Ypsomed Annual Report 2014-2015 by Ypsomed AG

Ypsomed Holding AG – Annual Report 2014 / 15

Ypsomed Holding AG

Annual Report 2014 / 15

Ypsomed – Annual Report

Contents

6 Key figures 8 Letter to shareholders 11 How the unpegging of the Swiss Franc from the Euro impacts the results 12 mylife™ Diabetescare 14 mylife™ Diabetescare 14 mylife™ Clickfine® DiamondTip pen needles 15 mylife™ YpsoPump® 16 Ypsomed subsidiaries 20 YDS Ypsomed Delivery Systems 22 New customers, new projects 23 Strong growth 24 Dynamic expansion in Solothurn 27 Ypsomed in the Far East 28 Sustainability Report 30 Sustainability and social responsibility 30 Employees in professional training 31 HR policy 32 Employee survey 2014 33 Operational safety 34 Corporate social responsibility 35 Sustainable use of resources 36 Financial Report 38 EBIT increased by over 80 % 40 Consolidated income statement 41 Consolidated balance sheet 42 Consolidated statement of cash flows 43 Consolidated statement of changes in equity 44 Basis for the consolidated ﬁnancial statements 49 Notes to the consolidated financial statements 64 Statutory closing of Ypsomed Holding AG 71 Five-year overview 72 Corporate Governance 74 Corporate Governance 76 Capital structure 78 Shareholder structure 80 Board of Directors 88 Executive Management 91 Compensation, participations and loans 92 Shareholders’ rights of participation 93 Change of control and blocking mechanisms 93 Auditors 94 Information policy 95 Compensation Report 102 Glossary 5

Ypsomed – Annual Report

Key figures Sales of goods and services

306.6 276.3

Ypsomed Group

244.6

248.6

Segment Delivery Devices

In million CHF

153.4

151.7

141.9

137.8

137.7

Segment DDB Segment Others

118.4

78.2 91.4 15.3

16.0

2012 / 13

2013 / 14

17.0

2011 / 12

17.2

EBIT

2014 / 15

9.3 %

Ypsomed Group

28.5

Segment Delivery Devices

5.7 %

In million CHF

Segment DDB 15.6 13.8

Segment Others

13.4 13.0

2.1 %

2.0 %

5.1

9.5

EBIT margin Group

9.3 6.3

4.8

2.1 0.4 2011 / 12

0.1 2012 / 13 –2.9

–1.7

2013 / 14

2014 / 15

– 9.0

Net profit, free cash flow & dividend payment

19.4 15.1

13.6

11.3 In million CHF

8.5

7.6 2.5

2011 / 12

1.6

2012 / 13

2013 / 14

– 11.1

Free cash flow Dividend payment

3.8

2.5

Net profit

11.1

2014 / 15

Ypsomed – Annual Report

Investments

Balance sheet structure

27.7 23.7

25.0 23.5

18.5

327.3 In million CHF

25.6

25.2 In million CHF

66.6 %

28.8 27.9

17.2

15.9

64.4 %

63.6 %

354.6

341.8

218.0

217.4

2 011 / 12

2012 / 13

228.2

66.6 %

361.2

240.7

7.5

2011 / 12

2012 / 13

In fixed assets

2013 / 14

2014 / 15

Depreciation / amortisation of fixed and intangible assets

R&D expenditures

Employee headcount

2014 / 15

Equity ratio

Equity

Identification of employees

1 0 26

1 015

999

241

251

287

785

764

2 011 / 12

2012 / 13

Switzerland

2013 / 14

Total assets

1 0 50

712

738

2013 / 14

2014 / 15

International

312

Total

73 Average (rated on a scale of 100)

2008

2010

2012

2014

Identification: I feel a strong sense of identification with this company

Development of YPSN

91.1

In CHF

85.0

80.0

75.0

April 2014

March 2015

Growth trajectory continues Outstanding business year 2014/15 In business year 2014 / 15, the Ypsomed Group posted consolidated sales of CHF 306.6 million, which represents an increase of 11 % year on year. The operating result (EBIT) rose by more than 80 % to CHF 28.5 million in comparison with the previous year (CHF 15.6 million). Net profit came to CHF 19.4 million. At the EBIT level, Ypsomed’s profitability now lies at 9.3 % (prior year: 5.7 %) and at the net profit level at 6.3 % (prior year: 4.9 %). The rise in profitability is primarily due to a consistent and ongoing cost and process optimisation process. Broken down by segments, the result can be presented as follows: In Diabetes Direct Business, sales increased by 16.3 % from CHF 118.4 million to CHF 137.6 million. In addition, following the turnaround in 2013 / 14 (EBIT CHF 6.3 million) the operating result more than doubled, with CHF 13.0 million being posted for 2014 / 15, showing that the investments of the previous years are paying off in a most impressive manner. The Delivery Devices segment posted an increase in sales of 6.9 % from CHF 141.9 million to CHF 151.7 million for 2014 / 15, which confirms that the growth trajectory started in 2012 still continues. In addition, there was a marked improvement in the EBIT segment. This rose from CHF 9.3 million in the previous year to CHF 13.4 million. The segment Others – this contains the precision mechanics supplier Ypsotec and the non-operationally-used properties – posted a slight increase in sales from CHF 16.0 million to CHF 17.2 million and an improvement in EBIT from CHF 0.1 million to CHF 2.1 million. The sale of land at the Solothurn site resulted in a profit of CHF 1.5 million.

Excellent result despite negative currency effects The result is all the more impressive given the background of the unpegging of the Swiss Franc from the Euro by the Swiss National Bank on 15 January 2015. Although admittedly only the last 2.5 months of the reporting year were affected by this challenging situation for all export-oriented Swiss companies, there is no doubt that the results would have been even better if the Euro exchange rate of CHF 1.20 had been retained. In this case, sales would have been CHF 311.2 million and EBIT CHF 30.3 million. In view of the structural problems in the eurozone, Ypsomed now faces the challenge of adjusting to a strong Swiss Franc both for the business year 2015 / 16 and for the longer term. However, it was not as a reaction to the thunderbolt in January that our company put in place appropriate measures. It has been doing this for a long time as part of an ongoing process. We try to ensure that the costs and sales of a business and / or business segment are always incurred in the same currency wherever possible. In addition, we carry out investments in property, plant and equipment with suppliers in the eurozone. In this respect, the “Swift” programme for process optimisation is extremely important. A detailed account of the effects of exchange rate fluctuations on Ypsomed’s business can be found on page 11.

Ypsomed – Annual Report

mylife™ Diabetescare Under the mylife™ Diabetescare brand, Ypsomed has successfully built up its direct business with products and services for people with diabetes mellitus. The product with the highest turnover in the mylife™ portfolio is the tubeless mylife™ OmniPod® insulin patch pump, sales of which have risen by around 50 % in comparison with the previous year. But sales with blood glucose monitoring systems also increased in this area by 8.5 %, despite zero global growth, in particular due to good results in the tendering business. mylife™ launches new products: Since the end of February 2015, Ypsomed’s new needles for its mylife™ Clickfine® DiamondTip injection pen have been on the market in Germany, Austria and Switzerland. Our new pen needles feature some amazingly innovative characteristics: A 6-bevel precision needle tip improves the smoothness and glide of the needle, the result being a noticeably more pleasant and reliable injection. This was confirmed in an independent user study carried out in Germany with more than 100 participants. The prospects are highly promising, since 91 % of the users questioned said they would switch to the DiamondTip in the future or would consider doing so. The mylife™ Clickfine® DiamondTip will gradually replace the former 3-bevel Clickfine needle in all our markets in business year 2015 / 16. Find out more on page 14. With the mylife™ YpsoPump®, we are introducing a new insulin pump in business year 2015 / 16: This is the result of more than 30 years of experience in the field of diabetology combined with the latest technology and tailored to current customer needs. The launch will mark the culmination of an intensive development phase, whereby not only the central pump unit, but all the components of the whole insulin pump system had to be redesigned and fully coordinated with each other: insulin pump, infusion set, compatible inserter, optional fillable or pre-filled insulin cartridges as well as treatment management software. For the first time in the history of insulin pump treatment, it is possible to identify a

clear segmentation of the market. On the one hand, patients increasingly opt for the freedom of the patch pump mylife™ OmniPod®. On the other hand, a growing trend towards even greater metabolic control by means of the complex functions and algorithms of standard, tube-connected insulin pumps can be observed. Between these two extremes, there is a broad market for easy-to-use, easy-to-understand, potentially more cost-efficient, “pure” insulin pumps. The mylife™ YpsoPump® was developed with this market segment in mind. As the only insulin pump manufacturer, Ypsomed is also in the happy position of being able to offer the ideal solution for two of the three segments and is thus unique with its offering. Find out more about mylife™ YpsoPump® on page 15. Ypsomed Delivery Systems Our pharmaceutical and biotech customers obtain injection systems and associated services from the YDS brand – Ypsomed Delivery Systems. YDS has enjoyed an intensive and successful year and the well-filled project pipeline means we can look to the future with full confidence. The following describes a selection of our current major projects: The long-standing partnership between the French pharmaceutical company Sanofi and Ypsomed has been further strengthened by a major new project: From the end of 2016, components for injection systems will be manufactured on an additional production line at the Solothurn site. In the first quarter of 2015, operations began at the Solothurn site on the automated production of the UnoPen™ injection pen. The special feature of the UnoPen™ system is its flexibility. It is possible to produce a wide variety of UnoPen™ styles, which means that all the different customer requirements can be taken into account. It

Ypsomed – Annual Report

is remarkable that the development and commissioning of this complex plant took less than two years. The Russian company Pharmstandard will be the first of Ypsomed’s customers to use the UnoPen™ as the injection system for its medication. In general, disposable injection systems are a strong future market. Find out more about the importance and the development of the UnoPen™ and its production site on page 24. The market for glucagon-like peptide-1 (GLP-1), a drug that is becoming increasingly important in the treatment of type 2 diabetes, is growing fast. In the reporting year, two Ypsomed pens based on GLP-1 products for our pharmaceutical partners GlaxoSmithKline and AstraZeneca were successfully brought to market.

Forecast In the coming business year 2015 / 16, the expenses for the launch of the mylife™ YpsoPump® and the opening up of new markets will have an impact on results. We anticipate growth in sales of around 10 % and an operating result (EBIT) of around 35 million, depending on the currency trend. It is worth stating that, if the Euro exchange rate had remained at CHF 1.20 the result would be around CHF 9.0 million higher. We wish to thank you, our valued shareholders, for your confidence in us.

Lupin, one of the largest pharmaceutical companies in India, is now using the YpsoPen® from Ypsomed to market its insulin preparation named Lupisulin. This project is an excellent example of a whole raft of projects with pharmaceutical partners from the newly industrialising countries. They are particularly responsive to solutions for price-sensitive markets and Ypsomed has precisely the right offering. The globally active Japanese medical technology company Terumo Corporation has integrated the autoinjector YpsoMate® from Ypsomed into its pre-fillable polymer syringe systems. In the reporting year, Terumo has gained two pharmaceutical customers with this combination. The list of further promising autoinjector projects with prominent pharmaceutical partners is long.

Dr. h. c. Willy Michel Chairman of the Board of Directors

Simon Michel Chief Executive Officer

Ypsomed – Annual Report

How the unpegging of the Swiss Franc from the Euro impacts the results The unpegging of the Swiss Franc from the Euro by the Swiss National Bank on 15 January 2015 took the Ypsomed Group by surprise and presented us with some significant challenges: Ypsomed sells its products worldwide, primarily in the eurozone. Ypsomed is keen to minimise the impact of exchange rate fluctuations on the business result by means of a natural hedge and Sales structure

Cost structure

Sales EBIT

Other currencies 2 % GBP 2 %

9.3 %

Other currencies GBP 3 % 7 %

10.3 %

43 43.3

35 29

CHF 41 % EUR 40 %

EUR 60 %

9.6 %

337***

USD 15 %

CHF 25 %

12.1 %

359**

in CHF million

USD 5 %

The unpegging of the Swiss Franc from the Euro had only a limited impact on the business year 2014 / 15, since only two and a half months were affected by the lower Euro / Franc rate. The impact will be felt in full in the business year 2015 / 16. Details of this are set out in the overview below:

307*

311**

2014 / 15

makes every effort to ensure that sales and costs are incurred in the same currency. In the graphic entitled “Currency impact on Ypsomed product categories”, the sales and manufacturing and / or purchase costs are broken down into the relevant currencies. The greatest currency impact can be seen with the pen needles, where the majority of sales are made in Euros but the manufacturing costs are primarily incurred in Swiss Francs. In the pump business with the mylife™ OmniPod®, the exchange rate trend between the Euro and the US dollar is decisive and in future the Euro rate will have an even greater impact on the result with the growth of the mylife™ YpsoPump®. In the other business and / or production categories the result can be almost completely hedged.

2014 / 15

2015 / 16

Currency effect EBIT margin *EUR = CHF 1.18; **constant exchange rate: EUR = CHF 1.20; ***Budget rate of EUR = CHF 1.07

In the reporting year, the negative currency effect on the result and the operating result amounted to CHF 4.6 million and CHF 1.7 million, respectively. In the business year 2015 / 16, the negative currency effect will account for around CHF 22.0 million and CHF 9.0 million, respectively.

Currency impact on Ypsomed product categories mylife™ Diabetescare

YDS Injection systems

Pen needles

YpsoPump®

Infusion sets

Blood glucose monitoring

OmniPod®

DiaExpert

Sales

CHF

EUR / USD

EUR / other

EUR

Manufacturing / purchase costs

CHF

USD

EUR

USD

EUR

Yorkshire Dales â&#x20AC;&#x201C; United Kingdom

Under the brand mylife™ Diabetescare, Ypsomed successfully deals in direct business with products and services for people with diabetes mellitus. The product portfolio includes:

Insulin pumps Infusion sets Pen needles Blood glucose monitoring systems

Patient base

mylife™ OmniPod® – continued growth

2011 / 12 2012 / 13 2013 / 14 2014 / 15 2015 / 16 Business year

Diabetes – pandemic growth over the next 20 years

387 million people (8.3 % of the global population) 592 million people

According to estimates of the International Diabetes Federation, by 2035 592 million people will be suffering from diabetes – an increase of over one-third. 2014

2035

Undiagnosed diabetes worldwide

46 % Source: IDF Diabetes Atlas, 2014

Diabetes Care

Strong mylife™ distribution network in 12 countries

Ypsomed – Diabetes Care

mylife™ Diabetescare Successful in patient service Under the brand mylife™ Diabetescare, Ypsomed successfully deals in direct business with products and services for people with diabetes mellitus. The product portfolio includes: mylife™ Clickfine® and Penfine® Classic pen needles, manufactured by Ypsomed at its Solothurn site. The blood glucose monitoring systems mylife Unio™ and mylife™ Pura®, manufactured by the Taiwanese company Bionime according to Ypsomed ™

specifications and distributed by Ypsomed sales companies. The tubeless insulin patch pump mylife™ Omni Pod®, manufactured by the American company Insulet, for which Ypsomed holds global distribution rights (excluding the USA, Canada and Israel). Soon to be launched: insulin pump mylife™ YpsoPump® with the infusion sets mylife™ Orbit® soft and Orbit® micro, which have been completely redesigned by Ypsomed.

mylife™ Clickfine® DiamondTip pen needles 6-bevel needle tip receives best marks in user study Since the end of February 2015, Ypsomed’s new needles for its mylife™ Clickfine® DiamondTip injection pen have been on the market in Germany, Austria and Switzerland. Our new pen needles feature some very innovative characteristics: A 6-bevel precision needle tip improves the smoothness and glide of the needle, the result being a more comfortable and reliable injection. This was confirmed in an independent user study carried out in Germany with more than 100 participants.

User questionnaire on pain perception

1 %

20.4 % 44.6 %

Highly promising prospects As well as maximum injection comfort, the new needle features tried-and-tested Clickfine® thin wall technology for an optimum, faster flow of medication. The prospects are highly promising, since 91 % of the users questioned said they would switch to the DiamondTip in the future or would consider doing so. The mylife™ Clickfine® DiamondTip will gradually replace the former 3-bevel Clickfine needle in all our markets in business year 2015/16.

mylife™ Clickfine® DiamondTip in three lengths

34 %

Felt a lot less pain

Didn’t notice any difference

Felt less pain

Felt more pain

Diabetes Care

Ypsomed – Diabetes Care

mylife™ YpsoPump® Simple to learn, simple to use, beautifully discreet

Ypsomed is launching the new mylife™ YpsoPump® insulin pump in the autumn of 2015. This is the result of more than 30 years of experience in the field of diabetology, combined with the latest technology and tailored to current customer needs. The launch marks the culmination of an intensive development phase, whereby not only the central pump unit, but all the components of the insulin pump system were redesigned and fully tailored to each other: insulin pump, infusion set, appropriate piercing head, optional fillable or pre-filled insulin cartridges as well as diabetes management software.

An “excellent” insulin pump The good impression is not simply a spontaneous reaction, but is also verified by in-depth studies. In the case of the central user study on mylife™ YpsoPump®, in which 30 patients and carers had to complete numerous tasks after a short training session, the mylife™ YpsoPump® clearly came out on top: 88 % of patients and 87 % of carers rated the pump as “excellent”. Ypsomed covers several segments

Simple for doctors and patients The needs of patients take centre stage. Due to this, many meticulous tests were carried out with pump users and medical specialists during the development phase. The result is an insulin pump that focuses on the essential functions. The new insulin pump system is easy to learn and leaves doctors and patients with more time for treatment management. The symbol-based menu and state-of-theart touch screen of the mylife™ YpsoPump® mean that its operation is simple, intuitive and fast. Thanks to the option of inserting pre-filled insulin reservoirs into the mylife™ YpsoPump®, there is no longer the necessity to spend precious time filling the cartridges. In addition, the light and discreet design of the YpsoPump® means that it is an unobtrusive companion in all everyday situations. This is a particularly important point in user tests and always generates very positive feedback.

For the first time in the 30 year history of insulin pump treatment, it is possible to identify a clear segmentation of the market. On the one hand, patients are increasingly opting for the freedom of the patch pump mylife™ OmniPod®, with the corresponding positive effects on mylife™ market share and turnover. This latest segment in the pump market has become firmly established over time with a market share of up to 20 % in some countries. On the other hand, a growing trend towards even greater metabolic control by means of the complex functions and algorithms of standard, tube-connected insulin pumps can be observed. Between these two extremes there is a broad market for easy-to-use, easy-to-understand, potentially more cost-efficient, “pure” insulin pumps. The mylife™ YpsoPump® was developed with this market segment in mind. Ypsomed is the only insulin pump company and manufacturer in the unique market position of being able to offer the ideal solution for two of the three segments.

Ypsomed – Diabetes Care

Ypsomed subsidiaries The organisation and the people behind mylife™ success It is not just the ground-breaking products that are crucial for the great success of mylife™ Diabetescare, but also the know-how and prestige of our sales organisation. Via a close network currently comprising twelve subsidiaries and dozens of distributors, we are able to reach a constantly growing customer base. The way the sales organisations operate strategically and tactically differs from country to country because there are highly different, market-specific “rules” in each of the specific countries and regions. These are described in the following brief portraits of our subsidiaries. This contribution is illustrated with photos of the global Ypsomed campaign for World Diabetes Day (WDD) on 14 November, 2014. WDD was set up by the International Diabetes Federation (IDF) with the aim of raising awareness about diabetes and its consequences and in order to increase the public perception of this disease, which is the fastest-growing worldwide. Germany Ypsomed GmbH in Liederbach near Frankfurt a. M. is responsible for the German market with its around one million insulin-dependent diabetics. The subsidiary, which was formed from a subsidiary of Disetronic in 2003, currently employs 87 members of staff headed up by General Manager (GM) Dirk Scherff. Scherff also serves as GM for Switzerland and Austria, which means that the synergies in the DACH area can be exploited as fully as possible. The sale of mylife™ products is carried out via doctors, pharmacies, the mail-order business of the Ypsomed subsidiary, DiaExpert, as well as via our own web shop mylife-shop.de, which went live in the autumn of 2014. The German healthcare system is primarily based on public sector health insurance schemes, which reimburse the costs for insulin treatment in full, with just a minimal deductible. There are tangible trends towards the consolidation of the health insurance system and towards a flat-rate insurance model. The reporting year marked the kick-off of the restructuring of Ypsomed activities in Germany, starting with the complete separation of the two companies Ypsomed and DiaExpert. In addition, the focus on the support of doctors’ practices relevant for insulin pumps has been strengthened, resulting in an extra 2 600 patients being acquired for the mylife™ OmniPod® insulin patch pump solution. This increase in pump patients is around two and a half times greater than in the three preceding years and corresponds to an increase in market share from around 8 % in 2013 to around 12 % today.

Switzerland Ypsomed has been active on the Swiss market since 2003. Switzerland has approximately 60 000 insulin-dependent diabetics. We currently service this market with 12 employees. In Switzerland, our sales force focusses on doctors, wholesale distributors and pharmacies. The private health insurance system reimburses the treatment costs in full, less a deductible. As in Germany, Ypsomed Switzerland sells mylife™ products directly to end users via a web shop. mylife™ OmniPod® has established itself as a force to be reckoned with in the Swiss insulin pump market, with a market share of around 22 % and, as of the reporting year, it is represented in all relevant diabetes centres. Austria Ypsomed has been active on the Austrian market, which has some 80 000 insulin-dependent patients, since 2011, currently with a workforce of six. In Austria, the public social insurance for the federal states and professional groups conclude contracts directly with the manufacturers, whereby pharmacies and the wholesale trade are largely circumvented. The patient is reimbursed in full, but has little freedom of choice. In the past business year, by focusing on the relevant doctors and patients for insulin pump treatment, Ypsomed Austria was able to achieve a market share of approximately 15 % with the mylife™ OmniPod®. The high quality of the product and the associated patient satisfaction had a very positive effect on the success of the treatment. One of the targets in the new business year is to make the health insurers even more aware of this fact. In addition, there has been a switch to internal logistics processes and central delivery from the Ypsomed Central Warehouse in Rheinfelden.

Switzerland, France, Germany and Italy

Diabetes Care

Ypsomed – Diabetes Care

Netherlands The Netherlands, with its approximately 120 000 insulin-dependent diabetics, has been an important Ypsomed subsidiary for many years. The Dutch branch was set up in 2003, based on the former Disetronic subsidiary. Dave Herkelmann heads up the 10-strong team, having taken over from the long-standing GM Bram van Bergen in 2014. The health system in the Netherlands is based on private health insurance and full reimbursement of costs, but currently finds itself in the middle of a transformation to a market determined by the health insurers, including the introduction of a tendering process for care contracts. Therefore, despite its good position with more than 20 % market share in the pump business, Ypsomed Netherlands is facing challenges in this traditionally strong pump market. The effectiveness of pump treatment must be proven once again as far as the health insurers are concerned. Price pressure is clearly increasing, in particular in the market for blood glucose monitoring systems. Ypsomed Netherlands is therefore in intensive negotiations with the health insurers and is positioning itself as the partner for insulin pump treatment. Our branch hopes to reinforce this claim by continuing the growth of the mylife™ OmniPod® and by increasing its pump portfolio via the unique and newly developed mylife™ YpsoPump®. The Netherlands is a pilot market for this new product and the team is determined to help mylife™ YpsoPump® break into the market and lay the foundations for further expansion. France Ypsomed has been active in France since 2003 and currently has 23 employees led by the GM, Jean-François Flamant. France is a large diabetes market with approximately of 440 000 insulin-dependent patients. The Health system is based on a public health insurance scheme that guarantees the full refund of costs. Sales from the manufacturer to the patient are made exclusively via pharmacies and direct selling is actually forbidden. The system is subject to huge economic pressure and Ypsomed France is reacting to this by adjusting its product range and prices. mylife™ Unio™ and mylife™ Pura® blood glucose monitoring systems and mylife™ Clickfine® pen needles are primarily sold. In particular with regard to the blood glucose monitoring systems, continued further development in collaboration with pharmacies is essential – a factor that Ypsomed France will continue to pay special attention to in the coming business year. The mylife™ Clickfine® DiamondTip pen needles that are about to be launched will also benefit from this.

Ypsomed – Diabetes Care

(India (top/bottom) and the Netherlands (middle)

Italy The latest addition to the Ypsomed group of subsidiaries is Ypsomed Italy, which was founded in 2013. The potential here is huge: around 470 000 people are insulin dependent, which makes Italy the third largest diabetes market in Europe. Driven by the massive interest in the patch pump mylife™ OmniPod®, Peter Haag, the GM, quickly found his team had expanded to 10 employees. After an intensive development phase, Ypsomed Italy launched the mylife™ OmniPod®, its first product, in August 2014, and is growing fast. The environment is challenging: It is true that national insurance covers all the costs incurred by patients, but the Italian health system is severely fragmented and the sometimes extremely different approval procedures generate high costs. Some regions solve their care problems through tender processes and the distribution system is organised differently depending on the region. Further savings rounds will place the health system under even more pressure. Despite this, Ypsomed Italy is optimistic for the future and in the coming business year it will build up a second mainstay in its portfolio with the introduction of the mylife™ Clickfine® pen needles. United Kingdom Together with his 20 employees, the GM, Gary Davies, serves another important diabetes market. Around 390 000 people in the UK require subcutaneous insulin because of their diabetes. They are cared for by the centralised National Health Service, which has been subject to major restructuring and cost reduction pressures for a long time now. Budget responsibility is now held by regional procurement committees, which sometimes means that the full costs cannot always be taken on everywhere in the country. Supply contracts with manufacturers are awarded regionally in tendering processes, which means that pharmacies and wholesalers are sometimes circumvented. Ypsomed UK, which was founded in 2010, had an eventful year: In the area of pen needles, it won 27 new supply contracts for mylife™ Penfine® Classic, exceeding the budget significantly. In the pump business, the market share was increased by more than 11 % and an important supply contract was won in the Central Manchester region. In the area of blood glucose monitoring systems, the focus is currently on winning further market share within the existing supply contracts. In addition, in the coming business year, it is anticipated that Scotland and Ireland will be included in mylife™ OmniPod® supply.

