Ypsomed Holding AG Annual Report 2011/12

Transcription

1 Ypsomed Holding AG Annual Report 2011/12

2 Ypsomed Holding AG Annual Report 2011/12

3 Ypsomed Better Life All over the world, there are many people who live their lives independently and with great enjoyment despite their condition, such as having diabetes. And all over the world, there are large numbers of people who are committed to achieving a better life for patients: family members, doctors, nurses, pharmaceutical researchers, developers and Ypsomed staff. All of them have their own personal story.

4 Ypsomed Better Life Patrick Martinsson was in a serious car accident. Damage to his pancreas meant that he would suffer from type 1 diabetes for the rest of his life. His doctor recommended conventional insulin syringes for the daily injections. While he did not have a problem performing the injections at home, he found the syringes too unwieldy to have with him all the time when he was out and about and not sufficiently discreet for use in his everyday activities. At Ypsomed he came up with a revolutionary new solution that is available today as mylife DailyDose and that has made many people s daily lives easier.

5 Patrick Martinsson Insulution, Inventor of mylife DailyDose

6 As Senior Product Manager, Adrian Gerber is expected to always be right up to date when it comes to the latest innovations for self-injection. One of these innovations is the launch of mylife DailyDose as an alternative for diabetes sufferers who need injections before meals. mylife Daily- Dose allows them to reach a new level of freedom. The world s smallest syringe can be easily tucked away in a jacket pocket and makes for a discreet, virtually invisible injection at any time.

7 Adrian Gerber Senior Product Manager

8 Ypsomed Better Life Ulrike Bauer and her team work closely with pharmaceutical and biotech partners from different parts of the world. In joint projects, platform products are adapted to the specific needs of user groups. This allows more and more patients to benefit from the convenience of simple, safe, self-medication in the form of Ypsomed s high-quality pens. After their market launch Ypsomed s specialists make sure that the products are always available for delivery and that the quality stays consistently high.

9 Ulrike Bauer Vice President Customer & Product Management

10 At the beginning of every new development there has to be an idea. Inspired by genuine issues affecting customers, Jürg Hirschel is constantly on the hunt for this idea. By combining technical innovations and a good understanding of the market, Jürg Hirschel and his team develop new products that make patients lives easier. Jürg Hirschel and his department make the link between sufferers needs and the technical possibilities, always aiming at the perfect solution.

11 Jürg Hirschel Technical Leader Product Development

12 Ypsomed Better Life As International Product Manager, Annika Baumann ensures that the innovative mylife Orbit infusion set is available to patients around the world. Together with her team, she works every day to make the mylife Orbit offering even more attractive and more suited to people s needs. Thanks to the sophisticated 360 freely rotating connection, this pioneering infusion set gives diabetics lots of freedom of movement and hence a greater quality of life.

13 Annika Baumann International Product Manager

14 mylife Orbit provides patients with an infusion set that offers a high degree of convenience when it comes to self-medication. One of the key tasks of a Logistics department is to ensure a welloiled procurement chain. As Head of Supply Chain Management, Konrad Indermitte and his team invest all their energies, every day, into making all mylife Diabetescare products available to the markets in the best possible quality, and into ensuring as secure a supply as possible.

15 Konrad Indermitte Head of Supply Chain Management

16 Ypsomed Better Life Ypsomed is committed to ensuring that, worldwide, self-medication becomes a matter of course for sufferers. To achieve this goal, it needs all its employees at every level to have both a high level of specialist expertise and the willingness to make constructive use of their skills. As Human Resources Manager, Erwin Ryser is good at spotting talented people. His balanced approach to human resources management ensures that everyone is deployed in a way that matches his or her specialist, methodological and social skills and can therefore develop his or her talent in the best way possible.

17 Erwin Ryser Human Resources Manager

18 Heike Grum and her team provide Ypsomed s management with management information that serves as a basis for important corporate decisions. As Head of Controlling, she is an advisor for operational issues and ensures that planning principles are created for corporate goals. Business cases are drawn up for new investment projects, meaning the financial framework is also strong and that Ypsomed can continue to provide its customers with high-quality products.

19 Heike Grum Head of Controlling

20 Ypsomed Better Life Life with diabetes is different but not that different. In spite of his illness, Stephan Stempfel does not have to do without anything. Having his blood sugar level under control at all times, be this in sport, at work or in his free time, allows him to have a normal life. Precise blood sugar testing is particularly important here. Only by being sure that he has everything under control can he deal easily with his everyday life, and mylife Diabetescare gives him this certainty.

21 Stephan Stempfel Type 1 diabetic

22 As a salesperson in the field, Natacha Boquet is particularly reliant on a comprehensive product portfolio. Salespeople can only be successful if they are convinced they are offering customers the best possible product. Thanks to the mylife Diabetescare product range, she doesn t need to worry about this. The well-balanced offering of innovative and high-tech products means this is always guaranteed.

23 Natacha Boquet Key Account Manager France

24 Ypsomed Annual Report Contents 17 Ypsomed key figures at a glance 18 Letter to the shareholders 21 Annual Report YDS Ypsomed Delivery Systems 21 Injection systems A worldwide growth market 22 YDS Ypsomed Delivery Systems Complete portfolio of injection systems 24 YDS Custom Products Individual platform products ready for use 29 YDS Contract Development Customer-specific order development 30 YDS Contract Manufacturing A flexible service 31 YDS Drug & Device Assembly One-stop shop for injection systems and drug packaging mylife Diabetescare 32 Strategic Diabetes Care business segment extended further 34 Ypsomed worldwide 37 Ypsomed extends the mylife Diabetescare product range 40 mylife Pen needles and safety pen needles 41 mylife Pura The blood glucose monitoring system that is highly accurate and easy to use 42 mylife OmniPod The insulin patch pump proves popular 45 Sustainability Report 45 Employees 48 Environment 49 Financial Report 49 Comments on the consolidated financial statement 2011/12 53 Consolidated financial statement 2011/12 77 Financial statement of Ypsomed Holding AG 2011/12 84 Five-year overview 85 Corporate Governance Report 85 Corporate Governance 105 Information policy 106 Glossary

25 Ypsomed Annual Report Key figures and share price development Key figures at a glance Annual Report In thousand CHF 1 April March April March 2011 (Adjusted*) Change in % Sales of goods and services thereof delivery devices thereof diabetes direct business thereof others Gross profit Gross profit in % 22.7% 23.3% Operating profit Operating profit in % 2.1% 3.4% Net profit Net profit in % 3.4% 2.1% Earnings per share (in CHF) Research and development expenditures, total Investments in fixed assets Equity ratio in % 66.6% 63.6% Employee headcount (as of 31 March) Employees fulltime equivalents (as of 31 March) Audited IFRS figures. In thousand CHF. Earnings per share in CHF. *The figures have been adjusted due to the change to Swiss GAAP FER. Share Price Development CHF Ypsomed Holding AG SPI Index 17

26 Ypsomed Annual Report Letter to the shareholders Net profit rises currency effects impact negatively on sales and operating result Dear shareholders In the 2011/12 business year, the Ypsomed Group posted consolidated sales of CHF million. Adjusted by CHF 10.8 million for currency effects occasioned by the strong Swiss franc, Ypsomed would have increased sales of delivered goods by 2.5% compared to the year before. Net profit in this business year was able to be increased by CHF 3.0 million to CHF 8.5 million thanks to the capital gains made from selling financial assets. Operating profits had a margin of 2.1%, lower than the previous year (3.4%). Here, too, currency effects had a major impact, cutting profitability by some CHF 3.0 million in the business year. A further negative factor was an amortization on a pen project of CHF 1.0 million because of an impairment. By sticking rigorously to its strategy and thanks to appropriate cost management, the sales base and profitability have been strengthened in the mid-term in a sustainable manner. Major cost savings realized The cost analysis launched by the Board of Directors at the start of the business year revealed new areas in which savings could be made. The targeted action taken enabled the Ypsomed Group to cut personnel costs by a total of CHF 8.5 million and reduce expenditure on investments by more than CHF 7.0 million in the 2011/12 business year compared with the previous year. Areas not contributing directly to production were cut back and management structures were streamlined, while existing capacities were utilized more efficiently and customer-focused activities were stepped up. Stringent cost management remains a high priority for us and we remain committed to improving our business processes continuously and achieving more with the resources available. The substantial investments over the past few years in innovative technology platforms and cutting-edge production infrastructure for injection systems and in cultivating the market for the new mylife Diabetescare products were made quite deliberately and are now gradually beginning to have a positive financial impact. Ypsomed s strategy is the right one Ypsomed s strategy is built around self-care solutions, focusing on solutions that allow patients to self-inject drugs and in particular on products and services for people with diabetes who need to treat themselves with insulin. Our aim is to further expand our two business segments Injection Systems and Diabetes Care and broaden our customer base. In terms of diabetes care, Ypsomed markets products and services directly to diabetics, doctors and health insurance providers such as our patented mylife pen needles or the extremely successful mylife OmniPod, the world s first tubing-free insulin pump. You can read more on the extensive mylife Diabetescare product range and the new second-generation mylife OmniPod, which is now two-thirds of its former size, from page 32 of this Annual Report onward. In the Injection Systems segment, Ypsomed s YDS Ypsomed Delivery Systems offer a complete range of products for pharmaceutical and biotech companies looking to deploy ready-to-use injection systems to administer their drugs or to develop and manufacture them in line with customer requirements and package them together with the drugs. More information on Ypsomed Delivery Systems, the injection system platforms available and Ypsomed s comprehensive service portfolio for pharmaceutical customers can be found from page 22 of this Annual Report onward. We are pursuing the right strategy and have successfully expanded our customer base, both in diabetes care and injection systems. 18

27 Ypsomed Annual Report Annual Report Ypsomed's strategy work for components for the SoloStar Pen. The share of sales attributable to Sanofi, formerly a major customer, is currently 20.5%. Because the OptiSet Pen is no longer being manufactured, sales with Sanofi will further reduce by some 40% in the 2012/13 business year. However, in the Diabetes Care segment, Ypsomed has also broadened its geographic customer base for mylife Diabetescare and has launched new products. For instance, a new distribution company was set up in Austria late last year and the mylife Orbit infusion set, which offers 360 degrees of freedom of movement, was already brought onto the market in summer In addition, the launch of mylife DailyDose, the insulin syringe in credit card format, will take place soon, and distribution of the second generation of mylife OmniPod insulin patch pumps is set to begin in summer Strategically important acquisition in the highly profitable infusion set business Ypsomed launches new products and expands its customer base In the 2011/12 business year, the Ypsomed Group diversified its sales base further. In the Injection Systems segment, we succeeded in winning several new customers for our highquality ServoPen insulin pen, including two more Asian insulin providers in the shape of Square Pharmaceuticals Ltd. and Incepta Pharmaceuticals Ltd. More and more pharmaceutical companies are turning to ergonomic, patient-friendly injection systems that can be produced at low cost and in high quality and quickly brought to market. Over the past few years, Ypsomed has succeeded in being considered for most of the relevant invitations to tender issued by pharmaceutical companies for pen systems and autoinjectors, which has secured the Group a number of key customer projects. Other particularly pleasing developments have included the growth in sales of ServoPens achieved with Tonghua Dongbao Pharmaceutical Co. Ltd. in China and the extremely reliable supply service for Amylin Pharmaceuticals Inc, which honored Ypsomed with its Supplier of the Year Award in Ypsomed was able to partially offset the decline in sales recorded by the OptiPen Pro and the OptiSet, which is no longer to be produced, with contract manufacturing Ypsomed made a strategically important acquisition in November 2011, purchasing the patents and infusion set business of the US company ICU Medical Inc. By taking over manufacturing processes and relocating production from the USA to Mexico, costs can be optimized and the gross profit margins achieved by these products increased in future. The market for infusion sets for insulin pumps is extremely promising and is already worth over a billion US dollars. The Orbit infusion sets are providing Ypsomed with potential for growth and are of great strategic importance in light of the launch of a self-developed, low-cost, user-friendly insulin pump, which is planned for early Ypsomed keeps executive responsibility in the family As founder and major shareholder and as a family, we are convinced that we at Ypsomed are pursuing the right strategy and we are implementing it with great consistency. We are acting in a targeted manner and taking extensive measures to diversify our sales base and cut our costs. With CEO Richard Fritschi moving to a start-up company in the dental sector, in August 2011 we once again assumed responsibility for the operational management of the company. We accept our responsibility and are ourselves keen to ensure Ypsomed s lasting positive development. The top-level management of the Ypsomed Group is in future to remain in the hands of the family, ensuring continuity for customers, partners and employees. The plan is for Simon Michel, currently re- 19

28 Ypsomed Annual Report sponsible for Marketing & Sales and a member of the management, to take over as CEO in two years time. As a father and son team, our commitment in terms of time and personal effort is great, and we are both firmly intent on increasing Ypsomed s sales and improving its profitability through stringent cost management in order to boost the share price once again in the medium term. We would like to take this opportunity to thank all our employees for their loyalty and hard work as well as you, our shareholders, for the trust you have placed in us. We intend to increase Ypsomed s profitability through strict cost management and thus boost the share price once again. company, we are taking all the countermeasures we can and are committed to strengthening Ypsomed s competitiveness on the international stage. Because of existing expertise and internationally recognized Swiss quality, the development and manufacture of high-technology products in large quantities will remain in Switzerland. However, for new injection systems that are primarily produced manually or are very sensitive to price fluctuations, Ypsomed will in future be forced to consider moving manufacturing activities abroad. The loss of the OptiSet Pen will mean that the first quarter of 2012/13 will be muted in terms of both sales and income, while the second semester, thanks to compensatory transactions, will have a result better than expected. As a whole, we are cautiously optimistic for the 2012/13 business year and are expecting sales and income to be at the same level as in the previous year. Outlook Injection systems for self-medication and diabetes care are both attractive markets with potential for growth at international level, in the USA, Europe and particularly in Asia. With mylife Diabetescare, Ypsomed is further expanding an extensive range of diabetes care products, with many promising customer projects for injection systems also in the pipeline. This makes us fundamentally very confident for the future, although the cultivation of the diabetes care market will continue to require substantial resources, and experience has shown us that new customer projects for injection systems take time to implement. Another challenge is compensating for the downward trend in former Sanofi products. Other challenges include increasing cost pressure in the healthcare sector as well as the global debt crisis and the associated currency trends. The strong Swiss franc is curbing Ypsomed s sales growth and eating into profit margins of individual products. As an export-oriented Swiss medical technology Dr. h. c. Willy Michel Chief Executive Officer, CEO and Chairman of the Board of Directors Simon Michel Senior Vice President Marketing & Sales 20

29 Ypsomed Annual Report Injection systems A worldwide growth market Innovative injection systems enable safe and cost-effective self-medication Modern injection systems, such as those that Ypsomed has been developing and supplying to pharmaceutical customers for more than 25 years, are a worldwide growth market. The medications that are produced using biotechnology today (such as peptide hormones and monoclonal antibodies) are administered almost exclusively subcutaneously, i.e. they are injected under the skin. Pen systems and autoinjectors are used primarily to treat diseases such as diabetes, growth disorders, infertility, thrombosis prophylaxis, osteoporosis, hepatitis C or anemia in the case of kidney disorders. However, they are also used for cancer, and various autoimmune diseases such as arthritis, multiple sclerosis, psoriasis or Crohn s disease. Because of the unchecked increase in diabetes around the world, the administration of insulin is one of the largest and most interesting markets for Ypsomed. Particularly promising here is the growth potential for insulin pens in emerging markets, and with new insulin suppliers. Innovative injection systems enable safe self-medication, and contribute to improving the success of treatment, while simultaneously reducing costs in the healthcare sector. Cost pressures in the healthcare sector and in pharmaceutical companies Because of this so-called patent cliff, pharmaceutical companies are implementing savings in the development, manufacture and marketing of drugs. In addition, generic products and biosimilar drugs, which are being developed both by the large US and European pharmaceutical groups as well as by up-and-coming pharmaceutical companies from India, China, Korea, Latin America and eastern Europe, are gaining in importance. Challenging market environment with numerous opportunities For the use of biosimilars, a market worth billions that will experience strong growth in the future, just as for the numerous new biotech drugs, there will be a demand for ergonomic, safe and economical pen systems or autoinjectors for pre-filled syringes, such as Ypsomed offers in its product portfolio. Small and medium-sized pharmaceutical companies that have little or no expertise in injection systems are therefore working today just as the large pharmaceutical companies have been doing for years already with independent developers and manufacturers of injection systems, or with contract developers and contract manufacturers. Pharmaceutical companies wish to offer their drugs either with new and innovative injection systems as a premium product, or to compete with original preparations with very simple and economical injection systems at significantly lower prices. Thus the pressure on costs not only leads to takeovers among pharmaceutical companies, but also leads to consolidation at the level of contract manufacturers and component manufacturers, as well as in the filling and packaging of drugs. Annual Report The trend towards self-medication has increased further in recent years, not least because of the ever- growing pressure on costs in the healthcare sector. Innovative injection systems such as pen systems or autoinjectors enable successful treatment by the patients themselves, thus helping to avoid expensive hospital stays and visits to doctors, and lowering the costs of treatment overall. But the established pharmaceutical companies too are subject to cost pressures, as more and more patents for their original preparations are running out. 21

