tax is recognized for goodwill unless amortization of goodwill for tax purposes is allowed. In cases, e.g. in respect of shares, in which the statement of the tax base can be made according to alternative taxation rules, deferred tax is measured on the basis of the planned use of the asset or settlement of the liability, respectively. Deferred tax assets, including the tax value of tax loss carried forward, are measured at the expected realizable value, either by elimination in tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction. Adjustment of deferred tax is made as regards elimination of unrealized inter-company profits and losses. Deferred tax is measured on the basis of the tax rules and tax rates in force in the respective countries at the balance sheet date when the deferred tax is expected to crystallize as current tax. Any changes in deferred tax as a consequence of amendments to tax rates are recognized in the income statement. Financial Liabilities Debt to banks and other credit institutions is recognized initially at the proceeds received net of transaction expenses incurred. In subsequent periods, financial liabilities other than provisions are measured at amortized cost corresponding to the capitalized value using the effective interest method; consequently, the difference between the proceeds and the nominal value is recognized in the income statement over the maturity period of the loan. The capitalized residual lease commitment on finance leases is recognized under finance leases. Other liabilities, comprising trade payables and other payables, are measured at amortized cost corresponding to nominal value. Cash Flow Statement The cash flow statement shows the cash flow for the year from operating, investment and financing activities, changes in cash and bank borrowings, and cash and bank borrowing position at the beginning and end of the year. Cash Flow from Operating Activities Cash flow from operating activities is presented as the share of the results for the year adjusted for non-cash operating items, changes in the net working capital and income tax paid.
M ED I C U LT M ED I A
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M I DAT L A N T I C DEVICES
Cash Flow from Investment Activities Cash flow from investment activities comprises payments in connection with the purchase and sale of intangible assets, property, plant and equipment and financial fixed assets. Cash Flow from Financing Activities Cash flow from financing activities comprises changes in size or structure of the share capital and related costs, contracting of loans, instalments on interest-bearing debt, payment of dividends to shareholders and paid interest on debt related to acquisitions. Cash and Cash Equivalents Cash and cash equivalents comprise cash and cash equivalents and bank borrowing with a term not exceeding three months and which can be traded into cash without any difficulties and which are only exposed slightly to changes in value. Key Figures Key figures are presented in accordance with the following definitions: Gross contribution margin, %: Gross contribution divided by revenue. EBITDA before special items margin, %: EBITDA before special items divided by revenue. EBITDA margin, %: EBITDA divided by revenue. EBIT before special items margin, %: EBIT before special items divided by revenue. EBIT margin, %: EBIT divided by revenue. Earnings Per Share: Profit/loss for the year divided by the average number of shares excluding treasury shares. Earnings Per Share after dilution: Profit/loss for the year divided by the diluted average number of shares excluding treasury shares. Cash Flow Per Share: Cash flow from operating activities divided by average number of shares excluding treasury shares. Equity ratio, %: The equity divided by the total amount of assets as per balance sheet day. Return on equity: Profit/loss for the year divided by average equity.
Accounting Estimates and Assessments In the statement of the carrying amounts of certain asset and liability items, estimates are required on how future events will affect the carrying amounts of these assets and liabilities at the balance sheet date. Estimates material to the financial reporting are, among others, made in the statement of depreciation/amortization, write-downs and contingent assets and liabilities. The estimates used are based on assumptions assessed by management. However, estimates are inherently uncertain. The assumptions can be incomplete or inaccurate and unexpected events or circumstances might occur. Furthermore, the enterprise is subject to risks and uncertainties that might result in deviations in actual results compared to estimates. As part of the accounting policies applied by the group and besides from estimates, management assesses situations which might influence amounts, recognized in the financial statements materially. Such assessments comprise among others determination of revenue recognition as well as recognition of development costs and share-based transactions. ORIGIO considers a variety of factors in determining the appropriate method of revenue recognition under these arrangements, such as the degree to which elements of the contract can be separated, their value to ORIGIO, the earnings process associated with each element and the degree of further work required to be completed by ORIGIO under the agreement. Generally, ORIGIO measures goods or services rendered at the fair value of goods or services received. For the warrants granted to employees, ORIGIO measures their value by reference to the fair value on the date of allocation of equity securities to be issued upon exercise, taking into account the terms and conditions upon which the warrants were granted, including trading conditions and market parameters such as volatility of the shares and vesting aspects. Recoverable Amount of Goodwill The assessment of whether goodwill is impaired requires a determination of the value in use of the cash-generating units to which the goodwill amounts have been allocated. The determination of the value in use requires estimates of the expected future cash flows of each cash generating unit and a reasonable discount rate. Property, Plant and Equipment The carrying amount of the tangible assets is reviewed annually in order to determine whether it is aligned with reasonable assumptions about underlying values to the company.
59
Assets held for sales The disposal of the previous facilities in Jyllinge, Denmark is expected to be realized to an amount lower than the depreciated cost price. The carrying amount has thus been written down in 2010, although the assessment of the sales price is subject to uncertainty. A sale is expected within the next twelve months and the facilities in Jyllinge, Denmark have thus been reclassified to asset held for sale. Tax Management is required to make an estimate of future taxable income related to the recognition of deferred tax assets and liabilities. Management recognizes deferred tax assets when it is probable that they can be set off against future taxable income.