Scandinavia Since 2003, Ypsomed has also been represented in the Scandinavian countries of Norway, Denmark, Sweden and Finland. Around 180 000 people in this area are insulin dependent. Ypsomed Nordics serves this massive region with a team of 11 employees. The health system functions in all four countries with national social insurance schemes and more or less full cost coverage. The Scandinavian countries are at the top of the table for a market determined by the health insurers with regard to the development of their health systems. Accordingly, many regions and even whole countries (Sweden and Finland), have adopted a system with tendering processes and supply contracts between manufacturers and the social insurance system. The cost pressure on Ypsomed Nordics is high. In view of this challenge, our subsidiary focuses on excellent customer service in order to firmly establish Ypsomed and the mylife™ products with patients, diabetes counsellors and doctors for the long term. In the past business year, the 10 % share in the Norwegian and Swedish pump market was exceeded and in Norway the 15 % mark is even within range. In the coming business year, Ypsomed Nordic hopes to really boost the sales of pen needles and blood glucose monitoring systems and to optimally prepare the introduction of mylife™ OmniPod® in Finland and Denmark as well as mylife™ YpsoPump® in all Nordic countries.

Diabetes Care

Ypsomed – Diabetes Care

Ypsomed India has introduced additional services such as the “mylife™ Academy” diabetes training programme for medical specialists to counter the increased price sensitivity of its customers. In the coming year, Ypsomed India hopes to further expand its market share with new, innovative methods to consolidate a strongly growing market.

Sales of mylife™ OmniPod®

India As can be seen from the market portraits above, the markets in Europe already function extremely heterogeneously. It is one of Ypsomed’s greatest strengths that, thanks to a high level of flexibility and in-depth market knowledge, its sales organisations are able to optimally adapt to the local situation. This competence is being particularly tested in the market in India. It is estimated that there are around 8.5 million insulin-dependent diabetics in India. Although this market is immense, its exploitation faces the challenges of a turbulently developing emerging market, high bureaucratic hurdles and immense price sensitivity. Since 2008, Ypsomed India and its GM, Sanjay Rajpal, together with his nine employees, has been wrestling with this task. This subsidiary concentrates on major customers in the economy and national institutions. In the past business year, for example, mylife™ pen needles and blood glucose monitoring systems were successfully introduced into all the administrative regions of the Indian army and in two further large regions of the Indian railway company.

Active sales Germany, United Kingdom, the Netherlands, Switzerland, Austria, Norway, Sweden and Italy Sales as of business year 2015/16 Finland, Denmark, Luxembourg and Ireland

Panorama landscape in Bavaria â&#x20AC;&#x201C; Germany

Our pharmaceutical and biotech customers obtain injection systems and associated services from the YDS brand – Ypsomed Delivery Systems. Ypsomed is the recognised industry leader in this field, since it is the largest global developer and manufacturer of pens with which patients can inject themselves subcutaneously with their liquid medication.

New products – product launches and studies

Studies Product launches

2012 / 13

2013 / 14

2014 / 15

2015 / 16

Global growth in pharmaceutical market in %

1 – 3 %

12 – 13 %

0 – 2 %

1 – 2 %

12 – 13 %

Source: IMS Health, 2014

Investments in production capacities for injection systems in million CHF Solothurn Burgdorf

9.8

4.2

5.9

2.3

2013 / 14

2014 / 15

Delivery Systems

Ypsomed expands production

Ypsomed – Delivery Systems

New customers, new projects Pipeline remains well stocked Our pharmaceutical and biotech customers obtain injection systems and associated services from the YDS brand – Ypsomed Delivery Systems. Ypsomed is the recognised industry leader in this field, since it is the largest global developer and manufacturer of pens with which patients can inject themselves subcutaneously with their liquid medication. This good result is also confirmed when you look at the project portfolio. In the reporting year, Ypsomed announced the following new contracts and cooperation agreements: The long-standing partnership between the French pharmaceutical company Sanofi and Ypsomed has been further strengthened by a new major project: From the end of 2016, components for injection systems will be manufactured on an additional production line. The line will be able to manufacture several different types of components for injection systems. The new production line will be of a similar complexity and size as the one already in place.

The globally active Japanese medical technology company Terumo Corporation has integrated the autoinjector YpsoMate® from Ypsomed into its PLAJEX™ pre-fillable polymer syringe systems to complement its product and service offering. In the reporting year, Terumo has gained two pharmaceutical customers with this combination. Lupin, one of the largest pharmaceutical companies in India, is now using the YpsoPen® from Ypsomed to market its insulin preparation named Lupisulin. Thus our pharmaceutical partner has found the ideal pen solution for the price-sensitive Indian market. The Russian company Pharmstandard will be the first of Ypsomed’s customers to use the Uno Pen™ as the injection system for its drugs. The company will bring to market its two medications Biosulin (insulin) and Rastan (growth hormone) using the Ypsomed disposable pen under the name БиоматикПен® 2 (BiomatikPen® 2).

Since July 2014, the British company GlaxoSmithKline has been selling its GLP-1 product Eperzan® / Tanzeum™ in a LyoTwist™ device from Ypsomed.

The American company Palatin Technologies, Inc. has started the third clinical phase for its new medication Bremelanotide using the autoinjector YpsoMate®.

The British company AstraZeneca uses a LyoTwist™ device from Ypsomed for the subcutaneous administration of its GLP-1 product Bydureon®. The product has been available in the USA since September 2014 and it will be available on the market in Europe this year.

From now on, Ypsomed will be supplying the Swiss company Finox with a disposable injection system for the administration of FSH biosimilars (fertility hormone).

Injection systems and components* manufactured by Ypsomed

* The final products on the market may differ from this illustration.

Ypsomed – Delivery Systems

Strong growth Future market – disposable injection systems

Simple and user-friendly for patients It is noticeable that the anticipated strong growth rates of sometimes up to 35 % per business year are mainly driven by disposable injection systems. This segment includes pens such as UnoPen™ and a new custom platform version, the FixPen™. Pens are used in treatments where patients more frequently administer the medication themselves and often in different doses. The largest number of units is used in the insulin treatment of diabetics. However, autoinjectors are also included in the disposable product segment. These are used for a number of innovative medications that have to be administered subcutaneously. They enable patients – as the name already implies – to administer an almost fully automatic injection. The injection is triggered by placing the autoinjector on the skin and needle shielding ensures that the needle is never visible and the patient is fully protected from needle-stick injuries after injection. Therefore, with YpsoMate® and VarioJect™ Ypsomed is able to offer two extremely user-friendly and innovative products. This has generated several promising projects.

Simple and user-friendly for pharmaceutical partners Disposable devices are not just simple and safe to use for patients, but symbolically also for the corresponding pharmaceutical partners, who face the challenge of meeting the increasingly stringent regulatory requirements. For example, they must provide comprehensive complaint handling and product support services. It has been shown that the use of disposable devices has significantly simplified such processes, making them more cost effective because no separate logistics are required as in the case of reusable pens. The medication and the injection system form a single unit. Disposable devices are also the mainstay of Ypsomed’s contract manufacturing business. The disposable segment is also related to the contract manufacturing segment. Every year, Ypsomed manufactures hundreds of millions of pen components, which are assembled into disposable injection systems, for mainly large pharma customers.

Delivery Systems

If we look at the near and medium-term future, the picture is equally promising, as the graphic showing the anticipated volume of sales in the different segments of YDS illustrates.

Stable market for reusable pens Nonetheless, we anticipate that the growth in sales volumes in the reusable pen segment will continue. These products are important for markets where the concept of something being “reusable” is historically firmly entrenched and where cultural factors mean that “disposable” is only tentatively accepted or there is a very high level of price sensitivity. Thanks to the ServoPen® and the YpsoPen®, Ypsomed has two modern platforms with which both the premium segment and the price-sensitive segment can be well served.

Planned growth in sales volume for YDS – average growth > 25 %

2015 / 16

2016 / 17

Disposable injection systems

2017 / 18

Reusable injection systems

2018 / 19

2019 / 2 0

Contract manufacturing

Ypsomed – Delivery Systems

Dynamic expansion in Solothurn A complete manufacturing plant in less than two years In the first quarter of 2015, operations began in Building 24 on the Solothurn site for the automated production of the UnoPen™ injection pen. The necessary plastic components are produced on 12 ultra-modern injection moulding machines. The new assembly plant covers an impressive 180 m2 and is particularly quiet thanks to special sound insulation. At a total of 59 stations, the individual assembly steps can be monitored and controlled in real time. The special feature of the UnoPen™ system is its flexibility. It is possible to produce a wide variety of UnoPen™ styles, which means that all the different customer requirements can be taken into account on a single line. Considering assembly at the design stage It is remarkable that the development and commissioning of this complex plant took less than two years. This was partly due to the fact that the process engineers at Ypsomed were heavily involved at the early product development stage and were invited to provide important input regarding subsequent process controls. This meant that the individual parts could be constructed in such a way that they could be optimally assembled. In addition, our maintenance mechanics were involved during the plant development phase with suppliers and so were able to directly influence the individual process steps within the plant. Production employees could also get to know the plant and familiarise themselves with it at the same time as it was being completed. Next round of pen components for Sanofi And even whilst we were completing the plant for our own product, UnoPen™, we also started on the next round, this time as a contract manufacturer. Thanks to a new major project with our long-term partner Sanofi, we will create a further manufacturing and assembly site for injection system components.

Decisive tenths of a millimetre Yet how does Ypsomed plan and build such highly complex production infrastructure? The difficulty of such a task becomes all the clearer when you realise that just minuscule changes and irregularities in the pen components can bring a whole assembly line to a grinding halt. Sometimes a production-related imperfection of just a few tenths of a millimetre caused by the injection moulding process can prevent a part from being grabbed at precisely this point by a vacuum lifting tool with the knock-on consequences for the following stations. A difference in volume of equally small proportions can also mean that parts can suddenly no longer be conveyed or assembled. Naturally, it is important to use tried-and-tested processes and suppliers when designing the individual stations. In addition, our more than 20 years of experience in manufacturing pens stands us in very good stead. Experience makes the difference In view of the challenges described above, the successful construction of such a production site is only possible thanks to the many years of in-depth experience of our employees in the areas of technology and production. These employees include numerous people who seem to have a “sixth sense” for technical plants and, thanks to their experience, intuition and finely honed skills of observation, they identify things that others would not notice and that cannot always be pinpointed even with technical tools. It is necessary to be able to “feel” the plant and to think yourself into its very core. In practice, this often means observing and listening to a machine for minutes at a time until a certain anomaly strikes you and provides you with the possible path to a solution. In many cases, high-speed cameras are used in this.

From innovation to mass production 2010

2011

2012

Innovation, research and development phases for the UnoPen™ injection platform It took more than seven years from the innovation of the UnoPen™ to the start of mass production. With the new assembly plant, it will be possible to produce pens for a broad range of customer products.

Ypsomed – Delivery Systems

Delivery Systems

UnoPen™ manufacturing plant

Squaring the plant In a further, parallel project area, it is important to find the optimum spatial layout for the plant, to incorporate this into the existing rooms and to undertake structural modifications if necessary. In this context, “optimum” means a great deal:

ideally placed so that “just-in-time” injection pens can be manufactured. We use the principles of lean production here and, in particular, the Kanban Method. Tried-and-tested partners

Observance of Ypsomed’s zoning concept in order to ensure compliance with the indispensable cleanliness and hygiene provisions for the manufacture of medicinal products. If necessary, the removal of any contaminated parts of the existing building – in the case of the UnoPen™ production rooms in the former Ascom building in Solothurn, we had to replace the completely outdated ventilation system, for example. To facilitate production with short pathways and as few temporary storage areas for parts and semi-finished products as possible that are also

2013

2014

2015

Up until now, Ypsomed has always been keen to make use of existing buildings for its construction projects. This has the advantage that the projects can be realised more quickly than with a new build, where approval processes can often cause serious delays to the start of the building work. The building projects are generally carried out using the same architects and construction companies. Thanks to well-practised processes, it can be guaranteed that everything is ready when a complete assembly system is delivered, installed and put into service a few weeks later.

2016

2017

Start of highly automated mass production Development of first customer-specific UnoPen™ Procurement, commissioning and industrialisation of the assembly plant Structural expansion measures

Customer-specific UnoPen™ Customer-specific UnoPen™ Customer-specific UnoPen™

Ypsomed – Delivery Systems

UnoPen™ – a portrait Size: 16.9 cm, weight (without cartridge): 24 g, special features: disposable product for the administration of liquid medication (e.g. insulin), suitable for mass production. Mandate: In compliance with established control concepts and benchmarks, to offer the patient a simple and safe injection and to facilitate the fast approval of the medication for the pharmaceutical partner involving as few hurdles as possible. Concept: Simplified use of the UnoPen™ for the user. Unlike reusable pens, it is not necessary to replace the drug cartridge, which is just one of its advantages. The UnoPen™ also simplifies requirement planning for the pharmaceutical companies and market supply, since the pens and the drug are firmly fixed together from the outset and are distributed together. Even in the case of defective pens, there is no need for a replacement pen process as a new disposable pen can simply be taken from the pack. The tried-and-tested administration fulfils the needs of both the users and the pharmaceutical partners: The principle of “dial and dose” is well known to every diabetic. New pharmaceutical companies, or those which previously had not dealt with diabetes and which are now entering the market due to the importance of insulin manufacture with regard to patient trends and the development of biosimilars and generics, adopt tried-and-tested administration concepts in order to win acceptance and approval as easily as possible. Development: From the very start of development, it was clear that the UnoPen™ platform would have to be not only reliable, simple and proven, but at the same time it had to be so flexible that it would be possible to develop and industrialise different versions quickly and simply, not simply from the point of view of design, but also from a technical perspective. The competitive patent landscape was a particular challenge in this. Risks had to be minimised and Ypsomed was able to achieve this in a highly effective manner thanks to the innovative strength of its product development organisation. All our experience with disposable pens was exploited in refining and optimising the platform on an ongoing basis. This was illustrated clearly in the usability and handling studies, in which the acceptance of the platform amongst end users was meticulously tested.

Customers: We have already convinced seven customers of the advantages of the UnoPen™ and three more are on the brink of signing contracts. The prospects that there will soon be more are highly promising in view of the fact that we are currently negotiating with a raft of other interested parties. These projects are all at different phases of development and include, for example as a first step, the provision of pens for clinical studies, whereby commercialisation will follow as soon as the medication has been approved. In other projects, the medication involved is already on the market in the form of reusable pens and is now to be switched to the disposable UnoPen™, whereby swift industrialisation is of the highest importance.

Ypsomed – Delivery Systems

Ypsomed in the far east New group company founded

90 % of Chinese insured At the same time, the Chinese healthcare system is improving on an ongoing basis: More than 90 % of the population has (partial) insurance. Insulin is paid for by the health insurance or the state. The local pharmaceutical companies supply the massive domestic market on the one hand, but they are also major exporters of numerous active substances. So whichever way you look at it, the Chinese pharmaceutical companies have a substantial need for innovative, high quality injection devices. In a nutshell: The potential in China is huge. Tonghua Dongbao Pharmaceutical Co., Ltd. became Ypsomed’s first pharmaceutical partner in China and

we enjoy a very close relationship. The fruits of this collaboration were the Dongbao Pen in 2002 and, from 2010, the ServoPen®-based Gansulin Pen. In 2013, the Sulin Pen was added to the range, an attractively priced reusable pen which is based on the YpsoPen™ platform and produced by a local contract manufacturer in China. The outlook for these pens is extremely promising.

Delivery Systems

It may seem banal, but when it is presented as clearly as in the illustration below, it is in fact striking: More than half of the entire human population lives in Asia – primarily in India and China. Ypsomed has been present in India since 2008 with its own subsidiary. We have been doing business in China for more than 10 years, primarily through our pharmaceutical partner Dongbao, and in the last business year a subsidiary was set up in Beijing. The fastest growing number of diabetics worldwide can be found in China – according to the International Diabetes Federation almost 100 million people in China are affected by diabetes, whereby the number of diabetics who (actually) require insulin is estimated at some 15 million (estimate: Ypsomed).

New Group company in Beijing For this reason, and also because interest in Ypsomed is increasing on an ongoing basis in China in general, setting up a subsidiary company of our own here really made sense. This subsidiary, which is based in Beijing, will initially concentrate on supporting existing customers and also on finding further pharmaceutical partners for pens and autoinjectors. It will employ local Chinese staff since personal relationships are an important success factor in Chinese business culture. A close relationship with the Swiss parent company is equally important in order to ensure that our colleagues in China have the necessary know-how and that they can represent Ypsomed’s values and competences professionally. Ypsomed Medical Devices Co., Ltd.is located in the Lufthansa Office Building in Chaoyang District, Beijing.

The importance of the Asian economic region

More people live inside this circle than in the rest of the world outside it.

Windmills and canal in Kinderdijk â&#x20AC;&#x201C; Netherlands

Sustainability and social responsibility Ypsomed follows a long-term and entrepreneurial approach when it comes to implementing its corporate objectives. In this, we are guided by the needs of patients and customers, such as pharmaceutical companies, doctors and medical specialists. In addition, Ypsomed takes its responsibility to its employees, society and the environment extremely seriously and therefore always takes economic, ecological and social aspects into account in its decisions.

Sustainability Report

Expenses for staff training 2014 / 15

CHF 462 in thousands 2013 / 14 CHF 437 in thousands

Age structure of Ypsomed employees in %

6 11 23 29 31

Recycling mylife™ OmniPod® 2014 / 15

985 000 recycled Pods 2013 / 14 985 000 recycled Pods

Up to 29 years 30 – 39 years 40 – 49 years 50 – 59 years 60 years and more

Ypsomed â&#x20AC;&#x201C; Sustainability Report

in Switzerland and 314 abroad. In the previous year, this figure was 999 employees, i.e. 712 in Switzerland and 287 abroad.

Employee structure as per 31 March 2015 Abroad 312 employees

Ypsomed Burgdorf 471 employees

Employee structure As per 31 March 2015, the Ypsomed Group employed a total of 1â&#x20AC;&#x2030;050 employees, of which 736 are Ypsotec Grenchen 86 employees

Ypsomed Solothurn 181 employees

Employees in professional training 13 new professionals trained In total, Ypsomed employs 36 apprentices in six different professional areas. In July 2014, a further 13 young men and women concluded their professional training with Ypsomed in a successfully completed qualification process. With marks averaging almost 5.0, it is no exaggeration to consider this a very satisfactory result. In addition, several Ypsomed apprentices achieved extremely good interim results, in particular with regard to their individual practical work. In addition, five apprentices passed the professional Matura examination.

fessional people to carry out a second apprenticeship or for high-school graduates to carry out an apprenticeship can also be seen in our company. However, the plastics technology and IT apprenticeships could not be filled due to a lack of appropriate applicants. This last fact is extremely surprising, since IT is supposed to be one of the most popular professions next to the role of a salesman/ saleswoman for prospective apprentices. Unfortunately, we repeatedly come to the conclusion that the skills and knowledge required for the successful completion of apprenticeships in precisely these professional fields are often lacking.

Second basic training required In the late summer, 11 new apprentices started their professional basic training. This meant that in August 2014 the number of apprentices with Ypsomed came to a total of 36, spread over six professional fields: design, multi-discipline engineering, plastics technology, logistics, IT and salesman/ saleswoman. The continued trend for young pro-

Schools still seem to be too unaware of the fact that they could link their apprenticeships with a relevant professional Matura. In our opinion, this is because the advantages of this option are not explained in nearly enough detail during the career choice phase.

Ypsomed – Sustainability Report

Internal further training and development

Improvement management

The ongoing training and development of our employees is essential for a medical technology company like Ypsomed. Employees are given training in important fields such as quality management, safety, IT and leadership within the framework of numerous internal and external training courses. In the past business year, the following internal seminars were carried out with a total of 29 participants:

Constant further development and improvement is essential for a company like Ypsomed in order for it to be successful. Every individual employee can make an important contribution to the success of Ypsomed by contributing his/her ideas. Thanks to its improvement management system, Ypsomed has a clear process, which is used intensively. For example, in the business year 2014/15 a total of 34 suggestions for improvements were submitted. Of these, 19 were implemented, two are currently under review and 13 are not being pursued any further for different reasons. The evaluation and introduction of software for ideas management is anticipated to give the improvement management system an added boost in the coming business year.

Leadership skills for shift supervisors Managing without a line manger function – working on projects In addition, Ypsomed offers its employees the opportunity to participate in English and French courses. Around 70 employees are currently taking advantage of this offer. Staff development Within the framework of staff development, the three Ypsomed career models continue to be successful, with a choice between management, project leader and specialist. In the business year 2014/15, 37 people, i.e. 5.8 % of the total workforce, trained for a new function within the framework of this career model. Of these, 24 people opted for the specialist career, 10 for management and 3 for the project leader option. Absence management In order to be successful as a company, we are dependent upon the full work complement of every individual employee. If someone is missing, there is a gap. Clear roles and codes of conduct prevent unnecessary absences and increase our efficiency. Dealing with absences efficiently is a management task and is part of the management system. The immediate impact: In 2006, before the introduction of the current absence management system, Ypsomed employees were absent on average 12.2 days per year due to accident or illness. Since then, the absence figures have continued to fall on an ongoing basis and since 2006 have dropped by a total of around 42 %. In figures: In 2014 Ypsomed employees were absent on average just 7.1 days per year.

Sustainability Report

HR policy

Sustainable retention of specialist staff In the business year 2014/15, the HR Project+ was started. This is a holistic programme for the sustainable retention of specialist staff and includes the development and implementation of the following topics: Expand professional training and development: Create further apprenticeships and establish additional apprenticeship occupations Promote catch-up education: Support motivated employees who do not have a professional qualification to acquire the qualification later on Promote dual study: Create part-time positions and incentives to motivate qualified graduate apprentices to take up a course of study and thus to stay with Ypsomed for the long term Establish the option of gradual retirement before retirement age: Promote relevant alternative job options for managers before they reach normal retirement age Flexible retirement: Offer the option of reducing the workload from the age of 60 on a gradual basis

Ypsomed – Sustainability Report

Employee survey 2014 High level of participation, positive results

It is part of our corporate culture to carry out surveys of our employees on a regular and systematic basis. Participation in our employee survey, which is carried out at two-year intervals, has continued to increase since it first started in 2004. This shows that the survey is seen to be valuable by employees and managers alike. In effect, it is a tool with which it is possible to symbolically feel the pulse of the company as well as to work on topics for which there is a need for action. Changes in the last surveys as well as a comparison with around 140 other companies in Switzerland (as part of the Swiss Employer Award) provide us with a valuable strategic stocktaking tool.

Target exceeded At the end of 2014, the seventh employee survey was carried out. A total of 866 people took part and gave their opinion on topics such as their workplace, team, teamwork, managers, satisfaction, etc. With a participation rate of 84 % we exceeded our target. The average participation rate according to the Swiss Employer Award is 71 % Not just the participation rate, but also the results are satisfactory. In comparison with previous surveys, it was possible to identify improvements in a lot of areas. This is illustrated in the fields marked “Satisfaction”, “Identification” and “Connection” in the graphic.

Personal attitudes at Ypsomed AG

86 79 74

75 70

73 66

Average (rated on a scale of 100)

Satisfaction: All in all, I am satisfied with my work situation

2006

2008

2010

Identification: I feel a strong sense of identification with this company

2012

2014

Connection: The future of this company is important to me

Ypsomed â&#x20AC;&#x201C; Sustainability Report

Operational safety Emergency services come up to the mark In spring 2014, there was a serious and unusual accident at the Ypsomed Solothurn site: A 3.5 tonne fork lift truck fell three metres down a lift shaft, burying the driver beneath it. Fortunately, after an hour-and-a-half-long recovery operation, the man was taken to hospital with only minor injuries. He remained in hospital until the evening of the following day, when he was discharged. This incident, which also caused quite a sensation in the local media, was a serious test of our emergency services and required the full rescue chain: Ypsomed inhouse health and safety officers, evacuation helpers, Ypsomed security officers, police, rescue services, fire brigade, REGA and the hospital. The subsequent investigations and clarifications involving the examining magistrate, the work inspector-

Fewer accidents overall Apart from the above-mentioned serious accident, the absolute number of accidents within Ypsomed in 2014 continued to fall: 21 occupational accidents were reported, of which 11 were of minor importance and 10 accidents caused absence from work. For the purpose of better comparability, the accident figure has now been standardised at 1000 employees. A satisfactory trend can be identified here too: 29 professional accidents is a clear improvement on 42 accidents in 2013. Occupational health and safety

Occupational accidents per 1â&#x20AC;&#x2030;000 employees

47 42

Sustainability Report

Ypsomed is excellently organised and offers its employees and visitors the highest possible level of safety. Our health and safety officers form the core of our emergency services. 17 part-time company medical officers at the Burgdorf and Solothurn sites are trained to provide first aid in the event of accidents. Their basic training takes nine days. In addition, all of our health and safety officers must take a refresher course every year.