30 Ypsomed Annual Report YDS Ypsomed Delivery Systems Complete portfolio of injection systems with extended service provision Within the industry, Ypsomed is regarded as the world s largest independent developer and producer of injection systems for subcutaneous administration of drugs in liquid form by patients. Ypsomed not only has an extensive patent portfolio and a comprehensive range of products, but also many years of experience in the development and manufacture of highquality injection systems. In order to be able to market the existing range of innovative injection systems and all the specialized services for pharmaceutical companies even better, Ypsomed has created a new umbrella brand with YDS Ypsomed Delivery Systems. Pharmaceutical customers can rely on the products, expertise and experience of Ypsomed Delivery Systems, and are thereby more successful on the market. Amylin names Ypsomed Supplier of the Year For more than 10 years, Ypsomed has been successfully working with Amylin Pharmaceuticals Inc., a leading US pharmaceutical group. Ypsomed has developed the SymlinPen for Amylin, for the administration of a liquid medication for better control of blood glucose, and has built up the production of the pen system in Switzerland. Ypsomed has been supplying the SymlinPen since 2007 and will soon be in a position to manufacture a further pen system for Amylin in Switzerland. Ypsomed is delighted that Amylin has awarded Ypsomed the accolade of Supplier of the Year for Amylin operates a professional supplier management system with quarterly assessments using the most diverse criteria relating to the supplier relationship. With the nomination as Supplier of the Year, Amylin particularly recognizes Ypsomed s delivery reliability, quality, flexibility, good partnership both during projects as well as product life and Ypsomed s will to continually improve. Ypsomed Delivery Systems covers the following four service provision areas: Custom Products Contract Development Contract Manufacturing Drug & Device Assembly 22

31 Ypsomed Annual Report More confidence more success with Ypsomed Delivery Systems Competent and flexible, at the service of pharmaceutical customers Annual Report Ypsomed Delivery Systems offer a complete range of products and services for injection systems, ranging from development, through the manufacture of injection systems, to packaging them with the drug. YDS Ypsomed Delivery Systems Custom products Contract development Contract manufacturing Drug & device assembly With YDS Ypsomed Delivery Systems, Ypsomed intends to further extend its leading market position as a comprehensive supplier of injection systems for original preparations and biosimilars from both large and smaller pharmaceutical and biotech companies, in both highly regulated markets as well as in emerging markets. The needs of the individual pharmaceutical and biotech companies vary, and the YDS offering from Ypsomed is accordingly flexible. Ypsomed can, as a full-service provider, manufacture already developed and industrialized pen systems, and also package and deliver them ready-filled with the drug. Ypsomed can, however, also provide individual services, and for example develop new injection systems on behalf of customers, or as a contract manufacturer can manufacture sophisticated components of medical technology products in high quality, at attractive prices. Ypsomed sees itself as a comprehensive service provider for pharmaceutical and biotech companies. 23

32 Ypsomed Annual Report Ypsomed Annual Report YDS Custom Products Individual platform products ready for use Developed and tested pen systems and autoinjectors ready for use With YDS Custom Products, Ypsomed offers pharmaceutical and biotech companies a complete product portfolio of already developed and tested pen systems and autoinjectors, which can be adapted to suit individual customer wishes with respect to design, drug dosing or functionality. Over and above that, Ypsomed provides the swift manufacture of smaller quantities for immediate use in clinical trials, through to complete industrialization and high-quality production of large volumes for market launches. Ypsomed is of course continually developing further new and innovative pen systems, autoinjectors for pre-filled syringes, as well as pen needles and safety pen needles. On average, every year Ypsomed invests some 10% of sales in basic research and product development. The injection systems from Ypsomed can be adapted to suit the specific customer, and are available for immediate use in clinical trials and for market launches. Annual Report Innovative portfolio of injection systems ServoPen YpsoPen Twist UnoPen Memo UnoPen Fix LyoTwist Trio LyoTwist Vario LyoTwist Trio S LyoTwist Vario S 3 ml cartridge 1 ml dual chamber cartridge 1 ml long prefilled syringe Reusable Disposable Automatic injection Multi dose Single dose Variable dose Fixed dose Min dose (ml) Max dose (ml) Built in needle safety Optional needle safety 24 25

33 Ypsomed Annual Report Benefits of YDS Custom Products for pharmaceutical and biotech customers Pharmaceutical and biotech companies look for standardized injection system platforms for the application of their new drugs, in other words: devices that have already been developed, have been tested in handling studies with patients, and have been largely industrialized and are thereby suitable for costeffective production. Pharmaceutical companies also want to use injection systems in which the patent issues have been successfully dealt with, and where use of the devices is guaranteed not to infringe any other patents (freedom to operate). By proceeding in this way, in contrast to new development, pharmaceutical companies avoid unnecessary risk and make considerable savings on upfront investment and development costs. When they use YDS Custom Products, they also make drastic savings on the time until use in clinical trials (time to clinic) and the time until market introduction (time to market). It is not only large pharmaceutical groups that benefit from the numerous advantages of YDS Custom Products, but also small and medium-sized pharmaceutical and biotech companies. UnoPen YpsoJect YpsoMate VarioJect 3 ml cartridge 1 ml dual chamber cartridge 1 ml long prefilled syringe Reusable Disposable Automatic injection Multi dose Single dose Variable dose Fixed dose Min dose (ml) Max dose (ml) Built in needle safety Optional needle safety 26

34 Ypsomed Annual Report With YDS Custom Products, pharmaceutical customers make considerable savings in terms of time and costs. The right injection system to suit every requirement Ypsomed wins new pharmaceutical customers in Asia Ypsomed is particularly proud that following Tonghua Dongbao from China, Square Pharmaceuticals Ltd. and Incepta Pharmaceuticals Ltd., two insulin manufacturers in Bangladesh, have opted for a Swiss quality product, the ServoPen insulin pen. Both companies will be launching the ServoPen with their respective insulins in Annual Report Both reusable and disposable pen systems are suitable for drugs that need to be injected by the patient either once or even several times a day, such as insulin, GLP-1 and growth or fertility hormones. Cost-effective injection systems are in demand particularly in emerging markets if the drug is offered within the context of tender procedures or generally at very low prices. Dual-chamber pen systems are used for drugs that are unstable or cannot be stored for long in a liquid state. With these pen systems, the substance in its freeze-dried form is mixed with the diluent in a special ampule just before use. In addition, autoinjectors with a pre-filled syringe tend to be used where even inexperienced patients need to administer the required substance easily, safely and in the required quantity, or where drugs need to be injected less frequently as a depot formulation e.g. weekly or monthly. For our clients in Bangladesh the ServoPen s great user-friendliness and the swift availability for the market launch were important decision criteria, along with the renowned Swiss quality. Several insulin suppliers have opted for the ServoPen from the YDS Custom Products range Ypsomed is particularly pleased that, in Square Pharmaceuticals Ltd., Incepta Pharmaceuticals Ltd., Pharmastandard and B. Braun, several insulin suppliers opted for the high-quality ServoPen insulin pen from Ypsomed from the YDS Custom Products product portfolio in the 2011/12 business year. The ServoPen, which has been developed by Ypsomed, is part of the YDS Custom Products portfolio, and has received the internationally renowned red dot design award. Ypsomed manufactures the ServoPen in Switzerland, utilizing existing production capacities. 27

35 Ypsomed Annual Report New YpsoPen Twist insulin pen Ypsomed has developed the existing platforms further, and in the last business year it has aroused great interest among potential customers with both the YpsoPen Twist, a simple and economical insulin pen, and the YpsoMate autoinjector. The YpsoPen Twist is ideal for markets where there is price pressure, or where insulin is marketed within the context of tender procedures (including China and India). The YpsoPen Twist is a simple, reusable pen, and together with the reusable, automatic ServoPen and the disposable UnoPen, it completes Ypsomed s range of insulin pens. YpsoMate 2-step autoinjector The two-step YpsoMate autoinjector was presented at the 2011 PDA conference in Basel, and is the latest autoinjector from Ypsomed for pre-filled syringes with a volume of up to 1 ml. The YpsoMate offers ergonomic handling and enables the convenient, safe and automatic release of the medicine as soon as the autoinjector is pressed against the skin (socalled push-on-skin release). Several easily audible clicks and a large viewing window onto the syringe with the medicine provide the patient with a high degree of assurance in use, and confirmation that the full dose has been injected. The YpsoMate has an extremely slimline design, and offers numerous possibilities for individual customisation. More and more pharmaceutical companies are realizing that patients want autoinjectors for the application of drugs, and are not content with pre-filled syringes. YpsoPen Twist YpsoMate 28

36 Ypsomed Annual Report YDS Contract Development Customer-specific order development Successful development of innovative injection systems for more than 25 years Annual Report Individual contract development for injection systems is requested by certain customers if none of the available platform products adequately meets their requirements, or if customers wish to implement their own ideas and claim the rights to the results of development, as well as to newly obtained patents. Large pharmaceutical companies in particular very often develop injection systems with contract developers, because they are thus not dependent on a specific manufacturer, and for reasons of risk they can split the production between several contract manufacturers. Comprehensive patent portfolio and proven development processes Within the framework of YDS Contract Development, Ypsomed makes available to the customer its many years of expertise in development, as well as its comprehensive patent portfolio for pen systems and autoinjectors. Depending on the customers needs, existing patents held by Ypsomed can be used on an exclusive or non-exclusive basis. The development process takes place in the form of collaboration with the customer, and fulfills all the ISO and cgmp guidelines, right through to the correct documentation to conform to regulations. During the development phase, concepts are continually tested and monitored by experts. Thanks to the in-house tool manufacturing department and available production capacities, prototypes can be produced quickly and costeffectively even in larger quantities, and are available for trials with patients within a short space of time. Thanks to its many years of experience as a manufacturer, Ypsomed takes into account the economical manufacture of components and their ease of assembly, right from the start when developing new injection systems. With YDS Contract Development for pharmaceutical and biotech companies, Ypsomed offers customer-specific contract development of injection systems and all the corresponding services. Since the mid-1980s, Ypsomed has built up an outstanding reputation in the industry as an innovative developer of user-friendly and safe injection systems. Many systems have won high-profile design awards and received excellent feedback from patients in handling studies. Injection systems developed by Ypsomed have won numerous highprofile design awards because they are innovative, user-friendly and safe. ServoPen 29

37 Ypsomed Annual Report YDS Contract Manufacturing A flexible service With YDS Contract Manufacturing, Ypsomed offers a complete range of services for the contract manufacture of injection systems, medical technology components and assemblies. The YDS Contract Manufacturing range furthermore includes consultancy, project management and expert support in the context of challenging industrialization and rapid upgrading of production capacities. Flexible contract manufacturing of small and large volumes The production facilities at Ypsomed are designed to be flexible, and allow the partially-automated manufacture of small volumes through to mass production of several hundred million parts with fully automated high-performance plants. Ypsomed has over 25 years experience in the manufacture of medical technology products, and has the necessary expertise in the corresponding manufacturing processes and technology. These include injection molding, printing, semi- and fully automatic parts assembly, country-specific labeling and packaging. Ypsomed also has its own tool manufacturing department, thus guaranteeing the flexible and swift manufacture of tools, as well as a high degree of precision and quality in the manufacture of high-specification injectionmolded parts. customers and by the FDA. Ypsomed operates several production sites in Switzerland and in the Czech Republic. Where necessary, Ypsomed has access to manufacturing capacities in the Far East and Mexico through trusted partners. By utilizing existing production infrastructure and partnerships, Ypsomed can offer competitive contract manufacturing, and rapidly adjust the production volumes to meet the needs of customers and markets. With YDS Contract Manufacturing, pharmaceutical companies can have devices and components that they have developed themselves manufactured by Ypsomed in a cost-effective way, and can adjust their production volumes swiftly and flexibly to meet market requirements. Components for Solostar by Sanofi Proven Swiss quality on attractive terms Ypsomed s excellently trained workforce and their expertise, as well as its modern production infrastructure, guarantee the highest quality. The Ypsomed Group and its quality management system are certified in accordance with ISO 13485:2003 and are regularly audited by international pharmaceutical 30

38 Ypsomed Annual Report YDS Drug & Device Assembly One-stop shop for injection systems and drug packaging One-stop shop for injection systems and drug packaging Annual Report For pharmaceutical and biotech companies, the manufacture and packaging of drugs together with the injection systems in conformity with FDA requirements is an absolutely critical process, and demands not only a great deal of expertise, but also major investment in infrastructure. In order that pharmaceutical and biotech companies, particularly small and medium-sized firms, do not have to build up this expensive infrastructure and these processes themselves, with YDS Drug & Device Assembly, Ypsomed offers the integrated assembly of pen components or autoinjector components with the ampule, or of the pre-filled syringe that contains the medication. Ypsomed has received corresponding inquiries from customers, and can make available its tried and tested production and assembly plants for injection systems, as well as the relevant packaging and logistics infrastructure, right through to distribution specific to the country in question. The final assembly of injection systems and packaging together with the drugs can be considerably simplified by this, enabling pharmaceutical companies to save time and costs. The multilingual country of Switzerland, in the heart of Europe, offers not only logistical benefits, but also tax benefits for pharmaceutical and biotech companies. With YDS Drug & Device Assembly, Ypsomed extends the value-creation chain and provides an important additional service for pharmaceutical customers. 31

39 Ypsomed Annual Report Success in diabetes treatment with mylife Diabetescare Sustained strong increase in diabetes Strategic diabetes care business segment extended further Over the last 25 years, Ypsomed has made a name for itself around the world as a competent diabetes expert, and in recent years it has made substantial investments in building up the strategic Diabetes Care business segment. Ypsomed has extended its international marketing presence through its own subsidiaries and distribution partners to more than 50 countries, and furthermore in 2009 it launched the new mylife Diabetescare umbrella brand. With mylife Diabetescare, Ypsomed offers a complete product range for diabetes care, specifically for type 1 and type 2 diabetics who are treated with insulin. In the 2011/12 business year, Ypsomed extended the mylife Diabetescare range of products still further, and introduced numerous new products to the market, including the mylife Orbit infusion set, with 360-degree freedom of movement, the new mylife Clickfine 4.5 mm pen needles with extra-short needles, and the mylife Clickfine AutoProtect safety pen needles. mylife DailyDose, a self-injection system in credit card format comprising three small syringes that are pre-filled with the daily requirement of insulin, will be launched in the next business year. No other company in the world offers such a complete product range for comprehensive diabetes care under one umbrella brand as Ypsomed does with mylife Diabetescare. With the strategic Diabetes Care business segment, Ypsomed is active in a market that is experiencing sustained growth, as the worldwide increase in diabetes shows. The World Health Organization (WHO) estimates that currently almost 300 million people are suffering from diabetes. Expert estimates predict that in the year 2030, around the world roughly 440 million people will be living with diabetes. The USA, which currently has the most diabetics, will be overtaken in the next few years by China, India and other countries in Asia and the Middle East. The reasons for the sustained increase in diabetes are on the one hand the rising world population (from approx. 7 billion people today to over 8 billion in 2030), and increased life expectancy, with a continually growing proportion of older people in need of care, and on the other hand the increase in standards of living along with the associated changes in nutritional habits and lifestyle. Excessive intake of calories, coupled with lack of movement, is widespread not only in the industrialized countries but also in emerging countries in Asia, Central and South America, as well as the Middle and Near East. Diabetes care a global market worth billions Along with the rising numbers of diabetics, the costs of treating diabetes also increase. Today, diabetes care is a global market worth billions, with further high growth potential in the future. In view of the enormous costs however, the cost pressure on suppliers, which is exerted by the authorities, politicians and the cost payers such as health insurance providers, insurance companies and patients, is also increasing. This leads to a preference for products that tend to be cheap, and new products are reimbursed only if they are demonstrated to improve treatment or can be offered cheaper. To some extent, the choice of products is restricted for doctors and patients, or only a flat rate reimbursement is paid, instead of reimbursing individual products and services as previously. Increasing harmonization is also being observed of prices that are still heterogeneous in individual countries, both internationally and specifically within Europe. The price war puts the large and established suppliers under pressure and opens up fresh opportunities for lower-priced competitors. Although the pressure on prices is continually increasing and demands a corresponding adjustment of the cost structures and the products offered, diabetes care will remain an attractive and growing market for Ypsomed for years to come. 32

