Ypsomed Holding AG Annual Report 2013/14

Transcription

1 Ypsomed Holding AG Annual Report 2013/14

2 Ypsomed Holding AG Annual Report 2013/14

3 Ypsomed Better Life More freedom, more confidence: before patients all over the world can experience these benefits for themselves, countless people are involved in the development, production and distribution of an Ypsomed product. The innovation, quality and consistency of our products does not come about by chance; these characteristics are only possible thanks to an organization that operates harmoniously and continues to strive for further knowledge. An organization that achieves ambitious goals, such as the break-even of mylife Diabetescare, and completes bold projects, such as the construction of production facilities costing millions. Here are just a few of the people involved.

4 Ypsomed Better Life Ypsomed has been producing components for the SoloTAR pen at its Solothurn plant since SoloSTAR is used by Sanofi for the administration of a number of products, including Lantus, an insulin that is used worldwide for the treatment of type 2 diabetes. Senior Product Manager Tony Ackermann is responsible for the internal coordination of all SoloSTAR activities and for customer liaison. With the help of his large product management team, Tony makes sure that Lantus users can always be confident that they are using a high-quality injection pen.

5 Tony Ackermann Senior Product Manager Delivery Systems

6 Sometimes Christian Haefeli feels like a juggler: as Manager Production responsible for injection molding in SoloSTAR production, he and his team often have to react quickly to changes in output capacity and achieve new targets at short notice. He also witnesses for himself on a daily basis in his immediate family the difference made to a patients quality of life by such a marvelous device an injection pen of impeccable quality and this makes him even more determined to keep all balls in the air.

7 Christian Haefeli Manager Production

8 Ypsomed Better Life At the time of writing, Remo Zulauf, Manager Industrialization & Optimization, is gearing up for the imminent production start of the new UnoPen disposable injector at the Solothurn site. This is the latest highlight in the industrialization process which has been significantly shaped and orchestrated by Remo. It is precisely the complexity of this project that is spurring Remo on to complete the last few meters in the sprint to the finish with the assistance of all the other colleagues and departments involved. The fact that his family is affected by diabetes also fuels his passion for his work.

9 Remo Zulauf Manager Industrialisation & Optimisation

10 The idea for the UnoPen was born five years ago in Ypsomed s development department. Stefan Burren, Manager Product Development, was involved from the outset. He and his team have supported the pen platform through each stage of its development. Stefan, who has been with Ypsomed for many years, never fails to be fascinated by the way in which so many different departments in the company work together, constantly improving and optimizing the product.

11 Stefan Burren Manager Product Development

12 Ypsomed Better Life Quality standards and guidelines, namely ISO 13485, 21CFR820 and GMP, are an integral part of the Ypsomed processes and management system. Andrea Scheffold, who is both the Q-Guide and the Process Cartographer, guides her colleagues through this complex system. The Quality System Manager is in frequent contact with a great variety of Ypsomed customers and employees before, during and after the regular external and internal quality audits.

13 Andrea Scheffold Quality System Manager

14 Patrik Born, who at one time was the sidecar member of a team that was at the forefront of sidecar motocross racing, is today responsible for putting the Ypsomed pens through their paces in intensive functional and stress tests in the mechanical testing laboratory. And, in the same way that the work of the sidecar team member is crucial in motocross, his work in the laboratory is vital to the quality of the products: with his quick and skilled fingers nobody else in the company has such a high throughput rate as Patrik his highly-valued opinion and advice is sought by many different departments.

15 Patrik Born Specialist Laboratory

16 Ypsomed Better Life An integral part of an insulin pump system like the mylife OmniPod is a user-friendly software for the analysis of the recorded pump data and blood glucose levels. Ypsomed offers a choice of two different diabetes management software products: mylife SiDiary and mylife Diabass. Daniela van Drunen, Product Manager Software and keen mountain biker, makes sure that these products can be used anywhere, at any time: on a PC, online and via a smartphone app.

17 Daniela van Drunen Product Manager Infusion Business

18 The mylife OmniPod tubingfree insulin pump the current star of the mylife Diabetescare product range is enjoying a continuous rise in demand in seven countries. Peter Richard plays a key role in this extremely dynamic growth. As Planner SCM Diabetes Care, the linguistically gifted fan of America makes sure that the producer Insulet in Bedford, Massachusetts, always supplies the correct number of pods to the Ypsomed subsidiaries.

19 Peter Richard Planner SCM Diabetes Care

20 Ypsomed Better Life Type 1 diabetics test their blood glucose levels several times a day. International Product Manager BGMS, Nina Saner, knows diabetics needs inside out and played an important part in developing the new mylife Unio blood glucose meter. The result is a high-quality, modern meter that offers intuitive operation and enables the target users to test their blood glucose levels discreetly. Nina s role is a very varied one, involving working in cooperation with business partners, subsidiaries and the internal product management team, running training sessions and presenting the mylife Diabetescare product range at trade fairs.

21 Nina Saner International Product Manager

22 Once an ambitious marketing strategy has been devised, it needs to be implemented successfully on international markets. This job falls to Marianne Wüthrich and her team from the Indirect Sales department, which is responsible for evaluating and looking after mylife sales partners in more than 35 countries. At present, it is mainly pen needles which are sold in this way, but this channel will be extended to Ypsomed s own insulin pump in selected markets in future. Marianne enjoys the interaction with people from a wide variety of nationalities and cultures and is looking forward to boosting Ypsomed s market presence further still by working in cooperation with motivated and committed distribution partners.

23 Marianne Wüthrich Head of Indirect Sales

24 Ypsomed Better Life Striking the perfect balance between Ypsomed s dynamism and the high standard of quality which is essential in medical technology: for Marcus Schaalburg, Head of Quality Assurance, this is both the attraction and the challenge of his role. Marcus, who comes from the north of Germany, appreciates both the innovative flair and the Swiss quality that characterize each and every Ypsomed product. Time and again, he is always impressed by the flexibility that Ypsomed displays in adapting to an environment in which the demands keep on growing.

25 Marcus Schaalburg Head of Quality Assurance

26 Preventing or managing risk is Patrik Gfeller s mission in life, whether in his role as Safety Officer at Ypsomed, Commander of the Fire Department in his local community, Lieutenant Colonel of the Swiss Army or when indulging in his favorite hobbies of paragliding and riding his motorbike. The safety engineer is responsible for ensuring a high level of industrial safety throughout the company, as well as for the associated prevention and training activities. The devoted animal lover we have a small menagerie at home is also responsible for environmental protection and the handling of hazardous substances.

27 Patrik Gfeller Safety Officer

28 Contents 17 Ypsomed achieves retail business turnaround and increases operating profit significantly Ypsomed key figures at a glance 20 Annual Report YDS Ypsomed Delivery Systems 20 Don t put all your eggs in one basket 21 Project pipeline is increasingly well-stocked 22 Successful projects in India, China and South Africa 23 The right offer 24 Sophisticated platforms 25 We are investing 26 Der VarioJect a portrait 27 Expanding production 28 Production on site in China mylife Diabetescare 29 Profitable in direct business 30 Comprehensive portfolio for diabetes patients 32 Selling the brand 33 Full speed ahead in the sales organization 35 Sustainability Report 35 Economic, ecological and social responsibility 36 Staff structure 37 Occupational safety 38 Energy consumption and business travel 39 Corporate social responsibility 40 Regional commitment: sunny times ahead thanks to Ypsomed 41 Financial Report 41 Comments on the consolidated financial statement 2013/14 43 Consolidated financial statement 2013/14 64 Financial statement of Ypsomed Holding AG 2013/14 71 Five-year overview 73 Corporate Governance Report 73 Corporate Governance 93 Information policy 94 Glossary

29 Ypsomed Annual Report Ypsomed achieves retail business turnaround and increases operating profit significantly Annual Report Dear Shareholders The Ypsomed Group generated consolidated sales of CHF million in the 2013/14 financial year, an increase of 13.0% on the prior year. At CHF 15.6 million, operating profit has more than tripled from the prior year s figure of CHF 4.8 million. This pleasing result is reflected in the EBIT margin, which rose from 2.0% to 5.7%. In Diabetes Direct Business, we successfully increased sales from CHF 91.4 million to CHF million, up some 30% on last year. One key driver of this trend was the mylife OmniPod tubing-free insulin patch pump, sales of which doubled year-on-year for the second time in succession. A milestone was reached when the Diabetes Direct Business segment successfully turned the corner: at CHF 6.3 million in 2013/14, EBIT was positive for the first time following a loss of CHF 2.9 million in the prior year. The many years of investment in developing this segment are beginning to pay off. In the Delivery Devices segment, Ypsomed achieved sales of CHF million in 2013/14 as against CHF million in the prior year. At CHF 9.3 million, operating profit was virtually on a par with the prior year. Higher sales volumes for SoloSTAR components, growth in sales and volumes for pen needle products and a very healthy project pipeline involving the rapid industrialization of new pen platforms give us reason to be highly confident for the future of this segment too. Net profit rose by CHF 12.0 million to CHF 13.6 million in the period under review. In view of the positive business performance, the Ypsomed Board of Directors will propose to the General Meeting of Shareholders that the dividend payment from capital reserves be increased from its most recent level of CHF 0.20 to CHF 0.30 per registered share. Key figures at a glance in thousand CHF April 1, 2013 March 31, 2014 April 1, 2012 March 31, 2013 Change in % Sales of goods and services % thereof Delivery Devices % thereof Diabetes Direct business % thereof others % Gross profit % Gross profit in % 25.5% 23.3% Operating profit % Operating profit in % 5.7% 2.0% Net profit % Net profit in % 4.9% 0.7% Earnings per share (in CHF) % Research and development expenditures, total % Investments in fixed assets % Equity ratio in % 64.4% 63.6% Employee headcount (as of March 31) % Employees fulltime equivalents (as of March 31) % Audited Swiss GAAP FER figures. 17

30 Ypsomed Annual Report Upheaval in the medtech industry: Ypsomed is well equipped Since the financial crisis struck over five years ago, there have been some huge changes across the world to the overall conditions governing the medical technology industry. The healthcare systems of the Western world have developed a new approach, known as value-based care, which requires greater cost-awareness among the buyers of medtech products, such as insurers, hospitals and purchasing companies. This will mean that the average annual growth rates in our industry will fall from 10 % at present to a more modest level in future, putting pressure on margins. Medtech companies are being forced to adapt their business models and keep costs firmly under control. At the same time, the global market is continuing to grow, particularly in the diabetes segment. This is due to an aging population as well as increased prosperity in the emerging markets and the associated improvements in medical care. However, these markets also and especially need to be catered for with lower priced solutions. Based on this analysis, the question has to be asked: can Ypsomed tackle this trend shift successfully? We are pleased to confirm our clear conviction that our company is ideally placed to do so. What makes us so sure? Ypsomed had its own crisis at a much earlier stage: in 2006 and 2007, the diversification strategy of a former major customer forced us to reevaluate the future and rethink both our strategy and our business model. Looking back, it is fair to say that, at the time, we gauged the potential of the diabetes market and the trends in the patent field accurately and devised the right actions to take based on our assessment. Having built up our direct business under the mylife Diabetescare brand, the second main pillar of our operations, and established product platforms in Delivery Systems, we are now in an excellent position. This is exemplified by the following facts: Investments made in light of the patent cliff pay off In tough economic times, we invested a lot of time and money in developing flexible product platforms for injection systems and autoinjectors. In doing so, we pre-empted the patent cliff the phenomenon whereby numerous pharmaceutical patents expire at the same time and the resulting entry of many new pharmaceutical and biotech firms onto the market. Most of these companies, which are either entirely new or new to our sector, have no expertise of their own when it comes to manufacturing high-quality injection systems. The successful market launches seen in the past business year, ongoing projects, and the large number of customer inquiries for Delivery Systems prove that the assumptions we made were correct. Customized solutions to meet a range of needs These platforms and the expert key account and project management from our Delivery Systems team mean that we can now offer a customized solution for almost any need with flexibility and efficiency. We support our partners both by customizing the platform itself and through our expertise and the ongoing expansion of our production facilities and capacity for the industrialization of their products. We firmly believe that this integrated approach, combined with our expertise as consultants, is a key success factor when it comes to signing contracts and enables long-term customer relationships. Share price CHF Ypsomed Holding AG SPI index 18