35 29

2010

2011

2012

2013

2014

ate, SUVA and the media were an enormous challenge. Finally, it was established that our in-house, well-trained emergency services play a huge part in the positive outcome of such an accident. Internal prevention measures were implemented as quickly as possible. In addition, the Swiss Association for Careers in Logistics (SVBL) modified its training of logistics specialists based on this accident.

Ypsomed – Sustainability Report

Corporate social responsibility Holistic promotion for employees and society In the business year 2014/15, our Ypsomed was once again heavily committed in the area of corporate social responsibility. Family-friendly corporate culture Ypsomed is strongly committed to the long-term, sustainable employment of its staff and, in particular, of parents. This is illustrated in its flexible working hours model, part-time work opportunities and parental leave, for example. The home office regulation that was approved in the past business year also aims in the same direction. As a supplement to working at the office, Ypsomed employees also have the option of working from home for one day a week. The Ypsomed-subsidised nursery places at a day nursery (KITA) in Burgdorf also help to make it easier for Ypsomed’s employees to achieve a better work-life balance. Promotion in many areas In addition, Ypsomed is involved in the following areas and projects: Innovation promotion: Through the Ypsomed Innovation Fund, Ypsomed makes financial contributions to support innovative companies in Espace Mittelland. Occupational training and development: In 2014, Ypsomed once again supported the National Youth Day (Nationaler Zukunftstag). This enables girls and boys in classes 5 – 7 to get an insight into their parent’s or guardian’s world of work.

tive flu injections and free occupational social counselling. Ergonomics at the workplace: In the past business year, our office workers, in particular, were sensitised to the issue of ergonomics in the workplace. In the subsequent checks, it was possible to identify better set-out workplaces in many areas. This initiative proactively helps to prevent occupational illnesses. Staff restaurant: The staff restaurant “Schlossblick” at the Burgdorf head office operates according to the “One Two We” principle, a sustainability programme of the supplier, SV Group. Sport: Ypsomed supports its employees financially and organisationally when taking part in specific sporting events. For example, in May 2014, 35 Ypsomed employees took part in the Grand Prix von Bern, the largest fun run in German-speaking Switzerland. Ypsomed paid the entry fee for the runners and also provided them with shirts bearing the Ypsomed logo. Mobility: Ypsomed promotes the use of public transport and finances half-fare travel cards for all its employees from the fees levied on the company-owned parking spaces. “Bike to work” initiative: This annual initiative to promote the use of the bicycle has become increasingly popular amongst Ypsomed employees. In 2014, a total of 14 teams took part. On an average of 85 % of the working days in June, a total of 56 participants used their bikes and cycled a total of 9 959 kilometres.

Health promotion: We actively promote the health of our employees through a strong focus on the ergonomics of the workplace, free entry to a sports centre and swimming pool, preventa-

On your marks: all Ypsomed participants in the Grand Prix von Bern 2014

Ypsomed – Sustainability Report

Sustainable use of resources Comprehensive recycling programme for mylife™ OmniPod® Ypsomed’s diabetes direct sales has a blockbuster of a product with the insulin patch pump mylife™ OmniPod®. This has resulted in highly satisfactory sales figures and also in very high unit numbers for the disposable components in the system, the pod. Users can wear the pod for a maximum of three days, after which it has to be disposed of and replaced by a fresh pod. Of course, after a time this gives rise to a considerable number of used pods, but from day one Ypsomed offered a comprehensive recycling programme for its products to every customer and for every individual pod.

A special plant has been built in Switzerland for the recycling of the mylife™ OmniPod®. Here the different components such as plastic, metal and batteries are separated and recycled. Currently 52 % of the materials used in the pod are recyclable.

Energy in thousand megawatt hours (MWh)*

Business travel in thousand kilometres*

Energy consumption and business travel

Sustainability Report

Ypsomed’s energy consumption remains at a constant level. It will rise slightly in the future due to an increase in manufacturing. The consumption of natural gas in the past year was very low due to the

114 185

8.5 2.6

2.8 0.2

0.3

2.9

493 2.3

437

282

338

0.1

134

140 121

166

333

16.4

17.4

17.0

18.0

17.7

1321

1233

1607

963

1276

2010

2011

2012

2013

2014

2010

2011

2012

2013

2014

Natural gas

Heating oil

Electricity

Company cars

Rail kilometres

Cars employees / management

Air travel

* Companies in Switzerland

This is because the used pod is not simply refuse but contains valuable components such as batteries and platinum which can be re-used and recycled if professionally processed. The mylife™ OmniPod® recycling programme is: Environmentally-friendly as reusable materials are recycled and not simply thrown away Fair, because every customer can take part. The costs of recycling and return are borne by Ypsomed. Simple: Every customer automatically receives a postage-paid recycling box from us. Participants collect their used pods in the recycling box for three months. Full boxes can be sent to Ypsomed free of charge via the post office.

exceptionally mild winter in 2013 / 14. Heating oil is now used at all locations merely as a back-up for gas. In 2014, 1 800 litres of oil were consumed. This was due to the first cold snap in December 2014 which led to a temporary shortage in natural gas and meant that heating had to be supplemented with oil. In order to gain a holistic view of business travel, Ypsomed’s employees’ rail kilometres have been taken into account for the first time. Journeys in company cars have risen slightly, but this is due to external customer orders. The sudden increase in air kilometres is striking, but this is primarily due to the growing importance of our markets in the Far East and, in particular, to the setting-up of our Ypsomed subsidiary in Beijing, China.

% %

% %% %%

% %

% % %

% %

%% %%

% % %

% %

% % % %%

%% %

% % %

% % %%

% % %

Fishing village â&#x20AC;&#x201C; Norway

% % %

% % % %%

% % %

% %

% % %% %% %%

% % %

% % % %

% % %

% % % % % %

% %

% % %% % %

% % %

%% % %

%% %% %%

% %

% % %

% %

% % %

% % % % %

% % %

% %

% %% % %

% %

% % %

%% % % % %

%% %%

% %

% % %

% %

% % %

%% %

% % %

% %%

% % %

% % % % %%

% % %

% % %%

% %

% % %

% %

% % %

% %

% % %

Sales in CHF million 306.6 276.3 248.6

2011 / 12

244.6

2012 / 13

2013 / 14

2014 / 15

% %

EBIT trend in CHF million

28.5

15.6

5.1

4.8

2011 / 12

2012 / 13

2013 / 14

2014 / 15

Dividends 2014 / 15

CHF 0.60 from the capital contribution reserves (proposal

to the General Meeting of Shareholders)

2013 / 14 CHF 0.30 from the capital contribution reserves

Financial Report

Ypsomed – Financial Report

EBIT increased by over 80 % In the business year 2014 / 15, the Ypsomed Group posted consolidated sales of CHF 306.6 million, which represents an increase of around 11 % year on year. The operating result (EBIT) rose by more than 80 % to CHF 28.5 million in comparison with the previous year (CHF 15.6 million). This means that Ypsomed’s profitability at EBIT level is now 9.3 %. This is primarily due to consistent and continuous cost and process optimisation. Excellent result despite negative currency effects This outstanding result is all the more impressive given the background of the unpegging of the Swiss Franc from the Euro by the Swiss National Bank on 15 January 2015. Although admittedly only the last two and a half months of the reporting year were affected by this challenging situation for all export-oriented Swiss companies, there is no doubt that the results would have been even better if the Euro exchange rate of CHF 1.20 had been retained. In this case, sales would have been CHF 311.2 million and EBIT CHF 30.3 million. A detailed account of the effects of exchange rate fluctuations on Ypsomed’s business can be found on page 11. Delivery Devices: Growth trajectory fuelled by GLP-1 In 2014 / 15, the Delivery Devices segment posted growth in sales of 6.9 % to CHF 151.7 million and thus continued its growth trajectory that began in 2012. The main drivers for this are: The market for glucagon-like peptide-1 (GLP-1), a drug that is becoming increasingly important in the treatment of type 2 diabetes, is growing fast. In the reporting year, two of the Ypsomed pens based on GLP-1 products of our pharmaceutical partners GlaxoSmithKline and AstraZeneca were successfully brought to market. The disposable platform UnoPen™, for which we began automated production in Solothurn in Q1 2015, generated its first sales with a pen for our Russian pharmaceutical partner Pharmstandard. Business with pen needles also posted impressive growth, in particular thanks to the clever dealings of our sales companies in various tender deals. In addition, it was possible to exploit opportunities in the supply processes for our major customers. However, price pressure on our needle products remains challenging.

Conversely, we have improved our efficiency and profitability: The centralisation and optimisation of our needle production in Solothurn in the previous year and the continuous process optimisation are bearing fruit, particularly as we have better exploited our existing infrastructure. The lower sales in the contract manufacturing of pen components had a dampening effect on the segment result. The extraordinarily high order volumes of the previous year due to Sanofi returned to more normal levels. A further factor can be seen in the impairment of CHF 1.5 million for injection moulding tools that became obsolete during the course of process optimisation work and of CHF 1.2 million for pen platforms for which development was stopped. The end effect was a marked improvement in the EBIT for the Delivery Devices segment, which rose from CHF 9.3 million in the previous year to CHF 13.4 million. Diabetes Direct Business: sharp climb following turnaround In the reporting year 2014 / 15, we once again posted strong growth in the Diabetes Direct Business segment. Sales rose from CHF 118.4 million in the previous year to CHF 137.6 million, which represents an increase of 16.3 %. The driver for this growth was once again the tubeless mylife™ OmniPod® insulin patch pump, sales of which rose by around 50 % in comparison with the previous year. But sales with blood glucose monitoring systems also increased in this segment by 8.5 %, despite zero global growth, in particular due to good results in the tendering business. Provisions of CHF 0.7 million are recorded for possible legal costs in connection with our international distribution network that could occur based on historic receivables. Overall, we can see a massive increase in the profitability of the Diabetes Direct Business segment. Following the turnaround in 2013 / 14 (EBIT CHF 6.3 million), the operating result in the reporting year has already more than doubled and is recorded at CHF 13.0 million. Thus the investments in the previous years are more than paying off. Others: Successful location policy The Others segment also posted positive results. Our subsidiary Ypsotec posted slightly increased sales at CHF 17.2 million. The EBIT for the suppliers of mechanical precision components rose from CHF 0.1 million in the previous year to currently CHF 0.5 million. Ypsotec is facing the massive challenge posed by the strong Swiss Franc as of the beginning of 2015, but it is well positioned with its second production site in Tábor in the Czech

Ypsomed – Financial Report

Intensive investment activity In the business year 2014 / 15, Ypsomed maintained cash flow from operating activities at CHF 41.4 million, a figure comparable with the excellent previous year’s level. In addition, in the reporting year we invested a total of CHF 30.5 million in property, plant and equipment and intangible assets, which is comparable with the previous year’s level. Of this, around CHF 6.0 million was invested in the Solothurn and Burgdorf sites for assembly lines and injection moulding tools for UnoPen™ and autoinjector production, respectively. A further CHF 7.4 million was invested in the ongoing development and industrialisation of the new insulin pump, the mylife™ YpsoPump®. The rest was used on the ongoing updating and maintenance of infrastructure, IT and buildings. Currency losses depress financial result As far as the financial result is concerned, the impact of the unpegging of the Swiss Franc from the Euro had palpable repercussions for Ypsomed. In the reporting year, financial income of CHF 3.2 million is offset by financial expenses of CHF 8.0 million, which represents a loss of CHF 4.8 million. In the previous year, the financial loss was just CHF 0.4 million. This result was mainly caused by currency losses amounting to a net total of CHF 2.4 million, but also by the impairment to Ypsomed’s participation in the Taiwanese manufacturer of blood glucose monitoring systems, Bionime, which accounted for CHF 1.7 million. In the previous year, the reversal of such a impairment generated a profit of CHF 1.1 million. On the other hand, the participation in Bionime earned a dividend of CHF 0.3 million. The final tax burden of CHF 4.3 million for the results is clearly higher than that of the previous year (CHF 1.6 million). The higher tax is partly explained by the resolution of additional tax claims in the previous year, which was recognised through profit and loss, and by the accrual and liquidation of impairment to the participation in Bionime, which were apportioned to a tax-privileged company.

Net profit increases by over 40 % After the deduction of tax, Ypsomed posted net profit of CHF 19.4 million for the business year 2014 / 15, a clear increase compared to the CHF 13.6 million of the previous year. The result corresponds to earnings per share of CHF 1.54. Robust balance sheet preserves company’s autonomy Ypsomed’s balance sheet has been very healthy for many years and currently boasts a high equity ratio of 66.6 %. Once again, major shareholder Willy Michel made a key contribution in this regard with his current shareholder loan. In the reporting year, this was reduced from CHF 20 million to CHF 15 million. In the coming year, Willy Michel will again waive his annual repayment. This arrangement ensures that the Ypsomed Group can continue to be managed entrepreneurially and independently in the future. Dividend payment from capital reserves In the past financial year, a total of CHF 3.8 million was paid out to shareholders. The Ypsomed Board of Directors will propose to the General Meeting of Shareholders that the dividend be increased by 100 %. A payout of CHF 0.60 per registered share is to be made to shareholders from tax-beneficial capital reserves for the 2014 / 15 financial year. The General Meeting of Shareholders of Ypsomed Holding AG will take place on Wednesday, 1 July 2015, in Berne.

Financial Report

Republic. The sale of land at the Solothurn site has also had a positive impact on the Others segment. Part of the Ypsomed site that was no longer operational was sold for housing redevelopment, which resulted in a profit of CHF 1.5 million. The EBIT for the whole segment is CHF 2.1 million in comparison with CHF 0.1 million in the previous year.

Ypsomed – Financial Report

Consolidated income statement (Audited Swiss GAAP FER figures) in thousand CHF

Sales of goods and services

Notes

Cost of goods and services sold Gross profit

in %

1 April 2013 – 31 March 2014

in %

306 632 100.0 %

276 257 100.0 %

– 220 782 – 72.0 %

– 205 731 – 74.5 %

85 850

28.0 %

70 526

25.5 %

Marketing and sales expenses

– 44 679 – 14.6 %

– 41 529 – 15.0 %

Administration expenses

– 15 530

– 5.1 %

– 13 884

– 5.0 %

5 717

1.9 %

4 065

1.5 %

Other operating income Other operating expenses

– 2 812

– 0.9 %

– 3 534

– 1.3 %

Operating profit

28 546

9.3 %

15 645

5.7 %

Financial income

3 180

1.0 %

2 299

0.8 %

Financial expenses

– 7 993

– 2.6 %

– 2 702

– 1.0 %

23 733

7.7 %

15 243

5.5 %

– 4 339

– 1.4 %

– 1 635

– 0.6 %

19 395

6.3 %

13 608

4.9 %

Profit before income taxes Income taxes

Net profit

1.54

1.08

Operating profit

28 546

15 645

Depreciation of fixed assets

21 308

18 931

7 514

6 139

Earnings per share (basic and diluted) in CHF

Amortisation of intangible assets

EBITDA (operating profit before depreciation and amortisation)

1 April 2014 – 31 March 2015

57 369

18.7 %

40 715

14.7 %

Ypsomed – Financial Report

Consolidated balance sheet (Audited Swiss GAAP FER figures) in thousand CHF Notes

31 March 2015

in %

31 March 2014

Cash and cash equivalents

Trade receivables

16 243

4.5 %

16 164

4.6 %

45 343

12.6 %

35 342

10.0 %

Other current assets

5 600

1.6 %

5 172

1.5 %

Prepayments and accrued income

4 428

1.2 %

5 571

1.6 %

0.0 %

51 781

14.3 %

52 231

14.7 %

0.0 %

123 498

34.2 %

114 584

32.3 %

Current income tax assets Inventories

Customer machinery Total current assets Financial assets

in %

8 591

2.4 %

9 376

2.6 %

9 169

2.5 %

8 835

2.5 %

Fixed assets

150 946

41.8 %

160 437

45.3 %

Intangible assets

69 007

19.1 %

61 296

17.3 %

Total non-current assets

237 713

65.8 %

239 944

67.7 %

Total assets

361 211 100.0 %

Deferred income tax assets

Liabilities and equity

Notes

354 528 100.0 %

31 March 2015

in %

31 March 2014

in %

Financial liabilities

56 000

15.5 %

62 500

17.6 %

Trade payables

15 484

4.3 %

15 928

4.5 %

Prepayments from customers

2 189

0.6 %

3 442

1.0 %

Current income tax payable

1 854

0.5 %

1 076

0.3 %

3 336

0.9 %

2 720

0.8 %

20 243

5.6 %

16 306

4.6 %

Other payables Accrued liabilities and deferred income Provisions

1 521

0.4 %

1 063

0.3 %

100 628

27.9 %

103 037

29.0 %

15 000

4.2 %

20 000

5.6 %

470

0.1 %

1 086

0.3 %

Provisions

2 710

0.8 %

1 173

0.3 %

Deferred income tax liabilities

Total current liabilities Non-current liabilities to major shareholder Other non-current financial liabilities

1 766

0.5 %

1 069

0.3 %

19 946

5.5 %

23 329

6.6 %

178 994

49.6 %

178 994

50.5 %

Capital reserves

170 114

47.1 %

173 492

48.9 %

Own shares / Translation exchange differences

– 12 067

–3.3 %

–8 525

–2.4 %

Total non-current liabilities Share capital

Goodwill acquired offset

– 322 892 –89.4 %

Financial Report

Assets

–322 892 –91.1 %

Retained earnings

226 488

62.7 %

207 093

58.4 %

Total equity

240 637

66.6 %

228 162

64.4 %

Total liabilities and equity

361 211 100.0 %

354 528 100.0 %

Ypsomed – Financial Report

Consolidated statement of cash flows (Audited Swiss GAAP FER figures) in thousand CHF

Notes

1 April 2013 – 31 March 2014

Net profit

19 395

13 608

Depreciation of fixed and intangible assets

26 076

24 530

4 482

– 592

2 231

450

Loss from impairment (+) / Reversal of impairment (–)

7/8/16/17

Change in provisions (incl. deferred income taxes) Other expenses/income that do no not affect the fund

Gain (–) / loss (+) of fixed and financial assets Increase (–) / decrease (+) in trade receivables Increase (–) / decrease (+) in other receivables and prepayments and accr. income Increase (–) / decrease (+) in inventories Increase (–) / decrease (+) in customer machinery Increase (+) / decrease (–) in trade payables Increase (+) / decrease (–) in prepayments from customers Increase (+) / decrease (–) in other payables and accr. liabilities and deferred income Cash flow from operating activities Purchases of financial assets Disposals of financial assets

1 858

– 1 601

– 113

– 12 999

– 4 199

769

– 38

– 2 176

4 321

555

– 699

– 685

– 1 253

1 392

5 277

1 978

41 381

41 206

– 956

– 17 212

– 18 530

Purchases of fixed assets

Disposals of fixed assets

5 218

562

Purchases of intangible assets

– 13 282

– 12 107

– 26 232

– 30 062

Cash flow from investing activities Repayment of financial liabilities to major shareholder

Proceeds (+) / repayment (–) from borrowings Purchase (–) / disposals (+) of own shares

Distribution of capital reserves Cash flow from financing activities Effect of foreign currency translation Total cash flow

– 5 000

– 6 500

– 2 000

1118

– 3 784

– 2 523

– 14 167

– 4 523

– 902

– 71

6 551

Cash and cash equivalents as of 1 April

16 164

9 613

Cash and cash equivalents as of 31 March

16 243

16 164

6 551

Net increase (+) / decrease (–) in cash and cash equivalents Includes foreign currency effects on transactions between Group companies and on long-term intercompany loans with equity characteristics (equity-like loans).

1 April 2014 – 31 March 2015

Ypsomed – Financial Report

Consolidated statement of changes in equity

Balance as of 1 April 2013

Share capital

Group reserves and share premium

Treasury shares

Cumulative translation reserve

178 994

176 015

– 2 337

– 5 891

Goodwill offset

Retained earnings

Total

– 322 892 193 485

217 375

Net profit

13 608

Distribution of dividends from capital contribution reserves

– 2 523

Translation exchange differences Balance as of 31 March 2014

Balance as of 1 April 2014

– 297

178 994

173 492

– 2 337

– 6 188

– 322 892

207 093

228 162

Share capital

Group reserves and share premium

Treasury shares

Cumulative translation reserve

Goodwill offset

Retained earnings

Total

178 994

173 492

– 2 337

– 6 188

– 322 892

207 093

228 162

Net profit

19 395

Distribution of dividends from capital contribution reserves

– 3 784

Disposal of own shares

406

Purchase of own shares

1 621

2 027

– 919

– 919 – 4 244

178 994

170 114

19 395 – 3 784

Translation exchange differences Balance as of 31 March 2015

13 608 – 2 523

– 1 635

– 10 432

– 4 244 – 322 892

226 488

240 637

Financial Report

(Audited Swiss GAAP FER figures) in thousand CHF

Ypsomed – Financial Report

Basis for the consolidated financial statements 1. General information Ypsomed Holding AG is a limited company (Aktiengesellschaft) established on 29 December 2003 under Swiss law with registered offices in Burgdorf (canton of Berne, Switzerland). Operating in the field of medical technology, the Ypsomed Group is a leading independent manufacturer of injection pens for pharmaceutical and biotech companies, as well as a supplier of pen needles. Ypsomed’s core manufacturing business consists of developing and marketing products and services allowing patients to administer their own medication. The Group operates production sites in Burgdorf, Solothurn, Grenchen (all CH) and Tábor (CZ) and has a sales and distribution network across Europe. The shares of Ypsomed Holding AG have been traded on SIX Swiss Exchange since 2004 and since 2007 on the BX Berne eXchange. The company was created as a result of the split-up of the Disetronic Group in 2003. Disetronic had been founded in 1984 to develop, manufacture and sell infusion pumps and had expanded into the injection systems business in 1986. The consolidated financial statements were approved for issue by the Board of Directors on 20 May 2015 and recommended for acceptance to the General Meeting of Shareholders of 1 July 2015. 2. Fundamental accounting and assessment methods Basics The consolidated financial statements have been prepared in accordance with the Swiss accounting and reporting recommendations of Swiss GAAP FER according to the principle of “true and fair view”. They are based on the financial statements of the company prepared for the same reporting period using consistent accounting policies. The Group’s reporting currency is the Swiss Franc (CHF). The period under review comprises twelve months and ends 31 March. The accompanying consolidated financial statements are published in German and English. The German version is legally binding. All figures included in these financial statements and notes to the financial statements are rounded to the nearest CHF 1 000 except where otherwise indicated. Consolidation Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or tradable can also determine 44

whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is obtained. They are de-consolidated from the date that control ceases. Subsidiaries are recognised using the purchase method. The consideration encompasses the compensation transferred in exchange for obtaining control over the identifiable assets, liabilities and contingent liabilities of the company acquired. The compensation encompasses cash payments as well as the fair market value of both the transferred assets, the incurred or assumed liabilities and, in addition, the equity instruments as of the trade date that have been issued by the Group. The net assets acquired, comprising identifiable assets, liabilities and contingent liabilities, are recognised at their fair value. Goodwill is recognised as of the acquisition date and is measured as the excess of the consideration transferred as described over and above the fair value of the identified net assets. If the Group does not acquire 100 % of the shares of a company, the minority interest in equity is to be disclosed separately under the equity. Transactions, balances and gains on transactions between subsidiaries are eliminated. Losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Associates Associates are those companies that are significantly influenced but not controlled by the Group. This normally applies to investments in which the Group owns between 20 % and 50 %. Investments in associates are accounted for using the equity method. The Group’s investment in associates includes goodwill identified on acquisition. Ypsomed does not currently have any investments in associates. Foreign currency translation Foreign currency transactions are translated to the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income as financial income or expenses. In the consolidated financial statement, assets and liabilities of foreign subsidiaries are converted into Swiss francs at year-end exchange rates. Equity is converted with historical exchange rates. The statement of comprehensive income and the statement of cash flows are translated at annual average exchange rates. The effects of this conversion as well as foreign exchange gains and losses arising from the translation of non-currency congruent financed equity-like corporate loans denominated in foreign currencies are to be recognised in the equity, with no effect on the income statement.

Ypsomed – Financial Report

Trade receivables / other receivables Trade receivables and other receivables are valued at par value less impairment, if any. An allowance is set aside if objective indications show that receivables cannot be collected. Allowances are based on individual valuations. Inventories Raw materials and merchandise purchased are recognised at cost, semi-finished and finished goods at their cost of conversion. Discounts are recognised as a reduction in the purchase price. Manufacturing costs include the associated direct production costs and production overheads. If the acquisition or manufacturing costs are higher than the net market value, an impairment loss is recorded on the income statement in the current period to write the inventories down to the net market value (lower of cost or market principle). Net market value is equivalent to the current market price less the usual sales deductions, marketing costs and administrative costs yet to be incurred. Inventories that cannot be sold are written off in full. The costs of inventories are determined by using the FIFO method. Customer machinery / prepayments from customers Ypsomed receives prepayments from pharma partners in order to acquire production machinery for these pharma partners. Ypsomed coordinates the manufacturing of the machinery with suppliers and makes contractual advance payments to the suppliers. After installation and successful test runs, the machinery is accepted by Ypsomed. From a legal and commercial viewpoint, once the machinery has been accepted by Ypsomed the title is transferred to the pharma partners. The advance and final payments made by Ypsomed to suppliers are disclosed in the consolidated balance sheet as current assets until acceptance of the machinery. The prepayments from customers are recognised in current liabilities. Once the machinery is accepted, the advance and final payments from Ypsomed are settled with the prepayments from the customer.