Impact of new International Financial Reporting Standards ORIGIO has adopted all new or amended and revised International Financial Reporting standards (IFRS/IAS) and interpretations (IFRICs) endorsed by the EU effective for the accounting period beginning on January 1, 2010. Accounting policies have been changed regarding acquisition costs in connection with “Business Combinations” which are expensed from January 1, 2010 as a consequence of the revised IFRS 3. Expensed acquisition costs regarding business combinations amount to DKK 0. During 2010, the International Accounting Standard Board (IASB) issued a number of IFRS, amendments and interpretations (IFRICs) of which some have been endorsed by the EU as per December 31, 2010 and are mandatory for the Groups’ accounting period beginning on or after January 1, 2011 and some are not yet adopted by the EU. The Company has assessed the amendments and interpretations and determined that none of them will have a material impact on the consolidated financial statements going forward.
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Note 2. Segment Information (DKK â&#x20AC;&#x2122;000)
Group
2010 2009 Business segments 2010
Dispos- Equip- Fertility ables ment products
Stem Total Dispos- Equip- Fertility Cells ables ment products
Stem Cells
Total
External revenue
260,967 47,021 307,988
0 307,988 237,690 27,993 265,683
0 265,683
Total revenue
260,967
0
0
47,021
307,988
307,988
237,690
27,993
265,683
265,683
Research and Development expenses 0 0 (16,687) (3,038) (19,725) 0 0 (14,181) (3,816) (17,997) EBITDA before special items
0 0 46,859 (3,038) 43,821 0 0 40,012 (3,816) 36,196
EBIT befores special items 0 0 30,788 (3,038) 27,750 0 0 24,902 (3,816) 21,086 Assets
0 0 529,756 172 529,928 0 0 478,600 195 478,795
Liabilities
0 0 336,511 486 336,997 0 0 299,622 678 300,300
Investments in intangible assets
0 0 26,619 0 26,619 0 0 6,611 0 6,611
Property, plant and equipment
0 0 91,721 0 91,721 0 0 57,114 0 57,114
Geographical split 2010 Revenue Assets
Denmark
Europe
Americas
Rest of World
Total
4,998 151,371 87,148 64,471 307,988 255,626
77,929
186,583
9,790 529,928
Investments in: intangible assets
26,316 303 0 0 26,619
Property, plant and equipment
85,996
140
5,175
410
91,721
Denmark
Europe
Americas
Rest of World
Total
Geographical split 2009 Revenue Assets
3,915 138,609 78,625 44,534 265,683 249,866
51,188
177,741
0 478,795
Investments in: intangible assets Property, plant and equipment
4,154 2,457 0 0 6,611 45,308
8,141
3,665
0
57,114
61
Note 3. Expenses Classified by Function (DKK â&#x20AC;&#x2122;000) Costs of sales
Group
Parent
2010 2009 2010 2009 140,596
110,394
46,346
34,446
Sales and Marketing expenses
87,177
74,423
22,590
23,629
Administrative expenses
44,135 46,276 20,031 23,202
Research and Development expenses
21,562
18,644
19,300
16,871
Incl. depreciation, amortization and special items
Note 4. Special Items (DKK â&#x20AC;&#x2122;000)
Group
Parent
2010
Property, Jyllinge (former headquarters)
5,706
0
Former US automation project
6,681
0
845
0
Establishment of ORIGIO LLC (Russia)
2009
2010
2009
5,706
0
845
0
VitroLife/Merck process
0 2,979
0 2,979
Branding process
0 2,161
0 2,161
Total special items
13,232 5,140 6,551 5,140
Special items is charged as: Cost af sales Sales and Marketing Administrative Depreciation and write-down
1,987
0
500
0
0
2,161
0
2,161
1,161 2,979 845 2,979 10,084
0
5,206
0
M ED I C U LT M ED I A
H U M AGEN PI PE T S
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Note 5. Financial Items (DKK ’000)
Group 2010
Parent 2009
2010
2009
Financial income: Interest income
161 852 118 695
Exchange gains
0
115
5,331
0
Interest income from subsidiaries
0
0
7,682
7,293
Dividend from subsidiaries
0
0
2,691
0
Total
161
967 15,822 7,988
Financial expenses: Interest expenses Fair value adjustments of securities
11,350 7,892 7,580 4,230 0
2,153
0
2,153
Impairment of investments 6,766 0 0 0 Exchange losses Total
223 0 0 1,563 18,339 10,045 7,580 7,946
Note 6. Corporate Tax DKK (‘000)
Group
Parent
2010 2009 2010 2009 Actual corporate tax 6,335 6,529 0 0 Changed in deferred tax
0
(1,053)
0
0
Total corporate tax 6,335 5,476 0 0 Net result before tax
(3,660)
6,868
(4,787)
(9,400)
Computed 25% tax on result
(915)
1,717
(1,196)
(2,350)
Adjustments to previous years
(929)
(1,112)
0
0
Effect of differences in tax rate
1,048
2,138
-
-
Tax effect of:
Tax exempt income 0 0 673 0 Non-deductible costs, incl. warrants
3,422
752
233
449
Deferred tax on entries in equity
874
(317)
0
(12)
Reversal of write-downs 0 0 0 0 Deferred tax asset not recognized
2,853
2,298
1,636
1,913
Total corporate tax 6,335 5,476 0 0 Effective tax rate 25% 25% 25% 25% Components of the deferred tax are as follows: Non-current assets (18,337) (16,896) (15,471) (14,011) Current assets (1,223) (1,252) (29) (137) Tax deductible losses (8,232) (6,831) (3,017) (2,733) Total (27,792) (24,979) (18,517) (16,881) Deferred tax asset recognized
18,977
18,777
15,000
15,000
Tax asset not recognized as asset
9,280
6,667
3,517
1,881
Deferred tax liability
(465)
(465)
0
0
As earnings are expected to increase in future years, it has been decided to maintain a partly capitalized deferred tax asset, corresponding to the expected tax on the parent company’s estimated earnings within a foreseeable future.