31 Ypsomed Annual Report mylife Diabetescare breaks even We also invested in our retail business in challenging economic times, developing sales companies and establishing an extensive product range under the mylife Diabetescare brand, as we had faith in the growth forecasts for the diabetes market and firmly believed in the great potential of our products, particularly in infusion. Over the past business year, we reached the break-even point in this segment and are now in the black for the first time. Demand for the mylife OmniPod the only tubing-free insulin patch pump in the world remains extremely high, which will continue to drive this trend. Thanks to their extensive experience in Europe s heterogeneous markets and their highly dedicated approach, our employees within the sales companies and in logistics are able to ensure that end consumers are never without their mylife products or the associated consumables. Outlook We are anticipating sales growth of around 10% and an increase in EBIT of some 40 % in the 2014/2015 business year. Sales and EBIT will be disproportionately lower in the first six months of the year than in the second: investments in building up the Italian market will have an adverse impact on the first half-year s result, while in the second half the launch of new injection systems will boost sales and profit. We wish to thank you, our valued shareholders, for your confidence in us. Annual Report Low costs and lean processes bring competitive advantages As mentioned in the introduction, authorities and health insurers are beginning to put pressure on product prices in certain markets, for example by using tendering/auction systems. For a long time, therefore, we have focused on rigorous cost management and lean processes. This has meant, for instance, that we are now very successful in the UK with our blood glucose meter, because we can offer the authorities more competitive terms. The YpsoPump: returning to our roots to meet the requirements of today Last but not least, Ypsomed is to once again become a recognized pump manufacturer just like Disetronic once was with the mylife YpsoPump. We are convinced that this insulin pump, which was developed completely in-house, meets the requirements of today and will thus further boost Ypsomed s growth. Dr. h. c. Willy Michel Chief Executive Officer, CEO und Präsident des Verwaltungsrates Simon Michel Senior Vice President Marketing & Sales We believe that the examples mentioned above and the figures in this Annual Report are a clear indication that we can look to the future with optimism. Our thanks in this regard should go to our employees, who have enabled Ypsomed to turn the corner through their dedication and loyalty over the challenging last few years. The extensive specialist knowledge, efficiency and passion of our staff is one reason why we are continuing to make major investments in Switzerland as a business location. 19

32 Ypsomed Annual Report YDS Ypsomed Delivery Systems Don t put all your eggs in one basket Ypsomed strategy In line with the proverb Don t put all your eggs in one basket, Ypsomed is serving its markets with the two brands mylife Diabetescare and Ypsomed Delivery Systems, or YDS for short. With mylife Diabetescare, Ypsomed is operating successfully in direct business with products and services for people with diabetes mellitus (from page 29). Pharmaceutical and biotech companies buy injection systems and associated services under the YDS brand. This is happening at the top of the industry, because Ypsomed is the world s largest independent developer and manufacturer of pens and autoinjectors, which patients can use to administer their liquid drugs themselves subcutaneously. In recent years, Ypsomed has made great efforts to compensate for the decline in sales resulting from its largest customer s decision to spread the production of pens for one of its most successful drugs between several suppliers. Our activities had two targets: to enhance our range of products and services and to widen our customer portfolio. The relevant measures are beginning to show success, and so, for the 2013/14 business year, we can say that we are starting to harvest the fruits of our labor. The large number of inquiries from both new and existing customers makes us confident of our future prospects. Success gets under your skin Great progress is being made in terms of projects. Although it is often a long way from first customer contact to mass production of the injection system, the large number of enquiries from both new and existing customers makes us confident of our future prospects. It is encouraging that, aside from biotech companies, the new project partners also include not only regionally active pharmaceutical companies, but also some of the largest in the world. These companies generally have a large number of drugs in their portfolios which can be administered using injection systems, and therefore have the potential for wide-ranging cooperation. In the increasingly significant autoinjector business in particular, it is also positive that a large number of projects are much closer to completion than last year. A total of ten customers are planning to place Ypsomed pens and autoinjectors on the market in the next 24 months. In the increasingly significant autoinjector business, it is positive that a large number of projects are much closer to completion than last year. 20

33 Ypsomed Annual Report Project pipeline is increasingly well-stocked Ypsomed is currently working on a large number of specific projects for new injection systems. The critical success factor is not only actual implementation of the project by the customer, but also authorization of the relevant drug by the competent authority. Among disposable pens, the technically sophisticated UnoPen and the unique, patented LyoTwist pen, which is used together with dual chamber cartridges, are generating great interest from our pharmaceutical customers. As is clear from the illustration on the right, there are currently a total of fifteen customer inquiries in the pipeline, eleven of which have a high or very high chance of market launch. Two projects involving large pharmaceutical customers are close to product launch, to be followed a little later in the same business year by another very specific project involving another market player. In addition, several clinical trials are carried out with UnoPen. Disposable injection systems very high Reusable injection systems very high now medium-term future Annual Report In reusable pens, we have a premium product in the spring-driven ServoPen, while the YpsoPen provides a modern pen for price-sensitive markets. There are currently twelve customer inquiries for reusable pen systems in the pipeline here, ten of which have a high to very high chance of being placed on the market. The YpsoPen and the ServoPen are suitable for administering insulin, but also for other drugs such as growth and parathyroid hormones. now Autoinjectors medium-term future In the autoinjector field, Ypsomed supplies single-use autoinjectors for prefilled glass or plastic syringes in the form of the YpsoMate, YpsoMate Control, YpsoJect and VarioJect. In this field, Ypsomed is involved very early on in the pharmaceutical partners projects, as early as the clinical trials in fact. We are currently assisting in four clinical trials which may develop into commercial projects given sufficient time. very high average average average now medium-term future The y-axis of the charts above shows the probability of the relevant injection systems being placed on the market. Original preparations Generic drugs/biosimilars Clinical trials 21

34 Ypsomed Annual Report Successful projects in India, China and South Africa May 2013: launch in India. Lupin is providing the Indian market with Lupisulin pens for the first time. These are used with the company s human insulin of the same name. The Ypsomed project team created this variant of the ServoPen in just four and a half months. What is particularly encouraging is that this was Ypsomed s first project for Lupin. Lupin is the third-largest pharmaceutical company in India and one of the world s largest manufacturers of generic drugs. At present, over 51 million people with diabetes live in India. Experts expect an increase of over 60 percent to around 85 million diabetics by July 2013: the first Sulin pen for insulin treatment is supplied commercially to the customer. This is the high point of a project that was officially agreed in February 2012 between Ypsomed and its long-term Chinese partner, the pharmaceutical company Tonghua Dongbao Pharmaceutical, and subsequently went into production in record time. This is a double first, since the Sulin pen is the first variant created using the still young YpsoPen platform. Also, the Sulin pen is already the fourth pen system that Tonghua Dongbao Pharmaceutical has purchased from Ypsomed. With this attractively priced pen, the company hopes to gain a greater share of the Chinese market, especially in rural areas. This is because purchasing power is lower there than in towns, where the Gansulin pen has become well-established as Tonghua Dongbao Pharmaceutical s premium product and enjoys great popularity. The Gansulin pen also originates from Ypsomed, is based on the ServoPen platform, and was successfully placed on the market in China in September 2013: YpsoPen again. The second variant of the YpsoPen is being supplied just a few weeks after the Sulin pen. The project partner is the Indian pharmaceutical company MJ Biopharm, which was first to place the Biosulin pen on the South African market. A growing market The market for injection systems is growing. This is partly due to an aging population, but is also a consequence of increasing prosperity in emerging markets and the associated improvement in medical care. Already, more than 1.3 billion 3.0 ml cartridges are placed on the market each year. However, the market for 1.0 ml prefilled syringes for biotech drugs for self-injection is also growing, and currently has a volume of around 300 million units per year. Only about eight percent are sold together with an autoinjector. In addition, the pharmaceutical market is undergoing change. Keyword: patent cliff. This means that important patents for high-revenue drugs are expiring, and generic drugs and imitation products from biotech companies, known as biosimilars, are taking their place. These will play a greater role in medical care in the future. At present, a large number of these substances are in development, such as long-acting insulins. In the pioneering European market, biosimilars had achieved sales of around USD 400 million as early as 2011, and all indications suggest that this is just the beginning. Estimates of global sales of biosimilars range from USD 2.6 billion in 2015 (IMS Health) to USD 14 billion in 2017 (PharmaIntellect) and USD 40 billion in 2024 (Pfizer). Suppliers of biosimilars often have little or no expertise in the field of injection systems. Ypsomed is therefore attractive to these companies in view of its comprehensive YDS range. This trend is opening up new possibilities for Ypsomed. This is because suppliers of biosimilars often have little or no expertise in the field of injection systems. Ypsomed is therefore attractive to these companies in view of its comprehensive YDS range. Moreover, well-established pharmaceutical companies are also intending to place biosimilars and new drugs on the market, and require cost-effective and standardized injection systems. 22

35 Ypsomed Annual Report YDS production plant in Solothurn Comprehensive service Annual Report Henry Ford said, Any customer can have a car painted any color that he wants so long as it is black. Things are better for Ypsomed customers: not only do they get injection systems of the design they want, but they can also choose the services they need from a comprehensive range. After all, biotech companies, regional pharmaceutical companies and globally operating pharmaceutical groups have different needs, which also vary over time and according to the end product. The YDS range covers four fields: YDS Custom Products: We offer our customers tailored injection systems. These systems are reliable, technologically innovative and optimized for automated mass production of the finished pens or autoinjectors. YDS Contract Development: We offer our customers almost 30 years of innovation experience in developing outstanding injection systems. The right offer The market is ready. However, it is not enough to want to exploit opportunities; you also need the ability to do so. Ypsomed is extremely well-positioned to exploit the market potential, i.e. turn it into sales and profit. This is partly due to the flexible range of products and services that Ypsomed offers its customers under the YDS brand, and partly due to the vast array of platforms for pens and autoinjectors. In this way, with our expert key account management and professional project organization, we can meet the wide range of requirements that inevitably arise from a heterogeneous customer base. YDS Contract Manufacturing: We manufacture injection systems for our customers, relying on our comprehensive equipment for high volume and small-scale manufacturing. YDS Drug & Device Assembly: Combining the drug with the medical device is a critical process step. Ypsomed customers can rely on our modern GMP quality systems and synergies in the field of logistics to supply the market with the finished product. 23