Fixed assets Fixed assets are carried at historical acquisition or manufacturing cost, with depreciation calculated using the straight-line method based on the following estimated useful lives:

Buildings 20 to 40 years Technical assets 6 to 20 years Machinery and company facilities 3 to 12 years Fixtures, ﬁttings and vehicles 3 to 8 years Other ﬁxed assets 2 to 10 years

Depreciation is included in the following income statement categories: manufacturing costs of goods sold, marketing and distribution costs, administration costs and other operating expenses. Should an asset be impaired as a result of impairment testing, the corresponding impairment charge is included in depreciation and reported separately as an impairment loss. Value-enhancing expenditures are capitalised if the market value or the value in use increases as a result. Long-term leasing contracts, which are, in substance, equivalent to the purchase of assets with long-term ﬁnancing (ﬁnancial leasing), are recognised at the beginning of the lease as an asset and measured at net market value / acquisition cost or, if lower, at the present cost of the leasing payments. The asset is depreciated in line with its useful economic life. Investment properties are reported at cost of acquirement minus depreciation. The period of depreciation is calculated according to the category of asset.

Financial Report

Cash Cash and cash equivalents comprise cash on hand, demand deposits and time deposits with a residual term to maturity from the balance sheet date of 90 days at the most. They form the basis of the consolidated statement of cash ﬂows.

Intangible assets Goodwill Net assets taken over in an acquisition are to be valued at actual values and any surplus of acquisition cost over the newly valued net assets is to be designated as goodwill (purchase price allocation). The goodwill is to be offset at the date of acquisition. The effects of a theoretical capitalisation are to be disclosed in the notes. Development costs Development costs are capitalised if an intangible asset can be identified, finished, marketed or used internally, if it is controlled by the Ypsomed Group, if it is expected to provide the Ypsomed Group with an economic benefit over several years and if its costs can be reliably determined. Capitalised development costs are amortised straight-line over their useful economic lives after the beginning of marketing. The amortisation is included in the manufacturing costs of products and services sold. Costs accrued for development projects are tested for impairment on an annual basis. 45

Ypsomed – Financial Report

Other intangible assets Patents are carried at acquisition cost and amortised over their estimated useful lives of 15 to 20 years. Amortisation is included in the costs of research and development that are integrated in the manufacturing costs of products and services sold. Software is capitalised on the basis of the costs incurred to acquire the software and bring the software to use. These costs are amortised over the estimated useful life of three to four years using the straight-line method. Amortisation is mainly included in administration expenses. Intangible assets, such as brand names or customer relationships that were acquired through a business combination and can be identified separately, are reported if they fulfil the definition of an intangible asset. The acquisition costs of such intangible assets correspond to their fair value at the time of acquisition. The value thereafter is measured at acquisition cost minus accumulated amortisation and depreciation. The useful life is estimated at five to eight years. Amortisation is included in marketing and distribution costs. Financial assets Financial assets are recognised at acquisition cost less impairment, if any. Impairment is recorded in profit or loss for the current period. Impairment of assets All assets are reviewed as of each balance sheet date for indications of impairment. If there are indications that an asset may be impaired, the recoverable amount of the asset is determined and the impairment loss is estimated. Should the estimated recoverable amount of the asset, which is equivalent to the higher of net market value and the useful value of the asset, be lower than the asset’s book value, an adjustment is made to the income statement to reduce the book value of the asset to the estimated recoverable amount in the same period in which the impairment was discovered. Net market value is the price obtainable between independent third parties less the associated selling expenses. Useful value is based on the estimated future cash flows resulting from the use of the asset, including any possible cash flow at the end of the useful life, discounted using an appropriate long-term interest rate. Long-term financial liabilities to shareholders The loan to the major shareholder is measured at its nominal amount. Provisions Provisions are established when a legal or de facto obligation arising from previous events exists that will likely result in a cash outflow and this cash outflow can be reliably estimated. The provisions established represent the best possible estimate of the final obligation. Long-term provisions are dis46

counted to their present values, provided that the impact is material. The subdivision into short-term and long-term provisions is based on whether utilisation is assumed to be probable within one year or at a later time. Possible obligations whose existence requires confirmation by future events, or obligations whose amount cannot be reliably estimated, are disclosed in the notes to the financial statements as contingent liabilities. Pension benefit obligations The pension benefit obligations of the Group companies in respect of old age, death and disability comply with the statutory provisions and regulations in the respective countries. The employees of the Swiss companies have a legally independent pension fund for retirement, death and disability. The pension funds are financed by employer and employee contributions (defined contribution plan). The actual economic impact of pension plans on the company is calculated as of the balance sheet date. An economic benefit is capitalised provided it will be available to reduce the company’s future pension expenses. An economic obligation is recognised as a liability if the conditions for establishing a provision are met. Any unconditionally available employer contribution reserves are recognised as assets. The economic impacts of surpluses or deficits in the pension funds on the Group, as well as a change in any employer contribution reserves, are recognised as profit or loss and reported as personnel expenses in addition to the contributions deferred to the reporting period. Current income taxes Income taxes are calculated based on reported profits and in conformity with the tax laws prevailing in the individual countries and recognised in profit or loss of the current period. Deferred taxes are taken into account on temporary differences between tax bases and the carrying amounts in the consolidated financial statements and are calculated using the liability method based on effective or expected effective local tax rates. Deferred tax assets are recognised for loss carry-forwards where it is highly probable that they can be offset against future taxable income. The changes in deferred tax assets and liabilities are recognised in the consolidated income statement. Taxes on transactions that are reported in equity are also recognised in equity.

Ypsomed â&#x20AC;&#x201C; Financial Report

Other operating income Other operating income primarily includes rental income arising from the leasing of properties owned by the Ypsomed Group, licencing income arising from the use of Ypsomed assets by external third parties and proceeds from the disposal of property, plant and equipment. Long-term contracts Development and industrialisation projects are accounted for according to the percentage-of-completion method (PoCM). Services and costs are correspondingly considered according to the degree of completion (cost-to-cost method) so that any profit is taken into consideration proportionally. The degree of completion for the services provided is calculated by determining the difference between the costs incurred and the costs expected for the whole order. Long-term contracts are accounted for under inventories, customer machinery and prepayments from customers. Research and development costs Research costs are routinely included in the manufacturing costs of the products and services sold. Development costs are capitalised if an intangible asset can be identified, finished, marketed or used internally, if it is controlled by the Ypsomed Group, if it is expected to provide the Ypsomed Group with an economic benefit over several years and if its costs can be reliably determined. Capitalised development costs are amortised straight-line over their useful economic lives. The amortisation is included in the manufacturing costs of products and services sold. Costs accrued for development projects are tested for impairment on an annual basis.

3. Risk assessment The management of the Ypsomed Group carries out a comprehensive risk assessment at least once a year. This standardised process is based on a risk inventory that encompasses the relevant risk categories such as strategic risks, management risks, general risks in the operating business, legal risks, systemic risks, financial risks (including market, credit and liquidity risks) and event risks (including political, regulatory, fiscal and external risks). The fundamental risks are assessed with regard to probability of occurrence and impact and both management and the Board of Directors decide on measures to be taken and monitor their implementation according to predetermined criteria. 4. Legal risks The Ypsomed Group develops, manufactures and sells innovative medical technical devices based on technical expertise and technologies protected by intellectual property rights. The Group is either owner of the required rights or licence holder of the property rights of a third party. In the medical devices market, disputes over patent rights and patent infringements occur fairly frequently and can involve costly and time-intensive patent infringement suits. The development, manufacture and sale of medtech products involve product liability risks and can lead to product recalls. There is no guarantee that the present liability insurance is sufďŹ cient to cover all damage cases connected with the development, manufacture and sale of medical products and that the insurance companies will still be prepared in future to insure Ypsomed Group business activities against liability risks at viable conditions. The risk of patent infringement or product liability claims by a third party, risks in connection with the recall of products and negative developments in the reimbursement of costs of Ypsomed products through state-prescribed cost-saving measures in the area of healthcare or by health insurance schemes as well as problems with authorisation and upholding of authorisation of drugs used together with Ypsomed products can also result in lasting detrimental effects, not only on the business performance of the Ypsomed Group, but also on its ďŹ nancial situation and competitive position in the marketplace.

Financial Report

Net sales and sales recognition Net sales Sales consists of all sales proceeds attained from the delivery of goods and the provision of services to third parties after deducting discounts, rebates, cash discounts and value-added taxes. Sales proceeds are always included in the income statement as soon as the delivery of the goods has taken place and benefit and risk have been transferred to the buyer or the service has been rendered. Net sales also comprises income from the provision of research, development, industrialisation and marketing services.

Borrowing costs Borrowing costs in connection with the construction of property, plant and equipment are capitalised under certain conditions. All other borrowing costs are charged directly to the income statement.

Ypsomed – Financial Report

5. Key estimates and assumptions The preparation of the consolidated financial statements in accordance with generally accepted accounting principles assumes that management makes certain estimates and assumptions which have an impact on the reported carrying amounts of assets and liabilities shown in the balance sheet on the balance sheet date and income and expenses accounted for in the period under review. These estimates and assumptions are based on future expectations and are held reasonable at the time of preparation of the financial statements. The actual amounts can deviate from these assumptions. The most important influential factors on positions based on estimates and assumptions are expressed as follows: Capitalised development expenses The development expenses are capitalised when the requirements for the capitalisation are met. Ypsomed’s estimation of future economic benefits is based on management’s assumptions with regard to the economic baseline conditions, expected prospective cash flows, the discount rates to be applied and the expected period of time in which economic benefits are targeted. Capitalised development expenses amount to CHF 65.2 million as of 31 March 2015 (prior year: CHF 58.7 million). Provisions for warranties When determining the provisions for warranties, management takes into account currently marketed own products and sets the provisions necessary to cover all callable claims based on the maturity and characteristics of the products as well as experience. Provisions for warranties as of 31 March 2015 amount to CHF 1.3 million (prior year: CHF 0.9 million). Income taxes When accruals for income taxes are made for a period, uncertainties regarding final tax payments remain. Estimates that vary from the definitive tax amount have an impact on current and deferred income taxes. In particular, with the capitalisation of deferred tax assets from losses carried forward, the value of these tax loss carry-forwards and the tax rates to be applied must be estimated. Deferred income tax assets related to tax loss carry-forwards as of 31 March 2015 amount to CHF 7.2 million (prior year: CHF 6.9 million).

Ypsomed – Financial Report

Notes to the consolidated financial statements In thousand CHF, unless otherwise stated Subsequent events From the balance sheet date until the consolidated financial statements were approved by the Board of Directors on 20 May 2015, no major events occurred which could adversely affect the validity of the annual financial statements for 2014/15 or which would have to be disclosed.

Share capital

Interest held capital/ votes

Ypsomed Holding AG, CH-Burgdorf

CHF

178 993 807

Ypsomed AG, CH-Burgdorf

100 %

CHF

10 000 000

Ypsomed Distribution AG, CH-Burgdorf

100 %

CHF

6 000 000

TecPharma Licensing AG, CH-Burgdorf

100 %

CHF

100 000

Ypsotec AG, CH-Grenchen

100 %

CHF

1 000 000

Ypsotec s.r.o., CZ-Tábor

100 %

CZK

33 200 000

Ypsomed GmbH, DE-Liederbach

100 %

EUR

100 000

DiaExpert GmbH, DE-Liederbach

100 %

EUR

50 000

Feelfree GmbH, DE-Liederbach

100 %

EUR

25 000

Ypsomed AB, SE-Bromma

100 %

SEK

10 000 000

Ypsomed S.A.S., FR-Paris

100 %

EUR

1 000 000

Ypsomed BV, NL-Vianen

100 %

EUR

50 000

Ypsomed India Private Ltd., IN-New Delhi

100 %

INR

62 801 470

Ypsomed Limited, GB-Escrick

100 %

GBP

300 000

Ypsomed GmbH, A-Wien

100 %

EUR

35 000

Ypsomed S.r.l., IT-Varese

100 %

EUR

50 000

Ypsomed Medical Devices Co., Ltd., CN-Peking1

100 %

CHF

500 000

Research & Development

Production

Marketing and Sales

Financing and Services

Financial Report

1. Consolidation scope

The formal capital contribution has not been made by the reference date. Based on the provisions of the Articles of Association, this constitutes full control.

2. Foreign currencies Euro (EUR) US dollar (USD) Swedish krona (100 SEK)

Balance sheet year-end rates

Income statement average rates

31 March 2015

31 March 2014

2014/15

2013/14

1.05

1.22

1.18

1.23

0.97

0.88

0.93

0.92

11.25

13.63

12.77

14.07

Norwegian krone (100 NOK)

12.01

14.76

13.97

15.33

Danish krone (100 DKK)

13.99

16.31

15.81

16.48

Czech koruna (100 CZK)

3.80

4.44

4.27

4.66

Indian rupee (100 INR)

1.56

1.47

1.52

1.53

1.44

1.47

1.50

1.46

15.69

–

15.12

–

British pound (GBP) Chinese yuan renminbi (100 CNY)

Ypsomed – Financial Report

3. Cash and cash equivalents 31 March 2015

Cash

31 March 2014

227

422

Postal accounts

1 979

1 651

Bank accounts

14 038

14 090

Total

16 243

16 164

31 March 2015

31 March 2014

45 566

35 644

– 223

– 303

Total

45 343

35 342

Provision for bad and doubtful debts

2014/15

2013/14

303

666

4. Trade receivables Trade receivables Provision for bad and doubtful debts

At 1 April Addition Use Reversal

– 127

– 399

– 26

223

303

31 March 2015

31 March 2014

3 958

4 720

Goods in process

12 291

16 144

Finished products

37 930

34 514

Currency translation differences At 31 March

5. Inventories Raw materials and supplies

Gross inventories

54 179

55 377

Valuation allowance

– 2 398

– 3 146

Total

51 781

52 231

31 March 2015

31 March 2014

8 499

9 329

8 591

9 376

6. Financial assets Bionime Corp. Taiwan and Insulet Corp. USA Other financial assets Total

Ypsomed – Financial Report

7. Fixed assets Land and buildings

Machinery and equipment

Other fixed assets

Assets under construction

Buildings for investment purposes

Total

77 723

219 218

12 835

13 154

20 509

343 439

14 139

Cost

At 1 April 2013 Additions

3 668

631

Disposals

– 33

– 11 561

– 769

Transfers

1 256

9 783

101

– 10 993

147

Currency translation differences

– 105

– 144

– 18

– 26

– 293

78 933

220 964

12 780

16 274

20 509

349 460

– 29 896

– 138 070

– 10 319

– 3 468

– 181 753

– 2 607

– 14 463

– 1 152

– 709

– 18 931

Disposals

11 174

703

11 914

Transfers

– 325

– 33

– 330

At 31 March 2014

18 530 – 12 363

Accumulated depreciation

At 1 April 2013 Depreciation

– 32 435

– 141 616

– 10 795

– 4 178

– 189 023

Net book value at 1 April 2013

47 827

81 149

2 516

13 154

17 041

161 686

Net book value at 31 March 2014

46 498

79 348

1 985

16 274

16 332

160 437

78 933

220 964

12 780

16 274

20 509

349 460

4 498

1 451

10 613

– 3 860

– 251

Currency translation differences At 31 March 2014

At 1 April 2014 Additions

563

Disposals Transfers Currency translation differences At 31 March 2015

1 395

18 521

– 4004

– 8 115

539

– 2 134

196

10 852

520

– 14 241

– 328

– 688

– 340

– 30

79 363

231 767

14 160

12 616

18 439

356 346

– 32 435

– 141 616

–10 795

– 4 178

– 189 023

– 2 551

– 15 008

– 1 446

– 755

– 19 759

Financial Report

Cost

– 1 386

Accumulated depreciation

At 1 April 2014 Depreciation

– 1 549

Impairment

3 860

Disposals

– 1 549 239

4 098

150

161

384

258

672

– 34 955

– 153 779

– 11 733

– 4 932

– 205 400

Net book value at 1 April 2014

46 498

79 348

1 985

16 274

16 332

160 437

Net book value at 31 March 2015

44 408

77 988

2 427

12 616

13 507

150 946

Transfers Currency translation differences At 31 March 2015

There are no fixed assets pledged to secure loans and there are no long-term leasing agreements (financial leasing). The fire insurance value of fixed assets at 31 March 2015 amounted to CHF 498 million (prior year: CHF 512.0 million).

Gains from the sale of fixed assets in the 2014/15 business year amounted to CHF 1.6 million (prior year: CHF 0.1 million). Gains from the sale of fixed assets are included in the income statement under other operating income.

Ypsomed – Financial Report

8. Intangible assets Cost

Development costs

Patents

Software

Client base

At 1 April 2013

60 338

660

13 647

12 523

Additions

11 442

665

Disposals

– 93

– 125

Transfers

242

Currency translation differences

Total

87 167 12 107 – 218

– 60

181

– 2

– 4

– 7

71 687

660

14 426

12 459

99 231

At 1 April 2013

– 8 855

– 132

– 12 028

– 11 011

– 32 026

Amortisation

– 3 672

– 132

– 1 080

– 714

– 5 599

At 31 March 2014 Accumulated amortisation

Impairment Disposals

– 540

124

Currency translation differences

217

– 12 974

– 264

– 12 982

– 11 716

– 37 936

Net book value at 1 April 2013

51 482

528

1 618

1 512

55 141

Net book value at 31 March 2014

58 712

396

1 444

743

61 296

At 1 April 2014

71 687

660

14 426

12 459

99 231

Additions

12 075

At 31 March 2014

Cost

1 207

13 282

2 001

Disposals Transfers Currency translation differences At 31 March 2015

– 134

– 720

– 854

83 761

660

17 500

11 739

113 660

Accumulated amortisation

At 1 April 2014

– 12 974

– 264

– 12 982

– 11 716

– 37 936

Amortisation

– 4 363

– 132

– 1 245

– 577

– 6 317

Impairment

– 1 197

Disposals Currency translation differences At 31 March 2015

680

796

– 18 534

– 396

– 14 111

– 11 613

– 44 653

Net book value at 1 April 2014

58 712

396

1 444

743

61 296

Net book value at 31 March 2015

65 227

264

3 390

126

69 007

Due to a development project being shelved, CHF 1.2 million was impaired. Development costs capitalised include CHF 39.5 million (prior year: CHF 32.2 million) for products in the development phase, CHF 3.1 million (prior year: CHF 4.2 million)

116

for products in the industrialisation phase and CHF 22.6 million (prior year: CHF 22.3 million) for products in the phase of commercialisation.

Ypsomed – Financial Report

9. Goodwill not reported in the balance sheet Acquired goodwill – the difference between acquisition costs and the recalculated current value of all net assets acquired – is offset directly against equity at the time of acquisition of a participation or

Cost

At 1 April Additions before taxes Accumulated currency translation differences At 31 March

business. Theoretical capitalisation of goodwill and amortisation over five years would produce the following stated values under assets and scheduled amortisation of goodwill in the income statement:

2014/15

2013/14

325 126

325 048

– 1 414

323 712

325 126

– 317 283

– 313 700

– 3 551

– 3 530

Accumulated amortisation

At 1 April Amortisation, scheduled amortisation over 5 years Change in accumulated currency translation differences

1 425

– 52

– 319 409

– 317 283

Net book value at 1 April

7 843

11 348

Net book value at 31 March

4 303

7 843

At 31 March

Net profit

19 395

13 608

Scheduled amortisation over 5 years

– 3 551

– 3 530

Tax effects Net profit / net loss on reporting goodwill

767

788

16 611

10 865

240 637

228 162

4 303

7 843

Financial Report

Net profit and equity would change as follows:

Equity at 31 March

Equity at 31 March Effect of reporting goodwill in the balance sheet FX effects on goodwill Equity on reporting goodwill at 31 March

– 12

– 26

244 929

235 979

Ypsomed – Financial Report

10. Financial liabilities to major shareholder 31 March 2015

31 March 2014

Loan from Techpharma Management AG, Burgdorf Current Non-current

Since 1 April 2010 the interest has been based on the CHF 12-month LIBOR rate as published by the Swiss National Bank plus a margin of 0.5 %, but at least 0.7%. At any time, Ypsomed Holding AG is eligible to amortise the loan in full or part. Techpharma Management AG for its part may call for an amortisation of CHF 5.0 million per annum by applying a term of notice of three months. In the

15 000

20 000

2015/16 business year, Techpharma Management AG will waive repayment of CHF 5.0 million. The loan is due for repayment on 31 March 2017. Techpharma Management AG is controlled by Willy Michel. In the 2014/15 business year, interest amounting to CHF 0.1 million (prior year: CHF 0.1 million) was paid on the loan.

11. Provisions Taxes

From pension plans

Restructuring

Other

Total

At 1 April 2013

350

756

781

1 955

Additions

722

250

910

1 882

– 2

– 131

– 32

– 166

– 17

– 36

– 311

– 365

– 2

– 1

1 069

857

1 380

3 306

819

245

1 063

1 069

857

1 380

3 306

Additions

738

743

2 110

3 610

Release

– 37

Release Utilisation Currency translation differences At 31 March 2014 of which current At 1 April 2014

Utilisation Currency translation differences At 31 March 2015 of which current

Warranties

– 59

– 96

– 200

– 596

– 795

– 21

– 25

– 4

– 2

1 766

1 340

2 874

5 997

1 144

377

1 521

Warranties

Other provisions

There is a risk that medical products developed, distributed and produced by Ypsomed could have material defects or product faults, resulting in legal liability and product liability in particular, as well as other liabilities, such as the withdrawal or recall of products. Provisions are recorded based on managementâ&#x20AC;&#x2122;s best estimate and relate to guarantees and also to replacement costs for withdrawn products. The companyâ&#x20AC;&#x2122;s management bases these provisions on the estimated potential guarantee claim for each product. Ypsomed holds insurance policies with third parties to cover material damages, interruption of operation, product liability and other risks, with worldwide cover. Ypsomed believes that its insurance cover and provisions with regard to business activities and the associated operative risks involved with this are appropriate and sensible. However, events can arise that are not covered or only partly covered by insurance policies or provisions made by Ypsomed. The closing of an insurance contract, covering product liability, depends on the development of the insurance market and, in particular, on the general development of the pharmaceutical industry, in which high claims for compensation are typical. Although no such losses are presently expected at Ypsomed, there is no guarantee that the company might not be subjected to damage claims in the future that are in excess of the cover available. Provisions for warranties cover any guarantee claims that may occur for products on the market. The provisions extend for the average life of the products, which is between one and four years, depending on the product, and are also determined by the best possible assessment of the risk of a claim for each product category.

Other provisions are based on estimates and have the purpose of complying with requirements for the disposal of waste related to the upcoming conversions of buildings. In the reporting year, CHF 0.3 million was appropriated in connection with the sale of the property in Solothurn. Also included are provisions for employee gifts on the occasion of service anniversaries. In addition, during the reporting year provisions amounting to CHF 0.7 million were accrued for legal costs in connection with the international sales network.

Financial Report

Ypsomed â&#x20AC;&#x201C; Financial Report

Ypsomed – Financial Report

12. Share capital Share capital (in thousand CHF)

2014/15

2013/14

At 1 April

178 994

At 31 March

178 994

12 649 739

22 341

35 013

12 614 726

11 635

79.0

24 307

83.8

12 627 398

12 614 726

Shares issued at 31 March Treasury shares at 31 March Shares outstanding at 1 April Purchases Average price in CHF Disposals Average price in CHF Shares outstanding at 31 March

Ypsomed Holding AG was founded on 29 December 2003 with original share capital of CHF 250 000, consisting of 2 500 shares with a nominal value of CHF 100 each. Today a total of 12 649 739 shares

Conditional share capital (in thousand CHF)

2014/15

2013/14

At 1 April

2 264

At 31 March

2 264

The company has a conditional share capital totaling CHF 2.3 million (prior year: CHF 2.3 million). The company may issue a maximum of 160 000 fully paid-up registered shares with a nominal value of CHF 14.15 (prior year: CHF 14.15) each to selected

employees and members of the Board of Directors. The Board of Directors proposes to the Ordinary General Meeting of Shareholders of 1 July 2015 that the contingent capital should be cancelled.

Authorised share capital (in thousand CHF)

2014/15

2013/14

At 1 April

42 450

At 31 March

On 26 June 2014, the authorised capital expired in full. Correspondingly, Ypsomed Holding AG does not have any authorised capital as at 31 March 2015. Non-distributable reserves Non-distributable reserves in the Group’s shareholders’ equity amounted to CHF 89.5 million at the end of the year under review (CHF 89.5 million in 2013).

exists, each with a par value of CHF 14.15. As of 31 March 2015, the Ypsomed Group and the employee pension fund held 38 797 treasury shares in total (prior year: 51 469).