63
Note 7. Earnings per Share (DKK ’000)
2010 2009 2008
Profit for the year
(9,995)
Minority interests
1,392
13,508
(582) (243) (584)
Profit for the year to equity holders of the parent
(10,577)
Average number of shares Average number of own shares
1,149
12,924
28,741,736
28,392,897
28,060,229
255,164
317,462
325,000
28,486,572
28,075,435
27,735,229
Average number of shares excluding own shares Average dilution effect of warrants Diluted average number of shares
25,629
0
0
28,537,645
28,075,435
27,735,229
(0.37)
0.04
0.47
Earnings per share (EPS), DKK Earnings per share, adjusted* Earnings per share diluted (EPS), DKK
0.33
0.22
0.47
(0.37)
0.04
0.47
*Adjusted for special items and impairment of investments.
Note 8. Intangible Assets (DKK ’000)
Group
Parent
2010 Goodwill Licenses & Development rights projects in progress
Other Licenses & Development intangible rights projects assets in progress
Other intangible assets
Cost as at January 1
131,560
6,280
6,166
47,268
5,983
6,166
148
Additions from business combinations 0 0 0 0 0 0 0 Additions internal cost
0 0 1,575 0 0 1,575 0
Additions in the year
191
1,894
22,959
191
1,894
22,656
Exchange rate adjustments 7,890 0 0 3,808 0 0 0 Cost as at December 31
139,450
6,471
4,263
9,635
74,035
6,174
0
26,090
4,196
9,635
22,804
0
6
Amortization and impairment as at January 1
0
Amortization
0 379
Impairment
0 0 0 0 0 0 0
Exchange rate adjustments
0 0 0 2,111 0 0 0
0 8,555 359
0 980
Amortizations and impairment as at December 31
0
4,642
0
36,756
4,555
0
986
Carrying amount as at December 31 139,450 Remaining life time, years
1,829
9,635
– 1-10
37,279
1,619
9,635
– 8-15 1-10
21,818
– 8-15
Amortization and impairment is charged as: Cost of sales
–
0
–
13
0
–
13
Sales and Marketing
–
20
–
164
0
–
164
Administrative
– 0 – 7,627 0 – 52
Research and Development
– 359
– 751 359
– 751
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
An impairment test regarding goodwill is performed based on the discounted values of future cash flows for each unit. Future cash flows are based on the budget for 2011 and projections for nine years. Important parameters are sales, EBIT, working capital, tangible assets and growth assumptions after the indicated 10-year period. Budgets are based on specific commercial assessments of the business areas while projections that go beyond 2011 are based on general parameters. A major part of the goodwill is related to the business units in the US. The parameters in the projection for the period 20122020 are sales growth of 5-8%, and corresponding EBIT growth. Parameters in projection for the periode 2012-2020 for goodwill related to other business units are sales growth of 5-10%, and corresponding EBIT growth. Applying a decrease of 50% in expected growth rate from 2012 to 2020 will cause a limited need for impairment of the goodwill. The rate of discount is 7.3%. Alternatively, applying an increase of 1 percentage point on the rate of discount will not cause a need for impairment of goodwill. The tax rate is assumed to be between 30-40%. The test did not result in any impairment.