40 Ypsomed Annual Report mylife Diabetescare Complete product range for diabetics The best products under one umbrella brand: mylife Diabetescare Diabetes expertise and access to markets as a benefit for mylife Diabetescare partners Annual Report For the care of people with diabetes mellitus, Ypsomed has created the mylife Diabetescare umbrella brand, under which it offers not only products manufactured by Ypsomed itself, such as mylife Penfine, mylife Optifine, mylife Clickfine and the mylife Clickfine AutoProtect safety needles, but also diabetes products from partners. To this end, Ypsomed has established several partnerships with the best suppliers in the respective product categories, and has included their products in the mylife Diabetescare product family as private labels. Thus, for example, Ypsomed has since 2009 been working closely with the Taiwanese company Bionime Corp., which produces one of the most accurate blood glucose test strips in the world, and distributes the mylife Pura blood glucose monitoring system exclusively in Europe, through its own subsidiaries. At the start of 2010, Ypsomed acquired from Insulet Corp. the exclusive distribution rights outside North America for OmniPod, the first and until now only insulin patch pump, and introduced the tubing-free, userfriendly insulin pump to the market in numerous countries under the name mylife OmniPod. In November 2011, Ypsomed also acquired the Orbit product line from the US medical technology company ICU Medical Corp., and has thus become a manufacturer of infusion sets for conventional insulin pumps (see page 38 of the Annual Report). The reason for the acquisition is that wherever possible, Ypsomed wishes to own and manufacture the products that are distributed under mylife Diabetescare itself. For Ypsomed, it is also strategically important to be able to influence product development and ensure quality. With the mylife Diabetescare umbrella brand, Ypsomed makes a decisive contribution to the market success of partner products. Thanks to mylife Diabetescare, Ypsomed is of interest to partners with innovative diabetes products for several reasons. First of all, Ypsomed has an undisputed reputation and expertise in the field of diabetes, and secondly, Ypsomed enables direct access to markets for the partners diabetes products under the mylife Diabetescare brand through its own subsidiaries in Europe and India, via direct distribution through DiaExpert, as well as through local distribution partners in more than 50 countries. Furthermore, the partners also benefit from the high credibility and quality of the mylife Diabetescare brand. With mylife Diabetescare, Ypsomed has built up a brand that enjoys the trust of patients, doctors, diabetes specialists and health insurance providers alike. Ultimately, with mylife Diabetescare Ypsomed can also offer a complete product range, which companies that have only one diabetes product cannot do. Depending on the needs of the health insurance providers, flat-rate offers or individual product categories can be combined with one another and offered at attractive prices (so-called bundling), such as for example infusion sets and pump accessories, or blood glucose test strips and pen needles. With mylife Diabetescare, Ypsomed wants to become the partner of choice for patients, doctors and health insurance providers, and at the same time contribute towards lowering the overall costs of diabetes treatment. 33

41 Ypsomed Annual Report Ypsomed Annual Report Ypsomed worldwide Under the brand mylife Diabetescare Ypsomed offers patients worldwide an extensive range of products for the treatment of diabetes. Countries with subsidiaries (in 1000) Ypsomed Norway Population: 5000 Number of diabetics: 202 Estimated growth by 2022: 12% Ypsomed Netherlands Population: Number of diabetics: 882 Estimated growth by 2022: 12% Ypsomed Sweden Population: Number of diabetics: 386 Estimated growth by 2022: 6% Ypsomed Finland Population: 5400 Number of diabetics: 340 Estimated growth by 2022: 5% Annual Report Countries with distributors (in 1000) 1 Algeria Population: Number of diabetics 2012: 654 Estimated growth by 2022: 43% 2 Egypt Population: Number of diabetics 2012: Estimated growth by 2022: 38% 12 Estonia Population: Number of diabetics 2012: 45 Estimated growth by 2022: n/a Ypsomed UK Population: Number of diabetics: Estimated growth by 2022: 10% Ypsomed France Population: Number of diabetics: Estimated growth by 2022: 10% Ypsomed Switzerland (head office) Population: Number of diabetics: 424 Estimated growth by 2022: 10% Ypsomed Germany Population: Number of diabetics: Estimated growth by 2022: 6% Ypsomed Denmark Population: 5500 Number of diabetics: 299 Estimated growth by 2022: 5% 9 3 Argentina Population: Number of diabetics 2012: Estimated growth by 2022: 21% 4 Australia Population: Number of diabetics 2012: Estimated growth by 2022: 22% 5 Bahrain Population: Number of diabetics 2012: 55 Estimated growth by 2022: 40% 13 Greece Population: Number of diabetics 2012: 939 Estimated growth by 2022: 8% 14 Ireland Population: Number of diabetics 2012: 110 Estimated growth by 2022: 23% 15 Iran Population: Number of diabetics 2012: Estimated growth by 2022: 46% 22 Kuwait Population: Number of diabetics 2012: 165 Estimated growth by 2022: 47% 23 Latvia Population: Number of diabetics 2012: 85 Estimated growth by 2022: 3% 24 Lebanon Population: Number of diabetics 2012: 216 Estimated growth by 2022: 39% Ypsomed Austria Population: Number of diabetics: 706 Estimated growth by 2022: 10% 30 Ypsomed India Population: Number of diabetics: Estimated growth by 2022: 30% Belgium Population: Number of diabetics 2012: 370 Estimated growth by 2022: 14% 16 Iceland Population: 318 Number of diabetics 2012: 8 Estimated growth by 2022: 27% 25 Lithuania Population: Number of diabetics 2012: 126 Estimated growth by 2022: 9% 4 7 Bosnia-Herzegovina Population: Number of diabetics 2012: 136 Estimated growth by 2022: 18% 17 Israel Population: Number of diabetics 2012: 338 Estimated growth by 2022: 26% 26 Malaysia Population: Number of diabetics 2012: Estimated growth by 2022: 40% 3 8 Bulgaria Population: Number of diabetics 2012: 466 Estimated growth by 2022: n/a 18 Italy Population: Number of diabetics 2012: 468 Estimated growth by 2022: 8% 27 Morocco Population: Number of diabetics 2012: 641 Estimated growth by 2022: 40% 31 Portugal Population: Number of diabetics 2012: 75 Estimated growth by 2022: 10% 35 Saudi Arabia Population: Number of diabetics 2012: Estimated growth by 2022: 43% 39 Spain Population: Number of diabetics 2012: Estimated growth by 2022: 12% 43 Hungary Population: Number of diabetics 2012: 350 Estimated growth by 2022: 4% 9 China Population: Number of diabetics 2012: Estimated growth by 2022: 28% 19 Jordan Population: Number of diabetics 2012: 327 Estimated growth by 2022: 54% 28 Mexico Population: Number of diabetics 2012: Estimated growth by 2022: 43% 32 Qatar Population: Number of diabetics 2012: 53 Estimated growth by 2022: 34% 36 Serbia/Montenegro Population: Number of diabetics 2012: 351 Estimated growth by 2022: 7% 40 Tunisia Population: Number of diabetics 2012: 236 Estimated growth by 2022: 34% 44 United Arab Emirates Population: Number of diabetics 2012: 462 Estimated growth by 2022: 26% 10 Colombia Population: Number of diabetics 2012: Estimated growth by 2022: 42% 20 Canada Population: Number of diabetics 2012: Estimated growth by 2022: 22% 29 Poland Population: Number of diabetics 2012: Estimated growth by 2022: 11% 33 Romania Population: Number of diabetics 2012: Estimated growth by 2022: 9% 37 Singapore Population: Number of diabetics 2012: 448 Estimated growth by 2022: 29% 41 Turkey Population: Number of diabetics 2012: Estimated growth by 2022: 31% 45 USA Population: Number of diabetics 2012: Estimated growth by 2022: 20% 11 Czech Republic Population: Number of diabetics 2012: Estimated growth by 2022: 10% 21 Croatia Population: Number of diabetics 2012: 165 Estimated growth by 2022: 5% 30 Oman Population: Number of diabetics 2012: 178 Estimated growth by 2022: 47% Source: WHO 34 Russia Population: Number of diabetics 2012: Estimated growth by 2022: 5% 38 Slovenia Population: Number of diabetics 2012: 74 Estimated growth by 2022: 10% 42 Ukraine Population: Number of diabetics 2012: Estimated growth by 2022: 0.3% 46 Venezuela Population: Number of diabetics 2012: 887 Estimated growth by 2022: 42% 34 35

42 Ypsomed Annual Report International market presence and marketing expertise for mylife Diabetescare Specialized diabetes sales force in Europe In Europe, Ypsomed has its own sales force that specializes in diabetes, as well as subsidiaries in Germany, France, England, Switzerland, the Netherlands, Sweden, Denmark, Norway, Finland and, as a new addition since December 2011, also in Austria. With the establishment of the new subsidiary that is headquartered in Vienna, Ypsomed particularly wants to exploit the promising market potential for the tubing-free mylife OmniPod insulin patch pump, and strengthen the marketing of the other products from the mylife portfolio in Austria. Since 2007, Ypsomed has also had a subsidiary and representation in New Delhi, India. International sales via local distribution partners In addition to distribution through its own subsidiaries, Ypsomed also has an international network of strong, locally established partners with expertise in diabetes. Today, Ypsomed has a presence in over 50 countries, and with mylife Diabetescare it can offer distributors an attractive range of diabetes products that includes more than just pen needles. Expansion in the diabetes mail order business In Germany, through its subsidiary DiaExpert, Ypsomed has been successfully active in the diabetes mail order business for over twenty years. In Germany, DiaExpert is the country s largest diabetes mail order business, and supplies over half of all insulin pump users. DiaExpert serves several tens of thousands of customers with more than high-quality diabetes products. The products that are ordered are delivered directly to customers homes within 24 hours. The advice available also includes a telephone hotline and the Feel Free customer magazine with specialist articles and up-todate product information on the subject of diabetes. Market access is decisive for the success of diabetes products. In 2012, Ypsomed will start up a diabetes direct mail order service, similar to DiaExpert, in Norway and Switzerland too. Where regulations permit, from 2013 onwards a diabetes direct mail order service will also be set up in other countries in Europe. DiaExpert shop Global presence with Via the web portal mylife Diabetescare has a worldwide presence on the market round the clock. People with diabetes and diabetes experts can obtain information on the subject of diabetes and on the mylife Diabetescare product portfolio. In addition to a newsletter and practical tips on dealing with diabetes on a dayto-day basis, advice can also be obtained by telephone or . 36

43 Ypsomed Annual Report Ypsomed extends the mylife Diabetescare product range The complete mylife Diabetescare product range Annual Report Since 2009, Ypsomed has continually expanded the mylife Diabetescare product portfolio. Currently, mylife Diabetescare covers a complete range and comprises the following products for diabetes care. mylife Diabetescare product portfolio expansion Pen needles Blood glucose meters Insulin pumps and infusion sets Accessoires 37

44 Ypsomed Annual Report The new mylife Orbit infusion set with 360-degree freedom of movement In April 2011, Ypsomed started the market introduction of a new infusion set for insulin pumps, and in the 2011/12 business year it thus expanded the mylife Diabetescare portfolio with an additional, extremely attractive product. mylife Orbit is a new infusion set for patients who use an insulin pump with a Luer lock connection. The system offers much greater freedom of movement than conventional catheters, as the tube rotates around 360 degrees. The new infusion set is available with a flexible Teflon catheter (mylife Orbitsoft ) and with a particularly fine steel cannula (mylife Orbitmicro ). The mylife Orbit infusion set offers numerous benefits Because the tape is semi-transparent and the set is very flat, with a height of just six millimeters, mylife Orbit can be worn discreetly and is hardly noticeable. For patients, using the set is very simple and user-friendly. The choice of infusion site is just as easy as connecting and disconnecting the set in any position. A click signals that everything is fitting correctly, and gives patients the necessary assurance. Moreover, the mylife Orbit infusion set is attached with an innovative, heat-activated tape, which ensures secure positioning. Acquisition of the infusion set business of ICU Medical Inc. With this acquisition, Ypsomed has become a manufacturer of infusion sets, and at the same time secures the ownership of important patents in the area of infusion sets. The purchase contract was signed in November The transfer of production is under way, and will be concluded in the third quarter of With the acquisition of the mylife Orbit infusion set, Ypsomed is strengthening the strategic Diabetes Care business segment. Increased profit margin With this acquisition, Ypsomed is strengthening the strategic Diabetes Care business segment and sees the opportunity to increase its market share in the extremely promising growth market for infusion sets. For Ypsomed, the acquisition is also beneficial because as the manufacturer of the infusion sets, Ypsomed can achieve a clearly better margin than the previous retail margin. Ypsomed has also made preparations for transferring the production of the infusion sets from the USA to Mexico. Ypsomed thus benefits from synergies with the strategic partner AdvalTech Group, and can use the existing production site of AdvalTech s subsidiary Omni Group in Queretaro, Mexico. Moreover, with a view to the launch of its own economical and user-friendly insulin pump, Ypsomed has also secured the availability of this important accessory. mylife Orbit 38

45 Ypsomed Annual Report Pleasing progress in the product development of the new insulin pump Ypsomed launches new mylife DailyDose the world s smallest insulin syringe Annual Report In the 2011/12 business year, Ypsomed once again invested substantially in the product development of a new insulin pump and achieved pleasing progress. Thanks to a new type of design and construction, the insulin pump can be produced economically and is easy for patients to operate. The new pump from Ypsomed will, however, above all be lower priced than conventional insulin pumps, which cost between CHF and CHF per device alone, and are associated with additional annual costs of CHF to CHF for accessories such as catheters and batteries. The new pump from Ypsomed will yield clear savings, to the benefit of health insurance providers, and at the same time will enable optimum insulin treatment with an insulin pump for more diabetics. The new insulin pump from Ypsomed will change the market, because it generates considerably fewer costs than conventional insulin pumps. In future, more diabetics will therefore be able to benefit from the advantages of insulin pump treatment. The most recent addition to the mylife family is mylife DailyDose, an innovative self-injection system in credit card format, which comprises three small syringes that are pre-filled to cover the insulin requirement for a day. This handy product enables an active and independent lifestyle, and ideally suits the motto of mylife Diabetescare: More freedom. More confidence. With mylife! Thanks to its compact size, mylife DailyDose can be tucked away discreetly and carried anywhere, and can be used immediately where necessary. The packaging sleeve is transparent, making it possible to tell at a glance how much insulin is still available, or how much has already been dispensed. With these benefits, mylife Daily- Dose is particularly suitable for children, and gives parents a great sense of security. Ypsomed has signed a distribution contract for mylife DailyDose with the Swedish manufacturer Insulution AB, and will be presenting mylife DailyDose at the German Diabetes Congress in May It will then be introduced gradually on the market in Switzerland, Germany, England, Norway, Austria and the Netherlands. mylife DailyDose The market introduction of the new insulin pump is planned for the start of 2014 Although the development of the new insulin pump is more complex than was originally assumed, in the 2011/12 business year Ypsomed reached important milestones. Based on current project progress, a market introduction at the start of 2014 appears realistic. Thanks to the low manufacturing costs, Ypsomed plans to market the new insulin pump in emerging and developing countries too. 39

46 Ypsomed Annual Report mylife pen needles and safety pen needles Ypsomed has been producing pen needles in Switzerland for 20 years The development and production of pen needles has a tradition at Ypsomed. Over the last 20 years, Ypsomed has developed a wide range of pen needles, with complete production in Switzerland. Ypsomed thus has the necessary experience, and has full control over the sophisticated fully automated production of sterile disposable products. In the last 20 years, Ypsomed has produced and sold several billion pen needles, without ever having had a single recall. The high quality of Ypsomed s patented pen needles is known around the world among patients and doctors, as well as distributors. Comprehensive range of pen needles In addition to its reputation for high-quality pen needles, acknowledged across the industry, Ypsomed is the supplier with the most comprehensive product range worldwide. Ypsomed offers five different needle lengths, ranging from 4.5 mm, 6 mm, 8 mm, 10 mm through to 12 mm. Patients can thus select the ideal length of pen needle depending on their physical constitution. Ypsomed markets the different pen needles which, thanks to the patented click mechanism, fit all conventional insulin pens as a private label and under the mylife Diabetescare umbrella brand. The mylife pen needle range includes the mylife Penfine, mylife Clickfine and, in Germany, the mylife Optifine needles, as well as the mylife Clickfine AutoProtect safety pen needle, for which Ypsomed also gained approval in the USA last year. The mylife Clickfine AutoProtect is equipped with a special locking mechanism that prevents a second injection and thus also prevents accidental needle-stick injuries, infections and the transmission of life-threatening diseases. Rising demand and expansion of production capacities The growing number of insulin-dependent diabetes patients, coupled with Ypsomed s efforts in international marketing, has led to a continuous rise in demand for pen needles. Particularly pleasing are the volume increases in the USA, France, China and India. In order to be able to supply the higher quantities of pen needles, in recent years Ypsomed has continually optimized the existing pen needle production in Burgdorf, and has additionally set up a new production facility in Solothurn. Ypsomed currently has a capacity of 500 million pen needles a year, and will increase this to 1 billion within the next 24 months. When extending the production facilities further, Ypsomed has opted for a tried and tested German supplier, following considerable ejection problems with an Italian machine manufacturer, which have now largely been resolved. mylife pen needles 40