Ypsomed – Financial Report

13. Long-term contracts Revenue from development and industrialisation services (PoC method) Long-term contracts in the balance sheet

Trade receivables Inventories Prepayments from customers

2014/15

2013/14

3 389

2 755

31 March 2015

31 March 2014

387

150

2 189

2 017

2014/15

2013/14

Wages and salaries

85 397

84.9

81 116

84.9

Social security expenses

13 767

13.7

13 330

14.0

Other personnel expenses

1 434

1.4

1 080

1.1

100 598

100.0

95 526

100.0

31 March 2015

31 March 2014

Switzerland

708

690

Germany

172

156

Total Personnel at 31 March (full-time equivalents)

Netherlands France Scandinavia

Czech Republic

United Kingdom

Austria

India

Italy

China

Total

1 013

958

Headcount

1 050

999

Financial Report

14. Personnel expenses

Ypsomed – Financial Report

15. Employee pensions Within the Group, there are various employee pension plans, of which most employees are members. For the companies abroad and one company in Switzerland, there are pension plans for which the obligation to provide benefits such as retirement, death or invalidity benefits lies with a state institution and/or an insurance company. For the pension plan for two companies in Switzerland representing a proportion of 62 % of the Group’s workforce as at 31 March 2015, there is a separate pension scheme set up in accordance with the Swiss Federal Act on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG) and independent of the Group. As at 31 March 2015, the pension scheme held a value fluctuation reserve of CHF 28.9 million (prior year: CHF 19.6 million). The surplus in the value fluctuation reserve, i.e. the amount by which the reSurplus / deficit

31.03.2015

Pension institutions with surplus Pension institutions without own assets

serves exceed the target value of 14.6 % of assets, stands at CHF 9.5 million (prior year: CHF 3.0 million). This corresponds to a calculated level of cover within the meaning of Art. 44 of the Ordinance on Occupational Retirement, Survivors’ and Disability Pension Plans (BVV2) of 127.5 % based on a technical interest rate of 2.75 % and BVG 2010 (prior year: 120.6 %, technical interest rate 2.75 % and BVG 2010). The board responsible for the pension scheme has decided not to use the surplus in the value fluctuation reserve to reduce contributions. This surplus thus does not represent an economic benefit within the meaning of Swiss GAAP FER 16 and was therefore not capitalised. Pension costs as part of personnel expense correspond to the standard contribution payments by the Group companies involved. Economical benefit / economic obligation

Contributions concerning the business period

Pension benefit expenses within personnel expenses

31.03.2015

31.03.2014

2014/15

2013/14

9 473

3 747

3 666

435

432

Per end of the business years 2013/14 and 2014/15, there were no employer contribution reserves existing.

16. Financial income Interest income Reversal of an impairment Foreign exchange gains Other ﬁnancial income Total

2014/15

2013/14

1 133

2 913

1 018

253

120

3 180

2 299

The impairment on the participating interest in Bionime was reversed in full during the previous year under review following the recovery in the share price.

17. Financial expenses Interest expenses Losses from marketable securities

2014/15

2013/14

845

1 041

Impairment

1 736

Foreign exchange losses

5 338

1 576

Other ﬁnancial expenses

7 993

2 702

Total

The impairment in the current year resulted from a decrease in the market value of a financial asset. 58

Ypsomed – Financial Report

18. Income taxes

Current income taxes Deferred income taxes Total Average tax rate in %

The Group benefits from reduced tax rates for individual companies. These rates are subject to annual changes. Changes to these tax rates and differences in the allocation of profits to these companies

2014/15

2013/14

4 124

1 869

214

– 234

4 339

1 635

18.3 %

10.7 %

affect the effective tax rate. In the previous year a significant proportion of tax provisions were released and credited to income.

Capitalised deferred tax assets

31 March 2015

31 March 2014

9 169

8 835

of which temporary differences

1 951

1 917

of which not yet utilised tax-loss carryforwards

7 219

6 918

Tax-loss carryforwards are only recognised if it is probable that the associated tax benefits can be realised. 19. Segment information

Business year 2013/14

Sales of goods and services to third-party customers

tes Direct Business” business segment covers the direct trade in a range of diabetes articles. “Others” contains the business segment precison turned parts and currently unused real estate for operational purposes. Intersegmental sales are executed at arm’s length.

Delivery Devices

Diabetes Direct Business

Others

141 877

118 380

16 000

Intersegmental sales Total sales of goods and services Operating profit

141 877

118 380

Eliminations

Group

276 257

1 950

– 1 950

17 950

– 1 950

276 257

9 274

6 289

15 645

Investments in fixed and intangible assets

28 821

256

1 560

30 637

Depreciation /Amortisation / Impairment

20 207

1 161

2 570

23 938

Delivery Devices

Diabetes Direct Business

Others

151 735

137 665

17 231

Business year 2014/15

Sales of goods and services to third-party customers Intersegmental sales Total sales of goods and services

Financial Report

For the purposes of company management, the Ypsomed Group is organised into business sectors according to products and services. The “Delivery Devices” segment comprises the product groups pen systems, pen neeedles, infusion sets and other injection mouldings produced by Ypsomed. The “Diabe-

Eliminations

Group

306 632

1 952

– 1 952

306 632

151 735

137 665

19 183

Operating profit

13 440

13 022

2 085

28 546

Investments in fixed and intangible assets

25 946

775

3 774

30 494

Depreciation /Amortisation / Impairment

24 858

1 383

2 581

28 822

Ypsomed – Financial Report

Sales of goods and services Sales of goods and services are reported by geographical location

Switzerland Europe North America Rest of the world Total

Sales of goods and services are reported by geographical location in accordance with the invoice address. The sales of injection systems to biotech

2014/15

2013/14

20 947

18 079

252 038

229 481

25 714

22 066

7 932

6 631

306 632

276 257

and pharmaceutical partners are made mainly to their European group companies. These companies market the products worldwide.

20. Contingent liabilities The Group has contingent liabilities of kCHF 638 (prior year: kCHF 669) toward third parties arising in the ordinary course of business. Ypsomed does

not anticipate that any material liabilities will arise from the contingent liabilities.

21. Contractual obligations 31 March 2015

31 March 2014

Contractual purchase commitments for products

38 161

27 989

Contractual obligations from rental contract with Techpharma Management AG until 31.12.2019

4 306

1 813

964

1 641

Contractual obligations from service contract with GBUK Healthcare until 31.03.2016 Contractual obligations from service contract with Exel Medical GmbH Contractual obligations from rental contract of the German subsidiaries Total contractual obligations

The rental contract between Ypsomed AG and Techpharma Management AG, a company controlled by Willy Michel, was signed at arm’s length. Rental interest is based on an independent rental value estimate and was per reduced as of 1 January 2012 from CHF 985 402 to CHF 906 570 annually plus VAT. It is linked to the consumer price index. The rental contract arranges for small and normal maintenance work on the building to be paid by the

–

2 287

–

45 539

31 478

tenant up to a maximum amount of 2 % of the annual rent per calendar year. As at 31 March 2015, contractual obligations for the purchase of fixed assets amount to CHF 1.9 million (prior year: CHF 4.2 million), for the purchase of intangible assets to CHF 0.2 million (prior year: CHF 0.3 million) and for material and other purchase to CHF 3.9 million (prior year: CHF 0.0 million)

22. Transactions with related parties Related Group parties are Techpharma Management AG, Adval Tech Group, Finox AG and employee pension funds. Services are remunerated in line with industry standards. Receivables from related parties amounted to kCHF 3 (prior year: kCHF 14) on the balance sheet date. Liabilities amounted to

kCHF 4 (prior year: kCHF 2). In the year under review, the following transactions were made with related parties:

Ypsomed – Financial Report

2014/15

2013/14

Techpharma Management AG (interest according to Note 10)

128

149

Techpharma Management AG (compensation for rented business premises)

907

Techpharma Management AG (amounts in accordance with service contract)

Adval Tech Group

900

561

Finox AG

– 61

– 76

Finox AG

1 920

1 644

Total

ment AG (e. g. management and IT support, including temporary personnel leasing). The services are invoiced at normal market conditions. The mutual supply of temporary personnel is invoiced at the personnel cost rate. This contract was discussed and approved by the Board of Directors, in whose opinion this is a cooperation agreement at normal market conditions. See also Corporate Governance “Other contractual relationships” on page 84. In June 2007, Ypsomed AG and Adval Tech Holding AG signed an agreement on strategic cooperation in tool construction. The services purchased are in line with normal market conditions. A licencing agreement has existed between Ypsomed Holding AG and two of its subsidiaries, on the one hand, and Finox AG, on the other hand, since December 2011. See also Corporate Governance “Contractual relationship with Finox AG” on page 84. Financial Report

Willy Michel (i.e. his company Techpharma Management AG) has been renting out the building on Buchmattstrasse in Burgdorf (Ypsomed Nord) to Ypsomed since 1 January 2006. The parties signed a rental contract set at an indexed market rent based on a rental assessment performed by an independent party. The rental contract can be terminated each month subject to 24 months’ notice. See Corporate Governance “Rental contract” on page 83. Willy Michel (i.e. his company Techpharma Management AG) and Ypsomed have concluded a framework service contract that can be terminated by either side at any time. This contract allows for Techpharma Management AG to provide occasional services to the Ypsomed Group (e.g. hotel, catering and transport services) as well as selected management support services (including temporary personnel leasing) and, for its part, for the Ypsomed Group to offer occasional services to Techpharma Manage-

23. Earnings per share Earnings per share are calculated by dividing net profit by the weighted monthly number of shares outstanding during the period. The average number

of treasury shares is deducted from the number of shares issued.

Net profit in thousand CHF Number of outstanding shares weighted on a monthly basis Earnings per share in CHF (basic and diluted)

2014/15

2013/14

19 395

13 608

12 624 614

12 614 726

1.54

1.08

24. Compensation statement and significant shareholders See the notes to the financial statements 2014/15 of Ypsomed Holding AG from page 66 and the Compensation Report from page 95.

Ypsomed â&#x20AC;&#x201C; Financial Report

Report of the group auditors

Financial Report

Ypsomed â&#x20AC;&#x201C; Financial Report

Ypsomed – Financial Report

Balance sheet of Ypsomed Holding AG – statutory financial statements In thousand CHF Assets

Cash and cash equivalents Marketable securities Accrued income and prepaid expenses

31 March 2014

233

317

1 635

2 343

1 889

2 698

Loans to Group companies

193 405

201 268

Investments

323 485

324 315

Other receivables Total current assets

Expenditures related to capital increase

Total non-current assets

516 890

525 583

Total assets

518 779

528 281

31 March 2015

31 March 2014

Liabilities and equity

Trade payables

959

1 079

45 000

50 500

339

Total current liabilities

46 077

51 955

Non-current financial liabilities to major shareholder

15 000

20 000

Total non-current liabilities

15 000

20 000

Share capital

178 994

Capital contribution reserves

172 320

176 105

– 150

Accrued expenses and deferred income Bank loans Current income taxes payable

Disagio Legal reserves Reserves for own shares Retained earnings Net profit Total equity Total liabilities and equity

31 March 2015

1 635

2 343

99 693

89 632

5 161

9 352

457 702

456 326

518 779

528 281

Ypsomed – Financial Report

Income statement of Ypsomed Holding AG – statutory financial statements In thousand CHF 1 April 2014 – 31 March 2015

1 April 2013 – 31 March 2014

Financial income

9 819

12 708

Total income

9 819

12 708

– 397

Income

Expenses

Depreciation and amortisation Financial expenses

– 2 444

– 847

Administration

– 1 664

– 1 691

Income tax expenses Total expenses Net profit

– 550

– 421

– 4 658

– 3 356

5 161

9 352

Proposal for the appropriation of retained earnings

In thousand CHF

Retained earnings Increase reserve for own shares Net profit for business year Retained earnings at disposal of the General Meeting of Shareholders Allotment from capital contribution reserves Distribution of dividend from capital contribution reserves

Carried forward to the next year

31 March 2015

31 March 2014

98 984

89 632

708

5 161

9 352

104 853

98 984

7 576

3 784

– 7 576

– 3 784

104 853

98 984

Financial Report

The Board of Directors proposes to the General Meeting of Shareholders that the retained earnings be appropriated as follows:

The Board of Directors proposes to the General Meeting of Shareholders a tax free distribution of capital contribution reserves in the amount of CHF 0.60 per share. The total distribution based on the actual share capital as per 31 March 2015 will be approximately CHF 7.6 million (prior year: CHF 3.8 million). This amount will be credited to shareholders. 1

Ypsomed – Financial Report

Notes to the financial statements of Ypsomed Holding AG Income Financial income mainly consists of dividends, interest income and gains on securities. Share capital The share capital of CHF 178 993 806 (prior year CHF 178 993 806) consists of 12 649 739 (prior year 12 649 739) registered shares with a nominal value of CHF 14.15 (prior year CHF 14.15).

company may issue a maximum of 160 000 (prior year 160 000) fully paid-up registered shares with a nominal value of CHF 14.15 (prior year: CHF 14.15) each to selected employees and members of the Board of the Directors. The Board of Directors proposes to the General Meeting of Shareholders of 1 July 2015 that the contingent share capital should be cancelled. Authorised share capital On 26 June 2014, the authorised share capital expired in full. Correspondingly, Ypsomed Holding AG does not have any authorised share capital as at 31 March 2015.

Conditional share capital The company has a conditional share capital totalling CHF 2.3 million (prior year: CHF 2.3 million). The Significant shareholders and shareholder groups

Shareholder group Michel family

31 March 2015 Number of shares

Capital and vote share1

Number of shares

Capital and vote share1

9 502 337

75.1 %

9 681 119

76.5 %

556 847

4.4 %

1 350 724

10.7 %

Patinex AG 1

In line with Art. 16 paragraph 2 of the Articles of Association, no shareholder may directly or indirectly amalgamate more than 5 % of the total voting rights in the form of his/her own shares and those he/she is representing. In accordance with

Investments Ypsomed AG, CH-Burgdorf

31 March 2014

paragraph 3, this provision of the Articles of Association does not apply to shareholders to whom more than 5 % of all voting rights were registered at the time the provision was issued.

31 March 2015

31 March 2014

Interest held

Book value (CHF)

Interest held

Book value (CHF)

100 %

277 180 644

100 %

277 180 644

100 %

13 643 520

100 %

13 643 520

100 %

18 161 816

100 %

18 161 816

100 %

6 000 000

100 %

6 000 000

10.2 %

8 488 196

10.2 %

9 318 261

0.0 %

10 638

0.0 %

10 638

Share capital CHF 10 000 000 Ypsotec AG, CH-Grenchen Share capital CHF 1 000 000 TecPharma Licensing AG, CH-Burgdorf Share capital CHF 100 000 Ypsomed Distribution AG, CH-Burgdorf Share capital CHF 6 000 000 Bionime Corporation, Taiwan Share capital TWD 514 467 940 (Prior year TWD 439 467 940) Insulet Corporation, Bedford, MA, U.S.A. Share capital USD 56 299 (Prior year USD 45 441) Total investments

Own shares

323 484 813

31 March 2015

324 314 879

31 March 2014

Number of shares

Ø price

Number of shares

Purchase of own shares

11 635

79.0

Disposal of own shares

24 307

83.8

Own shares held

22 341

0 35 013

Ø price

Ypsomed – Financial Report

Claim subject to subordination clause against subsidiaries Claim subject to subordination clause against subsidiaries

31 March 2015

31 March 2014

32 100 000

31 March 2015

31 March 2014

37 500 000

In addition, there is a letter of comfort with an unlimited amount in favour of a group company.

Securities, reserve for guarantees and collateral order in favour of third parties

Credit Suisse, CH-Zurich Guarantee in the context of credit business for Ypsomed AG

Risk assessment political, regulatory, fiscal and external risks. The significant risks are evaluated regarding the probability of occurrence and impact, and both Management and the Board of Directors decide on measures to be taken and monitor their implementation according to predetermined criteria.

Financial Report

Ypsomed Holding AG performs an extensive risk assessment at least once a year. This standardised process is based on an inventory of risks, which covers the relevant categories of risks such as strategic risks, management risks, general risks of the business areas, legal risks, systemic risks, financial risks, including market, credit and liquidity risks, and event risks, including

Ypsomed – Financial Report

Investments held by members of the Board of Directors and Executive Management As of 31 March, members of the non-executive and executive boards, Executive Management and people closely related to them held the following shares. No Ypsomed share options were held.

Share ownership of Board of Directors

Anton Kräuliger, Vice Chairman Prof. em. Dr. Norbert Thom, member Gerhart Isler, member Total

Shares as of 31 March 2015

Shares as of 31 March 2014

8 717 746

8 574 114

478 682

657 480

22 500

9 218 928

9 254 094

5 100

2 000

132

8 100

5 000

9 232 260

9 261 169

144 888

500

Share ownership of Executive Management

Simon Michel, CEO * Dr. Beat Maurer, Senior Vice President Legal Services & Intellectual Property Yvonne Müller, Senior Vice President Human Resources

800

1 069

Hans-Ulrich Lehmann, Senior Vice President Technology

150

Ulrike Bauer, Senior Vice President Marketing & Sales Delivery Systems **

150

–

Niklaus Ramseier, Senior Vice President Finance/IT (CFO)

Dr. Eberhard Bauer, Senior Vice President Marketing & Sales Diabetes Care ** Dr. Benjamin Reinmann, Senior Vice President Operations Total

2 110

–

149 717

147 377

* Until June 2014, Willy Michel was CEO of the Ypsomed Group. Simon Michel took over as CEO on 1 July 2014 (previously Senior Vice President Marketing & Sales). ** On 1 July 2014, Ulrike Bauer and Dr. Eberhard Bauer joined the Executive Management of Ypsomed Group.

For information on the Family Michel shareholder group and their shareholding, see also the “Corporate Governance” section on page 78.

Ypsomed â&#x20AC;&#x201C; Financial Report

Financial Report

Report of the statutory auditors

Ypsomed â&#x20AC;&#x201C; Financial Report

Ypsomed – Financial Report

In thousand CHF

Sales of goods and services

2014/15

2013/14

2012/13

2011/12

306 632

276 257

244 565

248 593

Gross profit

85 850

70 526

57 074

56 373

Gross profit in %

28.0 %

25.5 %

23.3 %

22.7 %

Operating profit

28 546

15 645

4 846

5 140

9.3 %

5.7 %

2.0 %

2.1 %

19 395

13 608

1 646

8 500

6.3 %

4.9 %

0.7 %

3.4 %

21 308

18 931

19 939

19 578

Operating profit in % Net profit Net profit in % Depreciation of fixed assets Amortisation of intangible assets

7 514

6 139

5 704

8 146

EBITDA2

57 369

40 715

30 489

32 865

EBITDA in %

18.7 %

14.7 %

12.5 %

13.2 %

Current assets

123 498

114 584

108 731

94 604

Non-current assets

237 713

239 944

233 062

232 668

Current liabilities

100 628

103 037

101 367

90 895

19 946

23 329

23 052

18 374

Balance sheet total

361 211

354 528

341 793

327 273

Capital expenditure

– 17 212

– 18 530

– 15 945

– 7 501

Cash flow from operating activities

41 381

41 206

15 168

31 055

Cash flow from investing activities

– 26 232

– 30 062

– 26 290

– 19 781

Cash flow from financing activities

– 14 167

– 4 523

10 957

– 6 425

Issued shares at 31 March

12 649 739

Average shares outstanding

12 624 614

12 614 726

12 615 303

1.54

1.08

0.13

0.67

Non-current liabilities

Earnings per share in CHF (basic / diluted) Dividend per share (in CHF)

0.60

0.30

0.20

Book value per issued share (in CHF)3

19.02

18.04

17.18

17.23

Share price: year’s highest (in CHF)

94.00

80.80

60.00

58.00

Share price: year’s lowest (in CHF)

77.40

52.00

47.00

43.50

Share price: year-end (in CHF)

91.10

78.00

55.00

Market capitalisation (in million CHF)

1 152

987

696

Average headcount

1 022

996

1 021

1 062

983

954

976

1 018

1 050

999

1 015

1 026

Average full-time equivalent Year-end headcount Year-end full-time equivalent Sales per average full-time equivalent (in CHF)

1 013

958

971

980

311 935

289 578

250 579

244 197

Financial Report

Five-year overview

See basis for the consolidated ﬁnancial statements on page 44. Operating profit before depreciation and amortisation. 3 The goodwill was offset with equity under Swiss GAAP FER. 1 2

Lavender field â&#x20AC;&#x201C; France

Corporate Governance and Compensation Report This Corporate Governance report describes the management and control principles at the highest corporate level of Ypsomed Holding AG and its subsidiaries according to the directive of SIX Swiss Exchange concerning information on corporate governance.

Free float of Ypsomed registered shares 2014 / 15

24.9 % 2013 / 14 12.8 % Geographic distribution of registered shareholders in %

Market capitalisation 2014 / 15

CHF 1 152 391 223 2013 / 14 CHF 986 679 642

Corporate Governance Compensation Report

Switzerland 98.2 % RoW 1.5 % Europe 0.3 %

Ypsomed – Corporate Governance

Corporate Governance This Corporate Governance report describes the management and control principles at the highest corporate level of Ypsomed Holding AG and its subsidiaries according to the directive of SIX Swiss Exchange concerning information on corporate governance. Ypsomed, with headquarters in Burgdorf, Switzerland, is a world leader in the field of injection systems for the administration of pharmaceutical substances. Ypsomed develops and produces its products primarily in Switzerland. Ypsomed injection systems are largely marketed by globally active biotechnology and pharmaceutical companies. As part of its diabetes care business segment, Ypsomed focuses on self-medication products for patients with diabetes. The company’s own pen needles as well as infusion sets and commercial products purchased from third parties, in particular devices for the self-monitoring of blood glucose levels as well as infusion pumps, accessories and many day-to-day items for diabetics, are sold through the company’s own distribution network and by independent distributors. The Ypsomed Group also includes Ypsotec, with headquarters in Grenchen, Switzerland, a supplier of precision turned parts and components. The Ypsomed Group’s rules and regulations on Corporate Governance are defined in the Articles of Association, in the Organisational Policy of Ypsomed Holding AG and in the Code of Conduct of the Ypsomed Group and correspond to the Corporate Governance Directive of 1 September 2014, issued by SIX Swiss Exchange. The organisational policy issued by the Board of Directors governs the duties, powers and responsibilities of the executive bodies of the Ypsomed Group. The main features of this policy are set out on page 86 under the section on regulations concerning authority. A copy of Ypsomed Holding AG’s Articles of Association (in German) can be ordered in print form from the company or can be viewed on the company’s website at www.ypsomed.com (under Media & Investors / Publications / Corporate Governance). A copy of the Code of Conduct of the Ypsomed Group (in German, English and French) can be ordered in

Market capitalisation in CHF In % of equity Share price in CHF

Price/earnings ratio * Equity capital on 31 March 2015: kCHF 240 637 Equity capital on 31 March 2014: kCHF 228 162 ** Earnings per share as at 31 March 2015: CHF 1.54 Earnings per share as at 31 March 2014: CHF 1.08

print form from the company or can be viewed on the company’s website at www.ypsomed.com (under Media & Investors / Publications / Corporate Governance). Compliance with the basic principles and values laid down in the Code of Conduct is reviewed on an ongoing basis during the company’s day-to-day business. In addition, the Board of Directors receives information on a regular basis regarding experiences with the Code of Conduct. Group structure Ypsomed Holding AG is organised as a holding company pursuant to Swiss law and directly or indirectly owns or controls all the companies that form part of the Ypsomed Group worldwide. None of Ypsomed Holding AG’s subsidiaries are listed companies. History of Ypsomed’s development Ypsomed was formed from what was previously Disetronic, which was founded in 1984 and which developed and produced infusion systems and also, from 1986, injection systems. On 30 April 2003, Roche Holding AG acquired the infusion business of Disetronic through a public tender offer. Willy Michel continued the injection business under the Ypsomed trade name. Listed Group company Ypsomed Holding AG, which has its headquarters in Burgdorf, is the parent company of the Ypsomed Group. It has a share capital of CHF 178 993 806.85, divided into 12 649 739 registered shares with a nominal value of CHF 14.15 each. Shares in Ypsomed Holding AG were traded on the Main Standard of SIX Swiss Exchange from 22 September 2004 to 28 September 2011. Since 29 September 2011, shares in Ypsomed Holding AG have been traded on the Domestic Standard of SIX

As at 31 March 2015

As at 31 March 2014

1 152 391 223

986 679 642

478.9*

432.4*

91.1

78.0

59.4**

72.5**

Ypsomed – Corporate Governance

international distribution companies report to the Senior Vice President of Marketing & Sales for Diabetes Care. In terms of operations, the Ypsomed Group is divided into two business segments: The Delivery Devices segment consists of business with the product group’s pen systems, pen needles, infusion sets and other injection-moulded parts that are developed and manufactured by Ypsomed. The Diabetes Direct Business segment consists of the sales and direct trade business with various supplies for diabetes care, for example devices for the self-monitoring of blood glucose levels as well as infusion pumps, accessories and other day-to-day items for diabetics. The Others segment comprises precision turned parts and real estate not currently in operational use.