Note 8. Intangible Assets (DKK ’000)
Group
Parent
2009 Goodwill Licenses & Development Other Licenses & Development Other rights projects intangible rights projects intangible in progress assets in progress assets
Cost as at January 1 Additions internal cost Additions in the year Exchange rate adjustments Cost as at December 31
132,925
5,890
946
47,256
5,593
946
0
0
1,537
0
0
1,537
0 0
426
390
3,683
575
390
3,683
148
(1,791)
0
0
(563)
0
0
0
131,560
6,280
6,166
47,268
5,983
6,166
148
0
0
Amortization and impairment as at January 1
0
Amortization
0 345 0 10,583 325 0 6
3,918
0
15,842
3,871
Impairment
0 0 0 0 0 0 0
Exchange rate adjustments
0
0
0
(335)
0
0
0
0
4,263
0
26,090
4,196
0
6
6,166
141
Amortizations and impairment as at December 31
Carrying amount as at December 31
131,560
2,017
6,166
21,178
1,787
Amortization and impairment is charged as: Cost of sales
–
0
–
3
0
–
3
Sales and Marketing
–
20
–
3
0
–
3
Administrative
– 0 – 10,577 0 – 0
Research and Development
–
325
–
0
325
–
0
65
Note 9. Properties, Plant and Equipment (DKK ’000)
Group Parent
2010 Properties Plant and Assets Other Properties Plant and Assets Other equipment under operating equipment under operating construction assets construction assets Cost as at January 1 39,712 11,197 86,637 16,289 25,445 7,241 81,872 12,484 Additions in the year 15 462 85,432 5,812 0 426 80,309 5,261 Reclassifications 147,276 10,552 (164,933) 7,105 147,276 7,763 (162,056) 7,017 Disposals in the year (25,445) (3,922) 0 (4,970) (25,445) (3,922) 0 (4,505) Exchange rate adjustments 1,163 315 378 38 0 0 0 0 Cost as at December 31 162,721 18,604 7,514 24,274 147,276 11,508 125 20,257 Depreciation as at January 1 9,371 6,336 0 8,869 8,090 5,084 0 7,095 Depreciation in the year 8,200 1,592 4,878 2,551 7,648 686 0 2,021 Depreciation on disposals in the year (13,777) (3,595) 0 (4,629) (13,777) (3,595) 0 (4,505) Exchange rate adjustments 103 (319) 0 21 0 0 0 0 Depreciation as at December 31 3,897 4,014 4,878 6,812 1,961 2,175 0 4,611 Carrying amount as at December 31
158,824
14,590
2,636
17,462
145,315
9,333
125
15,646
Capitalized financial items 15,025 0 0 0 15,025 0 0 0 Depreciation etc., charged as: Costs of sales Sales and Marketing Administrative Research and Development Special items
1,898 920 – 784 1,567 651 – 784 221 0 – 549 221 0 – 19 512 637 – 928 291 14 – 928 363 35 – 290 363 21 – 290 5,206 – 4,878 0 5,206 0 – 0
2009 Properties Plant and Assets Other Properties Plant and Assets Other equipment under operating equipment under operating construction assets construction assets Cost as at January 1 39,541 9,589 34,355 13,512 25,445 7,199 31,306 10,371 Additions in the year 381 856 53,234 2,643 0 42 50,691 1,988 Reclassifications 35 803 (963) 125 0 0 (125) 125 Disposals in the year 0 (10) 0 (363) 0 0 0 0 Exchange rate adjustments (245) (41) 11 372 0 0 0 0 Cost as at December 31 39,712 11,197 86,637 16,289 25,445 7,241 81,872 12,484 Depreciation as at January 1 8,201 5,209 0 6,788 7,403 4,602 0 5,860 Depreciation in the year 1,200 1,166 0 1,816 687 482 0 1,235 Depreciation on disposals in the year 0 0 0 (120) 0 0 0 0 Exchange rate adjustments (30) (39) 0 385 0 0 0 0 Depreciation as at December 31 9,371 6,336 0 8,869 8,090 5,084 0 7,095 Carrying amount as at December 31
30,341
4,861
86,637
7,420
17,356
2,157
81,872
5,389
Capitalized financial items – – 10,697 – – – 10,697 – Carrying amount of leased assets Depreciation etc., charged as: Costs of sales Sales and Marketing Administrative Research and Development
0 0 0 112 0 0 0 112
647 717 46 18 417 424 90 7
– 363 339 462 – 585 46 2 – 643 212 11 – 225 90 7
– 363 – 4 – 643 – 225
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Note 10. Financial Assets (DKK â&#x20AC;&#x2122;000)
Group Parent
2010 Other Loans to Shares in investments subsidiaries subsidiaries
Cost as at January 1
7,036
183,365
60,175
Additions in the year
0
11,175
461
Disposals in the year
0
(28,296)
0
Exchange rate adjustments
0
15,330
0
Cost at December 31
7,036
181,574
60,636
Adjustments at January 1
(289)
0
(34,676)
Exchange rate adjustments
550
0
0
Adjustments as at December 31
261
0
(34,676)
Amortization and impairment as at January 1
0
0
0
Impairment 6,766 0 0 Exchange rate adjustments
(30)
0
0
Amortization and impairment at December 31
6,736
0
0
Carrying amount at December 31
561
181,574
25,960
The operational subsidiaries in the group are listed on page 83. In addition, the group comprise the following subsidiaries: Name
Registered office
Ownership
ORIGIO US Inc.
Delaware, US
100%
ORIGIO MediCult Inc.