47 Ypsomed Annual Report mylife Pura The blood glucose monitoring system that is highly accurate and easy to use High level of measurement accuracy and precision with HDST technology Further development of the next generation of mylife Pura blood glucose monitoring devices Annual Report The mylife Pura blood glucose monitoring system, produced by our Taiwanese partner Bionime Corp., and which Ypsomed has been distributing on an exclusive basis in Europe since 2009, stands apart from conventional devices through its measurement accuracy. mylife Pura features the innovative High Definition Signal Transmission (HDST) technology, which ensures interruption-free signal transmission and thus very accurate measurement results. With conventional test strips with a long signal path and corrosion-prone conductive material, faults in measurement can occur, thus resulting in inaccurate measurement results. Not so with mylife Pura : thanks to the innovative design of the test strip with lateral test strip insertion, in the mylife Pura the signal path is around 10 times shorter than for conventional test strips with insertion at the front. Moreover, with mylife Pura, high-quality gold electrodes are used for optimum signal transmission in test strips and in the meter. In the 2011/12 business year, Ypsomed has intensively driven forward the product development of a new blood glucose monitoring system together with the Taiwanese partner Bionime Corp. and a Swiss design partner. The results from customer surveys and focus groups that were conducted in Switzerland and Germany have been fed into the development of a new, very small and high-performance blood glucose monitoring system. The meter has been designed specifically for insulin-dependent patients, and is easy to operate, through modern menu guidance and an LCD display. Moreover, the newly developed system will set new standards in precision and accuracy. The new system already effortlessly meets the latest ISO standards and the most recent, even stricter, specifications of the FDA in the USA. For the new system, Ypsomed has itself developed a new lancing aid. Ypsomed plans to introduce it on the market in Germany, France, Austria, the Netherlands and Switzerland from fall 2012 onwards. Ease of use and innovative design The unique design of the mylife Pura test strip brings additional benefits, by making the blood glucose monitoring system easier and safer to use. mylife Pura is the first blood glucose monitoring device with insertion of the test strips from the side, thus allowing hygienic measurement without contact with blood. Of course, mylife Pura also has autocoding and autostart functions. The mylife Pura blood glucose monitoring system also includes an innovative lancing device for gentle blood sampling. The mylife Softlance lancing device, which was developed in Switzerland, has vibration-reducing fins to aid precise guidance of the lancet, and has seven puncture depths that can be set. In the 2011/12 business year, in addition to the tried and tested mylife Pura, Ypsomed has successfully marketed a Limited Edition mylife Pura X with an unusual design. The mylife Pura blood glucose monitoring system is marketed by Ypsomed in Germany, France, the Netherlands, Switzerland, Sweden, Denmark, Finland, England and India. As several studies have shown, mylife Pura is one of the most accurate blood glucose monitoring systems on the market. mylife Pura and Pura X 41

48 Ypsomed Annual Report mylife OmniPod The insulin patch pump proves popular Pleasing growth in sales with the mylife OmniPod insulin patch pump In the 2011/12 business year, it was particularly pleasing to note the disproportionately large growth in sales of the mylife OmniPod insulin patch pump in comparison with the same period in the previous year. The numerous benefits of the innovative mylife OmniPod insulin patch pump have won over both doctors and patients. Ypsomed s presence at numerous European and international diabetes conferences, as well as the training of specialist staff and the certification of diabetes centers for the mylife OmniPod, have proved worthwhile. In Germany alone, Ypsomed has certified over 300 specialist practices and pump centers for the patch pump. In Germany, one in three new pump users chooses the tubing-free mylife OmniPod insulin pump. Successful market introduction of the mylife OmniPod Ypsomed has invested considerable funds in the rapid market introduction of the mylife OmniPod, and has expanded the sales force and enhanced its specialist expertise at the subsidiaries in Europe. The mylife OmniPod insulin patch pump has been on the market in Germany, England and the Netherlands since 2010, and in Switzerland since In the 2011/12 business year, Ypsomed made preparations for its market introduction in Scandinavia, France and China. There were both unexpected and unwelcome problems with the registration of the mylife OmniPod in France, where the launch is now not anticipated before the end of 2013 because of a trial required by the authorities. Extension of cooperation with Insulet In the coming business year, Ypsomed intends to further intensify its successful cooperation with Insulet. The cooperation was extended early by one year and in addition the tubingfree insulin patch pump can be distributed in 14 new countries. These include, among others, countries such as Denmark, India, Poland, Hungary, the Czech Republic and countries from the Middle East. The launch in the additional countries is planned for the 2012/13 business year and will be implemented on a rolling basis. High level of acceptance among patients and diabetes experts In the market, Ypsomed s mylife OmniPod insulin patch pump is being met with enthusiasm by both patients and leading diabetes experts. In contrast to conventional insulin pumps, the unique patch pump for type 1 diabetes patients offers a very high degree of freedom and flexibility in how they manage their everyday life. Using the mylife OmniPod is extremely simple: the small pod with insulin that is required for up to 3 days is stuck directly onto the skin, and is activated and controlled wirelessly via the Personal Diabetes Manager. The cannula is inserted automatically, invisibly and almost painfree for the patients. The flat, lightweight pod can be worn very discreetly on many different places on the body. The pod is also watertight, and does not need to be removed for showers or swimming. Users of the tubing-free mylife OmniPod patch pump therefore no longer need any infusion sets, and can also use the Personal Diabetes Manager as a blood glucose monitoring device. The used pods are collected by Ypsomed and recycled in a proper, environmentally friendly way. The costs for the mylife OmniPod are comparable with the costs of conventional insulin pump treatment, and are reimbursed by the health insurance providers. The tubing-free mylife OmniPod patch pump can be worn very discreetly, and operating it is child s play. 42

49 Ypsomed Annual Report Second-generation mylife OmniPod flatter and even more compact Annual Report Im September 2011, Ypsomed presented the second generation of the mylife OmniPod at the largest European diabetes conference, EASD (European Association for the Study of Diabetes), which was held in Lisbon. This product innovation stimulated great interest among the diabetes specialists who were present, as the second-generation pod is one third smaller in volume, and at just 1.4 cm it is even flatter than the first-generation pod, which itself was small. The new pod has the same fill quantity for insulin (200 units), but weighs only 27 grams when the insulin reservoir is full. The further development of the new pod has taken account of experience gained so far from over four years of use in the market, and has implemented numerous improvements. Thus for example the distance for secure wireless communication has been extended to 7.5 meters, the skin-friendly adhesive patch has been strengthened, and the number of batteries has been reduced. Ypsomed is currently undertaking supplementary studies with the new pod, and is planning its gradual introduction to the market from summer 2012 onwards. The refined second-generation pod is one third smaller in volume and significantly flatter than the previous pod. NEW NEW 43

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51 Ypsomed Sustainability Report Sustainability and social responsibility For Ypsomed, acting in a sustainable and socially aware manner is part of our corporate responsibility. That is why economic, environmental and social aspects are all taken into account in decision-making. Accordingly, starting out from the vision and the mission, Ypsomed has defined uniform values and management principles that ensure this for the whole Group. As a medical technology enterprise, Ypsomed focuses on the needs of patients and customers, such as pharmaceutical companies, doctors and specialist medical staff. Innovative products and high-quality services are possible above all thanks to the above-average commitment, great loyalty and many years of experience of Ypsomed s employees. Employee education and training are therefore important to Ypsomed, as are an innovation-driving and family-friendly corporate culture. As the explanations below show, in spite of a difficult economic environment, even in the 2011/12 business year Ypsomed has lived up to its social responsibility to employees and to society. In its actions and decision-making, Ypsomed takes account of economic, environmental and social aspects. Employee education and training Ypsomed offers interesting apprenticeships In the 2011/12 business year, Ypsomed trained a total of 43 apprentices in six different vocational areas. Since the company was floated on the stock exchange in 2004, the number of trainees has more than tripled from the 14 apprentices we had then. In summer 2011, 11 new apprentices started their training. Because of the site closure, Ypsomed has also taken on two apprentices from Roche Diabetes Care AG in Burgdorf. Of 12 apprentices who completed their basic vocational training this year with very good results, Ypsomed has kept six of them on as employees. For August 2012, Ypsomed has the following apprenticeships to offer: design engineers, polymechanics, plastics technologists, logistics assistants, computer scientists, business assistants. Careers and equal opportunities at Ypsomed Within the framework of human resources development, Ypsomed endeavors to develop employees skills further, through internal and external training courses. Within the company, Ypsomed offers three career path models: management, project management and specialist careers. The different management careers promote equality of opportunity, and allow specialists and women to achieve management status within Ypsomed. In the 2011/12 business year, 30 employees have progressed to a new role, more than half into a management position. Sustainability Report 45

52 Ypsomed Sustainability Report Innovation-driving and familyfriendly corporate culture Great importance of employee surveys and the improvement system As the regular employee surveys show, Ypsomed offers an innovation-driving and family-friendly corporate culture. Ypsomed offers exciting and challenging positions in the development of medical technology products, in complex projects together with pharmaceutical and biotech customers, or operating ultra-modern production and assembly plants. Ypsomed s management takes the feedback from the employee surveys and the suggestions for improvement very seriously, and together with the employees, it endeavors continually to optimize and improve the structures and business processes. Every year, Ypsomed awards prizes for the best suggestions for improvement. Occupational health promotion yields measurable successes Ypsomed places great value on occupational health promotion, and every year it invests a large, five-figure sum in the health and safety of Ypsomed employees. The successes of health promotion and accident prevention are measurable: since 2006, it has been possible to reduce the number of days of absence due to sickness and accidents by 4.7 days, from 12.2 days to 7.5 days at present. In this connection, we are pleased to report that the number of accidents at Ypsomed overall has settled at a low level, and around 70.0% of accidents are merely minor. In the context of health promotion, Ypsomed offers its employees free entry to the fitness training facility and indoor swimming pool, the opportunity to take part in company sports events, as well as preventive flu vaccinations. Ypsomed is continually improving workplace ergonomics, and has once again been involved in the bike to work campaign, as well as National Future Day (Nationaler Zukunftstag). Furthermore, employee car parking spaces are subject to a fee, and this is intended to motivate employees to use public transport, or to get to work on foot or by bicycle. Ypsomed offers attractive employment conditions and a family-friendly working environment In order to win and retain well-educated, talented and motivated employees, Ypsomed offers attractive employment conditions, different paths to management careers, and a family-friendly working environment. Ypsomed supports equal opportunities and a good mix of ages. Accordingly, Ypsomed also offers jobs to older people, and people with a disability. Compared with the industry, the workforce at Ypsomed tends to be young, at 42 years. 40.0% of employees have a family with children. But a good work/life balance is important not just for fathers and mothers, but for all employees at Ypsomed. Ypsomed supports this through flexible working hours in the framework of a defined annual working time, and offers the opportunity for part-time working, as well as unpaid leave. Ypsomed also enables parental leave, and makes financial contributions to childcare. Ypsomed is convinced that the individuality of employees and the social diversity of staff at Ypsomed make an important contribution to success. Daycare center for Ypsomed employees in Burgdorf For the children of Ypsomed employees at the Burgdorf site, places are available at the Bucher Areal daycare center. At present, all the places are filled, and feedback from parents is very positive in every respect. The Bucher Areal daycare center in Burgdorf is run by the LeoLea organization (for more information, see The Ypsomed Innovation Fund foundation, which is supported by annual contributions from Ypsomed, supported the non-profit LeoLea organization with a loan when it started up. 46

53 Ypsomed Sustainability Report Ypsomed assumes social responsibility in the adjustment of staffing structures As of March 31, 2012, the Ypsomed Group employed a total staff of 1,026, compared with 1,097 the previous year. In Switzerland, Ypsomed employed 785 people (previous year: 879) and 241 abroad (previous year: 218). In the 2011/12 business year, Ypsomed laid off a total of 23 people in Burgdorf and Solothurn for economic reasons. A redundancy program was put in place for the affected staff, in order to manage the economic consequences of the redundancies and to alleviate the human and financial hardship. In working out the redundancy program in cooperation with the Personnel Commission, the emphasis was placed on the reorientation of the affected staff. Ypsomed provided affected employees with support in analyzing their current situation and finding new employment faster and more successfully. Commitment to society and to the region In addition to its commitment to its employees, Ypsomed also has a commitment to society and to the region. For years, Ypsomed has been making financial contributions to the Ypsomed Innovation Fund, to support innovative enterprises in the Swiss Mittelland region. Furthermore, Ypsomed has established the Ypsomed innovation prize, worth CHF , to promote knowledge and technology transfer at the University of Bern and the Bern University of Applied Sciences. Ypsomed also traditionally uses around 1.0% of the consolidated net profit for regional sponsorship at the Burgdorf, Solothurn and Grenchen locations, in the areas of social and cultural affairs, specialist training, and sports for all. Furthermore, through the Franz Gertsch Museum, Ypsomed supports the arts, offering young Swiss artists a platform and opportunities for exhibitions and workshops. With the Franz Gertsch Museum, Burgdorf has acquired a lasting attraction and a great deal of positive publicity for the region. Sustainability Report The Swiss Federal Council in front of a painting by Franz Gertsch 47

54 Ypsomed Sustainability Report Environment Environmentally sensitive use of energy and resources is an important concern for Ypsomed, and an integral part of management decisions, particularly in the case of new investment in fixed assets, operating infrastructure and buildings. For this reason, Ypsomed provides training to raise employees awareness of the subject of the environment, and actively endeavors continually to improve Ypsomed s energy efficiency. Ypsomed s most important environmental key data for the calendar years 2007 to 2011 are listed below, with comments. Low energy consumption in an industry comparison Overall, Ypsomed uses very little in the way of energy and natural resources in production compared with other sectors or industries. In the 2011 calendar year, thanks to optimization of costs and changes in production, Ypsomed once again reduced its energy requirement by 1.8% (see diagram on energy consumption). Compared with the previous year, Ypsomed used 14.8% less natural gas and 8.5% less heating oil, but due to increasing demands relating to indoor air quality, it used 5.0% more electricity. Overall, investments made in recent years in order to improve energy efficiency have paid off, such as for example the modernization of the shell of the building and building services in Solothurn, or the introduction of electrical injection molding machines with 50.0% less energy requirement. Investment in energy efficiency makes sense not only for environmental reasons, but is also financially necessary against the background of continually rising energy prices. For the 2012/13 business year, Ypsomed is therefore planning fresh measures to reduce energy consumption, including increased use of waste heat from production processes and air conditioning processes, as well as through the optimization of compressed air production and more intelligent monitoring and control of the systems for lighting, ventilation and air conditioning. Lower burden on the environment through reduced business travel Consistent cost management at Ypsomed has yielded not only considerable savings on travel costs, but has also significantly reduced the burden on the environment caused by business travel by Ypsomed staff and flights. In the 2011 calendar year, business travel as measured in kilometers traveled was reduced by 14.4% overall. The kilometers traveled using our own vehicles were reduced by 24.1%, and the kilometers traveled by vehicles belonging to Ypsomed staff were even reduced by more than 34.0%. Energy in business years Natural gas 14.81% Heating oil 8.48% Electricity 5.09% Business travel (CH) in km Own vehicles 24.15% Vehicles of employees 34.29% Air travel 6.69%

55 Ypsomed Financial Report Financial results 2011/12 Financial reporting now in accordance with Swiss GAAP FER During the 2011/12 business year, Ypsomed switched its financial reporting from IFRS (International Financial Reporting Standards) to Swiss GAAP FER (Accounting and Reporting Recommendations). The effects of the conversion and reclassification are explained in detail in the notes from page 57 onward. Ypsomed increases net profit despite lower sales of goods and services In the 2011/12 business year, the Ypsomed Group generated consolidated sales of goods and services totaling CHF million and increased net profit by 55.5% from CHF 5.5 million to CHF 8.5 million. Sales of goods and services in the 2011/12 business year were CHF 13.2 million (5.1%) lower than in the same period in the previous year (CHF million). The pleasing growth in sales of goods and services in the Diabetes Direct Business (up 7.7% from CHF 72.6 million to CHF 78.2 million) and in the Others segment (up 11.0% from CHF 15.3 million to CHF 17.0 million), largely thanks to Ypsotec, only went some way toward offsetting a fall in sales in the Delivery Device Business (down 11.8% from CHF million to CHF million). The Delivery Device Business had to contend with the loss of proceeds from the manufacture of adapters for Roche infusion systems, while the proceeds generated with Ypsomed pens for Sanofi were once again lower than in the previous year, as had been expected. Overall, the share of total revenue attributable to Sanofi fell from 22.0% to 20.5%. Because the OptiSet Pen was delivered for the last time in March 2012, sales with Sanofi will reduce by some 40% in the 2012/13 business year. Consolidated sales of goods and services in the 2011/12 business year were also adversely affected by fluctuations in the Swiss franc exchange rate and lower remuneration for research and development services. Sales development In million CHF / /11 Delivery Devices Sales of goods and services 2011/ / / /11 Diabetes Direct Others Business Currency effect Delivery Device Business expands customer base The Ypsomed Group stuck rigorously to its company strategy in the 2011/12 business year, further diversifying the Group s earnings base. In the Injection Systems segment, Ypsomed won several new customers for the ServoPen insulin pen, including more insulin providers from Asia in the shape of Square Pharmaceuticals Ltd. and Incepta Pharmaceuticals Ltd. Particularly gratifying was the increase in earnings generated with Ypsomed s China-based pharmaceuticals partner Tonghua Dongbao Pharmaceutical. mylife Diabetescare products enjoy earnings growth Financial Report During the 2011/12 business year, Ypsomed also expanded the geographical reach of its mylife Diabetescare customer base in the Diabetes Care business segment and launched new products. The mylife Roto infusion set, which offers 360 degrees of freedom of movement, was brought onto the market in spring 2011 and a new distribution company was 49