Swiss Exchange. The shares have also been traded since 27 June 2007 on the BX Berne eXchange. The move from the Main Standard to the Domestic Standard of SIX Swiss Exchange was associated with the switch in accounting standards from IFRS (International Financial Reporting Standards) to Swiss GAAP FER, which, in accordance with SIX Swiss Exchange’s accounting guidelines, results in a change of segment. Security number: 1939699 / ticker symbol: YPSN. Operating organisation The operating organisation of the Ypsomed Group is based on a parent company structure. The CEO is responsible for the following departments: Operations (incl. Production, Logistics, Quality Management & Regulatory), Technology, Corporate Finance / IT, Marketing & Sales (Delivery Systems and Diabetes Care), Human Resources and Legal & Intellectual Property. As a rule, two members of Ypsomed Executive Management sit on the Board of Directors of each subsidiary. The Executive Management of Ypsotec reports directly to the CEO, whereas the executive management bodies of the

Group structure as at 31 March 2015 Ypsomed Holding AG Burgdorf

Ypsomed Distribution AG Burgdorf 100 %

TecPharma Licensing AG Burgdorf 100 %

Ypsotec AG Grenchen 100 %

Ypsotec s.r.o Tábor, CZ 100 %

Ypsomed Medical Devices Co., Ltd. Beijing, CN 100 %

feelfree GmbH Liederbach, DE 100 %

Ypsomed BV Vianen, NL 100 %

Ypsomed AB Bromma, SE 100 %

Ypsomed SAS Paris, FR 100 %

Ypsomed GmbH Liederbach, DE 100 %

Ypsomed Ltd. Escrick, UK 100 %

Ypsomed India Private Ltd. New Delhi, IN 100 %

Ypsomed GmbH Vienna, AT 100 %

Ypsomed S.r.l. Varese, IT 100 %

Corporate Governance Compensation Report

Ypsomed AG Burgdorf / Solothurn 100 %

DiaExpert GmbH Liederbach, DE 100 %

Ypsomed – Corporate Governance

Capital structure Share capital The share capital of Ypsomed Holding AG amounts to CHF 178 993 806.85, divided into 12 649 739 fully paid-up registered shares, each with a nominal value of CHF 14.15. Conditional share capital Ypsomed Holding AG has conditional share capital of CHF 2 264 000. The company may issue to selected employees and members of the Board of Directors up to a maximum of 160 000 registered shares, to be paid up in full, with a par value of CHF 14.15 each. Shareholders’ purchase and advance

subscription rights are excluded. Pursuant to the Articles of Association, shares and option rights may be issued at a price below the stock market value. The acquisition of shares through the exercising of subscription or option rights is subject to the statutory recording limitation and the statutory voting right limitation (see below). The company has not issued any shares or option rights to date. The Board of Directors proposes to the Annual General Meeting of Shareholders of 1 July 2015 that the conditional share capital should be cancelled.

Equity analysis of Ypsomed Holding AG

Date

Issue

01.04.12

Balance

12.07.12

Reassignment of capital reserves to reserves as capital investments

31.03.13

Net profit

11.07.13

Reassignment of capital reserves to reserves as capital investments

31.03.14

Net profit

10.07.14

Reassignment of capital reserves to reserves as capital investments

31.03.15

Reserves for own shares

31.03.15

Net profit

31.03.15

Balance

Number of shares

Nominal value

Share capital

12 649 739

14.15

178 993 806.85

12 649 739

14.15

178 993 806.85

Ypsomed – Corporate Governance

Authorised share capital

Participation certificates

On 26 June 2014, the authorised share capital expired in full. Correspondingly Ypsomed Holding AG has no authorised share capital as at 31 March 2015.

Ypsomed Holding AG has no participation certificates. Changes in capital

Shares and participation certificates The 12 649 739 registered shares are fully paid-up and each has a nominal value of CHF 14.15. One registered share represents one vote. The shares have equal dividend rights. Ypsomed Holding AG has no participation certificate capital.

The capital changed as follows in the past years: Changes in the share capital up to 31 March 2014 pursuant to the accounts of Ypsomed Holding AG produced in accordance with company law.

General statutory reserves Capital reserves

Retained earnings

Reserves from equity

General reserves

Reserves for own shares

Total

–150 000.00

80 865 605.61

181 150 546.80

50 000.00

2 343 459.40

443 253 418.66

– 2 522 945.20

440 730 473.46

8 766 447.94

449 496 921.40 – 2 522 945.20

446 973 976.20

9 352 303.09

456 326 279.29 – 3 784 417.80

452 541 861.49

708 210.15

– 708 210.15

104 853 158.05

457 702 452.75 172 320 238.60

50 000.00

1 635 249.25

Corporate Governance Compensation Report

5 160 591.26 –150 000.00

452 541 861.49 457 702 454.75

Ypsomed – Corporate Governance

Shareholder structure Registered shareholders There were 3 966 shareholders registered in the Share Register on 31 March 2015 (prior year: 4 241 shareholders). Of these shareholders, 98 % report Switzerland as their place of residence. The distribution of shareholdings is as follows: Number of shareholders as at 31 March 2015

Number of shareholders as at 31 March 2014

1 to 100

2 213

2 399

101 to 1000

1 591

1 705

137

121

Number of shares

1001 to 10 000 10 001 to 100 000 more than 100 000

Significant shareholders and significant shareholder groups The Michel family shareholder group, set up for the purposes of holding shares in family ownership, comprises Willy Michel, Chairman of the Board of Directors of Ypsomed Holding AG, who holds shares both directly and indirectly via the companies he controls, Techpharma Management AG and BV Holding AG, as well as his children Simon Michel, CEO of Ypsomed Holding AG and the Ypsomed Group, Serge Michel and Lavinia Camilla Nussio, who each hold shares directly. As at 31 March 2015, the Michel family shareholder group holds a combined total of 9 502 337 registered shares (prior year: 9 681 119) in Ypsomed Holding AG, which represents 75.12 % (prior year: 76.53 %) of all the shares in the company. Patinex AG, Egglirain 24, CH-8832 Wilen, which is directly controlled by Martin and Rosmarie Ebner, and BZ Bank Aktiengesellschaft, Egglirain 15, 8832 Wilen, which they indirectly control, disclosed that their shareholding fell below the threshold limit of 10 % on 10 July 2014 and the threshold limit of 5 % on 15 January 2015. On 31 March 2015, Patinex AG posted a holding in the company of 4.40 % (prior year: 10.68 %). BZ Bank Aktiengesellschaft currently does not hold any shareholdings subject to disclosure. There are no other known significant shareholders or significant shareholder groups. No shareholder agreements have been disclosed. In the reporting year, there were no further disclosure notifications. The disclosure notifications published pursuant to Art. 20 of the Stock Exchange Act can be accessed at the website of SIX Swiss Exchange via the following link: www.six-exchange-regulation.com.

Accounting With effect from 30 September 2011, Ypsomed changed its accounting standard from IFRS to Swiss GAAP FER. Since then, SWISS GAAP FER has been used as the accounting and reporting standard. The primary principle of Swiss GAAP FER is to promote a true and fair view of the assets, liabilities, financial position and profit or loss, meaning informative and reliable accounting remains guaranteed under Swiss GAAP FER. Group accounting in accordance with Swiss GAAP FER comprises comprehensive consolidated accounts including a profit and loss statement, balance sheet, cash flow statement, statement of changes in equity, as well as selected management statistics. Cross participations There are no cross participations. Limitation on the transferability of shares No share certificates are issued for Ypsomed Holding AG shares. Any shareholder may ask the company at any time to issue a confirmation regarding the registered shares entered in the Share Register in his/her name. Any person validly entered in the Share Register as an owner or beneficiary is considered to be a shareholder of the company. Any person acquiring registered shares or the beneficial entitlement to registered shares must apply in writing to be entered in the Share Register. Approval is given by the Board of Directors, which may delegate this power. The transfer is then entered in the Share Register. Applicants will be entered in the Share Register as shareholders with voting rights provided they expressly declare that they have ac-

Ypsomed – Corporate Governance

quired the registered shares in their own name and for their own account. If this declaration is not made, the Board of Directors may refuse the entry. The Board of Directors may draw up guidelines for the entry of nominees and may permit nominees to be entered in the Share Register with voting rights for shares up to a maximum of 5.0 % of the nominal share capital. The Board of Directors may also allow nominees to be entered in the Share Register with voting rights for shares exceeding this limit if the nominees disclose the names, addresses, nationality, domicile and shareholdings of the natural persons and legal entities on whose account they hold 1.0 % or more of the share capital. The 5.0 % limit also applies to nominees who are related to one another through capital ownership or voting rights by virtue of a common management or otherwise. If a shareholder has been entered in the Share Register on the basis of incorrect information then the Board of Directors may, after having given the

parties involved the right to be heard, remove from the Share Register the entry as a shareholder with voting rights and replace it instead with an entry as a shareholder without voting rights. In the reporting year, no applications for the entry of nominees were made. Restrictions on the transfer of registered shares may only be amended by a resolution passed at the General Meeting of Shareholders with a qualified majority of at least two-thirds of the votes represented and an absolute majority of the nominal share capital represented at the meeting. Convertible bonds and options There are no outstanding convertible bonds and no options on participation rights for Ypsomed Holding AG or any Group companies have been issued.

Corporate Governance Compensation Report

The head office of the Ypsomed Group is in Burgdorf.

Ypsomed – Corporate Governance

Board of Directors Dr. h. c. Willy Michel, Chairman of the Board of Directors of Ypsomed Holding AG. Until April 2003, Willy Michel was the Chairman of the Board of Directors and CEO of Disetronic Holding AG and since 2003 he has been Chairman of the Board of Directors of Ypsomed Holding AG. From August 2011 to June 2014, Willy Michel was Delegate of the Board of Directors and CEO of Ypsomed Holding AG and the Ypsomed Group. He founded Disetronic together with his brother in 1984 and they were together until his brother’s departure from the business in 1995, whereupon Willy Michel became solely responsible for the development, production, distribution and sale of Disetronic products (until 1999). Within the scope of the sale of Disetronic to Roche Holding AG in 2003, Willy Michel bought back Disetronic’s injection business, which has subsequently traded under the name Ypsomed. Prior to the founding of Disetronic, Willy Michel, who holds a professional qualification as a pharmaceutical consultant with a federal diploma, obtained a broad range of experience with several industrial and pharmaceutical companies in the fields of development, sales and marketing and he was the head of novo Nordisk Switzerland for six years (from 1978 until 1984). Willy Michel is the majority shareholder and Chairman of the Board of Directors of the non-listed company Finox AG, which is active in the development, manufacturing and sale of pharmaceuticals, Vice Chairman (Chairman from 2001 to March 2008) of the Board of Directors of BV Holding AG, an equity investment company which is listed on the BX Berne eXchange and Chairman (since 2012, a member since 2007) of the Board of Directors of Adval Tech Holding AG, which is listed on SIX Swiss Exchange. In addition, he is the owner of a number of companies, including well-known firms involved in the fields of art, watch-making and gastronomy, and is a member of the Boards of Directors of various non-listed companies operating in different sectors from the Ypsomed Group and of no significance to its business activities. Willy Michel was declared the “Master Entrepreneur of the Year” for his overall business performance by Ernst & Young AG in 2005 and in 2006 he was awarded an honorary doctorate (Dr. h. c.) by the Economic and Social Science Faculty of the University of Bern. In 2014, the Swiss Association for Internal and Integrated Communication (Schweizerischer Verband für interne und integrierte Kommunikation SVIK) awarded Willy Michel the “Communicator of the Year” (COTY) Award 2014.

Anton Kräuliger, Vice Chairman of the Board of Directors of Ypsomed Holding AG (member of the Board since 2007). After completing his studies at ETH Zurich with a degree in Mechanical Engineering, Anton Kräuliger joined the family business in 1971 and in 1978 took over the majority shareholding in Lyss AG (today Metalyss AG), a metal foundry and fittings factory. He developed this company into the leading fittings group on the Swiss market, the Similor Group. Within the scope of the sale of the fittings division to Madison Private Equity Holding AG in 2002 and 2005, Mr Kräuliger repurchased the Industrial Division, which today is combined into Metalyss AG once more. Between 1993 and 2004, Mr Kräuliger was a member of the Board of Directors of the listed Berner Kantonalbank BEKB I BCBE. He was also a member of the Board of Directors of Sécheron-Hasler Holding AG (2005 to 2013) and Chairman of the Board of Directors of Sécheron SA (2005 to 2014). He continues to be active as Chairman of the Board of Directors of Metalyss AG (since 1978).

Ypsomed – Corporate Governance

Prof. em. Dr. Norbert Thom, member of the Board of Directors of Ypsomed Holding AG since 2005. After studying economics and social sciences at the University of Cologne (Dr. rer. pol. and postdoctoral qualification in business management), Norbert Thom completed a full academic career spanning some 40 years spent at four universities (Cologne, Giessen, Fribourg, Bern) before his retirement in 2012. In Berne, Prof. Thom was founder and director of the Institute of Organisation and Human Resource Management (1991 to 2012) as well as holding several other offices at the university including Vice Rector for Finance and Planning. Prof. Thom has received awards in Switzerland and abroad for his academic achievements, including three honorary doctorates and one honorary professorship. Prof. Thom has maintained close links with the business world for many years. As well as consultancy work and membership of advisory boards, he has also been a member of several boards of non-listed companies operating in different sectors from the Ypsomed Group and of no significance to its business activities. Currently, in his capacity as professor emeritus, he retains ties to the University of Bern, most notably as a supervisor and examiner for its Executive Master of Health Administration programme. Since 2012, he has also been a member of the Supervisory Board of the REHAU Group (Muri bei Bern), a global plastics company.

Gerhart Isler, member of the Board of Directors of Ypsomed Holding AG since 2008. After completing his studies in economics at the University of Zurich, Gerhart Isler joined the family newspaper publishing company Finanz und Wirtschaft AG as an editor in 1976. In 1980, he managed the company’s editorial department in New York, was head of foreign correspondence from 1981 until 1986 and then held the position of manager of the publishing house until 1989. He then became the owner of Finanz und Wirtschaft, which enjoyed strong growth up to 2000 and became the country’s most important financial newspaper. Mr Isler subsequently sold the publishing firm but continued as its editor until the end of 2004. From 2005 until the end of 2008, Mr Isler was a member of the Board of Directors of the listed company PubliGroupe and from 2008 to spring 2012 he was a member of the Board of Directors of the listed investment company New Value. In 2005, he was elected to the Board of Directors of Grand Casino Baden. Mr Isler has been a member of the Board of Trustees of the move>med Foundation, which is involved in the field of sports, since 2005. Furthermore, Mr Isler has been Mayor of Bergdietikon since early 2010.

Name

Nationality

Year of birth

Dr. h. c. Willy Michel ****

1947

Anton Kräuliger ***

Prof. em. Dr. Norbert Thom *** Gerhart Isler ***

Position

Member since *

Elected until General Meeting of Shareholders **

Chairman of the Board of Directors

1984

01.07.2015

1946

Vice Chairman of the Board of Directors

2007

01.07.2015

DE / CH

1946

Member of the Board of Directors

2005

01.07.2015

1949

Member of the Board of Directors

2008

01.07.2015

Corporate Governance Compensation Report

Board of Directors

* First election including membership of the Board of Directors of Disetronic (until 2003). ** Following the enactment of the Minder initiative, all the members of the Board of Directors and the chairman had to stand for re-election at the 2014 Annual General Meeting of Shareholders. *** Non-executive member of the Board of Directors, member of the Compensation Committee: No operational activity for Ypsomed Holding AG and its subsidiaries in the current year and the three preceding business years. **** Until April 2003, Willy Michel was a member of the Executive Management of Disetronic Holding AG and from 2003 to August 2011 he was the non-executive Chairman of the Board of Directors of Ypsomed Holding AG. From August 2011 to June 2014, Willy Michel was Delegate of the Board of Directors and CEO of Ypsomed Holding AG and the Ypsomed Group. Since July 2014, he has been the non-executive Chairman of the Board of Directors of Ypsomed Holding AG.

Ypsomed – Corporate Governance

Dr. h. c. Willy Michel

Prof. em. Dr. Norbert Thom

Anton Kräuliger

Gerhart Isler

Other activities and vested interests

Rental contract

There are no other activities or vested interests apart from those already mentioned.

Willy Michel (i.e. the company Techpharma Management AG which he controls) has been renting out the building on Buchmattstrasse in Burgdorf (Ypsomed Nord) to Ypsomed since 1 January 2006. The parties signed a rental contract set at an indexed market rent based on a rental assessment performed by an independent party. The rent was reduced on 1 January 2012 to CHF 906 570 plus VAT (excluding additional costs). The rental contract can be terminated on 31 December 2019 conditional upon 24 months’ notice and after this on any month. The tenant has unlimited first right of refusal for purchasing the property for the entire rental period, but for a maximum of 25 years from the start of the rental. The rental contract stipulates that small and standard maintenance work on the building shall be paid by the tenant up to a maximum amount of 2.0 % of the annual rent per calendar year. Major maintenance work and repairs necessary for safeguarding the asset value of the building are at the lessor’s expense. On termination of the contract, the tenant will be reimbursed for the alterations carried out to the leased property with the lessor’s consent in application of Swiss GAAP FER depreciation rates at the residual book value. The rental contract was discussed and approved by the Board of Directors, in whose opinion it is commensurate with a rental contract at normal market conditions.

Significant business relations With the exception of Willy Michel, there are no business relations between the individual members of the Board of Directors and Ypsomed Holding AG and its subsidiaries. There were the following business relations between Willy Michel and people closely related to him as well as to Ypsomed Holding AG and its subsidiaries in the reporting year. Executive loan Willy Michel made a loan to Ypsomed Holding AG, which he assigned to his company Techpharma Management AG. In the reporting year, an amortisation payment of CHF 5 million was made. As at 31 March 2015, a loan amount of CHF 15 million was still outstanding. Since 1 April 2010, the loan has borne interest at a rate based on the CHF 12-month LIBOR as published by the Swiss National Bank plus interest of 0.5 %, but at least 0.7 %, and it is adjusted in line with the prevailing rate as at the end of March and the end of September every year. The other key terms of the loan agreement in its currently valid version as at 31 March 2014 are: Ypsomed Holding AG may repay the loan in full or in part at any time. However, it is repayable by 31 March 2017 at the latest. Techpharma Management AG has renounced the possibility of any further amortisation until 31 March 2016. However, as of 1 April 2016 it may each year demand repayment of a maximum of CHF 5.0 million at three months’ notice, whereby the loan becomes due for repayment on 31 March 2017. There are no further executive loans.

Corporate Governance Compensation Report

Ypsomed – Corporate Governance

Contractual relationship with Finox AG Finox AG (Finox), which is controlled by Willy Michel, develops and distributes pharmaceuticals, in particular fertility hormones as well as the associated pen systems for their administration. There has been a licencing agreement between Ypsomed Holding AG and two of its subsidiaries and Finox since December 2011, which replaced a former cooperation agreement. The licencing agreement regulates the rights to the technology and the industrial property rights regarding the pen systems. Ypsomed AG is granted a licence under this agreement for the use of two administering technologies outside of the specified areas of application. Finox AG may use the industrial property rights developed under the cooperation agreement on an exclusive basis within specified areas of application. In the reporting year, Finox also concluded two supply agreements with Ypsomed AG. Under the first agreement Ypsomed shall supply Finox with its Clickfine® pen needles and under the second agreement, Ypsomed shall produce and supply Finox with the pen systems that are used for the administration of its fertility hormone. The agreements include clauses that are standard for such agreements. They were discussed and approved by the Board of Directors and, in the opinion of the Board, they represent a cooperative relationship that is usual in the market. Other contractual relationships Ypsomed AG and Adval Tech Holding AG signed an agreement on strategic cooperation in mould making in June 2007. The objective of this cooperative venture is to combine the respective strengths and core competencies of Ypsomed and Adval Tech and exploit them for the economically efficient manufacture of high-quality products. Willy Michel (i.e. his company Techpharma Management AG) and Ypsomed have concluded a framework service contract that can be terminated by either side at any time. This contract allows for Techpharma Management AG to provide occasional services to the Ypsomed Group (e.g. hotel and catering services) as well as selected management support ser-

vices (including temporary personnel leasing) and, for its part, for the Ypsomed Group to offer occasional services to Techpharma Management AG (e.g. management and IT support, including temporary personnel leasing). The services are invoiced at normal market conditions. This contract was discussed and approved by the Board of Directors, in whose opinion it is a cooperation agreement at normal market conditions. The framework service contract was expanded insofar as Willy Michel performed the function of CEO of the company from August 2011 until June 2014. The amount of compensation remained unchanged at CHF 140 000. Following the enactment of the Minder initiative and the corresponding adjustment of the framework service contract, compensation of the same amount (CHF 140 000) was paid to Willy Michel for the first time as a fee for his chairmanship of the Board of Directors of Ypsomed AG for the business year ending 31 March 2014. For the business year ending 31 March 2015, Willy Michel has decided to take only half this amount, which means that the fee for his chairmanship of the Board of Directors of Ypsomed AG amounts to CHF 70 000 for the reporting year. This amount, together with the compensation for the chairmanship of the Board of Directors of Ypsomed Holding AG, represents the full compensation for all consulting and management services provided by Willy Michel, including his activity as CEO in the reporting year up to 30 June 2014. Willy Michel has expressly waived the right to any more extensive compensation for his operating activities as CEO in the reporting year. Number of permissible mandates The Articles of Association of Ypsomed Holding AG have not yet been modified in accordance with the Ordinance against Excessive Compensation in Listed Stock Companies (VegüV). The Board of Directors shall correspondingly propose a comprehensive revision of the Articles of Association at the General Meeting of Shareholders of 1 July 2015. Pursuant to the recommendation, the members of the Board of Directors should not accept more than 15 additional mandates in legal entities and only a maximum of five of these may be with companies whose participation rights are listed on an exchange. A mandate is deemed to be any activity in the highest management or administrative bodies of other legal entities that are obliged by law to be entered into the commercial register or a comparable foreign register and that are not directly or indirectly controlled by Ypsomed Holding AG or control the company. Mandates with different legal entities that are under joint control are not deemed to be mandates in this sense. Mandates that a member

Ypsomed – Corporate Governance

of the Board of Directors accepts on the instructions of the company, as well as mandates in associations, organisations and legal entities that are of a charitable or public nature, or in foundations, trusts and pension schemes are not governed by the restriction on admissible mandates. Election and period of office The members of the Board of Directors and the chairman are elected on an annual basis. Re-election is possible. There is no restriction to the period of office. The members of the Board of Directors were each re-elected at the General Meeting of Shareholders in 2014 and Willy Michel was also re-elected as chairman. The results of the first election can be seen in the table on page 81. The Articles of Association of Ypsomed Holding AG have not yet been modified in accordance with the Ordinance against Excessive Compensation in Listed Stock Companies (VegüV). The Board of Directors shall correspondingly propose a comprehensive revision of the Articles of Association at the General Meeting of Shareholders of 1 July 2015. Pursuant to the recommendation, no rules that deviate from the statutory provisions regarding the appointment of the chairman, the members of the compensation committee and the independent proxy are anticipated. Internal organisation The Chairman of the Board of Directors is elected by the General Meeting of Shareholders. In addition, the Board of Directors constitutes itself. There is no advisory board.

therefore can dispense with the creation of further committees, with the exception of the compensation committee. However, it can transfer individual powers to an executive committee. Compensation committee The General Meeting of Shareholders of 1 July 2014 elected Anton Kräuliger, Norbert Thom and Gerhart Isler as members of the compensation committee. The Board of Directors appoints the chairman of the compensation committee. Anton Kräuliger was appointed as chairman. The compensation committee supports the full Board of Directors in determining and reviewing the compensation principles, in drafting the compensation report and in preparing the proposals for the General Meeting of Shareholders with regard to the compensation of the Board of Directors and Executive Management. In addition, it draws up recommendations regarding the compensation principles, which are then decided on by the Board of Directors. Modus operandi of the Board of Directors and its committees As a rule, the Board of Directors meets four times a year. In these meetings, it considers the written report and the verbal comments of the CEO and deliberates and decides on the proposals of the CEO. The auditors participate in the May Board meeting, in which they provide information on the comprehensive report and on other questions. The Board of Directors meets on one additional occasion per year for two to three days within the context of a strategy meeting with Executive Management. Occasionally, the Board of Directors also passes resolutions by means of circular letter. The agendas for

Corporate Governance Compensation Report

Division of duties in the Board of Directors Willy Michel, Chairman of the Board of Directors of Ypsomed Holding AG, chairs the General Meeting of Shareholders and the meetings of the Board of Directors. He is the link between the Board of Directors and the CEO, is in regular contact with the CEO, discusses individual transactions with the CEO, monitors the activities of the CEO and of Executive Management and represents the Board of Directors outside the company. Due to the size and composition of the Board of Directors, it can offer advice and make decisions on all questions as a full Board of Directors and it