Delaware, US
100%
ORIGIO Ltd. Aktieselskabet af 20/11 2003
(DKK â&#x20AC;&#x2122;000)
Hong Kong, China
51%
Copenhagen, Denmark
100%
Group Parent
2009 Other Loans to Shares in investments subsidiaries subsidiaries
Cost as at January 1
6,476
176,417
55,606
Additions from business combinations 0 0 0 Additions in the year
560
11,082
4,569
Disposals in the year
0
(1,264)
0
Exchange rate adjustments
0
(2,870)
0
Cost as at December 31
7,036
183,365
60,175
Adjustments as at January 1
(176)
0
(34,676)
Ajustments on disposals previous years Exchange rate adjustments
(113)
-
-
Adjustments as at December 31
(289)
0
(34,676)
Carrying amount as at December 31
6,747
183,365
25,499
67
Note 11. Inventories (DKK ’000)
Group Parent
2010
Raw materials and consumables Manufactured goods Work in progress Inventories Cost of material included in production cost Expensed write-downs on inventories
2009
6,664 7,203 30,553 22,272 2,405 1,358 39,622 30,833
61,506 55,013 143 21
2010
2009
7,443 5,466 4,367 3,857 34 824 11,844 10,147
13,348 12,593 143 21
Note 12. Trade Receivables (DKK ’000)
Group Parent 2010
2009
2010
2009
The aging of trade receivables at the reporting date was: Not past due
24,224
22,194
5,319
4,938
Past due up to 3 months
18,180
13,456
1,222
1,631
Past due from 3 to 6 months
4,308
4,828
111
189
Past due more than 6 months
6,847
2,753
158
490
53,559 43,231
6,810 7,248
The changes in the provision for impairment in respect of trade receivables during the year were as follows: Balance as at January 1 Impairment loss recognized Balance as at December 31
601
1,393
547
1,340
(450)
(792)
(432)
(793)
151
601
115
547
Based on historic default rates, the group believes that no impairment provision is necessary in respect of trade receivables not past due or past due up to 3 months. Credit risks Outstanding receivables are monitored on a regular basis in accordance with the company’s debtor policy which is based on concrete debtor assessments of private customers. Public-sector customers are an important part of the company’s receivables, and it is believed that no credit risks are associated with public-sector customers. In the event of uncertainty regarding a customer’s ability or willingness to pay a receivable and if it is deemed that the claim is subject to risk, a write-down is made. Public-sector customers account for approximately 63% of the outstanding debtors, with a balance past due of more than 6 months, which in spite of slow payment reduces the risk of loss.
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Note 13. Assets Classified As Held For Sale (DKK ’000)
Group
2010
Parent 2009
2010
2009
Assets classified as held for sale: Property
11,995 0 11,995 0
Liabilities associated with assets held for sale Credit institutions
11,395 0 11,395 0
Note 14. Non-current Liabilities 2010 2009
Outstanding Interest debt
Market value
Outstanding Interest debt
2010 Principal % p.a. (DKK ‘000) (DKK ’000) Principal Realkredit Danmark (DKK) 100,191,113 3) Var. 100,191 96,033 107,945,000 Realkredit Danmark (EUR) - - - - 1,295,700 Realkredit Danmark (EUR) - - - - 743,800 Realkredit Danmark (EUR) - - - - 403,800
3) 1) 1) 1)
Var. 4.5 4.5 4.5
107,945 6,301 3,617 2,446
102,818 6,311 3,623 2,450
Danske Bank (USD) Danske Bank (USD) Danske Bank (DKK) Danske Bank (DKK) Monte Dei Paschi di Siena (EUR) UniCredit Banca d’Impresa (EUR)
2) 2.16 2) Var. 6.7 - - 5) 2.0
50,545 4,195 - - - 744
50,545 35,894 4,195 744
1) 2) 3) 4) 5)
9,950,000 6,915,868 6,175,000 36,000,000 1,118,160 1,491,000
2) 2.16 4) Var. 2) 6.7 3.5 5) 2.1 5) 3.9
41,000 38,821 3,830 35,512 979 320
41,000 38,821 4,170 35,512 979 320
9,950,000 6,915,868 6,175,000 - - 1,391,000
% p.a.