56 Ypsomed Financial Report set up in Austria toward the end of the year. In addition, summer 2012 will see the launch of mylife DailyDose, the smallest insulin syringe to date, and distribution of secondgeneration mylife OmniPod insulin patch pumps will begin. Expenditure on sales and marketing has paid off, with mylife Diabetescare products posting earnings growth of 7.7% in the 2011/12 business year. Especially pleasing was the growth in earnings enjoyed by the mylife OmniPod insulin pump and the mylife Orbit infusion set. Overall, the strategic Diabetes Care business segment continued to gain in importance, contributing as much as 31.5% to the Ypsomed Group s consolidated sales of goods and services in the 2011/12 business year (previous year: 27.1%). Adjusted for currency effects, sales of goods increase by 2.5% In the course of the 2011/12 business year, the Swiss franc rose 9.5% against the euro and 13.0% against the US dollar, knocking CHF 10.8 million off Ypsomed s sales of goods and services. Adjusted to take account of these currency effects, Ypsomed would have increased sales of goods in the 2011/12 business year by 2.5%. Foreign exchange effects also had a significant impact on profit. In the pen needle business, the strong Swiss franc cut profitability by CHF 3.0 million. The remaining products mainly generate sales proceeds and incur purchasing costs in the same currencies. This operational currency hedge prevented the strong Swiss franc from doing even greater damage to Ypsomed s profitability. Adjusted for the negative currency effects caused by the strong Swiss franc, Ypsomed increased net sales from goods by 2.5% in the 2011/12 business year compared to the previous year. Gross profit of 22.7% despite non-recurring special circumstances In the 2011/12 business year, Ypsomed cut manufacturing costs from CHF million to CHF million, generating a gross profit of CHF 56.4 million as against CHF 61.0 million in the previous year. The fall in gross profit year-on-year was due to amortization, currency effects in the pen needle business, and higher pen needle production costs. Needle production in Solothurn has now been optimized and expanded cost-effectively through the use of additional facilities provided by another manufacturer. The gross profit was also negatively affected by an impairment of CHF 1.3 million on capitalized development costs. CHF 1.0 million of this figure relates to Pfizer s and Biocon s decision to abandon their cooperation. It is therefore all the more pleasing that, by rigorously adjusting its cost structure in line with lower sales volumes in the pen needle business, Ypsomed nevertheless generated a gross profit margin of 22.7%, only 0.6% below last year s figure of 23.3%. Rigorous cost savings result in an operating profit before depreciation and amortization of CHF 32.9 million During the past business year, Ypsomed carried out a cost analysis commissioned by the Board of Directors, and most of the resulting cost-cutting measures have already been implemented. Overall, personnel expenses fell by 7.8% (CHF 8.4 million) from CHF million to CHF 99.6 million. Total expenditure (incl. capitalized development activities) for research and development remained high in the 2011/12 business year, accounting for some 10.0% of net proceeds, but this was also reduced year-on-year, from CHF 27.5 million to CHF 25.2 million. Administrative expenses were reduced from CHF 13.6 million to CHF 12.8 million. At CHF 40.6 million, expenditure on sales and marketing remained more or less the same as in the previous year (CHF 40.5 million) but increased in percentage terms from 15.5% to 16.3% of sales of goods and services. This illustrates Ypsomed s determination to further diversify its earnings base and further expand its strategic mylife Diabetes care business segment. Overall, despite a CHF 13.2 million decrease in sales 50

57 Ypsomed Financial Report of goods and services, in the 2011/12 business year Ypsomed recorded an operating profit before depreciation and amortization (EBITDA) of CHF 32.9 million and an EBITDA margin of 13.2%, slightly higher than the previous year s figure of 12.9%. Despite lower sales of goods and services, in the 2011/12 business year Ypsomed succeeded in achieving an EBITDA margin slightly higher than the previous year s level, thanks to rigorous cost savings. In the 2011/12 business year, financial expenses increased only slightly year-on-year, up from CHF 2.6 million to CHF 3.4 million. Financial income, on the other hand, rose markedly by CHF 6.3 million from CHF 1.7 million in the previous year to CHF 8.0 million, due to the sale of the stake in Insulet Corp. at a profit. The good financial result and slightly lower taxes had a positive impact on net profit, which improved by 55.5% in the 2011/12 business year, up from CHF 5.5 million to CHF 8.5 million. Profit per share in the 2011/12 business year thus stood at CHF 0.67 per registered share as against CHF 0.43 per registered share in the previous year. Net profit increased by 55% Depreciation of fixed assets in the 2011/12 business year remained unchanged on the previous year at CHF 19.6 million, while amortization of intangible assets increased from CHF 5.4 million to CHF 6.9 million. Due to the negative currency effects and the impairment, operating profit amounted to a still unsatisfactory CHF 5.1 million, a fall on the previous year s figure of CHF 8.8 million. Stringent cost management and process optimizations will therefore remain top priorities and the focus of Ypsomed s efforts. Ypsomed boosts cash flow from operating activities to CHF 31.1 million In the 2011/12 business year, Ypsomed generated cash flow from operating activities of CHF 31.1 million, up by 7.5% on the previous year. Thanks to the substantial investments made over the past few years and free capacity, Ypsomed was able to cut investments in fixed assets by nearly 50% in the past business year. By contrast, Ypsomed increased its stake in Taiwan-based Bionime Corp. by CHF 1.7 million and used its own funds to acquire the infusion business of ICU Medical Inc. for CHF 14.3 million. Financial Report Cost development In million CHF / /11 Personnel expenses 2011/ /11 R & D expenses 2011/ / / /11 Marketing & Sales expenses Administration expenses 2011/ /11 Capital expenditure (capex) 51

58 Ypsomed Financial Report Strategically important acquisition of the infusion set business of ICU Medical Inc. The acquisition of the patents and infusion set business of the US firm ICU Medical Inc. in November 2011 was a very important strategic step for Ypsomed as it turned the company into a manufacturer of infusion sets and thus further strengthened the Diabetes Care business segment. Ypsomed intends to increase its market share in the extremely promising growth market for infusion sets, and improve its profit margin by taking over production activities. Ypsomed has thus secured a key accessory with a view to the launch of its own low-cost economical and user-friendly insulin pump. With the acquisition of the infusion set business of ICU Medical Inc., Ypsomed is becoming a manufacturer of infusion sets and is strengthening the strategic Diabetes Care business segment. Positive cash flow in the 2011/12 business year Total cash flow from investing activities amounted to CHF million in the 2011/12 business year, a fall of CHF 8.1 million on the previous year (CHF million). In the past business year, Ypsomed increased its bank loans by CHF 6.5 million, while at the same time repaying a further CHF 10.0 million of the current shareholder loan and paying shareholders a dividend of CHF 2.5 million from capital reserves in June Cash flow from financing activities thus stood at CHF -6.4 million as against CHF -3.2 million in the previous year. The Ypsomed Group s total cash flow improved from CHF -3.0 million in the previous year to CHF 4.7 million in the 2011/12 business year. High equity ratio despite offset goodwill Even with the switch in reporting standards from IFRS to Swiss GAAP FER, Ypsomed has maintained an extremely solid balance sheet. Cash and cash equivalents increased from CHF 5.0 million to CHF 9.7 million in the 2011/12 business year, while trade receivables fell from CHF 32.2 million to CHF 24.5 million. At CHF 50.1 million, inventories dipped only slightly below the previous year s level of CHF 51.6 million. Financial assets fell in the past business year from CHF 13.1 million to CHF 9.1 million due to the sale of the stake in Insulet Corp. at a profit. With depreciation remaining at the same level as the previous year but investment lower, fixed assets declined from CHF million to CHF million. When the reporting standards were switched, capitalized goodwill was offset in full against equity and thus eliminated from the balance sheet. The Ypsomed Group s equity ratio increased by 3.0% in the 2011/12 business year from 63.6% to 66.6%. On the liabilities side of the balance sheet, the shareholder loan was reduced from CHF 34.5 million to CHF 24.5 million, while bank loans increased from CHF 40.0 million to CHF 46.5 million. Overall, the balance sheet total decreased in the 2011/12 business year from CHF million to CHF million as of the reporting date, 31 March Dividend payment from capital reserves For the 2011/12 business year, the Ypsomed Board of Directors will propose to the General Meeting of Shareholders, to be held on June 27, 2012 in Bern, that a dividend payment of CHF 0.20 per registered share be made from tax-beneficial capital reserves. At CHF 2.5 million in total, the dividend paid to shareholders for the 2011/12 business year will thus be the same as in the previous year. 52

59 Ypsomed Financial Report Consolidated income statement (Audited Swiss GAAP FER figures) in thousand CHF Notes 1 April 2011 in % 1 April March March 2011 (Adjusted*) in % Sales of goods and services Cost of goods and services sold Gross profit Marketing and sales expenses Administration expenses Other operating income Other operating expenses Operating profit Financial income Financial expenses Profit before income taxes Income taxes Net profit Earnings per share (basic and diluted) in CHF Operating profit Depreciation of fixed assets Amortization of intangible assets EBITDA (operating profit before depreciation and amortization) Financial Report *The figures have been adjusted due to the change to Swiss GAAP FER. 53

60 Ypsomed Financial Report Consolidated balance sheet (Audited Swiss GAAP FER figures) in thousand CHF Assets Notes 31 March 2012 in % 31 March 2011 (Adjusted*) in % Cash and cash equivalents Trade receivables 5/ Other current assets Prepayments and accrued income Current income tax assets Inventories 6/ Customer machinery Total current assets Financial assets Deferred income tax assets Fixed assets Intangible assets Total non-current assets Total assets Liabilities and equity Notes 31 March 2012 in % 31 March 2011 (Adjusted*) Financial liabilities Current financial liabilities to major shareholder Trade payables Prepayments from customers Current income tax payable Other payables Accrued liabilities and deferred income Provisions Total current liabilities in % Non-current liabilities to major shareholder Other non-current financial liabilities Provisions Deferred income tax liabilities Total non-current liabilities Share capital Capital reserves Own shares/translation exchange differences Goodwill acquired offset Retained earnings Total equity Total liabilities and equity *The figures have been adjusted due to the change to Swiss GAAP FER. 54

61 Ypsomed Financial Report Consolidated statement of cash flows (Audited Swiss GAAP FER figures) in thousand CHF Notes 1 April April March March 2011 (Adjusted*) Net profit Depreciation of fixed and intangible assets Loss from impairment 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 Purchases of fixed assets Disposals of fixed assets Purchases of intangible assets Disposals of intangible assets Final payment acquisition prev. year/acquisitions, net of cash acquired Cash flow from investing activities Financial Report Repayment of financial liabilities to major shareholder Proceeds from borrowings Outflows from borrowings Distribution of capital reserves/par value repayment Purchase of treasury shares Cash flow from financing activities Effect of foreign currency translation Total Cash Flow Cash and cash equivalents as of April Cash and cash equivalents as of March Net increase (+)/decrease ( ) in cash and cash equivalents *The figures have been adjusted due to the change to Swiss GAAP FER. 55

62 Ypsomed Financial Report Consolidated statement of changes in equity (Audited Swiss GAAP FER figures) in thousand CHF Share capital Group reserves and share premium Treasury shares Cumulative translation reserve Fluctuation in value of financial instruments Goodwill offset Retained earnings Total Balance as of 1 April 2010 IFRS Change from IFRS to Swiss GAAP FER Balance as of 1 April 2010 Swiss GAAP FER Net profit Par value repayment Translation exchange differences Goodwill acquired offset Balance as of 31 March 2011 (after adjustment) Net profit Distribution of dividends from capital contribution reserves Purchases of own shares Translation exchange differences Goodwill due to akquisition offset Balance as of 31 March

63 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 Tabor (CZ) and has a sales and distribution network across Europe. The shares of Ypsomed Holding AG have been traded on the SIX Swiss Exchange since 2004, and since 2007, on the BX Bern exchange. The company was created as a result of the split-up of the Disetronic group in Disetronic had been founded in 1984 to develop, manufacture and sell infusion pumps and had expanded into the injection systems business in The consolidated financial statements were approved for issue by the Board of Directors on 15 May 2012 and recommended for acceptance to the General Meeting of 27 June 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 except where otherwise indicated. Change in accounting policies Up to March , the Ypsomed Group used the IFRS accounting system (International Financial Reporting Standards). The ever-increasing regulatory scope of IFRS, which is based on formal, complex, detailed regulations, has become too elaborate for Ypsomed Holding AG. In addition, disclosure obligations, which by and large do not provide stakeholders with a better understanding of the company s financial position and earnings situation, increase the risk of revealing trade secrets. Swiss GAAP FER also ensures a meaningful accounting framework built around the guiding principle of presenting a true and fair view of a company s net assets, financial position and earnings situation. Due to this reason, the Board of Directors decided to accomplish the switch to Swiss GAAP FER (accounting and reporting recommendations) as of 1 April The switch from IFRS to Swiss GAAP FER has necessitated adjustments to the Group s accounting policies in terms of how goodwill, pension obligations and financial assets are treated, and in the presentation and structure of the annual financial statements. The figures for the previous year have been adjusted to make it possible to draw comparisons with the previous year. Goodwill Under IFRS, goodwill is reported under intangible assets, is subjected to an annual impairment test and is shown in the balance sheet at cost less accumulated impairment. Under Swiss GAAP FER, goodwill is reported either as an intangible asset at cost less accumulated amortization, or is offset against equity at the time of acquisition. The Board of Directors has decided to offset goodwill against equity. Pension benefit obligations With the adoption of Swiss GAAP FER, the economic impact of pension benefit obligations is now reported in accordance with Swiss GAAP FER 16. The pension benefit obligations of the Group companies in respect of retirement, death and disability comply with the statutory provisions and regulations in the respective countries. Two Swiss companies have a legally independent pension fund financed by employer and employee contributions (defined contribution plan). The actual economic impact of pension plans on Ypsomed s consolidated financial statement is calculated as of the balance sheet date. An economic benefit is capitalized provided it will be available to reduce the company s future pension expenses. An economic obligation is recognized as a liability if the conditions for establishing a provision are met. Any unconditionally available employer contribution reserves are recognized 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 recognized as income and reported as personnel expenses in addition to the contributions deferred to the reporting period. Based on the existing pension agreements and the actual circumstances as of April 1, 2010, March 31, 2011, and March 31, 2012, no economic benefits or economic obligations were recognized in the Group s consolidated financial statements. Financial assets Under IAS 39, financial assets available for disposal were initially reported in the balance sheet at cost and were then valued at fair value. Changes in fair value were included in equity until any such financial instrument was either reduced in value or sold. Under Swiss GAAP FER 2, financial assets must be valued at cost, less any impairment of value. Presentation and structure The structure and presentation of the balance sheet, the income statement, the statement of changes in equity and the statement of cash flows have been adjusted to reflect the requirements of Swiss GAAP FER. In this process, only the income statement has been adjusted to any significant extent: all revenue from sales and services has now been included under Sales of goods and services, which now also comprises income from the provision of research, development, industrialization and marketing services. The items Real estate income, Gains from disposal of fixed assets and Licensing revenue, which were listed individually under IFRS, are combined under Other operating income. The costs required for the generation of real estate income are included in Other operating costs. Research and development expenses are now included under Cost of goods and services sold. The effects of the accounting adjustments indicated above on equity, the income statement and the presentation and structure of the income statement are summarized in the table shown (see page 58). Financial Report 57

64 Ypsomed Financial Report Figures in thousand CHF Income statement 1 April March 2011 IFRS IFRS Reclassification Valuation effects Swiss GAAP FER Swiss GAAP FER Sales of goods and services Real estate income Total sales of goods and services Total sales of goods and services Cost of goods and services sold Gross profit Gross profit Cost of goods and services sold Profit from disposal of fixed assets Licensing revenues Research and development reimbursed Research and development expenses Research and development expenses net Marketing and sales expenses Marketing and sales expenses Administration expenses Administration expenses Other operating income Other operating expenses Operating profit Operating profit Financial income Financial income Financial expenses Financial expenses Profit before income taxes Profit before income taxes Income taxes Income taxes Net profit Net profit Equity under IFRS Adjustment of goodwill* Adjustment of pension obligations* Adjustment of financial instruments* Equity under Swiss GAAP FER 1 April March Net profit under IFRS Adjustment of taxes on goodwill Adjustment of pension obligations* Adjustment of financial instruments Net profit under Swiss GAAP FER Total 2010/ *After taxes 58