Ypsomed – Corporate Governance

the meetings are set by the chairman; any member as well as the CEO can request that an item should be added to the agenda. The members, the CEO and CFO as well as the officers responsible for internal audit and risk management generally receive the agenda and the necessary documentation for decision making seven to ten days before the meeting. Any member of the Board of Directors may request information about any aspect of the Group’s affairs. Votes and elections within the Board of Directors are passed by majority decision. In the event of a tied vote, the chairman has the casting vote. Should the chairman be absent, the vice chairman shall have the casting vote. Votes may not be taken by proxy. The CEO and generally the CFO as well as the officers responsible for internal audit and risk management and, on a caseby-case basis, other members of Executive Management or employees with an advisory role are present at the meetings. In the reporting year, the Board of Directors met four times and passed several resolutions by circular letter. The lead auditor took part in the Board of Directors meeting in May 2014. In addition, the Board of Directors convened for two and a half days in March 2015 as part of the strategy meeting with Executive Management. All the members of the Board of Directors took part in all the Board of Directors meetings and in the General Meeting of Shareholders in July 2014. With the exception of Norbert Thom, all the members of the Board of Directors took part in the strategy meeting in March 2015. The compensation committee also meets during the strategy meeting and prior to or subsequent to the Board of Directors meeting in May. All the recommendations of the committee are dealt with in the standard Board of Directors meetings. In the reporting year, the compensation committee met once during the strategy meeting in order to decide on recommendations for the attention of the full Board of Directors. Definition of competences The Board of Directors has by law certain non-transferable and irrevocable duties. It has the highest decision-making power in the company, under restriction of those matters on which shareholders must decide in accordance with the law. In particular, it defines company policy, the mission statement – consisting of a mission and a vision – and

the strategic direction of the Ypsomed Group, sets its targets and priorities and allocates the resources for achieving the targets set. The Board of Directors defines the organisation of the Ypsomed Group, supervises business activities, controls the finance and accounting divisions and is responsible for appointments and dismissals as well as the supervision of the individuals entrusted with management duties. It is responsible for the Annual Report and the Compensation Report, issues the Code of Conduct, approves the budget and the mid-term planning for Executive Management and also monitors the business activities of the Group companies and it periodically assesses strategic, operational and financial risks. The Board of Directors approves individual business affairs. This includes, in particular, decisions on the purchase or sale of companies, properties and new technologies as well as the conclusion of contracts regarding strategic cooperations and contracts with other financial significance. In addition, the Board of Directors approves the financial statements and any amendments to or dissolution of employment contracts with members of Executive Management. The competences of the Board of Directors and of the other decision-makers within the Ypsomed Group are determined within the competence regulation. Otherwise, the Board of Directors has delegated responsibility for running the company to the CEO. Instruments for information and control with regard to Executive Management The Ypsomed Group’s information and control tools, which are at the disposal of the Board of Directors, consist of a quarterly written management report (management review, quarterly reports), and a financial report. The Chairman of the Board of Di-

Ypsomed â&#x20AC;&#x201C; Corporate Governance

Corporate Governance Compensation Report

rectors and the CEO have direct access at all times to the management information system (MIS). The CEO and generally the CFO as well as the officers responsible for internal audit and risk management and, on a case-by-case basis, other members of Executive Management or employees with an advisory role, are present at the meetings. Furthermore, the full Board of Directors meets for two to three days within the context of a strategy meeting with Executive Management and other employees during which there is also a focus on risk management. Furthermore, the Board of Directors uses strategic planning documents as management tools for steering the company. Responsibility for risk management and monitoring rests with Executive Management, which reports on these matters periodically to the full Board of Directors, but at least once a year. In addition to these documents, further selected financial figures are available to Executive Management on a monthly basis. Risk assessment is based on a risk inventory that encompasses the relevant risk categories such as strategic risks, management risks, general risks in the operating business, legal risks, systemic risks, financial risks (including market, credit and liquidity risks) and event risks (including political, regulatory, fiscal and external risks). These risks are assessed with regard to probability of occurrence and impact. The Internal Auditing function, for which the Board of Directors is directly responsible, is commissioned with the constant expansion of the documented, internal control system. The auditing plans are based on a risk-oriented procedure that relates to business processes and are geared towards the following goals and tasks: reviewing the fulfilment of business goals and objectives; evaluation of the effectiveness of risk management, control and corporate management processes; optimisation of business processes; improvement of controls and processes with regard to the information systems; verification of controls and processes for accounting systems and financial reporting; confirmation and guarantee of authorised business transactions; safeguarding and protection of assets; support with regard to complying with legal and regulatory requirements; reviewing significant or special business cases and transactions. The Board of Directors can determine additional areas to be reviewed. The officer responsible for internal auditing provides the auditors several times per year with appropriate documentation on his/her internal auditing activities and coordinates these with the auditing to be carried out by the auditors within the framework of the interim and year-end audits.

Ypsomed – Corporate Governance

Executive Management The CEO as well as Executive Management are responsible for the operational management of the Ypsomed Group within the scope of the guidelines laid down by the Board of Directors.

Name

Nationality

Year of birth

Position

Employed at Ypsomed (i.e. before 2003 for Disetronic) since

Simon Michel *

1977

CEO

2006

Dr. Beat Maurer

1958

Senior Vice President Legal & Intellectual Property, Secretary of the Board

1992

Hans Ulrich Lehmann **

1966

Senior Vice President Technology

2000

Ulrike Bauer ***

1969

Senior Vice President M & S Delivery Systems

2001

Niklaus Ramseier

1963

Chief Financial Officer (CFO)

2002

Dr. Benjamin Reinmann ****

1969

Senior Vice President Operations

2002

Yvonne Müller

1969

Senior Vice President Human Resources

2003

Dr. Eberhard Bauer ***

1960

Senior Vice President M & S Diabetes Care

2012

* CEO since July 2014. Previously Senior Vice President Marketing & Sales ** Since April 2015, Hans Ulrich Lehmann has been managing the Operations area on an ad interim basis *** Member of Executive Management since July 2014 **** Left the Ypsomed Group at the end of March 2015

Simon Michel Chief Executive Officer, CEO 88

Dr. Beat Maurer Senior Vice President Legal & Intellectual Property

Ypsomed – Corporate Governance

Ulrike Bauer Senior Vice President M & S Delivery Systems

Niklaus Ramseier Chief Financial Officer (CFO)

Dr. Benjamin Reinmann Senior Vice President Operations

Yvonne Müller Senior Vice President Human Resources

Dr. Eberhard Bauer Senior Vice President M & S Diabetes Care

Corporate Governance Compensation Report

Hans Ulrich Lehmann Senior Vice President Technology

Ypsomed – Corporate Governance

Organisation of Ypsomed

Board of Directors

CEO S. Michel

Finance & IT CFO N. Ramseier

Legal & IP Dr. B. Maurer

Human Resources Y. Müller

Operations* Dr. B. Reinmann

Technology H. U. Lehmann

Marketing & Sales Delivery Systems U. Bauer

Marketing & Sales Diabetes Care Dr. E. Bauer

* Since April 2015, Hans Ulrich Lehmann has been managing the Operations area on an ad interim basis

Simon Michel, CEO of Ypsomed Holding AG and the Ypsomed Group. With Ypsomed since October 2006. Member of management since 2008 and responsible for Marketing & Sales. CEO since July 2014. From 2003 until 2006, Simon Michel worked for Orange Communications AG in Zurich and Lausanne, where he was responsible for, among other things, the introduction and marketing of UMTS. Simon Michel studied economics at the University of St. Gallen and completed a Masters with a focus on media and communications management. Since 2006, he has been a member of the Board of Directors of Sphinx Werkzeuge AG and since 2008 a board member of the Burgdorf-Emmental Trade and Industry Association. Since 2015, he has been a member of the Board of Directors of the Solothurn Chamber of Commerce, Chairman of the Industry Commission and a member of the Board of Directors of FASMED, the Federation of Swiss Medical Devices Trade and Industry Associations, as well as a member of further boards of trustees and advisory boards. Beat Maurer, Dr. iur., attorney-at-law, Senior Vice President Legal and Intellectual Property, Secretary to the Board of Directors of Ypsomed Holding AG, with Ypsomed (pre-2003 with Disetronic) since1992, prior to that tax and legal consultant with a trust and auditing company. Education: degree in Law from the University of Fribourg, studied at the Free University of Berlin, took a doctorate in law at the University of Bern and was admitted to the bar in the canton of Berne. Beat Maurer has been a judge specialising in issues relating to business law and intellectual property law at the commercial court of the canton of Berne since 2002. He is also a member of the Board of Directors of FASMED, the Federation of Swiss Medical Devices Trade and Industry Associations.

Hans Ulrich Lehmann, Senior Vice President Technology. As of April 2015, Hans Ulrich Lehmann has been managing Operations on an ad interim basis. He has been a member of Executive Management since 2011 and is responsible for Technology. He has been with Ypsomed since 2000 (pre2003 at Disetronic) in different positions, initially as Senior Project Manager for R&D projects, before spending several years as Vice President Manufacturing and Vice President Technology. Previously, he worked at various medical device manufacturing and injection moulding companies in Switzerland and the USA. He graduated as a mechanical engineer and completed the postgraduate programme in business administration at the University of Applied Sciences in Berne and also completed the Program for Leadership Development PLD at Harvard Business School in Boston, USA. Ulrike Bauer, Senior Vice President Marketing & Sales Delivery Systems, with Ypsomed (pre2003 with Disetronic) since 2001 in different Marketing & Sales functions and since 2014 a member of Executive Management. Previously Product Manager with Mettler Toledo (1996 – 2001). Ulrike Bauer graduated in chemical engineering and biotechnology at the University of Aachen and completed a postgraduate diploma in International Management at the Kalaidos University of Applied Sciences in Zurich. Ulrike Bauer and Eberhard Bauer are not related in any way. Niklaus Ramseier, CFO, with Ypsomed (pre-2003 with Disetronic) since 2002, prior to that Head of Finance and Controlling for the industrial services product line of the Von Roll Group (from 1995 until 2002) and various advisory and accounting functions within a trust and auditing company. Education: Swiss certified expert in accounting and controlling.

Ypsomed – Corporate Governance

Yvonne Müller, Senior Vice President Human Resources, with Ypsomed since 2003, prior to that responsibility for training at Berner Kantonalbank BEKB I BCBE (from 2002 until 2003) and for human resources at X-Media and Scout24 (from 2000 until 2002) as well as at IKEA (from 1996 until 2000). Education: graduated as a human resources specialist and has an Executive MBA in General Management from Bern University of Applied Sciences. Dr. Eberhard Bauer, Dr. med. vet, Senior Vice President Marketing & Sales Diabetes Care. Since July 2014, member of Executive Management and responsible for Marketing & Sales in the Diabetes Care business area. Eberhard Bauer was responsible for the global distribution and the distribution companies of Diabetes Care from July 2012 until July 2014. Prior to this, he held various functions with Boehringer Mannheim and Roche Diagnostik over more than 20 years, including Division Head Iberia, Global Head of Marketing and Product Development for Roche Diabetes Care and most recently, Head Latin America. He graduated as Dr. med. vet. from the Ludwig-Maximilians-Universität München and carried out postgraduate studies at IMD Laus-

anne and the London Business School. Ulrike Bauer and Eberhard Bauer are not related in any way. Other activities and vested interests There are no other activities or vested interests apart from those already mentioned. Number of permissible mandates The Articles of Association of Ypsomed Holding AG have not yet been modified in accordance with the Ordinance against Excessive Compensation in Listed Stock Companies (VegüV). The Board of Directors shall correspondingly propose a comprehensive revision of the Articles of Association at the General Meeting of Shareholders of 1 July 2015. Pursuant to the recommendation, the members of Executive Management should not accept more than seven additional mandates in legal entities and only a maximum of two of these may be with companies whose participation rights are listed on an exchange. A mandate is deemed to be any activity in the highest management or administrative bodies of other legal entities that are obliged by law to be entered into the commercial register or a comparable foreign register and that are not directly or indirectly controlled by Ypsomed Holding AG or control the company. Mandates with different legal entities that are under joint control are not deemed to be mandates in this sense. Mandates that a member of Executive Management accepts on the instructions of the company, as well as mandates in associations, organisations and legal entities that are of a charitable or public nature, or in foundations, trusts and pension schemes are not governed by the restriction on admissible mandates. Management contracts Corporate Governance Compensation Report

Benjamin Reinmann, Dr. med., Dr. phil. med., Senior Vice President Operations until March 2015. Member of Executive Management since 2011 and responsible for Operations. Benjamin Reinmann has carried out a number of different roles at Ypsomed (and at Disetronic prior to 2003) since joining the company in 2002 in the areas of Marketing & Sales, Technology and Production. He was previously a medical practitioner at the Universitätskinderspital (University Children’s Hospital) Bern (2001 – 2002) and a research associate at the University of Bern and the University of Indianapolis, USA (1997 to 2001). Education: studied medicine, took his doctorate in medicine and structural biology at the University of Bern, then completed postgraduate studies in business management at PHW Bern. Benjamin Reinmann left the company on 31 March 2015.

There are no management contracts.

Compensation, participations and loans Information on the compensation and participations of members of the Board of Directors and Executive Management, the contents and determination procedure as well as the statutory rules governing the principles, loans, credits and insurance benefits and the principles governing the votes of the General Meeting of Shareholders re-

garding compensation as well as the actual compensation paid to current and former members of the Board of Directors and Executive Management in 2014/15 as stipulated by the VegüV (formerly Art. 663bbis of the Swiss Code of Obligations) can be found in the Compensation Report 2014/15, on page 95. 91

Ypsomed – Corporate Governance

Shareholders’ rights of participation Voting-right restrictions and representation All shareholders who are entered in the Share Register with voting rights are entitled to vote at the General Meeting of Shareholders. Shareholders may arrange to be represented at the General Meeting of Shareholders by written proxy. In exercising his/her voting rights, no shareholder may directly or indirectly amalgamate more than 5 % of the total voting rights in the form of his/her own shares and those he/she is representing. Legal entities and partnerships that are related to one another through capital ownership or voting rights or by virtue of a common management or otherwise, as well as natural persons, legal entities or partnerships that adopt a coordinated approach in order to circumvent the restrictions on voting rights, will be considered as one person. However, the restriction on voting rights will not apply to the exercise of voting rights by the independent proxy, nor to Willy Michel, because more than 5 % of all voting rights were registered to him in the Share Register at the time the Articles of Association were drawn up (Art. 16 of the Articles of Association). There are no rules governing the annulment of statutory voting-right restrictions. Independent proxy The General Meeting of Shareholders of 1 July 2014 elected Dr. Peter Stähli, attorney-at-law and notary, Burgdorf, as the independent proxy for the period up to the conclusion of the next General Meeting of Shareholders. The Articles of Association valid as at 31 March 2015 have not yet been modified in accordance with the Ordinance against Excessive Compensation in Listed Stock Companies (VegüV) and therefore contain no provisions governing the issuance of instructions to the independent proxy. The Board of Directors shall correspondingly propose a comprehensive revision of the Articles of Association at the General Meeting of Shareholders of 1 July 2015. The proposal shall authorise the Board of Directors to issue a directive governing the independent proxy. It shall be authorised to determine the requirements under which valid instructions may be issued to the independent proxy. For the coming General Meeting of Shareholders of 1 July 2015, the shareholders may also issue their powers of attorney and instructions electronically to the independent proxy. The precise details regarding the issuance of instructions electronically to the independent proxy shall be explained in the invitation to attend the General Meeting of Shareholders.

Quorums according to the Articles of Association Unless otherwise stipulated by law or by the Articles of Association, the General Meeting of Shareholders shall adopt resolutions and conduct votes on the basis of an absolute majority of the votes cast, excluding blank and invalid votes. The chairman shall also vote and, if the vote is tied, he/she shall have the casting vote. The quorums laid down in the Articles of Association reflect statutory quorums. Convening the General Meeting of Shareholders The General Meeting of Shareholders will be convened at least 20 days prior to the meeting by way of a letter to the shareholders who are entered in the Share Register as well as by publishing a notice in the Swiss Official Gazette of Commerce (SOGC). Agenda items Shareholders holding shares with a nominal value of at least CHF 1 million have the right to request that a specific matter be put on the agenda by specifying the item of the agenda and the proposal. Such requests must be submitted in writing to the Chairman of the Board of Directors at least 45 days before the meeting. Entries in the Share Register Entries in the Share Register shall be made until six days prior to the General Meeting of Shareholders. There are no rules governing the granting of exceptions.

Ypsomed – Corporate Governance

Change of control and blocking mechanisms In the event of a public takeover bid, the bidder is required pursuant to Art. 32 of the Swiss Stock Exchange Act to make an offer for all of the company’s listed shares as soon as he/she acquires shares in the company directly, indirectly or in concert with third parties, which along with the shares already held exceed the threshold of 49 % of the voting rights of the company, whether exercisable or not (Art. 10 Articles of Association).

There are no change-of-control clauses with members of the Board of Directors, Executive Management and / or other management personnel.

Auditors Term of mandate of auditors and term of the lead auditor On 27 June 2007, the General Meeting of Shareholders of Ypsomed Holding AG selected Ernst & Young AG, Berne, as auditors for the first time. The lead auditor, Dr. Thomas Nösberger, has been in office at Ypsomed Holding AG since June 2014. He replaces Christian Schibler, who was lead auditor from 2007 and needed to be replaced due to the rotation obligation. The auditors are each appointed for a period of office of one year by the General Meeting of Shareholders, the last time being on the occasion of the 2014 General Meeting of Shareholders.

Tools for the supervision and control of auditing The full Board of Directors undertakes the supervision and control of the auditor. The lead auditor is in attendance during the discussion and acceptance of the consolidated and annual financial statements by the Board of Directors. The auditor compiles a comprehensive report annually for the attention of the Board of Directors and this is discussed by the Board of Directors with the lead auditor in attendance.

Auditing fees

Corporate Governance Compensation Report

The total auditing fees charged by the auditor for Ypsomed Holding AG and its Group companies in the course of the reporting year amounted to kCHF 277. Ypsomed Holding AG and its Group companies were invoiced a total of kCHF 325 for additional so called non-auditing services regarding the intended disposal of DiaExpert and for tax consultancy services.

Ypsomed – Corporate Governance

Information policy Ypsomed Holding AG maintains an open and transparent communication policy towards shareholders, potential investors, financial analysts, the media, customers and other interested people, based on the principle of equality. The company uses the following tools: annual report, interim report presentation of the annual results to the media and financial analysts ahead of the General Meeting of Shareholders, as well as media briefings and company publications that have potential relevance to the share price. Responsibility for communication with investors rests with the Chairman of the Board of Directors.

Equity trading

The following research banks monitor the development of the Ypsomed Group:

Important forthcoming dates

BZ-Bank, Wilen (www.bzbank.ch), Holger Blum Credit Suisse, Zurich (www.credit-suisse.com), Christoph Gretler Vontobel, Zurich (www.vontobel.com), Carla Bänziger

The registered shares of Ypsomed Holding AG are traded on SIX Swiss Exchange and at the BX Bern eXchange. Ticker symbols: YPSN (Telekurs) YPSN.S (Reuters) YPSN SW (Bloomberg) Securities number: 1939 699 ISIN: CH 001 939 699 0

1 July 2015 General Meeting of Shareholders, Berne 29 October 2015 Media conference and analysts’ presentation of the semi-annual figures 2015 / 16, Solothurn 26 May 2016 Media conference and analysts’ presentation of the annual figures 2015 / 16, Burgdorf

Zürcher Kantonalbank, Zurich (www.zkb.ch), Sibylle Bischofberger Frick Contact On our website at www.ypsomed.com (under Media & Investors), all interested parties can access up-to-date and potentially market-relevant information (pull system) without charge. Furthermore, all interested parties can subscribe to an e-mail distribution list under www.ypsomed.com / media. html (push system). The official publication organ of Ypsomed Holding AG is the Swiss Official Gazette of Commerce (SOGC). Company publications with potential relevance to the share price are usually communicated at the end of daily trading. Such publications are initially reported to the SIX Swiss Exchange Regulation and thereafter uploaded to the above-mentioned website and simultaneously communicated to a number of national newspapers, electronic information systems and to persons registered on the e-mail distribution list.

Ypsomed Holding AG Benjamin Overney, Head of Investor & Public Relations benjamin.overney@ypsomed.com Tel. +41 34 424 41 59 Fax +41 34 424 41 55 www.ypsomed.com

Ypsomed – Compensation Report

Compensation Report The Compensation Report for Ypsomed Holding AG for the business year 2014 / 15 sets out the compensation principles, the compensation system and the actual compensation for the Board of Directors and Executive Management in accordance with the provisions pursuant to the Ordinance against Excessive Compensation in Listed Stock Companies (VegüV). The Articles of Association for Ypsomed Holding AG have not yet been aligned with the VegüV. The Board of Directors shall correspondingly propose a comprehensive revision of the Articles of Association at the General Meeting of Shareholders of 1 July 2015. The overall responsibility for the definition of the compensation principles is held by the Board of Directors. The compensation committee supports the full Board of Directors in determining and reviewing the compensation principles, in drafting the compensation report and in preparing the proposals for the General Meeting of Shareholders with regard to the compensation of the Board of Directors and Executive Management and prepares recommendations regarding the compensation principles, which are then decided on by the Board of Directors. The members of the Board of Directors and the members of Executive Management present at the relevant meet-

ing of the Board of Directors have the right of participation and the right to comment if their compensation is being decided by the committee responsible. For the first time at the General Meeting of Shareholders of Ypsomed Holding AG of 1 July 2015, the General Meeting of Shareholders shall decide with binding effect and in separate votes on the maximum total amount of the fixed compensation both for the members of the Board of Directors for the period until the next General Meeting of Shareholders and for the members of Executive Management for the duration of the following business year. It shall also decide on the performance-related compensation for the members of the Board of Directors and Executive Management for the business year preceding the General Meeting of Shareholders. The relevant total amounts include all the employer contributions to the social insurance and occupational insurance. No credits, loans or insurance benefits apart from those from the occupational insurance were granted to the members of the Board of Directors and Executive Management. Fees and expenses that are paid in compliance with the regulations approved by the authorities are not deemed to be compensation subject to authorisation.

Compensation approval process

Executive Management

Compensation committee

Full Board of Directors

General Meeting of Shareholders

Maximum amount of the fixed compensation of the members of the Board of Directors for the period from 1 July 2015 until the next ordinary general meeting in June 2016.

Examination of the principles and recommendation to the Board of Directors

Proposal to GMOS

Approval of GMOS dated 1.7.2015

Individual compensation for the chairman and members of the Board of Directors

Proposal to Board of Directors

Approval

Total amount of the performance-related compensation for the members of the Board of Directors for the business year ending on 31 March 2015

Recommendation

Proposal to GMOS

Individual compensation for members Proposal to Board of of the Board of Directors Directors

Approval

Maximum amount of the fixed compensation for members of Executive Management for the business year 2016 / 17

Examination of the principles and recommendation to the Board of Directors

Proposal to GMOS

Individual compensation to the members of the Board of Directors

Proposal to Board of Directors

Approval

Total amount of the performance-related compensation for the members of Recommendation Executive Management for the business year ending on 31 March 2015

Proposal to GMOS

Individual compensation for members Proposal to Board of of Executive Management Directors

Approval

Approval of GMOS dated 1.7.2015

Corporate Governance Compensation Report

Board of Directors

Type of compensation

Approval of GMOS dated 1.7.2015

Ypsomed – Compensation Report

Board of Directors compensation Participation in the compensation committee is not remunerated separately. Board of Directors’ fees and attendance fees are paid to the members of the Board of Directors after the General Meeting of Shareholders. All compensation is paid in cash. There are no equity or option plans. The Chairman of the Board of Directors of Ypsomed Holding AG and / or of his company Techpharma Management AG was awarded a flat rate sum of CHF 70 000 (prior year: CHF 140 000) as a fee for his work as a Board member for Ypsomed AG in addition to the above-mentioned fee for his work as Chairman of the Board of Ypsomed Holding AG (see Corporate Governance Report 2014 / 15, page 84, Other contractual relationships). Both the fees mentioned represent the full compensation for all the activities carried out by Willy Michel in the Ypsomed Group, including his function as CEO until the end of June 2014. Depending on the situation, VAT or statutory social insurances must be paid on the compensation. Members of the Board of Directors are not granted any insurance benefits from the occupational insurance. Information on all the actual compensation paid to the current and former members of the Board of Directors in the business year 2014/15 that is prescribed by the VegüV (formerly Art. 663bbis of the Swiss Code of Obligations) is given in the following table.

The bases and elements of the compensation granted to the Board of Directors, comprising a fixed basic component and further benefits (e.g. attendance fee) as well as a performance-related component, are discussed, examined and presented to the full Board of Directors for a decision annually by the compensation committee. The full Board of Directors determines the compensation annually at its own discretion and without consulting external advisors. The fixed component comprises CHF 150 000 (prior year: CHF 150 000) for the Chairman of the Board of Directors and CHF 90 000 (prior year: CHF 90 000) for each member of the Board of Directors. The performance-related component comprises between 0 % and a maximum of 41 5⁄8 % of the fixed component. The amount of the performance-related component is dependent on the targets achieved vis-à-vis the budgeted targets, based on two-thirds of the consolidated EBIT margin and one-third of the consolidated sales. In the reporting year, this amounted to around CHF 163 000 and/or 36 % of the total of the fixed basic compensation of the Board of Directors, respectively. If target attainment had been 100 %, the performance-related components would have totalled around CHF 142 000. The attendance fee amounts to CHF 1 500 for every meeting that lasts at least half a day (prior year: CHF 1 500) No attendance fee is paid for shorter meetings and participation in strategy meetings and the General Meeting of Shareholders. Board of Directors compensation Willy Michel (Chairman)

Anton Kräuliger (Vice Chairman)

Prof. em. Dr. Norbert Thom (Member)

Gerhart Isler (Member)

Total

2014 / 15 2013 / 14

(Gross, in thousand CHF, exclusive of VAT)

Fixed compensation

150.0 150.0

Other compensation

6.0

90.0

6.0

Employer contribution to social insurance Total fixed compensation

5.5 156.0 156.0

Performance-related component

57.5

56.7

Compensation to Willy Michel as Chairman of the Board of Directors of Ypsomed AG

70.0 140.0

Total compensation for Board of Directors

56.7

283.5 352.7

24.0

5.5

96.0

101.5

96.0

449.5 444.0

34.5

34.0

34.5

34.0

34.5

34.0

161.0 158.7

2.0 57.5

24.0

96.0

Employer contribution to social insurance Total performance-related comp.