Market value
(DKK ‘000) (DKK ’000)
Realkredit Danmark (EUR) is reclassified to Current Liabilities, as the related property is for sale Fixed interest For the first two quarters of 2011, the interest rate is adjusted to 1.55% The interest rate is fixed to 4.97, please refer to note 15 Adjustment of interest every 1 to 6 months. From January 1, 2011, the interest rate is adjusted to 0.26% Adjustment of interest every quarter
(DKK ‘000)
Group
Parent
Leases Credit institutions Leases Credit institutions 2010 2009 2010 2009 2010 2009 2010 2009 Liabilities due after more than 5 years 0 0 134,354 118,684 0 0 134,171 118,683 Liabilities due between 2-5 years 0 0 68,793 77,330 0 0 68,150 77,011 Liabilities due within 1 year 0 111 17,110 15,148 0 111 16,636 14,723
69
Note 15. Financial Instruments From time to time, the ORIGIO Group enters into financial instrument contracts with the aim of minimizing its exposure to interest and currency fluctuations. Currency risks
Generally, the investments in foreign group enterprises are not hedged though in connection with ORIGIO Inc., a partial hedging of the investment has been entered into, by taking up loans of USD 14 million. Adjustments arising on net investments as a result of changes in the exchange rates are recognized in other comprehensive income. An increase in USD currency rate versus DKK of 10% will effect the net profit by approximately DKK 0.4 million and will affect the equity by DKK 7.3 million including effect of translation between USD and DKK. The exposures of the ORIGIO Group to currency fluctuations are mainly related to foreign receivables and payables. (DKK â&#x20AC;&#x2122;000) Currency 2010
Group Securities Receivables Liabilities Net and cash position
USD
26 155,099 89,033 66,092
EUR
2,224 55,452 20,353 37,323
GBP
1
1 124 (122)
DKK
0
0 159 (159)
Other
46 2,602 136 2,513
2009 USD
80 147,479 92,226 55,333
EUR
220 35,812 15,033 20,999
GBP
4
DKK
0 0 0 0
Other
0 405 (401)
528 104 48 586
Of the USD liabilities, USD 14.2 million is regarded as hedge of the equity in the US subsidiary. Credit risks ORIGIO is exposed to credit risks in respect of receivables and bank balances. The maximum credit risk corresponds to the carrying amount. Cash is not deemed to be subject to any credit risks, as the counterparts are banks with good credit ratings. Interest rate risks The exposure of the ORIGIO Group to interest fluctuations mainly relates to cash and securities as well as loans as specified in note 14. ORIGIO has entered into an interest swap agreement as specified below: 2010 Danske Bank A/S
Group Received interest
Paid interest
Principal Maturity amount (DKK)
Cibor6
4.97
107,945,000
December 31, 2027
Cibor6
4.97
107,945,000
December 31, 2027
2009 Danske Bank A/S
The fair value of the interest rate swap has been calculated by the bank according to general accepted valuation principles. The interest rate is recognized as a hedge and consequently fair value adjustments are recognized in equity. From May 2009, the interest rate related to the acquisition loan in Danske Bank of USD 9,950,000 has been fixed at 2.16% plus bank margin.
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Note 15. Financial Instruments (DKK â&#x20AC;&#x2122;000)
Group
Fair Carrying 0-1 year 1-5 years > 5 years Total value amount Credit institution
26,832 68,793 134,354 229,979 225,802 229,979
Bank debt
20,554
0
0 20,554 20,554 20,554
Trade payables
27,097
0
0 27,097 27,097 27,097
Other payables
46,978
0
0 46,978 46,978 46,978
Total financial liabilities
121,461 68,793 134,354 324,608 320,431 324,608
Cash
18,560
0
0 18,560 18,560 18,560
Trade receivables
53,408
0
0 53,408 53,408 53,408
Other receivables Total financial asssets
4,663 76,631
0
0 4,663 4,663 4,663
0
0 76,631 76,631 76,631
Liquidity risk as at December 31, 2010
(44,830)
(68,793)
(134,354)
(247,977)
(243,800)
(247,977)
(26,111)
(77,330)
(118,684)
(222,125)
(217,017)
(222,125)
Liquidity risk as at December 31, 2009
71
Note 16. Contingent Assets and Liabilities, Security etc. (DKK ’000)
Group Parent
2010
2009 2010 2009
Lease obligations
7,479 2,445 1,133 447
Lease obligations falling due within 1 year from the balance date
2,669
1,552
514
410
4,451
893
619
37
359
0
0
0
Lease obligations falling due between 2-5 years from the balance date Lease obligations falling due more than 5 years from balance date Lease expenses
3,227 1,660 558 481
Pledge as security The shares in ORIGIO Inc. have been pledged as security for the USD bank loans as listed in note 14. The property in Jyllinge, Denmark, carrying amount of DKK 12 million, has been pledged as security for the Realkredit Danmark (EUR) loans. The property in Måløv, Denmark, carrying amount of DKK 163.0 million, has been pledged as security for the Realkredit Danmark (DKK) loan on DKK 100.2 million.