36 Ypsomed Annual Report Sophisticated platforms Ypsomed customers can rest assured that the commissioned, specific injection systems are not only of the appropriate quality, but are also developed and delivered quickly and cost-effectively. The customer will also wish to minimize the risks surrounding the end product (drug plus injection system). Nowadays, in order to achieve this, the pens and autoinjectors are generally no longer developed from scratch, but instead stem from base systems known as platforms. Ypsomed offers a uniquely broad range of these pen and autoinjector platforms worldwide, and advises its customers as to which of them would be ideal for the specific application. During the project, the base system is adapted to the customer s individual wishes. These wishes usually relate to design, drug dose and functionality. On request, Ypsomed also produces small numbers of the injection system for immediate use in clinical trials, provides guarantees of professional industrialization, and ensures that even large volumes of the high-quality end product are produced and supplied punctually for placing on the market. Ypsomed offers a uniquely wide range of pen and autoinjector platforms worldwide, and advises its customers as to which of them would be ideal for the specific application. Pens ServoPen YpsoPen UnoPen UnoPen Fix LyoTwist Trio LyoTwist Trio S LyoTwist Vario LyoTwist Vario S Reusable Disposable Automatic injection Multiple-dose Single-dose Adjustable dose Fixed dose 24

37 Ypsomed Annual Report We are investing Production facility in Solothurn Annual Report Last business year was successful and bodes well for the current year. However, we think long-term, since we want to gain the maximum possible market share tomorrow and the next day. We believe in our own chances on the market. That is why we are investing in our YDS brand, to make ourselves even more competitive. This means that we will continue to expand our manufacturing capacity and add constantly to our range of platforms. For instance, in 2013 we presented the VarioJect, a variable dose autoinjector to the market, and we will present further new platform innovations in We believe in our own chances on the market. That is why we are investing in the expansion of our manufacturing capacity and product platforms. Autoinjectors YpsoMate YpsoMate Control YpsoJect VarioJect 25

38 Ypsomed Annual Report VarioJect a portrait Size: 14.1 cm, weight: 18 grams, special features: integrated needle safety system, adjustable dosing, and optionally also available for 1.5 ml cartridges. Task: to inject a variable drug dose from a 1.0 ml prefilled syringe or 1.5 ml cartridge safely, easily and painlessly. VarioJect Initial situation: Autoinjections are usually required for applications where the complete contents of a prefilled syringe are injected. However, the dose often depends on external factors such as body weight, meaning that only part of the contents needs to be injected. Also, children sometimes need a different dose than adults. There are potentially several ways of meeting this challenge, for example by developing different sizes of syringes for the different doses, with a separate autoinjector in each case. This can be an expensive undertaking. Solution: Together with various customers, we have reached the conclusion that the most efficient solution is an injector with variable dosing. A first on the market, and the starting point for the VarioJect project. In practice, this means that the syringe is always filled with the maximum dose of the drug and subsequently combined with the VarioJect. On the VarioJect, the patients set the doses prescribed, inject themselves with the drug and then dispose of the used autoinjector along with the rest of its contents. This means that the Vario- Ject is not just the simplest and most plausible solution for patients, but also overall the most cost-effective way of administering variable doses from prefilled syringes. Example fields of application: for treating indications where the dose of the liquid drug is dependent on factors unrelated to the illness, such as body weight or age for treating indications where the patient has to be brought up gradually to the full dose (known as titration) for clinical trials where the correct dose is yet to be determined 26

39 Ypsomed Annual Report Expanding production However, we are not just adding to our platforms for injection systems; we are also expanding our manufacturing capacity to meet the high demand for pens and autoinjectors. For example, for price-sensitive markets or market segments, where our premium product ServoPen is less successful, we are offering the YpsoPen, a competitively priced reusable standard pen. It is imperative that this be manufactured cost-effectively. Also, since much of the YpsoPen is manually assembled, the production costs become more competitive as the personnel costs are reduced. For this reason and to avoid long authorization processes, the YpsoPen is being manufactured in China. The situation is different for the YpsoMate autoinjector and the UnoPen disposable pen. Clearly, these two systems also have to be produced as cost-effectively as possible. However, because their production is highly automated, necessitating a high level of suitable expertise, Switzerland is an obvious place of manufacture. We are investing accordingly in our production capacity at these sites. When production is highly automated and thus requires a high level of expertise, Switzerland is an obvious place of manufacture. Automatically and flexibly at our Swiss sites In the middle of the year, manufacture of the UnoPen will take off fully at the Ypsomed site in Solothurn, Switzerland. The first supply contracts have been concluded, and the preparations for starting production are in full swing. For mass production of the UnoPen, we have invested in a production facility where the UnoPen can be produced flexibly but also with maximum automation. In this context, flexible means two things: 1. The facility can be scaled easily, meaning that the production volume can be increased without difficulty. 2. A wide range of customer variants can be produced with the same facility. For industrialization, more than thirteen million Swiss francs will be invested in the initial configuration. This gives us a solution which allows us to manufacture several million pens per year in four-shift operation. Further investments will be needed for the coming expansion stages. In addition to the UnoPen, mass production is also being prepared for the YpsoMate autoinjector, as well as for the UnoPen. Specifically, this means that a production facility with an annual capacity of several million autoinjectors will be established in the course of the year. Investments and project costs of around ten million Swiss francs are planned- Annual Report New UnoPen sub-assembly line in test operation with the manufacturer 27

40 Ypsomed Annual Report for the facilities as a whole. Once again, the facility can be scaled and is able to produce a wide range of variants of the YpsoMate. Successful production not only needs to be automated, it also needs to be flexible. The production site on Lochbachstrasse in the Swiss town of Burgdorf was selected for manufacturing the YpsoMate. As well as the technical expertise of Ypsomed employees being available, the site also has sufficient space that production can be expanded even if there is a major increase in demand for the YpsoMate. This is because a large number of projects relating to the YpsoMate are progressing extremely satisfactorily, and the number of inquiries is constantly increasing. We are confident that there will be more than just the one manufacturing line. Successful production not only needs to be automated, it also needs to be flexible. For both UnoPen and YpsoMate production, we are aiming for solutions which allow us to establish the principles of lean manufacturing even more firmly within the company. In particular, it is important to use appropriate technical equipment and just-in-time manufacture to avoid waste. The flexibility of both production facilities allows us to synchronize our processes, and dispense with costly warehousing in view of our ability to use the pull principle. In addition, we are optimizing the links in the value chain and the connection between them throughout the manufacturing process. This means that we are making use of the immense expertise at the Swiss sites and their technological advantages so as to work even more economically and be even more profitable. For both UnoPen and YpsoMate production, we are applying the principles of lean manufacturing even more rigorously within the company. Production on site in China It is no secret that manual labor is expensive in Switzerland. It therefore makes no sense to produce the YpsoPen, which is manufactured in a large number of manual steps, in Switzerland, especially given that the pen is particularly attractive in price-sensitive markets because of its specification as an affordable and reusable standard pen. Rural regions of the People s Republic of China are one of these target markets, so we have decided to build up production of the YpsoPen in China. This has several advantages: we have efficient manufacturing and are able to accelerate approval times. We have evaluated several potential partners for on-site production, and collaborate now with an international contract manufacturer. In future, different variants of our YpsoPen will be produced in the Suzhou metropolis, which has a population of ten million and is just one and a half hours drive from Shanghai. Summary: In the field of injection systems, Ypsomed has entered a still-growing market with the right products under the YDS brand. Moreover, Ypsomed is investing in further expanding its range of products and services and in manufacturing capacity, so that it can specifically meet the high demand. Thus, with its YDS range, Ypsomed is set up perfectly for the present and the future. 28

41 Ypsomed Annual Report mylife Diabetescare break-even point passed Profitable in direct business The new Ypsomed insulin pump Annual Report We are now profitable. About five years after the decision to develop and expand direct business with products for treating diabetes, and combine it under the mylife Diabetescare brand, this business sector passed the break-even point for the first time in the first half of the 2013/14 business year. The fact that we have now passed this milestone strongly motivates us to continue growth here. In this regard, we have great hopes for the mylife YpsoPump, the first insulin pump developed and manufactured by Ypsomed. Also, because the current star performer in our range, the mylife OmniPod tubing-free insulin patch pump, is far from exhausting its sales potential, and our other products in direct business are also on an upward trend, we are very confident about the future. The chart below shows the impressive growth rates and market shares achieved by the Ypsomed sales companies over the reporting year. mylife OmniPod market share and growth in the reporting year 20% 15% Ypsomed Switzerland Ypsomed Netherlands Ypsomed UK Market share 10% YPS AT Ypsomed Germany 5% 0% 60% 80% 100% 120% 140% 400% Growth compared with previous year Circle size represents the number of patients who are using the mylife OmniPod We have only been serving the Austrian market (YPS AT) for two years. Market share Sweden 3% and Norway 5%. We have only been working in the Scandinavian markets for one year, so the growth rates are not yet predictive and are not shown in the chart. 29

42 Ypsomed Annual Report Comprehensive portfolio for diabetes patients Since Ypsomed was founded in 2003, we have continually expanded our range for people with diabetes. Although there were initially gaps, in the served markets we now offer a comprehensive range, which will soon also be supplemented by our mylife YpsoPump. Comprehensive means that patients can rely on Ypsomed expertise throughout the entire process, from blood glucose monitoring to pen and pump treatment. Blood sugar monitoring Both type 1 diabetes and insulin-dependent type-2 diabetes patients have to use the blood glucose meter several times a day to check their blood sugar levels. Ypsomed has two of these meters to choose from: the mylife Pura and the mylife Unio. They are both technically top-quality devices. They differ primarily in appearance and handling. Because of the large display and the classic-style operation, the mylife Pura is mainly popular with older patients, in nursing and care homes and hospitals. The same applies to non-insulin-dependent type 2 patients, who do not have to check their blood sugar levels so often. By contrast, the mylife Unio, with its fresh, modern design and advanced handling, appeals to frequent measurers and type 1 patients. Among other things, the blood glucose meter starter kit includes the relevant lancing device. In the case of the mylife Pura this is the mylife Softlance in a traditional design. The mylife Unio is accompanied by the mylife Autolance lancing device, which was developed by Ypsomed and is breaking new technological ground. Among other things, this ensures that the lancet always penetrates to the same tissue depth, irrespective of the pressure with which the patient uses against the skin. Pump treatment In Ypsomed s mylife Diabetescare range, the mylife Omni- Pod is the sales and EBIT driver. Why? The mylife OmniPod gives people with diabetes much more freedom and flexibility in planning their everyday lives than the standard reusable pump with infusion set. This is due to the innovative operating principle behind the mylife OmniPod : the actual pump is combined with the insulin and the infusion set to form a compact unit. On this pod, there is a small infusion needle through which insulin is continuously supplied to the body. The pod is stuck to the skin using the integrated special adhesive patch, and the whole pod is changed every three days. The insulin supply is controlled via a separate unit, known as the Personal Diabetes Manager, or PDM for short. The PDM is remotely connected to the pod, so there are no cables and no tubes to hinder the patient. The PDM is also a blood glucose meter (BGM), meaning that the patient does not have to carry an extra BGM device. Also, because the pod is waterproof, it doesn t have to be taken off when showering or swimming, for example. The mylife OmniPod is the first patch pump available in Europe. mylife Diabetescare product range 30