65 Ypsomed Financial Report 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 one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or tradable can also determine 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 recognized 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 recognized at their fair value. Goodwill is recognized 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 recognized 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 noncurrency congruent financed equity-like corporate loans denominated in foreign currencies are to be recognized in the equity, with no effect on the income statement. 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. 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 recognized at cost, semifinished and finished goods at their cost of conversion. Discounts are recognized 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 machineries 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 recognized 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 capitalized 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 recognized 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. Intangible assets Goodwill Net assets taken over in an acquisition are to be valued at actual values, 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 capitalization are to be disclosed in the notes. Development costs Development costs are capitalized 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. Capitalized development costs are amortized straight-line over their useful economic lives. The amortization is included in the manufacturing costs of products and services sold. Costs accrued for development projects are tested for impairment on an annual basis. Other intangible assets Patents are carried at acquisition cost and amortized over their estimated useful lives of 15 to 20 years. Amortization is included in the costs of research and development that are integrated in the manufacturing costs of products and services sold. Software is capitalized on the basis of the costs incurred to acquire the software and bring the software to use. These costs are amortized over the estimated useful life of three to four years using the straight-line method. 59 Financial Report

66 Ypsomed Financial Report Amortization 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 fulfill 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 amortization and depreciation. The useful life is estimated at five to eight years. Amortization is included in marketing and distribution costs. Financial assets Financial assets are recognized 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 discounted to their present values, provided that the impact is material. The subdivision into short-term and long-term provisions is based on whether utilization 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 capitalized provided it will be available to reduce the company s future pension expenses. An economic obligation is recognized as a liability if the conditions for establishing a provision are met. Any unconditionally available employer contribution reserves are recognized 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 recognized as profit or loss and reported as personnel expenses in addition to the contributions deferred to the reporting period. or expected effective local tax rates. Deferred tax assets are recognized 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 recognized in the consolidated income statement. Taxes on transactions that are reported in equity are also recognized in equity. Net sales and sales recognition Net sales Sales consists of all sales proceeds attained from the delivery of goods and 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. Other operating income Other operating income primarily includes rental income arising from the leasing of properties owned by the Ypsomed Group, licensing 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 industrialization 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 capitalized 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. Capitalized development costs are amortized straight-line over their useful economic lives. The amortization is included in the manufacturing costs of products and services sold. Costs accrued for development projects are tested for impairment on an annual basis. Borrowing costs Borrowing costs in connection with the construction of property, plant, and equipment are capitalized under certain conditions. All other borrowing costs are charged directly to the income statement. Current income taxes Income taxes are calculated based on reported profits and in conformity with the tax laws prevailing in the individual countries and recognized 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 60

67 Ypsomed Financial Report 3. Risk assessment The management of the Ypsomed Group carries out a comprehensive risk assessment at least once a year. This standardized process is based on a risk inventory that encompasses the relevant risk categories such as strategic risks, management risks, general risks in 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 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, 2012, amount to CHF 1.6 million (prior year CHF 1.8 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 capitalization 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 amount to CHF 4.7 million (prior year CHF 3.9 million). 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 license 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 recall. There is no guarantee that the present liability insurance is sufficient 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 stateprescribed cost-saving measures in the area of healthcare or by health insurance schemes as well as problems with authorization and upholding of authorization 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 financial situation and competitive position in the marketplace. 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: Capitalized development expenses The development expenses are capitalized when the requirements for the capitalization 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. Capitalized development expenses amounted to CHF 45.3 million as of 31 March 2012 (prior year CHF 41.4 million). 61

68 Ypsomed Financial Report Notes to the consolidated financial statements In thousand CHF, unless otherwise stated 1. Acquisitions On 2 November 2011, Ypsomed AG, Burgdorf acquired the assets of the infusion-set-business Orbit of the american company ICU Medical Inc. In the previous period Ypsomed Ltd., UK acquired the assets of the diabetes business of its existing distributor in Great Britain and Ypsomed GmbH Germany acquired 100% of the shares of DIABETIC SERVICES Vertriebsund Beratungsgesellschaft GmbH in Ulm. Assets Book value after acquisition 2011/12 Book value after acquisition 2010/11 Cash and cash equivalents 5 Trade receivables 126 Inventories 509 Fixed assets 106 Intangible assets 660 Other assets 4 Total assets Liabilities Trade payables 75 Other liabilities 76 Total liabilities Net working capital Goodwill acquired offset Total purchase consideration Cash and cash equivalents acquired 5 Deferred purchase consideration 383 Offsetting of receivables 891 Net cash outflow After the transfer of the production of the infusion sets, inventories will be overtaken to the fair value. At the acquisition date, the inventories had a fair value of CHF 1.6 million. The goodwill is attributable to the stronger market position and the expected synergies resulting in a higher profitability. The goodwill is completely deductible for tax purposes. 62

69 Ypsomed Financial Report 2. Consolidation scope Interest held Capital / Votes Share capital Research & Development Production Marketing and Sales Financing and Services Ypsomed Holding AG, CH-Burgdorf CHF Ypsomed AG, CH-Burgdorf 100 % CHF Ypsomed Distribution AG, CH-Burgdorf 100 % CHF TecPharma Licensing AG, CH-Burgdorf 100 % CHF Ypsotec AG, CH-Grenchen 100 % CHF Ypsotec s.r.o., CZ-Tábor 100 % CZK Ypsomed GmbH, DE-Sulzbach 100 % EUR DiaExpert GmbH, DE-Sulzbach 100 % EUR Feelfree GmbH, DE-Sulzbach 100 % EUR Ypsomed AB, SE-Bromma 100 % SEK Ypsomed S.A.S., FR-Paris 100 % EUR Ypsomed BV, NL-Vianen 100 % EUR Ypsomed India Private Ltd., IN-Gurgaon 100 % INR Ypsomed Limited, GB-Selby 100 % GBP Ypsomed GmbH, A-Wien 100 % EUR On January 26, 2012 Ypsomed incorporated the affiliated company Ypsomed GmbH in Austria for the purpose of enhancing the sales- and marketing organization of the European Diabetes Diarect Business. It s business activities have started in the same month. 3. Foreign currencies Balance sheet year-end rates Income statement average rates 31 March March / /11 Euro (EUR) US-Dollar (USD) Swedish krona (100 SEK) Norwegian krone (100 NOK) Danish krone (100 DKK) Czech koruna (100 CZK) Indian rupee (100 INR) British pound (GBP) Financial Report 4. Cash and cash equivalents 31 March March 2011 Cash Postal accounts Bank accounts Total

70 Ypsomed Financial Report 5. Trade receivables 31 March March 2011 Trade receivables Provision for bad and doubtful debts Total Provision for bad and doubtful debts 2011/ /11 At 1 April Addition Use Reversal Currency translation differences 8 10 At 31 March Inventories 31 March March 2011 Raw materials and supplies Goods in process Finished products Gross inventories Valuation allowance Total Financial assets 31 March March 2011 Bionime Corp. Taiwan and Insulet Corp. USA Other financial assets Total

71 Ypsomed Financial Report 8. Fixed assets Cost Land and buildings Machinery and equipment Other fixed assets Assets under construction Buildings for investment purposes At 1 April Additions Disposals Transfers Currency translation differences At 31 March Total Accumulated depreciation At 1 April Depreciation Disposals Transfers Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Cost At 1 April Additions Disposals Changes in consolidation scope Transfers Currency translation differences At 31 March Financial Report Accumulated depreciation At 1 April Depreciation Disposals Transfers Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March 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 March 31, 2012, amounted to CHF million (previous year: CHF million). Gains from the sale of fixed assets in the 2011/12 business year amounted to CHF 0.2 million (previous year: CHF 0.4 million). Gains from the sale of fixed assets are included in the income statement under other operating income. 65

72 Ypsomed Financial Report 11. Intangible assets Development costs Patents Software Client base Total Cost At 1 April Additions Disposals Transfers Currency translation differences At 31 March Accumulated amortization At 1 April Amortization Transfers Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Cost At 1 April Additions Disposals Change in consolidation scope Transfers Currency translation differences At 31 March Accumulated amortization At 1 April Amortization Impairment Disposals Transfers 6 6 Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Due to the cancellation of development projects by pharmaceutical partners, CHF 1.3 million of capitalized development costs was written off. Development costs capitalized include CHF 23.3 million (prior year CHF 18.3 million) for products in the development phase, CHF 0.1 million (prior year CHF 1.0 million) for products in the industrialization phase, CHF 0.0 million (prior year CHF 0.0 million) for products in the pre-launch phase and CHF 21.8 million (prior year CHF 22.1 million) for products in the phase of commercialization. 66

73 Ypsomed Financial Report 10. 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 business. Theoretical capitalization of goodwill and amortization over five years would produce the following stated values under assets and scheduled amortization of goodwill in the income statement: Cost 2011/ /11 At 1 April Additions before taxes Accumulated currency translation differences At 31 March Accumulated amortization At 1 April Amortization, scheduled amortization over 5 years Change in accumulated currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Net profit and equity would change as follows: Net profit Scheduled amortization over 5 years Tax effects Net profit on reporting goodwill Financial Report 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

74 Ypsomed Financial Report 11. Financial liabilities to major shareholder 31 March March 2011 Loan from Techpharma Management AG, Burgdorf Current Non-Current Since April 1, 2010 the interest is based on CHF 12-month LIBOR rate as published by the Swiss National Bank plus a margin of 0.5 % with semiannual interest rate fixing. At any time Ypsomed Holding AG is eligible to amortize the loan in full or partially. Techpharma Management AG for its part may call for an amortization of CHF 10 million per annum starting April 1, 2011 by applying a term of notice of 3 months. Techpharma Management AG is controlled by Willy Michel. In the 2011/12 business year, interest amounting to CHF 0.3 million (prior year CHF 0.4 million) was paid on the loan. 12. Provisions Warranties Restructuring Other Total At 1 April Additions Release Utilization At 31 March of which current At 1 April Additions Release Utilization At 31 March of which current Warranties 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 management`s best estimate and relate to guarantees and also to replacement costs for withdrawn products. The company 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, 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 1 and 4 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 Other provisions are based on estimates and have the purpose of complying with requirements for disposal of waste related to the upcoming conversions of buildings. 68

75 Ypsomed Financial Report 13. Share capital Share capital (in thousand CHF) 2011/ /11 At 1 April Repayment of nominal value CHF 0.00 per share (prior year CHF 0.25) At 31 March Shares issued as at 31 March Treasury shares as at 31 March Shares outstanding as at 1 April Purchases Average price in CHF Shares outstanding as at 31 March Ypsomed Holding AG was founded on 29 December 2003 with original share capital of CHF , consisting of shares with a nominal value of CHF 100 each. There exist a total of shares, each with a par value of CHF The General Meeting of Shareholders resolved on 24 June 2009 an increase of the par value of CHF 5.25 to CHF As a result the share capital has increased in the amount of CHF 59.0 million by debiting the group reserves. Within the scope of the capital increase that took place in June 2009 the share capital was increased in the amount of CHF 21.1 million. As of September 30, 2010, the par value was reduced by CHF 0.25 to CHF and repaid to the shareholders. The total reduction of the par value was CHF 3.2 million. On 31 March 2012, Ypsomed Holding AG and its Group companies held a total of own shares (prior year: ). Conditional share capital (in thousand CHF) 2011/ /11 At 1 April Repayment of nominal value CHF 0.00 per share (prior year CHF 0.25) 0 40 At 31 March Financial Report 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 fully paid up registered shares of nominal value CHF (prior year CHF 14.15) each to selected employees and members of the Board of Directors. 69

76 Ypsomed Financial Report 14. Long-term contracts 2011/ /11 Revenue from development and industrialization services Long-term contracts in the balance sheet 31 March March 2011 Trade receivables Inventories Prepayments from customers Personnel expenses 2011/12 % 2010/11 % Wages and salaries Social security expenses Other personnel expenses Total Personnel at 31 March (full-time equivalents) 31 March March 2011 Switzerland Germany Netherlands 6 5 France Scandinavia 3 5 Czech Republic United Kingdom 7 6 Austria 1 0 India 6 6 Total Headcount

77 Ypsomed Financial Report 16. 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 67% of the Group s workforce as at March 31, 2012, 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. In the year under review, the actuarial surplus for this pension scheme amounted to CHF 10.0 million (previous year: CHF 10.2 million). This corresponds to a calculated level of cover within the meaning of Art. 444 of the Ordinance on Occupational Retirement, Survivors and Disability Pension Plans (BVV2) of 111.4% based on a technical interest rate of 2.5% and BVG 2010 (previous year: %, technical interest rate 3.5% and BVG 2010). As it has not yet been possible to set aside value fluctuation reserves to the target value of 15% of assets, the pension scheme does not have any freely disposable resources available to it. Free resources of this kind would be the prerequisite for an economic benefit in accordance with Swiss GAAP FER 16, so there is no economic benefit in this case. Pension costs as part of personnel expense correspond to the standard contribution payments by the Group companies involved. Surplus/Deficit Economical benefit/ Economic obligation Contributions concerning the business period Pension benefit expenses within personnel expenses 31 March March March / / /11 Pension institutions with surplus Per end of the business years 2011/12 and 2010/11 there were no employer contribution reserves existing. 17. Financial income 2011/ /11 Interest income Gains from marketable securities Foreign exchange gains Other financial income Total Financial Report The gains from marketable securities result from sales of financial assets. 18. Financial expenses 2011/ /11 Interest expenses Losses from marketable securities 44 0 Foreign exchange losses Other financial expenses Total

78 Ypsomed Financial Report 19. Income taxes 31 March March 2011 Current income taxes Deferred income taxes Total Average tax rate in % 12.7% 30.6% 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 affect the effective tax rate. The lower tax rate in comparison with the previous year is mainly due to the gains made from securities held in a tax-privileged company. 31 March March 2011 Capitalized deferred tax assets of which temporary differences of which not yet utilized tax-loss carryforwards Tax-loss carryforwards are only recognized if it is probable that the associated tax benefits can be realized. 20. Segment information For the purposes of company management, the Ypsomed Group is organized into business sectors according to products and services. The segment Delivery Devices comprises the product groups pen systems, pen neeedles, infusion sets and other injection moldings produced by Ypsomed. The business segment Diabetes Direct Business 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. Business year 2011/12 Delivery Devices Diabetes Direct Business Others Eliminations Group Sales of goods and services to third party customers Intersegmental sales Total sales of goods and services Operating profit Investments in fixed and intangible assets Depreciation/Amortization/Impairment Business year 2010/11 Delivery Devices Diabetes Direct Business Others Eliminations Group Sales of goods and services to third party customers Intersegmental sales Total sales of goods and services Operating profit Investments in fixed and intangible assets Depreciation/Amortization/Impairment

79 Ypsomed Financial Report Sales of goods and services are reported by geographical location Sales of goods and services 2011/ /11 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 and pharmaceutical partners are made mainly to their European group companies. These companies market the products worldwide. 21. Contingent liabilities The Group has contingent liabilities of kchf 699 (prior year kchf 803) toward third parties arising in the ordinary course of business. Ypsomed does not anticipate that any material liabilities will arise from the contingent liabilities. 22. Contractual obligations 31 March March 2011 Contractual obligations from consultancy and research and development projects Contractual purchase commitments for products Contractual obligations from rental contract with Techpharma Management AG until Contractual obligations from rental contract with GBUK Healthcare until Contractual obligations from rental contract with Exel Medical GmbH until Contractual obligations from contract for work and services to build a factory and office building for Ypsotec CZ by Total contractual obligations Financial Report 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 1 January 2012 reduced from CHF to CHF 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 tenant up to a maximum amount of 2% of the annual rent per calendar year. As at 31 March 2012 contractual obligations for the purchase of fixed assets amount to CHF 6.7 million (prior year CHF 2.4 million), and for the purchase of intangible assets these amount to CHF 0.05 (prior year CHF 0.08 million). 73

80 Ypsomed Financial Report 23. Transactions with related parties Related Group parties are Techpharma Management AG, Adval Tech Group and Finox AG. Services are remunerated in line with industry standards. Receivables from related parties amounted to kchf 527 (prior year kchf 23) on the balance sheet date. Liabilities amounted to kchf 0 (prior year kchf 53). In the year under review the following transactions were made with related parties: 2011/ /11 Techpharma Management AG (interest according to note 11) Techpharma Management AG (compensation for rented business premises) Techpharma Management AG (amounts in accordance with service contract) Adval Tech Group Finox AG Finox AG Faes Bau AG (not a related party any more in 2011/12) Total Willy Michel (respectively his company Techpharma Management AG) has been renting out the building on Buchmattstrasse in Burgdorf (Ypsomed Nord) to Ypsomed since 1 January The parties signed a rental contract set at an indexed market rent, based on a rental assessment performed by an independent party (see figure 22). The rental contract can be terminated for the first time on 31 December 2015, conditional upon 24 months notice. 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. Willy Michel (respectively 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 Management 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. The framework service contract has been expanded inasmuch as Willy Michel has been performing the function of CEO since August The amount of remuneration hitherto for the management services provided personally to the company by Willy Michel was for this reason not adjusted. In June 2007, Ypsomed AG and Adval Tech Holding AG signed an agreement on strategic cooperation in tool construction with a fixed contract term of 5 years. The services purchased are in line with normal market conditions. A cooperation contract existed between Ypsomed Holding AG and two of its subsidiaries on the one hand, and Techpharma Management AG (which is controlled by Willy Michel) and its subsidiary Finox AG on the other hand. This contract was terminated on 20 December 2011, and replaced by a licensing agreement. Finox AG primarily develops pharmaceuticals, in particular fertility hormones as well as devices for their administration. The licensing agreement regulates the rights to the technology and the industrial property rights developed under the cooperation contract with regard to the administration devices. Ypsomed AG is granted a license 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 contract on an exclusive basis within specified areas of application. Furthermore, under the licensing agreement, a former employee who has held key positions at Finox AG during the last three and a half years, rejoins Ypsomed AG. Under the licensing agreement, Finox AG can continue to use consultancy services provided by Ypsomed employees at hourly and daily rates that are in accordance with the prevailing market rates. Finally, the termination of the cooperation contract means that the former first right of refusal of Ypsomed AG to purchase the shares of Finox AG now no longer applies. The termination of the cooperation contract and the conclusion of the new licensing agreement were discussed and approved by the Board of Directors and, in the opinion of the Board, represent a cooperative relationship that is usual in the market. 24. Earnings per share Earnings per share are calculated by dividing net profit through the weighted monthly number of shares outstanding during the period. The average number of treasury shares is deducted from the number of shares issued. 2011/ /11 Net profit in thousand CHF Number of outstanding shares weighted on a monthly basis Earnings per share in CHF (basic and diluted) Proposal for the appropriation of retained earnings The Board of Directors proposes to the General Meeting of Shareholders on 27 June 2012 a tax-free distribution of capital reserves in the amount of CHF 0.20 per share (prior year CHF 0.20 per share). The total distribution based on the actual share capital as per 31 March 2012 will be approximately CHF 2.5 million (prior year CHF 2.5 million). This amount will be credited to shareholders. 74