Note 17. Staff and Remuneration (DKK ’000)
Group Parent 2010 2009 2010 2009
Total staff salaries, etc., excluding warrants, can be specified as follows: Salaries
100,167 86,878 46,976 43,337
Pension schemes
6,610 9,410 3,887 3,635
Other social security costs
5,075
8,055
478
470
111,852 104,343 51,341 47,442
Remuneration included in above to the: Executive Board Board of Directors
3,752 3,602 3,752 3,602 813
597
813
597
4,565 4,199 4,565 4,199
Warrants, Executive Board 184 480 184 480 Warrants, Board of Directors* Average number of employees
0
84
0
84
4,749 4,763 4,749 4,763 221
* No warrants programmes have been issued to the Board of Directors since 2007
220
90
87
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Note 17. Staff and Remuneration Outstanding warrants
(number of warrants â&#x20AC;&#x2122;000)
Program Program Program of 2005 of 2007 of 2008
Outstanding as at January 1, 2010
646
413
1,353
Allotted during the year
0
Utilized during the year
0
Cancelled during the year
0
Outstanding as at December 31, 2010
646
294
Total
294
413
Program Program Program of 2005 of 2007 of 2008
1,353
Total
Specified as follows: Board of Directors
0
50
0
50
Executive Board
500 65 100 665
Managers
146 163 291 600
Other employees Total Black & Scholes parameter Term (months) Volatility Exercise price (NOK) Dividend Risk free interest rate
0 16 22 38 646 294 413 1,353 Program Program Program of 2005 of 2007 of 2008 48 48 48 50.9 39.3 57.1 11.9
20.3
16.2
not expected
not expected
not expected
3%
4%
4%
0.0%
0.0%
0.0%
Dilution of year end share capital at year end share price
The expected volatility rate is based on the historical volatility. In 2010, the fair value of warrants recognized in the income statement amounts to DKK 738,000 of which DKK 184,000 relates to the Executive Board. The amount is charged as:
(DKK â&#x20AC;&#x2122;000) Costs of sales
212
Sales and Marketing expenses
129
Administrative expenses
240
Research and Development expenses
157
Total 738
73
Note 18. Fee to the Independent Auditor (DKK ’000)
Group
2010 2009
Fee to the parent company’s independent auditor: Audit fee
370
350
Tax consultancy
47
85
Other assurance services
57
18
Other fees
446
271
Total
920 724
Note 19. Related Parties and Transactions ORIGIO a/s has no related parties with controlling interests. ORIGIO’s related parties with significant influence comprise group enterprises as well as the company’s Board of Directors and Executive Board. No transactions were conducted with the Board of Directors, Executive Board, major shareholders or other related parties in the year, apart from intercompany transactions eliminated in the consolidated financial statement as well as usual remuneration, please refer to note 17, and legal fees of DKK 1,785,000.
Trade with group enterprises comprise: (DKK ‘000) Revenue Cost of goods Reimbursement of operational costs
Subsidiaries 2010 2009 38,979 32,494 1,161
331
(6,381)
0
Interest income
7,682
7,292
Dividend
2,691 0
Non-current receivables
181,574
183,365
Trade receivables
23,673
14,367
Trade payables
10,322
19,476
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Note 20. Depreciation and Other Adjustments (DKK ’000)
Group Parent 2010 2009
2010 2009
Depreciation and amortization
16,071
15,110
6,487
Depreciation and amortization in special items
10,084
0
5,206
0
6,766
0
0
0
738
2,058
738
2,058
Impairment of investments Warrant compensation expenses Miscellaneous provisions Financial income Financial expenses Tax Total adjustments to cash flows
2,735
0
(31)
0
0
(161)
(967)
(15,822)
(7,988)
11,573
10,045
7,580
7,946
6,335 5,476 51,406
31,691
0 4,189
0 4,751
Note 21. Changes in Net Working Capital (DKK ’000) Increase in inventories and receivables Decrease/increase in payables and other debt Changes in net working capital
Group Parent 2010 2009 2010 2009 (14,103)
(6,906)
(6,161)
(662)
9,813
6,433
1,491
4,706
(4,290)
(473)
(4,670)
4,044
Note 22. Cash, Cash Equivalents and Bank Borrowings (DKK ’000) Cash and cash equivalents
Group Parent 2010 2009 2010 2009 18,560
15,551
3,783
6,674
Bank borrowings
(20,554) (4,502) (17,527) (3,088)
Cash, cash equivalents and bank borrowings
(1,994)
11,049
(13,744)
3,586
75
M ED I C U LT M ED I A
H U M AGEN PI PE T S
M I DAT L A N T I C DEVICES
Statement by the Board of Directors and Executive Board Today the Board of Directors and Executive Board
Company’s operations and cash flows for the
have discussed and approved the Annual Report
financial year January 1 – December 31, 2010.
of ORIGIO a/s for the financial year January 1 – December 31, 2010.
In our opinion the management’s review includes a fair review about the development in the Parent
The Annual Report has been prepared in
Company’s and the Group’s operations and
accordance with International Financial Reporting
economic conditions, the results for the year and
Standards as adopted by the EU, the Oslo Stock
the Parent Company’s financial position, and the
Exchange´s requirements for financial reporting
position as a whole for the entities included in
by listed companies, and Danish disclosure
the consolidated financial statements, as well as a
requirements for listed companies.
review of the more significant risks and uncertainty the Parent Company and the Group face, in
In our opinion the consolidated financial statements
accordance with Danish disclosure requirements for
and the parent company financial statements give
listed companies.
a true and fair view of the Group’s and the Parent Company’s financial position at December 31, 2010,
We recommend that the Annual Report be
and of the results of the Group’s and the Parent
approved at the Annual General Meeting.