43 Ypsomed Annual Report In spite of these advantages, it would be presumptuous to assume that in future all insulin-dependent diabetes patients will switch to the mylife OmniPod. As well as the patch pump, it is therefore important to supply a reusable pump of contemporary design, which meets the increasing demands of both patients and health insurance companies. This is why Ypsomed is launching the mylife YpsoPump. At present, our range already includes the infusion sets which are indispensable for reusable insulin pumps. These are marketed under the mylife Orbit brand. Pen needles Under its YDS brand, Ypsomed supplies pharmaceutical companies with pens for the manual treatment of people with diabetes. Moreover, Ypsomed is also one of the world s largest manufacturers of pen needles, which are also sold under the mylife Diabetescare brand. The products range from the conventional, inexpensive mylife Penfine Classic needle to the mylife Clickfine Autoprotect needle with universal click technology and a locking system for protecting against accidental needle-stick injuries. mylife pen needles are available in different lengths and fit in all common injection pens. They have a special silicone coating for a painless injection, and their packaging is colored in such a way that the needle length can immediately be recognized. Tailored accessories We are in constant dialog with people who face the challenge of integrating diabetes into their daily lives. For example, in the mylife diabetes network, we have created a network of diabetes opinion leaders so that we can continually receive input on how to support people with diabetes. This input goes into our product development, and also means that as well as supplying consistently better blood glucose meters, pumps or pens, we can also include accessories in the portfolio to make the patient s everyday life with diabetes easier. One important accessory is the correct software for logging and planning the treatment of the disease. For instance, mylife SiDiary helps the patient at home and on the move, since the treatment management software is available for PC, online and as an app. With mylife SiDiary, all the relevant treatment data are recorded by direct data transfer from mylife devices such as mylife OmniPod and mylife Unio. The data can be supplemented manually and are prepared as clear charts and statistics. Trend analysis is used to evaluate the individual course of treatment. Moreover, clearly structured reports can be created as PDFs and sent encrypted by . mylife SiDiary also makes it possible to exploit the advantages of telemedicine, by making the treatment diary accessible to third parties, for example the treating physician. As well as mylife SiDiary, Ypsomed supplies another treatment management software, mylife Diabass, which is exclusively PC-based and is very popular with patients in Germany in particular. Annual Report 31

44 Ypsomed Annual Report Selling the brand Good products are one thing, and marketing is another. The mylife Diabetescare range is sold in over 50 countries from our own branches and a dense network of distributors. The strategies and tactics of the individual sales organizations vary between countries, since there are very different market-specific rules in the individual countries and regions (see chart). In all these countries, Ypsomed sales employees have again done excellent work in the 2013/14 business year. Moreover, we will continue to intensify our efforts to carry on the momentum that our company has gained from turning a profit on the mylife Diabetescare products. Heterogeneity of European markets Netherlands (subsidiary founded ) Health insurance system: private health insurers Cost reimbursement: complete reimbursement of costs with volume restrictions in some cases Sales system: physicians, pharmacies and direct sales, including online pharmacies for drugs Bidding process: none (expected from 2014/15) United Kingdom (founded 2010) Health insurance system: national social insurance National Health Service (NHS), recent shift to regional decentralized budget responsibility Cost reimbursement: complete reimbursement of costs dependent in some cases on the financial resources available regionally Sales system: direct contracts between manufacturers and Clinical Commissioning Groups (CCGs), thus bypassing wholesalers and pharmacies Bidding process: yes, regionally with the relevant Clinical Commissioning Groups (CCGs) Nordics (founded ) Health insurance system: national social insurance Sweden, Finland and Denmark (in part) with decentralized budget responsibility at a local district level Cost reimbursement: complete reimbursement of costs with limited top-up payment in some cases Sales system: pharmacies, but direct contracts between manufacturers and local authorities in Sweden and Finland Bidding process: yes, nationally and regionally in local districts Germany (founded ) Health insurance system: private health insurers (with a trend towards consolidation) Cost reimbursement: complete reimbursement of costs small excess in some cases, with a trend towards blanket provision Sales system: physicians, pharmacies and direct sales for diabetes aids Bidding process: none France (founded ) Health insurance system: national social insurance Cost reimbursement: complete reimbursement of costs Sales system: exclusively via pharmacies direct sale is prohibited Bidding process: none Switzerland (founded ) Health insurance system: private health insurers with basic and supplementary insurance Cost reimbursement: complete reimbursement of costs with excess Sales system: physicians, wholesalers, pharmacies and direct sales via online shop Bidding process: none 1 Originated from the subsidiaries of Disetronic, which was founded in Austria (founded 2011) Health insurance system: public social insurance in each federal province (professional groups) Cost reimbursement: complete reimbursement of costs Sales system: primarily direct contracts between manufacturers and the provincial social insurance institutions, increasingly bypassing wholesalers and pharmacies Bidding process: none Italy (founded 2013) Health insurance system: national social insurance Cost reimbursement: costs partly borne by patients Sales system: organized differently by region Sales via pharmacies, special distribution centers, specialist clinics and in some cases direct sales Bidding process: yes, nationally and regionally 32

45 Ypsomed Annual Report Full speed ahead in the sales organization Needle production facility in Solothurn Annual Report In Italy, there are now around 500,000 diabetes sufferers who have to self-administer insulin regularly. With our newly founded Italian subsidiary, we will be even closer to these people and better able to meet their needs. Ypsomed srl., founded in December 2013, will serve the third-largest diabetes market in Europe from Varese in Lombardy. The first patients were trained on the mylife OmniPod starting in May 2014, and Managing Director Peter Haag is working with his team at full speed to develop and expand the organization further. The sales organization in Switzerland, Austria and Germany was also strengthened early this year. The three entirely or predominantly German-speaking countries were placed under joint management to draw on further synergies and increase efficiency in business processes. Since January 2014, Dirk Scherff has been Managing Director of all three companies. One special feature of the Ypsomed sales concept is that, in Germany, mylife Diabetescare products are also sold by DiaExpert, Ypsomed s own specialist retailer. However, the majority of the products sold by DiaExpert are manufactured by third parties. As previously announced in April 2013, Ypsomed wants to sell DiaExpert and shift its future focus to the sales of the mylife Diabetescare products, as well as the B2B business with injection systems. Negotiations with potential buyers of DiaExpert are already at an advanced stage. Things are moving apace in production too Since August 2013, Ypsomed has been manufacturing its pen needles at a single site, in Solothurn. In turn, needle manufacture in Burgdorf has been discontinued. This marked the end of a twenty-year era, but it was no longer efficient to split the relevant work between two sites. The project was launched in December 2012; the facilities were relocated in May Since August 2013, all production has been centralized in Solothurn. In parallel with the relocation, Ypsomed has invested in an extra needle assembly line, so as to further modernize and expand needle manufacturing in Solothurn. This is because developments in the pen needle market mean that an annual increase in demand of some eight percent worldwide seems realistic. In addition, with our sales organization, we want to achieve better penetration in the needle markets, gain market share and also tap into new markets. The plant in Solothurn now has a production capacity of several hundred million pen needles per year. 33

46 Ypsomed Sustainability Report Sustainability and social responsibility Economic, ecological and social responsibility Employees in vocational training The name Ypsomed is derived from ipso (Latin for self ) and med (for medication), and reflects Ypsomed s expertise and vision: Ypsomed solutions make self-care simpler and easier. The company name also epitomizes Ypsomed s core business: Ypsomed offers products and services that enable patients to administer their own drugs safely and easily. Ypsomed supplies self-injection and diagnostic systems that help millions of people, many of whom are living with diabetes mellitus, to achieve the best possible quality of life. Ypsomed s mission is therefore as follows: With our innovative, user-friendly and reliable products and our modern care concepts, we make a major contribution to successful treatment and the best possible quality of life. When it comes to implementing its vision and mission, Ypsomed takes a long-term and entrepreneurial approach. Ypsomed focuses on the needs of patients and customers, such as pharmaceutical companies, physicians and other specialist medical staff. Moreover, Ypsomed believes that it equally has obligations to employees, society and the environment, and it therefore always takes account of economic, ecological and social aspects when making decisions. 13 successful vocational qualifications In July 2013, thirteen apprentices completed their qualifications. At the same time, there were several very good partial completions, for example in individual practical exercises (IPE), and an excellent average grade of almost 5.0 was achieved. In August 2013, fourteen new apprentices with an average age of 20 started their training at Ypsomed. The tendency for young professionals to opt for a second course of basic training, or for school leavers to want to take on additional basic training, is increasing. It is gratifying for Ypsomed to see how often these prospective trainees choose our company. This brought the total number of apprentices to 39 in August 2013 in the following areas: design engineering, mechanical engineering, plastics engineering, logistics, information technology and business assistant. Popular occupations As ever, student awareness for the option of vocational training with a vocational qualification is relatively low or insufficient emphasis is placed on these options when school leavers are making career choices. Similarly, the most popular occupations are still in the IT and business areas, leading to a high rejection rate in these areas. Meanwhile, it can be difficult to fill the apprenticeship places in the other areas. Sustainability Report Employee education and training Ongoing training Ongoing training for employees is essential for a medical technology company such as Ypsomed. Many internal and external training courses were provided for employees in important areas such as quality management, safety, IT and human resources management. The following four external seminars were held, with a total of 44 attendees: Leadership skills for team leaders Leadership training for shift managers Leadership outside supervisory positions working on projects Leadership appraisals for heads of departments 35

47 Ypsomed Sustainability Report Ypsomed also offers its employees the opportunity to attend English courses, and currently about 60 individuals are taking advantage of this. MedGyver cups Human resources development through management, project management and specialist careers With regard to human resources development, Ypsomed s three career path models management, project management and specialist careers have proven an effective approach. During the 2013/14 business year, 18 employees have progressed to a new role in line with these career path models. Twelve individuals are pursuing a specialist career, five individuals took on a management role, and one individual is following the project manager career path. Staff structure Improvement scheme As of March 31, 2014, the Ypsomed Group employed a total of 999 employees, of which 712 in Switzerland and 287 abroad. In the previous year, these figures were 1015, 764 and 251 individuals. Staff structure as of March 31, 2014 Abroad 287 employees Ypsomed Burgdorf 438 employees New MedGyver award In future, the traditional annual Ypsomed company party will be enhanced by an extra ceremony: the MedGyver award, for particularly effective suggestions for improvement from individual employees, will be handed out. MedGyvers can be won in the categories of quality, processes and production, as well as the usual team prizes. The award was presented at the relaunch of the improvement scheme, at the anniversary gala to mark Ypsomed s tenth birthday. The winner will receive the MedGyver trophy designed, constructed and produced by design and mechanical apprentices which is kept for one year before being passed on to the next winner. In addition, the winner s name is engraved on the plate at the base of the MedGyver. Ypsotec Grenchen 90 employees Ypsomed Solothurn 184 employees 26 suggestions for improvement Constant development and improvement is essential to the success of a business. Every individual employee has ideas that can make an important contribution to Ypsomed s success. The goal of the improvement scheme relaunch is to generate suggestions from across the company. A total of 26 suggestions for improvement were submitted in the 2013/14 business year. Seven of these have already been implemented, nine are currently being investigated or implemented, and ten were rejected. 36