81 Ypsomed Financial Report Report of the group auditors Financial Report 75

82 Ypsomed Financial Report 76

83 Ypsomed Financial Report Balance sheet of Ypsomed Holding AG statutory financial statements In thousand CHF Assets 31 March March 2011 Cash and cash equivalents Marketable securities Accrued income and prepaid expenses Other receivables 20 4 Total current assets Loans to Group companies Investments Expenditures related to capital increase Total non-current assets Total assets Liabilities and equity 31 March March 2011 Trade payables Accrued expenses and deferred income Current financial liabilities to major shareholder Bank loans Current income taxes payable Total current liabilities Non-current financial liabilities to major shareholder Total non-current liabilities Financial Report Share capital Capital contribution reserves Disagio Legal reserves Reserves for own shares Retained earnings Net profit Total equity Total liabilities and equity The classification as capital contribution reserves was undertaken as at 31 March 2011, subject to the approval of the Swiss Federal Tax Administration (FTA). In the 2011/12 reporting year, the capital contribution reserve in the amount of kchf was approved, with kchf being reclassified from capital contribution reserves to retained earnings. In addition, kchf was paid out to shareholders in the 2011/12 reporting year. 77

84 Ypsomed Financial Report Income statement of Ypsomed Holding AG statutory financial statements In thousand CHF Income 1 April March April March 2011 Financial income Total income Expenses Depreciation and amortization Financial expenses Administration Income tax expenses Total expenses Net profit Proposal for the appropriation of retained earnings The Board of Directors proposes to the General Meeting of Shareholder that the retained earnings be appropriated as follows: In thousand CHF 31 March March 2011 Retained earnings Increase reserve for own shares 392 Net profit for business year Non-approved capital contribution reserves from the Swiss Federal Tax Administration Retained earnings at disposal of the General Meeting Allotment from capital contribution reserves Distribution of dividend from capital contribution reserves Carried forward to the next year See balance sheet of Ypsomed Holding AG page The Board of Directors proposes to the General Meeting of Shareholders on 27 June 2012 a tax free distribution of capital contribution reserves in the amount of CHF 0.20 per share. The total distribution based on the actual share capital as per 31 March 2012 will be approximately CHF 2.5 million (prior year CHF 2.5 million). This amount will be credited to shareholders. 78

85 Ypsomed Financial Report Notes to the financial statements 2011/12 of Ypsomed Holding AG Income Financial income mainly consists of dividends, interest income and gains on securities. Share capital The share capital of CHF (prior year CHF ) consists of (prior year ) registered shares with a nominal value of CHF (prior year CHF 14.15). Conditional share capital The company has a conditional share capital totalling CHF 2.2 million (prior year CHF 2.2 million). The company may issue a maximum of (prior year ) fully paid-up registered shares with a nominal value of CHF (prior year CHF 14.15) each to selected employees and members of the Board of the Directors. Significant shareholders and shareholder groups 31 March March 2011 Number of shares Capital and vote share Shareholder group Michel family % Patinex AG % Number of shares Capital and vote share The Michel family shareholder group was set up in the year under review. The participation held by Patinex AG was reported in the year under review in accordance with the provisions of stock exchange law. See also Corporate Governance, page 90. In the previous year, the significant shareholders were Willy Michel, who held shares (share of capital/voting rights 70.7%), and Techpharma Management AG, a company controlled by him, which held shares (4.0%). Investments 31 March March 2011 Interest held Book value (CHF) Interest held Book value (CHF) Ypsomed AG, CH-Burgdorf 100 % CHF % CHF Share capital CHF Ypsotec AG, CH-Grenchen 100 % CHF % CHF Share capital CHF Techpharma Licensing AG, CH-Burgdorf 100 % CHF % CHF Share capital CHF Ypsomed Distribution AG, CH-Burgdorf 100 % CHF % CHF Share capital CHF Bionime Corporation, Taiwan 9.7 % TWD % TWD Financial Report Share capital TWD (Prior year TWD ) Insulet Corporation, Bedford, MA, U.S.A. 0.0 % USD % USD Share capital USD Total Investments Own shares 31 March March 2011 Number of shares Ø price Number of shares Ø price Purchase of own shares Disposal of own shares 0 0 Own shares held Claim subject to subordination clause against subsidiaries 31 March March 2011 Loan to Ypsomed Distribution AG, CH-Burgdorf In addition there is letter of comfort with unlimited amount in favor of a group company. 79

86 Ypsomed Financial Report Securities, reserve for guarantees and collateral order in favor of third parties 31 March March 2011 Credit Suisse, CH-Zurich Guarantee in the context of credit business for Ypsomed AG Risk assessment Ypsomed Holding AG performs an extensive risk assessment at least once a year. This standardized 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 political, regulatory, fiscal and external risks. The significant risks are valuated regarding the probability of occurrence and impact, and both Management and the Board of Directors determine measures and monitor the implementation according to established criteria. Board of Directors remuneration (Gross, in thousand CHF, exclusive of VAT) Board of Directors remuneration Willy Michel (Chairman) Anton Kräuliger (Vice-Chairman) Prof. em. Dr. Dr. h. c. mult. Norbert Thom (Member) Gerhart Isler (Member) Total 11/12 10/11 11/12 10/11 11/12 10/11 11/12 10/11 11/12 10/11 Fixed amount Variable amount Attendance fee / Others Total remuneration and attendance fee Techpharma Management AG: for consultancy services Dr. h. c. Willy Michel Total remuneration Board of Directors Highest remuneration to Willy Michel Further transactions to affiliated persons of Willy Michel Techpharma Management AG: for loan (interest) Techpharma Management AG: for rented business premises (rent) Management remuneration (Gross, in thousand CHF) Highest remuneration to: Basic Salary Variable Salary Payments Employer contributions to Social Insurance Total Richard Fritschi, CEO until August /12 10/11 11/12 10/11 11/12 10/11 11/12 10/11 11/12 10/ Add. members of management Total management remuneration

87 Ypsomed Financial Report As of 31 March members of the non-executive and executive boards held the following shares. No Ypsomed share options were held. Share ownership of Board of Directors excl. Michel family group Shares as of 31 March 2012 Shares as of 31 March 2011 Willy Michel, Chairman Techpharma Management AG as related party to Willy Michel, Chairman Total of Willy Michel and Techpharma Management AG combined Gerhart Isler, Member Anton Kräuliger, Vice-Chairman Prof. em. Dr. rer. pol. Dr. h.c. mult. Norbert Thom, Member 0 0 Total Share ownership of Management excl. Michel family group Willy Michel, CEO since August Techpharma Management AG as related party to Willy Michel Simon Michel, Senior Vice President Marketing & Sales Dr. Beat Maurer, Senior Vice President Legal Services & Intellectual Property Yvonne Müller, Senior Vice President Human Resources Niklaus Ramseier, Senior Vice President Finance/IT (CFO) Hans-Ulrich Lehmann, Senior Vice President Technology 50 0 Dr. Benjamin Reinmann, Senior Vice President Operations 50 0 Total At 31 March 2012, Richard Fritschi, CEO until August 2011, held shares (previous year: 3 500). For details of the Michel family shareholder group, see also Corporate Governance, page 90. For further details of shareholdings, see also Corporate Governance, page 102. Financial Report 81

88 Ypsomed Financial Report Report of the statutory auditors 82

89 Ypsomed Financial Report Financial Report 83

90 Ypsomed Financial Report Five-year overview 1 April 31 March Swiss GAAP FER IFRS In thousand CHF 2011/ / / / /08 Sales of goods and services 1 /Total Sales Gross profit Gross profit in % 22.7 % 23.3 % 26.2 % 30.7 % 31.4 % Operating profit Operating profit in % 2.1 % 3.4 % 5.3 % 11.2 % 10.8 % Net profit Net profit in % 3.4 % 2.1 % 3.7 % 9.6 % 9.2 % Depreciation of fixed assets Amortization of intangible assets EBITDA EBITDA in % 13.2 % 12.9 % 16.1 % 20.8 % 19.2 % Current assets Non-current assets Current liabilities Non-current liabilities Balance sheet total Capital expenditure Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Issued shares as of 31 March Average shares outstanding Earnings per share in CHF (basic / diluted) Dividend per share (in CHF) Par value repayment per share (in CHF) Book value per issued share (in CHF) Share price: year s highest (in CHF) Share price: year s lowest (in CHF) Share price: year-end (in CHF) Market capitalization (in million CHF) Average headcount Average fulltime equivalent Year-end headcount Year-end fulltime equivalent Sales per average fulltime equivalent (in CHF) See basis for the consolidated financial statements on page Since 1 April 2008, Real Estate income has been included in Total Sales (IFRS). 3 Operating profit before depreciation and amortization. 4 The Goodwill was offset with equity under Swiss GAAP FER. 84

91 Ypsomed Corporate Governance Report 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 the SIX Swiss Exchange concerning information on corporate governance. Ypsomed, which is headquartered in Burgdorf, Switzerland, is a world leader in the field of injection systems for the selfadministering of pharmaceutical substances. Ypsomed develops and produces its products primarily in Switzerland. Ypsomed injection systems are largely marketed by biotech and pharmaceutical partners around the world. As part of its diabetes care business segment, Ypsomed focuses on selfmedication products for patients with diabetes. The company s own injection systems and 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 dayto-day items for diabetics are sold through the company s own distribution network and by independent distributors. The Ypsomed Group also includes Ypsotec, headquartered in Grenchen, Switzerland, a supplier of precision turned parts and subassemblies. Code of Conduct of the Ypsomed Group and correspond to the Corporate Governance Directive of October 29, 2008, issued by the SIX Swiss Exchange. The Board of Directors has issued an organizational policy that stipulates the duties, powers and responsibilities of the executive bodies of the Ypsomed Group. The main features of this policy are set out on page 96 under the section on regulations concerning authority. A copy of Ypsomed Holding AG s Articles of Association (in the German version) can be ordered in print form from the company or can be viewed in its current version on the company s website at (under Company/Investors/Corporate Governance). A copy of the Code of Conduct of the Ypsomed Group (in German, English and French versions) can be ordered in print form from the company or can be viewed in its current version on the company s website at (under Company/Investors/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-today business. In addition, the Board of Directors receives information on a periodic basis regarding experiences with the Code of Conduct. The Ypsomed Group s rules and regulations on Corporate Governance are defined in the Articles of Association, in the Organizational Policy of Ypsomed Holding AG and in the Corporate Governance 85

92 Ypsomed Corporate Governance Report Group structure Ypsomed Holding AG is organized as a holding company pursuant to Swiss law and directly or indirectly owns or controls all companies that are 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, starting in 1986, injection systems. On April 30, 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 holding company Ypsomed Holding AG, which has its headquarters in Burgdorf, is the holding company of the Ypsomed Group. It has a share capital of CHF , divided into registered shares with a par value of CHF each. Shares in Ypsomed Holding AG were traded on the Main Standard of the SIX Swiss Exchange from September 22, 2004, to September 28, Since September 29, 2011, shares in Ypsomed Holding AG have been traded on the Domestic Standard of the SIX Swiss Exchange. The shares have also been traded since June 27, 2007, on the BX Berne exchange. The move from the Main Standard to the Domestic Standard of the SIX Swiss Exchange is associated with the switch in accounting standards from IFRS (International Financial Reporting Standards) to Swiss GAAP FER (see page 97), which, in accordance with SIX Swiss Exchange s accounting guidelines, results in a change of segment. Security Number /Ticker symbol: YPSN as of 31 March 2012 as of 31 March 2011 Market capitalization in CHF in % of equity 319.1* 320.4* Share price in CHF Price-earnings ratio 82.1** 132.6** * Equity on 31 March 2012: TCHF Equity on 31 March 2011: TCHF ** Profit per share 31 March 2012: CHF 0.67 Profit per share 31 March 2011: CHF

93 Ypsomed Corporate Governance Report Operating organization The Ypsomed Group s operating organization is based on a parent company structure. It is divided into the following departments: Delegate of the Board of Directors and CEO, Operations (including Production, Logistics and Quality Management & Regulatory Affairs), Technology, Corporate Finance/IT, Marketing & Sales, Human Resources, and Legal & Intellectual Property. As a rule, two members of Ypsomed Group management sit on the Board of Directors of each subsidiary. 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 injectionmolded 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 Other segment brings together precision-turned parts and real estate not currently in operational use. Corporate structure at March 31, 2012 Ypsomed AG Burgdorf / Solothurn 100 % Ypsomed Distribution AG Burgdorf 100 % Ypsomed Holding AG Burgdorf Ypsotec AG Grenchen 100 % Ypsotec s.r.o Tábor, CZ 100 % TecPharma Licensing AG Burgdorf 100 % Corporate Governance Ypsomed GmbH Liederbach, DE 100 % feelfree GmbH Liederbach, DE 100 % Ypsomed BV Vianen, NL 100 % Ypsomed AB Bromma, SE 100 % Ypsomed SAS Paris, FR 100 % Ypsomed Ltd. Selby, UK 100 % Ypsomed India Private Ltd. New Delhi, IN 100 % Ypsomed GmbH Vienna, AT 100 % DiaExpert GmbH Liederbach, DE 100 % 87

94 Ypsomed Corporate Governance Report Ypsomed Corporate Governance Report General statutory reserves Capital structure Date Issue Number of shares Nominal value Share capital Capital reserves Retained earnings Reserves from equity General reserves Reserves for own shares Total Founding Capital Ypsomed Holding AG has a share capital of CHF , divided into fully paid-up registered shares, each with a par value of CHF All shares entitle the holder to receive dividends. Ypsomed Holding AG does not have an authorized share capital amount. The company has issued neither profit certificates nor participation certificates. There are no convertible bonds outstanding, and no options have been issued for participation rights in Ypsomed Holding AG or any Group companies. Conditional share capital Ypsomed Holding AG has conditional share capital totaling CHF The company may issue to selected employees and members of the Board of Directors up to a maximum of registered shares, to be paid up in full, with a par value of CHF 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. Changes in capital Capital has changed in recent years as follows: Changes in equity capital up to March 31, 2012, pursuant to the accounts of Ypsomed Holding AG produced in accordance with company law Net profit Balance Reverse merger with Finox Beteiligungen AG Capital increase settled with shareholder loan Split 1 : Capital increase IPO Capital increase IPO over-allotment Net profit Nominal value reduction CHF 0.90 per share Net profit Nominal value reduction CHF 1.25 per share Reserves for own shares Net profit Reserves for own shares Net profit Nominal value reduction CHF 0.60 per share Reserves for own shares Net profit Nominal value increase Capital increase Nominal value reduction CHF 0.60 per share Reserves for own shares Net profit Nominal value reduction CHF 0.25 per share Reserves for own shares Reassignment of capital reserves to reserves as capital investments Reassignment of capital reserves to reserves as capital investments Reclassification of general reserves Net profit Reassignment of capital reserves to reserves as capital investments Adjustment capital contribution reserves Reserves for own shares Net profit Balance Corporate Governance Share premium of IPO Capital in % IPO costs Share premium gross Share premium net Capital increase % Capital increase % Total % The costs for the IPO have been capitalized in the statutory accounts and have been amortized over five years since September