Måløv, on February 22 2011
Executive Board
Jesper Funding Andersen
Board of Directors
Flemming Pedersen
Jens Zilstorff
Jørgen Drejer
Jaime Grego-Mayor
Bente Jensen
(Chairman)
Flemming Juul Jensen
Kirsten Bakbøl 77
Independent Auditor’s Report To the Shareholders of ORIGIO a/s
fraud or error, selecting and applying appropriate accounting policies, and making accounting
Report on consolidated financial statement and
estimates that are reasonable in the circumstances.
parent company financial statement We have audited the consolidated financial
Auditor’s responsibility and basis of opinion
statements and the parent company financial
Our responsibility is to express an opinion on the
statements of ORIGIO a/s for the financial year
consolidated financial statements and the parent
January 1 to December 31, 2010, which comprise
company financial statements based on our audit.
the income statement, statement of comprehensive
We conducted our audit in accordance with Danish
income, statement of financial position, statement
Standards on Auditing. Those standards require
of cash flows, statement of changes in equity
that we comply with ethical requirements and
and notes, for the Group as well as for the Parent
plan and perform the audit to obtain reasonable
Company. The consolidated financial statements
assurance about whether the consolidated financial
and the parent company financial statements
statements and the parent company financial
are prepared in accordance with International
statements are free from material misstatement.
Financial Reporting Standards as adopted by the EU, the Oslo Stock Exchange´s requirements for
An audit involves performing procedures to obtain
financial reporting by listed companies and Danish
audit evidence about the amounts and disclosures
disclosure requirements for listed companies.
in the consolidated financial statements and the parent company financial statements. The
Board of Directors’ and Executive Board’s
procedures selected depend on the auditor’s
responsibility for the consolidated financial
judgment, including the assessment of the risks
statements and parent company financial
of material misstatements in the consolidated
statements
financial statements and the parent company
The Board of Directors and Executive Board are
financial statements, whether due to fraud or error.
responsible for the presentation and preparation
In making those risk assessments, the auditor
of consolidated financial statements and parent
considers internal control relevant to the entity’s
company financial statements that give a true
presentation and preparation of consolidated
and fair view in accordance with International
financial statements and parent company financial
Financial Reporting Standards as adopted by the
statements that give a true and fair view in order
EU, the Oslo Stock Exchange´s requirements for
to design audit procedures that are appropriate
financial reporting by listed companies and Danish
in the circumstances, but not for the purpose of
disclosure requirements for listed companies. This
expressing an opinion on the effectiveness of the
responsibility includes, designing, implementing
entity’s internal control. An audit also includes
and maintaining internal control relevant for the
evaluating the appropriateness of accounting
presentation and preparation of consolidated
policies used and the reasonableness of accounting
financial statements and parent company financial
estimates made by the Board of Directors and
statements that give a true and fair view, free
Executive Board, as well as the overall presentation
from material misstatement, whether due to
M ED I C U LT M ED I A
H U M AGEN PI PE T S
of the consolidated financial statements and the
Statement on the management’s review
parent company financial statements.
The Board of Directors and Executive Board are also
M I DAT L A N T I C DEVICES
responsible for the preparation of a management’s We believe that the audit evidence we have
review that includes a fair review in accordance
obtained is sufficient and appropriate to provide a
with the Danish disclosure requirements for listed
basis for our opinion.
companies.
The audit has not resulted in any qualification.
The audit has not included the management’s review. Pursuant to the Danish Financial Statements
Opinion
Act, we have however read the management’s
In our opinion, the consolidated financial
review. We have not performed any further
statements and the parent company financial
procedures in addition to the audit of the
statements give a true and fair view of the Group’s
consolidated financial statements and the parent
and the Parent Company’s financial position at
company financial statements.
December 31, 2010 and of the results the Group’s and Parent Company’s operations and cash flow for
On this basis, it is our opinion that the information
the financial year January 1 to December 31, 2010 in
provided in the management’s review is consistent
accordance with International Financial Reporting
with the consolidated financial statements and the
Standards as adopted by the EU, the Oslo Stock
parent company financial statements.
Exchange´s requirements for financial reporting by listed companies, and Danish disclosure
Copenhagen, on February 22, 2011
requirements for listed companies. Grant Thornton Incorporated State Authorised Public Accountants
Gert Fisker Tomczyk
Henrik Ødegaard
State Authorised Public Accountant
State Authorised Public Accountant
79
for life ”At the end of the day, its all about life; the opportunity of new life for patients and our own new life as ORIGIO. Life is everything. That’s what we stand for.”
MEDICULT MEDIA
HUM AGEN PIPE TS
MIDATL ANTIC DE V ICES
Leads the way in the development and provision of specialized and innovative ART media.
Focuses on the creation of the highest quality speciality pipets and microtools for ART.
Provides innovative devices, equipment, and services to ART labs.
ORIGIO is a world leader in Assisted Reproductive Technology (ART) solutions. Through research and innovation, ORIGIO aims to provide the best products to medical professionals to help the #1 dream of every infertile couple come true. ORIGIO currently comprises the three product families, MediCult Media, Humagen Pipets and MidAtlantic Devices, that cater for the broadest range of ART requirements. ORIGIO, which is headquartered in Måløv, Denmark and has subsidiaries in 10 countries, is listed on the Oslo Stock Exchange under the symbol ORO. For further information, please visit www.origio.com.