48 Ypsomed Sustainability Report Occupational safety Evacuation assistants Ypsomed is organized in an exemplary manner to offer employees and visitors the highest possible safety. Since October 2013, the company has named fifteen evacuation assistants, distributed over all sites, in addition to the established company paramedics. In an emergency, these assistants ensure that all of the affected building parts are cleared as quickly as possible and that safety devices are in working order. They also brief the fire department, provide immediate assistance where possible, organize the meeting point, and provide first aid in cooperation with the company paramedics. Occupational accidents per 1000 employees Sustainable staff catering with ONE TWO WE Seasonal dishes, regional ingredients and high-quality vegetarian menus, along with reduced energy consumption and less waste: this is ONE TWO WE, a program developed by the SV Group operator of the Ypsomed staff restaurant Schlossblick in Burgdorf in cooperation with WWF Switzerland. The aim is to provide climate-friendly staff catering, since according to the SV Group around a third of ecological damage in Switzerland is food-related. CO 2 -savings equivalent to 7500 flights to London Ypsomed too has been placing emphasis on sustainability for a number of years. Now we are going one step further, and thinking of future generations in the context of staff catering too; we have therefore been operating the Schlossblick restaurant in accordance with ONE TWO WE principles since March Everyone from the producers to the chefs and the guests is getting involved. In future, all individuals should be doing their part to reduce food-related CO <119 2 consumption. For instance, from 2015 onwards, the SV Group wants to reduce CO 2 emissions in the ONE TWO WE catering facilities by 20% annually by comparison with In Ypsomed s case, this means a saving of 10% or 3000 tons of CO 2, equivalent to 500 car journeys around the equator or 7500 flights from Zurich to London. Sustainability Report Fewer occupational accidents At 50 accidents per 1000 employees, the number of accidents has declined slightly since In absolute terms, the number of occupational accidents declined from 35 to 32. The majority of these were minor accidents which did not result in loss of working hours. However, the number of accidents with loss of working hours increased to eleven. Apart from an electrical accident, the accidents resulted predominantly from moving heavy loads. The production supervisors were made aware of this development and equipped with the necessary information to train their teams. As in the past, we will continue to strive for consistent evaluation of occupational accidents so as to prevent repetition and keep accident rates as low as possible. Fields of activity for ONE TWO WE Procurement - Promoting organic and Fairtrade products - Purchasing in Switzerland - Reducing goods from heated greenhouses Operation - Sourcing green electricity, etc. - Reducing food waste - Economical use of dishwashers Range of products - Expansion and more attractive structuring of the vegetarian options - Regional and seasonal cooking Logistics - Reduction in products transported by airplane 37

49 Ypsomed Sustainability Report Seasonal, regional and vegetarian menus This goal can be achieved, for example, by way of increasingly efficient kitchen appliances and improved handling for example switching on and off as well as implementing the results of regular energy consultations. Steps are also being taken with transportation: flight goods foodstuffs transported by airplane drastically increase greenhouse gas emissions. It is therefore important to import as few products as possible from overseas by air. Also, seasonal products from the local region should be used more frequently, and vegetarian menus should be made available more often. Energy consumption and business travel production of injection systems, resulting in higher gas consumption for flame treatment. Natural gas flame treatment is used, for example, before printing the scale on pen components. In 2013, Ypsomed reduced business travel in the Swiss companies by a third from the previous year, from 2.1 million kilometers to 1.4 million. This is primarily due to a 40 percent drop in air travel. However, this development is unlikely to continue in the same manner, since Ypsomed s international presence and the increasing number of customer inquiries in particular from overseas necessitates relatively intensive travel activity. The 23 percent reduction in individual travel using employee vehicles is a positive sign and a trend that we wish to promote. The number of kilometers traveled in the company s own vehicles only increased slightly, by six percent. Energy in megawatt hours (MWh) Business travel in thousands of km Natural gas 35.29% Heating oil 95.65% Electricity 5.97% Own vehicles 6.07% Vehicles of empl./mgmt % Air travel 40.05% Ypsomed s electricity consumption has risen, but the reasons behind this are encouraging: specifically, this is due to an increased production volume of certain injection systems. Meanwhile, on all sites, heating oil is now only used as a backup for gas. Accordingly, in 2013, consumption was virtually negligible at 5600 liters. In turn, gas consumption has greatly increased again. This is partly due to the increased 38

50 Ypsomed Sustainability Report Corporate social responsibility In the 2013/14 business year, Ypsomed has once again engaged strongly with its corporate social responsibility. 25 Ypsomed employees had the chance to shine in the Gigathlon Over a whole week in July 2013, 25 Ypsomed employees took part in the Gigathlon sporting event throughout Switzerland. This is how the Ypsomed athletes performed: with serious preparation, focus, performance orientation and great team spirit, everyone got to experience a sensational week of competition, achieve goals, and demonstrate excellent teamwork and maximum commitment. The entry fee and jerseys for all the participants were paid for by Ypsomed. In return, all of the athletes and their supporters acted as worthy representatives of the Ypsomed brand name, which they wore with pride all the way from Chur to Lausanne. From the daycare center to the eco-bonus Ypsomed has also engaged in the following areas and projects: Family-friendly corporate culture: flexible working hours, part-time work, parental leave, provision of subsidized childcare places in a daycare center (KITA) in Burgdorf Health promotion: free entry to gym and indoor swimming pool, preventive flu vaccinations, continuous improvement to workplace ergonomics Company social counseling Participation in National Future Day Eco-bonus: Ypsomed actively manages its parking spaces, and distributes the proceeds to employees in the form of SBB train travel vouchers. This makes it possible, for example, to pay for an annual half-fare card. Participation in the bike to work campaign: in this campaign to promote travel by bicycle, 40 employees in 10 teams cycled to work on 81% of working days in June 2013, covering a distance of 8031 kilometers by bicycle. Sustainability Report Finish line in the Bundesplatz in Bern All of the Gigathlon participants got to experience a sensational week of competition, achieve goals, and demonstrate excellent teamwork and maximum commitment. 39

51 Ypsomed Sustainability Report Regional commitment: sunny times ahead thanks to Ypsomed On September 23, 2013, the largest solar installation in the Burgdorf region was connected to the public power grid at the Ypsomed BUCH100 logistics and production building in Buchmatt. The installation is a pilot project, and a first step towards the Solarstadt Burgdorf Project, initiated by Ypsomed CEO Willy Michel and by Hans Ulrich Flückiger, owner of the energy technology company Febacom AG. On the free roof space of 3600 square meters, a total of solar panels were installed, with a predicted annual output of approximately 450,000 kilowatt hours. At the 16-meter BUCH100 building, the initiators gained important experience in the construction of photovoltaic systems: from installation dimensions, through planning and approval processes, to technical building and installation construction solutions on a certified building. Large installations are subject to specific technical provisions for the supply to the public grid; the project in question even required its own transformer station. Making use of large industry roofs Everything started back in 2011: after the Swiss government s decision to phase out nuclear power in the aftermath of the Fukushima reactor disaster, Flückiger and Michel launched an initiative to make use of unexploited industry roofs by means of photovoltaic installations. This resulted in the Solarstadt Burgdorf concept. In a broad analysis, engineers from Ypsomed AG created a building inventory and a roof exploitation analysis for the Buchmatt industrial area, and thus evaluated the potential for obtaining solar power. These findings led to the idea of establishing an operating company for medium and large solar installations. The two businessmen have the community and the local energy provider Localnet AG on their side. In 2014, it is intended to found a company for promoting solar energy named Solarstadt Burgdorf AG. The company s goal is to produce 5 million kwh of electricity per year from photovoltaic installations on large roofed buildings in Burgdorf by Funding as with Burgdorfer beer The company s strategy envisages raising capital via public shares, in a similar way as Burgdorfer Gasthausbrauerei AG did in By purchasing shares in the company Solarstadt Burgdorf AG, interested parties gain the opportunity to participate in the company installations and thus produce their own energy. However, the company also wants to pave the way for investors in large installations and provide the necessary support for building owners who want to make use of their own roof spaces. Willy Michel and Hans Ulrich Flückiger in the middle of the solar installation Installation data Site: Buchmattstr. 100, Burgdorf Building: BUCH100 Ypsomed AG Roof area: 3600 m 2 Panel area: 2700 m 2 Number of panels: 1708 Panel power: 265 W Inverter: KACO 8 60 kw Supply to grid: 16 kv medium voltage Installed output: 448 kw Annual output: 450,000 kwh Building owner: Techpharma Management AG Installation owner: Febacom AG Installation maintenance: Resiq AG 40

52 Ypsomed Financial Report Consolidated financial results Profit more than triples In the 2013/14 financial year, the Ypsomed Group generated consolidated sales of CHF million, an increase of 13% on the prior year. At CHF 15.6 million, operating profit has more than tripled from the prior year s figure of CHF 4.8 million. Delivery Devices segment turns the corner In the Delivery Devices segment, Ypsomed generated sales of CHF million in 2013/14. Compared with the prior year, sales have risen by 3.0%, signaling a change in fortunes, after sales had fallen over the prior year from CHF million (2011/12) to CHF million (2012/13) due to expiring contracts. There were several factors underpinning this growth. Ypsomed increased the sales margin in its needle business by some 10%. Price pressure in sales markets meant that sales growth was around 4%. Higher sales volumes for SoloSTAR components and increased earnings from the industrialization of future pen systems for pharmaceutical partners also contributed to this positive growth. Further growth was limited as a pen product reached the end of its life, reducing sales by some CHF 8 million, and a planned partnership with a major customer for pen needles failed to get off the ground. An impairment in the amount of CHF 0.5 million was recognized due to the decision to discontinue development of a pen platform. The relocation of needle manufacturing from Burgdorf to Solothurn also had an adverse impact on the result as the entire production operation for pen needles has been optimized and is now only based at a single location. Despite these effects, the segment posted an operating profit of CHF 9.3 million, virtually on a par with the prior year (CHF 9.5 million). A very healthy project pipeline, involving the rapid industrialization of new pen platforms and extremely promising development projects give us reason to be highly confident for the future of this segment too. Major growth once again while Diabetes Direct Business completes turnaround In our Diabetes Direct Business segment, we successfully increased sales from CHF 91.4 million to CHF million, up some 30% on the prior year. One key driver of this trend was the mylife OmniPod tubing-free insulin patch pump, sales of which doubled year-on-year for the second time in succession. The mylife Diabetescare products for monitoring blood glucose also saw promising double-digit growth. A milestone was reached when the Diabetes Direct Business segment successfully turned the corner: at CHF 6.3 million in 2013/14, EBIT was positive for the first time following a loss of CHF 2.9 million in the prior year. As well as the major success enjoyed by mylife OmniPod, there are two other reasons for this pleasing result: Ypsomed is growing thanks to the many years of investing in its international sales organizations, while our company can also boast extensive management and sales expertise, allowing any opportunities to be pre-empted and exploited. For instance, government healthcare systems are increasingly using tenders to award care contracts, such as in the UK for instance. Ypsomed positioned itself in this market in good time, offering customized solutions for blood glucose meters and test strips, thus boosting its overall growth. Ypsotec makes a recovery One highlight in the Others segment has been the recovery at Ypsotec. The supplier of mechanical precision parts has benefited from the significant improvement in the market for turned parts. The company s competitiveness was also further increased with the development of its production site in Tabor in the Czech Republic, where labor-intensive work such as milling and component assembly takes place. As some plant and equipment proved to have a longer useful life than originally estimated, the resulting accounting adjustments improved the result by CHF 0.4 million. The success of the strategy of basing production in Switzerland and the Czech Republic is evident from the higher sales as well as EBIT of CHF 0.1 million, which has climbed back into the black following a loss of CHF 1.7 million in the prior year. Financial Report 41