95 Ypsomed Corporate Governance Report Shareholder structure Registered shareholders There were shareholders registered in the Share Register on March 31, 2012 (prior year: shareholders). Of these shareholders, 98% report Switzerland as their place of residence. The distribution of shareholdings is as follows: Number of shares Number of shareholders Number of shareholders as of 31 March 2012 as of 31 March to to to to more than Significant shareholders and significant shareholder groups Willy Michel, Chairman of the Board of Directors and CEO of Ypsomed Holding AG and the Ypsomed Group, who was listed as a significant shareholder in reports from previous years on the basis of his shareholding, formed a shareholder group in the year under review together with his children for the purposes of holding shares in family ownership. The group comprises Willy Michel, who owns shares both directly and also indirectly via the company Techpharma Management AG, over which he exerts control, and his children Simon Michel, Serge Michel and Lavinia Camilla Nussio, who all hold their shares directly. As of March 31, 2012, the Michel Family shareholder group together holds registered shares of Ypsomed Holding AG, which corresponds to 76.3% of the company s total shares. In the prior year (as of March 31, 2011), the Michel Family shareholder group had not yet been formed. At that time, Willy Michel held directly and also indirectly (via Techpharma Management AG, which he controls) a total of shares, equating to 74.7%. The formation of the group, together with the fact that the shareholding of Willy Michel as an individual has, as a result, fallen below the threshold of 3.0%, was notified to the SIX Swiss Exchange on January 4 and January 11, 2012, pursuant to Article 20 of the Swiss Federal Act on Stock Exchanges and Securities Trading (SESTA) and Article 10 in conjunction with Article 21 of the FINMA Stock Exchange Ordinance. At that point in time, the Michel Family shareholder group held a total of shares, comprising 76.2%. During the year under review, Patinex AG, Egglirain 24, 8832 Wilen, controlled by Martin and Rosmarie Ebner, also reported shareholdings in the company of 3.0% (notification of August 13, 2011) and 5.2% (notification of February 23, 2012) in accordance with the aforementioned provisions under stock exchange law. No further significant shareholders or significant shareholder groups are known. Cross participations There are no cross participations. 90

96 Ypsomed Corporate Governance Report 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 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 acquired 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 nominal 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 year under review, 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 such a meeting. Board of Directors Members of the Board of Directors The Board of Directors consists of a minimum of three and a maximum of five members elected for a term of office of three years with the possibility of re-election. The members of the Board of Directors were re-elected in globo on the occasion of the 2010 General Meeting of Shareholders. The Board of Directors is self-constituting. Willy Michel was a member of the executive management of Disetronic Holding AG until April 2003, non-executive Chairman of the Board of Directors of Ypsomed Holding AG between 2003 and August 2011, and since August 2011 has been Delegate of the Board of Directors and CEO of both Ypsomed Holding AG and the Ypsomed Group. The other directors are non-executive members of the Board of Directors. The main task of the Board of Directors is the overall management of the company and the supervision and control of executive management. As Delegate and CEO, Willy Michel represents both the Board of Directors of Ypsomed Holding and the Ypsomed Group externally. The other members of the Board of Directors are not actively employed in operative functions at either Ypsomed Holding AG or at any of its subsidiaries, nor have they held any such positions in the past three years. With the exception of Willy Michel, no business relationships exist between the individual members of the Board of Directors and Ypsomed Holding AG or any of its subsidiaries. The following business relationships between Willy Michel and affiliated persons and Ypsomed Holding AG and/or its subsidiaries existed in the year under review (information relating to the actual remuneration paid directly or indirectly in the 2011/2012 business year that is stipulated by Art. 663b bis of the Swiss Code of Obligations can be found in the Notes to the 2011/2012 financial statement, see page 80). Executive loan Willy Michel made a loan to the company that he assigned to his company Techpharma Management AG. In the year under review, an amount of CHF 10 million was paid off. As of March 31, 2012, a loan amount of CHF 24.5 million was still outstanding. The key terms of the loan agreement are: Since April 1, 2010, the loan has borne interest at a rate Corporate Governance 91

97 Ypsomed Corporate Governance Report based on the CHF 12-month LIBOR as published by the Swiss National Bank plus 0.5% and it is adjusted in line with the prevailing rate as at the end of March and the end of September every year. Ypsomed Holding AG may repay the loan in full or partially at any time. However, it is repayable by March 31, 2014, at the latest. Starting April 1, 2011, Techpharma Management AG may each year demand repayment of a maximum of CHF 10 million at three months notice. There are no further executive loans. Rental contract Willy Michel (respectively his company Techpharma Management AG) has been renting out the building on Buchmattstrasse in Burgdorf (Ypsomed Nord) to Ypsomed since January 1, 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 January 1, 2012, to CHF plus VAT (excluding additional costs). The rental contract can be terminated for the first time on December 31, 2015, conditional upon 24 months notice. 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 dictates that small and normal maintenance work on the building 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 this is regarded as a rental contract at normal market conditions. Other contractual relationships Willy Michel (respectively 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 Management 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. The framework service contract has been expanded inasmuch as Willy Michel has been performing the function of CEO since August The amount of remuneration hitherto for the management services provided personally to the company by Willy Michel was for this reason not adjusted. It remains at CHF incl. VAT (previous year: CHF ). This amount represents the full remuneration for all consulting and other work carried out by Willy Michel, including his activity as CEO in the year under review. Willy Michel has expressly waived the right to any more extensive remuneration for his operating activities as CEO in the year under review. Willy Michel no longer holds any shares in Faes Bau AG, which is headquartered in Burgdorf. Contractual relationship with Finox AG A cooperation contract existed between Ypsomed Holding AG and two of its subsidiaries on the one hand, and Techpharma Management AG (which is controlled by Willy Michel) and its subsidiary Finox AG on the other hand. This contract was terminated on December 20, 2011, and replaced by a licensing agreement. Finox AG primarily develops pharmaceuticals, in particular fertility hormones as well as devices for their administration. The licensing agreement regulates the rights to the technology and the industrial property rights developed under the cooperation contract with regard to the administration devices. Ypsomed AG is granted a license 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 contract on an exclusive basis within specified areas of application. Furthermore, under the licensing agreement, a former employee who has held key positions at Finox AG during the last three and a half years rejoins Ypsomed AG. Under the licensing agreement, Finox AG can continue to use consultancy services provided by Ypsomed employees at hourly and daily rates that are in accordance with the prevailing market rates. Finally, the termination of the cooperation contract means that the former first right of refusal of Ypsomed AG to purchase the shares of Finox AG now no longer applies. The termination of the cooperation contract and the conclusion of the new licensing agreement were discussed and approved by the Board of Directors and, in the opinion of the Board, represent a cooperative relationship that is usual in the market. 92

98 Ypsomed Corporate Governance Report Members of the Board of Directors Dr. h. c. Willy Michel, Chairman of the Board of Directors and CEO of Ypsomed Holding AG and the Ypsomed Group, founded Disetronic together with his brother in They were together until his brother s departure from the business in 1995, and thereafter Willy Michel was 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 repurchased the injection business of Disetronic, which has since then traded under the name Ypsomed. He has held the post of Chairman of the Board of Directors of the Disetronic Group and now of the Ypsomed Group without interruption. 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). For three years (from 1998 until 2001) he was a member of the Burgdorf City Council, and in 2004 the city awarded him its Medal of Honor. In addition, he is the owner of a number of companies including several wellknown firms involved in the fields of art, watchmaking and gastronomy as well as Finox AG, which is active in the development, manufacturing and sale of pharmaceuticals. He is currently Vice-Chairman of the Board of Directors of BV Holding AG (Chairman from 2001 until March 2008), a member of the Board of Directors of Adval Tech Holding AG (since 2007), 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 (Faes Bau AG and others). In 2005, Willy Michel was declared the Master Entrepreneur of the Year for his overall business performance by Ernst & Young AG, and in 2006 he was awarded an honorary doctorate (Dr. h. c.) by the Economic and Social Science Faculty of the University of Bern. Prof. em. Dr. rer. pol. Dr. h. c. mult. Norbert Thom, Member of the Board of Directors of Ypsomed Holding AG since After studying economics and social sciences, he became a scientific assistant, project manager and lecturer at the University of Cologne, Acting Professor at the University of Giessen and then full Professor of management, organization and human resources studies at the University of Fribourg, Switzerland. Prof. em. Thom is the founder (in 1991) and director of the Institute for Organization and Human Resources at the University of Bern (until 2012) as well as Emeritus Professor of Business Management Studies. From 1995 until 1997 he was Vice-Rector for Finance and Planning and a member of the Board of Governors at the University of Bern. From 1997 until 2000 he was a member of the Swiss Scientific Board, which is the advisory body of the Federal Council for questions concerning science policy. Prof. em. Thom has three honorary doctorates for his academic achievements in the areas of public management, organization and human resources management. He received these awards from universities in Lithuania (Vilnius), Austria (Linz) and Germany (Halle-Wittenberg). He has many years of practical experience as, among other things, an organizational and human resources advisor to companies, authorities and governments. He was further a member of the Board of Directors at WIFAG Polytype Holding AG, Bern (until 2011). He has been extensively involved in the further training of managers, is a lecturer for several executive master level courses and is Vice-President of the Volkswirtschaftliche Gesellschaft of the canton of Bern and Vice-President of the Schweizerische Gesellschaft fu r Organisation und Management (SGO). Corporate Governance 93

99 Ypsomed Corporate Governance Report Gerhart Isler, Member of the Board of Directors of Ypsomed Holding AG since 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 In 1980 he managed the company s editorial department in New York, was head of foreign correspondents from 1981 until 1986, and then held the position of manager of the publishing house until 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 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 Furthermore, Mr. Isler has been head of the Bergdietikon municipal council since early 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 BCBE and continues to be an active member of several Boards of Directors including serving as Chairman of the Board of Directors of Metalyss AG (since 1978), Chairman of the Board of Directors of Sécheron SA (since 2005) as well as a member of the Board of Directors of the parent company Sécheron-Hasler Holding AG (since 2005). Anton Kräuliger is also the owner of Moospinte AG, a restaurant in Mu nchenbuchsee. As a member of the City Council for the town of Kappelen he is director of the Finance Department. Name Nationality Year of birth Position Member since* Elected until the GV Dr. h. c. Willy Michel Swiss 1947 Chairman of the Board of Directors as CEO Gerhart Isler Swiss 1949 Member of the Board of Directors Prof. em. Dr. rer. pol. Dr. h. c. mult. Norbert Thom German 1946 Member of the Board of Directors Swiss Anton Kräuliger Swiss 1946 Vice-Chairman of the Board of Directors * Including membership of the Board of Directors of Disetronic 94

100 Dr. h. c. Willy Michel Prof. em. Dr. rer. pol. Dr. h. c. mult. Norbert Thom Corporate Governance Anton Kräuliger Gerhart Isler 95

101 Ypsomed Corporate Governance Report Interrelated companies Willy Michel is also Vice-Chairman of the Board of Directors of BV Holding AG, which is listed on the BX Berne exchange. On March 31, 2012, BV Holding AG held a total of shares in Ypsomed Holding AG (previous year: shares), representing a shareholding of 0.18% (previous year: 0.18%). Willy Michel is also a member of the Board of Directors of Adval Tech Holding AG, a company listed on the SIX Swiss Exchange and with headquarters in Niederwangen. In June 2007, Ypsomed AG and Adval Tech Holding AG signed an agreement on strategic cooperation in tool construction with a fixed contract term of five years. The objective of this cooperation is to bring together the respective strengths and core competencies of both companies and to use them for the efficient manufacturing of high-quality products. As part of this agreement, Ypsomed from time to time has tools manufactured by Adval Tech or its group companies at fair market prices based on standard industry conditions and existing competitive offers. Ypsomed and Adval Tech have also entered into a subcontracting agreement in May Under this agreement, Adval Tech, in its capacity as a subcontractor for Ypsomed, will manufacture infusion sets for insulin pumps. How the Board of Directors operates The Board of Directors holds regular meetings four times per year at which it accepts management s written report and the verbal comments of the Delegate and CEO, deliberates and also decides on management proposals. The auditors participate in the May meeting of the Board of Directors at which they give 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 management. Occasionally the Board of Directors makes additional decisions by correspondence. The agendas for the meetings are set by the chairman; any member may ask for points to be included on the agenda. The members receive the agenda and the necessary basis for decision-making generally seven to ten days before each meeting. Any member of the Board of Directors may request information about any aspect of the Group s affairs. Votes and resolutions within the Board of Directors are taken by majority decision; if the vote is tied, the Chairman, or in his absence the Vice-Chairman, has the deciding vote. Votes may not be taken by proxy. Meetings of the Board of Directors are regularly attended by the CFO and, depending on the business to be discussed, by other members of management. Simon Michel, the son of Willy Michel and a member of management, also takes part in Board of Directors meetings with an advisory role. Given the size and composition of the Board of Directors, it may advise and decide on all matters in plenary. However, it may delegate individual powers to a committee of the Board of Directors. There is also a monitoring committee consisting of three members of the Board of Directors, but not the Chairman of the Board of Directors. The members of the monitoring committee are Anton Kräuliger, Gerhart Isler and Prof. em. Norbert Thom. In the year under review, the Board of Directors met a total of five times and passed several resolutions by correspondence. During the Board of Directors meeting in May 2011, the lead auditor participated. The Board of Directors additionally met in March 2012 for two and a half days as part of the strategy meeting with executive management. All members of the Board of Directors participated in all Board of Directors meetings, in the General Meeting of Shareholders of June 2011, and in the strategy meeting of March Regulations concerning authority The Board of Directors by law has 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 organization 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, 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. 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 and properties as well as the conclusion of contracts regarding strategic cooperation and contracts with other financial significance. The Board of Directors approves securities obligations and employment contracts with members of management. At least once a year, the 96

102 Ypsomed Corporate Governance Report members of the monitoring committee speak individually with the persons in charge of the internal control system, risk management and compliance on the topics of monitoring the internal control system, risk management, compliance and internal audit planning. They report on their findings to the entire Board of Directors. The responsibilities of the Board of Directors and of the other decision-makers within the Ypsomed Group are fixed in the assignment of authority. Otherwise, the Board of Directors has delegated responsibility for running the company to its Delegate and CEO. Instruments for information and control with regard to management The Ypsomed Group s information and control instruments (Management Information System, MIS ), which are at the disposal of the Board of Directors, consist of written management reporting, which is produced quarterly (management review, quarterly reports), and financial reporting. The Chairman of the Board of Directors and CEO has access at all times to the MIS. As Chairman of the Board and CEO of Ypsomed, Willy Michel chairs the management meetings that regularly take place every two weeks and also participates in them. The CFO and Simon Michel (member of management) regularly participate in the meetings of the Board of Directors. Furthermore, the entire Board of Directors meets for two to three days within the context of a strategy meeting with management and other employees during which there is also a focus on risk management. The officer responsible for risk management takes part in all meetings of management, of the whole Board of Directors and in the strategy meeting. Furthermore, the Board of Directors uses strategic planning documents as management instruments for steering the company. Responsibility for risk management and monitoring rests with management, which reports on these matters periodically to the Board of Directors, but at least once a year. In addition to these documents, further selected financial figures are at management s disposal 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 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 fulfillment of business goals and objectives; evaluation of the effectiveness of risk management, control and corporate management processes; optimization 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 authorized business transactions; safeguarding of assets; support with regard to complying with legal and regulatory requirements; and reviewing significant or particular business cases and transactions. The Board of Directors can determine additional areas to be reviewed. The officer responsible for internal auditing provides the auditors four times per year with appropriate documentation on his internal auditing activities and coordinates these with the auditing to be carried out by the auditors in the framework of the intermediate and yearend audits. Accounting With effect from September 30, 2011, Ypsomed changed its accounting standard from IFRS to Swiss GAAP FER. The halfyear financial statement at the end of September 2011 was prepared for the first time in line with the new standard. The foremost principle of Swiss GAAP FER is to promote a true and fair view of the assets, liabilities, financial position and profit or loss, so informative and reliable accounting remains guaranteed under Swiss GAAP FER. Group accounting in accordance with Swiss GAAP FER comprises comprehensive consolidated accounts including profit and loss statement, balance sheet, cash flow statement, statement of changes in equity, as well as selected management statistics. Corporate Governance 97

103 Ypsomed Corporate Governance Report Executive Management The Delegate and CEO as well as the executive management team 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 Acting for Ypsomed (or pre-2003 for Disetronic) Dr. h. c. Willy Michel Swiss 1947 as Chairman of the Board of Directors 1984 as CEO 2011 Dr. Benjamin Reinmann Swiss 1969 Senior Vice-President Operations 2011 Hans Ulrich Lehmann Swiss 1966 Senior Vice-President Technology 2011 Simon Michel Swiss 1977 Senior Vice-President Marketing & Sales 2006 Niklaus Ramseier Swiss 1963 Chief Financial Officer (CFO) 2002 Yvonne Müller Swiss 1969 Senior Vice-President Human Resources 2003 Dr. Beat Maurer Swiss 1958 Senior Vice-President Legal & Intellectual Property, Secretary of the Board Dr. h. c. Willy Michel Chief Executive Officer, CEO and Chairman of the Board of Directors

104 Simon Michel Senior Vice-President Marketing & Sales Dr. Benjamin Reinmann Senior Vice-President Operations Hans Ulrich Lehmann Senior Vice-President Technology Corporate Governance Niklaus Ramseier Chief Financial Officer (CFO) Yvonne Mu ller Senior Vice-President Human Resources Dr. Beat Maurer Senior Vice-President Legal & Intellectual Property 99