420.0 420.0

34.5

34.0

34.5

34.0

36.5

2.0 34.0

163.0 158.7 70.0 140.0

130.5 130.0

Highest compensation to Willy Michel

130.5 130.0

138.0 130.0

682.5 742.7 283.5 352.7

Further transactions to affiliated persons of Willy Michel:

Techpharma Management AG: for loan (interest)

128.2 149.2

Techpharma Management AG: for rented business premises (rent)

906.6 906.6

Ypsomed – Compensation Report

Executive Management compensation The amounts paid to Willy Michel as Chairman of the Board of Directors of Ypsomed Holding AG and Chairman of Ypsomed AG (see page 96) are the full compensation for all the activities of Willy Michel including his work as CEO up until the end of June 2014. As in previous years, Willy Michel has expressly refused any further compensation for his operational activities as CEO (until June 2014). The elements of the compensation granted to Executive Management comprise a fixed basic component, further benefits (e.g. service years award) as well as a performance-related component based on the company result and the attainment of individual targets. The compensation committee assesses every year the performance and the compensation of the members of Executive Management and recommends any adjustments to the Board of Directors to decide on at its own discretion. The fixed basic compensation is dependent on the function, the qualification, the professional experience and the performance of the relevant person. The performance-related component amounts to between 0 % and a maximum of 31 1⁄4 % of the annual basic compensation (gross) of the individual member of Executive Management. The performance-related component is dependent on the targets achieved vis-à-vis the budgeted targets and is based to 50 % on the consolidated EBIT margin, 25 % on the consolidated sales and 25 % on the attainment of the individual targets of the relevant member of Executive Management. The individual targets are set together with the line manager during the annual performance appraisal. These can be project targets, personal development targets or the contribution to the target attainment of the team or the department. A management system for the assessment of performance ensures that targets are defined and

that target attainment is assessed during the annual performance appraisal. The amount of the performance-related component paid to the members of Executive Management in the reporting year came to around CHF 557 000 and/or 33 % of the fixed basic compensation, based on a target attainment level of 111 1⁄4 %. If the target attainment had been 100 %, the performance-related component would have been around CHF 54 000 less. All compensation is paid in cash. There are no equity or option plans. The Board of Directors is entitled to pay all types of compensation from the authorised, fixed compensation amounts and/or the additional amounts. Members of Executive Management are granted insurance benefits from the occupational insurance within the framework of the statutory provisions and the provisions according to the regulations including extra-mandatory benefits and in the case of illness or accident their compensation continues to be paid and/or is paid as insurance and bridging benefits within the framework of the statutory provisions and the provisions according to the regulations. Fees and expenses that are paid according to the regulations approved by the authorities responsible are not deemed to be compensation that is subject to approval. No severance pay and no notice periods of more than six months have been agreed with any members of Executive Management. In the reporting year, no severance pay was paid to former members of executive bodies. Information on the actual compensation paid to members of Executive Management either directly or indirectly in the business year 2014 / 15 and to former members of Executive Management that is prescribed by the VegüV (formerly Art. 663bbis of the Swiss Code of Obligations) is given in the following table.

(Gross, in thousand CHF)

Fixed compensation

2014/15

Simon Michel, CEO* Dr. Beat Maurer, Senior Vice President Legal Services & Intellectual Property Add. members **

2013/14

344.4

Other compensation

2014/15

303.5 1 579.5 1 168.9

Total management compensation

2013/14

0.0

Performance-related compensation

2014/15

0.0 9.0

2013/14

172.5

3.0

Employer contribution to social insurance 2014/15

83.5 384.8

2013/14

51.2

325.4

286.7

Corporate Governance Compensation Report

Executive Management compensation Total

2014/15

2013/14

568.1

55.0

442.0

203.3

2 259.9 1 700.6 2 828.0 2 142.6

* CEO since July 2014. Previously Senior Vice President Marketing & Sales ** On 1 July, Ulrike Bauer and Dr. Eberhard Bauer joined the Executive Management of the Ypsomed Group; their compensation as members of Executive Management thus comprises nine months (1 July 2014 to 31 March 2015). Compensation to Willy Michel, who was CEO until 30 June 2014, is not listed in this table illustrating compensation to Board members (page 96). *** The full performance-related compensation for Executive Management comes to a total of kCHF 632.9 (performance-related component kCHF 557.3 incl. the corresponding employer contributions to the social insurances of kCHF 75.6).

Ypsomed – Compensation Report

Rules according to the Articles of Association governing the principles regarding compensation The Articles of Association of Ypsomed Holding AG have not yet been modified in accordance with the Ordinance against Excessive Compensation in Listed Stock Companies (VegüV). The Board of Directors shall correspondingly propose a comprehensive revision of the Articles of Association at the General Meeting of Shareholders of 1 July 2015. The proposal provides that: The General Meeting of Shareholders approves annually on a binding basis and upon the proposal of the Board of Directors the total amounts of the fixed compensation for the following approval periods:

The Board of Directors is entitled to pay all types of compensation from the authorised, fixed compensation amounts and/or the additional amounts. If new members are elected to Executive Management following the resolution of the General Meeting of Shareholders, an additional amount of a maximum of 25 % of the previous total of the approved fixed compensation amounts for the approval period shall be made available to the company. The General Meeting of Shareholders shall not vote on the use of the additional amount.

– for Executive Management for the business year following the Ordinary General Meeting of Shareholders.

The company can conclude temporary and permanent contracts with members of the Board of Directors governing their compensation. Temporary contracts have a maximum period of one year, but they may be renewed more than once. Permanent contracts have a maximum notice period of twelve months.

If the General Meeting of Shareholders should refuse to approve a total amount, the Board of Directors may propose new motions at the same General Meeting of Shareholders or defer the approval of the compensation until an Extraordinary General Meeting of Shareholders or until the next Ordinary General Meeting of Shareholders.

The company can conclude temporary and permanent contracts with members of Executive Management governing their compensation. Temporary contracts have a maximum period of six months, but they may be renewed more than once. Permanent contracts have a maximum notice period of six months.

Until the fixed compensation components have been approved by the General Meeting of Shareholders the compensation can be paid subject to approval.

Compensation to members of Executive Management may be paid until the end of the contractual notice period, even if the employee was released from duties and has taken on a new appointment.

– for the Board of Directors until the next Ordinary General Meeting of Shareholders.

The amounts of compensation approved by the General Meeting of Shareholders can be paid by the company itself or by the company that it controls.

The General Meeting of Shareholders approves annually on a binding and individual basis the amount of the performance-related compensation components for the members of the Board of Directors and Executive Management for the business year preceding the General Meeting of Shareholders.

The compensation for non-competition clauses concluded with members of Executive Management may be paid for a maximum of twelve months and must not exceed the last annual compensation paid prior to the departure of this member.

Performance-related compensation components may be paid only once the resolution for approval has been passed by the General Meeting of Shareholders

Members of the Board of Directors and Executive Management are not granted any credits or loans or any insurance benefits apart from those from the occupational insurance.

Ypsomed – Compensation Report

Investments held by members of the Board of Directors and Executive Management As of 31 March members of the non-executive and executive boards, Executive Management and people closely related to them held the following shares. No Ypsomed share options were held.

Share ownership of Board of Directors

Willy Michel, Chairman * Techpharma Management AG as related party to Willy Michel, Chairman BV Holding AG as related party to Willy Michel, Chairman Total of Willy Michel and Techpharma Management AG and BV Holding AG Anton Kräuliger, Vice Chairman Prof. em. Dr. Norbert Thom, Member Gerhart Isler, Member Total

Shares as of 31 March 2015

Shares as of 31 March 2014

8 717 746

8 574 114

478 682

657 480

22 500

9 218 928

9 254 094

5 100

2 000

132

8 100

5 000

9 232 260

9 261 169

144 888

500

Share ownership of Executive Management

Simon Michel, CEO * Dr. Beat Maurer, Senior Vice President Legal Services & Intellectual Property Yvonne Müller, Senior Vice President Human Resources

800

1 069

Hans-Ulrich Lehmann, Senior Vice President Technology

150

Ulrike Bauer, Senior Vice President Marketing & Sales Delivery Systems **

150

–

Niklaus Ramseier, Senior Vice President Finance/IT (CFO)

Dr. Eberhard Bauer, Senior Vice President Marketing & Sales Diabetes Care ** Dr. Benjamin Reinmann, Senior Vice President Operations Total

2 110

–

149 717

147 377

* Willy Michel was CEO of the Ypsomed Group until June 2014. On 1 July 2014, Simon Michel took over the role of CEO (previously Senior Vice President Marketing & Sales). ** Ulrike Bauer and Dr. Eberhard Bauer joined the Executive Management of the Ypsomed Group on 1 July 2014.

Corporate Governance Compensation Report

See Corporate Governance page 78 for information on the Family Michel shareholder group and its shareholdings.

Ypsomed â&#x20AC;&#x201C; Compensation Report

Auditor report on the remuneration report

100

Corporate Governance Compensation Report

Ypsomed â&#x20AC;&#x201C; Compensation Report

101

Ypsomed – Glossary

Glossary Anaemia Anaemia means an insufficiency of blood. This can manifest itself in a reduction in haemoglobin concentration (red blood pigment), in the haematocrit (measurement of blood thickness, packed cell volume) and / or in the number of erythrocytes (red blood cells) in the blood compared with the age norm. One of its effects is a reduction in the capability of the blood to deliver oxygen. The classic symptoms include loss of energy and rapid fatigue as well as pallor, fatigue, breathlessness and palpitations (the heart beats irregularly, faster or more forcefully than it should in relation to the level of activity demanded of it). Anaemia can have a number of different causes. Autoinjector In autoinjectors, needle insertion into the skin and / or injection of the drug are automatic, usually driven by means of a spring mechanism. Basal rates The basal rate is the continuous dosage of rapid-acting insulin to cover a patient’s basic needs. Biomolecule injectables Drugs manufactured using biotechnology. Such biomolecules cannot be delivered using traditional methods (e. g. orally) because they would be destroyed by the digestive tract and thus require the injectable route of administration. Biosimilar The term “biosimilar” refers to a protein-based mimetic drug that has been produced using biotechnology and which is approved after the expiration of the patent period for the original active substance. Unlike the classic drugs defined in terms of molecular structure, the active substances of these novel biotechnology products are not completely identical to the original active substance and therefore require more extensive approval and monitoring procedures than the classic generics. The main reasons for these differences are the different organisms (for example E. coli bacteria) on which the target protein is expressed and the different methods applied, such as separation and cleansing. Blood sugar (blood glucose) Blood sugar means, in general, the level of glucose in the blood. Glucose is an important source of energy for the body and represents a significant measured value in medicine. If the blood sugar is high over a sustained period of time (hyperglycaemia), diabetes mellitus typically exists. In intensive insulin therapy, the blood sugar or blood glucose should be measured at least four times a day so that the amount of insulin administered can be adjusted to actual requirements. A person’s insulin requirements change over the course of the day due to the varying levels of hormones that influence blood sugar, the consumption of food, physical activity or febrile infectious diseases. Blood sugar monitoring (blood glucose monitoring) Diabetics normally measure their blood sugar levels themselves using a portable blood sugar monitor. To carry out the measurement, a small blood sample must first be placed on a test strip. Through an enzymatic reaction with the test strip, the blood sugar is converted into a measurable product that is then measured using a photometric or electrochemical process and displayed by the monitoring device. In the case of intensive insulin therapy, the measuring of the blood sugar takes place at least four times daily.

102

Bolus When a patient needs more insulin (especially at mealtimes), a bolus, i.e. an additional dose of insulin, is administered to cover this increased requirement. Cannula See Pen needle. Cartridge A drug reservoir containing the drug to be administered used with, for example, reusable pens. Some substances need pens with dual-chamber cartridges, which contain lyophilised drugs and diluent that are mixed automatically in the pen before use. CE registration In Europe, the process of CE registration encompasses the independent examination and licencing of a product and confirms that it bears the required safety-related marking. CM (contract manufacturing) Contract manufacturing refers to the assigning of one or several stages in the manufacture of a product to a contractor (outsourcing manufacturing). There are cost benefits for the OEM / ODM manufacturer as the infrastructure is not just utilised for a single product line / assembly line or product, but for several manufacturers or products. The specialisation of the contractor with a specific infrastructure results in larger production volumes (numbers of units). This leads to a win-win situation. Compliance In medicine we talk about the compliance of the patient. This means that, in the case of many illnesses, the patient must have a cooperative attitude for healing to occur. In the medical sense therefore, compliance can be described as observing your therapy and taking your medicine as prescribed; in short, following the doctor’s recommendations. Compliance is particularly important for diabetics with regard to taking their medicine, following a diet or making lifestyle changes. Diabetes mellitus Diabetes mellitus is a chronic metabolic disorder involving increased blood sugar levels. In people with diabetes mellitus, the glucose in the blood can no longer be absorbed into the cells of the body in the requisite quantity for the production of energy. As a result, there is excess glucose in the blood (hyperglycaemia / excess sugar), which is then excreted in part through the kidneys. In Type 1 diabetes mellitus, the body produces insufficient insulin, or no insulin at all (absolute insulin deficiency), because most or all of the insulin-producing cells in the pancreas have become damaged by an autoimmune disease. It generally manifests itself in persons up to 35 years old and requires the regular subcutaneous administration (injection) of insulin. Type 1 diabetes mellitus accounts for about 10 % of all cases of diabetes mellitus and, thanks to its clear principal symptoms, is generally correctly diagnosed and treated by physicians. In Type 2 diabetes mellitus, which is much more common, the pancreas continues to produce insulin, however its effectiveness is reduced by an insulin resistance (insulin insensitivity) of the somatic cells. As a rule, this leads to an increased release of insulin (hyperinsulin anemia) in order to compensate for the deficient insulin effectiveness. Risk factors, such as being overweight or lack of exercise, promote the development of Type 2 diabetes. It is therefore frequently labelled an illness of affluence. Type 2 diabetes mellitus is generally diagnosed in people over the age of 40 and who are overweight. As a first step, it is often successfully treated by following a healthy diet and by getting more physical exercise. In later phases, tablets and insulin injections may be considered. According to estimates,

Ypsomed – Glossary

Dual-chamber cartridge The dual-chamber cartridge was developed primarily for lyophilised substances. Dual-chamber technology enables the efficient use of the active substance through careful product reconstitution. The dual-chamber technology was thus designed specifically for sensitive drugs that are preserved through freeze drying. One of the two chambers contains the lyophilised active substance (freeze-dried active substance) and the other contains the solvent. The two are mixed together only immediately before use. This “all-in-one” design facilitates both a higher degree of accuracy in dosage and easier handling. FSH (follicle stimulating hormone) FSH is a germ line hormone (a hormone excreted by the anterior pituitary gland and placenta) that stimulates follicle growth in females and activates sperm-forming cells in males. FSH is used for treating infertility. GLP-1 Glucagon-like peptide-1 (GLP-1) is a peptide hormone formed in the intestines that plays an important part in glucose metabolism as part of the “incretin effect” – the insulin response of beta cells in the pancreas to the supply of sugar through the intestines and the blood. GLP-1 is released directly into the bloodstream when food is eaten. It is broken down within minutes by the enzyme dipeptidyl peptidase-4 (DPP-4) and therefore must be produced on an ongoing basis. It stimulates the production of insulin in the pancreas and slows the emptying of the stomach contents into the intestine, thereby suppressing hunger pangs and thirst. It also reduces glucagon levels. Glucagon helps the release and synthesis of glucose from the liver. In this way, secretion in sufficient quantities or the subcutaneous injection of GLP-1 prevents excessively high levels of blood sugar. Heparin Medication with anticoagulant properties. An anticoagulant is a substance that delays or stops blood clotting. Hyperglycaemia Hyperglycaemia (excess sugar) is an increased blood sugar value (glucose value) with clinical values above 110 mg / dl (6.1 mmol / l) on an empty stomach or above 140 mg / dl (7.8 mmol / l) two hours after eating. The cause of the hyperglycaemia is a relative or absolute insulin deficiency (diabetes mellitus). This has the effect that the glucose cannot be transported from the blood into the cells and at the same time glucose is released from the liver, for example. The result is that blood sugar increases. The body attempts to excrete the blood sugar through the kidneys, thereby losing vital amounts of liquid, and affected parties react with strong thirst and frequent urination. Slight increases in blood sugar remain unnoticed for the most part because the initial symptoms, such as fatigue and lethargy, are not recognised as resulting from high levels of blood sugar. A complete insulin deficiency and a prolonged increase in blood sugar may lead to nausea, vomiting, a smell of acetone on the breath, the appearance of glucose and

acetone in the urine and finally to a life-threatening diabetic coma. Insulin is administered and the intake of liquids is increased for the treatment of hyperglycaemia. Hypoglycaemia Hypoglycaemia is low blood sugar with a blood sugar value of less than 40 mg / dl (2.2 mmol / l) without the presence of symptoms. Hypoglycaemia can occur in all diabetics who are treated with sulphonylurea, glinides or insulin. Low blood sugar can occur when the factors reducing blood sugar (e. g. insulin, tablet effectiveness, physical activity) outweigh the factors increasing blood sugar (e. g. food intake, sugar regeneration in the liver). The symptoms include, among other things, trembling and sweating, increased appetite, headaches, weakness, a loss of concentration and blurred vision. It can be treated by the immediate administration of glucose or by drinking fruit juice. Severe hypoglycaemia can lead to unconsciousness and requires immediate medical attention. Injection Administration of liquid substances with a syringe. Injection systems / injection devices Injection systems or injection devices include self-injection devices such as pens and autoinjectors as well as pen needles. Incretins Incretins are hormones produced in the small intestine (peptide hormones) that are released after food is eaten and stimulate insulin secretion by the pancreas. At the same time, they prevent the insulin antagonist, glucagon, from being released. Patients with Type 2 diabetes release lower levels of incretin than healthy individuals. The incretins GLP-1 (glucagon-like peptide-1) and GIP (gastric inhibitor peptide) are of particular interest in the treatment of diabetes. There are two new classes of drugs that act on incretin metabolism: the “incretin mimetics” that imitate the action of incretins, and the “DPP-4 inhibitors” that delay the breakdown of endogenous incretins. Insulin A vital peptide hormone that is produced by the pancreas in the beta cells of the islets of Langerhans. The primary effect of insulin is the fast reduction of the blood sugar concentration in that it supports the transport of glucose from the blood into the cells’ interior. Insulin was first discovered in 1921 by two Canadians, Dr. Frederick Banting and Charles Best, and has since been used to treat diabetes. Today, it is produced mainly by means of biotechnological processes and must be either injected or infused. It cannot be administered orally because the peptide hormone insulin would be destroyed by gastric acid. Insulin analogues Insulin analogues are insulins with a modified amino acid sequence that have an altered metabolism compared with human insulin. The motivation for developing insulin analogues was to improve the ability to control the insulin treatment. In the case of normal insulin, the effect sets in after about 30 minutes and the maximum effect is reached after one to two hours. Through the exchange of certain amino acids, the insulin metabolism (pharmacokinetics) can be altered without affecting its action, i.e. binding to the insulin receptors. Insulin pump Insulin pumps are small, battery-operated devices (about the size of a pager or mobile phone) that can replace regular insulin injections for patients managing diabetes. They contain an insulin cartridge with fast-acting insulin. The insulin is delivered at regular intervals into the subcutaneous fatty tissue of the body

Glossary

about half of all people who currently have Type 2 diabetes mellitus are unaware of that fact. If both types of diabetes are not diagnosed at an early stage or if they are inadequately treated, this can lead to serious secondary diseases affecting the kidneys, nerves, eyes or blood vessels.

103

Ypsomed – Glossary

by means of a catheter, the cannula for which is under the skin. The catheter and cannula are changed every one to three days. The infusion pump allows for an almost normal adjustment of blood sugar by continuously delivering small doses of insulin, preprogrammed by the patient, around the clock, even while he/she is asleep. In addition, the patient can deliver extra insulin doses at the touch of a button in order to be able to cover additional insulin requirements, for example at mealtimes. The treatment with an insulin pump requires the patient to continue to take regular blood sugar measurements so that the insulin dose can be adjusted as necessary. Interferon alpha Interferons play an important role as messengers and cues for different defence mechanisms in the immune system. They are released by cells that are afflicted with viruses. In this way, defence cells of the immune system, such as macrophages, natural killer cells and cytocidal T lymphocytes, are activated. In addition, interferons inhibit the growth and the division of healthy as well as malignant cells. Alpha interferon is used for the treatment of acute and chronic hepatitis C infections. Lantus® Lantus® from Sanofi is a long-acting insulin analogue injected one to two times daily that lowers glucose levels for up to 24 hours. Lantus® is a basal insulin in that it provides for a slow and steady release of insulin.

Psoriasis Psoriasis is a non-communicable autoimmune disorder that affects the skin, resulting in lesions over various areas of the body. The most common form (accounting for 80 % of all cases) is plaque psoriasis, characterised by red, raised skin covered with scales. / The ® or ™ symbols, when used in this document, indicate that the relevant name is a registered trademark of the relevant pharmaceutical partner of Ypsomed or Ypsomed itself. ® ™

Rheumatoid arthritis Rheumatoid arthritis (also chronic polyarthritis) is the most common condition that leads to inflammation in the lining of the joints. Most commonly, the chronic condition develops episodically, with an episode lasting typically between several weeks and a few months. The pain recedes between individual episodes. The cause of the condition has not been fully explained although it is thought to result from an autoimmune condition.

Monoclonal antibodies Monoclonal antibodies are highly specialised and targeted antibodies – active protein molecules that are produced by the immune system in response to a foreign substance (e. g. foreign bodies, pathogens) and can render it harmless – that are created synthetically using biotechnological processes. What is special about them is that they are able to activate the body’s own natural defence mechanisms to combat a disease. Until now, monoclonal antibodies have been used in cancer therapy, in particular, and for the suppression of adverse immune reactions, e. g. in cases of psoriasis. This may also involve autoimmune diseases or even the prevention of rejection reactions after organ transplants.

Self-injection devices When used in this document, self-injection devices include pens (disposable, reusable and semi-disposable pens), autoinjectors, motor-driven injection systems, safety products and needle-free technology.

ODM (Original Design Manufacturer) A company is described as an original design manufacturer (ODM) if it carries out make-to-order production for another company. An ODM manufactures products commissioned by other companies, some of which it develops itself. The products are then sold under the purchasing company’s brand name. This method enables a customer of an ODM to offer branded products without having to run its own factory for this purpose. “Design” is significant in the definition of an ODM, as an ODM also carries out the planning and design of the parts produced. This is in contrast to a CM (contract manufacturer), which only carries out make-to-order production.

Tender A (public) call for bids.

Pen (injection pen) Injection device that looks like a fountain pen or ballpoint pen. The dose of medication prescribed by a doctor is set by adjusting a dosage knob and is injected from a cartridge through a cannula (pen needle) into the body. Pen needle (cannula) A fine, hollow needle for single use attached to the tip of the injection pen in order to inject the drug into the body. Ypsomed’s pen needles feature a click-on mechanism that makes the pen needle easy to attach to the pen.

104

Peptide hormones Peptide hormones have a protein structure and are insoluble in fats. They consist of chains of amino acids and are created by protein synthesis. These special proteins perform the functions of a hormone, i.e. they act as messengers, triggering specific changes in the human body (as well as in animals). Insulin is one example of a peptide hormone.

Subcutaneous (from Lat. sub = under, cutis = skin, abbr. s. c.) A subcutaneous injection is an injection into the fatty tissue under the skin. Using pens or other injection systems, drugs can, for example, be administered intramuscularly, subcutaneously or intravenously.

Editor Ypsomed Holding AG, Burgdorf Concept and Design Ypsomed AG, Marketing Communications, Burgdorf Printing Stämpfli Publikationen AG, Bern

The Group publishes its annual reports in English and German. The German version is legally binding.

Disclaimer This annual reports contains certain forward-looking statements. These can be identified by terms such as “should”, “accept”, “expect”, “anticipate”, “intend” or similar terms and phrases. The actual future results may differ materially from the forward-looking statements in this annual report, due to various factors such as legal and regulatory developments, exchange rate fluctuations, changes in market conditions, as well as the activities of competitors, the non-introduction or delayed introduction of new products for various reasons, risks in the development of new products, interruptions to production, the loss of or inability to obtain intellectual property, litigation and administrative proceedings, adverse publicity and news coverage. Links to third party websites and other references to the information of third parties are offered as a courtesy; we accept no responsibility forany third party information. All product names mentioned in this report are trademarks owned by or licensed to the Ypsomed Group. Third-party trademarks are marked with ® combined with the product name.

Ypsomed Holding AG Brunnmattstrasse 6 Postfach 3401 Burgdorf Switzerland Phone +41 34 424 41 11 Fax +41 34 424 41 22 www.ypsomed.com info@ypsomed.com