53 Ypsomed Financial Report Marked rise in profitability While administrative expenses, other operating expenses and expenditure on sales and marketing were only slightly above the prior year s figures at Group level, a patent-related lawsuit added CHF 1.3 million in other operating expenses in 2013/14. Ypsomed is committed to protecting its intellectual property against infringements by other market participants. In the 2013/14 financial year, Ypsomed generated a consolidated operating profit of CHF 15.6 million. This very pleasing result is reflected in an increase in the EBIT margin from 2.0% to 5.7%. At CHF 2.7 million, financial expenses in the 2013/14 financial year were below the prior year s level, while financial income rose from CHF 1.5 million to CHF 2.3 million. During the year under review, an impairment made last year on participating interests was reversed, having a positive impact of CHF 1.1 million. This move was facilitated by the recovery in the share price of Bionime Corp., in which Ypsomed has a stake. After deducting taxes, Ypsomed thus generated a net profit of CHF 13.6 million in the 2013/14 financial year compared to CHF 1.6 million in the prior year, equating to earnings per share of CHF Major investment in research, development and production facilities During the past financial year, Ypsomed once again invested strongly in research and development, particularly in developing its own insulin pump, the mylife YpsoPump, and in new pen platforms for pharmaceutical customers. Total expenditure on research and development amounted to CHF 23.5 million (prior year: CHF 23.7 million). In the 2013/14 financial year, Ypsomed also invested in new fixed assets primarily assembly and printing lines for the UnoPen and YpsoPen to the tune of CHF 18.5 million, CHF 2.6 million more than in the prior year. These investments in fixed assets were based on the situation as regards customer projects, which is described in detail on page 21 of this Annual Report. Expenditure on and investment in the new platforms and production facilities are a sign of positive expectations for the future and of confidence in Ypsomed s strategy. Positive free cash flow Cash flow from operating activities rose by an impressive CHF 26 million to CHF 41.2 million during the year under review. Of course, the CHF 12.0 million increase in net profit was a key factor here, but so too was the positive effect of the reduction in inventories. This came about because the back-up stock that had been built up in the prior year for the relocation of needle production from Burgdorf to Solothurn has now been reduced to a normal level. Cash flow from investing activities increased from CHF 26.3 million in the prior year to CHF 30.1 million in the 2013/14 financial year for reasons already mentioned. It is worth highlighting that free cash flow was positive in the year under review at CHF 11.1 million (prior year: CHF 11.1 million). One stated aim of CEO and Chairman of the Board of Directors Willy Michel is for it to be possible to finance investments through operating activities. Also in terms of financing, it was possible to repay bank debts of CHF 2.0 million, which is crucial for the company s independence. Robust balance sheet preserves company s autonomy Ypsomed s balance sheet has been very healthy for many years and currently boasts a high equity ratio of 64.4%. Once again, major shareholder Willy Michel made a key contribution in this regard, leaving his current shareholder loan unchanged at CHF 20 million and waiving his annual repayment of CHF 5 million. This arrangement will also apply in the 2014/15 financial year to ensure that the Ypsomed Group can continue to be managed entrepreneurially and independently in the future. Dividend payment from capital reserves In the past financial year, a total of CHF 2.5 million was paid out to shareholders. The Ypsomed Board of Directors will propose to the General Meeting of Shareholders that the dividend be increased by 50%. A payout of CHF 0.30 per registered share is to be made to shareholders from tax-beneficial capital reserves for the 2013/14 financial year. The General Meeting of Shareholders of Ypsomed Holding AG will take place on Tuesday, July 1, 2014 in Berne. 42

54 Ypsomed Financial Report Consolidated income statement (Audited Swiss GAAP FER figures) in thousand CHF Notes 1 April 2013 in % 1 April 2012 in % 31 March March 2013 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 43

55 Ypsomed Financial Report Consolidated balance sheet (Audited Swiss GAAP FER figures) in thousand CHF Assets Notes 31 March 2014 in % 31 March 2013 in % Cash and cash equivalents % % Trade receivables % % Other current assets % % Prepayments and accrued income % % Current income tax assets % % Inventories % % 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 2014 in % 31 March 2013 in % Financial liabilities % % Trade payables % % Prepayments from customers % % Current income tax payable % % Other payables % % Accrued liabilities and deferred income % % Provisions % % Total current liabilities % % 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 % % 44

56 Ypsomed Financial Report Consolidated statement of cash flows (Audited Swiss GAAP FER figures) in thousand CHF Notes 1 April April March March 2013 Net profit Depreciation of fixed and intangible assets Loss from impairment (+) / Reversal of impairment ( ) 8/16/ 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 14 0 Purchases of fixed assets Disposals of fixed assets Purchases of intangible assets Cash flow from investing activities Repayment of financial liabilities to major shareholder Proceeds (+)/repayment ( ) from borrowings Inflows from capital increase Distribution of capital reserves Cash flow from financing activities Financial Report 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 Costs due to increase of authorized share capital. 45

57 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 Goodwill offset Retained earnings Balance as of 1 April Net profit Distribution of dividends from capital contribution reserves Translation exchange differences Costs due to increase of authorized share capital Balance as of 31 March Total Balance as of 1 April Net profit Distribution of dividends from capital contribution reserves Translation exchange differences Balance as of 31 March

58 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 19 May 2014 and recommended for acceptance to the General Meeting of 1 July 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. 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. Financial Report 47

59 Ypsomed Financial Report 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 after beginning of marketing. 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. 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. 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 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. Net sales also comprises income from the provision of research, development, industrialization and marketing services. Other operating income Other operating income primarily includes rental income arising from the 48

60 Ypsomed Financial Report 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. 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. 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. 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 amount to CHF 58.7 million as of 31 March 2014 (prior year CHF 51.5 million). Provisions for warranties When determining the provisions for warranties, management takes into account currently marketed own products and sets the provisions necessary to cover all callable claims based on the maturity and characteristics of the products as well as experience. Provisions for warranties as of 31 March 2014 amount to CHF 0.9 million (prior year CHF 0.8 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 as of 31 March 2014 amount to CHF 6.9 million (prior year CHF 6.0 million). Financial Report 4. Legal risks The Ypsomed Group develops, manufactures and sells innovative medical technical devices, based on technical expertise and technologies protected by intellectual property rights. The Group is either owner of the required rights or 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. 49

61 Ypsomed Financial Report Notes to the consolidated financial statements In thousand CHF, unless otherwise stated Subsequent events From the balance sheet date until the consolidated financial statement were approved by the Board of Directors on 19 May 2014, no major events occurred which could adversely affect the validity of the annual financial statements for 2013/14 or which would have to be disclosed. 1. 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-Liederbach 100 % EUR DiaExpert GmbH, DE-Liederbach 100 % EUR Feelfree GmbH, DE-Liederbach 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 Ypsomed S.r.l., ITA-Varese 100 % EUR Foreign currencies Balance sheet year-end rates Income statement average rates 31 March March / /13 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)

62 Ypsomed Financial Report 3. Cash and cash equivalents 31 March March 2013 Cash Postal accounts Bank accounts Total Trade receivables 31 March March 2013 Trade receivables Provision for bad and doubtful debts Total Provision for bad and doubtful debts 2013/ /13 At 1 April Addition Use Reversal Currency translation differences 0 3 At 31 March Financial Report 5. Inventories 31 March March 2013 Raw materials and supplies Goods in process Finished products Gross inventories Valuation allowance Total Financial assets 31 March March 2013 Bionime Corp. Taiwan and Insulet Corp. USA Other financial assets Total

63 Ypsomed Financial Report 7. 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 Transfers Currency translation differences At 31 March 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 longterm leasing agreements (financial leasing). The fire insurance value of fixed assets at March 31, 2014, amounted to CHF million (previous year: CHF million). Gains from the sale of fixed assets in the 2013/14 business year amounted to CHF 0.1 million (previous year: CHF 0.1 million). Gains from the sale of fixed assets are included in the income statement under other operating income. 52

64 Ypsomed Financial Report 8. Intangible assets Cost Development costs Patents Software Client base Total At 1 April Additions Disposals Transfers Currency translation differences At 31 March Accumulated amortization At 1 April Amortization Impairment Disposals Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March Cost At 1 April Additions Disposals Transfers Currency translation differences At 31 March Financial Report Accumulated amortization At 1 April Amortization Impairment Disposals Currency translation differences At 31 March Net book value at 1 April Net book value at 31 March CHF 0.4 million was impaired due to a change of concept in a development project. Development costs capitalized include CHF 32.2 million (prior year CHF 27.1 million) for products in the development phase, CHF 4.2 million (prior year CHF 5.1 million) for products in the industrialization phase and CHF 22.3 million (prior year CHF 19.2 million) for products in the phase of commercialization. 53

65 Ypsomed Financial Report 9. Goodwill not reported in the balance sheet Acquired goodwill the difference between acquisition costs and the recalculated current value of all net assets acquired is offset directly against equity at the time of acquisition of a participation or 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 2013/ /13 At 1 April Additions before taxes 0 0 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/net loss on reporting goodwill 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

66 Ypsomed Financial Report 10. Financial liabilities to major shareholder 31 March March 2013 Loan from Techpharma Management AG, Burgdorf Current 0 0 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 5.0 million per annum by applying a term of notice of 3 months. In the 2014/15 business year, Techpharma Management AG will waive repayment of CHF 5.0 million. Techpharma Management AG is controlled by Willy Michel. In the 2013/14 business year, interest amounting to CHF 0.1 million (prior year CHF 0.2 million) was paid on the loan. 11. Provisions Taxes Warranties Restructuring Other Total At 1 April Additions Release Utilization Currency translation differences At 31 March of which current At 1 April Additions Release Utilization Currency translation differences At 31 March Financial Report 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. Also included are provisions for employee gifts on the occasion of their service anniversaries. 55

67 Ypsomed Financial Report 12. Share capital Share capital (in thousand CHF) 2013/ /13 At 1 April At 31 March Shares issued as at 31 March Treasury shares as at 31 March Shares outstanding as at 1 April Purchases 0 0 Average price in CHF 0 0 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. Today exist a total of shares, each with a par value of CHF As of March 31, 2014, the Ypsomed Group and the employee pension fund held treasury shares in total (previous year: ). Conditional share capital (in thousand CHF) 2013/ /13 At 1 April At 31 March 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. Authorized share capital (in thousand CHF) 2013/ /13 At 1 April At 31 March Until June 26, 2014, the Board of Directors is authorized at any time to increase the share capital by CHF by issuing a maximum of fully paid up registered shares with a nominal value of CHF each. Several increases in smaller amounts are permitted. The Board of Directors is authorized to restrict or withdraw shareholders subscription rights and assign them to third parties (1) for the acquisition or partial acquisition of companies, parts of companies or participating interests, (2) for the financing or refinancing of the acquisition of companies, parts of companies or participating interests, or (3) for the expansion of international distribution structures. Shares for which subscription rights have been granted but not exercised are to be allocated by the Board of Directors in the interests of the company. The Board of Directors shall determine the time and amount of each issue, the point in time at which an entitlement to a dividend accrues, the nature of contributions and, if relevant, the nature of contributions in kind or the takeover of tangible assets. In this regard, the Board of Directors may issue new shares by means of firm underwriting by a bank or third party followed by an offer made to existing shareholders. The subscription to and purchase of the new shares and any subsequent transfer of the shares is limited by the provisions of the Articles of Association. The Board of Directors made no use of its authorization during the reporting year. 56

68 Ypsomed Financial Report 13. Long-term contracts 2013/ /13 Revenue from development and industrialization services Long-term contracts in the balance sheet 31 March March 2013 Trade receivables Inventories 0 17 Prepayments from customers Personnel expenses 2013/14 % 2012/13 % Wages and salaries Social security expenses Other personnel expenses Total Personnel at 31 March (full-time equivalents) 31 March March 2013 Switzerland Germany Netherlands 7 7 France Scandinavia 6 3 Czech Republic United Kingdom Austria 3 2 India 12 9 Italy 2 0 Total Financial Report Headcount

69 Ypsomed Financial Report 15. Employee pensions Within the Group, there are various employee pension plans, of which most employees are members. For the companies abroad and one company in Switzerland, there are pension plans for which the obligation to provide benefits such as retirement, death or invalidity benefits lies with a state institution and/or an insurance company. For the pension plan for two companies in Switzerland representing a proportion of 63% of the Group s workforce as at March 31, 2014, there is a separate pension scheme set up in accordance with the Swiss Federal Act on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and independent of the Group. As at March 31, 2014, the pension scheme held a value fluctuation reserve of CHF 19.6 million (previous year: CHF 16.0 million). The surplus in the value fluctuation reserve, i.e. the amount by which the reserves exceed the target value of 14.6 % of assets, stands at CHF 3.0 million (previous year: CHF 0.0 million). This corresponds to a calculated level of cover within the meaning of Art. 44 of the Ordinance on Occupational Retirement, Survivors and Disability Pension Plans (BVV2) of % based on a technical interest rate of 2.75 % and BVG 2010 (previous year: %, technical interest rate 2.75 % and BVG 2010). The board responsible for the pension scheme has decided not to use the surplus in the value fluctuation reserve to reduce contributions. This surplus thus does not represent an economic benefit within the meaning of Swiss GAAP FER 16 and was therefore not capitalized. 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 / / /13 Pension institutions with surplus Pension institutions without owen assets Per end of the business years 2012/13 and 2013/14 there were no employer contribution reserves existing. 16. Financial income 2013/ /13 Interest income Reversal of an impairment Foreign exchange gains Other financial income Total The impairment on the participating interest in Bionime was reversed in full during the year under review following the recovery in the share price. 17. Financial expenses 2013/ /13 Interest expenses Losses from marketable securities 9 10 Impairment Foreign exchange losses Other financial expenses Total The impairment in the previous year resulted from decrease of market value of a financial asset. 58

70 Ypsomed Financial Report 18. Income taxes 2013/ /13 Current income taxes Deferred income taxes Total Average tax rate in % 10.7% 46.6% 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. A significant proportion of the back taxes that had been set aside in the previous year was released and credited to income during the year under review. 31 March March 2013 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. 19. 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. Business year 2012/13 Delivery Devices 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. Diabetes Direct Business Others Eliminations Group Sales of goods and services to third party customers Intersegmental sales Total sales of goods and services Financial Report Operating profit Investments in fixed and intangible assets Depreciation/Amortization/Impairment Business year 2013/14 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

71 Ypsomed Financial Report Sales of goods and services are reported by geographical location Sales of goods and services 2013/ /13 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. 20. Contingent liabilities The Group has contingent liabilities of kchf 669 (prior year kchf 698) toward third parties arising in the ordinary course of business. Ypsomed does not anticipate that any material liabilities will arise from the contingent liabilities. 21. Contractual obligations 31 March March 2013 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 Total contractual obligations The rental contract between Ypsomed AG and Techpharma Management AG, a company controlled by Willy Michel, was signed at arm s length. Rental interest is based on an independent rental value estimate and was per 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 2014 contractual obligations for the purchase of fixed assets amount to CHF 4.2 million (prior year CHF 9.0 million), and for the purchase of intangible assets these amount to CHF 0.3 million (prior year CHF 0.4 million). 60

72 Ypsomed Financial Report 22. Transactions with related parties Related Group parties are Techpharma Management AG, Adval Tech Group, Finox AG and employee pension funds. Services are remunerated in line with industry standards. Receivables from related parties amounted to kchf 14 (prior year kchf 684) on the balance sheet date. Liabilities amounted to kchf 2 (prior year kchf 97). In the year under review the following transactions were made with related parties: 2013/ /13 Techpharma Management AG (interest according to note 10) Techpharma Management AG (compensation for rented business premises) Techpharma Management AG (amounts in accordance with service contract) Adval Tech Group Adval Tech Group Finox AG Finox AG 4 16 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. The rental contract can be terminated on every month, 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. See also Corporate Governance on page 80. 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. 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. Financial Report 23. 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. 2013/ /13 Net profit in thousand CHF Number of outstanding shares weighted on a monthly basis Earnings per share in CHF (basic and diluted) Remuneration statement and significant shareholders See notes to the financial statement 2013/14 of Ypsomed Holding AG from page

73 Ypsomed Financial Report Report of the group auditors 62

74 Ypsomed Financial Report Financial Report 63

75 Ypsomed Financial Report Balance sheet of Ypsomed Holding AG statutory financial statements In thousand CHF Assets 31 March March 2013 Cash and cash equivalents Marketable securities Accrued income and prepaid expenses Other receivables 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 2013 Trade payables Accrued expenses and deferred income Bank loans Current income taxes payable Total current liabilities Non-current financial liabilities to major shareholder Total non-current liabilities Share capital Capital contribution reserves Disagio Legal reserves Reserves for own shares Retained earnings Net profit Total equity Total liabilities and equity

76 Ypsomed Financial Report Income statement of Ypsomed Holding AG statutory financial statements In thousand CHF Income 1 April March April March 2013 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 2013 Retained earnings Increase reserve for own shares 0 0 Net profit for business year Retained earnings at disposal of the General Meeting Allotment from capital contribution reserves Distribution of dividend from capital contribution reserves Financial Report Carried forward to the next year The Board of Directors proposes to the General Meeting of Shareholders a tax free distribution of capital contribution reserves in the amount of CHF 0.30 per share. The total distribution based on the actual share capital as per 31 March 2014 will be approximately CHF 3.8 million (prior year CHF 2.5 million). This amount will be credited to shareholders. 65

77 Ypsomed Financial Report Notes to the financial statements of Ypsomed Holding AG Income Financial income mainly consists of dividends, interest income and gains on securities. Share capital The share capital of CHF (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 2.3 million (prior year CHF 2.3 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. Authorized share capital At the General Meeting of Shareholders on June 27, 2012, the Board of Directors was authorized to increase the share capital by CHF by issuing a maximum of fully paid-up shares with a nominal value of CHF at any time between then and June 26, This may be done in several stages. Significant shareholders and shareholder groups 31 March March 2013 Number of shares Capital and vote share Number of shares Capital and vote share Shareholder group Michel family % % Patinex AG % % 1 In line with Art. 16 paragraph 2 of the Articles of Association, no shareholder may directly or indirectly amalgamate more than 5 % of the total voting rights in the form of his own shares and those he is representing. In accordance with paragraph 3, this provision of the Articles of Association does not apply to shareholders to whom more than 5 % of all voting rights were registered at the time the provision was issued. Investments 31 March March 2013 Interest held Book value (CHF) Interest held Book value (CHF) Ypsomed AG, CH-Burgdorf 100 % % Share capital CHF Ypsotec AG, CH-Grenchen 100 % % Share capital CHF TecPharma Licensing AG, CH-Burgdorf 100 % % Share capital CHF Ypsomed Distribution AG, CH-Burgdorf 100 % % Share capital CHF Bionime Corporation, Taiwan 10.2 % % Share capital TWD (Prior year TWD ) Insulet Corporation, Bedford, MA, U.S.A. 0.0 % % Share capital USD Total Investments Own shares 31 March March 2013 Number of shares Ø price Number of shares Ø price Purchase of own shares 0 0 Disposal of own shares 0 0 Own shares held

78 Ypsomed Financial Report Claim subject to subordination clause against subsidiaries 31 March March 2013 Loan to Ypsomed Distribution AG, CH-Burgdorf In addition there is letter of comfort with unlimited amount in favor of a group company. Securities, reserve for guarantees and collateral order in favor of third parties 31 March March 2013 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. Norbert Thom (Member) Gerhart Isler (Member) Total Financial Report 13/14 12/13 13/14 12/13 13/14 12/13 13/14 12/13 13/14 12/13 Fixed amount Variable amount Attendance fee / Others Total remuneration and attendance fee Ypsomed Holding AG Techpharma Management AG: for consultancy services Dr. h. c. Willy Michel Remuneration to Willy Michel as chairman of the board of directors of Ypsomed AG 1 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) Details see Corporate Governance page

79 Ypsomed Financial Report Management remuneration (Gross, in thousand CHF) Highest remuneration to: Basic Salary Variable Salary Payments Employer contributions to Social Insurance Total 13/14 12/13 13/14 12/13 13/14 12/13 13/14 12/13 13/14 12/13 Dr. Beat Maurer, Senior Vice President Legal Services & Intellectual Property Add. members of management Total management remuneration 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 Shares as of 31 March 2014 Shares as of 31 March 2013 Willy Michel, Chairman Techpharma Management AG as related party to Willy Michel, Chairman BV Holding AG as related party to Willy Michel, Chairman Total of Willy Michel and Techpharma Management AG and BV Holding AG Gerhart Isler, Member Anton Kräuliger, Vice-Chairman Prof. em. Dr. Norbert Thom, Member 75 0 Total Share ownership of Management Willy Michel, CEO since August Techpharma Management AG as related party to Willy Michel BV Holding AG as related party to Willy Michel, Chairman 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 Dr. Benjamin Reinmann, Senior Vice President Operations Total For details of the Michel family shareholder group and their shares kept, see also Corporate Governance, page 78. For further details of shareholdings, see also Corporate Governance, page

80 Ypsomed Financial Report Report of the statutory auditors Financial Report 69

81 Ypsomed Financial Report 70

82 Ypsomed Financial Report Five-year overview 1 April 31 March Swiss GAAP FER IFRS In thousand CHF 2013/ / / / /10 Sales of goods and services 1 /Total Sales Gross profit Gross profit in % 25.5 % 23.3 % 22.7 % 23.3 % 26.2 % Operating profit Operating profit in % 5.7 % 2.0 % 2.1 % 3.4 % 5.3 % Net profit Net profit in % 4.9 % 0.7 % 3.4 % 2.1 % 3.7 % Depreciation of fixed assets Amortization of intangible assets EBITDA EBITDA in % 14.7% 12.5% 13.2 % 12.9 % 16.1 % 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 Financial Report 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. 71

83 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 84 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 Media & Investors/Publications/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 Media & Investors/Publications/Corporate Governance). Compliance with the basic principles and values laid down in the Code of Conduct is reviewed on an ongoing basis during the company s day-to-day business. In addition, the Board of Directors receives information on a 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 73

84 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 was associated with the switch in accounting standards from IFRS (International Financial Reporting Standards) to Swiss GAAP FER, which, in accordance with SIX Swiss Exchange s accounting guidelines, results in a change of segment. Security Number /Ticker symbol: YPSN. as of 31 March 2014 as of 31 March 2013 Market capitalization in CHF in % of equity 432.4* 320.1* Share price in CHF Price-earnings ratio 72.5** 423.1** * Equity on 31 March 2013: TCHF Equity on 31 March 2014: TCHF ** Profit per share 31 March 2013: CHF 0.13 Profit per share 31 March 2014: CHF

85 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, 2014 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 % Ypsomed S.r.l. Varese, ITA 100 % DiaExpert GmbH Liederbach, DE 100 % 75

86 Ypsomed Corporate Governance Report Date Issue Capital structure 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. 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. Authorized share capital Until June 26, 2014, the Board of Directors is authorized at any time to increase the share capital by CHF by issuing a maximum of fully paid up registered shares with a nominal value of CHF each. Several increases in smaller amounts are permitted. The Board of Directors is authorized to restrict or withdraw shareholders subscription rights and assign them to third parties (1) for the acquisition or partial acquisition of companies, parts of companies or participating interests, (2) for the financing or refinancing of the acquisition of companies, parts of companies or participating interests, or (3) for the expansion of international distribution structures. Shares for which subscription rights have been granted but not exercised are to be allocated by the Board of Directors in the interests of the company. The Board of Directors shall determine the time and amount of each issue, the point in time at which an entitlement to a dividend accrues, the nature of contributions and, if relevant, the nature of contributions in kind or the takeover of tangible assets. In this regard, the Board of Directors may issue new shares by means of firm underwriting by a bank or third party followed by an offer made to existing shareholders. The subscription to and purchase of the new shares and any subsequent transfer of the shares is limited by the provisions of the Articles of Association. The Board of Directors made no use of its authorization during the reporting year. Changes in capital Capital has changed in recent years as follows: Changes in equity capital up to March 31, 2014, pursuant to the accounts of Ypsomed Holding AG produced in accordance with company law Founding 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 Reassignment of capital reserves to reserves as capital investments Net profit Reassignment of capital reserves to reserves as capital investments Net profit Balance Share premium of IPO 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 2004.

87 Ypsomed Corporate Governance Report General statutory reserves Number of shares Nominal value Share capital Capital reserves Retained earnings Reserves from equity General reserves Reserves for own shares Total Corporate Governance Capital in % IPO costs Share premium gross Share premium net % % %

88 Ypsomed Corporate Governance Report Shareholder structure Registered shareholders There were shareholders registered in the Share Register on March 31, 2014 (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 2014 as of 31 March to to to to more than Significant shareholders and significant shareholder groups The Michel family shareholder group, set up for the purposes of holding shares in family ownership, comprises Willy Michel, Chairman of the Board of Directors and CEO of Ypsomed Holding AG and the Ypsomed Group, who holds shares both directly and indirectly via the companies he controls, Techpharma Management AG and BV Holding AG, as well as his children Simon Michel, Serge Michel and Lavinia Camilla Nussio, who each hold shares directly. As of March 31, 2014, the Michel family shareholder group holds a combined total of registered shares (previous year: ) in Ypsomed Holding AG, equating to 76.53% (previous year: 76.35%) of all shares in the company. Patinex AG, Egglirain 24, CH-8832 Wilen, a company controlled by Martin and Rosmarie Ebner, disclosed a 10.68% holding as of March 31, 2014, in the company (previous year 5.21%; as per disclosure of November 5, 2013). The company was not informed of any further changes during the reporting year. There are no other known significant shareholders or significant shareholder groups. Accounting standards With effect from September 30, 2011, Ypsomed changed its accounting standard from IFRS to Swiss GAAP FER. Since that time, SWISS GAAP FER has been used as an accounting and reporting 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. Cross participations There are no cross participations. 78

89 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, who were been elected for a term of office of three years in the past. As a result of the Minder initiative, the members of the Board of Directors must now be elected annually. They may be re-elected. The members of the Board of Directors were re-elected in globo on the occasion of the 2013 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 2013/14 business year that is stipulated by Art. 663b bis of the Swiss Code of Obligations can be found in the Notes to the 2013/14 financial statement, see page 66). Executive loan Willy Michel made a loan to the company that he assigned to his company Techpharma Management AG. In the year under review, no repayments were made. As of March 31, 2014, a loan amount of CHF 20 million was still outstanding. The key terms of the loan agreement as of March 31, 2014, are: Since April 1, 2010, the loan has borne interest at a rate 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 Corporate Governance 79

90 Ypsomed Corporate Governance Report in full or partially at any time. However, it is repayable by March 31, 2017, at the latest. Techpharma Management AG has renounced the possibility of any further amortization until March 31, Starting April 1, 2015, Techpharma Management AG may each year demand repayment of a maximum of CHF 5.0 million at three months notice. There are no further executive loans. Rental contract Willy Michel (respectively the company Techpharma Management AG which he controls) 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 on every month, 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 and catering 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 has remained unchanged for years at CHF Following the enactment of the Minder initiative and the corresponding adjustment of the framework service contract, this remuneration, of the same amount, is now paid to Willy Michel as a fee for his chairmanship of the Board of Directors of Ypsomed AG. In addition to the remuneration for his chairmanship of the Board of Directors of Ypsomed Holding AG, this amount represents the full remuneration for all consulting and management services provided 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. Contractual relationship with Finox AG A cooperation contract existed between Ypsomed Holding AG and two of its subsidiaries on the one hand, and Tech-pharma 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. 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. 80

91 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. Willy Michel is the majority shareholder and Chairman of the Board of Directors of the listed company Finox AG, which is active in the development, manufacturing and sale of pharmaceuticals. He is also Vice Chairman (Chairman from 2001 to March 2008) of the Board of Directors of BV Holding AG, an equity investment company which is listed on the BX Berne exchange, and Chairman (since 2012, a member since 2007) of the Board of Directors of Adval Tech Holding AG, which is listed on the SIX Swiss Exchange. In addition, he is the owner of a number of companies, including well-known firms involved in the fields of art, watchmaking and gastronomy, and is a member of the Boards of Directors of various non-listed companies operating in different sectors from the Ypsomed Group and of no significance to its business activities. Willy Michel was declared the Master Entrepreneur of the Year for his overall business performance by Ernst & Young AG, 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. Norbert Thom, Member of the Board of Directors of Ypsomed Holding AG since After studying economics and social sciences at the University of Cologne (Dr. rer. pol. and habilitation in business management), Norbert Thom completed a full academic career spanning some 40 years spent at four universities (Cologne, Giessen, Fribourg, Bern) before his retirement in In Bern, Prof. Thom was founder and director of the Institute of Organization and Human Resource Management (1991 to 2012) as well as holding several other offices at the university including Vice Rector for Finance and Planning. For his academic achievements, Prof. Thom has received awards in Switzerland and abroad, including three honorary doctorates and one honorary professorship. Prof. Thom has maintained close links with the business world for many years. Alongside consultancy work and membership of advisory boards, he has also sat on several boards of non-listed companies operating in different sectors from the Ypsomed Group and of no significance to its business activities. Currently, in his capacity as professor emeritus, he retains ties to the University of Bern, most notably as a lecturer for its Executive Master of Health Administration program. Since 2012, he has also been a member of the Supervisory Board of the REHAU Group (Muri near Bern), a global plastics concern. Corporate Governance 81

92 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. He was also a member of the Board of Directors of Sécheron-Hasler Holding AG ( ) and Chairman of the Board of Directors of Sécheron SA ( ). He continues to be active as Chairman of the Board of Directors of Metalyss AG (since 1978). As Vice Chairman 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 General Meeting** Dr. h. c. Willy Michel Swiss 1947 Chairman of the Board of Directors Gerhart Isler Swiss 1949 Member of the Board of Directors Prof. em. Dr. 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 ** Following the enactment of the Minder initiative, the elected members of the Board of Directors are required to stand for re-election at the 2014 Annual General Meeting of Shareholders. 82

93 Dr. h. c. Willy Michel Prof. em. Dr. Norbert Thom Corporate Governance Anton Kräuliger Gerhart Isler 83

94 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, 2014, 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%). Techpharma Management AG, which is controlled by Willy Michel, increased its shareholding in BV Holding AG to over 50% in February Adval Tech Holding AG, a company listed on the SIX Swiss Exchange and with headquarters in Niederwangen, and of which Willy Michel is the Chairman of the Board of Directors, sold two subsidiaries which have business relations with Ypsomed to a third-party company during the year under review. Willy Michel does not hold shares in this company. Furthermore, Ypsomed occasionally has tools manufactured by Adval Tech or its group companies at fair market prices based on standard industry conditions and existing competitive offers. 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 members of management (CFO, Senior Vice President Technology, Senior Vice President Operations, Senior Vice President Marketing & Sales) and the Head of Internal Audit 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 four times and passed several resolutions by correspondence. During the Board of Directors meeting in May 2013, the lead auditor participated. The Board of Directors additionally met in March 2014 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 2013, 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 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 84

95 Ypsomed Corporate Governance Report 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. Members of management (CFO, Senior Vice President Technology, Senior Vice President Operations, Senior Vice President Marketing & Sales) and the Head of Internal Audit 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. Corporate Governance 85

96 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 2002 Hans Ulrich Lehmann Swiss 1966 Senior Vice President Technology 2000 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

97 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 Müller Senior Vice President Human Resources Dr. Beat Maurer Senior Vice President Legal & Intellectual Property 87